HUMAN

THIRTEENTH EDITION

RESOURCE
MANAGEMENT

GARY DESSLER
FLORIDA INTERNATIONAL UNIVERSITY

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Library of Congress Cataloging-in-Publication Data

Dessler, Gary
Human resource management/Gary Dessler. 13th ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-13-266821-7 (hardcover: alk. paper)
ISBN-10: 0-13-266821-1 (hardcover: alk. paper)
1. Personnel management. I. Title.
HF5549.D4379 2012
658.3 dc23
2011037044

10 9 8 7 6 5 4 3 2 1

ISBN 10: 0-13-266821-1

ISBN 13: 978-0-13-266821-7
DEDICATED TO SAMANTHA AND TAYLOR
BRIEF CONTENTS
PART ONE INTRODUCTION 2
1 Introduction to Human Resource Management 2
2 Equal Opportunity and the Law 30
3 Human Resource Management Strategy and Analysis 70

PART TWO RECRUITMENT, PLACEMENT, AND TALENT

MANAGEMENT 102

4 Job Analysis and the Talent Management Process 102

5 Personnel Planning and Recruiting 136
6 Employee Testing and Selection 174
7 Interviewing Candidates 212

PART THREE TRAINING AND DEVELOPMENT 242

8 Training and Developing Employees 242
9 Performance Management and Appraisal 282
10 Employee Retention, Engagement, and Careers 320

PART FOUR COMPENSATION 350

11 Establishing Strategic Pay Plans 350
12 Pay for Performance and Financial Incentives 390
13 Benefits and Services 422

PART FIVE EMPLOYEE RELATIONS 458

14 Ethics and Employee Rights and Discipline 458
15 Labor Relations and Collective Bargaining 494
16 Employee Safety and Health 530
17 Managing Global Human Resources 576
18 Managing Human Resources in Small and Entrepreneurial Firms 604

APPENDICES
APPENDIX A PHR and SPHR Knowledge Base 633
APPENDIX B Comprehensive Cases 641

V
CONTENTS
Preface xxiii
Acknowledgments xxvii

PART ONE INTRODUCTION 2

1 Introduction to Human Resource Management 2

WHAT IS HUMAN RESOURCE MANAGEMENT AND WHY IS IT IMPORTANT? 4
What Is Human Resource Management? 4
Why Is Human Resource Management Important to All Managers? 5
Line and Staff Aspects of Human Resource Management 6
Line Managers Human Resource Duties 7
Human Resource Manager s Duties 7
New Approaches to Organizing HR 9
Cooperative Line and Staff HR Management: An Example 9
THE TRENDS SHAPING HUMAN RESOURCE MANAGEMENT 10
Globalization and Competition Trends 11
Indebtedness ( Leverage ) and Deregulation 12
Technological Trends 12
Trends in the Nature of Work 13
* HR AS A PROFIT CENTER: Boosting Customer Service 14
Workforce and Demographic Trends 14
Economic Challenges and Trends 16
THE NEW HUMAN RESOURCE MANAGERS 17
Human Resource Management Yesterday and Today 17
They Focus More on Strategic, Big Picture Issues 17
* THE STRATEGIC CONTEXT: Building L.L.Bean 17
They Use New Ways to Provide Transactional Services 18
They Take an Integrated, Talent Management Approach to Managing
Human Resources 19
They Manage Ethics 19
They Manage Employee Engagement 19
They Measure HR Performance and Results 19
They Use Evidence-Based Human Resource Management 20
They Add Value 20
They Have New Competencies 21
HR Certification 22
THE PLAN OF THIS BOOK 22
The Basic Themes and Features 22
CHAPTER CONTENTS OVERVIEW 23
Part 1: Introduction 23
Part 2: Recruitment, Placement, and Talent Management 23
Part 3: Training and Development 23
Part 4: Compensation 23
Part 5: Employee Relations 23
The Topics Are Interrelated 24
CHAPTER SECTION SUMMARIES 25
DISCUSSION QUESTIONS 25
INDIVIDUAL AND GROUP ACTIVITIES 26
EXPERIENTIAL EXERCISE: HELPING THE DONALD 26
APPLICATION CASE: JACK NELSON S PROBLEM 27
CONTINUING CASE: CARTER CLEANING COMPANY 27
KEY TERMS 28
ENDNOTES 28
VII
VIII CONTENTS

2 Equal Opportunity and the Law 30

EQUAL EMPLOYMENT OPPORTUNITY 1964 1991 32
Title VII of the 1964 Civil Rights Act 32
Executive Orders 32
Equal Pay Act of 1963 33
Age Discrimination in Employment Act of 1967 33
Vocational Rehabilitation Act of 1973 33
Pregnancy Discrimination Act of 1978 34
Federal Agency Guidelines 34
Early Court Decisions Regarding Equal Employment Opportunity 34
EQUAL EMPLOYMENT OPPORTUNITY 1990 91 PRESENT 35
The Civil Rights Act of 1991 35
The Americans with Disabilities Act 36
Genetic Information Nondiscrimination Act of 2008 (GINA) 39
State and Local Equal Employment Opportunity Laws 39
Sexual Harassment 39
DEFENSES AGAINST DISCRIMINATION ALLEGATIONS 43
The Central Role of Adverse Impact 44
Bona Fide Occupational Qualification 46
Business Necessity 47
Other Considerations in Discriminatory Practice Defenses 48
ILLUSTRATIVE DISCRIMINATORY EMPLOYMENT PRACTICES 48
A Note on What You Can and Cannot Do 48
Recruitment 49
Selection Standards 49
Sample Discriminatory Promotion, Transfer, and Layoff Practices 50
What the Supervisor Should Keep in Mind 51
THE EEOC ENFORCEMENT PROCESS 51
Voluntary Mediation 53
Mandatory Arbitration of Discrimination Claims 54
DIVERSITY MANAGEMENT AND AFFIRMATIVE ACTION PROGRAMS 55
Diversity s Potential Pros and Cons 55
* HR AS A PROFIT CENTER 56
Managing Diversity 56
Encouraging Inclusiveness 57
Developing a Multicultural Consciousness 58
Equal Employment Opportunity Versus Affirmative Action 59
Implementing the Affirmative Action Program 59
Reverse Discrimination 60
CHAPTER SECTION SUMMARIES 61
DISCUSSION QUESTIONS 62
INDIVIDUAL AND GROUP ACTIVITIES 62
EXPERIENTIAL EXERCISE: SPACE CADET OR VICTIM? 63
APPLICATION CASE: AN ACCUSATION OF SEXUAL HARASSMENT IN PRO SPORTS 63
CONTINUING CASE: CARTER CLEANING COMPANY 64
KEY TERMS 65
ENDNOTES 65

3 Human Resource Management Strategy and Analysis 70

THE STRATEGIC MANAGEMENT PROCESS 72
* THE STRATEGIC CONTEXT: The Shanghai Portman Hotel 72
Goal-Setting and the Planning Process 72
Strategic Planning 73
Improving Productivity Through HRIS: Using Computerized Business Planning Software 76
Types of Strategies 76
Top Managers Role in Strategic Planning 78
 CONTENTS IX

Departmental Managers Strategic Planning Roles 78

Departmental Managers Strategic Planning Roles in Action: Improving Mergers and
Acquisitions 79
STRATEGIC HUMAN RESOURCE MANAGEMENT 80
Defining Strategic Human Resource Management 80
Human Resource Strategies and Policies 82
HR AS A PROFIT CENTER: Albertsons Example 82
Strategic Human Resource Management Tools 82
HR METRICS AND BENCHMARKING 84
Types of Metrics 85
Improving Productivity Through HRIS: Tracking Applicant Metrics for Improved Talent
Management 85
Benchmarking in Action 86
Strategy and Strategy-Based Metrics 87
Workforce/Talent Analytics and Data Mining 87
HR AS A PROFIT CENTER: Using Workforce/Talent Analytics 88
What Are HR Audits? 89
Evidence-Based HR and the Scientific Way of Doing Things 90
WHAT ARE HIGH-PERFORMANCE WORK SYSTEMS? 91
High-Performance Human Resource Policies and Practices 92
CHAPTER SECTION SUMMARIES 93
DISCUSSION QUESTIONS 94
INDIVIDUAL AND GROUP ACTIVITIES 94
EXPERIENTIAL EXERCISE: DEVELOPING AN HR STRATEGY FOR STARBUCKS 95
APPLICATION CASE: SIEMENS BUILDS A STRATEGY-ORIENTED HR SYSTEM 95
CONTINUING CASE: CARTER CLEANING COMPANY 96
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 96
KEY TERMS 98
ENDNOTES 99
PART 1 VIDEO CASES APPENDIX 100

PART TWO RECRUITMENT, PLACEMENT, AND TALENT

MANAGEMENT 102

4 Job Analysis and the Talent Management Process 102

THE TALENT MANAGEMENT PROCESS 104
What Is Talent Management? 104
THE BASICS OF JOB ANALYSIS 105
Uses of Job Analysis Information 106
THE STRATEGIC CONTEXT: Daimler Alabama Example 107
Conducting a Job Analysis 107
HR AS A PROFIT CENTER: Boosting Productivity through Work Redesign 108
Job Analysis Guidelines 110
METHODS FOR COLLECTING JOB ANALYSIS INFORMATION 110
The Interview 110
Questionnaires 113
Observation 114
Participant Diary/Logs 114
Quantitative Job Analysis Techniques 114
Internet-Based Job Analysis 116
WRITING JOB DESCRIPTIONS 118
Job Identification 118
Job Summary 119
Relationships 121
Responsibilities and Duties 121
X CONTENTS

MANAGING THE NEW WORKFORCE: Writing Job Descriptions That Comply

with the ADA 122
Standards of Performance and Working Conditions 122
Duty: Accurately Posting Accounts Payable 122
Using the Internet for Writing Job Descriptions 122
WRITING JOB SPECIFICATIONS 126
Specifications for Trained Versus Untrained Personnel 126
Specifications Based on Judgment 126
Job Specifications Based on Statistical Analysis 127
Using Task Statements 127
PROFILES IN TALENT MANAGEMENT 128
Competencies and Competency-Based Job Analysis 128
How to Write Job Competencies-Based Job Descriptions 130
CHAPTER SECTION SUMMARIES 131
DISCUSSION QUESTIONS 132
INDIVIDUAL AND GROUP ACTIVITIES 132
EXPERIENTIAL EXERCISE: THE INSTRUCTOR S JOB DESCRIPTION 132
APPLICATION CASE: THE FLOOD 133
CONTINUING CASE: CARTER CLEANING COMPANY 133
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL
PARIS CASE 134
KEY TERMS 134
ENDNOTES 134

5 Personnel Planning and Recruiting 136

INTRODUCTION 138
WORKFORCE PLANNING AND FORECASTING 138
Strategy and Workforce Planning 138
THE STRATEGIC CONTEXT: IBM 139
Forecasting Personnel Needs (Labor Demand) 139
Improving Productivity Through HRIS: Computerized Personnel Forecasting 142
Forecasting the Supply of Inside Candidates 142
Forecasting the Supply of Outside Candidates 144
Talent Management and Predictive Workforce Monitoring 144
Developing an Action Plan to Match Projected Labor Supply and Labor Demand 145
The Recruiting Yield Pyramid 145
THE NEED FOR EFFECTIVE RECRUITING 146
Why Recruiting Is Important 146
What Makes Recruiting a Challenge? 146
Organizing How You Recruit 146
INTERNAL SOURCES OF CANDIDATES 147
Using Internal Sources: Pros and Cons 147
Finding Internal Candidates 147
Rehiring 147
Succession Planning 148
Improving Productivity Through HRIS: Succession and Talent Planning Systems 148
OUTSIDE SOURCES OF CANDIDATES 149
Recruiting via the Internet 149
Advertising 152
Employment Agencies 154
Temp Agencies and Alternative Staffing 155
Offshoring and Outsourcing Jobs 157
Executive Recruiters 157
On-Demand Recruiting Services 158
College Recruiting 158
Referrals and Walk-Ins 159
Telecommuters 160
Military Personnel 160
 CONTENTS XI

Recruiting Source Use and Effectiveness 160

Evidence-Based HR: Measuring Recruiting Effectiveness 161
HR AS A PROFIT CENTER: GE Medical Recruitment Process Outsourcing (RPO) example 162
Improving Productivity Through HRIS: An Integrated Approach to Recruiting 162
RECRUITING A MORE DIVERSE WORKFORCE 162
Single Parents 162
Older Workers 163
Recruiting Minorities 163
Welfare-to-Work 164
The Disabled 164
DEVELOPING AND USING APPLICATION FORMS 164
Purpose of Application Forms 164
Application Guidelines 166
Application Forms and EEO Law 166
Using Application Forms to Predict Job Performance 167
Mandatory Arbitration 167
CHAPTER SECTION SUMMARIES 167
DISCUSSION QUESTIONS 168
INDIVIDUAL AND GROUP ACTIVITIES 168
EXPERIENTIAL EXERCISE: THE NURSING SHORTAGE 169
APPLICATION CASE: FINDING PEOPLE WHO ARE PASSIONATE ABOUT WHAT THEY DO 169
CONTINUING CASE: CARTER CLEANING COMPANY 170
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL
PARIS CASE 170
KEY TERMS 171
ENDNOTES 171

6 Employee Testing and Selection 174

WHY CAREFUL SELECTION IS IMPORTANT 176
Person and Job/Organization Fit 176
THE STRATEGIC CONTEXT: Crowd Sourcing at Google 176
BASIC TESTING CONCEPTS 177
Reliability 177
Validity 178
Evidence-Based HR: How to Validate a Test 180
Bias 182
Utility Analysis 182
HR AS A PROFIT CENTER: Reducing Turnover at KeyBank 183
Validity Generalization 183
Test Takers Individual Rights and Test Security 183
How Do Employers Use Tests at Work? 184
Computerized and Online Testing 185
TYPES OF TESTS 186
Tests of Cognitive Abilities 186
Tests of Motor and Physical Abilities 187
Measuring Personality and Interests 187
Achievement Tests 190
WORK SAMPLES AND SIMULATIONS 190
Using Work Sampling for Employee Selection 190
Situational Judgment Tests 191
Management Assessment Centers 191
Situational Testing and Video-Based Situational Testing 192
Computerized Multimedia Candidate Assessment Tools 192
The Miniature Job Training and Evaluation Approach 193
Realistic Job Previews 193
HR in Practice: Testing Techniques for Managers 193
Summary 194
XII CONTENTS

BACKGROUND INVESTIGATIONS AND OTHER SELECTION METHODS 194

Why Perform Background Investigations and Reference Checks? 194
The Legal Dangers and How to Avoid Them 195
How to Check a Candidate s Background 196
The Social Network: Checking Applicants Social Postings 198
Using Preemployment Information Services 199
The Polygraph and Honesty Testing 199
Graphology 201
Human Lie Detectors 201
Physical Exams 201
Substance Abuse Screening 202
Complying with Immigration Law 203
Improving Productivity Through HRIS: Using Automated Applicant Tracking and Screening
Systems 204
CHAPTER SECTION SUMMARIES 204
DISCUSSION QUESTIONS 205
INDIVIDUAL AND GROUP ACTIVITIES 205
EXPERIENTIAL EXERCISE: A TEST FOR A RESERVATION CLERK 206
APPLICATION CASE: THE INSIDER 206
CONTINUING CASE: HONESTY TESTING AT CARTER CLEANING COMPANY 207
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 207
KEY TERMS 208
ENDNOTES 208

7 Interviewing Candidates 212

BASIC TYPES OF INTERVIEWS 214
THE STRATEGIC CONTEXT: Whirlpool Corp. 214
Structured Versus Unstructured Interviews 214
Interview Content (What Types of Questions to Ask) 215
How Should We Administer the Interview? 218
HR AS A PROFIT CENTER: Great Western Bank 220
Three Ways to Make the Interview Usefulness 221
THE ERRORS THAT UNDERMINE AN INTERVIEW S USEFULNESS 221
First Impressions (Snap Judgments) 222
Not Clarifying What the Job Requires 222
Candidate-Order (Contrast) Error and Pressure to Hire 222
Nonverbal Behavior and Impression Management 223
Effect of Personal Characteristics: Attractiveness, Gender, Race 223
MANAGING THE NEW WORKFORCE: Applicant Disability and the Employment
Interview 224
Interviewer Behavior 224
HOW TO DESIGN AND CONDUCT AN EFFECTIVE INTERVIEW 225
Designing a Structured Situational Interview 225
How to Conduct an Effective Interview 226
Talent Management: Profiles and Employee Interviews 229
CHAPTER SECTION SUMMARIES 229
DISCUSSION QUESTIONS 230
INDIVIDUAL AND GROUP ACTIVITIES 230
EXPERIENTIAL EXERCISE: THE MOST IMPORTANT PERSON YOU LL EVER HIRE 231
APPLICATION CASE: THE OUT-OF-CONTROL INTERVIEW 231
CONTINUING CASE: CARTER CLEANING COMPANY 232
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 232
KEY TERMS 233
ENDNOTES 233
APPENDIX 1 FOR CHAPTER 7 APPLICANT INTERVIEW GUIDE 236
APPENDIX 2 FOR CHAPTER 7 INTERVIEW GUIDE FOR INTERVIEWEES 238
PART 2 VIDEO CASES APPENDIX 240
 CONTENTS XIII

PART THREE TRAINING AND DEVELOPMENT 242

8 Training and Developing Employees 242

ORIENTING AND ONBOARDING NEW EMPLOYEES 244
The Purposes of Employee Orientation/Onboarding 244
The Orientation Process 244
OVERVIEW OF THE TRAINING PROCESS 246
Aligning Strategy and Training 246
THE STRATEGIC CONTEXT 246
Training and Performance 247
The ADDIE Five-Step Training Process 247
Conducting the Training Needs Analysis 247
Designing the Training Program 250
Developing the Program 253
IMPLEMENTING TRAINING PROGRAMS 253
On-the-Job Training 253
Apprenticeship Training 255
Informal Learning 255
Job Instruction Training 255
Lectures 256
Programmed Learning 256
Audiovisual-Based Training 257
Vestibule Training 257
Electronic Performance Support Systems (EPSS) 257
Videoconferencing 258
Computer-Based Training (CBT) 258
Simulated Learning 258
Interactive Learning 259
Internet-Based Training 259
Improving Productivity Through HRIS: Learning Management Systems 260
Mobile Learning 260
The Virtual Classroom 261
Lifelong and Literacy Training Techniques 261
Team Training 262
IMPLEMENTING MANAGEMENT DEVELOPMENT PROGRAMS 263
Strategy and Development 263
Managerial On-the-Job Training 263
Off-the-Job Management Training and Development
Techniques 264
Leadership Development at GE 266
Talent Management and Mission-Critical Employees: Differential Development
Assignments 267
MANAGING ORGANIZATIONAL CHANGE PROGRAMS 268
What to Change 268
Lewin s Change Process 269
Leading Organizational Change 269
Using Organizational Development 270
EVALUATING THE TRAINING EFFORT 272
Designing the Study 272
Training Effects to Measure 273
HR AS A PROFIT CENTER: Judging Training s Impact 274
CHAPTER SECTION SUMMARIES 275
DISCUSSION QUESTIONS 275
INDIVIDUAL AND GROUP ACTIVITIES 276
EXPERIENTIAL EXERCISE: FLYING THE FRIENDLIER SKIES 276
APPLICATION CASE: REINVENTING THE WHEEL AT APEX DOOR COMPANY 277
CONTINUING CASE: CARTER CLEANING COMPANY 277
XIV CONTENTS

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 278
KEY TERMS 278
ENDNOTES 278

9 Performance Management and Appraisal 282

BASIC CONCEPTS IN PERFORMANCE MANAGEMENT AND APPRAISAL 284
The Performance Appraisal Process 284
Why Appraise Performance? 285
HR AS A PROFIT CENTER: Setting Performance Goals at Ball Corporation 286
The Importance of Continual Feedback 286
Performance Management 286
THE STRATEGIC CONTEXT: TRW 287
Defining the Employee s Goals and Performance Standards 287
Who Should Do the Appraising? 288
TECHNIQUES FOR APPRAISING PERFORMANCE 290
Graphic Rating Scale Method 290
Alternation Ranking Method 294
Paired Comparison Method 294
Forced Distribution Method 294
Critical Incident Method 295
Narrative Forms 296
Behaviorally Anchored Rating Scales 296
Mixed Standard Scales 299
Management by Objectives 300
Computerized and Web-Based Performance Appraisal 300
Electronic Performance Monitoring 301
Appraisal in Practice 301
DEALING WITH APPRAISAL PROBLEMS AND INTERVIEWS 302
Potential Appraisal Problems 303
Guidelines for Effective Appraisals 304
Appraisals and the Law 306
Managing the Appraisal Interview 306
PERFORMANCE MANAGEMENT 309
Performance Management vs. Performance Appraisal 309
Using Information Technology to Support Performance Management 310
TALENT MANAGEMENT PRACTICES AND EMPLOYEE APPRAISAL 311
Appraising and Actively Managing Employees 311
Segmenting and Actively Managing Employees in Practice 311
CHAPTER SECTION SUMMARIES 312
DISCUSSION QUESTIONS 313
INDIVIDUAL AND GROUP ACTIVITIES 313
EXPERIENTIAL EXERCISE: GRADING THE PROFESSOR 314
APPLICATION CASE: APPRAISING THE SECRETARIES AT SWEETWATER U 314
CONTINUING CASE: CARTER CLEANING COMPANY 315
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 316
KEY TERMS 316
ENDNOTES 316

10 Employee Retention, Engagement, and Careers 320

MANAGING EMPLOYEE TURNOVER AND RETENTION 322
Costs of Turnover 322
HR AS A PROFIT CENTER 322
Managing Voluntary Turnover 322
Retention Strategies for Reducing Voluntary Turnover 323
A Comprehensive Approach to Retaining Employees 324
THE STRATEGIC CONTEXT: IBM Aims for Flexibility 324
Managing Involuntary Turnover 325
 CONTENTS XV

Talent Management and Employee Retention 325

Job Withdrawal 325
EMPLOYEE ENGAGEMENT 326
Why Engagement Is Important 326
Actions That Foster Engagement 326
Monitoring Employee Engagement 326
CAREER MANAGEMENT 327
Careers Terminology 327
Careers Today 328
Psychological Contract 328
The Employee s Role in Career Management 328
The Employer s Role in Career Management 330
Career Management Systems 330
Gender Issues in Career Development 332
The Manager s Role 333
IMPROVING COACHING SKILLS 333
Building Your Coaching Skills 333
Building Your Mentoring Skills 334
Improving Productivity Through HRIS: Integrating Talent Management and Career
and Succession Planning 336
MAKING PROMOTION DECISIONS 337
Decision 1: Is Seniority or Competence the Rule? 337
Decision 2: How Should We Measure Competence? 337
Decision 3: Is the Process Formal or Informal? 338
Decision 4: Vertical, Horizontal, or Other? 338
Practical Considerations 338
Sources of Bias in Promotion Decisions 338
Promotions and the Law 339
Managing Transfers 339
Managing Retirements 340
CHAPTER SECTION SUMMARIES 341
DISCUSSION QUESTIONS 341
INDIVIDUAL AND GROUP ACTIVITIES 342
EXPERIENTIAL EXERCISE: WHERE AM I GOING . . . AND WHY? 342
APPLICATION CASE: GOOGLE REACTS 343
CONTINUING CASE: CARTER CLEANING COMPANY 343
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 343
KEY TERMS 344
ENDNOTES 344
PART 3 VIDEO CASES APPENDIX 347

PART FOUR COMPENSATION 350

11 Establishing Strategic Pay Plans 350

BASIC FACTORS IN DETERMINING PAY RATES 352
Aligning Total Rewards with Strategy 352
THE STRATEGIC CONTEXT: Wegmans Foods 352
Equity and Its Impact on Pay Rates 353
Legal Considerations in Compensation 354
MANAGING THE NEW WORKFORCE: The Independent Contractor 355
Union Influences on Compensation Decisions 358
Pay Policies 358
HR AS A PROFIT CENTER: Wegmans Foods 359
JOB EVALUATION METHODS 359
Compensable Factors 360
Preparing for the Job Evaluation 360
XVI CONTENTS

Job Evaluation Methods: Ranking 361

Job Evaluation Methods: Job Classification 362
Job Evaluation Methods: Point Method 363
Computerized Job Evaluations 363
HOW TO CREATE A MARKET-COMPETITIVE PAY PLAN 364
1. Choose Benchmark Jobs 364
2. Select Compensable Factors 364
3. Assign Weights to Compensable Factors 365
4. Convert Percentages to Points for Each Factor 365
5. Define Each Factor s Degrees 366
6. Determine for Each Job Its Factors Degrees and Assign Points 366
7. Review Job Descriptions and Job Specifications 366
8. Evaluate the Jobs 367
9. Draw the Current (Internal) Wage Curve 368
10. Conduct a Market Analysis: Salary Surveys 368
11. Draw the Market (External) Wage Curve 370
12. Compare and Adjust Current and Market Wage Rates for Jobs 370
13. Develop Pay Grades 371
14. Establish Rate Ranges 371
15. Address Remaining Jobs 373
16. Correct Out-of-Line Rates 373
PRICING MANAGERIAL AND PROFESSIONAL JOBS 374
Compensating Executives and Managers 374
What Determines Executive Pay? 374
Compensating Professional Employees 375
CONTEMPORARY TOPICS IN COMPENSATION 376
Competency-Based Pay 376
Broadbanding 378
Actively Managing Compensation Allocations and Talent Management 380
Comparable Worth 380
Board Oversight of Executive Pay 381
Total Rewards and Tomorrow s Pay Programs 381
Improving Productivity Through HRIS: Automating Strategic
Compensation Administration 382
CHAPTER SECTION SUMMARIES 382
DISCUSSION QUESTIONS 383
INDIVIDUAL AND GROUP ACTIVITIES 383
EXPERIENTIAL EXERCISE: RANKING THE COLLEGE S ADMINISTRATORS 384
APPLICATION CASE: SALARY INEQUITIES AT ACME MANUFACTURING 384
CONTINUING CASE: CARTER CLEANING COMPANY 385
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 385
KEY TERMS 386
ENDNOTES 386

12 Pay for Performance and Financial Incentives 390

MONEY AND MOTIVATION 392
Linking Strategy, Performance, and Incentive Pay 392
THE STRATEGIC CONTEXT: The Car Sales Commission 392
Motivation and Incentives 393
Incentive Pay Terminology 395
Employee Incentives and the Law 395
INDIVIDUAL EMPLOYEE INCENTIVE AND RECOGNITION PROGRAMS 396
Piecework Plans 396
Merit Pay as an Incentive 396
Incentives for Professional Employees 398
Nonfinancial and Recognition-Based Awards 398
Online and IT-Supported Awards 400
Job Design 400
 CONTENTS XVII

INCENTIVES FOR SALESPEOPLE 400

Salary Plan 401
Commission Plan 401
Combination Plan 401
Maximizing Sales Force Results 402
Evidence-Based HR: How Effective Are Your Incentives? 402
INCENTIVES FOR MANAGERS AND EXECUTIVES 403
Strategy and the Executive s Long-Term and Total Rewards Package 403
Sarbanes-Oxley 404
Short-Term Incentives and the Annual Bonus 404
Strategic Long-Term Incentives 406
Other Executive Incentives 407
TEAM AND ORGANIZATIONWIDE INCENTIVE PLANS 407
How to Design Team Incentives 407
Evidence-Based HR: How Effective Are Your Incentives? 408
Profit-Sharing Plans 409
Scanlon Plans 409
Other Gainsharing Plans 410
At-Risk Pay Plans 410
Employee Stock Ownership Plans 411
DESIGNING EFFECTIVE INCENTIVE PROGRAMS 411
HR AS A PROFIT CENTER: The Impact of Financial and Nonfinancial Incentives 412
The Five Building Blocks of Effective Incentive Plans 412
Incentive Plans in Practice: Nucor 413
CHAPTER SECTION SUMMARIES 413
DISCUSSION QUESTIONS 414
INDIVIDUAL AND GROUP ACTIVITIES 414
EXPERIENTIAL EXERCISE: MOTIVATING THE SALES FORCE AT EXPRESS AUTO 415
APPLICATION CASE: INSERTING THE TEAM CONCEPT INTO COMPENSATION OR NOT 415
CONTINUING CASE: CARTER CLEANING COMPANY 416
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 417
KEY TERMS 417
ENDNOTES 418

13 Benefits and Services 422

THE BENEFITS PICTURE TODAY 424
Policy Issues 424
THE STRATEGIC CONTEXT: NES Rentals 425
PAY FOR TIME NOT WORKED 425
Unemployment Insurance 425
Vacations and Holidays 427
Sick Leave 427
Evidence-Based HR: Tracking Sick Leave 428
HR AS A PROFIT CENTER: Cutting Absences at the Driver and Vehicle Licensing Agency 428
Parental Leave and the Family and Medical Leave Act 429
Severance Pay 431
Supplemental Unemployment Benefits 432
INSURANCE BENEFITS 432
Workers Compensation 432
Hospitalization, Health, and Disability Insurance 433
The Legal Side of Health Benefits 434
Trends in Employer Health Care Cost Control 435
Long-Term Care 437
Life Insurance 438
Benefits for Part-Time and Contingent Workers 438
RETIREMENT BENEFITS 438
Social Security 438
XVIII CONTENTS

Pension Plans 438

Pension Planning and the Law 441
Pensions and Early Retirement 442
Improving Productivity Through HRIS: Online Benefits Management Systems 442
PERSONAL SERVICES AND FAMILY-FRIENDLY BENEFITS 443
Personal Services 443
Family-Friendly (Work Life) Benefits 443
Other Job-Related Benefits 445
Executive Perquisites 445
FLEXIBLE BENEFITS PROGRAMS 446
The Cafeteria Approach 446
Benefits and Employee Leasing 447
Flexible Work Schedules 448
CHAPTER SECTION SUMMARIES 449
DISCUSSION QUESTIONS 450
INDIVIDUAL AND GROUP ACTIVITIES 450
EXPERIENTIAL EXERCISE: REVISING THE BENEFITS PACKAGE 450
APPLICATION CASE: STRIKING FOR BENEFITS 451
CONTINUING CASE: CARTER CLEANING COMPANY 451
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 452
KEY TERMS 452
ENDNOTES 453
PART 4 VIDEO CASES APPENDIX 456

PART FIVE EMPLOYEE RELATIONS 458

14 Ethics and Employee Rights and Discipline 458

ETHICS AND FAIR TREATMENT AT WORK 460
THE STRATEGIC CONTEXT: Berkshire Hathaway 460
What Is Ethics? 461
Ethics and the Law 461
Ethics, Justice, and Fair Treatment 461
Ethics, Public Policy, and Employee Rights 462
WHAT SHAPES ETHICAL BEHAVIOR AT WORK? 463
There s No One Smoking Gun 463
The Person (What Makes Bad Apples?) 464
Outside Forces That Shape Ethical Decisions (Bad Barrels) 464
In Summary: Some Things to Keep in Mind About Ethical Behavior at Work 466
USING HUMAN RESOURCE MANAGEMENT METHODS TO PROMOTE ETHICS
AND FAIR TREATMENT 467
Selection 467
Ethics Training 468
Performance Appraisal 468
Reward and Disciplinary Systems 468
Managing Ethics Compliance 468
MANAGING EMPLOYEE DISCIPLINE AND PRIVACY 468
Fairness in Disciplining 469
Bullying and Victimization 469
What Causes Unfair Behavior 470
Basics of a Fair and Just Disciplinary Process 471
Employee Privacy 474
Employee Monitoring 474
MANAGING DISMISSALS 476
Termination at Will and Wrongful Discharge 476
Grounds for Dismissal 477
Avoiding Wrongful Discharge Suits 478
 CONTENTS XIX

HR AS A PROFIT CENTER: Wrongful Terminations 479

Personal Supervisory Liability 480
The Termination Interview 481
Layoffs, Downsizing, and the Plant Closing Law 483
Adjusting to Downsizings and Mergers 485
CHAPTER SECTION SUMMARIES 486
DISCUSSION QUESTIONS 487
INDIVIDUAL AND GROUP ACTIVITIES 487
EXPERIENTIAL EXERCISE: DISCIPLINE OR NOT? 487
APPLICATION CASE: ENRON, ETHICS, AND ORGANIZATIONAL CULTURE 488
CONTINUING CASE: CARTER CLEANING COMPANY 489
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 489
KEY TERMS 490
ETHICS QUIZ ANSWERS 490
ENDNOTES 490

15 Labor Relations and Collective Bargaining 494

THE LABOR MOVEMENT 496
THE STRATEGIC CONTEXT: The Anti-Walmart 496
Why Do Workers Organize? 496
What Do Unions Want? 497
The AFL-CIO and the SEIU 498
UNIONS AND THE LAW 498
Period of Strong Encouragement: The Norris-LaGuardia (1932) and National Labor Relations
(or Wagner) Acts (1935) 499
Period of Modified Encouragement Coupled with Regulation: The Taft-Hartley Act (1947) 501
Unfair Union Labor Practices 501
THE UNION DRIVE AND ELECTION 502
Step 1. Initial Contact 502
Step 2. Obtaining Authorization Cards 504
Step 3. Hold a Hearing 505
Step 4. The Campaign 505
Step 5. The Election 506
How to Lose an NLRB Election 507
Evidence-Based HR: What to Expect the Union to Do to Win the Election 508
The Supervisor s Role 508
Rules Regarding Literature and Solicitation 509
Decertification Elections: Ousting the Union 509
THE COLLECTIVE BARGAINING PROCESS 509
What Is Collective Bargaining? 509
What Is Good Faith? 510
The Negotiating Team 510
HR AS A PROFIT CENTER: Costing the Contract 511
Bargaining Items 511
Bargaining Hints 511
Impasses, Mediation, and Strikes 512
Improving Productivity Through HRIS: Unions Go High-Tech 516
The Contract Agreement 516
DEALING WITH DISPUTES AND GRIEVANCES 517
Sources of Grievances 517
The Grievance Procedure 518
Guidelines for Handling Grievances 519
THE UNION MOVEMENT TODAY AND TOMORROW 520
Why Union Membership Is Down 520
An Upswing for Unions? 520
Card Check and Other New Union Tactics 521
High-Performance Work Systems, Employee Participation, and Unions 521
XX CONTENTS

CHAPTER SECTION SUMMARIES 523

DISCUSSION QUESTIONS 524
INDIVIDUAL AND GROUP ACTIVITIES 524
EXPERIENTIAL EXERCISE: THE UNION-ORGANIZING CAMPAIGN AT PIERCE U. 524
APPLICATION CASE: NEGOTIATING WITH THE WRITERS GUILD OF AMERICA 525
CONTINUING CASE: CARTER CLEANING COMPANY 525
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 526
KEY TERMS 526
ENDNOTES 527

16 Employee Safety and Health 530

SAFETY AND THE MANAGER 532
Why Safety Is Important 532
Management s Role in Safety 532
What Top Management Can Do 532
THE STRATEGIC CONTEXT: Deepwater Horizon 532
The Supervisor s Role in Safety 533
OCCUPATIONAL SAFETY LAW 533
OSHA Standards and Record Keeping 533
Inspections and Citations 535
Responsibilities and Rights of Employers and Employees 538
WHAT CAUSES ACCIDENTS? 539
What Causes Unsafe Conditions and Other Work-Related Safety Problems? 539
What Causes Unsafe Acts? (A Second Basic Cause of Accidents) 540
HOW TO PREVENT ACCIDENTS 540
Reducing Unsafe Conditions 540
MANAGING THE NEW WORKFORCE: Protecting Vulnerable Workers 545
Reducing Unsafe Acts 546
Reducing Unsafe Acts through Selection and Placement 546
Reducing Unsafe Acts through Training 546
MANAGING THE NEW WORKFORCE: Safety Training for Hispanic Workers 547
Reducing Unsafe Acts through Motivation: Posters, Incentives, and Positive Reinforcement 547
Reducing Unsafe Acts through Behavior-Based Safety 548
Reducing Unsafe Acts through Employee Participation 548
Reducing Unsafe Acts by Conducting Safety and Health Audits and Inspections 549
Controlling Workers Compensation Costs 550
HR AS A PROFIT CENTER: Reducing Workers Compensation Claims 551
WORKPLACE HEALTH HAZARDS: PROBLEMS AND REMEDIES 551
The Basic Industrial Hygiene Program 552
Asbestos Exposure at Work 552
Infectious Diseases 553
Air Quality 553
Alcoholism and Substance Abuse 553
Stress, Burnout, and Depression 555
Solving Computer-Related Ergonomic Problems 557
Repetitive Motion Disorders 557
Workplace Smoking 558
HR AS A PROFIT CENTER: Wellness Pays 558
Violence at Work 558
Workplace Violence Supervisory Training 560
OCCUPATIONAL SECURITY AND SAFETY 561
Basic Prerequisites for a Crime Prevention Plan 562
Setting Up a Basic Security Program 562
Evacuation Plans 563
Company Security and Employee Privacy 563
CHAPTER SECTION SUMMARIES 564
DISCUSSION QUESTIONS 564
 CONTENTS XXI

INDIVIDUAL AND GROUP ACTIVITIES 565

EXPERIENTIAL EXERCISE: HOW SAFE IS MY UNIVERSITY? 565
APPLICATION CASE: THE NEW SAFETY AND HEALTH PROGRAM 569
CONTINUING CASE: CARTER CLEANING COMPANY 570
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 570
KEY TERMS 571
ENDNOTES 571

17 Managing Global Human Resources 576

The Manager s Global Challenge 578
THE STRATEGIC CONTEXT: Unionizing Walmart Stores in China 578
ADAPTING HUMAN RESOURCE ACTIVITIES TO INTERCOUNTRY
DIFFERENCES 578
Cultural Factors 579
Economic Systems 580
Legal, Political, and Labor Relations Factors 580
Ethics and Codes of Conduct 581
HR Abroad Example: The European Union 581
HR Abroad Example: China 581
STAFFING THE GLOBAL ORGANIZATION 582
International Staffing: Home or Local? 582
HR AS A PROFIT CENTER: Reducing Expatriate Costs 583
Offshoring 585
Management Values and International Staffing Policy 585
Selecting Expatriate Managers 586
Avoiding Early Expatriate Returns 589
TRAINING AND MAINTAINING EMPLOYEES ABROAD 590
Orienting and Training Employees on International Assignment 590
Appraising Managers Abroad 590
Compensating Managers Abroad 591
Labor Relations Abroad 593
Terrorism, Safety, and Global HR 593
Repatriation: Problems and Solutions 594
Improving Productivity Through HRIS: Taking the HRIS Global 595
MANAGING HR LOCALLY: HOW TO PUT INTO PRACTICE A GLOBAL HR SYSTEM 595
Developing a More Effective Global HR System 596
Making the Global HR System More Acceptable 596
Implementing the Global HR System 597
CHAPTER SECTION SUMMARIES 597
DISCUSSION QUESTIONS 598
INDIVIDUAL AND GROUP ACTIVITIES 598
EXPERIENTIAL EXERCISE: A TAXING PROBLEM FOR EXPATRIATE EMPLOYEES 599
APPLICATION CASE: BOSS, I THINK WE HAVE A PROBLEM 599
CONTINUING CASE: CARTER CLEANING COMPANY 600
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE:
THE HOTEL PARIS CASE 600
KEY TERMS 601
ENDNOTES 601

18 Managing Human Resources in Small and Entrepreneurial

Firms 604
THE SMALL BUSINESS CHALLENGE 606
Why Small Business Is Important 606
How Small Business Human Resource Management Is Different 606
Why HRM Is Important to Small Businesses 607
THE STRATEGIC CONTEXT: The Dealership 608
USING INTERNET AND GOVERNMENT TOOLS TO SUPPORT THE HR EFFORT 608
XXII CONTENTS

Complying with Employment Laws 608

Employment Planning and Recruiting 611
Employment Selection 611
Employment Training 612
Employment Appraisal and Compensation 613
Employment Safety and Health 614
LEVERAGING SMALL SIZE: FAMILIARITY, FLEXIBILITY, FAIRNESS, INFORMALITY,
AND HRM 614
Simple, Informal Employee Selection Procedures 614
A Streamlined Interviewing Process 614
Work-Sampling Tests 616
Flexibility in Training 616
Flexibility in Benefits and Rewards 617
Improved Communications 620
* HR AS A PROFIT CENTER: IHOP 620
Fairness and the Family Business 620
USING PROFESSIONAL EMPLOYER ORGANIZATIONS 621
How Do PEOs Work? 621
Why Use a PEO? 621
Caveats 622
MANAGING HR SYSTEMS, PROCEDURES, AND PAPERWORK 623
Introduction 623
Basic Components of Manual HR Systems 623
Automating Individual HR Tasks 624
Human Resource Information Systems (HRIS) 624
Improved Transaction Processing 625
Online Self-Processing 625
Improved Reporting Capability 625
HR System Integration 625
HRIS Vendors 625
HR and Intranets 625
CHAPTER SECTION SUMMARIES 626
DISCUSSION QUESTIONS 626
INDIVIDUAL AND GROUP ACTIVITIES 627
EXPERIENTIAL EXERCISE: BUILDING AN HRIS 627
APPLICATION CASE: NETFLIX BREAKS THE RULES 627
CONTINUING CASE: CARTER CLEANING COMPANY 628
TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE: THE HOTEL PARIS CASE 628
ENDNOTES 629
PART 5 VIDEO CASES APPENDIX 631

APPENDICES

APPENDIX A PHR and SPHR Knowledge Base 633

APPENDIX B Comprehensive Cases 641

Glossary 655
Name and Organization Index 663

Subject Index 678

PREFACE
Human Resource Management, 13th edition provides students in human resource
management courses and practicing managers with a comprehensive review of
essential personnel management concepts and techniques in a highly readable and
understandable form. As this new edition goes to press, I feel even more strongly than
I did when I wrote the first that all managers not just HR managers need a strong
foundation in HR/personnel management concepts and techniques to effectively do
their jobs. Particularly in these difficult economic times, where students want to be
able to apply at work what they learn in class, this edition continues to particularly
focus on practical applications that all managers can use in carrying out their
HR-related responsibilities. If you adopted the previous edition, you will find
transitioning to the 13th edition easy, as the chapter outline (as well as the outline for
each chapter) is more or less the same.
I had two goals in writing the 13th edition. In brief, I wanted it to provide a
high-level book s complete coverage with a lower-level book s readability, user-
friendliness and (relative) brevity. To that end, I ve made six major changes to this
edition.
1. Dozens of new topics. These include new, expanded treatments of reliability,
validity, generalizability, utility, person-job fit, person-organization fit, and
bias in Chapter 6 (Employee Selection), as well as the standard deviation rule
in equal employment compliance, retaliation, job satisfaction and withdrawal,
managing voluntary turnover, management s willingness to take a strike, cross
training, the Myers-Briggs type indicator, workflow analysis, job design in job
analysis, task analysis and task statements, the psychological contract, job
hazard analysis, safety awareness programs, operations reviews, competencies
of HR professionals, managing voluntary turnover, employee engagement,
the process of job withdrawal, cumulative trauma disorders, a thoroughly
revised and expanded description of the ADDIE training process in Chapter 8,
and new material on employee rights in Chapter 14 (Ethics and Employee
Rights and Discipline). This edition also contains many dozens of new
recent citations.
2. A new boxed feature, The Strategic Context, paired with new strategic
human resource management opening scenarios. These boxes illustrate
the strategic context of each chapter s material for instance, how
L.L.Bean s employee selection standards help to produce the employee
competencies and behaviors that in turn support L.L.Bean s customer
service strategy. The new chapter opening model says this: that (1) the
company s human resource policies and practices should (2) produce
the employee competencies and behaviors that (3) the company needs
to implement its strategic plan.
3. New HR as a Profit Center boxed features. I ve added a new focus throughout
the book on the value proposition and on HR strategy, metrics, and analysis.
The new HR as a Profit Center features give readers actual examples of human
resource management practices they can apply on their jobs to cut costs, boost
revenues, and improve performance.
4. A completely revised Chapter 10 on Employee Retention, Engagement,
and Careers, and a completely rewritten and practical discussion in
Chapter 11 of how to actually develop a market competitive salary
structure.
5. Eighteen new videos all reviewed by me and with discussion questions
and a synopsis for each video included at the end of each part of the
textbook. We have a total of 28 videos on the DVD.
6. All in a slimmer package. This 13th edition is about 10% (73 pages) shorter
than the 12th edition, which I accomplished mostly by pruning material.

XXIII
XXIV PREFACE

NEW FEATURES
As noted previously, I ve added two important boxed features.
Strategic HR opening scenarios paired with a new boxed feature, The Strategic
Context. What HR practices and policies do we need to produce the employee
competencies and behaviors required to achieve our strategic goals? The new The
Strategic Context features (linked to the opening scenarios) show how companies
make human resource management decisions within the context of their strategic
initiatives. Examples include how Whirlpool uses candidate interviewing to build
its customer base (Chapter 7), and how Google fosters the employee interaction
its strategy depends on with a crowd sourcing selection process (Chapter 6).
New HR as a Profit Center boxed feature. Today s students want to apply what
they learn in class to their jobs, and today's employers expect human resource
management to add measurable value to the company. Our new HR as a Profit
Center features show actual examples of how human resource management
practices do this. Examples include how the Atlantic American insurance company
conducted a workflow analysis to identify inefficiencies in how it processes its
insurance claims (Chapter 4), and how KeyBank produced a $1.7 million cost
savings in teller turnover in one year, simply by making better hiring decisions to
reduce training costs (Chapter 6).
In addition, I ve retained these important 12th edition features.
Evidence-Based Human Resource Management illustrates why and how
managers base human resource decisions on measurable, data-based evidence.
Improving Productivity Through HRIS demonstrates how managers use tech-
nology to improve the productivity of HR.
Managing the New Workforce illustrates the skills managers need to manage
today s diverse employees.
Previous editions of this textbook were the first to provide specific, actionable expla-
nations and illustrations showing how to use devices such as the HR Scorecard process
(explained fully in Chapter 3) to measure HR s effectiveness in achieving the compa-
ny s strategic aims. In this 13th edition, a continuing Hotel Paris case at the end of
each chapter gives readers practice in applying strategic human resource management
in action. Coverage of the core concepts of strategic HR appears in Chapter 3.

Video Cases
To provide professors, students, and practicing managers with a richer and more flexible
textbook, I have incorporated 18 new video cases at the end of the book s five parts. The
in-book video cases provide a basis for in-class discussion of the videos available to
adopters; I reviewed the videos and wrote the questions.

Comprehensive Cases
To continue with the theme of a richer, more flexible textbook, professors, students,
and practicing managers will find I ve again included five comprehensive cases in an
appendix at the end of the book. I personally wrote the five comprehensive cases to provide
students and faculty with an opportunity to discuss and apply the book s concepts and
techniques by addressing more comprehensive and realistic case-based issues.

SHRM HRCI Review Questions

The profession of HR management is becoming increasingly demanding. Responding
to these new demands, thousands of HR managers have passed the various certification
exams offered by the Human Resource Certification Institute (HRCI), thus earning the
designations Professional in HR (PHR), Senior Professional in HR (SPHR), and Global
Professional in HR (GPHR) (as well as a special exam for California HR professionals).
 PREFACE XXV

This edition again contains, in each chapter, an HRCI-related exercise students can use
to apply their knowledge of that chapter s material within the HRCI exam context, as
well as a comprehensive listing of the topics that these exams address, in a HRCI guide-
lines appendix.

SUPPLEMENTS
Instructor Supplements
Instructors can access downloadable supplemental resources by signing into the
Instructor Resource Center at www.pearsonhighered.com/educator.
It gets better. Once you register, you will not have additional forms to fill out or
multiple user names and passwords to remember to access new titles and/or editions.
As a registered faculty member, you can log in directly to download resource files and
receive immediate access and instructions for installing Course Management content
to your campus server.
Need help? Our dedicated Technical Support team is ready to assist instructors
with questions about the media supplements that accompany this text. Visit
http://247pearsoned.custhelp.com/ for answers to frequently asked questions and
toll-free user support phone numbers. The following supplements are available to
adopting instructors.

INSTRUCTOR S MANUAL This comprehensive supplement provides extensive

instructional support. The instructor s manual includes a course planning guide and
chapter guides for each chapter in the text. The chapter guides include a chapter
outline, lecture notes, answers to discussion questions, definitions to key terms, and
references to the figures, tables, cases. The instructor s manual also includes a video
guide.

TEST ITEM FILE The test item file contains approximately 110 questions per
chapter including multiple-choice, true/false, and short-answer/essay-type questions.
Answers are provided for all questions along with difficulty ratings. In addition, the
Test Item File includes questions that are tagged to Learning Objectives and to AACSB
Learning Standards to help measure whether students are grasping the course content
that aligns with AACSB guidelines.

TESTGEN SOFTWARE Pearson Education s test-generating software is available

from www.pearsonhighered.com/irc. The software is PC/MAC compatible and
preloaded with all of the Test Item File questions. You can manually or randomly view
test questions and drag and drop to create a test. You can add or modify test-bank
questions as needed. All of our TestGens are converted for use in Blackboard and
WebCT and are available for download from www.pearsonhighered.com/irc.

BLACKBOARD/WEBCT BlackBoard and WebCT Course Cartridges are available

for download from www.pearsonhighered.com/irc. These standard course cartridges
contain the Instructor s Manual, TestGen, Instructor PowerPoints, and when available,
Student Powerpoints and Student Data Files.

INSTRUCTOR POWERPOINT PRESENTATION This presentation includes

basic outlines and key points from each chapter. It includes figures from the text but
no forms of rich media, which makes the file size manageable and easier to share
online or via email.

VIDEOS ON DVD Adopters can access the 18 videos referenced in the part-
ending cases, as well as 10 additional videos, on the 2013 Human Resource
Management Video Library DVD. These videos have been produced to depict real-
world HRM issues and give students a taste of the multi-faceted nature of HRM in
real companies.
XXVI PREFACE

Student Supplements
MYMANAGEMENTLAB MyManagementLab (www.mymanagementlab.com)
is an easy-to-use online tool that personalizes course content and provides robust
assessment and reporting to measure student and class performance. All the
resources you need for course success are in one place flexible and easily adapted
for your course experience.

COURSESMART ETEXTBOOKS ONLINE CourseSmart eTextbooks were deve-

loped for students looking to save on required or recommended textbooks. Students
simply select their eText by title or author and purchase immediate access to the content
for the duration of the course using any major credit card. With a CourseSmart eText,
students can search for specific keywords or page numbers, take notes online, print out
reading assignments that incorporate lecture notes, and bookmark important passages
for later review. For more information or to purchase a CourseSmart eTextbook, visit
www.coursesmart.com.
ACKNOWLEDGMENTS
Everyone involved in creating this book is very proud of what we ve achieved. Human
Resource Management is one of the top-selling books in this market, and, as you read this,
students and managers around the world are using versions translated into a number of
languages, including Thai, French, Spanish, Indonesian, Russian, and both traditional
and simplified Chinese.
Although I am, of course, solely responsible for the content in Human Resource
Management, I want to thank several people for their assistance. This includes, first, the
faculty who reviewed this and the 12th edition:
Kyle Stone, Fort Hayes State University
George Wynn, University of Tampa
Edward Ward, Saint Cloud State University
Daniel Grundmann, Indiana University
Clare Francis, University of North Dakota
John Durboraw, Columbia College
Mary Kern, Baruch College
Lucy Ford, St. Joseph s University
Tom Zagenczyk, Clemson University
Leonard Bierman, Texas A&M University
I would also like to thank the supplements authors for the 13th edition for their hard
work on updating and improving the supplements. They include George Wynn,
University of Tampa; Emily Yelverton, and Alyssa Lambert, Indiana University Southeast.
I appreciate comments, and you can reach me most easily at the address I use for this
book, [email protected].
At Pearson/Prentice Hall, I am again grateful for the support and dedicated assis-
tance of a great publishing team. Sally Yagan, Editorial Director; Brian Mickelson,
Acquisitions Editor; Judy Leale, Senior Managing Editor; Kelly Warsak, Production
Project Manager; and Ashley Santora, Director of Editorial Services, along with Jen
Welsch at BookMasters, worked hard to make this a book that we re all very proud of.
Thanks to Nikki Ayana Jones, Senior Marketing Manager, and the Pearson sales staff,
without whose efforts this book would no doubt languish on the shelf. I want to thank
all the people at Pearson International for their efforts and effectiveness in managing
the internationalization of this book.
At home, I want to acknowledge and thank my wife, Claudia, for her support
during the many hours I spent working on this edition; my son, Derek, certainly still the
best people manager I know and a source of enormous pride; as well as Lisa, Samantha,
and Taylor, who are always in my thoughts. My parents were always a great source of
support and encouragement and would have been very proud to see this book.
Gary Dessler

XXVII
PART ONE | INTRODUCTION

1
Introduction to Human
Resource Management
Source: Paul Beaty/AP Images.
LEARNING OBJECTIVES Company s
1. Explain what human resource management is and how Strategic Goals
it relates to the management process.
2. Show with examples why human resource management
is important to all managers.
3. Illustrate the human resources responsibilities of line
and staff (HR) managers. Employee Competencies
and Behaviors Required
4. Briefly discuss and illustrate each of the important for Company to Achieve
trends influencing human resource management. These Strategic Goals
5. List and briefly describe important traits of today s
human resource managers.
6. Define and give an example of evidence-based human
resource management. tegic and Lega
Stra nvironment l
7. Outline the plan of this book. E

Re Place
c r u m en t
Relatio ee

itme
ns
Employ
M

nt and
ost L.L.Bean customers find its customer service HR Policies and Practices
staff to be knowledgeable, helpful, and under- Required to Produce
standing. Its managers know that courteous, Employee Competencies
and Behaviors
expert workers are the key to such customer

De rai
service, and that it takes the right human resource practices l

ve
po n

T
ion
tas
to attract and cultivate such employees. The company knows n epm tnema gni
what it s looking for. Its Web site says candidates should be oC dn
Friendly, Dependable, Helpful & Authentic; Trustworthy &
Honest; Experienced & Innovative; Outdoor Oriented &
Environmentally Aware; and want to have Fun.1 The com-
pany uses an array of human resource practices, including WHERE ARE WE NOW . . .
competitive pay, cash performance bonuses, multiple medi- The purpose of this chapter is to explain
cal and insurance plans, and outdoor experience days to what human resource management is, and
attract and cultivate such employee behaviors.2 The success why it s important to all managers. We ll see
that human resource management activities
of L.L.Bean s customer service strategy depends on its such as hiring, training, appraising, compen-
human resource management practices. sating, and developing employees are part
of every manager s job. And we ll see that
human resource management is also a sepa-
rate function, usually with its own human
resource or HR manager. The main topics
we ll cover include the meaning of
human resource management; why human
resource management is important to all
managers, global and competitive trends,
human resource management trends, and
the plan of this book. The framework above
(which introduces each chapter) makes this
Access a host of interactive learning aids at point: That the firm s HR polices and
www.mymanagementlab.com to help strengthen practices should produce the employee
your understanding of the chapter concepts. skills and behaviors the company needs to
achieve its strategic aims.

MyManagementLab 3
4 PART 1 INTRODUCTION

1 Explain what human

WHAT IS HUMAN RESOURCE MANAGEMENT
resource management is and AND WHY IS IT IMPORTANT?
how it relates to the man-
agement process. What Is Human Resource Management?
L.L.Bean is an organization. An organization consists of people with formally assigned
roles who work together to achieve the organization s goals. A manager is the person
responsible for accomplishing the organization s goals, who does so by managing the
efforts of the organization s people.
Most experts agree that managing involves five functions: planning, organizing,
staffing, leading, and controlling. In total, these functions represent the
management process. Some of the specific activities involved in each function
include:

* Planning. Establishing goals and standards; developing rules and procedures;

developing plans and forecasting.
* Organizing. Giving each subordinate a specific task; establishing departments;
delegating authority to subordinates; establishing channels of authority and
communication; coordinating subordinates work.
* Staffing. Determining what type of people you should hire; recruiting
prospective employees; selecting employees; training and developing employees;
setting performance standards; evaluating performance; counseling employees;
compensating employees.
* Leading. Getting others to get the job done; maintaining morale; motivating
subordinates.
* Controlling. Setting standards such as sales quotas, quality standards, or produc-
tion levels; checking to see how actual performance compares with these standards;
taking corrective action, as needed.

In this book, we are going to focus on one of these functions the staffing, per-
sonnel management, or human resource management (HRM) function. Human
resource management is the process of acquiring, training, appraising, and com-
pensating employees, and of attending to their labor relations, health and safety, and
fairness concerns. The topics we ll discuss should therefore provide you with the
concepts and techniques you need to perform the people or personnel aspects of
your management job. These include:

* Conducting job analyses (determining the nature of each employee s job)

* Planning labor needs and recruiting job candidates
* Selecting job candidates
* Orienting and training new employees
* Managing wages and salaries (compensating employees)
* Providing incentives and benefits
* Appraising performance
* Communicating (interviewing, counseling, disciplining)
* Training and developing managers
* Building employee commitment

And what a manager should know about:

* Equal opportunity and affirmative action

* Employee health and safety
* Handling grievances and labor relations
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 5

2 Show with examples why

Why Is Human Resource Management Important
human resource to All Managers?
management is important These concepts and techniques important to all managers for several reasons.
to all managers.

AVOID PERSONNEL MISTAKES First, having a command of this knowledge

will help you avoid the sorts of personnel mistakes you don t want to make while
managing. For example, no manager wants to:
* Hire the wrong person for the job
* Experience high turnover
* Have your people not doing their best
* Waste time with useless interviews
* Have your company taken to court because of your discriminatory actions
* Have your company cited under federal occupational safety laws for unsafe practices
* Have some employees think their salaries are unfair relative to others in the
organization
* Allow a lack of training to undermine your department s effectiveness
* Commit any unfair labor practices
Carefully studying this book will help you avoid mistakes like these.

IMPROVE PROFITS AND PERFORMANCE Similarly, effective human

resource management can help ensure that you get results through people.
Remember that you can do everything else right as a manager lay brilliant plans,
draw clear organization charts, set up world-class assembly lines, and use
sophisticated accounting controls but still fail, by hiring the wrong people or by
not motivating subordinates. On the other hand, many managers presidents,
generals, governors, supervisors have been successful even with inadequate plans,
organizations, or controls. They were successful because they had the knack of
hiring the right people for the right jobs and motivating, appraising, and
developing them. Remember as you read this book that getting results is the bottom
line of managing, and that, as a manager, you will have to get those results through
people. As one company president summed up:
For many years, it has been said that capital is the bottleneck for a developing
industry. I don t think this any longer holds true. I think it s the work force and the
company s inability to recruit and maintain a good work force that does constitute
the bottleneck for production. I don t know of any major project backed by good
ideas, vigor, and enthusiasm that has been stopped by a shortage of cash. I do know
of industries whose growth has been partly stopped or hampered because they
can t maintain an efficient and enthusiastic labor force, and I think this will hold
true even more in the future.3
Indeed, we ll see that because of global competition, technological advances,
and the changing nature of work, that president s statement has never been truer than
it is today.

organization management process

People with formally assigned roles who work The five basic functions of planning, organizing,
together to achieve the organization s goals. staffing, leading, and controlling.
manager human resource management (HRM)
The person responsible for accomplishing The process of acquiring, training, apprais-
the organization s goals, and who does so by ing, and compensating employees, and of
managing (planning, organizing, staffing, attending to their labor relations, health
leading, and controlling) the efforts of the and safety, and fairness concerns.
organization s people.
6 PART 1 INTRODUCTION

YOU TOO MAY SPEND SOME TIME AS AN HR MANAGER Here is a third

reason to be familiar with this book s contents. You may well make a planned
(or unplanned) stopover as a human resource manager. For example, Pearson
Corporation (which publishes this book) recently promoted the head of one of its
publishing divisions to chief human resource executive at its corporate headquarters.
After General Motors emerged from bankruptcy a few years ago, it replaced its human
resource director with Mary Barra, GM s vice president for global manufacturing
engineering, an executive with no human resource management experience.4 One
survey found that about one-fourth of large U.S. businesses appointed managers with
no human resource management experience as their top human resource executives.
Reasons given include the fact that these people may give the firms HR efforts a more
strategic emphasis, and the possibility that they re sometimes better equipped to
integrate the firm s human resource efforts with the rest of the business.5
However, most top human resource executives do have prior human resource expe-
rience. About 80% of those in one survey worked their way up within HR.6 About 17%
of these HR executives had earned the Human Resource Certification Institute s Senior
Professional in Human Resources (SPHR) designation, and 13% were certified Profes-
sionals in Human Resources (PHR). The Society for Human Resource Management
(SHRM) offers a brochure describing alternative career paths within human resource
management. Find it at www.shrm.org/Communities/StudentPrograms/Documents/
07-0971%20Careers%20HR%20Book_final.pdf.

HR FOR ENTREPRENEURS Finally, another reason to study this book is that

you might end up as your own human resource manager. More than half the people
working in the United States about 68 million out of 118 million work for small
firms. Small businesses as a group also account for most of the 600,000 or so new
businesses created every year. Statistically speaking, therefore, most people
graduating from college in the next few years either will work for small businesses
or will create new small businesses of their own. Especially if you are managing
your own small firm with no human resource manager, you ll have to understand
the nuts and bolts of human resource management.7 We ll specifically address HR
for entrepreneurs in Chapter 18.

Line and Staff Aspects of Human Resource Management

3 Illustrate the human
resources responsibilities of All managers are, in a sense, human resource managers, because they all get involved in
line and staff (HR) managers. recruiting, interviewing, selecting, and training their employees. Yet most firms also
have human resource departments with their own top managers. How do the duties of
this human resource manager and department relate to the human resource duties
of sales and production and other managers? Answering this requires a short defini-
tion of line versus staff authority.
Authority is the right to make decisions, to direct the work of others, and to give
orders. Managers usually distinguish between line authority and staff authority.
In organizations, having what managers call line authority traditionally gives
managers the right to issue orders to other managers or employees. Line authority
therefore creates a superior (order giver) subordinate (order receiver) relationship.
When the vice president of sales tells her sales director to get the sales presentation
ready by Tuesday, she is exercising her line authority. Staff authority gives a manager
the right to advise other managers or employees. It creates an advisory relationship.
When the human resource manager suggests that the plant manager use a particular
selection test, he or she is exercising staff authority.
On the organization chart, managers with line authority are line managers. Those
with staff (advisory) authority are staff managers. In popular usage, people tend to
associate line managers with managing departments (like sales or production) that are
crucial for the company s survival. Staff managers generally run departments that are
advisory or supportive, like purchasing, and human resource management. Human
resource managers are usually staff managers. They assist and advise line managers in
areas like recruiting, hiring, and compensation.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 7

Line Managers Human Resource Duties

However, line managers still have many human resource duties. This is
because the direct handling of people has always been part of every line
manager s duties, from president down to first-line supervisors.
For example, one major company outlines its line supervisors respon-
sibilities for effective human resource management under these general
headings:

1. Placing the right person in the right job

2. Starting new employees in the organization (orientation)
3. Training employees for jobs that are new to them
4. Improving the job performance of each person
5. Gaining cooperation and developing smooth working
relationships
6. Interpreting the company s policies and procedures
7. Controlling labor costs
Source: Fotolia.

8. Developing the abilities of each person

9. Creating and maintaining department morale
10. Protecting employees health and physical condition
Line authority gives the manager the right
to issue orders. In small organizations, line managers may carry out all these personnel
tasks unassisted. But as the organization grows, they need the assistance,
specialized knowledge, and advice of a separate human resource staff. The human
resource department provides this specialized assistance.

Human Resource Manager s Duties

In providing this specialized assistance, the human resource manager carries out three
distinct functions:
1. A line function. The human resource manager directs the activities of the people in
his or her own department, and perhaps in related areas (like the plant cafeteria).
2. A coordinative function. The human resource manager also coordinates
personnel activities, a duty often referred to as functional authority (or func-
tional control). Here he or she ensures that line managers are implementing the
firm s human resource policies and practices (for example, adhering to its
sexual harassment policies).
3. Staff (assist and advise) functions. Assisting and advising line managers is the
heart of the human resource manager s job. He or she advises the CEO so the
CEO can better understand the personnel aspects of the company s strategic op-
tions. HR assists in hiring, training, evaluating, rewarding, counseling, promoting,
and firing employees. It administers the various benefit programs (health and
accident insurance, retirement, vacation, and so on). It helps line managers
comply with equal employment and occupational safety laws, and plays an
important role in handling grievances and labor relations. It carries out an

authority staff authority staff manager

The right to make decisions, direct others Staff authority gives the manager the right A manager who assists and advises line
work, and give orders. (authority) to advise other managers or managers.
employees.
line authority functional authority
The authority exerted by an HR manager by line manager The authority exerted by an HR manager as
directing the activities of the people in his or A manager who is authorized to direct the coordinator of personnel activities.
her own department and in service areas (like work of subordinates and is responsible for
the plant cafeteria). accomplishing the organization s tasks.
8 PART 1 INTRODUCTION

FIGURE 1-1 Human Resources Organization Chart

Source: www.co.pinellas.fl.us/persnl/pdf/orgchart.pdf, accessed April 1, 2009. Used with permission of Pinellas County Govt.

innovator role, by providing up-to-date information on current trends and new

methods for better utilizing the company s employees (or human resources ).
It plays an employee advocacy role, by representing the interests of employees
within the framework of its primary obligation to senior management. Although
human resource managers generally can t wield line authority (outside their
departments), they are likely to exert implied authority. This is because line
managers know the human resource manager has top management s ear in areas
like testing and affirmative action.

The size of the human resource department reflects the size of the employer. For a
very large employer, an organization chart like the one in Figure 1-1 would be typical,
containing a full complement of specialists for each HR function.
Examples of human resource management specialties include:8

* Recruiters. Search for qualified job applicants.

* Equal employment opportunity (EEO) coordinators. Investigate and resolve
EEO grievances; examine organizational practices for potential violations; and
compile and submit EEO reports.
* Job analysts. Collect and examine information about jobs to prepare job
descriptions.
* Compensation managers. Develop compensation plans and handle the
employee benefits program.
* Training specialists. Plan, organize, and direct training activities.
* Labor relations specialists. Advise management on all aspects of union
management relations.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 9

Manager Human
Resources

Human Resources Coordinator Office Generalist

FIGURE 1-2 HR Organization Chart (Small

Company)

At the other extreme, the human resource team for a small manufacturer may contain
just five or six (or fewer) staff, and have an organization similar to that in Figure 1-2.
There is generally about one human resource employee per 100 company employees.

New Approaches to Organizing HR

Employers are also offering human resource services in new ways. For example, some
organize their HR services around four groups: transactional, corporate, embedded,
and centers of expertise.9
* The transactional HR group uses centralized call centers and outsourcing
arrangements (such as with benefits advisors) to provide support for day-to-day
transactional activities (such as changing benefits plans and employee assistance
and counseling). In one survey, about 75% of respondents said their firms were
providing transactional, administrative human resource services through such
arrangements.10
* The corporate HR group focuses on assisting top management in top level big
picture issues such as developing and explaining the personnel aspects of the
company s long-term strategic plan.
* The embedded HR unit assigns HR generalists (also known as relationship
managers or HR business partners ) directly to departments like sales and
production. They provide the localized human resource management assistance
the departments need.
* The centers of expertise are like specialized HR consulting firms within the
company for instance, they provide specialized assistance in areas such as
organizational change.

IBM EXAMPLE Randall MacDonald, IBM s senior vice president of human

resources, noted that the traditional human resource organization often isolates HR
functions into silos such as recruitment, training, and employee relations. He says
this silo approach often means there s no one team of human resource specialists
focusing on the needs of specific groups of employees.
MacDonald therefore reorganized IBM s human resource function. He segmented
IBM s 330,000 employees into three sets of customers : executive and technical
employees, managers, and rank and file. Separate human resource management teams
(consisting of recruitment, training, and compensation specialists, for instance) now
focus on serving the needs of each employee segment. These specialized teams help
ensure that the employees in each segment get precisely the talent, learning, and
compensation they require to support IBM s needs.11

Cooperative Line and Staff HR Management: An Example

Because line managers and human resource managers both have human resource
management duties, it is reasonable to ask, Exactly which HR duties are carried out by
line managers and which by staff managers? No one division of responsibilities would
apply to all organizations, but we can generalize.
10 PART 1 INTRODUCTION

FIGURE 1-3 Employment and

Recruiting Who Handles It? Employment interviews
(Percentage of All Employers)

Source: HR Magazine, Copyright Recruiting (other than

2002 by Society for Human college recruiting)
Resource Management (SHRM).
Temporary labor
administration

Preemployment testing
(except drug tests)

College recruiting

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
HR department only HR and other departments Other departments only
Note: Length of bars represents prevalence of activity among all surveyed employers.

The most important generalization is that the line staff relationship should be
cooperative.12 For example, in recruiting and hiring, the line manager describes the
qualifications employees need to fill specific positions. Then the human resource
team takes over. They develop sources of qualified applicants, and conduct initial
screening interviews. They administer the appropriate tests. Then they refer the best
applicants to the line manager, who interviews and selects the ones he or she wants. In
training, the line manager again describes what he or she expects the employee to be
able to do. Then the human resource team devises a training program, which the line
manager then (usually) administers.
Some activities are usually HR s alone. For example, 60% of firms assign to
human resources the exclusive responsibility for preemployment testing, 75%
assign it college recruiting, and 80% assign it insurance benefits administration.
But employers split most activities, such as employment interviews, performance
appraisal, skills training, job descriptions, and disciplinary procedures, between
HR and line managers.13
Figure 1-3 illustrates the typical HR line management partnership. For
example, HR alone typically handles interviewing in about 25% of firms. But
in about 60% of firms, HR and the other hiring departments are both involved in
interviewing.
In summary, human resource management is part of every manager s job.
Whether you re a first-line supervisor, middle manager, or president or whether
you re a production manager or county manager (or HR manager) getting results
through people is the name of the game. And to do this, you will need a good working
knowledge of the human resource management concepts and techniques in
this book.

4 Briefly discuss and illustrate

THE TRENDS SHAPING HUMAN RESOURCE
each of the important trends MANAGEMENT
influencing human resource
management.
What human resource managers do and how they do it is changing. Some of the
reasons for these changes are obvious. One is technology. For example, employers
now use their intranets to let employees change their own benefits plans, something
they obviously couldn t do years ago. Other trends shaping human resource
management include globalization, deregulation, changes in demographics and the
nature of work, and economic challenges (summarized in Figure 1-4). Let s look
at these trends next.14
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 11

FIGURE 1-4 Trends Shaping Employers Will Therefore

Human Resource Management So Companies
Trends Expect from HR
Must Be
Management That They

Globalization More competitive Focus more on big picture

Increased competition Faster and more responsive issues such as helping the
Deregulation and increased More cost-effective company achieve its
indebtedness Human-capital oriented strategic goals
Technological innovation Quality conscious Find new ways to provide
More high-tech jobs Downsized transactional services such
More service jobs Organized flatter as benefits administration
More knowledge work (fewer layers) Create high-performance
An aging workforce Organized around work systems
Dramatic economic empowered teams Take steps to help the
downturn starting Leaner employer better manage
in 2007/2008 More fiscally conservative challenging times
De-leveraging plus a likely More scientific in how they Formulate practices and
slowdown in deregulation make decisions defend its actions based on
and globalization credible evidence
Slower economic growth in Manage ethically
many countries Have the proficiencies
required to do these things
for instance, a command of
strategic management and
financial budgeting

Globalization and Competition Trends

Globalization refers to the tendency of firms to extend their sales, ownership, and/or
manufacturing to new markets abroad. Examples surround us. Toyota produces the
Camry in Kentucky, while Dell produces PCs in China. Free trade areas agreements that
reduce tariffs and barriers among trading partners further encourage international
trade. NAFTA (the North American Free Trade Agreement) and the EU (European
Union) are examples.
Companies expand abroad for several reasons. Sales expansion is one. Walmart is
opening stores in South America. Dell, knowing that China will soon be the world s
biggest market for PCs, is aggressively selling there.
Firms go abroad for other reasons. Some manufacturers seek new foreign prod-
ucts and services to sell, and to cut labor costs. Thus, some apparel manufacturers
design and cut fabrics in Miami, and then assemble the actual products in Central
America, where labor costs are relatively low. Sometimes, it s the prospect of forming
partnerships that drives firms to do business abroad. When IBM sold its PC division
to the Chinese firm Lenovo, it did so partly to cement firmer ties with the booming
China market.
For businesspeople, globalization means more competition, and more
competition means more pressure to be world-class to lower costs, to make
employees more productive, and to do things better and less expensively. As
one expert puts it, The bottom line is that the growing integration of the
world economy into a single, huge marketplace is increasing the intensity of
competition in a wide range of manufacturing and service industries. 15 Both
workers and companies have to work harder and smarter than they did without
globalization.16
Globalization therefore brings both benefits and threats. For consumers it
means lower prices and higher quality on products from computers to cars, but for

globalization
The tendency of firms to extend their sales,
ownership, and/or manufacturing to new
markets abroad.
 12 PART 1 INTRODUCTION

workers it means the prospect of working harder, and perhaps less secure jobs.
Job offshoring having employees abroad do jobs that Americans formerly did
illustrates this threat. For example, in the next few years, many employers plan to
offshore even highly skilled jobs such as sales managers, general managers and
HR managers.17 (On the other hand, what USA Today calls A small but growing
band of U.S. manufacturers including giants such as General Electric, NCR, and
Caterpillar are actually reshoring jobs bringing them back to the United States.
Reasons range from rising shipping and labor costs abroad to occasional poor
quality goods and intellectual property theft abroad.) 18 For business owners,
globalization means (potentially) millions of new consumers, but also new and
powerful global competitors at home.
For 50 or so years, globalization boomed. For example, the total sum of U.S.
imports and exports rose from $47 billion in 1960, to $562 billion in 1980, to about
$4.1 trillion in 2010.19 Economic and political philosophies drove this boom. Govern-
ments dropped cross-border taxes or tariffs, formed economic free trade areas such
as NAFTA, and took other steps to encourage the free flow of trade among countries.
The fundamental economic rationale was that by doing so, all countries would gain.
And indeed, economies around the world, not just in the United States but also in
Europe and Asia, did grow rapidly.

Indebtedness ( Leverage ) and Deregulation

Other trends contributed to this economic growth. Deregulation was one.
In many countries, governments stripped away regulations. In the United States
and Europe, for instance, the rules that prevented commercial banks from
expanding into stock brokering were relaxed. Giant, multinational financial
supermarkets such as Citibank quickly emerged. As economies boomed,
more businesses and consumers went deeply into debt. Homebuyers bought
homes, often with little money down. Banks freely lent money to
developers to build more homes. For almost 20 years, U.S. consumers
actually spent more than they earned. On a grander scale, the
United States itself increasingly became a debtor nation. Its balance of
payments (exports minus imports) went from a healthy positive
$3.5 billion in 1960, to a not-so-healthy minus $19.4 billion in 1980
(imports exceeded exports), to a huge $497 billion deficit in 2010.20
The only way the country could keep buying more from abroad than
it sold was by borrowing money. So, much of the boom was built on
debt. By 2011, Standard & Poor s said it would lower the ratings of
U.S. sovereign (treasury) bonds, fearing Washington policymakers
could not get a handle on the huge indebtedness. Rating agencies had
already lowered their ratings on the bonds of countries such as Japan
and Greece.
Source: Digital Vision/Thinkstock.

Technological Trends
Everyone knows that technology changed almost everything we do. We use
smartphones and iPads to communicate with the office, and to plan trips,
manage money, and look for local eateries. We also increasingly use
technology for many human resource management type applications,
such as looking for jobs.
Many blue-collar workers no longer do hard
Facebookrecruiting is one example.21 According to Facebook s
physical labor with dangerous machinery like Facebookrecruiting site, employers start the process by installing the
this. Instead, as explained in the text, Chad Careers Tab on their Facebook page. Once installed, companies have
Toulouse spends most of his time as a team a seamless way to recruit and promote job listings from directly within
leader keying commands into computerized Facebook. 22 Then, after creating a job listing, the employer can adver-
machines. tise its job link using Facebook Advertisements.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 13

Trends in the Nature of Work

Technology has also had a huge impact on how people work, and therefore on the skills
and training today s workers need.

HIGH-TECH JOBS For example, skilled machinist Chad Toulouse illustrates the
modern blue-collar worker. After an 18-week training course, this former college
student works as a team leader in a plant where about 40% of the machines are
automated. In older plants, machinists would manually control machines that cut
chunks of metal into things like engine parts. Today, Chad and his team spend much
of their time keying commands into computerized machines that create precision
parts for products, including water pumps.23 As the U.S. government s Occupational
Outlook Quarterly put it, knowledge-intensive high-tech manufacturing in such
industries as aerospace, computers, telecommunications, home electronics,
pharmaceuticals, and medical instruments is replacing factory jobs in steel, auto,
rubber, and textiles.24

SERVICE JOBS Technology is not the only trend driving the change from
brawn to brains. Today over two-thirds of the U.S. workforce is producing
and delivering services, not products. Between 2004 and 2014, almost all of the
19 million new jobs added in the United States will be in services, not in goods-
producing industries.25
Several things account for this.26 With global competition, more manufacturing
jobs have shifted to low-wage countries. For example, Levi Strauss, one of the last
major clothing manufacturers in the United States, closed the last of its American
plants a few years ago.
Furthermore, higher productivity enables manufacturers to produce
more with fewer workers. Just-in-time manufacturing techniques link daily manu-
facturing schedules more precisely to customer demand, squeezing waste out of
the system and reducing inventory needs. As manufacturers integrate Internet-
based customer ordering with just-in-time manufacturing, scheduling becomes
more precise. For example, when a customer orders a Dell computer, the same
Internet message that informs Dell s assembly line to produce the order also
signals the screen and keyboard manufacturers to prepare for UPS to pick up
their parts. The net effect is that manufacturers have been squeezing slack and
inefficiencies out of production, enabling companies to produce more products
with fewer employees. So, in America and much of Europe, manufacturing jobs
are down, and service jobs up.

KNOWLEDGE WORK AND HUMAN CAPITAL In general, the best jobs that
remain require more education and more skills. For example, we saw that automation
and just-in-time manufacturing mean that even manufacturing jobs require more
reading, math, and communication skills.27
For employers this means relying more on knowledge workers like Chad
Toulouse, and therefore on human capital.28 Human capital refers to the knowledge,
education, training, skills, and expertise of a firm s workers.29 Today, as management
guru Peter Drucker predicted years ago, the center of gravity in employment is
moving fast from manual and clerical workers to knowledge workers. 30 Human
resource managers now list critical thinking/problem-solving and information
technology application as the two skills most likely to increase in importance over
the next few years.31 The accompanying HR as a Profit Center feature illustrates
how human resource management methods can boost profitability by building and
capitalizing on such employee skills.

human capital
The knowledge, education, training, skills,
and expertise of a firm s workers.
14 PART 1 INTRODUCTION

HR AS A PROFIT CENTER
Boosting Customer Service
A bank installed special software that made it easier for its customer service
representatives to handle customers inquiries. However, the bank did not
otherwise change the service reps jobs in any way. Here, the new software system
did help the service reps handle more calls. But otherwise, this bank saw no big
performance gains.32
A second bank installed the same software. But, seeking to capitalize on how
the new software freed up customer reps time, this bank also had its human
resource team upgrade the customer service representatives jobs. This bank
taught them how to sell more of the bank s services, gave them more authority
to make decisions, and raised their wages. Here, the new computer system
dramatically improved product sales and profitability, thanks to the newly trained
and empowered customer service reps. Today s employers want and need human
resource practices like these that improve employee performance and company
profitability.33

Workforce and Demographic Trends

All of this is occurring along with big changes in workforce and demographic trends.

DEMOGRAPHIC TRENDS Most importantly, the U.S. workforce is becoming

older and more multiethnic.34 Table 1-1 provides a bird s-eye view. For example,
between 1998 and 2018, the percent of the workforce that it classifies as white,
non-Hispanic will drop from 83.8% to 79.4%. At the same time, the percent of
the workforce that is black will rise from 11.6% to 12.1%, those classified Asian will rise
from 4.6% to 5.6%, and those of Hispanic origin will rise from 10.4% to 17.6%.
The percentages of younger workers will fall, while those over 55 of age will leap
from 12.4% of the workforce in 1998 to 23.9% in 2018.35
At the same time, demographic trends are making finding and hiring employees
more challenging. In the United States, labor force growth is not expected to keep
pace with job growth, with an estimated shortfall of about 14 million college-
educated workers by 2020.36 One study of 35 large global companies senior human
resource officers said talent management in particular, the acquisition, develop-
ment, and retention of talent to fill the companies employment needs ranked as
their top concern.37

GENERATION Y Also called Millennials, Gen Y employees are roughly those

born 1977 2002. They take the place of the labor force s previous new entrants,

TABLE 1-1 Demographic Groups as a Percent of the Workforce, 1998 2018

Age, Race, Ethnicity 1998 2008 2018

Age: 16 24 15.9% 14.3 12.7

25 54 71.7 67.7 63.5
55+ 12.4 18.1 23.9
White, non-Hispanic 83.8 81.4 79.4
Black 11.6 11.5 12.1
Asian 4.6 4.7 5.6
Hispanic origin 10.4 14.3 17.6

Source: Adapted from www.bls.gov/news.release/ecopro.t01.htm, accessed May 10, 2010.

 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 15

Generation X, those born roughly 1965 1976 (and who themselves were the children
of, and followed into the labor force, the Baby Boomers, born just after the Second
World War, roughly 1944 1960).
Although every generation obviously has its own labor force entrants, Gen Y
employees are different. For one thing, says one expert, they have been pampered,
nurtured, and programmed with a slew of activities since they were toddlers, meaning
they are both high-performance and high-maintenance. 38 As a result:
1. They want fair and direct supervisors who are highly engaged in their profes-
sional development.
2. They seek out creative challenges and view colleagues as vast resources from
whom to gain knowledge.
3. They want to make an important impact on Day 1.
4. They want small goals with tight deadlines so they can build up ownership
of tasks.
5. They aim to work faster and better than other workers.39
Fortune Magazine says that today s Generation Y employees will bring
challenges and strengths. It says they may be the most high-maintenance work-
force in the history of the world. Referring to them as the most praised genera-
tion, the Wall Street Journal explains how Lands End and Bank of America are
teaching their supervisors to complement these new employees with prize pack-
ages and public appreciation.40 But, as the first generation raised on cell phones
and e-mail, their capacity for using information technology will also make them
the most high-performing.

RETIREES Many human resource professionals call the aging workforce the
biggest demographic trend affecting employers. The basic problem is that there aren t
enough younger workers to replace the projected number of baby boom era
older-worker retirees.41
Employers are dealing with this challenge in various ways. One survey found
that 41% of surveyed employers are bringing retirees back into the workforce, 34%
are conducting studies to determine projected retirement rates in the organization,
and 31% are offering employment options designed to attract and retain semi-
retired workers.42

NONTRADITIONAL WORKERS At the same time, there has been a shift to

nontraditional workers. Nontraditional workers include those who hold multiple
jobs, or who are contingent or part-time workers, or who are working in alternative
work arrangements (such as a mother daughter team sharing one clerical job).
Today, almost 10% of American workers 13 million people fit this nontraditional
workforce category. Of these, about 8 million are independent contractors who work
on specific projects and move on once they complete the projects.
Technological trends facilitate such alternative work arrangements. For example,
professional online Web sites such as LinkedIn (www.linkedin.com) enable free
agent professionals to promote their services. Thanks to technology, people working
from remote locations at least once per month rose about 39% from 2006 to 2008
to just over 17 million people. Seeking the collaboration that s often missing when
one works alone, co-working sites are springing up. These offer freelance workers
and consultants office space and access to office equipment (and of course an oppor-
tunity to interact with other independent workers) for fees of perhaps $200 or
$300 per month.43

WORKERS FROM ABROAD With retirements triggering projected workforce

shortfalls, many employers are hiring foreign workers for U.S. jobs. The country s
H-1B visa program allows U.S. employers to recruit skilled foreign professionals to
work in the United States when they can t find qualified U.S. workers. U.S.
16 PART 1 INTRODUCTION

FIGURE 1-5 Gross National 900

Product (GNP) 800

(Change from year ago, billions of dollars)

Source: U.S. Department of 700
Commerce: Bureau of Economic
Analysis, http://research.stlouisfed.org 600
/fred2/fredgraph?chart_type=line&s[1] 500
[id]=GNP&s[1][transformation]=ch1,
accessed April 18, 2009. 400
300
200
100
0
100
1940 1950 1960 1970 1980 1990 2000 2010
Shaded areas indicate US recessions.
2009 research.stlouisfed.org

employers bring in about 181,000 foreign workers per year under these programs.
Particularly with high unemployment, such programs face opposition. For
example, one study concluded that many workers brought in under the programs
filled jobs that didn t actually demand highly specialized skills, many paying less
than $15 an hour.44

Economic Challenges and Trends

All these trends are occurring in a context of economic upheaval. As shown in
Figure 1-5, gross national product (GNP) a measure of U.S. total output
boomed between 2001 and 2008. During this period, home prices leaped as
much as 20% per year. (See Figure 1-6.) Unemployment remained at about 4.7%.45
Then, around 2007 2008, all these measures seemingly fell off a cliff. GNP fell.
Home prices dropped by 20% or more (depending on city). Unemployment
nationwide rose to more than 9.1%.
Why did all this happen? That is a complicated question, but for one thing, all
those years of accumulating excessive debt seems to have run their course. Banks and
other financial institutions (such as hedge funds) found themselves with trillions of
dollars of worthless loans on their books. Governments stepped in to try to prevent
their collapse. Lending dried up. Many businesses and consumers simply stopped
buying. The economy tanked.
Economic trends will undoubtedly turn positive again, perhaps even as you read
these pages. However, they have certainly grabbed employers attention. After what
the world went through starting in 2007 2008, it s doubtful that the deregulation,
leveraging, and globalization that drove economic growth for the previous 50 years

FIGURE 1-6 Case-Shiller Index, January 2000 = 100

Home Price Indexes 230
210
Source: S&P, Fiserv, and
MacroMarkets, LLC, http://www. 190
clevelandfed.org/research/trends/
2009/0309/04ecoact.cfm, accessed 170
April 18, 2009. 150
20-City index
130
110
10-City index
90
70
50
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 17

will continue unabated. That may mean slower growth for many countries, perhaps
for years. This means challenging times ahead for employers. The challenging times
mean that for the foreseeable future and even well after things turn positive
employers will have to be more frugal and creative in managing their human
resources than perhaps they ve been in the past.

THE NEW HUMAN RESOURCE MANAGERS

Trends like these mean changes in human resource management practices, and in
what employers expect from their human resource managers. We ll look at some
specifics.

Human Resource Management Yesterday and Today

For much of the twentieth century, personnel/HR managers focused on day-to-day
transactional types of activities. For example in the earliest firms, they first took over
hiring and firing from supervisors, ran the payroll department, and administered
benefits plans. As expertise in areas like testing began to appear, the personnel depart-
ment began to play an expanded role in employee selection and training.46 The
emergence of union legislation in the 1930s added, Helping the employer deal
with unions to its list of duties. Then, as Congress passed new equal employment
legislation in the 1960s and 1970s, employers began leaning on their human resource
managers expertise for avoiding and managing discrimination claims.47
Today, we ve seen that trends like globalization, indebtedness, and technology
confront employers with new challenges, such as squeezing more profits from opera-
tions. Employers expect their human resource managers to have what it takes to address
these challenges. We can list 10 characteristics of today s human resource professionals.

5 List and briefly describe

They Focus More on Strategic, Big Picture Issues
important traits of today's Today s human resource managers are more involved in longer term, strategic big
human resource managers. picture issues. We ll see in Chapter 3 (Strategy) that strategic human resource
management means formulating and executing human resource policies and practices
that produce the employee competencies and behaviors the company needs to
achieve its strategic aims. We illustrate this throughout this book with The Strategic
Context features such as the accompanying one.

THE STRATEGIC CONTEXT

Building L.L.Bean
Strategic human resource management means formulating and executing human
resource policies and practices that produce the employee competencies and
behaviors the company needs to achieve its strategic aims.
L.L.Bean illustrates how companies do this. The heart of L.L.Bean s strategy has
always been offering great outdoor equipment with outstanding service and
expert advice. As its company history said, L.L.Bean, Inc., quickly established itself
as a trusted source for reliable outdoor equipment and expert advice. The small
company grew. Customers spread the word of L.L.Bean s quality and service. 48
To provide such service, L.L.Bean needs employees with special, outdoors-skills
performing in a special way. As its Web site says, L.L.Bean attracts a special sort of
person. Like our customers, we are passionate about the L.L.Bean brand and our
love for the outdoors. You already know the outstanding service L.L.Bean
customers receive. Now imagine how we treat our employees. 49
L.L.Bean's HR policies and practices attract and develop just such employees.
For one thing, the company knows just who to recruit for. It wants sociable, friendly,
experienced, outdoors-oriented applicants and employees.50 To attract and
(Continued )
18 PART 1 INTRODUCTION

cultivate these sorts of employee competencies and behaviors, the company uses
multiple interviews to screen out applicants who might not fit in. And L.L.Bean
offers an outdoors-oriented work environment and competitive pay and benefits.
To help encourage great employee service, L.L.Bean also provides a supportive
environment. For example, when its Web sales recently for the first time exceeded
phone sales, L.L.Bean closed four local call centers, but arranged for the
220 employees to work from their homes. And instead of sending jobs abroad, the
company keeps its jobs close to the town where Leon Leonwood Bean started
his company almost 100 years ago.51 L.L.Bean s managers built the firm s strategy
and success around courteous, expert service. They know that having the right
employees is the key to its success, and that it takes the right blend of human
resource practices to attract and nurture such employees.

As at L.L.Bean in the Strategic Context feature, today s employers want their HR

managers to put in place practices that will help the company achieve its strategic
aims. Employers want them to be the firms internal consultants, by identifying and
institutionalizing changes that help employees better contribute to the company s
success, and by helping top management formulate and execute its long-term plans.52
HR managers no longer just do everyday transactional things like signing on new
employees or changing their benefits plans.

They Use New Ways to Provide Transactional Services

But then, how do employers perform these day-to-day transactional tasks?53 The
answer is that today s human resource managers must be skilled at offering these
transactional HR services in innovative ways. For example, they outsource more bene-
fits administration and safety training to outside vendors.54 They use technology, for
instance, company portals that allow employees to self-administer benefits plans,
Facebookrecruiting to recruit job applicants, online testing to prescreen job applicants,
and centralized call centers to answer HR-related inquiries from supervisors. Table 1-2
lists some other examples of how employers use technology to support human
resource management activities.55
As another example, more employers are installing their own internal social
networking sites. For example, after the real estate bubble burst several years ago,
many realtors from Long Realty in Tucson, Arizona, wanted a place where they could
discuss the current market and how to deal with it. Long Realty therefore set up Long
Connects. This internal social networking site lets its employees share experiences,
suggestions, and advice without exposing their comments to the wider world (as
would posting them on Facebook). IBM calls its internal social network site w3. IBM s
employees around the world use w3 to create personal profiles similar to those on

TABLE 1-2 Some Technology Applications to Support Human Resource

Activities

Technology How Used by HR

Streaming desktop video Used to facilitate distance learning and training or to

provide corporate information to employees quickly and
inexpensively
Internet- and network-monitoring Used to track employees Internet and e-mail activities
software or to monitor their performance
Data warehouses and computerized Help HR managers monitor their HR systems. For
analytical programs example, they make it easier to assess things like cost per
hire, and to compare current employees skills with the
firm s projected strategic needs
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 19

LinkedIn, bookmark web sites and news stories of interest, comment on company
blogs, contribute to wikis, share files, and gain knowledge from white papers, videos,
and podcasts. 56

They Take an Integrated, Talent Management Approach

to Managing Human Resources
Next, with employers competing for talent, no one wants to lose any high-potential
employees, or to fail to attract or fully utilize top-caliber ones.57 One survey of human
resource executives found that talent management issues were among the most
pressing ones they faced.58 Human resource managers are therefore emphasizing
talent management.

WHAT IS TALENT MANAGEMENT? Talent management is the goal-oriented

and integrated process of planning, recruiting, developing, managing, and compensating
employees.59 It involves instituting a coordinated process for identifying, recruiting,
hiring, and developing high-potential employees.
What does this mean in practice? For one thing, talent management means being
more focused in how you manage your company s talent. For example, IBM segmented
its employees into three groups. Now it can fine-tune the way it serves the employees in
each segment. As another example, many employers are segmenting out their most
mission-critical employees, and managing their development and rewards separately
from the firms other employees. We ll look more closely at talent management
techniques starting in Chapter 4.

They Manage Ethics

We ll see in Chapter 14 (Ethics) that 6 of the 10 most serious workplace ethical
issues workplace safety, security of employee records, employee theft, affirmative
action, comparable work, and employee privacy rights were human resource
management related.60 Ethics means the standards someone uses to decide what his
or her conduct should be. For example, prosecutors filed criminal charges against
several Iowa meatpacking plant human resource managers who allegedly violated
employment law by hiring children younger than 16.61 Every human resource
manager (and line manager) needs to understand the ethical implications of his
or her employee-related decisions.

They Manage Employee Engagement

In today s challenging environment, no employer can afford to have its employees
physically present but checked out mentally. The Institute for Corporate
Productivity defines engaged employees as those who are mentally and emotionally
invested in their work and in contributing to an employer s success. Unfortunately,
studies suggest that less than one-third of the U.S. workforce is engaged.62 One
Gallup study estimated that $350 billion is lost annually in the United States alone
on damage done by disengaged workers.63 Today s human resource managers need
the skills to foster and manage employee engagement.

They Measure HR Performance and Results

In today s performance-based environment, employers expect their human resource
managers to take action based on measurable performance-based criteria. For example,
IBM s Randall MacDonald needed $100 million from IBM to reorganize its HR

talent management
The goal-oriented and integrated process of
planning, recruiting, developing, managing,
and compensating employees.
20 PART 1 INTRODUCTION

operations. He told top management, I m going to deliver talent to you that s skilled
and on time and ready to be deployed. I will be able to measure the skills, tell you what
skills we have, what [skills] we don t have [and] then show you how to fill the gaps or
enhance our training. 64

SAMPLE METRICS To make claims like these, human resource managers need
performance measures (or metrics ). For example, median HR expenses as a
proportion of companies total operating costs average just under 1%. There tends
to be between 0.9 and 1.0 human resource staff persons per 100 employees.65
To see how they re doing compared to others, employers obtain customized
benchmark comparisons from services such as the Society for Human Resource
Management s Human Capital Benchmarking Service.66 We ll look at improving
performance through human resource management more closely in Chapter 3.

6 Define and give an example

They Use Evidence-Based Human Resource Management
of evidence-based human Basing decisions on the evidence, as practiced by IBM s Randall MacDonald ( I will
resource management. tell you what skills we have . . . ) is the heart of evidence-based human resource man-
agement. This is the use of data, facts, analytics, scientific rigor, critical evaluation,
and critically evaluated research/case studies to support human resource
management proposals, decisions, practices, and conclusions.67 Put simply,
evidence-based human resource management is the deliberate use of the best-
available evidence in making decisions about the human resource management
practices you are focusing on.68 The evidence may come from actual measurements
you make (such as, how did the trainees like this program?). It may come from
existing data (such as, what happened to company profits after we installed this
training program?). Or, it may come from published critically evaluated research
studies (such as, what does the research literature conclude about the best way to
ensure that trainees remember what they learn?).

They Add Value

This focus on performance, measurement, and evidence reflects another charac-
teristic of today s human resource managers. From top management s point of view,
it s not sufficient that HR management just oversee activities such as recruiting and
benefits. It must add value, particularly by boosting profitability and performance
in measurable ways. Professors Dave Ulrich and Wayne Brockbank explain this in
terms of what they call The HR Value Proposition. 69 They say the human resource
manager s programs (such as screening tests and training tools) are just a means to
an end. His or her ultimate aim must be to add value. Adding value means helping
the firm and its employees gain in a measurable way from the human resource
manager s actions.
We ll see in this book how human resource practices improve organizational
profitability and performance. For example, studies of personnel testing s effective-
ness conclude that screening applicants with personnel tests can produce employees
who perform better.70 Similarly, well-trained employees perform better than
untrained ones, and safe workplaces produce fewer lost-time accidents and accident
costs than do unsafe ones.
Putting in place a high-performance work system is one way to add value. Such a
system is a set of human resource management practices that together produce
superior employee performance. One study looked at 17 manufacturing plants, some
of which adopted high-performance work system practices. For example, the high-
performance plants paid more (median wages of $16 per hour compared with
$13 per hour for all plants), trained more (83% offered more than 20 hours of
training per year, compared with 32% for all plants), and used more sophisticated
recruitment and hiring practices (tests and validated interviews, for instance). These
plants also had the best overall profits, operating costs, and turnover.71 We ll discuss
high-performance work systems in Chapter 3.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 21

They Have New Competencies72

Adding value, strategizing, and using technology all require that human resource
managers have new competencies. They still need proficiencies in human resource
management functional areas such as selection, training, and compensation. But they
also require broader business competencies.
For example, human resource managers must speak the CFO s language by proposing
and explaining human resource plans in measurable terms (such as return on investment),
and be able to measure HR s impact.73 To assist top management in formulating strategies,
the human resource manager must understand strategic planning, marketing, production,
and finance.74 With companies grappling to adjust to competition, the human resource
manager must be skilled at formulating and implementing large-scale organizational
changes, designing organizational structures and work processes, and at understanding
what it takes for the company to compete in and succeed in the marketplace.75

THE HUMAN RESOURCE MANAGER S COMPETENCIES The accompanying

Figure 1-7 provides one view of the competencies today s HR managers need.76 Professor
Dave Ulrich and his colleagues say that today's human resource managers need the
knowledge, skills, and competencies to be:
* Talent Managers/Organization Designers, with a mastery of traditional human
resource management tasks such as acquiring, training, and compensating employees.
* Culture and Change Stewards, able to create human resource practices that
support the firm s cultural values.
* Strategy Architects, with the skills to help establish the company s overall strate-
gic plan, and to put in place the human resource practices required to support
accomplishing that plan.
* Operational Executors, able to anticipate, draft, and implement the human
resource practices (for instance in testing and appraising) the company needs to
implement its strategy.
* Business Allies, competent to apply business knowledge (for instance in finance,
sales, and production) that enable them to help functional and general managers
to achieve their departmental goals.
* Credible Activists, with the leadership and other competencies that make them
both credible (respected, admired, listened to) and active (offers a point of view,
takes a position, challenges assumptions.) 77

FIGURE 1-7 The Human

Resource Manager s
Culture &
Competencies ORGANIZATION Talent Mgr/ Change
Strategy
CAPABILITIES Org Designer Architect
Steward
Source: Used with permission of The
PEO

RBL Group, www.rbl.net, accessed

S
ES

April 4, 2011.
PLE

SIN
BU

SYSTEMS & Operational Business

PROCESSES Executor Ally

Credible
RELATIONSHIPS Activist

HR
PROFESSIONALISM
22 PART 1 INTRODUCTION

HR Certification
As the human resource manager s job becomes more demanding, human resource
managers are becoming more professional. More than 115,000 HR professionals
have already passed one or more of the Society for Human Resource Manage-
ment s (SHRM) HR professional certification exams. SHRM s Human Resource
Certification Institute offers these exams. Exams test the professional s knowledge
of all aspects of human resource management, including ethics, management
practices, staffing, development, compensation, labor relations, and health and
safety. Those who successfully complete all requirements earn the SPHR (Senior
Professional in HR), GPHR (Global Professional in HR), or PHR (Professional in
HR) certificate. You will find certification-related exercises in the end-of-chapter
exercises throughout this book. The test specifications for the HRCI exams, as well
as new SHRM-related learning guidelines and exercises for human resource
management courses, are in the SHRM appendix at the end of this book. Managers
can take an online HRCI assessment exam at www.HRCI.org (or by calling
866-898-HRCI). SHRM provides an assurance of learning assessment preparation
guide book for students.78
Finally, with all the changes taking place, the employment prospects for human
resource managers look good. The U.S. Department of Labor projects that employment
for human resource, training, and labor relations professionals will experience much
faster than average growth in the next few years.79 Top-ranked human resource
managers earn multimillion dollar total take-home pay.80

7 Outline the plan of this book.

THE PLAN OF THIS BOOK
The Basic Themes and Features
In this book, we ll use several themes and features to highlight particularly important
issues, and to provide continuity from chapter to chapter.

PRACTICAL TOOLS FOR EVERY MANAGER First, human resource management

is the responsibility of every manager not just those in human resources. Throughout
every page in this book, you ll therefore find an emphasis on practical material that you as
a manager will need to perform your day-to-day management responsibilities, even if you
never spend one day as an HR manager.

HR AS A PROFIT CENTER Second, we ve seen that employers need human

resource management practices that add value. To illustrate this throughout
the book, each chapter contains illustrative HR as a Profit Center features.
These show actual examples of how human resource management practices add
measurable value.

THE STRATEGIC CONTEXT Third, we ve seen that at companies such

as L.L.Bean, strategic human resource management means formulating and
executing human resource policies and practices that produce the employee
competencies and behaviors the company needs to achieve its strategic aims.
We ll use boxed The Strategic Context features in most chapters to help illustrate
the strategic context of each chapter s material for instance, how L.L.Bean s
employee selection standards help support the firm s strong customer service
philosophy, and thus its strategy.

EVIDENCE-BASED HR Fourth, the intensely competitive nature of business

today means human resource managers must defend their plans and contributions in
measurable terms. Chapter 3 (Strategy) explains how managers do this. We also use
(1) Evidence-Based HR features in most chapters to present examples of how
managers manage based on facts and evidence, and (2) brief Research Insights to
illustrate the evidence that supports what HR managers do.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 23

CHAPTER CONTENTS OVERVIEW

Following is a brief overview of the chapters and their content.

Part 1: Introduction
Chapter 1: Introduction to Human Resource Management. The manager s
human resource management jobs; crucial global and competitive trends; how
managers use technology and modern HR measurement systems to create high-
performance work systems.
Chapter 2: Equal Opportunity and the Law. What you should know about equal
opportunity laws and how they affect activities such as interviewing, selecting
employees, and evaluating performance.
Chapter 3: Human Resource Management Strategy and Analysis. What is
strategic planning; strategic human resource management; building high-
performance HR practices; tools for evidence-based HR.

Part 2: Recruitment, Placement, and Talent Management

Chapter 4: Job Analysis and the Talent Management Process. How to analyze a job;
how to determine the human resource requirements of the job, as well as its specific
duties, and what is talent management.
Chapter 5: Personnel Planning and Recruiting. Human resource planning;
determining what sorts of people need to be hired; recruiting them.
Chapter 6: Employee Testing and Selection. Techniques you can use to ensure
that you re hiring the right people.
Chapter 7: Interviewing Candidates. How you can interview candidates
effectively.

Part 3: Training and Development

Chapter 8: Training and Developing Employees. Providing the training and
development to ensure that your employees have the knowledge and skills
needed to accomplish their tasks.
Chapter 9: Performance Management and Appraisal. Techniques you can use for
appraising employee performance.
Chapter 10: Employee Retention, Engagement, and Careers. Coaching
employees; managing careers; techniques such as career planning and
promotion from within; talent management methods.

Part 4: Compensation
Chapter 11: Establishing Strategic Pay Plans. How to develop equitable pay plans
for your employees.
Chapter 12: Pay for Performance and Financial Incentives. Pay-for-performance
plans such as financial incentives, merit pay, and incentives that help tie
performance to pay.
Chapter 13: Benefits and Services. Providing benefits that make it clear the
firm views its employees as long-term investments and is concerned with their
welfare.

Part 5: Employee Relations

Chapter 14: Ethics and Employee Rights and Discipline. How you can ensure
ethical and fair treatment through grievance and discipline processes.
24 PART 1 INTRODUCTION

Chapter 15: Labor Relations and Collective Bargaining. How to deal with
unions, including the union organizing campaign, negotiating and agreeing
upon a collective bargaining agreement between unions and management, and
managing the agreement via the grievance process.
Chapter 16: Employee Safety and Health. How you can make the workplace safe,
including the causes of accidents, and laws governing your responsibilities for
employee safety and health.
Chapter 17: Managing Global Human Resources. Special topics in managing the
HR side of multinational operations.
Chapter 18: Managing Human Resources in Entrepreneurial Firms. Special
topics you can use in managing human resources in smaller firms, including
using Internet and government tools to support the HR effort, leveraging small
size, using professional employer organizations, and managing HR systems,
procedures, and paperwork.

The Topics Are Interrelated

In practice, don t think of each of this book s 18 chapters and topics as being unre-
lated to the others. Each topic interacts with and affects the others, and all should
align with the employer s strategic plan. For example, hiring people who don t have
the potential to learn the job will doom their performance regardless of how much
training they get.
Figure 1-8 summarizes this idea. For example, how you test and interview job
candidates (Chapters 6 and 7) and train and appraise job incumbents (Chapters 8
and 9) depends on the job s specific duties and responsibilities (Chapter 4). How
good a job you do selecting (Chapter 6) and training (Chapter 8) employees will
affect how safely they do their jobs (Chapter 16). An employee s performance and
thus his or her appraisal (Chapter 9) depends not just on the person s motivation,
but also on how well you identified the job s duties (Chapter 4), and screened and
trained the employee (Chapters 6 and 7). Furthermore, we saw that how you
recruit, select, train, appraise, and compensate employees should make sense in
terms of producing the employee behaviors required to support the company s
strategic plan.

Chapter 3
Company s Strategic Plan
What business are we in?
On what basis will we compete?
What behaviors and skills do our employees need for us to achieve our strategic goals?

Chapter 4 Chapter 5 Chapters 6, 7 Chapter 8 Chapters 9, 10 Chapters 11, 12, 13 Chapters 17, 18
Develop Recruit Interview and Train Appraise Reward Manage
personnel candidates select employees employees employees human resources
plans and job employees based on job in global and
descriptions requirements entrepreneurial
firms

Chapters 2, 14, 15, 16

Conform to ethical standards

and
EEOC, safety, and other HR-related laws

FIGURE 1-8 The interrelatedness of the Basic Human Resource Management Process
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 25

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. All managers should understand the importance of Today, with employers competing in a challenging
human resource management. Doing so helps new environment, employers expect and demand
managers avoid problems like hiring the wrong person more from their HR managers.
for the job. And more important, it can help ensure that For example, they expect their human resource
managers get results through people. Line managers management teams to focus more on big picture
human resource duties include placing the right per- issues including instituting human resource policies
son on the job, and orienting and training new employ- and practices that support the companies strategic
ees. The human resource manager s duties include objectives; to find new, more efficient ways to provide
supervising his or her own employees, coordinating the transactional services; and to have new proficiencies,
company s overall personnel policies, and assisting and for instance, in terms of strategizing and command-
advising line managers in the areas of human resource ing a broader array of business knowledge.
management. As part of this, employers expect their human
2. A changing environment today is influencing what resource managers to be able to create high-
human resource managers do and how they do it. Glob- performance work systems that produce superior
alization means more competition, and more competi- employee performance.
tion means more pressure to lower costs and to make To do so, HR managers should be able to apply
employees more productive and quality conscious. evidence-based human resource management, which
Technology is requiring more employees to be techno- means the use of data, facts, analytics, scientific rigor,
logically well informed and pressuring employers to critical evaluation, and critically evaluated research/case
improve their human resource processes by applying studies to support human resource management
new technological tools. There is more emphasis on proposals, decisions, practices, and conclusions.
knowledge work and therefore on building human
capital, the knowledge, education, training, skills, and 4. In understanding the overall plan of this book, keep
expertise of a firm s employees. Workforce and demo- several important themes in mind: that human resource
graphic changes mean that the workforce is becoming management is the responsibility of every manager, that
older and more diverse. the workforce is increasingly diverse, that employers and
3. Changes like these are manifesting themselves in their human resource managers face the need to manage
important trends in human resource management. in challenging economic times, and that human resource
Traditionally, personnel/HR managers focused on managers must be able to defend their plans and contri-
transactional issues such as hiring and firing butions in measurable terms to use evidence-based
employees and running the payroll department. management to show they ve added value.

DISCUSSION QUESTIONS
1. Explain what HR management is and how it relates to how HR can contribute to doing this. What are some
the management process. examples of employers who do this?
2. Give examples of how HR management concepts and 5. Think of some companies that you are familiar with or
techniques can be of use to all managers. that you ve read about where you think the human
3. Illustrate the HR management responsibilities of line resource managers have been successful in adding
and staff managers. value . What do the HR managers do to lead you to your
4. Why is it important for companies today to make their conclusion?
human resources into a competitive advantage? Explain
26 PART 1 INTRODUCTION

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, develop outlines at her company. And she had to do something about the
showing how trends like workforce diversity, technolo- company s top management compensation plan, which
gical innovation, globalization, and changes in the many felt contributed to the allegations by some that
nature of work have affected the college or university some former company officers had used the company as
you are attending now. Present in class. a sort of private ATM.
2. Working individually or in groups, contact the HR man- Siegel came to Tyco after a very impressive career. For
ager of a local bank. Ask the HR manager how he or she is example, she had been head of executive compensation
working as a strategic partner to manage human resources, at Allied Signal, and was a graduate of the Harvard Busi-
given the bank s strategic goals and objectives. Back in class, ness School. But, as strong as her background was, she
discuss the responses of the different HR managers. obviously had her work cut out for her when she took
3. Working individually or in groups, interview an HR the senior vice president of HR position at Tyco.
manager. Based on that interview, write a short presen- Working individually or in groups, conduct an Internet
tation regarding HR s role today in building competitive search and library research to answer the following
organizations. questions: What human resource management related
4. Working individually or in groups, bring several business steps did Siegel take to help get Tyco back on the right
publications such as Bloomberg BusinessWeek and the track? Do you think she took the appropriate steps? Why
Wall Street Journal to class, or access them in class via the or why not? What, if anything, do you suggest she do now?
Web. Based on their contents, compile a list titled What 7. The HRCI Test Specifications appendix at the end of this
HR Managers and Departments Do Today. book (pages 633 640) lists the knowledge someone study-
5. Based on your personal experiences, list 10 examples ing for the HRCI certification exam needs to have in each
showing how you used (or could have used) human area of human resource management (such as in Strategic
resource management techniques at work or school. Management, Workforce Planning, and Human Resource
6. Laurie Siegel, senior vice president of human resources Development). In groups of four to five students, do four
for Tyco International, took over her job just after things: (1) review that appendix now; (2) identify the
numerous charges forced the company s previous board material in this chapter that relates to the required knowl-
of directors and top executives to leave the firm. Hired edge the appendix lists; (3) write four multiple-choice
by new CEO Edward Breen, Siegel had to tackle numer- exam questions on this material that you believe would be
ous difficult problems starting the moment she assumed suitable for inclusion in the HRCI exam; and (4) if time
office. For example, she had to help hire a new manage- permits, have someone from your team post your team s
ment team. She had to do something about what the questions in front of the class, so the students in other
outside world viewed as a culture of questionable ethics teams can take each others exam questions.

EXPERIENTIAL EXERCISE
Helping The Donald
Purpose: The purpose of this exercise is to provide practice that therefore make the participants themselves
in identifying and applying the basic concepts of human (and especially the team leaders) look like winners
resource management by illustrating how managers use to Mr. Trump.
these techniques in their day-to-day jobs. 3. Watch several of these shows (or reruns of the
Required Understanding: Be thoroughly familiar with the shows), and then meet with your team and answer
material in this chapter, and with at least several episodes of the following questions:
The Apprentice or The Celebrity Apprentice, the TV shows in a. What specific HR functions (recruiting, interview-
which developer Donald Trump starred. ing, and so on) can you identify Donald Trump
How to Set Up the Exercise/Instructions: using on this show? Make sure to give specific exam-
1. Divide the class into teams of three to four students. ples based on the show.
2. Read this: As you may know by watching the b. What specific HR functions (recruiting, selecting,
Donald as he organizes his business teams for The training, etc.) can you identify one or more of the
Apprentice and The Celebrity Apprentice, human team leaders using to help manage their teams on
resource management plays an important role in the show? Again, please give specific answers.
what Donald Trump and the participants on his c. Provide a specific example of how HR functions
separate teams need to do to be successful. For (such as recruiting, selection, interviewing, compen-
example, Donald Trump needs to be able to appraise sating, appraising, and so on) contributed to one of
each of the participants. And, for their part, the the participants coming across as particularly suc-
leaders of each of his teams need to be able to staff cessful to Mr. Trump. Can you provide examples of
his or her team with the right participants, and then how one or more of these functions contributed to a
provide the sorts of training, incentives, and participant being told by Mr. Trump, You re fired ?
evaluations that help their companies succeed and d. Present your team s conclusions to the class.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 27

APPLICATION CASE
JACK NELSON S PROBLEM
As a new member of the board of directors for a local bank, After touring the 22 branches and finding similar prob-
Jack Nelson was being introduced to all the employees in the lems in many of them, Nelson wondered what the home office
home office. When he was introduced to Ruth Johnson, he was should do or what action he should take. The banking firm
curious about her work and asked her what the machine she generally was regarded as being a well-run institution that had
was using did. Johnson replied that she really did not know grown from 27 to 191 employees during the past 8 years. The
what the machine was called or what it did. She explained that more he thought about the matter, the more puzzled Nelson
she had only been working there for 2 months. However, she became. He couldn t quite put his finger on the problem, and
did know precisely how to operate the machine. According to he didn t know whether to report his findings to the president.
her supervisor, she was an excellent employee.
At one of the branch offices, the supervisor in charge
spoke to Nelson confidentially, telling him that something Questions
was wrong, but she didn t know what. For one thing, she 1. What do you think is causing some of the problems in
explained, employee turnover was too high, and no sooner the bank s home office and branches?
had one employee been put on the job than another one 2. Do you think setting up an HR unit in the main office
resigned. With customers to see and loans to be made, would help?
she continued, she had little time to work with the new 3. What specific functions should an HR unit carry out?
employees as they came and went. What HR functions would then be carried out by super-
All branch supervisors hired their own employees visors and other line managers? What role should the
without communication with the home office or other Internet play in the new HR organization?
branches. When an opening developed, the supervisor
tried to find a suitable employee to replace the worker who Source: From Claude S. George, Supervision in Action, 4th ed., 1985. Adapted
had quit. by permission of Prentice Hall, Inc., Upper Saddle River, NJ.

CONTINUING CASE
CARTER CLEANING COMPANY

Introduction Jack Carter opened his first laundromat in 1995 and his
A main theme of this book is that human resource manage- second in 1998. The main attraction of these coin laundry
ment activities like recruiting, selecting, training, and rewarding businesses for him was that they were capital- rather than
employees is not just the job of a central HR group but rather a labor-intensive. Thus, once the investment in machinery was
job in which every manager must engage. Perhaps nowhere is made, the stores could be run with just one unskilled atten-
this more apparent than in the typical small service business. dant and none of the labor problems one normally expects
Here the owner/manager usually has no HR staff to rely on. from being in the retail service business.
However, the success of his or her enterprise (not to mention The attractiveness of operating with virtually no skilled
his or her family s peace of mind) often depends largely on the labor notwithstanding, Jack had decided by 1999 to expand
effectiveness through which workers are recruited, hired, the services in each of his stores to include the dry cleaning
trained, evaluated, and rewarded. Therefore, to help illustrate and pressing of clothes. He embarked, in other words, on a
and emphasize the front-line manager s HR role, throughout strategy of related diversification by adding new services
this book we will use a continuing case based on an actual small that were related to and consistent with his existing coin
business in the southeastern United States. Each chapter s laundry activities. He added these for several reasons. He
segment of the case will illustrate how the case s main player wanted to better utilize the unused space in the rather large
owner/manager Jennifer Carter confronts and solves stores he currently had under lease. Furthermore, he was, as
personnel problems each day at work by applying the concepts he put it, tired of sending out the dry cleaning and pressing
and techniques of that particular chapter. Here is background work that came in from our coin laundry clients to a dry
information that you will need to answer questions that arise in cleaner 5 miles away, who then took most of what should
subsequent chapters. (We also present a second, unrelated have been our profits. To reflect the new, expanded line of
application case case incident in each chapter.) services, he renamed each of his two stores Carter Cleaning
Centers and was sufficiently satisfied with their performance
Carter Cleaning Centers to open four more of the same type of stores over the next
Jennifer Carter graduated from State University in June 5 years. Each store had its own on-site manager and, on
2005, and, after considering several job offers, decided to do average, about seven employees and annual revenues of
what she always planned to do go into business with her about $500,000. It was this six-store chain that Jennifer
father, Jack Carter. joined after graduating.
28 PART 1 INTRODUCTION

Her understanding with her father was that she would Questions
serve as a troubleshooter/consultant to the elder Carter with 1. Make a list of five specific HR problems you think
the aim of both learning the business and bringing to it Carter Cleaning will have to grapple with.
modern management concepts and techniques for solving 2. What would you do first if you were Jennifer?
the business s problems and facilitating its growth.

KEY TERMS
organization, 4 authority, 6 functional authority, 7
manager, 4 line authority, 6 globalization, 11
management process, 4 staff authority, 6 human capital, 13
human resource management line manager, 6 talent management, 19
(HRM), 4 staff manager, 6

ENDNOTES
1. http://llbeancareers.com/culture.htm, HR managers perceptions of their units 26. Ibid.
accessed February 28, 2010. reputation among line managers. Carol 27. See, for example, Engine of Change,
2. http://llbeancareers.com/culture.htm, Kulik and Elissa Perry, When Less Is Workforce Management, July 17, 2006,
accessed February 28, 2010. More: The Effect of Devolution on HR as pp. 20 30.
3. Quoted in Fred K. Foulkes, The Expand- a Strategic Role and Construed Image, 28. Moncarz and Reaser, The 2000 10 Job
ing Role of the Personnel Function, Human Resource Management 47, no. 3 Outlook in Brief.
Harvard Business Review, March April 1975, (Fall 2008), pp. 541 558. 29. Richard Crawford, In the Era of Human Cap-
pp. 71 84. See also http://www.bls.gov/ 13. Human Resource Activities, Budgets, ital (New York: Harper Business, 1991), p. 26.
oco/ocos021.htm, accessed October 3, 2011. and Staffs, 1999 2000, BNA Bulletin to 30. Peter Drucker, The Coming of the New
4. Jeremy Smerd, Outsider Thinking for Management, June 20, 2000. Organization, Harvard Business Review,
GM HR, Workforce Management,August 17, 14. For discussions of some other important January February 1998, p. 45. See also
2009, pp. 1 3. trends, see, for example, Society for Human James Guthrie et al., Correlates and Con-
5. Steve Bates, No Experience Necessary? Resource Management, Workplace Trends: sequences of High Involvement Work Prac-
Many Companies Are Putting Non-HR An Overview of the Findings of the Latest tices: The Role of Competitive Strategy,
Executives in Charge of HR with Mixed SHRM Workplace Forecast, Workplace International Journal of Human Resource
Results, HR Magazine 46, no. 11 Visions, no. 3 (2008), pp. 1 8; and Ed Management, February 2002, pp. 183 197.
(November 2001), pp. 34 41. See also Fay Frauenheim, Future View, Workforce Man- 31. Society for Human Resource Manage-
Hansen, Top of the Class, Workforce agement, December 15, 2008, pp. 18 23. ment, Workforce Readiness and the New
Management, June 23, 2008, pp. 1, 25 30. 15. Ibid., p. 9. See also Society for Human Essential Skills, Workplace Visions, no. 2
6. A Profile of Human Resource Executives, Resource Management, The Impact of (2008), p. 5.
BNA Bulletin to Management, June 21, Globalization on HR, Workplace Visions, 32. Human Resources Wharton, www.
2001, p. S5. no. 5 (2000), pp. 1 8. knowledge.wharton.upe.edu, accessed
7. This data comes from Small Business: 16. See, for example, Society for Human January 8, 2006.
A Report of the President (1998), www. Resource Management, Promoting Pro- 33. See, for example, Anthea Zacharatos
SBA.gov/ADV/stats, accessed March 9, ductivity, Workplace Visions, no. 1 (2006), et al., High-Performance Work Systems
2006. See also Statistics of U.S. Businesses pp. 1 8. and Occupational Safety, Journal of Applied
and Non-Employer Status, www.SBA.gov/ 17. Roger J. Moncarz, Michael G. Wolf, and Psychology 90, no. 1 (2005), pp. 77 93.
ADV oh/research/data.html, accessed Benjamin Wright, Service-Providing 34. Charting the Projections: 2004 2014,
March 9, 2006. Occupations, Offshoring, and the Labor Occupational Outlook Quarterly,Winter 2005
8. Some employers, like Google, are adding Market, Monthly Labor Review, December 2006, pp. 48 50; and www.bls.gov/emp/
chief sustainability officers within human 2008, pp. 71 86. emplabor01.pdf, accessed October 20, 2008.
resource management who are responsible 18. www.usatoday.com/money/economy/ 35. Percent Growth in Labor Force by Race,
for fostering the company s environmental 2010-08-06-manufacturing04_CV_ Projected 2008 18, Occupational Outlook
sustainability efforts. Nancy Woodward, N.htm, accessed May 8, 2011. Quarterly, Winter 2009 2010, p. 35;
New Breed of Human Resource Leader, 19. www.census.gov/foreign-trade/statistics/ Percent Growth in Labor Force by Ethnic
HR Magazine, June 2008, pp. 53 57. historical/gands.pdf, accessed May 8, 2011. Origin, Projected 2008 2018, Occupational
9. See Dave Ulrich, The New HR Organi- 20. Ibid. Outlook Quarterly,Winter 2009 2010, p. 36.
zation, Workforce Management, Decem- 21. http://facebookrecruiting.net/, accessed 36. Tony Carneval, The Coming Labor and
ber 10, 2007, pp. 40 44; and Dave Ulrich, May 8, 2011. Skills Shortage, Training & Development,
The 21st-Century HR Organization, 22. Ibid. January 2005, p. 39.
Human Resource Management 47, no. 4 23. Timothy Appel, Better Off a Blue-Collar, 37. Talent Management Leads in Top
(Winter 2008), pp. 829 850. The Wall Street Journal, July 1, 2003, p. B-1. HR Concerns, Compensation & Benefits
10. Robert Grossman, Saving Shared Services, 24. Roger Moncarz and Azure Reaser, Review, May/June 2007, p. 12.
HR Magazine, September 2010, pp. 26 31. The 2000 10 Job Outlook in Brief, 38. Bruce Tulgan, quoted in Stephanie
11. Robert Grossman, IBM s HR Takes a Risk, Occupational Outlook Quarterly, Spring Armour, Generation Y: They ve Arrived at
HR Management, April 2007, pp. 54 59. 2002, pp. 9 44. Work with a New Attitude, USA Today,
12. In fact, one study found that delegating 25. See Charting the Projections: 2004 2014, www.usatoday.com/money/workplace/
somewhat more of the HR activities to Occupational Outlook Quarterly, Winter 2005-11-06-gen-y_x.htm, accessed May 10,
line managers had a positive effect on 2005 2006. 2010.
 CHAPTER 1 INTRODUCTION TO HUMAN RESOURCE MANAGEMENT 29

39. Stephanie Armour, Generation Y: LaFleur, Information Technology Usage 43, no. 2 (March 2006), pp. 319 342; and
They ve Arrived at Work with a New Atti- and Human Resource Roles and Effective- Jaap Paauwe and Paul Boselie, HRM
tude, USA Today, www.usatoday.com/ ness, Human Resource Management 47, and Performance: What s Next? Human
money/workplace/2005-11-06-gen-y_ no. 3 (Fall 2008), pp. 525 540. See also R. Resource Management Journal 15, no. 4
x.htm, accessed May 10, 2010. Zeidner, The Tech Effect on Human (2005), pp. 68 82.
40. Nadira Hira, You Raised Them, Now Resources, HRMagazine (2009 HR 71. Super Human Resources Practices Result
Manage Them, Fortune, May 28, 2007, Trendbook supp), pp. 49 50, 52. in Better Overall Performance, Report
pp. 38 46; Katheryn Tyler, The Tethered 56. Susan Ladika, Socially Evolved, Work- Says, BNA Bulletin to Management,
Generation, HR Magazine, May 2007, force Management, September 2010, August 26, 2004, pp. 273 274. See also
pp. 41 46; Jeffrey Zaslow, The Most Praised pp. 18 22 Wendy Boswell, Aligning Employees with
Generation Goes to Work, The Wall Street 57. Paul Loftus, Tackle Talent Management the Organization s Strategic Objectives:
Journal, April 20, 2007, pp. W-1, W-7. to Achieve High Performance, Plant Engi- Out of Line of Sight, Out of Mind,
41. Talent Management Leads in Top HR neering 61, no. 6 (June 15, 2007), p. 29. International Journal of Human Resource
Concerns, Compensation & Benefits Review, 58. Survey: Talent Management a Top Con- Management 17, no. 9 (September 2006),
May/June 2007, p. 12. cern, CIO Insight, January 2, 2007. pp. 1014 1041. A recent study found that
42. Society for Human Resource Manage- 59. w w w. t a l e n t m a n a g e m e n t 1 0 1 . co m , some employers, which the researchers
ment, Jennifer Schramm, Exploring the accessed December 10, 2007. called cost minimizers, intentionally took a
Future of Work, Workplace Visions, no. 2 60. Kevin Wooten, Ethical Dilemmas in lower cost approach to human resource
(2005), p. 6; Rainer Strack, Jens Baier, and Human Resource Management, Human practices, with mixed results. See Soo Min
Anders Fahlander, Managing Demo- Resource Management Review 11 (2001), Toh et al., Human Resource Configura-
graphic Risk, Harvard Business Review, p. 161. See also Ann Pomeroy, The tions: Investigating Fit with the Orga-
February 2008, pp. 119 128. Ethics Squeeze, HR Magazine 51, no. 3 nizational Context, Journal of Applied
43. Adrienne Fox, At Work in 2020, HR (March 2006), pp. 48 55. Psychology 93, no. 4 (2008), pp. 864 882.
Magazine, January 2010, pp. 18 23. 61. Meatpacking Case Highlights HR s 72. Except as noted, most of this section is
44. Rita Zeidner, Does the United States Liability, Workforce Management, Sep- based on Richard Vosburgh, The Evolu-
Need Foreign Workers? HR Magazine, tember 20, 2008, p. 6. tion of HR: Developing HR as an Inter-
June 2009, pp. 42 44. 62. Dean Smith, Engagement Matters, T+D nal Consulting Organization, Human
45. www.bls.gov/opub/ted/2006/may/wk2 63, no. 10, October 2009, p. 14. Resource Planning 30, no. 3 (September
/art01.htm, accessed April 18, 2009. 63. Quoted in Smith, Engagement Matters. 2007), pp. 11 24.
46. Immigrants in the Workplace, BNA Bul- 64. Robert Grossman, IBM s HR Takes a Risk, 73. Dave Ulrich and Wayne Brockbank,
letin to Management Datagraph, March 15, HR Management, April 2007, pp. 54 59. See The HR Value Proposition (Boston: Harvard
1996, pp. 260 261. See also Tanuja Agar- also Robert Grossman, Close the Gap Business School Publishing, 2005).
wala, Human Resource Management: The Between Research and Practice, HR Maga- 74. See, for example, Employers Seek HR
Emerging Trends, Indian Journal of Indus- zine, November 2009, pp. 31 37. Executives with Global Experience, SOX
trial Relations, January 2002, pp. 315 331. 65. Chris Brewster, et al., What Determines Knowledge, Business Sense, BNA Bul-
47. Human Capital Critical to Success, the Size of the HR Function? A Cross letin to Management, September 19, 2006,
Management Review, November 1998, National Analysis, Human Resource Man- pp. 297 298; and Robert Rodriguez,
p. 9. See also HR 2018: Top Predictions, agement 45, no. 1 (Spring 2006), pp. 3 21. HR s New Breed, HR Magazine, Janu-
Workforce Management 87, no. 20 (Decem- 66. Contact the Society for Human Resource ary 2006, pp. 67 71.
ber 15, 2008), pp. 20 21. Management, 703.535.6366. 75. Ibid.
48. www.llbean.com/customerSer vice/ 67. See, for example, www.personneltoday. 76. w w w. e l e a r n i n g . s h r m . o r g / n e w h r
aboutLLBean/images/110408_About- com/blogs/hcglobal-human-capital-man- competency.aspx, accessed April 4, 2011.
LLB.pdf, accessed June 1, 2011. agement/2009/02/theres-no-such-thing- 77. Ibid.
49. www.llbean.com/, accessed June 1, 2011. as-eviden.html, accessed April 18, 2009. 78. SHRM no longer makes it possible for col-
50. http://llbeancareers.com/culture.htm, 68. The evidence-based movement began in lege graduates without HR experience to
accessed February 28, 2010. medicine. In 1996, in an editorial pub- sit for one of the chairman certification
51. Michael Arndt, L.L.Bean Follows Its lished by the British Medical Journal, David exams. However, it does provide a SHRM
Shoppers to the Web, Business Week, Sackett, MD, defined evidence based Assurance of Learning Assessment Prepa-
March 1, 2010. medicine as use of the best-available evi- ration Guidebook. This helps students
52. A survey found that HR managers referred dence in making decisions about patient study for a SHRM exam that aims to verify
to strategic/critical thinking skills as the care and urged his colleagues to adopt its that the student has acquired the knowl-
top most important factor in attaining tenets. Evidence-Based Training : Turn- edge required to enter the human resource
next HR job. See Career Development for ing Research Into Results for Pharmaceuti- management profession at the entry level.
HR Professionals, Society for Human cal Sales Training, An AXIOM White See www.SHRM.org/assuranceoflearning/
Resource Management Research Quarterly, Paper © 2006 AXIOM Professional Health index.html, accessed April 4, 2011.
second quarter 2008, p. 3. Learning LLC. All rights reserved. 79. Efforts to recruit and retain employees,
53. John Boudreau and Peter Ramstad, 69. Susan Wells, From HR to the Top, HR the growing importance of employee
Beyond HR: The New Science of Human Magazine, June 2003, p. 49. training, and new legal standards are
Capital (Boston: Harvard Business School 70. Mitchell Rothstein and Richard Goffin, expected to increase employment of these
Publishing Corporation, 2007), p. 9. The Use of Personality Measures in workers. The 2008 2018 Job Outlook in
54. For example, see Sandra Fisher et al., Personnel Selection: What Does Current Brief, Occupational Outlook Quarterly 54,
Human Resource Issues in Outsourcing: Research Support? Human Resource Man- no. 1 (Spring 2010), p. 9).
Integrating Research and Practice, Human agement Review 16 (2006), pp. 155 180; 80. For example, in 2009, the head of human
Resource Management 47, no. 3 (Fall Helen Shipton et al., HRM as a Predictor resources and labor relations at Delta Air
2008), pp. 501 523; and Sizing Up the of Innovation, Human Resource Man- Lines earned about $5 million in total
HR Outsourcing Market, HR Magazine, agement Journal 16, no. 1 (2006), pp. 3 27; compensation, and the senior vice presi-
November 2008, p. 78. Luc Sels et al., Unraveling the HRM dent for human resources at eBay earned
55. Studies suggest that IT usage does support Performance Link: Value Creating and over $4 million. Jessica Marquez, As the
human resource managers strategic plan- Cost-Increasing Effects of Small-Business Economy Goes, Workforce Management,
ning. See Victor Haines III and Genevieve HRM, Journal of Management Studies August 17, 2009, pp. 27 33.
2
Equal Opportunity
and the Law
Source: Martin Ruetschl/AP Images.
LEARNING OBJECTIVES Company s
1. Explain the importance of and list the basic features Strategic Goals
of Title VII of the 1964 Civil Rights Act and at least five
other equal employment laws.
2. Explain how to avoid and deal with accusations
of sexual harassment at work.
3. Define adverse impact and explain how it is proved. Employee Competencies
and Behaviors Required
4. Explain and illustrate two defenses you can use in the for Company to Achieve
event of discriminatory practice allegations. These Strategic Goals
5. Cite specific discriminatory personnel management
practices in recruitment, selection, promotion, transfer,
layoffs, and benefits.
6. List the steps in the EEOC enforcement process. tegic and Lega
Stra nvironment l
7. Discuss why diversity management is important E
and how to institutionalize a diversity management

Re Place
c r u m en t
program.

Relatio ee

itme
ns
Employ

nt and
HR Policies and Practices
Required to Produce

A
federal district court in New York recently Employee Competencies
and Behaviors
approved a $175 million settlement by Novartis

De rai
Pharmaceuticals Corp. to pay a class of about l

ve
po n

T
ion
tas
6,000 female current and former sales represen- n epm tnema gni
tatives to settle their sex discrimination class action suit.1 oC dn
As you ll see at http://eeoc.gov/eeoc/newsroom/index.cfm,
hardly a day goes by without equal opportunity related
lawsuits at work.
WHERE ARE WE NOW . . .
Every HR action you take as a manager,
from interviewing applicants to training,
appraising, and rewarding them, has equal
employment implications. Therefore, the
purpose of this chapter is to provide you
with the knowledge to deal effectively with
equal employment questions on the job.
The main topics we cover are equal
opportunity laws enacted from 1964 to
1991, the laws from 1991 to the present,
defenses against discrimination
allegations, illustrative discriminatory
employment practices, the EEOC
enforcement process, and diversity
management.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 31
32 PART 1 INTRODUCTION

1 Explain the importance of and

EQUAL EMPLOYMENT OPPORTUNITY 1964 1991
list the basic features of American race relations were not always as tolerant as President Barak Obama s election
Title VII of the 1964 Civil might suggest. It took centuries of legislative action, court decisions, and evolving
Rights Act and at least five public policy to arrive at this point.
other equal employment laws.
Legislation barring discrimination against minorities in the United States is
therefore nothing new. The Fifth Amendment to the U.S. Constitution (ratified in
1791) states that no person shall be deprived of life, liberty, or property, without
due process of the law. The Thirteenth Amendment (1865) outlawed slavery, and
courts have held that it bars racial discrimination. The Civil Rights Act of 1866 gives
all persons the same right to make and enforce contracts and to benefit from U.S.
laws.2 Other laws and various court decisions similarly made discrimination against
minorities illegal by the early 1900s, at least in theory.3
But as a practical matter, Congress and presidents avoided dramatic action on
implementing equal employment until the early 1960s. At that point, civil unrest
among minorities and women and changing traditions prompted them to act.
Congress passed a multitude of new civil rights laws.

Title VII of the 1964 Civil Rights Act

Title VII of the 1964 Civil Rights Act was one of the first of these 1960s-era laws. As
amended by the 1972 Equal Employment Opportunity Act, Title VII states that an
employer cannot discriminate based on race, color, religion, sex, or national origin.
Specifically, it states that it shall be an unlawful employment practice for an employer:
1. To fail or refuse to hire or to discharge an individual or otherwise to discriminate
against any individual with respect to his/her compensation, terms, conditions, or
privileges of employment, because of such individual s race, color, religion, sex,
or national origin.
2. To limit, segregate, or classify his/her employees or applicants for employment in
any way that would deprive or tend to deprive any individual of employment
opportunities or otherwise adversely affect his/her status as an employee, because
of such individual s race, color, religion, sex, or national origin.

WHO DOES TITLE VII COVER? Title VII covers just about everyone. It bars
discrimination on the part of most employers, including all public or private
employers of 15 or more persons. It also covers all private and public educational
institutions, the federal government, and state and local governments. It bars public
and private employment agencies from failing or refusing to refer for employment
any individual because of race, color, religion, sex, or national origin. And it bars
labor unions with 15 or more members from excluding, expelling, or classifying their
membership based on race, color, religion, sex, or national origin.
THE EEOC Title VII established the Equal Employment Opportunity Commission
(EEOC) to administer and enforce the Civil Rights law at work. The commission itself
consists of five members appointed by the president with the advice and consent of the
Senate. Each member serves a 5-year term. In popular usage, the EEOC also includes
the thousands of staff the EEOC has around the United States. They receive and
investigate job discrimination complaints from aggrieved individuals. When the EEOC
finds reasonable cause that the charges are justified, it attempts (through conciliation)
to reach an agreement. If this fails, it can go to court. The EEOC may file discrimination
charges on behalf of aggrieved individuals, or the individuals may file on behalf of
themselves.4 We ll discuss the EEOC procedure later in this chapter.

Executive Orders
Various U.S. presidents signed executive orders expanding equal employment in
federal agencies. For example, the Johnson administration (1963 1969) issued Execu-
tive Orders 11246 and 11375. These didn t just ban discrimination. They also required
that government contractors with contracts of over $50,000 and 50 or more employees
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 33

take affirmative action to ensure employment opportunities for those who may have
suffered past discrimination. These orders also established the Office of Federal
Contract Compliance Programs (OFCCP).5 It implements the orders and ensures
compliance. President Obama s administration recently directed more funds and
staffing to the OFCCP.6

Equal Pay Act of 1963

Under the Equal Pay Act of 1963 (amended in 1972), it is unlawful to discriminate in pay
on the basis of sex when jobs involve equal work; require equivalent skills, effort, and
responsibility; and are performed under similar working conditions. Pay differences
derived from seniority systems, merit systems, and systems that measure earnings by
production quantity or quality or from any factor other than sex do not violate the act.

Age Discrimination in Employment Act of 1967

The Age Discrimination in Employment Act of 1967 (ADEA) made it unlawful to
discriminate against employees or applicants who are between 40 and 65 years of age.
Subsequent amendments eliminated the age cap, effectively ending most mandatory
retirement at age 65. Most states and local agencies, when acting in the role of employer,
must also adhere to provisions of the act that protect workers from age discrimination.
You can t get around the ADEA by replacing employees over 40 years of age with
those who are also over 40. In O Connor v. Consolidated Coin Caterers Corp., the U.S.
Supreme Court held that an employee who is over 40 years of age might sue for
discrimination if a significantly younger employee replaces him or her, even if the
replacement is also over 40. The Court didn t specify what significantly younger
meant, but O Connor had been replaced by someone 16 years younger.7
Younger managers especially may have to guard against ageist prejudices. For
example, a 54-year-old former manager recently alleged that Google fired him
because he wasn t a cultural fit, according to his own manager. This and other
allegedly ageist statements by Google executives prompted the California Court of
Appeals to let the manager s case proceed.8
The ADEA is attractive to plaintiffs lawyers. It allows jury trials and double
damages to those proving willful discrimination.9

Vocational Rehabilitation Act of 1973

The Vocational Rehabilitation Act of 1973 requires employers with federal contracts
of more than $2,500 to take affirmative action in employing handicapped persons.
It does not require hiring unqualified people. It does require an employer to take steps
to accommodate a handicapped worker unless doing so imposes an undue hardship
on the employer.

Title VII of the 1964 Civil Rights Act Office of Federal Contract Compliance Vocational Rehabilitation Act of 1973
The section of the act that says an employer Programs (OFCCP) The act requiring certain federal contractors
cannot discriminate on the basis of race, This office is responsible for implementing to take affirmative action for disabled
color, religion, sex, or national origin with the executive orders and ensuring compli- persons.
respect to employment. ance of federal contractors.

Equal Employment Opportunity Equal Pay Act of 1963

Commission (EEOC) The act requiring equal pay for equal work,
The commission, created by Title VII, is regardless of sex.
empowered to investigate job discrimination
complaints and sue on behalf of Age Discrimination in Employment Act
complainants. of 1967 (ADEA)
The act prohibiting arbitrary age discrimina-
affirmative action tion and specifically protecting individuals
Steps that are taken for the purpose over 40 years old.
of eliminating the present effects of past
discrimination.
34 PART 1 INTRODUCTION

Pregnancy Discrimination Act of 1978

The Pregnancy Discrimination Act of 1978 prohibits using pregnancy, childbirth,
or related medical conditions to discriminate in hiring, promotion, suspension, or
discharge, or in any term or condition of employment. Furthermore, under the
act, if an employer offers its employees disability coverage, then it must treat
pregnancy and childbirth like any other disability, and include it in the plan as a
covered condition.10
More women are suing under this act. Pregnancy discrimination claims to the
EEOC rose about 50% from 2000 to 2010, to 6,119 charges in fiscal year 2010.11
(Progressive human resources notwithstanding, one firm, an auto dealership, fired an
employee after she said she was pregnant. The reason? Allegedly, In case I ended up
throwing up or cramping in one of their vehicles. They said pregnant women do that
sometimes, and I could cause an accident, which might mean a lawsuit against
them. )12 Managers therefore shouldn t jump to conclusions. They should base any
[such] decision on whether an employee can do the job on medical documentation,
not on a manager s interpretation. 13

Federal Agency Guidelines

The federal agencies charged with ensuring compliance with these laws and executive
orders issue their own implementing guidelines. These spell out recommended proce-
dures for complying with the law.14
The EEOC, Civil Service Commission, Department of Labor, and Department of
Justice together issued uniform guidelines. These set forth highly recommended
procedures regarding things like employee selection, record keeping, and preem-
ployment inquiries. As an example, they specify that employers must validate any
employment selection devices (like tests) that screen out disproportionate numbers
of women or minorities. And they explain how to validate a selection device. (We
explain this procedure in Chapter 6.) The EEOC and other agencies also periodically
issue updated guidelines clarifying and revising their positions on matters such as
sexual harassment. (The OFCCP has its own guidelines.) The American Psychological
Association has its own (non legally binding) Standards for Educational and
Psychological Testing.

Early Court Decisions Regarding Equal

Employment Opportunity
Several court decisions between 1964 and 1991 helped clarify courts interpretations of
EEO laws such as Title VII.

GRIGGS V. DUKE POWER COMPANY Griggs was a landmark case, because the
Supreme Court used it to define unfair discrimination. Lawyers sued the Duke Power
Company on behalf of Wilie Griggs, an applicant for a job as a coal handler. The
company required its coal handlers to be high school graduates. Griggs claimed this
requirement was illegally discriminatory. He said it wasn t related to success on the job,
and it resulted in more blacks than whites being rejected for these jobs. Griggs won the
case. The Court s decision was unanimous. In his written opinion, Chief Justice Burger
laid out three crucial guidelines affecting equal employment legislation.
* First, the Court ruled that the discrimination does not have to be overt to be illegal.
In other words, the plaintiff does not have to show that the employer intention-
ally discriminated against the employee or applicant. Instead, the plaintiff just has
to show that discrimination took place.
* Second, the Court held that an employment practice (in this case, requiring the
high school degree) must be job related if it has an unequal impact on members of
a protected class. (For example, if arithmetic is not required to perform the job,
don t test for arithmetic.)
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 35

* Third, Chief Justice Burger s opinion placed the burden of proof on the employer
to show that the hiring practice is job related. Thus, the employer must show
that the employment practice (in this case, requiring a high school degree) is
necessary for satisfactory job performance if the practice discriminates against
members of a protected class. In the words of Justice Burger,
The act proscribes not only overt discrimination, but also practices that are fair
in form, but discriminatory in operation. The touchstone is business necessity.
If an employment practice which operates to exclude Negroes cannot be shown
to be related to job performance, the practice is prohibited.15
For employers, Griggs established these five principles:
1. A test or other selection practice must be job related, and the burden of proof
is on the employer.
2. An employer s intent not to discriminate is irrelevant.16
3. If a practice is fair in form but discriminatory in operation, the courts will not
uphold it.
4. Business necessity is the defense for any existing program that has adverse impact.
The court did not define business necessity.
5. Title VII does not forbid testing. However, the test must be job related (valid),
in that performance on the test must relate to performance on the job.

ALBEMARLE PAPER COMPANY V. MOODY In the Albemarle case, the Court

provided more details on how employers could prove that tests or other screening
tools relate to job performance.17 For example, the Court said that if an employer
wants to test candidates for a job, then the employer should first clearly document
and understand the job s duties and responsibilities. Furthermore, the job s
performance standards should be clear and unambiguous. That way, the employer
can identify which employees are performing better than others. The Court s ruling
also established the EEOC (now Federal) Guidelines on validation as the procedures
for validating employment practices.

EQUAL EMPLOYMENT OPPORTUNITY

1990 91 PRESENT
The Civil Rights Act of 1991
Several subsequent Supreme Court rulings in the 1980s had the effect of limiting the
protection of women and minority groups under equal employment laws. For
example, they raised the plaintiff s burden of proving that the employer s acts were in
fact discriminatory. This soon prompted Congress to pass a new Civil Rights Act.
President George H. W. Bush signed the Civil Rights Act of 1991 (CRA 1991) into law
in November 1991. The effect of CRA 1991 was to roll back equal employment law to
where it stood before the 1980s decisions. In some respects, it even placed more
responsibility on employers.

Pregnancy Discrimination Act protected class Civil Rights Act of 1991 (CRA 1991)
An amendment to Title VII of the Civil Rights Persons such as minorities and women The act that places the burden of proof back
Act that prohibits sex discrimination based protected by equal opportunity laws, on employers and permits compensatory
on pregnancy, childbirth, or related medical including Title VII. and punitive damages.
conditions.

uniform guidelines
Guidelines issued by federal agencies
charged with ensuring compliance with equal
employment federal legislation explaining
recommended employer procedures
in detail.
36 PART 1 INTRODUCTION

BURDEN OF PROOF First, CRA 1991 addressed the issue of burden of proof.
Burden of proof what the plaintiff must show to establish possible illegal
discrimination, and what the employer must show to defend its actions plays a
central role in equal employment cases.18 Today, in brief, once an aggrieved applicant
or employee demonstrates that an employment practice (such as must lift
100 pounds ) has an adverse impact on a particular group, then the burden of proof
shifts to the employer, who must show that the challenged practice is job related.19
For example, the employer has to show that lifting 100 pounds is actually required for
performing the job in question, and that the business could not run efficiently
without the requirement that it is a business necessity.20
MONEY DAMAGES Before CRA 1991, victims of intentional discrimination
(which lawyers call disparate treatment) who had not suffered financial loss and who
sued under Title VII could not then sue for compensatory or punitive damages. All
they could expect was to have their jobs reinstated (or to get a particular job). They
were also eligible for back pay, attorneys fees, and court costs.
CRA 1991 makes it easier to sue for money damages in such cases. It provides that
an employee who is claiming intentional discrimination can ask for (1) compensatory
damages and (2) punitive damages, if he or she can show the employer engaged in
discrimination with malice or reckless indifference to the federally protected rights
of an aggrieved individual. 21
MIXED MOTIVES Finally, CRA 1991 states:
An unlawful employment practice is established when the complaining party demon-
strates that race, color, religion, sex, or national origin was a motivating factor for
any employment practice, even though other factors also motivated the practice.22
The last phrase is pivotal. Some employers in so-called mixed motive cases had
taken the position that even though their actions were discriminatory, other factors
like the employee s dubious behavior made the job action acceptable. Under CRA
1991, an employer cannot avoid liability by proving it would have taken the same
action such as terminating someone even without the discriminatory motive.23 If
there is any such motive, the practice may be unlawful.24

The Americans with Disabilities Act

The Americans with Disabilities Act (ADA) of 1990 prohibits employment discrim-
ination against qualified disabled individuals.25 It prohibits employers with 15 or
more workers from discriminating against qualified individuals with disabilities, with
regard to applications, hiring, discharge, compensation, advancement, training, or
other terms, conditions, or privileges of employment.26 It also says employers must
make reasonable accommodations for physical or mental limitations unless doing
so imposes an undue hardship on the business.
The ADA does not list specific disabilities. Instead, EEOC guidelines say
someone is disabled when he or she has a physical or mental impairment that
substantially limits one or more major life activity. Impairments include any
physiological disorder or condition, cosmetic disfigurement, or anatomical loss
affecting one or more of several body systems, or any mental or psychological
disorder.27 The act specifies conditions that it does not regard as disabilities,
including homosexuality, bisexuality, voyeurism, compulsive gambling, pyroma-
nia, and certain disorders resulting from the current illegal use of drugs.28 The
EEOC s position is that the ADA prohibits discriminating against people with
HIV/AIDS (and numerous state laws also shield such people).
MENTAL IMPAIRMENTS AND THE ADA Mental disabilities account for
the greatest number of ADA claims.29 Under EEOC ADA guidelines, mental
impairment includes any mental or psychological disorder, such as . . . emotional or
mental illness. Examples include major depression, anxiety disorders, and
personality disorders. The ADA also protects employees with intellectual disabilities,
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 37

including those with IQs below 70 75.30 The guidelines say employers should be alert
to the possibility that traits normally regarded as undesirable (such as chronic
lateness, hostility, or poor judgment) may reflect mental impairments. Reasonable
accommodation, says the EEOC, might then include providing room dividers,
partitions, or other barriers between work spaces.

QUALIFIED INDIVIDUAL Just being disabled doesn t qualify someone for a job,
of course. Instead, the act prohibits discrimination against qualified individuals
those who, with (or without) a reasonable accommodation, can carry out the
essential functions of the job. The individual must have the requisite skills,
educational background, and experience to do the job. A job function is essential
when, for instance, it is the reason the position exists, or it is so highly specialized
that the employer hires the person for his or her expertise or ability to perform
that particular function. For example, when an Iowa County highway worker had an
on-the-job seizure, his driver s license was suspended and the state fired him. The
court ruled that he had no ADA claim because he couldn t perform the essential
functions of the job.31

REASONABLE ACCOMMODATION If the individual can t perform the job as

currently structured, the employer must make a reasonable accommodation unless
doing so would present an undue hardship. Reasonable accommodation might
include redesigning the job, modifying work schedules, or modifying or acquiring
equipment or other devices (such as adding curb ramps and widening door
openings).32 For example, the National Federation of the Blind estimates that about
70% of working age blind adults are unemployed or underemployed, although they
have the requisite education. Yet existing technologies would enable most of these
people to work successfully in numerous job functions. One such technology is a
screen-reading program called Jaws, which converts text from a computer screen into
Braille while speaking it.33
Attorneys, employers, and the courts continue to work through what reasonable
accommodation means.34 In one classic case, an employee with a bad back who
worked as a door greeter in a Walmart asked if she could sit on a stool while on duty.
The store said no. She sued. The federal district court agreed with Walmart that door
greeters must act in an aggressively hospitable manner, which can t be done sitting on
a stool.35 Standing was an essential job function. You can use technology and common
sense to make reasonable accommodation. Figure 2-1 summarizes several examples.

TRADITIONAL EMPLOYER DEFENSES Employers traditionally prevailed in

almost all 96% federal circuit court ADA decisions.36 A U.S. Supreme Court
decision typifies what plaintiffs faced. An assembly worker sued Toyota, arguing that
carpal tunnel syndrome prevented her from doing her job.37 The U.S. Supreme

FIGURE 2-1 Examples

Employees with mobility or vision impairments may benefit from voice
of How to Provide Reasonable
recognition software.
Accommodation
Word prediction software suggests words based on context with just one or
two letters typed.
Real-time translation captioning enables employees to participate in meetings.
Vibrating text pagers notify employees when messages arrive.
Arizona created a disability friendly Web site to help link prospective employees
and others to various agencies.

mixed motive case Americans with Disabilities Act (ADA) qualified individuals
A discrimination allegation case in which the The act requiring employers to make Under ADA, those who can carry out the
employer argues that the employment action reasonable accommodations for disabled essential functions of the job.
taken was motivated not by discrimination, employees; it prohibits discrimination against
but by some nondiscriminatory reason such disabled persons.
as ineffective performance.
38 PART 1 INTRODUCTION

Technology enables employers

to accommodate disabled
employees.

Source: Robin Sachs/PhotoEdit Inc.

Court ruled that the ADA covers carpal tunnel syndrome only if her impairments
affect not just her job performance, but also her daily living activities. The employee
admitted that she could perform personal chores such as washing her face and fixing
breakfast. The Court said the disability must be central to the employee s daily living
(not just job).38

THE NEW ADA The era in which employers prevail in most ADA claims
probably ended January 1, 2009. On that day, the ADA Amendments Act of 2008
(ADAAA) became effective. The EEOC had been interpreting the ADAs substantially
limits phrase very narrowly. The new ADAAAs basic effect will be to make it much
easier for employees to show that their disabilities are limiting. For example, the new
act makes it easier for an employee to show that his or her disability is influencing one
of the employee s major life activities. It does this by adding examples like reading,
concentrating, thinking, sleeping, and communicating to the list of ADA major life
activities. As another example, under the new act, an employee will be considered
disabled even if he or she has been able to control his or her impairments through
medical or learned behavioral modifications. The bottom line is that employers will
henceforth have to redouble their efforts to make sure they re complying with the
ADA and providing reasonable accommodations.39
Many employers simply take a progressive approach. Research shows that common
employer concerns about people with disabilities (for instance, that they can t perform
physically demanding tasks, are less productive, and have more accidents) are generally
baseless.40 So, for example, Walgreens has a goal of filling at least one-third of the jobs at
its two large distribution centers with people with disabilities.41
Figure 2-2 summarizes some important ADA guidelines for managers and
employers.

FIGURE 2-2 ADA Guidelines

for Managers and Employers
Do not deny a job to a disabled individual if the person is qualified and able to
perform the essential job functions.
Make a reasonable accommodation unless doing so would result in undue hardship.
Know what you can ask applicants. In general, you may not make preemployment
inquiries about a person s disability before making an offer. However, you may ask
questions about the person s ability to perform essential job functions.
Itemize essential job functions on the job descriptions. In virtually any ADA legal
action, a central question will be, what are the essential functions of the job?
Do not allow misconduct or erratic performance (including absences and tardiness),
even if that behavior is linked to the disability.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 39

Genetic Information Nondiscrimination Act of 2008 (GINA)

The Genetic Information Nondiscrimination Act (GINA) prohibits discrimination by
health insurers and employers based on people s genetic information. Specifically, it
prohibits the use of genetic information in employment, prohibits the intentional
acquisition of genetic information about applicants and employees, and imposes strict
confidentiality requirements.42

State and Local Equal Employment Opportunity Laws

In addition to federal laws, all states and many local governments prohibit employment
discrimination. The effect of the state or local laws is usually to cover employers who
federal laws might otherwise miss. Many cover employers (like those with less than
15 employees) not covered by federal legislation.43 In Arizona, for instance, plaintiffs
can bring sexual harassment claims against employers with as few as one employee.
Some extend the protection of age discrimination laws to young people, barring
discrimination against not only those over 40, but also those under 17. (Here, for
instance, it would be illegal to advertise for mature applicants, because that might
discourage some teenagers from applying.)
State and local equal employment opportunity agencies (often called Human
Resources Commissions or Fair Employment Commissions ) also play a role in
equal employment compliance. When the EEOC receives a discrimination charge, it
usually defers it for a limited time to the state and local agencies that have comparable
jurisdiction. If that doesn t achieve satisfactory remedies, the charges go back to the
EEOC for resolution.
Table 2-1 summarizes selected equal employment opportunity laws, actions,
executive orders, and agency guidelines.

ENFORCING EQUAL EMPLOYMENT LAWS WITH INTERNATIONAL

EMPLOYEES Most employers workforces are increasingly international, and this
complicates applying equal employment laws. Guidelines for applying EEO laws in an
international context follow.44
* U.S. EEO laws do apply inside the United States when the employer is a U.S. entity
and the employee is not a U.S. citizen but is legally authorized to work in the United
States. In some cases, U.S. laws may apply to workers who are not authorized to
work in the United States.45
* U.S. EEO laws do apply to jobs located inside the United States when the employer
is a foreign entity not exempted by a treaty and the employee is authorized to work
in the United States.
* U.S. EEO laws do not apply to jobs located outside the United States when the
employer is a foreign entity, even if the employee is a U.S. citizen.
* U.S. EEO laws do not apply to foreign citizens in jobs located outside the United
States, even if the employer is a U.S. entity.
* U.S. EEO laws do apply to jobs located outside the United States when the
employer is a U.S. entity and the employee is a U.S. citizen, if compliance with
U.S. laws would not violate foreign laws.

Sexual Harassment
Under Title VII, sexual harassment generally refers to harassment on the basis of sex
when such conduct has the purpose or effect of substantially interfering with a person s

sexual harassment
Harassment on the basis of sex that has the
purpose or effect of substantially interfering
with a person s work performance or creating
an intimidating, hostile, or offensive work
environment.
40 PART 1 INTRODUCTION

TABLE 2-1 Summary of Important Equal Employment Opportunity Actions

Action What It Does

Title VII of 1964 Civil Rights Act, as Bars discrimination because of race, color, religion, sex, or national origin; instituted EEOC.
amended
Executive orders Prohibit employment discrimination by employers with federal contracts of more than
$10,000 (and their subcontractors); establish office of federal compliance; require affirmative
action programs.
Federal agency guidelines Indicate guidelines covering discrimination based on sex, national origin, and religion,
as well as employee selection procedures; for example, require validation of tests.
Supreme Court decisions: Griggs v. Duke Rule that job requirements must be related to job success; that discrimination need not be
Power Co., Albemarle v. Moody overt to be proved; that the burden of proof is on the employer to prove the qualification
is valid.
Equal Pay Act of 1963 Requires equal pay for men and women for performing similar work.
Age Discrimination in Employment Prohibits discriminating against a person age 40 or over in any area of employment because
Act of 1967 of age.
State and local laws Often cover organizations too small to be covered by federal laws.
Vocational Rehabilitation Act of 1973 Requires affirmative action to employ and promote qualified handicapped persons
and prohibits discrimination against handicapped persons.
Pregnancy Discrimination Act of 1978 Prohibits discrimination in employment against pregnant women, or related conditions.
Vietnam Era Veterans Readjustment Requires affirmative action in employment for veterans of the Vietnam war era.
Assistance Act of 1974
Ward Cove v. Atonio Made it more difficult to prove a case of unlawful discrimination against an employer.
Americans with Disabilities Act of 1990 Strengthens the need for most employers to make reasonable accommodations for disabled
employees at work; prohibits discrimination.
Civil Rights Act of 1991 Reverses various U.S. Supreme Court decisions; places burden of proof back on employer
and permits compensatory and punitive money damages for discrimination.
ADA Amendments Act of 2008 Makes it easier for employee to show that his or her disability substantially limits a major
life function.
Genetic Information Signed into law in May 2008, prohibits discriminating against employees and applicants
Nondiscrimination Act based on their genetic information.

Source: The actual laws (and others) can be accessed via a search at www.usa.gov/Topics/Reference_Shelf.shtml#Laws, accessed August 24, 2007.

work performance or creating an intimidating, hostile, or offensive work environment.

Sexual harassment violates Title VII. In one recent year, the EEOC received 11,717
sexual harassment charges, about 15% of which were filed by men.46
EEOC guidelines emphasize that employers have an affirmative duty to maintain
workplaces free of sexual harassment and intimidation. As we noted earlier, CRA
1991 permits victims of intentional discrimination, including sexual harassment, to
have jury trials and to collect compensatory damages for pain and suffering and puni-
tive damages, in cases where the employer acted with malice or reckless indifference
to the person s rights.47
The U.S. Supreme Court held (in Oncale v. Sundowner Offshore Services Inc.) that
same-sex sexual harassment is also actionable under Title VII.48
Minority women are most at risk. One study found women experienced more
sexual harassment than men, minorities experienced more ethnic harassment than
whites, and minority women experience more harassment overall than majority men,
minority men, and majority women. 49
The Federal Violence Against Women Act of 1994 provides another path women
can use to seek relief for violent sexual harassment. It provides that a person who
commits a crime of violence motivated by gender and thus deprives another of her
rights shall be liable to the party injured.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 41

WHAT IS SEXUAL HARASSMENT? EEOC guidelines define sexual harassment

as unwelcome sexual advances, requests for sexual favors, and other verbal or physical
conduct of a sexual nature that takes place under any of the following conditions:
1. Submission to such conduct is made either explicitly or implicitly a term or
condition of an individual s employment.
2. Submission to or rejection of such conduct by an individual is used as the basis
for employment decisions affecting such individual.
3. Such conduct has the purpose or effect of unreasonably interfering with an
individual s work performance or creating an intimidating, hostile, or offensive
work environment.

PROVING SEXUAL HARASSMENT There are three main ways someone can
prove sexual harassment.
1. Quid Pro Quo. The most direct is to prove that rejecting a supervisor s advances
adversely affected what the EEOC calls a tangible employment action such as
hiring, firing, promotion, demotion, and/or work assignment. In one case, the
employee showed that continued job success and advancement were dependent
on her agreeing to the sexual demands of her supervisors.
2. Hostile Environment Created by Supervisors. One need not show that the
harassment had tangible consequences such as demotion. For example, in one
case the court found that a male supervisor s sexual harassment had substan-
tially affected a female employee s emotional and psychological ability to the
point that she felt she had to quit her job. Therefore, even though the super-
visor made no direct threats or promises in exchange for sexual advances, his
advances interfered with the woman s performance and created an offensive
work environment. That was sufficient to prove sexual harassment. Courts
generally do not interpret as sexual harassment sexual relationships that arise
during the course of employment but that do not have a substantial effect on
that employment.50 The U.S. Supreme Court also held that sexual harassment
law doesn t cover ordinary intersexual flirtation. In his ruling, Justice Antonin
Scalia said courts must carefully distinguish between simple teasing and truly
abusive behavior.51
3. Hostile Environment Created by Coworkers or Nonemployees. The question-
able behavior doesn t have to come from the person s supervisor. For example,
one court held that a mandatory sexually provocative uniform led to lewd
comments by customers. When the employee said she would no longer wear
the uniform, they fired her. The employer couldn t show there was a job-
related necessity for requiring the uniform, and only female employees had to
wear it. The court thus ruled that the employer, in effect, was responsible for
the sexually harassing behavior. Such abhorrent client behavior is more likely
when the clients are in positions of power, and when they think no one will
penalize them.52 EEOC guidelines also state that an employer is liable for the
sexually harassing acts of its nonsupervisor employees if the employer knew or
should have known of the harassing conduct.

WHEN IS THE ENVIRONMENT HOSTILE ? Hostile environment sexual

2 Explain how to avoid and
deal with accusations of
harassment generally means that the intimidation, insults, and ridicule were
sexual harassment at work. sufficiently severe to alter the working conditions. Here courts look at several things.

Federal Violence Against Women

Act of 1994
The act that provides that a person who
commits a crime of violence motivated by
gender shall be liable to the party injured.
42 PART 1 INTRODUCTION

These include whether the discriminatory conduct is frequent or severe; whether it is

physically threatening or humiliating, or a mere offensive utterance; and whether it
unreasonably interferes with an employee s work performance.53 Courts also consider
whether the employee subjectively perceives the work environment as being abusive.
For example, did he or she welcome the conduct or immediately show that it was
unwelcome?54

SUPREME COURT DECISIONS The U.S. Supreme Court used a case called
Meritor Savings Bank, FSB v. Vinson to endorse broadly the EEOC s guidelines on
sexual harassment. Two other Supreme Court decisions further clarified sexual
harassment law.
In the first, Burlington Industries v. Ellerth, the employee accused her supervisor
of quid pro quo harassment. She said her boss propositioned and threatened her with
demotion if she did not respond. He did not carry out the threats, and she was pro-
moted. In the second case, Faragher v. City of Boca Raton, the employee accused the
employer of condoning a hostile work environment. She said she quit her lifeguard
job after repeated taunts from other lifeguards. The Court ruled in favor of the
employees in both cases.

IMPLICATIONS The Court s written decisions have two implications for

employers and managers. First, in quid pro quo cases it is not necessary for the
employee to suffer a tangible job action (such as a demotion) to win the case.
Second, the Court laid out an important defense against harassment suits. It said
the employer must show that it took reasonable care to prevent and promptly
correct any sexually harassing behavior and that the employee unreasonably failed to
take advantage of the employer s policy. The implication is that an employer can
defend itself against sexual harassment liability by showing two things:
* First, it must show that the employer exercised reasonable care to prevent and
correct promptly any sexually harassing behavior. 55
* Second, it must demonstrate that the plaintiff unreasonably failed to take advan-
tage of any preventive or corrective opportunities provided by the employer.
The employee s failure to use formal reporting systems would satisfy the second
component.
Prudent employers promptly took steps to show they did take reasonable care.56
Steps to take include:57
* Take all complaints about harassment seriously.
* Issue a strong policy statement condemning such behavior. It should describe the
prohibited conduct, assure protection against retaliation, describe a confidential
complaint process, and provide impartial investigation and corrective action.
* Take steps to prevent sexual harassment from occurring. For example, communi-
cate to employees that the employer will not tolerate sexual harassment, and take
immediate action when someone complains.
* Establish a management response system that includes an immediate reaction
and investigation.
* Train supervisors and managers to increase their awareness of the issues, and
discipline managers and employees involved in sexual harassment.

WHEN THE LAW ISN T ENOUGH Unfortunately, two practical considerations

often trump the legal requirements. First, women react differently to possible
harassment than do men. In one study, about 58% of employees reported
experiencing at least some potentially harassment-type behaviors at work. Overall,
about 25% found it fun and flattering and about half viewed it as benign. But on
closer examination, about four times as many men as women found the behavior
flattering or benign.58 Women perceive a broader range of socio-sexual behaviors
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 43

(touching, for instance) as harassing. 59 Sexual harassment training and policies can
reduce this problem.60
A second reason the usual precautions often aren t enough is that employees
often won t use them. One study surveyed about 6,000 U.S. military employees. It
turned out that reporting harassment often triggered retaliation, and could harm
the victim in terms of lower job satisfaction and greater psychological distress.
Under such conditions, the most reasonable thing to do was to avoid reporting.
The solution is to execute zealously the anti-harassment policies like those
mentioned earlier.

WHAT THE EMPLOYEE CAN DO First, remember that courts generally look to
whether the harassed employee used the employer s reporting procedures to file a
complaint promptly. To quote one EEO manual, a victim has a duty to use reasonable
means to avoid or minimize his or her damages. Generally, this is satisfied if the
employer had an effectively communicated complaint procedure and the victim did
not utilize it, or if the victim did make a complaint but then refused to cooperate in
the investigation. 61 In that context, steps an employee can take include:
1. File a verbal contemporaneous complaint with the harasser and the harasser s
boss, stating that the unwanted overtures should cease because the conduct is
unwelcome.
2. If the unwelcome conduct does not cease, file verbal and written reports regarding
the unwelcome conduct and unsuccessful efforts to get it to stop with the harasser s
manager and/or the human resource director.
3. If the letters and appeals to the employer do not suffice, the accuser should turn
to the local office of the EEOC to file the necessary claim. In very serious cases,
the employee can also consult an attorney about suing the harasser for assault
and battery, intentional infliction of emotional distress, injunctive relief, and to
recover compensatory and punitive damages.

3 Define adverse impact and

DEFENSES AGAINST DISCRIMINATION
explain how it is proved. ALLEGATIONS
To understand how employers defend themselves against employment discrimination
claims, we should first briefly review some basic legal terminology.
Discrimination law distinguishes between disparate treatment and disparate
impact. Disparate treatment means intentional discrimination. It requires no
more than a finding that women (or protected minority
group members) were intentionally treated differently
because of their gender (or minority status). Disparate
treatment exists where an employer treats an individual
differently because that individual is a member of a
particular race, religion, gender, or ethnic group. 62 Having
a rule that says we do not hire bus drivers over 60 years of
age exemplifies this.
Disparate impact means that an employer engages in an
employment practice or policy that has a greater adverse
Source: Shutterstock.

impact (effect) on the members of a protected group under

Title VII than on other employees, regardless of intent. 63
A rule that says employees must have college degrees to do
this particular job exemplifies this (because more white
males than some minorities earn college degrees).
Employees who believe they are victims of harassment Disparate impact claims do not require proof of dis-
should have a mechanism for filing a complaint. criminatory intent. Instead, the plaintiff must show that the
44 PART 1 INTRODUCTION

apparently neutral employment practice (such as requiring a college degree) creates

an adverse impact a significant disparity between the proportion of (say)
minorities in the available labor pool and the proportion you hire. So, the key here
is to show that the employment practice caused an adverse impact. If it has, then the
employer will probably have to defend itself (for instance, by arguing that there is a
business necessity for the practice).

The Central Role of Adverse Impact

Showing adverse impact therefore plays a central role in discriminatory practice
allegations. Employers may not institute an employment practice that causes a
disparate impact on a particular class of people unless they can show that the practice
is job related and necessary.64 Under Title VII and CRA 1991, a person who believes
that (1) he or she was a victim of unintentional discrimination because of an
employer s practices need only (2) establish a prima facie case of discrimination.
This means showing, for instance, that the employer s selection procedures (like
requiring a college degree for the job) did have an adverse impact on the protected
minority group. Adverse impact refers to the total employment process that results
in a significantly higher percentage of a protected group in the candidate population
being rejected for employment, placement, or promotion. 65 Then the burden of
proof shifts to the employer.
So, for example, if a minority applicant feels he or she was a victim of discrimina-
tion, the person need only show that the employer s selection process resulted in an
adverse impact on his or her group. (For example, if 80% of the white applicants
passed the test, but only 20% of the black applicants passed, a black applicant has a
prima facie case proving adverse impact.) Then the burden of proof shifts to the
employer. It becomes the employer s task to prove that its test (or application blank or
the like) is a valid predictor of performance on the job (and that it applied its selec-
tion process fairly and equitably to both minorities and nonminorities).

HOW CAN SOMEONE SHOW ADVERSE IMPACT? An applicant or

employee can use one of the following methods to show that one of an employer s
procedures (such as a selection test) has an adverse impact on a protected group.

DISPARATE REJECTION RATES Disparate rejection rates can be shown by

comparing the rejection rates for a minority group and another group (usually the
remaining nonminority applicants).66
Federal agencies use a 4/5ths rule to assess disparate rejection rates: A selec-
tion rate for any racial, ethnic, or sex group which is less than four-fifths or 80% of
the rate for the group with the highest rate will generally be regarded as evidence of
adverse impact, while a greater than four-fifths rate will generally not be regarded as
evidence of adverse impact. For example, suppose the employer hires 60% of male
applicants, but only 30% of female applicants. Four-fifths of the 60% male hiring rate
would be 48%. Because the female hiring rate of 30% is less than 48%, adverse impact
exists as far as these federal agencies are concerned.67

THE STANDARD DEVIATION RULE Similarly, the courts have used the
standard deviation rule to confirm adverse impact. (The standard deviation is a
statistical measure of variability. Suppose we measure the heights of every person
in your management class. In simplest terms, the standard deviation helps to
describe, among other things, how wide a range there is between the shortest and
tallest students.) In selection, the standard deviation rule holds that as a rule of
thumb, the difference between the numbers of minority candidates we would have
expected to hire and whom we actually hired should be less than two standard
deviations.
Consider this example. Suppose 300 applicants apply for 20 openings; 80 of the
applicants are women and the other 220 are men. We use our screening processes and
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 45

hire 2 females and 18 males. Did our selection process have adverse impact? To
answer this, we can compute the standard deviation:

(Number of (Number of non-

minority applicants) minority applicants) (Number of

a
SD = * *
(Number of total (Number of total applicants) applicants selected)
applicants)

In our case:

a
A 300
* 20 b = 210.2667 * 0.7333 * 20)
80 220
SD = *

= 23.911 = SD = 1.977
300

In our example, women are 26% (80/300) of the applicant pool. We should therefore
expect to hire 26% of 20 or about 5 women. We actually hired 2 women. The difference
between the numbers of women we would expect to hire and whom we actually hired is
5 - 2 = 3. We can use the standard deviation rule to gauge if there is adverse
(disparate) impact. In our example, the standard deviation is 1.977. Again, the standard
deviation rule holds that as a rule of thumb, the difference between the numbers of
minority candidates we would have expected to hire and whom we actually hired should
be less than two standard deviations. Two times 1.9777 is about 4. Since the difference
between the number of women we would have expected to hire (5) and actually hired
(2) is 3, the results suggest that our screening did not have adverse impact on women. (Put
another way, in this case, hiring just 2 rather than 5 is not a highly improbable result.)68
RESTRICTED POLICY The restricted policy approach means demonstrating that
the employer s policy intentionally or unintentionally excluded members of a
protected group. Here the problem is usually obvious such as policies against hiring
bartenders less than six feet tall. Evidence of restricted policies such as these is enough
to prove adverse impact and to expose an employer to litigation.
POPULATION COMPARISONS This approach compares (1) the percentage of
minority/protected group and white workers in the organization with (2) the percentage
of the corresponding group in the labor market. The EEOC usually defines labor market
as the U.S. Census data for that Standard Metropolitan Statistical Area.
Labor market, of course, varies with the job. For some jobs, such as laborer or
secretary, it makes sense to compare the percentage of minority employees with the
percentage of minorities in the surrounding community, since they will come from
that community. But for jobs such as engineer, recruiting may be nationwide.
Determining whether an employer has enough black engineers might thus involve
determining the number available nationwide, not in the surrounding community.
Employers use workforce analysis to analyze the data regarding the firm s use
of protected versus nonprotected employees in various job classifications.

adverse impact 4/5ths rule restricted policy

The overall impact of employer practices that Federal agency rule that a minority selection Another test for adverse impact, involving
result in significantly higher percentages of rate less than 80% (4/5ths) of that for the demonstration that an employer s hiring
members of minorities and other protected group with the highest rate is evidence of practices exclude a protected group,
groups being rejected for employment, adverse impact. whether intentionally or not.
placement, or promotion.

disparate rejection rates

A test for adverse impact in which it can be
demonstrated that there is a discrepancy
between rates of rejection of members of a
protected group and of others.
46 PART 1 INTRODUCTION

The process of comparing the percentage of minority employees in a job (or jobs)
at the company with the number of similarly trained minority employees available
in the relevant labor market is utilization analysis.

MCDONNELL-DOUGLAS TEST Lawyers in disparate impact cases use the

previous approaches (such as population comparisons) to test whether an employer s
policies or actions have the effect of unintentionally screening out disproportionate
numbers of women or minorities. Lawyers use the McDonnell-Douglas test for showing
(intentional) disparate treatment, rather than (unintentional) disparate impact.
This test grew out of a case at the former McDonnell-Douglas Corporation.
The applicant was qualified but the employer rejected the person and continued
seeking applicants. Did this show that the hiring company intentionally discrimi-
nated against the female or minority candidate? The U.S. Supreme Court set four
rules for applying the McDonnell-Douglas test:
1. that the person belongs to a protected class;
2. that he or she applied and was qualified for a job for which the employer was
seeking applicants;
3. that, despite this qualification, he or she was rejected; and
4. that, after his or her rejection, the position remained open and the employer
continued seeking applications from persons with the complainant s qualifications.
If the plaintiff meets all these conditions, then a prima facie case of disparate
treatment is established. At that point, the employer must articulate a legitimate
nondiscriminatory reason for its action, and produce evidence but not prove that it
acted based on such a reason. If it meets this relatively easy standard, the plaintiff then
has the burden of proving that the employer s articulated reason is merely a pretext
for engaging in unlawful discrimination.

ADVERSE IMPACT EXAMPLE Assume you turn down a member of a protected

group for a job with your firm. You do this based on a test score (although it could
have been interview questions or something else). Further, assume that this person
feels he or she was discriminated against due to being in a protected class, and decides
to sue your company.
Basically, all he or she must do is show that your human resources procedure
(such as the selection test) had an adverse impact on members of his or her minority
group. The plaintiff can apply three approaches here. These are disparate rejection
rates, restricted policy, or population comparisons. Once the person proves adverse
impact (to the court s satisfaction), the burden of proof shifts to the employer. The
employer must defend against the discrimination charges.
Note that there is nothing in the law that says that because one of your procedures
has an adverse impact on a protected group, you can t use the procedure. In fact, it
may well happen that some tests screen out disproportionately higher numbers of,
say, blacks than they do whites. What the law does say is that once your applicant has
made his or her case (showing adverse impact), the burden of proof shifts to you.
Now you (or your company) must defend use of the procedure.
There are then two basic defenses employers use to justify an employment
practice that has an adverse impact on members of a minority group: the bona fide
occupational qualification (BFOQ) defense and the business necessity defense.

4 Explain and illustrate two

Bona Fide Occupational Qualification
defenses you can use in the An employer can claim that the employment practice is a bona fide occupational
event of discriminatory qualification (BFOQ) for performing the job. Title VII specifically permits this defense.
practice allegations. Title VII provides that it should not be an unlawful employment practice for an employer
to hire an employee . . . on the basis of religion, sex, or national origin in those certain
instances where religion, sex, or national origin is a bona fide occupational qualification
reasonably necessary to the normal operation of that particular business or enterprise.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 47

However, courts usually interpret the BFOQ exception narrowly. It is usually a

defense to a disparate treatment case based upon direct evidence of intentional
discrimination, rather than to disparate impact (unintentional) cases. As a practical
matter, employers use it mostly as a defense against charges of intentional discrimina-
tion based on age.

AGE AS A BFOQ The Age Discrimination in Employment Act (ADEA) permits

disparate treatment in those instances when age is a BFOQ.69 For example, age is a
BFOQ when the Federal Aviation Agency sets a compulsory retirement age of 65 for
commercial pilots.70 Actors required for youthful or elderly roles suggest other
instances when age may be a BFOQ. However, courts set the bar high: The reason for
the age limit must go to the essence of the business. A court said a bus line s
maximum-age hiring policy for bus drivers was a BFOQ. The court said the essence of
the business was safe transportation of passengers, and given that, the employer could
strive to employ the most qualified persons available.71
Employers who use the BFOQ defense admit they base their personnel decisions
on age. However, they seek to justify them by showing that the decisions were reason-
ably necessary to normal business operations (for instance, the bus line arguing its
age requirement is necessary for safety).72

RELIGION AS A BFOQ Religion may be a BFOQ in religious organizations or

societies that require employees to share their particular religion. For example,
religion may be a BFOQ when hiring persons to teach in a religious school. However,
remember courts construe the BFOQ defense very narrowly.

GENDER AS A BFOQ Gender may be a BFOQ for positions like actor, model, and
restroom attendant requiring physical characteristics possessed by one sex. However,
for most jobs today, it s difficult to claim that gender is a BFOQ. For example, gender is
not a BFOQ for parole and probation officers.73 It is not a BFOQ for positions just
because the positions require lifting heavy objects. A Texas man recently filed a
complaint against Hooters of America alleging that one of its franchisees would not
hire him as a waiter because it merely wishes to exploit female sexuality as a marketing
tool to attract customers and ensure profitability and so was limiting hiring to
females.74 Hooters argued a BFOQ defense before reaching a confidential settlement.

NATIONAL ORIGIN AS A BFOQ A person s country of national origin may be

a BFOQ. For example, an employer who is running the Chinese pavilion at a fair
might claim that Chinese heritage is a BFOQ for persons to deal with the public.

Business Necessity
Business necessity is a defense created by the courts. It requires showing that there is
an overriding business purpose for the discriminatory practice and that the practice is
therefore acceptable.
It s not easy to prove business necessity.75 The Supreme Court made it clear that
business necessity does not encompass such matters as avoiding an employer incon-
venience, annoyance, or expense. For example, an employer can t generally discharge
employees whose wages have been garnished merely because garnishment (requiring
the employer to divert part of the person s wages to pay his or her debts) creates an
inconvenience. The Second Circuit Court of Appeals held that business necessity

bona fide occupational qualification

(BFOQ)
Requirement that an employee be of a
certain religion, sex, or national origin where
that is reasonably necessary to the
organization s normal operation. Specified
by the 1964 Civil Rights Act.
48 PART 1 INTRODUCTION

means an irresistible demand. It said the practice must not only directly foster
safety and efficiency but also be essential to these goals.76 Furthermore, the business
purpose must be sufficiently compelling to override any racial impact. . . . 77
However, many employers have used the business necessity defense successfully. In
an early case, Spurlock v. United Airlines, a minority candidate sued United Airlines. He
said that its requirements that pilot candidates have 500 flight hours and college degrees
were unfairly discriminatory. The court agreed that the requirements did have an adverse
impact on members of the person s minority group. But it held that in light of the cost of
the training program and the huge human and economic risks in hiring unqualified
candidates, the selection standards were a business necessity and were job related.78
In general, when a job requires a small amount of skill and training, the courts
closely scrutinize any preemployment standards or criteria that discriminate against
minorities. There is a correspondingly lighter burden when the job requires a high
degree of skill, and when the economic and human risks of hiring an unqualified
applicant are great.79
Attempts by employers to show that their selection tests or other employment
practices are valid are examples of the business necessity defense. Here the employer
must show that the test or other practice is job related in other words, that it is a
valid predictor of performance on the job. Where the employer can establish such
validity, the courts have generally supported using the test or other employment
practice as a business necessity. In this context, validity means the degree to which the
test or other employment practice is related to or predicts performance on the job;
Chapter 6 explains validation.

Other Considerations in Discriminatory Practice Defenses

There are three other points to remember about discrimination charges:
1. First, good intentions are no excuse. As the Supreme Court held in the Griggs case,
Good intent or absence of discriminatory intent does not redeem procedures
or testing mechanisms that operate as built-in headwinds for minority groups
and are unrelated to measuring job capability.
2. Second, one cannot hide behind collective bargaining agreements (for instance, by
claiming that a union agreement necessitates some discriminatory practice).
Equal employment opportunity laws take precedence.80
3. Third, a strong defense is not your only recourse. The employer can also respond
by agreeing to eliminate the illegal practice and (when required) by compensating
the people discriminated against.

5 Cite specific discriminatory ILLUSTRATIVE DISCRIMINATORY EMPLOYMENT

personnel management
practices in recruitment,
PRACTICES
selection, promotion, A Note on What You Can and Cannot Do
transfer, layoffs, and benefits.
Before proceeding, we should review what federal fair employment laws allow (and do
not allow) you to say and do.
Federal laws like Title VII usually don t expressly ban preemployment questions
about an applicant s race, color, religion, sex, or national origin. In other words,
with the exception of personnel policies calling for outright discrimination against
the members of some protected group, it s not the questions but their impact.81
In other words, illustrative inquiries and practices such as those summarized on the
next few pages are not illegal per se. For example, it isn t illegal to ask a job candidate
about her marital status (although such a question might seem discriminatory). You
can ask. However, be prepared to show either that you do not discriminate or that
you can defend the practice as a BFOQ or business necessity.
But, in practice, there are two reasons to avoid such questions. First, although
federal law may not bar such questions, many state and local laws do.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 49

Second, the EEOC has said that it will disapprove of such practices, so just asking
the questions may draw its attention. Such questions may identify and/or adversely
affect an applicant as a member of a protected group. They become illegal if a
complainant can show you use them to screen out a greater proportion of his or her
protected group s applicants, and you can t prove the practice is required as a business
necessity or BFOQ.
Let s look now at some of the potentially discriminatory practices to avoid.82

Recruitment
WORD OF MOUTH You cannot rely upon word-of-mouth dissemination of
information about job opportunities when your workforce is all (or mostly all) white
or all members of some other class such as all female, all Hispanic, and so on. Doing
so reduces the likelihood that others will become aware of the jobs and thus apply
for them.
MISLEADING INFORMATION It is unlawful to give false or misleading
information to members of any group, or to fail or refuse to advise them of work
opportunities and the procedures for obtaining them.

HELP WANTED ADS Help wanted male and help wanted female ads are
violations unless gender is a bona fide occupational qualification for the job. The
same applies to ads that suggest age discrimination. For example, you cannot
advertise for a young man or woman.

Selection Standards
EDUCATIONAL REQUIREMENTS Courts have found educational qualifications
to be illegal when (1) minority groups are less likely to possess the educational
qualifications (such as a high school degree) and (2) such qualifications are also not
job related. However, there may be jobs of course for which educational requirements
(such as college degrees for pilot candidates) are a necessity.
TESTS Courts deem tests unlawful if they disproportionately screen out minorities
or women and they are not job related. According to a former U.S. Supreme Court
Chief Justice,
Nothing in the [Title VII] act precludes the use of testing or measuring procedures;
obviously they are useful. What Congress has forbidden is giving these devices and
mechanisms controlling force unless they are demonstrating a reasonable measure
of job performance.
The employer must be prepared to show that the test results are job related for
instance, that test scores relate to on-the-job performance.
PREFERENCE TO RELATIVES Do not give preference to relatives of current
employees with respect to employment opportunities if your current employees are
substantially nonminority.
HEIGHT, WEIGHT, AND PHYSICAL CHARACTERISTICS Physical requirements
such as minimum height are unlawful unless the employer can show they re job related.
For example, a U.S. Appeals Court upheld a $3.4 million jury verdict against Dial Corp.
Dial rejected 52 women for entry-level jobs at a meat processing plant because they failed
strength tests, although strength was not a job requirement.83 Maximum weight rules
generally don t trigger adverse legal rulings. To qualify for reasonable accommodation,
obese applicants must be at least 100 pounds above their ideal weight or there must be a
physiological cause for their disability. However, legalities aside, managers should be
vigilant.84 Studies leave little doubt that obese individuals are less likely to be hired, less
likely to receive promotions, more likely to get less desirable sales assignments, and more
likely to receive poor customer service as customers.85
50 PART 1 INTRODUCTION

RESEARCH INSIGHT A study compared the wages of women whose weights ranged
from very thin to average with the wages and salaries of men. The very thin women
received the most severe wage punishment for adding their first few pounds. For
example, for very thin American women, gaining 25 pounds produces an average
predicted decrease in salary of approximately $15,572 per year. For women with
above average weight, gaining that extra 25 pounds costs the women about $13,847.
Conversely, For men, gaining 25 pounds produced a predicted increase in wages of
approximately $8,437 per year at below-average weights and a predicted increase of
approximately $7,775 per year at above-average weights [to the point of obesity]. 86

ARREST RECORDS Unless the job requires security clearance, do not ask an
applicant whether he or she has been arrested or spent time in jail, or use an arrest
record to disqualify a person automatically. There are several reasons for this. Various
racial minorities are more likely than whites to have arrest records.87 There is always a
presumption of innocence until proven guilty. And arrest records in general are not
valid for predicting job performance. Thus, disqualifying applicants based on arrest
records adversely impacts minorities. You can ask about conviction records. Then
determine on a case-by-case basis whether the facts justify refusal to employ an
applicant in a particular position.

APPLICATION FORMS Employment applications generally shouldn t contain

questions about applicants disabilities, workers compensation history, age, arrest
record, or U.S. citizenship. In general it s best to collect personal information required
for legitimate tax or benefit reasons (such as who to contact in case of emergency)
after you hire the person.88

DISCHARGE DUE TO GARNISHMENT A disproportionate number of

minorities suffer garnishment procedures (in which creditors make a claim to some
of the person s wages). Therefore, firing a minority member whose salary is garnished
is illegal, unless you can show some overriding business necessity.

Sample Discriminatory Promotion, Transfer,

and Layoff Practices
Fair employment laws protect not just job applicants but also current employees. For
example, the Equal Pay Act requires that equal wages be paid for substantially similar
work performed by men and women. Therefore, courts may hold that any employment
practices regarding pay, promotion, termination, discipline, or benefits that
1. are applied differently to different classes of persons;
2. adversely impact members of a protected group; and
3. cannot be shown to be required as a BFOQ or business necessity are illegally
discriminatory.

PERSONAL APPEARANCE REGULATIONS AND TITLE VII Employees

sometimes file suits against employers dress and appearance codes under Title VII.
They usually claim sex discrimination, but sometimes claim racial or even religious
discrimination. A sampling of court rulings follows:89
* Dress. In general, employers do not violate the Title VII ban on sex bias by requiring
all employees to dress conservatively. For example, a supervisor s suggestion that a
female attorney tone down her attire was permissible when the firm consistently
sought to maintain a conservative dress style and counseled men to dress conservatively.
However, Alamo Rent-A-Car lost a case when they tried to prevent a Muslim woman
employee from wearing a head scarf.
* Hair. Here, courts usually favor employers. For example, employer rules against
facial hair do not constitute sex discrimination because they discriminate only
between clean-shaven and bearded men, discrimination not qualified as sex bias
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 51

under Title VII. Courts have also rejected arguments that prohibiting cornrow
hair styles infringed on black employees expression of cultural identification.
* Uniforms. When it comes to discriminatory uniforms and/or suggestive attire,
however, courts frequently side with employees. For example, requiring female
employees (such as waitresses) to wear sexually suggestive attire as a condition of
employment has been ruled as violating Title VII in many cases.90
* Tattoos and body piercings. Tattoos and body piercings are an issue at work. For
example, about 38% of millennials in one survey had tattoos as compared with
15% of baby boomers. About 23% of millennials had body piercings as compared
with 1% of baby boomers. One case involved a waiter with religious tattoos on his
wrists at a Red Robin Gourmet Burgers store. The company insisted he cover his
tattoos at work; he refused. Red Robin subsequently settled a lawsuit after the
waiter claimed that covering the tattoos would be a sin based on his religion.91

What the Supervisor Should Keep in Mind

The human resource manager plays a big role in helping the company avoid
practices like these, but at the end of the day, the first-line supervisor usually
triggers the problem. You make an ill-informed or foolish comment, and the
employee is quick to sue. Even something apparently nondiscriminatory like
telling a female candidate you d be concerned about her safety on the job after
dark might trigger a claim.
This is therefore a good point at which to emphasize three things. First, care-
fully learning this chapter s contents is important. For example, understand the
questions you can and cannot ask when interviewing applicants, and know what
constitutes sexual harassment. There is no substitute for that knowledge. Good
intentions are no excuse.
Second, the courts may hold you (not just your employer) personally liable for
your injudicious actions. Management malpractice is aberrant conduct on the part
of the manager that has serious consequences for the employee s personal or physi-
cal well-being, or which, as one court put it, exceeds all bounds usually tolerated by
society. 92 In one outrageous example, the employer demoted a manager to janitor
and took other steps to humiliate the person. The jury subsequently awarded the
former manager $3.4 million. Supervisors who commit management malpractice
may be personally liable for paying a portion of the judgment.
Third, know that retaliation is illegal under equal rights laws. To paraphrase the
EEOC, all of the laws we enforce make it illegal to fire, demote, harass, or otherwise
retaliate against people because they filed a charge, complained to their employer or
other covered entity about discrimination, or because they participated in a
discrimination investigation or lawsuit .93 In one U.S. Supreme Court case, the
employee complained to a government agency that her employer paid her less than
male counterparts. Soon after the company heard about the complaint, it fired her
fiancé, who also worked for the firm. Finding for the employee, the U.S. Supreme
Court decision said, a reasonable worker might be dissuaded from engaging in
protected activity if she knew that her fiancé would be fired.94

6 List the steps in the EEOC

THE EEOC ENFORCEMENT PROCESS
enforcement process. Even prudent employers eventually face employment discrimination claims and have to
deal with EEOC officials. All managers (not just human resource managers) play roles
in this process. Figure 2-3 provides an overview of the process.95
* File Charge. The process begins when someone files a claim with the EEOC.
Either the aggrieved person or a member of the EEOC who has reasonable cause
to believe that a violation occurred must file the claim in writing and under
oath.96 Under CRA 1991, the discrimination claim must be filed within 300 days
(when there is a similar state law) or 180 days (where there is no similar state law)
52 PART 1 INTRODUCTION

FIGURE 2-3 The EEOC

Applicant or employee
Charge-Filing Process files charge
Note: Parties may settle at any time.

Source: Based on information

at www.eeoc.gov. EEOC advises
employer of charge,
and if mediation is
an option

Successful Unsuccessful
mediation mediation

EEOC may EEOC may EEOC may

ask employer ask employer ask employer
to submit to respond to to permit on-
statement of and request for and site visit by
position of information EEOC and to
employer s (personnel provide
side of story files, etc.) information for
witness interview

EEOC completes investigation

Finds no Finds
reasonable reasonable
cause cause

Issues charging Issues Letter of

party Dismissal Determination
and Notice of
Rights
Offers parties
conciliation

Charging party
may file lawsuit in
federal court Conciliation Conciliation
within 90 days fails successful

EEOC may EEOC may

litigate in decide not to
federal court litigate
within 180 days
of charge

Sends charging
party notice of
Right to Sue

Party may sue

within 90 days
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 53

after the alleged incident took place (2 years for the Equal Pay Act).97 The U.S.
Supreme Court, in Ledbetter v. Goodyear Tire & Rubber Company, held that
employees claiming Title VII pay discrimination must file their claims within
180 days of when they first receive the allegedly discriminatory pay. Congress
then passed, and President Obama signed, the Lilly Ledbetter Fair Pay Act into
law. Employees can now file such claims anytime, as long they re still receiving an
infected paycheck. (In fiscal year 2010, individuals filed 99,922 charges with the
EEOC; the two largest categories were for race discrimination [36% of total
charges], and sex discrimination [29%].)98
* Charge Acceptance. The EEOC s common practice is to accept a charge and
orally refer it to the state or local agency on behalf of the charging party. If the
agency waives jurisdiction or cannot obtain a satisfactory solution, the EEOC
processes it upon the expiration of the deferral period.99
* Serve Notice. After a charge is filed (or the state or local deferral period has
ended), the EEOC has 10 days to serve notice on the employer. Figure 2-4 lists
some questions to ask after receiving a bias complaint from the EEOC.
* Investigation/Fact-Finding Conference. The EEOC then investigates the charge to
determine whether there is reasonable cause to believe it is true; it has 120 days to
decide. Early in the investigation, the EEOC holds an initial fact-finding conference.
However, the EEOC s focus here is often to find weak spots in each party s
position. They use these to push for a settlement.
* Cause/No Cause. If it finds no reasonable cause, the EEOC must dismiss the
charge, and must issue the charging party a Notice of Right to Sue. The person
then has 90 days to file a suit on his or her own behalf.
* Conciliation. If the EEOC does find cause, it has 30 days to work out a concilia-
tion agreement. The EEOC conciliator meets with the employee to determine
what remedy would be satisfactory. It then tries to negotiate a settlement with the
employer.
* Notice to Sue. If this conciliation is not satisfactory, the EEOC may bring a civil
suit in a federal district court, or issue a Notice of Right to Sue to the person who
filed the charge.

Voluntary Mediation
The EEOC refers about 10% of its charges to a voluntary mediation mechanism, an
informal process in which a neutral third party assists the opposing parties to reach a
voluntary, negotiated resolution of a charge of discrimination. 100 If the parties don t
reach agreement (or one of the parties rejects participation), the EEOC processes the
charge through its usual mechanisms.101

FIGURE 2-4 Questions to Ask

When an Employer Receives 1. Exactly what is the charge and is your company covered by the relevant statutes?
Notice That EEOC Has Filed a (For example, Title VII and the Americans with Disabilities Act generally apply only
Bias Claim to employees with 15 or more employees.) Did the employee file his or her charge on
time, and was it processed in a timely manner by the EEOC?
Source: Fair Employment Practices 2. What protected group does the employee belong to?
Summary of Latest Developments, 3. Is the EEOC claiming disparate impact or disparate treatment?
January 7, 1983, p. 3, Bureau of 4. Are there any obvious bases upon which you can challenge and/or rebut the claim?
National Affairs, Inc. (800-372-1033);
Kenneth Sovereign, Personnel Law
For example, would the employer have taken the action if the person did not belong
(Upper Saddle River, NJ: Prentice to a protected group?
Hall, 1999), pp. 36 37; EEOC 5. If it is a sexual harassment claim, are there offensive comments, calendars, posters,
Investigations What an Employer screensavers, and so on, on display in the company?
Should Know, Equal Employment 6. In terms of the practicality of defending your company against this claim, who are
Opportunity Commission (www.eoc.
gov/employers/investigations.html), the supervisors who actually took the allegedly discriminatory actions and how
accessed May 6, 2007. effective will they be as potential witnesses? Have you received an opinion from legal
counsel regarding the chances of prevailing?
54 PART 1 INTRODUCTION

Faced with an offer to mediate, the employer has three options: Agree to mediate the
charge; make a settlement offer without mediation; or prepare a position statement for
the EEOC. If the employer does not mediate or make an offer, the position statement
is required. It should include a robust defense, including information relating to the
company s business and the charging party s position; a description of any rules or
policies and procedures that are applicable; and the chronology of the offense that led
to the adverse action.102

Mandatory Arbitration of Discrimination Claims

Many employers, to avoid EEO litigation, require applicants and employees to agree
to arbitrate such claims. The EEO does not favor mandatory arbitration, but the U.S.
Supreme Court s decisions (in Gilmer v. Interstate/Johnson Lane Corp. and similar
cases) make it clear that employment discrimination plaintiffs [employees] may be
compelled to arbitrate their claims under some circumstances. 103 Given this,
employers may wish to consider inserting a mandatory arbitration clause in their
employment applications or employee handbooks. 104 To protect such a process
against appeal, the employer should institute steps to protect against arbitrator bias,
allow the arbitrator to offer a claimant broad relief (including reinstatement), and
allow for a reasonable amount of prehearing fact finding.
After an expensive EEO lawsuit, Rockwell International implemented a
grievance procedure that provides for binding arbitration as the last step. Called
(as is traditional) an alternative dispute resolution or ADR program, Rockwell
gradually extended the program to all nonunion employees at some locations.
New hires at Rockwell must sign the agreement. Current employees must sign it
prior to promotion or transfer. U.S. federal agencies must have ADR programs.105
ADR plans are popular, although the EEOC generally prefers mediation for
handling bias claims.106 Figure 2-5 sums up guidelines employers should follow in
addressing EEOC claims.

FIGURE 2-5 Management

During the EEOC Investigation:
Guidelines for Addressing EEOC
Claims Conduct your own investigation to get the facts.
Ensure that there is information in the EEOC s file demonstrating lack of merit of the charge.
Sources: Tips for Employers on Limit the information supplied to only those issues raised in the charge itself.
Dealing with EEOC Investigations, Get as much information as possible about the charging party s claim.
BNA Fair Employment Practices,
October 31, 1996, p. 130;
Meet with the employee who made the complaint to clarify all the relevant issues. For example,
Conducting Effective Investigations what happened? Who was involved?
of Employee Bias Complaints, BNA Remember that the EEOC can only ask (not compel) employers to submit documents and ask for
Fair Employment Practices, July 13, the testimony of witnesses under oath.
1995, p. 81; Commerce Clearing Give the EEOC a position statement. It should contain words to the effect that the company
House, Ideas and Trends, January 23,
1987, pp. 14 15; http://eeoc.gov/ has a policy against discrimination and would not discriminate in the manner charged in the
employers/investigations.html, complaint. Support the statement with documentation.
accessed October 4, 2009.
During the Fact-Finding Conference:
Because the only official record is the notes the EEOC investigator takes, keep your own records.
Bring an attorney.
Make sure you are fully informed of the charges and facts of the case.
Before appearing, witnesses (especially supervisors) need to be aware of the legal significance
of the facts they will present.
During the EEOC Determination and Attempted Conciliation:
If there is a finding of cause, review it carefully, and point out inaccuracies in writing to the EEOC.
Use this letter to try again to convince the parties that the charge is without merit.
Conciliate prudently. If you have properly investigated the case, there may be no real advantage
in settling at this stage.
Remember: It is likely that no suit will be filed by the EEOC.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 55

7 Discuss why diversity

DIVERSITY MANAGEMENT AND AFFIRMATIVE
management is important ACTION PROGRAMS
and how to institutionalize a
diversity management To some extent, demographic changes and globalization are rendering moot the goals of
program. equitable and fair treatment driving equal employment legislation. White males no longer
dominate the labor force, and women and minorities will represent the lion s share
of labor force growth over the near future. Employers therefore often are striving for
demographic balance not just because the law says they must, but due to self-interest.107
Furthermore, since many American workplaces are already diverse, the focus increas-
ingly is on managing diversity at work.108 Diversity means being diverse or varied, and at
work means having a workforce comprised of two or more groups of employees with various
racial, ethnic, gender, cultural, national origin, handicap, age, and religious backgrounds.109

Diversity s Potential Pros and Cons

The resulting workforce diversity produces both benefits and threats for employers.

SOME DIVERSITY DOWNSIDES First, demographic differences can produce

behavioral barriers that undermine work team collegiality and cooperation. Potential
problems include:
* Stereotyping is a process in which someone ascribes specific behavioral traits to
individuals based on their apparent membership in a group.110 For example, older
people can t work hard. Prejudice means a bias toward prejudging someone based
on that person s traits. For example, we won t hire him because he s old.
* Discrimination is prejudice in action. Discrimination means taking specific
actions toward or against the person based on the person s group.111
In the United States and many countries, it s generally illegal to discriminate at
work based on a person age, race, gender, disability, or country of national origin.
But in practice, discrimination is often subtle. For example, many argue that a
glass ceiling, enforced by an old boys network (friendships built in places like
exclusive clubs), effectively prevents women from reaching top management.
Insofar as it reflects national origin or religious discrimination, discrimination
against Muslim employees is prohibited under Title VII. In the year 2001, the EEOC
received 284 such charges from Muslim applicants or workers. The number rose to
803 charges by 2009.112
* Tokenism occurs when a company appoints a small group of women or minorities
to high-profile positions, rather than more aggressively seeking full representation
for that group.113
* Ethnocentrism is the tendency to view members of other social groups less favorably
than one s own. For example, in one study, managers attributed the performance of
some minorities less to their abilities and more to help they received from others. The
same managers attributed the performance of nonminorities to their own abilities.114
* Discrimination against women goes beyond glass ceilings. Working women also
confront gender-role stereotypes, the tendency to associate women with certain
(frequently nonmanagerial) jobs.

alternative dispute resolution or ADR discrimination gender-role stereotypes

program Taking specific actions toward or against the The tendency to associate women with
Grievance procedure that provides for person based on the person s group certain (frequently nonmanagerial) jobs.
binding arbitration as the last step.

diversity
The variety or multiplicity of demographic
features that characterize a company s
workforce, particularly in terms of race, sex,
culture, national origin, handicap, age, and
religion.
56 PART 1 INTRODUCTION

SOME DIVERSITY BENEFITS The key is properly managing these potential

threats. In one study, researchers examined the diversity climate in 654 stores of a
large U.S. retail chain. They defined diversity climate as the extent to which employees
in the stores reported believing that the firm promotes equal opportunity and
inclusion. They found the greatest sales growth in stores with the highest pro-
diversity climate, and the lowest in stores where subordinates and managers reported
less hospitable diversity climates.115 Another study found that racial discrimination
was related negatively to employee commitment, but that organizational efforts to
support diversity reduced such negative effects.116 The following HR as a Profit
Center feature provides another example.

HR AS A PROFIT CENTER
Workforce diversity makes strategic sense. With strong top-management support,
IBM created several minority task forces focusing on groups such as women and
Native Americans. One effect of these teams has been internal: In the 10 or so years
since forming them, IBM has boosted the number of U.S.-born ethnic minority
executives by almost 2 1 2 times.117
However, the firm s diversity program also aided IBM s strategy of expanding its
markets and business results. For example, one task force decided to focus on
expanding IBM s market among multicultural and women-owned businesses. They
did this in part by providing much-needed sales and service support to small and
midsize businesses, a niche well populated with minority and female buyers. 118
As a direct result, this IBM market grew from $10 million to more than $300 million
in revenue in just 3 years.

Managing Diversity
Managing diversity means maximizing diversity s potential advantages while mini-
mizing the potential barriers such as prejudices and bias that can undermine the
functioning of a diverse workforce.
In practice, diversity management involves both compulsory and voluntary
actions. However, compulsory actions (including EEO compliance) can t guarantee a
close-knit and thriving community. Diversity management therefore also relies on
taking steps to encourage employees to work together productively.119

TOP-DOWN PROGRAMS Typically, this starts at the top. The employer

institutes a diversity management program. One aim here is to make employees more
sensitive to and better able to adapt to individual cultural differences. One diversity
expert concluded that five sets of voluntary organizational activities are at the heart of
the typical company-wide diversity management program. We can summarize these
as follows:
Provide strong leadership. Companies with exemplary reputations in managing
diversity typically have CEOs who champion the cause of diversity. Leadership
means, for instance, becoming a role model for the behaviors required for the
change.
Assess the situation. One study found that the most common tools for
measuring a company s diversity include equal employment hiring and
retention metrics, employee attitude surveys, management and employee
evaluations, and focus groups.120
Provide diversity training and education. The most common starting point
for a diversity management effort is usually some type of employee education
program.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 57

Diversity management can

blend a diverse workforce into a
close-knit and productive
community.

Source: AGE Fotostock America Inc.

Change culture and management systems. Combine education programs
with other concrete steps aimed at changing the organization s culture and
management systems. For example, change the performance appraisal procedure to
appraise supervisors based partly on their success in reducing inter-group conflicts.
Evaluate the diversity management program. For example, do employee attitude
surveys now indicate any improvement in employees attitudes toward diversity?
One writer advocates a four-step AGEM diversity training process: Approach,
Goals, Executive commitment, and Mandatory attendance. First, determine if diversity
training is the solution or if some other approach is more advisable. If training is the
solution, then set measurable program goals, for instance, having training participants
evaluate their units diversity efforts. Next, make sure a high-visibility executive commits
to the program. Finally, consider making participation in the training mandatory.121

EXAMPLE Baxter Healthcare Corporation began by adopting strong company

policies advocating the benefits of a culturally, racially, and sexually diverse
workforce: Baxter International believes that a multicultural employee population is
essential to the company s leadership in healthcare around the world. Baxter then
publicizes this philosophy throughout the company.
Next, Baxter takes concrete steps to foster diversity at work. These steps
include evaluating diversity program efforts, recruiting minority members to
the board of directors, and interacting with representative minority groups and
networks. Diversity training is another concrete activity. It aims at sensitizing all
employees about the need to value cultural differences, build self-esteem, and
generally create a more smoothly functioning and hospitable environment for the
firm s diverse workforce.

Encouraging Inclusiveness
A big part of managing diversity involves overcoming barriers to inclusion to bringing
all employees under the same tent, in a matter of speaking. Figure 2-6 illustrates
strategies for overcoming barriers to inclusion, such as learning about other cultures and
helping all employees to better understand the causes of prejudice.

managing diversity
Maximizing diversity s potential benefits
while minimizing its potential barriers.
58 PART 1 INTRODUCTION

FIGURE 2-6 What the

Inclusive Strategies Barriers to Inclusion
Manager Can Do to Overcome
Barriers to Inclusion Personal Level
T
][]

Source: Norma Carr-Ruffino, Making Become aware of prejudice and other Stereotypes, prejudices
Diversity Work (Upper Saddle River,
NJ: Pearson Education, 2005), p. 104. barriers to valuing diversity
Learn about other cultures and groups Past experiences and influences
Serve as an example, walk the talk Stereotyped expectations and perceptions
Participate in managing diversity Feelings that tend to separate, divide
Interpersonal Level

Facilitate communication and interactions Cultural differences

in ways that value diversity
Encourage participation Group differences
Share your perspective Myths
Facilitate unique contributions Relationship patterns based on exclusion
Resolve conflicts in ways that value diversity
Accept responsibility for developing
common ground
Organizational Level

All employees have access to networks Individuals who get away with
and focus groups discriminating and excluding
All employees take a proactive role in A culture that values or allows exclusion
managing diversity and creating a more
diverse workplace culture
All employees are included in the inner Work structures, policies, and practices
circle that contributes to the bottom-line that discriminate and exclude
success of the company
All employees give feedback to teams
and management
All employees are encouraged to
contribute to change

Developing a Multicultural Consciousness

In July 2009, after a heated exchange on his doorstep in Cambridge, Massachusetts,
police arrested Professor Henry Louis Gates Jr., a nationally known African-American
Harvard professor, for disorderly conduct. Professor Gates initially accused the police of
racially profiling him. The arresting officer (who his department had appointed as a
trainer to show fellow officers how to avoid racial profiling) denied any racial motives.
President Obama, at a news conference, accused the Cambridge police of using less than
good judgment. Whatever else one can say about the episode, it seems that three people
who should know quite a bit about multicultural consciousness differed dramatically
about how culturally sensitive the other person had been.
Being sensitive to and adapting to individual cultural differences is apparently
easier said than done. Sometimes it s not easy for even the most well-meaning person
to appreciate how people who are different from us may be feeling. This suggests that
it s useful to take steps like these to develop a personal diversity consciousness :122
1. Take an active role in educating yourself. For example, develop diverse
relationships, and widen your circle of friends.
2. Put yourself in a learning mode in any multicultural setting. For example,
suspend judgment and view the person you re dealing with just as an individual
and in terms of the experiences you ve actually had with him or her.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 59

3. Move beyond your personal comfort zone. For example, put yourself in more
situations where you are an outsider.
4. Don t be too hard on yourself if misunderstandings arise. As one expert says,
The important thing is to acknowledge our mistakes and learn from them. 123
5. Realize that you are not alone. Remember that there are other people including
colleagues, friends, and mentors at work who you can turn to for advice as you
deal with diversity issues.
Some employers encourage diversity through affirmative action programs. Affirmative
action means making an extra effort to hire and promote those in protected groups,
particularly when those groups are underrepresented. We turn to this next.

Equal Employment Opportunity Versus Affirmative Action

Equal employment opportunity aims to ensure that anyone, regardless of race, color,
disability, sex, religion, national origin, or age, has an equal opportunity based on his or
her qualifications. Affirmative action goes beyond this by having the employer take
actions (in recruitment, hiring, promotions, and compensation) to eliminate the
current effects of past discrimination.
Affirmative action is still a significant workplace issue today. The incidences of
major court-mandated affirmative action programs are down, but courts still use
them. Furthermore, many employers must still engage in voluntary programs. For
example, Executive Order 11246 (issued in 1965) requires federal contractors to take
affirmative action to improve employment opportunities for groups such as women
and racial minorities. EO 11246 covers about 26 million workers about 22% of the
U.S. workforce.124

Implementing the Affirmative Action Program

Under guidelines such as EO 11246, the key aims of affirmative action programs are
(1) to use numerical analysis to determine which (if any) target groups the firm is
underutilizing relative to the relevant labor market, and (2) to eliminate the barriers
to equal employment. Many employers pursue these aims with a good faith effort
strategy; this emphasizes identifying and eliminating the obstacles to hiring and
promoting women and minorities, and increasing the minority or female applicant
flow. Reasonable steps to take include those shown in Figure 2-7.
RECRUITING MINORITIES ONLINE One important step is to direct recruiting ads
to one or more of the online minority-oriented job markets. For example, Recruiting-
Online.com lists dozens of online diversity candidate resources (www.recruiting-
online.com/course55.html). Diversity candidate Web sites with job banks include the
National Urban League, Hispanic Online, Latino Web, Society of Hispanic Engineers,
Gay.com, Association for Women in Science, and Minorities Job Bank.
EMPLOYEE RESISTANCE Avoiding employee resistance to affirmative action
programs is important. Studies suggest that current employees need to believe the
program is fair. Transparent selection procedures (making it clear what selection tools
and standards the company uses) help in this regard. Communication is also crucial.
Make clear that the program doesn t involve preferential selection standards. Provide
details on the qualifications of all new hires (both minority and nonminority).
Justifications for the program should emphasize redressing past discrimination and
the practical value of diversity, not underrepresentation.125

good faith effort strategy

An affirmative action strategy that empha-
sizes identifying and eliminating the obsta-
cles to hiring and promoting women and
minorities, and increasing the minority or
female applicant flow.
60 PART 1 INTRODUCTION

FIGURE 2-7 Steps in an

Affirmative Action Program
1. Issue a written equal employment policy indicating that the firm is an equal
employment opportunity employer and the employer s commitment
to affirmative action.
2. Demonstrate top-management support for the equal employment policy for
instance, appoint a high-ranking EEO administrator.
3. Publicize internally and externally the equal employment policy and affirmative
action commitment.
4. Survey current minority and female employment by department and job
classification to determine where affirmative action programs are especially
desirable.
5. Carefully analyze employer human resources practices to identify and eliminate
hidden barriers.
6. Review, develop, and implement specific HR programs to improve female and
minority utilization.
7. Use focused recruitment to find qualified applicants from the target group(s).
8. Establish an internal audit and reporting system to monitor and evaluate progress.
9. Develop support for the affirmative action program, inside the company and
in the community.

PROGRAM EVALUATION How can one tell if the diversity initiatives are
effective? Some commonsense questions can be asked:
* Are there women and minorities reporting directly to senior managers?
* Do women and minorities have a fair share of the jobs that are the traditional
stepping-stones to successful careers in the company?
* Do women and minorities have equal access to international assignments?
* Is the employer taking steps that ensure that female and minority candidates will
be in the company s career development pipeline?
* Are turnover rates for female and minority managers the same or lower than
those for white males?
* Do employees report that they perceive positive behavior changes as a result of
the diversity efforts?126

Reverse Discrimination
Courts have been grappling with the use of quotas (or de facto quotas) in hiring, partic-
ularly with claims of reverse discrimination (discriminating against nonminority
applicants and employees). Many cases addressed these issues, but until recently, few
consistent answers emerged.
In one of the first such cases, Bakke v. Regents of the University of California
(1978), the University of California at Davis Medical School denied admission to
white student Allen Bakke, allegedly because of the school s affirmative action quota
system, which required that a specific number of openings go to minority applicants.
In a 5-to-4 vote, the U.S. Supreme Court struck down the policy that made race the
only factor in considering applications for a certain number of class openings and
thus allowed Bakke s admission.
Bakke was followed by many other cases. For example, in June 2001, the U.S.
Supreme Court refused to hear Texas s challenge to a ruling that one of its law school
affirmative action programs, which gives special consideration to black and Mexican
American student applicants, discriminated against whites. In 2003, the U.S.
Supreme Court decided against the University of Michigan s quota-based admis-
sions programs. In June 2007, the Court ruled against race-based school assignment
(busing) plans.127
In June 2009, the U.S. Supreme Court ruled in an important reverse discrimination
suit brought by Connecticut firefighters. In Ricci v. DeStefano, 19 white firefighters and
one Hispanic firefighter say the city of New Haven should have promoted them based
on their successful test scores. The city argued that certifying the tests would have left
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 61

them vulnerable to lawsuits from minorities for violating Title VII.128 The Court ruled
in favor of the (predominantly white) plaintiffs. In New Haven s desire to avoid making
promotions that might appear to have an adverse impact on minorities, Justice
Kennedy wrote that The city rejected the test results solely because the higher scoring
candidates were white. The consensus of observers was that the decision would make it
much harder for employers to ignore the results obtained by valid tests, even if the
results disproportionately impact minorities.129
The bottom line seems to be that employers should emphasize the external
recruitment and internal development of better-qualified minority and female
employees, while basing employment decisions on legitimate criteria. 130

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Several of the most important equal employment recommended procedures regarding HR activities
opportunity laws became law in the period from 1964 like employee selection, record keeping, and
to 1991. preemployment inquiries.
Of these, Title VII of the 1964 Civil Rights Act was One of the most important cases during this early
pivotal, and states that an employer cannot period was Griggs v. Duke Power Company. Here,
discriminate based on race, color, religion, sex, or Chief Justice Burger held that in employment,
national origin. This act established the Equal discrimination does not have to be overt to be illegal,
Employment Opportunity Commission, and covers and an employment practice that discriminates must
most employees. be job related.
Under the Equal Pay Act of 1963 (amended in 1972), 2. Equal employment law continues to evolve, with impor-
it is unlawful to discriminate in pay on the basis of tant new legislation being enacted since 1990 1991.
sex when jobs involve equal work, skills, effort, and The Civil Rights Act of 1991 reversed the effects of
responsibility, and are performed under similar several Supreme Court rulings for instance,
working conditions. underscoring that the burden of proof is the
The Age Discrimination in Employment Act of employer s once a plaintiff establishes possible
1967 made it unlawful to discriminate against illegal discrimination.
employees or applicants who are between 40 and The Americans with Disabilities Act prohibits
65 years of age. employment discrimination against qualified
The Vocational Rehabilitation Act of 1973 requires most disabled individuals. It also says employers must
employers with federal contracts to take affirmative make reasonable accommodations for physical or
action when employing handicapped persons. mental limitations unless doing so imposes an
The Pregnancy Discrimination Act of 1978 prohibits undue hardship on the business.
using pregnancy, childbirth, or related medical Although Title VII made sexual harassment at work
conditions to discriminate in hiring, promotion, illegal, the Federal Violence Against Women Act of
suspension, or discharge, or in any term or condition 1994 provided women with another way to seek relief
of employment. for (violent) sexual harassment. Basically, sexual
The EEOC, Civil Service Commission, Department harassment refers to unwelcome sexual advances,
of Labor, and Department of Justice together issued requests for sexual favors, and other verbal or physical
uniform guidelines that set forth highly conduct of a sexual nature that takes place, for

reverse discrimination
Claim that due to affirmative action quota
systems, white males are discriminated
against.
62 PART 1 INTRODUCTION

instance, when such conduct is made either explicitly necessary to do the job. Similarly, in promotion and transfer,
or implicitly a term or condition of an individual s the Equal Pay Act requires that equal wages be paid for
employment. Three main ways to prove sexual harass- substantially similar work performed by men and women.
ment include quid pro quo, hostile environment 5. All managers play an important role in the EEOC enforce-
created by supervisors, and hostile environment ment process. The basic steps in this process include filing
created by coworkers who are not employees. the charge, charge acceptance by the EEOC, serving notice
3. Employers use various defenses against discrimination on the employer, the investigation/fact-finding confer-
allegations. In defending themselves against discrimina- ence, a finding of cause/no cause, conciliation efforts, and
tion allegations, employers need to distinguish between (if necessary) a notice to sue. The EEOC refers about 10%
disparate treatment (intentional discrimination) and of its charges to voluntary mediation mechanisms.
disparate impact (a policy that has an adverse impact 6. With an increasingly diverse workforce, diversity man-
regardless of intent). Plaintiffs show adverse impact by agement is a key managerial skill. Managing diversity
the standard deviation rule or by showing disparate rejec- means maximizing diversity s potential benefits while
tion rates, restricted policy, population comparisons, or minimizing the potential barriers. In one typical
by applying the McDonnell-Douglas test. Employers approach, the steps include providing strong leadership,
defend themselves by showing that the employment assessing the situation, providing diversity training
practice is a bona fide occupational qualification (for and education, changing the culture and management
instance, gender is a BFOQ for a position such as model). systems, and evaluating the diversity management
Or they may defend themselves by using the business program s results. Affirmative action generally means
necessity defense, which requires showing that there is an taking actions to eliminate the present effects of past
overriding business purpose. discrimination. Many employers still pursue voluntary,
4. It s useful to have a working knowledge of discriminatory good-faith effort strategies in identifying and eliminat-
employment practices. For example, in recruitment, ing the obstacles to hiring and promoting women and
employers no longer use help wanted male ads and minorities, while some employers are under court-
endeavor to ensure that educational requirements are mandated requirement to do so.

DISCUSSION QUESTIONS
1. Explain the main features of Title VII, the Equal Pay Act, 4. What is sexual harassment? How can an employee prove
the Pregnancy Discrimination Act, the Americans with sexual harassment?
Disabilities Act, and the Civil Rights Act of 1991. 5. What are the two main defenses you can use in the event
2. What important precedents were set by the Griggs v. of a discriminatory practice allegation, and what exactly
Duke Power Company case? The Albemarle v. Moody do they involve?
case? 6. What is the difference between disparate treatment and
3. What is adverse impact? How can it be proved? disparate impact?

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, respond to these three 6. Assume you are the manager in a small restaurant; you
scenarios based on what you learned in this chapter. are responsible for hiring employees, supervising them,
Under what conditions (if any) do you think the following and recommending them for promotion. Working
constitute sexual harassment? (a) A female manager fires a individually or in groups, compile a list of potentially
male employee because he refuses her requests for sexual discriminatory management practices you should avoid.
favors. (b) A male manager refers to female employees as 7. The HRCI Test Specifications appendix at the end of this
sweetie or baby. (c) A female employee overhears two book (pages 633 640) lists the knowledge someone study-
male employees exchanging sexually oriented jokes. ing for the HRCI certification exam needs to have in each
2. Working individually or in groups, discuss how you area of human resource management (such as in Strategic
would set up an affirmative action program. Management, Workforce Planning, and Human Resource
3. Compare and contrast the issues presented in Bakke Development). In groups of four to five students, do four
with more recent court rulings on affirmative action. things: (1) review that appendix now; (2) identify the
Working individually or in groups, discuss the current material in this chapter that relates to the required knowl-
direction of affirmative action. edge the appendix lists; (3) write four multiple-choice
4. Working individually or in groups, write a paper titled exam questions on this material that you believe would
What the Manager Should Know About How the be suitable for inclusion in the HRCI exam; and (4) if time
EEOC Handles a Person s Discrimination Charge. permits, have someone from your team post your team s
5. Explain the difference between affirmative action and questions in front of the class, so the students in other
equal employment opportunity. teams can take each others exam questions.
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 63

EXPERIENTIAL EXERCISE
Space Cadet or Victim?
Discrimination lawsuits are rarely simple, because the Required Understanding: Be thoroughly familiar with the
employer will often argue that the person was fired due to material presented in this chapter. In addition, read the pre-
poor performance, rather than discrimination. So, there s ceding space cadet case on which this experiential exercise
often a mixed motive element to such situations. The facts is based.
of a case illustrate this (Burk v. California Association of
Realtors, California Court of Appeals, number 161513, How to Set Up the Exercise/Instructions:
unpublished, 12/12/03). The facts were as follows. The 1. Divide the class into groups of three to five students.
California Association of Realtors maintained a hotline 2. Each group should develop answers to the following
service to provide legal advice to real estate agents. One of questions:
the 12 lawyers who answered this hotline on behalf of the
Association was a 61-year-old California attorney who a. Based on what you read in this chapter, on what
worked at the Association from 1989 to 2000. Until 1996 he legal basis could the 61-year-old California attorney
received mostly good reviews and salary increases. At that claim he was a victim of discrimination?
time, Association members began filing complaints about b. On what laws and legal concepts did the employer
his advice. His supervisor told him to be more courteous and apparently base its termination of this 61-year-old
more thorough in providing advice. attorney?
Two years later,Association members were still complaining c. Based on what laws or legal concepts could you
about this individual. Among other things, Association mem-
take the position that it is legal to fire someone
bers who called in to deal with him filed complaints referring
to him as a space cadet, incompetent, and a total jerk. Sub- for poor performance even though there may be
sequently, his supervisor contacted six Association members a discriminatory aspect to the termination?
whom the 61-year-old lawyer had recently counseled; five of (This is not to say that there necessarily was such
the six said they had had bad experiences. The Association a discriminatory aspect with this case.)
fired him for mistreating Association members and providing d. If you were the judge called on to make a
inadequate legal advice. decision on this case, what would your decision
The 61-year-old lawyer sued the Association, claiming be, and why?
that the firing was age related. To support his claim, he e. The court s decision follows, so please do not read
noted, among other things, that one colleague had told him this until you ve completed the exercise.
that he was probably getting close to retirement and that
another colleague had told him that both he and another In this case, the California State Appeals court held that
lawyer were getting older. The appeals court had to decide the only reasonable inference that can be drawn from the
whether the Association fired the 61-year-old lawyer because evidence is that [plaintiff] was terminated because he failed
of his age or because of his performance. to competently perform his job of providing thorough,
accurate, and courteous legal advice to hotline callers. ( On
Purpose: The purpose of this exercise is to provide practice Appeal, Hotheaded Hotline Lawyer Loses Age, Disability
in analyzing and applying knowledge of equal opportunity Discrimination Claims, BNA Human Resources Report,
legislation to a real problem. January 12, 2004, p. 17.)

APPLICATION CASE
AN ACCUSATION OF SEXUAL HARASSMENT IN PRO SPORTS
The jury in a sexual harassment suit brought by a former its president, Isiah Thomas. The suit charged them with sex
high-ranking New York Knicks basketball team executive discrimination and retaliation. Ms. Browne Sanders accused
recently awarded her more than $11 million in punitive Mr. Thomas of verbally abusing and sexually harassing her
damages. They did so after hearing testimony during what over a 2-year period. She said the Garden fired her about a
the New York Times called a sordid four-week trial. Officials month after she complained to top management about the
of Madison Square Garden (which owns the Knicks) said harassment. My pleas and complaints about Mr. Thomas
they would appeal the verdict. However, even if they were to illegal and offensive actions fell on deaf ears, she said. At
win on appeal (which one University of Richmond Law the trial, the Garden cited numerous explanations for the
School professor said was unlikely), the case still exposed the dismissal, saying she had failed to fulfill professional respon-
organization and its managers to a great deal of unfavorable sibilities. At a news conference, Browne Sanders said that
publicity. Thomas refused to stop his demeaning and repulsive behavior
The federal suit pitted Anucha Browne Sanders, the and the Garden refused to intercede. For his part, Mr. Thomas
Knicks senior vice president of marketing and business vigorously insisted he was innocent, and said, I will not allow
operations (and former Northwestern University basketball her or anybody, man or woman, to use me as a pawn for their
star), against the team s owner, Madison Square Garden, and financial gain. According to one report of the trial, her claims
64 PART 1 INTRODUCTION

of harassment and verbal abuse had little corroboration 3. Based on the few facts that you have, what steps could
from witnesses, but neither did the Garden s claims that her Garden management have taken to protect itself from
performance had been subpar. After the jury decision came in, liability in this matter?
Browne Sanders lawyers said, This [decision] confirms 4. Aside from the appeal, what would you do now if you
what we ve been saying all along, that [Browne Sanders] was were the Garden s top management?
sexually abused and fired for complaining about it. The 5. The allegations against Madison Square Garden in this
Gardens statement said, in part, We look forward to presenting case raise ethical questions with regard to the employer s
our arguments to an appeals court and believe they will agree actions. Explain whether you agree or disagree with this
that no sexual harassment took place. statement, and why.

Questions Sources: Jury Awards $11.6 Million to Former Executive of Pro Basketball
Team in Harassment Case, BNA Bulletin to Management, October 9, 2007,
1. Do you think Ms. Browne Sanders had the basis for a
p. 323; Richard Sandomir, Jury Finds Knicks and Coach Harassed a Former
sexual harassment suit? Why? Executive, The New York Times, www.nytimes.com/2007/10/03/sports/
2. From what you know of this case, do you think the jury basketball/03garden.html?em&ex=1191556800&en=41d47437f805290d&ei=
arrived at the correct decision? If not, why not? If so, 5087%0A, accessed November 31, 2007; Thomas Defiant in Face of
why? Harassment Claims, espn.com, accessed November 31, 2007.

CONTINUING CASE
CARTER CLEANING COMPANY
A Question of Discrimination problems. Two women in one of her stores privately
One of the first problems Jennifer faced at her father s Carter confided to her that their manager was making unwelcome
Cleaning Centers concerned the inadequacies of the firm s sexual advances toward them, and one claimed he had
current HR management practices and procedures. threatened to fire her unless she socialized with him after
One problem that particularly concerned her was the hours. And during a fact-finding trip to another store, an
lack of attention to equal employment matters. Each store older gentleman he was 73 years old complained of the
manager independently handled virtually all hiring; the fact that although he had almost 50 years of experience in
managers had received no training regarding such funda- the business, he was being paid less than people half his age
mental matters as the types of questions they should not ask who were doing the very same job. Jennifer s review of the
of job applicants. It was therefore not unusual in fact, it stores resulted in the following questions.
was routine for female applicants to be asked questions
such as Who s going to take care of your children while Questions
you are at work? and for minority applicants to be asked 1. Is it true, as Jack Carter claims, that we can t be accused
questions about arrest records and credit histories. Non- of being discriminatory because we hire mostly women
minority applicants three store managers were white males and minorities anyway ?
and three were white females were not asked these 2. How should Jennifer and her company address the sexu-
questions, as Jennifer discerned from her interviews with the al harassment charges and problems?
managers. Based on discussions with her father, Jennifer 3. How should she and her company address the possible
deduced two reasons for the laid-back attitude toward equal problems of age discrimination?
employment: (1) her father s lack of sophistication regarding 4. Given the fact that each of its stores has only a handful
the legal requirements and (2) the fact that, as Jack Carter of employees, is her company covered by equal rights
put it, Virtually all our workers are women or minority legislation?
members anyway, so no one can really come in here and 5. And finally, aside from the specific problems, what other
accuse us of being discriminatory, can they? personnel management matters (application forms,
Jennifer decided to mull that question over, but before training, and so on) have to be reviewed given the need
she could, she was faced with two serious equal rights to bring them into compliance with equal rights laws?
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 65

KEY TERMS
Title VII of the 1964 Civil Rights uniform guidelines, 34 4/5ths rule, 44
Act, 32 protected class, 34 restricted policy, 45
Equal Employment Opportunity Civil Rights Act of 1991 (CRA 1991), 35 bona fide occupational qualification
Commission (EEOC), 32 (BFOQ), 46
mixed motive case, 36
affirmative action, 33 alternative dispute resolution or ADR
Americans with Disabilities Act
Office of Federal Contract Compliance program, 54
(ADA), 36
Programs (OFCCP), 33
qualified individuals, 37 diversity, 55
Equal Pay Act of 1963, 33
sexual harassment, 39 discrimination, 55
Age Discrimination in Employment
Act of 1967 (ADEA), 33 Federal Violence Against Women Act gender-role stereotypes, 55
Vocational Rehabilitation Act of of 1994, 40 managing diversity, 56
1973, 33 adverse impact, 44 good faith effort strategy, 59
Pregnancy Discrimination Act, 34 disparate rejection rates, 44 reverse discrimination, 60

ENDNOTES
1. Kevin McGowan, Court Approves $175 BNA Bulletin to Management, August 18, to Management, November 23, 2010,
Million Settlement of Novartis Sales Reps 2009, p. 257. p. 375.
and Sex Bias Claims, BNA Bulletin to 7. High Court: ADEA Does Not Protect 14. www.uniformguidelines.com/
Management, November 30, 2010, p. 377. Younger Workers Treated Worse Than uniformguidelines.html, accessed
2. Plaintiffs still bring equal employment Their Elders, BNA Bulletin to Manage- November 23, 2007.
claims under the Civil Rights Act of 1866. ment 55, no. 10 (March 4, 2004), 15. Griggs v. Duke Power Company, 3FEP
For example, in 2008 the U.S. Supreme pp. 73 80. See also D. Aaron Lacy, You Are cases 175.
Court held that the act prohibits retalia- Not Quite as Old as You Think: Making 16. This is applicable only to Title VII and
tion against someone who complains of the Case for Reverse Age Discrimination CRA 91; other statutes require intent.
discrimination against others when con- Under the ADEA, Berkeley Journal of 17. James Ledvinka, Federal Regulation of
tract rights (in this case, an employment Employment and Labor Law 26, no. 2 Personnel and Human Resources Manage-
agreement) are at stake. Charles Louder- (2005), pp. 363 403; Nancy Ursel and ment (Boston: Kent, 1982), p. 41.
back, U.S. Supreme Court Decisions Marjorie Armstrong-Stassen, How Age 18. Bruce Feldacker, Labor Guide to Labor
Expand Employees Ability to Bring Discrimination in Employment Affects Law (Upper Saddle River, NJ: Prentice
Retaliation Claims, Compensation & Stockholders, Journal of Labor Research Hall, 2000), p. 513.
Benefits Review, September/October 17, no. 1 (Winter 2006), pp. 89 99; and, 19. The Eleventh Circuit Explains Disparate
2008, p. 52. http://www.eeoc.gov/laws/statutes/adea. Impact, Disparate Treatment, BNA Fair
3. Based on or quoted from Principles of cfm, accessed October 3, 2011. Employment Practices, August 17, 2000,
Employment Discrimination Law, Inter- 8. Google Exec Can Pursue Claim, BNA p. 102. See also Kenneth York, Disparate
national Association of Official Human Bulletin to Management, October 20, Results in Adverse Impact Tests: The 4/5ths
Rights Agencies, Washington, DC. See 2007, p. 342; Fired Google Manager May Rule and the Chi Square Test, Public
also Bruce Feldacker, Labor Guide to Proceed with Age Bias Suit, California Personnel Management 31, no. 2 (Summer
Labor Law (Upper Saddle River, NJ: Justices Rule, BNA Bulletin to Manage- 2002), pp. 253 262; and Burden of
Prentice Hall, 2000); EEOC Attorneys ment, August 10, 2010, p. 249. Proof Under the Employment Non-
Highlight How Employers Can Better 9. http://www.eeoc.gov/laws/statutes/ Discrimination Act, http://www.civilrights.
Their Nondiscrimination Practices, adea.cfm, accessed October 3, 2011. org/lgbt/enda/burden-of-proof.html,
BNA Bulletin to Management, July 20, 10. The U.S. Supreme Court ruled in Cali- accessed August 8, 2011.
2008, p. 233; and www.eeoc.gov, accessed fornia Federal Savings and Loan Association 20. We ll see that the process of filing a dis-
June 27, 2009. Employment discrimina- v. Guerra that if an employer offers no crimination charge goes something like
tion law is a changing field, and the disability leave to any of its employees, this: The plaintiff (say, a rejected appli-
appropriateness of the rules, guidelines, it can (but need not) grant pregnancy cant) demonstrates that an employment
and conclusions in this chapter and book leave to a woman disabled for pregnancy, practice (such as a test) has a disparate (or
may also be affected by factors unique to childbirth, or a related medical condition. adverse ) impact on a particular group.
the employer s operation. They should be 11. John Kohl, Milton Mayfield, and Jacque- Disparate impact means that an employer
reviewed by the employer s attorney line Mayfield, Recent Trends in Pregnancy engages in an employment practice or
before implementation. Discrimination Law, Business Horizons 48, policy that has a greater adverse impact
4. Individuals may file under the Equal no. 5 (September 2005), pp. 421 429, and [effect] on the members of a protected
Employment Act of 1972. http://www.eeoc.gov/eeoc/statistics/enforc group under Title VII than on other
5. The Employer Should Validate Hiring ement/pregnancy.cfm, accessed October 3, employees, regardless of intent. (Requir-
Tests to Withstand EEOC Scrutiny, Offi- 2011. ing a college degree for a job would have
cials Advise, BNA Bulletin to Manage- 12. Nancy Woodward, Pregnancy Discrimina- an adverse impact on some minority
ment, April 1, 2008, p. 107. tion Grows, HR Magazine, July 2005, p. 79. groups, for instance.) Disparate impact
6. Restructured, Beefed Up OFCCP May 13. Pregnancy Claims Rising; Consistent claims do not require proof of discrimina-
Shift Policy Emphasis, Attorney Says, Procedures Paramount, BNA Bulletin tory intent. Instead, the plaintiff s burden
66 PART 1 INTRODUCTION

is to show two things. First, he or she must http://findarticles.com/p/articles/mi_hb4 to Management, April 11, 2006, p. 119;
show that a significant disparity exists 345/is_5_31, May 2003, at http://findarticles. Richard Posthuma, Mark Roehling, and
between the proportion of (say) women com/p/articles/mi_hb4345/is_5_31/ai_n2 Michael Campion, Applying U.S. Employ-
in the available labor pool and the propor- 9006702, accessed September 24, 2011. ment Discrimination Laws to International
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that an apparently neutral employment this issue, see http://www.eeoc.gov/facts/ titioners, Personnel Psychology, 2006, 59,
practice, such as word-of-mouth advertis- intellectual_disabilities.html, accessed pp. 705 739.
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be able to lift 100 pounds, is causing the 30. EEOC Guidance on Dealing with Intellec- al., Applying U.S. Employment Discrim-
disparity. Then, once the plaintiff fulfills his tual Disabilities, Workforce Management, ination Laws to International Employees:
or her burden of showing such disparate March 2005, p. 16. Advice for Scientists and Practitioners,
impact, the employer has the heavier burden 31. Driver Fired After Seizure on Job Lacks Personnel Psychology 59 (2006), p. 710.
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to show that lifting 100 pounds is actually 32. www.ada.gov/reg3a.html#Anchor- html, accessed April 24, 2009, and http://
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ever that . . . when an employer shows that cases, see Tillinghast Licht, Reasonable pp. 747 764. The Michigan Court of
it would have taken the same action even Accommodation and the ADA-Courts Appeals recently ruled that a male Ford
absent the discriminatory motive, the Draw the Line, at http://library.findlaw. Motor Company employee who claimed
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ages, http://www.eeoc.gov/policy/docs/ 36. For example, a U.S. circuit court recently Court Allows Same-Sex Harassment
caregiving.html#mixed, accessed Sep- found that a depressed former kidney Case to Proceed, BNA Bulletin to Man-
tember 24, 2011. dialysis technician could not claim ADA agement, November 20, 2007, p. 382.
23. Mark Kobata, The Civil Rights Act discrimination after the employer fired 49. Jennifer Berdahl and Celia Moore, Work-
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absent the discriminatory motive, the Court Decides, BNA Bulletin to Manage- Sexual Harassment: The Employer s Legal
complaining employee will not be entitled ment, December 18, 2007, p. 406. See also Obligations, Personnel 58 (November/
to reinstatement, back pay, or damages, www.eeoc.gov/press/5-10-01-b.html, December 1981),p. 64; and Court Examines
http://www.eeoc.gov/policy/docs/caregiving. accessed January 8, 2008. Workplace Flirtation, http://hr.blr.com/
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gov/ada, accessed November 20, 2007. 39. Lawrence Postol, ADAAA Will Result in 52. Hilary Gettman and Michele Gelfand,
26. ADA: Simple Common Sense Principles, Renewed Emphasis on Reasonable When the Customer Shouldn t Be King:
BNA Fair Employment Practices, June 4, Accommodations, Society for Human Antecedents and Consequences of Sexual
1992, p. 63; and http://www.eeoc.gov/ Resource Management Legal Report, Janu- Harassment by Clients and Customers,
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examples include epilepsy, diabetes, Human Resource Management 47, no. 2 Claim, BNA Fair Employment Practices,
cancer, HIV infection, and bipolar (Summer 2008), pp. 255 273. October 19, 1995, p. 124. See also Michael
disorder, http://www1.eeoc.gov//laws/ 41. Susan Wells, Counting on Workers with Zugelder et al., An Affirmative Defense to
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Relations Law Journal 25, no. 4 (Spring EEO Issues with Preemployment In- 54. Ibid., Examining Unwelcome Conduct
2000), pp. 93 107; and Betsy Bates, Men- quiries, Personnel Administrator 22, no. 2 in a Sexual Harassment Claim, p. 124.
tal Health Problems Predominate in ADA (February 1997), pp. 22 26. 55. For example, a server/bartender filed a
Claims, http://findarticles.com/p/articles/ 44. Expansion of Employment Laws Abroad sexual harassment claim against Chili s
mi_hb4345, Clinical Psychiatry News, Impacts U.S. Employers, BNA Bulletin Bar & Grill. She claimed that her former
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 67

boyfriend, also a restaurant employee, sion, see Robert Gatewood and Hubert of difference in selection rates, unlawful
had harassed her. The court ruled that Feild, Human Resource Selection (Fort discrimination may be present, and may
the restaurant s prompt response war- Worth, TX: The Dryden Press, 1994), be demonstrated through appropriate
ranted ruling in favor of it. Ex- pp. 40 42, and Jean Phillips and Stanley evidence . . .
Boyfriend Harassed, but Employer Acted Gulley, Strategic Staffing (Upper Saddle 69. The ADEA does not just protect against
Promptly, BNA Bulletin to Management, River, NJ: Pearson, 2012), pp. 68 69.] For intentional discrimination (disparate
January 8, 2008, p. 14. example, stock statistics might compare at a treatment). Under a Supreme Court
56. See Mindy D. Bergman et al., The (Un)rea- single point in time (1) the percentage of decision (Smith v. Jackson, Miss., 2005), it
sonableness of Reporting: Antecedents and female engineers the company has, as a also covers employer practices that seem
Consequences of Reporting Sexual Harass- percentage of its total number of engi- neutral but that actually bear more heav-
ment, Journal of Applied Psychology 87, no. 2 neers, with (2) the number of trained ily on older workers (disparate impact).
(2002), pp. 230 242. See also http://www. female engineers in the labor force as a Employees Need Not Show Intentional
eeoc.gov/policy/docs/harassment-facts. percentage of the total number of trained Bias to Bring Claims Under ADEA, High
html, accessed October 2, 2011. engineers in the labor force. Here, the Court Says, BNA Bulletin to Manage-
57. Adapted from Sexual Harassment Manual question of relevant labor market is ment 56, no. 14 (April 5, 2005), p. 105.
for Managers and Supervisors, published in important. For example, the relevant labor 70. The Fair Treatment for Experienced
1991, by CCH Incorporated, a Wolters- market if you re hiring unskilled assem- Pilots Act raised commercial pilots
Kluwer Company; www.eeoc. gov/types/ blers might be the local labor market mandatory retirement age from 60 to 65
sexual_harrassment.html, accessed May 6, within, say, 20 miles from your plant, in 2008. Allen Smith, Congress Gives
2007; and http://www.eeoc.gov/policy/ whereas the relevant labor market for Older Pilots a Reprieve, HR Magazine,
docs/harassment-facts.html, accessed highly skilled engineers might well be February 2008, p. 24.
October 2, 2011. national and possibly international. Flow 71. Usery v. Tamiami Trail Tours, 12FEP cases
58. Jennifer Berdahl and Karl Aquino, statistics measure proportions of employ- 1233.
Sexual Behavior at Work: Fun or Folly? ees, in particular, groups at two points in 72. Alternatively, an employer faced with an
Journal of Applied Psychology 94, no. 1, time: before selection and after selection age discrimination claim may raise the
2009, pp. 34 47. takes place. For example, when comparing FOA (factors other than age) defense.
59. Maria Rotundo et al., A Meta-Analytic the percentage of minority applicants Here, it argues that its actions were rea-
Review of Gender Differences in Percep- who applied with the percentage hired, sonable based on some factor other than
tions of Sexual Harassment, Journal of the employer is using flow statistics. An age, such as the terminated person s poor
Applied Psychology 86, no. 5 (2001): employer s company-wide minority hiring performance.
914 922. See also Nathan Bowling and statistics may be defensible company-wide 73. Ledvinka, Federal Regulation.
Terry Beehr, Workplace Harassment but not departmentally. The employer 74. www.foxnews.com/story/0,2933,517334,00.
from the Victim s Perspective: A Theoret- therefore may employ concentration statis- html, accessed January 7, 2010.
ical Model and Meta Analysis, Journal tics to drill down and determine the 75. Howard Anderson and Michael Levin-
of Applied Psychology 91, no. 5 (2006): concentration of minorities versus nonmi- Epstein, Primer of Equal Employment
998 1012. norities in particular job categories. Opportunity (Washington, DC: The Bureau
60. Jathan Janov, Sexual Harassment and 67. One study found that using the 4/5ths of National Affairs, 1982), pp. 13 14.
the Three Big Surprises, HR Magazine rule often resulted in false-positive ratings 76. U.S. v. Bethlehem Steel Company, 3FEP
46, no. 11 (November 2001), p. 123ff. of adverse impact, and that incorporating cases 589.
California mandates sexual harassment tests of statistical significance could 77. Robinson v. Lorillard Corporation, 3FEP
prevention training for supervisors. improve the accuracy of applying the cases 653.
See California Clarifies Training Law; 4/5ths rule. See Philip Roth, Philip Bobko, 78. Spurlock v. United Airlines, 5FEP cases 17.
Employers Take Note, BNA Bulletin to and Fred Switzer, Modeling the Behavior 79. Anderson and Levin-Epstein, Primer of
Management, November 20, 2007, p. 375. of the 4/5ths Rule for Determining Equal Employment Opportunity, p. 14.
61. Mary Rowe, Dealing with Sexual Harass- Adverse Impact: Reasons for Caution, 80. This isn t ironclad, however. For example,
ment, Harvard Business Review, May Journal of Applied Psychology 91, no. 3 the U.S. Supreme Court, in Stotts, held
June 1981, p. 43; the quoted material goes (2006), pp. 507 522. that a court cannot require retention of
on to say that The employer still bears the 68. The results must be realistic. In this exam- black employees hired under a court s
burden of proving that the employee s ple, hiring 2 out of 5 women suggests consent decree in preference to higher-
failure was unreasonable. If the employee there is no adverse impact. But suppose seniority white employees who were pro-
had a justifiable fear of retaliation, his or we had hired only one woman? Then the tected by a bona fide seniority system. It s
her failure to utilize the complaint process difference between those we would be unclear whether this decision also
may not be unreasonable, and is quoted expected to hire (5) and whom we actu- extends to personnel decisions not gov-
from http://www.uiowa.edu/~eod/policies/ ally hired (1) would rise to 4. Hiring just erned by seniority systems. Firefighters
sexual-harassment-guide/employer- one less woman might then trigger Local 1784 v. Stotts (BNA, April 14, 1985).
liablity.htm, accessed October 3, 2011. adverse impact issues, because twice the 81. Ledvinka and Gatewood, EEO Issues with
62. John Moran, Employment Law (Upper Sad- standard deviation is also about 4. How- Preemployment Inquiries, pp. 22 26.
dle River, NJ: Prentice Hall, 1997), p. 166. ever, realistically, it probably would not 82. Ibid.
63. The Eleventh Circuit Explains Disparate trigger such concerns, because with such 83. Eighth Circuit OKs $3.4 Million EEOC
Impact, Disparate Treatment, p. 102. small numbers, one person makes such a Verdict Relating to Pre-Hire Strength
64. Moran, Employment Law, p. 168. difference. The point is that tools like the Testing Rules, BNA Bulletin to Manage-
65. John Klinefelter and James Thompkins, 4/5ths rule and the standard deviation ment, November 28, 2006, p. 377.
Adverse Impact in Employment Selection, rule are only rules of thumb. They do not 84. Svetlana Shkolnikova, Weight Discrim-
Public Personnel Management, May/June themselves determine if the employer s ination Could Be as Common as Racial
1976, pp. 199 204; and http://www.eeoc. screening process is discriminatory. This Bias, www.usatoday.com/news/ health/
gov/policy/docs/factemployment_proce fact may work both for and against the weightloss/2008-05-20-overweight-bias_
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66. Employers use several types of statistics in (www.uniformguidelines.com/qandaprin 85. Jenessa Shapiro et al., Expectations of
addressing adverse impact. [For a discus- t.html) put it, Regardless of the amount Obese Trainees: How Stigmatized Trainee
68 PART 1 INTRODUCTION

Characteristics Influence Training Effec- 97. In 2007, the U.S. Supreme Court, in Diversity in Public Sector Organizations,
tiveness, Journal of Applied Psychology 92, Ledbetter v. Goodyear Tire & Rubber Public Personnel Management 24, no. 1
no. 1 (2007), pp. 239 249. See also Lisa Company, held that employees claiming (Spring 1995), pp. 99 111; Richard Koonce,
Finkelstein et al., Bias Against Over- Title VII pay discrimination must file Redefining Diversity, Training and Devel-
weight Job Applicants: Further Explana- their claims within 180 days of when they opment Journal, December 2001, pp. 22 33;
tions of When and Why, Human Resource first receive the allegedly discriminatory Kathryn Canas and Harris Sondak, Oppor-
Management 46, no. 2 (Summer 2007), pay. As of 2009, Congress was working tunities and Challenges of Workplace Diversity
pp. 203 222. to formulate new legislation enabling (Upper Saddle River, NJ: Pearson, 2008),
86. T. A. Judge and D. M. Cable, When It employees to file claims anytime, as long pp. 3 27. Others list race and ethnicity
Comes to Pay, Do the Thin Win? The as the person was still receiving an diversity, gender diversity, age diversity,
Effect of Weight on Pay for Men and infected paycheck. disability diversity, sexual diversity, and
Women, Journal of Applied Psychology, 98. http://eeoc.gov/eeoc/statistics/enforcement/ cultural and national origin diversity as
January 2011. charges.cfm, accessed May 20, 2010. examples. Lynn Shore et al., Diversity in
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Criminal Records in Hiring, BNA state or local agency within 180 days after and Where Are We Going? Human Resource
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2008, p. 383. the charge may then be filed with the 110. Taylor Cox, Jr., Cultural Diversity in Orga-
88. See, for example, www.eeoc.gov/policy/ EEOC within 30 days after the practice nizations (San Francisco, CA: Berrett
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June 28, 2009. person received notice that the state or see Stefanie Johnson, et al., The strong,
89. This is based on BNA Fair Employment local agency has ended its proceedings. sensitive type: Effects of gender stereotypes
Practices, April 13, 1989, pp. 45 47; and 100. www.eeoc.gov/mediate/facts.html, and leadership prototypes on the evalua-
Crossed: When Religion and Dress Code accessed June 29, 2009. tion of male and female leaders, Organi-
Policies Intersect, http://www.mcguire 101. EEOC s New Nationwide Mediation zational Behavior and Human Decision
woods.com/news-resources/item.asp? Plan Offers Option of Informal Settle- Processes 106, no. 1 (May 2008), pp. 39 60.
item=3108, accessed October 2, 2011. ments, BNA Fair Employment Practices, 111. Cox., p. 64.
90. Eric Matusewitch, Tailor Your Dress February 18, 1999, p. 21; and http:// 112. Workplace Bias Against Muslims Increas-
Codes, Personnel Journal 68, no. 2 (February www.eeoc.gov/employees/mediation.cf, ingly a Concern for Employers, BNA
1989), pp. 86 91; Matthew Miklave, Sort- accessed October 2, 2011. Bulletin to Management, October 26, 2010,
ing Out a Claim of Bias, Workforce 80, 102. Timothy Bland, Sealed Without a Kiss, p. 337.
no. 6 (June 2001), pp. 102 103, and Laws HR Magazine, October 2000, pp. 85 92. 113. Cox, Cultural Diversity in Organizations,
and Cases Affecting Appearance, http:// 103. Stuart Bompey and Michael Pappas, Is pp. 179 80.
www.boardmanlawfirm.com/perspec- There a Better Way? Compulsory Arbitra- 114. J. H. Greenhaus and S. Parasuraman, Job
tives_articles/appearance.php, accessed tion of Employment Discrimination Performance Attributions and Career
September 8, 2011. Claims After Gilmer, Employee Relations Advancement Prospects: An Examination
91. Rita Pyrillis, Body of Work, Workforce Law Journal 19, no. 3 (Winter 1993 1994), of Gender and Race Affects, Organizational
Management, November 7, 2010, pp. 20 26. pp. 197 216, and http://www.eeoc.gov/ Behavior and Human Decision Processes 55
92. Kenneth Sovereign, Personnel Law, 4th policy/docs/mandarb.html, accessed Sep- (July 1993), pp. 273 298. Much research
edition (Upper Saddle River, NJ: Prentice tember 5, 2011. The EEOC says here for here focuses on how ethnocentrism
Hall, 1999), p. 220. instance that the employer imposing prompts consumers to avoid certain
93. www.eeoc.gov/laws/types/retaliation. mandatory arbitration is free to manipu- products based on their country of origin.
cfm, accessed August 19, 2011. late the arbitral mechanism to its benefit . See for example, T.S. Chan, et al., How
94. Adam Liptak, Fiancés Firing Is Ruled an 104. See Bompey and Pappas, pp. 210 211. Consumer Ethnocentrism and Animosity
Illegal Reaction to a Discrimination 105. David Nye, When the Fired Fight Back, Impair the Economic Recovery of Emerg-
Claim, The New York Times, January 25, Across-the-Board, June 1995, pp. 31 34, ing Markets. Journal of Global Marketing
2011, p. A16. and http://www.eeoc.gov/federal/fed_ 23, no. 3 (July/August 2010), pp. 208 25.
95. Prudent employers often purchase employ- employees/adr.cfm, accessed October 3, 115. Patrick McKay et al., A Tale of Two
ment practices liability insurance to 2011. Climates: Diversity Climate from Subordi-
insure against some or all of the expenses 106. EEOC Opposes Mandatory Arbitra- nates and Managers Perspectives and
involved with defending against discrimi- tion, BNA Fair Employment Practices, Their Role in Store Unit Sales Perfor-
nation, sexual harassment, and wrongful July 24, 1997, p. 85; and http://www. mance, Personnel Psychology 62 (2009),
termination type claims. Antone Melton- eeoc.gov/employees/mediation.cfm, pp. 767 791.
Meaux, Maximizing Employment accessed October 2, 2011. 116. Maria del Carmen Triana, Maria Fernan-
Practices Liability Insurance Coverage, 107. See, for example, Diversity Is Used as dez Garcia, and Adrian Colella, Managing
Compensation & Benefits Review, May/June Business Advantage by Three Fourths of Diversity: How Organizational Efforts to
2008, pp. 55 59. Companies, Survey Says, BNA Bulletin to Support Diversity Moderate the Effects of
96. Litigants must watch the clock. In an Management, November 7, 2006, p. 355, Perceived Racial Discrimination on Affec-
equal pay decision, the U.S. Supreme and Claire Armstrong et al., The Impact tive Commitment, Personnel Psychology
Court held (in Ledbetter v. Goodyear Tire & of Diversity and Equality Management on 63 (2010), pp. 817 843.
Rubber Company) that the employee Firm Performance: Beyond High Perfor- 117. David Thomas, Diversity as Strategy,
must file a complaint within 180 (or 300) mance Work Systems, Human Resource Harvard Business Review, September
days of the employer s decision to pay the Management 49, no. 6 (November 2004, pp. 98 104; see also J. T. Childs Jr.,
allegedly unfair wage. The clock starts December 2010), pp. 977 998. Managing Global Diversity at IBM:
with that first pay decision, not with the 108. Brian O Leary and Bart Weathington, A Global HR Topic that Has Arrived,
subsequent paychecks that the employee Beyond the Business Case for Diversity Human Resource Management 44, no. 1
receives. Justices Rule 5 4 Claim-Filing in Organizations, Employee Responsibili- (Spring 2005), pp. 73 77.
Period Applies to Pay Decision, Not ties and Rights 18, no. 4 (December 118. Ibid., p. 99.
Subsequent Paycheck, BNA Bulletin to 2006), pp. 283 292. 119. As another example, leaders who facili-
Management 58, no. 23 (June 5, 2007), 109. See, for example, Michael Carrell and tated high levels of power sharing within
pp. 177 184. Everett Mann, Defining Work-Force their groups helped to reduce the frequently
 CHAPTER 2 EQUAL OPPORTUNITY AND THE LAW 69

observed positive relationship between River, NJ: Pearson Prentice Hall, 2004), Programs in Employment: Summary and
increased diversity and increase turn- pp. 109 137. Meta-Analysis of 35 Years of Research,
over. But leaders who were inclusive of 121. Faye Cocchiara et al., A Gem for Journal of Applied Psychology 91, no. 5
only a select few followers may actually Increasing the Effectiveness of Diversity (2006), pp. 1013 1036.
exacerbate the relationship between Training, Human Resource Management 126. Bill Leonard, Ways to Tell if a Diversity
diversity and turnover (p. 1422). Lisa 49, no. 6 (November December 2010), Program Is Measuring Up, HR Magazine,
Nishii and David Mayer, Do Inclusive pp. 1089 1106. July 2002, p. 21; and Ye Yang Zheng and
Leaders Help to Reduce Turnover 122. Richard Bucher, Diversity Consciousness: Brenda White, The Evaluation of a Diver-
in Diverse Groups? The Moderating Opening Our Minds to People, Cultures, and sity Program at an Academic Library,
Role of Leader Member Exchange in Opportunities (Upper Saddle River, NJ: Library Philosophy and Practice 2007,
the Diversity to Turn Over Relationship, Pearson Prentice Hall, 2004), pp. 132 133. http://unllib.unl.edu/LPP/yang.pdf,
Journal of Applied Psychology 94, no. 6 123. Ibid., p. 133 accessed October 2, 2011.
(2009), pp. 1412 1426. 124. David Harrison et al., Understanding 127. Lawyers, Scholars Differ on Likely
120. Patricia Digh, Creating a New Balance Attitudes Toward Affirmative Action Pro- Impact of Affirmative Action Rulings on
Sheet: The Need for Better Diversity grams in Employment: Summary and Workplace, BNA Fair Employment
Metrics, Mosaics, Society for Human Meta-Analysis of 35 Years of Research, Practices, July 3, 2003, pp. 79 80.
Resource Management, September/Octo- Journal of Applied Psychology 91, no. 5 128. http://newsfeedresearcher.com/data/
ber 1999, p. 1. For diversity management (2006), pp. 1013 1036; and Margaret articles_n17/tests-city-court.html,
steps see Taylor Cox, Jr., Cultural Diversity Fiester et al., Affirmative Action, Stock accessed April 24, 2009.
in Organizations: Theory, Research and Options, I-9 Documents, HR Magazine, 129. Adam Liptak, Supreme Court Finds Bias
Practice (San Francisco: Berrett-Koehler, November 2007, p. 31. Against White Firefighters, The New York
1993), p. 236; see also Richard Bucher, 125. David Harrison et al., Understanding Times, June 30, 2009, pp. A1, A13.
Diversity Consciousness (Upper Saddle Attitudes Toward Affirmative Action 130. Ibid., p. 560.
3
Human Resource
Management Strategy
and Analysis
Source: AP Images.
LEARNING OBJECTIVES Company s
1. Explain why strategic planning is important Strategic Goals
to all managers.
2. Explain with examples each of the seven steps
in the strategic planning process.
3. List with examples the main generic types of corporate
strategies and competitive strategies. Employee Competencies
and Behaviors Required
4. Define strategic human resource management and give for Company to Achieve
an example of strategic human resource management These Strategic Goals
in practice.
5. Briefly describe three important strategic human
resource management tools.
6. Explain with examples why metrics are important tegic and Lega
for managing human resources. Stra nvironment l
E

Re Place
c r u m en t
Relatio ee

itme
ns
Employ
S

nt and
everal years ago, the Ritz-Carlton Company took HR Policies and Practices
over managing the Portman Hotel in Shanghai Required to Produce
China. The new management reviewed the Portman s Employee Competencies
and Behaviors
strengths and weaknesses, and its fast-improving

De rai
local competitors. They decided that to be more competi- l

ve
po n

T
ion
tas
tive, they had to significantly improve the hotel s level of n epm tnema gni
service. Achieving that aim in turn meant formulating oC dn
secondary plans, particularly human resource management
plans, for hiring, training, and rewarding hotel employees.
It meant putting in place a new human resource strategy
for the Portman Hotel, one aimed at improving customer WHERE ARE WE NOW . . .
service. The next part of this book, Part 2, turns
to the nuts and bolts of human resource
management, topics such as analyzing jobs,
and recruiting and selecting employees.
But as at Shanghai s Portman Hotel,
managers should know what they want to
accomplish strategically before
formulating and putting in place specific
human resource management policies and
practices. Therefore the main purpose of
this chapter is to explain how managers
formulate human resource strategies for
their companies. The chapter addresses
the strategic management process,
strategic human resource management,
human resource metrics and analysis,
and building high-performance work
Access a host of interactive learning aids at systems.
www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 71
72 PART 1 INTRODUCTION

1 Explain why strategic

THE STRATEGIC MANAGEMENT PROCESS
planning is important As in the following Strategic Context feature, we can use the Shanghai Portman example
to all managers. to get a bird's eye view of the strategic human resource management process.

THE STRATEGIC CONTEXT

The Shanghai Portman Hotel
In Chapter 1, we said that strategic human resource management means formulat-
ing and executing human resource policies and practices that produce the
employee competencies and behaviors the company needs to achieve its strategic
aims. At the Shanghai Portman, the strategic human resource management
process involved taking these steps:
Strategically, they set the goal of making the Shanghai Portman outstanding
by offering superior customer service.
To achieve this, Shanghai Portman employees would have to exhibit new skills and
behaviors, for instance, in terms of how they treated and responded to guests.
To produce these employee skills and behaviors, management formulated new
human resource management plans and policies. For example, they intro-
duced the Ritz-Carlton Company s human resource system to the Portman.
Thus, the hotel s new head and his managers personally interviewed each job
candidate. They probed each candidate s values, selecting only employees
who cared for and respected others: Our selection focuses on talent and
personal values because these are things that can t be taught . . . it s about
caring for and respecting others. 1
Management s efforts paid off. Their new human resource plans and practices
produced the employee behaviors required to improve the Portman s level of
service, thus attracting new guests. Travel publications were soon calling it the
best employer in Asia, overall best business hotel in Asia, and best business
hotel in China. Profits soared, in no small part due to effective strategic human
resource management.

In this chapter we look more closely at how managers formulate and implement
plans, and how they analyze and evaluate their results. We will start with some basic
planning-related definitions.

Goal-Setting and the Planning Process

Whether the manager is planning to boost a hotel s profitability or something more
mundane, the basic planning process is the same. It involves setting objectives, making
basic planning forecasts, reviewing alternative courses of action, evaluating which
options are best, and then choosing and implementing your plan. A plan shows the
course of action for getting from where you are to where you want to go in other
words, to the goal. Planning is always goal-directed (in this case, to improve the
hotel s level of service significantly ).
THE HIERARCHY OF GOALS In companies, it is traditional to view the goals
from the top of the firm down to front-line employees as a chain or hierarchy of goals.
Figure 3-1 illustrates this. At the top, the president sets long term or strategic goals
(such as Double sales revenue to $16 million in fiscal year 2011 ). His or her vice
presidents then set goals, such as add one production line at plant, which flow from
and make sense in terms of accomplishing the president s goal. (In other words, What
must I as production head do to help make sure that the company accomplishes its
double sales goal? ) Then the vice presidents subordinates set their own goals, and so
on down the chain of command. The planning process thus traditionally starts with
formulating top-level, long-term strategic plans and goals.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 73

FIGURE 3-1 Sample Hierarchy President

of Goals Diagram for a Company Double sales
revenue to $16
million in fiscal year
2011

Vice President of Vice President of

Vice President of
Sales Production
Human Resources
Double sales in Add one new
Add, train 6
East, West, and production line at
salespeople
South regions plant

Sales Manager, Sales Manager, Sales Manager, Recruiting Training Manager

South Region East Region West Region Manager Train 6 new
Hire 4 new Triple sales to Move 6 Nevada Identify and attract salespeople and
salespeople, add 18 government salespeople to 20 good sales retrain all others within
customers agencies California market candidates 4 months

Strategic Planning
A strategic plan is the company s plan for how it will match its internal strengths and
weaknesses with external opportunities and threats in order to maintain a competitive
advantage. The essence of strategic planning is to ask, Where are we now as a business,
where do we want to be, and how should we get there? The manager then formulates
specific (human resources and other) plans to take the company from where it is now to
where he or she wants it to be. When Yahoo! tries to figure out whether to sell its search
business to Microsoft, it s engaged in strategic planning. A strategy is a course of action.
If Yahoo! decides it must raise money and focus more on applications like Yahoo!
Finance, one strategy might be to sell Yahoo! Search. Strategic management is the
process of identifying and executing the organization s strategic plan, by matching
the company s capabilities with the demands of its environment.
Figure 3-2 sums up the strategic management process. This process includes
(1) defining the business and developing a mission, (2) evaluating the firm s internal
and external strengths, weaknesses, opportunities, and threats, (3) formulating a new
business direction, (4) translating the mission into strategic goals, and (5) formulating
strategies or courses of action. Step (6) and step (7) entail implementing and then
FIGURE 3-2 The Strategic evaluating the strategic plan. Let s look at each step.
Management Process

Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Step 7:

Define the Perform Formulate a Translate Formulate Implement Evaluate
current external new the strategies to the performance
business and direction mission achieve the strategies
internal into strategic strategic
audits goals goals

Strategic Strategic
Strategic Planning
Execution Evaluation

strategic plan strategy strategic management

The company s plan for how it will match its A course of action the company can pursue The process of identifying and executing the
internal strengths and weaknesses with to achieve its strategic aims. organization s strategic plan, by matching
external opportunities and threats in order the company s capabilities with the demands
to maintain a competitive advantage. of its environment.
74 PART 1 INTRODUCTION

STEP 1: DEFINE THE CURRENT BUSINESS The logical place to start is by

2 Explain with examples each
defining one s current business. Specifically, what products do we sell, where do we
of the seven steps in the
strategic planning process. sell them, and how do our products or services differ from our competitor s. For
example, Rolex and Casio both sell watches. However, Rolex sells a limited line of
expensive watches. Casio sells a variety of relatively inexpensive but innovative
specialty watches with features like compasses and altimeters.

STEP 2: PERFORM EXTERNAL AND INTERNAL AUDITS The next step

is to ask, Are we heading in the right direction? No one is immune to competitive
pressures. Yahoo! s search tool predominated until Google. Amazon s Kindle Reader
forced even more bookstores to close. Prudent managers periodically assess what s
happening in their environments.
Managers need to audit both the firm s environment, and the firm s strengths
and weaknesses. The environmental scanning worksheet in Figure 3-3 is a simple
FIGURE 3-3 Worksheet for
Environmental Scanning

Economic Trends
(such as recession, inflation, employment, monetary policies)

Competitive and Market Trends

(such as market/customer trends, entry/exit of competitors, new products from
competitors)

Political Trends
(such as legislation and regulation/deregulation)

Technological Trends
(such as introduction of new production/distribution technologies, rate of product
obsolescence, trends in availability of supplies and raw materials)

Social Trends
(such as demographic trends, mobility, education, evolving values)

Geographic Trends
(such as opening/closing of new markets, factors affecting current plant/office
facilities location decisions)
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 75

FIGURE 3-4 SWOT Matrix,

with Generic Examples Potential Strengths Potential Opportunities
Market leadership New overseas markets
Strong research and development Failing trade barriers
High-quality products Competitors failing
Cost advantages Diversification
Patents Economy rebounding
Potential Weaknesses Potential Threats
Large inventories Market saturation
Excess capacity for market Threat of takeover
Management turnover Low-cost foreign competition
Weak market image Slower market growth
Lack of management depth Growing government regulation

guide for compiling relevant information about the company s environment. This
includes the economic, competitive, and political trends that may affect the
company. The SWOT chart in Figure 3-4 is the 800-pound gorilla of strategic
planning; everyone uses it. Managers use it to compile and organize the company
strengths, weaknesses, opportunities, and threats. The aim, of course, is to create a
strategy that makes sense in terms of the company s strengths, weaknesses, oppor-
tunities, and threats.

STEP 3: FORMULATE A NEW DIRECTION The question now is, based on the
environmental scan and SWOT analysis, what should our new business be, in terms of
what products we will sell, where we will sell them, and how our products or services
will differ from competitors products?
Managers sometimes formulate a vision statement to summarize how they see
the essence of their business down the road. The vision statement is a general state-
ment of the firm s intended direction; it shows, in broad terms, what we want to
become. 2 Rupert Murdoch, chairman of News Corporation (which owns the Fox
network, and many newspapers and satellite TV businesses), built his company
around a vision of an integrated, global satellite-based news-gathering, entertain-
ment, and multimedia firm. PepsiCo s vision is Performance with Purpose. PepsiCo
CEO Indra Nooyi says the company s executives choose which businesses to be in
based on Performance with Purposes three pillars of human sustainability, environ-
mental sustainability, and talent sustainability.3
Whereas vision statements usually describe in broad terms what the business
should be, the company s mission statement summarizes what the company s main
tasks are now. Several years ago, Ford adapted what was for several years a powerful
mission for them making Quality Job One.

STEP 4: TRANSLATE THE MISSION INTO STRATEGIC GOALS Next,

translate the mission into strategic objectives. The company and its managers need
strategic goals. At Ford, for example, what exactly did making Quality Job One
mean for each department in terms of how they would boost quality? The answer is
that its managers had to meet strict goals such as no more than 1 initial defect per
10,000 cars.

vision statement mission statement

A general statement of the firm s intended Summarizes the answer to the question,
direction that shows, in broad terms, what What business are we in?
we want to become.
76 PART 1 INTRODUCTION

STEP 5: FORMULATE STRATEGIES TO ACHIEVE THE STRATEGIC GOALS

Next, the manager chooses strategies courses of action that will enable the company
to achieve its strategic goals. For example, what strategies could Ford pursue to hit its
goal of no more than 1 initial defect per 10,000 cars? Perhaps open two new high-tech
plants, reduce the number of car lines to better focus on just a few, and put in place new
more rigorous employee selection, training, and performance appraisal procedures.

STEP 6: IMPLEMENT THE STRATEGIES Strategy execution means translating

the strategies into action. The company s managers do this by actually hiring (or
firing) people, building (or closing) plants, and adding (or eliminating) products and
product lines.

STEP 7: EVALUATE PERFORMANCE Things don t always turn out as planned.

For example, Ford bought Jaguar and Land Rover as a way to reduce reliance on
lower-profit cars. With auto competition brutal, Ford announced in 2009 it was
selling Jaguar and Land Rover (to Tata, a company in India). Ford wants to focus its
scarce resources on modernizing and turning around its North American operations.
Like all companies, Ford continually needs to assess its strategic decisions.

Improving Productivity Through HRIS

Using Computerized Business Planning Software
Business planning software packages are available to assist the manager in writing
strategic plans. CheckMATE (www.chechmateplan.com) uses strategic planning tools
such as SWOT analysis to enable even users with no prior planning experience to
develop sophisticated strategic plans.4 Business Plan Pro from Palo Alto Software
contains all the information and planning aids you need to create a business plan.
It contains 30 sample plans, step-by-step instructions (with examples) for creating
each part of a plan (executive summary, market analysis, and so on), financial
planning spreadsheets, easy-to-use tables (for instance, for making sales forecasts),
and programs for creating color 3-D charts for showing things like monthly sales and
yearly profits.

Types of Strategies
In practice, managers formulate three strategies. There is corporate-wide strategic plan-
ning, business unit (or competitive) strategic planning, and functional (or departmental)
strategic planning (see Figure 3-5). We ll look at each.

FIGURE 3-5 Type of Strategy

at Each Company Level Corporate-Level
Strategy
What businesses
are we in?

Business 1/ Business 2/ Business 3/

Competitive Strategy Competitive Strategy Competitive Strategy
How will we compete? How will we compete? How will we compete?

Business 1 Functional Business 1 Functional Business 1 Functional

Strategy Strategy Strategy
Sales Department Production HR Department
How do we support the How do we support the "How do we support the
business s competitive business s competitive business s competitive
strategy? strategy? strategy?
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 77

CORPORATE STRATEGY The corporate strategy question is, How many and what
3 List with examples the main
kind of businesses should we be in? For example, PepsiCo doesn t just make Pepsi-Cola.
generic types of corporate
strategies and competitive Instead, PepsiCo is comprised of four main businesses: Frito-Lay North America, PepsiCo
strategies. Beverages North America, PepsiCo International, and Quaker Oats North America.5
PepsiCo therefore needs a corporate-level strategy. A company s corporate-level
strategy identifies the portfolio of businesses that, in total, comprise the company
and how these businesses relate to each other.
* For example, with a concentration (single business) corporate strategy, the
company offers one product or product line, usually in one market. WD-40
Company (which makes a spray hardware lubricant) is one example.
* A diversification corporate strategy implies that the firm will expand by adding
new product lines. PepsiCo is diversified. Over the years, PepsiCo added chips
and Quaker Oats. Such related diversification means diversifying so that a firm s
lines of business still possess a logical fit. Conglomerate diversification means
diversifying into products or markets not related to the firm s current businesses
or to one another.
* A vertical integration strategy means the firm expands by, perhaps, producing its
own raw materials, or selling its products direct. Thus, Apple opened its own
Apple stores.
* With consolidation strategy, the company reduces its size.
* With geographic expansion, the company grows by entering new territorial markets,
for instance, by taking the business abroad, as PepsiCo also did.

COMPETITIVE STRATEGY On what basis will each of our businesses compete?

Each of these businesses (such as Frito-Lay) needs its own business-level/competitive
strategy. A competitive strategy identifies how to build and strengthen the business s
long-term competitive position in the marketplace.6 It identifies, for instance, how
Pizza Hut will compete with Papa John s or how Walmart competes with Target.
Managers endeavor to achieve competitive advantages for each of their businesses.
We can define competitive advantage as any factors that allow a company to differenti-
ate its product or service from those of its competitors to increase market share.
Managers use several standard competitive strategies to achieve competitive advantage:
* Cost leadership means becoming the low-cost leader in an industry. Walmart is a
classic example. It maintains its competitive advantage through its satellite-based
distribution system, careful (usually suburban) site location, and expert control
of purchasing and sales costs.
* Differentiation is a second possible competitive strategy. In a differentiation strategy,
the firm seeks to be unique in its industry along dimensions that are widely valued
by buyers.7 Thus, Volvo stresses the safety of its cars, Papa John s stresses fresh ingre-
dients, and Target stresses somewhat more upscale brands than Walmart. Like
Mercedes-Benz, firms can usually charge a premium if they successfully stake a claim
to being substantially different from competitors in some coveted way.
* Focusers carve out a market niche (like Ferrari). They compete by providing a
product or service that their customers cannot get from their generalist competi-
tors (such as Toyota).

HUMAN RESOURCES AS A COMPETITIVE ADVANTAGE A competitive

advantage enables a company to differentiate its product or service from those
of its competitors, but the competitive advantage needn t be tangible, such as

corporate-level strategy competitive strategy competitive advantage

Type of strategy that identifies the portfolio A strategy that identifies how to build and Any factors that allow an organization to
of businesses that, in total, comprise the strengthen the business s long-term competi- differentiate its product or service from those
company and the ways in which these busi- tive position in the marketplace. of its competitors to increase market share.
nesses relate to each other.
78 PART 1 INTRODUCTION

high-tech machines or satellite systems. Bloomberg Businessweek magazine recently

described teams of empowered workers at a GE airfoils plant in Greenville,
South Carolina. The teams run computer-controlled machine tools, interview
prospective team members, and adjust assembly lines to maximize production.8
For GE, the workers skills and dedication are competitive advantages; they produce
the quality and productivity that make GE an aerospace leader. Similarly, Apple s
reputation for innovation reflects its competitive advantage in creative and brilliant
engineers. Thus, the best competitive advantage is often human capital
knowledgeable, skilled, engaged employees working hard and with self-discipline.

FUNCTIONAL STRATEGY Finally, what do our competitive choices (such as

maintaining the lowest costs) mean for each of the departments that actually must do
the work? Each individual business (like PepsiCo s Frito-Lay and Quaker Oats units)
consists of departments such as manufacturing, sales, and human resource
management. Functional strategies identify the broad guidelines that each
department will follow in order to help the business accomplish its competitive goals.
Each department s functional strategy should make sense in terms of the business/
competitive strategy.
For example, the business s competitive strategy should mold the firm s human
resource management policies and practices. As an example, the Portland hotel wants
to differentiate itself with exceptional service, and so needs to select and train
employees who are exceptionally customer oriented. Walmart s low cost competitive
strategy translates into human resource management policies that many view as
low-pay and antiunion.

STRATEGIC FIT Strategic planning expert Michael Porter uses the term strategic
fit to sum up the idea that each department s functional strategy should fit and
support the company s competitive aims.
For example, Southwest Airlines is a low-cost leader. It aims to deliver
low-cost, convenient service on its routes. To accomplish this, Southwest builds its
departments activities around supporting certain core aims. Southwest s core aims
include limited passenger services (such as meals); short-haul, point-to-point
service between mostly mid-size cities; high aircraft utilization; and lean highly
productive ground crews. Achieving these aims means that each department s
efforts needs to fit these aims. Southwest s ground crew department must get fast
15-minute turnarounds at the gate. That way, Southwest can keep its planes flying
longer hours and have more departures with fewer aircraft. Its purchasing
and marketing departments shun frills like meals and premium classes of service.
To ensure highly productive ground crews, the HR department will provide
high compensation, flexible union contracts, and employee stock ownership. Their
aim is that:

High Pay Highly Productive Ground Crews Frequent Departures

Low Costs

Top Managers Roles in Strategic Planning

Devising a strategic plan is top management s responsibility. Top management
must decide what businesses the company will be in and where, and on what basis
it will compete. Southwest Airlines top managers could never let lower-level
managers make strategic decisions (such as unilaterally deciding that instead of
emphasizing low cost, they were going to retrofit the planes with first-class cabins).

Departmental Managers Strategic Planning Roles

However, the company s departmental managers (as for sales, manufacturing, and
human resource management) also play roles in strategic planning. Specifically,
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 79

they help the top managers devise the strategic plan; formulate functional, depart-
mental plans that support the overall strategic plan; and then execute the plans. We ll
look at each.

THEY HELP DEVISE THE STRATEGIC PLAN It would be reckless for any top
executive to formulate a strategic plan without the input of his or her lower-level
managers. Few people know as much about the firm s competitive pressures, vendor
capabilities, product and industry trends, and employee capabilities and concerns
than do the company s department managers. So in practice, devising the strategic
plan almost invariably involves frequent meetings and discussions among and
between levels of managers. The top managers then lean heavily on the information
from these interactions to hammer out their strategic plan.
For example, the human resource manager is in a good position to supply
competitive intelligence. Details regarding competitors incentive plans, employee
opinion surveys that elicit information about customer complaints, and informa-
tion about pending legislation such as labor laws are examples. And of course,
human resource managers should be the masters of information about current
employees strengths and weaknesses. Input like this should all help win human
resource managers a seat at the (top management strategic planning) table.
As other examples,
From public information and legitimate recruiting and interview activities, you
ought to be able to construct organization charts, staffing levels, and group
missions for the various organizational components of each of your major
competitors. Your knowledge of . . . who reports to whom can give important clues
as to a competitor s strategic priorities. You may even know the track record and
characteristic behavior of the executives.9

THEY FORMULATE SUPPORTING, FUNCTIONAL/DEPARTMENTAL

STRATEGIES Department managers also must translate the firm s strategic
choices (such as becoming a low-cost leader) into functional strategies. For example,
Walmart s cost leadership strategy means its purchasing department must pursue
forcefully buying the lowest-cost goods it can find.

THEY EXECUTE THE PLANS Whereas it would be reckless for top management
to devise a plan without lower-level managers advice, it is impossible for them to
execute the plan without the company s other managers. Except in the tiniest of
companies, no top manager could ever expect to do everything alone. With careful
oversight, they therefore rely on their subordinate managers to do the planning,
organizing, staffing, leading, and controlling that are required to execute the
company s and each department s plans and goals.

Department Managers Strategic Planning Roles in Action:

Improving Mergers and Acquisitions
Mergers and acquisitions are among the most important strategic moves companies
make. When mergers and acquisitions fail, it s often not due to financial or technical
issues but to personnel-related ones. These may include, for example, employee resistance,
mass exits by high-quality employees, and declining morale and productivity.10
It s therefore ironic that, until relatively recently, human resource managers played
limited roles in merger and acquisition (M&A) planning, according to a survey by

functional strategy
Strategy that identifies the broad activities
that each department will pursue in order
to help the business accomplish its
competitive goals.
80 PART 1 INTRODUCTION

consultants Towers and Perrin. They tended to get involved only when management
began integrating the two companies into one. By comparison, close to two thirds of
the [survey] participants are involved in M&A due diligence now. 11 How human
resource managers assist top management with mergers illustrates how functional
managers (and particularly human resource managers) can support the company s
strategic aims.

DUE DILIGENCE STAGE Before finalizing a deal, the merger partners usually
perform due diligence. These reviews assure they know what they re getting
into. For the human resource team, due diligence includes reviewing things like
employee compensation and benefits, labor relations, pending employee
litigation, human resource policies and procedures, and key employees. 12
For example, do the target firm s health insurance contracts have termination
clauses that could eliminate coverage for all employees if you lay off too many
after the merger?13

INTEGRATION STAGE Critical human resource issues during the first few months
of a merger or acquisition include choosing the top management, communicating
changes effectively to employees, and retaining key talent.14 Several human resource
consulting companies, such as Towers Perrin, assist firms with merger-related human
resource management services. Their services help to illustrate human resource
managers roles in facilitating a merger.
* Manage the deal costs. Towers Perrin consultants identify and quantify people-
related issues. These range from pension issues to redundancy costs and stock
options.
* Manage the messages. We support our clients in rapidly developing and deploying
an employee communication strategy.
* Secure the top team and key talent. Towers Perrin helps clients to identify key talent,
and then develop suitable retention strategies.
* Define and implement an effective HR service delivery strategy. Towers Perrin
helps clients plan how to implement the delivery of HR services, such as in
combining payroll systems.
* Develop a workable change management plan. Especially in cross-border
transactions, we assist companies in understanding and managing the cultural
differences they face as part of the deal.
* Design and implement the right staffing model. Towers Perrin helps companies
design the organization structure and determine which employee is best for
which role.
* Aligning total rewards. When integration [of pay plans] is desirable, we help
companies benchmarking and integration of compensation and benefit
programs. 15

4 Define strategic human

STRATEGIC HUMAN RESOURCE MANAGEMENT
resource management and We ve seen that once a company decides how it will compete, it turns to formulating
give an example of strategic functional departmental strategies to support its competitive aims. One of those
human resource
departments is human resource management. Its functional strategies are human
management in practice.
resource management strategies.

Defining Strategic Human Resource Management

Every company needs its human resource management policies and activities to make
sense in terms of its broad strategic aims. Strategic human resource management
means formulating and executing human resource policies and practices that
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 81

FIGURE 3-6 Linking Company-

Company s competitive environment
Wide and HR Strategies
Economic, political, demographic,
competitive, and technological trends
Source: © Gary Dessler, Ph.D., 2010.

Company s strategic plan

For example
Company s strategic situation Should we expand geographically?
Cut costs?
Diversify?

Company s internal strengths

and weaknesses
Company s HR (and other functional)
strategies
What are the basic policies
HR will pursue to ensure that the recruiting,
Organizational performance selecting, training, appraising, and
compensation systems support the
company s strategic plan?

produce the employee competencies and behaviors the company needs to achieve its
strategic aims. Figure 3-6 shows the link between human resource strategy and the
company s strategic plans.
The basic idea behind strategic human resource management is this: In formu-
lating human resource management policies and activities, the aim must be to
produce the employee skills and behaviors that the company needs to achieve its
strategic goals.
Figure 3-7 graphically outlines this idea. Management formulates a strategic plan
and measurable strategic goals or aims. These plans and aims imply certain workforce
requirements, in terms of the employee skills and behaviors required to achieve the
firm s strategic aims. Given these workforce requirements, human resource manage-
ment formulates HR strategies (policies and practices) to produce the desired
workforce skills, competencies, and behaviors.

FIGURE 3-7 The Practices

Behaviors Strategy Pyramid

What are
our strategic
goals or aims?

What employee behaviors and

skills do we need to achieve
our strategic aims?

What HR policies and practices will enable us to

produce the necessary employee
behaviors and skills?

strategic human resource management

Formulating and executing human resource
policies and practices that produce the
employee competencies and behaviors the
company needs to achieve its strategic aims.
82 PART 1 INTRODUCTION

Human Resource Strategies and Policies

Managers call the specific human resource management policies and practices they use
to support their strategic aims human resource strategies.16 The Shanghai Portman s
human resource strategy aimed to produce the service-oriented employee behaviors the
hotel needed to improve significantly the hotel s level of service. Its HR policies
included installing the Ritz-Carlton Company s human resource system, having top
management personally interview each candidate, and selecting only employees who
cared for and respected others. The accompanying HR as a Profit Center feature
presents another example.

HR AS A PROFIT CENTER
Albertsons Example
Several years ago, Albertsons Markets had to improve performance, and fast. With
2,500 stores and 230,000 workers, it faced competition not only from grocery
chains, but also from Walmart and online sites. Albertsons overall strategic aims
included reducing costs, maximizing financial returns, becoming more customer-
focused, and energizing employees. Albertsons turned to its human resource man-
agers to help achieve these strategic aims. Its new human resource strategy entailed
new screening, training, pay, and other human resources policies and practices, and
using more technology to reduce its HR activities costs.17 The Albertsons human
resource team s efforts helped Albertsons to cut costs, and to boost customer
service by hiring and motivating customer-focused applicants.

5 Briefly describe three impor-

Strategic Human Resource Management Tools
tant strategic human Managers use several tools to translate the company s broad strategic goals into human
resource management tools. resource management policies and activities. Three important tools include the strategy
map, the HR Scorecard, and the digital dashboard.

STRATEGY MAP The strategy map provides an overview of how each department s
performance contributes to achieving the company s overall strategic goals. It helps
the manager understand the role his or her department plays in helping to execute the
company s strategic plan.
Figure 3-8 presents a strategy map example, in this case for Southwest Airlines.
Recall that Southwest has a low-cost leader strategy. The strategy map for Southwest
succinctly lays out the hierarchy of main activities required for Southwest Airlines to
succeed. At the top is achieving company-wide, strategic financial goals. Then the
strategy map shows the chain of activities that help Southwest Airlines achieve these
goals. For example, as we saw earlier in this chapter, to boost revenues and profitabil-
ity Southwest needs to fly fewer planes (to keep costs down), maintain low prices, and
maintain on-time flights.
In turn (further down the strategy map), on-time flights and low prices require fast
turnaround. And, fast turnaround requires motivated ground and flight crews. The
strategy map helps each department (including HR) visualize what it needs to do to
support Southwest s low-cost strategy. Managers can access their companies strategy
maps while on the go. They can use the ActiveStrategy Company s ActiveStrategy
Enterprise to create and automate their strategy maps, and to access them through
iPhone or similar devices.18

THE HR SCORECARD Many employers quantify and computerize the strategy

map s activities. The HR Scorecard helps them to do so. The HR Scorecard is not a
scorecard. It refers to a process for assigning financial and nonfinancial goals or metrics
to the human resource management related chain of activities required for achieving
the company s strategic aims.19 (Metrics for Southwest might include airplane
turnaround time, percent of on-time flights, and ground crew productivity.) Simply
put, the idea is to take the strategy map and to quantify it.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 83

FIGURE 3-8 Strategy Map Strategy in Brief Low cost leader, high-quality customer service,
for Southwest Airlines operational efficiency
Strategic/Financial
Source: Based on TeamCHRYSALIS. Results Profitability
com, accessed July 2006; http://
mcknightkaney.com/Strategy_Maps_
Primer.html, accessed August 3, 2011;
http://www.strategymap.com.au/
home/StrategyMapOverview.htm Lower costs Increased revenues
accessed August 3, 2011

Customer-Based
Results Required More customers
to Produce Desired
Strategic/Financial
Results
Low fares On-time flights

Internal
Business Processes Fly fewer planes Minimize meals and frills
Required to Produce
Desired Financial
Results

Minimize plane turnaround on ground

Organizational
and Employee Highly engaged ground crews
Capabilities
Required to Support
Desired Internal
Business
Supportive, high-performance
Processes
HR practices

Managers use special scorecard software to facilitate this. The computerized

scorecard process helps the manager quantify the relationships between (1) the HR
activities (amount of testing, training, and so forth), (2) the resulting employee
behaviors (customer service, for instance), and (3) the resulting firm-wide strategic
outcomes and performance (such as customer satisfaction and profitability).20
DIGITAL DASHBOARDS The saying a picture is worth a thousand words
explains the purpose of the digital dashboard. A digital dashboard presents the
manager with desktop graphs and charts, showing a computerized picture of how
the company is doing on all the metrics from the HR Scorecard process. As in the
illustration on the next page, a top Southwest Airlines manager s dashboard might
display real-time trends for various strategy map activities. These might include fast
turnaround, attracting and keeping customers, and on-time flights. This gives the
manager time to take corrective action. For example, if ground crews are turning
planes around slower today, financial results tomorrow may decline unless the
manager takes action. Figure 3-9 summarizes the three strategic planning tools.

strategy map HR scorecard digital dashboard

A strategic planning tool that shows the A process for assigning financial and Presents the manager with desktop graphs
big picture of how each department s nonfinancial goals or metrics to the human and charts, and so a computerized picture of
performance contributes to achieving the resource management related chain where the company stands on all those
company s overall strategic goals. of activities required for achieving the metrics from the HR Scorecard process.
company s strategic aims and for
monitoring results.
84 PART 1 INTRODUCTION

Attracting and keeping Market share

customers: 2009 passengers to
date
2.5

Passengers (in million)

2.0

1.5

1.0

0.5
0% 100%
0.0
Jan-2008 June-2009
Employee morale trends based
on quarterly surveys
Plane turnaround time
June 30, 2009

Very Satisfied

Satisfied

18 55

Very Dissatisfied

HR METRICS AND BENCHMARKING

Being able to measure what you are doing is a big part of human resource manage-
ment today. It would have been futile, for instance, for the Portman Shanghai s
management to set better customer service as a goal, if they couldn t measure
customer service. Being able to measure what you are doing is an integral part
of the HR strategy process. First, management translates its strategic plan
into workforce requirements, in terms of measurable worker competencies and
behaviors (such as outstanding service). Given these workforce requirements, the
human resource manager then formulates supportive HR strategies, policies, and
practices (such as new training programs), intended to produce these workforce
competencies.
Finally, the HR manager picks measures by which to gauge whether his or her
new policies and practices are producing the required employee competencies and
behaviors. At the Portman Shanghai, the measures might include, for instance,
hours of training per employee, productivity per employee, and (via customer
surveys) customer satisfaction. The measures (or metrics ) you use may be broad
organizational measures (such as return on investment, and profit margins). Or
FIGURE 3-9 Three Important
Strategic HR Tools

Strategy Map HR Scorecard Digital Dashboard

Graphical tool that summarizes A process for managing employee Presents the manager with
the chain of activities that performance and for aligning all desktop graphs and charts, so
contribute to a company s success, employees with key objectives, by he or she gets a picture of
and so shows employees the big assigning financial and where the company has been
picture of how their performance nonfinancial goals, monitoring and and where it s going, in terms
contributes to achieving the assessing performance, and quickly of each activity in the strategy
company s overall strategic goals. taking corrective action. map.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 85

they may focus narrowly on specific human resource management and activities
(again, such as hours of training per employee ).21 In any case, the bottom line is
that measuring how we re doing, and why is important for managing one s
human resources.

Types of Metrics
There are many measures that human resource managers use. For example, the
HR-to-employee ratio averages about 1.12 HR employees per company employee
for all employers. However, the ratio varies with employer size. For example, there
is (on average) one human resource employee per 100 company employees for
firms with 100 249 employees. The HR employee-to-employee ratio drops to
about 0.79 for firms with 1,000 2,499 employees and to 0.72 for firms with more
than 7,500 employees.22
Figure 3-10 illustrates more focused human resource management metrics. These
include absence rate, cost per hire, and health care costs per employee.23

Improving Productivity Through HRIS

Tracking Applicant Metrics for Improved Talent Management
As an example of the benefits of using metrics, consider that most employers spend
thousands of dollars (or more) each year recruiting employees, without measuring
which hiring source produces the best candidates. The logical solution is to assess

Organizational Data Employment Data

Revenue Number of Positions Filled
Revenue per FTE Time-to-Fill
Net Income Before Taxes Cost-Per-Hire
Net Income Before Taxes per FTE Employee Tenure
Positions Included within the Organization s Annual Overall Turnover Rate
Succession Plan Annual Voluntary Turnover Rate
HR Department Data Annual Involuntary Turnover Rate
Total HR Staff Expectations for Revenue and Organizational Hiring
HR-to-Employee Ratio Percentage of Organizations Expecting Changes
Percentage of HR Staff in Supervisory Roles in Revenue in 2011 compared to 2010
Percentage of HR Staff in Professional/Technical Roles Percentage of Organizations Expecting Changes in Hiring
Percentage of HR Staff in Administrative Support Roles in 2011 compared to 2010
Reporting Structure for the Head of HR
Metrics for More Profitable Organizations
Types of HR Positions Organizations Expect to Hire in 2011
Total HR Staff
HR Expense Data HR-to-Employee Ratio
HR Expenses HR Expenses
HR Expense to Operating Expense Ratio HR Expense to Operating Expense Ratio
HR Expense to FTE Ratio HR Expense to FTE Ratio
Compensation Data Annual Salary Increase
Annual Salary Increase Target Bonus for Non-Executives
Salaries as a Percentage of Operating Expense Target Bonus for Executives
Target Bonus for Non-Executives Maximum Reimbursement Allowed for Tuition/Education
Target Bonus for Executives Expenses per Year
Tuition/Education Data Percentage of Employees Participating in Tuition/Education
Maximum Reimbursement Allowed for Tuition/Education Reimbursement Programs
Expenses per Year Time-to-Fill
Percentage of Employees Participating in Cost-Per-Hire
Tuition/Education Reimbursement Programs Annual Overall Turnover Rate

FIGURE 3-10 Metrics for the SHRM® 2011 2012 Customized Human Capital Benchmarking Report
Source: Reprinted with permission from the Society for Human Resource Management. All rights reserved.
86 PART 1 INTRODUCTION

recruitment effectiveness, using measures or metrics. Metrics here might include quality
of new hires and which recruitment sources produce the most new hires. 24
One way to track and analyze such data is by using an applicant tracking system
(ATS). Many vendors provide ATSs. Vendors include specialized ATS vendors like
Authoria, PeopleFilter, Wonderlic, eContinuum, and PeopleClick.
Regardless of the vendor, analyzing recruitment effectiveness using their software
involves two basic steps.
* First, the employer (and vendor) decides how to measure the performance of
new hires. For example, with Authoria s system, hiring managers input their
evaluations of each new hire at the end of the employee s first 90 days, using
a 1 5 scale.25
* Second, the applicant tracking system then enables the employer to track the
recruitment sources that correlate with superior hires. It may show, for instance,
that new employees hired through employee referrals stay longer and work
better than those from newspaper ads do. Most applicant tracking systems enable
hiring managers to track such hiring metrics on desktop dashboards.
Applicant tracking systems support an employer s talent management efforts in
other ways. For example, installing an Authoria ATS enabled the Thomson Reuters
Company to identify the sources, candidate traits, and best practices that work best in
each geographic area where they do business.26 This in turn enabled them to reduce
recruiting costs, for instance, by shifting recruitment dollars from less effective
sources to ones that are more effective. Similarly, the ATS can also help hire better
employees, for instance, by helping the employer see which applicant traits correlate
with subsequent employee performance.

Benchmarking in Action
Measuring how one is doing (for instance in terms of employee turnover, or employee
productivity) is rarely useful by itself. Instead, for a thorough analysis, you ll usually
want to know How are we doing? in relation to something. That something may be
historical company figures (for example, Are our accident rates going up or down?).
Or, you will want to benchmark your results. Benchmarking means comparing the
practices of high-performing companies to your own, in order to understand what they
do that makes them better.27
SHRM provides a customized benchmarking service. This enables employers to
compare their own HR-related metric results with those of other companies. SHRM s
service provides benchmark figures for many industries. These include construction
and mining, educational services, finance, manufacturing, and others. The employer
can also request the comparable (benchmark) figures not just by industry, but broken
down by employer size, company revenue, and geographic region. (See http://shrm.org/
research/benchmarks/.)
Figure 3-11 illustrates one of the many sets of comparable benchmark measures
you could obtain from SHRM s benchmark service. It shows how much employers are

FIGURE 3-11 SHRM Tuition/Education Data

Customized Human Capital
Benchmarking Report 25th 75th
n Percentile Median Percentile Average
Source: Reprinted with permission
from the Society for Human
Maximum reimbursement 32 $1,000 $5,000 $7,500 $6,000
Resource Management. allowed for tuition/
All rights reserved. education expenses per year
Percentage of employees 32 1.0% 3.0% 5.0% 4.0%
participating in tuition/
education reimbursement
programs

Note: To ensure that the data are seen as credible, data for metrics with an n of less than 5 are not
displayed.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 87

spending on average for tuition reimbursement programs, and what percentage of

employees typically participate in such programs.

Strategy and Strategy-Based Metrics

6 Explain with examples why
metrics are important for Benchmarking (comparing one firm s HR metrics with another s) only provides
managing human resources. one way to look at how your company s human resource management system is
performing. 28 It shows how your human resource management system s
performance compares to the competition. It may not show the extent to which
your firm s HR practices are helping your company to achieve its strategic goals.
For example, if our strategy calls for doubling profits by improving customer ser-
vice, to what extent are our new selection and training practices helping to improve
customer service?
Managers use strategy-based metrics to answer that question. Strategy-based
metrics are metrics that focus on measuring the activities that contribute to achiev-
ing a company s strategic aims.29
As an example:
* Let us say the owners of the Paris International Hotel decide to make their
hotel one of the top 10 hotels in France.
* They believe doing so will translate into revenues and profits 50% higher than now.
* They decide that achieving those strategic aims requires improving customer
service. They will measure customer service in terms of measures like guest
returns, and guest compliments of employees.
* What can the hotel s human resource managers do to help achieve this improved
customer service? They can take measurable steps to improve certain targeted
HR practices, such as increase training per year per employee from 10 hours to 25,
boost incentive pay (tied to guest service ratings) from zero now to 10% of total
salaries, and move from no job candidates tested before hiring to 100% testing
prior to hiring.
* So, for the Paris Hotel, the strategic HR metrics would include (among others)
100% employee testing, 80% guest returns, incentive pay as a percent of total
salaries, and sales up 50%. If changes in HR practices such as increased training
and better incentives have their intended effects, then metrics like guest returns
and guest compliments should also rise. And if so, the Paris Hotel should also
achieve its strategic goal of being one of the top 10 hotels in France.

Workforce/Talent Analytics and Data Mining

Employers increasingly use workforce analytics (or talent analytics ) software appli-
cations to analyze their human resources data and to draw conclusions from it.30
For example, a talent analytics team at Google analyzed data on employee back-
grounds, capabilities, and performance. The team was able to identify the factors
(such as an employee feeling underutilized) likely to lead to the employee leaving. In a
similar project, Google analyzed data on things like employee survey feedback
and performance management scores to identify the attributes of successful Google
managers. Microsoft identified correlations among the schools and companies
employees arrived from and the employee s subsequent performance. This enabled
Microsoft to improve its recruitment and selection practices.31 Software company
SAS s employee retention program sifts through employee data on things like skills,
tenure, performance, education, and friendships. The program can predict which
high-value employees are more likely to quit in the near future.32 Alliant Techsystems
created a flight risk model to calculate the probability an employee would leave.

strategy-based metrics
Metrics that specifically focus on measuring
the activities that contribute to achieving a
company s strategic aims.
88 PART 1 INTRODUCTION

This enabled Alliant to predict unusually high turnover in one important group and
to take corrective action.33 IBM uses workforce analytics to identify employees who
are idea leaders to whom other employees frequently turn for advice (for instance
based on e-mail interactions and e-mail mentions by colleagues).
DATA MINING Such efforts usually employ data mining techniques. Data
mining sifts through huge amounts of employee data to identify correlations that
employers then use to improve their employee selection and other practices. Data
mining is the set of activities used to find new, hidden, or unexpected patterns in
data. 34 Data mining systems use tools like statistical analysis to sift through data
looking for relationships. Department stores often use data mining. For example,
Macy s captures huge amounts of data on its customers what they buy, when
they buy it, how they pay for it, and what day of the week they tend to shop. Macy s
can use data mining to make sense of it. For example, data mining reveals that
some customers often come in to redeem 20% off coupons they get in the mail.
Other customers are more apt to buy new electronic gadgets with coupons than
are others.
Thanks to data mining, the manager can discover patterns that he or she can
then use to make predictions. He or she can answer questions such as Which of
our products would this customer be most likely to buy? Which of our customers
are making too many returns? , and What is the likelihood that this candidate will
succeed here at Google? The accompanying HR as a Profit Center presents other
examples.

HR AS A PROFIT CENTER
Using Workforce/Talent Analytics
Talent analytics can produce striking profitability results. For example, Best Buy
used talent analytics to determine that a 0.1% increase in employee engagement
led to a more than $100,000 rise in a Best Buy store annual operating income.35
Employers are using talent analytics to answer six types of talent management
questions:36
Human capital facts. For example, What are the key indicators of my orga-
nization s overall health? JetBlue found that a key measure of employee
engagement correlated with financial performance.
Analytical HR. For example, Which units, departments, or individuals need
attention? Lockheed Martin collects performance data in order to identify
areas needing improvement.
Human capital investment analysis. For example, Which actions have the
greatest impact on my business? By monitoring employee satisfaction
levels, Cisco was able to improve its employee retention rate from 65% to
85%, saving the company nearly $50 million in recruitment, selection, and
training costs.
Workforce forecasts. For example, How do I know when to staff up or cut
back? Dow Chemical uses a computerized model that predicts future
required headcount for each business unit based on predictions for things like
industry trends.
Talent value model. For example, Why do employees choose to stay with
or leave my company? For example, Google was able to anticipate when
an employee felt underutilized and was preparing to quit, thus reducing
turnover costs.
Talent supply chain. For example, How should my workforce needs adapt
to changes in the business environment? Thus, retail companies can use
special analytical models to predict store volumes and release hourly
employees early.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 89

What Are HR Audits?

Human resource managers often collect data on matters such as employee turnover
and safety with the help of human resource audits. One practitioner calls an HR audit
an analysis by which an organization measures where it currently stands and deter-
mines what it has to accomplish to improve its HR function. 37 Another calls it a
process of examining policies, procedures, documentation, systems, and practices
with respect to an organization s HR functions. 38 In sum, the HR audit generally
involves (1) reviewing the functioning of most aspects of the company s human
resource function (recruiting, testing, training, and so on), usually using a checklist,
as well as (2) ensuring that the employer is adhering to government regulations and
company policies.
In conducting the HR audit, managers often benchmark compare their results
to those of comparable companies. Many private human resource management
consulting firms (such as Mercer, www.mercer.com) offer such comparable data on a
variety of HR activities. Sample activities include what other employers are paying
and the ratio of HR professionals per company employee. We saw that the Society for
Human Resource Management provides extensive benchmarking services. HR
audits vary in scope and focus. As an example, typical broad areas to cover with the
HR audit include:39

1. Roles and head count (including job descriptions, and employees by exempt/
nonexempt and full/part-time status)
2. Legal issues (compliance with federal, state, local employment related legislation)
3. Recruitment and selection (including selection tools, background checks, and so on)
4. Compensation (policies, incentives, survey procedures, and so on)
5. Employee relations (union agreements, performance management, disciplinary
procedures, employee recognition)
6. Mandated benefits (social security, unemployment insurance, workers com-
pensation, and so on)
7. Group benefits (insurance, time off, flexible benefits, and so on)
8. Payroll (internal versus external payroll options, FLSA compliance)
9. Documentation and record keeping (HR information systems, personnel files,
I-9 and other forms, and so on)
10. Training and development (new employee orientation, workforce development,
technical and safety, career planning, and so on)
11. Employee communications (employee handbook, newsletter, recognition
programs)
12. Internal communications (policies and procedures, and so on)
13. Termination and transition policies and practices

Drilling down to a finer level of analysis, here is what we might look for in several
of these 13 items.

Item 9, Personnel Files Do our files contain information including résumés

and applications, offer letters, job descriptions, performance evaluations,
benefit enrollment forms, payroll change notices and/or documentation related
to personnel actions, documents regarding performance issues, employee

HR audit
An analysis by which an organization meas-
ures where it currently stands and determines
what it has to accomplish to improve its HR
function.
90 PART 1 INTRODUCTION

handbook acknowledgments, I-9 forms, medical information (related to

a medical leave of absence or FMLA leave), and workers compensation
information?40
Items 2 and 8, Wage and Hour Compliance Is our time record-keeping
process in compliance with state and with federal law (for instance
check-in/check-out no more than 3 minutes before starting/stopping work)?
Do we conduct a random audit of timecards to ensure that practices are as
they should be?41
Item 1, Headcount How many employees are currently on staff? How many
employees of those on staff are currently

* Regular
* Probationary
* Temporary
* Full Time
* Part Time
* Exempt
* Non-Exempt42

Evidence-Based HR and the Scientific

Way of Doing Things
In this chapter, we ve seen that decision-making based on an objective review of the
evidence is important for successful human resource management. Managers today
strive to make decisions based on an analysis of the evidence. Evidence-based human
resource management is the use of data, facts, analytics, scientific rigor, critical evalua-
tion, and critically evaluated research/case studies to support human resource
management proposals, decisions, practices, and conclusions.43
You may possibly sense that taking an evidence-based approach to making
management decisions is similar to being scientific in how you do things, and if so,
you are correct. A recent Harvard Business Review article even argues that managers
must become more scientific and to think like scientists when making business
decisions.44

HOW TO BE SCIENTIFIC But how can managers do this? Two things are
particularly important. First, in gathering evidence, scientists (or managers) need to
be objective, or there s no way to trust their conclusions. For example, a medical
school recently disciplined several of its professors. These doctors had failed to reveal
that they were on the payroll of the drug company who supplied the drugs, the
results of which the doctors were studying. Who could trust their objectivity or
their conclusions?
Being scientific also requires experimentation. An experiment is a test the man-
ager sets up in such a way as to ensure (to the extent possible) that he or she under-
stands the reasons for the results obtained. For example, in their Harvard Business
Review article, A Step-by-Step Guide to Smart Business Experiments, the authors
argue that if you want to judge a new incentive plan s impact on corporate profits,
don t start by implementing the plan with all employees. Instead, implement it with
an experimental group (which gets the incentive plan), and with a control group
(a group that does not get the incentive plan). Doing so will help you gauge if any
performance improvement stemmed from the incentive or from some other cause
(such as a new company-wide training program).45
If you ve done a good job designing your business experiment, you should be
able to use your results to explain and predict why, say, one plan succeeds and
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 91

another fails. For example, you own a small business and a vendor suggests that
you pay her $10,000 per year to use a personnel test to identify high-potential sales
candidates. You conduct a study (we ll explain how in Chapter 5, Testing), using
the test with some applicants but not with others. You conclude that by using that
test you can predict, with high accuracy, which candidates will succeed. How many
extra sales will that produce? You decide based on the evidence that the $10,000
would be well spent. Hopefully, your study will also help you explain your results,
in other words to answer Why. For example, This test uncovers applicants who
are highly self-confident, and that s a trait one needs to be a great salesperson in
my business.

WHY SHOULD A MANAGER BE SCIENTIFIC? For managers, the key point

of being scientific is to make better decisions. The problem is that what s
intuitively obvious can be misleading. Does our expensive applicant testing
program really produce better employees? Is this sales incentive plan really
boosting sales? We ve spent $40,000 in the past 5 years on our tuition-refund
plan; what (if anything) did we get out of it? What s the evidence?

EXAMPLES Examples abound of human resource managers taking a scientific,

evidence-based approach to making decisions. For example, an insurance firm was
considering cutting costs by buying out senior underwriters, most of whom were
earning very high salaries. But after analyzing the data, HR noticed that these
underwriters also brought in a disproportionate share of the company s revenue.
In fact, reviewing data on things such as employee salaries and productivity
showed that it would be much more profitable to eliminate some low-pay call-
center employees, replacing them with even less expensive employees. As another
example, the chemical Company BASF Corp. analyzed data regarding the
relationship among stress, health, and productivity in its 15,000 American
headquarters staff. Based on that analysis, the company instituted health programs
that it calculated would more than pay for themselves in increased productivity by
reducing stress.46
Throughout this book we will show examples of how managers can use an
evidence-based approach to making better human resource management decisions.
For example, which recruitment source produces the best candidates for us? Does it
pay to use this testing program? Should we raise salaries, or not? And, Does our
safety program really result in fewer accidents?

WHAT ARE HIGH-PERFORMANCE WORK SYSTEMS?

One reason to measure, benchmark, and scientifically analyze human resource
management practices is to identify and promote high-performance work practices.
A high-performance work system is a set of human resource management policies
and practices that together produce superior employee performance. As we saw in
Chapter 1, one illustrative study looked at 17 manufacturing plants, some of which
adopted high-performance work system practices. The high-performance plants
paid more (median wages of $16 per hour compared with $13 per hour for all
plants), trained more, used more sophisticated recruitment and hiring practices
(tests and validated interviews, for instance), and used more self-managing work
teams. These plants also had the best overall financial performance.47 The bottom

high-performance work system

A set of human resource management poli-
cies and practices that promote organiza-
tional effectiveness.
92 PART 1 INTRODUCTION

TABLE 3-1 Comparison of HR Practices in High-Performance and Low-Performance Companies

Low-Performance Company High-Performance Company
HR System Averages HR System Averages
(Bottom 10%, 42 Firms) (Top 10%, 43 Firms)

Sample HR Practices
Number of qualified applicants per position (Recruiting) 8.24 36.55
Percentage hired based on a validated selection test 4.26 29.67
Percentage of jobs filled from within 34.90 61.46
Number of hours of training for new employees (less than 1 year) 35.02 116.87
.

Number of hours of training for experienced employees 13.40 72.00

Percentage of employees receiving a regular performance appraisal 41.31 95.17
Percentage of workforce whose merit increase or incentive pay is 23.36 87.27
tied to performance
Percentage of workforce who received performance feedback from 3.90 51.67
multiple sources (360)
Target percentile for total compensation (market rate = 50%) 43.03 58.67
Percentage of the workforce eligible for incentive pay 27.83 83.56
Percentage of the workforce routinely working in a self-managed, 10.64 42.28
cross-functional,or project team
Percentage of HR budget spent on outsourced activities 13.46 26.24
(e.g., recruiting, benefits, payroll)
Number of employees per HR professional 253.88 139.51
Percentage of the eligible workforce covered by a union contract 30.00 8.98
Firm Performance
Employee turnover 34.09 20.87
Sales per employee $158,101 $617,576
Market value to book value 3.64 11.06

Source: Based on B. E. Becker, M. A. Huselid, and D. Ulrich, The HR Scorecard: Linking People, Strategy and Performance (Boston: Harvard Business School
Press, 2001), pp. 16 17.

line is that, one way to improve performance is to design recruiting, selection,

training, and other HR practices so that they produce superior employee
performance a high-performance work system.

High-Performance Human Resource Policies and Practices

What are these high-performance work practices? Studies show that high-performance
work systems human resource policies and practices do differ from less productive
ones. Table 3-1 illustrates this. For example, high-performing companies recruit more
job candidates, use more selection tests, and spend many more hours training employees.
Table 3-1 illustrates four things.
First, it presents examples of human resource metrics. A human resource metric
is a quantitative gauge of a human resource management activity such as employee
turnover, hours of training per employee, or qualified applicants per position.
(In Table 3-1, the metric for Number of qualified applicants per position
is 36.55 in the high-performing companies.) Managers use such metrics to assess
their companies HR performance, and to compare one company s performance with
another s.48
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 93

Second, Table 3-1 illustrates the things employers must do to have high-
performance systems. For example, they hire based on validated selection tests. They
fill more jobs from within. They organize work around self-managing teams.
They extensively train employees.
Third, the table shows that high-performance work practices usually aspire to help
workers to manage themselves. In other words, the point of such recruiting, screening,
training, and other human resources practices is to foster an empowered, self-motivated,
and flexible workforce.49
Fourth, Table 3-1 highlights the measurable differences between the human
resource management systems in high-performance and low-performance compa-
nies. For example, high-performing companies have more than four times the
number of qualified applicants per job than do low performers.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Strategic planning is important to all managers. All Strategic management is the process of identifying
managers personnel and other decisions should be and executing the organization s strategic plan. Basic
consistent with the goals that cascade down from the steps in the strategic management process include
firm s overall strategic plan. Those goals form a hierarchy, defining the current business, performing an external
starting with the president s overall strategic goals (such and internal audit, formulating a new direction, trans-
as double sales revenue to $16 million) and filtering down lating the mission into strategic goals, formulating
to what each individual manager needs to do in order to strategies to achieve the strategic goals, implementing
support that overall company goal. strategies, and evaluating performance.
2. Because each manager needs to make his or her deci- We distinguished among corporate-level,
sions within the context of the company s plans, it s competitive-level, and functional strategies.
important for all managers to understand management Corporate strategies include, among others,
planning. The management planning process includes diversification strategies, vertical integration,
setting an objective, making forecasts, determining what horizontal integration, geographic expansion, and
your alternatives are, evaluating your alternatives, and consolidation. The main competitive strategies
implementing and evaluating your plan. include cost leadership, differentiation, and
3. Again, because all managers operate within the framework focuser. Functional strategies reflect the specific
of their company s overall plans, it s important for all departmental policies that are necessary for
managers to be familiar with the strategic management executing the business s competitive strategies.
process. Department managers play an important role in
A strategic plan is the company s plan for how it strategic planning in terms of devising the strategic
will match its internal strengths and weaknesses plan, formulating supporting functional/
with external opportunities and threats in order departmental strategies, and of course in executing
to maintain a competitive advantage. A strategy the company s plans.
is a course of action.

human resource metric

The quantitative gauge of a human resource
management activity such as employee
turnover, hours of training per employee, or
qualified applicants per position.
94 PART 1 INTRODUCTION

4. Each function or department in the business needs its tools include the strategy map, the HR Scorecard, and
own functional strategy, and strategic human resource digital dashboards.
management means formulating and executing 5. The manager will want to gather and analyze data
human resource policies and practices that produce the prior to making decisions. A high-performance work
employee competencies and behaviors the company system is a set of human resource management policies
needs to achieve its strategic aims. Human resource and practices that promote organizational effectiveness.
strategies are the specific human resource management Human resource metrics (quantitative measures of
policies and practices managers use to support their some human resource management activities such as
strategic aims. The Shanghai Portman Hotel and Albert- employee turnover) are critical in creating high-
sons Markets are two examples of strategic human performance human resource policies and practices.
resource planning. Another is the use of HR consultants This is because they enable managers to benchmark
in improving mergers and acquisitions, for instance, their own practices against those of successful organi-
with respect to managing the deal s costs, and aligning zations. A high-performance work system is a set of
the total rewards necessary for the new entity. Important human resource management policies and practices
and popular strategic human resource management that together produce superior employee performance.

DISCUSSION QUESTIONS
1. Give an example of hierarchical planning in an 4. Explain how human resources management can be
organization. instrumental in helping a company create a competitive
2. What is the difference between a strategy, a vision, and a advantage.
mission? Give one example of each. 5. What is a high-performance work system? Provide
3. Define and give at least two examples of the cost leader- several specific examples of the typical components in a
ship competitive strategy and the differentiation high-performance work system.
competitive strategy.

INDIVIDUAL AND GROUP ACTIVITIES

1. With three or four other students, form a strategic man- seem to mean the same thing when they refer to HR
agement group for your college or university. Your Scorecards? How do they differ?
assignment is to develop the outline of a strategic plan 5. In teams of 4 5 students, choose a company for which you
for the college or university. This should include such will develop an outline of a strategic HR plan. What seem to
things as mission and vision statements; strategic goals; be this company s main strategic aims? What is the firm s
and corporate, competitive, and functional strategies. In competitive strategy? What would the strategic map for this
preparing your plan, make sure to show the main company look like? How would you summarize your
strengths, weaknesses, opportunities, and threats the recommended strategic HR policies for this company?
college faces, and which prompted you to develop your 6. The HRCI Test Specifications appendix at the end of this
particular strategic plans. book (pages 633 640) lists the things someone studying
2. Using the Internet or library resources, analyze the for the HRCI certification exam needs to know in each
annual reports of five companies. Bring to class area of human resource management (such as in Strategic
examples of how those companies say they are using Management, Workforce Planning, and Human Resource
their HR processes to help the company achieve its Development). In groups of four to five students, do four
strategic goals. things: (1) review that appendix now; (2) identify the
3. Interview an HR manager and write a short report material in this chapter that relates to the required knowl-
on The Strategic Roles of the HR Manager at XYZ edge the appendix lists; (3) write four multiple-choice
Company. exam questions on this material that you believe would be
4. Using the Internet or library resources, bring to class suitable for inclusion in the HRCI exam; and (4) if time
and discuss at least two examples of how companies are permits, have someone from your team post your team s
using an HR Scorecard to help create HR systems that questions in front of the class, so the students in other
support the company s strategic aims. Do all managers teams can take each others exam questions.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 95

EXPERIENTIAL EXERCISE
Developing an HR Strategy for Starbucks
By 2010, Starbucks was facing serious challenges. Sales per How to Set Up the Exercise/Instructions: Set up groups of
store were stagnant or declining, and its growth rate and three or four students for this exercise. You are probably
profitability were down. Many believed that its introduction already quite familiar with what it s like to have a cup of
of breakfast foods had diverted its baristas from their coffee or tea in a Starbucks coffee shop, but if not, spend
traditional jobs as coffee-preparation experts. McDonald s some time in one prior to this exercise. Meet in groups and
and Dunkin Donuts were introducing lower priced but still develop an outline for an HR strategy for Starbucks Corp.
high-grade coffees. Starbucks former CEO stepped back Your outline should include four basic elements: a basic
into the company s top job. You need to help him formulate business/competitive strategy for Starbucks, workforce
a new direction for his company. requirements (in terms of employee competencies and
Purpose: The purpose of this exercise is to give you experi- behaviors) this strategy requires, specific HR policies and the
ence in developing an HR strategy, in this case, by developing activities necessary to produce these workforce require-
one for Starbucks. ments, and suggestions for metrics to measure the success of
the HR strategy.
Required Understanding: You should be thoroughly familiar
with the material in this chapter.

APPLICATION CASE
SIEMENS BUILDS A STRATEGY-ORIENTED HR SYSTEM
Siemens is a 150-year-old German company, but it s not the to understand the whole process, not just bits and
company it was even a few years ago. Until recently, Siemens pieces. To support this, Siemens provides extensive
focused on producing electrical products. Today the firm has training and development. It also ensures that all
diversified into software, engineering, and services. It is also employees feel they re part of a strong, unifying
global, with more than 400,000 employees working in 190 corporate identity. For example, HR uses cross-border,
countries. In other words, Siemens became a world leader by cross-cultural experiences as prerequisites for career
pursuing a corporate strategy that emphasized diversifying advances.
into high-tech products and services, and doing so on a 3. A climate of mutual respect is the basis of all
global basis. relationships within the company and with society.
With a corporate strategy like that, human resource Siemens contends that the wealth of nationalities,
management plays a big role at Siemens. Sophisticated cultures, languages, and outlooks represented by
engineering and services require more focus on employee its employees is one of its most valuable assets.
selection, training, and compensation than in the average It therefore engages in numerous HR activities aimed
firm, and globalization requires delivering these services at building openness, transparency, and fairness,
globally. Siemens sums up the basic themes of its HR strategy and supporting diversity.
in several points. These include:
1. A living company is a learning company. The high-tech Questions
nature of Siemens business means that employees must 1. Based on the information in this case, provide examples
be able to learn on a continuing basis. Siemens uses its for Siemens of at least four strategically required
system of combined classroom and hands-on apprentice- organizational outcomes, and four required workforce
ship training around the world to help facilitate this. competencies and behaviors.
It also offers employees extensive continuing education 2. Identify at least four strategically relevant HR policies
and management development. and activities that Siemens has instituted in order to help
2. Global teamwork is the key to developing and using all human resource management contribute to achieving
the potential of the firm s human resources. Because it Siemens strategic goals.
is so important for employees throughout Siemens to 3. Provide a brief illustrative outline of a strategy map for
feel free to work together and interact, employees have Siemens.
96 PART 1 INTRODUCTION

CONTINUING CASE
CARTER CLEANING COMPANY

The High-Performance Work System cleaning fluid before washing items like these. As a result,
As a recent graduate and as a person who keeps up with the these fine white blouses were being washed in cleaning fluid
business press, Jennifer is familiar with the benefits of that had residue from other, earlier washes.
programs such as total quality management and high- Jennifer now wonders whether these employee meetings
performance work systems. should be expanded to give the employees an even bigger
Jack has actually installed a total quality program of role in managing the Carter stores quality. We can t be
sorts at Carter, and it has been in place for about 5 years. everywhere watching everything all the time, she said to her
This program takes the form of employee meetings. Jack father. Yes, but these people only earn about $8 to $15 per
holds employee meetings periodically, but particularly when hour. Will they really want to act like mini-managers?
there is a serious problem in a store such as poor-quality he replied.
work or machine breakdowns. When problems like these
arise, instead of trying to diagnose them himself or with
Jennifer, he contacts all the employees in that store and Questions
meets with them as soon as the store closes. Hourly employ- 1. Would you recommend that the Carters expand their
ees get extra pay for these meetings. The meetings have been quality program? If so, specifically what form should it
useful in helping Jack to identify and rectify several take?
problems. For example, in one store all the fine white blouses 2. Assume the Carters want to institute a high-performance
were coming out looking dingy. It turned out that the work system as a test program in one of their stores. Write
cleaner/spotter had been ignoring the company rule that a one-page outline summarizing important HR practices
required cleaning ( boiling down ) the perchloroethylene you think they should focus on.

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
We present a Translating Strategy into HR Policies and activities that contribute to a company s success
Practices Case: The Hotel Paris Case in the end-of-chapter in achieving its strategic goals.
material of each chapter (starting with this chapter). This Step 3: Identify the Strategically Required Organizational
continuing case demonstrates how the Hotel Paris s HR Outcomes. Every company must produce strategi-
director uses the concepts and techniques from each chapter cally relevant outcomes if it is to achieve its strategic
to create a human resource management system that helps goals. For the Portman Hotel in Shanghai, in this
the Hotel Paris achieve its strategic goals. chapter's introduction, the main outcome manage-
As we explained in this chapter, the basic HR strategy ment sought was excellent customer service, to help
process is as follows: Management formulates a strategic plan. their hotel stand out from the rest.
This plan in turn implies certain required organizational Step 4: Identify the Required Workforce Competencies
outcomes, such as improved customer service. Those required and Behaviors. Here, ask, What competencies
outcomes in turn imply certain workforce requirements. and behaviors must our employees exhibit if our
Human resource management then formulates HR strategies company is to produce the strategically relevant
(policies and practices) to produce the desired workforce skills, organizational outcomes, and thereby achieve its
competencies, and behaviors. Finally, the human resource strategic goals?
manager chooses measures to gauge the extent to which its Step 5: Identify the Required HR System Policies and
new policies and practices are actually producing the required Activities. Once the human resource manager
employee skills and behaviors. The Hotel Paris s human knows the required employee competencies and
resource manager might for example use the following behaviors, he or she can turn to formulating the
sequence of steps: 50 HR activities and policies that will help to
produce them.
Step 1: Define the Business Strategy. We saw first that Here it is important to be specific. It is not
translating strategy into human resource policies enough to say, We need new training programs or
and activities starts by defining the company s disciplinary processes. Instead, the manager must
strategic plans and goals. now ask, Exactly what sorts of new training pro-
Step 2: Outline a Strategy Map. As we also saw, a strategy grams do we need to produce the sorts of employee
map summarizes the chain of major interrelated competencies and behaviors that we seek?
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 97

Step 6: Choose HR Scorecard Measures. We saw that guest service. For example, Lisa and her management
many managers quantify and computerize this colleagues must take steps that produce fewer customer
chain of strategic goals, employee competencies, complaints and more written compliments, more frequent
and required HR practices. The HR Scorecard guest returns and longer stays, and higher guest expenditures
process helps them to do so. Recall that the HR per visit.
Scorecard is a process for assigning financial The Strategically Relevant Workforce Competencies
and nonfinancial goals or metrics to the HR- and Behaviors
related chain of activities required for achieving
Therefore, the question facing Lisa is this: What are the com-
the company s strategic aims and for monitoring
petencies and behaviors that our hotel s employees will have
results.
to exhibit if we are to produce the required organizational
The task here is to choose the appropriate
outcomes such as fewer customer complaints, more compli-
metrics. For example, if we decide to improve
ments, and more frequent guest returns? Thinking through
the disciplinary system, how precisely will
the types of activities that occur at each step in the hotel s
we measure improvement? Perhaps we would
value chain helps Lisa answer that question. For example, the
use the metric, number of grievances.
hotel s required employee competencies and behaviors would
The Hotel Paris International include high-quality front-desk customer service, taking
calls for reservations in a friendly manner, greeting guests at
Let us demonstrate how this process works by considering the front door, and processing guests s room service meals
our fictitious company, the Hotel Paris International (Hotel efficiently. All require motivated, high-morale employees.
Paris). Starting as a single hotel in a Paris suburb in 1990, the
Hotel Paris now comprises a chain of nine hotels, with two The Strategically Relevant HR System Policies
in France, one each in London and Rome, and others in New and Activities
York, Miami, Washington, Chicago, and Los Angeles. As a The HR manager s task now is to identify the human resource
corporate strategy, the Hotel Paris s management and own- policies and activities that will enable the hotel to produce
ers want to continue to expand geographically. They believe these crucial workforce competencies and behaviors. As
doing so will let them capitalize on their reputation for good one example, high-quality front-desk customer service is
service by providing multi-city alternatives for their satisfied one such required behavior. From this, Lisa identifies human
guests. The problem is that their reputation for good service resource activities to produce such front-desk customer
has been deteriorating. If they cannot improve service it service efforts. For example, she decides to institute practices to
would be unwise for them to expand, since their guests improve the disciplinary fairness and justice in the company, with the
might actually prefer other hotels after trying the Hotel aim of improving employee morale. Her assumption is that
Paris. enhanced fairness will produce higher morale and that
higher morale will produce improved front-desk service.
The Strategy
The HR Scorecard
Top management, with input from the human resource
manager and other managers, and with the board of direc- Finally, Lisa may (or may not) decide to computerize all
tors approval, chooses a new competitive strategy and formu- these cause-and-effect links among the HR activities, the
lates new strategic goals. They decide: The Hotel Paris workforce behaviors, and the organizational outcomes,
International will use superior guest services to differentiate using scorecard software to present results on digital dash-
the Hotel Paris properties, and to thereby increase the length boards. With a computerized scorecard software package,
of stays and the return rate of guests, and thus boost revenues Lisa need not limit herself to assessing the effects of the
and profitability. All Hotel Paris managers including the handful of employee behaviors (such as percentage of calls
director of HR services must now formulate strategies that answered on time). Instead, she could include metrics
support this competitive strategy. covering dozens of activities, from recruitment and selec-
tion through training, appraisal, compensation, and labor
The Strategy Map relations. Her HR Scorecard model could also include the
effects of all these activities on a variety of workforce compe-
Based on discussions with other managers, the HR director,
tencies and behaviors, and thus on organizational outcomes
Lisa Cruz, outlines a strategy map. This should help her visu-
and on the company s performance. In this way, her HR
alize the HR activities that are crucial to helping the hotel
Scorecard would become a comprehensive model repre-
achieve its strategic goals. For example, producing satisfied
senting the value-adding effects of the full range of Hotel
guests requires attending to all those activities where there is
Paris human resource activities.
an opportunity to affect the guests experiences. For the
Hotel Paris, activities include getting the guest from the
airport and checked in, cleaning the guest s room, and How We Will Use the Hotel Paris Case in This Book
picking up baggage and getting the guest checked out. Table 3-2 presents some of the metrics that Lisa could use to
measure human resource activities (by chapter). For exam-
The Strategically Required Organizational Outcomes ple, she could endeavor to improve workforce competencies
The Hotel Paris s basic strategy is to use superior and behaviors by instituting (as per Chapter 5, Recruiting)
guest services to expand geographically. Each step in the improved recruitment processes, and measure the latter in
hotel s strategy map provides opportunities for improving terms of number of qualified applicants per position.
98 PART 1 INTRODUCTION

TABLE 3-2 Examples of HR System Activities the Hotel Paris Can Measure as Related
to Each Chapter in This Book
Chapter Strategic Activities Metrics

2. EEOC Number EEOC claims/year; cost of HR-related litigation; % minority/women promotions

3. Strategy % employees who can quote company strategy/vision
4. Job Analysis % employees with updated job descriptions
5. Recruiting Number applicants per recruiting source; number qualified applicants/position
6. Testing % employees hired based on validated employment test
7. Interview % applicants receiving structured interview
8. Training Number hours training/employee/year; number hours training new employee
9. Appraisal Number employees getting feedback; % appraisals completed on time
10. Career Management % employees with formal career/development plan
11. Compensation Target percentile for total compensation (pay in top 25%)
12. Incentives % workforce eligible for merit pay
13. Benefits % employees 80% satisfied with benefits
14. Ethics Number grievances/year; % employees able to quote ethics code
15. Labor Relations % workforce in unions
16. Health and Safety Number safety training programs/year; $ accident costs/year; hours lost time due to accidents
17. Global % expatriates receiving predeparture screening, counseling
18. Entrepreneurship Employee turnover

Overall HR Metrics HR cost/employee; HR expense/total expenses; turnover costs

Similarly, she may recommend to management that they Questions

change the firm s pay policies (see Chapter 11, Pay Plans) so 1. Draw a simple strategy map for the Hotel Paris. Specif-
that the target percentile for total compensation is in the ically, summarize in your own words an example of the
top 25%. She could then show that doing so improves hierarchy of links among the hotel s HR practices,
employee morale, employee service behavior, customer sat- necessary workforce competencies and behaviors, and
isfaction, and the hotel chain s performance. In practice, all required organizational outcomes.
the HR activities we discuss in this book influence employee 2. Using Table 3-1 (page 92), list at least five metrics the
competencies and behaviors, and, thereby, organizational Hotel Paris could use to measure its HR practices.
outcomes and performance.

KEY TERMS
strategic plan, 73 competitive strategy, 77 HR Scorecard, 82
strategy, 73 competitive advantage, 77 digital dashboard, 83
strategic management, 73 functional strategies, 78 strategy-based metrics, 87
vision statement, 75 strategic human resource HR audit, 89
mission statement, 75 management, 80 high-performance work system, 91
corporate-level strategy, 77 strategy map, 82 human resource metric, 92
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 99

ENDNOTES
1. Arthur Yeung, Setting Up for Success: Anne Kakkonen, Factors Affecting the and Manage the Quality of Hires, HR
How the Portman Ritz-Carlton Hotel Role of HR Managers in International Magazine 52, no. 5 (May 2007), pp. 93 94,
Gets the Best from Its People, Human Mergers and Acquisitions: A Multiple 96, 98.
Resource Management 45, no. 2 (Summer Case Study, Personnel Review 37, no. 3 25. Ibid.
2006), pp. 67 75. (2008), pp. 280 299; and Linda Tepedino 26. Ibid.
2. See, for example, Fred David, Strategic and Muriel Watkins, Be a Master of 27. See, for example, Benchmarking for
Management (Upper Saddle River, NJ: Mergers and Acquisitions, HR Magazine, Functional HR Metrics, HR Focus
Prentice Hall, 2007), p. 11. June 2010, pp. 53 56. 83, no. 11 (November 2006), p. 1; and
3. Tony Bingham and Pat Galagan, Doing 15. This is paraphrased or quoted from HR John Sullivan, The Last Word, Work-
Good While Doing Well, Training & Services, Service Offerings: Mergers, Acqui- force Management, November 19, 2007,
Development, June 2008, p. 33. sitions and Restructuring, www.towers p. 42.
4. www.checkmateplan.com, accessed April 24, Perrin.com, accessed December 4, 2007. 28. See Brian Becker and Mark Huselid,
2009. 16. See, for example, Evan Offstein, Devi Measuring HR? Benchmarking Is Not
5. www.pepsico.com/PEP_Company/ Gnyawali, and Anthony Cobb, A Strate- the Answer! HR Magazine 8, no. 12
Overview, accessed December 7, 2007. gic Human Resource Perspective of (December 2003), www.charmed.org,
6. Paul Nutt, Making Strategic Choices, Firm Competitive Behavior, Human accessed February 2, 2008.
Journal of Management Studies, January Resource Management Review 15 (2005), 29. Ibid.
2002, pp. 67 96. pp. 305 318. 30. Ed Frauenheim, Keeping Score with Ana-
7. Michael Porter, Competitive Strategy 17. Automation Improves Retailer s Hiring lytics Software, Workforce Management
(New York: The Free Press, 1980), p. 14. Efficiency and Quality, HR Focus 82, no. 2 86, no. 10 (May 21, 2007), pp. 25 33.
8. Peter Coy, A Renaissance in U.S. Manu- (February 2005), p. 3. 31. Steven Baker, Data Mining Moves to
facturing, Bloomberg Businessweek, 18. www.activestrategy.com/solutions/ Human Resources, Bloomberg Business-
May 9 15, 2011, pp. 11 13. strategy_mapping.aspx, accessed March 24, week, March 12, 2009, www.BusinessWeek.
9. Samuel Greengard, You re Next! There s 2009. com/magazine/, accessed April 13, 2011.
No Escaping Merger Mania! Workforce, 19. When focusing on HR activities, man- 32. Ibid.
April 1997, pp. 52 62. The extent to agers call this an HR Scorecard. When 33. Ed Frauenheim, Numbers Game, Work-
which top executives rely on HR man- applying the same process broadly to all force Management 90, no. 3 (March 2011),
agers to support their strategic planning the company s activities, including, for p. 21.
efforts is a matter of debate. Many example, sales, production, and finance, 34. George Marakas, Decision Support Systems
employers still view HR managers mostly managers call it the balanced scorecard (Upper Saddle River, NJ: Prentice-Hall),
as strategy executors. On the other hand, process. 2003, p. 326.
a recent study found that 71% of the 20. The idea for the HR Scorecard derives 35. Thomas Davenport, Jeanne Harris, and
management teams do see HR as a from a broader measurement tool man- Jeremy Shapiro, Competing on Talent
strategic player. See Patrick Kiger, agers call the balanced scorecard. This Analytics, Harvard Business Review,
Survey: HR Still Battling for Leaders does for the company as a whole what the October 2010, pp. 52 58.
Respect, Workforce Management, Dec- HR Scorecard does for HR, summarizing 36. Ibid., p. 54.
ember 15, 2008, p. 8. See also E. E. Lawler instead the impact of various functions 37. Lin Grensing-Pophal, HR Audits: Know
et al., What Makes HR a Strategic including HRM, sales, production, and the Market, Land Assignments, SHRM
Partner? People & Strategy 32, no. 1 distribution. The balanced in balanced Consultants Forum, December 2004,
(2009), p. 14. scorecard refers to a balance of goals www.shrm.org/hrdisciplines/consultants/
10. Andy Cook, Make Sure You Get a financial and nonfinancial. Ar ti cles/Pages/CMS_010705.aspx,
Prenup, European Venture Capital Journal, 21. See, for example, Using HR Performance accessed July 7, 2010.
December/January 2007, p. 76. See www. Metrics to Optimize Operations and 38. Bill Coy, Introduction to The Human
accessmylibrary.com/coms2/summary_ Profits, PR Newswire, February 27, 2008; Resources Audit, La Piana Associates, Inc.,
0286-29140938_ITM, accessed June 29, and How to Make Over Your HR www.lapiana.org/consulting, accessed
2009. Metrics, HR Focus 84, no. 9 (September May 1, 2008.
11. www.towersPerrin.com, accessed Decem- 2007), p. 3. 39. Grensing-Pophal, HR Audits: Know the
ber 4, 2007. 22. SHRM Human Capital Benchmarking Market, Land Assignments ; and Coy,
12. Mergers & Acquisitions: Managing the Study: 2007 Executive Summary. Introduction to The Humsan Resources
HR Issues, The M&A Spotlight, January 1, 23. For additional information on HR metrics Audit.
2007. see, for example, Karen M. Kroll, Repur- 40. Dana R. Scott, Conducting a Human
13. Leah Carlson, Smooth Transition: HR posing Metrics for HR: HR Professionals Resources Audit, New Hampshire Business
Input Can Prevent Benefits Blunders Are Looking Through a People-Focused Review, August 2007.
During M&As, Employee Benefit News, Lens at the CFO s Metrics on Revenue and 41. Ibid.
June 1, 2005. Income per FTE, HR Magazine 51, no. 7 42. Coy, Introduction to The Human
14. www.towersPerrin.com, accessed Decem- (July 2006), pp. 64 69; and http://shrm.org/ Resources Audit.
ber 4, 2007. See also Ingmar Bjorkman, metrics/library_publishedover/measure- 43. See for example, www.personneltoday.
The HR Function in Large-Scale mentsystemsTOC.asp, accessed February 2, com/blogs/hcglobal-human-capital-
Mergers and Acquisitions: The Case of 2008. management/2009/02/theres-no-such-
Nordea, Personnel Review 35, no. 6 24. Connie Winkler, Quality Check: Better thing-as-eviden.html, accessed April 18,
(2006), pp. 654 671; Elina Antila and Metrics Improve HR s Ability to Measure 2009.
100 PART 1 INTRODUCTION

44. Eric Anderson and Duncan Simester, Employees with the Organization s 48. See, for example, www.personneltoday.
A Step-by-Step Guide to Smart Business Strategic Objectives: Out of Line com/blogs/hcglobal-human-capital-
Experiments, Harvard Business Review, of Sight, Out of Mind, International management/2009/02/theres-no-such-
March 2011, pp. 98 105. Journal of Human Resource Manage- thing-as-eviden.html, accessed April 18,
45. Ibid. ment 17, no. 9 (September 2006), 2009.
46. Bill Roberts, How to Put Analytics on pp. 1014 1041. A study found that some 49. Robert McNabb and Keith Whitfield, Job
Your Side, HR Magazine, October 2009, employers, which the researchers called Evaluation and High-Performance Work
pp. 43 46. cost minimizers, intentionally took a Practices: Compatible or Conflictual?
47. www.bls.gov/opub/ted/2006/may/wk2/ lower cost approach to human resource Journal of Management Studies 38, no. 2
art01.htm, accessed April 18, 2009; practices, with mixed results. See Soo (March 2001), p. 294.
Super Human Resources Practices Min Toh et al., Human Resource 50. This section is adapted in part from Brian
Result in Better Overall Performance, Configurations: Investigating Fit with Becker, Mark Huselid, and Dave Ulrich,
Report Says, BNA Bulletin to Manage- the Organizational Context, Journal The HR Scorecard: Linking People, Strategy,
ment, August 26, 2004, pp. 273 274. of Applied Psychology 93, no. 4 (2008), and Performance (Boston: Harvard Business
See also Wendy Boswell, Aligning pp. 864 882. School Press, 2001).

PART 1 VIDEO CASES APPENDIX

Video Title: Human Resource Management (Patagonia)

SYNOPSIS
The mission at Patagonia is to build the best product possible, cause no unnecessary
environmental harm, and inspire solutions to the environmental crisis. The benefits
to employees working for Patagonia are considerable. Although the pay is slightly
below the industry average, employees are given time off work to try out the wetsuits
the company produces, and employees are encouraged to put the needs of their
families first. Employees can work flexible hours to accommodate this company
value. Employees are also offered a period of 60 days in which they can work for a
nonprofit environmental organization and still receive their full pay. Much thought is
put into the hiring of new employees at Patagonia; ambitious, mission-driven people,
with whom the core values of Patagonia resonate, are selected to fill open positions
within this unique company.

Discussion Questions
1. How does the mission of Patagonia differ from most other companies?
2. Patagonia has often been selected as one of the country s best places to work.
What Patagonia HR practices and employee benefits do you think help
Patagonia earn this honor?
3. What characteristics would you use to describe a candidate likely to be hired by
Patagonia? How do these characteristics reflect and support Patagonia s strategy?

Video Title: Equal Employment (UPS)

SYNOPSIS
A former HR director for UPS, now the president of The Virtual HR Director, gives
some perspective on what diversity means, and what its value can be to a company.
Employees of a wide variety of backgrounds are intrinsically valuable to a company in
the varied perspectives that they bring to the table, and can help a company find
creative solutions to new problems that it has not encountered before.
In a diverse workplace, where employees come from a variety of backgrounds and
ethnicities, there is always the possibility of harassment between employees.
The video addresses the value of diversity sensitivity training in its capacity to help
prevent incidence of employee harassment. Effective and constructive corrective
measures for incidents of harassment are also discussed.
 CHAPTER 3 HUMAN RESOURCE MANAGEMENT STRATEGY AND ANALYSIS 101

Discussion Questions
1. What kinds of things does Gary Wheeler think a diverse workforce can
contribute to a company?
2. What typical avenues are open to an employee who feels he or she is being
harassed, in order to make sure it is dealt with properly? Do you see any room
for improvement based on our discussion in Chapter 3?
3. What does Gary Wheeler report is most often the basis of reported claims of
harassment, and how are these cases dealt with?
4. What else would you do to deal with employees who are hostile to the idea of
diversity?
5. To what extent do you believe that harassment, such as sexual harassment, is
usually primarily a communications problem? Why?
6. In this video Mr. Wheeler focuses mostly on diversity and on sexual harassment.
Discuss five other important aspects of equal employment opportunity at work
that are also important.

Video Title: Strategic Management (Joie de Vivre

Hospitality)
SYNOPSIS
Chip Conley is the founder of Joie de Vivre Hospitality (JDV), a collection of boutique
hotels, restaurants, and spas in California. The kitschy atmosphere of the boutiques
allows JDV to differentiate itself from both the luxury and the chain hotels. Customer
loyalty is so great that JDV relies primarily on word-of-mouth advertising and spends
little on traditional advertising methods.

Discussion Questions
1. How does Joie de Vivre Hospitality differentiate its boutique hotels from other
hotel offerings in the area?
2. How did Chip Conley and Joie de Vivre Hospitality demonstrate great strategic
flexibility during the dot-com crash and post-9/11 industry recession?
3. What is Joie de Vivre s philosophy on advertising for its hotels? How does this
support the firm s strategic aims?
4. Similarly, list five specific human resource management practices that you would
suggest JDV use in order to produce the employee behaviors required to achieve
JDV s strategic aims.
PART TWO | RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

4
Job Analysis and the Talent
Management Process
Source: ©Jim West/Alamy.
LEARNING OBJECTIVES Company s
1. Explain why talent management is important. Strategic Goals

2. Discuss the nature of job analysis, including what it is

and how it s used.
3. Use at least three methods of collecting job analysis
information, including interviews, questionnaires, and
observation. Employee Competencies
and Behaviors Required
4. Write job descriptions, including summaries and job for Company to Achieve
functions, using the Internet and traditional methods. These Strategic Goals
5. Write a job specification.
6. Explain competency-based job analysis, including what
it means and how it s done in practice.
ruitment an
Rec cemen d
Pla t

ent al
Environm Leg

Tra elopment
De
inin
v
Strategic and
W

g a nd
hen Daimler opened its Mercedes-Benz HR Policies and Practices
assembly plant in Alabama, its managers had a Required to Produce
dilemma. They could not hire, train, or pay Employee Competencies
and Behaviors
the plant employees unless the managers
knew what each employee was expected to do they needed, no

Co
s
ey itale
ep

m
for each person, a job description. But in this plant, self- olp R
e
mE o ita sn
managing teams of employees would assemble the vehicles, n
and their jobs and duties might change every day. How do you
list job duties when the duties are a moving target?1

WHERE ARE WE NOW . . .

The human resource management process
really begins with deciding what the job
entails. The main purpose of this chapter is
to show you how to analyze a job and write
job descriptions. We ll see that analyzing
jobs involves determining what the job
entails and what kind of people the firm
should hire for the job. We discuss several
techniques for analyzing jobs, and explain
how to draft job descriptions and job
specifications. Then, in Chapter 5 (Personnel
Planning and Recruiting), we ll turn to the
methods managers use to actually find the
employees they need. The main topics we ll
cover in this chapter include the talent
management process, the basics of job
analysis, methods for collecting job analysis
Access a host of interactive learning aids at information, writing job descriptions, and
www.mymanagementlab.com to help strengthen writing job specifications.
your understanding of the chapter concepts.

MyManagementLab 103
104 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

1 Explain why talent

THE TALENT MANAGEMENT PROCESS
management is important. This is the first chapter of the portion of the book (Parts Two, Three, and Four) which
for many embodies the heart of human resource management, including recruitment
and selection (staffing), training, appraisal, career development, and compensation.
The traditional way to view staffing, training, appraisal, development, and compensa-
tion is as a series of steps:
1. Decide what positions to fill, through job analysis, personnel planning, and
forecasting.
2. Build a pool of job candidates, by recruiting internal or external candidates.
3. Have candidates complete application forms and perhaps undergo initial screening
interviews.
4. Use selection tools like tests, interviews, background checks, and physical exams to
identify viable candidates.
5. Decide to whom to make an offer.
6. Orient, train, and develop employees to provide them with the competencies they
need to do their jobs.
7. Appraise employees to assess how they re doing.
8. Reward and compensate employees to maintain their motivation.
This linear view makes sense. For example, the employer needs job candidates
before selecting whom to hire. However, the step-by-step view also tends to mask the
fact that the functions are more interrelated. For example, employers don t just train
employees and appraise how they re doing; the appraisal results also loop back to
shape the employee s subsequent training.
Therefore, employers today often view all these staff train reward activities as
part of a single integrated talent management process. One survey of human resource
executives found that talent management issues were among the most pressing ones
they faced.2 A survey of CEOs of big companies said they typically spent between
20% and 40% of their time on talent management.3

What Is Talent Management?

We can define talent management as the goal-oriented and integrated process of planning,
recruiting, developing, managing, and compensating employees.4 When a manager takes a
talent management perspective, he or she:
1. Understands that the talent management tasks (such as recruiting, training, and
paying employees) are parts of a single interrelated talent management process. For
example, having employees with the right skills depends as much on recruiting,
training, and compensation as it does on applicant testing.
2. Makes sure talent management decisions such as staffing, training, and pay are
goal-directed. Managers should always be asking, What recruiting, testing, or
other actions should I take to produce the employee competencies we need to
achieve our strategic goals?
3. Consistently uses the same profile of competencies, traits, knowledge, and
experience for formulating recruitment plans for a job as for making selection,
training, appraisal, and payment decisions for it. For example, ask selection
interview questions to determine if the candidate has the knowledge and skills to
do the job, and then train and appraise the employee based on whether he or she
shows mastery of that knowledge and skills.
4. Actively segments and proactively manages employees. Taking a talent manage-
ment approach requires that employers proactively manage their employees
recruitment, selection, development, and rewards. As one example, IBM segmented
its employees into three main groups (executive and technical employees, managers,
and rank and file). This enables IBM to fine-tune its training, pay, and other practices
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 105

for employees in each segment. As another example, many employers pinpoint

their mission-critical employees, and manage their development and rewards
separately from the firms other employees.
5. Integrates/coordinates all the talent management functions. Finally, an effec-
tive talent management process integrates the underlying talent management
activities such as recruiting, developing, and compensating employees. For
example, performance appraisals should trigger the required employee training.
One simple way to achieve such integration is for HR managers to meet as a team
to visualize and discuss how to coordinate activities like testing, appraising, and
training. (For instance, they make sure the firm is using the same skills profile to
recruit, as to select, train, and appraise for a particular job.) Another way to coor-
dinate these activities is by using information technology.
* For example, Talent Management Solutions (www.talentmanagement101.com)
talent management suite includes e-recruiting software, employee performance
management, a learning management system, and compensation management
support. Among other things, this suite of programs relieves the stress of
writing employee performance reviews by automating the task, and ensures
that all levels of the organization are aligned all working for the
same goals. 5
* SilkRoad Technology s talent management solution includes applicant tracking,
onboarding, performance management, compensation, and an employee
intranet support. Its talent management Life Suite helps you recruit, manage,
and retain your best employees. 6
* Info HCM Talent Management includes . . . tracking and monitoring
performance metrics, interactive online training via WebEx, support for
e-commerce integration to enable training. . . . 7

2 Discuss the nature of job

THE BASICS OF JOB ANALYSIS
analysis, including what it is Talent management begins with understanding what jobs need to be filled, and the
and how it s used. human traits and competencies employees need to do those jobs effectively. Job
analysis is the procedure through which you determine the duties of the positions
and the characteristics of the people to hire for them.8 Job analysis produces informa-
tion for writing job descriptions (a list of what the job entails) and job (or person )
specifications (what kind of people to hire for the job). Virtually every personnel-
related action you take interviewing applicants, and training and appraising
employees, for instance depends on knowing what the job entails and what human
traits one needs to do the job well.9
The supervisor or human resources specialist normally collects one or more of
the following types of information via the job analysis:
* Work activities. First, he or she collects information about the job s actual work
activities, such as cleaning, selling, teaching, or painting. This list may also
include how, why, and when the worker performs each activity.
* Human behaviors. Information about human behaviors the job requires, like
sensing, communicating, lifting weights, or walking long distances.

talent management job descriptions job specifications

The goal-oriented and integrated process of A list of a job s duties, responsibilities, report- A list of a job s human requirements, that is,
planning, recruiting, developing, managing, ing relationships, working conditions, and the requisite education, skills, personality, and
and compensating employees. supervisory responsibilities one product of so on another product of a job analysis.
a job analysis.
job analysis
The procedure for determining the duties
and skill requirements of a job and the kind
of person who should be hired for it.
106 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

* Machines, tools, equipment, and work aids. Information regarding tools used,
materials processed, knowledge dealt with or applied (such as finance or law), and
services rendered (such as counseling or repairing).
* Performance standards. Information about the job s performance standards
(in terms of quantity or quality levels for each job duty, for instance).
* Job context. Information about such matters as physical working conditions,
work schedule, incentives, and, for instance, the number of people with whom
the employee would normally interact.
* Human requirements. Information such as knowledge or skills (education,
training, work experience) and required personal attributes (aptitudes, person-
ality, interests).

Uses of Job Analysis Information

As Figure 4-1 summarizes, job analysis is important because managers use it to support
just about all their human resource management activities.

RECRUITMENT AND SELECTION Information about what duties the job

entails and what human characteristics are required to perform these activities helps
managers decide what sort of people to recruit and hire.

EEO COMPLIANCE Job analysis is crucial for validating all major human
resources practices. For example, to comply with the Americans with Disabilities Act,
employers should know each job s essential job functions which in turn requires a
job analysis.

PERFORMANCE APPRAISAL A performance appraisal compares each

employee s actual performance with his or her duties and performance standards.
Managers use job analysis to learn what these duties and standards are.

COMPENSATION Compensation (such as salary and bonus) usually depends on

the job s required skill and education level, safety hazards, degree of responsibility,
and so on all factors you assess through job analysis.

TRAINING The job description lists the job s specific duties and requisite skills
and therefore the training that the job requires.
Job analysis is important in helping employers execute their overall strategic
plans. The accompanying Strategic Context feature illustrates this.

FIGURE 4-1 Uses of Job

Analysis Information
Job analysis

Job description and

job specification

Recruiting and selection EEO compliance Performance appraisal Job evaluation wage Training requirements
decisions and salary decisions
(compensation)
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 107

THE STRATEGIC CONTEXT

Daimler Alabama Example
In planning its Mercedes-Benz factory in Alabama, Daimler s strategy was to design
a modern factory.10 The plant emphasizes just-in-time inventory methods, so inven-
tories stay negligible due to the arrival just in time of parts. It also organizes
employees into work teams, and emphasizes that all employees must dedicate
themselves to continuous improvement.
Production operations like those require certain employee competencies and
behaviors. For example, they require multiskilled and flexible employees.
A modern approach to job analysis called competencies-based job analysis
(which we ll discuss later in this chapter) therefore played an important role in
staffing this factory. Written guidelines regarding who to hire and how to train them
is based more on lists of worker competencies than on job descriptions that say,
these are your job duties. Without detailed job descriptions showing what my
job is to constrain them, it s easier for employees to move from job to job within
their teams. Not being pigeonholed also encourages workers to look beyond their
own jobs to find ways to improve things. For instance, one team found a $0.23 plastic
prong that worked better than the one for $2.50 the plant was using to keep car
doors open during painting. Building its modern continuous improvement plant
meant Daimler needed employees who thought for themselves; organizing its jobs
around worker competencies and by using competency-based job analysis there-
fore helped Daimler achieve its strategic aims here.

Conducting a Job Analysis

There are six steps in doing a job analysis, as follows.

STEP 1: DECIDE HOW YOU LL USE THE INFORMATION This will deter-
mine the data you collect. Some data collection techniques like interviewing the
employee are good for writing job descriptions. Other techniques, like the position
analysis questionnaire we describe later, provide numerical ratings for each job; these
can be used to compare jobs for compensation purposes.

STEP 2: REVIEW RELEVANT BACKGROUND INFORMATION SUCH AS

ORGANIZATION CHARTS, PROCESS CHARTS, AND JOB DESCRIPTIONS11
Organization charts show the organization-wide division of work, and where the job
fits in the overall organization. The chart should show the title of each position and,
by means of interconnecting lines, who reports to whom and with whom the job
incumbent communicates. A process chart provides a more detailed picture of the
work flow. In its simplest form a process chart (like that in Figure 4-2) shows the flow
of inputs to and outputs from the job you re analyzing. (In Figure 4-2, the quality
control clerk is expected to review components from suppliers, check components
going to the plant managers, and give information regarding component s quality to
these managers.) Finally, the existing job description, if there is one, usually provides
a starting point for building the revised job description.

WORKFLOW ANALYSIS AND JOB REDESIGN Job analysis enables the manager to
list what a job s duties and demands are now. Job analysis does not answer questions
such as Does how this job relates to other jobs make sense? or Should this job even

organization chart process chart

A chart that shows the organization-wide A workflow chart that shows the flow of
distribution of work, with titles of each inputs to and outputs from a particular job.
position and interconnecting lines that show
who reports to and communicates with
whom.
108 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 4-2 Process Chart for

Analyzing a Job s Workflow Information input Components input
from plant manager from suppliers
Source: Compensation
Management: Rewarding
Performance by Richard
J. Henderson. Reprinted by
permission of Pearson Education, Job under study
Upper Saddle River, NJ. Quality Control Clerk

Information output to
plant manager Product quality output
regarding component to plant manager
quality

exist? To answer such questions, it s necessary to conduct a workflow analysis. It may

then be deemed necessary to redesign jobs. Workflow analysis is a detailed study of
the flow of work from job to job in a work process. Usually, the analyst focuses on one
identifiable work process, rather than on how the company gets all its work done. The
accompanying HR as a Profit Center feature illustrates workflow analysis.

HR AS A PROFIT CENTER
Boosting Productivity through Work Redesign
The Atlantic American insurance company in Atlanta conducted a workflow analysis to
identify inefficiencies in how it processes its insurance claims. The firm s HR Director
described the workflow analysis as follows: We followed the life of a claim to where it
arrived in the mail and where it eventually ended up in order to find ways to improve
the process.12
American Atlantic s workflow analysis prompted several productivity-boosting
changes. The firm reduced from four to one the number of people opening
mail, replacing three people with a machine that does it automatically. A new date
stamping machine lets staff stamp 20 pages at a time rather than 1. A new software
program adds bar codes to each claim automatically, rather than manually. Thus, the
firm used workflow analysis to view the process s big picture to automate work,
redesign jobs, boost labor productivity, and redeploy claims processing employees.

In conducting a workflow analysis, the manager may use a flow process chart; this
lists in order each step of the process. The manager may convert this step-by-step flow
process chart into a diagrammatic process chart. This lays out, with arrows and
circles, each step in the process from beginning to end.

BUSINESS PROCESS REENGINEERING American Atlantic is an example of business

process reengineering. Business process reengineering means redesigning business
processes, usually by combining steps, so that small multifunction teams using
information technology do the jobs formerly done by a sequence of departments.
The basic approach is to
1. Identify a business process to be redesigned (such as approving a mortgage
application)
2. Measure the performance of the existing processes
3. Identify opportunities to improve these processes
4. Redesign and implement a new way of doing the work
5. Assign ownership of sets of formerly separate tasks to an individual or a team that
use new computerized systems to support the new arrangement
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 109

As another example, one bank reengineered its mortgage approval process by

replacing the sequential operation with a multifunction mortgage approval team.
Loan originators in the field now enter the mortgage application directly into wireless
laptop computers, where software checks it for completeness. The information then
goes electronically to regional production centers. Here, specialists (like credit
analysts and loan underwriters) convene electronically, working as a team to review
the mortgage together at once. After they formally close the loan, another team of
specialists takes on the task of servicing the loan.
As at Atlantic American and at this bank, reengineering usually requires redesigning
individual jobs. For example, after creating the loan approval teams, the bank could
eliminate the separate credit checking, loan approval, and home-inspecting departments
from its organization chart. Reengineering also required delegating more authority to
the loan approval teams, who now did their jobs with less supervisory oversight. Since
loan team members may share duties, they tend to be more multiskilled than if they only
had to do, say, loan analysis. Changes like these in turn prompt changes in individual jobs
and job descriptions.
JOB REDESIGN Early economists wrote enthusiastically of how specialized jobs (doing
the same small thing repeatedly) were more efficient (as in, practice makes perfect ).
But soon other writers were reacting to what they viewed as the dehumanizing aspects
of pigeonholing workers into highly repetitive jobs. Many proposed job redesign
solutions such as job enlargement, job rotation, and job enrichment to address such
problems. Job enlargement means assigning workers additional same-level activities.
Thus, the worker who previously only bolted the seat to the legs might attach the back as
well. Job rotation means systematically moving workers from one job to another.
Psychologist Frederick Herzberg argued that the best way to motivate workers is
through job enrichment. Job enrichment means redesigning jobs in a way that
increases the opportunities for the worker to experience feelings of responsibility,
achievement, growth, and recognition. It does this by empowering the worker for
instance, by giving the worker the skills and authority to inspect the work, instead of
having supervisors do that. Herzberg said empowered employees would do their jobs
well because they wanted to, and quality and productivity would rise. That philosophy,
in one form or another, is the theoretical basis for the team-based self-managing jobs
in many companies around the world today.
STEP 3: SELECT REPRESENTATIVE POSITIONS Whether or not the manager
decides to redesign jobs via workforce analysis, process redesign, or job redesign, he or she
must at some point select which positions to focus on for the job analysis. For example,
it is usually unnecessary to analyze the jobs of 200 assembly workers when a sample of
10 jobs will do.
STEP 4: ACTUALLY ANALYZE THE JOB BY COLLECTING DATA ON JOB
ACTIVITIES, WORKING CONDITIONS, AND HUMAN TRAITS AND
ABILITIES NEEDED TO PERFORM THE JOB In brief, analyzing the job involves
greeting participants; briefly explaining the job analysis process and the participants
roles in this process; spending about 15 minutes interviewing the employees to get agree-
ment on a basic summary of the job; identifying the job s broad areas of responsibility,
such as calling on potential clients ; and identifying duties/tasks within each area inter-
actively with the employees.13

workflow analysis job enlargement job enrichment

A detailed study of the flow of work from job Assigning workers additional same-level Redesigning jobs in a way that increases the
to job in a work process. activities. opportunities for the worker to experience
feelings of responsibility, achievement,
business process reengineering job rotation growth, and recognition.
Redesigning business processes, usually by Systematically moving workers from one job
combining steps, so that small multifunction to another.
process teams using information technology
do the jobs formerly done by a sequence of
departments.
110 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

STEP 5: VERIFY THE JOB ANALYSIS INFORMATION WITH THE WORKER

PERFORMING THE JOB AND WITH HIS OR HER IMMEDIATE SUPERVISOR
This will help confirm that the information is factually correct and complete and help
to gain their acceptance.

STEP 6: DEVELOP A JOB DESCRIPTION AND JOB SPECIFICATION The

job description describes the activities and responsibilities of the job, as well as its
important features, such as working conditions. The job specification summarizes the
personal qualities, traits, skills, and background required for getting the job done.

Job Analysis Guidelines

Before actually analyzing the job, using one or more of the tools we turn to in the
following section, keep several things in mind.
* Make the job analysis a joint effort by a human resources manager, the worker,
and the worker s supervisor. The human resource manager might observe
the worker doing the job, and have both the supervisor and worker fill out job
questionnaires. Based on that, he or she lists the job s duties and required human
traits. The supervisor and worker then review and verify the HR manager s list of
job duties.
* Make sure the questions and the process are both clear to the employees. (For example,
some might not know what you mean when you ask about the job s mental
demands. )
* Use several different job analysis tools. Do not rely just on a questionnaire, for
instance, but supplement your survey with a short follow-up interview. (The
problem is that each tool has potential drawbacks.) For example, the questionnaire
might miss a task the worker performs just occasionally.

3 Use at least three methods

METHODS FOR COLLECTING JOB ANALYSIS
of collecting job analysis INFORMATION
information, including
interviews, questionnaires,
There are various ways (interviews, or questionnaires, for instance) to collect information
and observation. on a job s duties, responsibilities, and activities. We discuss the most important ones in
this section.
The basic rule is to use those that best fit your purpose. Thus, an interview might
be best for creating a list of job duties and a job description. The more quantitative
position analysis questionnaire may be best for quantifying each job s relative worth
for pay purposes.

The Interview
Job analysis interviews range from completely unstructured interviews ( Tell me
about your job ) to highly structured ones containing hundreds of specific items to
check off.
Managers may conduct individual interviews with each employee, group inter-
views with groups of employees who have the same job, and/or supervisor interviews
with one or more supervisors who know the job. They use group interviews when a
large number of employees are performing similar or identical work, since this
can be a quick and inexpensive way to gather information. As a rule, the workers
immediate supervisor attends the group session; if not, you can interview the super-
visor separately.
Whichever kind of interview you use, be sure the interviewee fully understands the
reason for the interview. There s a tendency for workers to view such interviews, rightly
or wrongly, as efficiency evaluations. If so, interviewees may hesitate to describe their
jobs accurately.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 111

TYPICAL QUESTIONS Some typical interview questions include the

following:
What is the job being performed?
What are the major duties of your position? What exactly do you do?
What physical locations do you work in?
What are the education, experience, skill, and [where applicable]
certification and licensing requirements?
In what activities do you participate?
What are the job s responsibilities and duties?
What are the basic accountabilities or performance standards that typify
Source: David Mager/Pearson Education.

your work?
What are your responsibilities? What are the environmental and working
conditions involved?
What are the job s physical demands? The emotional and mental
demands?
What are the health and safety conditions?
Are you exposed to any hazards or unusual working conditions?

It is helpful to spend several minutes prior to

STRUCTURED INTERVIEWS Many managers use a structured for-
collecting job analysis information explaining mat to guide the interview. Figure 4-3 presents one example, a job analy-
the process that you will be following. sis information sheet. It includes questions regarding matters like the
general purpose of the job; supervisory responsibilities; job duties; and
education, experience, and skills required.
Structured lists are not just for interviews. Job analysts who collect information
by personally observing the work or by using questionnaires two methods
explained later can also use structured lists.14

PROS AND CONS The interview s wide use reflects its advantages. It s a simple and
quick way to collect information, including information that might not appear on a
written form. For instance, a skilled interviewer can unearth important activities that
occur only occasionally, or informal contacts that wouldn t be obvious from the organi-
zation chart. The employee can also vent frustrations that might otherwise go unnoticed.
Distortion of information is the main problem whether due to outright falsifica-
tion or honest misunderstanding.15 Job analysis is often a prelude to changing a job s pay
rate. As noted, employees therefore may legitimately view the interview as a sort of effi-
ciency evaluation that may affect their pay. They may then tend to exaggerate certain
responsibilities while minimizing others. In one study, researchers listed possible job
duties either as simple task statements ( record phone messages and other routine infor-
mation ) or as ability statements ( ability to record phone messages and other routine
information ). Respondents were more likely to include and report the ability-based
versions of the statements. There may be a tendency for people to inflate their job s
importance when abilities are involved, to impress the perceptions of others.16 Employees
will even puff up their job titles to make their jobs seem more important.17 Obtaining
valid information can thus be a slow process, and prudent analysts get multiple inputs.

INTERVIEWING GUIDELINES To get the best information possible, keep several

things in mind when conducting job analysis interviews.
* Quickly establish rapport with the interviewee. Know the person s name, speak
understandably, briefly review the interview s purpose, and explain how the
person was chosen for the interview.
* Use a structured guide that lists questions and provides space for answers. This
ensures you ll identify crucial questions ahead of time and that all interviewers
(if more than one) cover all the required questions. (However, also make sure to
ask, Was there anything we didn t cover with our questions? )
112 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 4-3 Job Analysis

Questionnaire for Developing
Job Descriptions

Source: www.hr.blr.com. Reprinted

Job Analysis Information Sheet
with permission of the publisher
Business and Legal Resources, Inc.,
Old Saybrook, CT. BLR® (Business & Job Title___________________________________________ Date _____________________________
Legal Resources, Inc.). Job Code________________________________ Dept. ________________________________________
Superior's Title ________________________________________________________________________
Hours Worked _______ AM to ________ PM
Job Analyst's Name ____________________________________________________________________
1. What is the job's overall purpose?
____________________________________________________________________________
2. If the incumbent supervises others, list them by job title; if there is more than one employee
with the same title, put the number in parentheses following.
____________________________________________________________________________
3. Check those activities that are part of the incumbent's supervisory duties.
Training
Performance appraisal
Inspecting work
Budgeting
Coaching and/or counseling
Others (please specify) ________________________________________________________
4. Describe the type and extent of supervision received by the incumbent.
____________________________________________________________________________
5. JOB DUTIES: Describe briefly WHAT the incumbent does and, if possible, HOW he/she
does it. Include duties in the following categories:
a. daily duties (those performed on a regular basis every day or almost every day)
_____________________________________________________________________
b. periodic duties (those performed weekly, monthly, quarterly, or at other regular
intervals)
_____________________________________________________________________
c. duties performed at irregular intervals
_____________________________________________________________________
6. Is the incumbent performing duties he/she considers unnecessary? If so, describe.
____________________________________________________________________________
7. Is the incumbent performing duties not presently included in the job description? If so,
describe.
____________________________________________________________________________
8. EDUCATION: Check the box that indicates the educational requirements for the job (not the
educational background of the incumbent).
No formal education required Eighth grade education
High school diploma (or equivalent) 2-year college degree (or equivalent)
4-year college degree (or equivalent) Graduate work or advanced degree
Specify: ____________________
Professional license
Specify: ____________________

* When duties are not performed in a regular manner for instance, when
the worker doesn t perform the same duties repeatedly many times a day ask
the worker to list his or her duties in order of importance and frequency of
occurrence. This will ensure that you don t overlook crucial but infrequently
performed activities like a nurse s occasional emergency room duties.
* After completing the interview, review the information with the worker s immediate
supervisor and with the interviewee.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 113

FIGURE 4-3 (Continued )

9. EXPERIENCE: Check the amount of experience needed to perform the job.

None Less than one month
One to six months Six months to one year
One to three years Three to five years
Five to ten years More than ten years
10. LOCATION: Check location of job and, if necessary or appropriate, describe briefly.
Outdoor Indoor
Underground Excavation
Scaffold Other (specify)
11. ENVIRONMENTAL CONDITIONS: Check any objectionable conditions found on the job
and note afterward how frequently each is encountered (rarely, occasionally, constantly, etc.).
Dirt Dust
Heat Cold
Noise Fumes
Odors Wetness/humidity
Vibration Sudden temperature changes
Darkness or poor lighting Other (specify)
12. HEALTH AND SAFETY: Check any undesirable health and safety conditions under which
the incumbent must perform and note how often they are encountered.
Elevated workplace Mechanical hazards
Explosives Electrical hazards
Fire hazards Radiation
Other (specify)
13. MACHINES, TOOLS, EQUIPMENT, AND WORK AIDS: Describe briefly what
machines, tools, equipment, or work aids the incumbent works with on a regular basis:
___________________________________________________________________________
14. Have concrete work standards been established (errors allowed, time taken for a particular
task, etc.)? If so, what are they?
___________________________________________________________________________
15. Are there any personal attributes (special aptitudes, physical characteristics, personality
traits, etc.) required by the job?
___________________________________________________________________________
16. Are there any exceptional problems the incumbent might be expected to encounter in
performing the job under normal conditions? If so, describe.
___________________________________________________________________________
17. Describe the successful completion and/or end results of the job.
___________________________________________________________________________
18. What is the seriousness of error on this job? Who or what is affected by errors the incumbent
makes?
___________________________________________________________________________
19. To what job would a successful incumbent expect to be promoted?
___________________________________________________________________________
[Note: This form is obviously slanted toward a manufacturing environment, but it can be adapted
quite easily to fit a number of different types of jobs.]

Questionnaires
Having employees fill out questionnaires to describe their job-related duties and
responsibilities is another popular way to obtain job analysis information.
Some questionnaires are very structured checklists. Here each employee gets an
inventory of perhaps hundreds of specific duties or tasks (such as change and splice
wire ). He or she is asked to indicate whether he or she performs each task and, if so,
how much time is normally spent on each. At the other extreme, the questionnaire
may simply ask, describe the major duties of your job.
114 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

In practice, the best questionnaire often falls between these two extremes.
As illustrated in Figure 4-3, a typical job analysis questionnaire might include several
open-ended questions (such as What is the job s overall purpose? ) as well as
structured questions (concerning, for instance, education required).
All questionnaires have pros and cons. A questionnaire is a quick and efficient way
to obtain information from a large number of employees; it s less costly than inter-
viewing hundreds of workers, for instance. However, developing the questionnaire and
testing it (perhaps by making sure the workers understand the questions) can be time-
consuming. And as with interviews, employees may distort their answers.

Observation
Direct observation is especially useful when jobs consist mainly of observable physical
activities assembly-line worker and accounting clerk are examples. On the other
hand, observation is usually not appropriate when the job entails a lot of mental
activity (lawyer, design engineer). Nor is it useful if the employee only occasionally
engages in important activities, such as a nurse who handles emergencies. And
reactivity the worker s changing what he or she normally does because you are
watching also can be a problem.
Managers often use direct observation and interviewing together. One approach is
to observe the worker on the job during a complete work cycle. (The cycle is the time it
takes to complete the job; it could be a minute for an assembly-line worker or an hour,
a day, or longer for complex jobs.) Here you take notes of all the job activities. Then,
ask the person to clarify points not understood and to explain what other activities he
or she performs that you didn t observe.

Participant Diary/Logs
Another method is to ask workers to keep a diary/log of what they do during the day. For
every activity engaged in, the employee records the activity (along with the time) in a log.
Some firms give employees pocket dictating machines and pagers. Then at random
times during the day, they page the workers, who dictate what they are doing at that
time. This approach can avoid relying on workers to remember what they did hours
earlier when they complete their logs at the end of the day.

Quantitative Job Analysis Techniques

Qualitative methods like interviews and questionnaires are not always suitable. For
example, if your aim is to compare jobs for pay purposes, a mere listing of duties may
not suffice. You may need to say that, in effect, Job A is twice as challenging as Job B,
and so is worth twice the pay. To do this, it helps to have quantitative ratings for each
job. The position analysis questionnaire and the Department of Labor approach are
quantitative methods for doing this.

POSITION ANALYSIS QUESTIONNAIRE The position analysis questionnaire

(PAQ) is a very popular quantitative job analysis tool, consisting of a questionnaire
containing 194 items (see Figure 4-4 for a sample).18 The 194 items (such as written
materials ) each represent a basic element that may play a role in the job. The items each
belong to one of five PAQ basic activities: (1) having decision-making/communication/
social responsibilities, (2) performing skilled activities, (3) being physically active,
(4) operating vehicles/equipment, and (5) processing information (Figure 4-4 illustrates
this last activity). The final PAQ score shows the job s rating on each of these five
activities. The job analyst decides if each of the 194 items plays a role and, if so, to what
extent. In Figure 4-4, for example, written materials received a rating of 4. Since the
scale ranges from 1 to 5, a 4 suggests that written materials (such as books and reports)
do play a significant role in this job. The analyst can use an online version of the PAQ
(see www.paq.com) for each job he or she is analyzing.
The PAQ s strength is in assigning jobs to job classes for pay purposes. With ratings
for each job s decision-making, skilled activity, physical activity, vehicle/equipment
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 115

FIGURE 4-4 Portion of a

Completed Page from the
Position Analysis Questionnaire. Information Input Extent of Use (U)
The 194 PAQ elements are 1 Information Input NA Does not apply
grouped into six dimensions, 1 Nominal/very infrequent
and this figure illustrates the 1.1 Sources of Job Information 2 Occasional
Rate each of the following items in terms of 3 Moderate
information input questions or 4 Considerable
elements. Other PAQ pages the extent to which it is used by the worker as
5 Very substantial
contain questions regarding a source of information in performing his job.
mental processes, work output, 1.1.1 Visual Sources of Job Information
relationships with others, job 1 4 Written materials (books, reports, office notes, articles, job instructions,
context, and other job signs, etc.)
characteristics. 2 2 Quantitative materials (materials which deal with quantities or amounts,
such as graphs, accounts, specifications, tables of numbers, etc.)
3 1 Pictorial materials (pictures or picture-like materials used as sources of
information, for example, drawings, blueprints, diagrams, maps, tracing,
photographic films, x-ray films, TV pictures, etc.)
4 1 Patterns/related devices (templates, stencils, patterns, etc., used as
sources of information when observed during use; do not include here
materials described in item 3 above)
5 2 Visual displays (dials, gauges, signal lights, radarscopes, speedom-
eters, clocks, etc.)
6 5 Measuring devices (rulers, calipers, tire pressure gauges, scales,
thickness gauges, pipettes, thermometers, protractors, etc., used to
obtain visual information about physical measurements; do not include
here devices describe in item 5 above)
7 4 Mechanical devices (tools, equipment, machinery, and other mechanical
devices which are sources of information when observed during use of
operation)
8 3 Materials in process (parts, material, objects, etc., which are sources of
information when being modified, worked on, or otherwise processed,
such as bread dough being mixed, workpiece being turned in a lathe,
fabric being cut, shoe being resoled, etc.)
9 4 Materials not in process (parts, materials, objects, etc., not in the
process of being changed or modified, which are sources of information
when being inspected, handled, packaged, distributed, or selected, etc.,
such as items or materials in inventory, storage, or distribution
channels, items being inspected, etc.)
10 3 Features of nature (landscapes, fields, geological samples, vegetation,
cloud formations, and other features of nature which are observed or
inspected to provide information)
11 2 Man-made features of environment (structures, buildings, dams,
highways, bridges, docks, railroads, and other man-made or altered
aspects of the indoor environment which are observed or inspected to
provide job information; do not consider equipment, machines, etc., that
an individual uses in his work, as covered by item 7)

operation, and information-processing characteristics, you can quantitatively compare

jobs relative to one another,19 and then classify jobs for pay purposes.20

DEPARTMENT OF LABOR (DOL) PROCEDURE Experts at the U.S. Department

of Labor did much of the early work developing job analysis.21 They used their results

diary/log position analysis questionnaire (PAQ)

Daily listings made by workers of every activ- A questionnaire used to collect quantifiable
ity in which they engage along with the time data concerning the duties and responsibili-
each activity takes. ties of various jobs.
116 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

TABLE 4-1 Basic Department of Labor Worker Functions

Data People Things

0 Synthesizing 0 Mentoring 0 Setting up

1 Coordinating 1 Negotiating 1 Precision working

Basic Activities
2 Analyzing 2 Instructing 2 Operating/controlling
3 Compiling 3 Supervising 3 Driving/operating
4 Computing 4 Diverting 4 Manipulating
5 Copying 5 Persuading 5 Tending
6 Comparing 6 Speaking/signaling 6 Feeding/offbearing
7 Serving 7 Handling
8 Taking instructions/helping

Note: Determine employee s job score on data, people, and things by observing his or her job and
determining, for each of the three categories, which of the basic functions illustrates the person s job.
0 is high; 6, 8, and 7 are lows in each column.22

to compile what was for many years the bible of job descriptions, the Dictionary of
Occupational Titles. This mammoth book contained detailed information on virtually
every job in America. We ll see in a moment that Internet-based tools have largely
replaced the Dictionary. However, the U.S. Department of Labor job analysis procedure
still offers a good example of how to quantitatively rate, classify, and compare different
jobs, based on the DOLs data, people, and things ratings.
It works as follows. As Table 4-1 shows, the DOL method uses a set of standard
basic activities called worker functions to describe what a worker must do with respect
to data, people, and things. With respect to data, for instance, the possible functions
include synthesizing, coordinating, and copying. With respect to people, they include
mentoring, negotiating, and supervising. With respect to things, the basic functions
include manipulating, tending, and handling.
Each worker function has an importance rating. Thus, coordinating is 1,
whereas copying is 5. If you were analyzing the job of a receptionist/clerk, for
example, you might label the job 5, 6, 7, to represent copying data, speaking/signaling
people, and handling things. On the other hand, you might code a psychiatric aide in
a hospital 1, 7, 5 in relation to data, people, and things. In practice, you would score
each task that the worker performed as part of his or her job in terms of data, people,
and things. Then you would use the highest combination (say 4, 6, 5) to rate the
overall job, since this is the highest level that you would expect a successful job
incumbent to attain. If you were selecting a worker for that 4, 6, 5 job, you d
expect him or her to be able to at least compute (4), speak/signal (6), and tend (5).
If you were comparing jobs for pay purposes, then a 4, 6, 5 job should rank higher
(see Table 4-1) than a 6, 8, 6 job. You can then present a summary of the job along
with its 3-digit rating on a form such as in Figure 4-5.

Internet-Based Job Analysis

Methods such as questionnaires and interviews can be time-consuming. And collecting
the information from geographically dispersed employees can be challenging.23
Conducting the job analysis via the Internet is an obvious solution.24 Most
simply, the human resource department can distribute standardized job analysis
questionnaires to geographically disbursed employees via their company intranets,
with instructions to complete the forms and return them by a particular date.
Of course, the instructions should be clear, and it s best to test the process first.
Without a job analyst actually sitting there with the employee or supervisor, there s
always a chance that the employees won t cover important points or that misunder-
standings will cloud the results.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 117

FIGURE 4-5 Sample Report

Based on Department of Labor
Job Analysis Technique Job Analysis Schedule
DOUGH MIXER
1. Established Job Title
(bake prod.)
2. Ind. Assign
3. SIC Code(s) and Title(s) 2051 Bread and other bakery products

4. JOB SUMMARY:
Operates mixing machine to mix ingredients for
straight and sponge (yeast) doughs according to
established formulas, directs other workers in
fermentation of dough, and curls dough into
pieces with hand cutter.

5. WORK PERFORMED RATINGS:

D P (T)
Worker Functions Data People Things
5 6 2

Cooking, Food Preparing

Work Field

6. WORKER TRAITS RATING (to be filled in by analyst):

Training time required
Aptitudes
Temperaments
Interests
Physical demands
Environment conditions

U.S. NAVY EXAMPLE The U.S. Navy used Web job analysis. The challenge was
to develop a system that would allow the collection of job-related information
with minimal intervention and guidance, so that the system could be used in a
distributed [long distance] manner. 25 To keep ambiguities to a minimum, they had
the employees complete structured job analysis forms step-by-step, and duty by
duty, as follows:
* First the online form shows workers a set of work activities (such as getting infor-
mation and monitor the process ) from the Department of Labor online
O*NET work activities list. (Figure 4-6 lists some of these activities, such as
Getting Information. You can access the site at www.onetcenter.org/
content.html/4.A#cm_4.A.)
* Next the form directs them to select those work activities that are important to
their job.
* Then the form asks them to list actual duties of their jobs that fit each of those
selected work activities. For example, suppose an employee chose Getting
Information as a work activity that was important to his or her job. In this final
step, he or she would list next to Getting Information one or more specific job
duties from the job, perhaps such as watch for new orders from our vendors and
bring them to the boss s attention.
Again, as here, the main issue with online job analysis is to strip the process of as
many ambiguities as possible. The Navy s method proved to be an effective way to
collect job-related information online.26
118 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 4-6 O*NET General

Work Activities Categories
Note: The U.S. Navy employees
were asked to indicate if their jobs
required them to engage in work
activities such as: Getting
Information; Monitor Processes;
Identifying Objects; Inspecting
Equipment; and Estimating
Quantifiable Characteristics.

Source: Reprinted by permission

of O*NET OnLine.

4 Write job descriptions,

WRITING JOB DESCRIPTIONS
including summaries and job The most important product of job analysis is the job description. A job description is a
functions, using the Internet written statement of what the worker actually does, how he or she does it, and what the
and traditional methods. job s working conditions are. You use this information to write a job specification; this
lists the knowledge, abilities, and skills required to perform the job satisfactorily.
There is no standard format for writing a job description. However, most descriptions
contain sections that cover:
1. Job identification
2. Job summary
3. Responsibilities and duties
4. Authority of incumbent
5. Standards of performance
6. Working conditions
7. Job specification
Figures 4-7 and 4-8 present two sample forms of job descriptions.

Job Identification
As in Figure 4-7, the job identification section (on top) contains several types of infor-
mation.27 The job title specifies the name of the job, such as supervisor of data processing
operations, or inventory control clerk. The FLSA status section identifies the job as
exempt or nonexempt. (Under the Fair Labor Standards Act, certain positions, primarily
administrative and professional, are exempt from the act s overtime and minimum wage
provisions.) Date is the date the job description was actually approved.
There may also be a space to indicate who approved the description and perhaps a
space showing the location of the job in terms of its facility/division and department.
This section might also include the immediate supervisor s title and information
regarding salary and/or pay scale. There might also be space for the grade/level of the
job, if there is such a category. For example, a firm may classify programmers as
programmer II, programmer III, and so on.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 119

JOB TITLE: Telesales Respresentative JOB CODE: 100001

RECOMMENDED SALARY GRADE: EXEMPT/NONEXEMPT STATUS: Nonexempt
JOB FAMILY: Sales EEOC: Sales Workers
DIVISION: Higher Education REPORTS TO: District Sales Manager
DEPARTMENT: In-House Sales LOCATION: Boston
DATE: April 2009

SUMMARY (Write a brief summary of job.)

The person in this position is responsible for selling college textbooks, software, and multimedia products to professors,
via incoming and outgoing telephone calls, and to carry out selling strategies to meet sales goals in assigned territories of
smaller colleges and universities. In addition, the individual in this position will be responsible for generating a designated
amount of editorial leads and communicating to the publishing groups product feedback and market trends observed in
the assigned territory.
SCOPE AND IMPACT OF JOB
Dollar responsibilities (budget and/or revenue)

The person in this position is responsible for generating approximately $2 million in revenue, for meeting operating expense
budget of approximately $4000, and a sampling budget of approximately 10,000 units.

Supervisory responsibilities (direct and indirect)

None
Other

REQUIRED KNOWLEDGE AND EXPERIENCE (Knowledge and experience necessary to do job)

Related work experience
Prior sales or publishing experience preferred. One year of company experience in a customer service or marketing
function with broad knowledge of company products and services is desirable.
Formal education or equivalent
Bachelor s degree with strong academic performance or work equivalent experience.
Skills
Must have strong organizational and persuasive skills. Must have excellent verbal and written communications skills
and must be PC proficient.
Other
Limited travel required (approx 5%)

(Continued)

FIGURE 4-7 Sample Job

Description, Pearson Education

Source: Courtesy of HR Department, Job Summary

Pearson Education. The job summary should summarize the essence of the job, and include only
its major functions or activities. Thus (in Figure 4-7), the telesales rep . . . is
responsible for selling college textbooks. . . . For the job of mailroom supervisor,
the mailroom supervisor receives, sorts, and delivers all incoming mail properly,
and he or she handles all outgoing mail including the accurate and timely posting
of such mail. 28
120 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

PRIMARY RESPONSIBILITIES (List in order of importance and list amount of time spent on task.)

Driving Sales (60%)

Achieve quantitative sales goal for assigned territory of smaller colleges and universities.
Determine sales priorities and strategies for territory and develop a plan for implementing those strategies.
Conduct 15 20 professor interviews per day during the academic sales year that accomplishes those priorities.
Conduct product presentations (including texts, software, and Web site); effectively articulate author s central
vision of key titles; conduct sales interviews using the PSS model; conduct walk-through of books and
technology.
Employ telephone selling techniques and strategies.
Sample products to appropriate faculty, making strategic use of assigned sampling budgets.
Close class test adoptions for first edition products.
Negotiate custom publishing and special packaging agreements within company guidelines.
Initiate and conduct in-person faculty presentations and selling trips as appropriate to maximize sales with the
strategic use of travel budget. Also use internal resources to support the territory sales goals.
Plan and execute in-territory special selling events and book-fairs.
Develop and implement in-territory promotional campaigns and targeted email campaigns.

Publishing (editorial/marketing) 25%

Report, track, and sign editorial projects.
Gather and communicate significant market feedback and information to publishing groups.

Territory Management 15%

Track and report all pending and closed business in assigned database.
Maintain records of customer sales interviews and adoption situations in assigned database.
Manage operating budget strategically.
Submit territory itineraries, sales plans, and sales forecasts as assigned.
Provide superior customer service and maintain professional bookstore relations in assigned territory.

Decision-Making Responsibilities for This Position:

Determine the strategic use of assigned sampling budget to most effectively generate sales revenue to exceed sales goals.
Determine the priority of customer and account contacts to achieve maximum sales potential.
Determine where in-person presentations and special selling events would be most effective to generate the most sales.

Submitted By: Jim Smith, District Sales Manager Date: April 10, 2007

Approval: Date:

Human Resources: Date:

Corporate Compensation: Date:

FIGURE 4-7 (Continued )

While it s common to do so, include general statements like performs other

assignments as required with care. Some experts state unequivocally that one
item frequently found that should never be included in a job description is a cop-
out clause like other duties, as assigned, 29 since this leaves open the nature of the
job. Finally, make it clear in the summary that the employer expects the employee
to carry out his or her duties efficiently, attentively, and conscientiously.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 121

FIGURE 4-8 Marketing

Manager Description from
Standard Occupational
Classification

Source: www.bls.gov/soc/
soc_a2c1.htm, accessed
May 10, 2007.

Relationships
There may be a relationships statement (not in Figure 4-7) that shows the jobholder s
relationships with others inside and outside the organization. For a human resource
manager, such a statement might look like this:30
Reports to: Vice president of employee relations.
Supervises: Human resource clerk, test administrator, labor relations director, and
one secretary.
Works with: All department managers and executive management.
Outside the company: Employment agencies, executive recruiting firms, union
representatives, state and federal employment offices, and various vendors.31

Responsibilities and Duties

This is the heart of the job description. It should present a list of the job s significant
responsibilities and duties. As in Figure 4-7, list each of the job s major duties separately,
and describe it in a few sentences. In the figure, for instance, the job s duties include
achieve quantitative sales goal . . . and determine sales priorities. . . . Typical duties
for other jobs might include making accurate postings to accounts payable, maintaining
favorable purchase price variances, and repairing production-line tools and equipment.
This section may also define the limits of the jobholder s authority. For example,
the jobholder might have authority to approve purchase requests up to $5,000, grant
time off or leaves of absence, discipline department personnel, recommend salary
increases, and interview and hire new employees.
Usually, the manager s basic question here is, How do I determine what the job s
duties are and should be? The answer first is, from the job analysis; this should
reveal what the employees on each job are doing now. Second, you can review
various sources of standardized job description information. For example, the
Standard Occupational Classification (SOC) (www.bls.gov/soc/socguide.htm)
classifies all workers into one of 23 major groups of jobs, such as Management
Occupations and Healthcare Occupations. These in turn contain 96 minor groups
of jobs, which in turn include 821 detailed occupations, such as the marketing
manager description in Figure 4-8. The employer can use standard descriptions like
these to identify a job s duties and responsibilities, such as Determine the demand

Standard Occupational Classification (SOC)

Classifies all workers into one of 23 major
groups of jobs that are subdivided into minor
groups of jobs and detailed occupations.
122 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

for products. (The accompanying Managing the New Workforce feature expands on
this.) The employer may also use other popular sources of job description informa-
tion, such as www.jobdescription.com. O*NET online, as noted, is another option
for finding job duties. We ll turn to this in a moment.

MANAGING THE NEW WORKFORCE

Writing Job Descriptions That Comply with the ADA
The list of job duties looms large in employers efforts to comply with ADA regula-
tions. Under the Americans with Disabilities Act (ADA), the individual must have
the requisite skills, educational background, and experience to perform the job s
essential functions. A job function is essential when it is the reason the position
exists or when the function is so specialized that the firm hired the person doing
the job for his or her expertise or ability to perform that particular function. If the
disabled individual can t perform the job as currently structured, the employer is
required to make a reasonable accommodation, unless doing so would present
an undue hardship.
Is a function essential? Questions to ask include:
1. What activities/duties/tasks actually constitute the job? Is each really necessary?
2. Do the tasks necessitate sitting, standing, crawling, walking, climbing, running,
stooping, kneeling, lifting, carrying, digging, writing, operating, pushing, pulling,
fingering, talking, listening, interpreting, analyzing, seeing, coordinating, etc.?
3. Would removing a function fundamentally alter the job?
4. What happens if a task is not completed on time?
5. Does the position actually exist to perform that function?
6. Are employees in the position actually required to perform the function?32
7. What is the degree of expertise or skill required to perform the function?33

Standards of Performance and Working Conditions

A standards of performance section lists the standards the company expects the
employee to achieve for each of the job description s main duties and responsibilities.
Setting standards is never easy. However, most managers soon learn that just telling
subordinates to do their best doesn t provide enough guidance. One straightforward
way of setting standards is to finish the statement, I will be completely satisfied with
your work when. . . . This sentence, if completed for each listed duty, should result in a
usable set of performance standards. Here is an example:

Duty: Accurately Posting Accounts Payable

1. Post all invoices received within the same working day.
2. Route all invoices to proper department managers for approval no later than the
day following receipt.
3. An average of no more than three posting errors per month.
The job description may also list the working conditions involved on the job. These
might include things like noise level, hazardous conditions, or heat.

Using the Internet for Writing Job Descriptions

More employers are turning to the Internet for their job descriptions. One site,
www.jobdescription.com, illustrates why. The process is simple. Search by alphabetical
title, keyword, category, or industry to find the desired job title. This leads you to a
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 123

generic job description for that title say, Computers & EDP Systems Sales Represen-
tative. You can then use the wizard to customize the generic description for this
position. For example, you can add specific information about your organization, such
as job title, job codes, department, and preparation date. And you can indicate whether
the job has supervisory abilities, and choose from a number of possible desirable
competencies and experience levels.

O*NET The U.S. Department of Labor s occupational information network, called

O*NET, is an increasingly popular Web tool (you ll find it at http://online.
onetcenter.org). It allows users (not just managers, but workers and job seekers) to see
the most important characteristics of various occupations, as well as the experience,
education, and knowledge required to do each job well. Both the Standard Occupa-
tional Classification and O*NET include the specific tasks associated with many
occupations. O*NET also lists skills, including basic skills such as reading and writing,
process skills such as critical thinking, and transferable skills such as persuasion and
negotiation.34 You ll also see that an O*NET job listing includes information on
worker requirements (required knowledge, for instance), occupation requirements
(such as compiling, coding, and categorizing data, for instance), and experience
requirements (including education and job training). You can also use O*NET
to check the job s labor market characteristics, such as employment projections and
earnings data.35

HOW TO USE O*NET Many managers and small business owners face two
hurdles when doing job analyses and job descriptions. First, they need a streamlined
approach for developing a job description. Second, they fear that they will overlook
duties that subordinates should be assigned.
You have three good options. The Standard Occupational Classification,
mentioned earlier, provides detailed descriptions of thousands of jobs and their
human requirements. Web sites like www.jobdescription.com provide customizable
descriptions by title and industry. And the Department of Labor s O*NET is a third
option. We ll focus here on how you can write a job description using O*NET
(http://online.onetcenter.org).36
Step 1: Decide on a Plan. Ideally, the jobs you need should flow from your depart-
mental or company plans. Therefore, you may want to review your plan.
What do you expect your sales to be next year, and in the next few years?
What areas or departments do you think will have to be expanded or
reduced? What kinds of new positions do you think you ll need?
Step 2: Develop an Organization Chart. You may want to write an organization
chart. Start with the organization as it is now. Then (depending upon how
far you re planning), produce a chart showing how you d like your chart to
look in the future (say, in a year or two). Microsoft s MS Word includes an
organization charting function. Software packages such as OrgPublisher
from TimeVision of Irving, Texas, are another option.37
Step 3: Use a Job Analysis Questionnaire. Next, gather information about the job s
duties. (You can use job analysis questionnaires, such as those shown in
Figure 4-3 and Figure 4-9.)
Step 4: Obtain Job Duties from O*NET. The list of job duties you uncovered in the
previous step may or may not be complete. We ll therefore use O*NET to
compile a more complete list. (Refer to the A, B, and C examples pictured on
page 125 as you read along.)
Start by going to http://online.onetcenter.org (A). Here, click on Find
Occupations. Assume you want to create job descriptions for a retail sales-
person. Key Retail Sales in the Keyword drop-down box. This brings you to
the Occupations matching retail sales page (B).
Clicking on the Retail Salespersons summary produces the job summary
and specific occupational duties for retail salespersons (C). For a small store,
you might want to combine the duties of the retail salesperson with those of
first-line supervisors/managers of retail sales workers.
124 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 4-9 Simple Job

Description Questionnaire
Instructions: Distribute copies of this questionnaire to
Source: Reprinted from supervisors, managers, personnel staff members, job analysts, and
www.hr.blr.com with the permission others who may be involved in writing job descriptions. Ask them
of the publisher. Business and to record their answers to these questions in writing.
Legal Resources, Inc., Old Saybrook,
CT. BLR® (Business & Legal 1. What is the job title?
Resources, Inc.).
2. Summarize the job s more important, regularly performed/duties
in a job summary.
3. In what department is the job located?
4. What is the title of the supervisor or manager to whom the job holder must
report?
5. Does the job holder supervise other employees? If so, give their job titles
and a brief description of their responsibilities.
Position Supervised Responsibilities

6. What essential function duties does the job holder perform regularly? List
them in order of importance.

Duty Percentage of Time Devoted

to This Duty
1.
2.
3.
4.
5.
6.

7. Does the job holder perform other duties periodically? Infrequently? If so,
please list, indicating frequency.
8. What are the working conditions? List such items as noise, heat, outside
work, and exposure to bad weather.
9. How much authority does the job holder have in such matters as training or
guiding other people?
10. How much education, experience, and skill are required for satisfactory job
performance?
11. At what stage is the job holder s work reviewed by the supervisor?
12. What machines or equipment is the job holder responsible for operating?
13. If the job holder makes a serious mistake or error in performing required
duties, what would be the cost to management?

Step 5: List the Job s Human Requirements from O*NET. Next, return to the
summary for Retail Salesperson (C). Here, click, for example, Knowledge,
Skills, and Abilities. Use this information to help develop a job specification
for your job. Use this information for recruiting, selecting, and training
your employees.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 125

Source: Reprinted by permission A

of O*NET OnLine.

Step 6: Finalize the Job Description. Finally, perhaps using Figure 4-9 as a
guide, write an appropriate job summary for the job. Then use the infor-
mation obtained previously in steps 4 and 5 to create a complete listing of
the tasks, duties, and human requirements of each of the jobs you will
need to fill.
126 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

5 Write a job specification.

WRITING JOB SPECIFICATIONS
The job specification takes the job description and answers the question, What human
traits and experience are required to do this job effectively? It shows what kind
of person to recruit and for what qualities you should test that person. It may be a
section of the job description, or a separate document. Often as in Figure 4-7 on
pages 119 120 the employer makes it part of the job description.38

Specifications for Trained Versus Untrained Personnel

Writing job specifications for trained employees is relatively straightforward. Here your
job specifications might focus mostly on traits like length of previous service, quality of
relevant training, and previous job performance.
The problems are more complex when you re filling jobs with untrained people
(with the intention of training them on the job). Here you must specify qualities such
as physical traits, personality, interests, or sensory skills that imply some potential for
performing or for being trained to do the job.
For example, suppose the job requires detailed manipulation in a circuit board
assembly line. Here you might want to ensure that the person scores high on a test
of finger dexterity. Employers identify these human requirements either through a
subjective, judgmental approach or through statistical analysis (or both). Let s examine
both approaches.

Specifications Based on Judgment

Most job specifications come from the educated guesses of people like supervisors and
human resource managers. The basic procedure here is to ask, What does it take in
terms of education, intelligence, training, and the like to do this job well?
There are several ways to get these educated guesses. You could simply review
the job s duties, and deduce from those what human traits and skills the
job requires. You can also choose them from the competencies listed in Web-based
job descriptions like those at www.jobdescription.com. (For example, a typical job
description there lists competencies like Generates creative solutions and
Manages difficult or emotional customer situations. ) O*NET online is another
option. Job listings there include complete lists of required education and other
experience and skills.

Filling jobs with untrained

employees requires identifying
the personal traits that predict
performance.
Source: Fotolia.
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 127

USE COMMON SENSE In any case, use common sense when compiling your
list. Don t ignore the behaviors that may apply to almost any job but that might not
normally surface through a job analysis.
Industriousness is an example. Who wants an employee who doesn t work hard?
One researcher collected supervisor ratings and other information from 18,000
employees in 42 different hourly entry-level jobs in predominantly retail settings.39
Regardless of the job, here are the work behaviors (with examples) that he found to be
important to all jobs:

Job-Related Behavior Some Examples

Industriousness Keeps working even when other employees are standing around
talking; takes the initiative to find another task when finished
with regular work.
Thoroughness Cleans equipment thoroughly, creating a more attractive display;
notices merchandise out of place and returns it to the proper area.
Schedule flexibility Accepts schedule changes when necessary; offers to stay late when
the store is extremely busy.
Attendance Arrives at work on time; maintains good attendance.
Off-task behavior Uses store phones to make personal unauthorized calls; conducts
(reverse) personal business during work time; lets joking friends be a
distraction and interruption to work.
Unruliness (reverse) Threatens to bully another employee; refuses to take routine
orders from supervisors; does not cooperate with other
employees.
Theft (reverse) (As a cashier) Under-rings the price of merchandise for a friend;
cheats on reporting time worked; allows nonemployees in
unauthorized areas.
Drug misuse (reverse) Drinks alcohol or takes drugs on company property; comes to
work under the influence of alcohol or drugs.

Job Specifications Based on Statistical Analysis

Basing job specifications on statistical analysis is the more defensible approach, but it s
also more difficult. The aim here is to determine statistically the relationship between
(1) some predictor (human trait, such as height, intelligence, or finger dexterity), and
(2) some indicator or criterion of job effectiveness, such as performance as rated by
the supervisor.
The procedure has five steps: (1) analyze the job and decide how to measure job
performance; (2) select personal traits like finger dexterity that you believe should
predict successful performance; (3) test candidates for these traits; (4) measure these
candidates subsequent job performance; and (5) statistically analyze the relationship
between the human trait (finger dexterity) and job performance. Your objective is to
determine whether the former predicts the latter.
This method is more defensible than the judgmental approach because equal rights
legislation forbids using traits that you can t prove distinguish between high and low job
performers. For example, hiring standards that discriminate based on sex, race, religion,
national origin, or age may have to be shown to predict job performance. Ideally, you
do this with a statistical validation study, as in the 5-step approach outlined earlier.
In practice, most employers probably rely more on judgmental approaches.

Using Task Statements

Although employers traditionally use job descriptions and job specifications to summa-
rize what their jobs entail, task statements are increasingly popular.40 Each of a job s task
statements shows what the worker does on one particular job task, how the worker does
it, and for what purpose.41 One task statement for a dry cleaning store counter person
might be, accepts an order of clothes from a customer and places it into a laundry bag
128 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

and provides the customer with a receipt, in order to ensure that the customer s clothes
items are together and identifiable and that the store and customer have an accurate
record of the transaction. (In contrast, the traditional job duty might say, accepts orders of
clothes from customers and places them in laundry bags; gives customers receipts). Writing
task statements such as that for each of the job s tasks is the first step in this process.
Next, for each task identify the knowledge, skills, abilities, and other characteristics
(KSAOs) needed to do each task. For the sample task, the counter person would need to
know how to operate the computerized cash register, would need the skill to identify
fabrics so proper prices can be charged, and would need the ability or natural talent (for
instance, cognitive ability or physical ability) to perform arithmetic computations and
lift heavy laundry bags. Most jobs also require certain other human characteristics.
For example, conscientiousness might be important for this and most other jobs.
Third, the job analyst takes the resulting 12 or 15 task statements for a job s tasks
and groups them into four or five main job duties. Thus the four main counter person
job duties might include accepts and returns customer s clothes, handles the cash
register, fills in for the cleaner/spotter when he or she is absent, and supervises the
tailor and assistant counter person.
Finally, the job analyst compiles all this information in a Job Requirements Matrix
for this job. This matrix lists each of the four or five main job duties in column 1; the task
statements associated with each job duty in column 2; the relative importance of each job
duty and the time spent on each job duty in columns 3 and 4; and the knowledge, skills,
ability, and other characteristics or competencies related to each job duty in column 5.42
The task statement matrix provides a more comprehensive picture of what the worker
does and how and why he or she does it than does a conventional job description. Such a
list of required knowledge, skills, abilities, and other characteristics can provide powerful
information for making staffing, training, and performance appraisal decisions, as can
job profiling, to which we now turn.

6 Explain competency-based
PROFILES IN TALENT MANAGEMENT
job analysis, including what A job is traditionally a set of closely related activities carried out for pay, but the concept
it means and how it s done of a job is changing. Employers such as Daimler are instituting high-performance work
in practice. policies and practices. These include management practices (such as organizing around
work teams) that depend on multiskilled employees who can tackle multiple jobs.
The problem is that in situations like these, relying on a list of conventional job
duties can be counterproductive, because the person s job changes frequently.43 Often,
the better option is to create job profiles. Job profiles list the competencies, traits,
knowledge, and experience that employees in these multi-skilled jobs must be able to
exhibit to get the multiple jobs done. Then the manager can recruit, hire, train, appraise,
and reward employees based on these profiles, rather than on a list of static job duties.
Experts at the consulting firm DDI say that the aim of writing job profiles (also called
competency or success profiles) is to create detailed descriptions of what is required
for exceptional performance in a given role or job, in terms of required Competencies
(necessary behaviors), Personal Attributes (traits, personality, etc.), Knowledge (technical
and/or professional), and Experience (necessary educational and work achievements).
Each job s profile then becomes the anchor for creating recruitment, selection, training,
and evaluation and development plans for each job. (Many use the term competency
model rather than profile.44) Figure 4-10 illustrates one type of profile, in the form of a
competency model.

Competencies and Competency-Based Job Analysis

Employers often use competency-based job analysis to create such profiles.
Competencies are observable and measurable behaviors of the person that make
performance possible (we ll look at examples in a moment). To determine what a
job s required competencies are, ask, In order to perform this job competently, what
should the employee be able to do? Competencies are typically skills. Examples of
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 129

FIGURE 4-10 Example of

Competency Model for Human
Roles Resource Manager
Line Function
(Within HR)
Staff Function
(Advise, Assist)
Coordinative Function
(Monitor)
Strategic HR Function
(Formulate, Execute)

Areas of Expertise
HR Practices (Recruiting,
Selection, Training, etc.)
Strategic Planning
Employment Law
Finance and Budgeting
General Management

Foundation Competencies
Personal Interpersonal HR/Business/
Competencies Competencies Management
Behave Ethically Communicate Effectively Institute Effective
Exercise Good Judgment Exercise Leadership HR Systems
Based on Evidence Negotiate Effectively Analyze Financial Statements
Set and Achieve Goals Motivate Others Craft Strategies
Manage Tasks Effectively Work Productively with Others Manage Vendors
Develop Personally

ILLUSTRATIVE
HUMAN RESOURCE MANAGER
COMPETENCY MODEL

competencies include program in HTML, produce a lesson plan, and engineer

the struts for a bridge. Competency-based job analysis means describing the job in
terms of measurable, observable, behavioral competencies (knowledge, skills, and/or
behaviors) that an employee doing that job must exhibit.45 Traditional job analysis is
more job-focused (What are this job s duties?). Competency-based analysis is more
worker-focused (What must employees be competent at to do this multiskilled job?).
Managers sometimes group competencies into various clusters, such as general
competencies (reading and writing, for instance), leadership competencies (leadership,
and strategic thinking, for instance), and technical competencies. Technical competen-
cies for the job of systems engineer might include the following:
* Design complex software applications, establish protocols, and create prototypes.
* Establish the necessary platform requirements to efficiently and completely
coordinate data transfer.46
Similarly, for a corporate treasurer, technical competencies might include:
* Formulate trade recommendations by studying several computer models for
currency trends.
* Recommend specific trades and when to make them.47

Competency-based job analysis

Describing the job in terms of measurable,
observable, behavioral competencies
(knowledge, skills, and/or behaviors) that an
employee doing that job must exhibit to do
the job well.
130 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

In practice, competency-based analysis usually comes down to identifying the basic

skills an employee needs to do the job. Thus, O*NET lists various skills within six skill
groups (accessible at http://online.onetcenter.org/skills). A sampling includes:
Mathematics using mathematics to solve problems
Speaking talking to others to convey information effectively
Complex problem-solving identifying complex problems and reviewing
related information to develop and evaluate options and implement solutions
Negotiation bringing others together and trying to reconcile differences

IBM EXAMPLE IBM recently identified all of the possible roles (leader, analyst,
engineer, and so on) that its workers, managers, and executives might fulfill. IBM
analysts then studied what people do in each role and what skills effectively
performing each role requires.
For doing what turned out to be 490 roles, IBM concluded there are 4,000 possible
sets of skills. IBM now assesses and rates its employees skills on a continuum from
Zero You have not demonstrated a significant mastery of the skill set, to Three
You have achieved a mastery level demonstrated by the fact that you re not only
proficient, but that you re developing others around it. This enables IBM to tell each
employee where we see your skill sets, which skills you have that will become obsolete
and what jobs we anticipate will become available down the road. . . . We ll direct you
to training programs that will prepare you for the future. 48

How to Write Competencies-Based Job Descriptions

Defining the job s competencies and writing them up is similar in most respects to tradi-
tional job analysis. In other words, you might interview job incumbents and their super-
visors, ask open-ended questions regarding job responsibilities and activities, and perhaps
identify critical incidents that pinpoint success on the job. However, instead of compiling
lists of job duties, you will ask, In order to perform this job competently, the employee should
be able to. . . ? Use your knowledge of the job to answer this, or use information from a
source such as O*NET. There are also off-the-shelf competencies databanks. One is that of
the Department of Labor s Office of Personnel Management (see www.opm.gov).

BP EXAMPLE Several years ago, British Petroleum s (BP s) exploration division

executives decided their unit needed a more efficient, faster-acting organization.49 To
help accomplish this, they felt they had to shift employees from a job duties oriented
that s-not-my-job attitude to one that motivated them to obtain the skills required
to accomplish their broader responsibilities.
Their solution was a skills matrix like that in Figure 4-11. BP created skills
matrices (such as in Figure 4-11) each job or job family (such as drilling managers).

FIGURE 4-11 The Skills Matrix H H H H H H H

for One Job at BP G G G G G G G
Note: The light blue boxes indicate
the minimum level of skill required F F F F F F F
for the job.
E E E E E E E

D D D D D D D

C C C C C C C

B B B B B B B

A A A A A A A

Technical Business Communication Decision- Leadership and Planning and Problem-

expertise awareness and making and guidance organizational solving
interpersonal initiative ability
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 131

As in Figure 4-11, each matrix listed (1) the types of skills required to do that job
(such as technical expertise) and (2) the minimum level of each skill required for
that job or job family. Talent management in this BP unit now involves recruiting,
hiring, training, appraising, and rewarding employees based on the competencies
they need to perform their ever-changing jobs, with the overall aim of creating a
more flexible organization.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Employers today often view all the staff train reward techniques such as position analysis questionnaires.
activities as part of a single integrated talent management Employers increasingly collect information from
process. We defined talent management as the goal- employees via the Internet.
oriented and integrated process of planning, recruiting, 4. Managers should be familiar with the process for
developing, managing, and compensating employees. When writing job descriptions. While there is no standard
a manager takes a talent management perspective, he or format, most descriptions contain sections that cover
she should keep in mind that the talent management tasks job identification, a job summary, a listing of responsi-
are parts of a single interrelated talent management bilities and duties, the job incumbent s authority, and
process, make sure talent management decisions such as performance standards. The job description may also
staffing and pay are goal-directed, consistently use the contain information regarding the job s working condi-
same profile for formulating recruitment plans for a job tions, and the job specifications. Many employers use
as you do for making selection, training, appraisal, Internet sources such as www.jobdescription.com to
and payment decisions for it, actively segment and facilitate writing job descriptions.
manage employees, and integrate/coordinate all the talent 5. In writing job specifications, it s important to distinguish
management functions. between specifications for trained versus untrained
2. All managers need to be familiar with the basics of job personnel. For trained employees, the process is relatively
analysis. straightforward, because you re looking primarily for traits
Job analysis is the procedure through which you like experience. For untrained personnel, it s necessary to
determine the duties of the department s positions identify traits that might predict success on the job. Most
and the characteristics of the people to hire for them. job specifications come from the educated guesses of
Job descriptions are a list of what the job entails, people like supervisors, and are based mostly on judgment.
while job specifications identify what kind of people Some employers use statistical analyses to identify predic-
to hire for the job. tors or human traits that are related to success on the job.
The job analysis itself involves collecting information 6. Employers are creating profiles for each of their jobs.
on matters such as work activities; required human The aim of creating profiles is to create detailed descrip-
behaviors; and machines, tools, and equipment used. tions of what is required for exceptional performance in
Managers use job analysis information in a given role or job, in terms of required competencies,
recruitment and selection, compensation, training, personal attributes, knowledge, and experience. Each
and performance appraisal. job s profile then becomes the anchor for creating
The basic steps in job analysis include deciding the use recruitment, selection, training, and evaluation and
of the job analysis information, reviewing relevant development plans for each job. Competency-based job
background information including organization analysis means describing the job in terms of measura-
charts, analyzing the job, verifying the information, ble, observable, behavioral competencies (such as
and developing job descriptions and job specifications. specific skills) that an employee doing the job must
3. There are various methods for collecting job analysis exhibit to do the job well. With the job of, say, a team
information. These include interviews, questionnaires, member possibly changing daily, one should identify the
observation, participant diary/logs, and quantitative skills the employee may need to move among jobs.
132 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

DISCUSSION QUESTIONS
1. Why, in summary, should managers think of staffing, and so on. Compare and contrast these methods, explain-
training, appraising, and paying employees as a talent ing what each is useful for and listing the pros and cons of
management process? each.
2. Explain to the head of a company how he or she could 6. Describe the types of information typically found in a
use the talent management approach to improve his or job specification.
her company s performance. 7. Explain how you would conduct a job analysis.
3. What items are typically included in the job description? 8. Do you think companies can really do without detailed
4. What is job analysis? How can you make use of the job descriptions? Why or why not?
information it provides? 9. In a company with only 25 employees, is there less need
5. We discussed several methods for collecting job analysis for job descriptions? Why or why not?
data questionnaires, the position analysis questionnaire,

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, obtain copies of 3. The HRCI Test Specifications appendix at the end of this
job descriptions for clerical positions at the college or book (pages 633 640) lists the knowledge someone study-
university where you study, or the firm where you ing for the HRCI certification exam needs to have in each
work. What types of information do they contain? Do area of human resource management (such as in Strategic
they give you enough information to explain what the Management, Workforce Planning, and Human Resource
job involves and how to do it? How would you Development). In groups of four to five students, do four
improve on the description? things: (1) review that appendix now; (2) identify the
2. Working individually or in groups, use O*NET to material in this chapter that relates to the required knowl-
develop a job description for your professor in this edge in the appendix lists; (3) write four multiple-choice
class. Based on that, use your judgment to develop a exam questions on this material that you believe would be
job specification. Compare your conclusions with suitable for inclusion in the HRCI exam; and (4) if time
those of other students or groups. Were there any sig- permits, have someone from your team post your team s
nificant differences? What do you think accounted for questions in front of the class, so the students in other
the differences? teams can take each others exam questions.

EXPERIENTIAL EXERCISE
The Instructor s Job Description
Purpose: The purpose of this exercise is to give you experi- analysis questionnaire for this purpose, and half will
ence in developing a job description, by developing one for use the Figure 4-9 job description questionnaire.
your instructor. 2. Based on this information, each group will develop
Required Understanding: You should understand the its own job description and job specification for
mechanics of job analysis and be thoroughly familiar with the instructor.
the job analysis questionnaires. (See Figures 4-3 and 4-9.) 3. Next, each group should choose a partner group,
How to Set Up the Exercise/Instructions: Set up groups of one that developed the job description and
four to six students for this exercise. As in all exercises in this job specification using the alternate method.
book, the groups should be separated and should not converse (A group that used the job analysis questionnaire
with each other. Half of the groups in the class will develop should be paired with a group that used the job
the job description using the job analysis questionnaire description questionnaire.)
(Figure 4-3), and the other half of the groups will develop it 4. Finally, within each of these new combined groups,
using the job description questionnaire (Figure 4-9). Each compare and critique each of the two sets of job
student should review his or her questionnaire (as appropri- descriptions and job specifications. Did each job
ate) before joining his or her group. analysis method provide different types of informa-
1. Each group should do a job analysis of the instructor s tion? Which seems superior? Does one seem more
job: Half of the groups will use the Figure 4-3 job advantageous for some types of jobs than others?
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 133

APPLICATION CASE
THE FLOOD
In May 2011, Mississippi River flooding hit Vicksburg, from the local university s business school. She immediately
Mississippi, and the Optima Air Filter Company. Many had the old-timers fill out a job questionnaire that listed all
employees homes were devastated, and the firm found that their duties. Arguments ensued almost at once: Both Phil and
it had to hire almost three completely new crews, one for Maybelline thought the old-timers were exaggerating to make
each of its shifts. The problem was that the old-timers had themselves look more important, and the old-timers insisted
known their jobs so well that no one had ever bothered to that the lists faithfully reflected their duties. Meanwhile, the
draw up job descriptions for them. When about 30 new customers clamored for their filters.
employees began taking their places, there was general con-
fusion about what they should do and how they should do it. Questions
The flood quickly became old news to the firm s out-of- 1. Should Phil and Linda ignore the old-timers protests
state customers, who wanted filters, not excuses. Phil Mann, and write the job descriptions as they see fit? Why? Why
the firm s president, was at his wits end. He had about 30 new not? How would you go about resolving the differences?
employees, 10 old-timers, and his original factory supervisor, 2. How would you have conducted the job analysis? What
Maybelline. He decided to meet with Linda Lowe, a consultant should Phil do now?

CONTINUING CASE
CARTER CLEANING COMPANY
The Job Description supply, and energy costs. In accomplishing that general aim,
Based on her review of the stores, Jennifer concluded that a specific store manager s duties and responsibilities include
one of the first matters she had to attend to involved devel- quality control, store appearance and cleanliness, customer
oping job descriptions for her store managers. relations, bookkeeping and cash management, cost control
As Jennifer tells it, her lessons regarding job descriptions and productivity, damage control, pricing, inventory con-
in her basic management and HR management courses were trol, spotting and cleaning, machine maintenance, purchas-
insufficient to fully convince her of the pivotal role job ing, employee safety, hazardous waste removal, human
descriptions actually play in the smooth functioning of an resource administration, and pest control.
enterprise. Many times during her first few weeks on the job, The questions that Jennifer had to address follow.
Jennifer found herself asking one of her store managers why
he was violating what she knew to be recommended company Questions
policies and procedures. Repeatedly, the answers were either 1. What should be the format and final form of the store
Because I didn t know it was my job or Because I didn t manager s job description?
know that was the way we were supposed to do it. Jennifer 2. Is it practical to specify standards and procedures in the
knew that a job description, along with a set of standards and body of the job description, or should these be kept
procedures that specified what was to be done and how to do separate?
it, would go a long way toward alleviating this problem. 3. How should Jennifer go about collecting the informa-
In general, the store manager is responsible for directing tion required for the standards, procedures, and job
all store activities in such a way that quality work is pro- description?
duced, customer relations and sales are maximized, and 4. What, in your opinion, should the store manager s job
profitability is maintained through effective control of labor, description look like and contain?
134 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
Job Descriptions A brief analysis, conducted with her company s CFO,
The Hotel Paris s competitive strategy is To use superior guest reinforced that observation. They chose departments across
service to differentiate the Hotel Paris properties, and to the hotel chain that did and did not have updated job descrip-
thereby increase the length of stay and return rate of guests, and tions. Although they understood that many other factors
thus boost revenues and profitability. HR manager Lisa Cruz might be influencing the results, they believed that the
must now formulate functional policies and activities that sup- relationships they observed did suggest that having job
port this competitive strategy by eliciting the required employee descriptions had a positive influence on various employee
behaviors and competencies. behaviors and competencies. Perhaps having the descriptions
As an experienced human resource director, the Hotel facilitated the employee selection process, or perhaps the
Paris s Lisa Cruz knew that recruitment and selection departments with the descriptions just had better managers.
processes invariably influenced employee competencies and She knew the Hotel Paris s job descriptions would have
behavior and, through them, the company s bottom line. to include traditional duties and responsibilities. However,
Everything about the workforce its collective skills, most should also include several competencies unique to
morale, experience, and motivation depended on attract- each job. For example, job descriptions for the front-desk
ing and then selecting the right employees. clerks might include able to check a guest in or out in 5
In reviewing the Hotel Paris s employment systems, she minutes or less. Most service employees descriptions
was therefore concerned that virtually all the company s job included the competency, able to exhibit patience and guest
descriptions were out of date, and that many jobs had supportiveness even when busy with other activities.
no descriptions at all. She knew that without accurate job
descriptions, all her improvement efforts would be in vain. Questions
After all, if you don t know a job s duties, responsibilities, In teams or individually:
and human requirements, how can you decide who to hire 1. Based on the hotel s stated strategy, list at least four impor-
or how to train them? To create human resource policies and tant employee behaviors for the Hotel Paris s staff.
practices that would produce employee competencies and 2. If time permits, spend some time prior to class observing
behaviors needed to achieve the hotel s strategic aims, Lisa s the front-desk clerk at a local hotel. In any case, create a
team first had to produce a set of usable job descriptions. job description for a Hotel Paris front-desk clerk.

KEY TERMS
talent management, 104 workflow analysis, 108 position analysis
job analysis, 105 business process reengineering, 108 questionnaire (PAQ), 114
job description, 105 job enlargement, 109 Standard Occupational
Classification (SOC), 121
job specifications, 105 job rotation, 109
competency-based job
organization chart, 107 job enrichment, 109
analysis, 129
process chart, 107 diary/log, 114

ENDNOTES
1. Daimler is now expanding this plant; see 5. Ibid. 9. One writer calls job analysis, The hub of
www.autoblog.com/2009/03/23/rumormill- 6. www.silkroadtech.com, accessed Dec- virtually all human resource management
mercedes-benz-expected-to-expand- ember 10, 2007. activities necessary for the successful func-
alabama-plant, accessed March 25, 2009, 7. Software Facilitates Talent Management, tioning organizations. See Parbudyal
http://mbusi.com/ accessed August 20, Product News Network, May 18, 2007. Singh, Job Analysis for a Changing Work-
2011. 8. For a good discussion of job analysis, see place, Human Resource Management
2. Survey: Talent Management a Top Con- James Clifford, Job Analysis: Why Do It, Review 18 (2008), p. 87.
cern, CIO Insight, January 2, 2007. and How Should It Be Done? Public 10. Lindsay Chappell, Mercedes Factories
3. Michael Laff, Talent Management: From Personnel Management 23, no. 2 (Summer Embrace a New Order, Automotive
Hire to Retire, Training and Development, 1994), pp. 321 340; and Job Analysis, News, May 28, 2001. See also, www.
November 2006, pp. 42 48. www.paq.com/index.cfm?FuseAction= autoblog.com/2009/03/23/rumormillme
4. w w w. t a l e n t m a n a g e m e n t 1 0 1 . c o m , bulletins.job-analysis, accessed February 3, rcedes-benz-expected-to-expandal-
accessed December 10, 2007. 2009. abama-plant, accessed March 25, 2009,
 CHAPTER 4 JOB ANALYSIS AND THE TALENT MANAGEMENT PROCESS 135

http://mbusi.com, accessed August 20, Design and the Nature of Work, Journal Employee Relations Law Journal 36, no. 1
2011. of Applied Psychology 91, no. 6 (2006), (Summer 2010), pp. 3 20.
11. Richard Henderson, Compensation Man- pp. 1321 1339; www.paq.com/index.cfm? 33. Kearney, op cit.
agement: Rewarding Performance (Upper FuseAction=bulletins.job-analysis, accessed 34. See, for example, Christelle Lapolice et al.,
Saddle River, NJ: Prentice Hall, 1994), February 3, 2009. Linking O*NET Descriptors to Occupa-
pp. 139 150. See also T. A. Stetz et al., New 21. www.paq.com/index.cfm?FuseAction= tional Literacy Requirements Using Job
Tricks for an Old Dog: Visualizing Job bulletins.job-analysis, accessed February 3, Component Validation, Personnel Psy-
Analysis Results, Public Personnel Manage- 2009. chology 61 (2008), pp. 405 441.
ment 38, no. 1 (Spring 2009), pp. 91 100. 22. Another technique, functional job analysis, 35. Mariani, Replace with a Database.
12. Ron Miller, Streamlining Claims Pro- is similar to the DOL method. However, it 36. O*Net is a trademark of the U.S.
cessing, eWeek 23, no. 25 (June 19, 2006), rates the job not just on data, people, and Department of Labor, Employment, and
pp. 33, 35. things, but also on the extent to which per- Training Administration.
13. Darin Hartley, Job Analysis at the Speed forming the task also requires four other 37. Jorgen Sandberg, Understanding Com-
of Reality, Training & Development, things specific instructions, reasoning petence at Work, Harvard Business
September 2004, pp. 20 22. and judgment, mathematical ability, and Review, March 2001, p. 28. Other organi-
14. See Henderson, Compensation Manage- verbal and language facilities. zation chart software vendors include
ment, pp. 148 152. 23. Roni Reiter-Palmon et al., Development of Nakisa, Aquire, and HumanConcepts. See
15. Wayne Cascio, Applied Psychology in Human an O*NET Web-Based Job Analysis and Its Advanced Org Charting, Workforce
Resource Management (Upper Saddle Implementation in the U.S. Navy: Lessons Management, May 19, 2008, p. 34.
River, NJ: Prentice Hall, 1998), p. 142. Learned, Human Resource Management 38. Based on Ernest J. McCormick and Joseph
Distortion of information is a potential Review 16 (2006), pp. 294 309. Tiffin, Industrial Psychology (Upper
with all self-report methods of gathering 24. Ibid., p. 294. Saddle River, NJ: Prentice Hall, 1974),
information. See for example, http:// 25. Ibid., p. 295. pp. 56 61.
apps.opm.gov/ADT/ContentFiles/Assess 26. Digitizing the information also enables 39. Steven Hunt, Generic Work Behavior:
mentDecisionGuide071807.pdf, accessed the employer to quantify, tag, and elec- An Investigation into the Dimensions
October 1, 2011. tronically store and access it more readily. of Entry-Level, Hourly Job Perfor-
16. Frederick Morgeson et al., Self Presentation Lauren McEntire et al., Innovations in mance, Personnel Psychology 49 (1996),
Processes in Job Analysis: A Field Experi- Job Analysis: Development and Applica- pp. 51 83.
ment Investigating Inflation in Abilities, tion of Metrics to Analyze Job Data, 40. Jean Phillips and Stanley Gulley, Strategic
Tasks, and Competencies, Journal of Applied Human Resource Management Review 16 Staffing (Upper Saddle River, NJ: Pearson
Psychology 89, no. 4 (November 4, 2004), (2006), pp. 310 323. Education, 2012), pp. 96 102.
pp. 674 686; and Frederick Morgeson and 27. Regarding this discussion, see Henderson, 41. Ibid., p. 96.
Stephen Humphrey, The Work Design Compensation Management, pp. 175 184. 42. Ibid., p. 102.
Questionnaire (WDQ): Developing and See also Louisa Wah, The Alphabet Soup 43. Jeffrey Shippmann et al., The Practice of
Validating a Comprehensive Measure for of Job Titles, Management Review 87, Competency Modeling, Personnel Psy-
Assessing Job Design and the Nature of no. 6 (June 1, 1998), pp. 40 43. chology 53, no. 3 (2000), p. 703.
Work, Journal of Applied Psychology 91, 28. For discussions of writing job descrip- 44. Richard S. Wellins et al., Nine Best Prac-
no. 6 (2006), pp. 1321 1339. tions, see James Evered, How to Write a tices for Effective Talent Management,
17. Arthur Martinez et al., Job Title Infla- Good Job Description, Supervisory Man- DDI Development Dimensions Interna-
tion, Human Resource Management agement, April 1981, pp. 14 19; Roger tional, Inc. http://www.ddiworld.com/
Review 18 (2008), pp. 19 27. J. Plachy, Writing Job Descriptions That DDIWorld/media/white-papers/ninebest
18. Note that the PAQ (and other quantitative Get Results, Personnel, October 1987, practicetalentmanagement_wp_ddi.pdf?
techniques) can also be used for job eval- pp. 56 58; and Jean Phillips and Stanley ext=pdf, accessed August 20, 2011. For a
uation, which is explained in Chapter 11. Gulley, Strategic Staffing (Upper Saddle discussion of competency modeling, see
19. We will see that job evaluation is the River, New Jersey: Pearson Education, Michael A. Campion, Alexis A. Fink, Brian
process through which jobs are com- 2012), pp. 89 95. J. Ruggeberg, Linda Carr, Geneva M.
pared to one another and their values 29. Evered, op cit., p. 16. Phillips, and Ronald B. Odman, Doing
determined. Although usually viewed as a 30. Ibid. Competencies Well: Best Practices in
job analysis technique, the PAQ, in prac- 31. Ibid. Competency Modeling, Personnel Psychol-
tice, is actually as much or more of a job 32. Deborah Kearney, Reasonable Accommoda- ogy 64, no. 1 (2011), pp. 225 262.
evaluation technique and could therefore tions: Job Descriptions in the Age of ADA, 45. Wellins, et al., op cit.
be discussed in either this chapter or in OSHA, and Workers Comp (New York: Van 46. Adapted from Richard Mirabile, Every-
Chapter 11. Nostrand Reinhold, 1994), p. 9. See thing You Wanted to Know About
20. Jack Smith and Milton Hakel, Convergence also Paul Starkman, The ADAs Essential Competency Modeling, Training &
Among Data Sources, Response Bias, Job Function Requirements: Just How Development 51, no. 8 (August 1997),
and Reliability and Validity of a Structured Essential Does an Essential Job Function pp. 73 78. See also Campion et al., op cit.
Job Analysis Questionnaire, Personnel Psy- Have to Be? Employee Relations Law Jour- 47. Mirabile, op cit.
chology 32 (Winter 1979), pp. 677 692. See nal 26, no. 4 (Spring 2001), pp. 43 102; 48. Robert Grossman, IBM S HR Takes a
also Frederick Morgeson and Stephen and Benjamin Wolkinson and Sarah Risk, HR Magazine, April 27, 2007, p. 57.
Humphrey, The Work Design Question- Wolkinson, The Pregnant Police Officer's 49. See, for example, Carol Spicer, Building
naire (WDQ): Developing and Validating a Overtime Duties and Forced Leave Policies a Competency Model, HR Magazine,
Comprehensive Measure for Assessing Job Under Title VII, the ADA, and FMLA, April 2009, pp. 34 36.
5
Personnel Planning
and Recruiting
Source: Hannibal Hanschke/Reuters Pictures Americas.
LEARNING OBJECTIVES Company s
1. List the steps in the recruitment and selection process. Strategic Goals

2. Explain the main techniques used in employment

planning and forecasting.
3. Explain and give examples for the need for effective
recruiting.
Employee Competencies
4. Name and describe the main internal sources of and Behaviors Required
candidates. for Company to Achieve
5. List and discuss the main outside sources of candidates. These Strategic Goals
6. Develop a help wanted ad.
7. Explain how to recruit a more diverse workforce.

ruitment an
Rec cemen d
Pla t

ent al
Environm Leg

Tra elopment
De
inin
v
Strategic and
A

g a nd
s its board of directors began reviewing possible HR Policies and Practices
candidates to be IBM s next CEO, their thoughts Required to Produce
Employee Competencies
turned to the sort of company IBM would be in
and Behaviors
the next few years. Some trends were clear. IBM
had already sold off several commodity businesses such as no

Co
s
ey itale
ep

m
personal computers and disk drives, replacing them with new olp R
e
mE o ita sn
software and service/consulting businesses. The new CEO n
would have to address new trends such as cloud computing.
More sales would come from emerging markets in Asia
and Africa. Strategic changes like these meant that IBM s
employees would need new skills, and that the firm needed WHERE ARE WE NOW . . .
new personnel and succession plans for how to staff its new In Chapter 4, we discussed job analysis and
businesses.1 the methods managers use to create job
descriptions, job specifications, and
competency profiles or models. The purpose
of this chapter is to improve your
effectiveness in recruiting candidates.
The topics we discuss include personnel
planning and forecasting, recruiting job
candidates, and developing and using
application forms. Then, in Chapter 6, we ll
turn to the methods managers use to select
the best employees from this applicant pool.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 137
138 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

INTRODUCTION
1 List the steps in the recruit-
ment and selection process.
Job analysis identifies the duties and human requirements for each of the company s
jobs. The next step is to decide which of these jobs you need to fill, and to recruit and
select employees for them. The traditional way to envision recruitment and selection is as
a series of hurdles (Figure 5-1):
1. Decide what positions to fill, through workforce/personnel planning and forecasting.
2. Build a pool of candidates for these jobs, by recruiting internal or external
candidates.
3. Have candidates complete application forms and perhaps undergo initial screening
interviews.
4. Use selection tools like tests, background investigations, and physical exams to
identify viable candidates.
5. Decide who to make an offer to, by having the supervisor and perhaps others
interview the candidates.
This chapter focuses on personnel planning and on recruiting employees.
Chapter 6 addresses tests, background checks, and physical exams. Chapter 7 focuses
on interviewing by far the most widely used selection technique.

2 Explain the main techniques

WORKFORCE PLANNING AND FORECASTING
used in employment plan- Recruitment and selection ideally starts with workforce planning. After all, if you don t
ning and forecasting. know what your team s employment needs will be in the next few months, why should
you be hiring?
Workforce (or employment or personnel) planning is the process of deciding
what positions the firm will have to fill, and how to fill them. It embraces all future
positions, from maintenance clerk to CEO. However, most firms call the process of
deciding how to fill executive jobs succession planning.

Strategy and Workforce Planning

In either case, as at IBM (see page 137), employment planning should reflect the firm s
strategic plans. Thus plans to enter new businesses or reduce costs all influence the types
of positions you ll need to fill (or eliminate). Strategic issues are always crucial. In the
short term, there s not much employers can do to overcome recessions, housing
bubbles, or increases or decreases in consumer spending. However, the managers
should control their strategy. So, knowing that the firm plans, say, to expand abroad,
means making plans for ramping up hiring in the firm s international division. The
accompanying Strategic Context feature illustrates this.

FIGURE 5-1 Steps in

Recruitment and Selection
Process Employment Recruiting: Candidates Candidate
planning and Build a pool
forecasting of candidates becomes
employee

Applicants Use selection Supervisors and

complete tools like tests others interview final
application to screen out candidates to make
forms most applicants final choice

The recruitment and selection process is a series of hurdles aimed at selecting the best candidate for the job.
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 139

THE STRATEGIC CONTEXT

IBM
IBM has been transitioning from supplying mostly computers to supplying software and
consulting services. Therefore, in terms of IBM s strategic workforce needs, in three
years, 22 percent of our workforce will have obsolete skills. Of the 22 percent,
85 percent have fundamental competencies that we can build on to get them ready for
skills we ll need years from now. The remaining 15% will either self-select out of IBM
or be let go.2
As at IBM, workforce and succession planning should entail thinking through the
skills and competencies the firm needs to execute its overall strategy. At IBM, for
instance, human resource executives review with finance and other executives the
personnel ramifications of their company s strategic plans.3 In other words, What
sorts of skills and competencies will we need to execute our strategic plans?

Figure 5-2 summarizes the link between strategic and personnel planning. Like
all plans, personnel plans require some forecasts or estimates, in this case, of three
things: personnel needs, the supply of inside candidates, and the likely supply of outside
candidates. The basic workforce planning process is to forecast the employer s
demand for labor and supply of labor; then identify supply demand gaps and
develop action plans to fill the projected gaps.
We ll start with forecasting personnel needs.

Forecasting Personnel Needs (Labor Demand)

How many people will we need? Managers consider several factors.4 For example, when
Dan Hilbert took over staffing at Valero Energy, he reviewed Valero s demographics,
growth plans, and turnover history. He discovered that projected employment shortfalls

FIGURE 5-2 Linking

Employer s strategic plan
Employer s Strategy to Plans Diversify?
Integrate vertically?
Expand geographically?
On what basis should we compete?

Employer s Marketing and Production Financial HR plans

functional sales plans plans plans
plans

Personnel Training and Compensation Labor Security and

plans development plans relations safety
plans plans plans

Personnel Recruitment Employee

forecasts plans selection
plans

workforce (or employment or personnel)

planning
The process of deciding what positions the
firm will have to fill, and how to fill them.
140 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

were four times more than Valero could fill with its current recruitment procedures.
He turned to formulating new personnel plans for boosting employee retention and
recruiting and screening more candidates.5
A firm s staffing needs reflect demand for its products or services, adjusted for
changes the firm plans to make in its strategic goals and for changes in its turnover
rate and productivity. Forecasting workforce demand therefore starts with estimating
what the demand will be for your products or services. Short term, management
should be concerned with daily, weekly, and seasonal forecasts.6 For example, retailers
track daily sales trends because they know, for instance, that Mother s Day produces a
jump in business and a need for additional store staff. Seasonal forecasts are critical
for retailers contemplating end-of-year holiday sales, and for many firms such as
landscaping and air-conditioning vendors.
Looking out a year or two isn t so easy. Managers will follow industry publications
and economic forecasts closely, for instance from the Conference Board. Predicting a
rise or fall in business activity a year of two in the future may not be precise. However,
the planning process may help you to develop contingency staffing plans to address the
potential changes in demand.
The basic process of forecasting personnel needs is to forecast revenues first. Then
estimate the size of the staff required to support this sales volume. However, managers
must also consider other, strategic factors. These include projected turnover, decisions
to upgrade (or downgrade) products or services, productivity changes, and financial
resources. There are several simple tools for projecting personnel needs, as follows.

TREND ANALYSIS Trend analysis means studying variations in the firm s

employment levels over the last few years. For example, you might compute the
number of employees at the end of each of the last 5 years, or perhaps the number in
each subgroup (like sales, production, secretarial, and administrative). The aim is to
identify trends that might continue into the future.
Trend analysis can provide an initial estimate of future staffing needs, but
employment levels rarely depend just on the passage of time. Other factors (like
changes in sales volume and productivity) also affect staffing needs. Carefully
studying the firm s historical and current workforce demographics and voluntary
withdrawals (due to retirements and resignations, for instance) can help reveal
impending labor force needs.

RATIO ANALYSIS Another simple approach, ratio analysis, means making

forecasts based on the historical ratio between (1) some causal factor (like sales
volume) and (2) the number of employees required (such as number of salespeople).
For example, suppose a salesperson traditionally generates $500,000 in sales. If the
sales revenue to salespeople ratio remains the same, you would require six new
salespeople next year (each of whom produces an extra $500,000) to produce a
hoped-for extra $3 million in sales.
Like trend analysis, ratio analysis assumes that productivity remains about the
same for instance, that you can t motivate each salesperson to produce much more
than $500,000 in sales. If sales productivity were to rise or fall, the ratio of sales to
salespeople would change.

THE SCATTER PLOT A scatter plot shows graphically how two variables such
as sales and your firm s staffing levels are related. If they are, then if you can
forecast the business activity (like sales), you should also be able to estimate your
personnel needs.
For example, suppose a 500-bed hospital expects to expand to 1,200 beds over the
next 5 years. The human resource director wants to forecast how many registered
nurses they ll need. The human resource director realizes she must determine the rela-
tionship between size of hospital (in terms of number of beds) and number of nurses
required. She calls eight hospitals of various sizes and gets the following figures:
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 141

Size of Hospital Number of Registered

(Number of Beds) Nurses

200 240
300 260
400 470
500 500
600 620
700 660
800 820
900 860

Figure 5-3 shows hospital size on the horizontal axis. It shows number of
nurses on the vertical axis. If these two factors are related, then the points you plot
(from the data above) will tend to fall along a straight line, as they do here. If you
carefully draw in a line to minimize the distances between the line and each one of
the plotted points, you will be able to estimate the number of nurses needed for
each hospital size. Thus, for a 1,200-bed hospital, the human resource director
would assume she needs about 1,210 nurses.
While simple, tools like scatter plots have drawbacks.7
1. They generally focus on historical sales/personnel relationships and assume that
the firm s existing activities will continue as is.
2. They tend to support compensation plans that reward managers for managing
ever-larger staffs, irrespective of the company s strategic needs.
3. They tend to institutionalize existing ways of doing things, even in the face of change.

MARKOV ANALYSIS Employers also use a mathematical process known as

Markov analysis (or transition analysis ) to forecast availability of internal job
candidates. Markov analysis involves creating a matrix that shows the probabilities
that employees in the chain of feeder positions for a key job (such as from junior
engineer, to engineer, to senior engineer, to engineering supervisor, to director

FIGURE 5-3 Determining the (1,210)

Relationship Between Hospital 1,200
Size and Number of Nurses
Note: After fitting the line, you can 1,000
Number of registered nurses

project how many employees you ll

need, given your projected volume.
800

600

400

200

200 400 600 800 1,000 1,200 1,400

Hospital size (no. of beds)

trend analysis ratio analysis scatter plot

Study of a firm s past employment needs A forecasting technique for determining A graphical method used to help identify the
over a period of years to predict future future staff needs by using ratios between, relationship between two variables.
needs. for example, sales volume and number of
employees needed.
142 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

of engineering) will move from position to position and therefore be available to fill
the key position.
Whichever forecasting tool you use, managerial judgment should play a big role.
It s rare that any historical trend, ratio, or relationship will simply continue. You will
therefore have to modify any forecast based on subjective factors such as the feeling
that more employees will be quitting you believe will be important.

Improving Productivity Through HRIS

Computerized Personnel Forecasting
Computerized forecasts enable managers to build more variables into their personnel
projections.8 These systems rely on setting clear goals, such as reducing inventory on
hand.9 Other variables might include direct labor hours required to produce one unit
of product (a measure of productivity), and minimum, maximum, and probable sales
projections. Based on such input, a typical program generates average staff levels
required to meet product demands, as well as separate forecasts for direct labor (such
as assembly workers), indirect staff (such as secretaries), and exempt staff (such as
executives).
With programs like these, employers can more accurately translate projected
productivity and sales levels into personnel needs. Many firms particularly use comput-
erized employee forecasting systems for estimating short-term needs. In retailing, for
instance, labor scheduling systems help retailers estimate required staffing needs based
on sales forecasts and estimated store traffic. As one vendor says, [Our] Workforce
Forecast Manager analyzes your business drivers to produce an accurate forecast down
to 15 minute intervals. Seasonal variations, events, and current trends are consistently
accounted for . . . 10
Perhaps because the demand for electric power is relatively predictable, utilities tend
to do exemplary workforce planning. For example, at Chelan County Public Utility
District, the development manager used spreadsheets to build a statistical model encom-
passing such things as age, tenure, turnover rate, and time to train new employees. This
model helped them quickly identify five employment hotspots among 33 occupational
groups at their company. This in turn prompted them to focus more closely on creating
plans to retain and hire, for instance, more systems operators.11

Forecasting the Supply of Inside Candidates

Knowing your staffing needs satisfies only half the staffing equation. Next, you have to
estimate the likely supply of both inside and outside candidates. Most firms start with
the inside candidates.
The main task here is determining which current employees might be qualified for
the projected openings. For this you need to know current employees skills sets their
current qualifications. Sometimes it s obvious how you have to proceed. When Google s
founders wanted a replacement for CEO Eric Schmidt, they chose one of their own.
Sometimes who to choose is not so obvious. Here, managers turn to qualifications
(or skills) inventories. These contain data on employees performance records, educa-
tional background, and promotability. Whether manual or computerized, these help
managers determine which employees are available for promotion or transfer.

MANUAL SYSTEMS AND REPLACEMENT CHARTS Department man-

agers or owners of smaller firms often use manual devices to track employee
qualifications. Thus a personnel inventory and development record form compiles
qualifications information on each employee. The information includes education,
company-sponsored courses taken, career and development interests, languages,
desired assignments, and skills. Personnel replacement charts (Figure 5-4)
are another option, particularly for the firm s top positions. They show the present
performance and promotability for each position s potential replacement. As an
alternative, you can develop a position replacement card. For this you create a
card for each position, showing possible replacements as well as their present
performance, promotion potential, and training.
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 143

FIGURE 5-4 Management Division

Replacement Chart Showing Vice President
Development Needs of Potential
Future Divisional Vice Presidents

Vice President Vice President Vice President

Production Sales Finance
Jones, D. Able, J. Smith, B.
Required development: Required development: Required development:
None recommended Job rotation into None recommended
finance and production
Executive development
course in strategic
planning
In-house development
center 2 weeks

PRESENT PROMOTION
PERFORMANCE POTENTIAL
Outstanding Ready now
Satisfactory Needs further training
Needs improvement Questionable

COMPUTERIZED SKILLS INVENTORIES Larger firms obviously can t track the

qualifications of hundreds or thousands of employees manually. Larger employers
therefore computerize this information, using various packaged software systems
such as SurveyAnalytics s Skills Inventory Software.
Such programs help management anticipate human resource shortages, and
facilitate making employment recruitment and training plans.12 Increasingly, they
also link skills inventories with their other human resources systems. So, for instance,
an employee s skills inventory might automatically update each time he or she is
trained or appraised.
The usual process is for the employee, the supervisor, and human resource
manager to enter information about the employee s background, experience, and
skills via the system. Then, when a manager needs a person for a position, he or she
uses key words to describe the position s specifications (for instance, in terms of
education and skills). The computerized system then produces a list of qualified
candidates. Computerized skills inventory data typically include items like work expe-
rience codes, product knowledge, the employee s level of familiarity with the employer s
product lines or services, the person s industry experience, and formal education.

KEEPING THE INFORMATION PRIVATE The employer should secure all its
employee data.13 Much of the data is personal (such as Social Security numbers and
illnesses). Legislation gives employees legal rights regarding who has access to infor-
mation about them. The legislation includes the Federal Privacy Act of 1974 (applies
to federal workers), the New York Personal Privacy Act of 1985, HIPAA (regulates use
of medical records), and the Americans with Disabilities Act. Employers should keep
their manual records under lock and key.
Internet access makes it relatively easy for more people to access the firm s
computerized files.14 One solution is to incorporate an access matrix in the database
management system. These define the rights of users to various kinds of access (such

qualifications (or skills) inventories personnel replacement charts position replacement card
Manual or computerized records listing Company records showing present A card prepared for each position in a
employees education, career and performance and promotability of inside company to show possible replacement
development interests, languages, special candidates for the most important positions. candidates and their qualifications.
skills, and so on, to be used in selecting
inside candidates for promotion.
144 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 5-5 Keeping

Since intruders can strike from outside an organization or from within, HR departments
Data Safe
can help screen out potential identity thieves by following four basic rules:
Source: HR Magazine by Perform background checks on anyone who is going to have access to personal
Caternicchia. Copyright 2005 by
Society for Human Resource information.
Management (SHRM). Reproduced If someone with access to personal information is out sick or on leave, don t hire a
with permission of Society for temporary employee to replace him or her. Instead, bring in a trusted worker from
Human Resource Management another department.
(SHRM) in the format Textbook via
Copyright Clearance Center. Perform random background checks such as random drug tests. Just because someone
passed 5 years ago doesn t mean their current situation is the same.
Limit access to information such as SSNs, health information, and other sensitive data
to HR managers who require it to do their jobs.

as read only or write only ) to each database element. (So, those in accounting
might read only information such as an employee s address.) Figure 5-5 summarizes
some guidelines for keeping employee data safe. A growing problem is that peer-
to-peer file-sharing applications jump firewalls and give outsiders quick access. Pfizer
Inc. lost personal data on about 17,000 current and former employees this way.15

Forecasting the Supply of Outside Candidates

If there won t be enough inside candidates to fill the anticipated openings (or you want
to go outside for another reason), you will turn to outside candidates.
Forecasting labor supply depends first on the manager s own sense of what s
happening in his or her industry and locale. He or she will then supplement these
observations with more formal labor market analyses, for instance, from the U.S.
Bureau of Labor Statistics and from O*Net. For example, unemployment rates
around 9% in the United States in 2011 signaled to HR managers that finding good
candidates would be easier.16
Information like this is easy to find, both online and in print format. For example,
look for economic projections online, for instance, from the U.S. Congressional
Budget Office (www.cbo.gov/showdoc.cfm?index=1824&sequence=0) and the
Bureau of Labor Statistics (www.bls.gov/news.release/ecopro.toc.htm). For hard-copy
formats, Bloomberg BusinessWeek presents a weekly snapshot of the economy on its
Outlook page, as well as a yearly forecast in December.
Your planning may also require forecasting specific occupations such as nurse,
computer programmer, or teacher. Recently, for instance, there has been an under-
supply of nurses. O*NET (discussed in Chapter 4) includes projections for most
occupations. The U.S. Bureau of Labor Statistics publishes annual occupational
projections both online and in the Monthly Labor Review and in Occupational
Outlook Quarterly. Beyond specific occupations, the emphasis on technologically
advanced jobs means many will lack basic skills such as communication, creativity,
and teamwork.17

Talent Management and Predictive Workforce Monitoring

Traditionally, employers engage in formal workforce planning perhaps every year or so.
However, this may not always provide enough time. For instance, having failed to do
much such planning for years, Valero almost didn t have sufficient time to gear up its
new employee development plan.
Applying a talent management philosophy to workforce planning requires being
more proactive. Specifically, it requires paying continuous attention to workforce
planning issues. Managers call this newer, continuous workforce planning approach
predictive workforce monitoring. Some examples follow.
Intel Corporation example. Intel conducts semiannual Organization Capability
Assessments. The staffing department works with the firm s business heads twice a
year to assess workforce needs both immediate and up to 2 years in the future.18
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 145

Amerada Hess example. Amerada Hess uses its Organizational Capability (OC)
group to monitor workforce attrition (such as retirement age, experience with
Hess, education, etc.) and prospective talent requirements. It then works with
the lines of business to better prepare them for meeting changing global talent
demands. The group considers how each line of business is evolving, examines
what jobs at Hess will look like in the future, identifies sources for procuring the
best talent, and assists in developing current and newly hired employees. 19
Valero Energy example. Valero created a labor supply chain for monitoring steps
in recruiting and hiring. It includes an analytic tool that predicts Valero s labor
needs based on past experience. It also includes computer screen dashboards
that show how components in the chain, such as ads placed on job boards, are
performing according to cost, speed, and quality. In 2002, it took 41 pieces
of paper to hire an employee and more than 120 days to fill a position. Each hire
cost about $12,000. Soon, with the new labor supply chain in place, little paper
was needed to bring an employee on board; the time-to-fill figure fell to below
40 days and cost per hire dropped to $2,300.20
ABB example. ABB s Talent Management process allows talent information
to be stored on a global IT platform. For example, the system stores perform-
ance appraisals, career plans, and training and development information. It also
shows a global overview of key management positions, including who holds
them, and their potential successors. Potential successors get two kinds of
assessments: by line managers, and against externally benchmarked leadership
competency profiles.21

Developing an Action Plan to Match Projected

Labor Supply and Labor Demand
Workforce planning should logically culminate in a workforce action plan. This lays out
the employer s projected workforce demand supply gaps, as well as staffing plans for
filling the necessary positions. The staffing plan should identify the positions to be
filled, potential internal and external sources for these positions, the required training,
development, and promotional activities moving people into the positions will entail,
and the resources that implementing the staffing plan will require. Resources might
include, for instance, advertising costs, recruiter fees, relocation costs, and travel and
interview expenses.22

The Recruiting Yield Pyramid

The manager should recognize that filling a relative handful of positions might require
recruiting dozens or hundreds of candidates. Employers therefore use a staffing or
recruiting yield pyramid as shown in Figure 5-6 to gauge the dimensions of the

FIGURE 5-6 Recruiting

Yield Pyramid 50 New hires

100 Offers made (2:1)

150 Candidates interviewed (3:2)

200 Candidates invited (4:3)

1,200 Leads generated (6:1)

recruiting yield pyramid

The historical arithmetic relationships
between recruitment leads and invitees,
invitees and interviews, interviews and offers
made, and offers made and offers accepted.
146 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

staffing issues it needs to address. In Figure 5-6, the company knows it needs 50 new
entry-level accountants next year. From experience, the firm also knows the following:
* The ratio of offers made to actual new hires is 2 to 1.
* The ratio of candidates interviewed to offers made is 3 to 2.
* The ratio of candidates invited for interviews to candidates interviewed is about
4 to 3.
* Finally, the firm knows that of six leads that come in from all its recruiting
sources, it typically invites only one applicant for an interview a 6-to-1 ratio.
Given these ratios, the firm knows it must generate about 1,200 leads to be able to
invite 200 viable candidates to its offices for interviews. The firm will then interview
about 150 of those invited, and from these it will make 100 offers, and so on.

3 Explain and give examples

THE NEED FOR EFFECTIVE RECRUITING
for the need for effective Assuming the company authorizes you to fill a position, the next step is to build up,
recruiting. through recruiting, an applicant pool. Employee recruiting means finding and/or
attracting applicants for the employer s open positions.

Why Recruiting Is Important

It s hard to overemphasize the importance of effective recruiting. If only two candidates
apply for two openings, you may have little choice but to hire them. But if 10 or 20 appli-
cants appear, you can use techniques like interviews and tests to screen out all but the best.
Even high unemployment doesn t necessarily mean that it is easy to find good
candidates. For example, a survey during an earlier slowdown (2003 2004) found
that about half of respondents said they had difficulty finding qualified applicants.
About 40% said it was hard to find good candidates.23

What Makes Recruiting a Challenge?

It s easy to assume that recruiting is easy that all you need do is place a few ads on the
Web. However, several things make it more complex.
* First, some recruiting methods are superior to others, depending on the type of
job for which you are recruiting.
* Second, the success you have recruiting depends on nonrecruitment issues and
policies. For example, paying 10% more than most firms in your locale should,
other things being equal, help you build a bigger applicant pool faster.24
* Third, employment law prescribes what you can and cannot do when recruiting.
For example, managers can t rely on word-of-mouth dissemination of informa-
tion about job opportunities when the workforce is substantially all white or all
members of some other class, such as Hispanic.25

Organizing How You Recruit

Should you centralize your firm s recruitment efforts, or let each plant or office do their
own recruiting? For many firms, it s simply much easier to recruit centrally now that so
much recruiting is on the Internet.26 The accountants Deloitte & Touche Tohmatsu
created a global recruitment site, thus eliminating the need to maintain 35 separate
local recruiting Web sites.27 Retailer 7-Eleven s site presents its worldwide job openings
and lets prospective employees apply online.

THE SUPERVISOR S ROLE The human resource manager charged with filling
an open position is seldom very familiar with the job itself. Someone has to tell this
person what the position really entails, and what key things to look or watch out for.
Only the position s supervisor can do this.
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 147

The supervisor should therefore know what sorts of questions to expect, and here
your knowledge of job analysis should serve you well. For example, in addition to
what the job entails now and its job specifications, the recruiter might want to know
about the supervisor s leadership style and about the work group is it a tough group
to get along with, for instance?

INTERNAL SOURCES OF CANDIDATES

4 Name and describe the
main internal sources Recruiting typically brings to mind LinkedIn, employment agencies, and classified ads,
of candidates. but internal sources in other words, current employees or hiring from within are
often the best source of candidates.

Using Internal Sources: Pros and Cons

Filling open positions with inside candidates has several advantages. First, there is
really no substitute for knowing a candidate s strengths and weaknesses, as you should
after working with them for some time. Current employees may also be more
committed to the company. Morale may rise if employees see promotions as rewards for
loyalty and competence. And inside candidates should require less orientation and
(perhaps) training than outsiders.
However, hiring from within can also backfire. Employees who apply for jobs and
don t get them may become discontented; telling them why you rejected them and
what remedial actions they might take is crucial. And too often internal recruiting is a
waste of time. Many employers require managers to post job openings and interview
all inside candidates. Yet the manager often knows whom he or she wants to hire.
Requiring him or her to interview a stream of unsuspecting inside candidates can be
a waste of time for everyone. Inbreeding is another potential drawback. When all
managers come up through the ranks, they may have a tendency to maintain the
status quo, when a new direction is required.

Finding Internal Candidates

Hiring from within ideally relies on job posting and the firm s skills inventories.
Job posting means publicizing the open job to employees (usually by literally posting it
on company intranets or bulletin boards). These postings list the job s attributes, like
qualifications, supervisor, work schedule, and pay rate.
Qualifications skills banks also play a role. For example, the database may reveal
persons who have potential for further training or who have the right background for
the open job.

Rehiring
Should you rehire someone who left your employ? It depends. On the plus side,
former employees are known quantities (more or less) and are already familiar with
how you do things. On the other hand, employees who you let go may return with
negative attitudes. A 2009 survey found that about 26 percent of employers who had
laid people off recently planned to bring some back.28
In any event, you can reduce the chance of adverse reactions. After employees have
been back on the job for awhile, credit them with the years of service they had accumu-
lated before they left. In addition, inquire (before rehiring them) about what they did
during the layoff and how they feel about returning: You don t want someone coming
back who feels they ve been mistreated, said one manager.29

employee recruiting job posting

Finding and/or attracting applicants for the Publicizing an open job to employees (often
employer s open positions. by literally posting it on bulletin boards)
and listing its attributes, like qualifications,
supervisor, working schedule, and pay rate.
148 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Succession Planning
Hiring from within is particularly important when it involves filling the employer s
top positions. Doing so requires succession planning the ongoing process of
systematically identifying, assessing, and developing organizational leadership to
enhance performance.30 About 36% of employers have formal succession planning
programs.31 As in IBM s search to eventually replace its CEO (outlined earlier in this
chapter), succession planning should conform to basic talent management practices.
In particular, the key is to profile the competencies that the firm s evolving strategy
will require the new CEO to have; then use that profile to formulate an integrated
development/appraisal/selection package for potential candidates.
Succession planning entails three steps: identify key needs, develop inside
candidates, and assess and choose those who will fill the key positions.
IDENTIFY KEY NEEDS First, based on the company s strategic and business
plans, top management and the HR director identify what the company s future key
position needs will be. Matters to address in this early stage include defining key
positions, defining high potentials , enlisting top management support, and reviewing
the company s current talent. (Thus, plans to expand abroad may suggest bulking up
the international division.32)
DEVELOP INSIDE CANDIDATES After identifying future key positions,
management turns to creating candidates for these jobs. Creating means providing
the inside or outside candidates you identify with the developmental experiences they
require to be viable candidates. Employers develop high-potential employees through
internal training and cross-functional experiences, job rotation, external training,
and global/regional assignments.33
ASSESS AND CHOOSE Finally, succession planning requires assessing these
candidates and selecting those who will actually fill the key positions.34

Improving Productivity Through HRIS

Succession and Talent Planning Systems
More large employers use software to facilitate succession planning and talent manage-
ment. These systems Capture and search for information about employee competencies,
skills, certifications, and experience . . . [and] Assess employees on key areas of leadership
potential, job performance, and risk of leaving; Target employees for future roles. 35 As the
user of one such system said, The [SumTotal] platform allows us to track and assess the
talent pool and promote people within the company. Our latest metrics show that 75% of
key openings are fulfilled by internal candidates. The succession module helps us to
identify who the next senior managers could be and build development plans to help
them achieve their potential. 36
Succession planning is an integral part of talent management. For example, when a
new president took over at Dole Food Co., Inc., Dole was highly decentralized. The new
president s strategy involved improving financial performance by reducing redundancies
and centralizing certain activities, including succession planning.37
Web technology helped Dole do this. It contracted with application system
providers (ASPs) to handle things like payroll management. For succession manage-
ment, Dole chose software from Pilat NAI, which keeps all the data on its own servers
for a monthly fee. Dole s managers access the program via the Web using a password.
They fill out online résumés for themselves, including career interests, and note
special considerations such as geographic restrictions.
The managers also assess themselves on four competencies. Once the manager
provides his or her input, the program notifies that manager s boss. The latter then
assesses his or her subordinate and indicates whether the person should be promoted.
This assessment and the online résumés then go automatically to the division head
and the divisional HR director. Dole s senior vice president for human resources then
uses the information to create career development plans for each manager, including
seminars and other programs.38
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 149

5 List and discuss the

OUTSIDE SOURCES OF CANDIDATES
main outside sources of Firms can t always get all the employees they need from their current staff, and sometimes
candidates. they just don t want to. We ll look at the sources firms use to find outside candidates next.

Recruiting via the Internet

For most employers and for most jobs, Internet-based recruiting is by far the recruit-
ing source of choice.39 For example, restaurant chain The Cheesecake Factory gets
about a third of its management applicants via the Web. Most employers recruit
through their own Web sites, or use job boards. Figure 5-7 highlights some top online

FIGURE 5-7 Some Top Online

Recruiting Job Boards

Source: www.quintcareers.com/
top_10_sites.html, accessed April 28,
2009. Used with permission
of QuintCareers.com.

succession planning
The ongoing process of systematically identi-
fying, assessing, and developing organiza-
tional leadership to enhance performance.
150 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

recruiting job boards. Job boards account for about 12% of recent hires. Other
major sources include company Web site, referrals, plus others such as temp to
hire, rehires, and employment agencies.
The CareerBuilder.com iPhone application on the left offers a unique way to
search nearly 2 million jobs on CareerBuilder.com, the largest U.S. job site.40 Users
may search for jobs by keyword, read job descriptions and salaries, save jobs to a list
of favorites, and e-mail job links to anyone on their contact list. The application
also takes advantage of the iPhone s geo-location capabilities. Users may direct it to
search only for jobs in the region where they are located. Finally, the application
integrates Google Maps by displaying a map of the city each job is located in.
Recruiting for professionals and managers is shifting from online job boards to
social networking sites such as Facebook and LinkedIn. For example, Science
Applications International Corp. cut the job boards it uses from 15 to 6 or so. Instead,
its recruiters are searching for candidates on professional social networks instead.
The problem is that many applications received via job boards didn t meet the job s
qualifications. As one recruiter said, recruiters had to put in all this extra time to
read applications but we didn t get benefit from it. Instead, this company now hires
recruiters who specialize in digging through social Web sites and competitors
publications to find applicants who may not even be looking for jobs.41

OTHER ONLINE RECRUITING PRACTICES Again, in moving away from

major job boards such as careerbuilder.com, recruiters are also seeking passive
candidates (people not actively looking for jobs) by using social networking sites
Source: www.careerbuilder.com/ such as LinkedIn to find potential candidates.42 One Massachusetts staffing
MarketingWeb/iPhone/CBJobsAppli
cation.aspx?cbRecursionCnt=1&cbsi firm uses its Facebook and LinkedIn pages to announce openings. Other firms use
d=7fd458dafd4a444fb192d9a24cee Twitter to announce job openings to jobseekers who subscribe to their Twitter
d771-291142537-wx-6&ns_siteid= feeds.43 ResumePal, from the career site JobFox (www.jobfox.com/), is a recent
ns_us_g_careerbuilder_ iphone,
accessed March 23, 2009. recruiting innovation. ResumePal is an online standard universal job application.
Jobseekers submit it to participating employers, who can then use the standardized
application s keywords to identify viable candidates more easily.44 McDonald s Corp.
posted a series of employee testimonials on social networking sites like Second Life
as a way to attract applicants.45 Other employers simply screen through job boards
résumé listings.46
Sites such as Linkedin facilitate developing personal relationships for networking
and employee referrals.47 Accountants Deloitte & Touche asked employees to make
short videos describing their experiences with Deloitte. It then took the 14 best (of
400 submitted) and posted them on YouTube.48 Monster has a video product that
helps employers integrate streaming video into their job postings.49 Facebook makes
it easy to start a company networking site, which many employers use for recruiting
purposes.50 McDonald s posted employee testimonials on networking sites like
Second Life as a way to attract applicants.51

TEXTING Some employers use text messaging to build an applicant pool. For
example, at one diversity-oriented conference in New Orleans, consultants Hewitt
Associates displayed posters asking attendees to text message hewdiversity to a specific
five digit number. Each person texting then became part of Hewitt s mobile recruit-
ing network, periodically receiving text messages regarding Hewitt openings.52

THE DOT-JOBS DOMAIN The dot-jobs domain gives job seekers a one-click
conduit for finding jobs at the employers who register at www.goto.jobs. For example,
applicants seeking a job at Disneyland can go to www.Disneyland.jobs. This takes
them to Disney s Disneyland recruiting Web site.

VIRTUAL JOB FAIRS Virtual (fully online) job fairs are another option. For
example, the magazine PR Week organized such a fair for about a dozen public
relations employers. At a virtual job fair, online visitors see a very similar setup to a
regular job fair. They can listen to presentations, visit booths, leave résumés and
business cards, participate in live chats, and get contact information from recruiters,
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 151

HR managers, and even hiring managers.53 As one writer said, virtual career fairs are
appealing because they re a way to get your foot in the door without having to walk
out the door. 54 The fairs last about 5 hours. Attendee might find 30 or more employ-
ers recruiting. Specialist virtual fair Web sites include Milicruit (for former military
personnel) and Unicruit (for college students).

PROS AND CONS Web-based recruiting generates more responses quicker and
for a longer time at less cost than just about any other method. But, it has two big
potential problems.
First, fewer older people and some minorities use the Internet, so online application
gathering may inadvertently exclude disproportionate numbers of older applicants
(and certain minorities). To prove they ve complied with EEO laws, employers should
keep track of each applicant s race, sex, and ethnic group. The EEO says that, to be
an applicant, he or she must meet three conditions: he or she must express interest
in employment; the employer must have taken steps to fill a specific job; and the
individual must have followed the employer s standard application procedure.55
The second problem is Internet overload: Employers end up deluged with
résumés. There are several ways to handle this. Realism helps. For example, The
Cheesecake Factory posts detailed job duties listings, so those not interested need not
apply. Another approach is to have job seekers complete a short online prescreening
questionnaire. Then use these to identify those who may proceed in the hiring
process.56 Most employers also use applicant tracking systems, to which we now turn.

USING APPLICANT TRACKING Web-based ads tend to generate so many

applicants that most firms use applicant tracking systems to support their on- and
offline recruiting efforts. Applicant tracking systems (from firms such as Taleo
Corporation and iTrack Solutions) are online systems that help employers attract,
gather, screen, compile, and manage applicants.57 They also provide other services,
including requisitions management (for monitoring the firm s open jobs), applicant
data collection (for scanning applicants data into the system), and reporting (to create
various recruiting-related reports such as cost per hire and hire by source).58 Most
are from application service providers (ASPs). The latter are companies that provide
employers with online services by enabling the employer s applicants or employees
to use the ASP s servers as if they re using the employer s own. Thus, applicants who
log on to take a test at the employer are actually taking the test at the ASP s site.59
Major suppliers of e-recruiting services include Automatic Data Processing
(ADP.com), HRSmart (hrsmart.com), Silkroad Technology (silkroad.com), and
Monster (monster.com).60

SUTTER HEALTH EXAMPLE For example, with 10,000 job openings per year, Sutter
Health Corporation turned to online recruiting. But this actually complicated
things.61 Sutter Health had so many résumés coming in by e-mail and through its
Web site (more than 300,000 per year) that the applications ended up in a pile,
waiting for Sutter affiliates HR departments to get to them.
Sutter Health s solution was to sign on with Taleo Corporation of San Francisco.
Taleo is a recruiting applications service provider (ASP). It now does all the work of
hosting Sutter Health s job site. Taleo doesn t just post Sutter Health job openings and
collect its résumés; it also gives Sutter Health an automated way to evaluate, rank, and
match IT and other job candidates with specific openings. For example, Taleo s
system automatically screens incoming résumés, compares them with Sutter s job
requirements, and flags high-priority applicants. This helped Sutter cut its recruiting
process from weeks to days.

applicant tracking systems

Online systems that help employers attract,
gather, screen, compile, and manage
applicants.
152 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 5-8 Ineffective

Ineffective Ad, Recycled from
and Effective Web Ads
Magazine to the Web Effective Web Ad (Space Not an Issue)

Process Engineer Pay: $65k $85k/year Do you want to help us make this a better
world?
Immediate Need in Florida for a We are one of the top wastewater treatment
Wastewater Treatment Process Engineer. companies in the world, with installations
Must have a min. 4 7 years Industrial from Miami to London to Beijing. We are
Wastewater exp. Reply growing fast and looking for an experienced
[email protected] process engineer to join our team. If you
have at least 4 7 years experience designing
processes for wastewater treatment facilities
and a dedication to make this a better
world, we would like to hear from you.
Pay range depending on experience is
$65,000 $85,000. Please reply in confidence
to [email protected]

IMPROVING ONLINE RECRUITING EFFECTIVENESS Planning your online

recruiting effort is crucial. Most Standard & Poor s 500 companies place employment
information one click away from their home pages.62 Applicants can submit their résumés
online at almost all Fortune 500 firms Web sites. Fewer companies give job seekers the
option of completing online applications, although that s what most applicants prefer.63
One survey of 256 alumni from graduate business schools showed why many
firms Web-based recruiting turned them off. The objections included the following:
* Job openings lacked relevant information (such as job descriptions).
* It was often difficult to format résumés and post them in the form required.
* Many respondents expressed concerns about the privacy of the information.
* Poor graphics often made it difficult to use the Web site.
* Slow feedback from the employers (in terms of follow-up responses and receiving
online applications) was annoying.64
Furthermore, the best Web ads don t just transpose newspaper ads to the Web. As
one specialist put it, getting recruiters out of the shrunken want ad mentality is a big
problem. Figure 5-8 is an example of recycling a print ad to the Web. The ineffective
Web ad has needless abbreviations, and doesn t say much about why the job seeker
should want that job.65
Now look at the effective Web ad in Figure 5-8. It uses compelling keywords such
as make this a better world. It provides good reasons to work for this company. It
starts with an attention-grabbing heading and uses the extra space to provide more
specific job information. Many employers often include the entire job description.66
Ideally, an ad also should provide a way (such as a checklist of the job s human
requirements) for potential applicants to gauge if the job is a good fit.67
Finally, online recruiting requires caution for applicants. Many job boards don t
check the legitimacy of the recruiters who place ads. Many applicants submit per-
sonal details such as Social Security numbers, not realizing that ASPs are running the
sites, rather than the firm to which they re applying.68 U.S. laws generally do not pro-
hibit job boards from sharing your data with other sources. One job board reportedly
had personal information on more than 1 million subscribers stolen.69

Advertising
While Web-based recruiting is replacing help wanted ads, a glance at almost any paper
or business or professional magazine will confirm that print ads are still popular. To use
help wanted ads successfully, employers should address two issues: the advertising
medium and the ad s construction.
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 153

THE MEDIA The best medium the local paper, the Wall Street Journal, the Web
(or some other) depends on the positions for which you re recruiting. For exam-
ple, the local newspaper is often a good source for local blue-collar help, clerical
employees, and lower-level administrative employees. On the other hand, if recruit-
ing for workers with special skills, such as furniture finishers, you d probably want to
advertise in places with many furniture manufacturers, such as the Carolinas, even if
your plant is in Tennessee. The point is to target your ads where they ll reach your
prospective employees.
For specialized employees, you can advertise in trade and professional journals
like American Psychologist, Sales Management, Chemical Engineering, and Women s
Wear Daily. Help wanted ads in papers like the Wall Street Journal and the
International Herald Tribune can be good sources of middle- or senior-management
personnel. Most of these print outlets now include online ads with the purchase of
print help wanted ads.
Technology lets companies be more creative about the media they use.70 For
example, Electronic Arts (EA), a video-game publisher, uses its products to help
solicit applicants. EA includes information about its internship program on the back
of its video game manuals. Thanks to nontraditional techniques like these, EA has a
database of more than 200,000 potential job candidates. It uses tracking software to
identify potential applicants with specific skills, and to facilitate ongoing e-mail
communications with everyone in its database.

CONSTRUCTING (WRITING) THE AD Experienced advertisers use the guide

6 Develop a help wanted ad.
AIDA (attention, interest, desire, action) to construct ads. Of course, you must attract
attention to the ad, or readers may just miss or ignore it. Figure 5-9 shows an ad from
one classified section. Why does this ad attract attention? The phrase next key player
certainly helps. Employers usually advertise key positions in display ads like this.
Next, develop interest in the job. You can create interest with lines such as are
you looking to make an impact? or use other aspects of the job, such as its location.
Create desire by spotlighting words such as travel or challenge. As an example,
having a graduate school nearby may appeal to engineers and professional people.

FIGURE 5-9 Help Wanted Ad

That Draws Attention Are You Our Next Key Player?
Source: Giombetti Associates,
Hampden, MA. Reprinted with PLANT CONTROLLER Northern New Jersey
permission.
Are you looking to make an impact? Can you be a strategic business partner
and team player, versus a classic, bean counter ? Our client, a growing
Northern New Jersey manufacturer with two locations, needs a high-energy,
self-initiating, technically competent Plant Controller. Your organizational skills
and strong understanding of general, cost, and manufacturing accounting are
a must. We are not looking for a delegator, this is a hands-on position. If you
have a positive can-do attitude and have what it takes to drive our accounting
function, read oh!
Responsibilities and Qualifications:
Monthly closings, management reporting, product costing, and
annual budget.
Accurate inventory valuations, year-end physical inventory, and
internal controls.
4-year Accounting degree, with 5 8 years experience in a
manufacturing environment.
Must be proficient in Microsoft Excel and have general computer skills
and aptitude.
Must be analytical and technically competent, with the leadership ability
to influence people, situations, and circumstances.

If you have what it takes to be our next key player, tell us in your cover letter,
Beyond the beans, what is the role of a Plant Controller? Only cover
letters addressing that question will be considered. Please indicate
your general salary requirements in your cover letter and email or fax
your resume and cover letter to:
Ross Giombetti
Giombetti Associates
2 Allen Street, P.O. Box 720
Hampden, MA 01036
Email: [email protected]
Fax: (413) 566-2009
154 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Finally, the ad should prompt action with a statement like call today. (Of
course, the ad should also comply with equal employment laws, avoiding features
like man wanted. )
More information is usually better than less. Job applicants view ads with more
specific job information as more attractive and more credible.71 If the job has big
drawbacks, then (depending on your risk preferences) consider a realistic ad. When
the New York City Administration for Children s Services was having problems with
employee retention, it began using these ads: Wanted: men and women willing to
walk into strange buildings in dangerous neighborhoods, [and] be screamed at by
unhinged individuals. . . . Realism reduces applicants, but improves employee
retention.72

Employment Agencies
There are three main types of employment agencies: (1) public agencies operated by
federal, state, or local governments; (2) agencies associated with nonprofit organiza-
tions; and (3) privately owned agencies.

PUBLIC AND NONPROFIT AGENCIES Every state has a public, state-run

employment service agency. The U.S. Department of Labor supports these agencies,
through grants and through other assistance such as a nationwide computerized job
bank. The National Job Bank enables agency counselors to advise applicants about
available jobs in other states as well.
Some employers have mixed experiences with public agencies. For one thing,
applicants for unemployment insurance are required to register and to make them-
selves available for job interviews. Some of these people are not interested in return-
ing to work, so employers can end up with applicants who have little desire for
immediate employment. And fairly or not, employers probably view some of these
local agencies as lethargic in their efforts to fill area employers jobs.
Yet these agencies are actually quite useful. Beyond just filling jobs, counselors
will visit an employer s work site, review the employer s job requirements, and even
assist the employer in writing job descriptions. Most states have turned their local
state employment service agencies into one-stop shops neighborhood training/
employment/educational services centers.73 One user said of the Queens New York
Career Center in Jamaica: I love it: I ve made this place like a second home. 74
At Oregon State s centers, job seekers can use iMatch skills assessment software,
while employers can get up-to-date local economic news and use the center s online
recruitment tools.75 More employers should be taking advantage of these centers
(formerly the unemployment offices in many cities).
Most (nonprofit) professional and technical societies, such as the Institute for
Electrical and Electronic Engineers (IEEE), have units that help members find jobs.
Many special public agencies place people who are in special categories, such as those
who are disabled.

PRIVATE AGENCIES Private employment agencies are important sources of

clerical, white-collar, and managerial personnel. They charge fees (set by state law and
posted in their offices) for each applicant they place. Most are fee-paid jobs, in
which the employer pays the fee.
Why use an agency? Reasons include:
1. Your firm doesn t have its own human resources department and feels it can t do
a good job recruiting and screening.
2. You must fill an opening quickly.
3. There is a perceived need to attract more minority or female applicants.
4. You want to reach currently employed individuals, who might feel more
comfortable dealing with agencies than with competing companies.
5. You want to reduce the time you re devoting to recruiting.76
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 155

Yet using employment agencies requires avoiding the potential pitfalls. For
example, the employment agency s screening may let poor applicants go directly to
the supervisors responsible for hiring, who may in turn naively hire them. Conversely,
improper screening at the agency could block potentially successful applicants.
To help avoid problems:
1. Give the agency an accurate and complete job description.
2. Make sure tests, application blanks, and interviews are part of the agency s
selection process.
3. Periodically review EEOC data on candidates accepted or rejected by your firm,
and by the agency.
4. Screen the agency. Check with other managers to find out which agencies have
been the most effective at filling the sorts of positions you need filled. Review the
Internet and classified ads to discover the agencies that handle the positions you
seek to fill.
5. Supplement the agency s reference checking by checking at least the final candidate s
references yourself.

Temp Agencies and Alternative Staffing

Employers increasingly supplement their permanent workforces by hiring contingent
or temporary workers, often through temporary help employment agencies.
Also known as part-time or just-in-time workers, the contingent workforce is big and
growing. In 2010, about 26% of all jobs private-sector employers added were tempo-
rary positions, two to three times the comparable figures for the last two recessions.
Several things contribute to the trend toward using more temporary employees. One
is continuing weak economic confidence among employers. Another is the trend
towards organizing around short-term projects. For example, Makino, which manu-
factures machine tools, now outsources the installation of large machines to contract
firms, who in turn hire temps to do the installations. Flexibility is another concern,
with more employers wanting to quickly reduce employment levels if the economic
turnaround proves short-lived.77
The contingent workforce isn t limited to clerical or maintenance staff. It includes
thousands of engineering, science, or management support occupations, such as tem-
porary chief financial officers, human resource managers, and chief executive officers.
Employers can hire temp workers either through direct hires or through temporary
staff agencies. Direct hiring involves simply hiring workers and placing them on the job.
The employer usually pays these people directly, as it does all its employees, but classifies
them separately, as casual, seasonal, or temporary employees, and often pays few if any
benefits.78 The other approach is to have a temp agency supply the employees. Here the
agency handles all the recruiting, screening, and payroll administration for the temps.
Thus, Nike hired Kelly Services to manage Nike s temp needs.

PROS AND CONS Employers have long used temps to fill in for permanent
employees who were out sick or on vacation. But today s desire for ever-higher produc-
tivity also contributes to temp workers growing popularity. Productivity is measured in
terms of output per hour paid for, and temps are generally paid only when they re
working not for days off, in other words. Many firms also use temporary hiring to give
prospective employees a trial run before hiring them as regular employees.79
The benefits don t come without a price. Temps may be more productive, but
generally cost employers 20% to 50% more than comparable permanent workers
(per hour or per week), since the agency gets a fee. Furthermore, people have a
psychological reference point to their place of employment. Once you put them in
the contingent category, you re saying they re expendable. 80
When working with temporary agencies, ensure that basic policies and procedures
are in place. For example, with temps, the time sheet is not just a verification of hours
worked. Once the worker s supervisor signs it, it s usually an agreement to pay the
156 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

The numbers of temporary and

freelance workers are increasing
all over the world.

Source: Greg Balfour Evans/Alamy.

agency s fees. What is the policy if the client wants to hire one of the agency s temps as
a permanent employee? How does the agency plan to recruit employees? Did you get a
document from the agency stating that it is not discriminating when filling temp orders?
Checking a temporary agency s references and its listing with the Better Business Bureau
is advisable.81

WHAT SUPERVISORS SHOULD KNOW ABOUT TEMPORARY EMPLOYEES

CONCERNS To make temporary relationships successful, managers supervising
temps should understand these employees main concerns. In one survey, six key
concerns emerged. Temporary workers said they were:
1.Treated by employers in a dehumanizing and ultimately discouraging way.
2.Insecure about their employment and pessimistic about the future.
3.Worried about their lack of insurance and pension benefits.
4.Misled about their job assignments and in particular about whether temporary
assignments were likely to become full-time.
5. Underemployed (particularly those trying to return to the full-time labor
market).82

LEGAL GUIDELINES Several years ago, federal agents rounded up about 250
illegal contract cleaning workers in 60 Walmart stores. The raid underscores the
need to understand the status of the contract employees who work on your premises
handling activities like security or after-hours store cleaning.83 The fact that they
actually work for another, temp-type company is no excuse. For purposes of most
employment laws, with certain limited exceptions, employees of temporary staffing
firms working in an employer s workplace will be considered to be employees both
of the agency and of the employer.84 The employer s liability basically comes down
to the degree to which its supervisors control the temp employee s activities. For
example, ask the staffing agency to handle training. Let it negotiate and set pay rates
and vacation/time-off policies with the temp.

ALTERNATIVE STAFFING Temporary employees are examples of alternative

staffing basically, the use of nontraditional recruitment sources. Other alternative
staffing arrangements include in-house temporary employees (people employed
directly by the company, but on an explicit short-term basis) and contract technical
employees (highly skilled workers like engineers, who are supplied for long-term
projects under contract from an outside technical services firm).
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 157

Offshoring and Outsourcing Jobs

Outsourcing and offshoring are perhaps the most extreme examples of alternative
staffing. Rather than bringing people in to do the company s jobs, outsourcing and
offshoring send the jobs out. Outsourcing means having outside vendors supply
services (such as benefits management, market research, or manufacturing) that the
company s own employees previously did in-house. Offshoring is a narrower term.
It means having outside vendors or employees abroad supply services that the company s
own employees previously did in-house.
Outsourcing and offshoring are both contentious. Particularly in challenging
economic times, employees, unions, legislators, and even many business owners feel
that shipping jobs out (particularly overseas) is ill-advised. That notwithstanding,
employers are sending more jobs out, and not just blue-collar jobs. For example, GE s
transportation division announced that it was shifting 17 mid-level drafting jobs
from Pennsylvania to India.85
Sending out jobs, particularly overseas, presents employers with some special
challenges. One is the potential for political tension in countries such as India. Others
include the likelihood of cultural misunderstandings (such as between your home-
based customers and the employees abroad); security and information privacy
concerns; the need to deal with foreign contract, liability, and legal systems issues; and
the fact that the offshore employees need special training (for instance, in using
pseudonyms like Jim without discomfort). Rising overseas wages, higher oil prices,
and quality issues are prompting more U.S. employers to bring their jobs back
home.86 The bottom line is that neither outsourcing nor offshoring always brings all
the savings one would have hoped for, and both require careful consideration
of human resource issues.

Executive Recruiters
Executive recruiters (also known as headhunters) are special employment agencies
employers retain to seek out top-management talent for their clients. The percentage of
your firm s positions filled by these services might be small. However, these jobs include
key executive and technical positions. For executive positions, headhunters may be your
only source of candidates. The employer always pays the fees.
There are two types of executive recruiters contingent and retained. Members
of the Association of Executive Search Consultants usually focus on executive posi-
tions paying $150,000 or more, and on retained executive search. They are paid
regardless of whether the employer hires the executive through the search firm s
efforts. Contingency-based recruiters tend to handle junior- to middle-level manage-
ment job searches in the $50,000 to $150,000 range. Whether retained or contingent,
fees are beginning to drop from the usual 30% or more of the executive s first-year
pay.87 Top recruiters (all retained) include Heidrick and Struggles, Egon Zehnder
International, Russell Reynolds, and Spencer Stuart.88
Executive recruiters are using more technology and becoming more specialized.
The challenging part of recruiting has always been finding potential candidates to
find, say, a sales manager with experience in chemical engineered products. Not
surprisingly, Internet-based databases now dramatically speed up such searches.
Executive recruiters are also becoming more specialized. The large ones are creating
new businesses aimed at specialized functions (such as sales) or industries (such as oil
products). So, it s advisable to look first for one that specializes in your field.

PROS AND CONS Recruiters bring a lot to the table. They have many contacts
and are especially adept at finding qualified employed candidates who aren t actively
looking to change jobs. They can keep your firm s name confidential until late into

alternative staffing
The use of nontraditional recruitment
sources.
158 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

the search process. The recruiter can save top management s time by finding and
screening an applicant pool. The recruiter s fee might actually turn out to be small
when you compare it to the executive time saved.
The big issue is ensuring that the recruiter really understands your needs and
then delivers properly vetted candidates who fill the bill. As an employer, it is essential
to explain completely what sort of candidate is required and why. Therefore, be pre-
pared for some in-depth dissecting of your request. Some recruiters also may be more
interested in persuading you to hire a candidate than in finding one who will really do
the job. Understand that one or two of the final candidates may actually just be
fillers to make the recruiter s one real candidate look better.

GUIDELINES In choosing a recruiter, guidelines include:89

1. Make sure the firm is capable of conducting a thorough search. Under their ethics
code, a recruiter can t approach the executive talent of a former client for a period
of 2 years after completing a search for that client. Since former clients are off
limits for 2 years, the recruiter must search from a constantly diminishing pool.90
2. Meet the individual who will actually handle your assignment.
3. Make sure to ask how much the search firm charges. Get the agreement in writing.91
4. Make sure the recruiter and you see eye to eye on what sort of person you need
for the position.
5. Never rely solely on the executive recruiter (or other search professional, such as
employment agency) to do all the reference checking. Certainly, let them check the
candidates references, but get notes of these references in writing from the recruiter
(if possible). And, in any event, make sure to check at least the final candidate s
references yourself.

On-Demand Recruiting Services

On-demand recruiting services (ODRS) provide short-term specialized recruiting
assistance to support specific projects without the expense of retaining traditional
search firms. They are recruiters who are paid by the hour or project, instead of a
percentage fee. For example, when the human resource manager for a biotech firm had
to hire several dozen people with scientific degrees and experience in pharmaceuticals,
she used an ODRS firm. A traditional recruiting firm might charge 20% to 30% of each
hire s salary, a prohibitive amount for a small company. The ODRS firm charged by
time, rather than per hire. It handled recruiting and prescreening, and left the client
with a short list of qualified candidates.92

College Recruiting
College recruiting sending an employer s representatives to college campuses to
prescreen applicants and create an applicant pool from the graduating class is an
important source of management trainees and professional and technical employees.
One study several years ago concluded, for instance, that new college graduates filled
about 38% of all externally filled jobs requiring a college degree.93
The problem is that on-campus recruiting is expensive and time-consuming.
Schedules must be set well in advance, company brochures printed, interview records
kept, and much time spent on campus. And recruiters themselves are sometimes
ineffective. Some recruiters are unprepared, show little interest in the candidate, and act
superior. Many don t screen candidates effectively. Employers need to train recruiters
in how to interview candidates, how to explain what the company has to offer, and
how to put candidates at ease. And even more than usual, the recruiter needs to be
personable and preferably have a history of attracting good candidates.94 GE hires
800 to 1,000 students each year from about 40 schools, and uses teams of employees
and interns to build GE s brand at each school. Similarly, IBM has 10 recruiting staff
who focus on improving the results of IBM s on-campus recruiting efforts.95
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 159

ON-CAMPUS RECRUITING GOALS The campus recruiter has two main

goals. One is to determine if a candidate is worthy of further consideration. Usual
traits to assess include communication skills, education, experience, and inter-
personal skills. The other aim is to attract good candidates. A sincere and informal
attitude, respect for the applicant, and prompt follow-up letters can help sell the
employer to the interviewee. Employers who send effective recruiters to campus and
build relationships with opinion leaders such as career counselors and professors
have better recruiting results.96
Building close ties with a college s career center can help employers achieve
these goals. Doing so provides recruiters with useful feedback regarding things like
labor market conditions and the effectiveness of one s on- and offline recruiting
ads.97 Shell Oil reduced the list of schools its recruiters visit, using factors such as
quality of academic program, number of students enrolled, and diversity of the
student body.98

THE ON-SITE VISIT Employers generally invite good candidates to the office or
plant for an on-site visit. There are several ways to make this visit fruitful. The invita-
tion should be warm and friendly but businesslike, and should give the person a
choice of dates to visit. Have someone meet the applicant, preferably at the airport or
at his or her hotel, and act as host. A package containing the applicant s schedule as
well as other information regarding the company such as annual reports and
employee benefits should be waiting for the applicant at the hotel.
Plan the interviews and adhere to the schedule. Avoid interruptions; give the
candidate the undivided attention of each person with whom he or she interviews.
Have another recently hired graduate host the candidate s lunch. Make any offer as
soon as possible, preferably at the time of the visit. If this is not possible, tell the
candidate when to expect a decision. Frequent follow-ups to find out how the
decision process is going may help to tilt the applicant in your favor.
A study of 96 graduating students from a major Northeastern university reveals some
other things for which to watch out. For example, 53% said on-site visit opportunities
to meet with people in positions similar to those applied for, or with higher-ranking
persons had a positive effect. Fifty-one percent mentioned, Impressive hotel/dinner
arrangements and having well-organized site arrangements. Disorganized, unprepared
interviewer behavior, or uninformed, useless answers turned off 41%. Forty percent
mentioned unimpressive cheap hotels, disorganized arrangements, or inappropriate
behavior of hosts as negatives.99

INTERNSHIPS Many college students get their jobs through college internships.
Internships can be win win situations. For students, it may mean being able to hone
business skills, learn more about potential employers, and discover their career likes
(and dislikes). And employers can use the interns to make useful contributions while
evaluating them as possible full-time employees. A recent study found that about
60% of internships turned into job offers.100

Referrals and Walk-Ins

Employee referral campaigns are an important recruiting option. Here the employer
posts announcements of openings and requests for referrals on its Web site, bulletin,
and/or wallboards. It often offers prizes or cash awards for referrals that lead

on-demand recruiting services (ODRS) college recruiting

Services that provide short-term specialized Sending an employer s representatives
recruiting to support specific projects to college campuses to prescreen applicants
without the expense of retaining traditional and create an applicant pool from the
search firms. graduating class.
160 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

to hiring. For example, health care giant Kaiser Permanente says, Our employee
referral program encourages you to introduce your talented friends, family
members, or former colleagues to career opportunities at Kaiser Permanente.
Referring someone for one of its award-eligible positions can produces bonuses of
$3,000 or more.101 The Container Store uses a successful variant of the employee
referral campaign. They train their employees to recruit new employees from among
the firm s customers.

PROS AND CONS The big advantage here is that referrals tend to generate more
applicants, more hires, and a higher yield ratio (hires/applicants). 102 Current
employees will usually provide accurate information about the job applicants they are
referring, since they re putting their own reputations on the line. The new employees
may also come with a more realistic picture of what the firm is like. A survey by the
Society for Human Resource Management (SHRM) found that of 586 employer
respondents, 69% said employee referral programs are more cost-effective than other
recruiting practices and 80% specifically said they are more cost-effective than
employment agencies. On average, referral programs cost around $400 $900 per hire
in incentives and rewards.103
There are a few things to avoid. If morale is low, you probably should address that
prior to asking for referrals. And if you don t hire someone, explain to your
employee/referrer why you did not hire his or her candidate. And we saw that relying
on referrals might be discriminatory.

WALK-INS Particularly for hourly workers, walk-ins direct applications made

at your office are a big source of applicants. From a practical point of view, simply
posting a Help Wanted sign outside the door may be the most cost-effective way of
attracting good local applicants. Treat walk-ins courteously and diplomatically, for
both the employer s community reputation and the applicant s self-esteem. Many
employers give every walk-in a brief interview, even if it is only to get information on
the applicant in case a position should be open in the future. Particularly in
challenging times, you ll also receive many unsolicited application letters from
professional and white-collar applicants. These can be good sources of leads. Good
business practice requires answering all letters of inquiry from applicants promptly
and courteously.

Telecommuters
Telecommuters are another option. For example, JetBlue Airways uses at-home agents
to handle its reservation needs. These JetBlue employee crewmembers live in the Salt
Lake City area and work out of their homes. They use JetBlue-supplied computers and
technology, and receive JetBlue training.104

Military Personnel
Returning and discharged U.S. military personnel provide an excellent source of
trained recruits. Several military branches have programs to facilitate soldiers finding
jobs. For example, the U.S. Army s Partnership for Youth Success enables someone
entering the Army to select a post-army corporate partner for an employment
interview as a way to help soldiers find a job after leaving the Army.105

Recruiting Source Use and Effectiveness

Research reveals several guidelines employers can use to improve their recruiting
efforts effectiveness (see Table 5-1). For example, referrals from current employees yield
applicants who are less likely to leave and more likely to perform better.106
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 161

TABLE 5-1 Recruitment: Practical Applications for Managers

Recruitment Research Findinga Practical Applications for Managers

The recruitment source affects the characteristics of applicants Use sources such as referrals from current employees that yield
you attract. applicants more likely to be better performers.
Recruitment materials have a more positive impact if they contain Provide applicants with information on aspects of the job that
more specific information. are important to them, such as salary, location, and diversity.
Organizational image influences applicants initial reactions. Ensure all communications regarding an organization provide
a positive message regarding the attractiveness of the organization
as a place to work.
Applicants with a greater number of job opportunities are more Ensure initial recruitment activities (e.g., Web site, brochure,
attentive to early recruitment activities. on-campus recruiting) are attractive to candidates.
Realistic job previews that highlight both the advantages and the Provide applicants with a realistic picture of the job and
disadvantages of the job reduce subsequent turnover. organization, not just the positives.
Applicants will infer (perhaps erroneous) information about Provide clear, specific, and complete information in recruitment
the job and company if the information is not clearly provided materials so that applicants do not make erroneous inferences about
by the company. the job or the employer.
Recruiter warmth has a large and positive effect on applicants Choose individuals who have contact with applicants for their
decisions to accept a job. interpersonal skills.
Recruitment source also has a significant effect Individuals recruited through personal recruitment sources such
on reducing turnover. as employee referral programs are less likely to terminate their
employment early.
a
Selected research principles from M. S. Taylor and & C. J. Collins (2000), Strategic Recruitment. In C. L. Cooper & E. A. Locke. (Eds.) I/O
Psychology: Practice and Theory Book. Oxford: Blackwell.
Sources: Adapted from Ann Marie Ryan and Nancy Tippins, Attracting and Selecting: What Psychological Research Tells Us, Human Resource Management 43,
no. 4 (Winter 2004), p. 311; and Ingo Weller et al., Level and Time Effects of Recruitment Sources on Early Voluntary Turnover, Journal of Applied Psychology
94, no. 5 (2009), pp. 1146 1162 (1157). Reprinted by permission of Society for Human Resource Management via Copyright Clearance Center.

Evidenced-Based HR: Measuring Recruiting Effectiveness

Even small employers may spend tens of thousands of dollars per year recruiting
applicants, yet few firms assess their recruitment efforts effectiveness. Is it more cost-
effective for us to advertise for applicants on the Web or in Sunday s paper? Should we
use this employment agency or that one? One survey found that only about 44% of the
279 firms surveyed made formal attempts to evaluate their recruitment efforts.107 Such
inattention flies in the face of common sense.108
In terms of what to measure, one question is How many applicants did we
generate through each of our recruitment sources? 109 Possible recruiting metrics
include new hire job performance, new hire failure rate, new hire turnover, training
success, and manager s satisfaction.110
The problem is that more applicants is not always better. The employer needs
qualified, hirable applicants, not just applicants. An Internet ad may generate
thousands of applicants, many from so far away that there s no chance they re viable.
Even with computerized prescreening and tracking software, there are still more
applicants to correspond with and screen.111
The applicant tracking system should help compare recruiting sources, but about
30% of them lack the necessary tools to effectively pinpoint source of hire.112 And
realistically, the manager looking to hire five engineers probably won t be twice as
selective with 20,000 applicants as with 10,000. So, it is not just quantity but quality.
It s therefore wise to compare your recruiting sources with measures of how employees
from these sources did after about a year on the job. The accompanying HR as a Profit
Center illustrates the role human resources can play.
162 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

HR AS A PROFIT CENTER
GE Medical Recruitment Process Outsourcing (RPO) Example
GE Medical hires about 500 technical workers a year to make sophisticated medical
devices such as CT scanners. GE Medical must compete for talent with the likes of
Microsoft. However, it has cut its hiring costs by 17%, reduced time to fill the positions
by 20% to 30%, and cut in half the percentage of new hires who don t work out.113
GE Medical s HR team accomplished this in part by applying some of its pur-
chasing techniques to its dealings with recruiters. For example, it called a meeting
and told 20 recruiters that it would work with only the 10 best. To measure best,
the company created measurements inspired by manufacturing techniques, such
as percentage of résumés that result in interviews and percentage of interviews
that lead to offers. Similarly, GE Medical discovered that current employees are
very effective as references. For instance, GE Medical interviews just 1% of appli-
cants whose résumés it receives, while 10% of employee referrals result in actual
hires. So GE Medical took steps to double the number of employee referrals. It
simplified the referral forms, eliminated bureaucratic submission procedures, and
added a small reward like a Sears gift certificate for referring a qualified candidate.
GE also upped the incentive $2,000 if someone referred is hired, and $3,000 if he
or she is a software engineer. GE is also moving to use recruitment process
outsourcers. These RPOs handle tasks such as setting up interviews, making
flight and hotel reservations and providing weekly reports on all open positions.113.

Improving Productivity Through HRIS

An Integrated Approach to Recruiting
Ideally, an employer s computerized recruitment system should include several
elements: a requisition management system, which facilitates requisition, routing,
approval, and posting of job openings; a recruiting solution, including job advertise-
ment, recruitment marketing, applicant tracking, and online recruitment vendor
management, to increase and improve applicant pool quality; screening services,
such as skills and behavioral assessment services; and hiring management software to
capture and manage candidate information.114

7 Explain how to recruit a

RECRUITING A MORE DIVERSE WORKFORCE
more diverse workforce. As we explained in Chapter 2, recruiting a diverse workforce isn t just socially responsi-
ble. Given the rapid increase in minority, older worker, and women candidates, it is a
necessity. The recruiting tools we have described to this point are certainly useful for
minority and other applicants, too. However, in general, recruiting a more diverse
workforce requires several special steps, to which we now turn.115

Single Parents
In 2010, there were almost 10 million single parent families with children under
18 maintained by the mother, about two-thirds of whom were employed. There were
about 1.25 million single parent families with children under 18 maintained by the
father, and three-fourths of those fathers were employed. Being a single parent isn t easy,
and recruiting and keeping them requires understanding the problems they face in
balancing work and family life.116 In one survey,
Many described falling into bed exhausted at midnight without even minimal time
for themselves. . . . They often needed personal sick time or excused days off to care
for sick children. As one mother noted, I don t have enough sick days to get sick. 117
Given such concerns, the first step in attracting (and keeping) single parents is to
make the workplace as user friendly for them as practical.118 Many firms have family
friendly programs but these may not be extensive enough for single parents. For exam-
ple, flextime programs provide employees some flexibility (such as 1-hour windows
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 163

at the beginning or end of the day)

around which to build their work-
days. The problem is that for many
single parents this limited flexibility
may not be enough in the face of the
conflicting work home pressures
that many face. CNN even offered a
Work/Life Balance Calculator (www.
cnn.com/2008/LIVING/worklife/06/
04/balance.calculator/) to assess how
far out of balance one s life may be.119
Flexible work schedules and

Source: Mel Yates/Getty Images USA, Inc.

child-care benefits are thus just two
big single-parent magnets. In addi-
tion, surveys suggest that a supportive
attitude on the supervisor s part can
go far toward making the single
parent s work home balancing act
more bearable.

Older Workers
When it comes to hiring older work- Not just single parents, but also their children
ers, employers don t have much may occasionally need some extra support.
choice.120 Over the next few years,
the fastest-growing labor force segment will be those from 45 to 64 years old. Those
age 25 to 34 will decline by almost 3 million, reflecting fewer births in the late 1960s
and early 1970s. On the positive side, a survey by AARP and SHRM concluded that
older workers tend to have lower absenteeism rates, more reliability, and better work
habits than younger workers.121 Firms like Home Depot capitalize on this by hiring
older employees, who serve as a powerful draw to baby boomer shoppers by
mirroring their knowledge and perspective. 122
It therefore makes sense for employers to encourage older workers to stay (or to
come to work at the company). Doing so involves several things. The big one is prob-
ably to provide opportunities for flexible (and often abbreviated) work schedules.
One survey found that flexibility was the main concern for 71% of baby boomers,
with those who continue working preferring to do so part time.123 At one company,
workers over 65 can progressively shorten their work schedules; another company
uses mini shifts to accommodate those interested in working less than full time.
Other suggestions include the following:
* Phased retirement that allows workers to ease out of the workforce.
* Portable jobs for snowbirds who wish to live in warmer climates in the winter.
* Part-time projects for retirees.
* Full benefits for part-timers.124
As always in recruiting, projecting the right image is essential. For example, one
study found that writing the ad so that it sent the message we re older-worker
friendly was important. The most effective ads emphasized schedule flexibility, and
accentuated the firm s equal opportunity employment statement. This was much
more effective than adding statements alluding to giving retirees opportunities
to transfer their knowledge to the new work setting.125

Recruiting Minorities
The same prescriptions that apply to recruiting older workers apply to recruiting
minorities. In practice, this requires a three-part effort: Understand the recruit-
ment barriers, formulate the required recruitment plans, and institute the specific
day-to-day programs.126
164 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

UNDERSTAND First, understand the barriers that prevent minorities from apply-
ing. For example, many minority applicants don t meet the educational or experience
standards for the job, so many companies offer remedial training in basic arithmetic
and writing. For others, lack of role models is a problem. For example, in one retail
chain, it was a lack of role models (plus what the one manager called a rather macho
culture ) that stopped women from applying. Sometimes (as we saw) it s a lack of
schedule flexibility, given the responsibility for caring and schooling of the children.

PLAN After recognizing the potential impediments, you can turn to formulating
plans for attracting and retaining minorities and women. This may include, for
instance, developing flexible work options, redesigning jobs, and offering flexible
benefits plans.

IMPLEMENT Finally, translate these personnel plans into recruitment programs.

Specifically, decide what the ads will say, and what recruiting sources you will use.
Many job seekers check with friends or relatives as a strategy for looking for jobs, so
encouraging your minority employees to assist in your recruitment efforts makes
sense. Diversity recruitment specialists include www.diversity.com, www.2trabajo.
com, and http://recruitersnetwork.com/resources/diversity.htm.
Other firms collaborate with specialist professional organizations. These include the
National Black MBA Association (www.nbmbaa.org/home.aspx?PageID=637&),
the National Society of Hispanic MBAs (www.nshmba.org/) and the Organization of
Chinese Americans (http://ocanational.org/).

Welfare-to-Work
Some companies report difficulty in hiring and assimilating people previously on wel-
fare. Applicants sometimes lack basic work skills, such as reporting for work on time,
working in teams, and taking orders. The key to a welfare-to-work program s success
seems to be the employer s pretraining program. Here, participants get counseling and
basic skills training over several weeks.127

The Disabled
The EEOC estimates that nearly 70% of the disabled are jobless, but it certainly doesn t
have to be that way.128 The research is quite persuasive regarding the fact that in terms
of virtually all work criteria, employees with disabilities are capable workers. Thousands
of employers in the United States and elsewhere have found that disabled employees
provide an excellent and largely untapped source of competent, efficient labor for jobs
ranging from information technology to creative advertising to receptionist.
Employers can do several things to tap this huge potential workforce. The U.S.
Department of Labor s Office of Disability Employment Policy offers several pro-
grams, including one that helps link disabled college undergraduates who are looking
for summer internships with potential employers.129 All states have local agencies
(such as Corporate Connections in Tennessee) that provide placement services and
other recruitment and training tools and information for employers seeking to hire the
disabled. Employers also must use common sense. For example, employers who only
post job openings online may miss potential employees who are visually impaired.130

DEVELOPING AND USING APPLICATION FORMS

Purpose of Application Forms
With a pool of applicants, the prescreening process can begin. The application form
is usually the first step in this process (some firms first require a brief, prescreening
interview or online test).
A filled-in application provides four types of information. First, you can make
judgments on substantive matters, such as whether the applicant has the education
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 165

FIGURE 5-10 FBI Employment

Application

Source: www.fbijobs.gov/
employment/fd646c.pdf, accessed
April 28, 2009.

and experience to do the job. Second, you can draw conclusions about the applicant s
previous progress and growth, especially important for management candidates.
Third, you can draw tentative conclusions about the applicant s stability based on
previous work record (although years of downsizing suggest the need for caution
here). Fourth, you may be able to use the data in the application to predict which
candidates will succeed on the job and which will not.
Most employers need several application forms. For technical and managerial
personnel, the form may require detailed answers to questions about education
and training. The form for hourly factory workers might focus on tools and
equipment. Figure 5-10 presents one employer s approach to collecting application
form information the employment application for the FBI. In practice, most
employers encourage online applications.

application form
The form that provides information on edu-
cation, prior work record, and skills.
166 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Application Guidelines
Managers should keep several practical guidelines in mind. In the Employment
History section, request detailed information on each prior employer, including the
name of the supervisor and his or her e-mail address and telephone number; this is
essential for reference checking. Also, in signing the application, the applicant should
certify his or her understanding that falsified statements may be cause for dismissal, that
investigation of credit and employment and driving record is authorized, that a medical
examination may be required, that drug screening tests may be required, and that
employment is for no definite period.
APPLICANT EXAGGERATION Job applicants often exaggerate their qualifica-
tions. Estimates of how many applicants exaggerate range from 40% to 70%.131
The most common exaggerations concern education and job experience. A majority
of graduating seniors reportedly believe that employers expect a degree of exaggera-
tion on resumes. Much of this exaggeration occurs on resumes, but may occur on
application forms too. Therefore, always ensure applicants complete the form and
sign a statement on it indicating that the information is true. The court will almost
always support a discharge for falsifying information when applying for work.132
Furthermore, doing a less-than-complete job of filling in the form may reflect poor
work habits. Some applicants simply scribble see résumé attached on the application.
This is not acceptable. You need the signed, completed form.

Application Forms and EEO Law

Carefully review application forms to ensure that they comply with equal employment
laws. Questions to be aware of include:
Education. A question on the dates of attendance and graduation from various
schools is one potential violation, insofar as it may reflect the applicant s age.
Arrest record. The courts have usually held that employers violate Title VII by
disqualifying applicants from employment because of an arrest. This item has an
adverse impact on minorities, and employers usually can t show it s required as a
business necessity.
Notify in case of emergency. It is generally legal to require the name, address,
and phone number of a person to notify in case of emergency. However, asking
the relationship of this person could indicate the applicant s marital status or
lineage.
Membership in organizations. Some forms ask the applicant to list memberships
in clubs, organizations, or societies. Employers should include instructions not to
include organizations that would reveal race, religion, physical handicaps, marital
status, or ancestry.
Physical handicaps. It is usually illegal to require the listing of an applicant s phys-
ical handicaps or past illnesses unless the application blank specifically asks only
for those that may interfere with your job performance. Similarly, it is generally
illegal to ask whether the applicant has ever received workers compensation.
Marital status. In general, the application should not ask whether an applicant
is single, married, divorced, separated, or living with anyone, or the names,
occupations, and ages of the applicant s spouse or children.
Housing. Asking whether an applicant owns, rents, or leases a house may also be
discriminatory. It can adversely affect minority groups and is difficult to justify
on business necessity.
VIDEO RÉSUMÉS More candidates are submitting video résumés, a practice
replete with benefits and threats. About half of responding employers in one survey
thought video résumés might give employers a better feel for the candidate. The
danger is that a video résumé makes it more likely that rejected candidates may claim
discrimination.133 To facilitate using video résumés, several Web sites compile for
applicants, usually for a fee, multimedia résumés.134
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 167

Using Application Forms to Predict Job Performance

Finally, employers can use analyses of application information ( biodata ) to predict
employee tenure and performance. In one study, the researchers found that applicants
who had longer tenure with previous employers were less likely to quit, and also had
higher performance within 6 months after hire.135 Examples of biodata items might
include quit a job without giving notice, graduated from college, and traveled
considerably growing up. 136
Choose biodata items with three things in mind. First, of course, equal employ-
ment law limits the items you ll want to use (don t use age, race, or gender, for
instance). And, noninvasive items are best. In one study, subjects perceived items such
as dollar sales achieved and grade point average in math as legitimate, and not
invasive. Other items such as birth order and frequent dates in high school were
more invasive, and unacceptable. Finally, consider that some applicants will fake
biodata answers in an effort to impress the employer.137

Mandatory Arbitration
Many employers, aware of the high costs of employment litigation, require applicants to
agree in writing to mandatory arbitration should a dispute arise. The practice is a
matter of debate.
Different federal courts have taken different positions on the enforceability of
these mandatory alternative dispute resolution clauses. The basic situation now is
that they are generally enforceable, with two big caveats.
First, it must be a fair process.138 For example, the agreement should be a signed
and dated separate agreement. Use simple wording. Provide for reconsideration and
judicial appeal if there is an error of law.139 The employer must absorb most of the
cost of the arbitration process. The arbitration process should be reasonably swift.
The employee, if he or she prevails, should be eligible to receive the full remedies that
he or she would have had if he or she had had access to the courts.
Second, mandatory arbitration clauses turn some candidates off. In one study,
389 MBA students read simulated employment brochures. Mandatory employ-
ment arbitration had a significantly negative impact on the attractiveness of the
company as a place to work.140

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. The recruitment and selection process entails five main scatter plots, or computerized software packages. The
steps: decide what positions to fill; build a pool of other side of the equation is forecasting the supply of
candidates for these jobs; have candidates complete inside candidates. Here employers use manual systems
application forms; use selection tools; and decide to and replacement charts, and computerized skills inven-
whom to make an offer, in part by having the supervisor tories. Forecasting the supply of outside candidates is
and others interview the candidates. important, particularly when entering periods of
2. Recruitment and selection starts with workforce plan- economic expansion where unemployment is low and
ning and forecasting. Workforce planning is the process good candidates are more difficult to come by.
of deciding what positions the firm will have to fill, and 3. All managers need to understand why effective recruit-
how to fill them. This often starts by forecasting person- ing is important. Without enough candidates, employers
nel needs, perhaps using trend analysis, ratio analysis, cannot effectively screen the candidates or hire the best.
168 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Some employers use a recruiting yield pyramid to alternative types of employees, such as contract
estimate how many applicants they need to generate in employees for special projects.
order to fill predicted job openings. Executive recruiters, a special type of employment
4. Filling open positions with internal sources of candi- agency, are invaluable for finding and helping the
dates has several advantages. For example, you re probably employer hire top-level professionals and executives.
already more familiar with their strengths and weaknesses, However, the employer needs to ensure that the
and they require less orientation. Finding internal candi- recruiter is conducting a thorough search and
dates often utilizes job posting. For filling the company s carefully checking references.
projected top-level positions, succession planning the Other outside sources include college recruiting,
ongoing process of systematically identifying, assessing, referrals and walk-ins, and military personnel.
and developing organizational leadership to enhance
6. Understanding how to recruit a more diverse workforce
performance is the process of choice.
is important. Whether the target is the single parent,
5. Employers use a variety of outside sources of candidates
older workers, or minorities, the basic rule is to under-
when recruiting applicants.
stand their special needs and to create a set of policies
Of these, recruiting via the Internet using job boards and practices that create a more hospitable environment
such as Monster.com represents the leading source. in which they can work.
It is quick and cost-effective. One downside is too 7. The recruitment process inevitably includes developing
many applicants from too far away, but employers and using application forms to collect essential back-
use applicant tracking software to screen online ground information about the applicant. The application
applicants. should enable you to make judgments on substantial
Other sources include advertising and employment matters such as the person s education and to identify the
agencies (including public and nonprofit agencies, person s job references and supervisors. Of course, it s
and private agencies). important to make sure the application complies with
Employers increasingly turn to temporary agencies equal employment laws, for instance with respect to
and other alternative staffing methods to hire questions regarding physical handicaps.

DISCUSSION QUESTIONS
1. What are the pros and cons of five sources of job 4. What should employers keep in mind when using Internet
candidates? sites to find job candidates?
2. What are the four main types of information that appli- 5. What are the five main things you would do to recruit
cation forms provide? and retain a more diverse workforce?
3. How, specifically, do equal employment laws apply
to personnel recruiting activities?

INDIVIDUAL AND GROUP ACTIVITIES

1. Bring to class several classified and display ads from the workers, and single parents. Discuss what they re doing
Sunday help wanted ads. Analyze the effectiveness of to be family friendly.
these ads using the guidelines discussed in this chapter. 5. Working individually or in groups, interview a manager
2. Working individually or in groups, develop a 5-year between the ages of 25 and 35 at a local business who
forecast of occupational market conditions for five manages employees age 40 or older. Ask the manager
occupations such as accountant, nurse, and engineer. to describe three or four of his or her most challenging
3. Working individually or in groups, visit the local office of experiences managing older employees.
your state employment agency (or check out their site 6. The HRCI Test Specifications appendix at the end of this
online). Come back to class prepared to discuss the follow- book (pages 633 640) lists the knowledge someone study-
ing questions: What types of jobs seem to be available ing for the HRCI certification exam needs to have in each
through this agency, predominantly? To what extent do you area of human resource management (such as in Strategic
think this particular agency would be a good source of pro- Management, Workforce Planning, and Human Resource
fessional, technical, and/or managerial applicants? What Development). In groups of four to five students, do four
sorts of paperwork are applicants to the state agency things: (1) review that appendix now; (2) identify the
required to complete before their applications are processed material in this chapter that relates to the required knowl-
by the agency? What other services does the office provide? edge the appendix lists; (3) write four multiple-choice
What other opinions did you form about the state agency? exam questions on this material that you believe would be
4. Working individually or in groups, find at least five suitable for inclusion in the HRCI exam; and (4) if time
employment ads, either on the Internet or in a local permits, have someone from your team post your team s
newspaper, that suggest that the company is family questions in front of the class, so the students in other
friendly and should appeal to women, minorities, older teams can take each others exam questions.
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 169

EXPERIENTIAL EXERCISE
The Nursing Shortage
As of August 2011, U.S. unemployment was still disappoint- How to Set Up the Exercise/Instructions: Set up groups of
ingly high, and employers were still holding back on their four to five students for this exercise. The groups should
hiring. However, while many people were unemployed, that work separately and should not converse with each other.
was not the case with nurse professionals. Virtually every Each group should address the following tasks:
hospital was aggressively recruiting nurses. Many were turn- 1. Based on information available on the hospital s
ing to foreign-trained nurses, for example, by recruiting Web site, create a hard-copy ad for the hospital to place
nurses in the Philippines. Experts expected nurses to be in in the Sunday edition of the New York Times. Which
very short supply for years to come. (geographic) editions of the Times would you use,
Purpose: The purpose of this exercise is to give you experi- and why?
ence in creating a recruitment program. 2. Analyze the hospital s current online nurses ad. How
Required Understanding: You should be thoroughly familiar would you improve on it?
with the contents of this chapter, and with the nurse recruit- 3. Prepare in outline form a complete nurses recruiting
ment program of a hospital such as Lenox Hill Hospital in New program for this hospital, including all recruiting
York (see http://lenoxhillhospital.org/careers_default.aspx). sources your group would use.

APPLICATION CASE
FINDING PEOPLE WHO ARE PASSIONATE ABOUT WHAT THEY DO
Trilogy Enterprises Inc. of Austin, Texas, is a fast-growing Trilogy makes finding the right people (it calls them
software company, and provides software solutions to giant great people ) a company-wide mission. Recruiters actively
global firms for improving sales and performance. It prides pursue the freshest, if least experienced, people in the job
itself on its unique and unorthodox culture. Many of its market, scouring college career fairs and computer science
approaches to business practice are unusual, but in Trilogy s departments for talented overachievers with ambition and
fast-changing and highly competitive environment, they entrepreneurial instincts. Top managers conduct the first
seem to work. rounds of interviews, letting prospects know they will be
There is no dress code and employees make their own pushed to achieve but will be well rewarded. Employees take
hours, often very long. They tend to socialize together (the top recruits and their significant others out on the town
average age is 26), both in the office s well-stocked kitchen and when they fly into Austin for the standard, 3-day preliminary
on company-sponsored events and trips to places like local visit. A typical day might begin with grueling interviews but
dance clubs and retreats in Las Vegas and Hawaii. An in-house end with mountain biking, rollerblading, or laser tag. Execu-
jargon has developed, and the shared history of the firm has tives have been known to fly out to meet and woo hot
taken on the status of legend. Responsibility is heavy and prospects who couldn t make the trip.
comes early, with a just do it now attitude that dispenses One year, Trilogy reviewed 15,000 résumés, conducted
with long apprenticeships. New recruits are given a few weeks 4,000 on-campus interviews, flew 850 prospects in for inter-
of intensive training, known as Trilogy University and views, and hired 262 college graduates, who account for over
described by participants as more like boot camp than busi- a third of its current employees. The cost per hire was
ness school. Information is delivered as if with a fire hose, $13,000; Jeff Daniel believes it was worth every penny.
and new employees are expected to commit their expertise
and vitality to everything they do. Jeff Daniel, director of Questions
college recruiting, admits the intense and unconventional 1. Identify some of the established recruiting techniques that
firm is not the employer for everybody. But it s definitely an apparently underlie Trilogy s unconventional approach
environment where people who are passionate about what to attracting talent.
they do can thrive. 2. What particular elements of Trilogy s culture most likely
The firm employs about 700 such passionate people. appeal to the kind of employees it seeks? How does it
Trilogy s managers know the rapid growth they seek convey those elements to job prospects?
depends on having a staff of the best people they can find, 3. Would Trilogy be an appealing employer for you? Why
quickly trained and given broad responsibility and freedom or why not? If not, what would it take for you to accept a
as soon as possible. CEO Joe Liemandt says, At a software job offer from Trilogy?
company, people are everything. You can t build the next 4. What suggestions would you make to Trilogy for improv-
great software company, which is what we re trying to do ing its recruiting processes?
here, unless you re totally committed to that. Of course, the
leaders at every company say, People are everything. But Sources: Chuck Salter, Insanity, Inc., Fast Company, January 1999, pp. 101 108;
they don t act on it. and www.trilogy.com/sections/careers/work, accessed August 24, 2007.
170 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

CONTINUING CASE
CARTER CLEANING COMPANY
Getting Better Applicants resources planning and trend analysis, says Jennifer. We re
If you were to ask Jennifer and her father what the main prob- fighting an economic war and I m happy just to be able to
lem was in running their firm, their answer would be quick round up enough live applicants to be able to keep my
and short: hiring good people. Originally begun as a string of trenches fully manned.
coin-operated laundromats requiring virtually no skilled help, In light of this problem, Jennifer s father asked her to
the chain grew to six stores, each heavily dependent on skilled answer the following questions:
managers, cleaner/spotters, and pressers. Employees generally
have no more than a high school education (often less), and Questions
the market for them is very competitive. Over a typical week- 1. First, how would you recommend we go about reducing
end, literally dozens of want ads for experienced pressers or the turnover in our stores?
cleaner/spotters can be found in area newspapers. All these 2. Provide a detailed list of recommendations concerning
people usually are paid around $15 per hour, and they change how we should go about increasing our pool of acceptable
jobs frequently. Jennifer and her father thus face the continu- job applicants so we no longer face the need to hire almost
ing task of recruiting and hiring qualified workers out of a anyone who walks in the door. (Your recommendations
pool of individuals they feel are almost nomadic in their regarding the latter should include completely worded
propensity to move from area to area and job to job. Turnover online and hard-copy advertisements and recommenda-
in their stores (as in the stores of many of their competitors) tions regarding any other recruiting strategies you would
often approaches 400%. Don t talk to me about human suggest we use.)

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Recruitment Process took the path of least resistance when a job became available,
The Hotel Paris s competitive strategy is To use superior guest such as by placing help wanted ads in their local papers.
service to differentiate the Hotel Paris properties, and to There was no sense of direction from the Hotel Paris s
thereby increase the length of stay and return rate of guests, and headquarters regarding what sorts of applicants the com-
thus boost revenues and profitability. HR manager Lisa Cruz pany preferred, what media and alternative sources of
must now formulate functional policies and activities that recruits its managers should use, no online recruiting, and
support this competitive strategy by eliciting the required no measurement at all of recruitment process effectiveness.
employee behaviors and competencies. The company ignored recruitment-source metrics that other
As a longtime HR professional, Lisa Cruz was well aware firms used effectively, such as number of qualified applicants
of the importance of effective employee recruitment. If the per position, percentage of jobs filled from within, the offer-
Hotel Paris didn t get enough applicants, it could not be selec- to-acceptance ratio, acceptance by recruiting source,
tive about who to hire. And, if it could not be selective about turnover by recruiting source, and selection test results by
who to hire, it wasn t likely that the hotels would enjoy the recruiting source.
customer-oriented employee behaviors that the company s It was safe to say that achieving the Hotel Paris s strate-
strategy relied on. She was therefore disappointed to discover gic aims depended on the quality of the people that it
that the Hotel Paris was paying virtually no attention to the attracted to and then selected for employment at the firm.
job of recruiting prospective employees. Individual hotel What we want are employees who will put our guests first,
managers slapped together help wanted ads when they had who will use initiative to see that our guests are satisfied, and
positions to fill, and no one in the chain had any measurable who will work tirelessly to provide our guests with services
idea of how many recruits these ads were producing, or which that exceed their expectations said the CFO. Lisa and the
recruiting approaches worked the best (or worked at all). Lisa CFO both knew this process had to start with better recruit-
knew that it was time to step back and get control of the Hotel ing. The CFO gave her the green light to design a new
Paris s recruitment function. recruitment process.
As they reviewed the details of the Hotel Paris s current
recruitment practices, Lisa Cruz and the firm s CFO became Questions
increasingly concerned. What they found, basically, was that 1. Given the hotel s stated employee preferences, what
the recruitment function was unmanaged, totally. The previ- recruiting sources would you suggest they use, and why?
ous HR director had simply allowed the responsibility for 2. What would a Hotel Paris help wanted ad look like?
recruiting to remain with each separate hotel, and the hotel 3. How would you suggest they measure the effectiveness
managers, not being human resources professionals, usually of their recruiting efforts?
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 171

KEY TERMS
workforce (or employment personnel replacement charts, 142 applicant tracking systems, 151
or personnel) planning, 138 position replacement card, 142 alternative staffing, 156
trend analysis, 140 recruiting yield pyramid, 145 on-demand recruiting services
ratio analysis, 140 employee recruiting, 146 (ODRS), 158
scatter plot, 140 job posting, 147 college recruiting, 158
qualifications (or skills) succession planning, 148 application form, 164
inventories, 142

ENDNOTES
1. Spencer Ante and Joann Lublin, IBM 16. See, for example, Society for Human talent management is a broader activity.
Crafts Succession Plan, The New York Resource Management, HR s Insight Talent management involves identifying,
Times, June 13, 2011, pp. B1, B12. into the Economy, Workplace Visions 4 recruiting, hiring, and developing high-
2. Robert Grossman, IBM S HR Takes a (2008), p. 5. potential employees. Soonhee Kim, Link-
Risk, HR Magazine, April 27, 2007, p. 57. 17. www.astd.org/NR/rdonlyres/CBAB6F0D- ing Employee Assessments to Succession
3. More Companies Turn to Workforce Plan- 97FA-4B1F-920C-6EBAF98906D1/0/ Planning, Public Personnel Management
ning to Boost Productivity and Efficiency, BridgingtheSkillsGap.pdf, accessed June 1, 32, no. 4 (Winter 2003), pp. 533 547. See
The Conference Board, press release/news, 2011. also Michael Laff, Talent Management:
August 7, 2006; Carolyn Hirschman, 18. Next Generation Talent Management, From Hire to Retire, Training & Develop-
Putting Forecasting in Focus, HR Maga- www.hewittassociates. com/_MetaBasicC- ment, November 2006, pp. 42 48.
zine, March 2007, pp. 44 49. MAssetCache_/Assets/Articles/next_ 31. Succession Management: Identifying and
4. Jones Shannon, Does HR Planning Im- generation.pdf, accessed November 9, 2010. Developing Leaders, BNA Bulletin to Man-
prove Business Performance? Industrial 19. Ibid. agement 21, no. 12 (December 2003); and
Management, January/February 2003, p. 20. 20. Ed Frauenheim, Valero Energy, Work- David Day, Developing leadership talent,
See also Michelle Harrison et al., Effective force Management, March 13, 2006. SHRM Foundation, http://www.shrm.
Succession Planning Training & Develop- 21. Gunter Stahl et al., Global Talent Manage- org/about/foundation/research/Docu-
ment, October 2006, pp. 22 23. ment: How Leading Multinationals Build ments/Developing%20Lead%20Talent-
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in Focus, HR Magazine, March 2007, & Research Working Paper, INSEAD, 2007. 32. Quoted in Susan Wells, Who s Next,
pp. 44 49. 22. Phillips and Gully, Strategic Staffing, HR Magazine, November 2003, p. 43.
6. Jean Phillips and Stanley Gully, Strategic pp. 116 181. See also Christee Atwood, Implementing
Staffing (Upper Saddle River, NJ: Pearson 23. Employers Still in Recruiting Bind Your Succession Plan, Training & Devel-
Education, 2012), pp. 116 181. Should Seek Government Help, Chamber opment, November 2007, pp. 54 57; and
7. Shannon, Does HR Planning Improve Suggests, BNA Bulletin to Management, David Day, op cit.
Business Performance? p. 16. May 29, 2003, pp. 169 170. See also 33. See Succession Management: Identifying
8. See, for example, Fay Hansen, The Long D. Mattioli, Only the Employed Need and Developing Leaders, BNA Bulletin to
View, Workforce Management, April 20, Apply, The Wall Street Journal (Eastern Management 21, no. 12 (December 2003),
2008, pp. 1, 14. Edition) (June 30, 2009), p. D1. p. 15; and David Day, op cit.
9. Chaman Jain and Mark Covas, Thinking 24. Tom Porter, Effective Techniques to 34. Soonhee Kim, Linking Employee Assess-
About Tomorrow: Seven Tips for Making Attract, Hire, and Retain Top Notch ments to Succession Planning, Public
Forecasting More Effective, The Wall Employees for Your Company, San Diego Personnel Management, Winter 2003.
Street Journal, July 7, 2008, p. 10. Business Journal 21, no. 13 (March 27, 35. www.sumtotalsystems.com/datasheets/
10. For an example of a computerized 2000), p. b36. sumt_succession_planning.pdf, accessed
personnel planning system, see Dan Kara, 25. Jonathan Segal, Land Executives, Not June 1, 2011.
Automating the Service Chain, Software Lawsuits, HR Magazine, October 2006, 36. Ibid.
Magazine 20 (June 2000), pp. 3, 42. http:// pp. 123 130. 37. Bill Roberts, Matching Talent with
www.kronos.com/scheduling-software/ 26. Ibid. Tasks, HR Magazine, November 2002,
scheduling.aspx, accessed October 2, 2011. 27. Jessica Marquez, A Global Recruiting pp. 91 96.
11. Bill Roberts, Can They Keep Our Lights Site Helps Far-Flung Managers at the 38. Ibid., p. 34.
On? HR Magazine, June 2010, pp. 62 68. Professional Services Company Acquire 39. See, for example, J. De Avila, Beyond Job
12. w w w. s u r ve y a n a l y t i c s . c o m / s k i l l s - the Talent They Need and Saves One Boards: Targeting the Source, The Wall
inventory-software.html, accessed June 1, Half-Million Dollars a Year, Workforce Street Journal (Eastern Edition), July 2,
2011. Management, March 13, 2006, p. 22. 2009, pp. D1, D5; and C. Fernandez-Araoz
13. For a recent discussion see, for example, 28. Hiring Works the Second Time Around, et al., The Definitive Guide to Recruiting
Pitfalls Abound for Employers Lacking BNA Bulletin to Management, January 30, in Good Times and Bad [Financial crisis
Electronic Information Retention Policies, 1997, p. 40; and Issie Lapowsky, How to spotlight], Harvard Business Review 87,
BNA Bulletin to Management, January 1, Rehire Former Employees , INC., May 18, no. 5 (May 2009), pp. 74 84.
2008, pp. 1 2. 2010, available at http://www.inc.com/ 40. Reprinted from www.careerbuilder.com/
14. Ibid. See also Bill Roberts, Risky Business, guides/2010/05/rehiring-former-employees. MarketingWeb/iPhone/CBJobsApplication.
HR Magazine, October 2006, pp. 69 72. html, accessed October 3, 2011. aspx?cbRecursionCnt=1&cbsid= 7fd458
15. Traditional Security Insufficient to Halt 29. Ibid. dafd4a444fb192d9a24ceed771-291142537-
File-Sharing Threat, BNA Bulletin to 30. Where succession planning aims to identify wx-6&ns_siteid=ns_us_g_careerbuilder_
Management, January 20, 2008, p. 39. and develop employees to fill specific slots, iphone, accessed March 23, 2009.
172 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

41. Joe Light, Recruiters Rethink Online William Dickmeyer, Applicant Tracking Temporary Hires, Workforce Management,
Playbook, online.wsj.com/article/SB Reports Make Data Meaningful, Work- February 26, 2007, p. 27.
1000142405274870430740457608049261 force, February 2001, pp. 65 67; and, as 79. John Zappe, Temp-to-Hire Is Becoming
3858846.html, accessed May 17, 2011. an example, http://www.icims.com/ a Full-Time Practice at Firms, Workforce
42. Ed Frauenheim, Logging Off of Job prelude/1101/3009?_vsrefdom=google_ Management, June 2005, pp. 82 86.
Boards, Workforce Management, June 22, ppc&gclid=CPHki_nx1KsCFcPt7Qodm 80. Shari Cauldron, Contingent Workforce
2009, pp. 25 27. kjLDA, accessed October 4, 2011. Spurs HR Planning, Personnel Journal,
43. Jennifer Arnold, Twittering at Face 59. Note that the U.S. Department of Labor s July 1994, p. 60.
Booking While They Were, HR Maga- office of federal contract compliance 81. This is based on or quoted from Nancy
zine, December 2009, p. 54. programs recently announced it would Howe, Match Temp Services to Your
44. ResumePal: Recruiter s Friend? Workforce review federal contractors online appli- Needs, Personnel Journal, March 1989,
Management, June 22, 2009, p. 28. cation tracking systems to ensure they re pp. 45 51. See also Stephen Miller, Collab-
45. Innovative HR Programs Cultivate Suc- providing equal opportunity to qualify oration Is Key to Effective Outsourcing,
cessful Employees, Nation s Restaurant prospective applicants with disabilities. HR Magazine 58 (2008), pp. 60 61; and
News 41, no. 50 (December 17, 2007), p. 74. Feds Want a Look at Online Job Sites, (as an example), http://www.bbb.org/
46. J. De Avila, Beyond Job Boards: Targeting HR Magazine, November 2008, p. 12. shrevepor t/accredited-business-
the Source, The Wall Street Journal 60. E-Recruiting Software Providers, Work- directory/employment-contractors-
(Eastern Edition), July 2, 2009, pp. D1, D5. force Management, June 22, 2009, p. 14. temporary-help/plain-dealing-la, accessed
47. Jennifer Berkshire, Social Network 61. Maria Seminerio, E-Recruiting Takes September 23, 2011.
Recruiting, HR Magazine, April 2005, Next Step, eWeek, April 23, 2001, 82. Daniel Feldman, Helen Doerpinghaus, and
pp. 95 98. See also S. DeKay, Are Business- pp. 49 51; http://www.sutterhealth.org/ William Turnley, Managing Temporary
Oriented Social Networking Web Sites employment, accessed October 2, 2011. Workers: A Permanent HRM Challenge,
Useful Resources for Locating Passive 62. Does Your Company s Website Click Organizational Dynamics 23, no. 2 (Fall
Jobseekers? Results of a Recent Study, with Job Seekers? Workforce, August 1994), p. 49. See also Kathryn Tyler, Treat
Business Communication Quarterly 72, 2000, p. 260. Contingent Workers with Care, HR
no. 1 (March 2009), pp. 101 105. 63. Study Says Career Web Sites Could Magazine, March 2008, p. 75; and http://
48. Josee Rose, Recruiters Take Hip Path to Snare More Job Seekers, BNA Bulletin to www.employment.oregon.gov/EMPLOY/
Fill Accounting Jobs, The Wall Street Management, February 1, 2001, p. 36. ES/BUS/index.shtml, accessed October 4,
Journal, September 18, 2007, p. 38. 64. Daniel Feldman and Brian Klaas, Inter- 2011.
49. Gina Ruiz, Firms Tapping Web Videos to net Job Hunting: A Field Study of Appli- 83. Carolyn Hirschman, Are Your Contrac-
Lure Jobseekers, Workforce Management, cant Experiences with Online Recruiting, tors Legal? HR Magazine, March 2004,
October 8, 2007, p. 12. Human Resource Management 41, no. 2 pp. 59 63.
50. Ed Frauenheim, Social Revolution, (Summer 2002), pp. 175 192. 84. Ibid.
Workforce, October 20, 2007, p. 30. 65. Sarah Gale, Internet Recruiting: Better, 85. This section is based on Robyn Meredith,
51. Innovative HR Programs Cultivate Suc- Cheaper, Faster, Workforce, December Giant Sucking Sound, Forbes 172, no. 6
cessful Employees, Nation s Restaurant 2001, p. 75. (September 29, 2003), p. 158; Jim McKay,
News 41, no. 50 (December 17, 2007), p. 74. 66. Help Wanted and Found, Fortune, Inevitable Outsourcing, Offshoring Stirred
52. Jennifer Taylor Arnold, Recruiting on October 2, 2006, p. 40. Passions at Pittsburgh Summit, Knight
the Run, February 2010, HR Magazine, 67. James Breaugh, Employee Recruitment: Ridder/Tribune Business News, March 11,
pp. 65 67. Current Knowledge and Important Areas 2004; Peter Panepento, General Electric
53. Elizabeth Agnvall, Job Fairs Go Virtual, for Future Research, Human Resource Transportation to Outsource Drafting
HR Magazine, July 2007, p. 85. Management Review 18 (2008), p. 114. Jobs to India, Knight Ridder/Tribune
54. Gary Stern, Virtual Job Fairs Becoming 68. Job Seekers Privacy Has Been Eroded with Business News, May 5, 2004; Julie Harbin,
More of a Reality, Workforce Manage- Online Job Searchers, Report Says, BNA Recent Survey Charts Execs Willingness
ment, February 2011, p. 11. Bulletin to Management, November 20, to Outsource Jobs, San Diego Business
55. EEOC Issues Much Delayed Definition 2003, p. 369. Journal 25, no. 14 (April 5, 2004),
of Applicant, HR Magazine, April 2004, 69. James Breaugh, Employee Recruitment. pp. 8 10; and Pamela Babcock, America s
p. 29; Valerie Hoffman and Greg Davis, 70. Eric Krell, Recruiting Outlook: Creative Newest Export: White-Collar Jobs, HR
OFCCP s Internet Applicant Definition HR for 2003, Workforce, December 2002, Magazine 49, no. 4 (April 2004), pp. 50 57.
Requires Overhaul of Recruitment and pp. 40 44. 86. Economics of Offshoring Shifting, as
Hiring Policies, Society for Human 71. James Breaugh, Employee Recruitment, Some Reconsider Ventures, BNA Bulletin
Resources Management Legal Report, p. 111. to Management, September 23, 2008,
January/February 2006, p. 2. 72. James Breaugh, Employee Recruitment, p. 311.
56. This carries legal risks, particularly if the p. 113. 87. Susan Wells, Slow Times for Executive
device disproportionately screens out 73. Find your nearest one-stop center at Recruiting, HR Magazine, April 2003,
minority or female applicants. Lisa www.servicelocator.org. pp. 61 67.
Harpe, Designing an Effective Employ- 74. Susan Saulney, New Jobless Centers 88. Leading Executive Search Firms, Work-
ment Prescreening Program, Employment Offer More Than a Benefit Check, The force Management, June 25, 2007, p. 24.
Relations Today 32, no. 3 (Fall 2005), New York Times, September 5, 2001, p. A1. 89. Michelle Martinez, Working with an
pp. 43 51. 75. Lynn Doherty and E. Norman Sims, Outside Recruiter? Get It in Writing, HR
57. William Dickmeyer, Applicant Tracking Quick, Easy Recruitment Help: From a Magazine, January 2001, pp. 98 105.
Reports Make Data Meaningful, Work- State? Workforce, May 1998, p. 36. 90. See, for example, Stephenie Overman,
force, February 2001, pp. 65 67; and, as 76. Ibid. Searching for the Top, HR Magazine,
an example, http://www.icims.com/prelude/ 77. As Hiring Falters, More Workers Are January 2008, p. 49.
1101/3009?_vsrefdom=google_ppc&gclid= Temporary, The New York Times, 91. Bill Leonard, Recruiting from the Com-
CPHki_nx1KsCFcPt7QodmkjLDA, December 20, 2010, pp. A1, A4. petition, HR Magazine, February 2001,
accessed October 4, 2011. 78. Robert Bohner Jr. and Elizabeth Salasko, pp. 78 86. See also G. Anders, Secrets of
58. Paul Gilster, Channel the Resume Beware the Legal Risks of Hiring Temps, the Talent Scouts, New York Times (Late
Flood with Applicant Tracking Systems, Workforce, October 2002, pp. 50 57. See New York Edition) (March 15, 2009),
Workforce, January 2001, pp. 32 34; also Fay Hansen, A Permanent Strategy for pp. 1, 7 (Sec 3).
 CHAPTER 5 PERSONNEL PLANNING AND RECRUITING 173

92. Martha Frase-Blunt, A Recruiting Spigot, 112. Gino Ruiz, Special Report: Talent Acqui- 127. Herbert Greenberg, A Hidden Source
HR Magazine, April 2003, pp. 71 79. sition, Workforce Management, July 23, of Talent, HR Magazine, March 1997,
93. Sara Rynes, Marc Orlitzky, and Robert 2007, p. 39. pp. 88 91.
Bretz Jr., Experienced Hiring Versus Col- 113. Thomas Stewart, In Search of Elusive 128. Linda Moore, Firms Need to Improve
lege Recruiting: Practices and Emerging Tech Workers, Fortune, February 16, 1998, Recruitment, Hiring of Disabled Workers,
Trends, Personnel Psychology 50 (1997), pp. 171 172; and http://www.outsourcing- EEO Chief Says, Knight Ridder/Tribune
pp. 309 339. See also Lisa Munniksma, center.com/2006-10-ge-looks-to-recruit- Business News, November 5, 2003. See also
Career Matchmakers: Partnering with ment-process-outsourcer-to-find-meat- Recruiting Disabled More Than Good
Collegiate Career Centers Offers Recruiters and-potatoes-candidates-as-well-as-the- Deed, Experts Say, BNA Bulletin to
Access to Rich Source of Applicants, purple-squirrel-article-37479.html, Management, February 27, 2007, p. 71.
HR Magazine 50, no. 2 (February 2005), accessed October 5, 2011. 129. Students with Disabilities Available,
p. 93. 114. Quoted or paraphrased from Robert HR Briefing, June 15, 2002, p. 5.
94. See, for example, James Breaugh, Employee Neveu, Making the Leap to Strategic 130. Moore, Firms Need to Improve
Recruitment, p. 111. Recruiting, special advertising supple- Recruitment.
95. Recruiters look to be big man on cam- ment to Workforce Management, 2005, p. 3. 131. This paragraph is based on Jennifer L.
pus, Workforce Management, September 115. Internship Programs Help These Wood, James M. Schmidtke, and Diane L.
2010, page 12 Recruiters Toward Qualified Students Decker, Lying on Job Applications: The
96. Greet Van Hoye and Filip Lievens, with Disabilities, BNA Bulletin to Man- Effects of Job Relevance, Commission, and
Tapping the Grapevine: A Closer Look agement, July 17, 2003, p. 225. Human Resource Management Experi-
at Word-of-Mouth as a Recruitment 116. Judith Casey and Marcie Pitt-Catsouphes, ence, J Bus Psychology 22 (2007), pp. 1 9.
Source, Journal of Applied Psychology 94, Employed Single Mothers: Balancing Job 132. Kenneth Sovereign, Personnel Law (Upper
no. 2 (2009), pp. 341 352. and Home Life, Employee Assistance Saddle River, NJ: Pearson, 1999), p. 51.
97. Lisa Munniksma, Career Matchmakers, Quarterly 9, no. 324 (1994), pp. 37 53; 133. Kathy Gurchiek, Video Resumes Spark
HR Magazine, February 2005, pp. 93 96. http://www.catalyst.org/publication/252/w Curiosity, Questions, HR Magazine,
98. Joe Mullich, Finding the Schools That Yield orking-parents, accessed October 3, 2011. May 2007, pp. 28 30; Video Resumes Can
the Best Job Applicant ROI, Workforce 117. Casey and Pitt-Catsouphes, op cit., p. 42. Illuminate Applicants Abilities, but Pose
Management, March 2004, pp. 67 68. 118. Barclaycard Helps Single Parents to Discrimination Concerns, BNA Bulletin to
99. Wendy Boswell et al., Individual Job Find Employment, Personnel Today, Management, May 20, 2007, pp.169 170.
Choice Decisions and the Impact of Job November 7, 2006. 134. As of May 2010, these companies included
Attributes and Recruitment Practices: 119. Susan Glairon, Single Parents Need resumebook.tv, optimalresume.com,
A Longitudinal Field Study, Human More Flexibility at Work, Advocate in interviewstudio.com, and brightab.com.
Resource Management 42, no. 1 (Spring Denver Says, Daily Camera, February 8, Alina Dizik, Wooing Job Recruiters with
2003), pp. 23 37. See also James Breaugh, 2002; http://www.cnn.com/2008/LIVING/ Video Resumes, The Wall Street Journal,
Employee Recruitment, p. 115. worklife/06/04/balance.calculator, May 20, 2010, p. D4.
100. Hao Zhao Oh and Robert Liden, Intern- accessed October 5, 2011. 135. Murray Barrick and Ryan Zimmerman,
ship: A Recruitment and Selected Perspec- 120. Sandra Block and Stephanie Armour, Hiring for Retention and Performance,
tive, Journal of Applied Psychology 96, no. 1 Many Americans Retire Years Before They Human Resource Management 48, no. 2
(2011), pp. 221 229. Want To, USA Today, July 26, 2006, http:// (March/April 2009), pp. 183 206.
101. w w w. k a i s e r p e r m a n e n t e j o b s . o r g / usatoday.com, accessed December 23, 2007. 136. James Breaugh, The Use of Biodata for
employee-referral-program.aspx, accessed 121. Phaedra Brotherton, Tapping into an Employee Selection: Test Research and
August 20, 2011. Older Workforce, Mosaics (Society for Future Directions, Human Resource Man-
102. James Breaugh, Employee Recruitment, Human Resource Management, March/ agement Review 19 (2009), pp. 219 231.
p. 109. April 2000). See also Thomas Ng and Utilizing biodata items of course presumes
103. Tell a Friend: Employee Referral Programs Daniel Feldman, The Relationship of Age that the employer can show that the items
Earn High Marks for Low Recruiting to Ten Dimensions of Job Performance, predict performance. Biodata items such as
Costs, BNA Bulletin to Management, Journal of Applied Psychology 90, no. 2 graduated from college may have an
June 28, 2001, p. 201. (2008), pp. 392 423. adverse impact on minorities but studies
104. Martha Frase-Blunt, Call Centers Come 122. Sue Shellenbarger, Gray Is Good: suggest that employers can avoid that
Home, HR Magazine, January 2007, Employers Make Efforts to Retain Older, problem through judicious choice of
pp. 85 90. Experienced Workers, The Wall Street biodata items (p. 229).
105. Theresa Minton-Eversole, Mission: Journal, December 1, 2005. 137. Fred Mael, Mary Connerley, and Ray
Recruitment, HR Magazine, January 123. Alison Wellner, Tapping a Silver Mine, Morath, None of Your Business: Parameters
2009, pp. 43 45. HR Magazine, March 2002, p. 29. of Biodata Invasiveness, Personnel Psychol-
106. Ann Marie Ryan and Nancy Tippins, 124. Sue Shellenbarger, Gray Is Good. See ogy 49 (1996), pp. 613 650; and Kenneth
Attracting and Selecting: What Psychologi- also Robert Grossman, Keep Pace with Law et al., Impression Management and
cal Research Tells Us, Human Resource Older Workers, HR Magazine, May 2008, Faking in Biodata Scores Among Chinese
Management 43, no. 4 (Winter 2004), pp. 39 46. Job-Seekers, Asia Pacific Journal of Manage-
p. 311. 125. Gary Adams and Barbara Rau, Attract- ment 19, no. 4 (December 2002), p. 541 556.
107. Kevin Carlson et al., Recruitment Evalua- ing Retirees to Apply: Desired Organi- 138. Supreme Court Denies Circuit City s Bid
tion: The Case for Assessing the Quality of zational Characteristics of Bridge for Review of Mandatory Arbitration, BNA
Applicants Attracted, Personnel Psychol- Employment, Journal of Organizational Bulletin to Management, June 6, 2002, p. 177.
ogy 55 (2002), pp. 461 490. For a recent Behavior 26, no. 6 (September 2005), 139. Supreme Court Gives the Employers
survey of recruiting source effectiveness, pp. 649 660. Green Light to Hold Most Employees
see The 2007 Recruiting Metrics and 126. Abby Ellin, Supervising the Graybeards, to Arbitration Pacts, BNA Bulletin to
Performance Benchmark Report, 2nd ed., The New York Times, January 16, 2000, Management, March 29, 2001, pp. 97 98.
Staffing.org, Inc., 2007. p. B16; Derek Avery and Patrick McKay, 140. Douglas Mahony et al., The Effects of
108. Ibid., p. 461. Target Practice: An Organizational Impres- Mandatory Employment Arbitration Sys-
109. Ibid., p. 466. sion Management Approach to Attracting tems on Applicants Attraction to Organi-
110. Phillips and Gully, Strategic Staffing, p. 180. Minority and Female Job Applicants, zations, Human Resource Management 44,
111. Ibid., p. 466. Personnel Psychology 59 (2006), pp. 157 189. no. 4 (Winter 2005), pp. 449 470.
6
Employee Testing
and Selection
Source: ZUMA Press/Newscom.
LEARNING OBJECTIVES Company s
1. Explain what is meant by reliability and validity. Strategic Goals

2. Explain how you would go about validating a test.

3. Cite and illustrate our testing guidelines.
4. Give examples of some of the ethical and legal
considerations in testing.
Employee Competencies
5. List eight tests you could use for employee selection, and Behaviors Required
and how you would use them. for Company to Achieve
6. Give two examples of work sample/simulation tests. These Strategic Goals

7. Explain the key points to remember in conducting

background investigations.

ruitment an
Rec cemen d
Pla t

G
oogle, famous for (among other things) its childcare

ent al
Environm Leg

Tra elopment
De
and other employee benefits recently changed its

inin
v
Strategic and
employee screening process. Candidates used to

g a nd
have a dozen or more grueling interviews. But, with HR Policies and Practices
Google hiring thousands of people annually, this selection Required to Produce
process proved too slow.1 Now Google uses just four to five Employee Competencies
and Behaviors
interviews, but lets all its employees express opinions on each
candidate by e-mail, using a screening technique called crowd no

Co
s
ey itale
ep

m
sourcing. The changes bring the firm s hiring practices in line olp R
e
mE ita sn
with its fast-growth strategy.2 n o

WHERE ARE WE NOW . . .

Chapter 5 focused on the methods managers
use to build an applicant pool. The purpose
of Chapter 6 is to explain how to use various
tools to select the best candidates for the
job. The main topics we ll cover include the
selection process, basic testing techniques,
background and reference checks, ethical
and legal questions in testing, types of tests,
and work samples and simulations.
In Chapter 7, we will turn to the techniques
you can use to improve your skills with what
is probably the most widely used screening
tool, the selection interview.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 175
176 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

WHY CAREFUL SELECTION IS IMPORTANT

Once you review your applicants résumés, the next step is selecting the best
candidates for the job. This usually means whittling down the applicant pool by
using the screening tools we cover in this chapter: tests, assessment centers, and
background and reference checks. Then the supervisor can interview likely candi-
dates and decide whom to hire. Nothing you do at work is more important than
hiring the right employees. It is important for three main reasons: performance,
costs, and legal obligations.

PERFORMANCE First, your own performance always depends on your subordi-

nates. Employees with the right skills will do a better job for you and the company.
Employees without these skills or who are abrasive or obstructionist won t perform
effectively, and your own performance and the firm s will suffer. The time to screen
out undesirables is before they are in the door, not after.

COST Second, it is important because it s costly to recruit and hire employees.

Hiring and training even a clerk can cost $5,000 or more in fees and supervisory time.
The total cost of hiring a manager could easily be 10 times as high once you add
search fees, interviewing time, reference checking, and travel and moving expenses.

LEGAL OBLIGATIONS Third, it s important because mismanaging hiring has

legal consequences. For one thing (as we saw in Chapter 2), equal employment laws
require nondiscriminatory selection procedures.3 Furthermore, someone can sue an
employer for negligent hiring. Negligent hiring means hiring employees with crimi-
nal records or other problems who then use access to customers homes (or similar
opportunities) to commit crimes.4 In one case, Ponticas v. K.M.S. Investments, an
apartment manager with a passkey entered a woman s apartment and assaulted her.5
The court found the apartment complex s owner negligent for not checking the
manager s background properly.6

Person and Job/Organization Fit

The main aim of employee selection is to achieve person-job fit. Person-job fit refers to
matching (1) the knowledge, skills, abilities (KSAs), and competencies that are central
to performing the job (as determined by job analysis) with (2) the prospective
employee s knowledge, skills, abilities, and competencies. The aim is to achieve a match.
However, a candidate might be right for a job, but wrong for the organization.7
For example, a highly experienced airline pilot might do well at American Airlines but
perhaps not as well at Southwest, where the organizational values require that all
employees help get the plane turned around fast, even if that means helping with bag-
gage handling. Thus, while person-job fit is usually the main consideration in selec-
tion, employers should care about person-organization fit as well. The accompanying
Strategic Context feature illustrates this.

THE STRATEGIC CONTEXT

Crowd Sourcing at Google
Google knows that to maintain its fast-growth strategy, it needs to keep
new Google tools like Gmail and Google Maps coming. To support that strategy,
Google needs its employees engaged and interacting with each other. Having
employees thinking of themselves in isolated silos would inhibit the cross-
pollination Google depends on. In formulating its employee selection practices,
Google therefore found a way to foster the employee engagement and inter-
action its success depends on. Google uses crowd sourcing when it comes to
making hiring decisions.8
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 177

Here s how it works.9 When a prospective employee applies for a job, his or her
information (such as school and previous employers) goes into Google s applicant-
tracking system (ATS). The ATS then matches the applicant s information with that
of current Google employees. When it finds a match, it asks those Google employ-
ees to comment on the applicant s suitability for the position. This helps give
Google recruiters a valuable insight into how the Google employees actually doing
the work think the applicant will do at Google. And it supports Google s strategy,
by fostering a sense of community and interaction among Google employees,
who see themselves working together to select new Googlers.

1 Explain what is meant

BASIC TESTING CONCEPTS
by reliability and validity. A test is one popular selection tool. A test is basically a sample of a person s behavior.
Using a test (or any selection tool) assumes the tool is both reliable and valid.
Few things illustrate evidence-based HR the deliberate use of the best-available
evidence in making decisions about the human resource management practices you
are focusing on as do checking for reliability and validity.

Reliability
Reliability is a test s first requirement and refers to its consistency: A reliable test is
one that yields consistent scores when a person takes two alternate forms of the test or
when he or she takes the same test on two or more different occasions. 10
Reliability is very important. If a person scores 90 on an intelligence test on a
Monday and 130 when retested on Tuesday, you probably wouldn t have much faith
in the test.
You can measure reliability in several ways. One is to administer a test to a group
of people one day, readminister the same test several days later to the same group, and
then correlate the first set of scores with the second (test-retest reliability estimates.)11
Or you could administer a test and then administer what experts believe to be
an equivalent test later; this would be an equivalent or alternate form estimate.
The Scholastic Assessment Test (SAT) is an example. Or, compare the test taker s
answers to certain questions on the test with his or her answers to a separate set
of questions on the same test aimed at measuring the same thing. For example, a
psychologist includes 10 items on a test believing that they all measure interest in
working outdoors. You administer the test and then statistically analyze the degree
to which responses to these 10 items vary together. This is an internal comparison
estimate. (Internal comparison is one reason that you find apparently repetitive
questions on some test questionnaires.)
Many things cause a test to be unreliable. These include physical conditions
(quiet tests conditions one day, noisy the next), differences in the test-taker (healthy
one day, sick the next), and differences in the person administering the test (courteous
one day, curt the next). Or the questions may do a poor job of sampling the material;
for example, test one focuses more on Chapters 1, 3, and 7, while test two focuses
more on Chapters 2, 4, and 8.
Because measuring reliability generally involves comparing two measures that
assess the same thing, it is typical to judge a test s reliability in terms of a reliability
coefficient. This basically shows the degree to which the two measures (say, test score
one day and test score the next day) are correlated.

negligent hiring reliability

Hiring workers with questionable back- The consistency of scores obtained by the
grounds without proper safeguards. same person when retested with the identical
tests or with alternate forms of the same test.
178 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 6-1 Correlation

Examples

Test Score Time 2

Test Score Time 2

Test Score Time 1 Test Score Time 1

Figure 6-1 illustrates correlation. In both the left and the right scatter plots, the
psychologist compared each applicant s time 1 test score (on the x-axis) with his or
her subsequent test score (on the y-axis). On the left, the scatter plot points (each
point showing one applicant s test score and subsequent test performance) are
dispersed. There seems to be no correlation between test scores obtained at time 1
and at time 2. On the right, the psychologist tried a new test. Here the resulting
points fall in a predictable pattern. This suggests that the applicants test scores
correlate closely with their previous scores.

Validity
Reliability, while indispensable, only tells you that the test is measuring something
consistently. It does not prove that you are measuring what you intend to measure.
A mismanufactured 33-inch yardstick will consistently tell you that 33-inch boards
are 33 inches long. Unfortunately, if what you re looking for is a board that is
1 yard long, then your 33-inch yardstick, though reliable, is misleading you by
3 inches.
What you need is a valid yardstick. Validity tells you whether the test (or yardstick)
is measuring what you think it s supposed to be measuring.12
A test, as we said, is a sample of a person s behavior, but some tests are more
clearly representative of the behavior being sampled than others. A typing test, for
example, clearly corresponds to an on-the-job behavior. At the other extreme,
there may be no apparent relationship between the items on the test and
the behavior. This is the case with projective personality tests. Thus, in the
Rorschach Test sample in Figure 6-2, the psychologist asks the person to explain
how he or she interprets an ambiguous picture. The psychologist uses that inter-
pretation to draw conclusions about the person s personality and behavior. In such

FIGURE 6-2 A Slide from the

Rorschach Test

Source: Fotolia LLC.

 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 179

tests, it is more difficult to prove that the tests are measuring what they are said to
measure, in this case, some trait of the person s personality in other words, that
they re valid.

TEST VALIDITY Test validity answers the question Does this test measure what
it s supposed to measure? Put another way, validity refers to the correctness of
the inferences that we can make based on the test. For example, if Jane s scores on
mechanical comprehension tests are higher than Jim s, can we be sure that Jane
possesses more mechanical comprehension than Jim?13 With employee selection
tests, validity often refers to evidence that the test is job related in other words, that
performance on the test accurately predicts subsequent performance on the job.
A selection test must be valid since, without proof of validity, there is no logical or
legally permissible reason to continue using it to screen job applicants. You would not
be too comfortable taking the GRE if you didn t think that your score on the GRE
predicted, in some valid way, your likely performance in graduate school. Equal
employment law (as we explained in Chapter 2) requires valid tests. In employment
testing, there are two main ways to demonstrate a test s validity: criterion validity and
content validity. A third option is construct validity.14

CRITERION VALIDITY Criterion validity involves demonstrating statistically

a relationship between scores on a selection procedure and job performance of a
sample of workers. For example, it means demonstrating that those who do well
on the test also do well on the job, and that those who do poorly on the test do
poorly on the job. The test has validity to the extent that the people with higher
test scores perform better on the job. In psychological measurement, a predictor is
the measurement (in this case, the test score) that you are trying to relate to a
criterion, such as performance on the job. The term criterion validity reflects that
terminology.

CONTENT VALIDITY Content validity is a demonstration that the content of a

selection procedure is representative of important aspects of performance on the
job. For example, employers may demonstrate the content validity of a test by show-
ing that the test constitutes a fair sample of the job s content. The basic procedure
here is to identify job tasks that are critical to performance, and then randomly select
a sample of those tasks to test. In selecting students for dental school, many schools
give applicants chunks of chalk, and ask them to carve something that looks like a
tooth. If the content you choose for the test is a representative sample of what the
person needs to know for the job, then the test is probably content valid. Clumsy
dental students need not apply.

CONSTRUCT VALIDITY Construct validity means demonstrating that (1) a

selection procedure measures a construct (an abstract idea such as morale or honesty)
and (2) that the construct is important for successful job performance.

test validity content validity construct validity

The accuracy with which a test, interview, A test that is content valid is one that A test that is construct valid is one that
and so on measures what it purports contains a fair sample of the tasks and skills demonstrates that a selection procedure
to measure or fulfills the function it was actually needed for the job in question. measures a construct and that construct is
designed to fill. important for successful job performance.

criterion validity
A type of validity based on showing that
scores on the test (predictors) are related
to job performance (criterion).
180 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

2 Explain how you would go

Evidence-Based HR: How to Validate a Test
about validating a test. Employers often opt to demonstrate evidence of a test s validity using criterion
validity. In order for a selection test to be useful, you need evidence that scores on the
test relate in a predictable way to performance on the job. Thus, other things being
equal, students who score high on the graduate admissions tests also do better
in graduate school. Applicants who score high on mechanical comprehension tests
perform better as engineers. In other words, you should validate the test before using
it by ensuring that scores on the test are a good predictor of some criterion like job
performance thus demonstrating the test s criterion validity.15
At best, invalid tests are a waste of time. At worst, they may be discriminatory.
Tests you buy off the shelf should include information on their validity. The
Society for Industrial and Organizational Psychology says that Experienced and
knowledgeable test publishers have (and are happy to provide) information on the
validity of their testing products. 16 But ideally, you should revalidate the tests for
the job(s) at hand. In any case, tests rarely predict performance with 100% accuracy
(or anywhere near it), so do not make tests your only selection tool; also use other
tools like interviews and background checks.
An industrial psychologist usually conducts the validation study. The human
resource department coordinates the effort. Strictly speaking, the supervisor s role is
just to make sure that the job s human requirements and performance standards are
clear to the psychologist. But in practice, anyone using tests (or test results) should
know something about validation. Then you can better understand how to use tests
and interpret their results. The validation process consists of five steps:

STEP 1: ANALYZE THE JOB The first step is to analyze the job and write job
descriptions and job specifications. The point is to specify the human traits and
skills you believe are required for job performance. For example, must an applicant
be verbal, a good talker? Must the person assemble small, detailed components? These
requirements become the predictors. These are the human traits and skills you believe
predict success on the job.
In this first step, also define what you mean by success on the job, since it s this
success for which you want predictors. The standards of success are criteria. Here
you could use production-related criteria (quantity, quality, and so on), personnel
data (absenteeism, length of service, and so on), or judgments of worker perform-
ance (by persons like supervisors). For an assembler s job, predictors might include
manual dexterity and patience. Criteria then might include number of rejects
produced per hour.17

STEP 2: CHOOSE THE TESTS Once you know the predictors (such as manual
dexterity) the next step is to decide how to test for them. Employers usually base this
choice on experience, previous research, and best guesses. They usually don t start
with just one test. Instead, they choose several tests and combine them into a test
battery. The test battery aims to measure an array of possible predictors, such as
aggressiveness, extroversion, and numerical ability.
What tests are available and where do you get them? The best advice is probably
to use a professional, such as a licensed industrial psychologist. However, many
firms publish tests. Psychological Assessment Resources, Inc., in Odessa, Florida, is
typical. Some tests are available to virtually any purchaser. Others are available only
to qualified buyers (such as those with degrees in psychology). Wonderlic, Inc.,
publishes a well-known intellectual capacity test and other tests, including aptitude
test batteries and interest inventories. G. Neil Company of Sunrise, Florida, offers
employment testing materials including, for example, a clerical skills test, telemar-
keting ability test, service ability test, management ability test, team skills test,
and sales abilities test.
Again, though, don t let the widespread availability of tests blind you to this fact:
You should use tests in a manner consistent with equal employment laws, and in a
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 181

FIGURE 6-3 Examples

of Web Sites Offering www.hr-guide.com/data/G371.htm
Information on Tests Provides general information and sources for all types of employment tests.
or Testing Programs http://ericae.net
Provides technical information on all types of employment and nonemployment tests.
www.ets.org/testcoll
Provides information on more than 20,000 tests.
www.kaplan.com
Information from Kaplan test preparation on how various admissions tests work.
www.assessments.biz
One of many firms offering employment tests.

manner that is ethical and protects the test taker s privacy. Figure 6-3 presents several
Web sites that provide information about tests or testing programs.

STEP 3: ADMINISTER THE TEST Next, administer the selected test(s). One
option is to administer the tests to employees currently on the job. You then compare
their test scores with their current performance; this is concurrent (at the same time)
validation. Its main advantage is that data on performance are readily available. The
disadvantage is that current employees may not be representative of new applicants
(who, of course, are really the ones for whom you are interested in developing a screen-
ing test). Current employees have already had on-the-job training and screening by
your existing selection techniques.
Predictive validation is the second and more dependable way to validate a test.
Here you administer the test to applicants before you hire them. Then hire these
applicants using only existing selection techniques, not the results of the new
tests. After they have been on the job for some time, measure their performance
and compare it to their earlier test scores. You can then determine whether you
could have used their performance on the new test to predict their subsequent job
performance.

STEP 4: RELATE YOUR TEST SCORES AND CRITERIA The next step is to
ascertain if there is a significant relationship between test scores (the predictor) and
performance (the criterion). The usual way to do this is to determine the statistical
relationship between (1) scores on the test and (2) job performance using correlation
analysis, which shows the degree of statistical relationship.
If there is a correlation between test and job performance, you can develop an
expectancy chart. This presents the relationship between test scores and job
performance graphically. To do this, split the employees into, say, five groups accord-
ing to test scores, with those scoring the highest fifth on the test, the second highest
fifth, and so on. Then compute the percentage of high job performers in each
of these five test score groups and present the data in an expectancy chart like
that in Figure 6-4. In this case, someone scoring in the top fifth of the test has a
97% chance of being a high performer, while one scoring in the lowest fifth has only
a 29% chance of being a high performer.18

STEP 5: CROSS-VALIDATE AND REVALIDATE Before using the test, you may
want to check it by cross-validating in other words, by again performing steps 3
and 4 on a new sample of employees. At a minimum, have someone revalidate the test
periodically.

expectancy chart
A graph showing the relationship between
test scores and job performance for a group
of people.
182 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 6-4 Expectancy Chart (Highest 20%) 57 64 97

Note: This expectancy chart shows
the relation between scores made
on the Minnesota Paper Form Board
(Next highest 20%) 51 56 84
and rated success of junior
draftspersons.

Test scores
Example: Those who score between
37 and 44 have a 55% chance (Middle 20%) 45 50 71
of being rated above average and
those scoring between 57 and 64
have a 97% chance. (Next lowest 20%) 37 44 55

(Lowest 20%) 11 36 29

0 20 40 60 80 100

Chances in a hundred of being rated a

high performer ; and % of high performers
found in each test score group

WHO SCORES THE TEST? Some tests (such as the 16PF® Personality Profile) are
3 Cite and illustrate our
professionally scored and interpreted. Thus Wonderlic, Inc., lets an employer administer
testing guidelines.
the 16PF. The employer then faxes (or scans) the answer sheet to Wonderlic, which scores
the candidate s profile and faxes (or scans) back the interpretive report. Psychologists
easily score many psychological tests online or using interpretive Windows-based
software. However, managers can easily score many tests, like the Wonderlic Personnel
Test, themselves.

Bias
Most employers know they shouldn t use biased tests in the employee selection
process.19 In practice, two types of bias may arise. First, there may be bias in how the test
measures the trait it purports to measure. For example, an IQ test may turn out to be a
valid measure of cognitive ability for middle-class whites, but when used for minorities,
it simply measures whether they are familiar with middle-class culture.20 Second,
the predictions one makes based on the test may be biased. For example, If the test used
in college admissions systematically over predicts the performance of males and under-
predicts the performance of females, [then] that test functions as a biased predictor. 21
For many years, industrial psychologists believed they were adequately controlling test
bias, but today that issue is under review.22 For now, the bottom line is that employers
should redouble their efforts to ensure that the tests they re using aren t producing
biased decisions.

Utility Analysis
Knowing that a test is reliable and valid may not be of much practical use. For example,
if it is going to cost the employer $1,000 per applicant for the test, and hundreds of
applicants must be tested, the cost of the test may exceed the benefits the employer
derives from hiring a few more capable employees.
Answering the question, Does it pay to use the test? requires utility analysis.
Two selection experts say, Using dollar and cents terms, [utility analysis] shows the
degree to which use of a selection measure improves the quality of individuals selected
over what would have happened if the measure had not been used. 23 The information
required for utility analysis generally includes, for instance, the validity of the selection
measure, a measure of job performance in dollars, applicants average test scores,
cost of testing an applicant, and the number of applicants tested and selected.
The accompanying HR as a Profit Center feature provides an illustrative example.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 183

HR AS A PROFIT CENTER
Reducing Turnover at KeyBank
Financial services firm KeyBank knew it needed a better way to screen and select
tellers and call-center employees.24 It calculated its cost about $10,000 to select
and train an employee, but it was losing 13% of new tellers and call-center employ-
ees in the first 90 days. That turnover number dropped to 4% after KeyBank imple-
mented a virtual job tryout candidate assessment screening tool. We calculated a
$1.7 million cost savings in teller turnover in one year, simply by making better
hiring decisions, reducing training costs and increasing quality of hires, said the
firm s human resources director.

Validity Generalization
Many employers, particularly smaller ones, won t find it cost-effective to conduct valid-
ity studies for the selection tools they use. These employers must find tests and other
screening tools that have been shown to be valid in other settings (companies), and then
bring them in-house in the hopes that they ll be valid there, too.25
If the test is valid in one company, to what extent can we generalize those validity
findings to our own company? Validity generalization refers to the degree to which
evidence of a measure s validity obtained in one situation can be generalized to
another situation without further study. 26 Being able to use it without your own
validation study is of course the key. Factors to consider in arriving at a conclusion
include existing validation evidence regarding using the test for various specific
purposes, the similarity of the subjects on whom the test was validated with those in
your organization, and the similarity of the jobs involved.27
Under the Uniform Guidelines, validation of selection procedures is desirable,
but the Uniform Guidelines require users to produce evidence of validity only when
adverse impact is shown to exist. If there is no adverse impact, there is no validation
requirement under the Guidelines. 28 Conversely, validating a test that suffers from
adverse impact may not be enough. Under the Uniform Guidelines, the employer
should also find an equally valid but less adversely impacting alternative.

4 Give examples of some

Test Takers Individual Rights and Test Security
of the ethical and legal Test takers have rights to privacy and feedback under the American Psychological
considerations in testing. Association s (APA) standard for educational and psychological tests; these guide
psychologists but are not legally enforceable. Test takers have the following rights:
* The right to the confidentiality of test results.
* The right to informed consent regarding use of these results.
* The right to expect that only people qualified to interpret the scores will have
access to them, or that sufficient information will accompany the scores to ensure
their appropriate interpretation.
* The right to expect the test is fair to all. For example, no one taking it should have
prior access to the questions or answers.
A complete discussion of the APAs Ethical Principles of Psychologists and Code
of Conduct is beyond the scope of this book. But some of the points it addresses
include competence, integrity, respect for people s dignity, nondiscrimination, and
sexual harassment.29

PRIVACY ISSUES Common sense suggests that managers should keep their
knowledge of employees test results private. However, there are also privacy protec-
tions embedded in U.S. and common law. Certain U.S. Supreme Court decisions do
184 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

protect individuals from intrusive governmental action in a variety of contexts.30

Furthermore, the Federal Privacy Act gives federal employees the right to inspect their
personnel files, and limits the disclosure of personnel information without the
employee s consent, among other things.31
Common law provides some protection against disclosing information about
employees to people outside the company. The main application here involves defama-
tion (either libel or slander), but there are privacy issues, too.32 The bottom line is this:
1. Make sure you understand the need to keep employees information confidential.
2. Adopt a need to know policy. For example, if an employee has been rehabilitated
after a period of drug use and that information is not relevant to his or her
functioning in the workplace, then a new supervisor may not need to know.

How Do Employers Use Tests at Work?

About 41% of companies that the American Management Association surveyed tested
applicants for basic skills (defined as the ability to read instructions, write reports, and
do arithmetic).33 About 67% of the respondents required employees to take job skills
tests, and 29% required some form of psychological measurement.34 To see what
such tests are like, try the short test in Figure 6-5. It shows how prone you might be to
on-the-job accidents.
Tests are not just for lower-level workers. In general, as work demands increase
(in terms of skill requirements, training, and pay), employers tend to rely more on
testing in the selection process.35 Employers don t use tests just to find good
employees, but also to screen out bad ones. By one account, about 30% of all
employees say they ve stolen from their employers.36 In retail, employers appre-
hended about one out of every 28 workers for stealing. 37 No wonder prudent
employers test their applicants. We ll look at two examples.

OUTBACK STEAKHOUSE EXAMPLE Outback Steakhouse has used preem-

ployment tests almost from when the company started. The testing seems successful.
While annual turnover rates for hourly employees may reach 200% in the restaurant
industry, Outback s turnover ranges from 40% to 60%. Outback wants employees

FIGURE 6-5 Sample Test

Source: Based on Sample Test CHECK YES OR NO YES NO
Analysis according to John Kamp,
an industrial psychologist. 1. You like a lot of excitement in your life.

2. An employee who takes it easy at work

is cheating on the employer.

3. You are a cautious person.

4. In the past three years you have found yourself

in a shouting match at school or work.

5. You like to drive fast just for fun.

Analysis: According to John Kamp, an industrial psychologist, applicants who answered no, yes, yes, no, no to questions 1, 2, 3, 4,
and 5 are statistically likely to be absent less often, to have fewer on-the-job injuries, and, if the job involves driving, to have
fewer on-the-job driving accidents. Actual scores on the test are based on answers to 130 questions.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 185

Many employers administer

online employment tests to job
candidates.

Source: Fotolia LLC.

who are highly social, meticulous, sympathetic, and adaptable. They use a personality
assessment test to screen out applicants who don t fit the Outback culture. This test is
part of a three-step preemployment screening process. Applicants take the test, and
managers then compare the candidates results to the profile for Outback Steakhouse
employees. Those who score low on certain traits (like compassion) don t move to
the next step. Those who score high move on to be interviewed by two managers.
The latter focus on behavioral questions such as What would you do if a customer
asked for a side dish we don t have on the menu? 38

CITY GARAGE EXAMPLE City Garage, a 200-employee chain of 25 auto ser-

vice and repair shops in Dallas Fort Worth, implemented a computerized testing
program to improve its operations. The original hiring process consisted of a
paper-and-pencil application and one interview, immediately followed by a
hire/don t hire decision. The result was high turnover. This inhibited the firm s
growth strategy.
City Garage s solution was to purchase the Personality Profile Analysis online test
from Thomas International USA. After a quick application and background check, likely
candidates take the 10-minute, 24-question PPA. City Garage staff then enter the answers
into the PPA Software system, and test results are available in less than 2 minutes.
These show whether the applicant is high or low in four personality characteristics; it
also produces follow-up questions about areas that might cause problems. For example,
applicants might be asked how they handled possible weaknesses such as lack of patience
in the past. If candidates answer those questions satisfactorily, they re asked back for
extensive, all-day interviews, after which hiring decisions are made.

Computerized and Online Testing

As you can see, computerized and/or online testing is increasingly replacing
conventional paper-and-pencil tests. Such tests are also becoming more sophisticated.
For example, PreVisor (www.previsor.com/) offers online adaptive personality tests.
As a candidate answers each question, these tests adapt the next question to the test
taker s answers to the previous question. This improves test validity and may reduce
cheating. For example, it makes it more unlikely that candidates can share test ques-
tions (since each candidate gets what amounts to a custom-made test).39 Service
firms like Unicru process and score online preemployment tests from employers
applicants. The applicant tracking systems we discussed in Chapter 5 often include an
online prescreening test.40 Most of the tests we describe on the following pages are
available in computerized form.Vendors are making tests available for applicants
to take via their iPhones. For example, www.iphonetypingtest.com offers an online
typing test you can take on an iPhone.41
186 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

The Web site iphonetypingtest.

com offers an online typing test
you can take on an iPhone.

Source: www.iphonetypingtest.com, accessed March 23, 2009. Used with permission of All Holdings, LTD.

5 List eight tests you could

TYPES OF TESTS
use for employee selection, We can conveniently classify tests according to whether they measure cognitive (mental)
and how you would use abilities, motor and physical abilities, personality and interests, or achievement.42 We ll
them. look at each.

Tests of Cognitive Abilities

Cognitive tests include tests of general reasoning ability (intelligence) and tests of
specific mental abilities like memory and inductive reasoning.

INTELLIGENCE TESTS Intelligence (IQ) tests are tests of general intellectual abil-
ities. They measure not a single trait but rather a range of abilities, including memory,
vocabulary, verbal fluency, and numerical ability. An adult s IQ score is a derived
score. It reflects the extent to which the person is above or below the average adult s
intelligence score.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 187

FIGURE 6-6
Type of Question Applicant
Might Expect on a Test of
Mechanical Comprehension Which gear will turn the
same way as the driver?

DRIVER

A B

Intelligence is often measured with individually administered tests like the

Stanford-Binet Test or the Wechsler Test. Employers can administer other IQ tests
such as the Wonderlic to groups of people. Other intelligence tests include the
Kaufman Adolescent and Adult Intelligence Test, the Slosson Intelligence Test, and the
Comprehensive Test of Nonverbal Intelligence. In a study of firefighter trainees
performance over 23 years, the researchers found that testing consisting of a measure
of general intellectual ability and a physical ability assessment was highly predictive
of firefighter trainee performance.43

SPECIFIC COGNITIVE ABILITIES There are also measures of specific mental

abilities, such as deductive reasoning, verbal comprehension, memory, and numerical
ability.
Psychologists often call such tests aptitude tests, since they purport to measure
aptitude for the job in question. Consider the Test of Mechanical Comprehension in
Figure 6-6, which tests applicants understanding of basic mechanical principles.
This may reflect a person s aptitude for jobs like that of machinist or engineer
that require mechanical comprehension. Other tests of mechanical aptitude include
the Mechanical Reasoning Test and the SRA Test of Mechanical Aptitude. The
revised Minnesota Paper Form Board Test consists of 64 two-dimensional diagrams
cut into separate pieces. It provides insights into an applicant s mechanical spatial
ability; you d use it for screening applicants for jobs such as designers, draftspeople,
or engineers.

Tests of Motor and Physical Abilities

You might also want to measure motor abilities, such as finger dexterity, manual dexter-
ity, and (if hiring pilots) reaction time. The Crawford Small Parts Dexterity Test is an
example. It measures the speed and accuracy of simple judgment as well as the speed of
finger, hand, and arm movements. Other tests include the Stromberg Dexterity Test, the
Minnesota Rate of Manipulation Test, and the Purdue Peg Board.
Tests of physical abilities may also be required. These include static strength (such
as lifting weights), dynamic strength (like pull-ups), body coordination (as in jumping
rope), and stamina.44 Thus applicants for the U.S. Marines must pass its Initial
Strength Test (2 pull ups, 35 sit-ups, and a 1.5 mile run).

Measuring Personality and Interests

A person s cognitive and physical abilities alone seldom explain his or her job perform-
ance. Other factors, like motivation and interpersonal skills, are very important. As one
consultant put it, most people are hired based on qualifications, but most are fired for
nonperformance. And nonperformance is usually the result of personal characteristics,
such as attitude, motivation, and especially, temperament. 45 Even some online dating
services, like eHarmony.com, have prospective members take online personality tests
and reject those who its software judges as unmatchable.46

WHAT DO PERSONALITY TESTS MEASURE? Personality tests measure basic

aspects of an applicant s personality, such as introversion, stability, and motivation.
188 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Some of these tests are projective. The psychologist presents an ambiguous

stimulus (like an inkblot or clouded picture) to the person. The person then reacts
to it. Since the pictures are ambiguous, the person supposedly projects into the
picture his or her attitudes. A security-oriented person might describe the ink blot
in Figure 6-2 (page 178) as A giant insect coming to get me. Other projective tech-
niques include Make a Picture Story (MAPS), and the Forer Structured Sentence
Completion Test.
Other personality tests are self-reported: applicants fill them out themselves.
Figure 6-7 is an example. Thus, the Guilford-Zimmerman survey measures personality
traits like emotional stability versus moodiness, and friendliness versus criticalness.
The Minnesota Multiphasic Personality Inventory (MMPI) taps traits like hypochon-
dria and paranoia. Available online, the Myers-Briggs test provides a personality type
classification useful for decisions such as career selection and planning.47

FIGURE 6-7 Sample Online

Personality Test Questions

Source: Elaine Pulakos, Selection

Assessment Methods, SHRM
Foundation, 2005, p. 9.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 189

THE BIG FIVE What traits to measure? Industrial psychologists often focus on
the big five personality dimensions: extraversion, emotional stability/neuroticism,
agreeableness, conscientiousness, and openness to experience.48
Neuroticism represents a tendency to exhibit poor emotional adjustment and
experience negative effects, such as anxiety, insecurity, and hostility. Extraversion
represents a tendency to be sociable, assertive, active, and to experience positive
effects, such as energy and zeal. Openness to experience is the disposition to
be imaginative, nonconforming, unconventional, and autonomous. Agreeableness
is the tendency to be trusting, compliant, caring, and gentle. Conscientiousness is
comprised of two related facets: achievement and dependability.49

DO PERSONALITY TESTS PREDICT PERFORMANCE? It seems to make

sense that personality tests would predict performance. After all, wouldn t an extro-
verted person do better in sales?
In fact, personality traits do often correlate with job performance. In one study,
extraversion, conscientiousness, and openness to experience were strong predictors
of leadership.50 In another study, neuroticism was negatively related to motivation,
while conscientiousness was positively related to it.51 And, in personality research,
conscientiousness has been the most consistent and universal predictor of job
performance. 52 So to paraphrase Woody Allen, it does seem that 90% of success is
just showing up.
Other traits correlate with occupational success. For example, extraversion
correlates with success in sales and management jobs.53 The responsibility, socializa-
tion, and self-control scales of the California Psychological Inventory predicted
dysfunctional job behaviors among law enforcement officers.54 Emotional stability,
extroversion, and agreeableness predicted whether expatriates would leave their
overseas assignments early.55

CAVEATS However, there are three caveats. First, projective tests are hard to inter-
pret. An expert must analyze the test taker s interpretations and infer from them his
or her personality. The test s usefulness then assumes there s a measurable relation-
ship between a personality trait (like introversion) and success on the job.
Second, personality tests can trigger legal challenges. For example, one court held
that the MMPI is a medical test (because it can screen out applicants with psychological
impairments), and so might violate the ADA.56
Third, some dispute that self-report personality tests predict performance at all.
The journal Personnel Psychology convened a panel of distinguished industrial
psychologists that said using self-report personality tests in selection should be recon-
sidered [due to low validity]. 57 Other experts call such concerns unfounded. 58 At a
minimum, make sure that any personality tests you use predict performance.

INTEREST INVENTORIES Interest inventories compare one s interests with those

of people in various occupations. Thus, a person who takes the Strong-Campbell Inter-
ests Inventory would receive a report comparing his or her interests to those of people
already in occupations like accounting, engineering, or management. Someone taking
the self-administered Self-Directed Search (SDS) (www.self-directed-search.com)
receives an interests code to use in identifying likely high-potential occupations.
Interest inventories have many uses.59 They re irreplaceable in career planning,
since a person will likely do better in jobs that involve activities in which he or she is
interested. They re also useful in selection. If you can select people whose interests are

interest inventory
A personal development and selection
device that compares the person s current
interests with those of others now in various
occupations so as to determine the preferred
occupation for the individual.
190 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

roughly the same as those of successful incumbents in the jobs for which you re
recruiting, it s more likely that those applicants will be successful.

Achievement Tests
Achievement tests measure what someone has learned. Most of the tests you take
in school are achievement tests. They measure your job knowledge in areas like
economics, marketing, or human resources. Achievement tests are also popular at work.
For example, the Purdue Test for Machinists and Machine Operators tests the job
knowledge of experienced machinists with questions like What is meant by tolerance ?
Some achievement tests measure the applicant s abilities; a typing test is one example.

WORK SAMPLES AND SIMULATIONS

With work samples, you present examinees with situations representative of the job
for which they re applying, and evaluate their responses.60 Experts consider these
(and simulations, like the assessment centers we also discuss in this section) to be
tests. However, they differ from most tests, because they measure job performance
directly. For example, work samples for a cashier may include operating a cash register
and counting money.61

6 Give two examples of work

Using Work Sampling for Employee Selection
sample/simulation tests. The work sampling technique tries to predict job performance by requiring job candi-
dates to perform one or more samples of the job s tasks.
Work sampling has several advantages. It measures actual job tasks, so it s harder
to fake answers. The work sample s content the actual tasks the person must per-
form is not as likely to be unfair to minorities (as might a personnel test that possi-
bly emphasizes middle-class concepts and values).62 Work sampling doesn t delve
into the applicant s personality, so there s almost no chance of applicants viewing it as
an invasion of privacy. Designed properly, work samples also exhibit better validity
than do other tests designed to predict performance.

BASIC PROCEDURE The basic procedure is to select a sample of several tasks

crucial to performing the job, and then to test applicants on them.63 An observer
monitors performance on each task, and indicates on a checklist how well the appli-
cant performs. Here is an example. In creating a work sampling test for maintenance
mechanics, experts first listed all possible job tasks (like install pulleys and belts and
install and align a motor ). Four crucial tasks were installing pulleys and belts, dis-
assembling and installing a gearbox, installing and aligning a motor, and pressing a
bushing into a sprocket.
They then broke down these four tasks into the steps required to complete each
step. Mechanics could perform each step in a slightly different way, of course. Since
some approaches were better than others, the experts gave a different weight to differ-
ent approaches.
Figure 6-8 shows one of the steps required for installing pulleys and belts
checks key before installing. As the figure shows, possible approaches here include
checking the key against (1) the shaft, (2) the pulley, or (3) neither. The right of the
figure lists the weights (scores) reflecting the worth of each method. The applicant
performs the task, and the observer checks off the approach used.

FIGURE 6-8 Example of a

Work Sampling Question Checks key before installing against:
shaft score 3
pulley score 2
neither score 1
Note: This is one step in installing pulleys and belts.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 191

Situational Judgment Tests

Situational judgment tests are personnel tests designed to assess an applicant s judg-
ment regarding a situation encountered in the workplace. As an example, You are
facing a project deadline and are concerned that you may not complete the project
by the time it is due. It is very important to your supervisor that you complete a
project by the deadline. It is not possible to get anyone to help you with the work.
You would:64
a. Ask for an extension of the deadline
b. Let the supervisor know that you may not meet the deadline
c. Work as many hours it as it takes to get the job done by the deadline
d. Explore different ways to do the work so it can be completed by the deadline
e. On the date it is due, hand in what you have done so far
f. Do the most critical parts of the project by the deadline and complete the
remaining parts after the deadline
g. Tell your supervisor that the deadline is unreasonable
h. Give your supervisor an update and express your concern about your ability to
complete the project by the deadline
i. Quit your job
Situational judgment tests are effective and widely used.65

Management Assessment Centers

A management assessment center is a 2- to 3-day simulation in which 10 to 12
candidates perform realistic management tasks (like making presentations) under
the observation of experts who appraise each candidate s leadership potential. The
center itself may be a simple conference room, but more likely a special room with
a one-way mirror to facilitate observation. Many firms use assessment centers. For
example, The Cheesecake Factory created its Professional Assessment and Develop-
ment Center to help select promotable managers. Candidates spend 2 days of
exercises, simulations, and classroom learning to see if they have the skills for key
management positions.66
Typical simulated tasks include:
* The in-basket. This exercise confronts the candidate with an accumulation of
reports, memos, notes of incoming phone calls, letters, and other materials
collected in the actual or computerized in-basket of the simulated job he or she is
about to start. The candidate must take appropriate action on each item. Trained
evaluators then review the candidate s efforts.
* Leaderless group discussion. Trainers give a leaderless group a discussion question
and tell members to arrive at a group decision. They then evaluate each group
member s interpersonal skills, acceptance by the group, leadership ability, and
individual influence.
* Management games. Participants solve realistic problems as members of simulated
companies competing in a marketplace.
* Individual presentations. Here trainers evaluate each participant s communication
skills and persuasiveness by having each make an assigned oral presentation.

work samples work sampling technique management assessment center

Actual job tasks used in testing applicants A testing method based on measuring A simulation in which management
performance. performance on actual basic job tasks. candidates are asked to perform realistic
tasks in hypothetical situations and are
scored on their performance. It usually
also involves testing and the use
of management games.
192 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

* Objective tests. An assessment center typically includes tests of personality, mental

ability, interests, and achievements.
* The interview. Most also require an interview between at least one trainer and
each participant, to assess the latter s interests, past performance, and motivation.
Supervisor recommendations usually play a big role in choosing center partici-
pants. Line managers usually act as assessors and typically arrive at their ratings
through consensus.67

EFFECTIVENESS Most experts view assessment centers as effective for selecting

management candidates, but are they worth their cost? They are expensive to develop,
take much longer than conventional tests, require managers acting as assessors, and
often require psychologists. However, studies suggest they are worth it.68 One study of
40 police candidates found that: Assessment center performance shows a unique and
substantial contribution to the prediction of future police work success, justifying
the usage of such method. In this study, peers evaluations of candidates during the
center proved especially useful.69

Situational Testing and Video-Based Situational Testing

Situational tests require examinees to respond to situations representative of the job.
Work sampling (discussed earlier) and some assessment center tasks (such as in-
baskets) fall in this category. So do video-based tests and miniature job training
(described next), and the situational interviews we address in Chapter 7.70
The video-based simulation presents the candidate with several online or
PC-based video situations, each followed by one or more multiple-choice questions.
For example, the scenario might depict an employee handling a situation on the job.
At a critical moment, the scenario ends and the video asks the candidate to choose
from several courses of action. For example:
(A manager is upset about the condition of the department and takes it out on one
of the department s employees.)
Manager: Well, I m glad you re here.
Associate: Oh? Why is that?
Manager: Look at this place, that s why! I take a day off and come back to find
the department in a mess. You should know better.
Associate: But I didn t work late last night.
Manager: Maybe not. But there have been plenty of times before when you ve
left this department in a mess.
(The scenario stops here.)
If you were this associate, what would you do?
a. Let the other associates responsible for the mess know that you had to take the
heat.
b. Straighten up the department, and try to reason with the manager later.
c. Suggest to the manager that he talk to the other associates who made the mess.
d. Take it up with the manager s boss.71

Computerized Multimedia Candidate Assessment Tools

Employers increasingly use computerized multimedia candidate assessment tools.
Development Dimensions International developed a multimedia skill test that Ford
Motor Company uses for hiring assembly workers. The company can test everything
from how people tighten the ball, to whether they followed a certain procedure
correctly, to using a weight-sensitive mat on the floor that, when stepped on at the
wrong time, will mark a candidate down in a safety category. 72
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 193

The Miniature Job Training and Evaluation Approach

Miniature job training and evaluation means training candidates to perform several
of the job s tasks, and then evaluating the candidates performance prior to hire. The
approach assumes that a person who demonstrates that he or she can learn and perform
the sample of tasks will be able to learn and perform the job itself. Like work sampling,
miniature job training and evaluation tests applicants with actual samples of the job, so
it s inherently content relevant and valid. The big problem is the expense involved in the
instruction and training.

HONDA EXAMPLE When Honda built a new plant in Alabama, it had to hire
thousands of new employees. Honda s recruiting ad sought applicants for a free train-
ing program Honda was offering as a precondition for applying for jobs at the new
plant. Applicants needed at least a high school diploma or GED, employment for the
past 2 years with no unexplainable gaps, and Alabama residency. Eighteen thousand
people applied.
First Honda and the Alabama state employment agency screened the applicants
by eliminating those who lacked the education or experience. They then gave prefer-
ence to applicants near the plant. About 340 applicants per 6-week session received
special training at a new facility, two evenings a week. This included classroom
instruction, videos of Honda employees in action, and actually practicing particular
jobs. (Thus, miniature job training and evaluation. ) Some candidates who watched
the videos dropped out after seeing the work s pace.
During training, Alabama state agency assessors scrutinized and
rated the trainees. They then invited those who graduated to apply for
plant jobs. Honda employees (from HR and departmental representa-
tives) then interviewed the candidates, reviewed their training records,
and decided who to hire. New employees take a one-time drug test, but
no other paper-and-pencil tests or credentials are required. New hires
receive a 3-day orientation. Then, assistant managers in each depart-
ment coordinate their day-to-day training.73

Realistic Job Previews

Sometimes, a dose of realism makes the best screening tool. For exam-
ple, Walmart found that many new associates quit within the first 90
days. When Walmart began explicitly explaining and asking about
Source: Issei Kato/Reuters Pictures Americas.

work schedules and work preferences, turnover improved.74 In gen-

eral, applicants who receive realistic job previews are more likely to
turn down job offers, but firms are more likely to have lower
turnover.75

HR in Practice: Testing Techniques for Managers

You may find that, even in large companies, when it comes to screening
employees, you re on your own. The human resource department may
work with you to design and administer screening tests. But more often
Employers such as Honda first train and then HR may do little more than the recruiting and some prescreening (such as
have applicants perform several of the job tasks,
typing tests for clerical applicants), and run background checks and drug
and then evaluate the candidates before hiring
them.
and physical exams.
Suppose you are, say, the marketing manager, and you want to
screen your job applicants more formally. You could buy your own

situational test video-based simulation miniature job training and evaluation

A test that requires examinees to respond A situational test in which examinees Training candidates to perform several of the
to situations representative of the job. respond to video simulations of realistic job job s tasks, and then evaluating the candi-
situations. dates performance prior to hire.
194 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

TABLE 6-1 Evaluation of Selected Assessment Methods

Costs (Develop/
Assessment Method Validity
* Adverse Impact Administer)

Cognitive ability tests High High (against minorities) Low/low

Job knowledge test High High (against minorities) Low/low
Personality tests Low to moderate Low Low/low
Integrity tests Moderate to high Low Low/low
Structured interviews High Low High/high
Situational judgment tests Moderate Moderate (against minorities) High/low
Work samples High Low High/high
Assessment centers Moderate to high Low to moderate, depending on exercise High/high
Physical ability tests Moderate to high High (against females and older workers) High/high

Source: Elaine Pulakos, Selection Assessment Methods, SHRM Foundation, 2005, p. 17. Reprinted by permission of Society for Human Resource Management
via Copyright Clearance Center.

test battery. However, using packaged intelligence tests may violate company pol-
icy, raise validity questions, and even expose your employer to EEO liability.
A preferred approach is to devise and use screening tools, the validity of which
is obvious ( face validity. ) For example, create a work sampling test. Thus, it is
reasonable for the marketing manager to ask an advertising applicant to spend an
hour designing an ad, or to ask a marketing research applicant to spend a half hour
outlining a marketing research program for a hypothetical product.

Summary
The employer needs to consider several things before deciding to use a particular selection
tool. These include the tool s reliability and validity, its return on investment (in terms of
utility analysis), applicant reactions, usability (in terms of your managers and employees
willingness and ability to use it), adverse impact, and the tool s selection ratio
(does it screen out, as it should, a high percentage of applicants or admit virtually all?).76
Table 6-1 summarizes the validity, potential adverse impact, and cost of several popular
assessment methods.

7 Explain the key points

BACKGROUND INVESTIGATIONS AND OTHER
to remember in conducting SELECTION METHODS
background investigations.
Testing is only part of an employer s selection process. Other tools may include back-
ground investigations and reference checks, preemployment information services, hon-
esty testing, graphology, and substance abuse screening.

Why Perform Background Investigations

and Reference Checks?
One of the easiest ways to avoid hiring mistakes is to check the candidate s background
thoroughly. Doing so is cheap and (if done right) useful. There s usually no reason why
even supervisors in large companies can t check the references of someone they re about
to hire, as long as they know the rules.
Most employers therefore check and verify the job applicant s background
information and references. In one survey of about 700 human resource managers,
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 195

87% said they conduct reference checks, 69% conduct background employment
checks, 61% check employee criminal records, 56% check employees driving
records, and 35% sometimes or always check credit.77 Commonly verified data
include legal eligibility for employment (in compliance with immigration laws),
dates of prior employment, military service (including discharge status), educa-
tion, identification (including date of birth and address to confirm identity),
county criminal records (current residence, last residence), motor vehicle
record, credit, licensing verification, Social Security number, and reference
checks.78 Some employers are checking executive candidates civil litigation
records, with the candidate s prior approval. 79 As of 2010, Massachusetts and
Hawaii prohibit private employers from asking about criminal records on initial
written applications.80

WHY CHECK? There are two main reasons to check backgrounds to verify the
applicant s information (name and so forth) and to uncover damaging information.81
Lying on one s application isn t unusual. A survey found that 23% of 7,000 executive
résumés contained exaggerated or false information.82
Even relatively sophisticated companies fall prey to criminal employees, in part
because they haven t conducted proper background checks. In Chicago, a pharma-
ceutical firm discovered it had hired gang members in mail delivery and computer
repair. The crooks were stealing close to a million dollars a year in computer parts,
and then using the mail department to ship them to a nearby computer store they
owned.83
How deeply you search depends on the position you seek to fill. For example, a
credit and education check is more important for hiring an accountant than
a groundskeeper. In any case, also periodically check the credit ratings of employees
(like cashiers) who have easy access to company assets, and the driving records
of employees who routinely use company cars.

EFFECTIVENESS Most managers don t view references as very useful. This makes
sense, given that few employers will talk freely about former employees. For example,
in one 2010 poll, the Society for Human Resource Management (SHRM) found that
98% of 433 responding members said their organizations would verify dates of
employment for current or former employees. However, 68% said they wouldn t
discuss work performance; 82% said they wouldn t discuss character or personality;
and 87% said they wouldn t disclose a disciplinary action.84
It s obvious why background checks have bad reputations. Many supervisors
don t want to damage a former employee s chances for a job; others might prefer
giving an incompetent employee good reviews if it will get rid of him or her.
The other reason is legal. Employers providing references generally can t be
successfully sued for defamation unless the employee can show malice that is, ill
will, culpable recklessness, or disregard of the employee s rights.85 But the managers
and companies providing the references understandably still don t want the grief.
Let s look at why.

The Legal Dangers and How to Avoid Them

In practice (as most people instinctively know), giving someone a bad reference can
drag you into a legal mess. For example, if the courts believe you gave the bad reference
to retaliate for the employee previously filing an EEOC claim, they might let him or her
sue you.86

DEFAMATION That is just the tip of the iceberg. Being sued for defamation is the
real danger. First-line supervisors and managers, not just employers, are potentially at
risk. Various federal laws87 give individuals and students the right to know the nature
and substance of information in their credit files and files with government agencies,
and to review records pertaining to them from any private business that contracts
196 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

with a federal agency. So, it s quite possible the person you re describing will see your
comments and decide you defamed him or her. Common law (in particular, the tort
of defamation) applies to any information you supply. A communication is
defamatory if it is false and tends to harm the reputation of another by lowering
the person in the estimation of the community or by deterring other persons from
associating or dealing with him or her.
The person alleging defamation has various legal remedies, including suing the
source of the reference for defamation.88 In one case, a court awarded a man
$56,000 after a company turned him down for a job because, among other things,
the former employer called him a character. As if that s not enough, there are
companies that, for a small fee, will call former employers on behalf of employees
who believe they re getting bad references. One supervisor thought his previous
employer might bad-mouth him. He hired BadReferences.com to investigate.
BadReferences.com (which uses trained court reporters for its investigations) found
that a supervisor at the company suggested that the employee was a little too
obsessive . . . and not comfortable with taking risks, or making big decisions.
The former employee sued his previous employer, demanding an end to defamation
and $45,000 in compensation.89

PRIVACY Furthermore, truth is not always a defense. Thus in some states, employees
can sue employers for disclosing to a large number of people true but embarrassing
private facts about the employee. Here truth is no defense.
One case involved a supervisor in a shouting match with an employee. The
supervisor yelled out that the employee s wife had been having sexual relations with
certain people. The employee and his wife sued the employer for invasion of
privacy. The jury found the employer liable for invasion of the couple s privacy. It
awarded damages to both of them, as well as damages for the couple s additional
claim that the supervisor s conduct amounted to an intentional infliction of
emotional distress.90
The net result is that most employers and managers are very restrictive about who
can give references, and what they can say. As a rule, only authorized managers should
provide information. Other suggestions include Don t volunteer information,
Avoid vague statements, and Do not answer trap questions such as, Would you
rehire this person? In practice, many firms have a policy of not providing any
information about former employees except for their dates of employment, last
salary, and position titles.91
However, not disclosing relevant information can be dangerous, too. In one
Florida case, a company fired an employee for allegedly bringing a handgun to work.
After his next employer fired him (for absenteeism), he returned to that company and
shot several employees before taking his own life. The injured parties and the relatives
of the murdered employees sued the previous employer, who had provided the
employee with a clean letter of recommendation allegedly because that first employer
didn t want to anger the employee over his firing.

How to Check a Candidate s Background

Which brings us back to this point: In practice, the references you receive may not be
useful. There are several things that managers and employers can do to get better
information.
Most employers at least try to verify an applicant s current (or former) position
and salary with his or her current (or former) employer by phone (assuming you
cleared doing so with the candidate). Others call the applicant s current and previ-
ous supervisors to try to discover more about the person s motivation, technical
competence, and ability to work with others (although again, many employers have
policies against providing such information). Figure 6-9 shows one form you can
use for phone references. Some employers get background reports from commercial
credit rating companies for information about credit standing, indebtedness,
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 197

FIGURE 6-9 Reference

Checking Form (Verify that the applicant has provided permission before conducting reference checks.)

Source: Society for Human Resource Candidate

Management, © 2004. Reproduced Name
with permission of Society for
Human Resource Management. Reference
Name

Company
Name

Dates of Employment
From: To:

Position(s)
Held

Salary
History

Reason for
Leaving

Explain the reason for your call and verify the above information with the supervisor (including the reason
for leaving)

1. Please describe the type of work for which the candidate was responsible.

2. How would you describe the applicant s relationships with coworkers, subordinates (if applicable), and
with superiors?

3. Did the candidate have a positive or negative work attitude? Please elaborate.

4. How would you describe the quantity and quality of output generated by the former employee?

5. What were his/her strengths on the job?

6. What were his/her weaknesses on the job?

7. What is your overall assessment of the candidate?

8. Would you recommend him/her for this position? Why or why not?

9. Would this individual be eligible for rehire? Why or why not?

Other comments?

reputation, character, and lifestyle. (Others check social network sites, as we will
see in a moment.)
More employers are automating their reference checking process. Instead of the
employer calling the references, the recruiter sends an e-mail link to each candidate.
198 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

The candidate then uses this link to contact five or more of his or her references,
asking them to fill out a tailored online questionnaire. Special vendors then compile
this information and create analytical reports for the employer.92

The Social Network: Checking Applicants Social Postings

More employers are Googling applicants or checking social networking sites. After
such online searches, recruiters found that 31% of applicants had lied about their
qualifications and 19% had posted information about their drinking or drug use.93
On Facebook.com, one employer found that a candidate had described his interests
as smoking pot and shooting people. The student may have been kidding, but
didn t get the job.94 An article called References You Can t Control notes that you
can use social networking sites to identify an applicant s former colleagues, and
thus contact them.95
Googling is probably safe enough, but checking social networking sites raises
legal issues. For example, while the Fair Credit Reporting Act refers more to
getting official reports, it s probably best to get the candidate s prior approval for
social networking searches.96 And, of course, do not use a pretext or fabricate an
identity.97

HR IN PRACTICE: MAKING THE BACKGROUND CHECK MORE VALUABLE

Is there any way to obtain better information? Yes.
* First, include on the application form a statement for applicants to sign explicitly
authorizing a background check, such as:
I hereby certify that the facts set forth in the above employment application
are true and complete to the best of my knowledge. I understand that falsified
statements or misrepresentation of information on this application or omis-
sion of any information sought may be cause for dismissal, if employed,
or may lead to refusal to make an offer and/or to withdrawal of an offer. I also
authorize investigation of credit, employment record, driving record, and,
once a job offer is made or during employment, workers compensation
background if required.
* Second (since telephone references apparently produce assessments that are more
candid), it s probably best to rely on telephone references. Use a form, such as the
one in Figure 6-9. Remember that you can get relatively accurate information
regarding dates of employment, eligibility for rehire, and job qualifications. It s
more difficult to get other background information (such as reasons for leaving a
previous job).98
* Third, persistence and attentiveness to potential red flags improves results. For
example, if the former employer hesitates or seems to qualify his or her answer
when you ask, Would you rehire? don t just go on to the next question. Try to
unearth what the applicant did to make the former employer pause. If he says,
Joe requires some special care, say, Special care?
* Fourth, compare the application to the résumé; people tend to be more imagina-
tive on their résumés than on their application forms, where they must certify the
information.
* Fifth, try to ask open-ended questions (such as, How much structure does the
applicant need in his/her work? ) in order to get the references to talk more about
the candidate.99 But in asking for information:
Only ask for and obtain information that you re going to use.
Remember that using arrest information is highly suspect.
Use information that is specific and job related.
Keep information confidential.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 199

* Sixth, use the references offered by the applicant as a source for other references.
You might ask each of the applicant s references, Could you give me the name of
another person who might be familiar with the applicant s performance? In that
way, you begin getting information from references that may be more objective,
because they did not come directly from the applicant.

Using Preemployment Information Services

It is easy to have employment screening services check out applicants. Major employ-
ment screening providers include ADP (www.ADP.com), Employment Background
Investigations (www.ebinc.com), First Advantage (www.FADV.com/employer),
Hireright (www.hireright.com), and Talentwise (www.talentwise.com).100 They use
databases to access information about matters such as workers compensation and
credit histories, and conviction and driving records. For example, a South Florida
firm advertises that for less than $50 it will do a criminal history report, motor
vehicle/driver s record report, and (after the person is hired) a workers compensation
claims report history, plus confirm identity, name, and Social Security number. There
are thousands of databases and sources for finding background information, includ-
ing sex offender registries, and criminal and educational histories.

USE CAUTION There are two reasons to use caution when delving into an appli-
cant s criminal, credit, and workers compensation histories.101 First (as discussed in
Chapter 2), it can be tricky complying with EEO laws. For example, the ADA
prohibits employers from making preemployment inquiries into the existence,
nature, or severity of a disability. Therefore, asking about a candidate s previous
workers compensation claims before offering the person a job is usually unlawful.
Similarly, asking about arrest records may be discriminatory. Never authorize an
unreasonable investigation.
Second, various federal and state laws govern how employers acquire and use
applicants and employees background information. At the federal level, the Fair
Credit Reporting Act is the main directive. In addition, at least 21 states impose their
own requirements. Compliance with these laws essentially involves four steps, as
follows:
STEP 1: DISCLOSURE AND AUTHORIZATION. Before requesting reports, the
employer must disclose to the applicant or employee that a report will be requested
and that the employee/applicant may receive a copy. (Do this on the application.)
STEP 2: CERTIFICATION. The employer must certify to the reporting agency that
the employer will comply with the federal and state legal requirements for example,
that the employer obtained written consent from the employee or applicant.
STEP 3: PROVIDING COPIES OF REPORTS. Under federal law, the employer must
provide copies of the report to the applicant or employee if adverse action (such as
withdrawing an offer of employment) is contemplated.102
STEP 4: NOTICE AFTER ADVERSE ACTION. After the employer provides the
employee or applicant with copies of the consumer and investigative reports and a
reasonable period has elapsed, the employer may take an adverse action (such as
withdrawing an offer). If the employer anticipates taking an adverse action, the
employee or applicant must receive an adverse action notice. This notice contains
information such as the name of the consumer reporting agency. The employee/
applicant then has various remedies under the applicable laws.103

The Polygraph and Honesty Testing

Some firms still use the polygraph (or lie detector) for honesty testing, although the
law severely restricts its use. The polygraph is a device that measures physiological
200 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

changes like increased perspiration. The assumption is that such changes reflect
changes in emotional state that accompany lying.
Complaints about offensiveness plus grave doubts about the polygraph s accuracy
culminated in the Employee Polygraph Protection Act of 1988.104 With a few excep-
tions, the law prohibits employers from conducting polygraph examinations of all job
applicants and most employees. (Also prohibited are other mechanical or electrical
devices that attempt to measure honesty or dishonesty, including psychological stress
evaluators and voice stress analyzers.) Federal laws don t prohibit paper-and-pencil
tests and chemical testing, as for drugs.

WHO CAN USE THE POLYGRAPH? Local, state, and federal government
employers (including the FBI) can use polygraphs, but state laws restrict many local
and state governments. Private employers can use polygraph testing, but only under
strictly limited circumstances. The latter include those with
* National defense or security contracts
* Nuclear power-related contracts with the Department of Energy
* Access to highly classified information
* Counterintelligence-related contracts with the FBI or Department of Justice
* Private businesses (1) hiring private security personnel, (2) hiring persons with
access to drugs, or (3) doing ongoing investigations involving economic loss or
injury to an employer s business, such as a theft
However, even if used for ongoing investigations of theft, the law restricts employers
rights. To administer a polygraph test for an ongoing investigation, an employer must
meet four standards:
1. First, the employer must show that it suffered an economic loss or injury.
2. Second, it must show that the employee in question had access to the property.
3. Third, it must have a reasonable suspicion before asking the employee to take the
polygraph.
4. Fourth, the employee must receive the details of the investigation before the test,
as well as the questions to be asked on the polygraph test.

PAPER-AND-PENCIL HONESTY TESTS The Polygraph Protection Act trig-

gered a burgeoning market for paper-and-pencil (or online) honesty tests. These are
psychological tests designed to predict job applicants proneness to dishonesty and
other forms of counterproductivity.105 Most measure attitudes regarding things like
tolerance of others who steal, acceptance of rationalizations for theft, and admission
of theft-related activities. Tests include the Phase II profile. London House, Inc., and
Stanton Corporation publish similar tests.106
Psychologists initially raised concerns about paper-and-pencil honesty tests, but
studies support these tests validity. One early study illustrates their potential useful-
ness. The study involved 111 employees hired by a convenience store chain to work at
store or gas station counters.107 The firm estimated that shrinkage equaled 3% of
sales, and believed that internal theft accounted for much of this. Scores on an
honesty test successfully predicted theft here, as measured by termination for theft.
One large review of such tests concluded that the pattern of findings regarding the
usefulness of such tests continues to be consistently positive. 108
CHECKING FOR HONESTY: WHAT YOU CAN DO With or without testing,
there s a lot a manager or employer can do to screen out dishonest applicants or
employees. Specifically:
* Ask blunt questions.109 Says one expert, there is nothing wrong with asking the
applicant direct questions, such as, Have you ever stolen anything from an
employer? Have you recently held jobs other than those listed on your applica-
tion? and, Is any information on your application misrepresented or falsified?
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 201

* Listen, rather than talk. Allow the applicant to do the talking so you can learn as
much about the person as possible.
* Do a credit check. Include a clause in your application giving you the right to
conduct background checks, including credit checks and motor vehicle reports.
* Check all employment and personal references.
* Use paper-and-pencil honesty tests and psychological tests.
* Test for drugs. Devise a drug-testing program and give each applicant a copy of
the policy.
* Establish a search-and-seizure policy and conduct searches. Give each applicant
a copy of the policy and require each to return a signed copy. The policy should
state, All lockers, desks, and similar property remain the property of the company
and may be inspected routinely.
Honesty testing still requires some caution. Having just taken and failed what is
fairly obviously an honesty test, the candidate may leave the premises feeling his or
her treatment was less than proper. Some honesty questions also pose invasion-
of-privacy issues. And there are state laws to consider. For instance, Massachusetts
and Rhode Island limit paper-and-pencil honesty testing.

Graphology
Graphology is the use of handwriting analysis to determine the writer s basic personality
traits. Graphology thus has some resemblance to projective personality tests, although
graphology s validity is highly suspect.
In graphology, the handwriting analyst studies an applicant s handwriting and
signature to discover the person s needs, desires, and psychological makeup. According
to the graphologist, the writing in Figure 6-10 exemplifies traits such as independence
and isolation.
Graphology s place in screening sometimes seems schizophrenic. Studies
suggest it is not valid, or that when graphologists do accurately size up candidates,
it s because they are also privy to other background information. Yet some firms
continue to swear by it. It tends to be popular in Europe, where countries like
France or Germany have one central graphology institute, which serves as the
certifying body. 110 Fike Corporation in Blue Springs, Missouri, a 325-employee
firm, uses profiles based on handwriting samples to design follow-up interviews.
Exchange Bank in Santa Rosa, California, uses it as one element for screening
officer candidates.111 Most experts shun it.

Human Lie Detectors

While perhaps no more valid than graphology, some employers are using so-called
human lie detectors. 112 These are experts who may (or may not) be able to identify
lying just by watching candidates. One Wall Street firm uses a psychologist and
former FBI agent. He sits in on interviews and watches for signs of candidate decep-
tiveness. Signs include pupils changing size (which often corresponds to emotions,
such as fear), irregular breathing (may flag nervousness), micro-expressions (quick
transitory facial expressions that may portray emotions such as fear), crossing legs
( liars typically try to distance themselves from an untruth ), and quick verbal
responses (possibly reflecting scripted statements).

Physical Exams
Once the employer extends the person a job offer, a medical exam is often the next step
in the selection (although it may also occur after the new employee starts work).
There are several reasons for preemployment medical exams: to verify that the appli-
cant meets the position s physical requirements, to discover any medical limitations you
202 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 6-10 The Uptight

Personality

Source: www.graphicinsight.co.za/
writingsamples.htm#The%20Uptight%
20Personality%2, accessed March 28,
2009. Used with permission of www.
graphicinsight.co.za.

should consider in placing him or her, and to establish a baseline for future insurance or
workers compensation claims. By identifying health problems, the examination can also
reduce absenteeism and accidents and, of course, detect communicable diseases.
Under the Americans with Disabilities Act, an employer cannot reject someone
with a disability if he or she is otherwise qualified and can perform the essential job
functions with reasonable accommodation. Recall that the ADA permits a medical
exam during the period between the job offer and commencement of work if such
exams are standard practice for all applicants for that job category.113

Substance Abuse Screening

Many employers conduct drug screenings. The most common practice is to test
candidates just before they re formally hired. Many also test current employees
when there is reason to believe the person has been using drugs after a work
accident, or in the presence of obvious behavioral symptoms such as chronic
lateness. Some firms routinely administer drug tests on a random or periodic basis,
while others require drug tests when they transfer or promote employees to new
positions.114 Employers may use urine testing to test for illicit drugs, breath alcohol
tests to determine amount of alcohol in the blood, blood tests to measure alcohol
or drug in the blood at the time of the test, hair analyses to reveal drug history,
saliva tests for substances such as marijuana and cocaine, and skin patches to
determine drug use.115

SOME PRACTICAL CONSIDERATIONS Drug testing, while ubiquitous, is

neither as simple nor effective as it might first appear. First, no drug test is foolproof.
Some urine sample tests can t distinguish between legal and illegal substances; for
example, Advil can produce positive results for marijuana. Furthermore, there is a
swarm of products that promise to help employees (both male and female) beat drug
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 203

tests. 116 (Employers should view the presence of adulterants in a sample as a positive
test.) The alternative, hair follicle testing, requires a small sample of hair, which the
lab analyzes.117 But here, too, classified ads advertise chemicals to rub on the scalp
to fool the test.
There s also the question of what is the point.118 Unlike roadside breathalyzers
for DUI drivers, tests for drugs only show whether drug residues are present, not
impairment (or, for that matter, habituation or addiction).119 Some therefore argue
that testing is not justifiable on the grounds of boosting workplace safety.120 Many
feel the testing procedures themselves are degrading and intrusive. Many employers
reasonably counter that they don t want drug-prone employees on their premises.
Employers should choose the lab they engage to do the testing carefully.

LEGAL ISSUES Drug testing raises legal issues, too.121 Several federal (and many
state) laws affect workplace drug testing. As an example, under the ADA, a court would
probably consider a former drug user (who no longer uses illegal drugs and has success-
fully completed or is participating in a rehabilitation program) a qualified applicant
with a disability.122 Under the Drug Free Workplace Act of 1988, federal contractors
must maintain a workplace free from illegal drugs. Under the U.S. Department
of Transportation workplace regulations, firms with more than 50 eligible employees
in transportation industries (mass transit workers, school bus drivers, and so on) must
conduct alcohol testing on workers with sensitive or safety-related jobs.123

WHAT TO DO IF AN EMPLOYEE TESTS POSITIVE What should one do

when a job candidate tests positive? Most companies will not hire such candidates,
and a few will immediately fire current employees who test positive. Current employ-
ees have more legal recourse. Employers must tell them the reason for dismissal if the
reason is a positive drug test.124
Where sensitive jobs are concerned, courts tend to side with employers. In one
case, the U.S. Court of Appeals for the First Circuit ruled that Exxon acted properly in
firing a truck driver who failed a drug test. Exxon s drug-free workplace program
included random testing of employees in safety-sensitive jobs. The employee drove a
tractor-trailer carrying 12,000 gallons of flammable motor fuel and tested positive
for cocaine. The union representing the employee challenged the firing, and an
arbitrator reduced the penalty to a 2-month suspension. The appeals court reversed
the arbitrator s decision. It ruled that the employer acted properly in firing the truck
driver, given the circumstances.125

Complying with Immigration Law

Employees hired in the United States must prove they are eligible to work in the
United States. A person does not have to be a U.S. citizen to be employable. However,
employers should ask a person they re about to hire whether he or she is a U.S. citizen or
an alien lawfully authorized to work in the United States. To comply with this law,
employers should follow procedures outlined in the so-called I-9 Employment Eligibility
Verification form.126 More employers are using the federal government s voluntary elec-
tronic employment verification program, E-Verify.127 Federal contractors must use it.128

PROOF OF ELIGIBILITY Applicants can prove their eligibility for employment

in two ways. One is to show a document (such as a U.S. passport or alien registration
card with photograph) that proves both the person s identity and employment eligi-
bility. The other is to show a document that proves the person s identity, along with
a second document showing the person s employment eligibility, such as a work
permit.129 In any case, it s always advisable to get two forms of proof of identity from
everyone.
Some documents may be fakes. For example, a few years ago Immigration and
Naturalization Service (INS) agents seized more than 2 million counterfeit docu-
ments ranging from green cards and Social Security cards to driver s licenses, from
204 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

nine different states. The federal government is tightening restrictions on hiring

undocumented workers. Realizing that many documents (such as Social Security
cards) are fakes, the government is putting the onus on employers to make sure whom
they re hiring. The Department of Homeland Security presses criminal charges
against suspected employer violators.130
Employers can protect themselves in several ways. First, they can use E-Verify. Then,
systematic background checks are important. Preemployment testing should include
employment verification, criminal record checks, drug screens, and reference checks. You
can verify Social Security numbers by calling the Social Security Administration.
Employers can avoid accusations of discrimination by verifying the documents of all
applicants, not just those they may think suspicious.131

AVOIDING DISCRIMINATION In any case, employers should not use the I-9
form to discriminate based on race or country of national origin. The requirement to
verify eligibility does not provide any basis to reject an applicant just because he or
she is a foreigner, not a U.S. citizen, or an alien residing in the United States, as long as
that person can prove his or her identity and employment eligibility. The latest I-9
forms contain a prominent antidiscrimination notice. 132

Improving Productivity Through HRIS

Using Automated Applicant Tracking and Screening Systems
The applicant tracking systems we introduced in Chapter 5 do more than compile
incoming Web-based résumés and track applicants during the hiring process. They
should also help with the testing and screening.
Thus, most employers also use their applicant tracking systems (ATS) to knock
out applicants who don t meet minimum, nonnegotiable job requirements, like
submitting to drug tests or holding driver s licenses.
Employers also use ATS to test and screen applicants online. This includes
skills testing (in accounting, for instance), cognitive skills testing (such as for mechan-
ical comprehension), and even psychological testing. For example, Recreation
Equipment, Inc., wanted to identify applicants who were team-oriented. Its applicant
tracking system helps it do that.133
Finally, the newer systems don t just screen out candidates, but discover hidden
talents. Thanks to the Internet, applicants often send their résumés out hoping a
shotgun approach will help them hit a match. For most employers, this is a screening
nuisance. But a good ATS can identify required talents in the applicant that even the
applicant didn t know existed when he or she applied.134

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Careful employee selection is important for several 2. Whether you are administering tests or making decisions
reasons. Your own performance always depends on your based on test results, managers need to understand sev-
subordinates; it is costly to recruit and hire employees; eral basic testing concepts. Reliability refers to a test s
and mismanaging the hiring process has various legal consistency, while validity tells you whether the test is
implications including equal employment, negligent measuring what you think it s supposed to be measuring.
hiring, and defamation. Criterion validity means demonstrating that those who
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 205

do well on the test also do well on the job while content 5. Testing is only part of an employer s selection process;
validity means showing that the test constitutes a fair you also want to conduct background investigations
sample of the job s content. Validating a test involves ana- and other selection procedures.
lyzing the job, choosing the tests, administering the test, The main point of doing a background check is
relating your test scores and criteria, and cross-validating to verify the applicant s information and to uncover
and revalidating. Test takers have rights to privacy and potentially damaging information. However, care
feedback as well as to confidentiality. must be taken, particularly when giving a reference,
3. Whether administered via paper and pencil, by that the employee not be defamed and that his or
computer, or online, we discussed several main types of her privacy rights are maintained.
tests. Tests of cognitive abilities measure things like
reasoning ability and include intelligence tests and tests Given former employers reluctance to provide a
of specific cognitive abilities such as mechanical comprehensive report, those checking references
comprehension. There are also tests of motor and physi- need to do several things. Make sure the applicant
cal abilities, and measures of personality and interests. explicitly authorizes a background check, use a
With respect to personality, psychologists often focus on checklist or form for obtaining telephone references,
the big five personality dimensions: extroversion, and be persistent and attentive to potential red flags.
emotional stability/neuroticism, agreeableness, consci- Given the growing popularity of computerized
entiousness, and openness to experience. Achievement employment background databases, many or most
tests measure what someone has learned. employers use preemployment information services
4. With work samples and simulations, you present exam- to obtain background information.
inees with situations representative of the jobs for which For many types of jobs, honesty testing is essential
they are applying. One example is the management and paper-and-pencil tests have proven useful.
assessment center, a 2- to 3-day simulation in which Most employers also require that new hires, before
10 to 12 candidates perform realistic management tasks actually coming on board, take physical exams and
under the observation of experts who appraise each substance abuse screening. It s essential to comply
candidate s leadership potential. Video-based situational with immigration law, in particular by having the
testing and the miniature job training and evaluation candidate complete an I-9 Employment Eligibility
approach are two other examples. Verification Form and submit proof of eligibility.

DISCUSSION QUESTIONS
1. What is the difference between reliability and validity? believe might predict success in various occupations,
In what respects are they similar? including college professor, accountant, and computer
2. Explain how you would go about validating a test. How programmer.
can this information be useful to a manager? 5. Why is it important to conduct preemployment back-
3. Explain why you think a certified psychologist who is ground investigations? Outline how you would go about
specifically trained in test construction should (or doing so.
should not) be used by a small business that needs a test 6. Explain how you would get around the problem of
battery. former employers being unwilling to give bad references
4. Give some examples of how to use interest inventories on their former employees.
to improve employee selection. In doing so, suggest 7. How can employers protect themselves against negligent
several examples of occupational interests that you hiring claims?

INDIVIDUAL AND GROUP ACTIVITIES

1. Write a short essay discussing some of the ethical and 4. The HRCI Test Specifications appendix at the end of this
legal considerations in testing. book (pages 633 640) lists the knowledge someone study-
2. Working individually or in groups, develop a list of spe- ing for the HRCI certification exam needs to have in each
cific selection techniques that you would suggest your area of human resource management (such as in Strategic
dean use to hire the next HR professor at your school. Management, Workforce Planning, and Human Resource
Explain why you chose each selection technique. Development). In groups of four to five students, do four
3. Working individually or in groups, contact the publisher things: (1) review that appendix now; (2) identify the
of a standardized test such as the Scholastic Assessment material in this chapter that relates to the required knowl-
Test and obtain from it written information regarding edge the appendix lists; (3) write four multiple-choice
the test s validity and reliability. Present a short report in exam questions on this material that you believe would be
class discussing what the test is supposed to measure suitable for inclusion in the HRCI exam; and (4) if time
and the degree to which you think the test does what it permits, have someone from your team post your team s
is supposed to do, based on the reported validity and questions in front of the class, so the students in other
reliability scores. teams can take each others exam questions.
206 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

EXPERIENTIAL EXERCISE
A Test for a Reservation Clerk
Purpose: The purpose of this exercise is to give you more alternative routes between the customer s starting
practice in developing a test to measure one specific ability point and destination.
for the job of airline reservation clerk for a major airline. If You may assume that we will hire about one-third of the
time permits, you ll be able to combine your tests into a test applicants as airline reservation clerks. Therefore, your
battery. objective is to create a test that is useful in selecting a third of
Required Understanding: Your airline has decided to out- those available.
source its reservation jobs to Asia. You should be fully
acquainted with the procedure for developing a personnel How to Set Up the Exercise/Instructions: Divide the class
test and should read the following description of an airline into teams of five or six students. The ideal candidate will
reservation clerk s duties: need to have a number of skills and abilities to perform this
job well. Your job is to select a single ability and to develop a
Customers contact our airline reservation clerks to test to measure that ability. Use only the materials available in
obtain flight schedules, prices, and itineraries. The reser- the room, please. The test should permit quantitative scoring
vation clerks look up the requested information on our and may be an individual or a group test.
airline s online flight schedule systems, which are updated
continuously. The reservation clerk must speak clearly, Please go to your assigned groups. As per our discussion
deal courteously and expeditiously with the customer, and of test development in this chapter, each group should make
be able to find quickly alternative flight arrangements in a list of the abilities relevant to success in the airline reserva-
order to provide the customer with the itinerary that fits tion clerk s job. Each group should then rate the importance
his or her needs. Alternative flights and prices must be of these abilities on a 5-point scale. Then, develop a test to
found quickly, so that the customer is not kept waiting, measure what you believe to be the top-ranked ability. If
and so that our reservations operations group maintains time permits, the groups should combine the various tests
its efficiency standards. It is often necessary to look from each group into a test battery. If possible, leave time for
under various routings, since there may be a dozen or a group of students to take the test battery.

APPLICATION CASE
THE INSIDER
In 2011, a federal jury convicted a stock trader who worked At lunch at the Four Seasons restaurant off Park
for a well-known investment firm, along with two alleged Avenue in Manhattan, the heads of several investment
accomplices, of insider trading. According to the indict- firms were discussing the conviction, and what they could
ment, the trader got inside information about pending do to make sure something like that didn t occur in their
mergers from lawyers. The lawyers allegedly browsed firms. It s not just compliance, said one, we ve got to
around their law firm picking up information about corpo- keep the bad apples from ever getting in the door. They ask
rate deals others in the firm were working on. The lawyers you for your advice.
would then allegedly pass their information on to a friend,
who in turn passed it on to the trader. Such inside infor-
mation reportedly helped the trader (and his investment Questions
firm) earn millions of dollars. The trader would then 1. We want you to design an employee selection program
allegedly thank the lawyers, for instance, with envelopes for hiring stock traders. We already know what to look
filled with cash. for as far as technical skills are concerned accounting
Of course, things like that are not supposed to happen. courses, economics, and so on. What we want is a pro-
Federal and state laws prohibit it. And investment firms gram for screening out potential bad apples. To that end,
have their own compliance procedures to identify and head please let us know the following: What screening test(s)
off, for instance, shady trades. The problem is that control- would you suggest, and why? What questions should we
ling such behavior once the firm has someone working for it add to our application form? Specifically, how should
who may be prone to engage in inside trading isn t easy. we check candidates backgrounds, and what questions
Better to avoid hiring such people in the first place, said should we ask previous employers and references?
one pundit. 2. What else (if anything) would you suggest?
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 207

CONTINUING CASE
HONESTY TESTING AT CARTER CLEANING COMPANY
Jennifer Carter, of the Carter Cleaning Centers, and her father According to Jack Carter, You would not believe the creativ-
have what the latter describes as an easy but hard job when it ity employees use to get around the management controls we
comes to screening job applicants. It is easy because for two set up to cut down on employee theft. As one extreme
important jobs the people who actually do the pressing and example of this felonious creativity, Jack tells the following
those who do the cleaning/spotting the applicants are easily story: To cut down on the amount of money my employees
screened with about 20 minutes of on-the-job testing. As with were stealing, I had a small sign painted and placed in front
typists, Jennifer points out, Applicants either know how to of all our cash registers. The sign said: YOUR ENTIRE
press clothes fast enough or how to use cleaning chemicals and ORDER FREE IF WE DON T GIVE YOU A CASH REGIS-
machines, or they don t, and we find out very quickly by just TER RECEIPT WHEN YOU PAY. CALL 552 0235. It was my
trying them out on the job. On the other hand, applicant intention with this sign to force all our cash-handling
screening for the stores can also be frustratingly hard because employees to give receipts so the cash register would record
of the nature of some of the other qualities that Jennifer would them for my accountants. After all, if all the cash that comes
like to screen for. Two of the most critical problems facing her in is recorded in the cash register, then we should have a
company are employee turnover and employee honesty. much better handle on stealing in our stores. Well, one
Jennifer and her father sorely need to implement practices that of our managers found a diabolical way around this. I came
will reduce the rate of employee turnover. If there is a way to do into the store one night and noticed that the cash register
this through employee testing and screening techniques, this particular manager was using just didn t look right,
Jennifer would like to know about it because of the manage- although the sign was placed in front of it. It turned out that
ment time and money that are now being wasted by the every afternoon at about 5:00 P.M. when the other employees
never-ending need to recruit and hire new employees. Of even left, this character would pull his own cash register out of a
greater concern to Jennifer and her father is the need to insti- box that he hid underneath our supplies. Customers coming
tute new practices to screen out those employees who may be in would notice the sign and, of course, the fact that he was
predisposed to steal from the company. meticulous in ringing up every sale. But unknown to them
Employee theft is an enormous problem for the Carter and us, for about 5 months the sales that came in for about
Cleaning Centers, and one that is not limited to employees an hour every day went into his cash register, not mine.
who handle the cash. For example, the cleaner/spotter and/or It took us that long to figure out where our cash for that
the presser often open the store themselves, without a manager store was going.
present, to get the day s work started, and it is not unusual to Here is what Jennifer would like you to answer:
have one or more of these people steal supplies or run a
route. Running a route means that an employee canvasses his
or her neighborhood to pick up people s clothes for cleaning Questions
and then secretly cleans and presses them in the Carter store, 1. What would be the advantages and disadvantages to
using the company s supplies, gas, and power. It would also not Jennifer s company of routinely administering honesty
be unusual for an unsupervised person (or his or her super- tests to all its employees?
visor, for that matter) to accept a 1-hour rush order for cleaning 2. Specifically, what other screening techniques could the
or laundering, quickly clean and press the item, and return it to company use to screen out theft-prone and turnover-
the customer for payment without making out a proper ticket prone employees, and how exactly could these be used?
for the item posting the sale. The money, of course, goes into 3. How should her company terminate employees caught
the worker s pocket instead of into the cash register. stealing, and what kind of procedure should be set up
The more serious problem concerns the store manager for handling reference calls about these employees when
and the counter workers who actually handle the cash. they go to other companies looking for jobs?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
Testing As she considered what she had to do next, Lisa Cruz,
The Hotel Paris s competitive strategy is To use superior the Hotel Paris s HR director, knew that employee selection
guest service to differentiate the Hotel Paris properties, and had to play a central role in her plans. The Hotel Paris
to thereby increase the length of stay and return rate of currently had an informal screening process in which local
guests, and thus boost revenues and profitability. HR man- hotel managers obtained application forms, interviewed
ager Lisa Cruz must now formulate functional policies and applicants, and checked their references. However, a pilot
activities that support this competitive strategy by eliciting project using an employment test for service people at the
the required employee behaviors and competencies. Chicago hotel had produced startling results. Lisa found
208 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

consistent, significant relationships between test perform- looking for. It should include, at a minimum, a work sample
ance and a range of employee competencies and behaviors test for front-desk clerk candidates and a personality test aimed
such as speed of check-in/out, employee turnover, and per- at weeding out applicants who lack emotional stability.
centage of calls answered with the required greeting. Clearly,
she was onto something. She knew that employee capabili-
ties and behaviors like these translated into just the sorts of Questions
improved guest services the Hotel Paris needed to execute its 1. Provide a detailed example of the front-desk work
strategy. She therefore had to decide what selection proce- sample test.
dures would be best. 2. Provide a detailed example of two possible personality
Lisa s team, working with an industrial psychologist, wants test questions.
to design a test battery that they believe will produce the sorts 3. What other tests would you suggest to Lisa, and why
of high-morale, patient, people-oriented employees they are would you suggest them?

KEY TERMS
negligent hiring, 176 construct validity, 179 management assessment center, 191
reliability, 177 expectancy chart, 181 situational test, 192
test validity, 179 interest inventory, 189 video-based simulation, 192
criterion validity, 179 work samples, 190 miniature job training
content validity, 179 work sampling technique, 190 and evaluation, 193

ENDNOTES
1. Kevin Delaney, Google Adjusts Hiring 6. Negligent hiring highlights the need to A construct is an abstract trait such
Process as Needs Grow, The Wall Street think through what the job s human as happiness or intelligence. Construct
Journal, October 23, 2006, pp. B1, B8; requirements really are. For example, validity generally addresses the question
http://googleblog.blogspot.com/2009/ non-rapist isn t likely to appear as a of validity of measurement, in other
01/changes-to-recruiting.html, accessed required knowledge, skill, or ability in a words, of whether the test is really
March 25, 2009. job analysis of an apartment manager, measuring, say, intelligence. To prove
2. Aliah D. Wright, At Google, It Takes A but in situations like this screening for construct validity, an employer has
Village to Hire an Employee, HR Mag- such tendencies is obviously required. to prove that the test measures the
azine 56, no. 7 (2009 HR Trendbook To avoid negligent hiring claims, make construct. Federal agency guidelines make
supplement). a systematic effort to gain relevant it difficult to prove construct validity,
3. Even if they use a third party to prepare information about the applicant, verify however, and as a result few employers
an employment test, contractors are documentation, follow up on missing use this approach as part of their process
ultimately responsible for ensuring records or gaps in employment, and keep for satisfying the federal guidelines.
the tests job relatedness and EEO a detailed log of all attempts to obtain See James Ledvinka, Federal Regulation
compliance. DOL Officials Discuss information, including the names and of Personnel and Human Resource Man-
Contractors Duties on Validating Tests, dates for phone calls or other requests. agement (Boston: Kent, 1982), p. 113; and
BNA Bulletin to Management, September 4, Fay Hansen, Taking Reasonable Action Murphy and Davidshofer, Psychological
2007, p. 287. Furthermore, enforcement to Avoid Negligent Hiring Claims, Testing, pp. 154 165.
units are increasing their scrutiny of Workforce Management, September 11, 15. The procedure you would use to demon-
employers who rely on tests and screen- 2006, p. 31. strate content validity differs from that used
ing. See Litigation Increasing with 7. See for example, Jean Phillips and Stanley to demonstrate criterion validity (as des-
Employer Reliance on Tests, Screening, Gully, Strategic Staffing (Upper Saddle cribed in steps 1 through 5). Content validity
BNA Bulletin to Management, April 8, River, NJ: Pearson Education, 2012), tends to emphasize judgment. Here, you
2008, p. 119. However, see also C. Tuna pp. 234 235. first do a careful job analysis to identify the
et al., Job-Test Ruling Cheers Employers, 8. Wright, At Google, It Takes a Village work behaviors required. Then combine
The Wall Street Journal, July 1, 2009, to Hire an Employee. several samples of those behaviors into a
p. B1 2. 9. Ibid. test. A typing and computer skills test for a
4. See, for example, Ann Marie Ryan and 10. Kevin Murphy and Charles Davidshofer, clerk would be an example. The fact that the
Marja Lasek, Negligent Hiring and Psychological Testing: Principles and test is a comprehensive sample of actual,
Defamation: Areas of Liability Related Applications (Upper Saddle River, NJ: observable, on-the-job behaviors is what
to Pre-Employment Inquiries, Personnel Prentice Hall, 2001), p. 73. lends the test its content validity.
Psychology 44, no. 2 (Summer 1991), 11. Ibid., pp. 116 119. 16. www.siop.org/workplace/employment%
pp. 293 319. See also Jay Stuller, Fatal 12. W. Bruce Walsh and Nancy Betz, Tests 20testing/information_to_consider_when_
Attraction, Across the Board 42, no. 6 and Assessment (Upper Saddle River, NJ: cre.aspx, accessed March 22, 2009.
(November December 2005), pp. 18 23. Prentice Hall, 2001). 17. Murphy and Davidshofer, Psychological
5. Also see, for example, Ryan Zimmerman, 13. Murphy and Davidshofer, Psychological Testing, p. 73. See also Chad Van Iddekinge
Wal-Mart to Toughen Job Screening, Testing, p. 74. and Robert Ployhart, Developments
The Wall Street Journal, July 12, 2004, 14. A third, less-used way to demonstrate in the Criterion-Related Validation of
pp. B1 B8. a test s validity is construct validity. Selection Procedures: A Critical Review
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 209

and Recommendations for Practice, 34. Ibid. See also Alison Wolf and Andrew 45. William Wagner, All Skill, No Finesse,
Personnel Psychology 60, no. 1 (2008), Jenkins, Explaining Greater Test Use for Workforce, June 2000, pp. 108 116. See
pp. 871 925. Selection: The Role of HR Professionals also, for example, James Diefendorff and
18. Experts sometimes have to develop sepa- in a World of Expanding Regulation, Kajal Mehta, The Relations of Motiva-
rate expectancy charts and cutting points Human Resource Management Journal 16, tional Traits with Workplace Deviance,
for minorities and nonminorities if the no. 2 (2006), pp. 193 213. Journal of Applied Psychology 92, no. 4
validation studies indicate that high 35. Steffanie Wilk and Peter Capelli, Under- (2007), pp. 967 977.
performers from either group (minority standing the Determinants of Employer 46. James Spencer, Sorry, You re Nobody s
or nonminority) score lower (or higher) Use of Selection Methods, Personnel Type, The Wall Street Journal, July 30,
on the test. Psychology 56 (2003), p. 117. 2003, p. D1.
19. In employment testing, bias has a precise 36. Kevin Hart, Not Wanted: Thieves, HR 47. www.myersbriggsreports.com/?gclid=
meaning. Specifically, bias is said to exist Magazine, April 2008, p. 119. CK71m6rEh6ACFVZS2godDEjgkw,
when a test makes systematic errors in 37. Sarah Needleman, Businesses Say Theft accessed February 22, 2010.
measurement or prediction. Murphy by Their Workers Is Up, The Wall Street 48. See, for example, Joyce Hogan et al.,
and Davidshofer, Psychological Testing, Journal, December 11, 2008, p. B8. Personality Measurement, Faking, and
p. 303. 38. Sarah Gale, Three Companies Cut Employee Selection, Journal of Applied
20. Ibid., p. 305. Turnover with Tests, Workforce, Spring Psychology 92, no. 5 (2007), pp. 1270 1285;
21. Ibid., p. 308. 2002, pp. 66 69. and Colin Gill and Gerard Hodgkin-
22. Herman Aguinis, Steven Culpepper, and 39. Ed Frauenheim, Personality Tests Adapt son, Development and Validation of
Charles Pierce, Revival of Test Bias to the Times, Workforce Management, the Five Factor Model Questionnaire
Research in Preemployment Testing, February 2010, p. 4. (FFMQ): An Adjectival-Based Personal-
Journal of Applied Psychology 95, no. 4 40. Requiring job seekers to complete pre- ity Inventory for Use in Occupational
(2010), p. 648. screening questionnaires and screening Settings, Personnel Psychology 60 (2007),
23. Robert Gatewood and Hubert Feild, selected applicants out on this basis pp. 731 766.
Human Resource Selection (Mason, OH: carries legal and business consequences. 49. Timothy Judge et al., Personality and
South-Western, Cengage Learning, 2008, See, for example, Lisa Harpe, Designing Leadership: A Qualitative and Quantita-
p. 243. an Effective Employment Prescreening tive Review, Journal of Applied Psychology
24. This is based on Dave Zielinski, Effective Program, Employment Relations Today 87, no. 4 (2002), p. 765.
Assessments, HR Magazine, January 32, no. 3 (Fall 2005), pp. 41 43. 50. Ibid.
2011, pp. 61 64 41. www.iphonetypingtest.com, accessed 51. Timothy Judge and Remus Ilies, Rela-
25. The Uniform Guidelines say, Employers March 23, 2009. tionship of Personality to Performance
should ensure that tests and selection 42. Except as noted, this is based on Laurence Motivation: A Meta Analytic Review,
procedures are not adopted casually by Siegel and Irving Lane, Personnel and Orga- Journal of Applied Psychology 87, no. 4
managers who know little about these nizational Psychology (Burr Ridge, IL: (2002), pp. 797 807.
processes . . . . no test or selection proce- McGraw-Hill, 1982), pp. 170 185. See also 52. L. A. Witt et al., The Interactive Effects of
dure should be implemented without an Cabot Jaffee, Measurement of Human Conscientiousness and Agreeableness on
understanding of its effectiveness and Potential, Employment Relations Today 17, Job Performance, Journal of Applied
limitations for the organization, its no. 2 (Summer 2000), pp. 15 27; Maureen Psychology 87, no. 1 (2002), pp. 164 169.
appropriateness for a specific job, and Patterson, Overcoming the Hiring 53. Murray Barrick et al., Personality and
whether it can be appropriately adminis- Crunch; Tests Deliver Informed Choices, Job Performance: Test of the Immediate
tered and scored. Employment Relations Today 27, no. 3 Effects of Motivation Among Sales
26. Phillips and Gully, Strategic Staffing, p. 220. (Fall 2000), pp. 77 88; Kathryn Tyler, Representatives, Journal of Applied
27. Ibid., p. 220. Put Applicants Skills to the Test, Psychology 87, no. 1 (2002), p. 43.
28. www.uniformguidelines.com/qandaprint. HR Magazine, January 2000, p. 74; Murphy 54. Charles Sarchione et al., Prediction of
html, accessed August 20, 2011. and Davidshofer, Psychological Testing, Dysfunctional Job Behaviors Among Law-
29. From Ethical Principles of Psychologists pp. 215 403; Elizabeth Schoenfelt and Enforcement Officers, Journal of Applied
and Code of Conduct, American Psychol- Leslie Pedigo, A Review of Court Decisions Psychology 83, no. 6 (1998), pp. 904 912.
ogist 47 (1992), pp. 1597 1611; and http:// on Cognitive Ability Testing, 1992 2004, See also W. A. Scroggins et al., Psycholog-
www.apa.org/ethics/code/index.aspx, Review of Public Personnel Administration ical Testing in Personnel Selection, Part III:
accessed September 9, 2011. 25, no. 3 (2005), pp. 271 287. The Resurgence of Personality Testing,
30. Susan Mendelsohn and Kathryn Morrison, 43. Norman Henderson, Predicting Long- Public Personnel Management 38, no. 1
The Right to Privacy at the Work Place, Term Firefighter Performance from (Spring 2009), pp. 67 77.
Part I: Employee Searches, Personnel, July Cognitive and Physical Ability Measures, 55. Paula Caligiuri, The Big Five Personality
1988, p. 20. See also Talya Bauer et al., Personnel Psychology 60, no. 3 (2010), Characteristics as Predictors of Expatri-
Applicant Reactions to Selection: Devel- pp. 999 1039. ate Desire to Terminate the Assignment
opment of the Selection Procedural Justice 44. As an example, results of meta-analyses and Supervisor Rated Performance,
Scale, Personnel Psychology 54 (2001), in one study indicated that isometric Personnel Psychology 53 (2000), pp. 67 68.
pp. 387 419. strength tests were valid predictors of For some other examples, see Ryan
31. Mendelsohn and Morrison, The Right both supervisory ratings of physical Zimmerman, Understanding the Impact
to Privacy in the Work Place, p. 22. performance and performance on work of Personality Traits on Individuals
32. Kenneth Sovereign, Personnel Law simulations. See Barry R. Blakley, Miguel Turnover Decisions: A Meta-Analytic
(Upper Saddle River, NJ: Prentice Hall, Quinones, Marnie Swerdlin Crawford, Path Model, Personnel Psychology 60,
1999), pp. 204 206. and I. Ann Jago, The Validity of Isomet- no. 1 (2008), pp. 309 348.
33. One-Third of Job Applicants Flunked ric Strength Tests, Personnel Psychology 56. Diane Cadrain, Reassess Personality
Basic Literacy and Math Tests Last 47 (1994), pp. 247 274; and http://www. Tests After Court Case, HR Magazine 50,
Year, American Management Association military.com/military-fitness/marine- no. 9 (September 2005), p. 30.
Survey Finds, American Management Asso- corps-fitness-requirements/marine- 57. Frederick Morgeson et al., Reconsider-
ciation, www.amanet.org/press/amanews/ corps-fitness-test, accessed October 4, ing the Use of Personality Tests in
bjp2001.htm, accessed January 11, 2008. 2011. Personnel Selection Contexts, Personnel
210 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Psychology 60 (2007), p. 683, and Freder- 69. Kobi Dayan et al., Entry-Level Police 87. Laws that affect references include the
ick Morgeson et al., Are We Getting Candidate Assessment Center: An Privacy Act of 1974 (which applies only
Fooled Again? Coming to Terms with Efficient Tool or a Hammer to Kill a to federal workers), the Fair Credit
Limitations in the Use of Personality Fly? Personnel Psychology 55 (2002), Reporting Act of 1970, the Family Educa-
Tests for Personnel Selection, Personnel pp. 827 848. tion Rights and Privacy Act of 1974 (and
Psychology 60 (2007), p. 1046. 70. Weekley and Jones, Video-Based Situa- Buckley Amendment of 1974), and the
58. Robert Tett and Neil Christiansen, tional Testing, p. 26. Freedom of Information Act of 1966.
Personality Tests at the Crossroads: A 71. Ibid., p. 30. 88. For additional information, see Lawrence
Response to Morgeson, Campion, 72. Except as noted, this is based on Dave E. Dube Jr., Employment References
Dipboye, Hollenbeck, Murphy, and Zielinski, Effective Assessments, HR and the Law, Personnel Journal 65, no. 2
Schmitt, Personnel Psychology 60 (2007), Magazine, January 2011, pp. 61 64. (February 1986), pp. 87 91. See also
p. 967. See also Deniz Ones et al., 73. Robert Grossman, Made from Scratch, Mickey Veich, Uncover the Resume Ruse,
In Support of Personality Assessment HR Magazine, April 2002, pp. 44 53. Security Management, October 1994,
in Organizational Settings, Personnel 74. Coleman Peterson, Employee Retention, pp. 75 76.
Psychology 60 (2007), pp. 995 1027. The Secrets Behind Wal-Mart s Success- 89. Eileen Zimmerman, A Subtle Reference
59. See, for example, Chad Van Iddekinge, ful Hiring Policies, Human Resource Trap for Unwary Employers, Workforce,
Dan Putka, and John Campbell, Recon- Management 44, no. 1 (Spring 2005), April 2003, p. 22.
sidering Vocational Interest for Personnel pp. 85 88. See also Murray Barrick and 90. Kehr v. Consolidated Freightways of Delaware,
Selection: The Validity of an Interest- Ryan Zimmerman, Reducing Voluntary, Docket No. 86 2126, July 15, 1987, U.S.
Based Selection Testing Relation to Avoidable Turnover Through Selection, Seventh Circuit Court of Appeals. Discussed
Job Knowledge, Job Performance, Journal of Applied Psychology 90, no. 1 in Commerce Clearing House, Ideas and
and Continuance Intentions, Journal of (2005), pp. 159 166. Trends, October 16, 1987, p. 165.
Applied Psychology 96, no. 1 (2011) 75. James Breaugh, Employee Recruitment: 91. James Bell, James Castagnera, and Jane
pp. 13 33. Current Knowledge and Important Patterson Young, Employment Refer-
60. Jeff Weekley and Casey Jones, Video- Areas for Future Research, Human ences: Do You Know the Law? Person-
Based Situational Testing, Personnel Resource Management Review 18 (2008), nel Journal 63, no. 2 (February 1984),
Psychology 50 (1997), p. 25. pp. 106 107. pp. 32 36. In order to demonstrate
61. Elaine Pulakos, Selection Assessment 76. Phillips and Gully, Strategic Staffing, defamation, several elements must be pres-
Methods, SHRM Foundation, 2005, p. 14. p. 223. ent: (a) the defamatory statement must
62. However, studies suggest that blacks may 77. Internet, E-Mail Monitoring Common have been communicated to another
be somewhat less likely to do well on at Most Workplaces, BNA Bulletin to party; (b) the statement must be a false
work sample tests than are whites. See, Management, February 1, 2001, p. 34. See statement of fact; (c) injury to reputation
for example, Philip Roth, Philip Bobko, also Are Your Background Checks must have occurred; and (d) the employer
and Lynn McFarland, A Meta-Analysis Balanced? Experts Identify Concerns over must not be protected under qualified or
of Work Sample Test Validity: Updating Verifications, BNA Bulletin to Manage- absolute privilege. For a discussion, see
and Integrating Some Classic Literature, ment, May 13, 2004, p. 153. Ryan and Lasek, Negligent Hiring and
Personnel Psychology 58, no. 4 (Winter 78. Merry Mayer, Background Checks in Defamation, p. 307. See also James Burns
2005), pp. 1009 1037; and Philip Roth Focus, HR Magazine, January 2002, Jr., Employment References: Is There a
et al., Work Sample Tests in Personnel pp. 59 62; and Carroll Lachnit, Protecting Better Way? Employee Relations Law
Selection: A Meta-Analysis of Black People and Profits with Background Journal 23, no. 2 (Fall 1997), pp. 157 168.
White Differences in Overall and Exercise Checks, Workforce, February 2002, p. 52. 92. Adrienne Fox, Automated Reference
Scores, Personnel Psychology 60, no. 1 79. Matthew Heller, Special Report: Back- Checking Puts Onus on Candidates, HR
(2008), pp. 637 662. ground Checking, Workforce Manage- Magazine 66, no. 9 (2009, HR Trendbook
63. Siegel and Lane, Personnel and Organiza- ment, March 3, 2008, pp. 35 54. supplement).
tional Psychology, pp. 182 183. 80. Bill Roberts, Close-up on Screening, 93. Vetting via Internet Is Free, Generally
64. Quoted from Deborah Whetzel and HR Magazine, February 2011, pp. 23 29. Legal, but Not Necessarily Smart Hiring
Michael McDaniel, Situational Judg- 81. Seymour Adler, Verifying a Job Candi- Strategy, BNA Bulletin to Management,
ment Tests: An Overview of Current date s Background: The State of Practice February 20, 2007, pp. 57 58.
Research, Human Resource Management in a Vital Human Resources Activity, 94. Alan Finder, When a Risqué Online
Review 19 (2009), pp. 188 202. Review of Business 15, no. 2 (Winter Persona Undermines a Chance for a Job,
65. Ibid. 1993), p. 6. The New York Times, June 11, 2006, p. 1.
66. Help Wanted and Found, Fortune, 82. Heller, Special Report: Background 95. Anjali Athavaley, Job References You
October 2, 2006, p. 40. Checking, p. 35. Can t Control, The Wall Street Journal,
67. Annette Spychalski, Miguel Quinones, 83. This is based on Samuel Greengard, Have September 27, 2007, p. B1.
Barbara Gaugler, and Katja Pohley, Gangs Invaded Your Workplace? Personnel 96. Rita Zeidner, How Deep Can You
A Survey of Assessment Center Practices Journal, February 1996, pp. 47 48. Probe? HR Magazine, October 1, 2007,
in Organizations in the United States, 84. Dori Meinert, Seeing Behind the Mask, pp. 57 62.
Personnel Psychology 50, no. 1 (Spring HR Magazine 56, no. 2 (February 2011), 97. Web Searches on Applicants Are Poten-
1997), pp. 71 90. See also Winfred http://www.shrm.org/Publications/ tially Perilous for Employers, BNA
Arthur Jr. et al., A Meta Analysis of the hrmagazine/EditorialContent/2011/ Bulletin to Management, October 14,
Criterion Related Validity of Assessment 0211/Pages/0211meinert.aspx, accessed 2008, p. 335.
Center Data Dimensions, Personnel August 20, 2011. 98. See Paul Taylor et al., Dimensionality and
Psychology 56 (2003), pp. 124 154. 85. Ibid., p. 55. the Validity of a Structured Telephone
68. See, for example, John Meriac et al., 86. For example, one U.S. Court of Appeals Reference Check Procedure, Personnel
Further Evidence for the Validity of found that bad references might be grounds Psychology 57 (2004), pp. 745 772, for a
Assessment Center Dimensions: A Meta- for a suit when they are retaliations for the discussion of checking other work habits
Analysis of the Incremental Criterion- employee having previously filed an EEOC and traits.
Related Validity of Dimension Ratings, claim. Negative Reference Leads to Charge 99. Getting Applicant Information Difficult
Journal of Applied Psychology 93, no. 5 of Retaliation, BNA Bulletin to Manage- but Still Necessary, BNA Bulletin
(2008), pp. 1042 1052. ment, October 21, 2004, p. 344. to Management, February 5, 1999, p. 63.
 CHAPTER 6 EMPLOYEE TESTING AND SELECTION 211

See also Robert Howie and Laurence review concludes these tests pose little Employee Relations Today, Winter 1991
Shapiro, Pre-Employment Criminal such legal risk to employers. Christopher 1992, pp. 411 415.
Background Checks: Why Employers Berry et al., A Review of Recent Devel- 122. Ibid., p. 413.
Should Look Before They Leap, Employee opments in Integrity Test Research, 123. Richard Lisko, A Manager s Guide to
Relations Law Journal, Summer 2002, Personnel Psychology 60, no. 2 (Summer Drug Testing, Security Management 38,
pp. 63 77. 2007), pp. 271 301. no. 8 (August 1994), p. 92. See also Ran-
100. Employment Related Screening Provi- 109. These are based on Divining Integrity dall Kesselring and Jeffrey Pittman,
ders, Workforce Management, February Through Interviews, BNA Bulletin to Drug Testing Laws and Employment
16, 2009, p. 14, and Background and Management, June 4, 1987, p. 184; and Injuries, Journal of Labor Research,
Screening Providers, Workforce Man- Commerce Clearing House, Ideas and Spring 2002, pp. 293 301.
agement, February 2011, at http://www. Trends, December 29, 1998, pp. 222 223. 124. Michael A. McDaniel, Does Pre-Employ-
workforce.com/section/recruiting- See also Bridget A. Styers and Kenneth S. ment Drug Use Predict On-the-Job Suit-
staffing/feature/2011-background- Shultz, Perceived Reasonableness of ability? Personnel Psychology 41, no. 4
screening-providers, accessed August 20, Employment Testing Accommodations for (Winter 1988), pp. 717 729.
2011. Persons with Disabilities, Public Personnel 125. Exxon Corp. v. Esso Workers Union, Inc.,
101. Jeffrey M. Hahn, Pre-Employment Infor- Management 38, no. 3 (Fall 2009), pp. 71 91. CA1#96 2241, 7/8/97; discussed in BNA
mation Services: Employers Beware? 110. Bill Leonard, Reading Employees, HR Bulletin to Management, August 7, 1997,
Employee Relations Law Journal 17, no. 1 Magazine, April 1999, pp. 67 73. p. 249.
(Summer 1991), pp. 45 69. See also Pre- 111. Ibid. 126. For the form, see http://www.uscis.gov/
Employment Background Screenings Have 112. This is based on Kyle Stock, Wary files/form/i-9.pdf, accessed October 4,
Evolved, But So Have Liability Risks, BNA Investors Turn to Lie Pros, The Wall 2011.
Bulletin to Management, November 1, Street Journal, December 29, 2010, p. C3. 127. Conflicting State E-Verify Laws Troub-
2005, p. 345. 113. Mick Haus, Pre-Employment Physicals ling for Employers, BNA Bulletin to Man-
102. Under California law, applicants or and the ADA, Safety and Health, Feb- agement, November 4, 2008, p. 359.
employees must have the option of request- ruary 1992, pp. 64 65. See also Bridget A. 128. President Bush Signs Executive Order:
ing a copy of the report regardless of action. Styers and Kenneth S. Shultz, Perceived Federal Contractors Must Use E-Verify,
103. Teresa Butler Stivarius, Background Reasonableness of Employment Testing BNA Bulletin to Management, June 17,
Checks: Steps to Basic Compliance in a Accommodations for Persons with Dis- 2008, p. 193.
Multistate Environment, Society for abilities, Public Personnel Management 129. Note that the acceptable documents on
Human Resource Management Legal 38, no. 3 (Fall 2009), pp. 71 91. page 3 of the current (as of 2009, but
Report, March April 2003, pp. 1 8. 114. Scott MacDonald, Samantha Wells, and extended until 2012) I-9 form do not
104. Polygraphs are still widely used in law Richard Fry, The Limitations of Drug reflect the current list of acceptable docu-
enforcement and reportedly are quite Screening in the Workplace, Inter- ments. For this, refer to the Web site of
useful. See, for example, Laurie Cohen, national Labor Review 132, no. 1 (1993), the U.S. Department of Homeland Secu-
The Polygraph Paradox, The Wall Street p. 98. Not all agree that drug testing is rity. Margaret Fiester et al., Affirmative
Journal, March 22, 2008, p. A1. worthwhile. See for example, Veronica Action, Stock Options, I-9 Documents,
105. John Jones and William Terris, Post- I. Luzzi, et al., Analytic Performance of HR Magazine, November 2007, p. 32.
Polygraph Selection Techniques, Recruit- Immunoassays for Drugs of Abuse Below See also, http://www.uscis.gov/USCIS/
ment Today, May June 1989, pp. 25 31. Established Cutoff Values, Clinical Office%20of%20Communications/Press
106. Norma Fritz, In Focus: Honest Chemistry 2004; 50:717 722 %20Releases/FY%2009/August%202009/
Answers Post Polygraph, Personnel, 115. Rita Zeidner, Putting Drug Screening to update_I-9_extension0827.pdf, accessed
April 1989, p. 8. See also Richard White Jr., the Test, HR Magazine, November 2010, August 20, 2011.
Ask Me No Questions, Tell Me No Lies: p. 26. 130. Susan Ladika, Trouble on the Hiring
Examining the Uses and Misuses of the 116. Diane Cadrain, Are Your Employees Front, HR Magazine, October 2006,
Polygraph, Public Personnel Management Drug Tests Accurate? HR Magazine, pp. 56 62.
30, no. 4 (Winter 2001), pp. 483 493. January 2003, pp. 40 45. 131. Russell Gerbman, License to Work, HR
107. John Bernardin and Donna Cooke, 117. Chris Berka and Courtney Poignand, Hair Magazine, June 2000, pp. 151 160; the I-9
Validity of an Honesty Test in Predicting Follicle Testing An Alternative to Urinaly- form clearly states that the employer may
Theft Among Convenience Store Employ- sis for Drug Abuse Screening, Employee not discriminate. See http://www.uscis.
ees, Academy of Management Journal 36, Relations Today, Winter 1991 1992, gov/files/form/i-9.pdf, accessed October 4,
no. 5 (1993), pp. 1097 1108. pp. 405 409; for an example, see http:// 2011.
108. Judith Collins and Frank Schmidt, www.americanscreeningcorp.com/default. 132. As E-Verify, No Match Rules, I-9 Evolve,
Personality, Integrity, and White aspx, accessed October 8, 2011. Employers Need to Stay on Top of Issues,
Collar Crime: A Construct Validity 118. MacDonald et al., The Limitations BNA Bulletin Management, April 15, 2008,
Study, Personnel Psychology 46 (1993), of Drug Screening, pp. 102 104. p. 121.
pp. 295 311; Paul Sackett and James 119. R. J. McCunney, Drug Testing: Technical 133. Note that unproctored Internet tests raise
Wanek, New Developments in the Use of Complications of a Complex Social serious questions in employment
Measures of Honesty, Integrity, Consci- Issue, American Journal of Industrial settings. Nancy Tippins et al., Unproc-
entiousness, Dependability, Trustworthi- Medicine 15, no. 5 (1989), pp. 589 600; tored Internet Testing in Employment
ness, and Reliability for Personnel discussed in MacDonald et al., The Settings, Personnel Psychology 59 (2006),
Selection, Personnel Psychology 49 Limitations of Drug Screening, p. 102. pp. 189 225.
(1996), p. 821. Some suggest that by 120. MacDonald et al., The Limitations 134. From Bob Neveu, Applicant Tracking s
possibly signaling mental illness, of Drug Screening, p. 103. Top 10: Do You Know What to Look
integrity tests may conflict with the 121. This is based on Ann M. O Neill, Legal for in Applicant Tracking Systems?
Americans with Disabilities Act, but one Issues Presented by Hair Follicle Testing, Workforce, October 2002, p. 10.
7
Interviewing Candidates

Source: Reuters Pictures Americas.

LEARNING OBJECTIVES Company s
1. List the main types of selection interviews. Strategic Goals

2. List and explain the main errors that can undermine an

interview s usefulness.
3. Define a structured situational interview.
4. Explain and illustrate each guideline for being a more
Employee Competencies
effective interviewer.
and Behaviors Required
5. Give several examples of situational questions, for Company to Achieve
behavioral questions, and background questions that These Strategic Goals
provide structure.

C
ruitment an
an a company turn job candidates into customers? Rec cemen d
Pla t
Whirlpool Corp. knows it can. Whirlpool makes and

ent al
markets 17 major brands, including Whirlpool,

Environm Leg

Tra elopment
De
KitchenAid, Maytag, Amana, and Jenn-Air.1 With

inin
v
Strategic and

g a nd
such a large product assortment and a global footprint,
HR Policies and Practices
Whirlpool knows that every person it interviews for a job is Required to Produce
either a current Whirlpool customer, or a potential one. That s Employee Competencies
why its strategy for building the Whirlpool brands reputation and Behaviors
and sales includes a special job applicant interviewing
no

Co
program. The program includes leaving all candidates even

s
ey itale
ep

m
olp R
e
those who don t get offers with a positive impression of mE o ita sn
Whirlpool and its brands. n

WHERE ARE WE NOW . . .

Chapter 6 focused on important tools
managers use to select employees. Now
we ll turn to one of these tools interviewing
candidates. The main topics we ll cover
include types of interviews, things that
undermine interviewing s usefulness, and
designing and conducting effective selection
interviews. In Chapter 8, we ll turn to
training the new employee.
If the interview is just one of several
selection tools, why devote a whole chapter
to it? Because interviews are the most widely
used selection procedure and most people
aren t very good interviewers.2

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 213
214 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

1 List the main types of

BASIC TYPES OF INTERVIEWS
selection interviews. An interview is more than a discussion. An interview is a procedure designed to obtain
information from a person through oral responses to oral inquiries. Employers use
several interviews at work, such as performance appraisal interviews and exit inter-
views. A selection interview (the focus of this chapter) is a selection procedure designed
to predict future job performance based on applicants oral responses to oral inquiries.3
Many techniques in this chapter apply to appraisal and exit interviews. However, we ll
postpone discussions of these two interviews until Chapters 9 and 10.
Interviewing should support the employer s strategic aims, as the accompanying
Strategic Context feature illustrates.

THE STRATEGIC CONTEXT

Whirlpool Corp.
With its 17-brand assortment and global footprint, Whirlpool knows that every
person it interviews is a current Whirlpool customer, or a potential one. The question
is, how can Whirlpool use its applicant interview practices to ensure that every inter-
view helps to build the Whirlpool brands reputation and sales?
Whirlpool calls its candidate selection process the Exceptional Candidate
Experience (ECE). The ECE doesn t just aim to select the best candidates. It also aims
to make every candidate a loyal customer. ECE contains three elements: initial
candidate touch points, candidate engagement, and candidate closings. 4
Initial candidate touch points means that whether candidates first encounter
Whirlpool via its careers Web site, at a job fair, or through some other means,
Whirlpool carefully manages the process to make sure the candidate s impression of
the company is consistent and positive.
Once a time is set for an interview, a Whirlpool guide contacts the candidate.
His or her aim is to find out about the candidate s special situations. For example,
does the candidate have special family responsibilities that the interviewing team
should make scheduling adjustments for? Does he or she have special hobbies?
The guide then helps to engage the candidate, for instance, by showing him or her
how the geographic location in which he or she would be working can help
support the candidate s preferences and needs, and by acting as a contact with the
Whirlpool interviewing team. At the candidate closings the human resource team
makes sure the candidate receives a thank-you note and a KitchenAid countertop
appliance after the interviews.
Whirlpool believes that its interviewing and screening process directly supports
the firm s strategy. In addition to ensuring that the firm s employees treat candidates
with civility, the effect of the process is to leave the candidate with a positive impres-
sion of Whirlpool and its products and people.

We can classify selection interviews according to

1. How structured they are
2. Their content the types of questions they contain
3. How the firm administers the interviews
Let s look at each.

Structured Versus Unstructured Interviews

First, most interviews vary in the degree to which the interviewer structures or
standardizes the interview process.5 You ve almost certainly seen that some interviews
are more structured or methodical than others. In unstructured (or nondirective)
interviews, the manager follows no set format. A few questions might be specified in
advance, but they re usually not, and there is seldom a formal guide for scoring right
 CHAPTER 7 INTERVIEWING CANDIDATES 215

or wrong answers. This type of interview could even be described as little more than a
general conversation.6 Most selection interviews probably fall in this category.
At the other extreme, in structured (or directive) interviews, the employer lists
the questions ahead of time, and may even list and score possible answers for appro-
priateness.7 McMurray s Patterned Interview was one early example. The interviewer
followed a printed form to ask a series of questions, such as How was the person s
present job obtained? Comments printed beneath the questions (such as Has he/she
shown self-reliance in getting his/her jobs? ) then guide the interviewer in evaluating
the answers. Some experts still restrict the term structured interview to interviews
like these, which are based on carefully selected job-oriented questions with predeter-
mined answers.
But in practice, interview structure is a matter of degree. Sometimes the manager
may just want to ensure he or she has a standard set of questions to ask so as to avoid
skipping any questions. Here, he or she might just choose questions from a list like that
in Figure 7-3 (page 228). The structured applicant interview guide in Figure 7-A1
(page 236) illustrates a more structured approach. As a third example, the Department
of Homeland Security uses the structured guide in Figure 7-1 to help screen Coast
Guard officer candidates. It contains a formal candidate rating procedure; it also
enables geographically disbursed interviewers to complete the form via the Web.8

WHICH TO USE? Structured interviews are generally superior. In structured

interviews, all interviewers generally ask all applicants the same questions. Partly
because of this, these interviews tend to be more reliable and valid. Structured inter-
views can also help less talented interviewers conduct better interviews. Standardizing
the interview also increases consistency across candidates, enhances job relatedness,
reduces overall subjectivity and thus the potential for bias, and may enhance the
ability to withstand legal challenge. 9

EEOC ASPECTS OF INTERVIEWS That last point is important. No one wants to

have someone sue for discrimination, let alone lose the suit. A study of federal cases
involving alleged employment interview discrimination is relevant. It s clear the courts
will look at whether the interview process is structured and consistently applied. For
example, did you (1) have objective/job-related questions, (2) standardize interview
administration, and (3) preferably use multiple interviewers?10
However, blindly following a structured format isn t advisable either. Doing so
may not provide enough opportunity to pursue points of interest as they develop.
Therefore, the interviewer should always leave an opportunity to ask follow-up
questions and pursue points of interest as they develop.

Interview Content (What Types of Questions to Ask)

We can also classify interviews based on the content or the types of questions you ask.
Many (probably most) interviewers tend to ask relatively unfocused questions. These
might include What are your main strengths and weaknesses? and What do you want
to be doing 5 years from now? Generally, questions like these don t provide much
insight into how the person will do on the job. At work, situational, behavioral, and
job-related questions are most important.

SITUATIONAL QUESTIONS In a situational interview, you ask the candidate

what his or her behavior would be in a given situation.11 For example, you might ask a
supervisory candidate how he or she would act in response to a subordinate coming
to work late 3 days in a row.

unstructured (or nondirective) interview structured (or directive) interview situational interview
An unstructured conversational-style inter- An interview following a set sequence of A series of job-related questions that focus
view in which the interviewer pursues points questions. on how the candidate would behave in a
of interest as they come up in response to given situation.
questions.
216 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

BEHAVIORAL QUESTIONS Whereas situational interviews ask applicants to

describe how they would react to a hypothetical situation today or tomorrow, behavioral
interviews ask applicants to describe how they reacted to actual situations in the past.12
For example, when Citizen s Banking Corporation in Flint, Michigan, found that 31 of
the 50 people in its call center quit in one year, Cynthia Wilson, the center s head,
switched to behavioral interviews. Many of those who left did so because they didn t
enjoy fielding questions from occasionally irate clients. So Wilson no longer tries to
predict how candidates will act based on asking them if they want to work with angry
clients. Instead, she asks behavioral questions like, Tell me about a time you were speak-
ing with an irate person, and how you turned the situation around. Wilson says this
makes it much harder to fool the interviewer, and, indeed, only four people left her center
in the following year.13 In summary, situational questions start with phrases such as,
Suppose you were faced with the following situation . . . What would you do?
Behavioral questions start with phrases like, Can you think of a time when . . . What did
you do? 14 More employers today are using (or planning to use) behavioral interviews.15

FIGURE 7-1 Officer Programs

Applicant Interview Form
Source: www.uscg.mil/forms/cg/
CG5527.pdf, accessed May 9, 2007.
 CHAPTER 7 INTERVIEWING CANDIDATES 217

FIGURE 7-1 (Continued)

OTHER TYPES OF QUESTIONS In a job-related interview, the interviewer

asks applicants questions about relevant past experiences. The questions here don t
revolve around hypothetical or actual situations or scenarios. Instead, the interviewer
asks job-related questions such as, Which courses did you like best in business
school? The aim is to draw conclusions about, say, the candidate s ability to handle
the financial aspects of the job the employer seeks to fill.
There are other, lesser-used types of questions. In a stress interview, the
interviewer seeks to make the applicant uncomfortable with occasionally rude
questions. The aim is supposedly to spot sensitive applicants and those with low (or
high) stress tolerance. Thus, a candidate for a customer relations manager position

behavioral interview job-related interview stress interview

A series of job-related questions that focus A series of job-related questions that focus An interview in which the applicant is made
on how the candidate reacted to actual situa- on relevant past job-related behaviors. uncomfortable by a series of often rude
tions in the past. questions. This technique helps identify
hypersensitive applicants and those with low
or high stress tolerance.
218 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

who obligingly mentions having had four jobs in the past 2 years might be told that
frequent job changes reflect irresponsible and immature behavior. If the applicant
then responds with a reasonable explanation of why the job changes were necessary,
the interviewer might pursue another topic. On the other hand, if the formerly
tranquil applicant reacts explosively with anger and disbelief, the interviewer might
deduce that the person has a low tolerance for stress.
Stress interviews may help unearth hypersensitive applicants who might overreact
to mild criticism with anger and abuse. However, the stress interview s invasive and
ethically questionable nature demands that the interviewer be both skilled in its
use and sure the job really calls for a thick skin and an ability to handle stress. This is
definitely not an approach for amateur interrogators or for those without the skills to
keep the interview under control.
Puzzle questions are popular. Recruiters like to use them to see how candidates
think under pressure. For example, an interviewer at Microsoft asked a tech service
applicant this: Mike and Todd have $21 between them. Mike has $20 more than Todd
does. How much money has Mike, and how much money has Todd? 16 (You ll find
the answer two paragraphs below.)

How Should We Administer the Interview?

Employers also administer interviews in various ways: one-on-one or by a panel of
interviewers, sequentially or all at once, and computerized or personally.
Most selection interviews are one-on-one and sequential. In a one-on-one inter-
view, two people meet alone, and one interviews the other by seeking oral responses
to oral inquiries. Employers tend to schedule these interviews sequentially. In a
sequential (or serial) interview, several persons interview the applicant, in sequence,
one-on-one, and then make their hiring decision. In an unstructured sequential
interview, each interviewer generally just asks questions as they come to mind. In a
structured sequential interview, each interviewer rates the candidates on a standard
evaluation form, using standardized questions. The hiring manager then reviews
and compares the evaluations before deciding whom to hire.17 (Answer: Mike had
$20.50, Todd $.50.)

PANEL INTERVIEWS A panel interview, also known as a board interview, is an

interview conducted by a team of interviewers (usually two to three), who together
interview each candidate and then combine their ratings into a final panel score.
This contrasts with the one-on-one interview (in which one interviewer meets one
candidate) and a serial interview (where several interviewers assess a single candidate
one-on-one, sequentially).18
The panel format enables interviewers to ask follow-up questions, much as
reporters do in press conferences. This may elicit more meaningful responses than are
normally produced by a series of one-on-one interviews. On the other hand, some
candidates find panel interviews more stressful, so they may actually inhibit
responses. (An even more stressful variant is the mass interview. Here a panel inter-
views several candidates simultaneously. The panel poses a problem, and then
watches to see which candidate takes the lead in formulating an answer.)
It s not clear whether as a rule panel interviews are more or less reliable and valid
than sequential interviews, because how the employer actually does the panel inter-
view determines this. For example, structured panel interviews in which members use
scoring sheets with descriptive scoring examples for sample answers are more reliable
and valid than those that don t. And, training the panel interviewers may boost the
interview s reliability.19

PHONE INTERVIEWS Employers do some interviews entirely by telephone. These

can actually be more accurate than face-to-face interviews for judging an applicant s
conscientiousness, intelligence, and interpersonal skills. Here, neither party need worry
about things like appearance or handshakes, so each can focus on substantive answers. Or
perhaps candidates somewhat surprised by an unexpected call from the recruiter just
 CHAPTER 7 INTERVIEWING CANDIDATES 219

give answers that are more spontaneous (although more confident interviewees do better,
of course .)20 In a typical study, interviewers tended to evaluate applicants more favorably
in telephone versus face-to-face interviews, particularly where the interviewees were less
physically attractive. However, the interviewers came to about the same conclusions
regarding the interviewees whether the interview was face-to-face or by videoconference.
The applicants themselves preferred the face-to-face interviews.21

VIDEO/WEB-ASSISTED INTERVIEWS Firms have long used the Web to do

selection interviews (particularly the initial, prescreening interviews). With iPad-type
video functionalities and the widespread use of Skype , their use is growing.
For instance, Cisco Systems, Inc., recruiters conduct preliminary interviews online.
Applicants use their own camera-supported PC or iPads (or go to a local FedEx Office
or similar business). Then, at the appointed time, they link to Cisco via Web video
for the prescreening interview. Naturally, such video interviews reduce travel and
recruiting expenses. Job interviewing apps are available through Apple s App Store.
One is from Martin s iPhone Apps. For people seeking technical jobs, this app includes
hundreds of potential interview questions, such as Brain Teasers, Algorithms, C/C++,
and Personal.22
Having a Skype job interview doesn t require special preparations for the
employer, but Career FAQs (www.careerfaqs.com.au) says there are things that
interviewees should keep in mind. Many of these may seem obvious. However,
it s often the obvious things people overlook (for more on how to take interviews,
see Appendix 2 to this chapter, pages 238 239):23
* Make sure you look presentable. You might feel silly sitting at home wearing a
suit, but it could make all the difference.
* Clean up the room. Whether the interview is from your own home or a busy
office environment, the interviewer does not want to see you sitting in front of a
pile of junk.
* Test first. As Career FAQs says, Five minutes before the video interview is not a
good time to realize that your Internet is down, Skype isn t working, or your pet
rabbit has chewed through the microphone cord.
* Do a dry run. Try recording yourself before the interview to try answering some
imaginary questions.
* Relax. The golden rule with a Skype interview is to treat it like any other face-to-face
meeting. There is a real person on the other end of the call, so treat them like one.
Smile, look confident and enthusiastic, try to make eye contact, and don t shout,
but do speak clearly.

COMPUTERIZED INTERVIEWS A computerized selection interview is one in

which a job candidate s oral and/or computerized replies are obtained in response to
computerized oral, visual, or written questions and/or situations. Most computerized
interviews present the applicant with a series of questions regarding his or her back-
ground, experience, education, skills, knowledge, and work attitudes that relate to the
job for which the person has applied. Some (video-based) computerized interviews
also confront candidates with realistic scenarios (such as irate customers) to which
they must respond. Such interviews are most often taken online.24

unstructured sequential interview panel interview mass interview

An interview in which each interviewer forms An interview in which a group of interviewers A panel interviews several candidates
an independent opinion after asking different questions the applicant. simultaneously.
questions.

structured sequential interview

An interview in which the applicant is inter-
viewed sequentially by several persons; each
rates the applicant on a standard form.
220 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Typical computerized interviews present questions in a multiple-choice format,

one at a time. The applicant has to respond to the questions on the screen by pressing
a key. A sample interview question for a person applying for a job as a retail store clerk
might be:
How would your supervisor rate your customer service skills?
a. Outstanding
b. Above average
c. Average
d. Below average
e. Poor25
Questions on computerized interviews come in rapid sequence and require the
applicant to concentrate.26 The typical computerized interview program measures
the response time to each question. A delay in answering certain questions such as
Can you be trusted? flags a potential problem. The accompanying HR as a Profit
Center feature illustrates the bottom line impact such systems can have.

HR AS A PROFIT CENTER
Great Western Bank
When Bonnie Dunn tried out for a teller s job at Great Western Bank, she faced
a lineup of tough customers.27 One young woman sputtered contradictory instruc-
tions about depositing a check and then blew her top when Bonnie didn t handle the
transaction fast enough. Another customer said, You people are unbelievably slow.
Both tough customers appeared on a computer screen, as part of a 20-minute
computerized job interview. Ms. Dunn sat in front of the screen, responding via a
touch screen and a microphone. She was tested on making change and on sales
skills, as well as keeping her cool. When applicants sit down facing the computer,
they hear it say, Welcome to the interactive assessment aid. The computer
doesn t understand what applicants say, although it records their comments for
evaluation later. To begin the interview, applicants touch an icon on the screen,
eliciting an ominous foreword: We ll be keeping track of how long it takes you and
how many mistakes you make. Accuracy is more important than speed.
Great Western reports success with its system. It dramatically reduced inter-
viewing of unacceptable candidates, saving valuable HR time and resources. And,
partly because the candidates see what the job is really like, those hired are report-
edly 26% less likely to leave within 90 days of hiring, significantly reducing the
bank s employee turnover costs.

SECOND LIFE Several employers such as Microsoft and Hewlett-Packard use the
online virtual community Second Life to conduct job interviews. Job seekers create
avatars to represent themselves in the interviews.28
SPEED DATING For better or worse, some employers are using a speed dating
approach to interviewing applicants. One employer sent e-mails to all applicants for
an advertised position. Four hundred (of 800 applicants) showed up. Over the next
few hours, applicants first mingled with employees, and then (in a so-called speed
dating area ) had one-on-one contacts with employees for a few minutes. Based on
this, the recruiting team chose 68 candidates for follow-up interviews.29
BAIN & COMPANY CASE INTERVIEW Bain & Company uses case interviews
as part of its candidate selection process. By having candidates explain how they
would address the case clients problems, the case interview combines elements of
behavioral and situational questioning to provide a more realistic assessment of the
candidate s consulting skills. The accompanying screen grab shows Bain candidates
how to prepare for the case-based interview.
 CHAPTER 7 INTERVIEWING CANDIDATES 221

Source: John Bain & Company,

www.joinbain.com, accessed
September 2011.

Three Ways to Make the Interview Useful

Interviews hold an ironic place in the hiring process: Everyone uses them, but they re gen-
erally not particularly valid. The knack is in doing them properly. If you do, then the inter-
view is generally a good predictor of performance and is comparable with many other
selection techniques.30 There are three things to keep in mind.
USE STRUCTURED SITUATIONAL INTERVIEWS First, structure the interview.31
Structured interviews (particularly structured interviews using situational questions) are
more valid than unstructured interviews for predicting job performance. They are more
valid partly because they are more reliable for example, the same interviewer adminis-
ters the interview more consistently from candidate to candidate.32 Situational interviews
yield a higher mean validity than do job-related (or behavioral) interviews, which in turn
yield a higher mean validity than do psychological interviews (which focus more on
motives and interests).33
CAREFULLY SELECT TRAITS TO ASSESS Interviews are better for revealing
some traits than others. A typical study illustrates this. Interviewers were able to size
up the interviewee s extraversion and agreeableness. What they could not assess
accurately were the traits that often matter most on jobs like conscientiousness
and emotional stability.34 The implication seems to be, don t focus (as many do) on
hard-to-assess traits like conscientiousness.35 Limit yourself mostly to situational and
job knowledge questions that help you assess how the candidate will actually respond
to typical situations on that job. We ll explain how to do this later in the chapter.
BEWARE OF COMMITTING INTERVIEWING ERRORS Third, understand and
avoid the various errors that can undermine any interview s usefulness. We turn to these next.

2 List and explain the main

THE ERRORS THAT UNDERMINE AN
errors that can undermine an INTERVIEW S USEFULNESS
interview s usefulness.
One reason selection interviews are often less than useful is that managers make
predictable, avoidable errors. We ll look at these next.
222 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

First Impressions (Snap Judgments)

Perhaps the most consistent finding is that interviewers tend to jump to conclusions
make snap judgments about candidates during the first few minutes of the interview
(or even before the interview starts, based on test scores or résumé data). One
researcher estimates that in 85% of the cases, interviewers had made up their minds
before the interview even began, based on first impressions the interviewers gleaned
from candidates applications and personal appearance.36 In one typical study, giving
interviewers the candidates test scores biased the ultimate assessment of the candi-
dates. In another study, interviewers judged candidates who they were told formerly
suffered from depression or substance abuse more negatively.37
First impressions are especially damaging when the prior information about the
candidate is negative. In one study, interviewers who previously received unfavorable
reference letters about applicants gave those applicants less credit for past successes
and held them more personally responsible for past failures after the interview. And
the interviewers final decisions (to accept or reject those applicants) always reflected
what they expected of the applicants based on the references, quite aside from the
applicants actual interview performance.38
Add to this two more interviewing facts. First, interviewers are more influenced
by unfavorable than favorable information about the candidate. Second, their impres-
sions are much more likely to change from favorable to unfavorable than from
unfavorable to favorable. Indeed, many interviewers really search more for negative
information, often without realizing it.
The bottom line is that most interviews are probably loaded against the applicant.
An applicant who starts well could easily end up with a low rating because unfavorable
information tends to carry more weight in the interview. And pity the poor interviewee
who starts out poorly. It s almost impossible to overcome that first bad impression.39
Here s how one London-based psychologist who interviewed the chief executives of
80 top companies put it:
Really, to make a good impression, you don t even get time to open your
mouth. . . . An interviewer s response to you will generally be preverbal how
you walk through the door, what your posture is like, whether you smile, whether
you have a captivating aura, whether you have a firm, confident handshake.
You ve got about half a minute to make an impact and after that all you are
doing is building on a good or bad first impression. . . . It s a very emotional
response. 40

Not Clarifying What the Job Requires

Interviewers who don t have an accurate picture of what the job entails and what sort
of candidate is best suited for it usually make their decisions based on incorrect
impressions or stereotypes of what a good applicant is. They then erroneously match
interviewees with their incorrect stereotypes. You should clarify what sorts of traits
you re looking for, and why, before starting the interview.
One classic study involved 30 professional interviewers.41 Half got just a brief
description of the jobs for which they were recruiting: It said, the eight applicants
here represented by their application blanks are applying for the position of secretary.
The other 15 interviewers got much more explicit job information, in terms of typing
speed and bilingual ability, for instance.
More job knowledge translated into better interviews. The 15 interviewers who had
more job information generally all agreed among themselves about each candidate s
potential; those without complete job information did not. The latter also didn t
discriminate as well among applicants they tended to give them all high ratings.

Candidate-Order (Contrast) Error and Pressure to Hire

Candidate-order (or contrast) error means that the order in which you see applicants
affects how you rate them. In one study, managers had to evaluate a candidate who was
just average after first evaluating several unfavorable candidates. They scored the
 CHAPTER 7 INTERVIEWING CANDIDATES 223

average candidate more favorably than they might otherwise have done because, in
contrast to the unfavorable candidates, the average one looked better than he actually
was. This contrast effect can be huge: In some early studies, evaluators based only a
small part of the applicant s rating on his or her actual potential.42
Pressure to hire accentuates this problem. Researchers told one group of
managers to assume they were behind in their recruiting quota. They told a second
group they were ahead of their quota. Those behind evaluated the same recruits
much more highly than did those ahead. 43

Nonverbal Behavior and Impression Management

The applicant s nonverbal behavior (smiling, avoiding your gaze, and so on) can also
have a surprisingly large impact on his or her rating. In one study, 52 human resource
specialists watched videotaped job interviews in which the applicants verbal content was
identical, but their nonverbal behavior differed markedly. Researchers told applicants in
one group to exhibit minimal eye contact, a low energy level, and low voice modulation.
Those in a second group demonstrated the opposite behavior. Twenty-three of the
26 personnel specialists who saw the high-eye-contact, high-energy-level candidate
would have invited him or her for a second interview. None who saw the low-eye-
contact, low-energy-level candidate would have recommended a second interview.44
It certainly seems to pay interviewees to look alive.
Nonverbal behaviors are probably so important because interviewers infer your
personality from the way you act in the interview. In one study, 99 graduating college
seniors completed questionnaires; the questionnaires included measures of personality,
among other things. The students then reported their success in generating follow-up
interviews and job offers. The interviewee s personality, particularly his or her level
of extraversion, had a pronounced influence on whether or not he or she received
follow-up interviews and job offers.45 Extraverted applicants seem particularly prone to
self-promotion, and self-promotion is strongly related to the interviewer s perceptions
of candidate job fit.46 Furthermore, No matter how much an interview is structured,
nonverbal cues cause interviewers to make [such] attributions about candidates. 47

IMPRESSION MANAGEMENT Clever candidates capitalize on that fact. One

study found that some used ingratiation to persuade interviewers to like them.
For instance, the candidates praised the interviewers or appeared to agree with their
opinions. Ingratiation also involves, for example, agreeing with the recruiter s opinions
and thus signaling that they share similar beliefs. Sensing that a perceived similarity in
attitudes may influence how the interviewer rates them, some interviewees try to
emphasize (or fabricate) such similarities.48 Others make self-promoting comments
about their own accomplishments.49 Self-promotion means promoting one s own
skills and abilities to create the impression of competence.50 Psychologists call using
techniques like ingratiation and self-promotion impression management.

Effect of Personal Characteristics: Attractiveness, Gender, Race

Unfortunately, physical attributes such as applicants attractiveness, gender, disability, or
race may also distort their assessments.51 For example, people usually ascribe more
favorable traits and more successful life outcomes to attractive people.52 Similarly, race
can play a role, depending on how you conduct the interview. In one study, for example,
the white members of a racially balanced interview panel rated white candidates higher,
while the black interviewers rated black candidates higher. (In all cases, structured inter-
views produced less of a difference between minority and white interviewees than did
unstructured interviews.)53

candidate-order (or contrast) error

An error of judgment on the part of the inter-
viewer due to interviewing one or more very
good or very bad candidates just before the
interview in question.
224 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Interviewers reactions to stereotypical minority behavior are complex. In one

study, the researchers dressed the applicants in either traditional Muslim attire
(black scarf and full-length black robe) or simple two-piece black pantsuits. Both
applicants got the same number of job offers. However, interactions were shorter and
more interpersonally negative when applicants wore the Muslim attire.54
In general, candidates evidencing various attributes and disabilities (such as
child-care demands, HIV-positive status, and being wheelchair-bound) had less
chance of obtaining a positive decision, even when the person performed very well in
the structured interview.55

MANAGING THE NEW WORKFORCE

Applicant Disability and the Employment Interview
Researchers surveyed 40 disabled people from various occupations. The basic
finding was that the disabled people felt that interviewers tend to avoid directly
addressing the disability, and therefore make their decisions without all the facts.56
What the disabled people prefer is a discussion that would allow the employer
to clarify his or her concerns and reach a knowledgeable conclusion. Among the
questions they said they would like interviewers to ask were these:
Is there any kind of setting or special equipment that will facilitate the interview
process for you?
Is there any specific technology that you currently use or have used in previous
jobs that assists the way you work?
Other than technology, what other kind of support did you have in previous
jobs? If none, is there anything that would benefit you?
Discuss a barrier or obstacle, if any, that you have encountered in any of your
previous jobs. How was that addressed?
Do you anticipate any transportation or scheduling issues with the work schedule
expected of this position?
Finally, remember that under the Americans with Disabilities Act, the inter-
viewer must limit his or her questions to whether the applicant has any physical or
mental impairment that may interfere with his or her ability to perform the job s
essential tasks.57

EMPLOYMENT DISCRIMINATION TESTERS Employment discrimination is

abhorrent, but the use of employment discrimination testers makes nondiscriminatory
interviewing even more important. As defined by the EEOC, testers are individuals
who apply for employment which they do not intend to accept, for the sole purpose of
uncovering unlawful discriminatory hiring practices. 58 Although they re not really
seeking employment, testers have legal standing with the courts and with the EEOC.59
For example, a civil rights group sent four university students two white, two
black to an employment agency, supposedly in pursuit of a job. The civil rights
group gave the four testers backgrounds and training to make them appear almost
indistinguishable from each other in terms of qualifications. The white tester/
applicants got interviews and job offers. The black tester/applicants got neither
interviews nor offers.60

Interviewer Behavior
Finally, the interviewer s behavior also affects the interviewee s performance and rating.
Consider some examples. Some interviewers inadvertently telegraph the expected
answers,61 as in: This job calls for handling a lot of stress. You can do that, can t you?
Even subtle cues (like a smile or nod) can telegraph the desired answer.62 Some inter-
viewers talk so much that applicants have no time to answer questions. At the other
extreme, some interviewers let the applicant dominate the interview, and so don t ask
 CHAPTER 7 INTERVIEWING CANDIDATES 225

all their questions.63 When interviewers have favorable pre-interview impressions

of the applicant, they tend to act more positively toward that person (smiling more,
for instance).64 Other interviewers play district attorney, forgetting that it is uncivil to
play gotcha by gleefully pouncing on inconsistencies. Some interviewers play
amateur psychologist, unprofessionally probing for hidden meanings in everything
the applicant says. Others ask improper questions, forgetting, as one study found, that
discriminatory questions had a significant negative effect on participant s reactions
to the interview and interviewer. 65 And, some interviewers are simply inept, unable
to formulate decent questions.
In summary, interviewing errors to avoid include:
* First impressions (snap judgments)
* Not clarifying what the job involves and requires
* Candidate-order error and pressure to hire
* Nonverbal behavior and impression management
* The effects of interviewees personal characteristics
* The interviewer s inadvertent behaviors

3 Define a structured
HOW TO DESIGN AND CONDUCT AN
situational interview. EFFECTIVE INTERVIEW
There are two basic ways to avoid interview errors. One is obvious: Keep them in mind
and avoid them (don t make snap judgments, for instance). The second is not so
obvious: Use structured interviews. The single biggest rule for conducting effective
selection interviews is to structure the interview around job-relevant situational and
behavioral questions. We ll look next at how to do this.

Designing a Structured Situational Interview

There is little doubt that the structured situational interview a series of job-relevant
questions with predetermined answers that interviewers ask of all applicants for the
job produces superior results.66 Ideally, the basic idea is to write situational (what
would you do), behavioral (what did you do), or job knowledge questions, and have job
experts (like those supervising the job) also write answers for these questions, rated
from good to poor. The people who interview and rate the applicants then use rating
sheets anchored with examples of good or bad answers to rate the interviewees
answers.67 The procedure is as follows.68
STEP 1: ANALYZE THE JOB Write a job description with a list of job duties;
required knowledge, skills, and abilities; and other worker qualifications.
STEP 2: RATE THE JOB S MAIN DUTIES Rate each job duty, say from 1 to 5,
based on its importance to job success.
STEP 3: CREATE INTERVIEW QUESTIONS Create interview questions for
each of the job duties, with more questions for the important duties. Recall that
situational questions pose a hypothetical job situation, such as What would you do if
the machine suddenly began heating up? Job knowledge questions assess knowledge
essential to job performance (such as What is HTML? ). Willingness questions gauge
the applicant s willingness and motivation to meet the job s requirements to do
repetitive physical work or to travel, for instance. Behavioral questions, of course, ask
candidates how they ve handled similar situations.

structured situational interview

A series of job-relevant questions with
predetermined answers that interviewers ask
of all applicants for the job.
226 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

The people who create the questions usually write them in terms of critical
incidents. For example, for a supervisory candidate, the interviewer might ask this
situational question:
Your spouse and two teenage children are sick in bed with colds. There are no
relatives or friends available to look in on them. Your shift starts in 3 hours.
What would you do in this situation?

STEP 4: CREATE BENCHMARK ANSWERS Next, for each question, develop

ideal (benchmark) answers for good (a 5 rating), marginal (a 3 rating), and poor
(a 1 rating) answers. Three benchmark answers (from low to high) for the example
question above might be, I d stay home my spouse and family come first (1); I d
phone my supervisor and explain my situation (3); and Since they only have colds,
I d come to work (5).

STEP 5: APPOINT THE INTERVIEW PANEL AND CONDUCT INTERVIEWS

Employers generally conduct structured situational interviews using a panel, rather than
one-on-one. The panel usually consists of three to six members, preferably the same
ones who wrote the questions and answers. It may also include the job s supervisor
and/or incumbent, and a human resources representative. The same panel interviews all
candidates for the job.69
The panel members generally review the job description, questions, and bench-
mark answers before the interview. One panel member introduces the applicant, and
asks all questions of all applicants in this and succeeding candidates interviews (to
ensure consistency). However, all panel members record and rate the applicant s
answers on the rating sheet. They do this by indicating where the candidate s answer
to each question falls relative to the ideal poor, marginal, or good answers. At the end
of the interview, someone answers any questions the applicant has.70
Web-based programs help interviewers design and organize behaviorally based
selection interviews. For example, SelectPro (www.selectpro.net) enables interviewers
to create behavior-based selection interviews, custom interview guides, and auto-
mated online interviews.

How to Conduct an Effective Interview

4 Explain and illustrate each
guideline for being a more You may not have the time or inclination to create a structured situational interview.
effective interviewer. However, there is still much you can do to make your interviews more systematic and
effective.

STEP 1: FIRST, MAKE SURE YOU KNOW THE JOB Do not start the interview
unless you understand the job and what human skills you re looking for. Study the job
description.
STEP 2: STRUCTURE THE INTERVIEW Any structuring is better than none.
If pressed for time, you can do several things to ask more consistent and job-relevant
questions, without developing a full-blown structured interview.71 They include:72
* Base questions on actual job duties. This will minimize irrelevant questions.
* Use job knowledge, situational, or behavioral questions, and know enough about
the job to be able to evaluate the interviewee s answers. Questions that simply
ask for opinions and attitudes, goals and aspirations, and self-descriptions and
self-evaluations allow candidates to present themselves in an overly favorable
manner or avoid revealing weaknesses.73 Figure 7-2 illustrates structured inter-
view questions.
* Use the same questions with all candidates. When it comes to asking questions, the
prescription is the more standardized, the better. Using the same questions with
all candidates improves reliability. It also reduces bias because of the obvious
fairness of giving all the candidates the exact same opportunity.
 CHAPTER 7 INTERVIEWING CANDIDATES 227

FIGURE 7-2 Examples of

Job Knowledge Questions
Questions That Provide
Interview Structure
1. What steps would you follow in changing the fan belt on a Toyota Camry?
2. What factors would you consider in choosing a computer to use for work?
Experience Questions
3. What experience have you had actually repairing automobile engines?
4. What experience have you had creating marketing programs for consumer
products?
Behavioral (Past Behavior) Questions
5. Tell me about a time when you had to deal with a particularly obnoxious person.
What was the situation, and how did you handle it?
6. Tell me about a time when you were under a great deal of stress. What was the
situation, and how did you handle it?
Situational (What Would You Do) Questions
7. Suppose your boss insisted that a presentation had to be finished by tonight, but
your subordinate said she has to get home early to attend an online class, so she is
unable to help you. What would you do?
8. The CEO just told you that he s planning on firing your boss, with whom you are
very close, and replacing him with you. What would you do?

* Use descriptive rating scales (excellent, fair, poor) to rate answers. For each question,
if possible, have several ideal answers and a score for each. Then rate each candi-
date s answers against this scale.
* If possible, use a standardized interview form. Interviews based on structured guides
like the ones in Figures 7-1 (pages 216-217) or 7A-1 (pages 236 238) usually result
in better interviews.74 At the very least, list your questions before the interview.
STEP 3: GET ORGANIZED Hold the interview in a private room where
telephone calls are not accepted and you can minimize interruptions (including text
messages). Prior to the interview, review the candidate s application and résumé, and
note any areas that are vague or that may indicate strengths or weaknesses.
STEP 4: ESTABLISH RAPPORT The main reason for the interview is to find out
5 Give several examples of
situational questions,
about the applicant. To do this, start by putting the person at ease. Greet the candidate
behavioral questions, and and start the interview by asking a noncontroversial question, perhaps about the
background questions that weather or the traffic conditions that day. As a rule, all applicants even unsolicited
provide structure. drop-ins should receive friendly, courteous treatment, not only on humanitarian
grounds but also because your reputation is on the line.

STEP 5: ASK QUESTIONS Try to follow the situational, behavioral, and job
knowledge questions you wrote out ahead of time. You ll find a sampling of other
technical questions (such as What did you most enjoy about your last job? ) in
Figure 7-3. As a rule,
Don t telegraph the desired answer.
Don t interrogate the applicant as if the person is on trial.
Don t monopolize the interview, nor let the applicant do so.
Do ask open-ended questions.
Do encourage the applicant to express thoughts fully.
Do draw out the applicant s opinions and feelings by repeating the person s last
comment as a question (e.g., You didn t like your last job? ).
Do ask for examples.75
Do ask, If I were to arrange for an interview with your boss, what s your best
guess as to what he or she would say as your strengths, weaker points, and
overall performance?, and Tell me about a time when you had to deal with
someone difficult what did you do? 76
228 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 7-3 Suggested

Supplementary Questions for 1. How did you choose this line of work?
Interviewing Applicants 2. What did you enjoy most about your last job?
Source: Reprinted from http://hr.blr.com
3. What did you like least about your last job?
with permission of the publisher 4. What has been your greatest frustration or disappointment on your present job?
Business and Legal Resources, Inc. 141 Why?
Mill Rock Road East, Old Saybrook, CT 5. What are some of the pluses and minuses of your last job?
© 2004. BLR© (Business and Legal 6. What were the circumstances surrounding your leaving your last job?
Resources, Inc.).
7. Did you give notice?
8. Why should we be hiring you?
9. What do you expect from this employer?
10. What are three things you will not do in your next job?
11. What would your last supervisor say your three weaknesses are?
12. What are your major strengths?
13. How can your supervisor best help you obtain your goals?
14. How did your supervisor rate your job performance?
15. In what ways would you change your last supervisor?
16. What are your career goals during the next 1 3 years? 5 10 years?
17. How will working for this company help you reach those goals?
18. What did you do the last time you received instructions with which you
disagreed?
19. What are some of the things about which you and your supervisor disagreed?
What did you do?
20. Which do you prefer, working alone or working with groups?
21. What motivated you to do better at your last job?
22. Do you consider your progress on that job representative of your ability? Why?
23. Do you have any questions about the duties of the job for which you have
applied?
24. Can you perform the essential functions of the job for which you have applied?

STEP 6: TAKE BRIEF, UNOBTRUSIVE NOTES DURING THE INTERVIEW

Doing so may help avoid making a snap decision early in the interview, and may also
help jog your memory once the interview is complete. Take notes, jotting down just
the key points of what the interviewee says.77

STEP 7: CLOSE THE INTERVIEW Leave time to answer any questions the
candidate may have and, if appropriate, to advocate your firm to the candidate.
Try to end the interview on a positive note. Tell the applicant whether there is any
interest and, if so, what the next step will be. Make rejections diplomatically for
instance, Although your background is impressive, there are other candidates whose
experience is closer to our requirements. If the applicant is still under consideration but
you can t reach a decision now, say so. Remember, as one recruiter says, An interview
experience should leave a lasting, positive impression of the company, whether the
candidate receives and accepts an offer or not. 78
In rejecting a candidate, one perennial question is, should you provide an explanation
or not? In one study, rejected candidates who received an explanation detailing why the
employer rejected them felt that the rejection process was fairer. Unfortunately, providing
detailed explanations may not be practical. As the researchers put it,
We were unsuccessful in a number of attempts to secure a site for our applied
study. Of three organizations that expressed interest in our research, all eventually
declined to participate in the study because they were afraid that any additional
information in the rejection letters might increase legal problems. They were
reluctant to give rejected applicants information that can be used to dispute the
decision. 79

STEP 8: REVIEW THE INTERVIEW After the candidate leaves, review your inter-
view notes, score the interview guide answers (if you used one), and make a decision.
 CHAPTER 7 INTERVIEWING CANDIDATES 229

We ll address what interviewees can do to apply these findings and

to excel in the interview in Appendix 2 to this chapter.

Talent Management: Profiles and Employee

Interviews
Talent management is the goal-oriented and integrated process of planning
for, recruiting, selecting, developing, and compensating employees. To ensure
an integrated, goal-oriented effort, talent management therefore involves
(among other things) using the same job profile (competencies, traits, knowl-
edge, and experience) for recruiting as for selecting, training, appraising, and
Source: Dorling Kindersley Publishing, Inc. [US].

paying the employee.

Profiles can play an important role in employee selection. For example,
we saw in Chapter 4 that IBM identified 490 possible roles that represented
the building blocks of IBM's various jobs. IBM then identified a profile or
set of required skills and competencies for each role (such as engineer).
Managers can use a job s profile to formulate job-related situational,
behavioral, and knowledge interview questions when selecting someone
for a job or set of roles. Consider a simple example. Table 7-1 summa-
rizes illustrative competency, knowledge, trait, and experience elements
for a chemical engineer, along with sample interview questions. Select-
ing engineers based on this profile helps to ensure that you focus your
Go into the interview with an accurate picture questions on the things that someone must be proficient at to do this
of the traits of an ideal candidate, know what job successfully. The same profile would similarly provide guidance for
you re going to ask, and be prepared to keep determining how to recruit candidates for this position, and on what
an open mind about the candidate. basis to train, appraise, and pay him or her.

TABLE 7-1 Asking Profile-Oriented Interview Questions

Profile
Component Example Sample Interview Question

Competency Able to use computer drafting software Tell me about a time you used CAD Pro computerized design software.
Knowledge How extreme heat affects hydrochloric Suppose you have an application where HCL is heated to 400 degrees
acid (HCL) Fahrenheit at 2 atmospheres of pressure; what happens to the HCL?
Trait Willing to travel abroad at least Suppose you had a family meeting that you had to attend next week and
4 months per year visiting facilities our company informed you that you had to leave for a job abroad
immediately, and stay 3 weeks. How would you handle that?
Experience Designed pollution filter for Tell me about a time when you designed a pollution filter device for an
acid-cleaning facility acid-cleaning facility. How did it work? What particular problems did
you encounter? How did you address them?

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. A selection interview is a selection procedure designed to based on the types of questions (such as situational versus
predict future job performance based on applicants oral behavioral) and on how you administer the interview,
responses to oral inquiries; we discussed several basic such as one-on-one, sequentially, or even via computer/
types of interviews. There are structured versus unstruc- video/telephone. However you decide to conduct and
tured interviews. We also distinguished between interviews structure the interview, be careful what sorts of traits
230 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

you try to assess, and beware of committing the sorts of Steps in creating a structured situational interview
interviewing errors we touch on next. include analyzing the job, rating the job s main
2. One reason selection interviews are often less useful duties, creating interview questions, creating
than they should be is that managers make predictable benchmark enters, and appointing the interview
errors that undermine an interview s usefulness. They panel and conducting interviews.
jump to conclusions or make snap judgments based on 4. Steps in conducting an effective interview include making
preliminary information, they don t clarify what the job sure you know the job, structuring the interview, getting
really requires, they succumb to candidate-order error organized, asking questions, taking brief unobtrusive notes
and pressure to hire, and they let a variety of nonverbal during the interview, and reviewing the interview.
behaviors and personal characteristics undermine the 5. Talent management profiles can play an important role
validity of the interview. in employee selection. For example, we saw that IBM
3. There are two basic ways to avoid interview errors. One is identified 490 possible roles employees might play, given
to keep them in mind, and the second is to use structured IBM s strategic aims. IBM can then identify the skill sets
interviews. each role requires. Managers can use a job s profile
The structured situational interview is a series of to formulate job-related situational, behavioral, and
job-related questions with predetermined answers knowledge interview questions when selecting someone
that interviewers ask of all applicants for the job. for a job or set of roles.

DISCUSSION QUESTIONS
1. Explain and illustrate the basic ways in which you can 5. Similarly, how would you explain the fact that struc-
classify selection interviews. tured interviews, regardless of content, are more
2. Briefly describe each of the following types of interviews: valid than unstructured interviews for predicting job
unstructured panel interviews, structured sequential performance?
interviews, job-related structured interviews. 6. Briefly discuss and give examples of at least five
3. For what sorts of jobs do you think computerized inter- common interviewing mistakes. What recommenda-
views are most appropriate? Why? tions would you give for avoiding these interviewing
4. Why do you think situational interviews yield a higher mistakes?
mean validity than do job-related or behavioral inter- 7. Briefly discuss what an interviewer can do to improve
views, which in turn yield a higher mean validity than his or her performance.
do psychological interviews?

INDIVIDUAL AND GROUP ACTIVITIES

1. Prepare and give a short presentation titled How to Be to solve brainteasers, and then openly evaluate their
Effective as an Employment Interviewer. fellow candidates strengths and weaknesses. What do
2. Use the Internet to find employers who now do prelimi- you think of a screening process like this? Specifically,
nary selection interviews via the Web. Print out and bring what do you think are its pros and cons? Would you
examples to class. Do you think these interviews are recommend a procedure like this? If so, what changes, if
useful? Why or why not? How would you improve them? any, would you recommend?80
3. In groups, discuss and compile examples of the worst 6. Several years ago, Lockheed Martin Corp. sued the
interview I ever had. What was it about these interviews Boeing Corp. in Orlando, Florida, accusing it of using
that made them so bad? If time permits, discuss as a Lockheed s trade secrets to help win a multibillion-
class. dollar government contract. Among other things, Lock-
4. In groups, prepare an interview (including a sequence of heed Martin claimed that Boeing had obtained those
at least 20 questions) you ll use to interview candidates trade secrets from a former Lockheed Martin employee
for the job of teaching a course in human resources who switched to Boeing.81 But in describing methods
management. Each group should present their interview companies use to commit corporate espionage, one
questions in class. writer says that hiring away the competitor s employees
5. Some firms swear by unorthodox interview methods. or hiring people to go through its dumpster are just the
For example, Tech Planet, of Menlo Park, California, uses most obvious methods companies use to commit corpo-
weekly lunches and wacky follow-up sessions as substi- rate espionage. As he says, one of the more unusual
tutes for first-round job interviews. During the informal scams sometimes referred to as help wanted uses a
meals, candidates are expected to mingle, and the Tech person posing as a corporate headhunter who approaches
Planet employees they meet at the luncheons then review an employee of the target company with a potentially
them. One Tech Planet employee asks candidates to ride lucrative job offer. During the interview, the employee is
a unicycle in her office to see if they ll bond with the quizzed about his responsibilities, accomplishments, and
corporate culture or not. Toward the end of the screen- current projects. The goal is to extract important details
ing process, the surviving group of interviewees has without the employee realizing there is no job. 82
 CHAPTER 7 INTERVIEWING CANDIDATES 231

Assume that you are the owner of a small high-tech in each area of human resource management (such as
company that is worried about the possibility that one in Strategic Management, Workforce Planning, and
or more of your employees may be approached by one Human Resource Development). In groups of four to
of these sinister headhunters. What would you do (in five students, do four things: (1) review that appendix
terms of employee training, or a letter from you, for now; (2) identify the material in this chapter that relates
instance) to try to minimize the chance that one of your to the required knowledge the appendix lists; (3) write
employees will fall into that kind of a trap? Also, compile four multiple-choice exam questions on this material
a list of 10 questions that you think such a corporate spy that you believe would be suitable for inclusion in the
might ask one of your employees. HRCI exam; and (4) if time permits, have someone
7. The HRCI Test Specifications appendix at the end of from your team post your team s questions in front of
this book (pages 633 640) lists the knowledge someone the class, so the students in other teams can take each
studying for the HRCI certification exam needs to have others exam questions.

EXPERIENTIAL EXERCISE
The Most Important Person You ll Ever Hire
Purpose: The purpose of this exercise is to give you practice room, the interviewees should develop an interviewer
using some of the interview techniques you learned from assessment form based on the information presented in
this chapter. this chapter regarding factors that can undermine the
Required Understanding: You should be familiar with the usefulness of an interview. During the panel interview,
information presented in this chapter, and read this: For the interviewees should assess the interviewers using the
parents, children are precious. It s therefore interesting that interviewer assessment form. After the panel interviewers
parents who hire nannies to take care of their children have conducted the interview, the interviewees should
usually do little more than ask several interview questions and leave the room to discuss their notes. Did the interviewers
conduct what is often, at best, a perfunctory reference check. exhibit any of the factors that can undermine the useful-
Given the often questionable validity of interviews, and the ness of an interview? If so, which ones? What suggestions
(often) relative inexperience of the father or mother doing the would you (the interviewees) make to the interviewers on
interviewing, it s not surprising that many of these arrange- how to improve the usefulness of the interview?
ments end in disappointment. You know from this chapter 3. Instructions for the interviewers: While the interviewees
that it is difficult to conduct a valid interview unless you know are out of the room, the panel interviewers will have
exactly what you re looking for and, preferably, structure the 20 minutes to develop a short structured situational
interview. Most parents simply aren t trained to do this. interview form for a nanny. The panel interview team
How to Set Up the Exercise/Instructions: will interview two candidates for the position. During
1. Set up groups of five or six students. Two students will be the panel interview, each interview should be taking
the interviewees, while the other students in the group will notes on a copy of the structured situational interview
serve as panel interviewers. The interviewees will develop form. After the panel interview, the panel interviewers
an interviewer assessment form, and the panel interviewers should discuss their notes. What were your first impres-
will develop a structured situational interview for a nanny. sions of each interviewee? Were your impressions
2. Instructions for the interviewees: The interviewees should similar? Which candidate would you all select for the
leave the room for about 20 minutes. While out of the position and why?

APPLICATION CASE
THE OUT-OF-CONTROL INTERVIEW
Maria Fernandez is a bright, popular, and well-informed firm like Apex, where she thought she could have a successful
mechanical engineer who graduated with an engineering career while making the world a better place.
degree from State University in June 2009. During the spring The interview, however, was a disaster. Maria walked into a
preceding her graduation, she went out on many job inter- room where five men the president of the company, two vice
views, most of which she thought were conducted courte- presidents, the marketing director, and another engineer
ously and were reasonably useful in giving both her and the began throwing questions at her that she felt were aimed prima-
prospective employer a good impression of where each of rily at tripping her up rather than finding out what she could
them stood on matters of importance to both of them. It was, offer through her engineering skills. The questions ranged from
therefore, with great anticipation that she looked forward to being unnecessarily discourteous ( Why would you take a job
an interview with the one firm in which she most wanted as a waitress in college if you re such an intelligent person? ) to
to work: Apex Environmental. She had always had a strong being irrelevant and sexist ( Are you planning on settling down
interest in cleaning up the environment and firmly believed and starting a family anytime soon? ). Then, after the interview,
that the best use of her training and skills lay in working for a she met with two of the gentlemen individually (including the
232 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

president), and the discussions focused almost exclusively on it reflected a well-thought-out interviewing strategy
her technical expertise. She thought that these later discussions on the part of the firm or carelessness on the part of
went fairly well. However, given the apparent aimlessness and the firm s management? If it were carelessness, what
even mean-spiritedness of the panel interview, she was aston- would you do to improve the interview process at Apex
ished when several days later the firm made her a job offer. Environmental?
The offer forced her to consider several matters. From her 2. Would you take the job offer if you were Maria? If you re
point of view, the job itself was perfect. She liked what she not sure, what additional information would help you
would be doing, the industry, and the firm s location. And in make your decision?
fact, the president had been quite courteous in subsequent 3. The job of applications engineer for which Maria was
discussions, as had been the other members of the manage- applying requires (a) excellent technical skills with respect
ment team. She was left wondering whether the panel inter- to mechanical engineering, (b) a commitment to working
view had been intentionally tense to see how she d stand up in the area of pollution control, (c) the ability to deal
under pressure, and, if so, why they would do such a thing. well and confidently with customers who have engineer-
ing problems, (d) a willingness to travel worldwide, and
Questions (e) a very intelligent and well-balanced personality. List
1. How would you explain the nature of the panel inter- 10 questions you would ask when interviewing applicants
view Maria had to endure? Specifically, do you think for the job.

CONTINUING CASE
CARTER CLEANING COMPANY
The Better Interview to improve her company s batting average in this impor-
Like virtually all the other HR-related activities at Carter tant area.
Cleaning Centers, the company currently has no orga-
nized approach to interviewing job candidates. Store Questions
managers, who do almost all the hiring, have a few 1. In general, what can Jennifer do to improve her employee
of their own favorite questions that they ask. But in interviewing practices? Should she develop interview
the absence of any guidance from top management, they forms that list questions for management and nonmanage-
all admit their interview performance leaves something ment jobs? If so, how should these look and what questions
to be desired. Similarly, Jack Carter himself is admittedly should be included? Should she initiate a computer-based
most comfortable dealing with what he calls the nuts interview approach? If so, why and how?
and bolts machinery aspect of his business and has never 2. Should she implement an interview training program
felt particularly comfortable having to interview manage- for her managers, and if so, specifically what should be
ment or other job applicants. Jennifer is sure that this the content of such a training program? In other
lack of formal interviewing practices, procedures, and words, if she did decide to start training her manage-
training account for some of the employee turnover ment people to be better interviewers, what should she
and theft problems. Therefore, she wants to do something tell them and how should she tell it to them?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Interviewing Program employment interview training program, nor, for that
The Hotel Paris s competitive strategy is To use superior guest matter, did it have standardized interview packages that
service to differentiate the Hotel Paris properties, and to hotel managers around the world could use.
thereby increase the length of stay and return rate of guests, and As an experienced HR professional, Lisa knew that
thus boost revenues and profitability. HR manager Lisa Cruz the company s new testing program would go only so far.
must now formulate functional policies and activities that She knew that, at best, employment tests explained perhaps
support this competitive strategy by eliciting the required 30% of employee performance. It was essential that she and
employee behaviors and competencies. her team design a package of interviews that her hotel man-
One thing that concerned Lisa Cruz was the fact that the agers could use to assess on an interactive and personal
Hotel Paris s hotel managers varied widely in their inter- basis candidates for various positions. It was only in that
viewing and hiring skills. Some were quite effective; most way that the hotel could hire the sorts of employees whose
were not. Furthermore, the company did not have a formal competencies and behaviors would translate into the kinds
 CHAPTER 7 INTERVIEWING CANDIDATES 233

of outcomes such as improved guest services that the having to work. How did you handle the situation? They also
hotel required to achieve its strategic goals. developed a number of situational questions, including,
Lisa receives budgetary approval to design a new employee Suppose you have a very pushy incoming guest who insists on
interview system. She and her team start by reviewing the job being checked in at once, while at the same time you re trying to
descriptions and job specifications for the positions of front- process the checkout for another guest who must be at the
desk clerk, assistant manager, security guard, valet/door person, airport in 10 minutes. How would you handle the situation?
and housekeeper. Focusing on developing structured inter-
views for each position, the team sets about devising interview Questions
questions. For example, for the front-desk clerk and assistant 1. For the job of security guard or valet, develop five situa-
manager, they formulate several behavioral questions, including, tional, five behavioral, and five job knowledge questions,
Tell me about a time when you had to deal with an irate with descriptive good/average/poor answers.
person, and what you did. And, Tell me about a time when 2. Combine your questions into a complete interview that
you had to deal with several conflicting demands at once, such you would give to someone who must interview candi-
as having to study for several final exams while at the same time dates for these jobs.

KEY TERMS
unstructured (or nondirective) behavioral interview, 216 panel interview, 218
interview, 214 job-related interview, 217 mass interview, 218
structured (or directive) stress interview, 217 candidate-order (or contrast)
interview, 215 unstructured sequential interview, 218 error, 222
situational interview, 215 structured sequential interview, 218 structured situational interview, 225

ENDNOTES
1. This is based on Kristen Weirick, The rapport building. Chapman and Zweig, 12. McDaniel et al., The Validity of Employ-
Perfect Interview, HR Magazine 53, no. 4 Developing a Nomological Network. ment Interviews, p. 602.
(April 2008), pp. 85 88. 7. McDaniel et al., The Validity of Employ- 13. Bill Stoneman, Matching Personalities
2. Derek Chapman and David Zweig, ment Interviews, p. 602. with Jobs Made Easier with Behavioral
Developing a Nomological Network for 8. We ll see later in this chapter that there are Interviews, American Banker, November 30,
Interview Structure: Antecedents and other ways to structure selection inter- 2000, p. 8a.
Consequences of the Structured Selec- views. Many of them have nothing to do 14. Paul Taylor and Bruce Small, Asking Appli-
tion Interview, Personnel Psychology 58 with using structured guides like these. cants What They Would Do Versus What
(2005), pp. 673 702. 9. Laura Gollub Williamson et al., Employ- They Did: A Meta-Analytic Comparison of
3. Michael McDaniel et al., The Validity of ment Interview on Trial: Linking Interview Situational and Past Behavior Employment
Employment Interviews: A Comprehen- Structure with Litigation Outcomes, Interview Questions, Journal of Occupa-
sive Review and Meta-Analysis, Journal Journal of Applied Psychology 82, no. 6 tional and Organizational Psychology 75,
of Applied Psychology 79, no. 4 (1994), (1996), p. 908. As an example, the findings no. 3 (September 2002), pp. 277 295.
p. 599. See also Laura Graves and Ronald of one recent study Demonstrate the 15. Aparna Nancherla, Anticipated Growth
Karren, The Employee Selection Inter- value of using highly structured interviews in Behavioral Interviewing, Training &
view: A Fresh Look at an Old Problem, to minimize the potential influence of Development, April 2008, p. 20.
Human Resource Management 35, no. 2 applicant demographic characteristics 16. Martha Frase-Blunt, Games Interview-
(Summer 1996), pp. 163 180. For an on selection decisions. Julie McCarthy, ers Play, HR Magazine, January 2001,
argument against holding selection inter- Chad Van iddekinge, and Michael Cam- pp. 104 114.
views, see D. Heath et al., Hold the Inter- pion, Are Highly Structured Job Inter- 17. Kevin Murphy and Charles Davidshofer,
view, Fast Company, no. 136 (June views Resistant to Demographic Similarity Psychological Testing (Upper Saddle River,
2009), pp. 51 52. Effects? Personnel Psychology 60, no. 3 NJ: Prentice Hall, 2001), pp. 430 431.
4. This is based on Weirick, The Perfect (2010), pp. 325 359. 18. Marlene Dixon et al., The Panel Interview:
Interview. 10. Richard Posthuma, Frederick Morgeson, A Review of Empirical Research and Guide-
5. Therese Macan, The Employment Inter- and Michael Campion, Beyond Employ- lines for Practice, Public Personnel Manage-
view: A Review of Current Studies and ment Interview Validity: A Comprehen- ment 31, no. 3 (Fall 2002), pp. 397 429.
Directions for Future Research, Human sive Narrative Review of Trends over 19. Ibid. See also M. Ronald Buckley, Kather-
Resource Management Review 19 (2009), Time, Personnel Psychology, 55 (2002), ine A. Jackson, and Mark C. Bolino, The
pp. 203 218. p. 47. See also Frederick P. Morgeson, Influence of Relational Demography on
6. Duane Schultz and Sydney Schultz, Matthew H. Reider, and Michael A. Cam- Panel Interview Ratings: A Field Experi-
Psychology and Work Today (Upper Sad- pion, Review of Research on Age Discrim- ment, Personnel Psychology 60, no. 3
dle River, NJ: Prentice Hall, 1998), p. 830. ination in the Employment Interview, (Autumn 2007), pp. 627 646.
A study found that interview structure Journal of Business & Psychology 22, no. 3 20. Phone Interviews Might Be the Most
was best described by four dimensions: (March 2008), pp. 223 232. Telling, Study Finds, BNA Bulletin to
questioning consistency, evaluation stan- 11. Williamson et al., Employment Inter- Management, September 1998, p. 273; and
dardization, question sophistication, and view on Trial. Lisa M. Moynihan, et al., A Longitudinal
234 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

Study of the Relationships Among Job 31. Williamson et al., Employment Inter- 69, no. 1 (February 1984), pp. 118 128;
Search Self-Efficacy, Job Interviews, and view on Trial, p. 900. and Nora Reilly, et al., Benchmarks
Employment Outcomes, Journal of Business 32. Frank Schmidt and Ryan Zimmerman, Affect Perceptions of Prior Disability in a
and Psychology, 18, no. 2 (Winter 2003), A Counterintuitive Hypothesis About Structured Interview, op cit.
pp. 207 233. For phone interview job Employment Interview Validity and Some 40. Anita Chaudhuri, Beat the Clock:
search suggestions, see for example, Janet Supporting Evidence, Journal of Applied Applying for Job? A New Study Shows
Wagner, Can You Succeed in a Phone Psychology 89, no. 3 (2004), pp. 553 561. That Interviewers Will Make Up Their
Interview? Strategic Finance 91, no. 10 33. This validity discussion and these findings Minds About You Within a Minute, The
(April 2010), p. 22, 61. are based on McDaniel et al., The Validity Guardian, June 14, 2000, pp. 2 6.
21. Susan Strauss et al., The Effects of Video- of Employment Interviews, pp. 607 610; 41. John Langdale and Joseph Weitz, Esti-
conference, Telephone, and Face-to-Face the validities for situational, job-related, mating the Influence of Job Information
Media on Interviewer and Applicant Judg- and psychological interviews were (.50), on Interviewer Agreement, Journal of
ments in Employment Interviews, Journal of (.39), and (.29), respectively. Applied Psychology 57 (1973), pp. 23 27.
Management 27, no. 3 (2001), pp. 363 381. 34. Murray Barrick et al., Accuracy of Inter- 42. R. E. Carlson, Effect of Applicant Sam-
If the employer records a video interview viewer Judgments of Job Applicant Per- ple on Ratings of Valid Information in an
with the intention of sharing it with hiring sonality Traits, Personnel Psychology 53 Employment Setting, Journal of Applied
managers who don t participate in the (2000), pp. 925 951. Psychology 54 (1970), pp. 217 222.
interview, it s advisable to first obtain the 35. For example, with respect to the useful- 43. R. E. Carlson, Selection Interview Deci-
candidate s written permission. Matt ness of selection interviews for assessing sions: The Effect of Interviewer Experience,
Bolch, Lights, Camera . . . Interview! HR candidate intelligence or cognitive ability, Relative Quota Situation, and Applicant
Magazine, March 2007, pp. 99 102. see Christopher Berry et al., Revisiting Sample on Interview Decisions, Personnel
22. www.martinreddy.net/iphone/interview, Interview Cognitive Ability Relationships: Psychology 20 (1967), pp. 259 280.
accessed July 5, 2009. Attending to Specific Range Restriction 44. See, for example, Scott T. Fleischmann, The
23. These are quoted or adapted from www. Mechanisms in Meta-Analysis, Personnel Messages of Body Language in Job Inter-
careerfaqs.com.au/getthatjob_video_inter Psychology 60 (2007), pp. 837 874. views, Employee Relations 18, no. 2 (Sum-
view.asp, accessed March 2, 2009. 36. McDaniel et al., The Validity of Employ- mer 1991), pp. 161 166; James Westphal
24. Douglas Rodgers, Computer-Aided Inter- ment Interviews, p. 608. and Ithai Stern, Flattery Will Get You
viewing Overcomes First Impressions, 37. Anthony Dalessio and Todd Silverhart, Everywhere (Especially if You re a Male Cau-
Personnel Journal, April 1987, pp. 148 152; Combining Biodata Test and Interview casian): How Ingratiation, Board Room
see also Linda Thornburg, Computer- Information: Predicting Decisions and Behavior, and a Demographic Minority
Assisted Interviewing Shortens Hiring Performance Criteria, Personnel Psychol- Status Affect Additional Board Appointments
Cycle, HR Magazine, February 1998, ogy 47 (1994), p. 313; and Nora Reilly, et al., at U.S. Companies, Academy of Management
p. 73ff; and http://interviewstream.com/ Benchmarks Affect Perceptions of Prior Journal 50, no. 2 (2007), pp. 267 288.
demorequest?gclid=COyxjOqd36sCFUbs Disability in a Structured Interview, 45. David Caldwell and Jerry Burger, Persona-
7QodMziuOw, accessed October 2, 2011. Journal of Business & Psychology 20, no. 4 lity Characteristics of Job Applicants and
25. Rogers, Computer-Aided Interviewing (Summer 2006), pp. 489 500. Success in Screening Interviews, Personnel
Overcomes First Impressions. 38. S. W. Constantin, An Investigation of Infor- Psychology 51 (1998), pp. 119 136.
26. Gary Robins, Dial-an-Interview, Stores, mation Favorability in the Employment 46. Amy Kristof-Brown et al., Applicant
June 1994, pp. 34 35. Interview, Journal of Applied Psychology 61 Impression Management: Dispositional
27. This is quoted from or paraphrased from (1976), pp. 743 749. It should be noted that Influences and Consequences for Recruiter
William Bulkeley, Replaced by Technol- a number of the studies discussed in this Perceptions of Fit and Similarity, Journal
ogy: Job Interviews, The Wall Street Jour- chapter involve having interviewers evaluate of Management 28, no. 1 (2002), pp. 27 46.
nal, August 22, 1994, pp. B1, B7. For more interviews based on written transcripts See also Lynn McFarland et al., Impres-
on careers at Great Western see http:// (rather than face to face) and that a study sion Management Use and Effectiveness
www.greatwesternbank.com/aboutus/ suggests that this procedure may not be Across Assessment Methods, Journal of
careers, accessed October 6, 2011. equivalent to having interviewers interview Management 29, no. 5 (2003), pp. 641 661.
28. Anjali Athavaley, A Job Interview You applicants directly. See Charles Gorman, 47. Timothy DeGroot and Janaki Gooty,
Don t Have to Show Up For, The Wall William Glover, and Michael Doherty, Can Nonverbal Cues be Used to Make
Street Journal, June 20, 2007, http:// Can We Learn Anything About Interview- Meaningful Personality Attributions in
online.wsj.com/article/SB118229876637 ing Real People from Interviews of Paper Employment Interviews? Journal of Busi-
841321.html, accessed April 8, 2011. People? A Study of the External Validity ness Psychology 24 (2009), p. 179.
29. Emily Maltby, To Find the Best Hires, Paradigm, Organizational Behavior and 48. Posthuma, Morgeson, and Campion,
Firms Become Creative, The Wall Street Human Performance 22, no. 2 (October Beyond Employment Interview Validity,
Journal, November 17, 2009, p. B6. 1978), pp. 165 192; and Frederick 1 87.
30. For example, structured employment P. Morgeson, Matthew H. Reider, Michael A. 49. C. K. Stevens and A. L. Kristof, Making
interviews using either situational ques- Campion, and Rebecca A. Bull, Review of the Right Impression: A Field Study
tions or behavioral questions tend to yield Research on Age Discrimination in of Applicant Impression Management
high criterion-related validities (.63 versus the Employment Interview, Journal of During Interviews, Journal of Applied
.47). This is particularly so where the Business Psychology 22 (2008), pp. 223 232. Psychology 80, pp. 587 606; Schultz and
raters can use descriptively anchored rat- 39. David Tucker and Patricia Rowe, Schultz, Psychology and Work Today,
ing scale answer sheets; these use short Relationship Between Expectancy, p. 82. See also Jay Stuller, Fatal Attrac-
descriptors to illustrate good, average, or Causal Attribution, and Final Hiring tion, Across the Board 42, no. 6 (November/
poor performance. Taylor and Small, Decisions in the Employment Interview, December 2005), pp. 18 23.
Asking Applicants What They Would Do Journal of Applied Psychology 64, no. 1 50. Chad Higgins and Timothy Judge, The
Versus What They Did. See also, Julie (February 1979), pp. 27 34. See also Effect of Applicant Influence Tactics on
McCarthy et al., Are Highly Structured Robert Dipboye, Gail Fontenelle, and Recruiter Perceptions of Fit and Hiring
Job Interviews Resistant to Demographic Kathleen Garner, Effect of Previewing Recommendations: A Field Study, Journal
Similarity Effects? Personnel Psychology the Application on Interview Process and of Applied Psychology 89, no. 4 (2004),
63, no. 2 (Summer 2010), p. 325 359. Outcomes, Journal of Applied Psychology pp. 622 632. Some researchers in this area
 CHAPTER 7 INTERVIEWING CANDIDATES 235

question results like these. The problem is Interviews Effective, Management and gram, Personnel Psychology 59, no. 2
that much of the interviewing research Labor Studies 18, no. 1 (1993), pp. 5 7. (Summer 2006), pp. 433 456.
uses students as raters and hypothetical 64. Posthuma, Morgeson, and Campion, 69. Pursell et al., Structured Interviewing,
jobs, so it s not clear that we can apply the Beyond Employment Interview Validity, p. 910.
findings to the real world. For example, pp. 1 87. 70. From a speech by industrial psychologist
with respect to age bias in interviews, 65. Pell, Nine Interviewing Pitfalls, p. 30; Paul Green and contained in BNA Bulletin
Laboratory studies may create too much quote from, Alan M. Saks and Julie M. to Management, June 20, 1985, pp. 2 3.
artificiality, in Frederick P. Morgeson, McCarthy, Effects of Discriminatory 71. Williamson et al., Employment Inter-
Matthew H. Reider, Michael A. Campion, Interview Questions and Gender on view on Trial, p. 901; Michael Campion,
and Rebecca A. Bull, Review of Research Applicant Reactions, Journal of Business David Palmer, and James Campion, A
on Age Discrimination in the Employ- and Psychology 21, No. 2 (Winter 2006), Review of Structure in the Selection
ment Interview, Journal of Business p. 175. Interview, Personnel Psychology 50 (1997),
Psychology 22 (2008), 223 232. 66. This section is based on Elliot Pursell et al., pp. 655 702. See also Maurer and Solamon,
51. See, for example, Madeline Heilmann and Structured Interviewing, Personnel Jour- The Science and Practice of a Structured
Lois Saruwatari, When Beauty Is Beastly: nal 59 (November 1980), pp. 907 912; and Employment Interview.
The Effects of Appearance and Sex on Eval- G. Latham et al., The Situational Inter- 72. Unless otherwise specified, the following
uations of Job Applicants for Managerial view, Journal of Applied Psychology 65 are based on Williamson et al., Employ-
and Nonmanagerial Jobs, Organizational (1980), pp. 422 427. See also Michael ment Interview on Trial, pp. 901 902.
Behavior and Human Performance 23 (June Campion, Elliott Pursell, and Barbara 73. Campion, Palmer, and Campion, A
1979), pp. 360 372; and Cynthia Marlowe, Brown, Structured Interviewing: Rais- Review of Structure, p. 668.
Sandra Schneider, and Carnot Nelson, ing the Psychometric Properties of the 74. Carlson, Selection Interview Decisions.
Gender and Attractiveness Biases in Employment Interview, Personnel Psychol- 75. Pamela Kaul, Interviewing Is Your Busi-
Hiring Decisions: Are More Experienced ogy 41 (1988), pp. 25 42; and Paul R. ness, Association Management, November
Managers Less Biased? Journal of Applied Bernthal, Recruitment and Selection, 1992, p. 29. See also Nancy Woodward,
Psychology 81, no. 1 (1996), pp. 11 21. http://www.ddiworld.com/DDIWorld/med Asking for Salary Histories, HR Magazine,
52. Marlowe et al., Gender and Attractive- ia/trend-research/recruitment-and-selec- February 2000, pp. 109 112. Gathering
ness Biases, p. 11. tion_ere_es_ddi.pdf?ext=.pdf, accessed information about specific interview
53. Allen Huffcutt and Philip Roth, Racial October 10, 2011. For a recent approach, see dimensions such as social ability, responsi-
Group Differences in Employment K. G. Melchers, et. al., Is More Structure bility, and independence (as is often done
Interview Evaluations, Journal of Applied Really Better? A Comparison of Frame- with structured interviews) can improve
Psychology 83, no. 2 (1998), pp. 179 189. of-Reference Training and Descriptively interview accuracy, at least for more com-
54. Eden King and Afra Ahmad, An Experi- Anchored Rating Scales to Improve Inter- plicated jobs. See also Andrea Poe, Gradu-
mental Field Study of Interpersonal viewers Rating Quality. Personnel Psychology ate Work: Behavioral Interviewing Can Tell
Discrimination Toward Muslim Job 64, no. 1 (2011), pp. 53 87. You If an Applicant Just Out of College Has
Applicants, Personnel Psychology 63, 67. Taylor and Small, Asking Applicants What Traits Needed for the Job, HR Magazine
no. 4 (2010), pp. 881 906. They Would Do Versus What They Did. 48, no. 10 (October 2003): 95 96.
55. N. S. Miceli et al., Potential Discrimina- Structured employment interviews using 76. Edwin Walley, Successful Interview-
tion in Structured Employment Inter- either situational questions or behavioral ing Techniques, The CPA Journal 63
views, Employee Responsibilities and Rights questions tend to yield high validities. (September 1993), p. 70; and Randy
13, no. 1 (March 2001), pp. 15 38. However, structured interviews with situa- Myers, Interviewing Techniques: Tips
56. Andrea Rodriguez and Fran Prezant, Bet- tional question formats yield the higher From the Pros, Journal of Accountancy
ter Interviews for People with Disabilities, ratings. This may be because interviewers 202, no. 2 (August 2006), pp. 53 55.
Workforce, www.workforce.com, accessed get more consistent (reliable) responses 77. Catherine Middendorf and Therese
November 14, 2003. with situational questions (which force all Macan, Note Taking in the Employment
57. Pat Tammaro, Laws to Prevent Discrimina- applicants to apply the same scenario) Interview: Effects on Recall and Judg-
tion Affect Job Interview Process, The Hous- than they do with behavioral questions ment, Journal of Applied Psychology 87,
ton Business Journal, June 16, 2000, p. 48. (which require each applicant to find no. 2 (2002), pp. 293 303.
58. This is based on John F. Wymer III applicable experiences). However, there 78. Weirick, The Perfect Interview, p. 85.
and Deborah A. Sudbury, Employment is some evidence that for higher-level 79. Stephen Gilliland et al., Improving Appli-
Discrimination: Testers Will Your Hiring positions, situational question based cants Reactions to Rejection Letters: An
Practices Pass ? Employee Relations Law interviews are inferior to behavioral ques- Application of Fairness Theory, Personnel
Journal 17, no. 4 (Spring 1992), pp. 623 633. tion based ones, possibly because the situ- Psychology 54 (2001), pp. 669 703.
59. Bureau of National Affairs, Daily Labor ations are just too simple to allow any real 80. Kris Maher, New High-Tech Recruiting
Report, December 5, 1990, p. D1. differentiation among candidates for Tools: Unicycles, Yahtzee and Silly Putty,
60. Wymer and Sudbury, Employment Dis- higher level positions. Allen Huffcutt The Wall Street Journal, June 6, 2000, p. B14;
crimination, p. 629. et al., Comparison of Situational and see also Paul McNamara, Extreme Inter-
61. Arthur Pell, Nine Interviewing Pitfalls, Behavioral Description Interview Ques- view, Network World, June 25, 2001, p. 65.
Managers Magazine, January 1994, p. 20. tions for Higher Level Positions, Personnel 81. Tim Barker, Corporate Espionage Takes
62. Thomas Dougherty, Daniel Turban, and Psychology 54, no. 3 (2001), p. 619. Center Stage with Boeing Revelation, Knight
John Callender, Confirming First Impres- 68. See Phillip Lowry, The Structured Inter- Ridder/Tribune Business News, June 15, 2003.
sions in the Employment Interview: A view: An Alternative to the Assessment 82. Ibid.
Field Study of Interviewer Behavior, Center? Public Personnel Management 23, 83. See for example the classic excellent dis-
Journal of Applied Psychology 79, no. 5 no. 2 (Summer 1994), pp. 201 215. See cussion of job-hunting and interviewing
(1994), p. 663. also Todd Maurer and Jerry Solamon, in Richard Payne, How to Get a Better Job
63. See Pell, Nine Interviewing Pitfalls, The Science and Practice of a Structured Quickly (New York: New American
p. 29; Parth Sarathi, Making Selection Employment Interview Coaching Pro- Library, 1979).
236 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

APPENDIX 1 FOR CHAPTER 7

How to Create Applicant Interview Guide Process

STEP 1 Create a Structured Interview Guide

Instructions:
First, here in step 1, create a structured interview guide like this one (including a competency definition, a lead question, and
benchmark examples and answers, for instance) for each of the job's required competencies:
Competency: Interpersonal Skills

De nition:
Shows understanding, courtesy, tact, empathy, concern; develops and maintains relationships; may deal with people who
are dif cult, hostile, distressed; relates well to people from varied backgrounds and situations; is sensitive to individual
differences.
Lead Questions:
Describe a situation in which you had to deal with people who were upset about a problem. What specific actions did you take?
What was the outcome or result?

Benchmark Level De nition Level Examples

Level
5 Establishes and maintains ongoing working Presents controversial ndings tactfully to irate
relationships with management, other employees, organization senior management of cials regarding
internal or external stakeholders, or customers. shortcomings of a newly installed computer system,
Remains courteous when discussing information software programs, and associated equipment.
or eliciting highly sensitive or controversial
information from people who are reluctant to
give it. Effectively handles situations involving
a high degree of tension or discomfort involving
people who are demonstrating a high degree
of hostility or distress.
4 Mediates disputes concerning system design/
architecture, the nature and capacity of data
management systems, system resources allocations,
or other equally controversial/sensitive matters.
3 Cooperates and works well with management, Courteously and tactfully delivers effective instruction
other employees, or customers, on short-term to frustrated customers. Provides technical advice
assignments. Remains courteous when discussing to customers and the public on various types of IT
information or eliciting moderately sensitive or such as communication or security systems, data
controversial information from people who are management procedures or analysis.
hesitant to give it. Effectively handles situations
involving a moderate degree of tension or discomfort
involving people who are demonstrating a moderate
degree of hostility or distress.
2 Familiarizes new employees with administrative
procedures and of ce systems.
1 Cooperates and works well with management, Responds courteously to customers general inquiries.
other employees, or customers during brief
interactions. Remains courteous when
discussing information or eliciting non-sensitive Greets and assists visitors attending a meeting within
or non-controversial information from people own organization.
who are willing to give it. Effectively handles
situations involving little or no tension,
discomfort, hostility, or distress.

FIGURE 7A-1 Three-Step Structured Interview Guide Process

Source: http://www.state.gov/documents/organization/107843.pdf, and United States Office of Personnel
Management. Structured Interviews: Interview Guide and Evaluation Materials for Structured Interviews.
 CHAPTER 7 INTERVIEWING CANDIDATES 237

FIGURE 7A-1
(Continued) STEP 2 INDIVIDUAL EVALUATION FORM
Instructions:
Next, in step 2, create a form for evaluating each job candidate on each of the job's competencies:
Candidate to be assessed: __________________________________________________________________________

Date of Interview:_________________________________________________________________________________

Problem Solving

De nition:
Identi es problems; determines accuracy and relevance of information; uses sound judgment to generate and evaluate
alternatives, and to make the recommendations.
Question:
Describe a situation in which you identi ed a problem and evaluated the alternatives to make a recommendation or
decision. What was the problem and who was affected?
Probes:
How did you generate and evaluate your alternatives? What was the outcome?
Describe speci c behaviors observed: (Use back of sheet, if necessary)

1 Low 2 3 Average 4 5 Outstanding

Uses logic to identify Uses logic to identify Uses logic to identify
alternatives to solve alternatives to solve alternatives to solve
routine problems. moderately dif cult complex or sensitive
Reacts to and problems. Identi es problems. Anticipates
solves problems by and solves problems by problems and identi es
gathering and applying gathering and applying and evaluates potential
information from information from a sources of information
standard materials or variety of materials or and generates
sources that provide sources that provide alternatives to solve
a limited number of several alternatives. problems where
alternatives. standards do not exist.

Final Evaluation: Printed Name: Signature:

238 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

FIGURE 7A-1 STEP 3 PANEL CONSENSUS EVALUATION FORM

(Continued)
Instructions:
Finally, in step 3, create a panel consensus evaluation form like this one, which the members of the panel who interviewed the
candidate will use to evaluate his or her interview performance.
Candidate: _______________________________________________________________________________________

Date:____________________________________________________________________________________________

Panel Consensus Evaluation Form

Instructions:
Translate each individual evaluation for each competency onto this form. If all of the individual competency evaluations
are within one rating scale point, enter the average of the evaluations in the column labeled Group Evaluation. If more
than one point separates any two raters, a consensus discussion must occur with each party justifying his/her evaluation.
The lead interviewer or his/her designee should take notes on the consensus discussion in the space provided. Any
changes in evaluation should be initialed and a nal evaluation entered for each competency.
Competency Final Individual Evaluations Group Evaluation
(1) (2) (3)
Interpersonal Skills
Self-Management
Reasoning
Decision Making
Problem Solving
Oral Communication
Total Score
Consensus Discussion Notes:

Signature Panel Member 1: ________________________________________________________________________

Signature Panel Member 2: ________________________________________________________________________

Signature Panel Member 3: ________________________________________________________________________

APPENDIX 2 FOR CHAPTER 7

Interview Guide for Interviewees

B
efore managers move into positions where they have to interview others, they
usually must navigate some interviews themselves. It s therefore useful to apply
some of what we discussed in this chapter to navigating one s own interviews.
Interviewers will tend to use the interview to try to determine what you are like as
a person. In other words, how you get along with other people and your desire to
 CHAPTER 7 INTERVIEWING CANDIDATES 239

work. They will look first at how you behave. Specifically, they will note whether you
respond concisely, cooperate fully in answering questions, state personal opinions
when relevant, and keep to the subject at hand; these are very important elements in
influencing the interviewer s decision.
There are six things to do to get an extra edge in the interview.

1. Preparation is essential. Before the interview, learn all you can about the
employer, the job, and the people doing the recruiting. On the Web or at the
library, look through business periodicals to find out what is happening in
the employer s field. Who is the competition? How are they doing? Try to
unearth the employer s problems. Be ready to explain why you think you
would be able to solve such problems, citing some of your specific
accomplishments to make your case.
2. Uncover the interviewer s real needs. Spend as little time as possible answering
your interviewer s first questions and as much time as possible getting him or
her to describe his or her needs. Determine what the person is expecting to
accomplish, and the type of person he or she feels is needed. Use open-ended
questions here such as, Could you tell me more about that?
3. Relate yourself to the interviewer s needs. Once you know the type of
person your interviewer is looking for and the sorts of problems he or she
wants solved, you are in a good position to describe your own accomplish-
ments in terms of the interviewer s needs. Start by saying something like,
One of the problem areas you ve said is important to you is similar to a
problem I once faced. Then state the problem, describe your solution,
and reveal the results.83
4. Think before answering. Answering a question should be a three-step process:
Pause Think Speak. Pause to make sure you understand what the interviewer
is driving at, think about how to structure your answer, and then speak. In your
answer, try to emphasize how hiring you will help the interviewer solve his or
her problem.
5. Remember that appearance and enthusiasm are important. Appropriate
clothing, good grooming, a firm handshake, and energy are important.
Remember that your nonverbal behavior may broadcast more about
you than does what you say. Maintain eye contact. In addition, speak
with enthusiasm, nod agreement, and remember to take a moment to
frame your answer (pause, think, speak) so that you sound articulate
and fluent.
6. Make a good first impression. Remember that in most cases interviewers
make up their minds about the applicant during the early minutes of the
interview. A good first impression may turn to bad during the interview,
but it is unlikely. Bad first impressions are almost impossible to
overcome. Experts suggest paying attention to the following key
interviewing considerations:

* Appropriate clothing
* Good grooming
* A firm handshake
* The appearance of controlled energy
* Pertinent humor and readiness to smile
* A genuine interest in the employer s operation and alert attention when the
interviewer speaks
* Pride in past performance
* An understanding of the employer s needs and a desire to serve them
240 PART 2 RECRUITMENT, PLACEMENT, AND TALENT MANAGEMENT

PART 2 VIDEO CASES APPENDIX

Video Title: Talent Management (The Weather Channel)

SYNOPSIS
This video discusses job analysis in some detail, including how employers use the job
analysis, who contributes to a job analysis, and writing the job description and the
job specification.

Discussion Questions
1. What job analysis tools would you suggest The Weather Channel use to
supplement what it s doing now to analyze jobs?
2. What role do you think job analysis plays in talent management at The Weather
Channel? What role should it play?
3. How is human resources at The Weather Channel involved in job analysis?
4. If Taylor asked you what strategic HR is, what would you tell her? Does The
Weather Channel seem to be practicing strategic HR? Why or why not?
5. What indications, if any, are there that The Weather Channel takes a talent
management approach?

Video Title: Recruiting (Hautelook)

SYNOPSIS
The online fashion retailer Hautelook is growing quickly and needs to recruit new
employees at a rapid rate. The video discusses the company s methods for recruiting
job applicants and for finding the best potential employees from among its applicants.
Hautelook prefers to promote internal job candidates, but also to hire applicants who
are most familiar with the company ideally, previous customers.

Discussion Questions
1. Explain the importance of employee referrals to Hautelook s recruiting.
2. Based on the chapter, what other recruiting tools would you suggest a company
like this use, and why?
3. How would you suggest Hautelook deal with the problem of receiving too many
résumé applications?
4. Given that it loves to promote internally, what other steps would you suggest
Hautelook take to facilitate this?
5. From what Hautelook says, is it really necessary for the company to use employment
agencies? Why?

Video Title: Personnel Planning and Recruiting

(Gawker Media)
SYNOPSIS
Gawker Media founder Nick Denton analyzes how his company responded to the
2007 2010 recession. A key was planning for staffing levels.

Discussion Questions
1. Based on what we discussed in Chapter 5, what advice would you give Gawker
regarding how to improve its personnel planning?
 CHAPTER 7 INTERVIEWING CANDIDATES 241

2. How is it that some organizations succeed during a recession?

3. Evaluate Gawker Media s practice of recruiting new writers from the people who
comment on its sites. How would you suggest the company improve its recruiting
practices overall?

Video Title: Employee Testing and Selection (Patagonia)

SYNOPSIS
Patagonia strives to select employees whose values are in sync with the philosophies and
values of the company. The interviewing process is a multi-faceted one, in which candi-
dates take part in several group interviews. These interviews follow a very conversational
style, in an attempt to reveal as much about a potential employee s interests, passions,
and personality as possible. It is important that those hired by Patagonia not only have
an interest in outdoor activities and the products the company produces, but also are
passionate about preserving the environment, which is the mission of Patagonia.

Discussion Questions
1. If you had to create a talent management type job profile for the average
employee at Patagonia, what would the profile look like in terms of its specific
contents?
2. What traits does Patagonia look for in its future employees during the interview
process?
3. In what respects does Patagonia s employee selection process reflect a talent
management approach to selection?
4. What is the employee turnover rate at Patagonia? Is this higher or lower than the
industry average? What reason can you give for why Patagonia s turnover rate is
as you described?
5. Describe the interview process used by Patagonia. How is this process similar to
others in the industry? How does the process used by Patagonia differ?

Video Title: Interviewing Candidates (Zipcar)

SYNOPSIS
Zipcar is a company that allows customers to share a car for a fee as small as a short
cab ride. Individuals who become Zipcar members are able to reserve a vehicle with as
little advance notice as 1 hour through any wireless device, unlock a car with a card
that members carry with them, and drive for the reserved period of time. The goal
of Zipcar is to reduce the number of cars being driven and thereby reduce environ-
mental pollution.
Zipcar is a fast-growing innovative company that supports the environment and
is socially responsible. This makes it an attractive place to work for many who are
looking for a company that is doing something new. When selecting new employees,
Zipcar aims to find people who are passionate about the brand, professional, courteous,
and presentable. It wants someone who understands the value of the organization and
the culture within which the company operates.

Discussion Questions
1. What makes Zipcar an attractive employer for which to work?
2. What do those doing the actual hiring at Zipcar feel are important
characteristics to find in potential employees?
3. List three behavioral and three situational questions that you would use to
interview Zipcar employment applicants.
4. According to the video, what practices should you avoid during an interview?
How do these compare with those we discussed in Chapter 7?
PART THREE | TRAINING AND DEVELOPMENT

8
Training and Developing
Employees
Source: Shutterstock.
LEARNING OBJECTIVES Company s
1. Summarize the purpose and process of employee Strategic Goals
orientation.
2. List and briefly explain each of the four steps in the
training process.
3. Describe and illustrate how you would identify training
requirements. Employee Competencies
and Behaviors Required
4. Explain how to distinguish between problems you can for Company to Achieve
fix with training and those you can t. These Strategic Goals
5. Discuss how you would motivate trainees.
6. Explain how to use five training techniques.
7. List and briefly discuss four management development
programs. Training and
opment
8. List and briefly discuss the importance of the eight Devel
steps in leading organizational change.

Co
Placem t and

mp
ent
9. Answer the question, What is organizational

Recruitmen

ensa
development and how does it differ from traditional HR Policies and Practices

tion
approaches to organizational change? Required to Produce
Employee Competencies
and Behaviors

F
l
Le t
m
ga

Re m
l

en
or about 6 years after its merger with May Department dn noriv ita
sno olp

E
a c nE
Stores Co., Macy s Inc. was in a consolidation mode. iget
artS eey
First, it had to concentrate on integrating the regional
department store chains under the single Macy s
umbrella. Then the 2008 recession hit and the focus shifted
to cutting costs. During these years, Macy s customer service WHERE ARE WE NOW . . .
suffered. Many Macy s sales associates just weren t providing Chapters 6 and 7 focused on the methods
the level of service that customers wanted. The question was, managers use to interview and select
what should Macy s do about it now? employees. Once employees are on board,
the employer must train them. The purpose
of this chapter is to increase your effective-
ness in training employees. The main topics
we ll cover include orienting employees, the
training process, analyzing training needs,
implementing training and development
programs, and evaluating the training effort.
Then, in Chapter 9, we ll turn to appraising
employees.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 243
244 PART 3 TRAINING AND DEVELOPMENT

ORIENTING AND ONBOARDING NEW EMPLOYEES

Carefully selecting employees doesn t guarantee they ll perform effectively. Even high-
potential employees can t do their jobs if they don t know what to do or how to do it.
Making sure your employees do know what to do and how to do it is the purpose of
orientation and training. The human resources department usually designs the
company s orientation and training programs, but the rubber hits the road with the
supervisor. He or she does most of the day-to-day orienting and training. Every manager
therefore needs to know how to orient and train employees. We will start with orientation.

The Purposes of Employee Orientation/Onboarding

1 Summarize the purpose Employee orientation (or onboarding ) involves more than what most people realize.1
and process of employee
orientation. Employee orientation still provides new employees with the information they need to
function (such as computer passwords and company rules); ideally, though, it should
also help new employees start getting emotionally attached to the firm. You want to
accomplish four things by orienting new employees:
1. Make the new employee feel welcome and at home and part of the team.
2. Make sure the new employee has the basic information to function effectively,
such as e-mail access, personnel policies and benefits, and what the employer
expects in terms of work behavior.
3. Help the new employee understand the organization in a broad sense (its past,
present, culture, and strategies and vision of the future).
4. Start the person on becoming socialized into the firm s culture, values, and ways
of doing things.2
Getting the new employee to appreciate the company s culture and values distin-
guishes today s onboarding programs from traditional orientation.3 For example, the
Mayo Clinic s new heritage and culture program emphasizes core Mayo Clinic values
such as teamwork, personal responsibility, innovation, integrity, diversity, customer
service, and mutual respect.4

The Orientation Process

The length of the orientation program depends on what you cover. Traditional orien-
tation programs take several hours. The human resource specialist (or, in smaller
firms, the office manager) usually performs the first part of the orientation by
explaining basic matters like working hours, benefits, and vacations. That person then
introduces the new employee to his or her new supervisor. The supervisor continues
the orientation by explaining (see Figure 8-1) the organization of the department and
by introducing the person to his or her new colleagues, familiarizing the new
employee with the workplace, and helping to reduce first-day jitters. Supervisors need
to be vigilant. Follow up on and encourage new employees to engage in activities
(such as taking breaks with current employees) that will enable each to learn the
ropes and become productive. In firms like Toyota Motor USA, onboarding-type
orientations take up to a week. These may include videos, lectures by company
officers, and exercises covering matters like company history, vision, and values.
At a minimum, as in Figure 8-1, an orientation typically includes information on
employee benefits, personnel policies, the daily routine, company organization and
operations, safety measures and regulations, and a facilities tour.5 New employees
should receive (and sign for) print or Internet-based employee handbooks covering
matters like these.

THE EMPLOYEE HANDBOOK Note that under certain conditions, courts may
find that the employee handbook s contents represent legally binding employment
commitments. Therefore, employers often include disclaimers. These make it clear
that statements of company policies, benefits, and regulations do not constitute the
terms and conditions of an employment contract, either expressed or implied. Also,
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 245

NEW EMPLOYEE DEPARTMENTAL ORIENTATION CHECKLIST

(Return to Human Resources within 10 days of Hire)
NAME: H I R E D AT E : SSN: JO B T I T L E :

DEPARTMENT: NEO DATE: DEPARTMENTAL ORIENTATION COMPLETED BY:

T OP I C D AT E N/A
REVIEWED

1. HUMAN RESOURCES INFORMATION

a. Departmental Attendance Procedures and UCSD Medical Center Work Time & Attendance a. ____________
Policy b. ____________
b. Job Description Review c. ____________
c. Annual Performance Evaluation and Peer Feedback Process d. ____________
d. Probationary Period Information e. ____________
e. Appearance/Dress Code Requirements f. ____________
f. Annual TB Screening g. ____________
g. License and/or Certification Renewals

2. DEPARTMENT INFORMATION a. ____________

a. Organizational Structure-Department Core Values Orientation b. ____________
b. Department/Unit Area Specific Policies & Procedures c. ____________
c. Customer Service Practices d. ____________
d. CQI Effort and Projects e. ____________
e. Tour and Floor Plan f. ____________
f. Equipment/Supplies ____________
* Keys issued ____________
* Radio Pager issued ____________
* Other _________________ g. ____________
g. Mail and Recharge Codes

3. SAFETY INFORMATION a. ____________

a. Departmental Safety Plan b. ____________
b. Employee Safety/Injury Reporting Procedures c. ____________
c. Hazard Communication d. ____________
d. Infection Control/Sharps Disposal e. ____________
e. Attendance at annual Safety Fair (mandatory)

4. FACILITES INFORMATION
a. Emergency Power a. ____________
b. Mechanical Systems b. ____________
c. Water c. ____________
d. Medical Gases d. ____________
e. Patient Room e. ____________
* Bed ____________
* Headwall ____________
* Bathroom ____________
____________
* Nurse Call System
a. ____________
5. SECURITY INFORMATION
b. ____________
a. Code Triage Assignment
c. ____________
b. Code Blue Assignment
d. ____________
c. Code Red Evacuation Procedure
e. ____________
d. Code 10 Bomb Threat Procedure
f. ____________
e. Departmental Security Measures
f. UCSD Emergency Number 6111 or 911

*This generic checklist may not constitute a complete departmental orientation or assessment. Please attach any additional unit specific orientation
material for placement in the employee s HR file*

I have been oriented on the items listed above______________________________________________________________________________

D1999(R7-01) WHITE HR Records (8912) Yellow Department Retains

FIGURE 8-1 New Employee Departmental Orientation Checklist

Source: Used with permission of UC San Diego Medical Center.

employers generally should not insert statements such as No employee will be fired
without just cause or statements that imply or state that employees have tenure.
Indeed, it s best to emphasize that the employment relationship is strictly at-will.

employee orientation
A procedure for providing new employees
with basic background information about
the firm.
246 PART 3 TRAINING AND DEVELOPMENT

ORIENTATION TECHNOLOGY Employers use technology to support orientation.

For example, some employers put all or some of their orientation media on the Web.
At the University of Cincinnati, new employees spend about 45 minutes online learning
about their new employer s mission, organization, and policies and procedures. IBM
uses virtual environments like Second Life to support orientation, particularly for
employees abroad. The new employees choose virtual avatars, which then interact
with other company avatars, for instance to learn how to enroll for benefits.6 ION Geo-
physical uses an online onboarding portal solution called RedCarpet. Ion s CEO uses
RedCarpet to offer a streaming video welcome message. New hires can view things like
photos and profiles of members of their work teams.7 With Workday s iPhone app,
employers can provide their employees easy mobile access to their employee directories.
Users can search their company s worker directory for names, images, and contact infor-
mation; call or e-mail coworkers directly; and view physical addresses on Google Maps.8

OVERVIEW OF THE TRAINING PROCESS

Directly after orientation, training should begin. Training means giving new or
current employees the skills that they need to perform their jobs. This might mean
showing new Web designers the intricacies of your site, new salespeople how to sell
your firm s product, or new supervisors how to complete the firm s weekly payroll.
It might involve simply having the current jobholder explain the job to the new hire,
or a multi-week training process including classroom or Internet classes.
In any case, training is a task that managers ignore at their peril. Having high-
potential employees doesn t guarantee they ll succeed. They must know what to do and
how to do it. If they don t, they will improvise or do nothing useful at all.
Inadequate training can also trigger negligent training liability. As one expert
puts it, It s clear from the case law that where an employer fails to train adequately
and an employee subsequently does harm to third parties, the court will find the
employer liable. 9 Employers should confirm the applicant/employee s claims of skill
and experience, provide adequate training (particularly where employees use danger-
ous equipment), and evaluate the training to ensure that it s actually reducing risks.

Aligning Strategy and Training

The employer s strategic plans should ultimately govern its training goals.10 In essence,
the task is to identify the employee behaviors the firm will require to execute its strategy,
and from that deduce what competencies employees will need. Then, put in place training
goals and programs to instill these competencies. As one trainer said, We sit down with
management and help them identify strategic goals and objectives and the skills and
knowledge needed to achieve them. 11 For example, Caterpillar Inc. created Caterpillar
University to oversee all its training and development programs. Company executives
comprise the university s board of directors. They set the university s policies and over-
see the alignment of the corporation s learning needs with the enterprises business
strategy. 12 The accompanying Strategic Context feature illustrates strategy s role in
training and development.

THE STRATEGIC CONTEXT

Having spent about 6 years consolidating and cutting costs to navigate its way
through the recession, Macy s top management turned to a new strategy in 2011.
As its CEO said, We are [now] talking about a cultural shift . . . becoming more
of a growth company. 13 However, Macy s top management knew that growth
would not occur without a dramatic improvement in how its sales associates
treated customers. (For example, studies by the consulting firm Bain & Co. showed
that when customers had positive interactions with sales associates, customer
purchases rose by as much as 50%.) To produce the improved customer service
that Macy s new growth strategy depended on, Macy s installed a new training
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 247

program. Rather than just watching a 90-minute interactive video as they

previously did, sales associates now attended 31 2-hour training sessions aimed at
cultivating higher levels of customer service. Macy s management believes the
training program and resulting improvement in customer service will be the
biggest factor in achieving Macy s projected 3% growth in 2011 sales.14

Training and Performance

One survey found that establishing a linkage between learning and organizational
performance was the number-one pressing issue facing training professionals.15
Training experts often use the phrase workplace learning and performance in lieu of
training to underscore training s dual aims of employee learning and organizational
performance.16 Training has an impressive record of influencing performance.
It scores higher than appraisal and feedback and just below goal setting in its effect on
productivity.17 Companies recently spent on average $1,103 per employee for training
per year and offered each about 28 hours of training.18

2 List and briefly explain each

The ADDIE Five-Step Training Process
of the five steps in the Creating a training program involves more than contracting with an online training
training process. vendor and requiring your employees to take the course. The employer should use a
rational training process. The gold standard here is still the basic analysis-design-
develop-implement-evaluate (ADDIE) training process model that training experts
have used for years.19 As an example, one training vendor describes its training process
as follows: 20
Analyze the training need.
Design the overall training program.
Develop the course (actually assembling/creating the training materials).
Implement training, by actually training the targeted employee group using methods
such as on-the-job or online training.
Evaluate the course s effectiveness.
We ll look at each step next.

Conducting the Training Needs Analysis

The training needs analysis should address the employer s strategic/longer term training
needs and/or its current training needs. If the program is to use technology, the manager
should also include a review of the technology he or she plans to use for presenting the
program, as part of the analysis. 21
STRATEGIC TRAINING NEEDS ANALYSIS Strategic goals (perhaps to enter new
lines of business or to expand abroad) usually mean the firm will have to fill new jobs.
Strategic training needs analysis focuses on identifying the training that employees will
need to fill these new future jobs. For example, when Wisconsin-based Signicast Corp.
decided to build a new, high-tech plant, the firm s top management knew the plant s
employees would need new skills to run the computerized machines. They worked
closely with their HR team to formulate hiring policies and training programs to ensure
the firm would have the human resources required to populate the new plant.
Strategic training needs analysis is tied to succession planning. The latter, recall,
means identifying the training and development that employees need to fill the firm s
key positions, and then formulating plans to ensure that high-potential employees get
the training and development to fill the firm s future positions.

training negligent training

The process of teaching new or current A situation where an employer fails to train
employees the basic skills they need to adequately, and the employee subsequently
perform their jobs. harms a third party.
248 PART 3 TRAINING AND DEVELOPMENT

CURRENT TRAINING NEEDS ANALYSIS As important as strategic training is,

most training efforts aim to improve current performance specifically training new
employees, and those whose performance is deficient.
How you analyze current training needs depends on whether you re training new
or current employees. The main task in analyzing new employees needs is to deter-
mine what the job entails and to break it down into subtasks, each of which you then
teach to the new employee.
Analyzing current employees training needs is more complex, because you must
also decide whether training is the solution. For example, performance may be down
because the standards aren t clear or because the person isn t motivated. Managers use
task analysis to identify new employees training needs, and performance analysis to
identify current employees training needs.

TASK ANALYSIS: ANALYZING NEW EMPLOYEES TRAINING NEEDS

3 Describe and illustrate how
Particularly with lower-level workers, it s common to hire inexperienced personnel
you would identify training
requirements. and train them. Your aim here is to give these new employees the skills and knowledge
they need to do the job. Task analysis is a detailed study of the job to determine what
specific skills like Java (in the case of a Web developer) or interviewing (in the
case of a supervisor) the job requires. For task analysis, job descriptions and job
specifications are essential. These list the job s specific duties and skills, which are the
basic reference points in determining the training required. Managers can also
uncover training needs by reviewing performance standards, performing the job, and
questioning current job holders and their supervisors.22
Some managers supplement the job description and specification with a task
analysis record form. This consolidates information regarding required tasks and skills
in a form that s especially helpful for determining training requirements. As Table 8-1
illustrates, the task analysis record form contains six types of information, such as
Skills or knowledge required.

TALENT MANAGEMENT: USING PROFILES AND COMPETENCY MODELS

Talent management is the goal-oriented and integrated process of planning for,
recruiting, selecting, developing, and compensating employees. Among other things,
talent management involves using the same competencies profile or model for recruiting
the employee as for selecting, training, appraising, and paying him or her. For training,
we can summarize this as follows:
Strategy Employee Behaviors Employee Competencies Training and Development
Needs Training Implementation and Evaluation.
Many employers (including Sharp Electronics and IBM) therefore use competency
models to help compile and summarize a job s training needs. The competency
model consolidates, usually in one diagram, a precise overview of the competencies
(the knowledge, skills, and behaviors) someone would need to do a job well. As noted,
the employer can then formulate training goals and programs aimed at developing
these competencies.
As an example, recall Figure 4-10 (page 129), the competency model for a human
resource manager in Chapter 4. Recall that the top of the pyramid shows four main
roles the human resource manager needs to fill. Beneath that are the areas of expertise
such as selection and training, in which he or she must be expert in order to carry out
these roles. Beneath are the HR manager s essential, foundation competencies, such
as communicating effectively.23
The model s aim is to identify and compile in one place the competencies for
executing the job. At Sharp, training managers interview senior executives to identify
the firm s strategic objectives and to infer what competencies those objectives will
require. Trainers also interview each job s top performers to identify the competencies
(such as able to focus on the customer ) the latter believe comprise the job s core
competencies. Subsequent training then aims to develop these competencies.24
As we ve seen, the employer can use a competency model such as in Figure 4-10
to support all its talent management functions, such as selection and training.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 249

TABLE 8-1 Sample Task Analysis Record Form

When and Quantity and Conditions Skills or
How Often Quality of Under Which Knowledge Where Best
Task List Performed Performance Performed Required Learned

1. Operate paper cutter 4 times per day Noisy pressroom:

distractions
1.1 Start motor 4 times per day On the job
1.2 Set cutting distance ± tolerance Read gauge On the job
of 0.007 in.
1.3 Place paper on cutting table Must be completely Lift paper On the job
even to prevent correctly
uneven cut
1.4 Push paper up to cutter Must be even On the job
1.5 Grasp safety release with 100% of time, Essential for On the job but
left hand for safety safety practice first with
no distractions
1.6 Grasp cutter release with Must keep On the job but
right hand both hands practice first with
on releases no distractions
1.7 Simultaneously pull safety Must keep On the job but
release with left hand and both hands practice first with
cutter release with right hand on releases no distractions
1.8 Wait for cutter to retract 100% of time, Must keep On the job but
for safety both hands practice first with
on releases no distractions
1.9 Retract paper Wait until On the job but
cutter retracts practice first with
no distractions
1.10 Shut off 100% of time, On the job but
for safety practice first with
no distractions
2. Operate printing press
2.1 Start motor

Note: Task analysis record form showing some of the tasks and subtasks performed by a printing press operator.

Thus selecting employees based on this model helps to ensure that you focus
your questions on the things that someone must be proficient at to do this job
successfully. The same model would help you to formulate training objectives. Thus a
training objective for testing skills might be, By completion of the ABC Company s
HR manager training program, the trainee will be fully skilled at using the five testing
tools that ABC uses to test its job applicants.
4 Explain how to distinguish PERFORMANCE ANALYSIS: ANALYZING CURRENT EMPLOYEES
between problems you can
TRAINING NEEDS For underperforming current employees, you can t assume
fix with training and those
you can t. that training is the problem. In other words, is it lack of training, or something else?
Performance analysis is the process of verifying that there is a performance

task analysis competency model performance analysis

A detailed study of a job to identify the A graphic model that consolidates, usually Verifying that there is a performance
specific skills required. in one diagram, a precise overview of the deficiency and determining whether that
competencies (the knowledge, skills, deficiency should be corrected through
and behaviors) someone would need to training or through some other means
do a job well. (such as transferring the employee).
250 PART 3 TRAINING AND DEVELOPMENT

deficiency and determining whether the employer should correct such deficiencies
through training or some other means (like transferring the employee).
The first step in performance analysis is usually to compare the person s actual
performance to what it should be. Doing so helps to confirm that there is a perform-
ance deficiency, and (hopefully) helps the manager to identify its cause. Examples of
performance deficiencies might be:
I expect each salesperson to make 10 new contracts per week, but John averages
only six.
Other plants our size average no more than two serious accidents per month; we re
averaging five.
There are several ways to identify how a current employee is doing. These include
reviewing:
* Performance appraisals
* Job-related performance data (including productivity, absenteeism and tardiness,
grievances, waste, late deliveries, product quality, downtime, repairs, equipment
utilization, and customer complaints)
* Observations by supervisors or other specialists
* Interviews with the employee or his or her supervisor
* Tests of things like job knowledge, skills, and attendance
* Attitude surveys
* Individual employee daily diaries
* Assessment center results
* Special performance gap analytical software, such as from Saba Software, Inc.
CAN T DO/WON T DO Ferreting out why performance is down is the heart
of performance analysis. Why spend time training inefficient employees when the
problem isn t training, but weak motivation?
The manager s aim is thus to distinguish between can t-do and won t-do problems.
First, determine whether it is a can t-do problem and, if so, its specific causes. For example:
The employees don t know what to do or what your standards are; there are obstacles in
the system such as lack of tools or supplies; there are no job aids (such as color-coded
wires that show assemblers which wire goes where); you ve hired people who haven t the
skills to do the job; or there is inadequate training.
On the other hand, it might be a won t-do problem. Here employees could do a
good job if they wanted to. One expert says, Perhaps the biggest trap that trainers fall
into is [developing] training for problems that training just won t fix. 25 For instance,
the solution may be to change the reward system.

Designing the Training Program

Armed with the needs analysis results, the manager next designs the overall training
program. Design means planning the overall training program including training
objectives, delivery methods, and program evaluation. Sub-steps include setting
performance objectives, creating a detailed training outline (all training program
steps from start to finish), choosing a program delivery method (such as lectures or
Web), and verifying the overall program design with management. The design should
include summaries of how you plan to set a training environment that motivates your
trainees both to learn and to transfer what they learn to the job. It is also at the design
stage that the manager reviews possible training program content (including work-
books, exercises, and activities), and estimates a budget for the training program.26
We ll look more closely next at several specific program design issues. (Chapter 18
describes a streamlined training design process for a small business.)

SETTING LEARNING OBJECTIVES Requests for training often start with line
managers presenting concerns, such as we re getting too many complaints from call
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 251

Most employers can build

training programs like this one
based on existing online
and offline content offered
by training content providers.

Source: Kim Kulish/Corbis Images.

center callers. 27 Training, development, or (more generally) instructional objectives
should specify in measurable terms what the trainee should be able to accomplish
after successfully completing the training program.28 For example:
The technical service representative will be able to adjust the color guidelines on
this HP Officejet All-in-One printer copier within 10 minutes according to the
device s specifications.
The learning objectives you choose should address rectifying the performance
deficiencies that you identified with needs analysis. Thus, if the sales team s sales are
40% too low, the objectives should focus on ensuring they get the knowledge, skills,
and attitudes they need to boost sales. But at the same time, the learning objectives
must be practical, given the constraints. One constraint is financial. For all but the
most trivial training programs, the employer will want to see and approve a training
budget for the program. Typical costs include the development costs (of having, say, a
human resource specialist working on the program for a week or two), the direct and
indirect (overhead) costs of the trainers time, participant compensation (for the time
they re actually being trained), and the cost of evaluating the program. The question,
of course, isn t just Can we afford this program? but Does it pay to spend this
much, given the benefits we ll devise from the program? Therefore, be prepared to
defend the training program on benefits-versus-costs grounds. There are also other
constraints to consider. For example, time constraints may require reducing three or
four desirable learning objectives down to one or two.

CREATING A MOTIVATIONAL LEARNING ENVIRONMENT Municipalities

running driver s ed programs for traffic violators know there s often no better way to get
a learner s attention than by presenting a terrifying filmed accident. In other words, they
start the training not with a lecture but by making the material meaningful. They know
that driver training is futile if the driver isn t motivated to benefit from the program.
The same is true in schools and at work. Learning requires both ability and
motivation, and the training program s learning environment should take both into
account. First, in terms of ability, the learner trainee needs (among other things)
the required reading, writing, and mathematics skills, and the educational level,
intelligence, and knowledge base. It is rare that the prospective trainees will be
homogeneous, for instance, in terms of intellectual capacity. Employees instinctively
understand that if the material you want them to learn is beyond their ability to master,
the training is a waste of time. In setting the learning environment, the manager therefore
has to address several trainee-related ability issues. For example, how will our program
accommodate differences in trainee abilities? Do we need to provide remedial training?
And, do we need to use more personal, one-on-one trainers given our trainees abilities?
252 PART 3 TRAINING AND DEVELOPMENT

Second, as every student (and driver s ed program) knows, the learner must also
be motivated to learn the material. No manager should want to waste his or her time
showing a disinterested employee how to do something (even if he or she has the
requisite ability).
Many books have been written about how to motivate employees, but several
5 Discuss how you would specific observations are pertinent here.29 It s likely that the training program s effects
motivate trainees.
will be diminished if trainees return to their jobs to snide comments such as, I hope
you liked your little vacation from peers or supervisors. Therefore, the low-hanging
fruit in motivating trainees is to make sure the trainee s peers and supervisor support
the training effort. Ideally, particularly for larger programs, top management should
visibly support the program. Beyond that, various motivation theories provide useful
guidance. From behavior modification, we know that the training should provide
opportunities for positive reinforcement. Expectancy theory shows us that the trainees
need to know they have the ability to succeed in the program, and that the value to them
of completing the program is high. Self-efficacy is crucial trainees must believe they
have the capacity to succeed. We can summarize such motivational points as follows.

MAKING THE LEARNING MEANINGFUL Learners are always more motivated

to learn something that has meaning for them. Therefore:
1. At the start of training, provide a bird s-eye view of the material that you are going
to present. For example, show why it s important, and provide an overview.30
2. Use a variety of familiar examples.
3. Organize the information so you can present it logically, and in meaningful units.
4. Use terms and concepts that are already familiar to trainees.
5. Use as many visual aids as possible.
6. Again, create a perceived training need in trainees minds.31 In one study, pilots
who experienced pretraining, accident-related events subsequently learned more
from an accident-reduction training program than did those experiencing fewer
such events.32 Similarly, before the training, managers need to sit down and talk
with the trainee about why they are enrolled in the class, what they are expected
to learn, and how they can use it on the job. 33

MAKING SKILLS TRANSFER OBVIOUS AND EASY Make it easy to transfer

new skills and behaviors from the training site to the job site:
1. Maximize the similarity between the training situation and the work situation.
2. Provide adequate practice.
3. Label or identify each feature of the machine and/or step in the process.
4. Direct the trainees attention to important aspects of the job. For example,
if you re training a customer service rep to handle calls, explain the different types
of calls he or she will encounter.34
5. Provide heads-up information. For example, supervisors often face stressful
conditions. You can reduce the negative impact of such events by letting supervisory
trainees know they might occur.35
6. Trainees learn best at their own pace. If possible, let them pace themselves.

REINFORCING THE LEARNING Make sure the learner gets plenty of feedback.
In particular:
1. Trainees learn best when the trainers immediately reinforce correct responses,
perhaps with a quick well done.
2. The schedule is important. The learning curve goes down late in the day, so that
full day training is not as effective as half the day or three-fourths of the day.
3. Provide follow-up assignments at the close of training, so trainees are reinforced
by having to apply back on the job what they've learned.36
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 253

ENSURING TRANSFER OF LEARNING TO THE JOB Unfortunately, less

than 35% of trainees seem to be transferring what they learned in training to their
jobs a year after training. Improving on that sad statistic requires taking special steps
at each stage of training. Prior to training, get trainee and supervisor input in designing
the program, institute a training attendance policy, and encourage employees to
participate. During training, provide trainees with training experiences and condi-
tions (surroundings, equipment) that resemble the actual work environment. After
training, reinforce what trainees learned, for instance, by appraising and rewarding
employees for using new skills, and by making sure that they have the tools and
materials they need to use their new skills.37

OTHER TRAINING DESIGN ISSUES Managers address several other issues

during the training design stage. Most importantly, they review relevant alternative
training methodologies (lectures, Web-based, and so on) and choose likely methods
for their program. They also decide how they will organize the various training con-
tent components, choose how to evaluate the program, develop an overall summary
plan for the program, and obtain management s approval to move ahead.

Developing the Program

Program development means actually assembling/creating the program s training
content and materials. It means choosing the actual content the program will present,
as well as designing/choosing the specific instructional methods (lectures, cases,
Web-based, etc.) you will use. Training equipment and materials include (for example)
iPads, workbooks, lectures, PowerPoint slides, Web- and computer-based activities,
course activities, trainer resources (manuals, for instance), and support materials.
Some employers create their own training content, but there s also a vast selec-
tion of online and offline content from which to choose. You ll find turnkey,
off-the-shelf programs on virtually any topic from occupational safety to sexual
harassment to Web design from tens of thousands of online and offline providers.
(See, for example, the American Society for Training and Development s Infoline at
www.astd.org, www.trainerswarehouse.com, and www.gneil.com, among thousands
of such suppliers.)38 Turnkey training packages often include trainer s guide,
self-study book, video, and other content.
Once you design, approve, and develop the program, management can imple-
ment and then evaluate it. Implement means to actually provide the training, using
one or more of the instructional methods (such as lectures) that we discuss next. We
address program evaluation at the end of this chapter.

6 Explain how to use five

IMPLEMENTING TRAINING PROGRAMS
training techniques. With objectives set and the program designed and budgeted, you can turn to imple-
menting the training program. This means actually doing the training, using one or
more of the training methods we turn to now. We ll start with simpler, low-tech
methods and proceed to computer-based ones.

On-the-Job Training
On-the-job training (OJT) means having a person learn a job by actually doing it.
Every employee, from mailroom clerk to CEO, gets on-the-job training when he or she
joins a firm. In many firms, OJT is the only training available.39 (Or worse: All too often
the supervisor simply says, Here s your desk; get started. )

on-the-job training
Training a person to learn a job while
working on it.
254 PART 3 TRAINING AND DEVELOPMENT

TYPES OF ON-THE-JOB TRAINING The most familiar on-the-job training is

the coaching or understudy method. Here, an experienced worker or the trainee s
supervisor trains the employee. This may involve simply acquiring skills by observing
the supervisor, or (preferably) having the supervisor or job expert show the new
employee the ropes, step-by-step. On-the-job training is part of multifaceted training
at The Men s Wearhouse. It combines on-the-job training with comprehensive initia-
tion programs and continuing-education seminars. Every Men s Wearhouse manager
is accountable for the development of his or her direct subordinates.40 Job rotation, in
which an employee (usually a management trainee) moves from job to job at planned
intervals, is another OJT technique. Special assignments similarly give lower-level
executives firsthand experience in working on actual problems.
It is important that employers don t take the success of an on-the-job training
effort for granted. Instead, the employer should formally plan out and structure the
OJT process and experience. Train the trainers themselves (often the employees
supervisors), and provide the training materials. Trainers should know, for instance,
the principles of motivating learners. Because low expectations may translate into
poor trainee performance, supervisor/trainers should emphasize their high expecta-
tions. Many firms use peer training for OJT; for instance expert employees answer
calls at selected times during the day or participate in in-house radio programs
to answer their peers call-in questions about technical aspects of doing their jobs.41
Others use employee teams (instead of training professionals) to analyze the jobs and
prepare training materials. The employees, already job experts, reportedly conduct
task analyses more quickly and effectively than do training experts.42
THE OJT PROCES Here are some steps to help ensure OJT success.
Step 1: Prepare the Learner
1. Put the learner at ease.
2. Explain why he or she is being taught.
3. Create interest and find out what the learner already knows about the job.
4. Explain the whole job and relate it to some job the worker already knows.
5. Place the learner as close to the normal working position as possible.
6. Familiarize the worker with equipment, materials, tools, and trade terms.
Step 2: Present the Operation
1. Explain quantity and quality requirements.
2. Go through the job at the normal work pace.
3. Go through the job at a slow pace several times, explaining each step. Between oper-
ations, explain the difficult parts, or those in which errors are likely to be made.
4. Again, go through the job at a slow pace several times; explain the key points.
5. Have the learner explain the steps as you go through the job at a slow pace.
Step 3: Do a Tryout
1. Have the learner go through the job several times, slowly, explaining each step to you.
Correct mistakes and, if necessary, do some of the complicated steps the first few times.
2. Run the job at the normal pace.
3. Have the learner do the job, gradually building up skill and speed.
4. As soon as the learner demonstrates ability to do the job, let the work begin, but
don t abandon him or her.
Step 4: Follow-Up
1. Designate to whom the learner should go for help.
2. Gradually decrease supervision, checking work from time to time.
3. Correct faulty work patterns before they become a habit. Show why the method
you suggest is superior.
4. Compliment good work.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 255

Apprenticeship Training
Apprenticeship training is a process by which people become skilled workers, usually
through a combination of formal learning and long-term on-the-job training. It tradi-
tionally involves having the learner/apprentice study under the tutelage of a master
craftsperson. When steelmaker Dofasco discovered that many of their employees
would be retiring during the next 5 to 10 years, the company decided to revive its
apprenticeship training. Applicants are prescreened. New recruits then spend about
32 months in an internal apprenticeship training program, learning various jobs
under the tutelage of experienced employees.43
The U.S. Department of Labor s National Apprenticeship System promotes
apprenticeship programs. More than 460,000 apprentices participate in 28,000
programs, and registered programs can receive federal and state contracts and
other assistance.44 Figure 8-2 lists popular recent apprenticeships.

Informal Learning
Surveys from the American Society for Training and Development estimate that as
much as 80% of what employees learn on the job they learn through informal means,
including performing their jobs on a daily basis with their colleagues.45
Although managers don t manage informal learning, there s still much they can do
to ensure that it occurs. Most of the steps are simple. For example, Siemens Power
Transmission and Distribution in Raleigh, North Carolina, places tools in cafeteria areas
to take advantage of the work-related discussions taking place. Even installing white-
boards with markers can facilitate informal learning. Sun Microsystems implemented
an informal online learning tool it called Sun Learning eXchange. This has evolved
into a platform containing more than 5,000 informal learning items/suggestions
addressing topics ranging from sales to technical support.46

Job Instruction Training

Many jobs (or parts of jobs) consist of a sequence of steps that one best learns step-
by-step. Such step-by-step training is called job instruction training (JIT). First, list
the job s required steps (let s say for using a mechanical paper cutter) each in its proper
sequence. Then (see the following page) list a corresponding key point (if any) beside
each step. The steps in such a job instruction training sheet show trainees what to do, and
the key points show how it s to be done and why.
As an example, when training new UPS drivers to park and disembark, the company
leaves nothing to chance. Among the steps it teaches new drivers are these: Shift into the

FIGURE 8-2 Some Popular

The U.S. Department of Labor s Registered Apprenticeship program offers access to 1,000 career
Apprenticeships
areas, including the following top occupations:
Source: www.doleta.gov/oa, Able seaman
accessed July 3, 2009.
Carpenter
Chef
Child care development specialist
Construction craft laborer
Dental assistant
Electrician
Elevator constructor
Fire medic
Law enforcement agent
Over-the-road truck driver
Pipefitter

apprenticeship training job instruction training (JIT)

A structured process by which people Listing each job s basic tasks, along with
become skilled workers through a key points, in order to provide step-by-step
combination of classroom instruction training for employees.
and on-the-job training.
256 PART 3 TRAINING AND DEVELOPMENT

Steps Key Points

1. Start motor None

2. Set cutting distance Carefully read scale to prevent wrong-sized cut
3. Place paper on cutting table Make sure paper is even to prevent uneven cut
4. Push paper up to cutter Make sure paper is tight to prevent uneven cut
5. Grasp safety release with Do not release left hand to prevent hand from
left hand being caught in cutter
6. Grasp cutter release with Do not release right hand to prevent hand from
right hand being caught in cutter
7. Simultaneously pull cutter Keep both hands on corresponding releases avoid
and safety releases hands being on cutting table
8. Wait for cutter to retract Keep both hands on releases to avoid having hands
on cutting table
9. Retract paper Make sure cutter is retracted; keep both hands away
from releases
10. Shut off motor None

lowest gear or into park; turn off the ignition; apply the parking brake; release the
seatbelt with your left hand; open the door; and place the key on your ring finger.47

Lectures
Lecturing is a quick and simple way to present knowledge to large groups of trainees, as
when the sales force needs to learn a new product s features.48 Here are some guidelines
for presenting a lecture:49
* Don t start out on the wrong foot. For instance, don t open with an irrelevant joke.
* Speak only about what you know well.
* Give your listeners signals. For instance, if you have a list of items, start by saying
something like, There are four reasons why the sales reports are necessary. . . .
The first . . .
* Use anecdotes and stories to show rather than tell.
* Be alert to your audience. Watch body language for negative signals like fidgeting.
If they re not looking at you, they may be bored.
* Maintain eye contact with the audience.
* Make sure everyone in the room can hear. Repeat questions that you get from trainees.
* Control your hands. Leave them hanging naturally at your sides.
* Talk from notes rather than from a script. Write out notes on large index cards or
on PowerPoint slides. Use these as an outline.
* Break a long talk into a series of short talks. Speakers often give a short overview
introduction and then spend the rest of a 1-hour presentation going point by point
through their material. Experts suggest instead breaking the long talk into a series of
10-minute talks, each with its own introduction. Write brief PowerPoint slides, and
spend about a minute on each. Each introduction highlights what you ll discuss, why
it s important to the audience, and your credibility why they should listen to you.50
* Practice. If possible, rehearse under conditions similar to those under which you
will actually give your presentation.

Programmed Learning
Whether the medium is a textbook, PC, or the Internet, programmed learning (or
programmed instruction) is a step-by-step, self-learning method that consists of three parts:
1. Presenting questions, facts, or problems to the learner
2. Allowing the person to respond
3. Providing feedback on the accuracy of answers, with instructions on what to do next
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 257

Generally, programmed learning presents facts and follow-up questions frame by

frame. When the learner responds, subsequent frames provide feedback on the answer s
accuracy. What the next question is often depends on how the learner answers the
previous question. The built-in feedback from the answers provides reinforcement.
Programmed learning reduces training time. It also facilitates learning by letting
trainees learn at their own pace, get immediate feedback, and reduce their risk of error.
Some argue that trainees do not learn much more from programmed learning than
from a textbook. Yet studies generally support programmed learning s effectiveness.
A typical study focused on 40 second year undergraduate students in an organic
chemistry-I course. Some studied in a conventional lecture setting and others used
programmed learning. The researchers concluded that The findings suggest that
programmed learning could be considered as a better alternative to conventional
lecturing in teaching stereochemistry. 51
Intelligent tutoring systems take programmed learning one step further. In addition
to the usual programmed learning, computerized intelligent tutoring systems
learn what questions and approaches worked and did not work for the learner, and
then adjust the instructional sequence to the trainee s unique needs.

Audiovisual-Based Training
Although increasingly replaced by Web-based methods, audiovisual-based training
techniques like DVDs, films, PowerPoint, and audiotapes are still popular.52 The Ford
Motor Company uses videos in its dealer training sessions to simulate problems and
reactions to various customer complaints, for example. Consider using them in the
following situations:
1. When there is a need to illustrate how to follow a certain sequence over time, such
as when teaching machine repair. The stop-action, instant replay, and fast- or
slow-motion capabilities of audiovisuals can be useful here.
2. When there is a need to show trainees events not easily demonstrable in live
lectures, such as a visual tour of a factory.

Vestibule Training
With vestibule training, trainees learn on the actual or simulated equipment they will
use on the job, but are trained off the job (perhaps in a separate room or vestibule).
Vestibule training is necessary when it s too costly or dangerous to train employees on
the job. Putting new assembly-line workers right to work could slow production, for
instance, and when safety is a concern as with pilots simulated training may be the
only practical alternative. As an example, UPS uses a life-size learning lab to provide a
40-hour, 5-day realistic training program for driver candidates.53

Electronic Performance Support Systems (EPSS)

Electronic performance support systems (EPSS) are computerized tools and
displays that automate training, documentation, and phone support.54 When you call
a Dell service rep about a problem with your new computer, he or she is probably
asking questions prompted by an EPSS; it takes you both, step-by-step, through
an analytical sequence. Without the EPSS, Dell would have to train its service reps
to memorize an unrealistically large number of solutions. Aetna Insurance cut its
13-week instructor-led training course for new call center employees by about
2 weeks by providing the employees with performance support tools.55

programmed learning electronic performance support

A systematic method for teaching job skills, systems (EPSS)
involving presenting questions or facts, Sets of computerized tools and displays that
allowing the person to respond, and giving automate training, documentation, and
the learner immediate feedback on the phone support; integrate this automation
accuracy of his or her answers. into applications; and provide support that s
faster, cheaper, and more effective than
traditional methods.
258 PART 3 TRAINING AND DEVELOPMENT

Performance support systems are modern job aids. Job aids are sets of instructions,
diagrams, or similar methods available at the job site to guide the worker.56 Job aids work
particularly well on complex jobs that require multiple steps, or where it s dangerous to
forget a step. Airline pilots use job aids (such as a checklist of things to do prior to takeoff).
GM s former Electromotive Division gave workers job aids in the form of diagrams. These
show, for example, where the locomotive wiring runs and which color wires go where.

Videoconferencing
Videoconferencing is popular for training geographically dispersed employees,
and involves delivering programs via compressed audio and video signals over cable
broadband lines, the Internet, or satellite. Vendors such as Cisco offer videoconfer-
ence products such as Webex and TelePresence (www.cisco.com/en/US/products/
ps10352/index.html). Employers typically use videoconferencing technology
with other technology. For example, Cisco s Unified Video Conferencing (CUVC)
product line combines Cisco group collaboration and decision-making software with
videoconferencing, video telephony, and realistic TelePresence capabilities.57
When Cisco organized a training program for its partners, it naturally used its
videoconferencing capabilities. The course is A hands-on course designed to assist
System Engineers and IT managers to fully understand the features, benefits and
overall operation of Cisco s videoconferencing network components. 58

Computer-Based Training (CBT)

Computer-based training refers to training methods that use interactive computer-
based systems to increase knowledge or skills. For example, employers use CBT to teach
employees safe methods for avoiding falls; the system lets the trainees replay the lessons
and answer questions, and are especially effective when paired with actual practice
under a trainer s watchful eye.59
Computer-based training is increasingly interactive and realistic. For example,
interactive multimedia training integrates the use of text, video, graphics, photos, anima-
tion, and sound to produce a complex training environment with which the trainee inter-
acts.60 In training a physician, for instance, such a system lets a medical student take a
hypothetical patient s medical history, conduct an examination, and analyze lab tests.
Then, by clicking the examine chest button, the student can choose a type of chest
examination and even hear the sounds of the person s heart. The medical student can then
interpret the sounds and draw conclusions upon which to base a diagnosis. Virtual reality
training takes this realism a step further, by putting trainees into a simulated environment.

Simulated Learning
Simulated learning means different things to different people. A survey asked training
professionals what experiences qualified as simulated learning experiences. The
percentages of trainers choosing each experience were:
* Virtual reality-type games, 19%
* Step-by-step animated guide, 8%
* Scenarios with questions and decision trees overlaying animation, 19%
* Online role-play with photos and videos, 14%
* Software training including screenshots with interactive requests, 35%
* Other, 6%61
Virtual reality puts the trainee in an artificial three-dimensional environment that
simulates events and situations that might be experienced on the job.62 Sensory devices
transmit how the trainee is responding to the computer, and the trainee sees, feels and
hears what is going on, assisted by special goggles and auditory and sensory devices.63
U.S. ARMY EXAMPLE The U.S. Armed Forces use simulation-based training
programs for soldiers and officers. For example, the army developed video game type
training programs called Full-Spectrum Command and Full-Spectrum Warrior for
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 259

training troops in urban warfare. According to one description, the two games offer
extremely realistic features, within a context that emphasizes real-time leadership and
decision-making skills.64

OTHER EXAMPLES Employers use computerized simulations to inject more

realism into their training. For example, Orlando-based Environmental Tectonics
Corporation created an Advanced Disaster Management simulation for emergency
medical response trainees. One of the simulated scenarios involves a passenger plane
crashing into a runway. So realistic that it s unsettling, trainees including firefighters
and airport officials respond to the simulated crash s sights and sounds via pointing
devices and radios.65 When Cisco Systems decided it needed a better way to train the
tens of thousands of Cisco trainees for Cisco certification exams it turned to gaming.
Cisco embedded the learning within a video game like atmosphere that included
music, graphics, and sound effects.66 Training simulations are expensive, but for
larger companies the cost per employee is usually reasonable.67
One way to reduce the cost is to capitalize on virtual environments such as Second
Life. For example, British Petroleum uses Second Life to train new gas station
employees. The aim here is to show new gas station employees how to use the safety
features of gasoline storage tanks. BP built three-dimensional renderings of the tank
systems in Second Life. Trainees could use these to see underground and observe
the effects of using the safety devices.68

ADVANTAGES In general, interactive and simulated technologies reduce learning time

by an average of 50%.69 Other advantages include instructional consistency (computers,
unlike human trainers, don t have good days and bad days), mastery of learning (if the
trainee doesn t learn it, he or she generally can t move on to the next step), increased reten-
tion, and increased trainee motivation (resulting from responsive feedback).
Specialist multimedia software houses such as Graphic Media of Portland, Oregon,
produce much of the content for these programs. They produce both custom titles
and generic programs such as a $999 package for teaching workplace safety.

Interactive Learning
Employers are also moving from textbook and classroom-based learning to interactive
learning. For example, Cheesecake Factory employees use VideoCafé, a YouTube-type
platform, to let employees upload and share video snippets on job-related topics,
including customer greetings and food preparation. The company is also emphasizing
interactive games, including a simulation that shows employees how to build the
perfect hamburger. Amongst vendors, Learning Tree International employs class-
room, live online, and on-site training solutions that resonate with Gen Y learners
because of their interactive features; hands-on exercises; and live, online experiences. 70

Internet-Based Training
Trainers increasingly employ Internet-based learning to deliver programs. Until 2004,
ADP s new sales associate training required two weeks of expensive classroom training
at ADP s Atlanta, Georgia, training center. Today, ADP trains its new salespeople
online, using a Blackboard learning management system similar to one used by many
online college students.71 The Italian eyewear company Luxottica (whose brands
include LensCrafters, Pearl Vision, and Sunglass Hut) provides standardized training
to its 38,000 employees worldwide via instant access online to information such as new
products and regulations.72
There are two basic ways to offer online courses to employees. First, the employer can
encourage and/or facilitate having its employees take relevant online courses from either

job aid
A set of instructions, diagrams, or similar
methods available at the job site to guide
the worker.
260 PART 3 TRAINING AND DEVELOPMENT

its own online (intranet) offerings or from the hundreds of online training vendors on the
Web. For example, the employer might arrange with www.puresafety. com to let its
employees take one or more occupational safety courses from those puresafety.com offers.

LEARNING PORTALS The second approach is to arrange with an online training

vendor to make its courses available via the employer s intranet-based learning portal.
A learning portal is a section of an employer s Web site that offers employees online
access to many or all of the training courses they need to succeed at their jobs. Most
often, the employer contracts with applications service providers (ASPs). A Google
search for e-learning companies reveals many vendors such as SkillSoft, Plateau
Systems, and Employment Law Learning Technologies. When employees go to their
firm s learning portal, they actually access the menu of training courses that the ASP
offers for the employer.

Improving Productivity Through HRIS

Learning Management Systems
Learning management systems (LMS) are special software tools that support
Internet training by helping employers identify training needs, and in scheduling,
delivering, assessing, and managing the online training itself. For example, General
Motors uses an LMS to help its dealers in Africa and the Middle East deliver
training. The Internet-based LMS includes a course catalog, supervisor approved
self-enrollment, and pre- and post-course tests. The system then automatically
schedules the individual s training.73 Blackboard and WebCT are two familiar
college-oriented learning management systems.
The movement today is toward integrating the e-learning system with the
company s enterprisewide information systems. In that way, for instance, employers
automatically update skills inventory and succession plans as employees complete
their training.74

USING INTERNET-BASED LEARNING Whether to use e-learning often comes

down to efficiency. Web learning doesn t necessarily teach faster or better. In one
review of the evidence, Web-based instruction was a bit more effective than class-
room instruction for teaching memory of facts and principles, and Web-based
instruction and classroom instruction were equally effective for teaching informa-
tion about how to perform a task or action.75 But of course, the need to teach large
numbers of students remotely, or to enable students to study at their leisure, often
makes e-learning so much more efficient that the small differences in Web-based
versus classroom learning become somewhat meaningless.76
In practice, many employers opt for blended learning. Here, the trainees make
use of several delivery methods (such as manuals, in-class lectures, self-guided
e-learning programs, and Web-based seminars or webinars ) to learn the material.77
Intuit (which makes software such as TurboTax) uses instructor-led classroom training
for bringing in new distributors and getting them up to speed. Then they use their
virtual classroom systems to provide additional training, for monthly meetings with
distributors, and for short classes on special software features.78

Mobile Learning
Mobile learning (or on-demand learning ) means delivering learning content on
demand via mobile devices like cell phones, laptops, and iPads, wherever and whenever
the learner has the time and desire to access it.79 For example, using dominKnow s
(www.dominknow.com) iPod touch and iPhone-optimized Touch Learning Center
Portal, trainees can log in and take full online courses.80
Employers use mobile learning to deliver corporate training and downloads on
everything from how to close an important sales deal to optimizing organizational
change to learning business Spanish . . . You can be . . . riding your bike while listening
to the training program.81 Capital One purchased 3,000 iPods for trainees who had
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 261

enrolled in one of 20 instructor-led courses at its Capital One University. The training
department then had an Internet audio book provider create an audio learning site
within Capital One s firewall. Employees used it to download the instructor-requested
books and other materials to their iPods.82 IBM uses mobile learning to deliver just-
in-time information (for instance, about new product features) to its sales force.
To increase such learning s accessibility, IBM s training department often breaks up, say,
an hour program into 10-minute pieces. That way, employees needn t put away a full
hour to listen. Some employers use blogs to communicate learning to trainees.83 JP
Morgan encourages employees to use instant messaging as a quick learning device, for
instance, to quickly update colleagues about new products.

The Virtual Classroom

Conventional Web-based learning tends to be limited to the sorts of online learning
with which many students are already familiar reading PowerPoint presentations,
participating in instant message type chat rooms, and taking online exams, for instance.
The virtual classroom takes online learning to a new level. A virtual classroom
uses special collaboration software to enable multiple remote learners, using their
PCs or laptops, to participate in live audio and visual discussions, communicate via
written text, and learn via content such as PowerPoint slides.
The virtual classroom combines the best of Web-based learning offered by systems
like Blackboard and WebCT with live video and audio. For example, Elluminate Live!
enables learners to communicate with clear, two-way audio; build communities with
user profiles and live video; collaborate with chat and shared whiteboards; and learn
with shared applications such as PowerPoint slides.84

Lifelong and Literacy Training Techniques

Lifelong learning means providing employees with continuing learning experiences
over their tenure with the firm, with the aims of ensuring they have the opportunity
to learn the skills they need to do their jobs and to expand their horizons. For
example, one senior waiter at the Rhapsody restaurant in Chicago received his
undergraduate degree and began work toward a master of social work using the
lifelong learning account (LiLA) program his employer offers. Lifelong learning may
thus range from basic remedial skills (for instance, English as a second language)
to college. Somewhat similar to 401(k) plans, employers and employees contribute to
LiLA plans (without the tax advantages of 401(k) plans), and the employee can use
these funds to better himself or herself.85

LITERACY TRAINING By one estimate, about 39 million people in the United

States have learning disabilities. Another study called the American workforce
ill-prepared.86 Yet today s emphasis on teamwork and quality requires that employees
read, write, and understand numbers.87
Employers often turn to private firms like Education Management Corporation
to provide the requisite education.88 Another simple literacy training approach is to
have supervisors teach basic skills by giving employees writing and speaking exercises.89
For example, if an employee needs to use a manual to find out how to change a part,
teach that person how to use the index to locate the relevant section. Another
approach is to bring in outside professionals (such as teachers from a local high
school) to teach, say, remedial reading or writing. Having employees attend adult
education or high school evening classes is another option.

virtual classroom lifelong learning

Teaching method that uses special Provides employees with continuing learning
collaboration software to enable multiple experiences over their tenure with the firm,
remote learners, using their PCs or laptops, to with the aims of ensuring they have the
participate in live audio and visual discussions, opportunity to learn the skills they need
communicate via written text, and learn via to do their jobs and to expand their
content such as PowerPoint slides. occupational horizons.
262 PART 3 TRAINING AND DEVELOPMENT

MANAGING THE NEW WORKFORCE

Diversity Training
Diversity training aims to improve cross-cultural sensitivity, with the goal of
fostering more harmonious working relationships among a firm s employees.
Such training typically includes improving interpersonal skills, understanding and
valuing cultural differences, improving technical skills, socializing employees into
the corporate culture, indoctrinating new workers into the U.S. work ethic,
improving English proficiency and basic math skills, and improving bilingual skills
for English-speaking employees. 90 For example, IBM has online programs
to educate managers regarding diversity, inclusive leadership, and sexual harass-
ment. Training materials include interactive learning modules that enable
trainees to practice what they ve learned, testimonials from IBM executives,
and self-assessment tools. 91
Most employers opt for an off-the-shelf diversity training program such as Just Be
F.A.I.R.: A practical approach to diversity and the workplace, from VisionPoint
productions. The package includes streaming video, a facilitator and discussion
guide, participant materials and workbook, a DVD with print materials, PowerPoint
slides, and two videos (the purchase price for the entire program is about $1,000).
It includes, for instance, vignettes illustrating such things as the importance of
communicating, and the potential pitfalls of stereotyping people.92

Team Training
Teamwork is not something that always comes naturally. Companies therefore devote
many hours to training new employees to listen to each other and to cooperate. Toyota s
training process stresses dedication to teamwork. For example, the program uses short
exercises to illustrate examples of good and bad teamwork, and to mold new employees
attitudes regarding good teamwork.
A team-building program at a Baltimore Coca-Cola plant illustrates what team
training typically involves.93 In this case, the plant suffered from high turnover and
absenteeism. The new plant manager decided to reorganize around teams and to use
team training to support the new organization.
Team training focused on technical, interpersonal, and team management issues.
In terms of technical training, for instance, management encouraged team employees
to learn each other s jobs, with the aim of encouraging flexible team assignments.
Cross training means training employees to do different tasks or jobs than their own;
doing so facilitates flexibility and job rotation, as when you expect team members to
occasionally share jobs.
When teamwork fails, it is often due to interpersonal problems such as intra-team
conflict, lack of agreement, guarded communications, and personal criticism. In this
case, team training therefore included interpersonal skills training such as in listening,
handling conflict, and negotiating.94 In practice, effective teams also require certain
team management skills. In this case, team management skills included training in
problem solving, meetings management, consensus decision making, and team leader-
ship (since each team member had to exercise team leadership at one time or another).
Employers also use team training to build stronger management teams. This often
involves special training methods. For example, some use outdoor adventure or
extreme training such as Outward Bound programs to build teamwork. Such training
usually involves taking a firm s management team out into rugged, mountainous
terrain. Activities might include, for instance, white water rafting, and maneuvering
through obstacle courses.95 The aim is to foster trust and cooperation among trainees.
For example, the chief financial officer for a bank helped organize a retreat for 73 of his
firm s financial officers and accountants. As he said, They are very individualistic
in their approach to their work. . . . What I have been trying to do is get them to see the
power of acting more like a team. 96 Other team training methods include action
learning and team building, both of which we ll address later in this chapter.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 263

7 List and briefly discuss four

IMPLEMENTING MANAGEMENT DEVELOPMENT
management development PROGRAMS
programs.
It s not always easy to tell where training leaves off and management development
begins. The latter, however, tends to emphasize long-term development and a focus on
developing current or future managers. Management development is any attempt to
improve managerial performance by imparting knowledge, changing attitudes, or
increasing skills.

Strategy and Development

The management development process consists of (1) assessing the company s strategic
needs (for instance, to fill future executive openings or to boost competitiveness),
(2) appraising managers current performance, and then (3) developing the managers
(and future managers).97 As we explained in Chapter 5, development is usually part of
the employer s succession planning. Succession planning refers to the process through
which a company plans for and fills senior-level openings.98
Succession planning and management development both stem from the
employer s strategy, vision, and personnel plans. For example, strategies to enter new
businesses or expand overseas imply that the employer will need managers who have
the skills to manage these new businesses.
Some management development programs are company-wide and involve all or
most new (or potential) managers. Thus, new MBAs may join GE s management
development program and rotate through various assignments and educational
experiences. The aims include identifying their management potential and giving
them the necessary developmental experience (in, say, production and finance).
The firm may then slot superior candidates onto a fast track, a development
program that prepares them more quickly for senior-level commands.
Other development programs aim to fill specific top positions, such as CEO. For
example, GE spent years developing, testing, and watching several potential replacements
for CEO before finally choosing Jeffrey Immelt.
Assessment is usually part of development. At frozen foods manufacturer
Schawn, senior executives first whittle 40 or more development candidates down to
about 10. Then the program begins with a 1-day assessment by outside consultants of
each manager s leadership strengths and weaknesses. The assessment involves
managers addressing problems such as employee conflict. This assessment becomes
the basis for each manager s individual development plan. Action-learning (practical)
projects then supplement individual and group training activities.99
A survey listed the most popular management development activities. The most
popular include classroom-based learning, executive coaching, action learning, 360°
feedback, experiential learning, off-site retreats (where managers meet with
colleagues for learning), mentoring, and job rotation.100 We ll look at some of these.

Managerial On-the-Job Training

Managerial on-the-job training methods include job rotation, the coaching/understudy
approach, and action learning. In the context of management development, job rotation
means moving managers from department to department to broaden their understand-
ing of the business and to test their abilities. The trainee may be a recent college graduate,
and spend several months in each department, learning the department s business
by actually doing it. Or he or she may be a senior manager being groomed for further
promotion by being exposed to a range of domestic and foreign challenges.

cross training management development job rotation

Training employees to do different tasks Any attempt to improve current or future A management training technique
or jobs than their own; doing so facilitates management performance by imparting that involves moving a trainee from
flexibility and job rotation. knowledge, changing attitudes, department to department to broaden
or increasing skills. his or her experience and identify strong
and weak points.
264 PART 3 TRAINING AND DEVELOPMENT

COACHING/UNDERSTUDY APPROACH Here the trainee works directly with

a senior manager or with the person he or she is to replace; the latter is responsible for
the trainee s coaching. Normally, the understudy relieves the executive of certain
responsibilities, giving the trainee a chance to learn the job.

ACTION LEARNING Action learning programs give managers and others

released time to work analyzing and solving problems in departments other than
their own. Its basics include carefully selected teams of 5 to 25 members, assigning the
teams real-world business problems that extend beyond their usual areas of expertise,
and structured learning through coaching and feedback. The employer s senior
managers usually choose the projects and decide whether to accept the teams
recommendations.101 For example, Pacific Gas & Electric Company s (PG&E)
Action-Forum Process has three phases:
1. A framework phase of 6 to 8 weeks basically, an intense planning period during
which the team defines and collects data on an issue;
2. The action forum 2 to 3 days at PG&E s learning center discussing the issue and
developing action-plan recommendations; and
3. Accountability sessions, when the teams meet with the leadership group at 30, 60,
and 90 days to review their action plans.

Off-the-Job Management Training and

Development Techniques
There are also many off-the-job techniques for training and developing managers.
THE CASE STUDY METHOD As most everyone knows, the case study method
presents a trainee with a written description of an organizational problem. The
person then analyzes the case, diagnoses the problem, and presents his or her findings
and solutions in a discussion with other trainees.
Integrated case scenarios expand the case analysis concept by creating long-term,
comprehensive case situations. For example, the FBI Academy created an integrated
case scenario. It starts with a concerned citizen s telephone call and ends 14 weeks
later with a simulated trial. In between is the stuff of a genuine investigation, includ-
ing a healthy sampling of what can go wrong in an actual criminal inquiry. To create
such scenarios, scriptwriters (often employees in the firm s training group) write the
scripts. The scripts include themes, background stories, detailed personnel histories,
and role-playing instructions. The scenarios aim to develop specific skills, such as
interviewing witnesses.102
MANAGEMENT GAMES Computerized management games enable trainees to
learn by making realistic decisions in simulated situations. For example, Interpret is a team
exercise that explores team communication, the management of information and the
planning and implementation of a strategy. It raises management trainees communica-
tion skills, helps them to better manage the information flow between individuals and the
team, and improves planning and problem solving skills .103 With some games, trainees
divide into teams, which compete in a simulated marketplace. Each team typically must
decide, for example, (1) how much to spend on advertising, (2) how much to produce,
(3) how much inventory to maintain, and (4) how many of which product to produce.
Management games are effective. People learn best by being involved, and games
gain such involvement. They also help trainees develop their problem-solving skills,
and to focus attention on planning rather than just putting out fires. The groups also
usually elect their own officers and organize themselves. This can develop leadership
skills and foster cooperation and teamwork.
OUTSIDE SEMINARS Numerous companies and universities offer Web-based and
traditional classroom management development seminars and conferences. The selec-
tion of 1- to 3-day training programs offered by the American Management Association
illustrates what s available. Recently, for instance, their offerings ranged from developing
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 265

your emotional intelligence to assertiveness training, assertiveness training for

managers, assertiveness training for women in business, dynamic listening skills for
successful communication, and fundamentals of cost accounting. 104 Specialized asso-
ciations, such as SHRM, provide specialized seminars for their profession s members.
UNIVERSITY-RELATED PROGRAMS Many universities provide executive
education and continuing education programs in leadership, supervision, and the
like. These can range from 1- to 4-day programs to executive development programs
lasting 1 to 4 months.
The Advanced Management Program of Harvard s Graduate School of Business
Administration is one example.105 Students are experienced managers from around the
world. It uses cases and lectures to provide them with the latest management skills. When
Hasbro wanted to improve its executives creativity skills, it turned to Dartmouth
University s Amos Tuck Business School. Tuck provided a custom approach to design-
ing a program that would be built from the ground up to suit Hasbro s specific needs. 106
ROLE PLAYING The aim of role playing is to create a realistic situation and then
have the trainees assume the parts (or roles) of specific persons in that situation. Each
trainee gets a role, such as:
You are the head of a crew of telephone maintenance workers, each of whom drives a
small service truck to and from the various jobs. Every so often you get a new truck
to exchange for an old one, and you have the problem of deciding to which of your
crew members you should give the new truck. Often there are hard feelings, since
each seems to feel entitled to the new truck, so you have a tough time being fair.107
When combined with the general instructions and other roles, role playing can
trigger spirited discussions among the role player/trainees. The aim is to develop
trainees skills in areas like leadership and delegating. For example, a supervisor could
experiment with both a considerate and an autocratic leadership style, whereas in the
real world the person might not have the luxury of experimenting. It may also train
someone to be more aware of and sensitive to others feelings.
BEHAVIOR MODELING Behavior modeling involves (1) showing trainees the
right (or model ) way of doing something, (2) letting trainees practice that way, and
then (3) giving feedback on the trainees performance. Behavior modeling training is
one of the most widely used, well researched, and highly regarded psychologically
based training interventions.108 The basic procedure is as follows:
1. Modeling. First, trainees watch live or video examples showing models behaving
effectively in a problem situation. Thus, the video might show a supervisor effec-
tively disciplining a subordinate, if teaching how to discipline is the aim of the
training program.
2. Role playing. Next, the trainees are given roles to play in a simulated situation;
here they are to practice the effective behaviors demonstrated by the models.
3. Social reinforcement. The trainer provides reinforcement in the form of praise
and constructive feedback.
4. Transfer of training. Finally, trainees are encouraged to apply their new skills
when they are back on their jobs.

action learning management game behavior modeling

A training technique by which management A development technique in which A training technique in which trainees are
trainees are allowed to work full-time teams of managers compete by making first shown good management techniques in
analyzing and solving problems in other computerized decisions regarding realistic a film, are asked to play roles in a simulated
departments. but simulated situations. situation, and are then given feedback and
praise by their supervisor.
case study method role playing
A development method in which the A training technique in which trainees act out
manager is presented with a written parts in a realistic management situation.
description of an organizational problem
to diagnose and solve.
266 PART 3 TRAINING AND DEVELOPMENT

CORPORATE UNIVERSITIES Many firms, particularly larger ones, establish

in-house development centers (often called corporate universities). GE, Caterpillar,
and IBM are examples. Such centers typically offer a catalogue of courses and
programs aimed at supporting the employers management development needs.
Employers often collaborate with academic institutions, and with training and
development program providers and Web-based educational portals, to create
packages of programs and materials. Characteristics of effective corporate universi-
ties include (1) alignment with corporate strategic goals, (2) a focus on development
of skills that support business needs, (3) evaluation of learning and performance,
(4) using technology to support the learning, and (5) partnering with academia.109
Employers increasingly offer virtual rather than bricks and morter corporate
university services. For example, Cerner, a health-care information technology
company, offers its employees Cerner KnowledgeWorks. This provides employees
with three types of knowledge stores: Dynamic knowledge is real-time content that
flows back and forth, such as e-mails, instant messages, or conference calls; Moderated
content includes best practices, such as case studies or wikis that capture information
about situations where we did well and how we did it; Codified content is more
formal documentation of official company practices, and includes installation guides,
help files, and formal training or courses. 110 Bain & Company's virtual university
provides a means for coordinating all the company s training efforts, and for delivering
Web-based modules that cover topics from strategic management to mentoring.
EXECUTIVE COACHES Many firms retain executive coaches to develop their top
managers effectiveness. An executive coach is an outside consultant who questions
the executive s boss, peers, subordinates, and (sometimes) family in order to identify the
executive s strengths and weaknesses, and to counsel the executive so he or she can capital-
ize on those strengths and overcome the weaknesses.111 Executive coaching can cost as
much as $50,000 per executive. Experts recommend using formal assessments prior to
coaching, to uncover strengths and weaknesses and to provide more focused coaching.112
Executive coaching can be effective. Participants in one study included about 1,400
senior managers who had received 360 degree performance feedback from bosses,
peers, and subordinates. About 400 worked with an executive coach to review the feed-
back. Then, about a year later, these 400 managers and about 400 who didn t receive
coaching again received multisource feedback. The managers who received executive
coaching were more likely to set more effective, specific goals for their subordinates,
and to have received improved ratings from subordinates and supervisors.113
The coaching field is unregulated, so managers should do their due diligence. Check
references carefully, and check with the International Coach Federation, a trade group.
THE SHRM LEARNING SYSTEM The Society for Human Resource Management,
encourages HR professionals to qualify for certification by taking examinations.
The society offers several preparatory training programs. The self-study option includes
text and DVD. The college/university option provides classroom interaction with
instructors and other students.

Leadership Development at GE
General Electric is known for its ability to develop executive talent. Their current mix
of executive development programs illustrate what is available:114
Leadership programs: These multiyear training programs rotate about 3,000
employees per year through various functions with the aim of enabling people
to run a large GE business.
Session C: This is GE s intense multi-level performance appraisal process.
The CEO personally reviews GE s top 625 officers every year.
Crotonville: This is GE s corporate training campus in New York and offers a mix
of conventional classroom learning and team-based training and cultural trips.
Boca Raton: At this annual meeting of GE s top 625 officers, they network, share
their best ideas, and get to understand the company s strategy for the coming year.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 267

The next big thing: Whether it s productivity and quality improvement

through Six Sigma or innovation, GE focuses its employees on central
themes or initiatives.
Monthly dinners: Jeffrey Immelt, GE s CEO, meets periodically at dinners
and breakfasts to learn more about his top executives and to strengthen his
connections with his top team. 115
Perusing the development pages of GE s Website (http://www.ge.com/careers/
students/entry-level.html) illustrates the breadth of training and development
opportunities GE offers its employees. For example,
The Edison Engineering Development Program (EEDP) develops technical
problem-solving skills through advanced courses in engineering and technical
projects and presentations to senior leadership that are aligned with business
objectives.
The Financial Management Program (FMP) develops leadership and analytical
skills through classroom training and key assignments. Hands-on experience
may include financial planning, accounting, operations analysis, auditing,
forecasting, treasury/cash management, and commercial finance.

Talent Management and Mission-Critical Employees:

Differential Development Assignments
Probably the most distinctive talent management best practice is to actively manage
employees. In today s competitive environment, the traditional HR practice of allocating
pay raises, development opportunities, and other scarce resources more-or-less across
the board or based mostly on performance is no longer viable. Employers need to think
through how to allocate those resources in a way that makes the most sense given their
strategic aims. It therefore makes sense that talent management oriented employers
focus more of their development resources on their mission-critical employees, those
deemed critical to the companies future growth.
We ll look closer at how employers do this in the following chapter. However, it is
useful here to illustrate how employers implement this differential approach with
several training-and-development examples.
* A telecommunications firm previously spread pay and development money evenly
over its 8,000 employees. When the recent recession came, company leaders began
segmenting their talent into four groups: business impact, high performers, high
potentials, and critical skills. Then they shifted their dollars away from low perform-
ers and those not making an impact. While the company lost some low performers,
the high performers and high potentials felt like they finally received recognition. 116
* One large manufacturer gives rising stars special access to online discussion
boards, led by the CEO, that are dedicated to the company s biggest challenges. It
encourages emerging leaders to visit the board daily to share ideas and opinions
and to apply for assignments.117
* High potential participants in Johnson & Johnson s special LeAD leadership
development program receive advice and regular assessments from coaches
brought in from outside the company. As special projects, they also must develop
a new product or service, or a new business model, intended to create value for
their individual units.118

in-house development center executive coach

A company-based method for exposing An outside consultant who questions the
prospective managers to realistic exercises executive s associates in order to identify the
to develop improved management skills. executive s strengths and weaknesses, and
then counsels the executive so he or she can
capitalize on those strengths and overcome
the weaknesses.
 268 PART 3 TRAINING AND DEVELOPMENT

* Some companies share future strategies on a privileged basis with rising leaders.
For example, these high-potentials receive e-mail updates detailing firm perform-
ance and strategic changes. Some invite them to quarterly meetings with
high-level executives; some provide access to an online portal where the rising
leaders can review the company s strategy and critical metrics.119

8 List and briefly discuss

MANAGING ORGANIZATIONAL CHANGE PROGRAMS
the importance of the Several years ago, Intel Corp. carried out a major reorganization that one writer says
eight steps in leading may have badly damaged employee development, morale and the company s culture of
organizational change.
innovation. 120 Managing change is important in today s challenging environment.
Professor Edward Lawler says that as more employers face rapid competitive change,
focusing on strategy, organizational development, and organizational change is a high
payoff activity for the HR organization. 121
Major organizational changes like these are never easy, but perhaps the hardest
part of leading a change is overcoming the resistance to it. Individuals, groups, and
even entire organizations may resist the change, perhaps because they are accustomed
to the usual way of doing things or because of perceived threats to their influence, or
some other reason.122

What to Change
The first question is, What should we change? For example, a few years ago,
Nokia was the worldwide leader in handsets and smartphones. Then, Apple
introduced its first iPhone. Within a year, Nokia s smartphone market share
plummeted, and its sales increasingly relied on low-priced handsets. By 2010,
Nokia s board knew something had to be done. It appointed a new CEO with
Silicon Valley experience, Stephen Elop (pictured).123 He knew Nokia faced press-
ing problems. Its smartphone share was down, and it was losing low-cost handset
business to Asian competitors. Nokia s R&D was behind the times. Its Symbian
mobile operating system couldn t handle many of the leading applications that
Apple s and Microsoft s systems could. Nokia was too slow in executing strategic
changes. He had to jumpstart Nokia.
Faced with situations like these, managers like Stephen Elop can
change one or more of five aspects of their companies their strategy,
culture, structure, technologies, or the attitudes and skills of the employees.

STRATEGIC CHANGE Organizational turnarounds often start with

a change in the firm s strategy, mission, and vision with strategic
change. For example, Elop embarked on a strategy to renew Nokia
by streamlining Nokia s product development process and by entering
into a partnership with Microsoft with the aim of introducing a new
Microsoft-based smartphone within a year.

OTHER CHANGES Nokia s new CEO instituted other organizational

changes. In terms of structure, Nokia split responsibility for its smart-
phones and handsets into two new units. He replaced managers in
Nokia s mobile phones unit and markets unit. In technology, Elop
reduced the Symbian operating system s central role in its smartphones,
.Source: Kevin Wolf/AP Images.

replacing it with Microsoft s mobile operating system. With its culture,

Elop had his new management team change the firm s culture, for
instance, by impressing on Nokia s employees the need to eradicate
bureaucratic decision making and to execute on Nokia s new strategy.
Of course, strategic, cultural, structural, and technological changes,
no matter how logical, will fail without employees active support. As one
example, a nationwide beverage distributor encountered opposition from
Nokia CEO Stephen Elop. its sales force several years ago when it moved from its paper-based sales
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 269

management system to wireless laptops.124 Organizational change therefore invariably

involves bringing about changes in the employees themselves and in their attitudes,
skills, and behaviors.125
Unfortunately, getting employees active support is easier said than done.
The change may require the cooperation of dozens or even hundreds of managers
and supervisors, many of whom might well view the change as detrimental to their
peace of mind. Resistance may therefore be formidable. Knowing how to deal with
that resistance is the heart of implementing an organizational change.

Lewin s Change Process

Psychologist Kurt Lewin formulated a model to summarize what he believed was the
basic process for implementing a change with minimal resistance. To Lewin, all behavior
in organizations was a product of two kinds of forces: those striving to maintain the
status quo and those pushing for change. Implementing change thus means reducing
the forces for the status quo or building up the forces for change. Lewin s process
consisted of three steps:
1. Unfreezing means reducing the forces that are striving to maintain the status quo,
usually by presenting a provocative problem or event to get people to recognize
the need for change and to search for new solutions.
2. Moving means developing new behaviors, values, and attitudes. The manager may
accomplish this through organizational structure changes, through conventional
training and development activities, and sometimes through the other organiza-
tional development techniques (such as the team building) we ll discuss later.
3. Refreezing means building in the reinforcement to make sure the organization
doesn t slide back into its former ways of doing things.

Leading Organizational Change126

Of course, the challenge is in the details. A CEO such as Nokia s Stephen Elop needs a
process for leading such a change. An 8-step process for leading organizational change
follows.127
Unfreezing Stage
1. Establish a sense of urgency. Most managers start by creating a sense of urgency.
This often requires creativity. For example, the CEO might present executives
with a (fictitious) analyst s report describing the firm s imminent demise.
2. Mobilize commitment through joint diagnosis of problems. Having established a
sense of urgency, the leader may then create one or more task forces to diagnose
the problems facing the company. Such teams can produce a shared understanding
of what they can and must improve, and thereby mobilize commitment.
Moving Stage
3. Create a guiding coalition. No one can really implement major organizational
change alone. Most CEOs create a guiding coalition of influential people. They
work together as a team to act as missionaries and implementers.
4. Develop and communicate a shared vision. Your organizational renewal may require
communicating a new vision. For example, Stephen Elop s vision was of a streamlined
Nokia moving fast to build advanced smartphones based on Microsoft s operating
system. Guidelines here are keep it simple (for example, We are going to become
faster than anyone else in our industry at satisfying customer needs. ), use multiple
forums (meetings, e-mails, formal and informal interaction), and lead by example.128
5. Help employees make the change. Are there impediments to change? Does a lack
of skills stand in the way? Do policies, procedures, or the firm s organization
make it difficult to act? Do intransigent managers discourage employees from
acting? If so, address the impediments. For example, Elop quickly replaced many
of Nokia s top and mid-level managers.
270 PART 3 TRAINING AND DEVELOPMENT

6. Consolidate gains and produce more change. Aim for attainable short-term
accomplishments. Use the credibility from these to change the remaining systems,
structures, and policies that don t fit well with the company s new vision.129
Refreezing Stage
7. Reinforce the new ways of doing things with changes to the company s systems and
procedures. For example, use new appraisal systems and incentives to reinforce
the desired behaviors. Reinforce the new culture by ensuring that the firm s
managers role-model the company s new values.
8. Finally, the leader must monitor and assess progress. In brief, this involves comparing
where the company is today with where it should be, based on measurable
milestones. At Nokia, for instance, How many new products has the company
introduced? What is our smartphone and handset market shares?

9 Answer the question, What

Using Organizational Development
is organizational develop- There are many ways to reduce resistance to change. Among the many suggestions are
ment and how does it differ that managers impose rewards or sanctions that guide employee behaviors, explain why
from traditional approaches the change is needed, negotiate with employees, give inspirational speeches, or ask
to organizational change?
employees to help design the change.130 Organizational development (OD) taps into
the latter. Organizational development is a change process through which employees
formulate the change that s required and implement it, often with the assistance of
trained consultants. OD has several distinguishing characteristics:
1. It usually involves action research, which means collecting data about a group,
department, or organization, and feeding the information back to the employees
so they can analyze it and develop hypotheses about what the problems might be.
2. It applies behavioral science knowledge to improve the organization s effectiveness.
3. It changes the organization in a particular direction toward empowerment,
improved problem solving, responsiveness, quality of work, and effectiveness.
There are four basic categories of OD applications: human process, technostructural,
human resource management, and strategic applications (see Table 8-2). Action
research getting the employees themselves to review the required data and to design
and implement the solutions is the basis of all four. We ll look at each.

TABLE 8-2 Examples of OD Interventions

Human Process Human Resource Management

T-groups Goal setting

Process consultation Performance appraisal
Third-party intervention Reward systems
Team building Career planning and development
Organizational confrontation meeting Managing workforce diversity
Survey research Employee wellness

Technostructural Strategic

Formal structural change Integrated strategic management

Differentiation and integration Culture change
Cooperative union management projects Strategic change
Quality circles Self-designing organizations
Total quality management
Work design
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 271

HUMAN PROCESS APPLICATIONS The goal of human process OD techniques

is to give employees the insight and skills required to analyze their own and others
behavior more effectively, so they can then solve interpersonal and intergroup
problems. These problems might include, for instance, conflict among employees.
Applications here include sensitivity training, team building, and survey research.
Sensitivity, laboratory, or t-group (the t is for training ) training s basic aim is
to increase the participant s insight into his or her own behavior by encouraging an
open expression of feelings in the trainer-guided t-group. Typically, 10 to 15 people
meet, usually away from the job, with no specific agenda. Instead, the focus is on the
feelings and emotions of the members in the group at the meeting. The facilitator
encourages participants to portray themselves as they feel within the group rather
than in terms of past behaviors. The t-group s success depends on the feedback each
person gets from the others, and on the participants willingness to be candid.131
T-group training is controversial. Its personal nature suggests that participation
should be voluntary. Some view it as unethical because you can t consider participation
suggested by one s superior as voluntary. Similarly, some practitioners have T-group
trainees take personality tests, for instance assigning them letters, such as D for domi-
nance and C for conscientiousness.132 Others argue that it can be dangerous if led by an
incompetent trainer.
Team building is another option. According to experts French and Bell, the typical
team-building meeting begins with the consultant interviewing each of the group
members and the leader before the meeting.133 They are asked what their problems are,
how they think the group functions, and what obstacles are keeping the group from
performing better. The consultant then categorizes the interview data into themes (such
as inadequate communications ) and presents the themes to the group at the start of the
meeting. The group ranks the themes in terms of importance, and the most important
ones become the agenda for the meeting. The group then explores and discusses the
issues, examines the underlying causes of the problems, and begins devising solutions.
Survey research, another human process OD technique, requires that employees
throughout the organization complete attitude surveys. The facilitator then uses those
data as a basis for problem analysis and action planning. Surveys are a convenient way
to unfreeze a company s management and employees. They provide a comparative,
graphic illustration of the fact that the organization does have problems to solve.134

TECHNOSTRUCTURAL INTERVENTIONS OD practitioners also get involved

in changing firms structures, methods, and job designs, using an assortment of techno-
structural interventions. For example, in a formal structural change program, the
employees collect data on the company s existing organizational structure; they then
jointly redesign and implement a new one.

HUMAN RESOURCE MANAGEMENT APPLICATIONS OD practitioners use

action research to enable employees to analyze and change their firm s human
resources practices. Targets of change here might include the performance appraisal
and reward systems, as well as installing diversity programs.

STRATEGIC OD APPLICATIONS Strategic interventions aim to use action

research to improve a company s strategic management. Integrated strategic manage-
ment is one example. It consists of four steps: managers and employees (1) analyze
current strategy and organizational structure, (2) choose a desired strategy and
organizational structure, and (3) design a strategic change plan an action plan for
moving the organization from its current strategy and organizational design to the
desired future strategy and design. 135 Finally, (4) the team oversees implementing
the strategic change and reviewing the results.136

organizational development
A special approach to organizational change
in which employees themselves formulate
and implement the change that s required.
272 PART 3 TRAINING AND DEVELOPMENT

EVALUATING THE TRAINING EFFORT

With today s emphasis on measuring results, it is crucial that the manager evaluate
the training program. There are several things you can measure: participants
reactions to the program, what (if anything) the trainees learned from the program,
and to what extent their on-the-job behavior or results changed as a result of the pro-
gram. In one survey of about 500 U.S. organizations, 77% evaluated their training
programs by eliciting reactions, 36% evaluated learning, and about 10% to 15%
assessed the program s behavior and/or results.137 Computerization facilitates evalua-
tion. For example, Bovis Lend Lease uses learning management system software to
monitor which employees are taking which courses, and the extent to which they re
improving their skills.138
There are two basic issues to address when evaluating training programs. The first
is the design of the evaluation study and, in particular, whether to use controlled
experimentation. The second issue is, What should we measure?

Designing the Study

In evaluating the training program, the first question should be how to design the
evaluation study. Your basic concern here is this: How can we be sure that the training
caused the results? The time series design is one option. Here, as in Figure 8-3, you take
a series of performance measures before and after the training program. This can
provide at least an initial reading on the program s effectiveness.139 However, you
can t be sure from this analysis that the training (rather than, say, a new pay plan)
caused any change.
Controlled experimentation is therefore the evaluation process of choice.
A controlled experiment uses both a training group, and a control group that receives
no training. Data (for instance, on quantity of sales or quality of service) are obtained
both before and after the group is exposed to training and before and after a correspon-
ding work period in the control group. This makes it possible to determine the extent
to which any change in the training group s performance resulted from the training,
rather than from some organization-wide change like a raise in pay. (The pay raise
should have affected employees in both groups equally.)140
This controlled approach is feasible, but again, relatively few firms use it. Most
simply measure trainees reactions to the program; some also measure the trainees job
performance before and after training.141

FIGURE 8-3 Using a Time 24

Series Graph to Assess a 23
Training Program s Effects 22
21
20
19
18
17
Performance (quality of items)

16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Before training After training
Weeks
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 273

Training Effects to Measure

The manager can measure four basic categories of training outcomes:
1. Reaction. Evaluate trainees reactions to the program. Did they like the program?
Did they think it worthwhile?
2. Learning. Test the trainees to determine whether they learned the principles,
skills, and facts they were supposed to learn.
3. Behavior. Ask whether the trainees on-the-job behavior changed because of the
training program. For example, are employees in the store s complaint depart-
ment more courteous toward disgruntled customers?
4. Results. Probably most important, ask, What results did we achieve, in terms of
the training objectives previously set? For example, did the number of customer
complaints diminish? Reactions, learning, and behavior are important. But if the
training program doesn t produce measurable results, then it probably hasn t
achieved its goals.142
Evaluating any of these is straightforward. For example, Figure 8-4 presents one page
from a sample evaluation questionnaire for assessing reactions. Or, you might assess
trainees learning by testing their new knowledge. The employer can also easily assess
trainees behavioral change. For example, assess the effectiveness of a supervisory
performance appraisal training program by asking that person s subordinates, Did your
supervisor take the time to provide you with examples of good and bad performance
when he or she appraised your performance most recently? Finally, you can directly
assess a training program s results by measuring, say, the percentage of phone calls that
call center trainees subsequently answered correctly. The accompanying HR as a Profit
FIGURE 8-4 A Training Center feature illustrates measuring a program s impact.
Evaluation Form

O P M INSTRUCTOR HANDOUTS United States Office of Personnel

Management

TRAINING EVALUATION FORM

DATE OF TRAINING
TITLE OF COURSE: Work and Family Issues A Module for Supervisors and Managers Started:____________
NAME OF INSTRUCTOR: Ended:_____________

NAME: POSITION TITLE/GRADE:

(Optional)
AGENCY: OFFICE PHONE: OFFICE ADDRESS:
(Optional) (Optional)
Rate Your Knowledge and Skill Level Overall, how would you rate this course?
(Circle your rating)
Before this course Low ---------------------------------------High __ Excellent __Very Good __ Good
1 2 3 4 5
After this course Low ---------------------------------------High __ Fair __ Poor
1 2 3 4 5

EVALUATION OF COURSE
(Check appropriate box)

ITEMS OF EVALUATION Excellent Very Good Fair Poor Not Applicable

How did the course sharpen your knowledge or skills in: Good
1. What work and family programs are
2. Who uses work and family programs
3. How to recognize/solve work/family issues
4. Helping you take practical steps on the job

(Continued)

controlled experimentation
Formal methods for testing the effectiveness
of a training program, preferably with
before-and-after tests and a control group.
274 PART 3 TRAINING AND DEVELOPMENT

FIGURE 8-4 RATING OF INSTRUCTOR

(Continued)
1. Presentation, organization, delivery
2. Knowledge and command of the subject
3. Use of audio-visuals or other training aids
4. Stimulation of an open exchange of ideas, participation, & group interaction

STRONG POINTS OF THE COURSE

WEAK POINTS OF THE COURSE

ADDITIONAL DATA YOU WOULD LIKE TO HAVE COVERED IN COURSE

ADDITIONAL COMMENTS/OR RECOMMENDATIONS

HR AS A PROFIT CENTER
Judging Training s Impact
A careful comparison of the training program s costs and benefits can enable the
human resource team to compute the program s return on investment. Online
calculators such as the one shown below are available to facilitate such analyses.

Source: www.training.com.au (Department of Education, Employment and Workplace Relations, Australian Government), accessed
September 2011.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 275

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Getting your new employee on board and up to speed increasingly use mobile learning, for instance, delivering
begins with orienting and training him or her. Employee short courses and explanations to employees iPods. With
orientation means providing new employees with the increasing demands for technologically literate employees,
information they need to function, and helping them start lifelong learning can help ensure employees have the basic
being emotionally attached to the firm. This may simply educational backgrounds they need to succeed on their
involve providing them with brief written orientation jobs. Diversity training aims to create better cross-cultural
materials and an employee handbook, but sometimes sensitivity with the goal of fostering more harmonious
involves a formal process aimed at instilling in the working relationships.
employee the company s cherished values. The four-step 4. Most training methods are useful for all employees,
training process includes needs analysis, instructional but some are particularly appropriate for management
design, implementation, and evaluation. Trainees need to development programs. Like all employees, new managers
be motivated to learn. Ensuring that they are motivated often get on-the-job training, for instance, via job rotation
involves making the learning meaningful, making skills and coaching. In addition, it s usual to supply various off-
transfers easy, and reinforcing the learning. the-job training and development opportunities for
2. We can use the acronym ADDIE to outline the training instance, using the case study method, management
process: analyze, develop, design, implement, and evalu- games, outside seminars, university-related programs, cor-
ate. Before training employees, it s necessary to analyze porate universities, executive coaches, and (for human
their training needs and design the training program. resource managers) the SHRM learning system.
In training new employees, employers use task analysis 5. When facing economic, competitive, or other chal-
basically, a detailed study of the job to determine what lenges, managers have to execute organizational change
skills the job requires. For current employees, perform- programs. These may aim at changing the company s
ance analysis is required, specifically to verify that there is strategy, culture, structure, technologies, or the attitudes
performance efficiency and to determine if training is and skills of the employees. Often, the trickiest part of
the solution. Distinguishing between can t do and won t organizational change is overcoming employees resist-
do problems is the main issue here. Once you under- ance to it. With that in mind, steps in an effective orga-
stand the issues, you can design a training program, nizational change program include establishing a sense
which means identifying specific training objectives, of urgency, mobilizing commitment, creating a guiding
clarifying a training budget, and then actually designing coalition, developing and communicating a shared
the program in terms of the actual content. vision, helping employees make the change, consolidat-
3. With this in place, you can turn to implementing the ing gains, reinforcing new ways of doing things, and
training program. Specific training methods include monitoring and assessing progress. Organizational
on-the-job training, apprenticeship training, informal development is a special approach to organizational
learning, job instruction training, lectures, programmed change, one that involves action research, which means
learning, audiovisual-based training, vestibule training, collecting data about a group and feeding the informa-
videoconferencing, electronic performance support tion back to the employees so they can analyze it and
systems, and computer-based training. Computerized develop hypotheses about what the problems might be.
training is increasingly popular, with many packaged 6. Whatever the training program, it s important to
programs available. Frequently, programs today are evaluate the training effort. You can measure reaction,
Internet-based, with employees accessing packaged online learning, behavior, or results, ideally using a control
programs, backed up by learning management systems, group that is not exposed to training, in parallel with the
through their company s learning portals. Employers also group that you re training.

DISCUSSION QUESTIONS
1. A well-thought-out orientation program is essential for 3. John Santos is an undergraduate business student
all new employees, whether they have experience or not. majoring in accounting. He just failed the first
Explain why you agree or disagree with this statement. accounting course, Accounting 101. He is under-
2. Explain how you would apply our motivation points standably upset. How would you use performance
(page 256) in developing a lecture, say, on orientation analysis to identify what, if any, are John s training
and training. needs?
276 PART 3 TRAINING AND DEVELOPMENT

4. What are some typical on-the-job training techniques? think is referred to, and how might that translate into
What do you think are some of the main drawbacks of lost business? What sort of training program would you
relying on informal on-the-job training for breaking recommend to avoid such cultural insensitivity?
new employees into their jobs? 6. Describe the pros and cons of five management devel-
5. One reason for implementing global training programs opment methods.
is the need to avoid business losses due to cultural 7. Do you think job rotation is a good method to use for
insensitivity. What sort of cultural insensitivity do you developing management trainees? Why or why not?

INDIVIDUAL AND GROUP ACTIVITIES

1. You re the supervisor of a group of employees whose 6. Working individually or in groups, develop an orienta-
task is to assemble disk drives that go into computers. tion program for high school graduates entering your
You find that quality is not what it should be and that university as freshmen.
many of your group s devices have to be brought back 7. The HRCI Test Specifications appendix at the end of
and reworked. Your boss says, You d better start doing a this book (pages 633 640) lists the knowledge someone
better job of training your workers. studying for the HRCI certification exam needs to have in
each area of human resource management (such as
a. What are some of the staffing factors that could be
in Strategic Management, Workforce Planning, and
contributing to this problem?
Human Resource Development). In groups of four to five
b. Explain how you would go about assessing whether
students, do four things: (1) review that appendix now;
it is in fact a training problem.
(2) identify the material in this chapter that relates to the
2. Choose a task with which you are familiar mowing the required knowledge the appendix lists; (3) write four
lawn, making a salad, or studying for a test and multiple-choice exam questions on this material that you
develop a job instruction sheet for it. believe would be suitable for inclusion in the HRCI exam;
3. Working individually or in groups, develop a short, and (4) if time permits, have someone from your team
programmed learning program on the subject Guidelines post your team s questions in front of the class, so the stu-
for Giving a More Effective Lecture. dents in other teams can take each others exam questions
4. Find a provider of management development semi- 8. Perhaps no training task in Iraq was more pressing than that
nars. Obtain copies of its recent listings of seminar involved in creating Iraq s country s new army, which is an
offerings. At what levels of managers are the offerings ongoing task. These were the people who were to help the
aimed? What seem to be the most popular types coalition bring security to Iraq. However, many new soldiers
of development programs? Why do you think that s and even officers had no experience. There were language
the case? barriers between trainers and trainees. And some trainees
5. Working individually or in groups, develop several found themselves quickly under fire from insurgents when
specific examples to illustrate how a professor teaching they went as trainees out into the field. Based on what you
human resource management could use at least four of learned about training from this chapter, list the five most
the techniques described in this chapter in teaching his important things you would tell the U.S. officer in charge of
or her HR course. training to keep in mind as he designs the training program.

EXPERIENTIAL EXERCISE
Flying the Friendlier Skies
Purpose: The purpose of this exercise is to give you practice since there may be a dozen or more alternative routes between
in developing a training program for the job of airline reser- the customer s starting point and destination.
vation clerk for a major airline.
You may assume that we just hired 30 new clerks, and
Required Understanding: You should be fully acquainted that you must create a 3-day training program.
with the material in this chapter and should read the following
description of an airline reservation clerk s duties: How to Set Up the Exercise/Instructions: Divide the class
Customers contact our airline reservation clerks to obtain into teams of five or six students.
flight schedules, prices, and itineraries. The reservation clerks Airline reservation clerks obviously need numerous
look up the requested information on our airline s online flight skills to perform their jobs. JetBlue Airlines has asked you
schedule systems, which are updated continuously. The reser- to develop quickly the outline of a training program for its
vation clerk must deal courteously and expeditiously with the new reservation clerks. You may want to start by listing the
customer, and be able to find quickly alternative flight arrange- job s main duties and by reviewing any work you may have
ments in order to provide the customer with the itinerary that done for the exercise at the end of Chapter 6. In any case,
fits his or her needs. Alternative flights and prices must be please produce the requested outline, making sure to
found quickly, so that the customer is not kept waiting, and so be very specific about what you want to teach the new
that our reservations operations group maintains its efficiency clerks, and what methods and aids you suggest using
standards. It is often necessary to look under various routings, to train them.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 277

APPLICATION CASE
REINVENTING THE WHEEL AT APEX DOOR COMPANY
Jim Delaney, president of Apex Door, has a problem. No mat- somewhat out-of-date job descriptions. The training for new
ter how often he tells his employees how to do their jobs, they people is all on the job. Usually, the person leaving the com-
invariably decide to do it their way, as he puts it, and argu- pany trains the new person during the 1- or 2-week overlap
ments ensue between Jim, the employee, and the employee s period, but if there s no overlap, the new person is trained as
supervisor. One example is the door-design department, well as possible by other employees who have filled in occa-
where the designers are expected to work with the architects sionally on the job in the past. The training is the same
to design doors that meet the specifications. While it s not throughout the company for machinists, secretaries,
rocket science, as Jim puts it, the designers invariably make assemblers, engineers, and accounting clerks, for example.
mistakes such as designing in too much steel, a problem that
can cost Apex tens of thousands of wasted dollars, once you Questions
consider the number of doors in, say, a 30-story office tower.
The order processing department is another example. 1. What do you think of Apex s training process? Could it
Jim has a very specific and detailed way he wants the order help to explain why employees do things their way ?
written up, but most of the order clerks don t understand If so, how?
how to use the multipage order form. They simply improvise 2. What role should job descriptions play in training at Apex?
when it comes to a detailed question such as whether to 3. Explain in detail what you would do to improve the
classify the customer as industrial or commercial. training process at Apex. Make sure to provide specific
The current training process is as follows. None of the suggestions, please.
jobs has a training manual per se, although several have Source: Copyright Dr. Gary Dessler.

CONTINUING CASE
CARTER CLEANING COMPANY
The New Training Program For example, two new employees became very upset last
The Carter Cleaning Centers currently have no formal orienta- month when they discovered that they were not paid at the end
tion or training policies or procedures, and Jennifer believes this of the week, on Friday, but instead were paid (as are all Carter
is one reason why the standards to which she and her father employees) on the following Tuesday. The Carters use the extra
would like employees to adhere are generally not followed. two days in part to give them time to obtain everyone s hours
The Carters would prefer that certain practices and proce- and compute their pay. The other reason they do it, according
dures be used in dealing with the customers at the front coun- to Jack, is that frankly, when we stay a few days behind in
ters. For example, all customers should be greeted with what paying employees it helps to ensure that they at least give us a
Jack refers to as a big hello. Garments they drop off should few days notice before quitting on us. While we are certainly
immediately be inspected for any damage or unusual stains so obligated to pay them anything they earn, we find that psycho-
these can be brought to the customer s attention, lest the cus- logically they seem to be less likely to just walk out on us Friday
tomer later return to pick up the garment and erroneously evening and not show up Monday morning if they still haven t
blame the store. The garments are then supposed to be imme- gotten their pay from the previous week. This way they at least
diately placed together in a nylon sack to separate them from give us a few days notice so we can find a replacement.
other customers garments. The ticket also has to be carefully There are other matters that could be covered during
written up, with the customer s name and telephone number orientation and training, says Jennifer. These include company
and the date precisely and clearly noted on all copies. The policy regarding paid holidays, lateness and absences, health
counter person is also supposed to take the opportunity to try benefits (there are none, other than workers compensation),
to sell the customer additional services such as waterproofing, substance abuse, and eating or smoking on the job (both
or simply notify the customer that Now that people are doing forbidden), and general matters like the maintenance of a clean
their spring cleaning, we re having a special on drapery clean- and safe work area, personal appearance and cleanliness, time
ing all this month. Finally, as the customer leaves, the counter sheets, personal telephone calls, and personal e-mail.
person is supposed to make a courteous comment like Have a Jennifer believes that implementing orientation and
nice day or Drive safely. Each of the other jobs in the stores training programs would help to ensure that employees
pressing, cleaning and spotting, and so forth similarly contain know how to do their jobs the right way. And she and her
certain steps, procedures, and most importantly, standards the father further believe that it is only when employees under-
Carters would prefer to see upheld. stand the right way to do their jobs that there is any hope
The company has had problems, Jennifer feels, because their jobs will be accomplished the way the Carters want
of a lack of adequate employee training and orientation. them to be accomplished.
278 PART 3 TRAINING AND DEVELOPMENT

Questions performed by an employee. Should the Carter Cleaning

1. Specifically, what should the Carters cover in their new Centers use a form like this for the counter persons job? If
employee orientation program and how should they so, what should the form look like, say, for a counter person?
convey this information? 3. Which specific training techniques should Jennifer use
2. In the HR management course Jennifer took, the book to train her pressers, her cleaner/spotters, her managers,
suggested using a job instruction sheet to identify tasks and her counter people? Why should these training
techniques be used?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Training Program (when compared to similar companies) some changes were
The Hotel Paris s competitive strategy is To use superior guest in order. Most other service companies provided at least
service to differentiate the Hotel Paris properties, and to 40 hours of training per employee per year, while the Hotel
thereby increase the length of stay and return rate of guests, and Paris offered, on average, no more than 5 or 6 hours. Similar
thus boost revenues and profitability. HR manager Lisa Cruz firms offered at least 40 hours of training per new employee,
must now formulate functional policies and activities that while the Hotel Paris offered, at most, 10. Even the appar-
support this competitive strategy by eliciting the required ently good metrics comparisons simply masked poor
employee behaviors and competencies. results. For example, whereas most service firms spend
As she reviewed her company s training processes, Lisa about 8% of their payrolls on training, the Hotel Paris spent
had reasons to be concerned. For one thing, the Hotel Paris less than 1%. The problem, of course, was that the Hotel
relied almost exclusively on informal on-the-job training. Paris s training was nonexistent. Given this and the common
New security guards attended a 1-week program offered by a sense links between (1) employee training and (2) employee
law enforcement agency, but all other new hires, from assis- performance, the CFO gave his go-ahead for Lisa and her
tant manager to housekeeping crew, learned the rudiments team to design a comprehensive package of training pro-
of their jobs from their colleagues and their supervisors, on grams for all Hotel Paris employees.
the job. Lisa noted that the drawbacks of this informality
were evident when she compared the Hotel Paris s perform- Questions
ance on various training metrics with those of other hotels 1. Based on what you read in this chapter, what do you suggest
and service firms. For example, in terms of number of hours Lisa and her team do first with respect to training? Why?
training per employee per year, number of hours training for 2. Have Lisa and the CFO sufficiently investigated whether
new employees, cost per trainee hour, and percent of payroll training is really called for? Why? What would you suggest?
spent on training, the Hotel Paris was far from the norm 3. Based on what you read in this chapter and what you
when benchmarked against similar firms. may access via the Web, develop a detailed training
Indeed, as Lisa and the CFO reviewed the measures of program for one of these hotel positions: security guard,
the Hotel Paris s current training efforts, it was clear that housekeeper, or valet/door person.

KEY TERMS
employee orientation, 244 programmed learning, 256 action learning, 264
training, 246 electronic performance support case study method, 264
negligent training, 246 systems (EPSS), 257 management game, 264
task analysis, 248 job aid, 258 role playing, 265
competency model, 248 virtual classroom, 261 behavior modeling, 265
performance analysis, 249 lifelong learning, 261 in-house development center, 266
on-the-job training (OJT), 253 cross training, 262 executive coach, 266
apprenticeship training, 255 management development, 263 organizational development, 270
job instruction training (JIT), 255 job rotation, 263 controlled experimentation, 272

ENDNOTES
1. Marjorie Derven, Management Onboard- 2. Sabrina Hicks, Successful Orientation and Natasha Weaver, The Effectiveness
ing, Training & Development, April 2008, Programs, Training & Development, of an Organizational Level Orientation
pp. 49 52. April 2000, p. 59. See also Howard Klein Program in the Socialization of New
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 279

Hires, Personnel Psychology 53 (2000), Expenditures on the Rise, American Sales- Feedback Specificity, Information Pro-
pp. 47 66; and Laurie Friedman, Are You man 49, no. 1 (January 2004), pp. 26 28. cessing, and Transfer of Training, Organi-
Losing Potential New Hires at Hello? 18. Companies Invested More in Training ; zational Behavior and Human Decision
Training & Development, November 2006, Andrew Paradise, The 2008 ASTD State of Processes 115 no. 2 (July 2011), pp. 253 67.
pp. 25 27. the Industry Report Shows Sustained Sup- 35. Ibid., p. 305.
3. Charlotte Garvey, The Whirlwind of a New port for Corporate Learning, Training & 36. Ibid., and see Kendra Lee, Reinforce
Job, HR Magazine, June 2001, p. 111. See Development, November 2008, pp. 45 51. Training, Training 48 no. 3(May/June
also Talya Bauer et al., Newcomer Adjust- 19. W. Clayton Allen, Overview and Evolu- 2011), p. 24.
ment During Organizational Socialization: tion of the ADDIE Training System, 37. Alan Saks and Monica Belcourt, An Inves-
A Meta-Analytic Review of Antecedents, Advances in Developing Human Resources 8, tigation of Training Activities and Transfer
Outcomes, and Methods, Journal of Applied no. 4 (November 2006), pp. 430 441. of Training in Organizations, Human
Psychology 92, no. 3 (2007), pp. 707 721. 20. www.intulogy.com/process//, accessed Resource Management 45, no. 4 (Winter
4. Sheila Hicks et al., Orientation Redesign, April 20, 2011. 2006), pp. 629 648. The percentage of
Training & Development, July 2006, 21. P. Nick Blanchard and James Thacker, managers transferring behaviors from
pp. 43 46. Effective Training (Upper Saddle River, NJ: training to the job may be as low as 10% to
5. See, for example, John Kammeyer-Mueller Pearson, 2010), pp. 26 94, 153 199, 20%. See George Vellios, On the Level,
and Connie Wanberg, Unwrapping the 285 316; see also, Bruno Neal, e-ADDIE!, Training & Development, December 2008,
Organizational Entry Process: Disentan- T*D 65, no. 3 (March 2011), p. 76 77. pp. 26 29. See also K. Lee, Implement
gling Multiple Antecedents and Their Path- 22. P. Nick Blanchard and James Thacker, Training Successfully, Training 46, no. 5
ways to Adjustments, Journal of Applied Effective Training: Systems, Strategies and (June 2009), p. 16.
Psychology 88, no. 5 (2003), pp. 779 794. Practices (Upper Saddle River, NJ: Pren- 38. Large training providers include Element K,
6. Ed Frauenheim, IBM Learning Programs tice Hall, 1999), pp. 138 139. See also Geo Learning, learn.com, Outsmart, Plateau,
Get a Second Life, Workforce Manage- Matthew Casey and Dennis Doverspike, Saba People Systems, and Sum-Total Sys-
ment, December 11, 2006, p. 6. See also J. T. Training Needs Analysis and Evaluation tems. Training Providers, Workforce
Arnold, Gaming Technology Used To for New Technologies Through the Use Management, January 2011, p. 8.
Orient New Hires, HRMagazine (2009 of Problem Based Inquiry, Performance 39. Wexley and Latham, Developing and
HR Trendbook supp), pp. 36, 38. Improvement Quarterly 18, no. 1 (2005), Training Human Resources, pp. 78 79.
7. Jennifer Taylor Arnold, Ramping Up on pp. 110 124. 40. Donna Goldwasser, Me a Trainer?
Boarding, HR Magazine, May 2010, 23. See, for example, Jennifer Salopek, The Training, April 2001, pp. 60 66; http://
pp. 75 78. Power of the Pyramid, Training and employment.menswearhouse.com/ats/
8. www.workday.com/company/news/ Development (May 2009), pp. 70 73. advantageSelector.action;jsessionid=
workdaymobility.php, accessed March 24, 24. Richard Montier et al., Competency C6EA17158451F5A2902F7195B678CF6
2009. Models Develop Top Performance, A?type=training, accessed June 1, 2011.
9. Mindy Chapman, The Return on Invest- Training and Development (July 2006): 41. See for example, www.aps-online.net/
ment for Training, Compensation &Benefits 47 50. See also Jennifer Salopek, The consulting/structured_ojt.htm, accessed
Review, January/February 2003, pp. 32 33. Power of the Pyramid, Training and June 1, 2011; and Kathryn Tyler, 15
10. Rita Smith, Aligning Learning with Busi- Development (May 2009): 70 73. Ways to Train on the Job, HR Magazine
ness Strategy, Training & Development, 25. Tom Barron, When Things Go Haywire, 53 no. 9 (September 2008) pp. 105 108.
November 2008, pp. 41 43. Training & Development, February 1999, 42. The following four steps in on-the-job
11. Christine Ellis and Sarah Gale, A Seat pp. 25 27. training based on William Berliner and
at the Table, Training, March 2001, 26. Employers increasingly utilize learning William McLarney, Management Practice
pp. 90 96. content management systems (LCMS) and Training (Burr Ridge, IL: McGraw-
12. Christopher Glynn, Building a Learning to compile and author training content. Hill, 1974), pp. 442 443. For the discus-
Infrastructure, Training & Development, See, for example, Bill Perry, Customized sion of employee task analysis, see Eight
January 2008, pp. 38 43. Training and Content at Your Fingertips, Training and Steps to Better On-the-Job Training, HR
development executives at Kelly Services Development (June 2009), pp. 29 30. Focus, 80 no. 7 (July 2003), pp. 11, 13 14.
Inc. meet periodically with the company s 27. Jay Bahlis, Blueprint for Planning 43. Cindy Waxer, Steelmaker Revives Appren-
senior executives to identify new priorities Learning, Training & Development, March tice Program to Address Graying Work-
and reallocate training dollars as needed, 2008, pp. 64 67. force, Forge Next Leaders, Workforce
based on the strategic needs of the business. 28. P. Nick Blanchard and James Thacker, Management, January 30, 2006, p. 40.
Garry Kranz, More to Learn, Workforce Effective Training: Systems, Strategies, and 44. Kermit Kaleba, New Changes to Appren-
Management, January 2011, p. 27. Practices (Upper Saddle River, NJ: Prentice ticeship Program Could Be Forthcoming,
13. Rachel Dodes, At Macy s, a Makeover on Hall, 2007), p. 8; and G. Sadri, Boosting Training & Development, February 2008,
Service, The Wall Street Journal, April 11, Performance Through Self-Efficacy, p. 14.
2011, p. B-10. T*D 65 no. 6 (June 2011), pp. 30 31. 45. Robert Weintraub and Jennifer Martineau,
14. Ibid. 29. Ibid. The Just in Time Imperative, Training &
15. Nancy DeViney and Brenda Sugrue, 30. Ibid., p. 90. Development, June 2002, p. 52; and
Learning Outsourcing: A Reality Check, 31. Kenneth Wexley and Gary Latham, Andrew Paradise, Informal Learning:
Training & Development, December 2004, Developing and Training Human Resources Overlooked or Overhyped? Training &
p. 41. See also How Are Organizations in Organizations (Upper Saddle River, NJ: Development, July 2008, pp. 52 53.
Training Today?, HR Focus 86, no. 7 (July Prentice Hall, 2002), p. 305. 46. Aparna Nancherla, Knowledge Deliv-
2009), pp. 52 53. 32. Ibid. ered in Any Other Form Is . . . Perhaps
16. Brenda Sugrue et al., What in the World Is 33. Kathryn Tyler, Focus on Training, HR Sweeter, Training & Development, May
WLP? Training & Development, January Magazine, May 2000, pp. 94 102. 2009, pp. 54 60.
2005, pp. 51 54. 34. Janice A. Cannon-Bowers et al., Frame- 47. Nadira Hira, The Making of a UPS Dri-
17. Companies Invested More in Training work for Understanding Pre-Practice ver, Fortune, November 12, 2007, p. 120.
Despite Economic Setbacks, Survey Conditions and Their Impact on Learn- 48. Arthur Winfred Jr. et al., Effectiveness of
Says, BNA Bulletin to Management, ing, Personnel Psychology 51 (1998), Training in Organizations: A Meta Analy-
March 7, 2002, p. 73; Employee Training pp. 291 320; see also, J. S. Goodman, et al., sis of Design and Evaluation Features,
280 PART 3 TRAINING AND DEVELOPMENT

Journal of Applied Psychology 88, no. 2 64. Paul Harris, Simulation: The Game Is p. 137; see also, M. Donahue, Mobile
(2003), pp. 234 245. On, Training & Development, October Learning is the Next Generation in Train-
49. Donald Michalak and Edwin G. Yager, 2003, p. 49. See also Jenni Jarventaus, ing. Hotel Management 226 no. 4 (April 4,
Making the Training Process Work (New Virtual Threat, Real Sweat, Training & 2011), p. 17.
York: Harper & Row, 1979), pp. 108 111. Development, May 2007, pp. 72 78. 80. www.dominknow.com, accessed March 23,
See also Richard Wiegand, Can All Your 65. Jarventaus, Virtual Threat, Real Sweat. 2009.
Trainees Hear You? Training & Develop- 66. Clark Aldrich, Engaging Mini-Games 81. Elizabeth Agnvall, Just-in-Time Train-
ment Journal 41, no. 8 (August 1987), Find Niche in Training, Training & Devel- ing, HR Magazine, May 2006, pp. 67 78.
pp. 38 43; and Dos and Don ts at the opment, July 2007, pp. 22 24; and Cisco s 82. Ibid.
Podium, Journal of Accountancy 200, no. 3 Global Training Machine, Workforce 83. For a similar program at Accenture, see
(September 2005). Management, November 17, 2008, p. 30. Don Vanthournout and Dana Koch,
50. Jacqueline Schmidt and Joseph Miller, 67. What Do Simulations Cost? Training & Training at Your Fingertips, Training &
The Five-Minute Rule for Presenta- Development, June 2007, p. 88; see also Development, September 2008, pp. 52 57.
tions, Training & Development, March Paul Harris, Immersive Learning Seeks For a discussion of blogs in training
2000, pp. 16 17; and Dos and Don ts at a Foothold, Training & Development, see Becky Livingston, Harnessing Blogs
the Podium, op cit. January 2009, pp. 40 45; and R. S. Polimeni for Learning, T+D 65, no. 5 (May 2011),
51. G. N. Nash, J. P. Muczyk, and F. L. Vettori, et al., Using Computer Simulations to pp. 76 77.
The Role and Practical Effectiveness Recruit and Train Generation Y Accoun- 84. Traci Sitzmann et al., The Comparative
of Programmed Instruction, Personnel tants, The CPA Journal 79, no. 5 (May Effectiveness of Web-Based and Classroom
Psychology 24 (1971), pp. 397 418; Duane 2009), pp. 64 68. Instruction: A Meta-Analysis, Personnel
Schultz and Sydney Ellen Schultz, Psychology 68. Pat Galagan, Second That, Training & Psychology 59 (2006), pp. 623 664.
and Work Today (Upper Saddle River, NJ: Development, February 2008, pp. 34 37. 85. Susan Ladika, When Learning Lasts a
Prentice Hall, 1998), pp. 181 183; chemistry 69. Garry Kranz, More to Learn, Workforce Lifetime, HR Magazine, May 2008, p. 57.
study based on N. Izzet Kurbanoglu, Yavuz Management, January 2011, p. 27; quote 86. Jeremy Smerd, New Workers Sorely Lack-
Taskesenligil and Mustafa Sozbilir, Pro- is from Ann Pace, Spurring Innovation ing Literacy Skills, Workforce Management,
grammed Instruction Revisited: A Study and Engaging the Learners of the 2011 December 10, 2008, p. 6.
on Teaching Stereochemistry, Chemistry Workplace, T+D 65, no. 8 (August 2011), 87. Paula Ketter, The Hidden Disability,
Education Research and Practice 7, no. 1 pp. 64 69 Training & Development, June 2006,
(2006), pp. 13 21. 70. See, for example, Rockley Miller, New pp. 34 40.
52. Wexley and Latham, Developing and Train- Training Looms, Hotel and Motel Man- 88. Jennifer Salopek, The Growth of Succes-
ing, pp. 131 133. See also Teri O. Grady and agement, April 4, 1994, pp. 26, 30; Albert sion Management, Training & Develop-
Mike Matthews, Video . . . Through the Ingram, Teaching with Technology, ment, June 2007, pp. 22 24; and Kermit
Eyes of the Trainee, Training 24, no. 7 (July Association Management 48 (June 1996), Kaleba, Businesses Continue to Push for
1987), pp. 57 62; New ARTBA PPE Video pp. 31 34; Sandra Vera-Munoz et al., Lifelong Learning, Training & Develop-
and Laborers Night Work Suggestions Enhancing Knowledge Sharing in Public ment, June 2007, p. 14.
Highlight Construction Safety Advances, Accounting Firms, Accounting Horizons 89. Rita Zeidner, One Workforce Many
EHS Today 2, no. 7 (July 2009), p. 51. 20, no. 2 (June 2006), pp. 133 155. Languages, HR Magazine, January 2009,
53. Paula Ketter, What Can Training Do for 71. Kevin Alansky, Blackboard Pays Off for pp. 33 37.
Brown? Training & Development, May ADP, T*D 65,no. 6 ( June 2011), pp. 68 69. 90. Matthew Reis, Do-It-Yourself Diversity,
2008, pp. 30 36. 72. Greg Wright, Retailers Buy into Relearn- Training & Development, March 2004,
54. Craig Marion, What Is the EPSS ing, HR Magazine, December 7, 2010, pp. 80 81.
movement and What Does It Mean to pp. 87 90. 91. www.prismdiversity.com/resources/
Information Designers? August 20, 1999. 73. John Zonneveld, GM Dealer Training diversity_training.html, accessed June 1,
55. Josh Bersin and Karen O Leonard, Goes Global, Training & Development, 2011.
Performance Support Systems, Training December 2006, pp. 47 51. 92. Jennifer Salopek, Trends: Lost in Trans-
& Development, April 2005, p. 68. 74. The Next Generation of Corporate lation, Training & Development, December
56. Blanchard and Thacker, Effective Training, Learning, Training & Development, June 2003, p. 15; www.visionpoint. com/training-
p. 163. 2003, p. 47. solutions/title/just-be-fair-basic-diversity-
57. www.radvision.com/Support/cisco.htm, 75. Ibid. training, accessed June 17, 2011.
accessed June 1, 2011. 76. For a list of guidelines for using e-learning, 93. Blanchard and Thacker, pp. 403 405.
58. Ibid. see, for example, Mark Simon, E-Learning 94. Ibid., p. 404.
59. Dina Berta, Computer-Based Training No How, Training & Development, January 95. Holly Dolezalek, Extreme Training,
Clicks with Both Franchisees and Their 2009, pp. 34 39. Training 47, no. 1 (January 2010), pp. 26 28.
Employees, Nation s Restaurant News, 77. The Next Generation of Corporate Learn- 96. Douglas Shuit, Sound of the Retreat,
July 9, 2001, pp. 1, 18; and, Is Online ing, Training & Development, June 2004, Workforce Management, September 2003,
Fall Protection Training Effective? EHS p. 47; Jennifer Hofmann and Nanatte p. 40.
Today 3, no. 7 (July 2010). Miner, Real Blended Learning Stands Up, 97. For a discussion of leadership develop-
60. P. Nick Blanchard and James Thacker, Training & Development, September 2008, ment tools, see John Beeson, Building
Effective Training: Systems, Strategies, and pp. 28 31; J. Hofmann, Top 10 Challenges Bench Strength: A Tool Kit for Executive
Practices (Upper Saddle River, NJ: Pearson, of Blended Learning, Training (Minneapo- Development, Business Horizons 47, no. 6
2003), p. 247; see also Michael Laff, Simula- lis, Minn.) 48 no. 2 (March/April 2011), (November 2004), pp. 3 9. See also Rita
tions: Slowly Proving Their Worth, Training pp. 12 13; and Lee Salz, Use Webinars for Smith and Beth Bledsoe, Grooming
& Development, June 2007, pp. 30 34. Training and Revenue, Training 48, no. 2 Leaders for Growth, Training & Devel-
61. Laff, Simulations. (March/April 2011), p. 14 opment, August 2006, pp. 47 50.
62. Blanchard and Thacker, Effective Training, 78. Ruth Clark, Harnessing the Virtual 98. Paula Caligiuri, Developing Global
2003, p. 248. Classroom, Training & Development, Leaders, Human Resource Management
63. Ibid., p. 249. See also Kim Kleps, Virtual November 2005, pp. 40 46. Review 16 (2006), pp. 219 228.
Sales Training Scores a Hit, Training & 79. Jennifer Taylor Arnold, Learning On-the- 99. Ann Pomeroy, Head of the Class, HR
Development, December 2006, pp. 63 64. Fly, HR Magazine, September 2007, Magazine, January 2005, p. 57.
 CHAPTER 8 TRAINING AND DEVELOPING EMPLOYEES 281

100. Mike Czarnowsky, Executive Develop- Psychology 56, no. 1 (Spring 2003), 130. Stacie Furst and Daniel Cable, Employee
ment, Training & Development, September pp. 23 44. Resistance to Organizational Change:
2008, pp. 44 45. 114. This is based on Diane Brady, Can GE Managerial Influence Tactics and Leader
101. Thrown into Deep End, Workers Surface Still Manage? Bloomberg Businessweek, Member Exchange, Journal of Applied
as Leaders, BNA Bulletin to Management, April 25, 2010, p. 29. Psychology 3, no. 2 (2008), p. 453.
July 11, 2002, p. 223. See also Ann Locke 115. Ibid. 131. Beer, Eisenstat, and Spector, Why Change
and Arlene Tarantino, Strategic Leadership 116. Quoted and abstracted from Five Programs Don t Produce Change, p. 164.
Development, Training & Development, Rules for Talent Management in the 132. Robert J. House, Management Develop-
December 2006, pp. 53 55. New Economy, May 2010, http://www. ment (Ann Arbor, MI: Bureau of Industrial
102. Chris Whitcomb, Scenario-Based Train- towerswatson.com/viewpoints/1988, Relations, University of Michigan, 1967),
ing at the FBI, Training & Development, accessed August 22, 2011. p. 71; Louis White and Kevin Wooten,
June 1999, pp. 42 46. See also Michael 117. Quoted and abstracted from Jean Martin Ethical Dilemmas in Various Stages of
Laff, Serious Gaming: The Trainer s New and Conrad Schmidt, How to Keep Your Organizational Development, Academy
Best Friend, Training & Development, Top Talent, Harvard Business Review of Management Review 8, no. 4 (1983),
January 2007, pp. 52 57. (May 2010): 53 61. pp. 690 697.
103. http://teamcommunication.blogspot. 118. Ibid. 133. Wendell French and Cecil Bell Jr.,
com/, accessed June 17, 2011. 119. Ibid. Organization Development (Upper Saddle
104. http://www.amanet.org/, accessedAugust 22, 120. Ed Fraeuenheim, Lost in the Shuffle, River, NJ: Prentice Hall, 1995), pp. 171 193.
2011. Workforce Management, January 14, 134. Benjamin Schneider, Steven Ashworth,
105. For a list of Harvard programs, see, http:// 2008, p. 13. A. Catherine Higgs, and Linda Carr, Design
www.exed.hbs.edu/programs/Pages/ 121. Paul Harris, A New Market Emerges, Validity, and Use of Strategically Focused
default.aspx, accessed August 22, 2011. Training & Development, September Employee Attitude Surveys, Personnel
106. Ann Pomeroy, Head of the Class, HR 2003, pp. 30 38. For an example of a suc- Psychology 49 (1996), pp. 695 705.
Magazine, January 2005, p. 57. See also cessful organizational change, see Jordan 135. Cummings and Worley, Organization
Michael Laff, Centralized Training Leads Mora et al., Recipe for Change, Training Development and Change, p. 501.
to Nontraditional Universities, Training & Development, March 2008, pp. 42 46. 136. For a description of how to make OD a
& Development, January 2007, pp. 27 29; 122. See, for example, John Austin, Mapping part of organizational strategy, see Aubrey
and Chris Musselwhite, University Execu- Out a Game Plan for Change, HR Maga- Mendelow and S. Jay Liebowitz, Difficul-
tive Education Gets Real, Training & zine, April 2009, pp. 39 42. ties in Making OD a Part of Organizational
Development, May 2006, p. 57. 123. Nokia examples based on www.engadget. Strategy, Human Resource Planning 12,
107. Norman Maier, Allen Solem, and Ayesha com/2011/02/05/nokia-reportedly-plan- no. 4 (1995), pp. 317 329; and Valerie Gar-
Maier, The Role Play Technique (San ning-organizational-changes-mobile- row and Sharon Varney, What Does OD
Diego, CA: University Associates, 1975), phone/, and http://press.nokia.com/ Do? People Management (June 4, 2009).
pp. 2 3. See also Karen Griggs, A Role press-release/, accessed June 17, 2011. 137. Wexley and Latham, Developing and
Play for Revising Style and Applying 124. Gina Gotsill and Meryl Natchez, From Training Human Resources in Organiza-
Management Theories, Business Com- Resistance to Acceptance: How to Imple- tions, p. 128.
munication Quarterly 68, no. 1 (March ment Change Management, Training & 138. Todd Raphel, What Learning Manage-
2005), pp. 60 65. Development, November 2007, pp. 24 26. ment Reports Do for You, Workforce, June
108. Paul Taylor et al., A Meta-Analytic 125. See for example, ibid. 2001, pp. 56 58.
Review of Behavior Modeling Training, 126. The steps are based on Michael Beer, 139. Wexley and Latham, Developing and
Journal of Applied Psychology 90, no. 4 Russell Eisenstat, and Bert Spector, Why Training Human Resources in Organiza-
(2005), pp. 692 719. Change Programs Don t Produce Change, tions, p. 153.
109. Martha Peak, Go Corporate U! Manage- Harvard Business Review, November 140. See, for example, Jack Phillips, and Patti
ment Review 86, no. 2 (February 1997), December 1990, pp. 158 166; Thomas Phillips, Moving From Evidence to Proof,
pp. 33 37; and Jessica Li and Amy Lui Cummings and Christopher Worley, T*D 65, no. 8 (August 2011), pp. 34 39
Abel, Prioritizing and Maximizing the Organization Development and Change for a discussion of a process for gathering
Impact of Corporate Universities, T*D (Minneapolis, MN: West Publishing Com- training assessment data.
65, no. 5 (May 2011), pp. 54 57. pany, 1993); John P. Kotter, Leading 141. See, for example, Antonio Aragon-
110. Russell Gerbman, Corporate Universi- Change: Why Transformation Efforts Fail, Sanchez et al., Effects of Training on
ties 101, HR Magazine, February 2000, Harvard Business Review, March April Business Results, International Journal of
pp. 101 106; Holly Dolezalek, Univer- 1995, pp. 59 66; and John P. Kotter, Human Resource Management 14, no. 6
sity 2.0, Training 44, no. 8 (September Leading Change (Boston: Harvard Business (September 2003), pp. 956 980.
2007). School Press, 1996). Change doesn t neces- 142. A recent review concluded that the rela-
111. Executive Coaching: Corporate Ther- sarily have to be painful. See, for example, tionship of training to human resource
apy, The Economist, November 15, 2003, Eric Abrahamson, Change Without Pain, outcomes and organizational performance
p. 61. See also Steve Gladis, Executive Harvard Business Review, July August is positive, but that training is only very
Coaching Builds Steam in Organizations, 2000, pp. 75 79. See also David Herold weakly related to financial outcomes.
Training & Development, December 2007, et al., Beyond Change Management: Given this, managers may want to assess
pp. 59 61. A Multilevel Investigation of Contextual training results not just in terms of
112. As Corporate Coaching Goes Main- and Personal Influences on Employees employee behavior and performance, but
stream, Key Prerequisite Overlooked: Commitment to Change, Journal of company financial performance as well.
Assessment, BNA Bulletin to Manage- Applied Psychology 92, no. 4 (2007), p. 949. See Phyllis Tharenou et al., A Review and
ment, May 16, 2006, p. 153. 127. Ibid. Critique of Research on Training and
113. James Smither et al., Can Working with 128. Kotter, Leading Change, p. 85. Organizational Level Outcomes, Human
an Executive Coach Improve Multisource 129. Beer, Eisenstat, and Spector, Why Change Resource Management Review 17 (2007),
Feedback Ratings over Time? Personnel Programs Don t Produce Change, p. 164. pp. 251 273.
282 PART 1 INTRODUCTION

9
Performance Management
and Appraisal
Source: TRW Instruments.
LEARNING OBJECTIVES Company s
1. Define performance management and discuss how it Strategic Goals
differs from performance appraisal.
2. Describe the appraisal process.
3. Set effective performance appraisal standards.
4. Develop, evaluate, and administer at least four
Employee Competencies
performance appraisal tools.
and Behaviors Required
5. Explain and illustrate the problems to avoid in for Company to Achieve
appraising performance. These Strategic Goals
6. Discuss the pros and cons of using different raters
to appraise a person s performance.
7. Perform an effective appraisal interview.
Training and
opment
Devel

Co
Placem t and
RW supplies automotive steering, braking, and

mp
ent
Recruitmen

ensa
safety and electronic equipment to customers world-
wide.1 Several years ago, TRW was deeply in debt.2 HR Policies and Practices

tion
With over 100,000 employees on five continents, Required to Produce
TRW management knew it had to base its new strategy on Employee Competencies
and Behaviors
improving competitiveness and performance. At the time,

l
most of the firm s far-flung departments used their own

Le t
m
ga

Re m
l

en
dn noriv ita
sno olp

E
paper-based performance appraisal systems. Top manage- a c nE
ment decided it needed a new company-wide performance
iget
artS eey
management system to help bring what TRW s employees
were doing into synch with the firm s new strategic goals.

WHERE ARE WE NOW . . .

Chapters 6 8 explained selecting, training,
and developing employees. After employees
have been on the job for some time, you
should appraise their performance. The
purpose of this chapter is to show you how
to do that. The main topics we cover include
the performance appraisal process, appraisal
methods, appraisal performance problems
and solutions, performance management,
and the appraisal interview. Career planning
is a logical consequence of appraisal: We ll
turn to career planning in Chapter 10.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 283
284 PART 3 TRAINING AND DEVELOPMENT

1 Define performance
BASIC CONCEPTS IN PERFORMANCE MANAGEMENT
management and discuss AND APPRAISAL
how it differs from
performance appraisal.
Few things supervisors do are fraught with more peril than appraising subordinates
performance. Employees tend to be overly optimistic about what their ratings will be.
They also know that their raises, careers, and peace of mind may hinge on how you rate
them. As if that s not enough, few appraisal processes are as fair as employers think they are.
Hundreds of obvious and not-so-obvious problems (such as bias, and the tendency for
supervisors to rate everyone average ) distort the process. However, the perils notwith-
standing, performance appraisal plays a central role in human resource management.

2 Describe the appraisal

The Performance Appraisal Process
process. Performance appraisal means evaluating an employee s current and/or past perform-
ance relative to his or her performance standards. You may equate appraisal forms
like Figure 9-1 with performance appraisal, but appraisal involves more than forms.

FIGURE 9-1 Online Faculty

Evaluation Form

Source: Used with permission

of Central Oregon Community
College.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 285

FIGURE 9-1 (Continued)

Effective appraisal also requires that the supervisor set performance standards. And it
requires that the employee receives the training, feedback, and incentives required to
eliminate performance deficiencies.
Effective appraisals begin before the actual appraisal, with the manager defining the
employee s job and performance criteria. Defining the job means making sure that you
and your subordinate agree on his or her duties and job standards and on the appraisal
method you will use. Stripped to its essentials, performance appraisal always involves
the 3-step performance appraisal process: (1) setting work standards; (2) assessing the
employee s actual performance relative to those standards (this usually involves some
rating form); and (3) providing feedback to the employee with the aim of helping him
or her to eliminate performance deficiencies or to continue to perform above par.

Why Appraise Performance?

There are five reasons to appraise subordinates performance.
* First, most employers still base pay, promotion, and retention decisions on the
employee s appraisal.3
* Second, appraisals play a central role in the employer s performance management
process. Performance management means continuously making sure that each
employee s and team s performance makes sense in terms of the company s
overall goals. The accompanying HR as a Profit Center feature illustrates this.
* Third, the appraisal lets you and the subordinate develop a plan for correcting
any deficiencies, and to reinforce the things the subordinate does right.
* Fourth, appraisals should facilitate career planning. They provide an opportunity
to review the employee s career plans in light of his or her exhibited strengths and
weaknesses. We address career planning in Chapter 10.
* Finally, supervisors use appraisals to identify employees training and development
needs. The appraisal should enable the supervisor to identify if there is a perform-
ance gap between the employee s performance and his or her standards. And it
should help identify the cause of any such gap, and the remedial steps required.

performance appraisal performance appraisal process

Evaluating an employee s current and/or A 3-step appraisal processing involving
past performance relative to his or her (1) setting work standards, (2) assessing the
performance standards. employee s actual performance relative to
those standards, and (3) providing feedback
to the employee with the aim of helping him
or her to eliminate performance deficiencies
or to continue to perform above par.
286 PART 3 TRAINING AND DEVELOPMENT

HR AS A PROFIT CENTER
Setting Performance Goals at Ball Corporation
Few HR practices have as pronounced an impact on a company s performance as
does setting and measuring goals. For example, consider a report by management at
Ball Corporation, which supplies metal packaging to customers such as food and paint
manufacturers worldwide.4 The management team at one Ball plant concluded that it
could improve plant performance by instituting an improved process for setting goals
and for ensuring that the plant s leaders mind-sets and behaviors were in synch
with these goals.5 The new program began by training plant leaders on how to
improve performance, and then setting and communicating daily performance goals.
Management communicated and tracked daily goal attainment by distributing team
scorecards to the plant s work teams. Plant employees received special coaching and
training to ensure they had the skills required for achieving the goals.
According to management, within 12 months the plant increased production by
84,000,000 cans, improved customer complaints by 50 percent, and yielded a
return-on-investment of more than $3,090,000.6

The Importance of Continuous Feedback

For accomplishing several of these aims, traditional annual or semiannual appraisal
reviews make sense. For example, promotions and raises tend to be periodic decisions.
Similarly, you probably wouldn t want to make career decisions without at least several
months of data gathering and introspection.
However, it s usually a mistake to wait until the actual appraisal to let employees
know what they re doing wrong and doing right. Aligning the employee s efforts with
the job s standards should be a continuous process. When you see a performance
problem, the time to take action is immediately there is no substitute for nudging
your employee s performance back into line continuously and incrementally.
Similarly, when someone does something well, the best reinforcement comes
immediately, not 6 months later.

Performance Management
Recognizing this, many employers today take a more continuous approach to the
performance appraisal cycle. For example, at Toyota Motor s Lexington, Kentucky,
Camry plant, the supervisors don t sit with individual employees to fill out forms and
appraise them. Instead, teams of employees monitor their own results, even posting
individual daily performance metrics. In frequent meetings, they continuously align
those results with the work team s standards and with the plant s overall quality and
productivity needs. They do this by continuously adjusting how they and their team
members do things. Team members who need coaching and training receive it, and
procedures that need changing are changed. This is performance management in action.

PERFORMANCE MANAGEMENT DEFINED Performance management means

different things to different people. Some use performance management as just a new
way of saying performance appraisal. Others say performance appraisal represents just
the appraisal step of a three-step goal-setting/appraisal/feedback performance man-
agement process. In this book, we assume that performance management is a uniquely
goal-oriented and continuous way to appraise and manage employees performance. It
is the continuous process of identifying, measuring, and developing the performance of
individuals and teams and aligning their performance with the organization s goals. 7
The difference between performance management and performance appraisal is
more than a matter of degree; it s a matter of substance. Many employers have what
they call performance management processes, but in fact still use traditional perform-
ance appraisal. Continuous feedback and strategically related performance criteria
are the two distinguishing characteristics of performance management. As one expert
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 287

puts it, a system that involves employee evaluations once a year without an ongoing
effort to provide feedback and coaching so that performance can be improved is not a
true performance management system. 8 Similarly, performance management
systems that do not make explicit the employee contribution to the organizational
goals are not true performance management systems. 9 The accompanying Strategic
Context feature illustrates this.

THE STRATEGIC CONTEXT

TRW
TRW management decided it needed a new company-wide performance manage-
ment system to help bring its employees actual performance into synch with the
firm s new operating goals. Top management appointed a special team, and charged
it with creating a one company, one system performance management system.
The team s aim was to quickly develop a performance management system that
was consistent in that employees in all of TRW s far-flung organization could use
the same system. It also had to be comprehensive in that it consolidated into a
single integrated system the necessary goal setting, performance appraisal,
professional development, and succession planning functions.
The new performance management system produced many benefits. Most
notably, it focuses every employee s s attention on what each employee needs to
do to contribute to achieving TRW s goals. It also identifies development needs
that are relevant to both TRW and to the employee.

We ll discuss performance management more fully later in the chapter after we

address some basics of performance appraisal.

3 Set effective performance

Defining the Employee s Goals and Performance Standards
appraisal standards. Most employees need and expect to know ahead of time on what basis their employer
will appraise them.10 Ideally, each employee s goals should derive from and contribute
to the company s overall aims. The manager s goals flow from the vice president s,
whose goals flow from the president s, for instance. However, setting useful goals is not
as simple as it may appear. There is an art to setting effective goals.
First, the supervisor must decide what to measure. Many employers simply use
packaged employee appraisal forms with generic scales, similar to that in Figure 9-1.
That appraisal form shows what will be measured, for instance, The instructor is
well-prepared for class. Other firms use a management by objectives approach. Thus,
the CEO may have a goal to double sales this year. Based on that, her vice president of
sales has his or her own sales goals, and each salesperson has his or her sales goal, set
in discussions with his or her supervisor.
It is typical to set measurable goals for each expectation you have for the employee.
Suppose you expect your sales manager to handle the company s three biggest
accounts personally, and to manage the sales force. You might measure the personal
selling activity in terms of a money goal how many dollars of sales the manager is
to generate personally. You might measure managing the sales force in terms of a
turnover goal (on the assumption that less than 10% of the sales force will quit in any
given year if morale is high).
But is, say, a 10% turnover goal reasonable? One way to think of this is to remem-
ber that effective goals are SMART. They are specific, and clearly state the desired
results. They are measurable, and answer the question How much? They are

performance management
The continuous process of identifying,
measuring, and developing the performance
of individuals and teams and aligning their
performance with the organization s goals.
288 PART 3 TRAINING AND DEVELOPMENT

attainable. They are relevant, and clearly derive from what the manager and company
want to achieve. And they are timely, and reflect deadlines and milestones.11

HR IN PRACTICE: HOW TO SET EFFECTIVE GOALS Behavioral science

research studies suggest four guidelines for setting performance goals:
1. Assign specific goals. Employees who receive specific goals usually perform
better than those who do not.
2. Assign measurable goals. Put goals in quantitative terms and include target dates
or deadlines.
3. Assign challenging but doable goals. Goals should be challenging, but not so
difficult that they appear impossible or unrealistic.
4. Encourage participation. The evidence suggests that participatively set goals do not
consistently result in higher performance than assigned goals, nor do assigned
goals consistently result in higher performance than participatively set ones. It is
only when the participatively set goals are more difficult (are set higher) than the
assigned ones that the participatively set goals produce higher performance. Because
it tends to be easier to set higher standards when your employees participate in
the process, participation tends to facilitate standards setting and performance.12

TALENT MANAGEMENT: BASING APPRAISAL STANDARDS ON REQUIRED

COMPETENCIES Other firms appraise employees based on the competencies and
skills the job requires. For example, BP s exploration division appraises and rewards
employees based on a skills matrix. This matrix shows (1) the basic skills required to do
that job (such as technical expertise ) and (2) the minimum level of each skill that job
requires.
THE ROLE OF JOB DESCRIPTIONS Ideally, what to appraise and how to appraise
it will be obvious from the job description. In terms of what criteria to appraise, the job
description should list the job s duties or tasks, including how critical each is to the
job, and how often it s performed. For example, a nurse s job description may include
safely administer patient medication as a task. You might then appraise the nurse on
how well he or she safely administers patient medication, for instance using data from
periodic hospital safety inspections.13 The job description may also include strategically
important behaviors such as building patient trust and satisfaction. Their presence
(either in the job description s list of duties or in a separate list of strategically relevant
core behaviors ) enables the manager to identify competencies (such as quality
consciousness ) to appraise that support the employers strategic aims.

Who Should Do the Appraising?

Appraisals by the immediate supervisor are still the heart of most appraisal processes.
Getting a supervisor s appraisal is relatively straightforward and makes sense. The
supervisor is usually in the best position to observe and evaluate his or her subordinate s
performance. The supervisor is also responsible for that person s performance.
The human resources department serves a policy-making and advisory role.
Generally, human resource managers provide the advice and the appraisal tool to use,
but leave final decisions on procedures to operating division heads. The human
resource team should also be responsible for training supervisors to improve their
appraisal skills, for monitoring the appraisal system s effectiveness, and for ensuring
that it complies with EEO laws.
Yet, although widely used, relying only on supervisors appraisals isn t always advisable.
For example, an employee s supervisor may not understand or appreciate how customers
and colleagues see the employee s performance. Furthermore, there is always some
danger of bias for or against the employee. If so, managers have several options.
PEER APPRAISALS With more firms using self-managing teams, appraisal of
an employee by his or her peers peer appraisal is popular. Typically, an
employee due for an annual appraisal chooses an appraisal chairperson. The latter
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 289

then selects one supervisor and three peers to evaluate the

employee s work.
Research indicates that peer appraisals can be effective. One
study involved undergraduates placed into self-managing work
groups. The researchers found that peer appraisals had an
immediate positive impact on [improving] perception of open
communication, task motivation, social loafing, group viability,
cohesion, and satisfaction. 14 Employees, in other words,
seem to be motivated to meet their colleagues expectations.

Source: Shutterstock.
RATING COMMITTEES A rating committee is usually
composed of the employee s immediate supervisor and three
or four other supervisors.15
Using multiple raters is advantageous. It can help cancel
Many employers use rating out problems such as bias on the part of individual raters.16 It can also provide a way to
committees to appraise include in the appraisal the different facets of an employee s performance observed by
employees. different appraisers. Multiple raters often see different facets of an employee s perform-
ance. Studies often find that the ratings obtained from different sources rarely match.17
It s therefore advisable to obtain ratings from the supervisor, his or her boss, and at least
one other manager who is familiar with the employee s work.18 At a minimum, most
employers require that the supervisor s boss sign off on any appraisals the supervisor does.
SELF-RATINGS Some employers obtain employees self-ratings, usually in conjunc-
tion with supervisors ratings. The basic problem, of course, is that employees usually
rate themselves higher than do their supervisors or peers.19 One study found that, when
asked to rate their own job performances, 40% of employees in jobs of all types placed
themselves in the top 10%, and virtually all remaining employees rated themselves at
least in the top 50%.20 In another study, subjects self-ratings correlated negatively with
their subsequent performance in an assessment center the higher they appraised them-
selves, the worse they did in the center. In contrast, an average of the person s supervisor,
peer, and subordinate ratings predicted the subjects assessment center performance.21
APPRAISAL BY SUBORDINATES Many employers have subordinates rate their
managers, usually for developmental rather than for pay purposes. Anonymity affects
the feedback. Managers who receive feedback from subordinates who identify
themselves view the upward feedback process more positively. However, subordinates
prefer giving anonymous responses (not surprisingly), and those who must identify
themselves tend to give inflated ratings.22
The evidence suggests that upward feedback can improve a manager s performance.
One study focused on 252 managers during five annual administrations of an upward
feedback program. Managers who were initially rated poor or moderate showed
significant improvements in [their] upward feedback ratings over the five-year period. In
another study, cynicism toward management and inadequate time to interact with
the boss reduced the upward appraisal s usefulness.23 And, managers who met with their
subordinates to discuss their upward feedback improved more than the managers
who did not.24
360-DEGREE FEEDBACK With 360-degree feedback, the employer collects per-
formance information all around an employee from his or her supervisors, subor-
dinates, peers, and internal or external customers generally for developmental
rather than pay purposes.25 The usual process is to have the raters complete online
appraisal surveys on the ratee. Computerized systems then compile all this feedback
into individualized reports to ratees (see the sample in Figure 9-2). The person may
then meet with his or her supervisor to develop a self-improvement plan.
Results are mixed. Participants seem to prefer this approach, but one study
concluded that multisource feedback led to generally small improvements in subse-
quent ratings by supervisors, peers, and subordinates. Improvement was most likely
to occur when the feedback the person received indicated that change was necessary,
and when the recipients believed that change was necessary and had a positive view of
 290 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-2 Part of

360-Degree Feedback Survey

Source: www.hr-survey.com/sd3609q.
htm, accessed April 28, 2009.

the change process.26 Also, 360-degree appraisals are more candid when subordinates
know rewards or promotions are not involved.
There are several ways to improve 360-degree appraisals.
* Anchor the 360-degree rating dimensions (such as conflict management ) with
specific behavioral examples (such as effectively deals with conflicts ).27
* Carefully train the people who are giving and receiving the feedback.28
* With so many appraisers involved, each potentially with his or her own ax to
grind, make sure that the feedback the person receives is productive, unbiased,
Supervisors must be familiar and development oriented.29
with appraisal techniques,
understand and avoid problems * Reduce the administrative costs associated with collecting multisource feedback by
that can cripple appraisals, using a Web-based system such as the one in Figure 9-2. This lets the rater log in,
and know how to conduct open a screen with a rating scale, and rate the person along a series of competencies
appraisals fairly. with ratings such as capable and effective. 30

TECHNIQUES FOR APPRAISING PERFORMANCE

The manager generally conducts the actual appraisal using a formal tool or
method like one or more of those described next. The two basic questions in
designing the actual appraisal tool are what performance dimensions to meas-
ure, and how to measure them. For example, in terms of what dimensions to
measure, we might measure the employee s performance in terms of generic
dimensions such as quality and timeliness, or with respect to achieving spe-
cific goals. In terms of how to measure it, you can use one or more of various
tools or methods, such as graphic rating scales or forced distribution
( grading on a curve ).We ll start with the most popular, graphic rating scales.

Graphic Rating Scale Method

Source: Getty Images, Inc.

The graphic rating scale is the simplest and most popular method for
appraising performance. Figure 9-3 shows one graphic rating scale.
A graphic rating scale lists traits or performance dimensions (such
as communication or teamwork ) and a range of performance values
(from below expectations to role model or unsatisfactory to
outstanding, ) for each trait. The supervisor rates each subordinate by
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 291

Sample Performance Rating Form

Employee s Name Level: Entry-level employee

Manager s Name

Key Work Responsibilities Results/Goals to Be Achieved

1. 1.
2. 2.
3. 3.
4. 4.

Communication
1 2 3 4 5
Below Expectations Meets Expectations Role Model
Even with guidance, fails to prepare straight- With guidance, prepares straightforward Independently prepares communications,
forward communications, including forms, communications, including forms, paperwork, such as forms, paperwork, and records, in a
paperwork, and records, in a timely and and records, in a timely and accurate manner; timely, clear, and accurate manner; products
accurate manner; products require minimal products require minimal corrections. require few, if any, corrections.
corrections.
With guidance, adapts style and materials to Independently adapts style and materials to
Even with guidance, fails to adapt style and communicate straightforward information. communicate information.
materials to communicate straightforward
information.

Organizational Know-How
1 2 3 4 5
Below Expectations Meets Expectations Role Model
<performance standards appear here> <performance standards appear here> <performance standards appear here>

Personal Effectiveness
1 2 3 4 5
Below Expectations Meets Expectations Role Model
<performance standards appear here> <performance standards appear here> <performance standards appear here>

Teamwork
1 2 3 4 5
Below Expectations Meets Expectations Role Model
<performance standards appear here> <performance standards appear here> <performance standards appear here>

Achieving Business Results

1 2 3 4 5
Below Expectations Meets Expectations Role Model
<performance standards appear here> <performance standards appear here> <performance standards appear here>

FIGURE 9-3 Sample Graphic Performance Rating Form

Source: Elaine Pulakos, Performance Management, SHRM Foundation, 2004, pp. 16 17.

graphic rating scale

A scale that lists a number of traits and a
range of performance for each. The
employee is then rated by identifying the
score that best describes his or her level of
performance for each trait.
292 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-4 One Item from

an Appraisal Form Assessing Position: Pizza Chef
Employee Performance on Duty 1: Maintain adequate inventory
Specific Job-Related Duties of pizza dough Rating
Each round pizza dough must be between Needs Satisfactory Excellent
12 and 14 ounces each, kneaded at least improvement
2 minutes before being placed in the
temperature and humidity-controlled
cooler, and kept there for at least 5 hours
prior to use. There should be enough,
but no more for each day s demand.

circling or checking the score that best describes the subordinate s performance for each
trait. The manager then totals the assigned ratings for the traits.

WHAT TO RATE? We can use graphic ratings scales to illustrate the range of traits
4 Develop, evaluate, and
or performance dimensions one might evaluate. For example:
administer at least four
performance appraisal tools.
* As in Figure 9-3, some rating scales assess generic job dimensions such as
communications, teamwork, know-how, and quantity.
FIGURE 9-5 Appraisal * Another option is to rate the employee s performance on the job s actual duties.
Form for Assessing Both For example, Figure 9-4 shows part of an appraisal form for a pizza chef. This
Competencies and Specific assesses the job s main specific duties, one of which is Maintain adequate
Objectives inventory of pizza dough. Here you would assess how well the employee did in
exercising each of these duties.
Source: www.case.edu/finadmin/
humres/policies/perfexempt.pdf, * Or, you might rate (as in Section I of Figure 9-5) how well the employee did with
accessed May 17, 2007. Used with respect to achieving specific performance expectations or objectives. Although not
permission of Case Western Reserve
University.

SECTION I Responsibilities/Objectives and Performance Standards in Support of Departmental Goals

Maximizing one s professional qualifications to make a difference

End of Period Rating

Primary Performance Expectations: Mid-Year of Success and Effectiveness
Comment and Place X on
Responsibilities/Objectives and Standards Progress Notes Not
Scale to Rate
Very
Strong Strong

Objective 1:

Objective 2:

Objective 3:

Objective 4:

Objective 5:

Objectives for new rating period reviewed and agreed to: Mid-Year Review:
Evaluator Date Employee Date Evaluator Date Employee Date
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 293

SECTION II Performance Competencies

Making a Difference by Working and Learning Together.

End of Period Rating

Mid-Year of Success and Effectiveness
Comment and Place X on
Progress Notes Not
Scale to Rate
Very
Strong Strong

Job Knowledge/Competency: Demonstrates the knowledge and skills necessary

to perform the job effectively. Understands the expectations of the job and remains
current regarding new developments in areas of responsibility. Performs responsibilities
in accordance with job procedures and policies. Acts as a resource person upon whom
others rely for assistance.
Quality/Quantity of Work: Completes assignments in a thorough, accurate, and
timely manner that achieves expected outcomes. Exhibits concern for the goals and
needs of the department and others that depend on services or work products. Handles
multiple responsibilities in an effective manner. Uses work time productively.
Planning/Organization: Establishes clear objectives and organizes duties for self
based on the goals of the department, division, or management center. Identifies
resources required to meet goals and objectives. Seeks guidance when goals or
priorities are unclear.
Initiative/Commitment: Demonstrates personal responsibility when performing
duties. Offers assistance to support the goals and objectives of the department and
division. Performs with minimal supervision. Meets work schedule/attendance
expectations for the position.
Problem Solving/Creativity: Identifies and analyzes problems. Formulates
alternative solutions. Takes or recommends appropriate actions. Follows up to ensure
problems are resolved.
Teamwork and Cooperation: Maintains harmonious and effective work relation-
ships with co-workers and constituents. Adapts to changing priorities and demands.
Shares information and resources with others to promote positive and collaborative
work relationships.
Interpersonal Skills: Deals positively and effectively with coworkers and
constituents. Demonstrates respect for all individuals.
Communication (Oral and Written): Effectively conveys information and ideas
both orally and in writing. Listens carefully and seeks clarification to ensure
understanding.

Competencies Reviewed and Discussed: Mid-Year Review

Evaluator Date Employee Date

FIGURE 9-5 (Continued)

in the figure, sell $600,000 worth of products per year illustrates a performance
expectation/objective.
* Competency-based appraisal forms are another option. Here you focus on the
extent to which the employee exhibits the competencies (generally the skills
and/or knowledge) needed to perform the job. Section II of Figure 9-5 illustrates
this appraisal approach. To illustrate, one competency that a nurse supervisor
should bring to the job might be builds a culture that is open and receptive to
improved clinical care. Why appraise such competencies? Suppose this hospital s
strategic goals include improving quality of patient care. If so, then focusing the
nurse supervisor s attention on improving his or her clinical care competencies
better supports the hospital s strategy than would appraising how he or she rates
on duties like supervise one dozen nurses. 31
Some graphic rating forms appraise several things. For example, Figure 9-5 (Sections I
and II) assesses the employee s performance relating to both competencies and objec-
tives. With respect to competencies, the employee is expected to develop and exhibit
competencies (Section II) such as identifies and analyzes problems (Problem Solv-
ing), and maintains harmonious and effective work relationships with co-workers
and constituents (Teamwork). The employee and supervisor would fill in the
objectives section (Section I) at the start of the year, and then rate results and set new
ones as part of the next appraisal.
294 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-6 Scale for

Alternate Ranking of Appraisee ALTERNATION RANKING SCALE

Trait:

For the trait you are measuring, list all the employees you want to rank. Put the highest-ranking
employee s name on line 1. Put the lowest-ranking employee s name on line 20. Then list the
next highest ranking on line 2, the next lowest ranking on line 19, and so on. Continue until all
names are on the scale.

Highest-ranking employee

1. 11.

2. 12.

3. 13.

4. 14.

5. 15.

6. 16.

7. 17.

8. 18.

9. 19.

10. 20.

Lowest-ranking employee

Alternation Ranking Method

Ranking employees from best to worst on a trait or traits is another option. Since it is
usually easier to distinguish between the worst and best employees, an alternation
ranking method is most popular. First, list all subordinates to be rated, and then
cross out the names of any not known well enough to rank. Then, on a form like that
in Figure 9-6, indicate the employee who is the highest on the performance dimension
being measured and the one who is the lowest. Then choose the next highest and the next
lowest, alternating between highest and lowest until all employees have been ranked.

Paired Comparison Method

The paired comparison method helps make the ranking method more precise. For
every trait (quantity of work, quality of work, and so on), you pair and compare every
subordinate with every other subordinate.
Suppose you have five employees to rate. In the paired comparison method, you
make a chart, as in Figure 9-7, of all possible pairs of employees for each trait. Then, for
each trait, indicate (with a * or +) who is the better employee of the pair. Next, add up
the number of * s for each employee. In Figure 9-7, Maria ranked highest (has the most
* marks) for quality of work, whereas Art was ranked highest for creativity.

Forced Distribution Method

The forced distribution method is similar to grading on a curve. With this method,
you place predetermined percentages of ratees into several performance categories.
The proportions in each category need not be symmetrical; GE used top 20%,
middle 70%, and bottom 10% for its managers. (GE now tells managers to use more
discretion in assigning rankings, and no longer strictly adheres to its famous
20/70/10 split.)32 Forced distribution makes some sense. It reflects the fact that top
employees often outperform average or poor ones by as much as 100%.33 About a
fourth of Fortune 500 companies including Microsoft, Conoco, and Intel use versions
of forced distribution.34
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 295

FIGURE 9-7 Ranking

Employees by the Paired FOR THE TRAIT QUALITY OF WORK FOR THE TRAIT CREATIVITY
Comparison Method
Employee rated: Employee rated:
Note: means better than.
As As
means worse than. For each Compared A B C D E Compared A B C D E
chart, add up the number of s in to: Art Maria Chuck Diane José to: Art Maria Chuck Diane José
each column to get the highest
A + + A
ranked employee. Art Art
B B + + +
Maria Maria
C + + C + + +
Chuck Chuck
D + + + D + +
Diane Diane
E + + + E + +
José José

Maria ranks highest here Art ranks highest here

As most students know, forced grading systems are unforgiving. With forced
distribution, you re either in the top 5% or 10% (and thus get that A ), or you re not.
And, if you re in the bottom 5% or 10%, you get an F, no questions asked. Your
professor hasn t any wiggle room. Some students must fail. One survey found that
77% of responding employers using this approach were at least somewhat satisfied
with forced ranking, while the remaining 23% were dissatisfied. The biggest
complaints: 44% said it damages morale. Forty-seven percent said it creates interde-
partmental inequities: High performing teams must cut 10% of their workers while
low performing teams are still allowed to retain 90% of theirs. 35 Some writers refer
unkindly to forced rankings as Rank and Yank. 36
Given this, to protect against unfairness and bias claims, managers should take
several steps.37 Appoint a review committee to review any employee s low ranking.
Train raters to be objective, and consider using multiple raters in conjunction with
the forced distribution approach. And remember that distinguishing between top and
bottom performers is usually not even the problem: The challenge is to differentiate
meaningfully between the other 80%. 38

Critical Incident Method

With the critical incident method, the supervisor keeps a log of positive and negative
examples (critical incidents) of a subordinate s work-related behavior. Every 6 months
or so, supervisor and subordinate meet to discuss the latter s performance, using the
incidents as examples.
Compiling incidents is useful. It provides examples of good and poor perform-
ance the supervisor can use to explain the person s rating. It makes the supervisor
think about the subordinate s appraisal all during the year (so the rating does not
just reflect the employee s most recent performance). And the list provides examples

alternation ranking method forced distribution method critical incident method

Ranking employees from best to worst on Similar to grading on a curve; predetermined Keeping a record of uncommonly good
a particular trait, choosing highest, then percentages of ratees are placed in various or undesirable examples of an employee s
lowest, until all are ranked. performance categories. work-related behavior and reviewing it with
the employee at predetermined times.
paired comparison method
Ranking employees by making a chart of all
possible pairs of the employees for each trait
and indicating which is the better employee
of the pair.
296 PART 3 TRAINING AND DEVELOPMENT

TABLE 9-1 Examples of Critical Incidents for Assistant Plant Manager

Continuing Duties Targets Critical Incidents

Schedule production for 90% utilization of personnel Instituted new production scheduling
plant and machinery in plant; system; decreased late orders by 10% last
orders delivered on time month; increased machine utilization
in plant by 20% last month
Supervise procurement Minimize inventory costs Let inventory storage costs rise 15% last
of raw materials while keeping adequate month; overordered parts A and B
and inventory control supplies on hand by 20%; underordered part C by 30%
Supervise machinery No shutdowns due to faulty Instituted new preventative maintenance
maintenance machinery system for plant; prevented a machine
breakdown by discovering faulty part

of how the subordinate can eliminate deficiencies. The downside is that without
some numerical rating, this method is not as useful for comparing employees or for
salary decisions.
In any case, it is common to accumulate incidents to illustrate the reasons behind
the employee s ratings. In Table 9-1, one of the assistant plant manager s continuing
duties was to supervise procurement and to minimize inventory costs. The critical
incident log shows that he or she let inventory storage costs rise 15%; this provides an
example of what performance to improve.

Narrative Forms
All or part of the written appraisal may be in narrative form. Figure 9-8 presents an
example. Here the person s supervisor assesses the employee s past performance and
required areas of improvement. The supervisor s narrative assessment aids helps the
employee understand where his or her performance was good or bad, and how to
improve that performance.

Behaviorally Anchored Rating Scales

A behaviorally anchored rating scale (BARS) is an appraisal tool that anchors a
numerical rating scale with specific illustrative examples of good or poor performance.
Its proponents say it provides better, more equitable appraisals than do the other tools
we discussed.39
Developing a BARS typically requires five steps:
1. Write critical incidents. Ask the job s jobholders and/or supervisors to write
specific illustrations (critical incidents) of effective and ineffective performance
on the job.
2. Develop performance dimensions. Have these people group the incidents
into 5 or 10 performance dimensions, such as salesmanship skills.
3. Reallocate incidents. To verify these groupings, have another team of people who
also know the job reallocate the original critical incidents. They must reassign
each incident to the cluster they think it fits best. Retain a critical incident if most
of this second team assigns it to the same cluster as did the first group.
4. Scale the incidents. This second group then rates the behavior described by
the incident as to how effectively or ineffectively it represents performance on the
dimension (7- to 9-point scales are typical).
5. Develop a final instrument. Choose about six or seven of the incidents as the
dimension s behavioral anchors.40 We ll look at an example.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 297

FIGURE 9-8 Appraisal-

Coaching Worksheet Appraisal-Coaching Worksheet

Source: Reprinted from Instructions: This form is to be filled out by supervisor and employee prior to each performance
www.HR.BLR.com with permission review period.
of the publisher Business and Legal
Resources, Inc. 141 Mill Rock
Road East, Old Saybrook,
CT © 2004. BLR® (Business & Employee: Position:
Legal Resources, Inc.).
Supervisor: Department:

Date: Period of Work under Consideration: from to

1. What areas of the employee s work performance are meeting job performance standards?

2. In what areas is improvement needed during the next six to twelve months?

3. What factors or events that are beyond the employee s control may affect (positively or
negatively) his or her ability to accomplish planned results during the next six to twelve months?

4. What specific strengths has the employee demonstrated on this job that should be more fully used
during the next six to twelve months?

5. List two or three areas (if applicable) in which the employee needs to improve his or her
performance during the next six to twelve months (gaps in knowledge or experience, skill
development needs, behavior modifications that affect job performance, etc.).

6. Based on your consideration of items 1 5 above, summarize your mutual objectives:

A. What supervisor will do:

B. What employee will do:

C. Date for next progress check or to re-evaluate objectives:

D. Data/evidence that will be used to observe and/or measure progress.

Employee Signature Supervisor Signature

Date

RESEARCH INSIGHT Three researchers developed a BARS for grocery checkout

clerks.41 They collected many critical incidents, and then grouped or clustered these
into eight performance dimensions:
Knowledge and Judgment
Conscientiousness
Skill in Human Relations
Skill in Operation of Register

behaviorally anchored rating scale (BARS)

An appraisal method that aims at combining
the benefits of narrative critical incidents and
quantified ratings by anchoring a quantified
scale with specific narrative examples
of good and poor performance.
298 PART 3 TRAINING AND DEVELOPMENT

Skill in Bagging
Organizational Ability of Checkstand Work
Skill in Monetary Transactions
Observational Ability
They then developed behaviorally anchored rating scales for each of these
dimensions. Each BARS contained a scale (ranging from 1 to 9) for rating
performance from extremely poor to extremely good. Then a specific critical
incident (such as by knowing the price of items, this checker would be expected
to look for mismarked and unmarked items ) helped anchor or specify what was
meant by extremely good (9) performance. Similarly, they used several other
critical incident anchors along the performance scale from (8) down to (1).
To illustrate, Figure 9-9 shows a BARS for one performance dimension for a car
sales person the dimension automobile salesmanship skills.

FIGURE 9-9 Example of a

Behaviorally Anchored Rating Automobile Salesmanship Skills
Scale for the Dimension
Salesmanship Skills Persuade prospective buyers to buy one of our vehicles; use our vehicles benefits to
encourage people to buy; use salesmanship skills to overcome buyers stated reasons
not to buy; adjust sales pitch to buyer s needs.

10

A prospect said she would only buy one of our luxury convertibles or would
buy a competitor s car. When the finance firm rejected her application, the
salesperson compared our lower-priced car to the competitor s and
convinced her to buy our lower-priced model.
9

Salesperson asks prospective buyer what he or she is looking for in a

vehicle and why, listens carefully to the buyer, and then explains how our
vehicle fulfills those needs and why.
7

The prospect said he was looking for a car that he could use to haul his boat
and for off-road purposes, and the salesperson emphasized our vehicle s
low price and quality in the sales pitch.
5

4
The prospective buyer said she really wanted to special-order a car with an
unusual color and amenities, and the salesperson said she d be better off
not waiting 2 months and should settle for a standard model.
3

2
The prospect said he didn t like the looks of our vehicle, and the
salesperson told him the style is the style and that he d probably be
happier with a competitor s vehicle.

1
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 299

ADVANTAGES It takes more time to develop a BARS, but the tool has advantages.
1. A more accurate gauge. People who know the job and its requirements better
than anyone develop the BARS. This should produce a good gauge of job
performance.
2. Clearer standards. The critical incidents along the scale illustrate what to look
for in terms of superior performance, average performance, and so forth.
3. Feedback. The critical incidents make it easier to explain the ratings to appraisees.
4. Independent dimensions. Clustering the critical incidents into five or six perform-
ance dimensions (such as salesmanship skills ) helps to make the performance
dimensions more independent of one another. For example, a rater should be
less likely to rate an employee high on all dimensions simply because he or she was
rated high in salesmanship skills.
5. Consistency.42 BARS evaluations seem to be relatively reliable, in that different
raters appraisals of the same person tend to be similar.

Mixed Standard Scales

Mixed standard scales are somewhat similar to behaviorally anchored scales. However,
mixed scales generally list just a few (usually 3) behavioral examples (or standards )
for each of, say, 3 performance dimensions. The employer then mixes the resulting
behavioral examples statements when listing them. The aim is to reduce rating errors
by making it less obvious to the person doing the appraising (1) what performance
dimensions he or she is rating; and (2) whether the behavioral example statements
represent high, medium, or low performance. The supervisor rates the employee
by indicating whether the latter s performance is better than, the same, or worse than
the statement.
Suppose you want to appraise employees on the dimensions Quality of Work,
Conscientiousness, and Gets Along with Others. You write three high, medium, low
behavioral examples for each of these three dimensions, as follows.43
For Quality of Work:
Employee s work is striking in its accuracy, there is never any evidence of care-
lessness in it.
The accuracy of employee s work is satisfactory; it is not often that you find clear
evidence of carelessness.
Frequent careless errors in this employee s work.
For Conscientiousness:
Is quick and efficient, able to keep work on schedule. Really gets going on a
new task.
Is efficient enough, usually getting through assignments and work in reasonable
time.
There is some lack of efficiency on employee s part. Employee may take too
much time to complete assignments, and sometimes does not really finish them.
For Gets Along with Others:
Is on good terms with everyone. Can get along with people even when they disagree.
Only very occasionally has conflicts with others on the job, and these are likely
to be minor.
Has a tendency to get into unnecessary conflicts with people.
Next, take the resulting nine high, medium, low statements, and list them randomly,
in a mixed fashion, for instance with the low statement from Conscientiousness
followed by the high Quality statement, and so on. Then the supervisor would
appraise each employee by rating him or her better, the same or worse than
for each of the 9 statements. However, it is not clear that mixed standard appraisals are
superior to others, such as graphic rating scales.
300 PART 3 TRAINING AND DEVELOPMENT

Management by Objectives
Some employers use management by objectives (MBO) as the primary appraisal method.
Others use it to supplement a graphic rating or other appraisal method. You could engage
in an informal MBO program with subordinates by jointly setting goals and periodically
providing feedback. However, MBO generally refers to a comprehensive and formal
organization-wide goal setting and appraisal program. Here goals cascade down by
level and department, from company-wide strategic goals to tactical day-to-day goals.

Computerized and Web-Based Performance Appraisal

Employers increasingly use computerized or Web-based performance appraisal
systems. These enable managers to compile computerized notes on subordinates
during the year, and then to merge these with ratings for each employee on several
performance traits. The software then generates written text to support each
appraisal. Most such appraisals combine several appraisal methods, such as graphic
ratings anchored by critical incidents.
EXAMPLES There are many examples from which to choose. Employee Appraiser
(developed by the Austin-Hayne Corporation, San Mateo, California) presents a
menu of more than a dozen evaluation dimensions, including dependability, initia-
tive, communication, decision making, leadership, judgment, and planning and
productivity.44 Within each dimension (such as Communication ) are separate
performance factors for things like writing, verbal communication, and receptivity
to criticism. When the user clicks on a performance factor, he or she is presented with
a graphic rating scale. However, instead of numerical ratings, Employee Appraiser uses
behaviorally anchored examples. For example, for verbal communication there are six
choices, ranging from presents ideas clearly to lacks structure. The manager
chooses the phrase that most accurately describes the worker. Then Employee
Appraiser generates an appraisal with sample text.
The eAppraisal system from Halogen Software is another example.45 Employees
using it can access the system year-round, track their progress against goals in real
time, and enter significant accomplishments.46 Seagate Technology uses Enterprise
Suite for managing the performance of its 39,000 employees.47 Early in Seagate s first
fiscal quarter, employees enter the system and set goals and development plans for
themselves that make sense in terms of Seagate s corporate objectives. Employees
update their plans quarterly, and then do self-evaluations at the end of the year, with

Many employers today make

use of online appraisals
for evaluating employee
performance.
Source: Corbis Images.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 301

follow-up reviews by their supervisors. Figure 9-10 illustrates another good online
appraisal tool, in this case from PerformancePro.

Electronic Performance Monitoring

Electronic performance monitoring (EPM) systems use computer network tech-
nology to allow managers to monitor their employees computers. They thus allow
managers to monitor the employees rate, accuracy, and time spent working online.48
EPM can improve productivity. For example, for more routine, less complex jobs,
highly skilled and monitored subjects keyed in more data entries than did highly
skilled unmonitored participants. However, EPM can also backfire. In this same study,
low-skilled but highly monitored participants did more poorly than did low-skilled,
unmonitored participants. EPM also seems to raise employee stress. However, one
researcher concludes that Electronic Performance Monitoring (EPM) represents
the future of performance feedback where supervisors can electronically monitor the
amount and quality of work an employee is producing and have objective indicators
of employee performance immediately available and visible. 49

Appraisal in Practice
The best appraisal forms merge several approaches. Figure 9-3 (page 291) was an
example. It supports a numerical graphic rating scale with illustrative behavioral
incidents such as Even with guidance, fails to. . . .
FIGURE 9-10 Online
Performance Appraisal Tool

Source: www.hrnonline.com/per_
about.asp, accessed April 29, 2009.

(Continued)

electronic performance monitoring (EPM)

Having supervisors electronically monitor the
amount of computerized data an employee
is processing per day, and thereby his or her
performance.
302 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-10 (Continued)

Figure 9-3 illustrates an important point about appraisals. Even if the company
uses a graphic rating scale with generic dimensions such as Below Expectations,
it can benefit from anchoring the scale, as here, with behavioral descriptions. Doing
so improves the reliability and validity of the appraisal.

5 Explain and illustrate

DEALING WITH APPRAISAL PROBLEMS
the problems to avoid AND INTERVIEWS
in appraising performance.
As we said, few things managers do are fraught with more peril than appraising
subordinates performance.50 We now turn to appraisal problems and how to solve
them, and to several other appraisal issues.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 303

TABLE 9-2 A Graphic Rating Scale with Unclear Standards

Excellent Good Fair Poor

Quantity of work
Quality of work
Creativity
Integrity

Note: For example, what exactly is meant by good, quantity of work, and so forth?

Potential Appraisal Problems

Graphic-type rating scales in particular are susceptible to several problems: unclear
standards, halo effect, central tendency, leniency or strictness, and bias.

UNCLEAR STANDARDS Table 9-2 illustrates the unclear standards problem.

This graphic rating scale seems objective. However, it would probably result in unfair
appraisals, because the traits and degrees of merit are ambiguous. For example,
different supervisors might define good performance, fair performance, and so
on differently. The same is true of traits such as quality of work or creativity. 51
The best way to fix this problem is to include descriptive phrases that define or
illustrate each trait, as in Figure 9-3. That form spells out what measures like Role
Model or Below Expectations mean. This specificity results in more consistent and
more easily explained appraisals.

HALO EFFECT Experts define halo effect as the influence of a rater s general
impression on ratings of specific ratee qualities. 52 For example, supervisors often
rate unfriendly employees lower on all traits, rather than just on gets along well with
others. Being aware of this problem is a step toward avoiding it. Supervisory training
can also alleviate the problem, as can using a BARS (on which, recall, the performance
dimensions are usually independent of each other).

CENTRAL TENDENCY Some supervisors stick to the middle when filling in

rating scales. For example, if the rating scale ranges from 1 to 7, they tend to avoid the
highs (6 and 7) and lows (1 and 2) and rate most of their people between 3 and 5.
Central tendency means rating all employees average. Doing so distorts the evalua-
tions, making them less useful for promotion, salary, or counseling purposes.
Ranking employees instead of using graphic rating scales can reduce this problem,
since ranking means you can t rate them all average.

LENIENCY OR STRICTNESS Other supervisors tend to rate all their subordi-

nates consistently high or low, just as some instructors are notoriously high or low
graders. This strictness/leniency problem is especially severe with graphic rating
scales. On the other hand, ranking forces supervisors to distinguish between high and
low performers.
There are other solutions. One is for the employer to recommend that supervisors
avoid giving all their employees high (or low) ratings. A second is to basically enforce a

unclear standards central tendency strictness/leniency

An appraisal that is too open A tendency to rate all employees the same The problem that occurs when a supervisor
to interpretation. way, such as rating them all average. has a tendency to rate all subordinates either
high or low.
halo effect
In performance appraisal, the problem
that occurs when a supervisor s rating of a
subordinate on one trait biases the rating
of that person on other traits.
304 PART 3 TRAINING AND DEVELOPMENT

distribution that, say, about 10% of the people should be rated excellent, 20% good,
and so forth. (But beware: Sometimes what appears to be an error such as leniency
isn t an error at all, as when all subordinates really are superior performers.)53
RECENCY EFFECTS The recency effect means letting what the employee
has done recently blind you to what his or her performance has been over the year.
The main solution is to accumulate critical incidents all year long.
BIAS The number of things that can lead to bias during appraisals is limitless. One
study focused on the rater s personality. Raters who scored higher on conscientiousness
tended to give their peers lower ratings they were stricter, in other words; those scoring
higher on agreeableness gave higher ratings they were more lenient.54 In another
study, performance appraisal ratings obtained for administrative purposes [such as pay
raises or promotions] were nearly one-third [higher] than those obtained for research or
employee development purposes. 55 Another writer says, performance ratings amplify
the quality of the personal relationship between boss and employee. Good relationships
tend to create good [appraisal] experiences, bad relationships bad ones. 56
Unfortunately, personal characteristics (such as age, race, and sex) also affect
ratings. A 36-year-old supervisor ranked a 62-year-old subordinate at the bottom of the
department s rankings, and then fired him. The court held that the younger boss s
discriminatory motives might have prejudiced the dismissal decision.57 In one study,
promoted women had to receive higher performance ratings than promoted men to be
promoted, suggesting that women were held to stricter standards for promotion. 58
Another study found that raters might actually penalize successful women for their
success.59 Other studies suggest that, rater idiosyncratic biases account for the largest
percentage of the observed variances in performance ratings. 60
The bottom line is that the appraisal often says more about the appraiser than
about the appraisee.61 This is a powerful reason for using multiple raters, for having
the supervisor s boss review the rating, and/or for having what some employers call
calibration meetings; here supervisors discuss among themselves their reasons
for the appraisals they gave each of their subordinates.62

Guidelines for Effective Appraisals

It s probably safe to say that problems like these can make an appraisal worse than no
appraisal at all. Would an employee not be better off with no appraisal than with a
seemingly objective but actually biased one? However, problems like these aren t
inevitable, and you can minimize them. Do five things to have effective appraisals.
KNOW THE PERFORMANCE APPRAISAL PROBLEMS First, learn and under-
stand the potential appraisal problems (such as central tendency). Understanding and
anticipating the problem can help you avoid it.
USE THE RIGHT APPRAISAL TOOL Second, use the right appraisal tool
6 Discuss the pros and cons
or combination of tools. Each has its own pros and cons. For example, the ranking
of using different raters
to appraise a person s method avoids central tendency but can cause bad feelings when employees
performance. performances are in fact all high.
In practice, employers choose an appraisal tool based on several criteria. Accessi-
bility and ease-of-use is probably first. That is why graphic rating scales are still so
popular, even within computerized appraisal packages. Table 9-3 summarizes each
tool s pros and cons.
KEEP A DIARY Third, keep a diary of employees performances over the year.63
One study involved 112 first-line supervisors. The conclusion of this and similar
studies is that compiling critical incidents as they occur reduces appraisal problems.64
GET AGREEMENT ON A PLAN Fourth, the aim of the appraisal should be
to improve unsatisfactory performance (and/or to reinforce exemplary performance).
The appraisal s end product should therefore always be a plan for what the employee
must do to improve his or her efforts.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 305

TABLE 9-3 Important Advantages and Disadvantages of Appraisal Tools

Tool Advantages Disadvantages

Graphic Simple to use; provides a quantitative Standards may be unclear; halo effect,
rating scale rating for each employee. central tendency, leniency, bias can
also be problems.
BARS Provides behavioral anchors. Difficult to develop.
BARS is very accurate.
Alternation Simple to use (but not as simple as graphic Can cause disagreements among
ranking rating scales). Avoids central tendency employees and may be unfair if all
and other problems of rating scales. employees are, in fact, excellent.
Forced End up with a predetermined number Employees appraisal results depend
distribution or % of people in each group. on your choice of cutoff points.
method
Critical Helps specify what is right and Difficult to rate or rank employees
incident wrong about the employee s relative to one another.
method performance; forces supervisor to evaluate
subordinates on an ongoing basis.
MBO Tied to jointly agreed-upon Time-consuming.
performance objectives.

ENSURE FAIRNESS Fifth, make sure that every appraisal you give is fair.
Studies confirm that, in practice, some managers ignore accuracy and honesty in
performance appraisals. Instead, they use the process for political purposes (such as
encouraging employees with whom they don t get along to leave the firm).65
The employees standards should be clear, employees should understand the basis
on which you re going to appraise them, and the appraisals should be objective
and fair.66 One study found that a number of best practices, such as have an
appeal mechanism, distinguish fair appraisals. The checklist in Figure 9-11
summarizes these.

FIGURE 9-11 Checklist of Best

Practices for Administering Fair
n Base the performance review on duties and standards from a job analysis.
Performance Appraisals
n Try to base the performance review on observable job behaviors or objective
performance data.
Source: Based on Richard Posthuma, n Make it clear ahead of time what your performance expectations are.
Twenty Best Practices for Just n Use a standardized performance review procedure for all employees.
Employee Performance Reviews, n Make sure whoever conducts the reviews has frequent opportunities to observe
Compensation and Benefits Review,
January/February 2008, pp. 47 54.
the employee s job performance.
n Either use multiple raters or have the rater s supervisor evaluate the appraisal results.
n Include an appeals mechanism.
n Document the appraisal review process and results.
n Discuss the appraisal results with the employee.
n Let the employees know ahead of time how you re going to conduct the reviews.
n Let the employee provide input regarding your assessment of him or her.
n Indicate what the employee needs to do to improve.
n Train the supervisors who will be doing the appraisals. Make sure they understand
the procedure to use, how problems (like leniency and strictness) arise, and how
to deal with them.

bias
The tendency to allow individual differences
such as age, race, and sex to affect the
appraisal ratings employees receive.
306 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-12 Checklist for a

n Preferably, conduct a job analysis to establish performance criteria and standards.
Legally Defensible Appraisal
n Communicate performance standards to employees and to those rating them, in writing.
n When using graphic rating scales, avoid undefined abstract trait names
(such as loyalty or honesty ).
n Use subjective narratives as only one component of the appraisal.
n Train supervisors to use the rating instrument properly.
n Allow appraisers daily contact with the employees they re evaluating.
n Don t use a single overall rating of performance.
n Have more than one appraiser, and conduct all such appraisals independently.
n One appraiser should never have absolute authority to determine a personnel action.
n Give employees the opportunity to review and make comments.
n Have a formal appeals process.
n Document everything.
n Provide corrective guidance to assist poor performers in improving.

Appraisals and the Law

One sure way to cause legal problems for an employer is to hold unfair appraisals. One
court held that the firm had violated Title VII when it laid off several Hispanic-
surnamed employees based on poor performance ratings.67 The court concluded that
the practice was illegal because:
1. The firm based the appraisals on subjective supervisory observations.
2. It didn t administer and score the appraisals in a standardized fashion.
3. Two of the three supervisory evaluators did not have daily contact with the employees.
If your case gets to court, what will judges look for? A review of about 300 U.S. court
decisions is informative. Actions reflecting fairness and due process were most
important. Figure 9-12 presents a checklist for developing a legally defensible
appraisal process.68

7 Perform an effective
Managing the Appraisal Interview
appraisal interview. The appraisal typically culminates in an appraisal interview. Here you and the
subordinate review the appraisal and make plans to remedy deficiencies and reinforce
strengths. Interviews like these are often uncomfortable. Few people like to receive
or give negative feedback. Adequate preparation and effective implementation are
therefore essential.

TYPES OF APPRAISAL INTERVIEWS Supervisors face four types of appraisal

interviews, each with its unique objectives:
Satisfactory Promotable is the easiest interview: The person s performance is
satisfactory and there is a promotion ahead. Your objective is to discuss the person s
career plans and to develop a specific professional development plan.
Satisfactory Not promotable is for employees whose performance is satisfactory
but for whom promotion is not possible. The objective here is to maintain satisfactory
performance. The best option is usually to find incentives that are important to the
person and sufficient to maintain performance. These might include extra time off, a
small bonus, and reinforcement, perhaps in the form of an occasional well done!
When the person s performance is unsatisfactory but correctable, the interview
objective is to lay out an action plan (see Figure 9-13) for correcting the unsatisfac-
tory performance.
Finally, if the employee is unsatisfactory and the situation is uncorrectable, you can
usually skip the interview. You either tolerate the person s poor performance for now,
or (more likely) dismiss the person.
HOW TO CONDUCT THE APPRAISAL INTERVIEW Beforehand, review the
person s job description, compare performance to the standards, and review the
previous appraisals. Give the employee at least a week s notice to review his or her work.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 307

FIGURE 9-13 Sample

Employee Development Plan

Source: www.career-change-
mentor.com/support-files/
sampleemployeedevelopmentplan.
pdf, accessed April 28, 2009.

Set a time for the interview and allow enough time. Interviews with lower-level
personnel like clerical workers should take no more than an hour. Interviews with
management employees often take 2 or 3 hours. Conduct the interview in a private
place with no interruptions.
There are four things to keep in mind when conducting the interview:
1. Talk in terms of objective work data. Use examples such as absences, tardiness,
quality records, orders processed, productivity records, and so on.
2. Don t get personal. Don t say, You re too slow in producing those reports.
Instead, try to compare the person s performance to a standard. ( These reports
should normally be done within 10 days. ) Similarly, don t compare the person s
performance to that of other people. ( He s quicker than you are. )
3. Encourage the person to talk. Stop and listen to what the person is saying; ask
open-ended questions such as, What do you think we can do to improve the
situation? Use a command such as Go on. Restate the person s last point as a
question, such as, You don t think you can get the job done?
4. Get agreement. Make sure the person leaves knowing specifically what he or she is
doing right and doing wrong and with agreement on how things will be improved,
and by when. Write an action plan (Figure 9-13) with targets and dates.
Whether subordinates express satisfaction with their appraisal interview depends
on several things. Subordinates will prefer:
1. not feeling threatened during the interview;
2. having an opportunity to present their ideas and feelings and to influence the
course of the interview; and
3. having a helpful and constructive supervisor conduct the interview.

appraisal interview
An interview in which the supervisor and
subordinate review the appraisal and make
plans to remedy deficiencies and reinforce
strengths.
308 PART 3 TRAINING AND DEVELOPMENT

FIGURE 9-14 Checklist During

Appraisal Interview
CHECKLIST DURING THE APPRAISAL INTERVIEW
Source: Reprinted from www.HR.
BLR.com with permission of the Yes No
publisher Business and Legal Did you discuss each goal or objective established
Resources, Inc. 141 Mill Rock Road
for this employee?
East, Old Saybrook, CT © 2004. BLR®
(Business & Legal Resources, Inc.). Are you and the employee clear on the areas of
agreement? disagreement?
Did you and the employee cover all positive skills,
traits, accomplishments, areas of growth, etc.? Did
you reinforce the employee s accomplishments?
Did you give the employee a sense of what you
thought of his or her potential or ability?
Are you both clear on areas where improvement is
required? expected? demanded? desired?
What training or development recommendations did
you agree on?
Did you indicate consequences for noncompliance, if
appropriate?
Did you set good objectives for the next appraisal
period?
Objective?
Specific?
Measurable?
Did you set a standard to be used for evaluation?
Time frame?
Did you set a time for the next evaluation?
Did you confirm what your part would be? Did the
employee confirm his or her part?
Did you thank the employee for his or her efforts?

Figure 9-14 provides an appraisal interview checklist.

HOW TO HANDLE A DEFENSIVE SUBORDINATE Defenses are a familiar

aspect of our lives. When a supervisor tells someone his or her performance is poor,
the first reaction is often denial. Denial is a defense mechanism. By denying the fault,
the person avoids having to question his or her own competence. Others react with
anger and aggression. This helps them let off steam and postpones confronting the
immediate problem.
In any event, understanding and dealing with defensiveness is an important
appraisal skill. In his book Effective Psychology for Managers, psychologist Mortimer
Feinberg suggests the following:
1. Recognize that defensive behavior is normal.
2. Never attack a person s defenses. Don t try to explain someone to themselves
by saying things like, You know the real reason you re using that excuse is that
you can t bear to be blamed. Instead, concentrate on the fact ( sales are down ).
3. Postpone action. Sometimes it is best to do nothing. Employees may react to
sudden threats by instinctively hiding behind their defenses. But given sufficient
time, a more rational reaction takes over.
4. Recognize your own limitations. The supervisor should not try to be a psychologist.
Offering understanding is one thing; trying to deal with psychological problems
is another.

HOW TO CRITICIZE A SUBORDINATE When you must criticize, do so in a

manner that lets the person maintain his or her dignity in private, and construc-
tively. Provide examples of critical incidents and specific suggestions of what to do
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 309

and why. Avoid once-a-year critical broadsides by giving feedback periodically, so

that the formal review contains no surprises. Never say the person is always wrong
(since no one is ever always wrong or right). Criticism should be objective and free
of personal bias.

HOW TO HANDLE A FORMAL WRITTEN WARNING An employee s per-

formance may be so weak that it requires a formal written warning. Such warnings
serve two purposes: (1) They may serve to shake your employee out of his or her bad
habits, and (2) they can help you defend your rating, both to your own boss and (if
needed) to the courts.
Written warnings should identify the employee s standards, make it clear that the
employee was aware of the standard, specify any deficiencies relative to the standard,
and show the employee had an opportunity to correct his or her performance.

REALISTIC APPRAISALS When the employee is not doing well, the manager will
have to decide how candid to be. Not all managers are devotees of candor, but some
firms, like GE, are famous for hard-hearted appraisals. GE s former CEO Jack Welch
once said, for instance, that it is cruel to tell someone who s doing a mediocre job that
their work is satisfactory.69 Someone who might have had the chance to correct bad
behavior or find a more appropriate vocation may instead spend years in a dead-end
job, only to have to leave when a more demanding boss arrives.
There are many practical motivations for giving soft appraisals: the fear of having
to hire and train someone new; the appraisee s unpleasant reactions; or a company
appraisal process that s not conducive to candor, for instance. Ultimately, the person
doing the appraising must decide if the drawbacks of less-than-candid appraisals
outweigh the assumed benefits. They rarely do.

PERFORMANCE MANAGEMENT
Earlier in this chapter, we said that performance management is the continuous process
of identifying, measuring, and developing the performance of individuals and teams
and aligning their performance with the organization s goals.70 We look at performance
management more closely in this section.

Performance Management vs. Performance Appraisal

In comparing performance management and performance appraisal, the distinction is
the contrast between a year-end event the completion of the appraisal form and a
process that starts the year with performance planning and is integral to the way people
are managed throughout the year. 71 Three main things distinguish performance
management from performance appraisal.
1. First, performance management never means just meeting with a subordinate
once or twice a year to review your performance. It means continuous, daily, or
weekly interactions and feedback to ensure continuous improvement.72
2. Second, performance management is always goal-directed. The continuing
performance reviews always involve comparing the employee s or team s
performance against goals that specifically stem from and link to the company s
strategic goals. Strategic congruence is central to performance management: each
employee s goals must be aligned with departmental and company goals.
3. Third, performance management means continuously reevaluating and (if need be)
modifying how the employee and team get their work done. Depending on the issue,
this may mean additional training, changing work procedures, or instituting new
incentive plans, for instance.
Furthermore, performance management systems increasingly use information
technology to help managers automatically track employee performance and take
310 PART 3 TRAINING AND DEVELOPMENT

immediate corrective action as required. By comparison, performance appraisal

systems usually rely on paper forms, or perhaps online or computerized appraisal
forms.
We can summarize performance management s six basic elements as follows:73
* Direction sharing means communicating the company s goals throughout the
company and then translating these into doable departmental, team, and individual
goals.
* Goal alignment means having a method that enables managers and employees
to see the link between the employees goals and those of their department and
company.
* Ongoing performance monitoring usually includes using computerized systems
that measure and then e-mail progress and exception reports based on the
person s progress toward meeting his or her performance goals.
* Ongoing feedback includes both face-to-face and computerized feedback regarding
progress toward goals.
* Coaching and developmental support should be an integral part of the feedback
process.
* Recognition and rewards provide the consequences needed to keep the employee s
goal-directed performance on track.

Using Information Technology to Support

Performance Management
Performance management needn t be high-tech. For example, in many production
facilities, work teams simply meet daily to review their performance and to get their
efforts and those of their members aligned with their performance standards
and goals.
On the other hand, information technology enables management to automate
performance management and to monitor and correct deviations in real time. We can
sum up this IT-supported performance management process as follows:
* Assign financial and nonfinancial goals to each team s activities along the strategy
map chain of activities leading from the team s activities up to the company s
overall strategic goals. (For example, an airline measures ground crew aircraft
turnaround time in terms of improve turnaround time from an average of
30 minutes per plane to 26 minutes per plane this year. )
* Inform all employees of their goals.
* Use IT-supported tools like scorecard software and digital dashboards to contin-
uously display, monitor, and assess each team s and employee s performance.
(We discussed this in Chapter 3, Strategy.)
* Take corrective action before things swing out of control. Figure 9-15 presents an
example of an online performance management report for an employee.

FIGURE 9-15 Summary

of Performance Management
Process Report

Source: Performance Management

Report from www.activestrategy.
com/images/7.2/PGM.jpg,
accessed April 29, 2009. Used with
permission of ActiveStrategy, Inc.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 311

TALENT MANAGEMENT PRACTICES

AND EMPLOYEE APPRAISAL
In Chapter 4, we defined talent management as the goal-oriented and integrated
process of planning, recruiting, developing, appraising, and compensating employees.
By way of review, we said five sets of practices distinguish talent management from
merely recruiting, selecting, training, appraising, and paying employees. It requires:
1. Identifying the workforce profiles (competencies, knowledge, traits, and experiences)
that the firm needs to achieve its strategic goals;
2. Consciously thinking through all the tasks (recruiting and so on) required for
managing the company s talent;
3. Consistently using the same profile for formulating recruitment plans for the
employee as you do for making the selection, training, appraisal, and payment
decisions;
4. Actively managing different employees recruitment, selection, development, and
rewards; and
5. Integrating the underlying talent management activities (planning for, recruiting,
developing, appraising, and compensating employees).

Appraising and Actively Managing Employees

Performance appraisal traditionally plays a predictable role when managers make
pay raise and related decisions. Perhaps with the exception of selected fast-track
employees, managers tend to allocate resources such as compensation and develop-
ment opportunities either across-the-board or based on the employee s appraisal
ratings (or both).
In contrast, talent management requires actively managing decisions like these.
The point is that the traditional practice of allocating pay raises, development oppor-
tunities, and other scarce resources across the board or based just on performance
makes less sense than it used to. Today, employers also need to focus their attention
and resources on their company s mission-critical employees, those who are critical
to the firm s strategic needs. Simply allocating awards across the board obviously does
not fill that need. But allocating pay based solely on performance can also backfire.
For example, is an employer really actively managing its employees if it gives the same
percentage pay raise to every employee who rates excellent, regardless of how
important that employee is to the company s future success?
Increasingly, the answer from employers is no. They continue to use performance
appraisal to evaluate how their employees are performing. However, they also segment
their employees based on how critical the employees are to the company s success. The
point again is to focus your attention and resources on your company s mission-critical
employees.

HOW TO SEGMENT EMPLOYEES Figure 9-16 illustrates one way to do

this. Accenture uses a 4 * 4 Strategic Role Assessment matrix to plot employees by
Performance (exceptional, high, medium, low) and Value to the organization (mission-
critical, core, necessary, nonessential). As an example, consider a chemical engineering
company that designs sophisticated pollution control equipment. The firm s experienced
engineers may be mission-critical; engineer-trainees may be core; sales, accounting, and
HR employees necessary; and peripheral, outsourceable employees such as those
in maintenance non-essential. The company would then tie pay, development, dismissal,
and other personnel decisions to each employee s position in the matrix.

Segmenting and Actively Managing Employees in Practice

Several examples can illustrate how employers implement this active-management
segmented approach in practice.
312 PART 3 TRAINING AND DEVELOPMENT

Performance

Exceptional High Average Low

Mission-critical

Core
Value to the
organization
Necessary

Non-essential

Provide additional rewards and experiences Identify as at risk: Provide additional training
and provide development opportunities to and performance management attention to
benefit individual and organization improve motivation and performance, and/or
to move into necessary or core roles
Provide training and experiences to
prepare for mission-critical roles Divest/seek alternative sourcing

FIGURE 9-16 Accenture s Strategic Role Assessment Matrix

Source: The New Talent Equation, Outlook, June 2009, an Accenture publication. © 2009 Accenture.
All rights reserved. Chart reprinted by permission.

* Compass Group PLC identifies top performers. Then Compass assesses them for
promotability, promotability time-frame, and leadership potential. Top employees
then get special coaching and feedback, and development opportunities. Compass
monitors their progress. GE prioritizes jobs and focuses on what it calls its
employee game changers. 74
* Tesco PLC segments employees according to personal and professional goals to
better communicate and motivate its employees.75
* McKinsey & Co. recommends limiting the high potential group in whom the
company invests heavily to no more than 10% to 20% of managerial and profes-
sional staff. 76
* Unilever includes 15% of employees per management level in its high potential
list each year, and expects these people to move to the next management level
within 5 years.77
* Shell China appoints career stewards to meet regularly with emerging leaders.
They assess their level of engagement, help them set realistic career expectations,
and make sure they re getting the right development opportunities.78

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Before appraising performance, managers should assessing the employee s actual performance relative to
understand certain basic concepts in performance those standards, and providing feedback to the
management and appraisal. Stripped to its essentials, employee. Managers should appraise employees based
performance appraisal involves setting work standards, on the criteria previously assigned, and the actual
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 313

standards should be specific, measurable, attainable, Guidelines for effective appraisals include knowing the
relevant, and timely. problems (such as bias), using the right appraisal tool,
2. There are several basic techniques managers use for keeping a diary of incidents, getting agreement on a
appraising performance. plan, and being fair. Appraisals also need to be legally
Whichever tool you use, the appraisal should pro- defensible, for instance, based on a job analysis and on
vide information on which to base pay and promo- defined rather than subjective standards. The appraisal
tional decisions, clarify for the employee important may be administered by the immediate supervisor or
company-relevant goals, develop a plan for correct- by the employee s peers, a rating committee, via self-
ing deficiencies, and support career planning. appraisal, by subordinates, or by 360-degree feedback.
In terms of specific techniques, the graphic rating In any case, it s advisable to have at least the supervisor
scale lists a number of traits and a range of perform- of the person completing the appraisal reviewing and
ance for each. Managers use generic job dimensions approving it.
such as quantity, or focus on the job s actual duties 4. The supervisor needs to keep several points in mind
or on competencies/skills. during the appraisal interview. Preparation is essen-
With the alternation ranking method, you rank tial, talk in terms of objective work, don t get personal,
employees from best to worst on a particular trait. encourage the person to talk, and get agreement
The paired comparison method means ranking on how things will be improved. Minimize defensive
employees by making a chart of all possible pairs reactions, for instance, by avoiding attacking the
of the employees and indicating which is the better employee s defenses. Criticize objectively, in private,
employee of the pair. and constructively.
Many employers use the forced distribution method, 5. More employers are moving from traditional performance
which is similar to grading on a curve. Here you appraisals to performance management.
place predetermined percentages of appraisees Performance management is the continuous process
in various performance categories. of identifying, measuring, and developing the
Regardless of the specific methods used, the performance of individuals and teams and aligning
manager may want to maintain a record of critical their performance with the organization s goals.
incidents uncommonly good or undesirable Its basic building blocks include direction (goals)
examples of employees work behavior to review sharing, goal alignment, ongoing performance
with the employee. monitoring, ongoing feedback, coaching, and
A behaviorally anchored rating scale anchors a rewards and recognition.
quantified scale with specific narrative examples The performance management approach reflects a
of good and poor performance. total quality philosophy toward performance. More
In practice, many employers use computerized importantly, it focuses on aligning and monitoring
and/or Web-based performance appraisal methods. the link between the company s overall strategic
3. Many supervisors find appraisals difficult to adminis- goals and what each individual employee and team
ter, and it s important to understand how to deal with are supposed to accomplish.
performance appraisal problems. Particularly with In practice, employers use information technology
graphic rating scales, potential appraisal problems to support performance management, for instance,
include unclear standards, halo effect, central ten- using digital dashboards to monitor and correct each
dency, leniency/strictness, recency effects, and bias. team s performance on a real-time basis.

DISCUSSION QUESTIONS
1. What is the purpose of a performance appraisal? 5. Explain the problems to be avoided in appraising
2. Discuss the pros and cons of four performance appraisal performance.
tools. 6. Discuss the pros and cons of using different potential
3. Explain how you would use the alternation ranking raters to appraise a person s performance.
method, the paired comparison method, and the forced 7. Compare and contrast performance management and
distribution method. performance appraisal.
4. Explain in your own words how you would go about 8. Answer the question, How would you avoid defensiveness
developing a behaviorally anchored rating scale. during an appraisal interview?

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, develop a graphic 2. Working individually or in groups, describe the advan-
rating scale for the following jobs: secretary, professor, tages and disadvantages of using the forced distribution
directory assistance operator. appraisal method for college professors.
314 PART 3 TRAINING AND DEVELOPMENT

3. Working individually or in groups, develop, over the that you believe would be suitable for inclusion in the
period of a week, a set of critical incidents covering the HRCI exam; and (4) if time permits, have someone
classroom performance of one of your instructors. from your team post your team s questions in front of
4. The HRCI Test Specifications Appendix at the end of the class, so the students in other teams can take each
this book (pages 633 640) lists the knowledge someone others exam questions
studying for the HRCI certification exam needs to have 5. Every week, like clockwork, during the 2009 TV season,
in each area of human resource management (such as in Donald Trump told another apprentice, You re fired!
Strategic Management, Workforce Planning, and Review recent (or archived) episodes of Donald Trump s
Human Resource Development). In groups of four to Apprentice show and answer this: What performance
five students, do four things: (1) review that appendix appraisal system did Mr. Trump use, and do you think it
now; (2) identify the material in this chapter that relates resulted in valid appraisals? What techniques discussed in
to the required knowledge the appendix lists; (3) write this chapter did he seem to apply? How would you suggest
four multiple-choice exam questions on this material he change his appraisal system to make it more effective?

EXPERIENTIAL EXERCISE
Grading the Professor
Purpose: The purpose of this exercise is to give you prac- 2. Next, your group should develop its own tool for
tice in developing and using a performance appraisal appraising the performance of an instructor. Decide
form. which of the appraisal tools (graphic rating scales,
alternation ranking, and so on) you are going to use,
Required Understanding: You are going to develop a
performance appraisal form for an instructor and should and then design the instrument itself.
therefore be thoroughly familiar with the discussion of 3. Next, have a spokesperson from each group post his
performance appraisals in this chapter. or her group s appraisal tool on the board. How similar
are the tools? Do they all measure the same factors?
How to Set Up the Exercise/Instructions: Divide the class Which factor appears most often? Which do you think
into groups of four or five students. is the most effective tool on the board?
1. First, based on what you now know about 4. The class should select the top 10 factors from all
performance appraisal, do you think Figure 9-1 of the appraisal tools presented to create what the class
is an effective scale for appraising instructors? Why? perceives to be the most effective tool for appraising
Why not? the performance of the instructor.

APPLICATION CASE
APPRAISING THE SECRETARIES AT SWEETWATER U
Rob Winchester, newly appointed vice president for admin- reporting to any particular administrator could be appraised
istrative affairs at Sweetwater State University, faced a tough as excellent. This move, in effect, forced each supervisor to
problem shortly after his university career began. Three begin ranking his or her secretaries for quality of perform-
weeks after he came on board in September, Sweetwater s ance. The vice president s memo met widespread resistance
president, Rob s boss, told Rob that one of his first tasks was immediately from administrators, who were afraid that
to improve the appraisal system used to evaluate secretarial many of their secretaries would begin leaving for more
and clerical performance at Sweetwater U. The main diffi- lucrative jobs, and from secretaries, who felt that the new
culty was that the performance appraisal was traditionally system was unfair and reduced each secretary s chance of
tied directly to salary increases given at the end of the year. receiving a maximum salary increase. A handful of secre-
Therefore, most administrators were less than accurate when taries had begun picketing outside the president s home on
they used the graphic rating forms that were the basis of the the university campus. The picketing, caustic remarks by
clerical staff evaluation. In fact, what usually happened was disgruntled administrators, and rumors of an impending
that each administrator simply rated his or her clerk or slowdown by the secretaries (there were about 250 on
secretary as excellent. This cleared the way for all support campus) made Rob Winchester wonder whether he had
staff to receive a maximum pay increase every year. made the right decision by setting up forced ranking. He
But the current university budget simply did not include knew, however, that there were a few performance appraisal
enough money to fund another maximum annual increase experts in the School of Business, so he decided to set up an
for every staffer. Furthermore, Sweetwater s president felt appointment with them to discuss the matter.
that the custom of providing invalid feedback to each secre- He met with them the next morning. He explained the
tary on his or her year s performance was not productive, situation as he had found it: The current appraisal system had
so he had asked the new vice president to revise the system. been set up when the university first opened 10 years earlier.
In October, Rob sent a memo to all administrators, telling A committee of secretaries had developed it. Under that
them that in the future no more than half the secretaries system, Sweetwater s administrators filled out forms similar
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 315

to the one shown in Table 9-2. This once-a-year appraisal the appraisal process more seriously was to stop tying it to
(in March) had run into problems almost immediately, since salary increases. In other words, they recommended that
it was apparent from the start that administrators varied every administrator fill out a form like that in Figure 9-3 for
widely in their interpretations of job standards, as well as in each secretary at least once a year and then use this form as
how conscientiously they filled out the forms and supervised the basis of a counseling session. Salary increases would have
their secretaries. Moreover, at the end of the first year it to be made on some basis other than the performance
became obvious to everyone that each secretary s salary appraisal, so that administrators would no longer hesitate to
increase was tied directly to the March appraisal. For fill out the rating forms honestly.
example, those rated excellent received the maximum Rob thanked the two experts and went back to his office
increases, those rated good received smaller increases, to ponder their recommendations. Some of the recommen-
and those given neither rating received only the standard dations (such as substituting the new rating form for the
across-the-board cost-of-living increase. Since universities old) seemed to make sense. Nevertheless, he still had serious
in general and Sweetwater, in particular have paid secre- doubts as to the efficacy of any graphic rating form, particu-
taries somewhat lower salaries than those prevailing in larly compared with his original, preferred forced ranking
private industry, some secretaries left in a huff that first year. approach. The experts second recommendation to stop
From that time on, most administrators simply rated all tying the appraisals to automatic salary increases made
secretaries excellent in order to reduce staff turnover, thus sense but raised at least one very practical problem: If salary
ensuring each a maximum increase. In the process, they also increases were not to be based on performance appraisals, on
avoided the hard feelings aroused by the significant perform- what were they to be based? He began wondering whether
ance differences otherwise highlighted by administrators. the experts recommendations weren t simply based on ivory
Two Sweetwater experts agreed to consider the problem, tower theorizing.
and in 2 weeks they came back to the vice president with the
following recommendations. First, the form used to rate the
secretaries was grossly insufficient. It was unclear what Questions
excellent or quality of work meant, for example. They 1. Do you think that the experts recommendations will be
recommended instead a form like that in Figure 9-3. In addi- sufficient to get most of the administrators to fill out the
tion, they recommended that the vice president rescind his rating forms properly? Why? Why not? What additional
earlier memo and no longer attempt to force university actions (if any) do you think will be necessary?
administrators to arbitrarily rate at least half their secretaries 2. Do you think that Vice President Winchester would be
as something less than excellent. The two consultants better off dropping graphic rating forms, substituting
pointed out that this was, in fact, an unfair procedure since it instead one of the other techniques we discussed in this
was quite possible that any particular administrator might chapter, such as a ranking method? Why?
have staffers who were all or virtually all excellent or 3. What performance appraisal system would you develop
conceivably, although less likely, all below standard. The for the secretaries if you were Rob Winchester? Defend
experts said that the way to get all the administrators to take your answer.

CONTINUING CASE
CARTER CLEANING COMPANY
The Performance Appraisal This informal feedback notwithstanding, Jennifer believes
After spending several weeks on the job, Jennifer was that a more formal appraisal approach is required. She believes
surprised to discover that her father had not formally evalu- that there are criteria such as quality, quantity, attendance, and
ated any employee s performance for all the years that he had punctuality that should be evaluated periodically even if a
owned the business. Jack s position was that he had a worker is paid on piece rate. Furthermore, she feels quite
hundred higher-priority things to attend to, such as boosting strongly that the managers need to have a list of quality stan-
sales and lowering costs, and, in any case, many employees dards for matters such as store cleanliness, efficiency, safety,
didn t stick around long enough to be appraisable anyway. and adherence to budget on which they know they are to be
Furthermore, contended Jack, manual workers such as those formally evaluated.
doing the pressing and the cleaning did periodically get
positive feedback in terms of praise from Jack for a job well
done, or criticism, also from Jack, if things did not look right Questions
during one of his swings through the stores. Similarly, Jack 1. Is Jennifer right about the need to evaluate the workers
was never shy about telling his managers about store formally? The managers? Why or why not?
problems so that they, too, got some feedback on where 2. Develop a performance appraisal method for the workers
they stood. and managers in each store.
316 PART 3 TRAINING AND DEVELOPMENT

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Performance Management System Lisa and her team also wanted a performance manage-
The Hotel Paris s competitive strategy is To use superior ment system that focused on both competencies and objec-
guest service to differentiate the Hotel Paris properties, and tives. In designing the new system, their starting point was
to thereby increase the length of stay and return rate of the job descriptions they had created for the hotel s employees.
guests, and thus boost revenues and profitability. HR man- These descriptions each included required competencies.
ager Lisa Cruz must now formulate functional policies and Consequently, using a form similar to Figure 9-5 (pages
activities that support this competitive strategy by eliciting 292 293), the front-desk clerks appraisals now focus on
the required employee behaviors and competencies. competencies such as able to check a guest in or out in
Lisa knew that the Hotel Paris s performance appraisal 5 minutes or less. Most service employees appraisals include
system was archaic. When the founders opened their first the competency, able to exhibit patience and guest support
hotel, they went to an office-supply store and purchased a even when busy with other activities. There were other required
pad of performance appraisal forms. The hotel chain uses competencies. For example, the Hotel Paris wanted all service
these to this day. Each form is a two-sided page. Supervisors employees to show initiative in helping guests, to be customer-
indicate whether the employee s performance in terms of oriented, and to be team players (in terms of sharing informa-
various standard traits including quantity of work, quality tion and best practices). Each of these competencies derives
of work, and dependability was excellent, good, fair, or from the hotel s aim of becoming more service-oriented.
poor. Lisa knew that, among other flaws, this appraisal tool
did not force either the employee or the supervisor to focus Questions
the appraisal on the extent to which the employee was 1. Choose one job, such as front-desk clerk. Based on any
helping the Hotel Paris to achieve its strategic goals. She information you have (including job descriptions you may
wanted a system that focused the employee s attention on have created in other chapters), write a list of duties, com-
taking those actions that would contribute to helping petencies, and performance standards for that chosen job.
the company achieve its goals, for instance, in terms of 2. Based on that, create a performance appraisal form for
improved customer service. appraising that job.

KEY TERMS
performance appraisal, 284 forced distribution method, 294 unclear standards, 303
performance appraisal process, 285 critical incident method, 295 halo effect, 303
performance management, 286 behaviorally anchored rating central tendency, 303
graphic rating scale, 290 scale (BARS), 296 strictness/leniency, 303
alternation ranking method, 294 electronic performance bias, 304
paired comparison method, 294 monitoring (EPM), 301 appraisal interview, 306

ENDNOTES
1. http://trw.com/, accessed June 1, 2011. appraisals are not directly linked to pay, they 4. www.ball.com/page.jsp?page=1, accessed
2. D. Bradford Neary, Creating a Company- apparently contributed to pay satisfaction, June 1, 2011.
Wide, Online, Performance Management probably through mechanisms related 5. Aligning People and Processes for Perfor-
System: A Case at TRW, Inc., Human to perceived organizational justice ; and mance Improvement , T*D 65, no. 3
Resource Management 41, no. 4 (Winter (3) whether or not the employees received (March 2011), p. 80.
2002), pp. 491 498. performance pay, individuals who do 6. Ibid.
3. Experts debate the pros and cons of tying not receive performance appraisals are 7. Peter Glendinning, Performance
appraisals to pay decisions. One side argues significantly less satisfied with their pay. Management: Pariah or Messiah, Public
that doing so distorts the appraisals. Mary Jo Ducharme et al., Exploring the Personnel Management 31, no. 2 (Summer
A recent study concludes the opposite. Links Between Performance Appraisals 2002), pp. 161 178. See also Herman Agui-
Based on an analysis of surveys from over and Pay Satisfaction, Compensation and nis, Performance Management (Upper Sad-
24,000 employees in more than 6,000 Benefits Review, September/October 2005, dle River, NJ: Prentice Hall 2007), p. 2.
workplaces in Canada, the researchers pp. 46 52. See also Robert Morgan, Making 8. Herman Aguinis, Performance Manage-
concluded: (1) linking the employees pay to the Most of Performance Management ment (Upper Saddle River, NJ: Pearson,
their performance appraisals contributed Systems, Compensation and Benefits Review, 2009), pp. 3 4
to improved pay satisfaction; (2) even when September/October 2006, pp. 22 27. 9. Ibid., p. 3.
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 317

10. Vesa Suutari and Marja Tahbanainen, et al., The Effect of Other Orientation 26. James Smither et al., Does Performance
The Antecedents of Performance Man- on Self: Supervisor Rating Agreement, Improve Following Multi-Score Feedback?
agement among Finnish Expatriates, Journal of Organizational Behavior 25, A Theoretical Model, Meta Analysis, and
Journal of Human Resource Management no. 7 (November 2004), pp. 873 891. See Review of Empirical Findings, Personnel
13, no. 1 (February 2002), pp. 53 75. also Heike Heidemeier and Klaus Mosar, Psychology 58 (2005), pp. 33 36.
11. Get SMART about Setting Goals, Asia Self Other Agreement in Job Perfor- 27. Christine Hagan et al., Predicting Assess-
Africa Intelligence Wire, May 22, 2005. mance Ratings: A Meta-Analytic Test of a ment Center Performance with 360 Degree,
12. See, for example, Robert Renn, Further Process Model, Journal of Applied Top-Down, and Customer-Based Compe-
Examination of the Measurement of Psychology 94, no. 2 (2009), pp. 353 370. tency Assessments, Human Resource Man-
Properties of Leifer & McGannon s 1996 20. Forest Jourden and Chip Heath, The Eval- agement 45, no. 3 (Fall 2006), pp. 357 390.
Goal Acceptance and Goal Commitment uation Gap in Performance Perceptions: 28. Bruce Pfau, Does a 360-Degree Feed-
Scales, Journal of Occupational and Illusory Perceptions of Groups and Indi- back Negatively Affect the Company
Organizational Psychology, March 1999, viduals, Journal of Applied Psychology 81, Performance? HR Magazine, June 2002,
pp. 107 114. One recent study found no. 4 (August 1996), pp. 369 379. See also pp. 55 59.
that, at least in China, a sense of coopera- Sheri Ostroff, Understanding Self-Other 29. Jim Meade, Visual 360: A Performance
tion improves the positive aspects of Agreement: A Look at Rater and Ratee Appraisal System That s Fun, HR
participative leadership. Yi Feng Chen Characteristics, Context, and Outcomes, Magazine, July 1999, pp. 118 119.
and Dean Tjosvold, Participative Personnel Psychology 57, no. 2 (Summer 30. www.sumtotalsystems.com/performance/
Leadership by American and Chinese 2004), pp. 333 375. index.html?e=001&sitenbr=156896193&
Managers in China: The Role of Relation- 21. Paul Atkins and Robert Wood, Self keys=visual+360&submit.x=11&submit.
ships, Journal of Management Studies versus Others Ratings as Predictors of y=11&submit=submit, accessed April 20,
(Oxford, England) 43 no. 8 (December Assessment Center Ratings: Validation 2008.
2006), pp. 1727 1752. Evidence for 360 Degree Feedback Pro- 31. Howard Risher, Getting Serious About
13. Aguinis, Performance Management, p. 35. grams, Personnel Psychology 55, no. 4 Performance Management, Compensation
14. Vanessa Druskat and Steven Wolf, Effects (Winter 2002), pp. 871 904. & Benefits Review, November/December
and Timing of Developmental Peer Apprai- 22. David Antonioni, The Effects of 2005, pp. 18 26.
sals in Self-Managing Work-Groups, Feedback Accountability on Upward 32. Jena McGregor, The Struggle to Measure
Journal of Applied Psychology 84, no. 1 Appraisal Ratings, Personnel Psychology Performance, BusinessWeek, January 9,
(1999), pp. 58 74. For a recent review, see 47 (1994), pp. 349 355. 2006, p. 26.
Erich Dierdorff and Eric Surface, Placing 23. Alan Walker and James Smither, A Five- 33. Steve Bates, Forced Ranking, HR Maga-
Peer Ratings in Context: Systematic Influ- Year Study of Upward Feedback: What zine, June 2003, pp. 63 68.
ences beyond Ratee Performance, Personnel Managers Do with Their Results Matters, 34. Steven Cullen et al., Forced Distribution
Psychology 60,no.1 (Spring 2007),pp.93 126. Personnel Psychology 52 (1999), pp. 393 423, Rating Systems and the Improvement
15. See, for example, Brian Hoffman and David and Austin F. R. Smith and Vincent J. of Workforce Potential: A Baseline Simula-
Woehr, Disentangling the Meaning of Fortunato, Factors Influencing Employee tion, Personnel Psychology 58 (2005), p. 1.
Multisource Performance Rating Source Intentions to Provide Honest Upward 35. Survey Says Problems with Forced Rank-
and Dimension Factors, Personnel Psycho- Feedback Ratings, Journal of Business ing Include Lower Morale and Costly
logy 62 (2009), pp. 735 765. Psychology 22 (2008), pp. 191 207 Turnover, BNA Bulletin to Management,
16. As one study recently concluded, Far 24. The evidence from another study September 16, 2004, p. 297.
from being a source of non-meaningful suggests also that upward and peer 36. Steve Bates, Forced Ranking: Why Grad-
error variance, the discrepancies among 360-degree ratings may be biased by rater ing Employees on a Scale Relative to Each
ratings from multiple perspectives can in affect [whether the rater likes the ratee]; Other Forces a Hard Look at Finding
fact capture meaningful variance in mul- therefore, at this point, these ratings Keepers, Losers May Become Weepers,
tilevel managerial performance. In Sue should be used for the sole purpose of HR Magazine 48, no. 6 (June 2003), p. 62.
Oh and Christopher Berry, The Five providing ratees with developmental See also D. J. Schleicher et al., Rater
Factor Model of Personality and Manage- feedback. David Antonioni and Heejoon Reactions to Forced Distribution Rating
rial Performance: Validity Gains through Park, The Relationship Between Rater Systems, Journal of Management 35,
the Use of 360° Performance Ratings, Affect and Three Sources of 360-Degree no. 4 (August 2009), pp. 899 927.
Journal of Applied Psychology 94, no. 6 Feedback Ratings, Journal of Manage- 37. Straight Talk About Grading Employees
(2009), p. 1510. ment 27, no. 4 (2001), pp. 479 495. on a Curve, BNA Bulletin to Manage-
17. Jeffrey Facteau and S. Bartholomew 25. See, for example, 360-Degree Feedback on ment, November 1, 2001, p. 351.
Craig, Performance Appraisal Ratings the Rise Survey Finds, BNA Bulletin to 38. Clinton Wingrove, Developing an Effec-
from Different Rating Scores, Journal Management, January 23, 1997, p. 31; tive Blend of Process and Technology in
of Applied Psychology 86, no. 2 (2001), Leanne Atwater et al., Multisource Feed- the New Era of Performance Manage-
pp. 215 227. back: Lessons Learned and Implications ment, Compensation & Benefits Review,
18. See also Kevin Murphy et al., Raters Who for Practice, Human Resource Manage- January/February 2003, p. 26.
Pursue Different Goals Give Different ment 46, no. 2 (Summer 2007), p. 285. 39. See, for example, Timothy Keaveny and
Ratings, Journal of Applied Psychology 89, However, a small number of employers are Anthony McGann, A Comparison of
no. 1 (2004), pp. 158 164. beginning to use 360-degree feedback for Behavioral Expectation Scales and Graphic
19. Such findings may be culturally related. performance appraisals, rather than just Rating Scales, Journal of Applied Psychol-
One study compared self and supervisor development. See, for example, Tracy ogy 60 (1975), pp. 695 703. See also Neil
ratings in other-oriented cultures (as Maylett, 360° Feedback Revisited: The Hauenstein et al., BARS and Those
in Asia, where values tend to emphasize Transition from Development to Appraisal, Mysterious, Missing Middle Anchors,
teams). It found that self and supervisor Compensation & Benefits Review, September/ Journal of Business & Psychology 25, no. 4
ratings were related. M. Audrey Korsgaard October 2009, pp. 52 59. (December 2010), pp. 663 672.
318 PART 3 TRAINING AND DEVELOPMENT

40. Based on Donald Schwab, Herbert 50. See, for example, Jonathan Segal, Perfor- pp. 73 74. As one study recently concludes,
Heneman III, and Thomas DeCotiis, mance Management Blunders, HR Far from being a source of non-meaning-
Behaviorally Anchored Scales: A Review Magazine, November 2010, pp. 75 77. ful error variance, the discrepancies among
of the Literature, Personnel Psychology 28 51. See, for example, Adrienne Fox, Curing ratings from multiple perspectives can in
(1975), pp. 549 562. For a discussion, see What Ails Performance Reviews, HR fact capture meaningful variance in multi-
also Uco Wiersma and Gary Latham, Magazine, January 2009, pp. 52 55. level managerial performance. In-Sue Oh
The Practicality of Behavioral Observa- 52. Andrew Solomonson and Charles Lance, and Christopher Berry, The Five Factor
tion Scales, Behavioral Expectation Scales, Examination of the Relationship Between Model of Personality and Managerial
and Trait Scales, Personnel Psychology 30, True Halo and Halo Effect in Performance Performance: Validity Gains through the
no. 3 (Autumn 1986), pp. 619 689, and Ratings, Journal of Applied Psychology 82, Use of 360° Performance Ratings, Journal
Neil Hauenstein et al., BARS and Those no. 5 (1997), pp. 665 674. of Applied Psychology 94, no. 6 (2009),
Mysterious, Missing Middle Anchors, 53. Manuel London, Edward Mone, and p. 1510.
op cit. John C. Scott, Performance Management 63. Angelo DeNisi and Lawrence Peters,
41. Lawrence Fogli, Charles Hulin, and Mil- and Assessment: Methods for Improved Organization of Information in
ton Blood, Development of First Level Rater Accuracy and Employee Goal Setting, Memory and the Performance Appraisal
Behavioral Job Criteria, Journal of Human Resource Management 43, no. 4 Process: Evidence from the Field,
Applied Psychology 55 (1971), pp. 3 8. See (Winter 2004), pp. 319 336. Journal of Applied Psychology 81, no. 6
also Joseph Maiorca, How to Construct 54. Ted Turnasella, Dagwood Bumstead, Will (1996), pp. 717 737. See also A. Fox,
Behaviorally Anchored Rating Scales You Ever Get That Raise? Compensation Curing What Ails Performance
(BARS) for Employee Evaluations, Super- & Benefits Review, September October Reviews, HR Magazine 54, no. 1 (Janu-
vision, August 1997, pp. 15 19; and Neil 1995, pp. 25 27. See also Solomonson and ary 2009), pp. 52 56.
Hauenstein et al., BARS and Those Mys- Lance, Examination of the Relationship 64. Juan Sanchez and Phillip De La Torre,
terious, Missing Middle Anchors, op cit. Between True Halo and Halo Effect, A Second Look at the Relationship
42. Kevin R. Murphy and Joseph Constans, pp. 665 674. Between Rating and Behavioral Accuracy
Behavioral Anchors as a Source of Bias 55. I. M. Jawahar and Charles Williams, in Performance Appraisal, Journal of
in Rating, Journal of Applied Psychology Where All the Children Are Above Applied Psychology 81, no. 1 (1996), p. 7.
72, no. 4 (November 1987), pp. 573 577; Average: The Performance Appraisal See also How To . . . Improve Appraisals,
Aharon Tziner, A Comparison of Three Purpose Effect, Personnel Psychology People Management 15, no. 3 (January 29,
Methods of Performance Appraisal with 50 (1997), p. 921. 2009), p. 57.
Regard to Goal Properties, Goal Percep- 56. Annette Simmons, When Perfor- 65. M. Ronald Buckley et al., Ethical Issues
tion, and Ratee Satisfaction, Group & mance Reviews Fail, Training & in Human Resources Systems, Human
Organization Management 25, no. 2 (June Development 57, no. 9 (September Resource Management Review 11 (2001),
2000), pp. 175 191. 2003), pp. 47 53. pp. 11, 29. See also Ann Pomeroy, The
43. www.explorehr.org/ar ticles/home/ 57. Flawed Ranking System Revives Work- Ethics Squeeze, HR Magazine, March
p e r f o r m a nce _ a p p r a i s a l_ m e t h o d s . ers Bias Claim, BNA Bulletin to Manage- 2006, pp. 48 55.
html and http://jobsin.build-reciprocal- ment, June 28, 2005, p. 206. 66. G. R Weaver and L. K.Treviño. The role
l i n k s . co m / s e c t i o n - f o r- re c r u i te r s / 58. Karen Lyness and Madeline Heilman, of human resources in ethics/compliance
performance-appraisal-manage- When Fit Is Fundamental: Performance management: A fairness perspective,
ment/2519110-performance-appraisal- Evaluations and Promotions of Upper- Human Resource Management Review,
method-mixed-standard-scales.html, Level Female and Male Managers, (2001), pp. 113 134. Researchers recently
accessed April 21, 2011. Journal of Applied Psychology 91, no. 4 conducted studies of 490 police officers
44. www.employeeappraiser.com/index.php, (2006), pp. 767 775. undergoing standardized promotional
accessed January 10, 2008. 59. Madeleine Heilman et al., Penalties for exams. Among their conclusions was that
45. www.halogensoftware.com/products/ Success: Reactions to Women Who Succeed Organizations should strive to ensure
halogen-eappraisal, accessed January 10, at Male Gender Type Tasks, Journal of that candidates perceived justice both in
2008. Applied Psychology 89, no. 3 (2004), the content of personnel assessments and
46. Drew Robb, Appraising Appraisal Soft- pp. 416 427. Managers may not rate in the way they are treated during the
ware, HR Magazine, October 2008, p. 68. successful female managers negatively (for assessment process. Julie McCarthy et
47. Drew Robb, Building a Better Work- instance, in terms of likability and boss al., Progression through the Ranks:
force, HR Magazine, October 2004, desirability) when they see the woman as Assessing Employee Reactions to High
pp. 87 94. supportive, caring, and sensitive to their Stakes Employment Testing, Personnel
48. See, for example, Stoney Alder and needs. Madeleine Heilmann and Tyler Psychology 62 (2009), p. 826.
Maureen Ambrose, Towards Understand- Okimoto, Why Are Women Penalized 67. David Martin et al., The Legal Ramifica-
ing Fairness Judgments Associated with for Success at Male Tasks? The Implied tions of Performance Appraisal: The
Computer Performance Monitoring: An Communality Deficit, Journal of Applied Growing Significance, Public Personnel
Integration of the Feedback, Justice, and Psychology 92, no. 1 (2007), pp. 81 92. Management 29, no. 3 (Fall 2000),
Monitoring Research, Human Resource 60. Gary Greguras et al., A Field Study of the pp. 381 383.
Management Review 15, no. 1 (March Effects of Rating Purpose on the Quality of 68. Wayne Cascio and H. John Bernardin,
2005), pp. 43 67. Multisource Ratings, Personnel Psychology Implications of Performance Appraisal
49. ibid., and David T. Goomas, Electronic 56 (2003), pp. 1 21. Litigation for Personnel Decisions,
Performance Selfmonitoring and Engi- 61. Wingrove, Developing an Effective Personnel Psychology, Summer 1981,
neered Labor Standards for Man-Up Blend of Process and Technology, pp. 211 212; Gerald Barrett and Mary
Drivers in a Distribution Center, Journal of pp. 25 30. Kernan, Performance Appraisal and
Business and Psychology 21 no. 4 (Summer 62. Joanne Sammer, Calibrating Consis- Terminations: A Review of Court Deci-
2007), pp. 541 558. tency, HR Magazine, January 2008, sions Since Brito v. Zia with Implications
 CHAPTER 9 PERFORMANCE MANAGEMENT AND APPRAISAL 319

for Personnel Practices, Personnel Psycho- 71. Howard Risher, Getting Serious about 74. Adapted or quoted from Next Generation
logy 40, no. 3 (Autumn 1987), pp. 489 504; Performance Management, Compensation Talent Management, Hewitt.com, accessed
Elaine Pulakos, Performance Manage- and Benefits Review, November/December June 2010.
ment, SHRM Foundation, 2004. 2005, p. 19. 75. Ibid.
69. John (Jack) Welch, broadcast interview at 72. Clinton Wingrove, Developing an Effective 76. Adapted or quoted from Gunter Stahl et
Fairfield University, C-Span, May 5, 2001. Blend of Process and Technology, p. 27. al., Global Talent Management: How
70. Peter Glendinning, Performance Manage- 73. These are quoted or paraphrased from Leading Multinationals Build and Sustain
ment: Pariah or Messiah, Public Personnel Howard Risher, Getting Serious about their Talent Pipelines, Faculty & Research
Management 31, no. 2 (Summer 2002), Performance Management, Compensation Working Paper, INSEAD, 2007.
pp. 161 178. See also Aguinis, Perfor- and Benefits Review, November/December 77. Ibid.
mance Management, p. 2. 2005, p. 19. 78. Ibid.
320 PART 1 INTRODUCTION

10
Employee Retention,
Engagement, and Careers
Source: Steven Senne/AP Images.
LEARNING OBJECTIVES Company s
1. Describe a comprehensive approach to retaining Strategic Goals
employees.
2. Explain why employee engagement is important, and
how to foster such engagement.
3. Discuss what employers and supervisors can do to
support employees career development needs. Employee Competencies
and Behaviors Required
4. List and discuss the four steps in effectively coaching for Company to Achieve
an employee. These Strategic Goals
5. List the main decisions employers should address in
reaching promotion decisions.

Training and
opment
Devel

I
BM celebrated its centenary in 2011, marking 100 years
since Charles Flint founded it to provide punch card

Co
Placem t and

mp
tabulating machines for making business computations.1

ent
Recruitmen

ensa
Staying in business that many years is a feat shared by few
HR Policies and Practices

tion
companies. Most credit IBM s ability to adapt to changing Required to Produce
customer needs for its longevity. Today, IBM faces a new Employee Competencies
threat. Technology is changing so fast that IBM will soon and Behaviors
need a workforce with dramatically different skills than its

l
Le t
m
ga

Re m
l

en
workforce has now. What should it do to build that new work- dn noriv ita
sno olp

E
force, and to retain the employees it needs to move ahead? a c nE
iget
artS eey

WHERE ARE WE NOW . . .

Having invested time and resources in
selecting, training, and appraising
employees, the employer naturally wants
its employees to stay with the firm.
Unfortunately, keeping good employees can
be challenging. The main purpose of this
chapter is to help you be more effective
at improving employee retention,
engagement, and careers. The main topics
we ll address include employee retention,
employee engagement, career development,
coaching employees, and promotions.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 321
322 PART 3 TRAINING AND DEVELOPMENT

MANAGING EMPLOYEE TURNOVER

AND RETENTION
Turnover the rate at which employees leave the firm varies markedly among industries.
For example, turnover in the accommodation and food services industry is chronically
high, with over half the industry s employees voluntarily leaving each year. In contrast,
voluntary turnover in educational services is about 12%.2
Furthermore, such figures only reflect employees who leave voluntarily, such as for
better jobs or for retirement. They do not include involuntary separations, such as those
due to poor performance, disability, or corporate downsizings.3 Combining voluntary
and involuntary turnover produces some astounding statistics. For example, the turnover
in many food service organizations is around 100% per year. This means that (other
things equal) many restaurants need to replace just about all their employees every year.

Costs of Turnover
The costs to employers of turnover are high.4 The accompanying HR as a Profit Center
feature illustrates this.

HR AS A PROFIT CENTER
A research team analyzed the tangible and intangible costs of turnover in a call
center with 31 agents and 4 supervisors.5 Tangible costs associated with an agent s
leaving included, for instance, the costs of recruiting, screening, interviewing, and
testing applicants, as well as the cost of wages while the new agent was oriented
and trained. Intangible costs included the cost of lost productivity for the new
agent (who is less productive at first than his or her predecessor), the cost of rework
for errors the new agent makes, and the supervisory cost for coaching the new
agent. For this call center, the researchers mathematical model estimated the cost
of an agent leaving at about $21,551. This call center averaged 18.6 vacancies per
year (about a 60% turnover rate). Therefore, the researchers estimated the total
annual cost of agent turnover at $400,853. Taking steps to cut this turnover rate in,
say, half could save this firm about $200,000 per year.

Reducing turnover requires identifying and managing the reasons for both
voluntary and involuntary turnover. We address managing voluntary turnover here,
and managing involuntary turnover in Chapter 14 (ethics and fair treatment).

Managing Voluntary Turnover

Managing voluntary turnover requires identifying its causes and then addressing
them. Unfortunately, identifying why employees voluntarily leave is easier said
than done. People who are dissatisfied with their jobs are more likely to leave,
but the sources of dissatisfaction are many and varied. Figure 10-1 provides an
example. 6 The consultants collected survey data from 262 U.S. organizations
having a minimum of 1,000 employees. In this survey, the five top reasons high
commitment/top-performing employees gave for leaving (ranked from high to
low) were pay, promotional opportunities, work life balance, career development,
and health care benefits. In contrast, employers ranked the top five reasons employ-
ees left as promotion, career development, pay, relationship with supervisor, and
work life balance. Other reasons employees voluntarily leave include unfairness, not
having their voices heard, and a lack of recognition.7 Sometimes simply asking,
All things considered, how satisfied are you with your job? can be as effective as
soliciting employees attitudes toward various facets of the job (such as supervision
and pay).8 Practical considerations affect turnover. For example, high unemployment
reduces voluntary turnover, and some locales have fewer job opportunities (and
thus turnover) than do others.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 323

FIGURE 10-1 Reasons

Top-Performing Employees
Leave an Organization

Source: www.worldatwork.org/
waw/adimLink?id=17180, accessed
April 3, 2011.

Of course, turnover isn t necessarily bad. For example, losing low-performing

employees isn t as problematical as losing high-performing ones. Some firms, such as
the restaurant chain Applebee s, even incentivize their managers differentially, with
higher incentives for reducing turnover among top-performing employees.9

Retention Strategies for Reducing Voluntary Turnover

In any case, given the variety of things prompting employees to leave voluntarily, what
can one do to manage voluntary turnover? There is no silver bullet. The manager should
understand that retaining employees is a talent management issue, and that the best
retention strategies are therefore multifunctional. For example, employees who aren t
interested in their jobs, sense that they re not suited for their jobs, or who feel undercom-
pensated are more likely to leave. Employers can only address such issues by instituting
effective and comprehensive talent management (recruitment, selection, training,
appraisal, and compensation) practices. Put another way, turnovers (both voluntary
and involuntary) often start with poor selection decisions, compounded by inadequate
training, insensitive appraisals, and inequitable pay. Therefore trying to formulate a
retention strategy without considering all of one s HR practices is generally futile.
Identifying the issues is an important first step in any retention strategy. As we ll
explain in Chapter 14, effectively conducted exit interviews provide useful insights
into potential turnover problem areas. Many employers routinely administer attitude
surveys to monitor employees feelings about matters such as supervision and pay.
Open door policies and anonymous hotlines help management identify and remedy
morale problems before they get out of hand. Sometimes, analyzing the situation
leads to simple solutions. For example, Walmart discovered it could significantly
reduce voluntary turnover by providing aggressively realistic previews about the job s
demands and work hours. Then, having identified potential problems, the employer
can take steps like the following to boost employee retention.
324 PART 3 TRAINING AND DEVELOPMENT

1 Describe a comprehensive
A Comprehensive Approach to Retaining Employees
approach to retaining Experts from the consulting company Development Dimensions International (DDI)
employees. and the employment firm Robert Half International suggest building comprehensive
retention programs around the following steps.
Selection. Retention starts up front, in the selection and hiring of the right
employees. 10 Selection refers not just to the worker but to choosing the right
supervisors as well. For example, FedEx conducts periodic employee attitude
surveys. The supervisor then meets to review the results with his or her
employees to address any problems the surveys raise.
Professional growth. Inadequate career and professional development prospects
prompt many employees to leave. Conversely, a well-thought-out training and
career development program can provide a strong incentive for staying with the
company. As one expert says, professionals who feel their company cares
about their development and progress are much more likely to stay. 11 The
accompanying Strategic Context feature illustrates this, and we also address
career development later in the chapter.
Provide career direction. Periodically discuss with employees their career
preferences and prospects at your firm, and help them lay out potential career
plans. Furthermore, don t wait until performance reviews to remind top
employees how valuable they are to your company. 12
Meaningful work and ownership of goals. People can t do their jobs if they
don t know what to do or what their goals are. Therefore, an important part
of retaining employees is making it clear what your expectations are regarding
their performance and what their responsibilities are.
Recognition and rewards. We ve seen that in addition to pay and benefits,
employees need and appreciate recognition for a job well done.
Culture and environment. For example, companies that are very tense and
political may prompt employees to leave, while companies that make them
feel comfortable encourage them to stay.
Promote work life balance. In one survey conducted by Robert Half and
careerbuilder.com, workers identified flexible work arrangements and
telecommuting as the two top benefits that would encourage them to
choose one job or another.
Acknowledge achievements. When employees feel underappreciated,
they re more likely to leave. Surveys suggest that frequent recognition
of accomplishments is an effective nonmonetary reward.

THE STRATEGIC CONTEXT

IBM Aims for Flexibility
Technological change is occurring so fast that IBM will soon need a workforce with
dramatically different skills than its workforce has now, one capable of reacting to
customers changing needs on demand. IBM could, of course, merely size up its
employees periodically and let go those who don t measure up. Instead, IBM
chose to put in place an on-demand staffing strategy. This aims to ensure that its
current employees get the training and coaching they need to play roles in IBM s
future.13 To do this, IBM budgeted $700 million per year to identify needed skills,
spot gaps for skills that are in short supply, and to train and assess its executives,
managers, and rank-and-file employees. IBM s on-demand staffing effort is having
at least two big effects. It is supporting IBM s strategy, which depends on being
able to offer the fast-evolving technological services its customers need, at once,
on demand. The staffing program is also improving employee retention, by
minimizing the layoffs and resignations that might occur if employees skill sets
were inconsistent with IBM s needs.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 325

Managing Involuntary Turnover

We discuss involuntary turnover in Chapter 14, but several points are pertinent here.
Involuntary turnovers are inevitable. Even under the best conditions, the employer
will have to let some employers go when jobs are restructured, or when competitive
pressures necessitate reductions in force. However, dismissals due to poor perform-
ance are sometimes avoidable. As with voluntary turnover, performance-based
dismissals may stem from breakdowns in the employer s talent management system.
Therefore, here, too, reviewing and improving one s recruitment, selection, training,
appraisal, and compensation/incentive plans can reduce dismissals by addressing
the reasons for poor performance. We discuss strategies for managing involuntary
turnover in Chapter 14.

Talent Management and Employee Retention

All employees are important, but as we explained earlier in this book, talent
management oriented employers put special emphasis on developing and retaining
their most critical employees. For example, we saw that Accenture uses a 4 * 4
strategic role assessment matrix. It plots employees by performance and by
value to the organization. Accenture then ties pay, development, dismissal, and
other personnel decisions to each employee s position in the matrix. Compass
Group identifies top performers, and then assesses them for promotability and
leadership potential. Shell China appoints career stewards to meet regularly with
emerging leaders. Novartis China uses a checklist to assess the attitudes of its most
mission-critical employees. The point is that taking a talent management approach to
retaining employees suggests focusing augmented retention efforts on the company s
most important employees.

Job Withdrawal
Unfortunately, voluntary turnover is just one way that employees withdraw.
Withdrawal in general means separating oneself from one s current situation it s a
means of escape for someone who is dissatisfied or fearful. At work, job withdrawal has
been defined as actions intended to place physical or psychological distance between
employees and their work environments. 14
Poor attendance and voluntary turnover are two job withdrawal examples. Other
types of job withdrawal can be less obvious if no less corrosive. Some examples
include taking undeserved work breaks, spending time in idle conversation and
neglecting aspects of the job one is obligated to perform. 15 Other employees stop
showing up mentally ( psychological withdrawal ), perhaps daydreaming at their
desks while productivity suffers.16 The employee is there, but mentally absent. In fact,
the job withdrawal process tends to be incremental, often evolving from daydreaming
to absences to quitting: [W]hen an employee perceives that temporary withdrawal
will not resolve his/her problems, then the employee is apt to choose a more perma-
nent form of withdrawal (i.e., turnover, assuming that alternative work opportunities
are available). 17

DEALING WITH JOB WITHDRAWAL Studies confirm the high costs of job
withdrawal behavior, so understanding its causes is important.18 Because many people
have experienced the desire to withdraw to get away from some situation
it s perhaps not difficult to empathize with those who feel they must escape. The
simplest way to think about it is in terms of pain versus pleasure. People tend to
move toward situations that make them feel good, and move away from those that
make them feel bad. More technically, negative emotional states make people
aware that their current situation is problematic, and this awareness motivates
them to take action. 19 People are repelled by situations that produce unpleasant,
uncomfortable emotions, and are attracted to those that produce pleasant,
comfortable ones.20 The point is that the more negative and less positive the person s
326 PART 3 TRAINING AND DEVELOPMENT

mood about a situation, the more likely he or she will try to avoid or withdraw from
the situation.21
The manager can therefore think of withdrawal-reducing strategies in terms of
reducing the job s negative effects, and/or of raising its positive effects. Because poten-
tial negatives and positives are virtually limitless, addressing withdrawal problems
again requires a comprehensive human resource management approach. Illustrative
potential negatives include, for instance, boring jobs, poor supervision, low pay,
bullying, lack of career prospects, and poor working conditions. Potential positives
include job enrichment, supportive supervision, equitable pay/family-friendly
benefits, disciplinary/appeals processes, career development opportunities, safe and
healthy working conditions, and having high-morale colleagues.22 Interviews, surveys,
and observation can help identify issues to address.

EMPLOYEE ENGAGEMENT
Poor attendance, voluntary turnover, and psychological withdrawal often also reflect
diminished employee engagement. Engagement refers to being psychologically involved
in, connected to, and committed to getting one s jobs done.

2 Explain why employee

Why Engagement Is Important
engagement is important, Employee engagement is an important topic, because many employee behaviors,
and how to foster such including turnover, reflect the degree to which employees are engaged. For example,
engagement. based on surveys by the Gallup organization, business units with the highest levels of
employee engagement have an 83% chance of performing above the company
median, while those with the lowest employee engagement have only a 17% chance of
performing better than the company median.23 A survey by consultants Watson
Wyatt Worldwide concluded that companies with highly engaged employees have
26% higher revenue per employee.24 The director of recruiting at the nonprofit Fair
Trade USA believes boosting engagement helps to explain the firm s subsequent 10%
drop in turnover. A recent Harvard Business Review article notes that when it comes
to customer service, satisfied employees aren t enough. Instead, Employees should be
engaged by providing them with reasons and methods to satisfy customers and then
rewarded for appropriate behavior. 25 Yet studies, including one from the consulting
firm TowersPerrin, concluded that only about 21% of the global workforce is
engaged, while almost 40% is disengaged.26

Actions That Foster Engagement

The same TowersPerrin findings illustrate the sorts of managerial actions that can
foster employee engagement. Figure 10-2 summarizes these findings.27 Engagement-
supporting actions include making sure employees (1) understand how their depart-
ments contribute to the company s success, (2) see how their own efforts contribute
to achieving the company s goals, and (3) get a sense of accomplishment from working
at the firm.

Monitoring Employee Engagement

Monitoring employee engagement needn t be complicated. With about 180,000
employees worldwide, the consulting firm Accenture uses a three-part shorthand
method they call say, stay, and strive to identify which employees are engaged, and
why. First, Accenture assesses the employee s pride in being with the organization
in terms of how positively he or she speaks about the company and recommends it
to others. Second, it looks at who stays with a company, and why. Finally, it looks
at strive. For instance, do employees take an active role in the overall success of the
organization by moving beyond just doing tasks to going above and beyond? 28
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 327

FIGURE 10-2 Employer

Actions that Make Employees
Feel More Engaged

Source: Working Today:

Understanding What Drives Employee
Engagement, www.towersperrin.
com/tp/getwebcachedoc?webc=
hrs/usa/2003/200309/talent_2003.pdf,
accessed April 3, 2011.

CAREER MANAGEMENT
Career development plays an important role in engaging and retaining employees. For
example, a survey by the human resource management consulting firm Mercer found
that as of 2010, employers planned to focus both on money and on career development
to retain and engage the right talent.29 One observer similarly says that rather than
focusing on incentives and perks to entice and retain employees, organizations . . .
will hold onto the most talented workers . . . by offering them a range of professional
experiences, broad functional and geographic exposure within the organization,
and more targeted leadership opportunities. 30 These experiences become part of the
employer s total rewards package.
Employers, not just employees, therefore benefit from offering employees career
development support. The employees, armed with better insights about their occupa-
tional strengths, should be better equipped to serve the company.31 Supporting your
employees career development may also boost employee engagement and support
your recruitment and retention efforts. As one expert said, The most attractive
proposition an employer can make today is that in 5 years the employee will have
more knowledge and be more employable than now. That should be the acid test
for any career development program. 32

Careers Terminology
We may define career as the occupational positions a person holds over the years.
Career management is a process for enabling employees to better understand and
develop their career skills and interests and to use these skills and interests
most effectively both within the company and after they leave the firm. Career
development is the lifelong series of activities (such as workshops) that contribute

career career management career development

The occupational positions a person has had The process for enabling employees to better The lifelong series of activities that
over many years. understand and develop their career skills contribute to a person s career exploration,
and interests, and to use these skills and establishment, success, and fulfillment.
interests more effectively.
328 PART 3 TRAINING AND DEVELOPMENT

to a person s career exploration, establishment, success, and fulfillment. Career

planning is the deliberate process through which someone becomes aware of
personal skills, interests, knowledge, motivations, and other characteristics; acquires
information about opportunities and choices; identifies career-related goals; and
establishes action plans to attain specific goals.
We ll see that the employee s manager and employer should play roles in guiding
and developing the employee s career. However, the employee must always accept full
responsibility for his or her own career development and career success.

Careers Today
People once viewed careers as a sort of upward stairway from job to job, more often
than not with one or at most a few firms. Today, recessions, mergers, outsourcing,
consolidations, and more or less endless downsizings have changed the rules. Many
people do still move up from job to job. But more often employees find themselves
having to reinvent themselves. For example, the sales rep, laid off by a publishing firm
that s just merged, may reinvent her career as an account executive at a media-
oriented advertising firm.33
Careers today differ in other ways from a few years ago. With more women pursuing
professional and managerial careers, families must balance the challenges associated with
dual career pressures. At the same time, what people want from their careers seems to be
changing. Baby boomers those retiring in the next few years tended to be job- and
employer-focused. People entering the job market now often value work arrangements
that provide more opportunities for balanced work family lives.

Psychological Contract
One implication is that what employers and employees expect from each other
is changing. What the employer and employee expect of each other is part of what
psychologists call a psychological contract. This is an unwritten agreement that exists
between employers and employees. 34 The psychological contract identifies each
party s mutual expectations. For example, the unstated agreement is that manage-
ment will treat employees fairly and provide satisfactory work conditions, hopefully
in a long-term relationship. Employees are expected to respond by demonstrating a
good attitude, following directions, and showing loyalty to the organization. 35
But with today s tumultuous labor markets, neither the employer nor the
employee can count on long term commitments from each other. That fact changes
the terms of the psychological contract, and makes career management even more
critical for the employee.

The Employee s Role in Career Management

The employer and manager have roles in guiding employees careers, but particularly in
today s environment, no employee should ever abandon this task to others. For the
employee, career planning means matching individual strengths and weaknesses with
occupational opportunities and threats. In other words, the person wants to pursue
occupations, jobs, and a career that capitalize on his or her interests, aptitudes, values,
and skills. He or she also wants to choose occupations, jobs, and a career that make sense
in terms of projected future demand for various types of occupations. The consequences
of a bad choice (or of no choice) are too severe to leave to others. There is a wealth
of sources to turn to.
As one example, career-counseling expert John Holland says that personality
(including values, motives, and needs) is one career choice determinant. For example,
a person with a strong social orientation might be attracted to careers that entail
interpersonal rather than intellectual or physical activities and to occupations such as
social work. Holland found six basic personality types or orientations. Individuals
can use his Self-Directed Search (SDS) test (available online at www.self-directed-
search.com) to assess their occupational orientations and preferred occupations.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 329

The SDS has an excellent reputation, but the career seeker needs to be wary of some
of the other online career assessment sites. One study of 24 no-cost online career assess-
ment Web sites concluded that they were easy to use, but suffered from insufficient vali-
dation and confidentiality. However, a number of online career assessment instruments
such as Career Key (www.careerkey.org) do reportedly provide validated and useful
information.36 O*Net offers a free comprehensive online My Next Move occupations
and career assessment system (http://www.onetcenter.org/mynextmove.html). You will
find other examples at Workday.com, and in the following exercises.

EXERCISE 1 One useful exercise for identifying occupational skills is to head a

page The School or Occupational Tasks I Was Best At. Then write a short essay
describing the tasks. Provide as much detail as you can about your duties and respon-
sibilities, and what you found enjoyable about each task. (It s not necessarily the most
enjoyable job you ve had, but the most enjoyable task you ve had to perform within
your jobs.) Next, on other pages, do the same thing for two other tasks you ve had.
Now scrutinize the three essays. Underline the skills that you mentioned the most
often. For example, did you especially enjoy the hours you spent in the library doing
research for your boss when you worked one summer as an office clerk?37

EXERCISE 2 Another exercise can prove enlightening. On a page, answer the

question: If you could have any kind of job, what would it be? Invent your own job
if need be, and don t worry about what you can do just what you want to do.38

career planning
The deliberate process through which
someone becomes aware of personal skills,
interests, knowledge, motivations, and other
characteristics and establishes action plans
to attain specific goals.
330 PART 3 TRAINING AND DEVELOPMENT

3 Discuss what employers and

The Employer s Role in Career Management
supervisors can do to sup- The employer s career development tasks depend partly on how long the employee has
port employees career been with the firm. For example, before hiring, realistic job interviews can help prospec-
development needs. tive employees more accurately gauge whether the job is a good fit with the candidate s
skills and interests.
Especially for recent college graduates, the first job can be crucial for building con-
fidence and a more realistic picture of what he or she can and cannot do: Providing
challenging first jobs (rather than relegating new employees to jobs where they can t
do any harm ) and having an experienced mentor who can help the person learn the
ropes are important. Some refer to this as preventing reality shock, a phenomenon
that occurs when a new employee s high expectations and enthusiasm confront the
reality of a boring, unchallenging job.
After the person has been on the job for a while, new employer career-management
roles arise. Career-oriented appraisals in which the manager is trained not just to
appraise the employee but also to match the person s strengths and weaknesses with a
feasible career path and required development work is one important step. Similarly,
providing periodic job rotation can help the person develop a more realistic picture of
what he or she is (and is not) good at, and thus the sort of future career moves that
might be best.

Career Management Systems

Most employers aren t inclined to provide a wide range of expensive career develop-
ment options. However, career development systems needn t be complicated. Even just
receiving performance feedback from supervisors, having individual development
plans, and having access to training is enough for most employees. Beyond that, job
postings, formal career-oriented performance appraisals, career development centers,
formal counseling and mentoring with managers, and individual succession planning
for high-potential employees are valuable career development tools.39 Yet only about a
fourth of the respondents in one survey even had individual development plans.40
Figure 10-3 illustrates a simple employee career planning form.41

CAREER CENTERS Other systems are more comprehensive. Some employers create
Web-based or offline libraries of career development materials, plus career workshops,
workshops on related topics (such as time management), and individual career coaches
for career guidance. First USA Bank has its Opportunity Knocks program. Its aim is
to help employees crystallize their career goals and achieve them within the company.
In addition to career development training and follow-up support, the program includes
career development centers at work sites that employees use on company time. The latter
contain materials such as career assessment and planning tools.42

CAREER PLANNING WORKSHOPS A career planning workshop is a planned

learning event in which participants are expected to be actively involved, completing
career planning exercises and inventories and participating in career skills practice
sessions. 43 A typical workshop includes self-assessment exercises (skills, interests,
values, and so on), an assessment of important occupational trends, and goal-setting
and action-planning segments.

LIFELONG LEARNING BUDGETS As we explained in Chapter 8 (Training),

several employers provide 401(k)-type lifelong learning accounts for their employees.
Both employers and employees contribute, and the employees can tap into these to
get the career-related education and development they desire.44

PROVIDE CAREER COACHES For example, Allmerica Financial Corp. hired

20 career development coaches to assist its 850-person information technology staff.
The coaches helped individual employees identify their development needs and
obtain the training, professional development, and networking opportunities that
they require to satisfy those needs.45
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 331

FIGURE 10-3 Employee

Career Development Plan
Employee Career Development Plan
Source: Reprinted from
www.HR.BLR.com with permission Employee: Position:
of the publisher Business and Legal
Resources, Inc., 141 Mill Rock Road Manager: Department:
East, Old Saybrook, CT © 2004. BLR®
(Business and Legal Resources, Inc.). Date of Appraisal:

1. What is the next logical step up for this employee, and when do
you think he or she will be ready for it?

When Ready:
Probable Next Job:
Now 6 Months 1 Year 2 Years
1.
2.

3.

2. What is the highest probable promotion within five years?

3. What does this employee need to prepare for promotion?

Knowledge:

Action Plan:

Still Training:

Action Plan:

Management Training:

Action Plan:

Career coaches generally help employees create 1- to 5-year plans showing where
their careers with the firm may lead. Then, the employer and employee base the latter s
development plans on what he or she will need to move up.46
OFFER ONLINE PROGRAMS For example, WorkforceVision from Criterion,
Inc., supplies online systems that help the employer analyze an employee s training
needs. Clicking on the employee s name launches his or her work history, competencies,
career path, and other information. For each competency (such as leadership and
customer focus), a bar chart graphically shows a gap analysis highlighting the person s
strengths and weaknesses. The firm can then organize developmental activities around
the person s needs.47
CAREER-ORIENTED APPRAISALS In brief, if you use the performance review
only to tell the employee how he or she is doing, you ll miss an opportunity to
support the employee s career development. Performance appraisals also provide an

reality shock
Results of a period that may occur at the initial
career entry when the new employee s high
job expectations confront the reality of a
boring or otherwise unattractive work situation.
332 PART 3 TRAINING AND DEVELOPMENT

opportunity to discuss and link the employee s performance, career interests, and
developmental needs into a coherent career plan.
Many employers have formal programs to do this. For example, JCPenney s
managerial performance appraisal form contains a listing of all jobs by title, function,
and level that employees could conceivably want to consider. The company trains its
supervisors to link the employee s performance, career interests, and corporate needs,
and develop a career plan including development activities for the employee.
However, even a simple form like the one shown in Figure 10-4 can suffice. The
main thing is to help the manager and employee translate the latter s performance-based
FIGURE 10-4 Sample experiences for the year into tangible development plans and goals.
Performance Review
Development Plan
Gender Issues in Career Development
Source: Reprinted from Women and men face different challenges as they advance through their careers. In one
www.HR.BLR.com with permission
of the publisher Business and Legal study, promoted women had to receive higher performance ratings than promoted
Resources, Inc., 141 Mill Rock Road men to get promoted, suggesting that women were held to stricter standards for
East, Old Saybrook, CT © 2004. promotion. 48 Women report greater barriers (such as being excluded from informal
BLR® (Business and Legal
Resources, Inc.).

A. Employee s Major Strengths

1.
2.
3.
B. Areas for Improvement/Development
1.
2.
3.
C. Development Plans: Areas for Development
1.
2.
3.
4.
Development Strategy:

D. Employee s Comments on This Review:

E. Reviewer s Comments:

Growth potential in present position and future growth potential for increased
responsibilities:

Employer s Signature: Date:

Reviewer s Signature: Date:
Reviewer s Manager s Signature: Date:
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 333

networks) than do men, and more difficulty getting developmental assignments and
geographic mobility opportunities. Women have to be more proactive than men just to
be considered for such assignments, and employers therefore need to focus on breaking
down the barriers that impede women s career progress. One study concluded that three
corporate career development activities fast-track programs, individual career coun-
seling, and career planning workshops were less available to women than to men.49
Many call this combination of subtle and not-so-subtle barriers to women s progress the
glass ceiling. Because developmental experiences like these are so important, organiza-
tions that are interested in helping female managers advance should focus on breaking
down barriers that interfere with women s access to developmental experiences. 50

The Manager s Role

It s hard to overstate the impact that a supervisor can have on his or her employee s
career development. With little or no additional effort than realistic performance reviews
and candid career advice, a competent supervisor can help the employee get on and stay
on the right career track. At the other extreme, an uncaring or unsupportive supervisor
may look back on years of having inhibited his or her employees career development.
The manager can do several things to support his or her subordinates career
development needs. For example, when the subordinate first begins his or her job,
make sure (through orientation and training) that he or she develops the skills
required to get off to a good start. Schedule regular performance appraisals and, at
these reviews, cover the extent to which the employee s current skills and performance
are consistent with the person s career aspirations. Provide the employee with an
informal career development plan like that in Figure 10-4. Keep subordinates
informed about how they can utilize the firm s current career-related benefits,
and encourage them to do so.51 And, know how to coach employees and provide
mentoring assistance. Let s look at this next.

IMPROVING COACHING SKILLS

4 List and discuss the four
steps in effectively coaching Coaching and the closely related mentoring are key managerial skills. Coaching
an employee. means educating, instructing, and training subordinates. Mentoring means advising,
counseling, and guiding. Coaching focuses on teaching shorter-term job-related
skills. Mentoring focuses on helping employees navigate longer-term career hazards.
Supervisors have coached and mentored employees from the dawn of management
(in Greek mythology, Mentor advised Odysseus s son during Odysseus absence).
But with more managers leading highly trained employees and self-managing teams,
supporting, coaching, and mentoring are fast replacing formal authority and giving
orders for getting things done.
Employers understand that coaching and mentoring are important. One consulting
firm surveyed about 2,500 senior human resource and training and development
managers to see what their training programs offered.52 The survey found that the
top skills their firms development programs taught were coaching a performance
problem (72%), communicating performance standards (69%), coaching a devel-
opment opportunity (69%), and conducting a performance appraisal (67%).

Building Your Coaching Skills

Coaching and mentoring require both analytical and interpersonal skills. They require
analysis because it s futile to teach or advise someone if you don t know what the problem
is. They require interpersonal skills because it s equally futile to know the problem if you
can t get the person to listen or change.

coaching mentoring
Educating, instructing, and training Advising, counseling, and guiding.
subordinates.
334 PART 3 TRAINING AND DEVELOPMENT

Some performance situations don t require coaching. For example, if your new
employee learns the first time through how to do the job, or if your employee s perform-
ance review is flawless, you won t need to do much coaching. But things rarely go so
smoothly. And when they don t, you re probably going to have to coach the employee.
Coaching does not mean just telling someone what to do. We can best think of
coaching in terms of a four-step process: preparation, planning, active coaching, and
follow-up.53 Preparation means understanding the problem, the employee, and the
employee s skills. Your aim is to formulate a hypothesis about what the problem is. You ll
watch the employee to see what he or she is doing, and observe the workflow and how
coworkers interact with the employee. In addition to observation, you may review (as we
explained in Chapter 8, Training) objective data on things like productivity, absenteeism
and tardiness, accidents, grievances, waste, product quality, downtime, repairs, customer
complaints, and the employee s previous performance reviews and training.
Planning the solution is next. Perhaps the most powerful way to get someone to
change is to obtain his or her enthusiastic agreement on what change is required. This
requires reaching agreement on the problem and on what to change. In practice,
you ll then lay out a change plan in the form of steps to take, measures of success, and
date to complete.
With agreement on a plan, you can start the actual coaching. Here you are, in
essence, the teacher. Your toolkit will include what you learned about on-the-job
training in Chapter 8 ( Explain quantity and quality requirements, Go through the
job at the normal work pace, and so on). As one writer says, [a]n effective coach
offers ideas and advice in such a way that the subordinate can hear them, respond to
them, and appreciate their value. 54
Finally, bad habits sometimes reemerge. It s therefore necessary to follow-up and
re-observe the person s progress periodically.
Figure 10-5 presents a self-evaluation checklist for assessing your coaching skills.

Building Your Mentoring Skills

Mentoring traditionally means having experienced senior people advising, counseling,
and guiding employees longer-term career development. An employee who agonizes
over which career to pursue or how to navigate office politics might need mentoring.
Mentoring may be formal or informal. Informally, mid- and senior-level managers
may voluntarily help less-experienced employees for instance, by giving them career
advice and helping them to navigate office politics. Many employers also have formal
mentoring programs. For instance, the employer may pair protégés with potential
mentors, and provide training to help mentor and protégé better understand their
respective responsibilities. Either formal or informal, studies show that having a
mentor give career-related guidance and act as a sounding board can significantly
enhance one s career satisfaction and success.55

MENTORING CAVEATS For the supervisor, mentoring is both valuable and

dangerous. It can be valuable insofar as it allows you to influence, in a positive way, the
careers and lives of your less experienced subordinates and colleagues. The danger lies
on the other side of that same coin. Coaching focuses on daily tasks that you can easily
re-learn, so coaching s downside is usually limited. Mentoring focuses on relatively
hard-to-reverse longer-term issues, and often touches on the person s psychology
(motives, needs, aptitudes, and how one gets along with others, for instance). Because
the supervisor is usually not a psychologist or trained career advisor, he or she must
be extra cautious in the mentoring advice he or she gives.

THE EFFECTIVE MENTOR Research on what supervisors can do to be better

mentors reveals few surprises. Effective mentors set high standards, are willing to
invest the time and effort the mentoring relationship requires, and actively steer
protégés into important projects, teams, and jobs.56 Effective mentoring requires trust,
and the level of trust reflects the mentor s professional competence, consistency, ability
to communicate, and readiness to share control.57
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 335

FIGURE 10-5 Coach s

Self-Evaluation Checklist
Coach s Self-Evaluation Checklist
Source: Based on Richard Luecke,
Coaching and Mentoring
(Boston: Harvard Business School The questions below relate to the skills and qualities needed to be an effective coach.
Press, 2004), pp. 8 9. Use this tool to evaluate your own effectiveness as a coach.

Question Yes No

1. Do you show interest in career development, not just short-term

performance?
2. Do you provide both support and autonomy?
3. Do you set high yet attainable goals?
4. Do you serve as a role model?
5. Do you communicate business strategies and expected behaviors as a
basis for establishing objectives?
6. Do you work with the individual you are coaching to generate alternative
approaches or solutions which you can consider together?
7. Before giving feedback, do you observe carefully, and without bias, the
individual you are coaching?
8. Do you separate observations from judgments or assumptions?
9. Do you test your theories about a person s behavior before acting on them?
10. Are you careful to avoid using your own performance as a yardstick to
measure others?
11. Do you focus your attention and avoid distractions when someone is
talking to you?
12. Do you paraphrase or use some other method to clarify what is being said
in a discussion?
13. Do you use relaxed body language and verbal cues to encourage a speaker
during conversations?
14. Do you use open-ended questions to promote sharing of ideas and
information?
15. Do you give specific feedback?
16. Do you give timely feedback?
17. Do you give feedback that focuses on behavior and its consequences
(rather than on vague judgments)?
18. Do you give positive as well as negative feedback?
19. Do you try to reach agreement on desired goals and outcomes rather than
simply dictate them?
20. Do you try to prepare for coaching discussions in advance?
21. Do you always follow up on a coaching discussion to make sure
progress is proceeding as planned?

TOTALS

When you have these characteristics and use these strategies, people trust you and tum to you
for both professional and personal support.
If you answered yes to most of these questions, you are probably an effective coach.
If you answered no to some or many of these questions, you may want to consider how you
can further develop your coaching skills.

Source: Harvard ManageMentor* Coaching.

However, studies suggest that traditional mentoring is less effective for women
that it is for men. For example, in one survey of employees who had active mentoring
relationships in one recent year, 72% of the men received one or more promotions
in the ensuing 2 years, compared with 65% of the women. A CEO or other senior
executive mentored 78% of the men, compared with 69% of women.58
Figures like these are prompting employers to assign women to mentor/sponsors
who have more organizational clout. For example, when Deutsche Bank discovered
336 PART 3 TRAINING AND DEVELOPMENT

that several female managing directors had left the firm for better jobs at competitors,
it began pairing them with mentor/sponsors from the bank s executive committee. The
latter were in a position to advocate the women for promotion.

THE PROTÉGÉ S RESPONSIBILITIES Effective mentoring is a two-way street.

It s important to have effective mentors. But as the one with the most to gain, the
protégé is still largely responsible for making the relationship work. Suggestions
for protégés include:
* Choose an appropriate potential mentor. The mentor should be objective
enough to offer good career advice. Many people seek out someone who is one or
two levels above their current boss.
* Don t be surprised if you re turned down. Not everyone is willing to undertake
this time-consuming commitment.
* Make it easier for a potential mentor to agree to your request. Do so by making
it clear ahead of time what you expect in terms of time and advice.
* Respect the mentor s time. Be selective about the work-related issues that you
bring to the table. The mentoring relationship generally should not involve
personal problems or issues.59

Improving Productivity through HRIS: Integrating Talent

Management and Career and Succession Planning
Talent management is the goal-oriented and integrated process of planning, recruiting,
developing, managing, and compensating employees. Talent management oriented
employers therefore actively integrate related human resource functions. For example,
the employee s career planning and development needs should reflect the employee
strengths and weaknesses that the performance appraisal brings to light, while employees
career interests and appraisals should factor into the firm s succession planning.
Achieving such integration usually means using integrated talent management
software. For example, the company that manages the trans-Alaska pipeline has a
user-friendly portal that lets employees see their full training history, development
plans and upcoming deadlines, register for courses, or do career planning usually
without having to ask for help. 60 At the same time, managers can get a quick picture
of the training needs for a particular group, or see all the employees who have a
specific qualification. 61
Various talent management systems enable employers to achieve such appraisal,
career development, training, and succession planning integration. For example, Kenexa
CareerTracker helps organizations optimize workforce productivity by providing an
easily accessible platform for ongoing employee performance management, succession
planning, and career development. 62 Halogen eSuccession enables the employer to
Identify the skills and competencies required to support your 3 5 year strategic plans
and cultivate these in your high-potential employees with career and development
planning . . . [and] establish and develop a large number of promotable employees for
all key areas in your organization. 63 Cornerstone Succession manages succession
management through automated talent profiles, career management, internal recruiting
and comprehensive succession planning capabilities.64 Sum-Total Succession Planning
supports a holistic, end-to-end talent management strategy including:65
* 360 Feedback: Competency reviews by peers can be used as inputs into succession
gap analysis;
* Career Development: As employees map out their career progressions, plans can
be established that address competency, skill, and behavior gaps;
* Compensation Management: Financial plans can be tied to future succession
plans so that the financial impact can be modeled;
* Career Progression: Historical information regarding past positions and career
progression can be used to guide future succession decisions;
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 337

* Learning Management: Learning paths and courses can be established for

desired future positions;
* Performance Management: Performance reviews can identify consistent high
performers and top talent in the organization; and
* Recruiting & Hiring: Job profiles can be shared with Succession Planning;
External candidates can be tagged as successors.66

5 List the main decisions

MAKING PROMOTION DECISIONS
employers should address in Career planning and mentoring often precede promotion decisions. Most people
reaching promotion decisions. crave promotions, which usually mean more pay, responsibility, and (often) job
satisfaction. For employers, promotions can provide opportunities to reward excep-
tional performance, and to fill open positions with tested and loyal employees. Yet
the promotion process isn t always a positive experience. Unfairness, arbitrariness,
or secrecy can diminish the effectiveness of the process. Furthermore, with more
employers downsizing, some promotions take the form of more challenging but not
necessarily higher-ranked or better-paid jobs. Several decisions, therefore, loom large
in any firm s promotion process.

Decision 1: Is Seniority or Competence the Rule?

Probably the most important decision is whether to base promotion on seniority or
competence, or some combination of the two.
Today s focus on competitiveness favors competence. However, a company s
ability to use competence as the criterion depends on several things. Union agree-
ments sometimes contain clauses that emphasize seniority. Civil service regulations
that stress seniority rather than competence often govern promotions in many
public-sector organizations.

Decision 2: How Should We Measure Competence?

If the firm opts for competence, how should it define and measure competence?
The question highlights an important managerial adage called the Peter Principle,
after its founder. In brief, the Peter Principle says that companies often promote
competent employees up to their level of incompetence, where they then sit,
sometimes underperforming for years. The point is that defining and measuring
past performance is relatively straightforward. But promotions should require
something more. You also need a valid procedure for predicting the candidate s
future performance.
For better or worse, most employers use prior performance as a guide, and
assume that (based on exemplary prior performance) the person will do well on the
new job. This is the simplest procedure. Many others use tests or assessment centers to
evaluate promotable employees and to identify those with executive potential.
For example, given the public safety issues involved, police departments and the
military tend to take a relatively systematic approach when evaluating candidates for
promotion to command positions. For the police, traditional promotional reviews
include a written knowledge test, an assessment center, credit for seniority, and a score
based on recent performance appraisal ratings. Others include a personnel records
review. This includes evaluation of job-related influences such as supervisory-related
education and experience, ratings from multiple sources, and systematic evaluation
of behavioral evidence.67

THE 9-BOX ASSESSMENT In assessing candidates for promotions, it s not just

current performance but performance potential that s important. For example, some
high-performing candidates may already be at their limit and have no potential for
future growth. Some high potential candidates may be performing poorly but be
338 PART 3 TRAINING AND DEVELOPMENT

salvageable. That idea is at the heart of the 9-box matrix approach to assessing cur-
rent employees promotional prospects.68 The 9-box matrix displays three levels of
current job performance (exceptional, fully performing, not yet fully performing)
across the top. It also shows three levels of likely potential (eligible for promotion,
room for growth in current position, not likely to grow beyond current position)
down the side. This 3 * 3 design results in 9 possible combinations of current job per-
formance and likely potential. For example, an employee may be eligible for promotion
and exceptional in his or her current performance. He or she is therefore ready for
promotion. As another example, an employee may have room to grow in his or her
current position, but not fully performing yet. Here you would want to identify the
reasons for the underperformance and improve the employee s skills.

Decision 3: Is the Process Formal or Informal?

Many firms have informal promotion processes. They may or may not post open posi-
tions, and key managers may use their own unpublished criteria to make decisions.
Here employees may (reasonably) conclude that factors like who you know are more
important than performance, and that working hard to get ahead at least in this firm
is futile.
Other employers set formal, published promotion policies and procedures.
Employees receive a formal promotion policy describing the criteria by which the firm
awards promotions. A job posting policy states the firm will post open positions and
their requirements, and circulate these to all employees. As explained in Chapter 5
(Recruiting), many employers also maintain employee qualification databanks and use
replacement charts and computerized employee information systems.

Decision 4: Vertical, Horizontal, or Other?

Promotions aren t necessarily upwards. For example, how do you motivate employees
with the prospect of promotion when your firm is downsizing? And how do you
provide promotional opportunities for those, like engineers, who may have little or no
interest in managerial roles?
Several options are available. Some firms, such as the exploration division of British
Petroleum (BP), create two parallel career paths, one for managers and another for indi-
vidual contributors such as high-performing engineers. At BP, individual contributors
can move up to nonsupervisory but senior positions, such as senior engineer. These jobs
have most of the financial rewards attached to management-track positions at that level.
Another option is to move the person horizontally. For instance, move a produc-
tion employee to human resources, to develop his or her skills and to test and chal-
lenge his or her aptitudes. And, in a sense, promotions are possible even when
leaving the person in the same job. For example, you can usually enrich the job and
provide training to enhance the opportunity for assuming more responsibility.

Practical Considerations
In any case, there are practical steps to take in formulating promotion policies.69
Establish eligibility requirements, for instance, in terms of minimum tenure and
performance ratings. Require managers to review the job description, and revise if
necessary. Vigorously review all candidates performance and history, including those
now in the firm. Preferably hire only those who meet the requirements.

Sources of Bias in Promotion Decisions

Women and people of color still experience relatively less career progress in organiza-
tions, and bias and more subtle barriers are often the cause. Yet this is not necessarily the
result of decision makers racist sentiments. Instead, secondary factors such as having
few people of color employed in the hiring department may be the cause. In any case,
the bottom line seems to be that whether it s bias or some other reason, barriers still
exist. Employers and supervisors need to identify and abolish them.
Similarly, women still don t make it to the top of the career ladder in numbers
proportionate to their numbers in U.S. industry. Women constitute more than
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 339

40% of the workforce, but hold less than 2% of top management positions. Blatant or
subtle discrimination probably accounts for much of this. Some hiring managers
erroneously believe that women belong at home and are not committed to careers.
The old-boy network of informal (mostly male) friendships forged over lunch, at
social events, or at club meetings is still a problem. More women than men must also
make the career versus family decision, since the responsibilities of raising children
still fall disproportionately on women.
Similarly, a lack of female mentors makes it harder for women to find the role models
and supporters they need to help guide their careers. Special networking and mentoring
opportunities can reduce some of these problems, as can more flexible employment
policies. For example, when the accounting firm Deloitte & Touche noticed it was losing
good female auditors, it instituted a new flexible/reduced work schedule. This enabled
many working mothers who might otherwise have left to stay with the firm.70

Promotions and the Law

In general, the employer s promotion processes must comply with all the same antidis-
crimination laws as do procedures for recruiting and selecting employees or any other
HR actions. But beyond that general caveat, there are several specific things to keep in
mind regarding promotion decisions.
One concerns retaliation. Most federal and state employment laws contain anti-
retaliation provisions. For example, one U.S. Appeals Court allowed a claim of retaliation
to proceed when a female employee provided evidence that her employer turned her
down for promotion because a supervisor she had previously accused of sexual harass-
ment made comments that persuaded her current supervisor not to promote her.71
The evidence confirmed that, in a meeting at which supervisors reviewed the person s
performance, the former supervisor (and object of the sexual harassment accusation)
made comments regarding the employee s ability to work effectively with others.
A second concerns using inconsistent, unsystematic processes to decide who to
promote. For example, one employer turned down a 61-year-old applicant for a
promotion because of his interview performance; the person who interviewed him
said he did not get a real feeling of confidence from the candidate.72 In this case,
the court made it clear that while subjective reasons can justify adverse
employment decisions, an employer must articulate any clear and reason-
ably specific factual bases upon which it based its decision. In other words,
you should be able to provide objective evidence supporting your subjective
assessment for promotion.

Managing Transfers
A transfer is a move from one job to another, usually with no change
in salary or grade. Employers may transfer a worker to vacate a position
where he or she is no longer needed, to fill one where he or she is needed, or
Source: Shutterstock.

more generally to find a better fit for the employee within the firm. Many
firms today boost productivity by consolidating positions. Transfers are a
way to give displaced employees a chance for another assignment or,
perhaps, some personal growth. Employees seek transfers for many
reasons, including personal enrichment, more interesting jobs, greater
Employers are transferring employees less convenience better hours, location of work, and so on or to jobs offering
often, partly because of family resistance. greater advancement possibilities.

9-box matrix transfer

In workforce planning, this displays three levels Reassignments to similar positions in other
of current job performance (exceptional, fully parts of the firm.
performing, not yet fully performing) across
the top, and also shows three levels of likely
potential (eligible for promotion, room for
growth in current position, not likely to grow
beyond current position) down the side.
340 PART 3 TRAINING AND DEVELOPMENT

Managing Retirements
For many employees, years of appraisals and career planning end with retirement.
Retirement planning is a significant long-term issue for employers. In the
United States, the number of 25- to 34-year-olds is growing relatively slowly, and
the number of 35- to 44-year olds is declining. So, with many employees in their
50s and 60s moving toward traditional retirement age, employers face a longer-term
labor shortage: companies have been so focused on downsizing to contain costs
that they largely neglected a looming threat to their competitiveness . . . a severe
shortage of talented workers. 73
Many have wisely chosen to fill their staffing gaps in part with current or soon-to-be
retirees. Fortuitously, 78% of employees in one survey said they expect to continue
working in some capacity after normal retirement age (64% said they want to do so part-
time). Only about a third said they plan to continue work for financial reasons; about
43% said they just wanted to remain active.74
The bottom line is that retirement planning is no longer just for helping
current employees slip into retirement.75 It can also enable the employer to retain, in
some capacity, the skills and brain power of those who would normally retire and
leave the firm.

WORKFORCE RETIREMENT PLANNING A reasonable first step is to conduct

numerical analyses of pending retirements. This should include a demographic
analysis (including a census of the company s employees), a determination of the
average retirement age for the company s employees, and a review of how retirement
is going to affect the employer s health care and pension benefits. The employer can
then determine the extent of the retirement problem, and take fact-based steps to
address it.76

METHODS Employers seeking to attract and/or retain retirees need to take

several steps. The general idea is to institute human resource policies that encourage
and support older workers. Not surprisingly, studies show that employees who are
more committed and loyal to the employer are more likely to stay beyond their
normal retirement age.77 This often starts by creating a culture that honors experience.
For example, the CVS pharmacy chain knows that traditional recruiting media such
as help-wanted signs might not attract older workers; CVS thus works through
The National Council on Aging, city agencies, and community organizations to
find new employees. They also made it clear to retirees that they welcome older
workers: I m too young to retire. [CVS] is willing to hire older people. They don t
look at your age but your experience, said one dedicated older worker.78 Others
modify selection procedures. For example, one British bank stopped using psycho-
metric tests, replacing them with role-playing exercises to gauge how candidates
deal with customers.
The techniques employers use to keep older workers include offering them
part-time positions, hiring them as consultants or temporary workers, offering
them flexible work arrangements, encouraging them to work past traditional retire-
ment age, providing training to upgrade skills, and instituting a phased retirement
program. The latter lets older workers ease into retirement with gradually reduced
work schedules.79
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 341

REVIEW

MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Managing voluntary turnover requires identifying its online career development workshops and programs.
causes and then addressing them. A comprehensive Perhaps the simplest and most direct is to make the
approach to retaining employees should be multi- appraisal itself career-oriented, insofar as the appraisal
faceted, and include improved selection, a well- feedback is a link to the employee s aspirations and
thought-out training and career development program, plans. Supervisors can play a major role in their
assistance in helping employees lay out potential career employee s career development. For example, make sure
plans, providing employees with meaningful work and the employee gets the training he or she requires, and
recognition and rewards, promoting work life balance, make sure appraisals are discussed in the context of the
acknowledging employees achievements, and providing employee s career aspirations.
all this within a supportive company culture. 4. Getting employees to do better requires improving your
2. Employee engagement is important. Numerous employee coaching skills. Ideally, the coaching process involves
outcomes including turnover and performance preparation (in terms of analyzing the issues), developing
reflect the degree to which employees are engaged. For an improvement plan, active coaching, and follow-up.
example, business units with the highest levels Effective mentors set high standards, invest the time, steer
of employee engagement have an 83% chance of protégés into important projects, and exhibit professional
performing above the company median, while those competence and consistency.
with the lowest employee engagement have only a 5. For employers, promotions can provide opportunities
17% chance. Engagement-supporting actions include to reward exceptional performance, and to fill open
making sure employees (1) understand how their positions with tested and loyal employees. Several deci-
departments contribute to the company s success, sions loom large in any firm s promotion process: Is
(2) see how their own efforts contribute to achieving the seniority or competence the rule? How should we meas-
company s goals, and (3) get a sense of accomplishment ure competence? Is the process formal or informal? and,
from working at the firm. Vertical, horizontal, or other? Women and people of
3. Employees ultimately need to take responsibility for color still experience relatively less career progress in
their own careers, but employers and managers should organizations, and bias and more subtle barriers are
also understand what career management methods are often the cause. In general, the employer s promotion
available. These include establishing company-based processes must comply with all the same antidiscrimi-
career centers, offering career planning workshops, nation laws as do procedures for recruiting and selecting
providing employee development budgets, and offering employees or any other HR actions.

DISCUSSION QUESTIONS
1. Why is it advisable for an employee retention effort to be 3. What is the employee s role in the career development
comprehensive? To what extent does IBM s on-demand process? The manager s role? The employer s role?
program fit that description, and why? 4. List and discuss the four steps in effectively coaching
2. Explain why employee engagement is important, and an employee. How could (and would) a professional
how to foster such engagement. What exactly would football coach apply these steps?
you as a supervisor do to increase your employees 5. What are the main decisions employers should address
engagement? in reaching promotion decisions?
342 PART 3 TRAINING AND DEVELOPMENT

INDIVIDUAL AND GROUP ACTIVITIES

1. Many rightfully offer IBM as an example of an employer to the required knowledge the appendix lists; (3) write
that works hard to improve employee retention and four multiple-choice exam questions on this material
engagement. Browse through the employment pages that you believe would be suitable for inclusion in the
of IBM.com s Web site (such as www-03.ibm.com/ HRCI exam; and (4) if time permits, have someone
employment/build_your_career.html). In this chapter, we from your team post your team s questions in front of
discussed actions employers can take to improve employee the class, so the students in other teams can take each
retention and engagement. From the information on others exam questions
IBM s Web pages, what is IBM doing to support retention 7. Several years ago, a survey of college graduates in the
and engagement? United Kingdom found that although many hadn t
2. In groups of four or five students, meet with one or two found their first jobs, most were already planning
administrators and faculty members in your college or career breaks and to keep up their hobbies and inter-
university and, based on this, write a 2-page paper on ests outside work. As one report of the findings put it,
the topic the faculty promotion process at our college. the next generation of workers is determined not to
What do you think of the process? Based on our discus- wind up on the hamster wheel of long hours with no
sion in this chapter, could you make any suggestions for play. 80 Part of the problem seems to be that many
improving it? already see their friends putting in more than 48 hours
3. Working individually or in groups, choose two occupa- a week at work. Career experts reviewing the results
tions (such as management consultant, HR manager, or concluded that many of these recent college grads are
salesperson) and use sources such as O*Net to size up not looking for high-pay, high-profile jobs anymore. 81
the future demand for this occupation in the next Instead, they seem to be looking to compartmentalize
10 years or so. Does this seem like a good occupation their lives. They want to keep the number of hours they
to pursue? Why or why not? spend at work down, so they can maintain their hobbies
4. In groups of four or five students, interview a small and outside interests. If you were mentoring one of
business owner or an HR manager with the aim of these people at work, what three bits of career advice
writing a 2-page paper addressing the topic steps our would you give him or her? Why? What (if anything)
company is taking to reduce voluntary employee would you suggest their employers do to accommodate
turnover. What is this employer s turnover rate now? these graduates stated career wishes?
How would you suggest it improve its turnover rate? 8. Sporting News (http://aol.sportingnews.com/ncaa-
5. The HRCI Test Specifications Appendix at the end of basketball/story/2009-07-29/sporting-news-50-greatest-
this book (pages 633 640) lists the knowledge someone coaches-all-time) ran a story listing what they called the
studying for the HRCI certification exam needs to have 50 greatest basketball coaches. Look at this list, and pick
in each area of human resource management (such as in out two of the names. Then research these people online
Strategic Management, Workforce Planning, and to determine what behaviors they exhibited that seem to
Human Resource Development). In groups of four to account for why they were great coaches. How do these
five students, do four things: (1) review that appendix behaviors compare with what this chapter had to say
now; (2) identify the material in this chapter that relates about effective coaching?

EXPERIENTIAL EXERCISE
Where Am I Going . . . and Why?
Purpose: The purpose of this exercise is to provide you with you may do this analysis in teams of three or four
experience in analyzing your career preferences. students).
Required Understanding: Students should be thoroughly
familiar with the Employee s Role in Career Management 1. What does your research suggest to you about what
section in this chapter, as well as using O*Net (which we would be your preferable occupational options?
discussed in Chapter 4). 2. What are the prospects for these occupations?
3. Given these prospects and your own occupational
How to Set Up the Exercise/Instructions: inclinations, outline a brief, 1-page career plan for
Using O*Net and the Employee s Role in Career Manage- yourself, including current occupational inclinations,
ment section in this chapter, analyze your career-related career goals, and an action plan listing four or five
inclinations (you can take the self-directed search for development steps you will need to take in order to
about $10 at www.self-directed-search.com). Based on get from where you are now career-wise to where you
this analysis, answer the following questions (if you wish, want to be, based on your career goals.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 343

APPLICATION CASE
GOOGLE REACTS
On the face of it, Google would seem to be the last company Google management knew that pay was just part of the
that one would expect to have an employee retention solution. It had to take other steps.
problem. Google usually shows up in Best Employers to
Work for lists; it s famous for full benefits, from dry-cleaning
to free Web-enabled transportation from San Francisco Questions
to great pensions; it offers great stock options; and as a fast- 1. Without doing any further research than what you learned
growing company, it usually has many job applicants. in this chapter, what other steps would you suggest Google
So when its employee turnover began creeping up around take to improve employee retention?
2010, Google s human resource team had to decide what to 2. Was there any information in previous chapters of this
do. Part of the problem is that as attractive as Google is to book that would help to illustrate other steps Google
work for, Silicon Valley is filled with attractive employers, took to improve retention?
from Apple to Facebook. One of Google s first steps was to 3. Use other Internet sources, including Google.com, to
boost compensation. It gave all 23,000 Google employees a finalize an answer to the question, What other steps
10% raise, plus a $1,000 tax-free holiday bonus. 82 But still, should Google take to improve employee retention?

CONTINUING CASE
CARTER CLEANING COMPANY
The Career Planning Program Questions
Career planning has always been a pretty low-priority item for 1. What would be the advantages to Carter Cleaning of
Carter Cleaning, since just getting workers to come to work setting up a career planning program?
and then keeping them honest is enough of a problem, as Jack 2. Who should participate in the program? All employees?
likes to say. Yet Jennifer thought it might not be a bad idea to Selected employees?
give some thought to what a career planning program might 3. Outline and describe the career development pro-
involve for Carter. Many of their employees had been with gram you would propose for the cleaners, pressers,
them for years in dead-end jobs, and she frankly felt a little counter people, and managers at the Carter Cleaning
badly for them: Perhaps we could help them gain a better Centers.
perspective on what they want to do, she thought. And she
definitely believed that career support would have an effect on
improving Carter s employee retention.

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Career Management System sure that the employees were doing their jobs. But in a hotel,
The Hotel Paris s competitive strategy is To use superior guest just about every employee is on the front line. There is usu-
service to differentiate the Hotel Paris properties, and to ally no one there to supervise the limousine driver when he
thereby increase the length of stay and return rate of guests, and or she picks up a guest at the airport, or when the valet takes
thus boost revenues and profitability. HR manager Lisa Cruz the guest s car, or the front-desk clerk signs the guest in, or
must now formulate functional policies and activities that sup- the housekeeping clerk needs to handle a guest s special
port this competitive strategy by eliciting the required employee request. If the hotel wanted satisfied guests, they had to have
behaviors and competencies. committed employees who did their jobs as if they owned
Lisa Cruz knew that as a hospitality business, the Hotel the company, even when the supervisor was nowhere in
Paris was uniquely dependent upon having committed, sight. But for the employees to be committed, Lisa knew the
high-morale employees. In a factory or small retail shop, the Hotel Paris had to make it clear that the company was also
employer might be able to rely on direct supervision to make committed to its employees.
344 PART 3 TRAINING AND DEVELOPMENT

From her experience, she knew that one way to do this chapter). For example, the new performance management
was to help her employees have successful and satisfying system required that the supervisor appraise the employee
careers, and she was therefore concerned to find that the based on goals and competencies that were driven by the
Hotel Paris had no career management process at all. Super- company s strategic needs, and the appraisal itself produced
visors weren t trained to discuss employees developmental new goals for the coming year and specific development
needs or promotional options during the performance plans for the employee.
appraisal interviews. Promotional processes were informal.
And the firm did not attempt to provide any career develop-
ment services that might help its employees to develop a Questions
better understanding of what their career options were, 1. Many hotel jobs are inherently dead end ; for example,
or should be. Lisa was sure that committed employees were maids, laundry workers, and valets either have no great
the key to improving the experiences of its guests, and that aspirations to move up, or are just using these jobs
she couldn t boost employee commitment without doing a temporarily, for instance, to help out with household
better job of attending to her employees career needs. expenses. First, do you agree with this statement why,
For Lisa and the CFO, preliminary research left little or why not? Second, list three specific career activities you
doubt about the advisability of instituting a new career man- would recommend Lisa implement for these employees.
agement system at the Hotel Paris. The CFO therefore gave 2. Build on the company s current performance manage-
the go-ahead to design and institute a new Hotel Paris career ment system by recommending two other specific career
management program. Lisa and her team knew that they development activities the hotel should implement.
already had some of the building blocks in place, thanks 3. What specific career development activities would you
to the new performance management system they had recommend in light of the fact that the Paris s hotels and
instituted just a few weeks earlier (as noted in the previous employees are disbursed around the world?

KEY TERMS
career, 327 career planning, 328 mentoring, 333
career management, 327 reality shock, 330 9-box matrix, 339
career development, 328 coaching, 333 transfers, 339

ENDNOTES
1. IBM s Centenary: The Test of Time, The 10. Max Messmer, Employee Retention: Why Withdrawal Behavior, Journal of Manage-
Economist, June 11, 2011, p. 20; IBM is It Matters Now, CPA Magazine, June/July ment 25, no. 6 (1999), pp. 875 895.
Founded, http://www.ibm.com/ibm100/ 2009, p. 28; and The Employee Retention 18. Ibid.
us/en/icons/founded/, accessed August 28, Challenge, Development Dimensions 19. Pelled and Xin, Down and Out.
2011. International, 2009. 20. Ibid.
2. See, for example, www.nobscot.com/ 11. Messmer, Employee Retention. 21. For an examination of this, see ibid.
survey/index.cfm www.bls.gov/jlt/, accessed 12. Ibid. 22. See, for example, Margaret Shaffer and
April 27, 2011. 13. Jessica Marquez, IBM Cuts Costs and David Harrison, Expatriates Psycho-
3. Jean Phillips and Stanley Gulley, Strategic Reduces Layoffs as It Prepares Workers for logical Withdrawal from International
Staffing (Upper Saddle River, NJ: Pearson an On Demand World, Workforce Man- Assignments: Work, Nonwork, and
Education, 2012). agement 84, no. 5 (May 2005), pp. 84 85. Family Influences, Personnel Psychol-
4. The following example is based on 14. David Wilson, Comparative Effects of ogy 51, no. 1 (Spring 1998), pp. 87 118;
Barbara Hillmer, Steve Hillmer, and Gale Race/Ethnicity and Employee Engage- Karl Pajo, Alan Coetzer, and Nigel
McRoberts, The Real Costs of Turnover: ment on Withdrawal Behavior, Journal Guenole, Formal Development Oppor-
Lessons from a Call Center, Human of Managerial Issues 21, no. 2 (Summer tunities and Withdrawal Behaviors
Resource Planning 27, no. 3 (2004), 2009), pp. 165 166, 195 215. by Employees in Small and Medium-
pp. 34 41. 15. Paul Eder and Robert Eisenberger, Per- Sized Enterprises, Journal of Small
5. Ibid. ceived Organizational Support: Reducing Business Management 48, no. 3 (July
6. www.worldatwork.org/waw/adimLink? the Negative Influence of Coworker With- 2010), pp. 281 301; and P. Eder, et. al.,
id=17180, accessed April 27, 2011. drawal Behavior, Journal of Management 34, Perceived Organizational Support:
7. Phillips and Gulley, Strategic Staffing, no. 1 (February 2008), pp. 55 68. Reducing the Negative Influence of
p. 329. 16. Wilson, Comparative Effects of Race/ Coworker Withdrawal Behavior, Jour-
8. Stephen Robbins and Timothy Judge, Ethnicity and Employee Engagement. nal of Management 34 no. 1 (February
Organizational Behavior (Upper Saddle 17. Lisa Hope Pelled and Katherine R. Xin, 2008), pp. 55 68.
River, NJ: Pearson Education, 2011), p. 81. Down and Out: An Investigation of the 23. Adrienne Facts, Raising Engagement,
9. Phillips and Gulley, Strategic Staffing, p. 328. Relationship between Mood and Employee HR Magazine, May 2010, pp. 35 40.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 345

24. Except as noted, this is based on Kathryn Traditional and Contemporary View- 58. Herminia Ibarra, Nancy Carter, and
Tyler, Prepare for Impact, HR Magazine points, Human Resource Management Christine Silva, Why Men Still Get More
56, no. 3 (March 2011), pp. 53 56. Review 16 (2006), p. 131. Promotions than Women, Harvard Busi-
25. Rosa Chun and Gary Davies, Employee 40. Carla Joinson, Employee, Sculpt Thyself ness Review, September 2010, pp. 80 85.
Happiness Isn t Enough to Satisfy Cus- with a Little Help, HR Magazine, May 59. Preparing Future Leaders in Health-Care,
tomers, Harvard Business Review 87, 2001, pp. 61 64. Leaders, c/o Witt/Kieffer, 2015 Spring
no. 4 (April 2009), p. 19. 41. Bright, Career Development. Road, Suite 510, Oak Brook, IL 60523.
26. As another example, one recent study 42. Patrick Kiger, First USA Bank, Promo- 60. Tim Harvey, Enterprise Training System
distinguished among physical engagement tions and Job Satisfaction, Workforce, Is Trans Alaska Pipeline s Latest Safety
( I work with intensity on my job, I exert March 2001, pp. 54 56. Innovation, Pipeline and Gas Journal
my full effort to my job, and so on), 43. Fred Otte and Peggy Hutcheson, Helping 229, no. 12 (December 2002), pp. 28 32.
emotional engagement ( I am enthusiastic Employees Manage Careers (Upper Saddle 61. Ibid.
in my job, I feel energetic at my job, and so River, NJ: Prentice Hall, 1992), p. 143. 62. Kenexa Announces a Latest Version of
on), and cognitive engagement ( at work, 44. Greene and Knudsen, Competitive Employ- Kenexa Career Tracker, Internet Wire,
my mind is focused on my job, and at ers, p. 27. March 22, 2004.
work, I pay a lot of attention to my job ). 45. Julekha Dash, Coaching to Aid IT Careers, 63. http://www.halogensoftware.com/
Bruce Louis Rich et al., Job Engagement: Retention, Computerworld, March 20, products/halogen-esuccession/, accessed.
Antecedents and Effects on Job Perfor- 2000, p. 52. 64. w ww.co r n e rs ton eo nd e ma n d. com /
mance, Academy of Management Journal 46. David Foote, Wanna Keep Your Staff leadership-development-and-succession,
53, no. 3 (2010), pp. 617 635. Happy? Think Career, Computerworld, accessed.
27. Rich, Job Engagement. October 9, 2000, p. 38. 65. The following is quoted from http://
28. Paula Ketter, What s the Big Deal about 47. Jim Meade, Boost Careers and Succes- www.sumtotalsystems.com/products/car
Employee Engagement, Training & sion Planning, HR Magazine, October eer-succession-planning.html, accessed
Development, January 2008, pp. 47 48. 2000, pp. 175 178. August 28, 2011.
29. Organizations Focus on Employee 48. Karen Lyness and Madeline Heilman, 66. http://www.sumtotalsystems.com/
Engagement to Attract and Retain Top When Fit Is Fundamental: Performance products/career-succession-planning.
Talent, www.Mercer.com, accessed Evaluations and Promotions of Upper- html, accessed August 28, 2011.
July 24, 2010. Level Female and Male Managers, 67. George Thornton III and David Morris,
30. Robert Siegfried Jr., Mapping a Career Path Journal of Applied Psychology 91, no. 4 The Application of Assessment Center
for Attracting & Retaining Talent, Financial (2006), pp. 777 785. Technology to the Evaluation of Person-
Executive, November 2008, pp. 52 55. 49. Jan Selmer and Alicia Leung, Are Corpo- nel Records, Public Personnel Manage-
31. Barbara Greene and Liana Knudsen, rate Career Development Activities Less ment 30, no. 1 (Spring 2001), p. 55.
Competitive Employers Make Career Available to Female than to Male Expatri- 68. Phillips and Gulley, Strategic Staffing,
Development Programs a Priority, San ates? Journal of Business Ethics, March pp. 282 283.
Antonio Business Journal 15, no. 26 (July 20, 2003, pp. 125 137. 69. Pamela Babcock, quoting Terry Henley,
2001), p. 27. 50. Karen Lyness and Donna Thompson, SPHR, in Promotions: Is There a New
32. Jim Bright, Career Development: Empow- Climbing the Corporate Ladder: Do Normal ? www.shrm.org/hrdisciplines/
ering Your Staff to Excellence, Journal of Female and Male Executives Follow the employeereltions/articles/Pages/Promo-
Banking and Financial Services 17, no. 3 Same Route? Journal of Applied Psychol- tionsIsThereaNewNormal.aspx, accessed
(July 2003), p. 12. ogy 85, no. 1 (2000), pp. 86 101. June 1, 2011.
33. For example, see Phyllis Moen and Patricia 51. Bill Hayes, Helping Workers with Career 70. Robin Shay, Don t Get Caught in the
Roehling, The Career Mystique (Boulder, Goals Boosts Retention Efforts, Boston Legal Wringer When Dealing with Diffi-
CO: Rowman & Littlefield Publishers, Business Journal 21, no. 11 (April 20, cult to Manage Employees, www.shrm.
2005). 2001), p. 38. org http://moss07.shrm.org/Publications/
34. Robbins and Judge, Organizational 52. Ann Pace, Coaching Gains Ground, hrmagazine/EditorialContent/Pages/070
Behavior, p. 285. Training & Development 62, no. 7 (July 21, 2toc.aspx, accessed July 28, 2009.
35. Ibid., p. 284. 2008), http://findarticles.com/p/articles/ 71. Maria Danaher, Unclear Promotion
36. Edward Levinson et al., A Critical Evalua- mi_m4467/is_200807/ai_n27996020/, Procedures Smack of Discrimination,
tion of the Web-Based Version of the accessed July 28, 2009. www.shrm.org, accessed March 2, 2004.
Career Key, Career Development Quarterly 53. This is based on Richard Luecke, Coaching 72. In Susan Wells, Smoothing the Way, HR
50, no. 1 (September 1, 2002), pp. 26 36. and Mentoring (Boston: Harvard Business Magazine, June 2001, pp. 52 58.
37. Richard Bolles, What Color Is Your Para- School Press, 2004), pp. 8 9. 73. Ken Dychtwald et al., It s Time to Retire
chute? (Berkeley, CA: Ten Speed Press, 54. Ibid., p. 9. Retirement, Harvard Business Review,
2003), pp. 5 6. 55. Michael Doody, A Mentor Is a Key to March 2004, p. 49.
38. This example is based on Richard Bolles, Career Success, Health-Care Financial 74. Employees Plan to Work Past Retire-
The Three Boxes of Life (Berkeley, CA: Ten Management 57, no. 2 (February 2003), ment, but Not Necessarily for Financial
Speed Press, 1976). Richard Bolles updates pp. 92 94. Reasons, BNA Bulletin to Management,
his famous career book What Color is Your 56. Luecke, Coaching and Mentoring, February 19, 2004, pp. 57 58. See also
Parachute annually. It contains this and pp. 100 101. Mo Wang, Profiling Retirees in the
many other career exercises. The 2011 57. Ferda Erdem and Janset Özen Aytemur, Retirement Transition and Adjustment
edition is published by Ten-Speed Press in Mentoring A Relationship Based Process: Examining the Longitudinal
Berkeley, California. on Trust: Qualitative Research, Public Change Patterns of Retirees Psychological
39. Yehuda Baruch, Career Development in Personnel Management 37, no. 1 (Spring Well-Being, Journal of Applied Psychology
Organizations and Beyond: Balancing 2008), pp. 55 65. 92, no. 2 (2007), pp. 455 474.
346 PART 3 TRAINING AND DEVELOPMENT

75. See, for example, Matt Bolch, Bidding 77. Andrew Luchak et al., When Do Com- 79. Eric Krell, Ways to Phased Retire-
Adieu, HR Magazine, June 2006, mitted Employees Retire? The Effects ment, HR Magazine, October 2010,
pp. 123 127; and Claudia Deutsch, A of Organizational Commitment on p. 90.
Longer Goodbye, The New York Times, Retirement Plans Under a Defined 80. New Trend in Career Hunt, Europe
April 20, 2008, pp. H1, H10. Benefit Pension Plan, Human Resource Intelligence Wire, February 10, 2004.
76. Luis Fleites and Lou Valentino, The Case Management 47, no. 3 (Fall 2008), 81. Ibid.
for Phased Retirement, Compensation pp. 581 599. 82. http://abclocal.go.com/kgo/stor y?
& Benefits Review, March/April 2007, 78. Dychtwald et al., It s Time to Retire section=news/business&id=7775524,
pp. 42 46. Retirement, p. 52. accessed June 1, 2011.
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 347

PART 3 VIDEO CASES APPENDIX

Video Title: Training (Wilson Learning)

SYNOPSIS
Maxene Raices is a senior manager at Wilson Learning, a company that specializes
in developing training programs. She describes the best practices that make train-
ing most effective. She explains how training sessions have to be planned carefully
with an outcome in mind, and have to consist of more than just lecturing. Good
training programs help employees do their jobs, and ideally produce measurable
results. Managers can use technology to make training even more effective, giving
opportunities for people spread over various locations to attend training sessions.

Discussion Questions
1. How does Wilson Learning s know, show, do approach fit with the training
process that Chapter 8 described?
2. Explain what specific training tools and processes discussed in Chapter 8
you would use to implement a know, show, do training approach.
3. What you think of the experimental design Wilson used to assess the call-center
training program? How would you suggest the company improve it?
4. Discuss four types of technology Wilson could use to deliver training, based
on the Chapter 8.
5. What are two reasons that Maxene gives for thinking it is important
for different learning styles to be recognized?
6. How does identifying the intended outcomes of a training shape
the training itself?

Video Title: Training and Developing Employees

(Witness.org)
SYNOPSIS
Witness.org trains human rights advocacy groups to capture on video the testimonies
of survivors and witnesses to human rights abuses all over the world. The company s
goal is to empower the people who are directly involved in the situations, by giving
them the tools necessary to use the power of video to communicate their stories.
Witness.org trains advocacy partners on how to use the video equipment, how to tell
a story in such a way that it effects change in those who hear it, and how to get the
video in front of the people who are able to make a positive change.
Witness.org is ran by a core of 28 people with experience in a variety of areas,
including speaking multiple languages, managing a nonprofit organization, produc-
ing videos, and working with human rights issues. These employees train advocacy
groups on the technical aspects of creating a video, as well as safety and security issues
related to producing videos containing sensitive materials. The main goal of
Witness.org is to achieve changes in policies, laws, or behaviors that are currently
causing human suffering.

Discussion Questions
1. Explain how training and development play an important role in Witness.org.
2. Describe the challenges incurred in the training and development process
at Witness.org.
3. Describe the group of experts who conduct the training for Witness.org.
348 PART 3 TRAINING AND DEVELOPMENT

Video Title: Performance Management (California

Health Foundation)
SYNOPSIS
Kim Galvin, the human resources director of the California Health Foundation,
explains the nature of the company s performance management system. The
employee appraisal system is open-ended and includes just a few general categories,
covering the employees past performance with respect to their objectives set at the
previous year s appraisal, and their future goals in the company.

Discussion Questions
1. Specifically what type of appraisal tool does the company seem to be using,
based on what you read in Chapter 9? How would you modify it?
2. What you think of the idea of getting anonymous third-party feedback on the
employee? Why?
3. Why does Kim Galvin think that, besides the human resources director, only an
employee and his or her manager should review the employee s performance
review? What (if any) is the drawback of not having the supervisor s own
manager review the appraisal? Would you require some type of review, and why?
4. Suppose, as Kim Galvin says, you have an employee who is very well liked but
not meeting the job expectations. What would you do?
5. How does the California Health Foundation handle employees who may be
candidates for future promotion?

Video Title: Appraising (Hautelook)

SYNOPSIS
Performance appraisal can be performed both by employees and by their supervisors.
The online clothing retail company Hautelook conducts evaluations by both a formal
and an informal process. Informal evaluations can happen at any time during the
year, whereas formal evaluations are in January, with an informal mid-year review in
July. Hautelook has an informal culture, where managers have an open-door policy
and employees are encouraged to have regular discussions with managers as to their
performance, as well as to self-evaluate their own performance continually.
Hautelook rewards employees in various ways, such as by recognition, raises,
bonuses, and promotions. Filling positions by internal promotion is strongly empha-
sized, and employees are encouraged to think about how they might advance their
position in the company in the future.

Discussion Questions
1. What appraisal tool or tools would you recommend using at Hautelook,
and why?
2. What do you think of how Hautelook handled its attendance problem? Was this
an appraisal or a discipline problem? What difference would it make in how you
handle the problem?
3. Which appraisal problems from Chapter 9 would help to explain the fairness
and accuracy issues that sometimes arise in the company s appraisals?
4. From what you ve seen in this video, what exactly would you do to turn
Hautelook s appraisal process into more of a performance management process?
 CHAPTER 10 EMPLOYEE RETENTION, ENGAGEMENT, AND CAREERS 349

Video Title: Appraising (The Weather Channel)

SYNOPSIS
Employee appraisals at The Weather Channel are recommended to be done on an
ongoing, continual basis so that an employee always knows where he or she stands as
far as what is expected and how well he or she is doing. This way, the employee can
look forward to performance reviews instead of dreading them. The idea is that the
appraisals will be a confirmation of the progress the employee has been making.
An employee is recognized not just for what he or she has achieved during
the appraisal year, but for the ways in which his or her goals were accomplished.
The employee can thereby have opportunities identified for building on his or her
previous performance and better progress within the company.

Discussion Questions
1. From what Ms. Taylor says, does The Weather Channel really use a performance
management process? Why do you conclude that?
2. How, specifically, does a firm s performance management process support its
training process?
3. How would you reduce the anxiety and stress of an appraisal, based on what you
read in Chapter 9?
4. How exactly would you appraise the employees competencies ? What tools
would you use specifically, and why?
350 PART FOUR | COMPENSATION
PART 1 INTRODUCTION

11
Establishing Strategic
Pay Plans
Source: Tyler Olson/Shutterstock.
LEARNING OBJECTIVES Company s
1. List the basic factors determining pay rates. Strategic Goals

2. Define and give an example of how to conduct

a job evaluation.
3. Explain in detail how to establish a market-competitive
pay plan.
Employee Competencies
4. Explain how to price managerial and professional jobs.
and Behaviors Required
5. Explain the difference between competency-based for Company to Achieve
and traditional pay plans. These Strategic Goals
6. List and explain six important trends in compensation
management.

ensation
Comp

T
he retail grocery business is highly competitive.
Therefore, when Walmart moves into a grocery s

Developm nd

Em ations
e nt

Rel
a
area, the knee-jerk reaction is to cut costs, particu-

ploye
Training
larly wages and benefits. So as Wegman s Food HR Policies and Practices

e
Markets, Inc., adds more stores and increasingly competes Required to Produce
with Walmart, its management needs to decide this: Should Employee Competencies
we cut pay to better compete based on cost, or pursue a and Behaviors
different compensation policy?1

St r
En eg
e r
tne meca

nt
d

at
vi
no i
an
mt lP
iu r c tnem na c
d
eR lageL

WHERE ARE WE NOW . . .

Once you ve appraised and coached your
employees, they ll expect to be paid. Of
course, few firms just pay employees
arbitrarily. Each employee s pay should make
sense in terms of what other employees earn,
and this requires a pay plan. The main purpose
of this chapter is to show you how to establish
a pay plan. We explain job evaluation
techniques for finding the relative worth of a
job and how to conduct online and offline
salary surveys. We also explain how to price
the jobs in your firm by developing pay grades
and an overall pay plan. The next chapter
focuses specifically on pay-for-performance
and incentive plans.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 351
352 PART 4 COMPENSATION

1 List the basic factors

BASIC FACTORS IN DETERMINING PAY RATES
determining pay rates. Employee compensation includes all forms of pay going to employees and arising
from their employment. It has two main components, direct financial payments
(wages, salaries, incentives, commissions, and bonuses) and indirect financial
payments (financial benefits like employer-paid insurance and vacations).
In turn, there are two basic ways to make direct financial payments to employees:
based on increments of time or based on performance. Time-based pay is still the
foundation of most employers pay plans. Blue-collar and clerical workers receive
hourly or daily wages, for instance. Others, like managers or Web designers, tend to
be salaried and paid weekly, monthly, or yearly.
The second direct payment option is to pay for performance. For example, piecework
ties compensation to the amount of production (or number of pieces ) the worker turns
out. Sales commissions are another performance-based (in this case, sales-based)
compensation. Other employers devise pay plans that combine time-based pay plus
incentives.
In this chapter, we explain how to formulate plans for paying employees a time-
based wage or salary. Subsequent chapters cover performance-based financial incentives
and bonuses (Chapter 12) and employee benefits (Chapter 13).
Several factors determine the design of any pay plan: company strategy and
policy, equity, legal, and union.

Aligning Total Rewards with Strategy

The compensation plan should first advance the firm s strategic aims management
should produce an aligned reward strategy. This means creating a compensation
package including wages, incentives, and benefits that produces the employee behav-
iors the firm needs to support and achieve its competitive strategy.2 We will see that
many employers formulate a total rewards strategy. Total rewards encompass the
traditional pay, incentives, and benefits, but also things such as more challenging
jobs (job design), career development, and recognition programs.
Based on Chapter 3 s strategy * behaviors * HR practices process (Figure 3-7,
page 81), Table 11-1 lists illustrative questions to ask.
The accompanying Strategic Context feature illustrates strategic rewards.

THE STRATEGIC CONTEXT

Wegmans Foods
Strategic compensation management means asking, What must the company do
to achieve its strategic aims? ; then asking, What are the employee behaviors or
actions needed to support this strategic effort? ; and then putting in place
compensation programs to reinforce those employee behaviors.
Wegmans exemplifies strategic compensation management. It competes in the
retail food sector, where profit margins are notoriously thin and where online
competitors and brick-and-mortar giants like Walmart excel at driving costs and
prices down. The usual reaction, from competitors like Safeway, is to cut employee
benefits and costs.3 Wegmans takes a different approach. It views its workforce as
an invaluable and integral part of achieving Wegmans strategic aims of optimizing
service while controlling costs by improving systems and productivity. For example,
one dairy department employee designed a new way to organize the cooler, thus
improving ordering decisions and inventory control.4
Wegmans compensation policies aim to elicit just this sort of employee
dedication. The firm offers above-market pay rates, affordable health insurance, a
full range of employee benefits, and Wegmans hasn t laid off employees in
96 years.5 In sum, Wegmans pay policies aim to produce exactly the sorts of
employee behaviors the company needs to achieve its strategic aims.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 353

TABLE 11-1 Do Our Compensation Policies Support Our

Strategic Aims?

* What are our strategic aims?

* What employee behaviors and skills do we need to achieve our strategic aims?
* What compensation policies and practices salary, incentive plans, and benefits will help
to produce the employee behaviors we need to achieve our strategic aims?

Equity and Its Impact on Pay Rates

In studies at Emory University, researchers investigated how capuchin monkeys reacted
to inequitable pay. They trained monkeys to trade pebbles for food. Some monkeys got
grapes in return for pebbles; others got cucumber slices. Those receiving the sweeter
grapes willingly traded in their pebbles. But if a monkey receiving a cucumber slice saw
one of its neighbors get grapes, it slammed down the pebble or refused to eat the
cucumber.6 The moral seems to be that even lower primates are programmed to
demand fair treatment when it comes to pay.

EQUITY THEORY OF MOTIVATION Higher up the primate line, the equity

theory of motivation postulates that people are strongly motivated to maintain a
balance between what they perceive as their contributions and their rewards.
Equity theory states that if a person perceives an inequity, a tension or drive will
develop in the person s mind, and the person will be motivated to reduce or elimi-
nate the tension and perceived inequity. Research tends to support equity theory,
particularly as it applies to people who are underpaid.7 For example, one study
found that turnover of retail buyers is significantly lower when the buyers perceive
fair treatment in the amount or rewards and in the methods by which employers
allocate rewards.8
With respect to compensation, managers should address four forms of equity:
external, internal, individual, and procedural.9
* External equity refers to how a job s pay rate in one company compares to the job s
pay rate in other companies.
* Internal equity refers to how fair the job s pay rate is when compared to other jobs
within the same company (for instance, is the sales manager s pay fair, when
compared to what the production manager is earning?).
* Individual equity refers to the fairness of an individual s pay as compared with
what his or her coworkers are earning for the same or very similar jobs within the
company, based on each individual s performance.
* Procedural equity refers to the perceived fairness of the processes and procedures
used to make decisions regarding the allocation of pay. 10

ADDRESSING EQUITY ISSUES Managers use various means to address such

equity issues. For example, they use salary surveys (surveys of what other employers
are paying) to monitor and maintain external equity. They use job analysis and
comparisons of each job ( job evaluation ) to maintain internal equity. They use
performance appraisal and incentive pay to maintain individual equity. And they use
communications, grievance mechanisms, and employees participation to help ensure
that employees view the pay process as procedurally fair. Some firms administer
surveys to monitor employees pay satisfaction. Questions typically include, How
satisfied are you with your pay? and What factors do you believe are used when your
pay is determined? 11

employee compensation direct financial payments indirect financial payments

All forms of pay or rewards going to employees Pay in the form of wages, salaries, incentives, Pay in the form of financial benefits such as
and arising from their employment. commissions, and bonuses. insurance.
354 PART 4 COMPENSATION

When inequities do arise, conflicts ensue. To head off discussions that might
prompt feelings of internal inequity, some firms maintain strict secrecy over pay
rates, with mixed results.12 But for external equity, online pay sites like Salary.com
make it easy to see what one could earn elsewhere. Ironically, overpaying people
relative to what they think they re worth can backfire too, perhaps due to feelings
of guilt or discomfort. 13

Legal Considerations in Compensation

Employers do not have free reign in designing pay plans. Various laws specify things
like minimum wages, overtime rates, and benefits.14 Thus, the 1931 Davis-Bacon
Act lets the secretary of labor set wage rates for laborers and mechanics employed
by contractors working for the federal government. The 1936 Walsh-Healey Public
Contract Act sets basic labor standards for employees working on any government
contract that amounts to more than $10,000. It contains minimum wage,
maximum hour, and safety and health provisions, and requires time-and-a-half pay
for work over 40 hours a week. Title VII of the 1964 Civil Rights Act makes
it unlawful for employers to discriminate against any individual with respect
to hiring, compensation, terms, conditions, or privileges of employment because
of race, color, religion, sex, or national origin.15 We ll look next at other important
compensation-related laws.
THE 1938 FAIR LABOR STANDARDS ACT The Fair Labor Standards Act,
originally passed in 1938 and since amended many times, contains minimum wage,
maximum hours, overtime pay, equal pay, record-keeping, and child labor provisions
that are familiar to most working people.16 It covers the majority of U.S. workers
virtually all those engaged in the production and/or sale of goods for interstate and
foreign commerce. In addition, agricultural workers and those employed by certain
larger retail and service companies are included. State fair labor standards laws cover
most employers not covered by the Fair Labor Standards Act (FLSA).17
One familiar provision governs overtime pay. It says employers must pay
overtime at a rate of at least one-and-a-half times normal pay for any hours worked
over 40 in a workweek. Thus, if a worker covered by the act works 44 hours in one
week, he or she must be paid for 4 of those hours at a rate equal to one-and-a-half
times the hourly or weekly base rate the person would have earned for 40 hours. For
example, if the person earns $12 an hour (or $480 for a 40-hour week), he or she
would be paid at the rate of $18 per hour ($12 times 1.5) for each of the 4 overtime
hours worked, or a total of $72 for the extra 4 hours. If the employee instead receives
time off for the overtime hours, the employer must also compute the number
of hours granted off at the one-and-a-half-times rate. So the person would get
6 hours off for the 4 hours of overtime, in lieu of overtime pay. Employers need
to monitor when employees clock in and out, lest they become obligated for
unexpected additional demands for overtime pay.18
Even giant firms make errors. Walmart agreed to pay up to $640 million to settle
63 wage and hour suits alleging infractions, such as failing to pay overtime and not
providing required meal breaks.19 The Chicago Police Department distributed Black-
Berry smartphones to its officers in the field. One police officer subsequently sued,
claiming that he wasn t paid overtime for the hours he spent using his smartphone off
the clock. Vendors such as Pacific Timesheet (www.pacifictimesheet.com) provide
mobile payroll time sheets. Employees who work outside the office can access and fill
these in via their iPhones or similar devices. This improves attendance and payroll
accuracy, and helps eliminate overpaying overtime.20
A great many employers today pay people as independent contractors rather
than as employees. Strictly speaking, these people are like consultants, not covered by
the FLSA. The accompanying Managing the New Workforce feature explains about
paying this type of worker.
The FLSA also sets a minimum wage, which sets a floor for employees covered by
the act (and usually bumps up wages for practically all workers when Congress raises
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 355

MANAGING THE NEW WORKFORCE

The Independent Contractor
Whether the person is an employee or an independent contractor is a continuing
issue for employers.21 For example, FedEx Ground is battling many lawsuits
defending its right to maintain its roughly 15,000 delivery truck owner-operators as
independent contractors. In December 2010, a federal district court in Indiana
ruled that most of the FedEx ground package drivers were independent contrac-
tors, and that although FedEx encouraged the drivers to work fast, that didn t
mean it controlled the means by which drivers achieved that result.22
For employers, there are advantages to claiming that someone is an independent
contractor. For one thing, the FLSAs overtime and most other requirements do
not apply. For another, the employer does not have to pay unemployment compen-
sation payroll taxes, Social Security taxes, or city, state, and federal income taxes
or compulsory workers compensation for that worker. The problem is that many
so-called independent contractor relationships aren t independent contractor
relationships. There is no single rule or test for determining whether an individual
is an independent contractor or a bona fide employee. Instead, the courts will look
at the total activity or situation. The major consideration is this: The more the
employer controls what the worker does and how he or she does it, the more likely
it is that the courts will find the worker is actually an employee. Figure 11-1 lists
some factors the courts will consider.

the minimum). The minimum wage for the majority of those covered by the act was
$7.25 in 2011.23 Many states have their own minimum wage laws. About 80 localities,
including Boston and Chicago, require businesses that have contracts with the city to
pay employees wages ranging from $8 to $12 an hour.24 FLSA child labor provisions
prohibit employing minors between 16 and 18 years old in hazardous occupations,
and carefully restrict employment of those under 16.
EXEMPT/NONEXEMPT Specific categories of employees are exempt from the FLSA
or certain provisions of the act, and particularly from the act s overtime provisions
they are exempt employees. A person s exemption depends on his or her responsibili-
ties, duties, and salary. Bona fide executive, administrative (like office managers), and
professional employees (like architects) are generally exempt from the minimum wage
and overtime requirements of the act.25 A white-collar worker earning more than
$100,000 and performing any one exempt administrative, executive, or professional duty
is automatically ineligible for overtime pay. Other employees can generally earn up
to $23,660 per year and still automatically get overtime pay (so most employees earning
less than $455 per week are nonexempt and earn overtime).26 Figure 11-2 lists some
examples of typically exempt and nonexempt jobs.
If an employee is exempt from the FLSAs minimum wage provisions, then he or
she is also exempt from its overtime pay provisions. However, certain employees are
always exempt from overtime pay provisions. They include, among others, agricultural
employees, live-in household employees, taxi drivers, and motion picture theater
employees.27

Davis-Bacon Act (1931) Title VII of the 1964 Civil Rights Act Fair Labor Standards Act (1938)
A law that sets wage rates for laborers This act makes it unlawful for employers to This act provides for minimum wages, maxi-
employed by contractors working for the discriminate against any individual with mum hours, overtime pay, and child labor
federal government. respect to hiring, compensation, terms, con- protection. The law, amended many times,
ditions, or privileges of employment because covers most employees.
Walsh-Healey Public Contract Act (1936) of race, color, religion, sex, or national origin.
A law that requires minimum wage and
working conditions for employees working
on any government contract amounting to
more than $10,000.
356 PART 4 COMPENSATION

FIGURE 11-1 Independent

Contractor Independent Contractor
Managers are to use the following checklist to classify
Source: Reprinted from individuals as independent contractors. If more than three questions
www.HR.BLR.com with permission are answered yes, the manager will confer with human
of the publisher Business and Legal resources regarding the classification. (EE = Employees,
Resources Inc., 141 Mill Rock Road IC = Independent Contractors)
East, Old Saybrook, CT © 2004. BLR® Factors which show control:
(Business and Legal Resources, Inc.).
Yes/EE No/IC N/A
1. Worker must comply with
instructions.
2. Worker is trained by person hired.
3. Worker s services are integrated in
business.
4. W orker must personally render
services.
5. Worker cannot hire or fire assistants.
6. Work relationship is continuous or
indefinite.
7. Work hours are present.
8. Worker must devote full time to this
business.
9. Work is done on the employer s
premises.
10. Worker cannot control order or
sequence.
11. Worker submits oral or written
reports.
12. Worker is paid at specific intervals.
13. Worker s business expenses are
reimbursed.
14. Worker is provided with tools or
materials.
15. Worker has no significant
investment.
16. Worker has no opportunity for
profit/loss.
17. Worker is not engaged by many
different firms.
18. Worker does not offer services to
public.
19. Worker may be discharged by
employer.
20. Worker can terminate without
liability.

Identifying exemptions is tricky. As noted, some jobs for example, top

managers and lawyers are clearly exempt, while others such as office workers
earning less than $23,660 per year are clearly nonexempt. Unfortunately, beyond
the obvious categorizations, it s advisable to review the job before classifying it as
exempt or nonexempt. Figure 11-3 presents a procedure for making this decision.
In all but the clearest situations, carefully review the job description. Make sure,
for instance, that the job currently does, in fact, require that the person perform, say,
an exempt-type supervisory duty.28
FLSA exemption lawsuits are on the rise. For example, sales reps for a drug firm
argue in one suit that the FLSA outside salesperson exemption doesn t cover
them because they market and advise not sell drugs to doctors.29 Supervisors
are saying they don t really themselves supervise two or more employees.30 So, again,
it s not the title; it is what the employees actually do.31
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 357

FIGURE 11-2 Some Typical

Exempt, Nonexempt Job Titles EXEMPT NONEXEMPT

Source: Based on www.flsa.com/ Lawyers

T
][ Paralegals
coverage.html, accessed August 5,
2011.
Medical doctors Accounting clerks
Dentists Bookkeepers
Engineers (with degrees) Licensed practical nurses
Teachers Clerical employees
Scientists Most secretaries (although some, such as the CEO s
Registered nurses secretary, might be exempt)
General managers Lab technicians
Pharmacists
Administrative employees*
* The administrative exemption is designed for relatively high-level employees whose main job
is to keep the business running. Examples of administrative functions, whose high level
employees may typically be exempt, include labor relations and personnel (human resources
employees), payroll and finance (including budgeting and benefits management), records
maintenance, accounting and tax, marketing and advertising (as differentiated from direct sales),
quality control, public relations (including shareholder or investment relations, and government
relations), legal and regulatory compliance, and some computer-related jobs (such as network,
internet and database administration).

1963 EQUAL PAY ACT The Equal Pay Act, an amendment to the Fair Labor
Standards Act, states that employees of one sex may not be paid wages at a rate lower
than that paid to employees of the opposite sex for doing roughly equivalent work.
Specifically, if the work requires equal skills, effort, and responsibility and involves
similar working conditions, employees of both sexes must receive equal pay, unless
the differences in pay stem from a seniority system, a merit system, the quantity or
quality of production, or any factor other than sex.

Step 1: Salary Basis Test Step 2: Exemption Applicability Step 3: Job Analysis

Is the employee paid at least $455 per week Does the employee perform any of the following A thorough analysis of the job duties must be
($23,660 per annum), not subject to reduction due types of duties/jobs? performed to determine exempt status. An exempt
to variations in quantity/quality of work performed? Yes Yes position must pass both the salary basis and the
Executive management is the employee s primary duty duties tests.

Administrative employee performing nonmanual

No office work

Professional/creative employee whose work requires

Employee Is Nonexempt highly advanced knowledge/education; creative
and artistic professional

Computer professional employee involved in design

or application of computers and related systems

Outside sales employee making sales or taking

orders which influence sales outside of the
employer's premises

No

Employee Is Nonexempt

FIGURE 11-3 Who Is Exempt? Who Is Not Exempt?

Equal Pay Act (1963)

An amendment to the Fair Labor Standards
Act designed to require equal pay for
women doing the same work as men.
 358 PART 4 COMPENSATION

1974 EMPLOYEE RETIREMENT INCOME SECURITY ACT The

Employee Retirement Income Security Act (ERISA) provided for the
creation of government-run, employer-financed corporations to protect
employees against the failure of their employers pension plans. In
addition, it sets regulations regarding vesting rights (vesting refers to the
equity or ownership the employees build up in their pension plans
should their employment terminate before retirement). ERISA also
regulates portability rights (the transfer of an employee s vested rights
from one organization to another). It also contains fiduciary standards
to prevent dishonesty in pension plan funding.

OTHER LEGISLATION AFFECTING COMPENSATION Various

other laws influence compensation decisions. For example, the Age
Discrimination in Employment Act prohibits age discrimination against
employees who are 40 years of age and older in all aspects of employment,
including compensation.32 The Americans with Disabilities Act prohibits
Source: Dreamstime LLC.

discrimination against qualified persons with disabilities in all aspects of

employment, including compensation. The Family and Medical Leave Act
aims to entitle eligible employees, both men and women, to take up to
12 weeks of unpaid, job-protected leave for the birth of a child or for the
care of a child, spouse, or parent. And various executive orders require
employers that are federal government contractors or subcontractors
Two executives discuss a print layout; one to not discriminate, and to take affirmative action in certain employment
happens to be in a wheelchair. Federal law
areas, including compensation.
mandates that the wheelchair-bound employee
not suffer discrimination in compensation.
Each state has its own workers compensation laws. Among other
things, these aim to provide prompt, sure, and reasonable income to
victims of work-related accidents. The Social Security Act of 1935 (as amended)
provides for unemployment compensation for workers unemployed through no fault
of their own for up to 26 weeks (and recently extended), and for retirement benefits.
(We ll discuss Social Security benefits in Chapter 13.) The federal wage garnishment
law limits the amount of an employee s earnings that employers can withhold
(garnish) per week, and protects the worker from discharge due to garnishment.

Union Influences on Compensation Decisions

Unions and labor relations laws also influence pay plan design. The National Labor
Relations Act of 1935 (Wagner Act) granted employees the right to unionize, and
to bargain collectively. Historically, the wage rate has been the main issue in collective
bargaining. However, unions also negotiate other pay-related issues, including time off
with pay, income security (for those in industries with periodic layoffs), cost-of-living
adjustments, and health care benefits.
The Wagner Act created the National Labor Relations Board (NLRB) to oversee
employer practices and ensure that employees receive their rights. For example, the
NLRB says that employers must give the union a written explanation of the
employer s wage curves the graph that relates job to pay rate. The union is also
entitled to know its members salaries.33

Pay Policies
The employer s compensation strategy will manifest itself in pay policies. For example, a
top hospital like Johns Hopkins might have a policy of paying nurses 20% above the
prevailing market wage. Pay policies can influence the employer s performance and
profitability, as the accompanying HR as a Profit Center illustrates.
Managers need to formulate pay policies covering a range of issues. One is whether
to emphasize seniority or performance. For example, it takes 18 years for a U.S. federal
employee to progress from step 1 to step 9 of the government s pay scale. Seniority-based
pay may be advantageous to the extent that seniority is an objective standard. One disad-
vantage is that top performers may get the same raises as poor ones. Seniority-based pay
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 359

might seem to be a relic reserved for some government agencies and unionized firms.
However, one recent survey found that 60% of employees responding thought high-
seniority employees got the most pay. Only about 35% said their companies paid
high performers more.34
How to distinguish between high and low performers is a related policy issue. For
example, for many years Payless ShoeSource was paternal in how it distributed raises it
paid everyone about the same. However, after seeing its market share drop over several
years, management decided on a turnaround strategy. It necessitated revising the firm s
compensation policies to differentiate more aggressively between top performers and
others.35 Other pay policies usually cover how to award salary increases and promotions,
overtime pay, probationary pay, leaves for military service, jury duty, and holidays.

GEOGRAPHY How to account for geographic differences in cost of living is

another big pay policy issue. For example, the average base pay for an office supervisor
ranges from $47,210 in Florida to $51,120 in Texas to $57,970 in New York.36
Employers handle cost-of-living differentials for transferees in several ways. One is to
pay a differential for ongoing costs in addition to a one-time allocation. For example, one
employer pays a differential of $6,000 per year to people earning $35,000 to $45,000
whom it transfers from Atlanta to Minneapolis. Others simply raise the employee s base
salary. The problem is more complicated when you re sending employees overseas. Here,
for instance, the person typically gets allowances including cost-of-living, relocation,
housing, education, and hardship allowances (the latter for countries with a relatively
hard quality of life, such as Zambia).37

HR AS A PROFIT CENTER
Wegmans Foods
As we saw, Wegmans strategic pay policies aim to produce the employee behaviors
the company needs to achieve its strategic aims. It is likely that those pay policies are
one reason for the firm s exceptional profitability. For example, Wegmans employee
turnover (from 38% for part-timers to 6% 7% for full timers) is well below the industry s
average total of about 47%.38 Its stores (which at about 120,000 square feet are
much larger than competitors ) average about $950,000 a week in sales (compared
to a national average of $361,564), or about $46 million in sales annually, compared
with a typical Walmart store s grocery sales of $23.5 million in sales.39 Wegmans
human resource head was quoted as saying, Our pay and benefits are at or above
our competition s . . . It helps us attract a higher caliber of employee. As she
also said, good employees assure higher productivity, and that translates into better
bottom-line results.40

2 Define and give an example

JOB EVALUATION METHODS
of how to conduct a job Employers use two basic approaches to setting pay rates: market-based approaches and
evaluation. job evaluation methods. Many firms, particularly smaller ones, simply use a market-based
approach. Doing so involves conducting formal or informal salary surveys to determine
what others in the relevant labor markets are paying for particular jobs. They then use
these figures to price their own jobs. Job evaluation methods involve assigning values
to each of the company s jobs. This helps to produce a pay plan in which each job s pay

Employee Retirement Income

Security Act (ERISA)
The law that provides government protection
of pensions for all employees with company
pension plans. It also regulates vesting rights
(employees who leave before retirement may
claim compensation from the pension plan).
360 PART 4 COMPENSATION

is equitable based on its value to the employer. However, we ll see that even with the job
evaluation approach, managers must adjust pay rates to fit the market.41
Job evaluation is a formal and systematic comparison of jobs to determine the
worth of one job relative to another. Job evaluation aims to determine a job s relative
worth. Job evaluation eventually results in a wage or salary structure or hierarchy (this
shows the pay rate for various jobs or groups of jobs). The basic principle of job evalu-
ation is this: Jobs that require greater qualifications, more responsibilities, and more
complex job duties should receive more pay than jobs with lesser requirements.42 The
basic job evaluation procedure is to compare jobs in relation to one another for
example, in terms of required effort, job complexity, and skills. Suppose you know
(based on your job evaluation) the relative worth of the key jobs in your firm. You then
conduct a salary survey to see what others are paying for similar jobs. You are then well
on your way to being able to price all the jobs in your organization equitably.

Compensable Factors
You can use two basic approaches to compare the worth of several jobs. First, you can
take an intuitive approach. You might decide that one job is more important than
another is, and not dig any deeper. As an alternative, you could compare the jobs by
focusing on certain basic factors the jobs have in common. Compensation management
specialists call these compensable factors. They are the factors that establish how the
jobs compare to one another, and that determine the pay for each job.
Some employers develop their own compensable factors. However, most use
factors popularized by packaged job evaluation systems or by federal legislation.
For example, the Equal Pay Act uses four compensable factors skills, effort, respon-
sibility, and working conditions. The method popularized by the Hay consulting firm
emphasizes three factors: know-how, problem solving, and accountability. Walmart
uses knowledge, problem-solving skills, and accountability requirements.
Identifying compensable factors plays a central role in job evaluation. You usually
compare each job with all comparable jobs using the same compensable factors.
However, the compensable factors you use depend on the job and the job evaluation
method. For example, decision making might make sense for a manager s job, but
not for a cleaner s job.43

Preparing for the Job Evaluation

Job evaluation is a judgmental process and demands close cooperation among supervi-
sors, HR specialists, and employees and union representatives. The main steps include
identifying the need for the program, getting cooperation, and then choosing an evalu-
ation committee. The committee then performs the actual evaluation.
Identifying the need for job evaluation should not be difficult. For example, dissatis-
faction reflected in high turnover, work stoppages, or arguments may result from
paying employees different rates for similar jobs. Managers may express uneasiness with
an informal way of assigning pay rates.
Employees may fear that a systematic evaluation of their jobs may reduce their pay
rates, so getting employees to cooperate in the evaluation is important. For example, you
can tell employees that because of the impending job evaluation program, pay rate
decisions will no longer be made just by management whim, and that no current
employee s rate will be adversely affected because of the job evaluation.
Third, choose a job evaluation committee. The committee usually consists of about
five members, most of whom are employees. Management has the right to serve on
such committees, but employees may view this with suspicion. However, a human
resource specialist can usually be justified to provide expert assistance. Union repre-
sentation is possible. In most cases, though, the union s position is that it is accepting
the results of the job evaluation only as an initial decision and is reserving the right to
appeal actual job pricing decisions through grievance or bargaining channels.44
Once appointed, each committee member should receive a manual explaining the job
evaluation process, and how to conduct the job evaluation.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 361

The evaluation committee performs three main functions. First, it

usually identifies 10 or 15 key benchmark jobs. These will be the first
jobs they ll evaluate and will serve as the anchors or benchmarks
against which the relative importance or value of all other jobs is
compared. Next, the committee may select compensable factors
(although the human resources department will usually choose these).
Finally, the committee performs its most important function
actually evaluating the worth of each job. For this, the committee will
probably use one of the following methods: ranking, job classification,
Source: Shutterstock.

or point method.

Job Evaluation Methods: Ranking

The job evaluation committee typically includes The simplest job evaluation method ranks each job relative to all other
at least several employees, and has the important jobs, usually based on some overall factor like job difficulty. There are
task of evaluating the worth of each job using several steps in the job ranking method.
compensable factors.
1. Obtain job information. Job analysis is the first step. Here job descriptions for
each job are prepared, and the information they contain about the job s duties is
usually the basis for ranking jobs. (Sometimes job specifications are also pre-
pared. However, the ranking method usually ranks jobs based on the whole job,
rather than on several compensable factors. Therefore, job specifications, which
tend to list job demands in terms of compensable factors such as problem solv-
ing, decision making, and skills, are not as important with this method as they are
for other job evaluation methods.)
2. Select and group jobs. It is usually not practical to make a single ranking for all
jobs in an organization. The usual procedure is to rank jobs by department or in
clusters (such as factory workers or clerical workers). This eliminates the need for
direct comparison of, say, factory jobs and clerical jobs.
3. Select compensable factors. In the ranking method, it is common to use just one
factor (such as job difficulty) and to rank jobs based on the whole job. Regardless
of the number of factors you choose, it s advisable to explain the definition of the
factor(s) to the evaluators carefully so that they all evaluate the jobs consistently.
4. Rank jobs. For example, give each rater a set of index cards, each of which contains
a brief description of a job. Then they rank these cards from lowest to highest. Some
managers use an alternation ranking method for making the procedure more
accurate. Here you take the cards, first choosing the highest and the lowest, then
the next highest and next lowest, and so forth, until you ve ranked all the cards.
Table 11-2 illustrates a job ranking. Jobs in this small health facility rank from
orderly up to office manager. The corresponding pay scales are on the right. After
ranking, it is possible to slot additional jobs between those already ranked and to
assign an appropriate wage rate. Online programs, as at www.hr-guide.com/data/
G909.htm, can help you rank (and check the rankings of) your positions.
5. Combine ratings. Usually, several raters rank the jobs independently. Then the
rating committee (or the employer) can simply average the raters rankings.
This is the simplest job evaluation method, as well as the easiest to explain. And it
usually takes less time than other methods.

job evaluation benchmark job ranking method

A systematic comparison done in order to A job that is used to anchor the employer s The simplest method of job evaluation that
determine the worth of one job relative to pay scale and around which other jobs are involves ranking each job relative to all other
another. arranged in order of relative worth. jobs, usually based on overall difficulty.
compensable factor
A fundamental, compensable element of a
job, such as skills, effort, responsibility, and
working conditions.
362 PART 4 COMPENSATION

TABLE 11-2 Job Ranking at Jackson Hospital

Ranking Order Annual Pay Scale

1. Office manager $43,000

2. Chief nurse 42,500
3. Bookkeeper 34,000
4. Nurse 32,500
5. Cook 31,000
6. Nurse s aide 28,500
7. Orderly 25,500

Note: After ranking, it becomes possible to slot additional jobs (based on overall
job difficulty, for instance) between those already ranked and to assign each an
appropriate wage rate.

Some of its drawbacks derive more from how it s used than from the method itself.
For example, there s a tendency to rely too heavily on guesstimates (of things like
overall difficulty), since ranking usually does not use compensable factors. Similarly,
ranking provides no yardstick for quantifying the value of one job relative to another.
For example, job number 4 may in fact be five times more valuable than job number 5,
but with the ranking method all you know is that one job ranks higher than the other.
Ranking is usually more appropriate for small employers that can t afford the time or
expense of developing a more elaborate system.
The factor comparison method a considerably more complicated method of
ranking jobs according to various skill and difficulty factors, then adding up these
rankings to arrive at an overall numerical rating for each job is seldom used today.

Job Evaluation Methods: Job Classification

Job classification (or job grading) is a simple, widely used job evaluation method in
which raters categorize jobs into groups; all the jobs in each group are of roughly the
same value for pay purposes. We call the groups classes if they contain similar jobs or
grades if they contain jobs that are similar in difficulty but otherwise different. Thus, in
the federal government s pay grade system, a press secretary and a fire chief might
both be graded GS-10 (GS stands for General Schedule ). On the other hand, in its
job class system, the state of Florida might classify all secretary IIs in one class, all
maintenance engineers in another, and so forth.
In practice, there are several ways to categorize jobs. One is to write class or grade
descriptions (similar to job descriptions) and place jobs into classes or grades based
on how well they fit these descriptions. A second is to write a set of compensable
factor-based rules for each class (for instance, how much independent judgment,
skill, and physical effort does the class of jobs require?). Then categorize the jobs
according to these rules.
The latter is the most popular procedure choose compensable factors, and then
develop class or grade descriptions for each class or grade based on the amount or level
of the compensable factor(s) in those jobs. For example, the U.S. government s classifi-
cation system uses the following compensable factors: (1) difficulty and variety of
work, (2) supervision received and exercised, (3) judgment exercised, (4) originality
required, (5) nature and purpose of interpersonal work relationships, (6) responsibility,
(7) experience, and (8) knowledge required. Based on these compensable factors,
raters write a grade definition like that in Figure 11-4. This one shows one grade
description (GS-7) for the federal government s pay grade system. Then the evaluation
committee reviews all job descriptions and slots each job into its appropriate grade, by
comparing each job description to the rules in each grade description. For instance,
the federal government system classifies the positions automotive mechanic, welder,
electrician, and machinist in grade GS-10.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 363

FIGURE 11-4 Example of a Grade Nature of Assignment Level of Responsibility

Grade Level Definition
GS-7 Performs specialized duties in a defined Work is assigned in terms of objectives,
Source: www.opm.gov/fedclass/ functional or program area involving a priorities, and deadlines; the employee
gscler.pdf, accessed May 18, 2007. wide variety of problems or situations; works independently in resolving most
develops information, identifies conflicts; completed work is evaluated for
interrelationships, and takes actions conformance to policy; guidelines, such
consistent with objectives of the as regulations, precedent cases, and
function or program served. policy statements require considerable
interpretation and adaptation.

The classification method has several advantages. The main one is that most
employers usually end up grouping jobs into classes or grades anyway, regardless of
the evaluation method they use. They do this to avoid having to price separately
dozens or hundreds of jobs. Of course, the job classification automatically groups the
employer s jobs into classes. The disadvantages are that it is difficult to write the class
or grade descriptions, and considerable judgment is required to apply them. Yet many
employers use this method with success.

Job Evaluation Methods: Point Method

The point method s overall aim is to determine the degree to which the jobs you re
evaluating contain selected compensable factors. It involves identifying several compen-
sable factors for the jobs, as well as the degree to which each factor is present in each job.
Assume there are five degrees of the compensable factor responsibility a job could
contain. Further, assume you assign a different number of points to each degree of each
compensable factor. Once the evaluation committee determines the degree to which
each compensable factor (like responsibility and effort ) is present in a job, it can
calculate a total point value for the job by adding up the corresponding degree points
for each factor. The result is a quantitative point rating for each job. The point method
of job evaluation is the most popular job evaluation method today.45

PACKAGED POINT PLANS A number of groups (such as the Hay Group,

the National Electrical Manufacturer s Association, and the National Trade Associa-
tion) have developed standardized point plans. Many thousands of employers use
these systems. They contain ready-made factor and degree definitions and point
assessments for a wide range of jobs. Employers can often use them with little or
no modification.

Computerized Job Evaluations

Using quantitative job evaluation methods such as the point method can be time-
consuming. Accumulating the information about how much of each compensable
factor the job contains is a tedious process. The evaluation committees must debate the
level of each compensable factor in each job. They then write down their consensus
judgments and compute each job s point values or rankings.

job classification (or grading) method grades point method

A method for categorizing jobs into A job classification system like the class system, The job evaluation method in which a
groups. although grades often contain dissimilar jobs, number of compensable factors are
such as secretaries, mechanics, and firefighters. identified and then the degree to which
classes Grade descriptions are written based on com- each of these factors is present on the job
Grouping jobs based on a set of rules for pensable factors listed in classification systems. is determined.
each group or class, such as amount of inde-
pendent judgment, skill, physical effort, and grade definition
so forth, required. Classes usually contain Written descriptions of the level of, say,
similar jobs. responsibility and knowledge required by
jobs in each grade. Similar jobs can then be
combined into grades or classes.
364 PART 4 COMPENSATION

Source: www.hr-software.net/cgi/JobEvaluation.cgi.
Computer-aided job evaluation streamlines this process. The accompanying
screen grab illustrates one. Most of these computerized systems have two main
components. There is, first, a structured questionnaire. This contains items such as
enter total number of employees who report to this position. Second, all such
systems use statistical models. These allow the computer program to price jobs more
or less automatically, by assigning points.

3 Explain in detail how

HOW TO CREATE A MARKET-COMPETITIVE PAY PLAN
to establish a market- As we said, many firms simply price their jobs based on what other employers are
competitive pay plan. paying they use a market-based approach. However, most employers also base their
pay plans on job evaluations. These evaluations assign values (such as point values)
to each job. This helps to produce a pay plan in which each job s pay is internally
equitable, based, as it is, on the job s value to the employer (as measured, for instance,
by how many points it warrants). However, even with the job evaluation approach,
managers must adjust pay rates to fit the market.46 After all, you want employees pay
to be equitable internally relative to what their colleagues in the firm earning but
also competitive to what other employers are paying. In a market-competitive pay plan
a job s compensation reflects both the job s value in the company, as well as what
other employers are paying for similar jobs in the marketplace. Because the point
method (or point-factor method ) is so popular, we ll use it as the centerpiece of our
step-by-step example for creating a market-competitive pay plan.47 The 16 steps
in creating a market-competitive pay plan begin with choosing benchmark jobs.

1. Choose Benchmark Jobs

Particularly when an employer has dozens or hundreds of different jobs, it s imprac-
tical and unnecessary to evaluate each of them separately. Therefore, the first step
in the point method is to select benchmark jobs. Benchmark jobs are representative
of the entire range of jobs the employer needs to evaluate. Like accounting clerk
they should be common among employers (thus making it easier to survey what
competitors are paying for similar jobs).48

2. Select Compensable Factors

The choice of compensable factors depends on tradition (as noted, the Equal Pay Act of
1963 uses four compensable factors: skill, effort, responsibility, and working conditions),
and on strategic and practical considerations. For example, if your firm s competitive
advantage is quality, you might substitute responsibility for quality for working
conditions, or simply add it as a fifth factor.49 Similarly, using working conditions
makes little practical sense for evaluating executive jobs.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 365

FIGURE 11-5 Illustrative Point

Factor Definition: What Is Job Complexity? Job complexity generally refers to an
Values and Degree Definitions
amount of judgment, initiative, ingenuity, and complex data analysis that doing the job
for the Factor Job Complexity
requires. To what extent does the person doing this job confront unfamiliar problems,
deal with complex decisions, and have to exercise discretion?
Job Complexity Degree Definitions:
Degree Points What to Look for in the Job
First 120 Here the job is routine and consists of repetitive operations
requiring little or no choice of action and the automatic
application of easily understood rules and procedures.
For example, a filing clerk.
Second 240 Here the employee follows detailed instructions but may have
to make limited decisions based on previously prescribed
instructions which lay our prescribed alternatives. For example,
a billing clerk or a receptionist.
Third 360 Here the employee again follows detailed instructions but because
the number of matters to consider is more varied the employee
needs to exhibit initiative and independent judgment, under
direct supervision. For example, a nurse s aide.
Fourth 480 Here the employee can generally follow standard practices
but the presence of nonroutine problems requires that the
employee be able to use initiative and judgment to analyze and
evaluate situations, possibly modifying the standard procedures
to adjust to the new situations. For example, a nurse.
Fifth 600 On this job, the employee needs to use independent judgment
and plan and perform complex work under only general
supervision, often working independently toward achieving
overall results. For example, medical intern.

The employer should carefully define each factor. This is to ensure that the evalu-
ation committee members will each apply the factors with consistency. Figure 11-5
shows (on top) one such definition, in this case for the factor job complexity. The
human resource specialist often draws up the definitions.

3. Assign Weights to Compensable Factors

Having selected compensable factors, the next step is to determine the relative
importance (or weighting) of each factor (for instance, how much more impor-
tant is skill then effort ?). This is important because for each cluster of
jobs some factors are bound to be more important than others are. Thus, for
executive jobs the mental requirements factor would carry far more weight
than would physical requirements. To assign weights, we assume we have a total
100 percentage points to allocate for each job. Then (as an illustration), assign
percentage weights of 60% for the factor job complexity, 30% for effort, and 10%
for working conditions.50

4. Convert Percentages to Points for Each Factor

Next, we want to convert the percentage weights assigned to each compensable factor
into point values for each factor (this is, after all, the point method). It is traditional to
assume we are working with a total number of l,000 points (although one could use
some other figure). To convert percentages to points for each compensable factor,
multiply the percentage weight for each compensable factor (from the previous step) by
1,000.51 This will tell you the maximum number of points for each compensable factor.
The example above would translate into 1,000 * 0.60 + 600 possible points for job
complexity, 1,000 * 0.30 + 300 points for effort, and 1,000 * 0.10 + 100 points for
working conditions.
366 PART 4 COMPENSATION

5. Define Each Factor s Degrees

Next, split each factor into degrees, and define each degree so that raters may judge
the amount or degree of a factor existing in a job. Thus, for a factor such as job
complexity you might choose to have five degrees, ranging from here the job is
routine to uses independent judgment. (Definitions for each degree are shown
in Figure 11-5 under Degree definitions: What to look for in each job ). The num-
ber of degrees usually does not exceed five or six, and the actual number depends
mostly on judgment. Thus, if all employees work either in a quiet, air-conditioned
office or in a noisy, hot factory, then two degrees would probably suffice for the
factor working conditions. You need not have the same number of degrees for
each factor, and you should limit degrees to the number necessary to distinguish
among jobs.

6. Determine for Each Factor Its Factor

Degrees Points
The evaluation committee must be able to determine the number of points each job
is worth. To do this, the committee must be able to examine each job and (from
each factor s degree definitions) determine what degree of each compensable factor
that job has. For them to do this, we must first assign points to each degree of each
compensable factor. For example, in our illustration, we have five possible degrees of
job complexity, and the job complexity compensable factor is worth up to
600 points total. In our case, we decide that the first degree level of job complexity
is worth 120 (or one-fifth of 600) points, the second degree level is worth
240 points, the third degree level is worth 360 points, the fourth degree level is
worth 480 points, and the fifth degree is worth the full 600 points.52 Do this for
each factor (as in Table 11-3).

7. Review Job Descriptions and Job Specifications

The heart of job evaluation involves determining the amount or degree to which the job
contains the selected compensable factors such as effort, job complexity, and working
conditions. The team conducting the job evaluation will frequently do so by reviewing
each job s job description and job specification. As we explained in Chapter 4
(Job Analysis), it is through the job analysis that the manager identifies the job s duties
and responsibilities and writes the job description and job specification. Ideally, the
job analysis should therefore include an explicit attempt to gather information about
the compensable factors (such as job complexity) around which the employer plans
to build its compensation plan.53

TABLE 11-3 Points Assigned to Factors and to Their Degrees (revised)

First-Degree Second-Degree Third-Degree Fourth-Degree Fifth-Degree
Factors Points Points Points Points Points

Job complexity 120 240 360 480 600

(Total maximum points
equal 600)
Effort (Total maximum 60 120 180 240 300
points equal 300)
Working conditions 20 40 60 80 100
(Total maximum
points equal
100 points)
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 367

8. Evaluate the Jobs

The preceding steps provide us with the information on points and degrees we need
to evaluate the jobs. Therefore, the committee now gathers job descriptions and job
specifications for the benchmark jobs they want to focus on. Then for each of these
jobs, the committee reviews the job description and job specification.
From this, the committee determines the degree to which each compensable factor is
present in each job. Thus for, say, a job of master mechanic, the team might conclude
(after studying the job description and job specification) that the master mechanic s
job deserves the third degree level of job complexity points, the first degree level of
effort, and the first-degree level of working conditions.
Knowing the job complexity, effort, and working conditions degrees for each job,
and knowing the number of points we previously assigned to each degree of each com-
pensable factor, we can now determine how many job complexity, effort, and working
conditions points each benchmark job should contain. (We know the degree level for
each factor for each job, so we merely check the corresponding points (see Table 11-3)
that we previously assigned to each of these degrees.)
Finally, we add up these degree points for each job to determine each job s total
number of points.54 We thereby get a total point value for each benchmark job. This
in turn enables us to list a hierarchy of jobs, based upon each job s points. We can then
turn to assigning wage rates to each job (step nine). But first, we should define
market-competitive pay plan, and wage curve.

WHAT IS A MARKET-COMPETITIVE PAY PLAN? What should the pay rate be

for each job? Of course, jobs with more points should command higher pay. The ques-
tion is what pay rate to use. Our company s current, internal pay rates? Or pay rates
based on what the external market is paying?55
With a market-competitive pay system, the employer s actual pay rates are
competitive with those in the relevant labor, as well as equitable internally.56 Put
simply, the basic approach is to compare what the employer is currently paying for each
job ( internal pay ) with what the market is paying for the same or similar job
( external pay ), and then to combine this information to produce a market-competitive
pay system.

WHAT ARE WAGE CURVES? Wage curves play a central role in assigning wage
rates to jobs. The wage curve typically shows the pay rates paid for jobs, relative to
the points or rankings assigned to each job by the job evaluation. Figure 11-6
presents an example. Note that it shows pay rates for jobs on the vertical axis, and
point values for these jobs along the horizontal axis. The purpose of the wage curve
is to show the relationships between (1) the value of the job (expressed in points) as
determined by one of the job evaluation methods and (2) the pay rates for the job.
(We ll see that many employers may combine jobs into classes or grades. Here the
wage curve shows the relationship between average pay rates for each grade, and
each grade s average point value.) The pay rates on the wage curve are traditionally
those now paid by the employer. However, if there is reason to believe the current
pay rates are out of step with the market rates for these jobs, the employer will have
to adjust them. One way to do this is to compare a wage curve that shows the jobs
current wage rates relative to the jobs points, with a second curve that shows market
wage rates relative to points. We do this as follows.

9. Draw the Current (Internal) Wage Curve

First, to study how each job s points relates to its current pay rate, we start by
drawing an internal wage curve. Plotting each job s points and the wage rate the

wage curve market-competitive pay system

Shows the relationship between the value A pay system in which the employer s actual
of the job and the average wage paid for pay rates are competitive with those in the
this job. relevant labor market.
368 PART 4 COMPENSATION

FIGURE 11-6 Plotting $8.00

a Wage Curve

$7.00

Average pay rates

$6.00

$5.00

$4.00 Note: Some current pay rates may fall

well off wage curve

I II III IV V VI VII VIII IX X XI

$3.00
0 100 200 300 400 500
Points

employer is now paying for each job (or wage rates, if there are several for each
job) produces a scatter plot as in Figure 11-7 (left). We now draw a wage curve (on
the right) through these plots that shows how point values relate to current wage
rates. We can draw this wage line by just estimating a line that best fits the plotted
points (by minimizing the distances between the plots and the curve). Or we can
use regression, a statistical technique. Using the latter will produce a current/
internal wage curve that best fits the plotted points. In any case, we show the
results in Figure 11-7 (right).57

10. Conduct a Market Analysis: Salary Surveys

Next, we must compile the information needed to draw an external wage curve for our
jobs, based on what other employers are paying for similar jobs. Salary surveys
surveys of what others are paying play a big role in pricing jobs.58 Employers use
salary surveys in three ways. First, they use survey data to price benchmark jobs.
Benchmark jobs are the anchor jobs around which they slot their other jobs, based on
each job s relative worth to the firm. Second, employers typically price 20% or more
of their positions directly in the marketplace (rather than relative to the firm s bench-
mark jobs), based on a survey of what comparable firms are paying for comparable
jobs. (Google might do this for jobs like systems engineer, whose salaries fluctuate
widely and often.) Third, surveys also collect data on benefits like insurance, sick
leave, and vacations for decisions regarding employee benefits.
Salary surveys can be formal or informal. Informal phone or Internet surveys
are good for checking specific issues, such as when a bank wants to confirm the
salary at which to advertise a newly open teller s job, or whether some banks are
really paying tellers an incentive. Some large employers can afford to send out their
own formal surveys to collect compensation information from other employers.
These ask about things like number of employees, overtime policies, starting
salaries, and paid vacations.

FIGURE 11-7 The Current/

Jobs current (internal)

Jobs current (internal)

Internal Wage Curve

wage rates

wage rates

Jobs point values Jobs point values

 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 369

COMMERCIAL, PROFESSIONAL, AND GOVERNMENT SALARY SURVEYS

Many employers use surveys published by consulting firms, professional associations,
or government agencies. For example, the U.S. Department of Labor s Bureau of Labor
Statistics (BLS) National Compensation Survey (NCS) provides comprehensive reports
of occupational earnings, compensation cost trends, and benefits (www.bls.gov/bls/
wages.htm).
Detailed occupational earnings are available from the national compensation
survey for over 800 occupations in the United States, regions, states, and many
metropolitan areas (http://stats.bls.gov/oes/current/oes_nat.htm). The Current
Employment Statistics survey is a monthly survey of the payroll records of business
establishments that provides data on earnings of production and nonsupervisory
workers at the national level. This provides information about earnings as well as
production bonuses, commissions, and cost-of-living increases. The National
Compensation Survey Benefits provides information on the share of workers who
participate in specified benefits, such as health care, retirement plans, and paid
vacations. These data also show the details of those benefits, such as amounts of
paid leave. Internationally, the BLS reports comparative hourly compensation costs
in local currencies and U.S. dollars for production workers and all employees in
manufacturing in its international labor comparisons tables.
Private consulting and/or executive recruiting companies like Hay Associates,
Heidrick and Struggles, Watson Wyatt Data Services, and Hewitt Associates publish
data covering compensation for top and middle management and members of
boards of directors. Professional organizations like the Society for Human Resource
Management and the Financial Executives Institute publish surveys of compensation
practices among members of their associations.59

USING THE INTERNET TO DO COMPENSATION SURVEYS A rapidly

expanding array of Internet-based options makes it easy for anyone to access
published compensation survey information. Table 11-4 shows some popular salary
survey Web sites.

TABLE 11-4 Some Pay Data Web Sites

Sponsor Internet Address What It Provides Downside

Salary.com Salary.com Salary by job and zip Adapts national averages

code, plus job and by applying local cost-
description, for of-living differences
hundreds of jobs
U.S. Office www.opm.gov/ Salaries and wages Limited to U.S.
of Personnel oca/09Tables/ for U.S. government government jobs
Management index.asp jobs, by location
Job Star http://jobstar.org/ Profession-specific Necessary to review
tools/salary/ salary surveys numerous salary surveys
sal-prof.php for each profession
cnnmoney.com cnnmoney.com Input your current salary Based on national averages
and city, and this gives adapted to cost-of-living
you comparable salary differences
in destination city

salary survey
A survey aimed at determining prevailing
wage rates. A good salary survey provides
specific wage rates for specific jobs. Formal
written questionnaire surveys are the most
comprehensive, but telephone surveys
and newspaper ads are also sources of
information.
370 PART 4 COMPENSATION

FIGURE 11-8 The Market/

Jobs market wage rates

Jobs market wage rates

External Wage Curve

Jobs point values Jobs point values

Many of these sites, such as Salary.com, provide national salary levels for jobs
that the site then arithmetically adjusts to each locale based on cost-of-living formulas.
To get a real-time picture of what employers in your area are actually paying for, say,
accounting clerks, it s useful to access the online Internet sites of one or two of
your local newspapers. For example, the South Florida Sun-Sentinel (and many
papers) uses a site called careerbuilder.com. It lists career opportunities in other
words, just about all the jobs listed in the newspaper by category and, in many
instances, their wage rates (www.sun-sentinel.com/classified/jobs).

11. Draw the Market (External) Wage Curve

The current/internal wage curve from step 9 is helpful. For example, showing, as it does,
how a job s current pay rate compares with its points helps the employer identify jobs
for which pay rates are currently too high or too low, relative to others in the company.
(For example, if a job s current wage rate is well above the internal wage curve, it
suggests that the present wage rate for that job is inequitably high, given the number of
points we ve assigned to that job.)
What the current (internal) wage curve does not reveal is whether our pay rates
are too high, too low, or just right relative to what other firms are paying. For this,
we need to draw a market or external wage curve.
To draw the market/external wage curve, we produce a scatter plot and wage
curve as in Figure 11-8 (left and right). However, instead of using our firm s current
wage rates, we use market wage rates (obtained from salary surveys). The market/
external wage curve compares our jobs points with market pay rates for our jobs.

12. Compare and Adjust Current and Market Wage

Rates for Jobs
How different are the market rates others are paying for our jobs and the current rates
we are now paying for our jobs? To determine this, we can draw both the current/
internal and market/external wage curves on one graph, as in Figure 11-9. The market
wage curve might be higher than our current wage curve (suggesting that our current
pay rates may be too low), or below our current wage curve (suggesting that our
current wage rates might be too high). Or perhaps market wage rates are higher for
some of our jobs, and lower for others.60
Based on comparing the current/internal wage curve and market/external
wage curve in Figure 11-9, we must decide whether to adjust the current pay rates
for our jobs, and if so how. This calls for a policy decision by management. Strate-
gic considerations influence this decision. Do our strategic aspirations suggest we
should pay more, the same, or less than competitors? For example, we might
decide to move our current internal wage curve up (and thereby give everyone a
raise), or down (and thereby perhaps withhold pay increases for some time), or
adjust the slope of the internal wage curve to increase what we pay for some jobs
and decrease what we pay for others. In any case, the wage curve we end up
(the green line in Figure 11-10, on page 372) should now be equitable internally
(in terms of the point value of each job) and equitable externally (in terms of what
other firms are paying).61
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 371

FIGURE 11-9 Plotting Both

t
the Market and Internal Wage rke
Ma a g e
Curves w ve
cur

Wage rates
e
cur v
) w age
r nal
inte
e nt (
Curr

Our jobs point values

13. Develop Pay Grades

Employers typically group similar jobs (in terms of points) into grades for pay
purposes. Then, instead of having to deal with hundreds of job rates, you might only
have to focus on, say, pay rates for 10 or 12 pay grades. For example, Serco, a services
firm which operates a London, England light railway system, set up pay grades after
ranking jobs using a point system based on knowledge, management complexity,
and the job s magnitude and impact on the organization.62
A pay (or wage) grade is comprised of jobs of approximately equal difficulty or
importance as determined by job evaluation. If you used the point method of job
evaluation, the pay grade consists of jobs falling within a range of points. If the
ranking method was used, the grade consists of a specific number of ranks. If you
use the classification system, then your jobs are already categorized into classes
(or grades).

DETERMINING THE NUMBER OF PAY GRADES It is standard to establish

grades of equal point spread. (In other words, each grade might include all those
jobs falling between 50 and 100 points, 100 and 150 points, 150 and 200 points,
etc.) Since each grade is the same width, the main issue involves determining
how many grades to have. There doesn t seem to be any optimal number, although
10 to 16 grades for a given job cluster (shop jobs, clerical jobs, etc.) seems to be
common. You need more pay grades if there are, say, 1,000 jobs to be graded than
if there are only 100.

14. Establish Rate Ranges

Most employers do not pay just one rate for all jobs in a particular pay grade. For
example, GE Medical won t want to pay all its accounting clerks, from beginners
to long tenure, at the same rate, even though they may all be in the same pay grade.
Instead, employers develop vertical pay (or rate ) ranges for each of the horizontal
pay grades (or pay classes). These pay (or rate) ranges often appear as vertical boxes
within each grade, showing minimum, maximum, and midpoint pay rates for that
grade, as in Figure 11-10. (Specialists call this graph a wage structure. Figure 11-10
graphically depicts the range of pay rates in this case, per hour paid for each pay
grade.) Alternatively, you may depict the pay range for each class or grade as steps in
a table, such as Table 11-5, on page 373. Here you will have specific corresponding

pay (or wage) grade pay (or rate) ranges

A pay grade is comprised of jobs A series of steps or levels within a pay grade,
of approximately equal difficulty. usually based upon years of service.
372 PART 4 COMPENSATION

FIGURE 11-10 $10.00

Wage Structure Wage curve (or line)

$9.50

$9.00

$8.50
Maximum rate
$8.00

$7.50
Wage rates, dollars
Rate
range
$7.00

$6.50

$6.00 Minimum rate

$5.50

$5.00

$4.50

I II III IV V VI
$4.00
0 50 100 150 200 250 300
Jobs grades and evaluated points

pay rates for each step within each grade in tabular form. Thus Table 11-5 shows the
pay rates and steps for some federal government grades. As of the time of this pay
schedule, for instance, employees in positions classified in grade GS-10 could be paid
annual salaries between $45,771 and $59,505, depending on the level or step at
which they were hired into the grade, the amount of time they were in the grade, and
any merit increases they ve received.

DEVELOPING RATE RANGES The wage curve usually anchors the average pay
rate for each vertical pay range. The firm might then arbitrarily decide on a maximum
and minimum rate for each grade, such as 15% above and below the wage curve.
As an alternative, some employers allow the pay range for each grade to become
wider (they include more pay rates) for the higher pay ranges, reflecting the
greater demands and performance variability inherent in more complex jobs. As in
Figure 11-10, most employers structure their rate ranges to overlap a bit, so an
employee in one grade who has more experience or seniority may earn more than
would someone in an entry-level position in the next higher pay grade.63
There are several reasons to use pay ranges for each pay grade. First, it lets the
employer take a more flexible stance in the labor market. For example, it makes
it easier to attract experienced, higher-paid employees into a pay grade at the top of
the range, since the starting salary for the pay grade s lowest step may be too
low to attract them. Pay ranges also let companies provide for performance differ-
ences between employees within the same grade or between those with different
seniorities.
Compensation experts sometimes use compa ratios. The compa ratio equals an
employee s pay rate divided by the pay range midpoint for his or her pay grade.
A compa ratio of 1 means the employee is being paid exactly at the pay range
midpoint. If the compa ratio is above 1 then the person s pay rate exceeds
the midpoint pay for the job. If it is below then the pay rate is less than the midpoint.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 373

TABLE 11-5 Federal Government Salary Table65

SALARY TABLE 2009-GS

INCORPORATING THE 2.90% GENERAL SCHEDULE INCREASE EFFECTIVE JANUARY 2011

Annual Salary Rates by Grade and Step

Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8 Step 9 Step 10

1 17,803 18,398 18,990 19,579 20,171 20,519 21,104 21,694 21,717 22,269
2 20,017 20,493 21,155 21,717 21,961 22,607 23,253 23,899 24,545 25,191
3 21,840 22,568 23,296 24,024 24,752 25,480 26,208 26,936 27,664 28,392
4 24,518 25,335 26,152 26,969 27,786 28,603 29,420 30,237 31,054 31,871
5 27,431 28,345 29,259 30,173 31,087 32,001 32,915 33,829 34,743 35,657
6 30,577 31,596 32,615 33,634 34,653 35,672 36,691 37,710 38,729 39,748
7 33,979 35,112 36,245 37,378 38,511 39,644 40,777 41,910 43,043 44,176
8 37,631 38,885 40,139 41,393 42,647 43,901 45,155 46,409 47,663 48,917
9 41,563 42,948 44,333 45,718 47,103 48,488 49,873 51,258 52,643 54,028
10 45,771 47,297 48,823 50,349 51,875 53,401 54,927 56,453 57,979 59,505
11 50,287 51,963 53,639 55,315 56,991 58,667 60,343 62,019 63,695 65,371
12 60,274 62,283 64,292 66,301 68,310 70,319 72,328 74,337 76,346 78,355
13 71,674 74,063 76,452 78,841 81,230 83,619 86,008 88,397 90,786 93,175
14 84,697 87,520 90,343 93,166 95,989 98,812 101,635 104,458 107,281 110,104
15 99,628 102,949 106,270 109,591 112,912 116,233 119,554 122,875 126,196 129,517

The compa ratio can help reveal how many jobs in each pay grade are paid above and
below competitive market pay rates.64

15. Address Remaining Jobs

To this point, we have focused our job evaluation on a limited number of bench-
mark jobs, as is traditional. We now want to add our remaining jobs to the wage
structure. We can do this in two ways. We can evaluate each of the remaining jobs
using the same process we just went through. Or we can simply slot the remaining
jobs into the wage structure where we feel they belong, without formally evaluating
and assigning points to these jobs. Jobs similar to our benchmark jobs we can easily
slot into the wage structure. Jobs we re not sure about should undergo the same job
evaluation process; we assign points to them and precisely slot them into the wage
structure.66

16. Correct Out-of-Line Rates

Finally, the wage rate the firm is now paying for a particular job may fall well
off the wage curve or well outside the rate range for its grade, as illustrated in
Figure 11-6 (page 368).This means that the average pay for that job is currently too
high or too low, relative to other jobs in the firm. For underpaid jobs, the solution
is clear: Raise the wages of underpaid employees to the minimum of the rate range
for their pay grade.

compa ratio
Equals an employee s pay rate divided
by the pay range midpoint for his or her
pay grade.
374 PART 4 COMPENSATION

Current pay rates falling above the rate range are a different story. These are red
circle, flagged, or overrates. There are several ways to cope with this problem. One
is to freeze the rate paid to these employees until general salary increases bring the
other jobs into line. A second option is to transfer or promote the employees involved
to jobs for which you can legitimately pay them their current pay rates. The third
option is to freeze the rate for 6 months, during which time you try to transfer or
promote the overpaid employees. If you cannot, then cut the rate you pay these
employees to the maximum in the pay range for their pay grade.

4 Explain how to price

PRICING MANAGERIAL AND PROFESSIONAL JOBS
managerial and Developing compensation plans for managers or professionals is similar in many
professional jobs. respects to developing plans for any employee. The basic aim is the same: to attract,
motivate, and retain good employees. And job evaluation is about as applicable to
managerial and professional jobs (below the top executive levels) as to production
and clerical ones.
There are some big differences, though. Managerial jobs tend to stress harder-
to-quantify factors like judgment and problem solving more than do production
and clerical jobs. There is also more emphasis on paying managers and professionals
based on their performance or on what they can do, rather than on static job
demands like working conditions. And one must compete in the marketplace for
executives who sometimes have the pay of rock stars. So, job evaluation, although
still important, usually plays a secondary role to issues like bonuses, incentives,
market rates, and benefits.

Compensating Executives and Managers

Compensation for a company s top executives usually consists of four main
elements.67 Base pay includes the person s fixed salary as well as, often, guaranteed
bonuses such as 10% of pay at the end of the fourth fiscal quarter, regardless of
whether or not the company makes a profit. Short-term incentives are usually cash or
stock bonuses for achieving short-term goals, such as year-to-year increases in sales
revenue. Long-term incentives aim to encourage the executive to take actions that
drive up the value of the company s stock and include things like stock options; these
generally give the executive the right to purchase stock at a specific price for a specific
period. Finally, executive benefits and perks include things such as supplemental
executive retirement pension plans, supplemental life insurance, and health insurance
without a deductible or coinsurance. With so many complicated elements, employers
must also be alert to the tax and securities law implications of their executive
compensation decisions.68

What Determines Executive Pay?

For top executive jobs (especially the CEO), job evaluation typically has little rele-
vance. The traditional wisdom is that company size and performance significantly
affect top managers salaries. Yet studies from the early 2000s showed that size and
performance explained only about 30% of CEO pay: In reality, CEO pay is set by the
board taking into account a variety of factors such as the business strategy, corporate
trends, and most importantly where they want to be in a short and long term. 69
One recent study concluded that three main factors, job complexity (span of control,
the number of functional divisions over which the executive has direct responsibil-
ity, and management level), the employer s ability to pay (total profit and rate
of return), and the executive s human capital (educational level, field of study, work
experience) accounted for about two-thirds of executive compensation variance.70
In practice, CEOs may have considerable influence over the boards of directors who
theoretically set their pay. So, their pay sometimes doesn t reflect strictly arms-length
negotiations.71
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 375

Shareholder activism and government oversight have tightened the restrictions

on what companies pay top executives. For example, the banking giant HSBC
recently shelved plans to raise its CEO s pay by over a third after shareholders
rejected the proposals.72

ELEMENTS OF EXECUTIVE PAY Salary is traditionally the cornerstone of exec-

utive compensation. On it, employers layer benefits, incentives, and perquisites all
normally conferred in proportion to base pay. Executive compensation emphasizes
performance incentives more than do other employees pay plans, since organizational
results are likely to reflect executives contributions more directly than those of lower-
echelon employees.73 Indeed, boards are boosting the emphasis on performance-based
pay (in part due to shareholder activism). The big issue here is identifying the appro-
priate performance standards and then determining how to link these to pay. Typical
short-term measures of shareholder value include revenue growth and operating
profit margin. Long-term shareholder value measures include rate of return above
some predetermined base, and what compensation experts call economic value added.
We ll discuss such short and long-term incentives in Chapter 12.
Performance-based pay can focus a manager s attention. In 2010, Microsoft s
board cut CEO Steve Ballmer s bonus in half, when (among other things) Microsoft
failed to move fast enough to introduce a tablet to compete with the iPad.

MANAGERIAL JOB EVALUATION Many employers use job evaluation for

pricing managerial jobs (at least, below the top jobs) in most large firms. The basic
approach is to classify all executive and management positions into a series of grades,
each with a salary range.
As with nonmanagerial jobs, one alternative is to rank the executive and manage-
ment positions in relation to each other, grouping those of equal value. However,
firms also use the job classification and point evaluation methods, with compensable
factors like position scope, complexity, and difficulty. Job analysis, salary surveys, and
the fine-tuning of salary levels around wage curves also play roles.

Compensating Professional Employees

In compensating professionals, employers should first ensure that each employee is
actually a professional under the law. The Fair Labor Standards Act provides an
exemption from both minimum wage and overtime pay for employees employed as
bona fide executive, administrative, professional and outside sales employees. 74
However, calling someone a professional doesn t make him or her so. In addition to
earning at least $455 per week, the person s main duty must be the performance of
work requiring advanced knowledge, and the advanced knowledge must be customarily
acquired by a prolonged course of specialized intellectual instruction. 75 One company
hired a high school graduate as an exempt Product design specialist II, earning
$62,000 per year. The job required 12 years of relevant experience, but no particular
education. The court ruled the job was non-exempt.76
Beyond that, compensating professional employees like engineers and scientists
presents unique problems.77 Analytical jobs emphasize compensable factors such as
creativity and problem solving, compensable factors not easily compared or measured.
Furthermore, how do you measure performance? For example, the success of an engi-
neer s invention depends on how well the firm develops and markets it. Employers can
use job evaluation for professional jobs. Compensable factors here tend to focus on
problem solving, creativity, job scope, and technical knowledge and expertise. Firms
use the point method and job classification.
Yet in practice, firms rarely rely on just job evaluation for pricing professional
jobs. Factors like creativity are hard to measure, and other issues often influence
professionals job decisions. Competing for engineers in Silicon Valley illustrates the
problem. Google recently raised its employees salaries by 10% in the face of defec-
tions by even their highest paid professionals, such as the head of its Chrome
OS team, to Facebook.78 Many of these Google professionals, although well paid
376 PART 4 COMPENSATION

by national standards, still felt underpaid. Some undoubtedly moved to jobs they
hoped would have more challenges. Many also probably felt that the best way to hit it
big in terms of pay was to join a younger faster-growing firm and capitalize on new
stock options.
Most employers therefore use a market-pricing approach. They price professional
jobs in the marketplace as best they can, to establish the values for benchmark jobs.
Then they slot these benchmark jobs and their other professional jobs into a salary
structure. Each professional discipline usually ends up having four to six grade levels,
each with a broad salary range. This helps employers remain competitive when
bidding for professionals who literally have global employment possibilities.79

CONTEMPORARY TOPICS IN COMPENSATION

How employers pay employees has been evolving. In this final section, we ll look at six
important contemporary compensation topics, competency-based pay, broadbanding,
talent management, comparable worth, board oversight of executive pay, and total
rewards. Chapter 12 then addresses performance-based pay.

Competency-Based Pay
5 Explain the difference
between competency-based Employers traditionally base a job s pay rate on the relative worth of the job. The job
and traditional pay plans. evaluation committee compares jobs using compensable factors such as effort and
responsibility. This allows them (1) to compare jobs to one another (as in, based on its
duties, this job seems to require about twice the effort of that one ), and (2) to assign
internally equitable pay rates for each job. Therefore, the pay rate for the job principally
depends on the job itself, not on who is doing it.
For reasons we ll explain shortly, some compensation experts and employers
are moving away from assigning pay rates to jobs based on the jobs numerically
rated, intrinsic duties. Instead, they advocate basing the job s pay rate on the level
of competencies the job demands of those who fill it.80 Title and tenure have
been replaced with performance and competencies is how one expert puts it.81
Compensation specialists call this second approach competency-based pay.

WHAT IS COMPETENCY-BASED PAY? In Chapter 4 (Job Analysis), we defined

competencies as observable and measurable behaviors of the person that make
performance possible. To determine what a job s required competencies are, ask,
In order to perform this job competently, the employee should be able to . . . ?
Competencies are most typically skills. Examples of competencies include program
in HTML, produce a lesson plan, and engineer the struts for a bridge.
In brief, competency-based pay means the company pays for the employee s
skills and knowledge, rather than for the title he or she holds.82 Experts variously call
this competence-, knowledge-, or skill-based pay. With competency-based pay, an
employee in a class I job who could (but may not have to at the moment) do class II
work gets paid as a class II worker, not a class I.
In practice, competency-based pay usually comes down to pay for knowledge or
skill-based pay.83 Pay-for-knowledge pay plans reward employees for learning
organizationally relevant knowledge for instance, Microsoft pays new program-
mers more as they learn the intricacies of Windows. Skill-based pay tends to be used
more for workers with manual jobs thus, carpenters earn more as they become
more proficient at finishing cabinets.
In sum, the biggest difference between traditional and competency-based pay is this:
* Traditional job evaluation ties the worker s pay to the worth of the job based on
the job description and duties. Pay is job oriented.
* Competency-based pay ties the worker s pay to his or her competencies pay is
person oriented. Employees are paid based on what they know or can do even
if (at the moment), they don t have to do it.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 377

WHY USE COMPETENCY-BASED PAY? Why pay employees based on the skill,
knowledge, or competency level they achieve, rather than based on the duties of the
jobs to which they re assigned? For example, why pay an Accounting Clerk III who
has achieved a exceptional mastery of accounting techniques the same (or more than)
someone who is an Accounting Clerk IV?
There are three reasons. First, paying for competencies enables the company to
encourage employees to develop the competencies the company requires to achieve its
strategic aims. For example, Canon Corp. needs competencies in miniaturization and
precision manufacturing to design and produce its cameras and copiers. It thus makes
sense for Canon to pay employees based on the skills and knowledge they develop in
these two strategically crucial areas.
Second, paying for measurable competencies provides a focus for the employer s
talent management process. Thus at Canon, hiring, training, appraising, and rewards
all focus on the competencies of miniaturization and precision manufacturing
competencies.
Third, traditional pay plans can backfire if a high-performance work system is
your goal. The whole thrust of these systems is to encourage employees to work in a
self-motivated way. Employers do this by organizing the work around teams,
by encouraging team members to rotate freely among jobs (each with its own skill
set), and by pushing more responsibility for things like day-to-day supervision down
to the workers. In such systems, the manager wants employees to be enthusiastic
about learning and moving among jobs. Pigeonholing workers by classifying
them too narrowly into jobs based on the job s points may actually discourage such
enthusiasm and flexibility.

COMPETENCY-BASED PAY IN PRACTICE In practice, a skill- (or competency-

or knowledge-) based pay program generally has five main elements:
1. A system for defining required skills
2. A process for tying the person s pay to his or her skill level
3. A training system that lets employees acquire the skills
4. A formal skills competency testing system
5. A work design that lets employees move among jobs to permit work assignment
flexibility84

GENERAL MILLS EXAMPLE A General Mills manufacturing plant pays workers

based on skill levels.85 Plant management created four job clusters, corresponding to
the plant s four production areas: mixing, filling, packaging, and materials. Within each
cluster, workers could attain three levels of skill. Level 1 indicates limited ability, such
as the ability to perform simple tasks.86 Level 2 means the employee attained partial
proficiency. Attaining Level 3 means the employee is fully competent. Each of the four
job clusters had a different average wage rate. There were therefore 12 pay levels in the
plant (four job clusters with three pay levels each).
General Mills set the wages for each job cluster s three levels by making the pay
for the lowest of the three pay levels in each job cluster equal to the average entry-level
pay rate for similar jobs in the community. A new employee could start in any job
cluster, but always at Level 1. If after several weeks he or she was certified at the next
higher skill level, General Mills raised his or her salary. Employees freely rotated from
job cluster to cluster, as long as they could achieve Level 2 performance within their
current cluster.

competency-based pay
Where the company pays for the
employee s range, depth, and types of skills
and knowledge, rather than for the job title
he or she holds.
378 PART 4 COMPENSATION

Many employers, such as

General Mills, pay certain
workers based on attained
skill levels.

Source: Mark Richards/ PhotoEdit Inc.

THE BOTTOM LINE ON COMPETENCY-BASED PAY Some note that
competency-based pay ignores the cost implications of paying [employees] for
knowledge, skills and behaviors even if they are not used. 87 There may also be simpler
alternatives. For example, overlapping rate ranges allow workers to move from grade to
grade, within limits. An article in Compensation & Benefits Review recently summed
up the bottom line. It argued that, after two decades of innovation in pay rate deter-
mination, it appears that old-fashioned job evaluation is back in vogue, if indeed it was
ever gone. 88 In challenging times, perhaps the efficiencies of job evaluation sometimes
outweigh the flexibility that comes with competency-based pay.

6 List and explain six

Broadbanding
important trends in Most firms end up with pay plans that slot jobs into classes or grades, each with its own
compensation vertical pay rate range. For example, the U.S. government s pay plan consists of 18 main
management. grades (GS-1 to GS-18), each with its own pay range. For an employee whose job falls in
one of these grades, the pay range for that grade dictates his or her minimum and maxi-
mum salary.
The question is, How wide should the salary grades be, in terms of the number
of job evaluation points they include? (For example, might the U.S. government
want to collapse its 18 salary grades into 6 or 7 broader bands?) There is a downside
to having (say, 18) narrow grades. For instance, if you want someone whose job is in
grade 2 to fill in for a time in a job that happens to be in grade 1, it s difficult to reas-
sign that person without lowering his or her salary. Similarly, if you want the person
to learn about a job that happens to be in grade 3, the employee might object to the
reassignment without a corresponding raise to grade 3 pay. Traditional grade pay
plans thus may tend to encourage inflexibility.
That is why some firms are broadbanding their pay plans. Broadbanding means
collapsing salary grades into just a few wide levels or bands, each of which contains a
relatively wide range of jobs and pay levels. Figure 11-11 illustrates this. In this case,
the company s previous six pay grades are consolidated into two broad grades or
broadbands.
A company may create broadbands for all its jobs, or for specific groups such as
managers or professionals. The pay rate range of each broadband is relatively large,
since it ranges from the minimum pay of the lowest grade the firm merged into the
broadband up to the maximum pay of the highest merged grade. Thus, for example,
instead of having 10 salary grades, each of which contains a salary range of $15,000,
the firm might collapse the 10 grades into three broadbands, each with a set of jobs
such that the difference between the lowest- and highest-paid jobs might be $40,000
or more. For the jobs that fall in this broadband, there is therefore a much wider range
of pay rates. You can move an employee from job to job within the broadband more
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 379

FIGURE 11-11 Broadbanded

Structure and How It Relates
to Traditional Pay Grades Band B
and Ranges

Wage rates, dollars

Band A

Grades and evaluated points

easily, without worrying about the employee s moving outside the relatively narrow
rate range associated with a traditional narrow pay grade. Broadbanding therefore
facilitates flexibility.

PROS AND CONS Companies create broadbands for several reasons. The basic
advantage is that it injects greater flexibility into employee assignments.89 It is especially
sensible where firms organize into self-managing teams. The new, broad salary bands
can include both supervisors and subordinates and also facilitate moving employees
slightly up or down along the pay scale, without bumping the person into a new salary
range. For example, the employee who needs to spend time in a lower-level job to
develop a certain skill set can receive higher-than-usual pay for the work, a circum-
stance considered impossible under traditional pay systems. 90 Similarly, one expert
argues that, say, point plans, may actually encourage inadaptability.91 He says that jobs
narrowly defined by compensable factors such as effort are unlikely to encourage job
incumbents to be flexible. Instead, the tendency may be for workers to take a that s not
my job attitude and to concentrate on their usual assigned duties.
On the other hand, broadbanding can be unsettling, particularly for new employees.
For example, The Home Depot has used broadbanding for more than 10 years, and
when employees want to learn something new, they play to the level [on that project]
that they re capable of, says the firm s head of information systems. Moving among jobs
is motivating once you get used to it. However, it can make a new employee feel adrift:
There s a sense of permanence in the set of job responsibilities often attached to
job titles, he says. That sense of permanence isn t nearly as clear when employees move
frequently from project to project and job to job.92

broadbanding
Consolidating salary grades and ranges
into just a few wide levels or bands, each
of which contains a relatively wide range
of jobs and salary levels.
380 PART 4 COMPENSATION

Actively Managing Compensation Allocations,

and Talent Management
As we saw in previous chapters, employers are increasingly segmenting their employees
and actively assigning more resources to those they deem mission-critical in terms of
the firm s strategy. Recall, for instance, that Accenture uses a 4 * 4 matrix to plot
employees by Performance (exceptional, high, medium, low) and Value to the Organi-
zation (mission-critical, core, necessary, nonessential). It then allocates pay and other
resources based on where the employee places in the matrix.93 The decisions on
whether to allocate pay on such a basis, and if so how to do so, are therefore important
policy matters for employers.
Many employers are taking this more active, segmentation approach. For exam-
ple, we saw that one telecommunications firm previously spread development money
and compensation evenly over its 8,000 employees. When the recession came, it seg-
mented its talent into business impact, high performers, high potentials, and critical
skills. Then they shifted their dollars away from low performers and those not making
an impact to high performers and high potentials.94
As another example, the human resources consulting company Hewitt says that,
In the next generation of talent management, organizations will use consumer-
marketing technologies to customize total rewards packages. Through personalized
Web portals, organizations will offer rewards menus and associated dollar credits that
are tailored to groups of workers and even individual workers. Dollar amounts will be
tied to role and performance as opposed to age or seniority. Options offered will
go beyond the traditional flexible benefits fare to include choice in work assignments
and location, time and money for training, and working time flexibility. For example,
AstraZeneca PLC offers workers customized rewards menus, allowing them to design
the specifics of their rewards packages. 95

Comparable Worth
Comparable worth refers to the requirement to pay men and women equal wages for jobs
that are of comparable (rather than strictly equal) value to the employer. Thus, compara-
ble worth may mean comparing quite dissimilar jobs, such as nurses to truck mechanics
or secretaries to technicians. The question comparable worth seeks to address is this:
Should you pay women who are performing jobs equal to men s or just comparable to
men s the same as men? If it s only for equal jobs, then the tendency may be to limit
women s pay to that of the other, lower-paid jobs in which women tend to predominate.
County of Washington v. Gunther (1981) was a pivotal case for comparable worth.
It involved Washington County, Oregon, prison matrons who claimed sex discrimi-
nation. The county had evaluated roughly comparable but non-equal men s jobs as
having 5% more job content (based on a point evaluation system) than the women s
jobs, but paid the men 35% more.96 Why should there be such a pay discrepancy for
roughly comparable jobs? After seesawing through the courts to the U.S. Supreme
Court, Washington County finally agreed to pay 35,000 employees in female-domi-
nated jobs almost $500 million in pay raises over 7 years to settle the suit.
Comparable worth has implications for job evaluation. Virtually every comparable
worth case that reached a court involved the use of the point method of job
evaluation. By assigning points to dissimilar jobs, point plans facilitate comparability
ratings among different jobs. Should employers still use point-type plans? Perhaps the
wisest approach is for employers to price their jobs as they see fit (with or without
point plans), but to ensure that women have equal access to all jobs. In other words,
eliminate the wage discrimination issue by eliminating sex-segregated jobs.

THE PAY GAP All this notwithstanding, women in the United States earn only
about 77% as much as men.97 In general, education may reduce the wage gap some-
what. For example, studies suggest that schooling s impact on earnings is greater for
females than for males, other things equal.98 But gaps remain, even among the most
highly trained. For example, new female medical doctors recently earned about
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 381

$17,000 per year less than their male counterparts did, and that gap has been widening
for years.99 Reasons put forward for the male-female gap range from the outdated
notion that employers view women as having less leverage, to the fact that profes-
sional men change jobs more often (gaining more raises in the process) and that
women tend to end up in departments that pay less.100 In any case, it s a problem
employers need recognize and to address.

Board Oversight of Executive Pay

Several years ago, the antivirus company McAfee apparently pushed out its president
and saw its CEO leave after a stock options investigation found accounting problems
that will require financial restatements. 101
There are various reasons why boards are clamping down on executive pay. As of
2005, the Financial Accounting Standards Board required that most public compa-
nies recognize as an expense the fair value of the stock options they grant.102 The
Sarbanes-Oxley Act makes executives personally liable, under certain conditions, for
corporate financial oversight lapses. Writing in the Harvard Business Review, the chief
justice of Delaware s Supreme Court said that governance issues, shareholder
activism, and other changes have created a new set of expectations for directors. 103
As of 2007, the Securities and Exchange Commission (SEC) required filing more
compensation-related information, including a detailed listing of all individual
perks or benefits if they total more than $100,000.104 The economic downturn that
began around 2008 exposed the enormous disconnect between what many executives
were earning and their performance. The U.S. government s pay czar was soon over-
seeing certain pay awards in firms that had U.S. treasury loans. Yet none of these SEC
or legislative actions seem (in retrospect) to have prevented some employers from
dramatically overpaying their executives. The net result is that lawyers specializing in
executive pay suggest that boards of directors (board compensation committees usu-
ally make executive pay decisions in large firms)105 ask themselves these questions:
* Has our compensation committee thoroughly identified its duties and processes?
* Is our compensation committee using the appropriate compensation advisors?
(Government regulators and commentators strongly encourage this.)
* Are there particular executive compensation issues that our committee should
address?106
* Do our procedures demonstrate diligence and independence? (This demands
careful deliberations and records.)
* Is our committee appropriately communicating its decisions? How will shareholders
react?107

Total Rewards and Tomorrow s Pay Programs

Companies face severe economic and competitive challenges.108 There will be what
consultants McKinsey & Co. calls a war for talent as companies vie to hire and retain
top employees. With reduced Social Security and company pensions, employees will
have to build their own wealth for retirement. And younger millennial applicants
will enter the workforce with greater expectations for recognition and feedback than
did their predecessors.
Tomorrow s pay programs will therefore probably exhibit several features. Every
company has jobs that are strategically crucial to their futures, and others, which while
important, are supportive. Talent management oriented employers will have to identify
the strategically crucial jobs and pay them at premium levels. To engage the millennial

comparable worth
The concept by which women who are
usually paid less than men can claim that
men in comparable rather than in strictly
equal jobs are paid more.
382 PART 4 COMPENSATION

employees, it s essential that they know what s expected of them, and that they get
continuing constructive feedback about their performance. Incentives will be a compo-
nent of every compensation package. Employers will have to be creative about providing
rewards like stock ownership options to provide young talent with the opportunity to
create retirement wealth through their employment. And nonfinancial rewards including
personal recognition will grow in importance as supplements to financial rewards.
That last point highlights the trend toward viewing rewards not just in terms of pay,
incentives, and benefits, but as total rewards. As noted earlier, total rewards encompass the
traditional compensation components, but also things such as recognition and redesigned
more challenging jobs (as we discussed in this chapter), telecommuting programs,
health and well being programs, and training and career development (discussed in
Chapters 8 and 10). Some employers distribute annual total rewards statements to
employees, to help them appreciate the full range of rewards that they are receiving.109

Improving Productivity through HRIS

Automating Strategic Compensation Administration
Traditionally, employers used spreadsheets to administer annual pay raise decisions,
and many still do. The human resource department creates individual spreadsheets
for each manager. The managers then record salary increase recommendations for their
subordinates on these spreadsheets. The human resource team then compiles the spread-
sheets by unit, department, division, and, finally, company-wide to add up who was
spending what. This is a labor-intensive and costly process.
Today, companies more often use server-based intranet compensation planning
programs to keep track of who is spending what.110 This Web-based method has many
advantages. The employer can quickly update its compensation programs (such as how
much is available, and how much each manager can allocate) without having to modify
the software on individual managers computers. Automating the system reduces costs
by eliminating manual processes. For example, one company estimated that it cost
about $35 to complete a single manual compensation transaction (such as combining
the raise budgets for two departments), but about $16 if it automated this process.
Using a centralized application saves money in other ways. For example, employers
often assign pay raise budgets to all their managers, only to find that (once the various
department budgets all come together) the total accumulated raises are excessive. This
generally doesn t happen with automated systems.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. In establishing strategic pay plans, managers first need to wages and overtime pay. Specific categories of employees
understand some basic factors in determining pay rates. are exempt from the act or certain provisions of the act,
Employee compensation includes both direct financial particularly its overtime provisions. The Equal Pay Act of
payments and indirect financial statements. The factors 1963 and the Employee Retirement Income Security Act
determining the design of any pay plan include legal, are other important laws.
union, company strategy/policy, and equity. Legal consid- 2. The process of establishing pay rates while ensuring
erations include, most importantly, the Fair Labor external, internal, and procedural equity consists of five
Standards Act, which governs matters such as minimum steps: conducting a salary survey, determining the worth of
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 383

each job, doing a job evaluation, grouping jobs comprised executive benefits and, particularly at the top levels, doesn t
of approximately equal difficulty and pricing each pay lend itself to job evaluation but rather to understanding
grade with wage curves, and fine-tuning pay rates. the job s complexity, the employer s ability to pay, and the
need to be competitive in attracting top talent.
Salary surveys may be informal phone or Internet
4. More employers are moving from paying jobs based on
surveys, or formal surveys conducted by the
their intrinsic duties toward paying jobs based on the
employer or utilizing commercial, professional,
competencies the job requires. The main reason for
and/or government salary surveys.
doing so is to encourage employees to develop the com-
Job evaluation is a systematic comparison done
petencies they need to move seamlessly from job to job.
in order to determine the worth of one job relative
At General Mills, for instance, certain plant personnel
to another based on compensable factors.
are paid based on the skill levels they attain.
Compensable factors refer to compensable elements
5. We addressed several important special topics in
of a job such as skills and efforts.
compensation. Broadbanding means consolidating several
Popular job evaluation methods include ranking,
rates and ranges into a few wide levels or bands, each of
job classification, the point method, and factor
which contains a relatively wide range of jobs in salary
comparison. With ranking, for instance, you conduct
levels. Broadbanding encourages employees to move freely
a job analysis, group jobs by department, and have
from job to job and facilitates implementing team-based
raters rank jobs.
high-performance management systems. Comparable
Once the committee uses job evaluation to
worth refers to the requirement to pay men and women
determine the relative worth of each job, it can
equal pay for jobs that are of comparable rather than
turn to the task of assigning pay rates to each job;
strictly equal value to the employee. With many stockhold-
it would usually first want to group jobs into pay
ers concerned with excessive executive remuneration,
grades to streamline the process.
board oversight of executive pay has become an important
The team can then use wage curves to price each
issue, and boards of directors should use qualified advisers
grade and then fine-tune pay rates.
and exercise diligence and independence in formulating
3. Pricing managerial and professional jobs involves some executive pay plans. Total rewards encompass the tradi-
special issues. Managerial pay typically consists of base tional compensation components, but also things such as
pay, short-term incentives, long-term incentives, and recognition and redesigned more challenging jobs.

DISCUSSION QUESTIONS
1. What is the difference between exempt and nonexempt (or some other firm you re familiar with) use it? Why
jobs? or why not?
2. Should the job evaluation depend on an appraisal of the 6. It was recently reported in the news that the average pay
jobholder s performance? Why? Why not? for most university presidents was around $250,000 per
3. What is the relationship between compensable factors year, but that a few earned much more. For example,
and job specifications? the new president of Vanderbilt received $852,000
4. Compare and contrast the following methods of job in one year. Discuss why you would (or would not) pay
evaluation: ranking, classification, factor comparison, university presidents as much or more than many
and point method. corporate CEOs.
5. What are the pros and cons of broadbanding, 7. Do small companies need to develop a pay plan? Why
and would you recommend your current employer or why not?

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, conduct salary sur- 3. Working individually or in groups, access relevant Web
veys for the following positions: entry-level accountant sites to determine what equitable pay ranges are for these
and entry-level chemical engineer. What sources did you jobs: chemical engineer, marketing manager, and HR man-
use, and what conclusions did you reach? If you were the ager, all with a bachelor s degree and 5 years experience.
HR manager for a local engineering firm, what would Do so for the following cities: New York, New York; San
you recommend that you pay for each job? Francisco, California; Houston, Texas; Denver, Colorado;
2. Working individually or in groups, develop compensa- Miami, Florida; Atlanta, Georgia; Chicago, Illinois; Birm-
tion policies for the teller position at a local bank. ingham, Alabama; Detroit, Michigan; and Washington,
Assume that there are four tellers: two were hired D.C. For each position in each city, what are the pay ranges
in May and the other two were hired in December. The and the average pay? Does geographical location impact
compensation policies should address the following: the salaries of the different positions? If so, how?
appraisals, raises, holidays, vacation pay, overtime pay, 4. The HRCI Test Specifications Appendix (pages
method of pay, garnishments, and time cards. 633 640) lists the knowledge someone studying for the
384 PART 4 COMPENSATION

HRCI certification exam needs to have in each area of 5. Some of America s executives have come under fire
human resource management (such as in Strategic recently because their pay seemed to some to be exces-
Management, Workforce Planning, and Human Resource sive, given their firms performances. To choose just
Development). In groups of four to five students, do two of many: one Citigroup division head was due a
four things: (1) review that appendix now; (2) identify $97 million bonus in 2009, and Merrill Lynch paid tens
the material in this chapter that relates to the required of millions in bonuses soon after Bank of America
knowledge the appendix lists; (3) write four multiple- rescued it. However, big institutional investors are no
choice exam questions on this material that you believe longer sitting back and not complaining. For example,
would be suitable for inclusion in the HRCI exam; TV s Nightly Business Line says that pension manager
and (4) if time permits, have someone from your team TIAA-CREF is talking to 50 companies about executive
post your team s questions in front of the class, so the pay. And the U.S. government s pay czar is looking
students in other teams can take each others exam to roll back some such payouts. Do you think they are
questions. right to make a fuss? Why?

EXPERIENTIAL EXERCISE
Ranking the College s Administrators
Purpose: The purpose of this exercise is to give you experience of dean, department chairperson, and professor using the
in performing a job evaluation using the ranking method. ranking method.
Required Understanding: You should be thoroughly familiar 1. Perform a job evaluation by ranking the jobs.
with the ranking method of job evaluation and obtain job You may use one or more compensable
descriptions for your college s dean, department chairperson, factors.
director of admissions, library director, registrar, and your 2. If time permits, a spokesperson from each group
professor. can put his or her group s rankings on the board.
How to Set Up the Exercise/Instructions: Did the groups end up with about the same
Divide the class into groups of four or five students. results? How did they differ? Why do you think
The groups will perform a job evaluation of the positions they differed?

APPLICATION CASE
SALARY INEQUITIES AT ACME MANUFACTURING
Joe Black was trying to figure out what to do about a problem one was the human resources director. The other 10 were
salary situation he had in his plant. Black recently took over nonmanagement.
as president of Acme Manufacturing. The founder and for- This examination also showed that the human resources
mer president, Bill George, had been president for 35 years. director appeared underpaid, and that the three female
The company was family owned and located in a small east- supervisors earned somewhat less than any male supervisor
ern Arkansas town. It had approximately 250 employees and did. However, there were no similar supervisory jobs with
was the largest employer in the community. Black was a both male and female job incumbents. When asked, the HR
member of the family that owned Acme, but he had never director said she thought the female supervisors may have
worked for the company prior to becoming president. He been paid at a lower rate mainly because they were women,
had an MBA and a law degree, plus 5 years of management and perhaps George, the former president, did not think that
experience with a large manufacturing organization, where women needed as much money because they had working
he was senior vice president for human resources before husbands. However, she added she personally thought that
making his move to Acme. they were paid less because they supervised less-skilled
A short time after joining Acme, Black started to notice employees than did the male supervisors. Black was not sure
that there was considerable inequity in the pay structure for that this was true.
salaried employees. A discussion with the human resources The company from which Black had moved had a good
director led him to believe that salaried employees pay was job evaluation system. Although he was thoroughly familiar
very much a matter of individual bargaining with the past with and capable in this compensation tool, Black did not
president. Hourly paid factory employees were not part of the have time to make a job evaluation study at Acme. Therefore,
problem because they were unionized and their wages were he decided to hire a compensation consultant from a nearby
set by collective bargaining. An examination of the salaried university to help him. Together, they decided that all 25
payroll showed that there were 25 employees, ranging in pay salaried jobs should be in the same job evaluation cluster;
from that of the president to that of the receptionist. A closer that a modified ranking method of job evaluation should be
examination showed that 14 of the salaried employees were used; and that the job descriptions recently completed by the
female. Three of these were front-line factory supervisors and HR director were current, accurate, and usable in the study.
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 385

The job evaluation showed that the HR director and the 1. To do nothing
three female supervisors were being underpaid relative 2. To gradually increase the female supervisors salaries
to comparable male salaried employees. 3. To increase their salaries immediately
Black was not sure what to do. He knew that if the under- 4. To call the three supervisors into his office, discuss the
paid female supervisors took the case to the local EEOC office, situation with them, and jointly decide what to do
the company could be found guilty of sex discrimination and
then have to pay considerable back wages. He was afraid that if
he gave these women an immediate salary increase large Questions
enough to bring them up to where they should be, the male 1. What would you do if you were Black?
supervisors would be upset and the female supervisors might 2. How do you think the company got into a situation like
comprehend the total situation and want back pay. The HR this in the first place?
director told Black that the female supervisors had never 3. Why would you suggest Black pursue the alternative you
complained about pay differences. suggested?
The HR director agreed to take a sizable salary increase
with no back pay, so this part of the problem was solved. Source: This case was prepared by Professor James C. Hodgetts of the
Black believed he had four choices relative to the female Fogelman College of Business and Economics of the University of Memphis.
supervisors: All names are disguised. Used by permission.

CONTINUING CASE
CARTER CLEANING COMPANY
The New Pay Plan turnover while fostering employee loyalty. Of somewhat
Carter Cleaning Centers does not have a formal wage struc- more concern to Jennifer is her father s informal policy of
ture nor does it have rate ranges or use compensable factors. paying men about 20% more than women for the same
Wage rates are based mostly on those prevailing in the sur- job. Her father s explanation is, They re stronger and can
rounding community and are tempered with an attempt on work harder for longer hours, and besides they all have
the part of Jack Carter to maintain some semblance of equity families to support.
between what workers with different responsibilities in the
stores are paid.
Carter does not make any formal surveys when deter- Questions
mining what his company should pay. He peruses the want 1. Is the company at the point where it should be setting
ads almost every day and conducts informal surveys up a formal salary structure based on a complete job
among his friends in the local chapter of the laundry and evaluation? Why?
cleaners trade association. While Jack has taken a seat- 2. Is Jack Carter s policy of paying 10% more than the
of-the-pants approach to paying employees, his salary prevailing rates a sound one, and how could that be
schedule has been guided by several basic pay policies. determined?
Although many of his colleagues adhere to a policy of 3. Similarly, is Carter s male female differential wise?
paying minimum rates, Jack has always followed a policy If not, why not?
of paying his employees about 10% above what he feels are 4. Specifically, what would you suggest Jennifer do now
the prevailing rates, a policy that he believes reduces with respect to her company s pay plan?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Compensation Plan Like several other HR systems at the Hotel Paris, the
The Hotel Paris s competitive strategy is To use superior guest compensation program was unplanned and unsophisticated.
service to differentiate the Hotel Paris properties, and to The company has a narrow target range for what it will pay
thereby increase the length of stay and return rate of guests, and employees in each job category (front-desk clerk, security
thus boost revenues and profitability. HR manager Lisa Cruz guard, and so forth). Each hotel manager decides where
must now formulate functional policies and activities that to start a new employee within that narrow pay range. The
support this competitive strategy by eliciting the required company has given little thought to tying general pay levels or
employee behaviors and competencies. individual employees pay to the company s strategic goals.
386 PART 4 COMPENSATION

For example, the firm s policy is simply to pay its employees a actually was dysfunctional: It was not channeling employees
competitive salary, by which it means about average for behaviors toward those required to achieve the company s
what other hotels in the city are paying for similar jobs. Lisa goals. In some ways, it was doing the opposite.
knows that pay policies like these may actually run counter Lisa and the CFO knew they had to institute a new,
to what the company wants to achieve strategically, in terms strategic compensation plan. They wanted a plan that
of creating an extraordinarily service-oriented workforce. improved employee morale, contributed to employee com-
How can you hire and retain a top workforce, and channel mitment, reduced employee turnover, and rewarded (and
their behaviors toward high-quality guest services, if you thus encouraged) the sorts of service-oriented behaviors
don t somehow link performance and pay? She and her team that boosted guest satisfaction. After meeting with the com-
therefore turn to the task of assessing and redesigning the pany s CEO and the board, the CFO gave Lisa the go-ahead
company s compensation plan. to redesign the company s compensation plan, with the
Even a casual review by Lisa Cruz and the CFO made it overall aim of creating a new plan that would support the
clear that the company s compensation plan wasn t designed company s strategic aims.
to support the firm s new strategic goals. For one thing, they
knew that they should pay somewhat more, on average, than
did their competitors if they expected employees to consis- Questions
tently exceed expectations when it came to serving guests. 1. Draw a diagram showing with arrows how compensa-
Yet their review of a variety of metrics (including the Hotel tion at Hotel Paris should influence employee perform-
Paris s salary/competitive salary ratios, the total compensa- ance, which should in turn influence Hotel Paris
tion expense per employee, and the target percentile for total performance. Include at each level examples of relevant
compensation) suggested that in virtually all job categories compensation policies, employee behavior, and Hotel
the Hotel Paris paid no more than average, and, occasionally, Paris outcomes.
paid somewhat less. 2. Would you suggest that Hotel Paris implement a
The current compensation policies had also bred what competency-based pay plan for its nonmanagerial staff?
one hotel manager called an I don t care attitude on the Why or why not?
part of most employees. What she meant was that most 3. Devise a ranking job evaluation system for the Hotel
Hotel Paris employees quickly learned that regardless of Paris s nonmanagerial employees (housekeepers, valets,
what their performance was, they always ended up being front-desk clerks, phone operators, waitstaff, groundskeep-
paid about the same as employees who performed better ers, and security guards) and use it to show the worth
and worse than they did. So, the firm s compensation plan of these jobs relative to one another.

KEY TERMS
employee compensation, 352 Employee Retirement Income Security point method, 363
direct financial payments, 352 Act (ERISA), 358 wage curve, 367
indirect financial job evaluation, 360 market-competitive
payments, 352 compensable pay system, 367
Davis-Bacon Act (1931), 354 factor, 360 salary survey, 368
Walsh-Healey Public benchmark job, 361
pay (or wage) grade, 371
Contract Act (1936), 354 ranking method, 361
pay (or rate) ranges, 371
Title VII of the 1964 Civil Rights job classification
(or grading) method, 362 compa ratio, 372
Act, 354
Fair Labor Standards classes, 362 competency-based pay, 376
Act (1938), 354 grades, 362 broadbanding, 378
Equal Pay Act (1963), 357 grade definition, 362 comparable worth, 380

ENDNOTES
1. Elayne Robertson Demby, Two Stores 2. Richard Henderson, Compensation Man- 4. Ibid.
Refused to Join the Race to the Bottom agement (Reston, VA: Reston Publishing, 5. www.wegmans.com, accessed June 1,
for Benefits and Wages, Workforce 1980), pp. 101 127; and Stacey L. Kaplan, 2011.
Management, February 2004, pp. 57 59; Total Rewards in Action: Developing a 6. Nicholas Wade, Play Fair: Your Life May
w w w. w e g m a n s . c o m / w e b a p p / w c s / Total Rewards Strategy, Benefits & Com- Depend on It, The New York Times,
stores/servlet/CategoryDisplay?langId= pensation Digest 42 no. 8 (August 2005). September 12, 2003, p. 12.
1&storeId=10052&catalogId=10002& 3. Demby, Two Stores Refused to Join the 7. Robert Bretz and Stephen Thomas, Per-
categoryId=256548, accessed March 25, 2009. Race. ceived Inequity, Motivation, and Final Offer
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 387

Arbitration in Major League Baseball, Penalties for Child Labor Violations management Work, BNA Bulletin to
Journal of Applied Psychology, June 1992, Increase, HR Magazine, July 2008, p. 19. Management, August 30, 2001, p. 275.
pp. 280 282; Reginald ell, Addressing 17. Also note that 18 states have their own 27. Because the overtime and minimum wage
Employees Feelings of Inequity: Capitaliz- rules governing overtime. The states are rules only changed in 2004, exactly how
ing on Equity Theory in Modern Manage- Alaska, Arkansas, California, Colorado, to apply these rules is still in a state
ment, Supervision 72 no. 5 (May 2011), Connecticut, Hawaii, Illinois, Kentucky, of flux. If there s doubt about exemption
pp. 3 6. Maryland, Minnesota, Montana, New eligibility, it s probably best to check with
8. James DeConinck and Duane Bachmann, Jersey, North Dakota, Oregon, Pennsylva- the local Department of Labor Wage and
An Analysis of Turnover Among Retail nia, Washington, West Virginia, and Hour office. See, for example, Attorneys
Buyers, Journal of Business Research 58, Wisconsin. DOL s Final Rule Is Not the Say FLSA Draws a Fine Line Between
no. 7 (July 2005), pp. 874 882. Final Word on Overtime for Employers Exempt/Nonexempt Employees, BNA
9. David Terpstra and Andre Honoree, The in 18 States, BNA Bulletin to Management, Bulletin to Management, July 5, 2005,
Relative Importance of External, Internal, June 3, 2004, pp. 55, 177. p. 219; DOL Releases Letters on Admin-
Individual, and Procedural Equity to Pay 18. One company, Healthcare Management istrative Exemption, Overtime, BNA
Satisfaction, Compensation & Benefits Group, estimates that clock creep Bulletin to Management, October 18,
Review, November/December 2003, employees regularly clocking in a bit earlier 2005, p. 335. The U.S. Labor Department
pp. 67 74. late costs as much as $250,000 per year occasionally changes its positions. For
10. Ibid., p. 68. in overtime. The company remedied the example, in 2010 it concluded that mort-
11. Millicent Nelson et al., Pay Me More: situation by installing an automated time gage loan officers are subject to the
What Companies Need to Know About and attendance system. These systems administrative exemption from federal
Employee Pay Satisfaction, Compensation help provide real-time labor data to line overtime pay, although several years
& Benefits Review, March/April 2008, managers, and automatically update previously IT had ruled the opposite. Tim
pp. 35 42. timing systems for changes such as Watson and Barry Miller, Tightening a
12. Pay inequities manifest in unexpected daylight savings time. Jennifer Arnold, White Collar Exemption, HR Magazine,
ways. In one study, the researchers stud- Reining in Overtime Costs, HR Magazine, December 2010, p. 95.
ied the impact of keeping pay rates secret, April 2009, pp. 74 76. 28. See, for example, Jeffrey Friedman,
rather than publicizing them on individ- 19. Wal-Mart to Settle 63 Wage and Hour The Fair Labor Standards Act Today:
ual employees test performance. They Suits, Paying up to $640 Million to A Primer, Compensation, January/
found that individuals with lower levels Resolve Claims, BNA Bulletin to Manage- February 2002, p. 53; Andre Honoree,
of tolerance for inequity reacted particu- ment, January 13, 2009, p. 11. The New Fair Labor Standards Act
larly harshly to pay secrecy in terms 20. www.pacifictimesheet.com/timesheet_ Regulations and the Sales Force: Who Is
of weaker individual test performance. products/pacific_timesheet_handheld_ Entitled to Overtime Pay? Compensation
Peter Bamberger and Elena Belogolovsky, pda_field_data_entry_software.htm, & Benefits Review, January/February
The Impact of Pay Secrecy on Individual accessed March 23, 2009. 2006, p. 31; www.shrm.org/issues/FLSA,
Test Performance, Personnel Psychology 21. Recently, several state legislatures have accessed August 12, 2007; www.dol.gov/
60 no. 3 (2010), pp. 965 996. moved to tighten regulations regarding esa/whd/flsa, accessed August 12, 2007.
13. Michael Harris et al., Keeping Up with misclassifying workers as independent 29. Drug Sales Reps Raise Questions About
the Joneses: A Field Study of the contractors, some going so far as adding Outside Sales Exemption, BNA Bulletin
Relationships Among Upward, Lateral, criminal penalties for violations. Misclas- to Management, April 1, 2008, p. 111.
and Downward Comparisons and Pay sification Cases Draw More Attention, 30. Diane Cadrain, Guard Against FLSA
Level Satisfaction, Journal of Applied Attorneys Say, BNA Bulletin to Manage- Claims, HR Magazine, April 2008,
Psychology 93, no. 3 (2008), pp. 665 673. ment, December 15, 2009, p. 399. pp. 97 100.
14. Henderson, Compensation Management; 22. Federal Court Mostly Rules for FedEx 31. For another example, this one involving
see also Barry Gerhart and Sara Rynes, Ground in Driver Lawsuits Alleging technical writers working for Sun Microsys-
Compensation: Theory, Evidence, and Misclassification, BNA Bulletin to Manage- tems, see Court Certifies Class of Technical
Strategic Implications (Thousand Oaks, ment, December 21, 2010, p. 403. Writers Working for Sun Microsystems,
CA: Sage Publications, 2003); and Joseph 23. Senate Passes Minimum Wage Increase BNA Bulletin to Management, May 20,
Martocchio, Strategic Compensation That Includes Small-Business Tax Provi- 2008, p. 161.
(Upper Saddle River, NJ: Prentice Hall, sions, BNA Bulletin to Management, 32. Robert Nobile, How Discrimination
2006), pp. 67 94. February 6, 2007, p. 41; www.dol.gov/esa/ Laws Affect Compensation, Compensation
15. In a recent case, Ledbetter v. Goodyear whd/flsa, accessed August 12, 2007. & Benefits Review, July/August 1996,
Tire & Rubber Co., the U.S. Supreme 24. Society for Human Resource Manage- pp. 38 42.
Court notably restricted the amount of ment, The Evolution of Compensation, 33. See for example, http://www.bls.gov/
time (to 180 or 300 days) after each Workplace Visions, 2002, p. 2; www.dol. opub/cwc/cm20030124ar01p1.htm,
allegedly discriminatory pay decision gov/esa/minwage/america.htm, accessed accessed October 9, 2011. See also Barry
under Title VII to file or forever lose the June 3, 2004. Hirsch and Edward Schumacher, Unions,
claim. Congress subsequently passed and 25. For a description of exemption require- Wages, and Skills, Journal of Human
President Obama assigned a new law ments, see Jeffrey Friedman, The Fair Resources 33, no. 1 (Winter 1998), p. 115.
significantly expanding the amount of Labor Standards Act Today: A Primer, 34. Peg Buchenroth, Driving Performance:
time to file such claims. See, for example, Compensation, January/February 2002, Making Pay Work for the Organization,
Following Ledbetter Ruling, Issue of pp. 51 54. See also www.shrm.org/issues/ Compensation & Benefits Review, May/
Workers Sharing Pay Information Takes FLSA, accessed August 12, 2007; and www. June 2006, pp. 30 35.
Center Stage, BNA Bulletin to Manage- dol.gov/esa/whd/flsa, accessed August 12, 35. Jessica Marquez, Raising the Perfor-
ment, July 17, 2007, p. 225. 2007. mance Bar, Workforce Management,
16. The recently approved Genetic Informa- 26. Employer Ordered to Pay $2 Million in April 24, 2006, pp. 31 32.
tion Nondiscrimination Act amended the Overtime, BNA Bulletin to Management, 36. www.bls.gov/oes/current/oes431011.
Fair Labor Standards Act to increase September 26, 1996, pp. 308 309. See htm#st, accessed June 1, 2011.
penalties for the death or serious injury also Restaurant Managers Awarded 37. Bobby Watson Jr. and Gangaram Singh,
of employees under age 18. Allen Smith, $2.9 Million in Overtime Wages for Non- Global Pay Systems: Compensation in
388 PART 4 COMPENSATION

Support of Multinational Strategy, Com- September/October 1987, pp. 9 24; and 1996, pp. 12 36. See also Bruce Ellig,
pensation & Benefits Review, January/ particularly John Kilgour, Job Evaluation Executive Pay: A Primer, Compensation
February 2005, pp. 33 36. Revisited: The Point Factor Method, & Benefits Review, January/ February 2003,
38. Demby, Two Stores Refuse to Join the Compensation & Benefits Review, July/ pp. 44 50.
Race ; www.hoovers.com/company/ August 2008, pp. 37 46. 69. James Reda, Executive Pay Today and
Wegmans_Food_Markets_Inc/cfhtji-1. 48. Martocchio, Strategic Compensation, p. 141. Tomorrow, Corporate Board 22, no. 126
html, accessed June 1, 2011. 49. Kilgour, Job Evaluation Revisited, (January 2001), p. 18.
39. Ibid. pp. 37 46. 70. Syed Tahir Hijazi, Determinants of Execu-
40. Demby, Two Stores Refuse to Join the 50. Ibid. tive Compensation and Its Impact on
Race. 51. Ibid. Organizational Performance, Compensation
41. Joseph Martocchio, Strategic Compensa- 52. Ibid. & Benefits Review 39, no. 2 (March April
tion (Upper Saddle River, NJ: Pearson 53. Ibid. 2007), p. 58(9).
Education, 2011), p. 140. 54. Ibid. 71. For example, one book argues that execu-
42. Martocchio, Strategic Compensation, 55. Ibid. Of course, the level of economic tives of large companies use their power
p. 138. See also Nona Tobin, Can Tech- activity influences compensation expecta- to have themselves compensated in
nology Ease the Pain of Salary Surveys? tions. For instance, salary increases were ways that are not sufficiently related to
Public Personnel Management 31, no. 1 lower than expected in 2010 due to a lack- performance. Lucian Bebchuk and Jesse
(Spring 2002), pp. 65 78. luster economy, but were predicted to Fried, Pay Without Performance: The
43. You may have noticed that job analysis as increase significantly for 2011. Fay Hansen, Unfulfilled Promise of Executive Compen-
discussed in Chapter 4 can be a useful Currents in Compensation and Benefits, sation (Boston: Harvard University Press,
source of information on compensable Compensation & Benefits Review 42, no. 6 2004).
factors, as well as on job descriptions (2010), p. 435. 72. http://uk.reuters.com/article/2010/02/
and job specifications. For example, a 56. Martocchio, Strategic Compensation, p. 151. 23/uk-hsbc-idUKTRE61M6FT20100223,
quantitative job analysis technique like the 57. Kilgour, Job Evaluation Revisited, accessed June 23, 2011.
position analysis questionnaire generates pp. 37 46. 73. See, for example, Fay Hansen, Current
quantitative information on the degree 58. Henderson, Compensation Management, Trends in Compensation and Benefits,
to which the following five basic factors are pp. 260 269. See also Web Access Trans- Compensation & Benefits Review 36, no. 2
present in each job: having decision-making/ forms Compensation Surveys, Workforce (March/April 2004), pp. 7 8.
communication/social responsibilities, Management, April 24, 2006, p. 34. 74. www.dol.gov/whd/regs/compliance/
performing skilled activities, being phy- 59. For more information on these surveys, see fairpay/fs17d_professional.pdf, accessed
sically active, operating vehicles or equip- the company s brochure, Domestic Survey June 1, 2011.
ment, and processing information. As a References, Watson Wyatt Data Services, 75. Ibid.
result, a job analysis technique like the PAQ 218 Route 17 North, Rochelle Park, NJ 76. Roger S. Achille, FLSA Requires Educa-
is actually as (or some say, more) appropri- 07662. See www.watsonwyatt. com/search/ tion for Professional Exemption, www.
ate as a job evaluation technique (than for publications.asp?ArticleID= 21432, accessed shrm.org/LegalIssues/FederalResources/
job analysis) in that jobs can be quantita- October 29, 2009. Pages/2ndFLSAProfessionalExemption.
tively compared to one another on those 60. Kilgour, Job Evaluation Revisited, aspx, accessed August 28, 2011.
five dimensions and their relative worth pp. 37 46. 77. See, for example, Martocchio, Strategic
thus ascertained. Another point worth 61. Ibid. Compensation; and Patricia Zingheim and
noting is that you may find that a single set 62. David W. Belcher, Compensation Adminis- Jay Schuster, Designing Pay and Rewards
of compensable factors is not adequate for tration (Englewood Cliffs, NJ: Prentice in Professional Services Companies,
describing all your jobs. This is another Hall, 1974), pp. 257 276; and Nicola Sul- Compensation & Benefits Review, January/
reason why many managers therefore liva, Serco Introduces Pay Grade Structure February 2007, pp. 55 62.
divide their jobs into job clusters. For for Senior Staff, Employee Benefits, July 78. Farhad Manjoo, Engineers to the Valley:
example, you might have a separate job 2010, p. 5. Pay Up, Fast Company 153, no. 38 (March
cluster for factory workers, for clerical 63. Martocchio, Strategic Compensation, p. 185. 2011).
workers, and for managerial personnel. 64. Ibid., p 189. 79. Dimitris Manolopoulos, What Motivates
You would then probably have a somewhat 65. www.opm.gov/oca/11tables/html/gs.asp Research and Development Professionals?
different set of compensable factors for accessed June 1, 2011. Evidence from Decentralized Laboratories
each job cluster. 66. Kilgour, Job Evaluation Revisited, in Greece, International Journal of Human
44. Michael Carrell and Christina Heavrin, pp. 37 46. Resource Management 17, no. 4 (April
Labor Relations and Collective Bargaining 67. Mark Meltzer and Howard Goldsmith, 2006), pp. 616 647.
(Upper Saddle River, NJ: Prentice Hall, Executive Compensation for Growth 80. See, for example, Robert Heneman and
2004), pp. 300 303. Companies, Compensation & Benefits Peter LeBlanc, Development of and
45. John Kilgour, Job Evaluation Revisited: Review, November/December 1997, Approach for Valuing Knowledge Work,
The Point Factor Method, Compensation pp. 41 50; Martocchio, Strategic Com- Compensation & Benefits Review, July/
& Benefits Review, July/August 2008, p. 40. pensation, pp. 421 428. See also Martin J. August 2002, p. 47.
46. Martocchio, Strategic Compensation, p. 140. Conyon, Executive Compensation and 81. Kevin Foote, Competencies in the Real
47. For a discussion, see, Roger Plachy, Incentives, The Academy of Management World: Performance Management for
The Point Factor Job Evaluation System: Perspectives 20, no. 1 (February 2006), the Rationally Healthy Organization,
A Step-by-Step Guide, Part I, Compen- p. 25(20); and Realities of Executive Compensation & Benefits Review, July/
sation & Benefits Review, July/August Compensation 2006/2007 Report on August 2001, p. 25.
1987, pp. 12 27; Roger Plachy, The Case Executive Pay and Stock Options, www. 82. Gerald Ledford Jr., Paying for the
for Effective Point-Factor Job Evaluation, watsonwyatt.com/research/resrender.asp Skills, Knowledge, and Competencies of
Viewpoint I, Compensation & Benefits ?id=2006-US-0085&page=1, accessed Knowledge Workers, Compensation &
Review, March/April 1987, pp. 45 48; May 20, 2007. Benefits Review, July/August 1995, p. 56;
Roger Plachy, The Point-Factor Job 68. Douglas Tormey, Executive Compensa- see also P. K. Zingheim, et. al., Compe-
Evaluation System: A Step-by-Step Guide, tion: Creating a Legal Checklist, Com- tencies and Rewards: Substance or
Part II, Compensation & Benefits Review, pensation & Benefits Review, July/August Just Style? Compensation and Benefits
 CHAPTER 11 ESTABLISHING STRATEGIC PAY PLANS 389

Review 35 no. 5 (September/October February 1991, pp. 39 52; Nan Weiner, Job 2000), p. 10. See also, E. Frazier, Raises
2003), p. 40 44. Evaluation Systems: A Critique, Human for Women Executives Match Those for
83. Joseph Martocchio, Strategic Compensation, Resource Management Review 1, no. 2 Men, but Pay Gap Persists, The Chronicle
p. 168. (Summer 1991), pp. 119 132; and Brian of Philanthropy 20 no. 24 (October 2,
84. Gerald Ledford Jr., Three Case Studies Klaas, Compensation in the Jobless Orga- 2008), p. 33.
on Skill-Based Pay, Compensation & nization, Human Resource Management 101. www.msnbc.msn.com/id/15219832/ns/
Benefits Review, March/April 1981, p. 12. Review 12, no. 1 (Spring 2002), pp. 43 62. business-corporate_scandals/t/mcafee-
See also Kathryn Cofsky, Critical Keys to 92. Dawne Shand, Broadbanding the IT ousts-execs-after-stock-options-probe/,
Competency-Based Pay, Compensation Worker, Computerworld 34, no. 41 accessed June 1, 2011.
& Benefits Review, November/December (October 9, 2000). 102. Mark Poerio and Eric Keller, Executive
1993, pp. 46 52; Murray and Gerhart, 93. The New Talent Equation, www. Compensation 2005: Many Forces, One
Skill-Based Pay and Skills Seeking, accenture.com/NR/rdonlyres/7438E440- Direction, Compensation & Benefits
Human Resource Management Review 10, F7D5-4F81-B012-8D3271891D92/0/ Review, May/June 2005, pp. 34 40.
no. 3 (2000), pp. 271 287. Accenture_Outlook_The_New_Talent_ 103. Ibid., p. 38.
85. Gerald Ledford Jr. and Gary Bergel, Skill- Equation.pdf, accessed November 9, 2010. 104. Jennifer Dudley, The New Executive
Based Pay Case Number 1: General Mills, 94. Five Rules for Talent Management in the Compensation Rule: The Tough Disclo-
Compensation & Benefits Review, March/ New Economy, www.towerswatson.com/ sures, Compensation & Benefits Review,
April 1991, pp. 24 38; as explained else- viewpoints/2606, accessed November 9, July/August 2007, pp. 28 34.
where in this section, competency based 2010. 105. Society for Human Resource Manage-
plans (including skill-based plans such as 95. Next Generation Talent Management, ment, Changing Leadership Strategies,
this one) require new selection, training, www.hewittassociates.com/_MetaBasicC Workplace Visions, no. 1 (2008), p. 3.
and appraisal practices to be successful. See MAssetCache_/Assets/Articles/next_ 106. For a discussion of some of the issues that
for example, Frank L. Giancola, A Frame- generation.pdf, accessed November 9, go into hammering out an executive
work for Understanding New Concepts in 2010. employment agreement, see, for example,
Compensation Management, Benefits & 96. County of Washington v. Gunther, U.S. Jonathan Cohen and Laura Clark, Is the
Compensation Digest 46 no. 9 (September Supreme Court, no. 80 426, June 8, 1981. Executive Employment Agreement Dead?
2009), pp. 7, 13 16. 97. Laura Fitzpatrick, Why Do Women Still Compensation & Benefits Review, July/
86. This is based on Ledford and Bergel, Skill- Earn Less Than Men? , www.time.com/ August 2007, pp. 50 55.
Based Pay Case Number 1, pp. 28 29. time/nation/article/0,8599,1983185,00. 107. Ibid. See also Brent Longnecker and
87. Robert Heneman and Peter LeBlanc, html, accessed May 21, 2011. James Krueger, The Next Wave of Com-
Work Evaluation Addresses the Short- 98. Christopher Dougherty, Why Are the pensation Disclosure, Compensation &
comings of Both Job Evaluation and Returns to Schooling Higher for Women Benefits Review, January/February 2007,
Market Pricing, Compensation & Bene- Than for Men? Journal of Human pp. 50 54.
fits Review, January/February 2003, p. 8. Resources 40, no. 4 (Fall 2005), pp. 969 988. 108. This is based on Howard Risher, Planning
88. Kilgour, Job Evaluation Revisited, p. 37. 99. Rachel Silverman, Women Doctors Face and Managing Tomorrow s Pay Programs,
89. David Hofrichter, Broadbanding: A Sec- Pay Disparity, The Wall Street Journal, Compensation & Benefits Review, July/
ond Generation Approach, Compensation February 8, 2011, p. D4. August 2008, pp. 30 35.
& Benefits Review, September/October 100. Women Still Earned Less Than Men, 109. Frank L. Giancola, A Framework for
1993, pp. 53 58. See also The Future BLS Data Show, BNA Bulletin to Man- Understanding New Concepts in Compen-
of Salary Management, Compensation agement, June 8, 2000, p. 72. However, sation Management, op cit.; and Georgina
& Benefits Review, July/August 2001, there is some indication that there is less Fuller, Total Reward Statements, Employee
pp. 7 12. gender-based pay gap among full-time Benefits, January 2011, p. 47.
90. Ibid., p. 55. workers ages 21 to 35 living alone. Kent 110. Al Wright, Tools for Automating Complex
91. For example, see Sandra Emerson, Job Hoover, Study Finds No Pay Gap for Compensation Programs, Compensation
Evaluation: A Barrier to Excellence? Young, Single Workers, Tampa Bay & Benefits Review, November/ December
Compensation & Benefits Review, January/ Business Journal 20, no. 19 (May 12, 2003, pp. 53 61.
12
Pay for Performance and
Financial Incentives
Source: David Zalubowski/AP Images.
LEARNING OBJECTIVES Company s
1. Explain how you would apply five motivation theories Strategic Goals
in formulating an incentive plan.
2. Discuss the main incentives for individual employees.
3. Discuss the pros and cons of commissions versus
straight pay incentives for salespeople.
Employee Competencies
4. Describe the main incentives for managers and
and Behaviors Required
executives. for Company to Achieve
5. Name and define the most popular organization-wide These Strategic Goals
variable pay plans.
6. Outline the steps in designing effective incentive plans.

ensation
Comp

Developm nd

Em ations
e nt

Rel
a

ploye
Training
F
ord Motor Company recently announced a new strat- HR Policies and Practices

e
egy for rejuvenating its Lincoln car brand. For several Required to Produce
years, Ford simply built many Lincolns based on Ford Employee Competencies
and Behaviors
chassis, and Lincoln sales suffered. The new strategy

St r
En eg
calls for spending $1 billion on new high-tech Lincoln car e r
tne meca

nt
d

at
vi
no i
an
models, and requiring Lincoln dealers to build luxurious mt lP
iu r c tnem na c
d
showrooms. Now the increased investments and prospects eR lageL
for car sales have some dealers wondering what employee
sales incentives would best help them achieve their aims.

WHERE ARE WE NOW . . .

Chapter 11 focused on developing the overall
pay plan and on salaries and wages. Incentives
play an important role in any pay plan.
The main purpose of this chapter is to explain
how managers use performance-based
incentives to motivate employees. After a brief
overview of motivation theories, we ll discuss
incentives for individual employees, for
managers and executives, salespeople, and
professionals, as well as organization-wide
incentive plans. In Chapter 13 we ll turn
to financial and nonfinancial benefits and
services, which are the final part of the
employee s compensation package.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 391
392 PART 4 COMPENSATION

MONEY AND MOTIVATION

Frederick Taylor popularized using financial incentives financial rewards paid to
workers whose production exceeds some predetermined standard in the late
1800s. As a supervisor at the Midvale Steel Company, Taylor was concerned with
what he called systematic soldiering the tendency of employees to work at the
slowest pace possible and to produce at the minimum acceptable level. What espe-
cially intrigued him was the fact that some of these workers had the energy to run
home and work on their houses, even after a 12-hour day. Taylor knew that if he
could harness this energy at work, Midvale could achieve huge productivity gains.
Productivity is the ratio of outputs (goods and services) divided by the inputs
(resources such as labor and capital). 1
In pursuing that aim, Taylor turned to financial incentives. At the time, primitive
incentive plans were in use, but were generally ineffective (because employers arbi-
trarily changed incentive rates). Taylor made three contributions. He saw the need for
formulating what he called a fair day s work, namely standards of output for a job,
which he devised for each job based on careful, scientific analysis. He spearheaded the
scientific management movement, a management approach that emphasized
improving work methods through observation and analysis. And he popularized the
use of incentive pay as a way to reward employees who produced over standard.
Graphically, we can summarize Taylor s aims as follows:
Financial Incentives * Boost Employee Performance * Productivity Gains.

Linking Strategy, Performance, and Incentive Pay

Today, incentive pay tying workers pay to their performance is widely popular.2
The problem is that doing so is easier said than done. Many such programs are ineffec-
tive, and some are disastrous. (One plan, at Levi Strauss, is widely assumed to have been
the last nail in the coffin of Levi s U.S.-based production.) As logical as it seems to link
pay to performance, about 83% of companies with such programs say their programs
are at best somewhat successful. One study found that just 28% of the 2,600 U.S. workers
it surveyed said their companies incentive plans motivated them. Employees don t
see a strong connection between pay and performance, and their performance is
not particularly influenced by the company s incentive plan, said one expert.3,4
Equally problematical is the fact that some incentives incentivize the wrong behavior
and performance. Thus, simply incentivizing number of cars sold in a dealership
might produce high performance (in numbers of cars sold) but a low per-car profit.
The accompanying Strategic Context feature illustrates this.

THE STRATEGIC CONTEXT

The Car Sales Commission
Strategic human resource management means formulating and executing human
resource policies and practices that produce the employee competencies and
behaviors the company needs to achieve its strategic aims.
Few HR practices illustrate this better than designing car sales incentive plans.
Car salespersons compensation ranges from 100% commission to a small base
salary with commission accounting for most of total compensation. Traditionally, the
car salesperson s commission is based on a percentage of the difference between
the dealer s invoice cost and the amount the car is sold for, minus an amount to
cover the pack or dealer overhead (the pack being perhaps $300 for a new car
to $800 for a used car, and rising for pricier cars).5 This promotes precisely the sorts
of behaviors the car dealer wants to encourage. For example, it encourages the
salesperson to hold firm on the retail price, and to push after-sale products like
floor mats and side moldings. There may also be extra incentives to sell packages
such as rustproofing. For selling slow-moving vehicles, the salesperson may get a
spiff a car dealer term for an extra incentive bonus over commission. And there
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 393

are bonuses, such as Salesperson of the Month (perhaps $300 for most cars sold),
and a Monthly Car Count Bonus for selling, say, 10 or 12 cars.6
Because maximizing car unit sales and profits still predominates as the strategy
at many dealerships, commission plans like these still dominate, but they are not as
popular as they once were. Many dealerships are substituting salary plus bonus
plans for commissions. The transition to salary plus bonus reflects the growing
emphasis on a dealer (and car company) strategy aimed at making the purchase
process less tense, for instance, with one price no hassle pricing.7 But in any
case, the pay plan s aim is to produce the salesperson behaviors the dealership
needs to support its strategic aims.

We ll see that there are many reasons for incentive plans often-dismal results.
Many employers, perhaps ignorant of Taylor and history, change their plans standards
arbitrarily. Others ignore the fact that incentive pay that may motivate some people
won t motivate others.8 Compensation experts therefore argue that managers should
understand the motivational bases of incentive plans.9 We ll review some motivation
background next.

1 Explain how you would

Motivation and Incentives
apply five motivation Several motivation theories have particular relevance to designing incentive plans.
theories in formulating These include theories associated with the psychologists Abraham Maslow, Frederick
an incentive plan. Herzberg, Edward Deci, Victor Vroom, and B. F. Skinner.
THE HIERARCHY OF NEEDS AND ABRAHAM MASLOW Abraham Maslow
propounded one widely quoted observation on what motivates people. Although
lacking much scientific support, his theory is widely quoted.
He said that people have a hierarchy of five types of needs: physiological (food,
water, warmth), security (a secure income, knowing one has a job), social (friendships
and camaraderie), self-esteem (respect), and self-actualization (becoming the person
you believe you can become). According to Maslow s prepotency process principle,
people are motivated first to satisfy each lower-order need and then, in sequence, each
of the higher-level needs. For example, if someone is out of work and insecure,
getting a job may drive everything he or she does. (So, during periods of high unem-
ployment, one may see even former executives taking low-level jobs to make ends
meet.) A secure employee may then turn to being concerned with building friend-
ships, getting respect, and going to school to get the degree required to be a top
executive. On the other hand, don t try to motivate someone with more challenging
work if he or she doesn t earn enough to pay the bills. We usually envision Maslow s
hierarchy of five needs as a stepladder or pyramid.
MOTIVATORS AND FREDERICK HERZBERG Frederick Herzberg said the
best way to motivate someone is to organize the job so that doing it provides the feed-
back and challenge that helps satisfy the person s higher-level needs for things like
accomplishment and recognition. These needs are relatively insatiable, says Herzberg,
so recognition and challenging work provide a sort of built-in motivation generator.
Satisfying lower level needs for things like better pay and working conditions just
keeps the person from becoming dissatisfied.

financial incentives fair day s work scientific management

Financial rewards paid to workers whose Output standards devised based on careful, Management approach based on
production exceeds some predetermined scientific analysis. improving work methods through
standard. observation and analysis.

productivity
The ratio of outputs (goods and services)
divided by the inputs (resources such
as labor and capital).
394 PART 4 COMPENSATION

Herzberg says the factors ( hygienes ) that satisfy lower-level needs are different
from those ( motivators ) that satisfy or partially satisfy higher-level needs. If hygiene
factors (factors outside the job itself, such as working conditions, salary, and incentive
pay) are inadequate, employees become dissatisfied. However, adding more of these
hygienes (like incentives) to the job (supplying what Herzberg calls extrinsic motiva-
tion ) is an inferior way to try to motivate someone, because lower-level needs are
quickly satisfied. Soon the person simply says, in effect, What have you done for
me lately? I want another raise.
Instead of relying on hygienes, says Herzberg, managers interested in creating a
self-motivated workforce should emphasize job content or motivator factors.
Managers do this by enriching workers jobs so that the jobs are more challenging,
and by providing feedback and recognition they make doing the job intrinsically
motivating, in other words. In organizational psychology, intrinsic motivation is
motivation that derives from the pleasure someone gets from doing the job or task. It
comes from within the person, rather than from some externally applied motivator,
such as a boss s order or a financial incentive plan. When one is intrinsically moti-
vated, just doing the job or task provides the motivation (as would a favorite hobby).
Among other things, Herzberg s theory makes the point that relying exclusively
on financial incentives is risky. The employer should also provide the recognition and
challenging work that most people desire.

DEMOTIVATORS AND EDWARD DECI Psychologist Edward Deci s work

highlights another potential downside to relying too heavily on extrinsic rewards:
They may backfire. Deci found that extrinsic rewards could at times actually detract
from the person s intrinsic motivation.10 For example, a Samaritan who risks danger
by rushing to an accident victim s aid might be insulted if the victim said, Thanks,
here s some money for your trouble. The point may be stated thusly: Be cautious in
devising incentive pay for highly motivated employees, lest you inadvertently demean
and detract from the desire they have to do the job out of a sense of responsibility.

EXPECTANCY THEORY AND VICTOR VROOM Another important motiva-

tional fact is that, in general, people won t pursue rewards they find unattractive, or
where the odds of success are very low. Psychologist Victor Vroom s expectancy moti-
vation theory echoes these commonsense observations. He says a person s motivation
to exert some level of effort depends on three things: the person s expectancy (in terms
of probability) that his or her effort will lead to performance;11 instrumentality, or the
perceived connection (if any) between successful performance and actually obtaining
the rewards; and valence, which represents the perceived value the person attaches
to the reward.12 In Vroom s theory, motivation is thus a product of three things:
Motivation (E V),
where, of course, E represents expectancy, I instrumentality, and V valence. If E or I or V
is zero or inconsequential, there will be no motivation.
Vroom s theory has three implications for how managers design incentive plans.
* First, if employees don t expect that effort will produce performance, no motivation
will occur. So, managers must ensure that their employees have the skills to do the
job, and believe they can do the job. Thus training, job descriptions, and confidence
building and support are important in using incentives.
* Second, Vroom s theory suggests that employees must see the instrumentality
of their efforts they must believe that successful performance will in fact lead to
getting the reward. Managers can accomplish this, for instance, by creating easy
to understand incentive plans.
* Third, the reward itself must be of value to the employee. Ideally, the manager
should take into account individual employee preferences.

BEHAVIOR MODIFICATION/REINFORCEMENT AND B. F. SKINNER

Using incentives also assumes you know something about how consequences affect
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 395

behavior.13 Psychologist B. F. Skinner s findings provide the foundation for much of

what we know about this. Managers apply Skinner s principles by using behavior
modification. Behavior modification means changing behavior through rewards or
punishments that are contingent on performance. For managers, behavior modifica-
tion boils down to two main principles. First, that behavior that appears to lead to a
positive consequence (reward) tends to be repeated, whereas behavior that appears
to lead to a negative consequence (punishment) tends not to be repeated; and
second, that, therefore, managers can get someone to change his or her behavior
by providing the properly scheduled rewards (or punishment).

Incentive Pay Terminology

Managers often use two terms synonymously with incentive plans.14 Traditionally, all
incentive plans are pay-for-performance plans. They all tie employees pay to the
employees performance. Variable pay is more specific: It is usually an incentive plan
that ties a group or team s pay to some measure of the firm s (or the facility s) overall
profitability;15 profit-sharing plans (discussed later) are one example. Variable pay is
advantageous insofar as it reduces an employer s fixed pay, so that if sales or perform-
ance dips, pay declines too.16 However, confusing as it may be, some experts have used
the term variable pay to include incentive plans for individual employees.17
To arrange our discussion, we will organize the following sections around individual
employee incentive and recognition programs, sales compensation programs, manage-
ment and executive incentive compensation programs, and team and organization-wide
incentive programs.

Employee Incentives and the Law

Under the Fair Labor Standards Act, if the incentive is in the form of a prize or cash
award, the employer generally must include the value of that award when calculating
the worker s overtime pay for that pay period.18 Employers pay overtime rates to
nonexempt employees based on the employees previous week s earnings. So, unless
you structure the incentive bonuses properly, the bonus itself becomes part of the
week s wages. Suppose someone earning $10 per hour for a 40-hour week also earns
performance incentive pay of $80 for the week, or $480 total. Further, assume she also
works 2 hours overtime that week. The overtime rate for the 2 hours she works
overtime that week equals 1.5 times $12 (which includes the $80/40 equals $2 per hour
incentive pay) or $18; you must include the average $2 per hour ($80 divided by
40 hours) she earned in incentive pay.
Certain bonuses are excludable from overtime pay calculations. For example,
Christmas and gift bonuses that are not based on hours worked, or are so substantial
that employees don t consider them a part of their wages, do not have to be included
in overtime pay calculations. Similarly, purely discretionary bonuses in which the
employer retains discretion over how much if anything to pay are excludable.
Other types of incentive pay must be included. Under the Fair Labor Standards
Act (FLSA), bonuses to include in overtime pay computations include those prom-
ised to newly hired employees; those provided for in union contracts or other
agreements; and those announced to induce employees to work more productively,
steadily, rapidly, or efficiently or to induce them to remain with the company. Such
bonuses would include many of those we turn to next, such as individual and group
production bonuses.

intrinsic motivation instrumentality behavior modification

Motivation that derives from the pleasure The perceived relationship between successful Using contingent rewards or punishment
someone gets from doing the job or task. performance and obtaining the reward. to change behavior.

expectancy valence variable pay

A person s expectation that his or her effort The perceived value a person attaches to the Any plan that ties pay to productivity
will lead to performance. reward. or profitability, usually as one-time lump
payments.
396 PART 4 COMPENSATION

2 Discuss the main incentives

INDIVIDUAL EMPLOYEE INCENTIVE AND
for individual employees. RECOGNITION PROGRAMS
Several incentive plans are particularly suited for use with individual employees.

Piecework Plans
Piecework is the oldest and still most popular individual incentive plan. Here you pay
the worker a sum (called a piece rate) for each unit he or she produces. Thus, if Tom the
Web surfer receives $0.40 for each e-mail sales lead he finds for the firm, he would make
$40 for bringing in 100 a day and $80 for 200.
In a perfect world, developing a workable piece rate plan requires industrial engi-
neering. The crucial issue is the production standard, and industrial engineers often
set this for instance, in terms of a standard number of e-mail leads per hour or a
standard number of minutes per e-mail lead. In Tom s case, a job evaluation indicated
that his Web surfing job was worth $8 an hour. The industrial engineer determined
that 20 good leads per hour was the standard production rate. Therefore, the piece
rate (for each lead) was $8 divided by 20, or $0.40 per sales lead. (Of course, we need
to ensure that Tom makes at least the minimum wage, so we d probably pay him $7.25
per hour the federal minimum wage as of 2011 whether or not he brought in 18
leads, and then pay him $0.40 per lead for each over 18.) But in practice, most
employers set the piece rates more informally. Thus, at Safelite Glass Corp., workers
earn an hourly wage plus a bonus based on how many windshields they install.
STRAIGHT PIECEWORK Piecework generally implies straight piecework, which
entails a strict proportionality between results and rewards regardless of output.
However, some piecework plans allow for sharing productivity gains between
employer and worker; here the worker receives extra income for some above-normal
production.19 So, if Tom starts bringing in 30 leads per hour instead of the engineered
standard 20, his piece rate for leads above 25 might bump to $.45 each.
STANDARD HOUR PLANS The standard hour plan is like the piece rate plan,
with one difference. Instead of getting a rate per piece, the worker gets a premium
equal to the percent by which his or her performance exceeds the standard. So if Tom s
standard is 160 leads per day (and thus $64 per day), and he brings in 200 leads, he d
get an extra 25% (40/160), or $80 total for the day. Some firms find that expressing
the incentive in percentages may reduce somewhat the workers tendency to link their
production standard to pay (thus making the standard easier to change). It also elimi-
nates the need to recalculate piece rates whenever hourly wage rates are changed.
PROS AND CONS Piecework plans are understandable, appear equitable in prin-
ciple, and can be powerful incentives, since rewards are proportionate to performance.
But from the time of Taylor, managers have seen piecework s disadvantages. Work-
ers on piecework may resist even justified attempts to raise production standards.
Because piecework plans usually tie incentive pay to quantity produced, employees
may well downplay quality, or resist switching from job to job (since doing so could
reduce productivity).20 Attempts to introduce new technology or processes may trigger
resistance, for much the same reason.
In some industries, the term piecework has a dreadful reputation. In one case, an
electronics firm had a woman who assembled cables for the firm during the day
take home parts to assemble at night. Working at home, she allegedly averaged only
$2 to $2.50 an hour for the piecework.21
For these and other reasons, more employers are moving to other plans.22 We ll
look at these on the following pages.

Merit Pay as an Incentive

Merit pay or a merit raise is any salary increase the firm awards to an individual
employee based on his or her individual performance. It is different from a bonus in
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 397

that it usually becomes part of the employee s base salary, whereas a bonus is a one-time
payment. Although the term merit pay can apply to the incentive raises given to any
employee, the term is more often used for white-collar employees and particularly
professional, office, and clerical employees.
Merit pay is the subject of much debate. Advocates argue that awarding pay raises
across the board (without regard to individual merit) may actually detract from per-
formance, by showing employees they ll be rewarded regardless of how they perform.
Detractors present good reasons why merit pay can backfire. One is the dubious
nature of many appraisal processes. Since many appraisals are unfair, so too will be
the merit pay you base them on.23 Similarly, supervisors often give most employees
about the same rating and raise, either because of a reluctance to alienate some
employees or to give everyone a raise that will help them stay even with the cost
of living. (Alienating employees is a problem. Almost every employee thinks he or
she is above average, so getting a below-average merit increase can be demoralizing.)
The evidence is mixed, but tends to support using merit pay. One study focused on
218 workers in a nuclear waste facility. The researchers found a very modest
relationship between merit pay increase and performance rating. 24 Research into
tying merit pay increases to teachers or faculty members research and/or teaching
performance suggest that merit pay is more clearly linked with research productivity
than with teaching effectiveness.25
The solution is not to throw out merit raises, but to make them more effective.
Among other things, this means establishing effective appraisal procedures and
ensuring that managers tie merit pay awards to performance.

DIFFERENTIAL PAY INCREASES Merit plan effectiveness depends on truly

differentiating among employees. For example, expected base pay increases by
U.S. employers for their highest ranked employees recently were 5.6%, compared
with only 0.6% for the lowest rated employees. Middle rated employees could
expect about 3.3%. The same is true for incentive payouts. For example, the
highest-paid office clerical employees could expect short-term incentive
payouts of 13%, while lowest rated employees could expect 3%, and mid-rated
employees 8%.26

MERIT PAY OPTIONS Two adaptations of merit pay plans are popular. One
awards merit raises in a lump sum once a year and does not make the raise part of
the employee s salary (making them, in effect, short-term bonuses for lower-level
workers). Traditional merit increases are cumulative, but these lump-sum merit
raises are not. This produces two potential benefits. First, the merit raise is not
baked into the employee s salary, so you need not pay it year after year. Lump-sum
merit increases can also be more dramatic motivators than a traditional merit raise.
For example, a 5% lump-sum merit payment to a $30,000 employee is $1,500 cash,
as opposed to a traditional weekly merit payout of $29 for 52 weeks.
The other adaptation ties merit awards to both individual and organizational
performance. Table 12-1 presents a sample matrix for doing so. In this example, you
might measure the company s performance by, say, sales divided by payroll costs.
Company performance and the employee s performance (using his or her perform-
ance appraisal) receive equal weight in computing the merit pay. In Table 12-1 an

piecework standard hour plan merit pay (merit raise)

A system of pay based on the number A plan by which a worker is paid a basic Any salary increase awarded to an employee
of items processed by each individual worker hourly rate but is paid an extra percentage based on his or her individual performance.
in a unit of time, such as items per hour of his or her rate for production exceeding
or items per day. the standard per hour or per day. Similar
to piecework payment but based on a
straight piecework percent premium.
An incentive plan in which a person is paid a
sum for each item he or she makes or sells,
with a strict proportionality between results
and rewards.
398 PART 4 COMPENSATION

TABLE 12-1 Merit Award Determination Matrix (an Example)

The Employee s The Company s Performance (Weight = 0.50)
Performance Rating
(Weight = 0.50) Outstanding Excellent Good Marginal Unacceptable

Outstanding 1.00 0.90 0.80 0.70 0.00

Excellent 0.90 0.80 0.70 0.60 0.00
Good 0.80 0.70 0.60 0.50 0.00
Marginal
Unacceptable

Note: To determine the dollar value of each employee s award: (1) multiply the employee s annual,
straight-time wage or salary as of June 30 times his or her maximum incentive award (as determined
by management or the board such as, 10% of each employee s pay ) and (2) multiply the
resultant product by the appropriate percentage figure from this table. For example, if an employee
had an annual salary of $20,000 on June 30 and a maximum incentive award of 7% and if her
performance and the organization s performance were both excellent, the employee s award
would be $1,120: ($20,000 + 0.07 + 0.80 * $1,120).

outstanding performer would receive 70% of his or her maximum lump-sum award
even if the organization s performance were marginal. However, employees with
marginal or unacceptable performance would get no lump-sum awards even in years
in which the firm s performance was outstanding. The bonus plan at Discovery
Communications is an example. Executive assistants can receive bonuses of up to a
maximum of 10% of their salaries. The boss s evaluation of the assistant s individual
performance accounts for 80% of the potential bonus; 10% is based on how the
division does, and 10% on how the company does.27

Incentives for Professional Employees

Professional employees are those whose work involves the application of learned
knowledge to the solution of the employer s problems. They include lawyers, doctors,
economists, and engineers.
Making incentive pay decisions for professional employees can be challenging.
For one thing, firms usually pay professionals well anyway. For another, they re
already driven by the desire to produce high-caliber work and receive recognition
from colleagues.
However, it is unrealistic to assume that people like the engineers, systems analysts,
and programmers at Microsoft and Google work only for professional gratification.
Few firms therefore work harder to maintain competitive incentives for professionals.
For example, Google reportedly pays higher incentives to engineers working on impor-
tant projects. Those who choose the intrinsic motivation of working on more theoretical
long-term projects are rewarded if their research pays off.28 As at most Silicon Valley
firms, Google s professionals also bask in the light of potentially millionaire-making
stock option grants.
Dual-career ladders are another way to manage professionals pay. At many employers,
a bigger salary and bonus requires rerouting from, say, engineering into management.
However, not all professionals want such paths. Therefore, many employers institute
dual-career paths, in other words, one path for managers, and another for technical
experts. The latter offer professionals such as engineers the prospect of using advanced
technical skills and earning higher pay without switching to management.29

Nonfinancial and Recognition-Based Awards

Recognition programs are one of several types of nonfinancial rewards. The term
recognition program usually refers to formal programs, such as employee-of-the-month
programs. Social recognition program generally refers to informal manager employee
exchanges such as praise, approval, or expressions of appreciation for a job well done.
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 399

Performance feedback means providing quantitative or qualitative information on task

performance to change or maintain performance; showing workers a graph of how
their performance is trending is an example.30
Studies show that recognition has a positive impact on performance, either alone
or in conjunction with financial rewards.31 In one survey, 89% of surveyed compa-
nies reported having recognition programs in place, for things ranging from exceptional
performance to attendance, safety, sales, and major life events.32
Many employers are bulking up their recognition programs. For example,
Baudville, a workplace recognition vendor, recently unveiled an e-card service
called ePraise. Employers use this to remind employees of how much they re appre-
ciated. Intuit shifted its employee recognition, years of service, patent awards, and
wellness awards programs from several vendors to Globoforce several years ago.
The move allowed us to build efficiencies and improved effectiveness into the
programs management, says Intuit s vice president of performance, rewards, and
workplace.33
At American Skandia, which provides insurance and financial planning products
and services, customer service reps who exceed standards receive a plaque, a $500 check,
their photo and story on the firm s internal Web site, and a dinner for themselves and
their teams.34 Most employers combine financial and nonfinancial awards. One survey
of 235 managers found that the most-used rewards to motivate employees (top down,
from most used to least) were:35
* Employee recognition
* Gift certificates
* Special events
* Cash rewards
* Merchandise incentives
* E-mail/print communications
* Training programs
* Work/life benefits
* Variable pay
* Group travel
* Individual travel
* Sweepstakes

HR IN PRACTICE: INCENTIVES MANAGERS CAN USE As you can see, the

individual line manager should not rely just on the employer s incentive plans for
motivating subordinates. Those plans may not be very complete, and there are simply
too many opportunities to motivate employees every day to let those opportunities
pass. There are three guides to follow.
First, the best option for motivating employees is also the simplest make sure
the employee has a doable goal and that he or she agrees with it. It makes little sense
to try to motivate employees with financial incentives if they don t know their goals or
don t agree with them. Psychologist Edwin Locke and his colleagues have consistently
found that specific, challenging goals lead to higher task performance than specific,
unchallenging goals, or vague goals or no goals.
Second, recognizing an employee s contribution is a powerful motivation tool.
Studies (and theories like those of Maslow and Herzberg) show that recognition has a
positive impact on performance, either alone or in combination with financial
rewards. For example, in one study, combining financial rewards with recognition
produced a 30% performance improvement in service firms, almost twice the effect
of using each reward alone.
Third, the manager can use social recognition (such as compliments) as positive
reinforcement on a day-to-day basis. Figure 12-1 presents a short list.36
400 PART 4 COMPENSATION

Challenging work assignments Being provided with ample

Freedom to choose own work activity encouragement
Having fun built into work Being allowed to set own goals
More of preferred task Compliments
Role as boss s stand-in when he Expression of appreciation in front
or she is away of others
Role in presentations to top Note of thanks
management Employee-of-the-month award
Job rotation Special commendation
Encouragement of learning Bigger desk
and continuous improvement Bigger office or cubicle

FIGURE 12-1 Social Recognition and Related Positive Reinforcement Managers Can Use
Source: Bob Nelson, 1001 Ways to Reward Employees (New York: Workman Pub, 1994), p. 19; Sunny
C. L. Fong and Margaret A. Shaffer, The Dimensionality and Determinants of Pay Satisfaction:
A Cross-Cultural Investigation of a Group Incentive Plan, International Journal of Human Resource
Management 14, no. 4 (June 2003), p. 559.

Online and IT-Supported Awards

Incentive programs can be expensive and complicated to administer.37 For example,
with more than 1,000 sales representatives, First Tennessee Bank was having prob-
lems managing its sales incentive programs.38 Tracking the performance of dozens
or hundreds of measures and then computing individual employees incentives is
time-consuming. Bank employees had to enter by hand sales information for each
of the 1,000 sales reps onto Excel spreadsheets. The process, said one officer,
had begun to spiral out of control. As one solution, vendors provide enterprise
incentive management (EIM) systems. These automate the planning, analysis, and
management of incentive compensation plans.39
Administering recognition programs is similarly challenging. If a company has an
Employee Anniversary Recognition Program, for instance, someone (probably in
human resources) needs to compile a prizes catalog, distribute it, and keep track of
who gets what. Many firms including Levi Strauss & Co. and Walmart now use
online awards firms to expedite the process. Management consultant Hewitt Associ-
ates uses www.bravanta.com to help its managers more easily recognize exceptional
employee service with special awards. Additional Internet incentive/recognition sites
include www.premierechoiceaward.com/secure/home.asp, www.giveanything.com,
www.incentivecity.com, and www.kudoz.com.

Job Design
Although not usually considered an incentive, job design can have a significant impact
on employee motivation and retention. A study by Harvard Business School researchers
concluded that job design is a primary driver of employee engagement. A study by
Sibson Consulting concluded that job responsibility and feedback from a job were the
fifth and seventh most important drivers of employee engagement. A study by Towers
Watson concluded that challenging work ranked as the seventh most important driver
for attracting employees.40 Job design is thus a useful part of an employer s total
rewards program.

3 Discuss the pros and cons

of commissions versus INCENTIVES FOR SALESPEOPLE
straight pay incentives Sales compensation plans typically rely heavily on sales commissions, and should
for salespeople.
aim to achieve the company s strategic (and therefore sales) goals. As one survey
said, the performance metrics given to the sales team must drive behaviors that will
help the company s go-to-market strategy to be successful. 41 Unfortunately, the
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 401

same survey found that 30% of respondents believe their sales compensation
program rewarded the right behaviors not well or very poorly. 42 However, with
the recent recession, employers are moving to align the metrics they use to reward
their salespeople with the firms strategies. For instance they re factoring in more
growth-oriented metrics, and reviewing their sales pay plans more often.43 In any
case, some salespeople do get straight salaries; most receive a combination of salary
and commissions.

Salary Plan
Some firms pay salespeople fixed salaries (perhaps with occasional incentives in the
form of bonuses, sales contest prizes, and the like).44 Why do this? Straight salaries
particularly make sense when the main task involves prospecting (finding new
clients) or account servicing (such as participating in trade shows). Turnover is
another reason. Faced with the difficulty of attracting and keeping good salespeople,
a Buick-GMC dealership in Lincolnton, North Carolina, offers straight salary as an
option to salespeople who sell an average of at least eight vehicles a month (plus a
small retention bonus per car sold).45
The straight salary approach also makes it easier to switch territories or to reassign
salespeople, and it can foster sales staff loyalty. The main disadvantage, of course,
is that straight salary can demotivate potentially high-performing salespeople.46

Commission Plan
Straight commission plans pay salespeople for results, and only for results. Commission
plans tend to attract high-performing salespeople who see that effort clearly produces
rewards. Sales costs are proportionate to sales rather than fixed, and the company s fixed
sales costs are thus lower. It s a plan that s easy to understand and compute. Commis-
sion plan alternatives include quota bonuses (for meeting particular quotas), straight
commissions, management by objectives programs (pay is based on specific metrics),
and ranking programs (these reward high achievers but pay little or no bonuses to the
lowest performing salespeople.)47
However, problems abound. In poorly designed plans, salespeople may focus on
making the sale, and may neglect nonselling duties such as servicing small accounts,
cultivating dedicated customers, and pushing hard-to-sell items. Wide variations in
pay may occur; this can make some feel the plan is inequitable. Misjudging sales
potential can lead to excessively high commissions and to the need to cut commission
rates. In addition, salespersons pay may be excessive in boom times and low in reces-
sions. Furthermore, sales performance like any performance reflects not just
motivation, but ability, too. If the person hasn t the sales skills, commissions won t
produce sales.48

Combination Plan
Most companies pay salespeople a combination of salary and commissions, usually
with a sizable salary component. An incentive mix of about 70% base salary/30%
incentive seems typical; this cushions the salesperson s downside risk (of earning
nothing), while limiting the risk that the commissions could get out of hand from the
firm s point of view.49
Combination plans have pros and cons.50 They give salespeople a floor to their
earnings, let the company specify what services the salary component is for (such as
servicing current accounts), and still provide an incentive for superior performance.
However, the salary component isn t tied to performance, so the employer is obvi-
ously trading away some incentive value. Combination plans also tend to become
complicated, and misunderstandings can result.
The latter might not be a problem with a simple salary-plus-commission plan, but
most plans are not so simple. For example, in a commission-plus-drawing-account
402 PART 4 COMPENSATION

plan, the salesperson is paid based on commissions. However, he or she can draw on
future earnings to get through low sales periods. Similarly, in the commission-
plus-bonus plan, the firm pays its salespeople mostly based on commissions. However,
they also get a small bonus for directed activities like selling slow-moving items.

Maximizing Sales Force Results

In setting sales quotas and commission rates, the employer wants to motivate sales
activity but avoid excessive commissions. Unfortunately, the tendency is to set
commission rates informally.51
Setting effective quotas is an art. Questions to ask include: Are quotas communi-
cated to the sales force within 1 month of the start of the period? Does the sales force
know how their quotas are set? Do you combine bottom up information (like
account forecasts) with top down requirements (like the company business plan)?
Are returns and de-bookings reasonably low? And, has your firm generally avoided
compensation-related lawsuits?52 One expert suggests the following rule as to
whether the sales incentive plan is effective: 75% or more of the sales force achieving
quota or better, 10% of the sales force achieving higher performance level (than
previously), and 5% to 10% of the sales force achieving below-quota performance
and receiving performance development coaching.53
A survey of sales effectiveness reveals that, among other things, salespeople at
high-performing companies:

* Receive 38% of their total cash compensation in the form of sales-related variable
pay (compared with 27% for salespeople at low-performing companies)
* Are twice as likely to receive stock, stock options, or other equity pay as their counter-
parts at low-performing companies (36% versus 18%)
* Spend 264 more hours per year on high-value sales activities (e.g., prospecting,
making sales presentations, and closing) than salespeople at low-performing
companies
* Spend 40% more time each year with their best potential customers qualified
leads and prospects they know than salespeople at low-performing companies
* Compared with salespeople at low-performing companies, spend nearly 25% less
time on administration, allowing them to allocate more time to core sales activities,
such as prospecting leads and closing sales54

Evidence-Based HR: How Effective Are Your Incentives?

Somewhat astonishingly, given the amount of money employers pay out in com-
missions, about 60% of employers track sales performance and sales commissions
much as they did decades ago, using spreadsheets.55 But to maximize performance,
the sales manager typically needs evidence, such as the following: Do the sales
team members understand the compensation plans? Do they know how we meas-
ure and reward performance? Are quotas set fairly? Is there a positive correlation
between performance and commission earnings? Are commissions more than
covering total salespersons expenses? And, does our commission plan maximize
sales of our most profitable products?56 It is difficult or impossible to gather this
evidence or answer these questions because the spreadsheets don t easily support
these types of analyses.
Gathering this evidence and conducting these analyses require special enterprise
incentive management software applications.57 Several vendors supply these systems.
One is VUE Software , which supplies VUE Compensation Management®.58 With
the aid of VUE Compensation Management® the sales manager can analyze compen-
sation and performance data, conduct what-if analyses and reports, and do trend
analyses for performance data.59
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 403

Source: Used with permission

of Computer Solutions & Software
International, Inc.

4 Describe the main incentives

INCENTIVES FOR MANAGERS AND EXECUTIVES
for managers and executives. Managers play a crucial role in divisional and company-wide profitability, and most
firms therefore put considerable thought into how to reward them. Most managers get
short-term and long-term incentives in addition to salary.60 For firms offering short-
term incentive plans, virtually all 96% provide those incentives in cash. For those
offering long-term incentives, about 48% offer them as stock options. The latter are to
motivate and reward management for long-term corporate growth, prosperity, and
shareholder value. A survey several years ago found that the average CEO pay mix was
16% salary, 22% bonus, and 62% long-term incentives.61 Today, more employers are
emphasizing short-term rather than long-term performance.

Strategy and the Executive s Long-Term

and Total Rewards Package
Few human resource practices have as profound an impact on strategic success as the
executive s long-term incentives. Whether building joint ventures abroad, consoli-
dating operations, or pursuing growth, firms can t fully implement strategies in just
1 or 2 years. Therefore, the long-term signals you send managers and executives
regarding what you will (or won t) reward can have a big effect on whether the firm s
strategy succeeds.
In turn, the executives total reward package base salary, short- and long-term
incentives, and perks must align with each other and with the goal of achieving the
company s strategic aims. Compensation experts suggest first defining the strategic
context for the executive compensation plan. In other words, What is our strategy
and what are our strategic goals? Then decide what long-term behaviors (boosting
sales, cutting costs, and so on) the executives must exhibit to achieve the firm s strate-
gic goals. Then shape each component of the executive total compensation package
(base salary, short- and long-term incentives, and perks) and group them into a
balanced plan that makes sense in terms of motivating the executive to achieve these
aims. The rule is this: Each pay component should help focus the manager s attention
on the behaviors required to achieve the company s strategic goals.62
 404 PART 4 COMPENSATION

Therefore, using multiple, strategy-based performance criteria is best. These

include financial performance, number of strategic goals met, performance assessment
by the board, employee productivity measures, customer satisfaction surveys, and
employee morale surveys. The bottom line is that the top executive s pay package should
direct his or her attention toward accomplishing the company s strategic goals.63

Sarbanes-Oxley
The Sarbanes-Oxley Act of 2002 affects how employers formulate their executive
incentive programs. Congress passed Sarbanes-Oxley to inject a higher level of
responsibility into executives and board members decisions. It makes them
personally liable for violating their fiduciary responsibilities to their shareholders.
The act also requires CEOs and CFOs of a public company to repay any bonuses,
incentives, or equity-based compensation received from the company during the
12-month period following the issuance of a financial statement that the company
must restate due to material noncompliance with a financial reporting requirement
stemming from misconduct.64
We ll now look at short- and long-term management incentives.

Short-Term Incentives and the Annual Bonus

For better or worse, surveys suggest that employers are shifting away from long term
incentives to put more emphasis on short term performance and incentives. 65 Most firms
have annual bonus plans for motivating managers short-term performance. Such
short-term incentives can easily produce plus or minus adjustments of 25% or more to
total pay. Four factors influence one s bonus: eligibility, fund size, individual performance,
and formula.

ELIGIBILITY Employers traditionally based annual bonus eligibility on job

level/title, base salary, and/or officer status. Some simply based eligibility on job level
or job title, or salary.66 Recently, however, more employers are offering executives as
well as employees below the executive level single annual incentive plans . . . in which
both executives and other employees participate. 67 The change reflects the fact that
more employees not just top managers are now responsible for (and thus
rewarded for) measurable contributions. The annual bonus is one such reward.
That trend to broader short-term bonus eligibility is evident from recent
surveys of what factors determine bonus plan eligibility. Rather than job title or
officer status, salary grade or band is now the most common eligibility determi-
nant, reported by 42% of employers in a recent survey. This was followed by
title/reporting relationship (24%), officer status (13%), compensation committee
approval (11%), discretionary (6%), and base salary (2%).68
The percentage size of the bonus is typically greater for top-level executives.
Thus, an executive earning $250,000 in salary may be able to earn another 80%
of his or her salary as a bonus, while a manager in the same firm earning
$100,000 can earn only another 30%. In 2010, Microsoft s CEO was eligible
for an annual bonus of up to 100% of his salary (but he collected only half).
A supervisor might be able to earn up to 15% of his or her base salary
in bonuses. A typical breakdown might be executives, 45% of base salary;
managers, 25%; and supervisory personnel, 12%.
Source: Shutterstock.

FUND SIZE How does one determine how big the annual bonus fund should
be? Most employers (33% in a recent survey) traditionally use the Sum of
Targets approach.69 Specifically, they estimate the likely bonus for each eligible
( target ) employee, and total these up to arrive at the bonus pool s size.
Even in retail stores, it s not unusual However, an increasing portion of employers (32%)are funding the short-
to compensate store managers partly term bonus fund based on financial results (32%). Here there are no fixed rules
based on short-term sales and profits. about the proportion of profits to pay out. One alternative is to reserve a minimal
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 405

amount of the profits, say, 10%, for safeguarding stockholders investments, and then
to establish a fund for bonuses equal to, say, 20% of the corporate operating profit
before taxes in excess of this safeguard amount. Suppose the operating profits were
$200,000 (after putting away 10% to safeguard stockholders). Then the management
bonus fund might be 20% of $200,000 or $40,000. Most employers use more than one
financial measure, with sales, earnings per share, and cash flow the most popular. 70
Other illustrative formulas might include:
* Twelve percent of net earnings after deducting 6% of net capital
* Ten percent of the amount by which net income exceeds 5% of stockholders equity
Some firms don t use a formula at all, but make that decision on a discretionary
basis.71
Other bases for determining fund size include simply summing up the actual
awards and discretionary.

INDIVIDUAL PERFORMANCE The third task is deciding the actual individual

awards. Typically, the employer sets a target bonus (as well as maximum bonus, per-
haps double the target bonus) for each eligible position. The actual award then
reflects the manager s performance. For example, having previously decided which
financial performance measures (return on assets, revenue growth, and so on) to use
to measure each manager s performance, the employer computes preliminary total
company bonus estimates, and compares the total amount of money required with
the bonus fund available.72 If necessary, it then adjusts the individual bonus
estimates. In any case, outstanding managers should receive at least their target
bonuses, and marginal ones should receive at best below-average awards. Use what
you save on the marginal employees to supplement the outstanding employees.
One question is whether managers will receive bonuses based on individual
performance, corporate performance, or both. Firms usually tie top-level executive
bonuses mostly to overall corporate results (or divisional results if the executive heads
a major division). This makes sense because the company s results are largely their
own. But as one moves farther down the chain of command, corporate profits
become a less accurate gauge of a manager s contribution. For, say, supervisors or the
heads of functional departments, it often makes more sense to tie the bonus more
closely to individual performance.
Many firms therefore end up tying short-term bonuses to both organizational and
individual performance. Perhaps the simplest method is the split-award plan. This makes
the manager eligible for two bonuses, one based on his or her individual effort and one
based on the organization s overall performance. Thus, a manager might be eligible for
an individual performance bonus of up to $10,000, but receive only $2,000 at the end
of the year, based on his or her individual performance evaluation. But the person might
also receive a second bonus of $3,000, based on the firm s profits for the year.
One drawback to this approach is that it may give marginal performers too
much for instance, someone could get a company-based bonus, even if his or her
own performance is mediocre. One way to avoid this is to use the multiplier method.
In other words, make the bonus a product of both individual and corporate perform-
ance. As Table 12-2 illustrates, multiply the target bonus by 1.00, .80, or zero (if the
firm s performance is excellent, and the person s performance is excellent, good, fair,
or poor). A manager whose own performance is poor does not even receive the
company-based bonus.

FORMULA The employer may also use a formula so as to base the bonus pool on
those measures the employer wishes to emphasize. For example, Transocean Ltd., the
firm that managed the Deepwater Horizon Gulf oil rig that sank in 2010, uses a

annual bonus
Plans that are designed to motivate
short-term performance of managers and
which are tied to company profitability.
406 PART 4 COMPENSATION

TABLE 12-2 Multiplier Approach to Determining Annual Bonus

Individual Company Performance (Based on
Performance (Based Sales Targets, Weight * 0.50)
on Appraisal,
Weight * 0.50) Excellent Good Fair Poor

Excellent 1.00 0.90 0.80 0.70

Good 0.80 0.70 0.60 0.50
Fair 0.00 0.00 0.00 0.00
Poor 0.00 0.00 0.00 0.00

Note: To determine the dollar amount of a manager s award, multiply the maximum possible (target)
bonus by the appropriate factor in the matrix.

formula that includes several financial factors such as new rig contracts. Safety
accounts for 25% of the formula. After the Gulf explosion, senior Transocean execu-
tives donated their safety bonuses to the victims families.73

Strategic Long-Term Incentives

Employers use long-term incentives to inject a long-term strategic perspective into their
executives decisions. With only short-term criteria to shoot for, a manager could con-
ceivably boost profitability by reducing plant maintenance, for instance; this tactic
might catch up with the company 2 or 3 years later. Long-term incentives such as stock
options, if well-designed, should only pay off if the firm achieves its strategic goals, at
which point the owners and investors should also benefit from the executives efforts.
Long-term incentives may also be golden handcuffs, motivating executives to stay by
letting them accumulate capital (usually options to buy company stock) that they can
only cash in after a certain period. Popular long-term incentives include cash, stock,
stock options, stock appreciation rights, and phantom stock. We ll look at each.

STOCK OPTIONS A stock option is the right to purchase a specific number of shares
of company stock at a specific price during a specific period. The executive thus hopes
to profit by exercising his or her option to buy the shares in the future but at today s price.
The assumption is that the price of the stock will go up. Unfortunately, this depends
partly on considerations outside the manager s control, such as general economic
conditions.74 When stock markets dropped a few years ago, many employers including
Intel and Google modified option plans to increase the likely payout.75

STOCK OPTION PROBLEMS The chronic problem with stock options is that
they often reward even managers who have lackluster performance, but there are also
other issues. Many blame stock options for contributing to corporate scandals,
in which executives allegedly manipulated the dates they received their options
to maximize their returns. Options may also encourage executives to take perilous
risks in pursuit of higher (at least short-term) profits.76 The stock options provide an
incentive to go for spectacular results, but since the managers haven t actually bought
the stock yet, they don t risk their own money. One solution is to draft the option plan
so that it forces recipients to convert their options to stock more quickly.77

OTHER STOCK PLANS The trend is toward tying rewards more explicitly to
performance goals. Instead of stock options, more firms are granting various types of
performance shares such as performance-contingent restricted stock; the executive
receives his or her shares only if he or she meets the preset performance targets.78 With
(time-based) restricted stock plans, the firm usually awards rights to the shares without
cost to the executive but the employee is restricted from acquiring (and selling) the
shares for, say, 5 years. The employer s aim is to retain the employee s services during
that time.79 With indexed options, the option s exercise price fluctuates with the
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 407

performance of, say, a market index. Then, if the company s stock does no better than
the index, the manager s options are worthless. With premium priced options, the
exercise price is higher than the stock s closing price on the date of the grant, so
the executive can t profit from the options until the stock makes significant gains.80
Stock appreciation rights (SARs) permit the recipient to exercise the stock option
(by buying the stock) or to take any appreciation in the stock price in cash, stock, or
some combination of these. Under phantom stock plans, executives receive not shares
but units that are similar to shares of company stock. Then at some future time, they
receive value (usually in cash) equal to the appreciation of the phantom stock they
own. Both SARs and phantom stock essentially are bonus plans that grant not stock
but rather the right to receive an award based on the value of the company s stock. 81
A performance achievement plan awards shares of stock for the achievement of pre-
determined financial targets, such as profit or growth in earnings per share.
ETHICS AND INCENTIVES People put their efforts where they know they ll
be rewarded is a management truism with implications for long-term incentive
plans. Simplistic, financial performance-oriented incentives, in the absence
of strong ethical standards, may breed unethical behavior. As one article notes,
in today s cash focused culture, where new research suggests that money may have
similar influences on individual actions as drugs or sex, the unexpected impact
of plans that reward certain behaviors with cash is perhaps more than first
thought. 82 For example, in describing one financial firm known for its high ethical
standards, Forbes recently alleged that the firm s culture now rewards hard-nosed
aggressiveness and doesn t put the client s interests before those of the firm. 83
The solutions are to foster an ethical culture (see Chapter 14), and to include a
sufficient array of bonus-able criteria in the incentive plan.

Other Executive Incentives

Companies also provide various incentives to persuade executives not to leave the firm.
This is especially important when there is reason to believe another company is stalking
the firm and wants to buy it. Golden parachutes are extraordinary payments companies
make to executives in connection with a change in ownership or control of a company.
For example, a company s golden parachute clause might state that, with a change in
ownership of the firm, the executive would receive a one-time payment of $2 million.84
Other firms, perhaps more dubiously, guarantee large loans as incentives to directors
and officers, for instance, to buy company stock. Thus, directors and officers of Conseco
owed the company more than $500 million for such loans when shares of the company
stock dropped precipitously.85

5 Name and define the most

TEAM AND ORGANIZATIONWIDE INCENTIVE PLANS
popular organization-wide We ve focused to this point on individual employee incentives such as piecework, com-
variable pay plans. missions, and executive bonuses. Let s look now at incentives for teams, and for all
employees company-wide.

How to Design Team Incentives

Firms increasingly rely on teams to manage their work. They therefore need incentive
plans that encourage teamwork and focus team members attention on performance.
Team (or group) incentive plans pay incentives to the team based on the team s
performance.

stock option golden parachute team (or group) incentive plan

The right to purchase a stated number of A payment companies make in connection A plan in which a production standard is set
shares of a company stock at today s price at with a change in ownership or control of a for a specific work group, and its members
some time in the future. company. are paid incentives if the group exceeds the
production standard.
 408 PART 4 COMPENSATION

The main question here is how to reward the team s perform-

ance, and the wrong choice can prove lethal. Levi Strauss installed
a team incentive plan that rewarded the team as a whole for its
output, neglecting the fact that some employees worked harder
than others did. The faster ones soon slowed down, production
declined, and Levi s (as noted earlier) closed its U.S. factories.
So, the main thing is to make sure you have all your team
pulling together. Yet the usual approach is still to tie rewards to
some overall standard of group performance, such as total labor
Source: Shutterstock.

hours per car. Doing so avoids the need for a precisely

engineered piecework standard (in terms of wheels installed
per hour, for instance).86 One company established such an
overall standard for its teams. If the firm reached 100% of its
goal, the employees would share in about 5% of the improvement
Team incentives can foster a (in labor costs saved). The firm divided the 5% pool by the number of employees to
sense of cooperation and compute the value of a share. If the firm achieved less than 100% of its goal, the
unanimity. bonus pool was less. The results of this plan in terms of changing employee
attitudes and focusing teams on strategic goals were reportedly extraordinary. 87

ENGINEERED STANDARDS Some employers set an engineered production

standard tied to the output of the group (again, such as in terms of wheels installed
per hour). The employer typically uses either the piece rate or standard hour plan, but
the latter is more prevalent. All team members then typically receive the same share of
the team s incentive pay. Occasionally, the employer may want to pay all team
members according to some other formula. For instance, instead of paying each team
member based on how well the team as a whole does, pay everyone based on how well
the best team member does. This counterintuitive option may make sense when
an employer has reason to believe the new team incentive plan might demotivate
high-performing team members. That s what happened at Levi s, for instance.

PROS AND CONS OF TEAM INCENTIVES Team incentives often make

sense. They reinforce team planning and problem solving, and can help ensure
collaboration. In Asia in general, the tendency is to reward the group to reduce
jealousy, to make group members indebted to one another, and to encourage a
sense of cooperation. Team incentives also facilitate training, since each member has
an interest in getting new members trained as fast as possible. The main disadvan-
tage is the demotivating effects of workers who share in the team-based pay but who
don t put their hearts into it ( free riders ).

Evidence-Based HR: Inequities That Undercut

Team Incentives
Although about 85% of large employers reportedly use some type of group- or
team-based incentives, studies suggest that team incentives are often counterproductive.
What are the main things to beware of? A researcher studied business students
enrolled in a graduate online MBA program.88 She devised a method for systematically
categorizing their qualitative observations about the team incentives they d experienced.
The fundamental problem was inequity.89 In many cases, each team member s
financial compensation was the same, although one or two people did the lion s
share of the work. In other cases, the employer chose one or two team members for
promotion, leaving others to feel they d worked hard to support someone else s
career. The bottom line seems to be that unless you actively minimize inequities, it s
probably best to pay employees based on their individual contributions to the team,
rather than on collective team performance.
Aside from avoiding inequities, the other thing to keep in mind is that successful
teamwork reflects more than team incentives. Companies such as Honda screen,
hire, train, and cultivate workers to be team members, so the incentives are just one
component.
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 409

Many employers take the team incentive idea to the next logical level and institute
incentive plans in which all or most employees participate. Organization-wide
incentive plans are plans in which all or most employees can participate, and which
generally tie the reward to some measure of company-wide performance. Also called
variable pay plans, they include profit sharing, Scanlon/gainsharing plans, and
employee stock ownership (ESOP) plans. We ll look at them next.

Profit-Sharing Plans
Profit-sharing plans are plans in which all or most employees receive a share of the
firm s annual profits. Research on such plans effectiveness is sketchy. One study
concludes that there is ample evidence that profit-sharing plans boost productivity and
morale, but that their effect on profits is insignificant, once you factor in the costs of the
plans payouts.90 A recent study, conducted in Spain, concluded that profit-sharing
plans enhance employees commitment to the organization.91
There are several types of profit-sharing plans. With current profit-sharing or cash
plans, employees share in a portion of the employer s profits quarterly or annually.
In cash plans, the firm simply distributes a percentage of profits (usually 15% to 20%)
as profit shares to employees at regular intervals. The Home Depot instituted such a
cash program for all its store workers. It started paying store associates a bonus if their
stores meet certain financial goals. In one recent year, The Home Depot distributed a
total of $90 million under that company-wide incentive plan.92
With deferred profit-sharing plans, the employer puts cash awards into trust
accounts for the employees retirement.93 These are essentially defined contribution
pension plans in which the employer has discretion to determine when and how
much the company pays into the plan. 94 The employer generally distributes the awards
based on a percentage of the employee s salary, or some measure of the employee s
contribution to company profits.95 Employees income taxes on the distributions
are deferred until the employee retires or withdraws funds from the plan.

Scanlon Plans
Few would argue with the idea that the most powerful way of ensuring employee
commitment is to synchronize the company s goals with those of its employees in
other words, to ensure that by pursuing his or her goals, the worker pursues the
employer s goals as well. Experts have proposed many techniques for attaining this ideal
state. However, few plans are used as widely or successfully as the Scanlon plan,
an incentive plan developed in 1937 by Joseph Scanlon, a United Steel Workers Union
official.96 It is still popular today.
The Scanlon plan is remarkably progressive, considering that it is now more
than 70 years old. Scanlon plans have five basic features.97 The first is Scanlon s
philosophy of cooperation. This philosophy assumes that managers and workers must
rid themselves of the us and them attitudes that normally inhibit employees from
developing a sense of ownership in the company.
A second feature is what its practitioners call identity. This means that in order to
focus employee involvement, the company must articulate its mission or purpose,
and employees must understand how the business operates in terms of customers,
prices, and costs. Competence is a third basic feature. The program, say three experts,
explicitly recognizes that a Scanlon plan demands a high level of competence from
employees at all levels. 98 This suggests careful selection and training.

organization-wide incentive plan profit-sharing plan Scanlon plan

Incentive plan in which all or most employees A plan whereby employees share in the An incentive plan developed in 1937
can participate. company s profits. by Joseph Scanlon and designed to
encourage cooperation, involvement,
and sharing of benefits.
410 PART 4 COMPENSATION

The fourth feature of the plan is the involvement system. Employees present
improvement suggestions to the appropriate departmental-level committees, which
transmit the valuable ones to the executive-level committee. The latter then decides
whether to implement the suggestion.
The fifth element of the plan is the sharing of benefits formula. If a suggestion is
implemented and successful, all employees usually share in 75% of the savings. For
example, assume that the normal monthly ratio of payroll costs to sales is 50%.
(Thus, if sales are $600,000, payroll costs should be $300,000.) Assume the firm
implements suggestions that result in payroll costs of $250,000 in a month when sales
were $550,000 and payroll costs therefore should have been $275,000 (50% of sales).
The savings attributable to these suggestions is $25,000 ($275,000 minus $250,000).
Workers would typically split 75% of this ($18,750), while $6,250 would go to the
firm. In practice, the firm sets aside a portion, usually one-quarter of the $18,750, for
the months in which payroll costs exceed the standard.

Other Gainsharing Plans

The Scanlon plan is one early version of today s gainsharing plans. Gainsharing is an
incentive plan that engages many or all employees in a common effort to achieve a
company s productivity objectives, with any resulting cost-savings gains shared
among employees and the company.99 In addition to the Scanlon plan, other popular
gainsharing plans include the Lincoln, Rucker, and Improshare plans.
The basic difference among these plans is the formula employers use to determine
employee bonuses. The Scanlon formula divides payroll expenses by total sales (or,
sometimes, by total sales plus increases in inventory). In one version of the Lincoln
incentive system, first instituted at the Lincoln Electric Company of Ohio, employees
work on a guaranteed piecework basis. The company distributes total annual profits
(less taxes, 6% dividends to stockholders, and a reserve) each year among employees
based on their merit rating.
Most firms that use gainsharing implement customized versions. Recent
results from various efforts in hospitals, as well as manufacturing plants suggest
quite clearly that gainsharing plans can improve productivity and patient care, and
reduce grievances, but often also entail considerable implementation costs.100 Based
on positive results, the U.S. Department of Health and Human Service s Office of
Inspector General approved certain hospital gainsharing plans wherein the hospital
pays physicians a share of any cost savings attributable in part to the physicians
efforts. In any case, there are eight basic steps in implementing a gainsharing plan:101
1. Establish general plan objectives, such as boosting productivity or lowering labor
costs.
2. Choose specific performance measures, such as labor hours per unit produced.
3. Decide the portion of gains employees will receive. In the Scanlon example
mentioned earlier, employees receive about 75% of the gains.
4. Decide on a method for dividing and distributing the employees share of the
gains. Popular methods include equal percentage of pay or equal shares.
5. Choose the form of payment, usually cash.
6. Decide how often to pay bonuses. Firms tend to pay based on financial per-
formance measures annually and on labor productivity measures quarterly or
monthly.
7. Develop the involvement system. The most commonly used systems include steer-
ing committees, update meetings, suggestion systems, and problem-solving teams.
8. Implement the plan.

At-Risk Pay Plans

In an earnings-at-risk pay plan, employees agree to put some portion of their
normal pay (say, 6%) at risk (forego) if they don t meet their goals, in return for
possibly obtaining a much larger bonus (say, 12%), if they exceed their goals. Suppose
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 411

in one department the employees base pay will be 94% of their counterparts in a
not-at-risk department. If the former department then achieves its goals, the employees
get their full pay; if it exceeds its goals, they receive a 12% bonus.

Employee Stock Ownership Plans

Employee stock ownership plans (ESOPs) are company-wide plans in which the
employer contributes shares of its own stock (or cash to be used to purchase such
stock) to a trust established to purchase shares of the firm s stock for employees.
The firm generally makes these contributions annually in proportion to total
employee compensation, with a limit of 15% of compensation. The trust holds the
stock in individual employee accounts and distributes it to employees upon retire-
ment (or other separation from service), assuming the person has worked long
enough to earn ownership of the stock. (Stock options, as discussed earlier in this
chapter, go directly to the employees individually to use as they see fit, rather than
into a retirement trust.)
ESOPs are popular. The company receives a tax deduction equal to the fair market
value of the shares it transfers to the trustee, and can claim an income tax deduction
for dividends paid on ESOP-owned stock. Employees, as noted, aren t taxed until they
receive a distribution from the trust, usually at retirement. The Employee Retirement
Income Security Act (ERISA) allows a firm to borrow against employee stock held in
trust and then repay the loan in pretax rather than after-tax dollars, another tax
incentive for using such plans.102
ESOPs can also help the shareholders of closely held corporations (in which, for
instance, a family owns virtually all the shares) to diversify their assets. They do this
by placing some of their own shares of the company s stock into the ESOP trust and
purchasing other marketable securities for themselves in their place.103
Research suggests that ESOPs probably do encourage employees to develop a sense
of ownership in and commitment to the firm, but their effects on motivation and
performance are questionable. In any case, those responsible for the funds usually, the
firm s top executives must be fastidious in executing their fiduciary responsibilities for
the fund.104

BROAD-BASED STOCK OPTIONS Companies have offered broad-based

stock option plans in which all or most employees can participate. The basic thinking
is that sharing ownership in the company with employees makes motivational and
practical sense.105
Employers seem to be cutting back on these. For example, Time Warner,
Microsoft, Aetna, and Charles Schwab announced they were discontinuing distributing
stock options to most employees. Some of them, including Microsoft, are instead
awarding stock. With current tax laws, companies must show the options as an
expense when awarded, reducing their attractiveness as a costless reward. Microsoft
and others apparently feel awarding stock instead of stock options is a more direct
and immediate way to link pay to performance.106

6 Outline the steps in

DESIGNING EFFECTIVE INCENTIVE PROGRAMS
designing effective As we saw at the start of this chapter, roughly 70% of employees feel that their firms
incentive plans. incentive plans are ineffective. We now turn to why such plans fail, and to how
to improve their effectiveness.107 We ll start with an HR as a Profit Center example.108

gainsharing plan earnings-at-risk pay plan employee stock ownership plan (ESOP)
An incentive plan that engages employees Plan that puts some portion of employees A corporation contributes shares of its
in a common effort to achieve productivity normal pay at risk if they don t meet their own stock to a trust in which additional
objectives and share the gains. goals, in return for possibly obtaining a much contributions are made annually. The trust
larger bonus if they exceed their goals. distributes the stock to employees on
retirement or separation from service.
412 PART 4 COMPENSATION

HR AS A PROFIT CENTER
The Impact of Financial and Nonfinancial Incentives
Two researchers studied the impact of financial and nonfinancial incentives on
business performance in 21 stores of a fast-food franchise in the Midwest.109
The researchers carefully compared performance over time in stores that did and
did not use financial and nonfinancial incentives. Each store had about 25 workers
and two managers. The researchers trained the managers to identify observable,
measurable employee behaviors that were currently deficient but that could
influence store performance. Example behaviors included keeping both hands
moving at the drive-through window, working during idle time, and repeating
the customer s order back to him or her. 110 Then they instituted the incentive
plans. The researchers measured store performance in terms of gross profitability
(revenue minus expenses), drive-through time, and employee turnover.
Financial Incentives
Some employees in some of the stores received financial incentives for exhibiting
the desired behaviors. The financial incentives consisted of lump-sum bonuses in
the workers paychecks. For example, if the manager observed a work team
exhibiting up to 50 behaviors during the observation period, he or she added
$25 to the paychecks of all store employees that period; 50 to 100 behaviors
added $50 per paycheck, and more than 100 behaviors added $75 per paycheck.
Payouts rose over time as the employees learned more about the behaviors they
were to exhibit.
Nonfinancial Incentives
The researchers also trained the managers in some stores to deliver nonfinancial
incentives in the form of feedback and recognition. For example, for performance
feedback managers maintained charts showing the drive-through times at the end
of each day. They placed the charts by the time clocks, so all the store employees
could keep track of their store s performance on things like drive-through times.
The researchers also trained managers to administer recognition to employees,
such as, I noticed that today the drive-through times were really good. That is
great since that is what we re really focusing on these days. 111
Results
Both the financial and nonfinancial incentives improved employee and store per-
formance.112 For example, store profits rose 30% for those units where managers
used financial rewards. Store profits rose 36% for those units where managers used
nonfinancial rewards. During the same 9-month period, drive-through times
decreased 19% for the financial incentives group, and 25% for the nonfinancial
incentives groups. Turnover improved 13% for the financial incentives group, and
10% for the nonfinancial incentives group.

The Five Building Blocks of Effective Incentive Plans

The incentive plans in the accompanying feature exhibited the characteristics of effec-
tive incentive plans. We can summarize these as follows:
1. Ask: Does it make sense to use incentives?113 It makes more sense to use an
incentive plan when:
* Motivation (and not ability) is the problem.

* There is a clear relationship between employee effort and quantity or quality

of output.
* The employees can control the work you plan to incentivize.

* Delays are few or consistent.

 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 413

2. Link the incentive with your strategy. Link the incentive to behavior that is
critical for achieving strategic goals.114 For example, one incentive program at
Sun Microsystems (now part of Oracle) supported Sun s customer satisfac-
tion goals. Employees received incentives based on improvements in activities
like on-time delivery and customer returns.115
3. Make sure the program is motivational. Victor Vroom would say there should
be a clear link between effort and performance, and between performance and
reward, and that the reward must be attractive to the employee. Employees must
have the skills and training to do the job. Employers should support the incentive
plan with performance feedback, as in the form of performance graphs.
4. Set complete standards. For example, don t just pay for quantity if quality is an
issue, too.
5. Be scientific. Don t waste money on incentives that seem logical but that may not
be contributing to performance. Gather evidence and analyze the effects of
the incentive plan over time, to ascertain whether it is indeed influencing the
measures (such as employee turnover, and so on) that you intended to improve
through your plan.116

Incentive Plans in Practice: Nucor

Nucor Corp. is the largest steel producer in the United States. It also has the highest
productivity and lowest labor cost per ton in the American steel industry.117 Employees
can earn bonuses of 100% or more of base salary, and all Nucor employees participate
in one of four performance-based incentive plans. With the production incentive plan,
operating and maintenance employees and supervisors get weekly bonuses based on
their work groups productivity. The department manager incentive plan pays depart-
ment managers annual incentive bonuses based mostly on the ratio of net income
to dollars of assets employed for their division. With the professional and clerical bonus
plan, employees who are not in one of the two previous plans get bonuses based on their
divisions net income return on assets.118 Finally, under the senior officer incentive plan,
Nucor senior managers (whose base salaries are lower than those in comparable firms)
get bonuses based on Nucor s annual overall percentage of net income to stockholders
equity.119 Nucor also divides 10% of its operating profits yearly among all employees
(except senior officers). Depending on company performance, this may be from 1%
to over 20% of an employee s pay.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. In designing an effective financial incentive plan, it s Edward Deci found that extrinsic rewards may
important to understand the relationship between actually detract from a person s intrinsic
money and motivation. motivation.
Abraham Maslow said that people have a hierarchy Victor Vroom s expectancy motivation theory
of five types of needs and that people are first says a person s motivation depends on expectancy,
motivated to satisfy each lower order need. instrumentality, and valence.
Frederick Hertzberg said the best way to motivate Psychologist B. F. Skinner s behavior
someone is to organize the job so that it provides the modification based approach means changing
feedback and challenge that helps satisfy the person s behavior through rewards or punishments that are
higher-level needs. contingent on performance.
414 PART 4 COMPENSATION

2. Several incentive plans are particularly suited for even if the company itself underperforms. Long-term
individual employee incentives and recognition incentives include stock options, golden parachutes,
programs. Piecework is an incentive plan in which a and stock appreciation rights.
person is paid a sum for each item he or she makes. 5. With more employers organizing their efforts around
Merit pay refers to any salary increase awarded to an teams, team and organization-wide incentive plans are
employee based on his or her individual performance. more important. With team incentive plans, the main
Nonfinancial and recognition-based awards are increas- question is whether to reward members based on indi-
ingly important and include awards in the form of vidual or team performance; both have pros and cons.
employee recognition, gift certificates, and individual Organization-wide incentive plans are plans in which all
travel. Many employers use enterprise incentive man- or most employees can participate. These include profit-
agement systems to automate the planning, analysis, and sharing plans in which employees share in the com-
management of their incentive plans. pany s profits; gainsharing plans, including the Scanlon
3. Incentives for salespeople are typically sales commis- plan, engage employees in a common effort to achieve
sions. Although the percentage of pay in the form of productivity objectives and thereby share the gains.
sales commission may vary from zero to 100%, a survey Employee stock ownership plans are company-wide
found that salespeople at high-performing companies plans in which the employer contributes shares of its
receive about 38% of their total cash compensation own stock to a trust established to purchase shares of the
in the form of sales-related variable pay. firm s stock for employees.
4. Managers take many things into consideration when 6. Because so many incentive plans fail, designing effective
formulating incentives for managers and executives. incentive programs is crucial. Five important building
Most firms have annual bonus plans aimed at motivat- blocks include determining whether using incentives
ing managers short-term performance. The actual makes sense, linking the incentive with your strategy,
award often depends on some combination of individ- making sure the program is motivational, setting com-
ual performance and organizational performance, so plete standards, and being scientific in terms of analyzing
that, for instance, high-performing managers get a bonus the effects of the incentive plan.

DISCUSSION QUESTIONS
1. Compare and contrast six types of incentive plans. these points make sense in terms of motivation theory?
2. Explain five reasons why incentive plans fail. Why or why not?
3. Describe the nature of some important management 7. What is a Scanlon plan? Based on what you ve read
incentives. in this chapter, what features of an effective incentive
4. When and why would you pay a salesperson a combined program does the Scanlon plan include?
salary and commission? 8. Give four examples of when you would suggest using
5. What is merit pay? Do you think it s a good idea to team or group incentive programs rather than individual
award employees merit raises? Why or why not? incentive programs.
6. In this chapter, we listed a number of guidelines for not
instituting a pay-for-performance plan. Do you think

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, create an incentive Management, Workforce Planning, and Human Resource
plan for the following positions: chemical engineer, Development). In groups of four to five students, do four
plant manager, used-car salesperson. What factors did things: (1) review that appendix now; (2) identify the
you have to consider in reaching your conclusions? material in this chapter that relates to the required knowl-
2. A state university system in the Southeast instituted a edge the appendix lists; (3) write four multiple-choice
Teacher Incentive Program (TIP) for its faculty. exam questions on this material that you believe would be
Faculty committees within each university s colleges suitable for inclusion in the HRCI exam; and (4) if time
were told to award $5,000 raises (not bonuses) to about permits, have someone from your team post your team s
40% of their faculty members based on how good a job questions in front of the class, so the students in other
they did teaching undergraduates, and how many teams can take each others exam questions.
courses they taught per year. What are the potential 4. Several years ago, the pension plan of the Utility Workers
advantages and pitfalls of such an incentive program? Union of America proposed that shareholders change the
How well do you think it was accepted by the faculty? corporate bylaws of Dominion Resources, Inc., so that in
Do you think it had the desired effect? the future, management had to get shareholder approval
3. The HRCI Test Specifications Appendix (pages of executive pay exceeding $1 million, as well as detailed
633 640) lists the knowledge someone studying for information about the firm s executive incentive plans.
the HRCI certification exam needs to have in each area Many unions most of which have pension funds with
of human resource management (such as in Strategic huge investments in U.S. companies are taking similar
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 415

steps. They point out that, usually, under Internal Revenue above $1 million; instead, shareholders would have to vote
Service regulations, corporations can t deduct more than on it. In terms of effectively running a company, what
$1 million in pay for any of a company s top five paid exec- do you think are the pros and cons of the unions recom-
utives. Under the new rules the unions are pushing, boards mendations? Would you vote for or against the unions
of directors will no longer be able to approve executive pay recommendation? Why or why not?

EXPERIENTIAL EXERCISE
Motivating the Sales Force at Express Auto
Purpose: The purpose of this exercise is to give you practice Cars often had to be returned to have repair work
developing an incentive plan. redone.
Required Understanding: Be thoroughly familiar with this Table 12-3 describes Express Auto s current compensation
chapter, and read the following: system.
Express Auto, an automobile mega-dealership with How to Set Up the Exercise/Instructions:
more than 600 employees that represents 22 brands, has just Divide the class into groups of four to five students. One or
received a very discouraging set of survey results. Customer more groups should analyze each of the five teams in
satisfaction scores have fallen for the ninth straight quarter. column one. Each student group should analyze the com-
Customer complaints include: pensation package for its Express Auto team. Each group
It was hard to get prompt feedback from mechanics by should address these questions:
phone. 1. In what ways might your team s compensation plan
Salespeople often did not return phone calls. contribute to the customer service problems?
The finance people seemed pushy. 2. What recommendations would you make to improve
New cars were often not properly cleaned or had minor the compensation system in a way that would likely
items that needed immediate repair or adjustment. improve customer satisfaction?

TABLE 12-3 Express Auto Compensation System

Express Auto Team Responsibility of Team Current Compensation Method

1. Sales force Persuade buyer to purchase a car. Very small salary (minimum wage) with commissions.
Commission rate increases with every 20 cars sold per month.
2. Finance office Help close the sale; persuade customer Salary, plus bonus for each $10,000 financed with the
to use company finance plan. company.
3. Detailing Inspect cars delivered from factory, clean, Piecework paid on the number of cars detailed per day.
and make minor adjustments.
4. Mechanics Provide factory warranty service, Small hourly wage, plus bonus based on (1) number of cars
maintenance, and repair. completed per day and (2) finishing each car faster than the
standard estimated time to repair.
5. Receptionists/phone Primary liaison between customer Minimum wage.
service personnel and sales force, finance, and mechanics.

APPLICATION CASE
INSERTING THE TEAM CONCEPT INTO COMPENSATION OR NOT
In his new position at Hathaway Manufacturing, one of the vision for the 500-employee facility, which they expressed in
first things Sandy Caldwell wanted to do was improve pro- the simple phrase Excellence Together. They drafted a new
ductivity through teamwork at every level of the firm. As the mission statement for the firm that focused on becoming
new human resource manager for the suburban plant, Sandy customer driven and team based, and that called upon
set out to change the culture to accommodate the team-based employees to raise their level of commitment and begin
approach he had become so enthusiastic about in his most acting as owners of the firm.
recent position. The next step was to convey the team message to
Sandy started by installing the concept of team manage- employees throughout the company. The communication
ment at the highest level, to oversee the operations of the process went surprisingly well, and Sandy was happy to see
entire plant. The new management team consisted of manu- his idea of a workforce of owners begin to take shape.
facturing, distribution, planning, technical, and human Teams trained together, developed production plans together,
resource plant managers. Together they developed a new and embraced the technique of 360-degree feedback, in
416 PART 4 COMPENSATION

which an employee s performance evaluation is obtained Sandy and Regina arranged a meeting for early the next
from supervisors, subordinates, peers, and internal or exter- morning. Sitting in her office, they began a painful debate.
nal customers. Performance and morale improved, and Should the new policy be rescinded as quickly as it was
productivity began to tick upward. The company even spon- adopted, or should it be allowed to stand?
sored occasional celebrations to reward team achievements,
and the team structure seemed firmly in place.
Sandy decided to change one more thing. Hathaway s Questions
long-standing policy had been to give all employees the same 1. Does the pay-for-performance plan seem like a good
annual pay increase. But Sandy felt that in the new team idea? Why or why not?
environment, outstanding performance should be the crite- 2. What advice would you give Regina and Sandy as they
rion for pay raises. After consulting with CEO Regina Cioffi, consider their decision?
Sandy sent a memo to all employees announcing the change 3. What mistakes did they make in adopting and commu-
to team-based pay for performance. nicating the new salary plan? How might Sandy have ap-
The reaction was immediate and 100% negative. None of proached this major compensation change a little
the employees was happy with the change, and among their differently?
complaints, two stood out. First, because the 360-degree feed- 4. Assuming the new pay plan is eventually accepted, how
back system made everyone responsible in part for someone would you address the fact that in the new performance
else s performance evaluation, no one was comfortable with evaluation system, employees input affects their peers
the idea that pay raises might also be linked to peer input. pay levels?
Second, there was a widespread perception that the way the
change was decided upon, and the way it was announced, put Note: The incident in this case is based on an actual event at Frito-Lay s
the firm s commitment to team effort in doubt. Simply put, Kirkwood, New York, plant, as reported in C. James Novak, Proceed with
employees felt left out of the decision process. Caution When Paying Teams, HR Magazine, April 1997, p. 73.

CONTINUING CASE
CARTER CLEANING COMPANY
The Incentive Plan not about to earn less than his target wage, regardless of
The question of whether to pay Carter Cleaning Center how busy or slow the store was. The problem was that the
employees an hourly wage or an incentive of some kind has longer Walt kept pressing each day, the longer the steam
always intrigued Jack Carter. boilers and compressors had to be kept on to power his
His basic policy has been to pay employees an hourly machines, and the fuel charges alone ran close to $6 per hour.
wage, except that his managers do receive an end-of-year Jack clearly needed some way short of firing Walt to solve the
bonus depending, as Jack puts it, on whether their stores do problem, since the fuel bills were eating up his profits.
well or not that year. His solution was to tell Walt that, instead of an hourly $8
However, he is considering using an incentive plan in wage, he would henceforth pay him $0.33 per item pressed.
one store. Jack knows that a presser should press about 25 That way, said Jack to himself, if Walt presses 25 items per
tops (jackets, dresses, blouses) per hour. Most of his hour at $0.33 he will in effect get a small raise. He ll get more
pressers do not attain this ideal standard, though. In one items pressed per hour and will therefore be able to shut the
instance, a presser named Walt was paid $8 per hour, and machines down earlier.
Jack noticed that regardless of the amount of work he had to On the whole, the experiment worked well. Walt generally
do, Walt always ended up going home at about 3:00 P.M., so presses 25 to 35 pieces per hour now. He gets to leave earlier
he earned about $300 at the end of the week. If it was a holi- and, with the small increase in pay, he generally earns his tar-
day week, for instance, and there were a lot of clothes to get wage. Two problems have arisen, though. The quality
press, he might average 22 to 23 tops per hour (someone else of Walt s work has dipped a bit, plus his manager has to spend
did pants) and so he d earn perhaps $300 and still finish each a minute or two each hour counting the number of pieces
day in time to leave by 3:00 P.M. so he could pick up his chil- Walt pressed that hour. Otherwise, Jack is fairly pleased with
dren at school. But when things were very slow in the store, the results of his incentive plan, and he s wondering whether
his productivity would drop to perhaps 12 to 15 pieces an to extend it to other employees and other stores.
hour, so that at the end of the week he d end up earning per-
haps $280, and in fact not go home much earlier than he did
when it was busy. Questions
Jack spoke with Walt several times, and while Walt always 1. Should this plan be extended to pressers in the other
promised to try to do better, it gradually became apparent stores?
to Jack that Walt was simply going to earn his $300 per week 2. Should other employees (cleaner/spotters, counter
no matter what. Though Walt never told him so directly, it people) be put on a similar plan? Why? Why not? If so,
dawned on Jack that Walt had a family to support and was how, exactly?
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 417

3. Is there another incentive plan you think would work directly affect sales by ensuring courteous customer
better for the pressers? Describe it. service and by ensuring that the work is done properly.
4. A store manager s job is to keep total wages to no more What suggestions would you make to Jennifer and her
than 30% of sales and to maintain the fuel bill and the father for an incentive plan for store managers or front-
supply bill at about 9% of sales each. Managers can also desk clerks?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Incentive Plan pay between a low-performing and a high-performing
The Hotel Paris s competitive strategy is To use superior guest employee. The CFO authorized Lisa to design a new strategy-
service to differentiate the Hotel Paris properties, and to oriented incentive plan for the Hotel Paris s employees. Their
thereby increase the length of stay and return rate of guests, and overall aim was to incentivize the pay plans of just about all
thus boost revenues and profitability. HR manager Lisa Cruz the company s employees.
must now formulate functional policies and activities that sup- Lisa and the company s CFO laid out three measurable
port this competitive strategy by eliciting the required employee criteria that the new incentive plan had to meet. First, at least
behaviors and competencies. 90% (and preferably all) of the Hotel Paris s employees must
One of Lisa Cruz s biggest pay-related concerns is that be eligible for a merit increase or incentive pay that is tied to
the Hotel Paris compensation plan does not link pay to performance. Second, there must be at least a 10% difference
performance in any effective way. Because salaries were in incentive pay between a low-performing and high-
historically barely competitive, supervisors tended to award performing employee. Third, the new incentive plan had to
merit raises across the board. So, employees who performed include specific bonuses and evaluative mechanisms that
well got only about the same raise as did those who per- linked employee behaviors in each job category with strate-
formed poorly. Similarly, there was no bonus or incentive gically relevant employee capabilities and behaviors. For
plan of any kind aimed at linking employee performance to example, front-desk clerks were to be rewarded in part based
strategically relevant employee capabilities and behaviors on the friendliness and speed of their check-ins and check-
such as greeting guests in a friendly manner or providing outs, and the housecleaning crew was to be evaluated and
expeditious check-ins and checkouts. rewarded in part based on the percentage of room-cleaning
Based on their analysis, Lisa Cruz and the CFO con- infractions.
cluded that by any metric, their company s incentive plan
was inadequate. The percentage of the workforce whose
merit increase or incentive pay is tied to performance is Questions
effectively zero, because managers awarded merit pay across 1. Discuss what you think of the measurable criteria that
the board. No more than 5% of the workforce (just the man- Lisa and the CFO set for their new incentive plan.
agers) was eligible for incentive pay. And, the percentage of 2. Given what you know about the Hotel Paris s strategic
difference in incentive pay between a low-performing and a goals, list three or four specific behaviors you would
high-performing employee was less than 2%. Lisa knew incentivize for each of the following groups of employees:
from industry studies that in top firms, more than 80% front-desk clerks, hotel managers, valets, housekeepers.
of the workforce had merit pay or incentive pay tied to 3. Lay out a complete incentive plan (including all long-
performance. She also knew that in high-performing firms, and short-term incentives) for the Hotel Paris s hotel
there was at least a 5% or 6% difference in incentive managers.

KEY TERMS
financial incentives, 392 behavior modification, 395 team (or group) incentive plan, 407
productivity, 392 variable pay, 395 organization-wide incentive
fair day s work, 392 piecework, 396 plan, 409
scientific management straight piecework, 396 profit-sharing plan, 409
movement, 392 standard hour plan, 396 Scanlon plan, 409
intrinsic motivation, 394 gainsharing plan, 410
merit pay (merit raise), 396
earnings-at-risk
expectancy, 394 annual bonus, 404 pay plan, 410
instrumentality, 394 stock option, 406 employee stock ownership plan
valence, 394 golden parachute, 407 (ESOP), 411
418 PART 4 COMPENSATION

ENDNOTES
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Management (Upper Saddle River, NJ: Robert Prichard, Motivation Theory in 2008), pp. 22 29.
Pearson, 2001), p. 15. Industrial and Organizational Psychology, 25. Eric R. Schulz and Denise Marie Tanguay,
2. Even the traditional holiday bonus is in Marvin Dunnette (ed.), Industrial and Merit Pay in a Public Higher Education
being replaced by performance-based Organizational Psychology (Chicago: Rand Institution: Questions of Impact and Atti-
pay. A survey by consultants Hewitt Asso- McNally, 1976), pp. 74 75; Kanfer, Moti- tudes, Public Personnel Management 35,
ciates found that only about 5% of vation Theory, pp. 115 116; and B. Schaffer, no. 1 (Spring 2006), p. 71(18); Thomas S.
employers surveyed would distribute Leadership and Motivation, op cit. Dee and Benjamin J. Keys, Does Merit Pay
holiday cash bonuses. About 78% said 13. See, for example, Aubrey Daniels et al., Reward Good Teachers? Evidence from a
they were offering performance-based The Leader s Role in Pay Systems and Randomized Experiment, Journal of Policy
awards, up from 51% about 15 years Organizational Performance, Compen- Analysis & Management 23, no. 3 (Summer
previously. Cash Bonuses Are Ghosts of sation & Benefits Review, May/June 2006, 2004), pp. 471 488. See also David N.
Holidays Past, Survey Says, BNA Bulletin pp. 58 60; and Suzanne Peterson and Figlio and Lawrence W. Kenny, Individual
to Management, December 13, 2005, Fred Luthans, The Impact of Financial Teacher Incentives and Student Perfor-
p. 396. See also Aligning Rewards with and Non-Financial Incentives on Busi- mance, Journal of Public Economics 91,
the Changing Employment Deal: 2006/ ness Unit Outcomes Over Time, Journal no. 5 6 (June 2007), p. 901(14).
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May 20, 2007. Mark Podolsky, Variable Pay: Its Impact 27. Jonathan Glater, Varying the Recipe
3. Few Employees See the Pay for Perfor- on Motivation and Organisation Perfor- Helps TV Operations Solve Morale Prob-
mance Connection, Compensation & mance, International Journal of Human lem, The New York Times, March 7, 2001,
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Most Workers Not Motivated by Cash, (May 9, 2006), p. 68. 28. Steve Yegge, quoted in http://glinden.
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Uncertain: Study, Modern Healthcare, BNA Bulletin to Management, August 21, June 1, 2011.
May 24, 2004, p. 34. 1997, p. 272; and Variable Pay Is Superior to 29. Brian Skelton, Dual-Career Tracks: Reward-
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and Marketing Management 156 (January Incentive System? Compensation & Bene- Creating Places Where People Love to
2004), p. 19. See also Salary and Bonus fits Review, March/April 1992, pp. 43 49. Work (San Francisco, CA: Berrett-Koehler
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Pay Increases: A Longitudinal Test of a March 23, 2000, item 0008408e. May/June 2007, pp. 44 50.
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Motivation (New York: Plenum, 1975). Process, MIT Study Finds, Workforce and Determinants of Pay Satisfaction:
11. Ruth Kanfer, Motivation Theory, in Management, September 20, 2008, pp. 8 9. A Cross-Cultural Investigation of a Group
Harry C. Triandis, Marvin D. Dunnette, 24. The average uncorrected cross-sectional Incentive Plan, International Journal of
and Leaetta M. Hough, Handbook of correlation was 17. Michael Harris et al., Human Resource Management 14, no. 4
Industrial and Organizational Psychology A Longitudinal Examination of a Merit (June 2003), p. 559(22).
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Press, 1994), p. 113. For a recent discus- mance Ratings, Merit Increases, and Fine-Tune Pay/Bonus Plans, The Wall
sion about applying Vroom s principles, Total Pay Increases, Journal of Applied Street Journal, August 16, 2001, p. B4.
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tion. Supervision 69, no. 2 (February see also, H. Risher, Add Merit Pay for Use E.I.M. Software Systems, American
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39. Nina McIntyre, Using EIM Technology (March/April 2000), pp. 35 42. See also 66. Meltzer and Goldsmith, Executive Com-
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an incentive compensation plan as we use New Sales Compensation Plans, Compen- Measurements, Compensation & Bene-
the term in this chapter. sation & Benefits Review, March/April fits Review, September/October 2008,
45. Donna Harris, Dealers Rethink How 2008, p. 51. pp. 42 49.
They Pay Salespeople, Automotive News, 57. Ibid., p. 53. 73. Dionne Searcey, Transocean Executives
June 14, 2010, www.autonews.com/apps/ 58. www.vuesoftware.com/Product/Compen- to Donate Bonuses, The Wall Street
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Plan Pay for Performance? Compen- 60. Mark Meltzer and Howard Goldsmith, Turnover: A Multidisciplinary Perspective
sation & Benefits Review, January/ Executive Compensation for Growth Com- Integrating Behavioral and Economic
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Realigning Fixed and Variable Pay in 64. See The Impact of Sarbanes-Oxley on Without Performance: Overview of the
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420 PART 4 COMPENSATION

82. Christine Bevilacqua and Parbudyal Singh, A Longitudinal Examination of the no. 11 (November 2005), p. 114(6); and
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deduct all golden parachute payments Offer Packages Linking Pay Plans to The Effect of Gainsharing on Business
made to executives, and the executive must Performance, The Wall Street Journal, Performance at a Paper Mill, National
pay a 20% excise tax on the golden December 13, 2005, p. B4. Productivity Review, Summer 1993,
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85. Conseco Not Alone on Executive Perks, may be considered a deferred compensa- pp. 124 128, 130.
Knight-Ridder/Tribune Business News, tion arrangement. Steven Friedman, 102. See for example, http://www.dol.gov/dol/
August 28, 2003, item 03240015. See also 2008 Compliance Strategies for Employ- topic/health-plans/erisa.htm, accessed
Realities of Executive Compensation ers in Light of Final 409A Regulations, October 2, 2011.
2006/2007 Report on Executive Pay and Compensation & Benefits Review, March/ 103. Steven Etkind, ESOPs Create Liquidity for
Stock Options, www.watsonwyatt.com/ April 2008, p. 27. Share Holders and Help Diversify Their
research/resrender.asp?id=2006-US- 94. www.axa-equitable.com/retirement/ Assets, Estate Planning 24, no. 4 (May
0085&page=1), accessed May 20, 2007. how-do-company-profit-sharing-plans- 1998), pp. 158 165. See also S. Coomes,
86. Other suggestions are as follows: equal work.html, accessed June 1, 2011. Employee Stock Plans Can Save Taxes,
payments to all members on the team; 95. Joseph Martocchio, Strategic Compensa- Attract Talent, Nation s Restaurant News
differential payments to team members tion (Upper Saddle River, NJ: Prentice 42, no. 36 (September 15, 2008), p. 12.
based on their contributions to the team s Hall, 2006), pp. 163 165. 104. William Smith, Harold Lazarus, and
performance; and differential payments 96. Brian Graham-Moore and Timothy Ross, Harold Murray Kalkstein, Employee Stock
determined by a ratio of each group The Scanlon Way to Improved Productivity: Ownership Plans: Motivation and Moral
member s base pay to the total base pay of A Practical Guide (New York: Wiley, 1978), Issues, Compensation & Benefits Review,
the group. See Kathryn Bartol and Laura p. 2. For a review of potential problems, September/October 1990, pp. 37 46.
Hagmann, Team Based Pay Plans: A Key see Denis Collins, Death of a Gainsharing See also ESOP Trustees Breached Their
to Effective Team Work, Compensation & Plan: Power Politics and Participatory Fiduciary Duties Under ERISA by Failing
Benefits Review, November December Management, Organizational Dynamics 24 to Make Prudent Investigation into Value of
1992, pp. 24 29. See also Charlotte (Summer 1995), pp. 23 37. Stock Purchased by ESOP, Tax Manage-
Garvey, Steer Teams with the Right Pay, 97. These are based in part on Steven ment Compensation Planning Journal 30,
HR Magazine, May 2002, pp. 70 71, and Markham, K. Dow Scott, and Walter Cox no. 10 (October 4, 2002), p. 301(1); and
K. Merriman, On the Folly of Rewarding Jr., The Evolutionary Development of a J. D. Mamorsky, Court Approves ERISA
Team Performance, While Hoping for Scanlon Plan, Compensation & Benefits Action Against ENRON Executives, Trustee,
Teamwork, Compensation & Benefits Review, March/April 1992, pp. 50 56. and Plan Auditor for Retirement Plan
Review 41, no. 1 (January/February See also Woodruff Imberman, Are You Losses, Journal of Compensation and Bene-
2009), pp. 61 66. Ready to Boost Productivity with a Gain- fits 20, no. 1 (January February 2004),
87. Richard Seaman, The Case Study: Reju- sharing Plan? To Survive and Prosper p. 46(7); G. Ledford, et al., The Effects of
venating an Organization with Team in Our Hyper-competitive Environment, Stock Ownership on Employee Attitudes
Pay, Compensation & Benefits Review, Board Converters Must Motivate Employ- and Behavior: Evidence from the Rewards
September/October 1997, pp. 25 30. See ees at All Levels, Official Board Markets of Work Studies, Journal of Compensation
also Peter Wright, Mark Kroll, Jeffrey A. 82, no. 47 (November 25, 2006), p. 5(2); & Benefits 20, no. 2 (March/April 2004),
Krug, and Michael Pettus, Influences of and James Reynolds and Daniel Roble, pp. 24 30.
Top Management Team Incentives on Combining Pay for Performance with 105. James Sesil et al., Broad-Based Employee
Firm Risk Taking, Strategic Management Gainsharing, Healthcare Financial Manage- Stock Options in U.S. New Economy
Journal 28, no. 1 (January 2007), ment 60, no. 11 (November 2006), p. 50(6). Firms, British Journal of Industrial Rela-
pp. 81 89. 98. Markham et al., The Evolutionary tions 40, no. 2 (June 2002), pp. 273 294.
88. K. Merriman, On the Folly of Rewarding Development of a Scanlon Plan, p. 51. 106. Eric Dash, Time Warner Stops Granting
Team Performance, While Hoping for 99. Barry W. Thomas and Madeline Hess Stock Options to Most of Staff, The New
Teamwork, Compensation & Benefits Olson, Gainsharing: The Design Guarantees York Times, February 19, 2005, item
Review, January/February 2009, pp. 61 66. Success, Personnel Journal, May 1998, 128921996.
89. As another example, see, Bernd Irlen- pp. 73 79; A. C. Gardner, Goal Setting and 107. Peter Kurlander, Building Incentive Com-
busch and Gabriele K. Lünser, Relative Gainsharing: The Evidence on Effective- pensation Management Systems: What
Rewards within Team-Based Compensa- ness, Compensation and Benefits Review Can Go Wrong? Compensation & Benefits
tion, November 2006. IZA Discussion 43, no. 4 (July/August 2011), pp. 236 244. Review, July/August 2001, pp. 52 56. The
Paper No. 2423. Available at SSRN: 100. Paraphrased from Woodruff Imbermann, average percentage of payroll employers
http://ssrn. com/abstract=947075, accessed Boosting Plant Performance with Gain- spent on broad-based performance pay
May 21, 2011. sharing, Business Horizons, November plans rose till 2005, and then has fallen for
90. Seongsu Kim, Does Profit Sharing Increase December 1992, p. 77. See also Max the past few years. Companies Pull Back
Firms Profits? Journal of Labor Research, Reynolds and Joane Goodroe, The from Performance Pay, Workforce Man-
Spring 1998, pp. 351 371. See also Jacque- Return of Gainsharing: Gainsharing agement, October 23, 2006, p. 26. For one
line Coyle-Shapiro et al., Using Profit- Appears to Be Enjoying a Renaissance, of many good discussions of why pay for
Sharing to Enhance Employee Attitudes: Healthcare Financial Management 59, performance tends to be ineffectual, see
 CHAPTER 12 PAY FOR PERFORMANCE AND FINANCIAL INCENTIVES 421

Fay Hansen, Where s the Merit-Pay Pay- Review, January 2003, pp. 57 65; and 116. Theodore Weinberger, Evaluating the
off? Workforce Management, November 3, Incentives, Motivation and Workplace Effectiveness of an Incentive Plan Design
2008, pp. 33 39. Performance, Incentive Research Founda- Within Company Constraints, Compen-
108. For a checklist for determining when tion, www.incentivescentral.org/employees/ sation & Benefits Review, November/
pay for performance is advisable, see whitepapers, accessed May 19, 2007. December 2005, pp. 27 33; Howard
Myron Glassman et al., Evaluating Pay 114. Two Frameworks for a More ROI-Minded Risher, Adding Merit to Pay for Perfor-
for Performance Systems: Critical Issues Rewards Plan, Pay for Performance Report, mance, Compensation & Benefits Review,
for Implementation, Compensation & February 2003, p. 1, www.ioma.com/issues/ November/December 2008, pp. 22 29.
Benefits Review 42, no. 4 (2010), p. 236. PFP/2003_02/518132-1.html, accessed 117. Janet Wiscombe, Can Pay for Performance
109. Suzanne Peterson and Fred Luthans, The November 3, 2009; and Alan Robinson and Really Work? Workforce, August 2001, p. 30.
Impact of Financial and Nonfinancial Dean Schroeder, Rewards That Really 118. Susan Marks, Incentives That Really
Incentives on Business Unit Outcomes over Work, Security Management, July 2004, Reward and Motivate, Workforce, June
Time, Journal of Applied Psychology 91, pp. 30 34. See also Patricia Zingheim and 2001, pp. 108 114.
no. 1 (2006), pp. 156 165. Jay Schuster, What Are Key Pay Issues 119. Although not an issue at Nucor, the
110. Ibid., p. 159. Right Now? Compensation & Benefits employer needs to beware of instituting
111. Ibid., p. 159. Review, May/June 2007, pp. 51 55. so many incentive plans (cash bonuses,
112. Ibid., p. 162. See also Delivering Incentive 115. See, for example, Jessica Marquez, Retool- stock options, recognition programs, and
Compensation Plans That Work, Financial ing Pay: Premium on Productivity, Work- so on) tied to so many different behaviors
Executive 25, no. 7 (September 2009), force Management 84, no. 12 (November 7, that employees don t have a clear priority
pp. 52 54. 2005), pp. 1, 22 23, 25 26, 28, 30; www. of the employer s priorities. See, for
113. Reed Taussig, Managing Cash Based scribd.com/doc/12824332/NUCOR- example, Stephen Rubenfeld and Jannifer
Incentives, Compensation & Benefits CORP-8K-Events-or-Changes-Between- David, Multiple Employee Incentive
Review, March/April 2002, pp. 65 68. See Quarterly-Reports-20090224, accessed Plans: Too Much of a Good Thing?
also Nigel Nicholson, How to Motivate November 3, 2009; and www.nucor.com/ Compensation & Benefits Review, March/
Your Problem People, Harvard Business careers, accessed November 3, 2009. April 2006, pp. 35 43.
13
Benefits and Services

Source: NES Rentals.

LEARNING OBJECTIVES Company s
1. Name and define each of the main pay for time Strategic Goals
not worked benefits.
2. Describe each of the main insurance benefits.
3. Discuss the main retirement benefits.
4. Outline the main employees services benefits.
Employee Competencies
5. Explain the main flexible benefit programs. and Behaviors Required
for Company to Achieve
These Strategic Goals

ensation
Comp

L
ike many companies recently, NES Rentals Holdings

Developm nd

Em ations
e nt

Rel
a
Inc. wants to make cost control part of its strategy.

ploye
Training
NES (www.nesrentals.com) rents and sells construction HR Policies and Practices

e
equipment, such as the aerial lifts that roadside crews Required to Produce
use to lift workers to repair traffic lights.1 It s a competitive Employee Competencies
business, and the question was, where could they cut costs, and Behaviors

St r
without undermining their reputation for great products

En eg
e r
tne meca

nt
d

at
vi
no i
an
and service?
mt lP
iu r c tnem na c
d
eR lageL

WHERE ARE WE NOW . . .

We ve now covered two of the three pay
plan components salary (or wages) and
incentives. The main purpose of this chapter
is to discuss employee benefits. We discuss
four main types of plans: supplemental pay
benefits (such as sick leave and vacation pay),
insurance benefits (such as workers
compensation), retirement benefits (such
as pensions), and employee services (such as
child-care facilities). Because legal considera-
tions loom large in any benefits decision,
we cover applicable federal laws and their
implications for managers. This chapter
completes our discussion of employee
compensation. The next chapter, Chapter 14
(Ethics and Employee Rights), starts a new
part of this book, and focuses on another
Access a host of interactive learning aids at important human resource task managing
www.mymanagementlab.com to help strengthen employee relations.
your understanding of the chapter concepts.

MyManagementLab 423
424 PART 4 COMPENSATION

THE BENEFITS PICTURE TODAY

What are your benefits? is the first thing many applicants ask. Benefits indirect
financial and nonfinancial payments employees receive for continuing their
employment with the company are an important part of just about everyone s
compensation.2 They include things like health and life insurance, pensions, time
off with pay, and child care assistance.
Virtually all employers offer some health insurance coverage.3 Employee benefits
account for between 33% 40% of wages and salaries (or about 28% of total payrolls).
Legally required benefits (like unemployment insurance) are the most expensive
benefits costs, followed by health insurance. Figure 13-1 summarizes the breakdown
of benefits as a percentage of employee compensation.
Health care benefit costs are rising. Health benefit costs rose 8% in 2011 and an
estimated 8.5% in 2012, making total 2012 health benefit costs per employee well
over $9,500.4 Employers contend that the new Patient Protection and Affordable Care
Act will raise this more, as we will see.
Employees understand the value of health benefits. In one survey, 78% of
employees cited health care benefits as most crucial to retaining them; 75% cited
compensation. But the same survey found that only 34% are satisfied with their
health care benefits.5

Policy Issues
Employers therefore need to design benefits packages carefully. The list of policy issues
includes what benefits to offer, who receives coverage, whether to include retirees in the
plan, whether to deny benefits to employees during initial probationary periods, how
to finance benefits, cost-containment procedures, and how to communicate benefits
options to employees.6
Legal issues loom large. Federal laws mandate some benefits (such as Social
Security) while other benefits are at the employer s discretion (see Table 13-1).
However, federal law also impacts discretionary benefits such as vacation leave.
And employers must adhere to the laws of the states in which they do business.
For example, California requires most state contractors to provide domestic partner
benefits for employees.7
There are many benefits and various ways to classify them. We will classify them as
(1) pay for time not worked (such as vacations), (2) insurance benefits, (3) retirement
benefits, and (4) services. We will start our discussion with pay for time not worked.
But in any case, the benefits should make sense in terms of supporting the employer s
strategy, as the accompanying Strategic Context feature illustrates.

FIGURE 13-1 Relative Legally required

Importance of Employer Costs 8.2%
for Employee Compensation, Retirement & savings
March 2011 3.5%
Sourc.e: www.bls.gov/news.release/ Insurance
ecec.nr0.htm, accessed June 1, 2011.
(including health)
8.0%
Supplemental pay
2.7%

Paid leave
6.8%
Wages and salaries
70.7%
 CHAPTER 13 BENEFITS AND SERVICES 425

TABLE 13-1 Some Required and Discretionary Benefits

Benefits Required by Federal Benefits Discretionary
or Most State Law on Part of Employer*

Social Security Disability, health, and life insurance

Unemployment insurance Pensions
Workers compensation Paid time off for vacations, holidays, sick leave,
personal leave, jury duty, etc.
Leaves under Family Medical Leave Act Employee assistance and counseling programs,
family friendly benefits for child care, elder care,
flexible work schedules, etc., executive perquisites
*
Although not required under federal law, all these benefits are regulated in some way by federal law,
as explained in this chapter.

THE STRATEGIC CONTEXT

NES Rentals
As with a company s salary and incentive plans, its benefits plan must make sense
in terms of, and support, the firm s strategy. As we saw in Chapters 11 and 12,
managers must align each component of the employer s total rewards program so
that each contributes in a meaningful way to fostering the employee behaviors that
the company needs to achieve its strategic goals.
Seeking to cut costs while maintaining its reputation for great products and
service, NES Rentals sent their employees home. Today, three-fourths of their
customer support, collections, finance, and other back-office workers at
their Chicago office work from home at least part of the week.8 They therefore no
longer have dedicated desks, but share space when in the office. The CEO says the
results have been good. Productivity has increased 20%. Employee turnover
dropped from 7% in 2009 to virtually non-existent in 2010. NES is leasing
40% less office space, and will save $100,000 in real estate expenses. And he
estimates NES s total savings from instituting this new telecommuting benefit at
about $350,000 annually. Introducing an employee benefit turned out to be a
smart way to support NES s strategy.9

1 Name and define each

PAY FOR TIME NOT WORKED
of the main pay for time Pay for time not worked also called supplemental pay benefits is the most costly
not worked benefits. benefit, because of the large amount of time off that most employees receive. Common
time-off-with-pay include holidays, vacations, jury duty, funeral leave, military
duty, personal days, sick leave, sabbatical leave, maternity leave, and unemployment
insurance payments for laid-off or terminated employees.

Unemployment Insurance
All states have unemployment insurance (or compensation) laws. These provide
benefits if a person is unable to work through no fault of his or her own. The
benefits derive from a tax on employers that can range from 0.1% to 5% of taxable
payroll in most states. An employer s unemployment tax rate reflects its rate of
employee terminations. Although they all follow federal guidelines, states have their

benefits supplemental pay benefits unemployment insurance

Indirect financial and nonfinancial payments Benefits for time not worked such as (or compensation)
employees receive for continuing their unemployment insurance, vacation and Provides benefits if a person is unable
employment with the company. holiday pay, and sick pay. to work through some fault other than his
or her own.
426 PART 4 COMPENSATION

Unemployment insurance/
compensation laws provide
short-term benefits to people
who lose their jobs through
no fault of their own.

Source: Greta Pratt/Corbis Images.

own unemployment laws. Unemployment tax rates are rising in many states. For
example, prior to the recent recession, Maryland s unemployment insurance tax
rate was 0.3% or lower. The rate now averages 2.2% to 13.5% per employee,
depending upon the employer s claim history.10
Firms aren t required to let everyone they dismiss receive unemployment
benefits only those released through no fault of their own. Thus, strictly speaking, a
worker fired for chronic lateness can t legitimately claim benefits. But many managers
take a lackadaisical attitude toward protecting their employers. Employers therefore
spend thousands of dollars on unemployment taxes that would not be necessary
if they protected themselves.
The main rule is to keep a list of written warnings. Beyond that, the checklist in
Table 13-2 can help protect employers. Actions like these should enable you to
demonstrate that the dismissal resulted from the person s inadequate performance.
(Those you fire during their initial 90-day probation are eligible for unemployment,
so follow that checklist for them, too.)

TABLE 13-2 An Unemployment Insurance Cost-Control Checklist

Do You:
n Keep documented history of lateness, absence, and warning notices
n Warn chronically late employees before discharging them
n Have rule that 3 days absence without calling in is reason for automatic discharge
n Request doctor s note on return to work after absence
n Make written approval for personal leave mandatory
n Stipulate date for return to work from leave
n Obtain a signed resignation statement
n Mail job abandonment letter if employee fails to return on time
n Document all instances of poor performance
n Require supervisors to document the steps taken to remedy the situation
n Document employee s refusal of advice and direction
n Require all employees to sign a statement acknowledging acceptance of firm s policies and rules
n File the protest against a former employee s unemployment claim on time (usually within 10 days)
n Use proper terminology on claim form and attach documented evidence regarding separation
n Attend hearings and appeal unwarranted claims
n Check every claim against the individual s personnel file
n Routinely conduct exit interviews to produce information for protesting unemployment claims
 CHAPTER 13 BENEFITS AND SERVICES 427

Vacations and Holidays

Most firms offer vacation leave benefits. About 90% of full time workers and 40% of
part timers get paid holidays, an average of 8 paid holidays off.11 The most common
U.S. paid holidays include New Year s Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Other common holidays include Martin
Luther King, Jr. Day, Good Friday, Presidents Day, Veterans Day, the Friday after
Thanksgiving, and the days before Christmas Day and New Year s Day.12 On average,
American workers get about 9 days of vacation leave after 1 year s employment, about
14 days after 5 years, and 17 after 10 years.13 Elsewhere, vacation allowances vary from 6
days in Mexico to 10 days in Japan to 25 days in Sweden and France.
Firms have to address several holiday- and vacation-related policy issues. They
must decide, of course, how many days off employees will get, and which days (if any)
will be the paid holidays. Other vacation policy decisions include:
* Will employees get their regular base pay while on vacation, or vacation pay based
on average earnings (which may include overtime)?
* Will you pay employees for accrued vacation time if they leave before taking their
vacations?
* Will you pay employees for a holiday if they don t come to work the day before
and the day after the holiday?
* And, should we pay some premium such as time and a half when employees
must work on holidays?
More firms are moving to a more flexible vacation leave approach. For example, IBM
gives each of its 350,000 plus employees at least 3 weeks vacation. However,
IBM doesn t formally track how much vacation each person takes. Instead, employees
simply make informal vacation arrangements with their direct supervisors.14
Wage surveys and Web sites like www.hrtools.com provide sample vacation policies
for inclusion in the firm s employee manual.
SOME LEGAL ASPECTS OF VACATIONS AND HOLIDAYS Although federal
law does not require vacation benefits, the employer must still formulate vacation
policy with care. As an example, many employers vacation policies say vacation pay
accrues, say, on a biweekly basis. By doing so, these employers obligate themselves to
pay employees pro rata vacation pay when they leave the firm. But if the employer s
vacation policy requires that a new employee pass his or her first employment
anniversary before becoming entitled to a vacation, the employee gets no vacation pay
if he or she leaves during that first year.
One frequent question is whether the employer can cancel an employee s scheduled
vacation, for instance, due to a rush of orders. Here it s important that the employer
formulate its vacation policy so it s clear that the employer reserves the right to require
vacation cancellation and rescheduling if production so demands.

Sick Leave
Sick leave provides pay to employees when they re out of work due to illness. Most
sick leave policies grant full pay for a specified number of sick days usually up
to about 12 per year. The sick days usually accumulate at the rate of, say, 1 day per
month of service.
Sick leave is problematical for employers. The problem is that while many employees
use their sick days only when sick, others use it whether sick or not. In one survey,
personal illnesses accounted for only about 45% of unscheduled sick leave absences.
Family issues (27%), personal needs (13%), and a mentality of entitlement (9%) were
other reasons cited.15 Absenteeism costs U.S. employers perhaps $100 billion per year,
with personal illness accounting for about a third of the absences.16

sick leave
Provides pay to an employee when he or she
is out of work because of illness.
428 PART 4 COMPENSATION

COST-REDUCTION TACTICS Employers use several tactics to reduce excessive

sick leave absence. Some repurchase unused sick leave at the end of the year by
paying their employees a sum for each sick leave day not used. The problem is that
legitimately sick employees may come to work. Others have held monthly lotteries
in which only employees with perfect monthly attendance are eligible for a cash
prize. At Marriott, employees can trade the value of some sick days for other benefits.
Others aggressively investigate all absences, for instance, by calling the absent
employees at their homes.17
Many employers use pooled paid leave plans (or banks ).18 These plans lump
together sick leave, vacation, and personal days into a single leave pool. For example,
one hospital previously granted new employees 25 days off per year (10 vacation days,
3 personal days, and 12 sick days). Employees used, on average, 5 of those 12 sick days
(as well as all vacations and personal days).19 The pooled paid leave plan allowed new
employees to accrue 18 days to use as they saw fit. ( Catastrophic leaves short-term
illnesses causing absences for more than 5 consecutive workdays, and special absences
like bereavement leave were handled separately.) The pooled plan reduced absences.
Most firms don t include federal holidays in their paid time off banks. 20

Evidence-Based HR: Tracking Sick Leave

For many employers, sick leave is out of control simply because they don t measure it.
In one survey, only 57% of employers formally tracked sick days for their exempt
employees and only 46% tracked personal days.21 Three-fourths of the employers
could not even provide an estimate of what their sick pay was costing as a percentage
of payrolls. Therefore, before taking other cost control steps the employer should have
a system in place for monitoring sick leaves and for measuring their financial impact.
The accompanying HR as a Profit Center feature expands on this.
The same applies to controlling health care costs. Some estimate that 5% to 15%
of medical plans enrollees may include ineligible dependents such as ex-spouses.
Periodically auditing dependents can thus translate into significant health care
cost savings.22

HR AS A PROFIT CENTER
Cutting Absences at the Driver and Vehicle Licensing Agency
Government agencies are as (if not more) susceptible to excessive sick leave claims
as are private companies. So when she came in as a director of the United Kingdom s
Driver and Vehicle Licensing Agency, part of the Department of Transport,
Judith Whitaker saw that steps were needed to address the agency s sickness
absence rate.23 The rate had peaked at 14 days out per employee in 2005, at a cost
of about $20 million per year (£10.3 million). The rate was down to 12.5 days
by 2008, but was still too high.
The new director organized a multi-faceted human resource management
initiative to address the sick leave absence problem.24 The agency set a goal
of reducing absences by 30% by 2010. Agency directors received absence-
reduction goals, and their progress was tracked. The agency introduced new
policies and procedures dealing with special leave, rehabilitation support, and
keeping in touch with absentees. They introduced new policies to make it easier
for employees to swap work shifts, and introduced a guaranteed leave day
policy. They also introduced new smoking cessation classes and a weight
management program.
These and similar actions were apparently very successful. The average
annual sickness absence rate in 2010 was down to 7.5 days per employee.
Improved attendance probably contributed to a 7% productivity increase
in 2009 2010. This translates into a reduction in the agency s costs of about
$48 million dollars (£24.4 million).
 CHAPTER 13 BENEFITS AND SERVICES 429

Parental Leave and the Family and Medical Leave Act

Parental leave is an important benefit. About half of workers are women, and about
80% will become pregnant during their work lives. Furthermore, many people head
single-parent households. Under the Pregnancy Discrimination Act, employers must
treat women applying for pregnancy leave as they would any other employee requesting
a leave under the employer s policies. Beyond this, Congress passed, as noted, the
Family and Medical Leave Act of 1993 (FMLA). Among other things (see Figure 13-2),
the FMLA stipulates that:25
1. Private employers of 50 or more employees must provide eligible employees
(women or men) up to 12 weeks of unpaid leave for their own serious illness, the
birth or adoption of a child, or the care of a seriously ill child, spouse, or parent.
2. Employers may require employees to take any unused paid sick leave or annual
leave as part of the 12-week leave provided in the law.
3. Employees taking leave are entitled to receive health benefits while they are on
unpaid leave, under the same terms and conditions as when they were on the job.
4. Employers must guarantee most employees the right to return to their previous
or equivalent position with no loss of benefits at the end of the leave.

FIGURE 13-2 Your Rights

Under the Family and Medical
Leave Act of 1993 Your Rights
under the
Family and Medical Leave Act of 1993
FMLA requires covered employers to provide up to 12 the previous 12 months, and if there are at least 50
weeks of unpaid, job-protected leave to eligible employees within 75 miles. The FMLA permits
employees for certain family and medical reasons. employees to take leave on an intermittent basis or to
Employees are eligible if they have worked for their work a reduced schedule under certain circumstances.
employer for at least one year, and for 1,250 hours over

Upon return from FMLA leave, most employees must

Reasons for Taking Leave: be restored to their original or equivalent positions with
equivalent pay, benefits, and other employment terms.
Unpaid leave must be granted for any of the following The use of FMLA leave cannot result in the loss of any
reasons: employment benefit that accrued prior to the start of an
to care for the employee s child after birth, or placement employee s leave.
for adoption or foster care;
to care for the employee s spouse, son or daughter, or Unlawful Acts by Employers:
parent who has a serious health condition; or
for a serious health condition that makes the employee FMLA makes it unlawful for any employer to:
unable to perform the employee s job. interfere with, restrain, or deny the exercise of any
At the employee s or employer s option, certain kinds of right provided under FMLA.
paid leave may be substituted for unpaid leave. discharge or discriminate against any person for
opposing any practice made unlawful by FMLA or for
Advance Notice and Medical involvement in any proceeding under or relating
to FMLA.
Certification:
The employee may be required to provide advance leave
Enforcement:
notice and medical certification. Taking of leave may be
denied if requirements are not met. The U.S. Department of Labor is authorized to
investigate and resolve complaints of violations.
The employee ordinarily must provide 30 days advance
notice when the leave is foreseeable. An eligible employee may bring a civil action against
an employer for violations.
An employer may require medical certification to
support a request for leave because of a serious health FMLA does not affect any Federal or State law
condition, and may require second or third opinions (at prohibiting discrimination, or supersede any State or
the employer s expense) and a fitness for duty report to local law or collective bargaining agreement which
return to work. provides greater family or medical leave rights.

Job Benefits and Protection: For Additional Information:

For the duration of FMLA leave, the employer must If you have access to the Internet visit our FMLA
maintain the employee s health coverage under any website: http://www.dol.gov. To locate your nearest
group health plan. Wage-Hour Office, telephone our Wage-Hour toll-free
information and help line at 1-866-4USWAGE (1-866-487-9243):
a customer service representative is available to assist you with
referral information from 8am to 5pm in your time zone; or log
U.S. Department of Labor onto our Home Page at http://www.wagehour.dol.gov.
Employment Standards Administration
Wage and Hour Division
WH Publication 1420
Washington, D.C. 20210
Revised August 2001
430 PART 4 COMPENSATION

Employers have expressed some dissatisfaction with the FMLA. In a survey of 416
human resource professionals, about half said they approved leaves they believed
were not legitimate, but felt they had to grant because of vague interpretations of the
law.26 Tracking leaves was another problem.27
FMLA leaves are usually unpaid, but they re not costless. The costs associated
with hiring temporary replacements, training them, and compensating for their lower
productivity can be considerable.

FMLA GUIDELINES Therefore, the manager who wants to avoid granting non-
required FMLA leaves needs to understand the FMLA. For example, to be eligible for
leave under the FMLA, the employee must have worked for the employer for at least
a total of 12 months and have worked (not just been paid, as someone might be if on
leave) for 1,250 or more hours in the past 12 consecutive months.28 If these do not
apply, no leave is required.

FIGURE 13-3 Online Request

for Leave Form

Source: www.opm.gov/FORMS/PDF_
FILL/opm71.pdf, accessed April 28,
2009.
 CHAPTER 13 BENEFITS AND SERVICES 431

Employers obviously need procedures for all leaves of absence (including those
awarded under the Family and Medical Leave Act). These include:
* Give no employee a leave until the reason for the leave is clear.
* If the leave is for medical or family reasons, the employer should obtain medical
certification from the medical practitioner.
* Use a standard form to record both the employee s expected return date and the
fact that, without an authorized extension, the firm may terminate his or her
employment (see Figure 13-3).
* One employment lawyer says employers should kind of bend over backward
when deciding if an employee is eligible for leave based on an FMLA situation.29
However, employers can require independent medical assessments before
approving paid FMLA disability leaves.30
Some employers are enriching their parental leave plans to make it more attractive for
mothers to return from maternity leave. Tactics include keeping in touch throughout
the maternity leave, offering flexible jobs with reduced travel and hours, giving mothers
fair access to bonuses and incentives, and facilitating longer leaves.31
Other laws apply to sick leaves. Under the Americans with Disabilities Act (ADA), a
qualified employee with a disability may be eligible for a leave if such a leave is necessary
to accommodate reasonably the employee. Under various state workers compensation
laws, employees may be eligible for leave in connection with work-related injuries.
Many states also have their own, more restrictive versions of the FMLA.32

Severance Pay
Many employers provide severance pay, a one-time separation payment when
terminating an employee. Severance pay makes sense. It is a humanitarian gesture,
and good public relations. In addition, most managers expect employees to give
them 1 or 2 weeks notice if they plan to quit, so it seems appropriate to provide
severance pay when dismissing an employee. Reducing the chances of litigation from
disgruntled former employees is another reason. Severance pay plans also help
reassure employees who stay on after a downsizing that they ll receive some financial
help if they re let go, too. In one survey of 3,000 human resource managers, 82%
of responding organizations reported having a severance policy.33
The reason for the dismissal affects whether the employee gets severance pay. About
95% of employees dismissed due to downsizings got severance pay, but only about a
third of employers offer severance when terminating for poor performance. It is
uncommon to pay when employees quit. The average maximum severance is 39 weeks
for executives and about 30 weeks for other downsized employees.34 About half of
employers surveyed give white-collar and exempt employees 1 week of severance pay
per year of service, and about one-third do the same for blue-collar workers.35 If the
employer obligates itself (for instance, in its employee handbook) to pay severance, then
its voluntary plan will have to comply with additional rules under ERISA.36

GUIDELINES In any event, there are several things to keep in mind when designing
the severance plan. These include:
* List the situations for which the firm will pay severance, such as layoffs resulting
from reorganizations. State that management will take other action as necessary.
* Require signing of a knowing and voluntary waiver/general release prior to remit-
tance of any severance pay, absolving the employer from employment-related
liability.
* Reserve the right to terminate or alter the severance policy.

severance pay
A one-time payment some employers
provide when terminating an employee.
432 PART 4 COMPENSATION

* Make it clear that any continuing severance payments continue until only the
stated deadline or until the employee gets a new job, whichever occurs first.
* Remember that as with all personnel actions, employers must make severance
payments, if any, equitably.37

Supplemental Unemployment Benefits

In some industries such as auto making, shutdowns to reduce inventories or change
machinery are common, and laid-off or furloughed employees must depend on unem-
ployment insurance. As the name implies, supplemental unemployment benefits are
cash payments that supplement the employee s unemployment compensation, to help
the person maintain his or her standard of living while out of work. They generally
cover three contingencies: layoffs, reduced workweeks, and facility relocations.

2 Describe each of the main

INSURANCE BENEFITS
insurance benefits. Most employers also provide a number of required or voluntary insurance benefits,
such as workers compensation and health insurance.

Workers Compensation
Workers compensation laws aim to provide sure, prompt income and medical bene-
fits to work-related accident victims or their dependents, regardless of fault. Every state
has its own workers compensation law and commission, and some run their own
insurance programs. However, most require employers to carry workers compensation
insurance with private, state-approved insurance companies. Neither the state nor the
federal government contributes any funds for workers compensation.

HOW BENEFITS ARE DETERMINED Workers compensation can be monetary

or medical. In the event of a worker s death or disablement, the person s dependents
receive a cash benefit based on prior earnings usually one-half to two-thirds the
worker s average weekly wage, per week of employment. Most states have a time
limit such as 500 weeks for which benefits can be paid. If the injury causes a
specific loss (such as an arm), the employee may receive additional benefits based on
a statutory list of losses, even though he or she may return to work. In addition to
these cash benefits, employers must furnish medical, surgical, and hospital services as
required for the employee.
For workers compensation to cover an injury or work-related illness, one must
only prove that it arose while the worker was on the job. It does not matter that he or
she may have been at fault; if the person was on the job when the injury occurred, he
or she is entitled to workers compensation. For example, suppose you instruct all
employees to wear safety goggles when at their machines. One worker does not and
experiences an eye injury on the job. The company must still provide workers
compensation benefits.
Keep in mind that ADA provisions generally prohibit employers from inquiring
about an applicant s workers compensation history. Furthermore, failing to let an
employee who is on injury-related workers compensation return to work, or not
accommodating him or her, could lead to lawsuits under ADA.

CONTROLLING WORKERS COMPENSATION COSTS It is important to

control workers compensation claims (and therefore costs). The employer s insur-
ance company usually pays the claim, but the costs of the employer s premiums
reflect the amount of claims.38 Workers comp claims also tend to correlate with
injuries, so fewer claims is usually a good sign of fewer accidents.
There are several ways to reduce workers compensation claims. Screen out
accident-prone workers. Reduce accident-causing conditions in your facilities.
And reduce the accidents and health problems that trigger these claims for instance,
 CHAPTER 13 BENEFITS AND SERVICES 433

by instituting effective safety and health programs and complying with government
safety standards. Furthermore, although many workers compensation claims are
legitimate, some are not. Supervisors should therefore watch for typical fraudulent
claim red flags. These include vague accident details, minor accidents resulting
in major injuries, lack of witnesses, injuries occurring late Friday or very early
Monday, and late reporting.39
Other workers comp cost-control techniques include monitoring health care
providers for compliance with their fee schedules and auditing medical bills.40 Case
management is a popular cost-control option. It is the treatment of injured workers
on a case-by-case basis by an assigned manager, usually a registered nurse, who coordi-
nates with the physician and health plan to determine which care settings are the most
effective for quality care and cost. 41
Moving aggressively to support the injured employee and to get him or her back
to work quickly is important. The involvement of an attorney and the duration of the
claim both influence the workers claim cost.42 Many firms have rehabilitation
programs. These include physical therapy, and nursing assistance to help reintegrate
claim recipients into the workforce.

Hospitalization, Health, and Disability Insurance

Health insurance looms large in many people s choice of employer, because it is so
expensive. Hospitalization, health, and disability insurance helps protect employees
against hospitalization costs and the loss of income arising from off-the-job accidents
or illness. Many employers purchase insurance from life insurance companies, casualty
insurance companies, or Blue Cross (for hospital expenses) and Blue Shield (for physi-
cian expenses) organizations. Others contract with health maintenance organizations
or preferred provider organizations. The employer and employee usually both
contribute to the plan. Table 13-3 illustrates the prevalence of health-related benefits.

COVERAGE Most employer health plans provide at least basic hospitalization and
surgical and medical insurance for all eligible employees at group rates. Insurance is

TABLE 13-3 Percentage of Employers Offering Some Popular Health

Benefits Change Over Time
Yes (%) 2005 Yes (%) 2011

Prescription drug program coverage 97 96

Dental insurance 95 94
Mail order prescription program 90 91
PPO (preferred provider organization) 87 84
Chiropractic coverage 56 83
Mental health insurance 72 82
Vision insurance 80 76
Employee assistance program 73 75
Medical/Flexible spending account 80 73
HMO (health maintenance organization) 53 33
Source: Adapted from 2011 SHRM Employee Benefits Survey Report, p. 2. www.shrm.org/Research/SurveyFindings/
Articles/Documents/Emp_Benefits_Tables.pdf, accessed, June 1, 2011. Reprinted with permission from the Society
for Human Resource Management. All rights reserved.

supplemental unemployment benefits workers compensation

Provide for a guaranteed annual income Provides income and medical benefits
in certain industries where employers must to work-related accident victims or their
shut down to change machinery or due dependents regardless of fault.
to reduced work. These benefits are paid
by the company and supplement
unemployment benefits.
434 PART 4 COMPENSATION

generally available to all employees including new nonprobationary ones regardless

of health or physical condition. Most basic plans pay for hospital room and board,
surgery charges, and medical expenses (such as doctors visits to the hospital). Some
also provide major medical coverage to meet the medical expenses resulting from
serious illnesses.
Most employers health plans also cover health-related expenses like doctors
visits, eye care, and dental services. Other plans pay for general and diagnostic visits
to the doctor s office, vision care, hearing aids, and prescription drugs. Disability
insurance provides income protection for salary loss due to illness or accident.
Payments usually start when normal sick leave payments end, and may continue until
age 65 or beyond. Disability benefits usually range from 50% to 75% of the
employee s base pay if he or she is disabled.

HMOS Many employers offer membership in a health maintenance organization

(HMO) as a hospital/medical insurance option. The HMO is a medical organization
consisting of specialists (surgeons, psychiatrists, and so on), often operating out of a
health care center. It provides routine medical services to employees who pay a
nominal fee. Employees often have gatekeeper doctors who must approve appoint-
ments with specialist doctors. The HMO receives a fixed annual fee per employee
from the employer (or employer and employee), regardless of whether it provides
that person service.

PPOS Preferred provider organizations (PPOs) are a cross between HMOs and
the traditional doctor patient arrangement: They are groups of health care providers
that contract with employers, insurance companies, or third-party payers to provide
medical care services at a reduced fee. 43 Unlike HMOs, PPOs let employees select
providers (such as doctors) from a relatively wide list, and see them in their offices,
often without gatekeeper doctor approval. The providers agree to provide discounts
and submit to certain controls, for example, on testing. Employers are shifting from
higher-cost HMOs to PPOs.44

MENTAL HEALTH BENEFITS The World Health Organization estimated that

more than 34 million people in the United States between the ages of 18 and 64 suffer
from mental illness.45 Mental illnesses represent about 24% of all reported disabilities,
more than disabling injuries, respiratory diseases, cardiovascular diseases, and cancer
combined.
Mental health costs are rising. Reasons include widespread drug and alcohol
problems, an increase in states that require employers to offer minimum mental
health benefits, and the fact that mental health claims tend to trigger other health care
claims. The Mental Health Parity Act of 1996 (as amended in 2008) sets minimum
mental health care benefits; it also prohibits employer group health plans from adopting
mental health benefits limitations without comparable limitations on medical and
surgical benefits.46

The Legal Side of Health Benefits

With the U.S. introducing new health insurance laws, federal influence over health
benefits will increase substantially in the next few years.

PROTECTION AND AFFORDABLE CARE ACT OF 2010 Signed into law by

President Obama in 2010, employers will face a number of deadlines under the new
Patient Protection and Affordable Care Act, unless Congress changes the law. For
example, employers must begin reporting the value of health care benefits on
employee s W-2 statements, contributions to health care flexible spending arrange-
ments will be limited to $2,500 as of January 1, 2013, and in 2018 a 40% excise tax on
high-cost health insurance plans goes into effect.47 Individual and group health plans
that already provide dependent coverage must expand eligibility up to age 26.48
Among many other things, the act encourages employers with 50 or more employees
 CHAPTER 13 BENEFITS AND SERVICES 435

to offer health insurance or pay a shared responsibility payment if the government

has to subsidize an employee s health care.
Employers in one recent survey by the consulting firm Mercer expected this act
to raise their health care expenses by from 2% to 5% in 2011.49 As the act phases in
over the next few years (assuming Congress makes no changes), the excise tax on
high-cost plans was the employers main cost concern. Other cost-raisers, the
employers told Mercer, include the expanded coverage for older children, the ban on
lifetime benefit dollar limits, the requirement that employers auto-enroll new hires
into a health plan, and the rule that employers must offer coverage to employees
including those working less than 30 hours per week (many of whom now have no
health benefits).50

COBRA COBRA the Consolidated Omnibus Budget Reconciliation Act

requires most private employers to continue to make health benefits available to sep-
arated employees and their families for a time, generally 18 months after separation.51
The former employee must pay for the coverage.
Employers ignore COBRAs regulations at their peril. Most importantly, you don t
want separated employees to leave and be injured, and then claim you never told
them they could have continued their insurance coverage. Therefore, when a new
employee first becomes eligible for your company s insurance plan, the person must
receive (and acknowledge receiving) an explanation of his or her COBRA rights. And,
all employees separated from the company should sign a form acknowledging that
they received and understand those rights. Figure 13-4 provides a COBRA checklist.

OTHER LAWS Other federal laws are pertinent. For example, among other
things, the Employee Retirement Income Security Act of 1974 (ERISA) sets mini-
mum standards for most voluntarily established pension and health plans in
private industry.52 The Newborn Mother s Protection Act of 1996 prohibits employers
health plans from using incentives to encourage employees to leave the hospital
after childbirth after less than the legislatively determined minimum stay. Employ-
ers who provide health care services must follow the privacy rules of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA).53 Employers must
provide the same health care benefits to employees over the age of 65 that they
do to younger workers, even though the older workers are eligible for federal
Medicare health insurance. Under the Americans with Disabilities Act, the plan
generally shouldn t make distinctions based on disability. And, as explained earlier,
the Pregnancy Discrimination Act requires employers to treat women affected
by pregnancy, childbirth, or related medical conditions the same as any other
employees not able to work, with respect to all benefits. Under the Genetic Infor-
mation Nondiscrimination Act of 2008 (GINA), employers need to be vigilant
about even apparently innocent situations. For example, if a health plan adminis-
trator learns that a member s mother passed away from breast cancer and makes a
note to send a card, making the note and sending the card could conceivably
be held as violations of the act.54

Trends in Employer Health Care Cost Control

Employers are endeavoring to rein in health care costs. Many retain cost-containment
specialists to help reduce such costs. And most negotiate more aggressively with
their health care insurance providers.55 Most cost-control efforts necessarily start
by instituting methods for measuring and tracking health care costs.56

health maintenance organization (HMO) preferred provider organizations (PPOs)

A prepaid health care system that generally Groups of health care providers that contract
provides routine round-the-clock medical with employers, insurance companies, or
services as well as preventive medicine in a third-party payers to provide medical care
clinic-type arrangement for employees, who services at a reduced fee.
pay a nominal fee in addition to the fixed
annual fee the employer pays.
436 PART 4 COMPENSATION

FIGURE 13-4 COBRA Detailed record keeping is crucial for COBRA compliance. The following checklist is designed
Record-Keeping Compliance to ensure that the proper records are maintained for problem-free COBRA compliance.
Checklist
Yes No
Source: Reprinted from Do you maintain records so that it is easily determined
www.HR.BLR.com with permission who is covered by your group health care plan?
of the publisher Business and Legal
Resources, Inc., 141 Mill Rock Road Do you record terminations of covered employees as
East, Old Saybrook, CT © 2004. BLR® soon as terminations occur?
(Business and Legal Resources, Inc.).
Do you track reduction of hours of employees covered
by group health care plans?
Do you track deaths of employees covered by group
health care plans?
Do you track leaves of absence of employees covered
by group health care plans?
Do you track Medicare eligibility of employees covered
by group health care plans?
Do you track the disability status of employees covered
by group health care plans?

Do you track retirees covered by group health care plans?

Do you maintain current addresses of employees?

Do you maintain current addresses of individuals

receiving COBRA benefits?
Do you require employees to provide a written
acknowledgment that they have received notice of their
COBRA rights?
Do you have a system to determine who has paid
COBRA premiums on time?
Do you have a system to determine who has obtained
other group health coverage so that they are no longer
eligible for COBRA under your plan?

Do you maintain a telephone log of calls received about

COBRA?

Do you maintain a record of changes in your plan?

Do you maintain a record of how premiums are calculated?

Do you maintain a log of those employees who are

denied COBRA coverage?
Do you maintain a log of why employees are denied
COBRA coverage?

For many employers, deductibles and co-pays are the low-hanging fruit in health
care cost control. For example, 22% of employers imposed deductibles of at least
$1,000 in 2011 for in-network services, up from 8% in 2008.57 Even more 44%
imposed such deductibles for out-of-network services.58 Consumer-driven health
plans (CDHPs) are increasingly popular. These are high-deductible plans that give
employees access to, for instance, a health savings account. (The Medicare Modern-
ization Act of 2003 allows employers to establish tax-free health savings accounts
(HSA).)59 After the employer, employee, or both deposit pretax (and thus tax
sheltered) pay in the employees HSAs, employees or their families can use their HSA
funds to pay for low dollar (not catastrophic) medical expenses.60 The assumption
is that this will motivate employees to utilize less expensive health care options, and
thus avoid big deductibles.61 Employers generally offer CDHPs as an option to
traditional plans, such as PPOs.62 We ll address other important cost-control trends.

COMMUNICATION AND EMPOWERMENT Most importantly, make sure

employees know the costs of their medical benefits.63 As one expert said, the biggest
criticism of managed care . . . is that the health care consumer has little financial stake
 CHAPTER 13 BENEFITS AND SERVICES 437

in treatment decisions. 64 So, for example, periodically send a statement to each

employee listing the employer s costs for each health benefit. Online selection lets
employees choose the best of the employer s health care offerings, based on input
from other employees concerning matters like doctor visits and specialists.

WELLNESS PROGRAMS Many illnesses are preventable. In one study employers

who undertook prevention programs aimed at cardiovascular disease . . . reported an
average 28% reduction in sick leave, [and] a 26% reduction in direct health-care
costs. 65 Many employers therefore offer preventive services.66 Clinical prevention
programs include things like mammograms, immunizations, and routine checkups.
Walgreens recently purchased two companies that provide on-site health care services
such as mammograms for employers.67 Health promotion and disease prevention
programs include seminars and incentives aimed at improving unhealthy behaviors.68
Top wellness program trends include obesity management, stress management, senior
health improvement, and tobacco cessation programs.69 Incentives, for instance,
$50 $100, can boost wellness program participation, but may backfire.70 Whirlpool
gives nonsmoker discounts on health care premiums worth about $500. It suspended
39 workers it caught smoking outside the plant after claiming on their benefits enrollment
forms that they were not tobacco users.

CLAIM AUDITS It makes little sense to initiate cost cuts when employers are paying
out thousands or millions of dollars in erroneous claims. Unfortunately, with health
care plans increasingly complicated, it s easier for errors to occur. Human resource
consultants Towers Perrin conducted a survey of claims payments. The industry
standard for percentage of claims errors is 3%, but Towers Perrin found the actual
percentage of claims with financial errors were about 6.3%. The industry standard for
percentage of claims dollars actually paid in error was 1%; the actual percentage
of claims dollars paid in error were 3.4%. So, setting standards for errors and then
aggressively auditing all claims may be the most direct way to reduce employer health
care expenses.71

LIMITED PLANS Some employers are offering limited-benefit health care insurance
plans. Unlike health care plans that may have lifetime coverage limits of $1 million or
more, these mini medical plans have annual caps of about $2,000 $10,000 per year.
The advantage, of course, is that the premiums are correspondingly lower.72

OUTSOURCING Benefits management ranks high on the list of HR activities that

employers outsource. For example, in one survey, 94% outsourced management of
flexible spending accounts, 89% outsourced defined contribution plans, 72% outsourced
defined benefit plans, and 68% outsourced the auditing of dependents.73

OTHER COST-CONTROL OPTIONS Employers are taking other steps. One is

using defined contribution health care plans. Here each employee gets a specific dollar
amount allotment to use for co-payments or discretionary medical costs, rather than a
specified health care benefits package with open-ended costs.74 As noted, outsourcing
health care plan administration and employee assistance and counseling to outside
companies for a fee are other options.75 Many employers reduce subsidized health
benefits for their future retirees.76 Small firms are joining benefits purchasing alliances,
banding together to purchase health care benefits. Other employers are encouraging
medical tourism, which means asking employees to have non-urgent medical proce-
dures abroad, where costs are lower.77 One simple method is just to ensure that any
dependents enrolled are actually eligible for coverage.78

Long-Term Care
With baby-boomers in their 60s, long-term care insurance for things like nursing
assistance to former employees in their old age is a key employee benefit. The Health
Insurance Portability and Accountability Act of 1996 lets employers and employees
438 PART 4 COMPENSATION

deduct the cost of long-term care insurance premiums from their annual income taxes,
making this benefit more attractive.79 Employers can also provide insurance benefits for
several types of long-term care, such as adult day care, assisted living, and custodial care.

Life Insurance
In addition to hospitalization and medical benefits, most employers provide group life
insurance plans. Employees can usually obtain lower rates in a group plan. And group
plans usually accept all employees including new, nonprobationary ones regardless
of health or physical condition.
In general, there are three key personnel policies to address: the benefits-paid
schedule (the amount of life insurance benefits is usually tied to the employee s
annual earnings), supplemental benefits (continued life insurance coverage after
retirement, for instance), and financing (the amount and percent the employee
contributes).
Accidental death and dismemberment coverage provides a lump-sum benefit in
addition to life insurance benefits when death is accidental. It also provides benefits in
case of accidental loss of limbs or sight.

Benefits for Part-Time and Contingent Workers

About 19 million people work part-time (less than 35 hours a week). The recession,
more phased retirements, a desire to better balance work and family life, and more
women in the workforce help explain this phenomenon. In any case, most firms
provide holiday, sick leave, and vacation benefits to part-timers, and more than 70%
offer some form of health care benefits to them.80 Again, employers should take care
to not misclassify part-timers as independent contractors. 81

3 Discuss the main retirement

RETIREMENT BENEFITS
benefits. The first contingent of baby-boomers turned 65 in 2011, and many didn t wait until
then to retire. This presents two challenges for employers. First (as we explained
in Chapter 10, Employee Retention), employers are taking steps to entice older workers
to keep working in some capacity.82 Second, retirement funding is a big issue. We ll
focus here on retirement benefits, including federal Social Security and employer
pension/retirement plans like the 401(k).

Social Security
Most people assume that Social Security provides income only when they are older
than 62, but it actually provides three types of benefits. The familiar retirement benefits
provide an income if you retire at age 62 or thereafter and are insured under the Social
Security Act. Second are survivor s or death benefits. These provide monthly payments
to your dependents regardless of your age at death, again assuming you are insured
under the Social Security Act. Finally, there are disability payments. These provide
monthly payments to employees who become disabled totally (and to their dependents)
if they meet certain requirements. The Social Security system also administers
the Medicare program, which provides health services to people age 65 or older.
Full retirement age for non-discounted social security benefits traditionally was 65
the usual age for retirement. It is now 67 for those born in 1960 or later.83
A tax on the employee s wages funds Social Security (technically, Federal Old Age
and Survivor s Insurance ). As of 2011, the maximum amount of earnings subject to
Social Security tax was $106,800; the employer pays 6.2% and the employee pays 4.2%.84

Pension Plans
Pension plans provide income to individuals in their retirement, and just over half of
full-time workers participate in some type of pension plan at work.
 CHAPTER 13 BENEFITS AND SERVICES 439

We can classify pension plans in three basic ways: contributory versus noncon-
tributory plans, qualified versus nonqualified plans, and defined contribution versus
defined benefit plans.85 The employee contributes to the contributory pension plan,
while the employer makes all contributions to the noncontributory pension plan.
Employers derive certain tax benefits (such as tax deductions) for contributing to
qualified pension plans (they are qualified for preferred tax treatment by the IRS);
nonqualified pension plans get less favorable tax treatment. (As with all pay plan
components, employers should ensure retirement benefits support their strategic
needs. For example set guiding principles such as assist in attracting employees and
assist in retaining knowledgeable employees. )86
With defined benefit plans, the employee s pension is specified or defined
ahead of time. Here the person knows ahead of time the pension benefits he or she
will receive. How is this possible? There is usually a formula that ties the person s
pension to (1) a percentage of (2) the person s pre-retirement pay (for example, to an
average of his or her last 5 years of employment), multiplied by (3) the number of
years he or she worked for the company. Due to tax law changes and other reasons,
defined benefit plans now represent a minority of pension benefit plans.87
Defined contribution plans specify ( define ) what contribution the employee
and employer will make to the employee s retirement or savings fund. Here the
contribution is defined, not the pension. With a defined benefit plan, the employee can
compute what his or her retirement benefits will be upon retirement. With a defined
contribution plan, the person only knows for sure what he or she is contributing to the
pension plan; the actual pension will depend on the amounts contributed to the fund
and on the success of the retirement fund s investment earnings. Defined contribution
plans are popular among employers today due to their relative ease of administration,
favorable tax treatment, and other factors. Portability making it easier for employees
who leave the firm prior to retirement to take their accumulated pension funds with
them is easier with defined contribution plans.

401(K) PLANS The most popular defined contribution plans are based on section
401(k) of the Internal Revenue Code, and called 401(k) plans. The employee author-
izes the employer to deduct a sum from his or her paycheck before taxes, and to invest
it in the bundle of investments in his or her 401(k). The deduction is pretax, so the
employee pays no tax on those dollars until after he or she retires (or removes
the money from the 401(k) plan). The person can decide to deduct any amount up
to the legal maximum (the IRS sets an annual dollar limit now about $15,000). The
employer arranges, usually with an investment company such as Fidelity Investments,
to administer the 401(k) plan and to make investment options available to the plan.
The options typically include mutual stock funds and bond funds. As the recent
downturn intensified, more employees made hardship withdrawals from their
401(k) plans (on which no taxes are due, for a time).88
Employers must choose their 401(k) providers with care. The employer has a fidu-
ciary responsibility to its employees; it must monitor the fund and its administration.89

group life insurance pension plans portability

Provides lower rates for the employer Plans that provide a fixed sum when Instituting policies that enable employees
or employee and includes all employees, employees reach a predetermined retirement to easily take their accumulated pension
including new employees, regardless age or when they can no longer work due funds when they leave employer.
of health or physical condition. to disability.
401(k) plan
Social Security defined benefit plan A defined contribution plan based on section
Federal program that provides three types A plan that contains a formula for 401(k) of the Internal Revenue Code.
of benefits retirement income at the age of 62 determining retirement benefits.
and thereafter, survivor s or death benefits
payable to the employee s dependents defined contribution plan
regardless of age at time of death, and A plan in which the employer s contribution
disability benefits payable to disabled to employees retirement savings funds
employees and their dependents. These is specified.
benefits are payable only if the employee
is insured under the Social Security Act.
440 PART 4 COMPENSATION

Firms such as Vanguard, Fidelity,

and others can establish online,
fully Web-based 401(k) plans
even for small firms with
10 to 50 employees.

Source: Fotolia LLC.

Furthermore, changing 401(k) providers can be grueling. 90 In addition to trustwor-

thiness, the 401(k) plan provider should make it easy to enroll and participate in the
plan.91 Firms such as Vanguard, Fidelity, and others can establish Web-based 401(k)
plans with online tools such as an asset allocation planner even for small firms.
It s also crucial that employers monitor 401(k) housekeeping issues. For example, the
IRS recently reported the top 10 most common violations that 401(k) plans encounter,
including late deposits and incorrect employer matching contributions.92
Under the Pension Protection Act of 2006, employers who sponsor plans that
facilitate both automatic enrollment and allocation to default investments (such as
age-appropriate lifestyle funds ) reduce their compliance burdens.93 Post-2008
stories, like that of David, a 47-year-old engineer, suggest prudence. His adviser said
that if we saved very aggressively, I might be able to retire in my early 70s. Such
experiences underscore the need for employee education, or perhaps directing funds
into (relatively) prudent default investments.94

OTHER DEFINED CONTRIBUTION PLANS The 401(k) plan is one example of a

savings and thrift plan.95 In any savings and thrift plan, employees contribute a
portion of their earnings to a fund, and the employer usually matches this contribution
completely or in part.
As discussed in Chapter 12 (Incentives), employers use a deferred profit-
sharing plan to contribute a portion of their profits in cash to a pension fund,
regardless of the level of employee contribution (income taxes on those contribu-
tions are deferred until the employee retires or leaves the employer). An employee
stock ownership plan (ESOP) is a qualified, tax-deductible defined contribution
plan in which employers contribute stock to a trust for eventual use by employees
who retire.

CASH BALANCE PENSION PLANS One problem with defined benefits plans is
that to get your maximum pension, you generally must stay with your employer
until you retire the formula, recall, takes the number of years you work into
consideration. With defined contribution plans, your pension is more portable you
can leave with it at any time, perhaps rolling it over into your next employer s
pension plan. Without delving into all the details, cash balance plans are a hybrid;
they have defined benefit plans more predictable benefits, but the portability advan-
tages of defined contribution plans.96 The employer contributes a percentage of
employees current pay to the employees pension plans every year, and employees
earn interest on this amount.97
 CHAPTER 13 BENEFITS AND SERVICES 441

Pension Planning and the Law

No one wants to wake up and discover that his or her pension has vanished. Therefore,
federal laws regulate pension planning and administration. As a rule, it is impossible to
formulate a plan without expert help.
The Employee Retirement Income Security Act of 1975 (ERISA) is the basic law.
It requires that employers have written pension plan documents and adhere to certain
guidelines, such as regarding who is eligible for the employer s plan.98 ERISA protects
the employer s pension or health plans assets by requiring that those who control the
plans act responsibly. The Department of Labor says that the primary responsibility
of fiduciaries is to run the plan solely in the interest of participants and beneficiaries.
Other laws are pertinent. Employers (and employees) want their pension contri-
butions to be qualified, or tax deductible, so they must adhere to the pertinent
income tax codes. Under labor relations laws, the employer must let its unions partici-
pate in pension plan administration. The Job Creation and Worker Assistance Act
provides guidelines regarding what rates of return employers should use in computing
their pension plan values.

PBGC ERISA established the Pension Benefits Guarantee Corporation (PBGC)

to oversee and insure a pension if a plan terminates without sufficient funds.
The PBGC guarantees only defined benefit plans, not defined contribution plans.
Furthermore, it will only pay an individual a pension of up to a maximum of about
$54,000 per year for someone 65 years of age with a plan terminating in 2011.99
So, high-income workers may still see most of their expected pensions evaporate
if their employers go bankrupt.

MEMBERSHIP REQUIREMENTS When does the employee become eligible for a

pension? Under the Tax Reform Act of 1986, an employer can require that an
employee complete a period of no more than 2 years service to the company before
becoming eligible to participate in the plan. However, if it requires more than 1 year
of service before eligibility, the plan must grant employees full and immediate vesting
rights at the end of that period.

VESTING Vested funds are the money employer and employee have placed in the
latter s pension fund that cannot be forfeited for any reason. The employees contri-
butions are always theirs, of course. However, until the passage of ERISA, the
employers contribution in many pension plans didn t vest until the employee retired.
So, you could have worked for a company for 30 years and been left with no pension
if the company went bust 1 year before you were to retire. That generally can t happen
today, given the PBGC s guarantees.
Employers can choose one of two minimum vesting schedules (employers can
allow funds to vest faster if they wish). With cliff vesting, the period for acquiring a
nonforfeitable right to employer matching contributions (if any) is 3 years. So, the
employee must have nonforfeitable rights to these funds by the end of 3 years. With the

savings and thrift plan cash balance plans Pension Benefits Guarantee
Plan in which employees contribute a portion Plans under which the employer contributes Corporation (PBGC)
of their earnings to a fund; the employer a percentage of employees current pay Established under ERISA to ensure that
usually matches this contribution in whole to employees pension plans every year, pensions meet vesting obligations; also
or in part. and employees earn interest on this amount. insures pensions should a plan terminate
without sufficient funds to meet its vested
deferred profit-sharing plan Employee Retirement Income Security Act obligations.
A plan in which a certain amount of profits (ERISA)
is credited to each employee s account, Signed into law by President Ford in 1974
payable at retirement, termination, or death. to require that pension rights be vested
and protected by a government agency,
employee stock ownership plan (ESOP) the PBGC.
A qualified, tax-deductible stock bonus plan
in which employers contribute stock to a
trust for eventual use by employees.
442 PART 4 COMPENSATION

second (graded vesting) option, pension plan participants must receive nonforfeitable
rights to the matching contributions as follows: 20% after 2 years, and then 20% for
each succeeding year, with a 100% nonforfeitable right by the end of 6 years.

Pensions and Early Retirement

To trim their workforces or for other reasons, some employers are encouraging employees
to retire early. Many of these plans take the form of early retirement window arrange-
ments for specific employees (often age 50*). The window means that for
a limited time, the employees can retire early. The financial incentive is generally a
combination of improved or liberalized pension benefits plus a cash payment.
Early retirement programs can backfire for two reasons. Some are too successful.
When Verizon Communications offered enhanced pension benefits to encourage
what it hoped would be 12,000 employees to retire, more than 21,000 took the plan.
Verizon had to replace 16,000 managers.100
Discrimination is the other potential problem. Unless structured properly, older
employees can challenge early retirement programs as de facto ways for forcing them
to retire against their will. Although it is generally legal to use incentives to encourage
individuals to choose early retirement, the employee s decision must be voluntary.
The Older Workers Benefit Protection Act (OWBPA) imposes limitations. The
employee s waiver must be knowing and voluntary, and give the employee ample time
to think over the agreement and to seek legal advice, among other things.

Improving Productivity through HRIS

Online Benefits Management Systems
Left un-automated, benefits administration can require the employer to devote
hundreds of human resource professionals hours to answering employees questions
about comparative benefits and updating employees benefits information.101
Typical employee questions include, In which option of the medical plan am
I enrolled? and If I retire in 2 years, what will be my monthly retirement income?
Tasks like that cry out for online self-service benefits management applications.

BENELOGIC For example, when the organization that assists Pennsylvania school
districts with their insurance needs decided to help the school boards automate their
benefits administration, they chose a company called Benelogic.102 The solution,
called the Employee Benefit Electronic Service Tool, lets users manage all aspects
of benefits administration, including enrollment, plan descriptions, eligibility, and
premium reconciliation, via their browsers.103
Benelogic hosts and maintains the Web support application on its own servers,
and creates customized, Web-based applications for each school district. The system
facilitates Web-based employee benefit enrollment, and provides centralized call
center support for benefit-related questions. It even handles benefits-related payroll,
HRIS, and similar functions by collaborating with companies like ADP (for payroll)
and Oracle PeopleSoft (which services many of the school boards human resource
information systems). Each school board employee accesses the Benelogic site via a
link on his or her own board s Web site.

BENEFITS WEB SITES Employers everywhere are adding new services to their
own benefits Web sites. In addition to offering things like self-enrollment, the insur-
ance company USAAs Web site (www.usaa.com) helps employees achieve better work
life balance. For example, click on the today, I m feeling . . . menu. Here employees
can respond to a list of words (such as stressed ). From there, they see suggestions
for dealing with (in this case) stress. Go to my child is behaving badly, and the
employee gets access to resources like guide to addressing child behavior prob-
lems. 104 Boeing s Pay & Benefits Profile site gives employees real-time information
about their salary and bonuses, benefits, pension, and even special services such as
child care referrals.105
 CHAPTER 13 BENEFITS AND SERVICES 443

4 Outline the main employees

PERSONAL SERVICES AND FAMILY-FRIENDLY
services benefits. BENEFITS
Although time off, insurance, and retirement benefits account for the lion s share
of benefits costs, most employers also provide various services benefits. These include
personal services (such as legal and personal counseling), family-friendly services
(such as child-care facilities), educational subsidies, and executive perquisites (such as
company cars for its executives).

Personal Services
Many employers provide access to the sorts of personal services that employees some-
times need. These include credit unions, legal services, counseling, and social and
recreational opportunities. (Some employers use the term voluntary benefits to cover
personal services benefits that range from things like pet insurance to automobile
insurance.106) We ll look at a few of these.

EMPLOYEE ASSISTANCE PROGRAMS Employee assistance programs

(EAPs) provide counseling and advisory services, such as personal legal and financial
services, child and elder care referrals, adoption assistance, mental health counseling,
and life event planning.107 EAPs are increasingly popular, with more than 60%
of larger firms offering such programs. One study found that personal mental health
was the most common problem addressed by employee assistance programs, followed
by family problems.108
For employers, EAPs produce advantages, not just costs. For example, sick family
members and problems like depression account for many of the sick days employees
take. Employee assistance programs can reduce such absences by providing expert
advice on issues like elder care referrals.109 Few but the largest employers establish their
own EAPs. Most contract for the necessary services with vendors such as Magellan
Health Services and CIGNA Behavioral Health.110
In either case, employers and managers need to keep several issues in mind. Everyone
involved with the EAP, including supervisors, secretaries, and support staff, must
understand the importance of confidentiality. Also, ensure files are locked, access is limited
and monitored, and identifying information is minimized. Be aware of legal issues.
For example, in most states counselors must disclose suspicions of child abuse to state
agencies. Define the program s purpose, employee eligibility, the roles and responsibilities
of EAP and employer personnel, and procedures for using the plan. And ensure the
vendors you use fulfill professional and state licensing requirements.

Family-Friendly (Work Life) Benefits

Several trends have changed the benefits landscape. There are more households where
both adults work, more one-parent households, more women in the workforce, and
more workers older than age 55. And, there s the time bind people working more,
without the time to do all they d like to do. The issues involve working men, as well as
women.111
These pressures have led many employers to bolster their family-friendly
(or work life) benefits. (The number of Americans who have never married is rising,
and the newer work life benefits terminology recognizes the need to improve all
employees work life situations, not just those with families.)112 These benefits include
child care, elder care, fitness facilities, and flexible work schedules benefits that help
employees balance their family and work lives.113 We ll look at some examples.

early retirement window employee assistance program (EAP) family-friendly (or work life) benefits
A type of offering by which employees are A formal employer program for providing Benefits such as child care and fitness
encouraged to retire early, the incentive employees with counseling and/or treatment facilities that make it easier for
being liberal pension benefits plus perhaps programs for problems such as alcoholism, employees to balance their work
a cash payment. gambling, or stress. and family responsibilities.
444 PART 4 COMPENSATION

Software giant SAS Institute,

Inc., offers generous employee
benefits. The North Carolina
firm keeps turnover at 4% in an
industry where 20% is typical,
partly by offering family-friendly
benefits like paid maternity
leave, day care on site,
lunchtime piano concerts,
massages, and yoga classes
like this one.
Source: Fotolia LLC.

SUBSIDIZED CHILD CARE Fulfilling work responsibilities while raising a family

is a challenge, particularly for single parents. Most working people make private pro-
visions to take care of their children. For example, relatives accounted for 48% of all
child care providers in one study.114 Organized day care centers accounted for
another 30% of child care arrangements, and nonrelatives accounted for most of the
remaining arrangements.
Employers who want to reduce the distractions associated with finding reliable
child care can help in various ways. Some employers simply investigate the day care
facilities in their communities and recommend certain ones to employees. Other
employers set up company-sponsored and subsidized day care facilities, both to
attract employees and to reduce absenteeism. For example, Abbott Laboratories built
a $10 million child care center at its headquarters north of Chicago, daytime home
to about 400 children of Abbott employees.115
By establishing subsidized day care, employers assumedly can benefit in several
ways. These include improved recruiting results, lower absenteeism, improved
morale, favorable publicity, and lower turnover. But, good planning is required. This
often starts with a questionnaire to employees to answer questions like, What would
you be willing to pay for care for one child in a child care center near work?
SICK CHILD BENEFITS One study found that unexpected absences climbed to about
2.4% of payroll hours recently, with a cost per absence to employers of about $700 per
episode (for temp employees and reduced productivity, for instance). More employers are
thus offering emergency child care benefits, for example, when a young child s regular
babysitter is a no-show. Texas Instruments built a Web database its employees use to find
last-minute child care providers. Others, like Canadian financial services company CIBC,
are expanding their on-site child care centers to handle last-minute emergencies.116
ELDER CARE The responsibility for caring for an aging relative can affect
the employee s performance.117 One study found that, to care for an older relative,
64% of employees took sick days or vacation time, 33% decreased work hours, 22%
took leaves of absence, 20% changed their job status from full- to part-time, 16% quit
their jobs, and 13% retired early. One survey found that about 120 million Americans
are now caring for or in the past cared for an adult relative or friend.118
So, more employers are providing elder care services. For example, the United Auto
Workers and Ford Motor Company provide elder care referral services for Ford s salaried
employees. The service provides a detailed assessment of the elderly relative s needs and
recommendations on the care that would be best.119 The National Council on Aging has
a Web site to help elders and caregivers find benefit programs: www.benefitscheckup.org.
 CHAPTER 13 BENEFITS AND SERVICES 445

FAMILY-FRIENDLY BENEFITS AND THE BOTTOM LINE It s not easy to

evaluate the profitability of such programs. The costs are clear. For example, a few
years ago Aetna found it saved $400,000 just by making employees at its Blue Bell,
Pennsylvania, office buy their own coffee and tea.120
Measuring the program s positive consequences isn t so simple. Family-friendly
firms such as SAS routinely turn up on best companies to work for lists. This almost
undoubtedly makes it easier to recruit and retain good employees. Employees may
even willingly forego somewhat higher pay for services like built-in day care. And
some of the advantages to the employer are indirect. For example, employees who
experience work family conflict may experience anger that affects performance, a
situation family-type benefits may improve.121
The bottom line is that employers are carefully reviewing these benefits. Even Google,
long known for offering benefits that blow almost every other employer s away (free buses
from the city, on-campus day care, and restaurants) has been cutting back of late.

Other Job-Related Benefits

Employers provide various other job-related benefits. Some provide subsidized
employee transportation, such as increased mileage allowances or mass transit
discounts.122 Google s Web site lists benefits such as adoption assistance, the Google
Child Care Center, free shuttle service from San Francisco, on-site dry cleaning,
backup child care assistance, and on-site physician and dental care. Home Depot offers
a nose to tail coverage pet health insurance program. Ben & Jerry s gives employees
three pints of ice cream to take home every day.

EDUCATIONAL SUBSIDIES Educational subsidies such as tuition refunds are

popular benefits. Payments range from all tuition and expenses down to a flat limit
of several hundred dollars per year. One survey found that about 72% of the
579 employers surveyed paid for college courses related to an employee s present job.
Many employers also reimburse non job-related courses (such as a Web designer
taking an accounting class) that pertain to the company business.123 Many employers
provide college programs, taught on the employer s premises. We ve seen that other
educational programs include remedial work in basic literacy.
The problem is that you may be paying your best employees to leave. Researchers
studied how employer-sponsored part-time college education reimbursements
influenced job mobility. They focused on the U.S. Navy s tuition assistance program.
Taking tuition assistance significantly decreased the probability the person stayed
in the Navy.124

DOMESTIC PARTNER BENEFITS When employers provide domestic partner

benefits to employees, it generally means that employees same-sex or opposite-sex
domestic partners are eligible to receive the same benefits (health care, life insurance,
and so forth) as do the husbands, wives, or legal dependents of the firm s other
employees.125 For example, Northrop Grumman Corp. extends domestic partner
benefits to the 9,500 salaried workers at its Newport News shipyard.126

Executive Perquisites
When you reach the pinnacle of the organizational pyramid or close to the top
you will find, waiting for you, the Executive Perk. Perquisites (perks, for short) usually
only go to top executives. Perks can range from substantial (company planes)
to relatively insignificant (private bathrooms).
Most perks fall between these extremes. These include management loans (which
typically enable senior officers to exercise their stock options); financial counseling
(to handle investments); and relocation benefits, often including subsidized mort-
gages, purchase of the executive s current house, and payment for the actual move.
As we noted in Chapter 11 (Strategic Pay Plans), publicly traded companies must now
itemize all executives perks (if they total more than $100,000).
446 PART 4 COMPENSATION

5 Explain the main flexible

FLEXIBLE BENEFITS PROGRAMS
benefit programs. Employees prefer choice in their benefits plans. In one survey of working couples, 83%
took advantage of flexible hours (when available); 69% took advantage of the flexible-
style benefits we ll discuss next; and 75% said that they prefer flexible benefits plans.127
The online job listing service Jobtrak.com asked college students and recent graduates,
Which benefit do you desire most? Thirty-five percent sought flexible hours; 19%,
stock options; 13%, more vacation time; and 12%, a better health plan. Most of the
preferred benefits had to do with lifestyle issues rather than financial ones.128
Given this, it is prudent to survey employees benefits preferences, perhaps using
a form like that in Figure 13-5. In any case, employers should provide for choice when
designing benefits plans.

The Cafeteria Approach

One way to provide a choice is with an aptly named cafeteria benefits plan. (Pay special-
ists use flexible benefits plan and cafeteria benefits plan synonymously.) A cafeteria
plan is one in which the employer gives each employee a benefits fund budget, and lets
the person spend it on the benefits he or she prefers, subject to two constraints. First,
the employer must of course limit the total cost for each employee s benefits package.
Second, each employee s benefits plan must include certain required items for
example, Social Security, workers compensation, and unemployment insurance.
Employees can often make midyear changes to their plans if, for instance, their
dependent care costs rise and they want to divert contributions.129 IRS regulations
require formal written plans describing the employer s cafeteria plan, including
benefits and procedures for choosing them.130
TYPES OF PLANS Cafeteria plans come in several varieties. To give employees
more flexibility in what benefits they use, about 70% of employers offer flexible spend-
ing accounts for medical and other expenses. This option lets employees pay for certain

FIGURE 13-5 Online Survey of

Employees Benefits Preferences

Source: http://data.grapevinesurveys.
com/survey.asp?sid=20062143964099,
accessed April 29, 2009.

(Continued)
 CHAPTER 13 BENEFITS AND SERVICES 447

FIGURE 13-5 (Continued)

benefits expenses with pretax dollars (so the IRS, in effect, subsidizes some of the
employee s expense). To encourage employees to use this option without laying out
cash, some firms are offering debit cards that employees can use at their medical
provider or pharmacy.131 Core plus option plans establish a core set of benefits (such as
medical insurance), which are usually mandatory for all employees. Beyond the core,
employees can then choose from various benefits options.132

Benefits and Employee Leasing

As we ll explain in Chapter 18, many businesses particularly smaller ones don t have
the resources or employee base to support the cost of many of the benefits we ve
discussed in this chapter. That s one big reason they turn to employee leasing.
In brief, employee leasing firms (also called professional employer organizations or
staff leasing firms) assume all or most of the employer s human resources chores.
In doing so, they also become the employer of record for the employer s employees,
by transferring them all to the employee leasing firm s payroll. The leasing firm thus
becomes the employees legal employer, and usually handles employee-related activi-
ties such as recruiting, hiring (with client firms supervisors approvals), and paying
taxes (Social Security payments, unemployment insurance, and so on).
Insurance and benefits are usually the big attraction. Even group rates for life or
health insurance can be quite high when only 20 or 30 employees are involved. That s
where the leasing firm comes in. Remember that the leasing firm is the legal employer
of your employees. The employees therefore are absorbed into a much larger insurable

flexible benefits plan/cafeteria

benefits plan
Individualized plans allowed by employers
to accommodate employee preferences
for benefits.
448 PART 4 COMPENSATION

group, along with other employers former employees. As a result, a small business
owner may be able to get insurance for its people that it couldn t otherwise afford.

Flexible Work Schedules

Flexible work schedules are increasingly popular.133 Single parents often find them
crucial for balancing work and family responsibilities. And for many millennial
employees, flexible work schedules provide a way to pursue their careers without
surrendering the quality of work life they desire. There are several flexible work
schedule options.

FLEXTIME Flextime is a plan whereby employees workdays are built around a core of
midday hours, such as 11:00 a.m. to 2:00 p.m. Workers determine their own starting
and stopping hours. For example, they may opt to work from 7:00 a.m. to 3:00 p.m.
or from 11:00 a.m. to 7:00 p.m. The number of employees in formal flextime
programs from 4% of operators to 17% of executive employees doesn t tell the
whole story. Many more employees, probably almost half, actually take advantage
of informal flexible work schedules.134 In practice, most employers hold fairly close to
the traditional 9:00 a.m. to 5:00 p.m. workday. Therefore, the effect of flextime for most
employees is to give them about 1 hour of leeway before 9:00 a.m. or after 5:00 p.m.

COMPRESSED WORKWEEKS Many employees, like airline pilots, do not work

conventional 5-day, 40-hour workweeks. Similarly, hospitals may want doctors and
nurses to provide continuing care to a patient, or manufacturers may want to reduce the
productivity lost whenever workers change shifts. Workers like these typically have
compressed workweek schedules. This means they work fewer days each week, but each
day they work longer hours. Nonconventional workweeks come in many flavors. Some
firms have 4-day workweeks, with four 10-hour days. Some workers in hospitals,
for instance work three 12-hour shifts, and then are off for the next 4 days.135

EFFECTIVENESS OF FLEXIBLE WORK SCHEDULE ARRANGEMENTS

Studies show that flexible work schedules have positive effects on employee produc-
tivity, job satisfaction, and employee absenteeism; the positive effect on absenteeism
was much greater than on productivity. Compressed workweeks positively affected
job satisfaction; absenteeism did not increase, and productivity was not positively
affected. Highly flexible programs were actually less effective than less flexible ones.136
Some experts argue that longer, 12-hour shifts may increase fatigue and accidents.
However, one report suggests 12-hour shifts can actually be safer, in some respects.
For example, 12-hour shifts reduce the general workplace confusion that often
occurs during shift changes, since there are fewer shift changes per day. To reduce
potential side effects, some employers install treadmills and exercise bikes, and special
light boxes that mimic daylight.

WORKPLACE FLEXIBILITY As anyone who has flown next to someone tapping

away on a laptop knows, employees are increasingly conducting business from non-
traditional settings, using technology like iPads and BlackBerry-type devices.137
Workplace flexibility means arming employees with the information technology
tools they need to get their jobs done wherever they are. For example, certain Capital
One Bank employees received mobile technology tools such as wireless access laptops
and BlackBerry-type cell phone devices. The program seems to have led to about a
41% increase in overall workplace satisfaction, a 31% reduction in time needed to get
input from peers, and a 53% increase in those who say their workplace enhances
group productivity.138

OTHER FLEXIBLE WORK ARRANGEMENTS Employers are taking other steps

to accommodate employees scheduling needs. Job sharing allows two or more people
to share a single full-time job. For example, two people may share a 40-hour-per-week
job, with one working mornings and the other working afternoons. About 22% of the
 CHAPTER 13 BENEFITS AND SERVICES 449

firms questioned in one survey indicated that they allow job sharing.139 Job sharing
can be particularly useful for retirement-aged employees. It allows them to reduce
their hours while enabling the company to retain their expertise.140 Work sharing
refers to a temporary reduction in work hours by a group of employees during
economic downturns as a way to prevent layoffs. Thus, 400 employees may all agree
to work (and be paid for) only 35 hours per week, to avoid a layoff of 30 workers.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Because benefits are so important to employees, it s Severance pay is a one-time payment some
important that all managers understand the benefits employers provide when terminating an employee.
picture today. In addition to the fact that benefits are
3. Most employers also provide a number of required or
very important to employees, the other big issue, of
voluntary insurance benefits. Workers compensation
course, is that benefits in general and health care costs in
laws aim to provide sure, prompt medical benefits to
particular are rising very fast. About 78% of employees
work-related accident victims or their dependents,
cite health care benefits as most crucial to retaining
regardless of fault. Hospitalization, health, and disability
them.
insurance costs are rising fast, and most employer health
2. Employers provide numerous pay for time not worked
plans provide at least basic hospitalization and surgical
benefits.
and medical insurance for eligible employees. Many
Unemployment insurance provides benefits if a employers provide these plans via preferred provider
person is unable to work due to some fault other organizations or health management organizations.
than his or her own. To avoid unnecessary When an employee is terminated or terminates his or her
unemployment taxes, the main rule is to keep a employment, it is essential that the employer make the
list of written warnings. person aware of his or her COBRA rights. The basic over-
American workers tend to get about 9 days of leave all trend in health care cost control is to take steps (for
after 1 year of employment. instance, in terms of communication and empowerment,
Sick pay provides pay to an employee when he or health savings accounts, and claims audits) to try to keep
she is out of work because of illness. Minimizing sick the rising cost of health care insurance under control.
leave pay is important, and here cost reduction 4. Particularly with stock markets volatile, retirement
tactics include repurchasing unused sick leave benefits are important to employees today. Social Secu-
or simply using paid leave plans that lump sick leave, rity is a federal program that provides retirement income
vacation, and holidays into one leave pool. at the age of 62 and thereafter, as well as other benefits.
In formulating parental leave policies, the employer Many employers make available pension plans; these
needs to keep in mind the Family and Medical Leave provide an income when employees reach retirement age
Act, which requires larger employers to provide up or when they can no longer work due to disability.
to 12 weeks of unpaid leave for family-related issues, Defined benefit plans contain a formula for determining
and the Americans with Disabilities Act. retirement benefits, while defined contribution plans

flextime workplace flexibility work sharing

A work schedule in which employees Arming employees with the information Refers to a temporary reduction in work
workdays are built around a care of midday technology tools they need to get their hours by a group of employees during
hours, and employees determine, within jobs done wherever they are. economic downturns as a way to prevent
limits, what other hours they will work. layoffs.
job sharing
compressed workweek Allows two or more people to share a single
Schedule in which employee works fewer full-time job.
but longer days each week.
450 PART 4 COMPENSATION

are plans in which the contribution to employees unions, employee assistance programs, and subsidized
retirement savings plans is specified. 401(k) plans are child care and elder care.
perhaps the most well-known of the latter, and are based 6. Employees prefer choice in their benefits plans, so flexible
on section 401(k) of the Internal Revenue Code. The benefits programs are important. Flexible benefits or cafe-
Employee Retirement Income Security Act of 1975 teria benefits plans are individual plans that accommodate
requires that employers have written pension plan employee preferences for benefits. Some employers turn to
documents, and established the Pension Benefits employee leasing companies to capitalize on the advantage
Guarantee Corporation to oversee employers pension of the leasing firm s large employee base to get better
plans. Key pension policy issues include membership employee benefits for their employees. Employers also are
requirements and testing. implementing various types of flexible work schedules,
5. Most employers also provide various personal services including flextime, compressed workweeks, and other
and family-friendly benefits. These include credit flexible work arrangements such as job sharing.

DISCUSSION QUESTIONS
1. You are applying for a job as a manager and are at the dismissed employees? Explain how you would go
point of negotiating salary and benefits. What questions about minimizing your organization s unemployment
would you ask your prospective employer concerning insurance tax.
benefits? Describe the benefits package you would try to 3. Explain how ERISA protects employees pension rights.
negotiate for yourself. 4. What is portability ? Why do you think it is (or isn t)
2. What is unemployment insurance? Is an organiza- important to a recent college graduate?
tion required to pay unemployment benefits to all 5. What are the main provisions of the FMLA?

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, research the unem- list of other benefits you believe it should offer, along
ployment insurance rate and laws of your state. Write a with your reasons for suggesting them.
summary detailing your state s unemployment laws. 4. The HRCI Test Specifications Appendix (pages
Assuming Company X has a 30% rate of annual person- 633 640) lists the knowledge someone studying for the
nel terminations, calculate Company X s unemployment HRCI certification exam needs to have in each area of
tax rate in your state. human resource management (such as in Strategic
2. Assume you run a small business. Working individually Management, Workforce Planning, and Human
or in groups, visit the Web site www.dol.gov/elaws. See Resource Development). In groups of four to five
the Small Business Retirement Savings Advisor. Write a students, do four things: (1) review that appendix now;
2-page summary explaining: (1) the various retirement (2) identify the material in this chapter that relates to
savings programs available to small business employers, the required knowledge the appendix lists; (3) write
and (2) which retirement savings program you would four-multiple choice exam questions on this material
choose for your small business and why. that you believe would be suitable for inclusion in the
3. You are the HR consultant to a small business with HRCI exam; and (4) if time permits, have someone
about 40 employees. Now the firm offers only 5 days of from your team post your team s questions in front of
vacation, 5 paid holidays, and legally mandated benefits the class, so the students in other teams can take each
such as unemployment insurance payments. Develop a others exam questions.

EXPERIENTIAL EXERCISE
Revising the Benefits Package
Purpose: The purpose of this exercise is to provide How to Set Up the Exercise/Instructions:
practice in developing a benefits package for a small Divide the class into groups of four or five students. Your
business. assignment is as follows: Maria Cortes runs a small personnel
Required Understanding: Be very familiar with the material recruiting office in Miami and has decided to start offering an
presented in this chapter. In addition, review Chapter 11 to expanded benefits package to her 25 employees. At the current
reacquaint yourself with sources of compensation survey time, the only benefits are 7 paid holidays per year and 5 sick
information, and come to class prepared to share with your days per year. In her company, there are 2 other managers, as
group the benefits package for the small business in which well as 17 full-time recruiters and 5 secretarial staff members.
you work or in which someone with whom you re familiar In the time allotted, your group should create a benefits
works. package in keeping with the size and requirements of this firm.
 CHAPTER 13 BENEFITS AND SERVICES 451

APPLICATION CASE
STRIKING FOR BENEFITS
By February 2004, the strike by Southern California grocery It was a difficult situation for all the parties involved. For
workers against the state s major supermarket chains was the grocery chain employers, skyrocketing health care costs
almost 5 months old. Because so many workers were striking were undermining their competitiveness; the current
(70,000), and because of the issues involved, unions and employees feared any step down the slippery slope that
employers across the country were closely following the nego- might eventually mean cutting their own health benefits.
tiations. Indeed, grocery union contracts were set to expire in The unions didn t welcome a situation in which they d end
several cities later in 2004, and many believed the California up representing two classes of employees, one (the existing
settlement assuming one was reached would set a pattern. employees) who had excellent health insurance benefits, and
The main issue was employee benefits, and specifically another (newly hired employees) whose benefits were rela-
how much (if any) of the employees health care costs the tively meager, and who might therefore be unhappy from the
employees should pay themselves. Based on their existing moment they took their jobs and joined the union.
contract, Southern California grocery workers had unusu-
ally good health benefits. For example, they paid nothing Questions
toward their health insurance premiums, and paid only $10 1. Assume you are mediating this dispute. Discuss five creative
co-payments for doctor visits. However, supporting these solutions you would suggest for how the grocers could re-
excellent health benefits cost the big Southern California duce the health insurance benefits and the cost of their total
grocery chains over $4 per hour per worker. benefits package without making any employees pay more.
The big grocery chains were not proposing cutting 2. From the grocery chains point of view, what is the down-
health care insurance benefits for their existing employees. side of having two classes of employees, one of which
Instead, they proposed putting any new employees hired has superior health insurance benefits? How would you
after the new contract went into effect into a separate suggest they handle the problem?
insurance pool, and contributing $1.35 per hour for their 3. Similarly, from the point of view of the union, what are the
health insurance coverage. That meant new employees downsides of having to represent two classes of employees,
health insurance would cost each new employee perhaps and how would you suggest handling the situation?
$10 per week. And, if that $10 per week weren t enough to
cover the cost of health care, then the employees would Source: Based on Settlement Nears for Southern California Grocery Strike,
have to pay more, or do without some of their benefits. Knight-Ridder/Tribune Business News, February 26, 2004, item 04057052.

CONTINUING CASE
CARTER CLEANING COMPANY
The New Benefit Plan of these holidays, while at other times employees who had
Carter Cleaning Centers has traditionally provided only been with the firm for 6 months or more had been paid for
legislatively required benefits for its employees. These include only half a day. Jennifer knows that this policy must be made
participation in the state s unemployment compensation more consistent.
program, Social Security, and workers compensation (which She also wonders whether it would be advisable to estab-
is provided through the same insurance carrier that insures lish some type of day care center for the employees children.
the stores for such hazards as theft and fire). The principals of She knows that many of the employees children have either
the firm Jack, Jennifer, and their families have individual, no place to go during the day (they are preschoolers) or have
family-supplied health and life insurance. no place to go after school, and she wonders whether a
Jennifer can see several potential problems with the benefit such as day care would be in the best interests of
company s policies regarding benefits and services. One is the company.
turnover. She wants to do a study to determine whether similar
companies experiences with providing health and life insurance
benefits suggest they enable these firms to reduce employee Questions
turnover and perhaps pay lower wages. Jennifer is also con- 1. Draw up a policy statement regarding vacations, sick
cerned with the fact that her company has no formal policy leave, and paid days off for Carter Cleaning Centers.
regarding vacations or paid days off or sick leave. Informally, 2. What would you tell Jennifer are the advantages and
at least, it is understood that employees get 1 week s vacation disadvantages to Carter Cleaning Centers of providing
after 1 year s work, but in the past the policy regarding paid its employees with health, hospitalization, and life
vacations for days such as New Year s Day and Thanksgiving insurance programs?
Day has been very inconsistent. Sometimes employees who 3. Would you advise establishing some type of day care center
had been on the job only 2 or 3 weeks were paid fully for one for the Carter Cleaning employees? Why or why not?
452 PART 4 COMPENSATION

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Benefits Plan Lisa knew there were several things she wanted to
The Hotel Paris s competitive strategy is To use superior guest accomplish with this plan. She wanted a plan that con-
service to differentiate the Hotel Paris properties, and to tributed to improved employee morale and commitment.
thereby increase the length of stay and return rate of guests, and She also wanted the plan to include elements that made it
thus boost revenues and profitability. HR manager Lisa Cruz easier for her employees to do their jobs so that, as she put
must now formulate functional policies and activities that sup- it, they could come to work and give their full attention to
port this competitive strategy by eliciting the required employee giving our guests great service, without worrying about child
behaviors and competencies. care and other major family-oriented distractions.
Although the Hotel Paris s benefits (in terms of things One of the metrics Lisa and her team specifically wanted
like holidays and health care) were comparable to those of to address was the relatively high absence rate at the
other hotels, Lisa Cruz knew they weren t good enough to Hotel Paris. Because so many of these jobs are front-line
support the high-quality service behaviors her company jobs valets, limousine drivers, and front-desk clerks, for
sought. Indeed, the fact that they were roughly comparable instance it s impossible to do without someone in the
to those of similar firms didn t seem to impress the Hotel position if there is absence. As a result, poor attendance had a
Paris s employees, at least 60% of whom consistently said particularly serious effect on metrics such as overtime pay
they were deeply dissatisfied with the benefits they were and temporary help costs. At the urging of her compensation
getting. Lisa s concern (with which the CFO concurred) was consultant, Lisa decided to look into a system similar to
that dissatisfaction with benefits contributed to morale and Marriott s BENETRADE. With this benefit program,
commitment being below what they should be, and thus to employees can trade the value of some sick days for other
inhibiting the Hotel Paris from achieving its strategic aims. benefits. As Lisa put it, I d rather see our employees using
Lisa therefore turned to the task of assessing and redesigning their sick day pay for things like additional health care
the company s benefits plans. benefits, if it means they ll think twice before taking a sick day
As they reviewed the numbers relating to their benefits to run a personal errand.
plan, Lisa Cruz and the CFO became increasingly concerned.
They computed several benefits-related metrics for their
firm, including benefits costs as a percentage of payroll, sick Questions
days per full-time equivalent employee per year, benefits 1. Because employers typically make benefits available to
cost/competitor s benefits cost ratio, and workers compensa- all employees, they may not have the motivational
tion experience ratings. The results, as the CFO put it, offered effects of incentive plans. Given this, list five employee
a good news bad news situation. On the good side, the behaviors you believe Hotel Paris could try to improve
ratios were generally similar to those of most competing through an enhanced benefits plan, and explain why you
hotels. The bad news was that the measures were strikingly chose them.
below what they were when compared with the results for 2. Given your answer to question 1, explain specifically
high-performing service-oriented businesses. The CFO what benefits you would recommend the Hotel Paris
authorized Lisa to design and propose a new benefits plan. implement to achieve these behavioral improvements.

KEY TERMS
benefits, 424 Social Security, 438 Pension Benefits Guarantee
supplemental pay benefits, 425 pension plans, 438 Corporation (PBGC), 441
unemployment insurance defined benefit pension plan, 439 early retirement window, 442
(or compensation), 425 defined contribution pension employee assistance
sick leave, 427 plan, 439 program (EAP), 443
severance pay, 431 portability, 439 family-friendly (or work life)
401(k) plan, 439 benefits, 443
supplemental unemployment
benefits, 432 savings and thrift plan, 440 flexible benefits plan/cafeteria
benefits plan, 446
workers compensation, 432 deferred profit-sharing plan, 440
flextime, 448
health maintenance employee stock ownership
organization (HMO), 434 plan (ESOP), 440 compressed workweek, 448
preferred provider cash balance plans, 440 workplace flexibility, 448
organizations (PPOs), 434 Employee Retirement Income job sharing, 448
group life insurance, 438 Security Act (ERISA), 441 work sharing, 449
 CHAPTER 13 BENEFITS AND SERVICES 453

ENDNOTES
1. John Pletz, Workers, Go Home, Crain s 17. Making Up for Lost Time: How Employers periods of employment with the employer
Chicago Business 34, no. 8 (February 21, Can Curb Excessive Unscheduled Absences, to satisfy the 12-month requirement. See
2011), pp. 2, 14. BNA Human Resources Report, October 20, Daniel Ritter et al., Recent Developments
2. Based on Frederick Hills, Thomas 2003, p. 1097. See also W. H. J. Hassink et Under the Family and Medical Leave
Bergmann, and Vida Scarpello, Compen- al., Do Financial Bonuses Reduce Act, Compensation & Benefits Review,
sation Decision Making (Fort Worth, TX: Employee Absenteeism? Evidence from a September/October 2007, p. 33.
The Dryden Press, 1994), p. 424. See also Lottery, Industrial and Labor Relations 29. Gillian Flynn, Employers Need an
Fay Hansen, The Cutting Edge of Bene- Review 62, no. 3 (April 2009), pp. 327 342. FMLA Brush-Up, Workforce, April 1997,
fit Cost Control, Workforce, March 2003, 18. SHRM Benefits Survey Finds Growth in pp. 101 104. See also Worker Who Was
pp. 36 42; Crain s Benefits Outlook 2009, Employer Use of Paid Leave Pools, BNA Employee for Less Than One Year Can
www.crainsbenefits.com/news/survey- Bulletin to Management, March 21, 2002, Pursue FMLA Claim, Federal Court
finds-nearly-20-percent-of-employers- p. 89. Determines, BNA Fair Employment Prac-
plan-to-drop-health-benefits.php, 19. See M. Michael Markowich and Steve tices, April 26, 2001, p. 51.
accessed July 28, 2009. Eckberg, Get Control of the Absentee- 30. Workers Who Come and Go Under
3. Survey Finds 99 Percent of Employers Pro- Minded, Personnel Journal, March 1996, FMLA Complicate Attendance Policies,
viding Health-Care Benefits, Compensation pp. 115 120; Exploring the Pluses, Lawyer Says, BNA Bulletin to Management,
& Benefits Review, September/October Minuses, and Myths of Switching to Paid March 16, 2000, p. 81.
2002, p. 11. See also National Compensa- Time Off Banks, BNA Bulletin to 31. Sue Shellenbarger, The Mommy Drain:
tion Survey: Employee Benefits in Private Management 55, no. 25 (June 17, 2004), Employers Beef Up Perks to Lure New
Industry in the United States, March 2006, pp. 193 194. Mothers Back to Work, The Wall Street
U.S. Department of Labor, U.S. Bureau of 20. Society for Human Resource Manage- Journal, September 28, 2006, p. D1.
Labor Statistics, August 2006. ment 2009 employee benefits survey, 32. Jill Fisher, Reconciling the Family Medical
4. Costs This Year Increased at Highest Rate quoted in Martha Frase, Taking Time Leave Act with Overlapping or Conflicting
Since 2004, Survey Reveals, HR Focus 88, Off to the Bank, HR Magazine, March State Leave Laws, Compensation & Benefits
no. 1 (January 10, 2011); Employee Medical 2010, p. 42. Review, September/October 2007, pp. 39 44.
Costs Expected to Increase by 8.5 Percent in 21. Creating Holistic Time Off Programs Can 33. Severance Practices, BNA Bulletin to
2012, According to PwC , http://www.pwc. Significantly Reduce Expenses, Compen- Management, January 11, 1996, pp. 12 13;
com/us/en/pressreleases/2011/employer- sation & Benefits Review, July/August 2007, and Neil Grossman, Shrinking the Work-
medical-costs-expected-to-increase.jhtml pp. 18 19. force in an Economic Slowdown, Compen-
accessed September 14, 2011. 22. See, for example, Rita Zeidner, Strategies sation & Benefits Review, Spring 2002,
5. Trouble Ahead? Dissatisfaction with for Saving in a Down Economy, HR pp. 12 23.
Benefits, Compensation, HR Trendbook, Magazine, February 2009, p. 28. 34. Severance Pay, July 2007, Culpepper
2008, p. 16. 23. Judith Whitaker, How HR Made a Compensation & Benefits Surveys.
6. Joseph Martocchio, Strategic Compensa- Difference, People Management 27 35. Terry Baglieri, Severance Pay, www.
tion (Upper Saddle River, NJ: Prentice (October 28, 2010). SHRM.org, accessed December 23, 2006.
Hall, 2001), p. 262. 24. Ibid. 36. Ibid.
7. California Domestic Partner Benefits 25. The Department of Labor updated its 37. Ibid.
Mandate Carries Likely Impact Beyond revised regulations for administering 38. Workers Compensation Costs Are Rising
State s Borders, BNA Bulletin to Manage- the Family and Medical Leave Act in Faster Than Wages, BNA Bulletin to
ment, November 6, 2003, p. 353. November 2008. See DOL Issues Long- Management, July 31, 2003, p. 244.
8. Pletz, Workers, Go Home. Awaited Rules; Address a Serious Health 39. Workers Comp Claims Rise with Lay-
9. Ibid. Condition, Many Other Issues, BNA offs, But Employers Can Identify, Prevent
10. HR Plays a Major Role in Curbing Com- Bulletin to Management, November 18, Fraud, BNA Bulletin to Management,
pany Unemployment Insurance Costs, 2008, p. 369. In 2008, Congress amended October 4, 2001, p. 313.
Analysts Say, BNA Bulletin to Manage- the family and medical leave act to 40. Firms Cite Own Efforts as Key to
ment, August 3, 2010, pp. 241 242. include, among other things, leave rights Controlling Costs, BNA Bulletin to
11. www.bls.gov/opub/perspectives/issue2. particularly for military families. See Management, March 21, 1996, p. 89. See
pdf, accessed June 1, 2011. Sarah Martin, FMLA Protection Recently also Workers Compensation Outlook:
12. Ibid. Expanded to Military Families: Qualify- Cost Control Persists, BNA Bulletin
13. www.bls.gov/opub/perspectives/issue2. ing Exigency and Service Member Family to Management, January 30, 1997,
pdf, accessed June 1, 2011. Leave, Compensation & Benefits Review, pp. 33 44; and Annmarie Lipold, The
14. Ken Belson, At IBM, a Vacation Anytime, September/October 2009, pp. 43 51. Soaring Costs of Workers Comp,
or Maybe No Vacation at All, The New 26. Ten Years After It Was Signed into Law, Workforce, February 2003, p. 42ff.
York Times, August 31, 2007, pp. A1 A18. FMLA Needs Makeover, Advocates 41. Using Case Management in Workers
15. National Compensation Survey: Employee Contend, BNA Bulletin to Management, Compensation, BNA Bulletin to Manage-
Benefits in Private Industry in the United February 20, 2003, p. 58. ment, June 6, 1996, p. 181; for other
States, March 2006, U.S. Bureau of Labor 27. HR Professionals Face Sundry Challenges tactics, see for example, H. Jorgensen,
Statistics, August, 2006, p. 116. See also Administering FMLA Leave, Survey Overhauling Claims Management. Risk
Spurious Sick-Notes Spiral Upwards, The Asserts, BNA Bulletin to Management, Management 54, no. 7 (July 2007), p. 50.
Safety and Health Practitioner 22, no. 6 July 20, 2007, p. 233. 42. Workers Comp Research Provides
(June 2004), p. 3. 28. Based on Dennis Grant, Managing Insight into Curbing Health Care Costs,
16. Unscheduled Employee Absences Cost Employee Leaves: A Legal Primer, Compen- EHS Today, February 2010, p. 18.
Companies More Than Ever, Compen- sation & Benefits Review 35, no. 4 (2003), 43. Hills, Bergmann, and Scarpello, Compen-
sation & Benefits Review, March/April p. 41. There are several unresolved issues sation Decision Making, p. 137.
2003, p. 19; Robert Grossman, Gone but in what 12 months employment means. 44. Costs This Year Increased at Highest
Not Forgotten, HRMagazine 56, no. 9 For example, several courts recently held Rate Since 2004, Survey Reveals, HR
(September 2011), pp. 34 46. that an employee can count previous Focus 88, no. 1 (January 10, 2011).
454 PART 4 COMPENSATION

45. Society for Human Resource Manage- 61. Michael Bond et al., Using Health December 12, 2002, p. 393. Reducing
ment, Mental Health Trends, Workplace Savings Accounts to Provide Low-Cost retiree benefits requires a preliminary
Visions, no. 2, http://moss07.shrm.org/ Health-Care, Compensation & Benefits legal review. See James McElligott Jr.,
Research/FutureWorkplaceTrends/Pages/ Review, March/April 2005, pp. 29 32. Retiree Medical Benefit Developments
0303.aspx, accessed July 28, 2009. 62. Costs This Year Increased At Highest in the Courts, Congress, and EEOC,
46. Mental-Health Parity Measure Enacted Rate Since 2004, Survey Reveals, HR Compensation & Benefits Review, March/
as Part of Financial Rescue Signed by Focus 88, no. 1 (January 10, 2011). April 2005, pp. 23 28; and Natalie Nor-
Bush, BNA Bulletin to Management, 63. Alan Cohen, Decision-Support in the fus, Retiree Benefits: Does an Employer s
October 7, 2008, p. 321. Benefits Consumer Age, Compensation Obligation to Pay Ever End? Compen-
47. Deadlines Vary for Implementing Provi- & Benefits Review, March/April 2006, sation & Benefits Review, January/February
sions of Health Care Law, BNA Bulletin pp. 46 51. 2008, pp. 42 45.
to Management, May 4, 2010, p. 143. 64. Ibid., p. 40. See also Employers Explore 77. Robert Christadore, Benefits Purchasing
48. Regulation Will Allow Young Adults Up Range of Tactics to Rein In Rising Health Alliances: Creating Stability in an Unstable
to Age 26 to Retain Dependent Coverage, Costs for 2005 Plan Year, BNA Bulletin World, Compensation & Benefits Review,
BNA Bulletin to Management, May 18, to Management 55, no. 27 (July 1, 2004), September/October 2001, pp. 49 53. Betty
2010, p. 153. p. 219. Liddick, Going the Distance for Health
49. www.mercer.com/press-releases/1380755, 65. Ron Finch, Preventive Services: Improv- Savings, HR Magazine, March 2007,
accessed July 25, 2011. ing the Bottom Line for Employers and pp. 51 55. J. Wojcik, Employers Consider
50. Ibid. Employees, Compensation & Benefits Short-Haul Medical Tourism, Business
51. See, for example, Karli Dunkelberger, Review, March/April 2005, p. 18. Note Insurance 43, no. 29 (August 24, 2009),
Avoiding COBRA s Bite: Three Keys to that prevention/wellness programs can pp. 1, 20.
Compliance, Compensation & Benefits run afoul of the Americans with Disabili- 78. Dependent Eligibility Audits Can Help
Review, March/April 2005, pp. 44 48. As ties Act. So, for instance, employers Rein In Health Care Costs, Analysts Say,
an example of the direction new federal should not make participation in such BNA Bulletin to Management, September 9,
health insurance may take post-2009, see plans mandatory or use information 2008, p. 289.
A. Mathews, Making Sense of the Debate obtained in such programs in such a way 79. Carolyn Hirschman, Will Employers
on Health Care, Wall Street Journal that violates ADA confidentiality require- Take the Lead in Long-Term Care? HR
(Eastern Edition), September 30, 2009, ments or discriminates against employees Magazine, March 1997, pp. 59 66. For
pp. D1, D5; and Patrick Muldowney, who are not physically fit. See Despite recent perspective, see A. D. Postal,
Cobra and the Stimulus Act: A Sign Good Intentions, Wellness Plans Can Industry Ramps Up Opposition To LTC
of Things to Come? Compensation & Run Afoul of ADA, Attorney Cautions, Program In Senate Health Bill, National
Benefits Review 42, no. 1 (January/ BNA Bulletin to Management 56, no. 51 Underwriter (Life & Health/Financial
February 2010), pp. 24 49. (December 20, 2005), p. 41. Services Edition) 113, no. 14 (July 20,
52. www.DOL.gov, accessed December 23, 66. Employer Partners to Launch a Three- 2009), pp. 10, 32.
2006. Year Wellness Initiative, BNA Bulletin to 80. Bill Leonard, Recipes for Part-Time
53. Larri Short and Eileen Kahanar, Unlock- Management, August 7, 2007, p. 255. Benefits, HR Magazine, April 2000,
ing the Secrets of the New Privacy Rules, 67. On-Site Clinics Aimed at Cutting Costs, pp. 56 62.
Occupational Hazards, September 2002, Promoting Wellness, BNA Bulletin 81. As we explained earlier in this book, do
pp. 51 54. to Management, March 25, 2008, p. 103. not confuse independent contractors
54. Kevin Maroney, Prognosis Negative? 68. Ibid. See also Josh Cable, The Road to with part-time workers. As three attor-
GINAs Interim Incentives Ruling a Con- Wellness, Occupational Hazards, April neys put it, Short-term, just-in-time
cern for Wellness Programs, Compensation 2007, pp. 23 27. workers provided by staffing agencies are
& Benefits Review 42, no. 2 (2010), 69. George DeVries, The Top 10 Wellness not an issue. However, the employer s
pp. 94 101. Trends for 2008 and Beyond, Compen- policy for workers who are still on the job
55. Hewitt Says Employer Measures to sation & Benefits Review, July/August after 1,000 to 1,500 hours should require
Control Increases in Health Care Costs 2008, pp. 60 63. that they be provided with benefits,
Are Working, BNA Bulletin to Manage- 70. Susan Wells, Getting Paid for Staying either through the staffing agency or by
ment, October 7, 2008, p. 323. Well, HR Magazine, February 2010, p. 59. outsourcing their administration to an
56. James Curcio, Creating Standardized Met- 71. Vanessa Fuhrmanns, Oops! As Health administrative employer who can pro-
rics and Benchmarking for Health, Absence Plans Become More Complicated, vide benefits. Bob Lanza et al., Legal
and Productivity Management Programs: They re Also Subject to a Lot More Costly Status of Contingent Workers, Compen-
The EMPAQ Initiative, Compensation Mistakes, The Wall Street Journal, sation & Benefits Review, July/August
& Benefits Review 42, no. 2 (2010), January 24, 2005, p. R4. 2003, pp. 47 60.
pp. 109 126. 72. Martha Frase, Minimalist Health Cover- 82. Brenda Paik Sunoo, Millions May Retire,
57. Jerry Geisel, Employers Accelerate Health age, HR Magazine, June 2009, pp. 107 112. Workforce, December 1997, p. 48. See also
Care Cost-Shifting, Business Insurance 45, 73. Bill Roberts, Outsourcing in Turbulent Many Older Workers Choose to Un-
no. 21 (May 23, 2011), pp. 3, 21. Times, HR Magazine, November 2009, p. Retire or Not Retire at All, Knight Ridder/
58. Ibid. 45. Tribune Business News, September 28,
59. Christine Keller and Christopher 74. High Deductible Plans Might Catch 2003, item 03271012; Patrick Purcell,
Condeluci, Tax Relief and Health Care On, BNA Human Resources Report, Older Workers: Recent Trends in Employ-
Act Should Prompt Re-Examination of September 15, 2003, p. 967. ment and Retirement, Journal of Deferred
HSAs, SHRM Legal Report, July August 75. HR Outsourcing: Managing Costs and Compensation 8, no. 3 (Spring 2003), pp.
2007, p. 1. Maximizing Provider Relations, BNA, Inc. 30 54; and For Many Seniors, a Job Beats
60. In contrast, with health reimbursement 21, no. 11 (Washington, DC: November Retirement, Knight Ridder/Tribune Busi-
arrangements (HRA) only the employer 2003), p. 10. ness News, February 9, 2003, item 3040001.
makes contributions. See Types of Tax 76. One in Five Big Firms May Drop Cover- 83. The U.S. Treasury has reportedly spent
Favored Health Accounts, HR Magazine, age for Future Retirees, Health Survey most of the trust fund on other govern-
August 2008, p. 76. Finds, BNA Bulletin to Management, ment programs, so that changes (for
 CHAPTER 13 BENEFITS AND SERVICES 455

instance, in terms of reducing benefits, 97. Harold Burlingame and Michael Gulotta, 114. Child Care Options, BNA Bulletin to
making people wait longer for benefits, Cash Balance Pension Plan Facilitates Management, July 4, 1996, p. 212. See also
or making some people pay more for Restructuring the Workforce at AT&T, Child Care Report Boasts of Its Benefit
benefits) will be necessary. John Kilgour, Compensation & Benefits Review, November/ to California Economy, Knight Ridder/
Social Security in the 21st Century, December 1998, pp. 25 31; Eric Lekus, Tribune Business News, January 9, 2003,
Compensation & Benefits Review 42, no. 6 When Are Cash Balance Pension Plans the item 03009011.
(2010), pp. 459 469. Right Choice? BNA Bulletin to Manage- 115. Patrick Kiger, A Case for Childcare,
84. In addition, tax rates under the Medicare ment, January 28, 1999, p. 7; Jerry Geisel, Workforce Management, April 2004,
program are 1.45 percent for employees IRS releases long-awaited cash balance pp. 34 40.
and employers. http://ssa-custhelp.ssa. guidance, Pensions & Investments 38 no. 22 116. w w w. S H R M . o r g / r e w a r d s / l i b r a r y,
gov/app/answers/detail/a_id/240/~/2011- (November 1 2010), p. 22. accessed December 23, 2006. See also
social-security-tax-rate-and-maximum- 98. This is based on Eric Parmenter, Kathy Gurchiek, Give Us Your Sick,
taxable-earnings, accessed June 1, 2011 Employee Benefit Compliance Check- HR Magazine, January 2007, pp. 91 93.
85. Martocchio, Strategic Compensation, list, Compensation & Benefits Review, 117. Kelli Earhart, R. Dennis Middlemist, and
pp. 245 248; and Lin Grensing-Pophal, May/June 2002, pp. 29 38. Willie Hopkins, Elder Care: An Emerging
A Pension Formula that Pays Off, HR 99. www.pbgc.gov/about/faq/pg/general-faqs- Assistance Issue, Employee Assistance
Magazine (February 2003), pp. 58 62. about-pbgc.html, accessed June 1, 2011. Quarterly 8, no. 3 (1993), pp. 1 10. See also,
86. For one recent example of how to do this, 100. Patrick Kiger, Early-Retirement Plans Finding a Balance Between Conflicting
see Gail Nichols, Reviewing and Redesign- Backfire, Driving Up Costs Instead of Responsibilities: Work and Caring for
ing Retirement Plans, Compensation & Cutting Them, Workforce Management, Aging Parents, Monday Business Briefing,
Benefits Review, May/June 2008, pp. 40 47. January 2004, pp. 66 68. July 7, 2004; and Employers Feel Impact of
87. Many employers are considering termi- 101. Benefits Cost Control Solutions to Eldercare: Some Expanded Benefits for
nating their plans but most employers are Consider Now, HR Focus 80, no. 11 Workers, Knight Ridder/Tribune Business
considering instead either ceasing bene- (November 2003), p. 1. News, June 13, 2004, item 04165011.
fits accruals for all participants or just 102. Johanna Rodgers, Web Based Apps 118. Employers Gain from Elder Care
for future participants. Michael Cotter, Simplify Employee Benefits, Insurance Programs by Boosting Workers Morale,
The Big Freeze: The Next Phase in the and Technology 28, no. 11 (November Productivity, BNA Bulletin to Manage-
Decline of Defined Benefit Plans, 2003), p. 21. See also www.benelogic.com/, ment 57, no. 10 (March 7, 2006), pp. 73 74.
Compensation & Benefits Review, March/ accessed June 28, 2011. 119. Rudy Yandrick, Elder Care Grows Up,
April 2009, pp. 44 53. 103. Ibid. HR Magazine, November 2001, pp. 72 77.
88. Jessica Marquez, More Workers Yanking 104. Scott Harper, Online Resources System 120. Matthew Boyle, How to Cut Perks With-
Money Out of 401(k)s, Workforce Manage- Boosts Worker Awareness, BNA Bulletin out Killing Morale, Fortune, February 19,
ment, August 11, 2008, p. 4. to Management, April 10, 2007, p. 119. 2001, pp. 241 244.
89. Nancy Pridgen, The Duty to Monitor 105. Drew Robb, A Total View of Employee 121. Susan Lambert, Added Benefits: The
Appointed Fiduciaries Under ERISA, Records, HR Magazine, August 2007, Link Between Work Life Benefits and
Compensation & Benefits Review, September/ pp. 93 96. Organizational Citizenship Behavior,
October 2007, pp. 46 51; Individual 106. Carolyn Hirschman, Employees Choice, Academy of Management Journal 43, no. 5
401(k) Plan Participant Can Sue Plan Fidu- HR Magazine, February 2006, pp. 95 99. (2000), pp. 801 815. Timothy Judge et
ciary for Losses, Justices Rule, BNA Bulletin 107. Joseph O Connell, Using Employee Assis- al., Work Family Conflict and Emotions:
to Management, February 20, 2008, p. 65. tance Programs to Avoid Crises, Long Effects at Work and Home, Personnel
90. Lindsay Wyatt, 401(k) Conversion: It s as Island Business News, April 19, 2002, p. 10. Psychology 59 (2006), pp. 779 814.
Easy as Riding a Bike, Workforce, April 108. See Scott MacDonald et al., Absenteeism 122. Rising Gas Prices Prompting Employers
1997, p. 66. See also Carolyn Hirschman, and Other Workplace Indicators of to Consider Varied Computer Benefit
Growing Pains. Employers and Employ- Employee Assistance Program Clients and Options, BNA Bulletin to Management,
ees Alike Have Lots to Learn About Matched Controls, Employee Assistance June 20, 2008, p. 201.
401(k) Plans, HR Magazine, June 2002, Quarterly 15, no. 3 (2000), pp. 51 58. See 123. Mary Burke, Euren Esen, and Jessica
pp. 30 38. also Paul Courtis et al., Performance Cullison, 2003 Benefits Survey, SHRM/
91. Benefit Trends: Automatic Enrollment Measures in the Employee Assistance Pro- SHRM Foundation, 1800 Duke Street,
Takes Off, Compensation & Benefits gram, Employee Assistance Quarterly 19, Alexandria VA, 2003, p. 30. See also Michael
Review, September/October 2008, p. 14. no. 3 (2005), pp. 45 58. Laff, U.S. Employers Tighten Reins on
92. For a discussion, see Jewel Esposito, 109. See, for example, Donna Owens, EAPs Tuition Reimbursement, Training &
Avoiding 401(k) ERISA Disasters, for a Diverse World, HR Magazine, Development, July 2006, p. 18.
Compensation & Benefits Review 42, no. 1 October 2006, pp. 91 96. 124. Richard Buddin and Kanika Kapur, The
(January/February 2010), pp. 39 45. 110. EAP Providers, Workforce Management, Effect of Employer-Sponsored Education
93. Jack VanDerhei, The Pension Protection July 14, 2008, p. 16. on Job Mobility: Evidence from the U.S.
Act and 401(k)s, The Wall Street Journal, 111. Fathers Fighting to Keep Work Life Navy, Industrial Relations 44, no. 2 (April
April 20, 2008, p. 12. Balance Are Finding Employers Firmly 2005), pp. 341 363.
94. Jessica Marquez, Retirement Out of Reach, in their Corner, BNA Bulletin to Manage- 125. What You Need to Know to Provide
Workforce Management, November 3, 2008, ment 56, no. 24 (June 14, 2005), p. 185. Domestic Partner Benefits, HR Focus 80,
pp. 1, 24. 112. Susan Wells, Are You Too Family-Friendly? no. 3 (August 2003), p. 3.
95. Wyatt, 401(k) Conversion, p. 20. HR Magazine, October 2007, pp. 35 39. 126. Carolyn Shapiro, More Companies
96. New Pension Law Plus a Recent Court 113. Maureen Hannay and Melissa Northam, Cover Benefits for Employee s Domestic
Ruling Doom Age-Related Suits, Practi- Low-Cost Strategies for Employee Reten- Partners, Knight-Ridder/Tribune Business
tioners Say, BNA Bulletin to Manage- tion, Compensation & Benefits Review, News, July 20, 2003.
ment 57, no. 36 (September 5, 2006), July/August 2000, pp. 65 72. See also 127. Couples Want Flexible Leave, Benefits,
pp. 281 282; and www.dol.gov/ebsa/FAQs/ Roseanne Geisel, Responding to Chang- BNA Bulletin to Management, February 19,
faq_consumer_cashbalanceplans.html, ing Ideas of Family, HR Magazine, August 1998, p. 53; SHRM, 2003 Benefits Survey,
accessed January 9, 2010. 2004, pp. 89 98. p. 14. See also Paul Harris, Flexible Work
456 PART 4 COMPENSATION

Policies Mean Business, Training & Devel- 132. Martocchio, Strategic Compensation, Hoff, With Flextime, Less Can Be More,
opment, April 2007, pp. 32 36. p. 263. Workforce Management, May 2005,
128. Money Isn t Everything, Journal of Busi- 133. Elka Maria Torpey, Flexible Work: pp. 65 66.
ness Strategy 21, no. 2 (March 2000), p. 4; Adjusting the When and Where of Your 137. Farrokh Mamaghani, Impact of Infor-
see also CEOs in the Dark on Employees Job, Occupational Outlook Quarterly, mation Technology on the Workforce of
Benefits Preferences, Employee Benefits Summer 2007, pp. 14 27. the Future: An Analysis, International
News, September 1, 2006, item 06244007. 134. Slightly More Workers Are Skirting 9 5 Journal of Management 23, no. 4 (2006),
129. Carolyn Hirshman, Kinder, Simpler Tradition, BNA Bulletin to Management, pp. 845 850; Jessica Marquez, Connecting
Cafeteria Rules, HR Magazine, January June 20, 2002, p. 197. a Virtual Workforce, Workforce Manage-
2001, pp. 74 79. 135. See, for example, Compressed Workweeks ment, September 20, 2008, pp. 1 3.
130. Employers Should Update Cafeteria Gain Popularity, but Concerns Remain 138. Ann Pomeroy, The Future Is Now, HR
Plans Now Based on Proposed Regs, About Effectiveness, BNA Bulletin to Magazine, September 2007, pp. 46 52.
Experts Say, BNA Bulletin to Manage- Management, September 16, 2008, p. 297. 139. SHRM, 2003 Benefits Survey, p. 2.
ment, September 4, 2007, pp. 281 282. 136. Boris Baltes et al., Flexible and Compressed 140. With Job Sharing Arrangements, Com-
131. Debit Cards for Health-Care Expenses Workweek Schedules: A Meta-Analysis of panies Can Get Two Employees for
Receive Increased Employer Attention, Their Effects on Work-Related Criteria, the Price of One, BNA Bulletin to
BNA Bulletin to Management, September 25, Journal of Applied Psychology 84, no. 4 Management 56, no. 47 (November 22,
2003, p. 305. (1999), pp. 496 513. See also Charlotte 2005), pp. 369 370.

PART 4 VIDEO CASES APPENDIX

Video Title: Pay for Performance and Financial Incentives

(Joie de Vivre Hospitality)
SYNOPSIS
Chip Conley is the founder of Joie de Vivre Hospitality (JDV), a collection of
boutique hotels, restaurants, and spas in California. Conley aims to foster employee
motivation using Maslow s Hierarchy of Needs and has written books and lectured on
the subject. Joie de Vivre pays average wages, but experiences low turnover due to the
nature of the relationships it has formed with each employee.

Discussion Questions
1. Chip Conley, founder of Joie de Vivre Hospitality, believes that most companies
frame their financial incentives in the wrong way. Explain what he means.
What does JDV do differently?
2. Why does Joie de Vivre offer free hotel stays to all employees as part of its
incentive plan?
3. According to the video, what separates a world-class organization is its ability
to care for its employees in good times and in bad? How did JDV accomplish
this during the dot-com crash and post-9/11 industry recession?
4. Of the compensation, benefits, and incentives practices we discussed in
Chapters 11, 12, and 13, which would you recommend JDV implement,
and why?

Video Title: Compensation (Focus Pointe)

SYNOPSIS
In this video, two HR staff members, Cheryl and Gina, must determine if an employee,
Angelo, is worthy of a pay raise. The company, Focus Pointe, provides market research
services. One of these services involves recruiting consumer, medical, and other respon-
dents for the market research industry. It s important to get good, qualified respondents.
To distinguish itself from its competitors, Focus Pointe uses a special triple screening
process to ensure that the respondents it recruits meet its clients specifications. In this
 CHAPTER 13 BENEFITS AND SERVICES 457

case, Angelo seems to be recruiting inadequate respondents. The two HR staff members
are trying to determine if giving Angelo a raise would solve the problem.
As Angelo says in the video, he d like to be better compensated. Cheryl and Gina
point out to him that his pay is falling because his recruits often don t qualify. They
ask him what he would like an increase in salary or an increase in the amount per
recruit that he is paid. He responds that he d like both. They tell them they will go
along with his request but that they must see higher levels of recruit qualifications
within 3 months. As the panel s human resource managers (including Paul, from
BMG) point out in assessing this video, they don t necessarily agree with giving some-
one who is underperforming a raise. As Paul says, They should have just told him
to improve first.

Discussion Questions
1. Do you think Angelo is underperforming as a result of motivation or something
else, such as the need for improved training? How would you find out?
2. Is it a good idea to give someone who is underperforming a raise? Does it send
the wrong signal, insofar as it seems to suggest that poor performance leads
to rewards?
3. Do you think the idea of paying recruiters like Angelo per recruit might actually
backfire, and if so how?
PART FIVE | EMPLOYEE RELATIONS

14
Ethics and Employee Rights
and Discipline
Source: Seth Wenig/AP Images.
LEARNING OBJECTIVES Company s
1. Explain what is meant by ethical behavior at work. Strategic Goals

2. Discuss important factors that shape ethical behavior

at work.
3. Describe at least four specific ways in which HR
management can influence ethical behavior at work.
Employee Competencies
4. Employ fair disciplinary practices. and Behaviors Required
5. List at least four important factors in managing for Company to Achieve
dismissals effectively. These Strategic Goals

N
ot too long ago, Berkshire Hathaway spent $9 billion
Employee
buying Lubrizol Corporation. Berkshire s CEO, Relations
Warren Buffett, at first declined to pursue Lubrizol, S

tra nviro
but a Berkshire top executive helped persuade him

teg nment
E
atio
to do so. This executive did mention to Mr. Buffett that he

ic an
Compens
(the executive) owned Lubrizol shares. However, Mr. Buffett HR Policies and Practices

d Legal
apparently didn t pursue the matter, for instance by asking how Required to Produce
many shares he owned. After it transpired that the executive Employee Competencies
bought about $10 million worth of shares just before bringing and Behaviors
the potential acquisition to Mr. Buffett, Berkshire Hathaway said

nd nt

Re
m

Pla u
c
a g polev

e
that the executive had now resigned. Questions remained, me i

cr
however. Why didn t Warren Buffett ask more questions about nin eD tne emt
iarT tn
how many shares the executive owned and when he bought dna
them? And, how could something like this even happen in a
company still rightfully praised for its high ethical standards?
WHERE ARE WE NOW . . .
For many managers, recruitment and
placement, training and development,
and compensation are the heart of human
resource management. But employees
expect something more. They expect
their employers to treat them fairly, and
to have a safe work environment. Now, in
Part 5, we turn to employee justice, safety,
and union relations. The main purpose of this
chapter is to explain ethics, employee rights,
and fair treatment in human resource
management, matters essential for positive
employee relations. Topics include ethics
and fair treatment at work, factors that
shape ethical behavior at work, and
managers roles in fostering improved
workplace ethics, employee discipline,
Access a host of interactive learning aids at and dismissals.
www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 459
460 PART 5 EMPLOYEE RELATIONS

1 Explain what is meant

ETHICS AND FAIR TREATMENT AT WORK
by ethical behavior at work.
THE STRATEGIC CONTEXT
Berkshire Hathaway
The situation with Berkshire Hathaway s purchase of Lubrizol illustrates the strategic
nature of ethics at work. Berkshire Hathaway s strategy of investing in diverse
businesses requires giving its division heads great latitude to run their divisions as
they see fit. Berkshire s strategy therefore depends heavily on its managers sticking
to the company s ethical rules. To help ensure such behavior, Berkshire s code
of ethics is very clear. It says A conflict of interest exists when a person s private
interests interfere in any way with the interests of the company. 1
So in this Lubrizol situation the strategic context was clear: Decentralized
management was central to Berkshire s diversified strategy, which in turn made
executives ethical behavior critical to Berkshire maintaining control and achieving its
goals. That such an alleged conflict of interest could arise at an exemplary firm like
Berkshire underscores the challenge that employers face in managing ethical behavior.

People face ethical choices every day. Is it wrong to use a company credit card for
FIGURE 14-1 The Wall Street personal purchases? Is a $50 gift to a client unacceptable? Compare your answers by
Journal Workplace Ethics Quiz answering the quiz in Figure 14-1.
Most everyone reading this book rightfully view themselves as ethical people, so
Source: The Wall Street Journal, why include ethics in a human resource management book? For two reasons: First,
October 21, 1999, pp. B1 B4. Ethics
Officer Association, Belmont, MA:
ethics is not theoretical. Instead, it greases the wheels that make businesses work.
Ethics Leadership Group.

The spread of technology into the workshop has raised a variety of new ethical questions and many old ones still linger. Compare
your answers with those of other Americans surveyed, on page 490.

Office Technology Gifts and Entertainment

1. Is it wrong to use company 7. What s the value at which a 13. Is it OK to take a $25 gift
e-mail for personal reasons? gift from a supplier or client certificate?
Yes No becomes troubling? Yes No
$25 $50 $100
2. Is it wrong to use office 14. Can you accept a $75 prize
equipment to help your 8. Is a $50 gift to a boss won at a raffle at a
children or spouse do unacceptable? supplier s conference?
schoolwork? Yes No Yes No
Yes No
9. Is a $50 gift from the boss Truth and Lies
3. Is it wrong to play computer unacceptable? 15. Due to on-the-job pressure,
games on office equipment Yes No have you ever abused or
during the workday? lied about sick days?
Yes No 10. Of gifts from suppliers: Is it
Yes No
OK to take a $200 pair of
4. Is it wrong to use office football tickets? 16. Due to on-the-job pressure,
equipment to do Internet Yes No have you ever taken credit
shopping? for someone else s work or
Yes No 11. Is it OK to take a $120 pair idea?
of theater tickets?
Yes No
5. Is it unethical to blame an Yes No
error you made on a
technological glitch? 12. Is it OK to take a $100
Yes No holiday food basket?
Yes No
6. Is it unethical to visit
pornographic Web sites
using office equipment?
Yes No
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 461

Managers who promise raises but don t deliver, salespeople who say The order s
coming when it s not, production managers who take kickbacks from suppliers
they all corrode the trust that day-to-day business transactions depend on. According
to one lawsuit, marketers for Pfizer Inc. influenced Pfizer to suppress unfavorable
studies about one of its drugs.2 Plaintiffs sued for billions.
Second, ethical dilemmas are a familiar part of human resource management.
For example, your team shouldn t start work on the new machine until all the safety
measures are checked, but your boss is pressing you to get started: What should you do?
You dismissed an employee in an angry moment, and now she has applied for unem-
ployment insurance, saying you never warned her. Should you create and place in her
file a note of warning, to protect your employer from paying higher unemployment
taxes? One survey found that 6 of the 10 most serious ethical work issues workplace
safety, employee records security, employee theft, affirmative action, comparable work,
and employee privacy rights were HR-related.3 Another found that 54% of human
resource professionals surveyed had observed misconduct ranging from violations
of Title VII to violations of the Occupational Safety and Health Act.4 The bottom line
is that all managers should understand the basics of ethics and the ethical dimensions
of their people-related decisions. We ll start with what ethics means.

What Is Ethics?
Ethics refers to the principles of conduct governing an individual or a group; specifically,
the standards you use to decide what your conduct should be. 5
Making ethical decisions always requires normative judgments.6 A normative
judgment means that something is good or bad, right or wrong, better or worse.
You are wearing a great outfit! is a normative statement. Ethical decisions also
always involve morality. Morality is society s highest accepted standards of behavior.
Moral standards guide behaviors regarding serious matters such as murder, lying,
and slander. Authoritative bodies like legislatures can t change what morality means.
You can t make something that s immoral (such as murder) legal by passing a law
that says it s legal. Violating moral standards often makes one feel ashamed
or remorseful.7 If the decision makes the person feel ashamed or remorseful, or
requires doing something with serious consequence such as murder, then, chances
are, it s unethical.

Ethics and the Law

Because legislative bodies can t change what morality means, asking, Is what I m
doing legal? won t necessarily reveal if it is ethical. Something may be legal but
unethical or even illegal but ethical. Firing a 59-year-old employee with 40 years
tenure without cause may be legal, but some would view it as unethical. One executive
put it this way: Ethics means making decisions that represent what you stand for, not
just what the laws are. 8

Ethics, Justice, and Fair Treatment

Companies that employees view as fair and just also tend to score higher on ethics.
One study concluded that, to the extent that survey respondents believed that
employees were treated fairly . . . [they] reported less unethical behavior in their
organizations. 9 A company that is just is, among other things, equitable, fair, impartial,
and unbiased. With respect to the workplace, experts generally define organizational
justice in terms of distributive justice and procedural justice.

ethics
The principles of conduct governing an
individual or a group; specifically, the
standards you use to decide what your
conduct should be.
462 PART 5 EMPLOYEE RELATIONS

FIGURE 14-2 Perceptions

What is your organization like most of the time? Circle Yes if the item describes your
of Fair Interpersonal
Treatment Scale organization, No if it does not describe your organization, and ? if you cannot decide.
IN THIS ORGANIZATION:
Source: Michelle A. Donovan
et al., The Perceptions of Their 1. Employees are praised for good work Yes ? No
Interpersonal Treatment Scale: 2. Supervisors yell at employees (R) Yes ? No
Development and Validation 3. Supervisors play favorites (R) Yes ? No
of a Measure of Interpersonal 4. Employees are trusted Yes ? No
Treatment in the Workplace,
Journal of Applied Psychology 83,
5. Employees complaints are dealt with effectively Yes ? No
no. 5 (1998), p. 692. 6. Employees are treated like children (R) Yes ? No
7. Employees are treated with respect Yes ? No
8. Employees questions and problems are responded to quickly Yes ? No
9. Employees are lied to (R) Yes ? No
10. Employees suggestions are ignored (R) Yes ? No
11. Supervisors swear at employees (R) Yes ? No
12. Employees hard work is appreciated Yes ? No
13. Supervisors threaten to fire or lay off employees (R) Yes ? No
14. Employees are treated fairly Yes ? No
15. Coworkers help each other out Yes ? No
16. Coworkers argue with each other (R) Yes ? No
17. Coworkers put each other down (R) Yes ? No
18. Coworkers treat each other with respect Yes ? No
Note: R = the item is reverse scored.

* Distributive justice refers to the fairness and justice of the decision s result
(for instance, did I get an equitable pay raise?).
* Procedural justice refers to the fairness of the process (for instance, is the process
my company uses to allocate merit raises fair?).10
In practice, fair treatment reflects concrete actions such as employees are treated
with respect (see Figure 14-2).11 Most employees probably can t and won t unscramble
what is ethical, fair, or just when it comes to how you treat them.12

Ethics, Public Policy, and Employee Rights

Recently, New York City s pension funds wanted Walmart to investigate allegations that
its suppliers abroad were treating workers unfairly.13 For instance, a Bangladeshi labor
organizer alleged that one factory does not enforce the law on minimum wages.14
Societies don t rely on employers ethics or sense of fairness or morality to ensure
that they do what s right. Societies also institute various laws and procedures
for enforcing these laws. These laws lay out what employers can and cannot do, for
instance in terms of discriminating based on race. In so doing, these laws also carve
out explicit rights for employees. For example, Title VII of The Civil Rights Act gives
an employee the right to bring legal charges against an employer who he or she
believes discriminated against him or her due to race.
UNALIENABLE RIGHTS However, not all rights derive from laws. Many rights
flow from broader unwritten human or unalienable rights, rights that form the
bedrock of American society.15 For example, the 1776 U.S. Declaration of Indepen-
dence famously states, We hold these truths to be self-evident, that all men are created
equal, that they are endowed by their Creator with certain unalienable Rights, that
among these are Life, Liberty and the pursuit of Happiness. Three years later, Congress
passed the first 10 amendments to the U.S. Constitution, amendments now called the
Bill of Rights. These rights govern Americans rights vis-à-vis the government. For
example, the first amendment gave Americans the right to practice their religions, to
speak freely, and to assemble peacefully.
PUBLIC POLICY Although many laws, such as Title VII, aim to guarantee rights
that people view as unalienable, reasonable people may differ over what the exact
nature of those legal rights should be.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 463

Most laws therefore also reflect public policy. In other words, governments enact
laws so as to further their public policy aims. Thus, if New York decides that it s in its
citizens best interests to lower fuel consumption by getting everyone to drive slower,
its legislature may lower New York s speed limit. Public policy consists of political
decisions for implementing programs to achieve societal goals. 16 As with traffic
laws, governments express their chosen public policies in the laws and regulations
they set, and in the other decisions they make (such as how they spend their tax
revenues). A government s public policy viewpoint propels the laws and the other
decisions it makes, and the rights it decides to carve out, governing what its citizens
can and cannot do.

EMPLOYMENT RIGHTS Protecting employee rights is therefore part and parcel

of all the employment laws we discuss in this book. As just a few examples,
the National Labor Relations Act established the right of employees to engage in
collective bargaining. The Landrum Griffin Act contained a Bill of Rights for union
members, protecting them from mistreatment from their unions. The Fair Labor
Standards Act gave employees the right to a minimum wage and overtime pay. The
Occupational Safety and Health Act gave employees the right to refuse to work under
unsafe conditions. The Consolidated Omnibus Budget Reconciliation Act (COBRA)
gave employees rights to extended health insurance benefits. The bottom line is
that although ethics, fairness, and morality help govern how employers treat their
employees, the enforceable rights embedded in employment and other laws also
govern employer behavior.

2 Discuss important factors

WHAT SHAPES ETHICAL BEHAVIOR AT WORK?
that shape ethical behavior Whether a person acts ethically at work is usually not a consequence of any one thing.
at work. For example, could it be that everyone running the banks that triggered the sub-prime
mess a few years ago was simply unethical? Not likely. There must have been more to it.

There s No One Smoking Gun

A recent review of over 30 years of ethics research concluded that three factors
combine to determine the ethical choices a person makes.17 The authors titled
their paper bad apples, bad cases, and bad barrels. They concluded that no single
smoking gun determines ethical behavior. Instead, bad apples (people who make
unethical choices), bad cases (ethical situations ripe for unethical choices), and bad
barrels (environments which foster unethical choices) combine to determine what a
person s ethical choices will be. The following summarizes their overall findings:
* Individual characteristics: Who are the bad apples? Some people are just more
inclined to make unethical choices. The most principled people, with the highest
level of cognitive moral development, think through the implications of their
decisions and apply ethical principles.
However, most adults don t operate at this high level. Instead, most base their
judgment about what is right on the expectations of their colleagues and other
important people with whom they interact, or on company policies and what the
law says.
People at the lowest level make their ethical choices solely based on obeying
what they re told and on avoiding punishment.
* Which ethical situations make for bad (ethically dangerous) cases or situations?
Some ethical dilemmas are more likely to prompt unethical choices. Surpris-
ingly, apparently smaller dilemmas prompt more bad choices. Why? Influential

distributive justice procedural justice

The fairness and justice of a decision s result. The fairness of the process.
464 PART 5 EMPLOYEE RELATIONS

factors in making such decisions include the total harm that can befall victims of
an unethical choice, the likelihood that the action will result in harm, and the
number of people potentially affected by the act. In less serious situations, it s
more likely that someone might say, in effect, It s okay to do this, even though
I know it s wrong.
* What are the bad barrels ? What outside factors mold ethical choices? These
researchers also concluded that employers create bad and good cultures ( barrels )
that shape ethical behavior, for good or for ill. Thus a strong ethical culture that
clearly communicates the range of acceptable and unacceptable behavior [such as
through leader role models] is associated with fewer unethical decisions in the
workplace. 18 For example, companies that promote an everyone for himself
atmosphere are more likely to suffer unethical decisions. On the other hand,
emphasizing that employees should focus on the well-being of everyone leads to
more ethical choices.
We look more closely at bad apples and bad barrels next.

The Person (What Makes Bad Apples?)

Because people bring to their jobs their own ideas of what is morally right and wrong,
each person must shoulder much of the credit (or blame) for his or her ethical choices.
Some people are just more principled than others. For example, researchers surveyed
CEOs to study the CEOs intentions to engage in two questionable practices: soliciting a
competitor s technological secrets, and making illegal payments to foreign officials.
The researchers concluded that the CEOs personal predispositions more strongly
affected their decisions than did outside pressures or characteristics of their firms.19

TRAITS The problem is it s hard to generalize about the characteristics of ethical

or unethical people. Some studies suggest that age is a factor. One study surveyed
421 employees to measure the degree to which various traits influenced responses
to ethical decisions. (Decisions included doing personal business on company time
and calling in sick to take a day off for personal use. ) Older workers generally
had stricter interpretations of ethical standards and made more ethical decisions than
did younger ones.
Honesty testing (as we discussed in Chapter 5) can help pinpoint those people
who are inclined to make bad ethical choices. How would you rate your own ethics?
Figure 14-1 presented a short self-assessment survey for helping you answer that
question.

Outside Forces That Shape Ethical Decisions (Bad Barrels)

COMPANY PRESSURES We also saw that outside pressures weaken one s ethical
compass. If people did unethical things at work solely for personal gain, it perhaps
would be understandable (though inexcusable). The scary thing about unethical
behavior at work is that it s often not driven by personal interests. As one former
top executive said at his trial, I took these actions, knowing they were wrong, in a
misguided attempt to preserve the company to allow it to withstand what I believed
were temporary financial difficulties. 20
One study asked employees to list their reasons for taking unethical actions at
work.21 For most of these employees, meeting schedule pressures, meeting overly
aggressive financial or business objectives, and helping the company survive were the
three top causes. Advancing my own career or financial interests ranked about last.
Thus (at least in this case) most ethical lapses seemed to occur because employees shifted
their ethical compasses to I must help my company. So the scary thing about unethical
behavior at work is that it s often not just personal interests driving it. (A recent study
suggests that people may not be so selfless. It found that people who took unethical
actions out of loyalty were also more likely to expect reciprocity.)22 In any case, guarding
against pressures such as overly aggressive goals is one way to head off ethical lapses.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 465

PRESSURE FROM THE BOSS It s hard to resist even subtle pressure, let alone
coercion, from your boss. According to one report, the level of misconduct at work
dropped dramatically when employees said their supervisors exhibited ethical
behavior. Only 25% of employees who agreed that their supervisors set a good
example of ethical business behavior said they had observed misconduct in the last
year, compared with 72% of those who did not feel that their supervisors set good
ethical examples.23 Yet in another poll, only about 27% of employees strongly agreed
that their organizations leadership is ethical.24
Examples of how supervisors knowingly (or unknowingly) lead subordinates
astray ethically include:
* Tell staffers to do whatever is necessary to achieve results.
* Overload top performers to ensure that work gets done.
* Look the other way when wrongdoing occurs.
* Take credit for others work or shift blame.
* Be dishonest.25

ETHICS POLICIES AND CODES An ethics policy and code is a good way to signal
that the firm is serious about ethics. For example, IBM s code of ethics has this to say
about tips, gifts, and entertainment:
No IBM employee, or any member of his or her immediate family, can accept
gratuities or gifts of money from a supplier, customer, or anyone in a business
relationship. Nor can they accept a gift or consideration that could be perceived
as having been offered because of the business relationship. Perceived simply
means this: If you read about it in the local newspaper, would you wonder whether
the gift just might have had something to do with a business relationship? No IBM
employee can give money or a gift of significant value to a customer, supplier, or
anyone if it could reasonably be viewed as being done to gain a business advantage.26
Sometimes ethics codes don t work. A number of years ago, Enron Corp. allegedly
collapsed in part due to some executives ethical misdeeds. Yet Enron s ethical princi-
ples were prominent on its Web site. It stated, that, as a partner in the communities
in which we operate, Enron believes it has a responsibility to conduct itself according
to certain basic principles. Those include respect, integrity, communication and
excellence. 27
Beyond the code, some firms urge employees to apply a quick ethics test to evalu-
ate whether what they re about to do fits the company s code of conduct. For example,
Raytheon Co. asks employees who face ethical dilemmas to ask:
Is the action legal?
Is it right?
Who will be affected?
Does it fit Raytheon s values?
How will it feel afterwards?
How will it look in the newspaper?
Will it reflect poorly on the company?28
However, codifying the rules without enforcing them is futile. As one study of
ethics concludes, strong statements by managers may reduce the risk of legal
and ethical violations by their work forces, but enforcement of standards has
the greatest impact. 29 More firms, such as Lockheed Martin Corp., therefore
appoint chief ethics officers.30 Ethics audits typically address topics like conflicts
of interest, giving and receiving gifts, employee discrimination, and access to
company information.31

THE ORGANIZATION S CULTURE These examples illustrate that employees

take their signals about what s acceptable not just from what managers say, but from
466 PART 5 EMPLOYEE RELATIONS

what they do. Those signals then mold the company s organizational culture, the
characteristic values, traditions, and behaviors a company s employees share.
A value is a basic belief about what is right or wrong, or about what you should or
shouldn t do. ( Honesty is the best policy would be a value.) Values are important
because they guide and channel behavior. Managing people and shaping their
behavior therefore depends on shaping the values they use as behavioral guides.
For example, if management really believes honesty is the best policy, the written
rules they follow and the things they do should reflect this value. Managers there-
fore have to think through how to send the right signals to their employees. Doing
so includes:

* Clarifying expectations. First, managers should make clear their expectations

with respect to the values they want subordinates to follow. For example, the
Johnson & Johnson ethics code says, We believe our first responsibility is to the
doctors, nurses and patients, to mothers and fathers and all others who use our
products and services.
* Using signs and symbols. Symbolism what the manager actually does and thus
the signals he or she sends is crucial. Managers need to walk the talk. They
can t expect to say, don t fudge the financials and then do so themselves.
* Providing physical support. The physical manifestations of the manager s
values the firm s incentive plan, appraisal system, and disciplinary procedures,
for instance signal employees regarding what they should and should not do.
For example, does the firm reward ethical behavior or penalize it? 32

In Summary: Some Things to Keep in Mind

About Ethical Behavior at Work
Several experts reviewed the research concerning things that influence ethical behavior
in organizations. Here is what their findings suggest for managers:33

* Ethical behavior starts with moral awareness. In other words, does the person
even recognize that a moral issue exists in the situation?
* Managers can do a lot to influence employee ethics by carefully cultivating the
right norms, leadership, reward systems, and culture.
* Ethics slide when people undergo moral disengagement. Doing so frees them
from the guilt that would normally go with violating one s ethical standards.
For example, you re more likely to harm others when you view the victims as
outsiders.
* The most powerful morality comes from within. In effect, when the moral person
asks, Why be moral? the answer is, Because that is who I am. Then, failure
to act morally creates emotional discomfort.34
* Beware the seductive power of an unmet goal. Unmet goals pursued blindly can
contribute to unethical behavior.35
* Offering rewards for ethical behavior can backfire. Doing so may actually undermine
the intrinsic value of ethical behavior.
* Don t inadvertently reward someone for bad behavior. For example, don t promote
someone who got a big sale through devious means.36
* Employers should punish unethical behavior. Employees who observe unethical
behavior expect you to discipline the perpetrators.
* The degree to which employees openly talk about ethics is a good predictor
of ethical conduct. Conversely, organizations characterized by moral muteness
suffer more ethically problematic behavior.
* People tend to alter their moral compasses when they join organizations. They
uncritically equate What s best for this organization (or team, or department)?
with What s the right thing to do?
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 467

3 Describe at least four

USING HUMAN RESOURCE MANAGEMENT METHODS
specific ways in which TO PROMOTE ETHICS AND FAIR TREATMENT
HR management can
influence ethical behavior
Managers can use personnel activities to support the employer s ethics goals. We ll con-
at work. sider examples.

Selection
As one writer says, The simplest way to tune up an organization, ethically speaking, is
to hire more ethical people. 37 Employers can start by creating recruitment materials
that emphasize ethics. (The Microsoft site in Figure 14-3 is an example.) Similarly,
use honesty tests and background checks (discussed in Chapter 6) to screen out
undesirables.38 Ask behavioral questions such as, Have you ever observed someone
stretching the rules at work? What did you do about it?39

FAIRNESS As two writers put it, If prospective employees perceive that the hiring
process does not treat people fairly, they may [also] assume that ethical behavior
is not important. 40 Here, keep several things in mind:
* Applicants tend to view the formal procedure (such as the interview) as fair to the
extent that it tests job-related criteria and provides an opportunity to demonstrate
competence.
* Applicants expect respect. Interpersonal treatment reflects such things as the
propriety of the questions, the politeness of interviewer, and the degree of
two-way communication.
* Applicants see a selection system as fair to the extent that the employer provides
useful feedback about the employee s or candidate s own performance.41

FIGURE 14-3 Using the

Company Web Site
to Emphasize Ethics

Source: www.microsoft.com/industry/
government/GovGiftingCompliance.
mspx, accessed April 28, 2009.

organizational culture
The characteristic values, traditions, and
behaviors a company s employees share.
468 PART 5 EMPLOYEE RELATIONS

Ethics Training
Ethics training involves showing employees how to recognize ethical dilemmas, how to
use codes of conduct to resolve problems, and how to use personnel activities like disci-
plinary practices in ethical ways.42 In addition, the training should emphasize the moral
underpinnings of the ethical choice and the company s deep commitment to integrity
and ethics. Include participation by top managers to underscore that commitment.43
For all practical purposes, ethics training is mandatory. Federal sentencing
guidelines reduced penalties for employers accused of misconduct who implemented
codes of conduct and ethics training. An amendment to those guidelines now outlines
stricter ethics training requirements.44 Ethics training usually includes showing
employees how to recognize ethical dilemmas, how to use ethical frameworks (such as
codes of conduct) to resolve problems, and how to use human resource activities (such
as interviews and disciplinary practices) in ethical ways.
Ethics training is often Internet-based. For example, Lockheed Martin s 160,000
employees take ethics and legal compliance training via the firm s intranet. Lockheed s
online ethics program software also keeps track of how well the company and its
employees are doing in terms of maintaining high ethical standards.45 Online ethics
training tools include Business Ethics for Managers from SkillSoft (skillsoftcom).46
Some employers are switching from packaged ethics training to more company-
relevant customized programs. For example, Yahoo! had a vendor produce an animated
package containing ethical scenarios set in Yahoo! company offices around the world.
The 45-minute program covers Yahoo! s code of conduct as well as issues like the
Foreign Corrupt Practices Act.47

Performance Appraisal
How you conduct appraisals is important. To send the signal that fairness is paramount,
performance standards should be clear, employees should understand the basis upon
which you re going to appraise them, and the appraisal itself should be objective.

Reward and Disciplinary Systems

To the extent that behavior is a function of its consequences, the manager needs to
reward ethical behavior and penalize unethical behavior. Employees expect the organi-
zation to dole out relatively harsh punishment for unethical conduct. 48 If not, it s often
the ethical employees who feel punished.

Managing Ethics Compliance

Passage of the Sarbanes-Oxley Act of 2002 made ethics compliance obligatory.49
Among other things, the act requires that the CEO and the CFO of publicly traded
companies personally attest to the accuracy of their companies financial statements,
and to the fact that internal controls are adequate.50 One study of Fortune 500
companies concluded than an HR officer was responsible for the program in 28%
of responding firms. Another 28% gave the firm s legal officers responsibility, and
16% established separate ethics or compliance departments. The remaining firms
spread the responsibility among auditing departments, or positions such as public
affairs and corporate communications.51

4 Employ fair disciplinary

MANAGING EMPLOYEE DISCIPLINE AND PRIVACY
practices. The purpose of discipline is to encourage employees to behave sensibly at work
(where sensible means adhering to rules and regulations). Discipline is necessary
when an employee violates a rule.52
Proper disciplinary procedures are important for several reasons (beyond the fact
that it s the ethical thing to do). One study surveyed 45 published arbitration awards
in which tardiness had triggered discipline and/or discharge. When arbitrators
overturned employers decisions, it was usually because the employer had failed
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 469

to clarify what it meant by tardy. A lack of clarity regarding how often an employee
may be late and an inappropriately severe penalty were other problems. Unfair disci-
plinary procedures can backfire in other ways. For example, an unfair disciplinary
procedure can trigger retaliatory employee misbehavior. It is also hard to be seen as
ethical when one s disciplinary practices are unfair. Discipline is not primarily a
factory-bound problem. Managers increasingly discipline workers for misuse of
social media and related devices in the workplace.53

Fairness in Disciplining
Disciplining employees is often unavoidable, but any such discipline must be rooted
in the need to be fair. For most people the answer to Why treat employees fairly?
is obvious, since most learn, early on, some version of the golden rule. But there are also
concrete reasons to treat employees fairly. Arbitrators and the courts will consider the fair-
ness of the disciplinary procedures when reviewing disciplinary decisions. Fairness also
relates to a wide range of positive employee outcomes. These include enhanced employee
commitment and enhanced satisfaction with the organization, and more organizational
citizenship behaviors (the steps employees take to support their employers interests).54
Job applicants who felt treated unfairly expressed more desire to appeal the outcome.
Those who view the firm s testing programs as fair view the company and the job as more
attractive.55 There are thus many practical reasons for treating employees fairly.

RESEARCH INSIGHT A study illustrates this. College instructors completed

surveys regarding the extent to which they saw their colleges as treating them with
procedural and distributive justice. Procedural justice items included, In general, the
department/college s procedures allow for requests for clarification for additional
information about a decision. Distributive justice items included, I am fairly
rewarded considering the responsibilities I have. The instructors also completed
attitude surveys. These included items such as, I am proud to tell others that I am
part of this department/college. Their students also completed surveys. These
contained items such as The instructor was sympathetic to my needs, and The
instructor treated me fairly.
The results were impressive. Instructors who perceived high distributive and proce-
dural justice reported being more committed to the college and to their jobs. Their
students reported higher levels of instructor effort, pro-social behaviors, and fairness.56

Bullying and Victimization

Workplace unfairness is often subtle, but can be blatant. Some supervisors are
workplace bullies, yelling at or even threatening subordinates. Employers should always
prohibit such behavior. Many firms have anti-harassment policies. (For example, at one
state agency, It is the policy of the department that all employees, customers, contrac-
tors, and visitors to the work site are entitled to a positive, respectful, and productive
work environment. )57 Not surprisingly, employees of abusive supervisors are more
likely to quit their jobs, and to report lower job and life satisfaction and higher stress.58
Mistreatment makes it more likely the employee will also show higher levels of work
withdrawal (show up for work, but not do his or her best).59 They also exhibit more
workplace deviance, for instance, in terms of theft and sabotage.60
Bullying singling out someone to harass and mistreating them is an increas-
ingly serious problem. The U.S. government (www.stopbullying.gov/#) points out that
while definitions of bullying vary, most would agree that bullying involves three things:
* Imbalance of power: People who bully use their power to control or harm and
the people being bullied may have a hard time defending themselves.
* Intent to cause harm: Actions done by accident are not bullying; the person
bullying has a goal to cause harm.
* Repetition: Incidents of bullying happen to the same person over and over by the
same person or group.
470 PART 5 EMPLOYEE RELATIONS

Bullying can take many forms, such as:

* Verbal: name-calling, teasing
* Social: spreading rumors, leaving people out on purpose, breaking up friendships
* Physical: hitting, punching, shoving
* Cyberbullying: using the Internet, mobile phones, or other digital technologies
to harm others
Lest there be any doubt, the person to blame for any bullying is the perpetrator.
Employers must have systems in place, similar to those discussed elsewhere in this
chapter, to ensure that the company can identify unfair treatment and deal with
it expeditiously. This includes having policies in place to monitor employees use
of social media Web sites.61
However, numerous studies (usually conducted under the umbrella of the victim
precipitation model ) show that certain people s traits and how they behave make them
more vulnerable to bullying.62 These include submissive victims (who seem more
anxious, cautious, quiet, and sensitive), provocative victims (who show more aggressive
behavior), and victims low in self-determination (who, in other words, seem to leave
it to others to make decisions for them and determine the course of their careers).

RESEARCH INSIGHT A recent study illustrates the interpersonal dynamics

involved. Research suggests that people with higher intellectual capability often suffer
bullying in school contexts, for instance, in the form of derogatory names such as
geek and nerd. In this study, 217 employees of a health care organization completed a
survey that measured cognitive ability, victimization, and how the person behaved
at work.63 The researchers found that it wasn t just whether the person was very smart
that determined whether he or she became a victim, but how the person behaved.
People with high cognitive ability who behaved more independently were more likely
to be victimized by bullying. High-cognitive-ability people who were team players
were less likely to be victimized.

What Causes Unfair Behavior

Some of the things that motivate managers to be fair may (or may not) be surprising.
For one thing, the saying, the squeaky wheel gets the grease is true. One study
investigated the extent to which assertiveness on the subordinate s part influenced
the fairness with which the person s supervisor treated him or her.64 Supervisors
treated pushier employees more fairly: Individuals who communicated assertively
were more likely to be treated fairly by the decision maker. Furthermore, super-
visors exposed to injustice exhibit abusive behavior against subordinates who they
see as vulnerable or provocative.65
One study concluded that three supervisory actions influenced perceived fairness:66
* Involving employees in the decisions that affect them by asking for their input and
allowing them to refute the others ideas and assumptions;
* Ensuring that everyone involved and affected understands why final decisions are
made and the thinking that underlies the decisions; and
* Making sure everyone knows up front by what standards you will judge him or her.
Many employers establish channels through which employees can air their concerns.
For example, the FedEx Survey Feedback Action (SFA) program includes an anony-
mous survey that lets employees express their feelings about the company and their
managers. Sample items include:
* I can tell my manager what I think.
* My manager tells me what is expected.
* My manager listens to my concerns.
* My manager keeps me informed.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 471

Each manager then has an opportunity to discuss the department results with
subordinates, and create an action plan for improving work group commitment.

Basics of a Fair and Just Disciplinary Process

The employer wants its discipline process to be both effective (in terms of discouraging
unwanted behavior) and fair. Employers base such a process on three pillars: clear rules
and regulations, a system of progressive penalties, and an appeals process.

RULES AND REGULATIONS First, rules and regulations address issues such as
theft, destruction of company property, drinking on the job, and insubordination.
Examples include:
* Poor performance is not acceptable. Each employee is expected to perform his
or her work properly and efficiently.
* Alcohol and drugs have no place at work. The use of either during working
hours and reporting for work under the influence of either are both prohibited.
Rules inform employees ahead of time what is and is not acceptable behavior.
Upon hiring, tell employees, preferably in writing, what is not permitted. The
employee handbook usually contains the rules and regulations.

PROGRESSIVE PENALTIES A system of progressive penalties is a second pillar

of effective discipline. Penalties typically range from oral warnings to written warnings
to suspension from the job to discharge.
The severity of the penalty usually reflects the type of offense and the number of
times it has occurred. For example, most companies issue warnings for the first unex-
cused lateness (see the form in Figure 14-4). For a fourth offense, discharge is the
usual disciplinary action.

FORMAL DISCIPLINARY APPEALS PROCESSES In addition to rules and

progressive penalties, the disciplinary process requires an appeals procedure (see
Figure 14-5).
Virtually all union agreements contain disciplinary appeal procedures, but such
procedures are not limited to unionized firms. For example, FedEx calls its 3-step
appeals procedure guaranteed fair treatment:
* In step 1, management review, the complainant submits a written complaint to a
member of management (manager, senior manager, or managing director)
within 7 calendar days.
* If not satisfied with that decision, then in step 2, officer complaint, the complainant
submits a written appeal to the vice president or senior vice president of the
division.
* Finally, in step 3, executive appeals review, the complainant may submit a written
complaint within 7 calendar days of the step 2 decision to the employee relations
department. It then investigates and prepares a case file for the executive review
appeals board. The appeals board the CEO, the COO, the chief personnel
officer, and three senior vice presidents then reviews all relevant information
and makes a decision to uphold, overturn, or initiate a board of review, or to take
other appropriate action.
Some companies establish independent ombudsman, neutral counselors outside
the normal chain of command to whom employees can turn for confidential
advice.67

DISCIPLINE WITHOUT PUNISHMENT Traditional discipline has two poten-

tial drawbacks. First, no one likes to be punished. Second, punishment tends
to gain short-term compliance, but not the long-term cooperation employers
often prefer.
472 PART 5 EMPLOYEE RELATIONS

FIGURE 14-4 Disciplinary

Action Form Disciplinary Action Form
Source: Reprinted from www.HR.BLR.
com with permission of the publisher Date:
Business and Legal Resources, Inc.,
141 Mill Rock Road East, Old Name:
Saybrook, CT © 2004. BLR®
(Business and Legal Resources, Inc.). Dept.:

Disciplinary Action:

Verbal* Written Written & Suspension Discharge

To the employee:

Your performance has been found unsatisfactory for the reasons set
forth below. Your failure to improve or avoid a recurrence will be
cause for further disciplinary action.

Details:

A copy of this warning was personally delivered to the above

employee by:

Supervisor:

Date:

I have received and read this warning notice. I have been informed
that a copy of this notice will be placed in my personnel file.

Employee:

Date:

*If action is verbal, completion of this form shall serve as documentation

only and should not be filed in the employee s personnel file.

Discipline without punishment (or nonpunitive discipline) aims to avoid these

drawbacks. It does this by gaining employees acceptance of the rules while reducing
the punitive nature of the discipline itself. Here is how it works:68
1. Issue an oral reminder. The goal is to get the employee to agree to avoid future
infractions.
2. Should another incident arise within 6 weeks, issue a formal written reminder,
a copy of which is placed in the employee s personnel file. In addition, hold a
second private discussion with the employee, again without any threats.
3. Give a paid, 1-day decision-making leave. If another incident occurs in the next
6 weeks or so, tell the employee to take a 1-day leave with pay, and to stay home and
consider whether he or she wants to abide by the company s rules. When the
employee returns to work, he or she meets with you and gives you his or her decision.
4. If no further incidents occur in the next year or so, purge the 1-day paid suspension
from the person s file. If the behavior reoccurs, typically the next step is dismissal.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 473

FIGURE 14-5 Grievance Form

as Part of Appeal Process

Source: http://www.wfu.edu/hr/
forms/staff-grievance.pdf, accessed
September 29, 2011. Used with
permission.

The process would not apply in exceptional circumstances. For example, criminal
behavior or in-plant fighting might be grounds for immediate dismissal. And if several
incidents occurred at very close intervals, you might skip step 2 the written warning.

IN SUMMARY: THE HOT STOVE RULE Supervisors traditionally apply the

4-point hot stove rule when applying discipline. When touching a hot stove that
says, Don t touch, the person has warning, and the pain is consistent, impersonal, and
immediate. Figure 14-6 summarizes useful fair discipline guidelines.

nonpunitive discipline
Discipline without punishment, usually
involving a system of oral warnings
and paid decision-making leaves in lieu
of more traditional punishment.
474 PART 5 EMPLOYEE RELATIONS

FIGURE 14-6 Summary of Fair

Make sure the evidence supports the charge.
Discipline Guidelines
Make sure the employee s due process rights are protected.
Warn the employee of the disciplinary consequences.
The rule that was allegedly violated should be reasonably related to the efficient
and safe operation of the work environment.
Fairly and adequately investigate the matter before administering discipline.
The investigation should produce substantial evidence of misconduct.
Apply all rules, orders, or penalties evenhandedly.
The penalty should be reasonably related to the misconduct and to the employee s
past work.
Maintain the employee s right to counsel.
Don t rob a subordinate of his or her dignity.
Remember that the burden of proof is on you.
Get the facts. Don t base a decision on hearsay or on your general impression.
Don t act while angry.
In general, do not attempt to deal with an employee s bad attitude. Focus on improving
the specific behaviors creating the workplace problem.

Employee Privacy
For most people, invasions of privacy are neither ethical nor fair.69 The four main
types of employee privacy violations upheld by courts are intrusion (locker room
and bathroom surveillance), publication of private matters, disclosure of medical
records, and appropriation of an employee s name or likeness for commercial
purposes.70 (Breaching security of personnel files is a related problem, as we
discussed in Chapter 5 [Recruiting]). One survey of security professionals ranked
human resources last among departments securing such confidential data.71) In
practice, background checks, monitoring off-duty conduct and lifestyle, drug testing,
workplace searches, and monitoring of workplace activities trigger most privacy
violations.72 Some employers, such as Eastman Kodak, are appointing chief privacy
officers to ensure that the human resource management and other departments don t
endanger the company by conducting inappropriate investigations of job applicants
or employees.73 We ll now look more closely at monitoring.

Employee Monitoring
Employee monitoring is pervasive. Biometrics using physical traits such as finger-
prints or iris scans for identification is one example. Thus, New York s Bronx Lebanon
Hospital uses biometric scanners to ensure that the employee who clocks-in in the

More employers are using iris

scanning to verify employee
identity.
Source: Tim Chapman/Getty Images USA, Inc..
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 475

morning is really who he or she says he is.74 Iris scanning tends to be the most accurate
authorization device. The Federal Aviation Authority uses it to control employees
access to its information systems.75 More than half of employers say they monitor their
employees incoming and outgoing e-mail; 27% monitor internal e-mail as well.76 One
survey found that 41% of large employers have someone reading employee e-mails.77
Ninety-six percent block access to adult Web sites; 61% block access to game sites.78
Employers such as United Parcel Service use GPS units to monitor their truckers and
street sweepers whereabouts. Indeed, iPhones, iPads, and Android devices track their
owners more or less continuously.
Employers monitor employees electronic activities mostly to improve produc-
tivity and to protect themselves from computer viruses, leaks of confidential
information, and harassment suits.79 In one case, a New Jersey court found an
employer liable when one of its employees used his company computer at work
to distribute child pornography. (Someone had previously alerted the employer to
the suspicious activity and the employer had not taken action.)80 When one
employer noticed that employees were piling up overtime claims, it installed new
software. It discovered many employees were spending hours on Facebook and
shopping online. A recent U.S. Federal Trade Commission decision may make
employers liable for deceptive endorsements that employees post on their own blogs
or on social media sites such as Facebook, even if the employers didn t authorize
the statements.81 Security is a problem, too. One 4-gigabyte MP3 player, such as
the first generation of iPod Mini . . . can take home a lot of corporate data, said
one employer (a process some graphically describe as pod slurping. )82

RESTRICTIONS There are two main restrictions on workplace monitoring: the

Electronic Communications Privacy Act (ECPA) and common-law protections
against invasion of privacy. The ECPA is a federal law intended to help restrict
interception and monitoring of oral and wire communications. It contains two
exceptions. The business purpose exception permits employers to monitor commu-
nications if they can show a legitimate business reason for doing so. The second,
consent exception, lets employers monitor communications if they have their
employees consent to do so.83
Electronic eavesdropping is thus legal up to a point. Federal law and most
state laws allow employers to monitor employees phone calls in the ordinary
course of business, but they must stop listening once it becomes clear that a
conversation is personal rather than business related. Employers can also generally
monitor their own e-mail systems (and possibly private accounts such as Hotmail,
if used by employees on their company computer systems), which are, after
all, their property. However, to be safe, employers should warn employees to use
those systems for business purposes only. 84 Employers should have employees
sign e-mail and telephone monitoring acknowledgment statements like that in
Figure 14-7.
Videotaped workplace monitoring deserves more caution. In one case, a U.S.
Court of Appeals ruled that an employer s continuous video surveillance of employees
in an office setting was not an unconstitutional invasion of privacy.85 But a Boston
employer had to pay more than $200,000 to five workers it secretly videotaped in an
employee locker room.86

Electronic Communications Privacy

Act (ECPA)
Intended in part to restrict interception and
monitoring of oral and wire communications,
but with two exceptions: employers who can
show a legitimate business reason for doing
so, and employers who have employees
consent to do so.
476 PART 5 EMPLOYEE RELATIONS

FIGURE 14-7 Sample E-Mail

Monitoring Acknowledgment
Statement I understand that XYZ Company periodically monitors any e-mail communications created, sent,
or retrieved using this company s e-mail system. Therefore I understand that my e-mail
communications may be read by individuals other than the intended recipient. I also understand
that XYZ Company periodically monitors telephone communications, for example to improve
customer service quality.

Signature Date

Print Name Department

5 List at least four important

MANAGING DISMISSALS
factors in managing Dismissal or termination is the most drastic disciplinary step the employer can take.
dismissals effectively. Because of this, it requires special care. There should be sufficient cause for the
dismissal, and (as a rule) you should only dismiss someone after taking reasonable steps
to rehabilitate the employee. However, there will undoubtedly be times when dismissal
is required, perhaps at once.
The best way to handle a dismissal is to avoid it in the first place. Many
dismissals start with bad hiring decisions. Using effective selection practices including
assessment tests, reference and background checks, drug testing, and clearly defined
job descriptions can reduce the need for many dismissals.

Termination at Will and Wrongful Discharge

For more than 100 years, termination at will was the prevailing dismissal-related rule
in the United States. Termination at will means that without a contract, either
the employer or the employee could terminate at will the employment relationship.
The employee can resign for any reason, at will, and the employer can dismiss an
employee for any reason, at will.87
Today, however, dismissed employees are increasingly taking their cases to
court, and many employers are discovering they no longer have a blanket right
to fire. Instead, EEO and other laws and court rulings limit management s right to
dismiss. For example, a statement in an employee handbook may imply a contrac-
tual agreement to keep an employee. Some employers even when faced with
employee theft are reluctant to terminate disruptive employees for fear of
lawsuits. In practice, plaintiffs only win a tiny fraction of such suits, but the cost
of defending the suits is still huge.88

WRONGFUL DISCHARGE Wrongful discharge refers to a dismissal that

violates the law or that fails to comply with contractual arrangements stated or
implied by the employer, for instance, in employee manuals.
Three main protections against wrongful discharge have eroded the termination-
at-will doctrine statutory exceptions, common law exceptions, and public policy
exceptions.
First, in terms of statutory exceptions, federal and state equal employment and
workplace laws prohibit specific types of dismissals. As just one example, occupational
safety laws prohibit firing employees for reporting dangerous workplace conditions.89
Second, numerous common law exceptions exist. For example, some state courts
recognize the concept of implied contracts in employment. Thus, a court may decide
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 477

that an employee handbook promising termination only for just cause may create an
exception to the at-will rule.
Finally, under the public policy exception, courts have held a discharge to be
wrongful when it was against an explicit, well-established public policy (for instance,
the employer fired the employee for refusing to break the law).

Grounds for Dismissal

There are four bases for dismissal: unsatisfactory performance, misconduct, lack of
qualifications for the job, and changed requirements of (or elimination of) the job.
We ll discuss each.
Unsatisfactory performance means persistent failure to perform assigned duties or
to meet prescribed job standards.90 Specific grounds include excessive absenteeism,
tardiness, a persistent failure to meet normal job requirements, or an adverse attitude
toward the company, supervisor, or fellow employees.
Misconduct is deliberate and willful violation of the employer s rules and may
include stealing, rowdy behavior, and insubordination. Sometimes the misconduct is
more serious, as when it causes someone else harm. For example, a coworker posted
on YouTube a cook at a national pizza chain apparently putting vile foreign matter
into the pizzas. Figure 14-8 shows how to identify such gross misconduct.
Lack of qualifications for the job is an employee s inability to do the assigned work
although he or she is diligent. If the employee may be trying to do the job, it is reason-
able to do what s possible to salvage him or her perhaps by assigning the person to
another job.
Changed requirements of the job refers to an employee s inability to do the job after
the employer changed the nature of the job. Again, the employee may be industrious,
so it is reasonable to retrain or transfer this person, if possible.

INSUBORDINATION Insubordination is a form of misconduct. It basically refers

to disobedience and/or rebelliousness. While things like stealing, chronic tardiness,
and poor-quality work are easily understood grounds for dismissal, insubordination is

FIGURE 14-8 Was It Gross

Was anyone physically harmed? How badly?
Misconduct?
Did the employee realize the seriousness of his or her actions?
Were other employees significantly affected?
Was the employer s reputation severely damaged?
Will the employer lose significant business or otherwise suffer economic harm
because of the misconduct?
Could the employer lose its business license because of the employee s misconduct?
Will the employee lose any license needed to work for the employer
(e.g., driver s license)?
Was criminal activity involved?
Was fraud involved?
Was any safety statute violated?
Was any civil statute violated?
Was the conduct purposeful?
Did the conduct occur while on duty?
Is the violated policy well-known to employees?
Does the conduct justify immediate termination?
Has the employer immediately fired other employees who did something similar?

dismissal wrongful discharge insubordination

Involuntary termination of an employee s An employee dismissal that does not comply Willful disregard or disobedience of the
employment with the firm. with the law or does not comply with the boss s authority or legitimate orders;
contractual arrangement stated or implied criticizing the boss in public.
termination at will by the firm via its employment application
In the absence of a contract, either the forms, employee manuals, or other promises.
employer or the employee can terminate
at will the employment relationship.
478 PART 5 EMPLOYEE RELATIONS

sometimes harder to translate into words. However, some acts are usually clearly
insubordinate. These include, for instance:
1. Direct disregard of the boss s authority
2. Direct disobedience of, or refusal to obey, the boss s orders, particularly in front
of others
3. Deliberate defiance of clearly stated company policies, rules, regulations, and
procedures
4. Public criticism of the boss
5. Blatant disregard of reasonable instructions
6. Contemptuous display of disrespect
7. Disregard for the chain of command, shown by frequently going around the
immediate supervisor with complaints, suggestions, or political maneuvers
8. Participation in (or leadership of) an effort to undermine or remove the boss91

FAIRNESS IN DISMISSALS Dismissals are never pleasant. However, there are

three things to do to make them fair.92 First, individuals who said that they were given
full explanations of why and how termination decisions were made were more likely to
perceive their layoff as fair . . . and indicate that they did not wish to take the past
employer to court.
Second, institute a formal multistep procedure (including warning) and a neutral
appeal process.
Third, who actually does the dismissing is important. Employees in one study whose
managers informed them of an impending layoff viewed the dismissal procedure as
much fairer than did those told by, say, a human resource manager. (One employer
took a less diplomatic approach. The firm had an in-person meeting to announce
the downsizing, but telecommuter employees got the news by e-mail. About 10%
of respondents in one survey said they ve used e-mail to fire employees.93)

SECURITY MEASURES Common sense requires using a checklist to ensure

that dismissed employees return all keys and company property, and (often)
accompanying them out of their offices and out of the building. The employer
should disable Internet-related passwords and accounts of former employees, plug
holes that could allow an ex-employee to gain illegal online access, and have rules
for return of company laptops and handhelds. Measures range from simply
disabling access and changing passwords to reconfiguring the network and chang-
ing IP addresses, remote access procedures, and telephone numbers, says one chief
technology officer.94

Avoiding Wrongful Discharge Suits

As noted earlier, wrongful discharge (or termination) occurs when an employee s
dismissal does not comply with the law or with the contractual arrangement stated
or implied by the employer. (In a constructive discharge claim, the plaintiff argues
that he or she quit, but had no choice because the employer made the situation so
intolerable at work.95)
Avoiding wrongful discharge suits requires a three-pronged approach.96 First,
create employment policies including grievance procedures that help make employees
feel you treated them fairly. Here employers can also use severance pay to blunt a
dismissal s sting.97 (Figure 14-9 summarizes typical severance policies in manufactur-
ing and service industries.) There is no way to make termination pleasant, but the first
line of defense is to handle it justly.98
Second, review and refine all employment-related policies, procedures, and
documents to limit challenges. Have applicants sign the employment application.
Make sure it contains a statement that employment is for no fixed term, and that the
employer can terminate at any time. Pay particular attention to the employee
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 479

FIGURE 14-9 Length of

Number of Weeks of Cash Severance Payments
Severance Period for Cash
Payments (Number of weeks Job Level 10th 25th (Median) 75th 90th
by year of service) and Years of Service Percentile Percentile 50th Percentile Percentile Percentile
Source: Culpepper Pay Practices & Executives *
Policies Surveys, March 2009, 1 Year of Service 1 2 4 12 26
www.culpepper.com.
2 Years of Service 2 2 6 16 26
3 Years of Service 3 4 9 18 26
5 Years of Service 5 5 13 24 29
10 Years of Service 9 10 20 33 52
15 Years of Service 10 15 26 38 52
20 Years of Service 10 20 26 43 52
Max # Weeks ** 13 26 39 52 52
Directors & Managers
1 Year of Service 1 2 2 4 11
2 Years of Service 2 2 4 7 12
3 Years of Service 3 3 6 8 13
5 Years of Service 5 5 8 10 19
10 Years of Service 5 10 12 20 26
15 Years of Service 7 13 17 26 30
20 Years of Service 8 13 20 29 40
Max # Weeks 9 13 20 29 52
Professional & Hourly
1 Year of Service 1 1 2 4 6
2 Years of Service 2 2 4 4 8
3 Years of Service 3 3 4 6 12
5 Years of Service 5 5 7 10 13
10 Years of Service 8 10 10 18 20
15 Years of Service 8 13 15 24 30
20 Years of Service 8 13 20 26 40
Max # Weeks 8 13 20 26 52
*Nearly two-thirds of companies reported calculating executive severance cash payments by the
number of years of service. Thirty percent calculate the amount of cash severance as a multiplier
of one times base salary.

handbook. It should include an acknowledgment form as in Figure 14-10. Consider

deleting statements such as employees can be terminated only for just cause. Keep
careful confidential records of all actions such as employee appraisals, warnings or
notices, and memos outlining how improvement should be accomplished.
Third (but not least), make sure you clearly communicate job expectations to
the employee; failing to do so triggers many wrongful termination claims.99 The
accompanying HR as a Profit Center feature illustrates what employers can gain
from such actions.

HR AS A PROFIT CENTER
Wrongful Terminations
As we ve seen, it is relatively easy for human resource managers to put in place
procedures to minimize (and largely eliminate) wrongful discharge claims. As a
result, this is one area where HR s profit center role is relatively clear, persuasive,
and easy to implement. Steps like those in the accompanying text such as
instituting grievance procedures are straightforward and essentially cost-less.
On the other hand, the costs of wrongful terminations are real and material.
(Continued)
480 PART 5 EMPLOYEE RELATIONS

The costs don t just include obvious ones such as fighting the lawsuit in court.
Wrongful termination can also trigger contractual clauses that require paying huge
sums. Consider one recent case.100 In this case, wrongfully terminating the
employee caused two benefits that the employee might not otherwise be eligible
for to vest: (1) five $14,000 annual deferred compensation payments and (2) a
$275,000 benefit that otherwise would not have accumulated until the plaintiff
completed 10 years of uninterrupted service (which the employee did not due
to his wrongful termination).101 In this case, the court did rule that the employer
could pay those benefits out in monthly installments. But the fact remains that had
the firm put in place procedures to minimize the possibility of a wrongful termina-
tion suit had management terminated him for cause, for instance, or reached an
agreement they might have avoided the huge expense.

Personal Supervisory Liability

Courts sometimes hold managers personally liable for supervisory actions (including
discipline and dismissal), particularly with respect to actions covered by the Fair Labor
Standards Act and the Family and Medical Leave Act.102
There are several ways to avoid personal liability. Managers should be fully familiar
with applicable federal, state, and local statutes (such as Title VII). Follow company
policies and procedures (since an employee may allege you did not follow company
policies and procedures). The essence of many charges is that the plaintiff was treated
differently than others, so consistent application of the rule is important. Administer
the discipline in a manner that does not add to the emotional hardship on the
employee (as dismissing them publicly would). Most employees will try to present

FIGURE 14-10 Handbook

Acknowledgment Form

Source: www.twc.state.tx.us,
accessed April 28, 2009.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 481

their side of the story, and allowing them to do so can provide the employee some
measure of satisfaction. Do not act in anger, since doing so undermines any appear-
ance of objectivity. Finally, utilize the human resources department for advice on how
to handle difficult disciplinary matters.

The Termination Interview

Dismissing an employee is one of the most difficult tasks a manager faces at work. During
one 5-year period, physicians interviewed 791 working people who had just undergone
heart attacks to find out what might have triggered them. The researchers concluded that
the stress associated with firing doubled the usual risk of a heart attack for the person
doing the firing, during the week following the dismissal.103 Furthermore, the dismissed
employee, even if forewarned many times, may still react with disbelief or even
violence.104 Guidelines for the termination interview itself are as follows:
1. Plan the interview carefully. According to experts at Hay Associates, this includes
the following:
* Make sure the employee keeps the appointment time.

* Allow 10 minutes as sufficient time for the interview.

* Use a neutral site, not your own office.

* Have employee agreements and release announcements prepared in advance.

* Have phone numbers ready for medical or security emergencies.

2. Get to the point. Avoid small talk. As soon as the employee enters, give the person
a moment to get comfortable and then inform him or her of your decision.
3. Describe the situation. Briefly explain why the person is being let go. For instance,
Production in your area is down 6%. We have talked about these problems several
times in the past 3 months. We have to make a change. Stress the situation, rather
than the employee and his or her shortcomings. Emphasize that the decision is
final and irrevocable.
4. Listen. To the extent practical, continue the interview for several minutes until the
person seems to be talking freely and reasonably calmly about the termination and
the support package including severance pay.
5. Review all elements of the severance package. Briefly describe severance payments,
benefits, access to office support people, and how references will be handled. (Human
resources may address this with the employee.) However, make no promises beyond
those already in the support package.
6. Identify the next step. The terminated employee may be disoriented and unsure
what to do next. Explain where the employee should go upon leaving the interview.
It s often best to have someone escort him or her until the person is out the door.

OUTPLACEMENT COUNSELING Outplacement counseling is a formal process

by which a specialist trains and counsels a terminated person in the techniques of
self-appraisal and securing a new position. Outplacement does not imply that the
employer takes responsibility for placing the person in a new job. Instead, it is a
counseling service whose purpose is to provide the person with advice, instructions,
and a sounding board to help formulate career goals and successfully execute a job
search for him or herself. Outplacement counseling is part of the terminated
employee s support or severance package and is done by specialized outside firms.
Outplacement firms don t just counsel displaced employees; they also help the
employer devise its dismissal plan. For example, prior to announcing a downsizing,

termination interview outplacement counseling

The interview in which an employee is A formal process by which a terminated
informed of the fact that he or she has been person is trained and counseled in the
dismissed. techniques of self-appraisal and securing
a new position.
482 PART 5 EMPLOYEE RELATIONS

it might be sensible to work with an outplacement firm to decide things like how
to break the news and deal with dismissed employees emotional reactions.

EXIT INTERVIEW Many employers conduct exit interviews with employees who
are leaving the firm for any reason. These are interviews, usually conducted by a
human resource professional just prior to the employee leaving; they elicit information
about the job or employer with the aim of giving employers insights into what
is right or wrong about their companies. Exit interview questions include,
Why did you join the company? Was the job presented correctly and honestly?
Were there any special problem areas? 105 Women and minorities are more likely
to quit early in their employment, so this might be one specific issue for which
to watch.106 Figure 14-11 presents an exit interview form.
The assumption of course is that because the employee is leaving, he or
she will be candid. However, the information you get may be questionable. 107
Researchers found that at the time of separation, 38% of those leaving blamed

FIGURE 14-11 Employee Exit

Interview Questionnaire

Source: www.fin.ucar.edu/forms/HR/
exit_form/exit.pdf, accessed May 24,
2007. Used with permission.
University Corporation for Atmospheric Research
EXIT INTERVIEW

Employee Name Supervisor

Division Job Title

Hire Date Termination Date

1. Why are you leaving UCAR?

2. What circumstances would have prevented your departure?

3. What did you like most about your job?

4. What did you like least about your job?

5. What did you think of your supervisor on the following points:

Almost Always Usually Sometimes Never

Was consistently fair ( ) ( ) ( ) ( )

Provided recognition ( ) ( ) ( ) ( )
Resolved complaints ( ) ( ) ( ) ( )
Was sensitive to employees needs ( ) ( ) ( ) ( )
Provided feedback on performance ( ) ( ) ( ) ( )
Was receptive to open communication ( ) ( ) ( ) ( )
Followed UCAR s policies ( ) ( ) ( ) ( )
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 483

salary and benefits, and only 4% blamed supervision. Followed up 18 months later,
however, 24% blamed supervision and only 12% blamed salary and benefits.
Getting to the real problem during the exit interview may thus require digging. Yet
these interviews can be useful. When Blue Cross of Northeastern Pennsylvania
dismissed employees, many said, in exit interviews, This is not a stable place
to work. The firm took steps to correct that misperception for those who stayed
with Blue Cross.

Layoffs, Downsizing, and the Plant Closing Law

Nondisciplinary separations are a fact of corporate life.108 For the employer, reduced
sales or profits may require layoffs or downsizing. Layoff generally refers to having
selected employees take time off, with the expectation that they will come back
to work. Downsizing refers to permanently dismissing a relatively large proportion
of employees in an attempt to improve productivity and competitiveness. Other
employees may resign to retire or to look for better jobs.

THE PLANT CLOSING LAW Until 1989, there were no federal laws requiring
notification of employees when an employer decided to close a facility. However,
in that year Congress passed the Worker Adjustment and Retraining Notification
Act (popularly known as the WARN or plant closing law). It requires employers of
100 or more employees to give 60 days notice before closing a facility or starting a
layoff of 50 people or more. The law does not prevent the employer from closing
down, nor does it require saving jobs. It simply gives employees time to seek other
work or retraining by giving them advance notice. Although there are exceptions, the
penalty for failing to give notice is 1 day s pay and benefits to each employee for each
day s notice he or she should have received, up to 60 days. The act does not have any
enforcement mechanism beyond suit in federal court. The law is not entirely clear
about how to notify employees. However, a paragraph that might suit the purpose
would be as follows:
Please consider this letter to be your official notice, as required by the federal plant
closing law, that your current position with the company will end 60 days from
today because of a [layoff or closing] that is now projected to take place on [date].
After that day, your employment with the company will be terminated and you will
no longer be carried on our payroll records. Any questions concerning the plant
closing law or this notice will be answered in the HR office.109

THE LAYOFF PROCESS A study illustrates one firm s downsizing process. In this
company, senior management first met to make strategic decisions about the size and
timing of the layoffs. These managers also debated the relative importance of the skill
sets they thought the firm needed going forward. Front-line supervisors assessed their
subordinates, rating their nonunion employees either A, B, or C (union employees
were covered by a union agreement making layoffs dependant on seniority).
The front-line supervisors then informed each of their subordinates about his or her
A, B, or C rating, and told each that those employees with C grades were designated
surplus and most likely to be laid off.110
Sensible layoff steps to take therefore include these:111
* Identify objectives and constraints. For example, decide how many positions
to eliminate at which locations, and what criteria to use.

exit interviews downsizing

Interviews with employees who are leaving The process of reducing, usually dramatically,
the firm, conducted for obtaining information the number of people employed by a firm.
about the job or related matters, to give the
employer insight about the company.
484 PART 5 EMPLOYEE RELATIONS

* Form a downsizing team. This team should prepare a communication strategy

for explaining the downsizing, produce a downsizing schedule, and supervise the
displaced employees benefit programs.
* Address legal issues. Review factors such as age, race, and gender before finalizing
and communicating any dismissals.
* Plan post-implementation actions. For those who remain, activities such as surveys
and explanatory meetings can help maintain morale.
* Address security concerns. With large layoffs, it may be wise to have security
personnel in place.
* Try to remain informative. When employees sue after mass layoffs, it s often because
they re unhappy with how the employer handled the layoff. Providing advanced
notice regarding the layoff and interpersonal sensitivity (in terms of the manager s
demeanor during layoffs) can both help mitigate negative results.112 The people who
announce the downsizing and deal with the employee questions should explain
what is happening truthfully.113

PREPARING FOR LAYOFFS As the U.S. slipped into recession a few years ago,
large layoffs climbed ominously, up by about 9.4%. How do managers prepare for the
layoffs that almost invariably result from such challenging times?
Interestingly, the initial focus isn t on the layoffs, but on the employer s appraisal
systems. One expert says that in preparing for large, scale layoffs, management
needs to:114
* Make sure appraisals are up-to-date.
* Identify top performers and get them working on the company s future.
* Have leaders committed to the company s turnaround.
Another HR consultant says companies that don t closely manage their performance
appraisal systems suddenly learn during a reduction in force that everyone has been
ranked a four out of five ; that information is meaningless. 115
So the essential point about layoffs is to prepare in advance by making sure to have
an effective performance appraisal system in place. If you don t, then when the time
comes to lay off significant numbers of employers, you may find yourself with no
rational basis on which to decide who stays or leaves.

DISMISSAL S EFFECTS It s not surprising that layoffs often result in harmful

psychological and physical health outcomes for employees who lose their jobs, as well
as for the survivors who face uncertainty.116
Furthermore, not just the victims and survivors suffer. In one study, researchers
found that the more managers were personally responsible for handing out warning
notices to employees, regardless of their age, gender, and marital status, the more likely
they were to report physical health problems, to seek treatment for these problems, and
to complain of disturbed sleep. 117

BUMPING/LAYOFF PROCEDURES As noted, layoff generally refers to having

some employees take time off, with the expectation that they will come back to work.
With layoffs, three conditions are usually present: (1) There is no work available
for these employees, (2) management expects the no-work situation to be temporary
and probably short term, and (3) management intends to recall the employees when
work is again available. A layoff is therefore not a termination, which is a permanent
severing of the employment relationship. Many employers, however, do use the term
layoff as a euphemism for discharge or termination. (Others call them productivity
transformation programs. )118
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 485

Employers who encounter frequent business slowdowns may have bumping/

layoff procedures that let employees use their seniority to remain on the job. Here:
1. Seniority is usually the ultimate determinant of who will work.
2. Seniority can give way to merit or ability, but usually only when no senior
employee is qualified for a particular job.
3. Seniority is usually based on the date the employee joined the organization, not
the date he or she took a particular job.
4. Because seniority is usually company-wide, an employee in one job can usually
bump or displace an employee in another job, provided the more senior person
can do the job.

LAYOFF AND DOWNSIZING ALTERNATIVES Layoffs and downsizings are

painful for all involved, and have the added disadvantage of stripping away trained
personnel. Employers therefore often try to find alternatives.
There are alternatives. Suggestions include finding volunteers who are interested in
reducing hours or part-time work, using attrition, and even networking with local
employers concerning temporary or permanent redeployments. With the voluntary
reduction in pay plan, all employees agree to reductions in pay to keep everyone work-
ing. Other employers arrange for all or most employees to concentrate their vacations
during slow periods. They don t have to hire temporary help for vacationing employees
during peak periods, and staffing automatically declines when business declines. Other
employees agree to take voluntary time off, which again has the effect of reducing the
employer s payroll and avoiding layoffs.
Many employers hire employees with the understanding their work is temporary.
When layoffs are required, they are the first to leave. Some seek volunteers as an alter-
native to dismissing large numbers of employees. For example, many employers offer
early retirement buyout packages to many of their employees.

Adjusting to Downsizings and Mergers

Firms usually downsize to improve their financial positions. Yet many firms discover
profits don t improve after major personnel cuts. Low morale among those remaining is
often part of the problem. Supportiveness in the face of downsizing is especially
important in high performance work system type firms that rely heavily on employee
morale and expertise.119 Options here include cut costs without reducing the workforce,
perhaps through pay freezes or cuts; introduce a hiring freeze before reducing the
workforce; provide candid communications about the need for the downsizing;
give employees an opportunity to express their opinions about the downsizing; and be
fair and compassionate in implementing the downsizing.120

MERGER GUIDELINES In terms of dismissal, mergers and acquisitions are usually

one-sided. In such situations, the acquired firm s surviving employees may be hyper-
sensitive to mistreatment of their soon-to-be former colleagues. It thus behooves the
manager to treat those whom you let go fairly. As a rule, therefore:
* Avoid the appearance of power and domination.
* Avoid win lose behavior.
* Remain businesslike and professional in all dealings.
* Maintain as positive a feeling about the acquired company as possible.
* Remember that the degree to which your organization treats the acquired group
with care and dignity will affect the confidence, productivity, and commitment
of those who remain.121
486 PART 5 EMPLOYEE RELATIONS

REVIEW

MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Ethics and fair treatment play important roles in man- technologies such as biometrics, monitoring is widespread.
aging employees at work. Ethics refers to the principles The Electronic Communications Privacy Act and com-
of conduct governing an individual or a group. The mon law protections against invasion of privacy limit,
concepts of ethics, justice, and fair treatment are inter- somewhat, workplace monitoring. Employers should
twined. For example, fairness is inseparable from what have employees sign e-mail and telephone monitoring
most people think of as justice from the individual acknowledgment statements.
employee s point of view. Few societies rely solely on 5. Dismissals are usually traumatic for both the manager
managers ethics or sense of fairness, and therefore and the dismissed employee, and so managers need
legislate employee rights, such as regarding employee to take special care in managing dismissals.
pension rights, references rights, defamation rights, and
Termination at will means that without a contract,
union activity rights.
either the employer or the employee could
2. Many things influence ethical behavior at work. From
terminate, at will, the employment relationship.
research, we know that moral awareness, the managers
Wrongful discharge refers to a dismissal that violates
themselves, moral engagement, morality, unmet goals,
the law or that fails to comply with contractual
and rewards all influence ethical behavior. The person is
arrangements stated or implied by the employer.
important, in that people bring to their jobs their own
Grounds for dismissal include unsatisfactory
ideas of what is morally right or wrong. The boss and
performance, misconduct (including insubordination),
how he or she molds the organizational culture have a
lack of qualifications for the job, and changed
prevailing effect on ethical behavior, because it s difficult
requirements of the job.
to resist even subtle pressure from your boss. Employers
Fairness in dismissals is enhanced when employees
themselves can take steps to support ethical behavior,
get explanations of why and how termination
for instance via training, whistle-blower programs, and
decisions were made; there is a formal multistep
ethics codes.
procedure, including warnings; and the supervisor
3. Managers can use personnel methods to promote
rather than a third person does the dismissing.
ethics and fair treatment. For example, in selection, the
Supervisors can be held personally liable for unjust
manager can hire ethical people and emphasize the fair-
dismissals, and so it is advisable that the supervisor
ness of selection procedures. Similarly, ethics training,
not act in anger, follow company policies and
conducting fair and just performance appraisals,
procedures, and avoid adding to the emotional
rewarding ethical behavior, and generally treating
hardship on the employee.
employees fairly all promote ethics and the perception
The termination interview should be planned
of fair treatment. Communication plays an important
carefully, and the supervisor should then get to the
role in fair treatment. For example, ask questions and
point, describe the situation, listen, review all
listen carefully, set aside your defensive actions, and ask,
elements of the severance package, and then identify
What would you like me to do?
the next step. Some employers use outplacement
4. Managing employee discipline and privacy are important
counselors to facilitate the process.
management skills. The basics of a fair and just
The Worker Adjustment and Retraining Notification
disciplinary process include clear rules and regulations, a
Act (plant closing law) requires larger employers
system of progressive penalties, and an appeals process.
to give 60 days notice before closing a facility
Some employers use nonpunitive discipline, which usually
or starting to lay off 50 people or more.
involves a system of oral warnings and paid decision-
To avoid wholesale dismissals during what may turn
making leaves. The hot stove rule means administering
out to be short-term downturns, some employers are
discipline in such a way that the person has warning,
using attrition or voluntary reductions in pay plans to
and the pain is consistent, impersonal, and immediate.
temporarily reduce headcount and compensation bills.
With more employers using Internet monitoring and
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 487

DISCUSSION QUESTIONS
1. Explain how you would ensure fairness in disciplining, 6. You need to select a nanny for your or a relative s child,
discussing particularly the prerequisites to disciplining, and want someone ethical. Based on what you read
disciplining guidelines, and the discipline without in this chapter, what would you do to help ensure you
punishment approach. ended up hiring someone ethical?
2. Why is it important in our highly litigious society 7. You believe your employee is being insubordinate. How
to manage dismissals properly? would you verify this and what would you do about it
3. What techniques would you use as alternatives to tradi- if it is true?
tional discipline? What do such alternatives have to do 8. Several years ago Walmart instituted a new employee
with organizational justice? Why do you think alternatives scheduling system that makes it more difficult for its
like these are important, given industry s need today for employees to know for sure what hours they would be
highly committed employees? working. Basically, the store supervisor calls them at the
4. Provide three examples of behaviors that would probably last minute if there s an opening that day. Based on what
be unethical but legal, and three that would probably be you read in this chapter, is the new system ethical? Why
illegal but ethical. or why not? Is it fair? What would you do if you were a
5. List 10 things your college or university does to encourage Walmart employee?
ethical behavior by students and/or faculty.

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, interview managers four multiple-choice exam questions on this material
or administrators at your employer or college in order to that you believe would be suitable for inclusion in the
determine the extent to which the employer or college HRCI exam; and (4) if time permits, have someone
endeavors to build two-way communication, and the from your team post your team s questions in front
specific types of programs used. Do the managers think of the class, so the students in other teams can take each
they are effective? What do the employees (or faculty others exam questions.
members) think of the programs in use at the employer 5. In a recent research study at Ohio State University, a
or college? professor found that even honest people, left to their
2. Working individually or in groups, obtain copies of the own devices, would steal from their employers.122 In this
student handbook for your college and determine study, the researchers gave financial services workers the
to what extent there is a formal process through which opportunity to steal a small amount of money after
students can air grievances. Based on your contacts with participating in an after-work project for which the pay
other students, has it been an effective grievance was inadequate. Would the employees steal to make up
process? Why or why not? for the underpayment? In most cases, yes. Employees
3. Working individually or in groups, determine the nature who scored low on an honesty test stole whether or not
of the academic discipline process in your college. their office had an ethics program that said stealing
Do you think it is effective? Based on what you read in from the company was illegal. Employees who scored
this chapter, would you recommend any modifications? high on the honesty test also stole, but only if their office
4. The HRCI Test Specifications Appendix (pages did not have such an employee ethics program the
633 640) lists the knowledge someone studying for the honest people didn t steal if there was an ethics policy.
HRCI certification exam needs to have in each area of In groups of four or five students, answer these
human resource management (such as in Strategic questions: Do you think findings like these are general-
Management, Workforce Planning, and Human izable? In other words, would they apply across the
Resource Development). In groups of four to five board to employees in other types of companies and
students, do four things: (1) review that appendix now; situations? If your answer is yes, what do you think this
(2) identify the material in this chapter that relates implies about the need for and wisdom of having an
to the required knowledge the appendix lists; (3) write ethics program?

EXPERIENTIAL EXERCISE
Discipline or Not?
Purpose: The purpose of this exercise is to provide you with Do not read the award or discussion sections until
some experience in analyzing and handling an actual after the groups have completed their deliberations.
disciplinary action. How to Set Up the Exercise/Instructions:
Required Understanding: Students should be thoroughly Divide the class into groups of four or five students. Each
familiar with the following case, titled Botched Batch. group should take the arbitrator s point of view and assume
488 PART 5 EMPLOYEE RELATIONS

that they are to analyze the case and make the arbitrator s impeccable work record and management s acknowledgment
decision. Review the case again at this point, but please do that she had always been a model employee, the employee
not read the award and discussion. insisted that the denial of her previously approved promotion
Each group should answer the following questions: was unconscionable.
1. Based on what you read in this chapter, including all (Please do not read beyond this point until after you have
relevant guidelines, what would your decision be if you answered the two questions.)
were the arbitrator? Why? Award: The arbitrator upholds the 3-day suspension,
2. Do you think that after their experience in this arbitration but decides that the promotion should be restored.
the parties will be more or less inclined to settle griev- Discussion: There is no question, the arbitrator notes, that
ances by themselves without resorting to arbitration? the employee s negligent act set in motion the train of events
that resulted in running two complete sets of reports reflecting
Botched Batch improper information. Stressing that the employer incurred
Facts: A computer department employee made an entry error substantial cost because of the error, the arbitrator cites
that botched an entire run of computer reports. Efforts to unchallenged testimony that management had commonly
rectify the situation produced a second set of improperly run issued 3-day suspensions for similar infractions in the past.
reports. Because of the series of errors, the employer incurred Thus, the arbitrator decides, the employer acted with just cause
extra costs of $2,400, plus a weekend of overtime work by other in meting out an evenhanded punishment for the negligence.
computer department staffers. Management suspended the Turning to the denial of the already approved promotion,
employee for 3 days for negligence, and revoked a promotion the arbitrator says that this action should be viewed in the
for which the employee had previously been approved. same light as a demotion for disciplinary reasons. In such
Protesting the discipline, the employee stressed that she cases, the arbitrator notes, management s decision normally is
had attempted to correct her error in the early stages of the based on a pattern of unsatisfactory behavior, an employee s
run by notifying the manager of computer operations of her inability to perform, or similar grounds. Observing that
mistake. Maintaining that the resulting string of errors could management had never before reversed a promotion as part of
have been avoided if the manager had followed up on her a disciplinary action, the arbitrator says that by tacking on the
report and stopped the initial run, the employee argued that denial of the promotion in this case, the employer substantially
she had been treated unfairly because the manager had not varied its disciplinary policy from its past practice. Because
been disciplined even though he compounded the problem, this action on management s part was not evenhanded, the
whereas she was severely punished. Moreover, citing her arbitrator rules, the promotion should be restored.123

APPLICATION CASE
ENRON, ETHICS, AND ORGANIZATIONAL CULTURE
For many people, a company called Enron Corp. still ranks Enron had all the elements usually found in comprehensive
as one of history s classic examples of ethics run amok. ethics and compliance programs: a code of ethics, a report-
During the 1990s and early 2000s, Enron was in the business ing system, as well as a training video on vision and values
of wholesaling natural gas and electricity. Rather than actu- led by [the company s top executives].124
ally owning the gas or electric, Enron made its money as the
intermediary (wholesaler) between suppliers and customers. Experts subsequently put forth many explanations for how
Without getting into all the details, the nature of Enron s a company that was apparently so ethical on its face could
business and the fact that Enron didn t actually own the actually have been making so many bad ethical decisions
assets meant that its accounting procedures were unusual. without other managers (and the board of directors)
For example, the profit statements and balance sheets listing noticing. The explanations ranged from a deliberate
the firm s assets and liabilities were unusually difficult concealment of information by officers to more psycho-
to understand. logical explanations (such as employees not wanting
It turned out that the lack of accounting transparency to contradict their bosses) and the surprising role of
enabled the company s managers to make Enron s financial irrationality in decision-making. 125
performance look much better than it actually was. Outside But perhaps the most persuasive explanation of how an
experts began questioning Enron s financial statements in apparently ethical company could go so wrong concerns
2001. In fairly short order, Enron collapsed, and courts organizational culture. The reasoning here is that it s not the
convicted several of its top executives of things like manipu- rules but what employees feel they should do that deter-
lating Enron s reported assets and profitability. Many investors mines ethical behavior. For example (speaking in general,
(including former Enron employees) lost all or most of their not specifically about Enron), the executive director of the
investments in Enron. Ethics Officer Association put it this way:
It s probably always easier to understand ethical break-
downs like this in retrospect, rather than to predict they are [W]e re a legalistic society, and we ve created a lot of laws.
going to happen. However, in Enron s case the breakdown is We assume that if you just knew what those laws meant
perhaps more perplexing than usual. As one writer said, that you would behave properly. Well, guess what? You
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 489

can t write enough laws to tell us what to do at all times Managers communicate the importance of integrity
every day of the week in every part of the world. We ve got when making difficult decisions.
to develop the critical thinking and critical reasoning
skills of our people because most of the ethical issues that
we deal with are in the ethical gray areas. Virtually every Questions
regulatory body in the last year has come out with 1. Based on what you read in this chapter, summarize in
language that has said in addition to law compliance, one page or less how you would explain Enron s ethical
businesses are also going to be accountable to ethics meltdown.
standards and a corporate culture that embraces them.126 2. It is said that when one securities analyst tried to confront
Enron s CEO about the firm s unusual accounting state-
How can one tell or measure when a company has an ments, the CEO publicly used vulgar language to describe
ethical culture ? Key attributes of a healthy ethical culture the analyst, and that Enron employees subsequently
include: thought doing so was humorous. If true, what does that
say about Enron s ethical culture?
Employees feel a sense of responsibility and accounta-
3. This case and chapter both had something to say about
bility for their actions and for the actions of others.127
how organizational culture influences ethical behavior.
Employees freely raise issues and concerns without fear What role do you think culture played at Enron? Give
of retaliation. five specific examples of things Enron s CEO could have
Managers model the behaviors they demand of others. done to create a healthy ethical culture.

CONTINUING CASE
CARTER CLEANING COMPANY
Guaranteeing Fair Treatment Although this was a serious matter, neither Jennifer nor her
Being in the laundry and cleaning business, the Carters father felt that what the counter people were doing was grounds
have always felt strongly about not allowing employees to for immediate dismissal, partly because the store manager had
smoke, eat, or drink in their stores. Jennifer was therefore apparently condoned their actions. The problem was, they
surprised to walk into a store and find two employees didn t know what to do. It seemed to them that the matter
eating lunch at the front counter. There was a large pizza called for more than just a warning but less than dismissal.
in its box, and the two of them were sipping colas and
eating slices of pizza and submarine sandwiches off paper Questions
plates. Not only did it look messy, but there were grease 1. What would you do if you were Jennifer, and why?
and soda spills on the counter and the store smelled from 2. Should a disciplinary system be established at Carter
onions and pepperoni, even with the exhaust fan pulling Cleaning Centers?
air out through the roof. In addition to being a turnoff 3. If so, what should it cover? How would you suggest it deal
to customers, the mess on the counter increased the possi- with a situation such as the one with the errant counter
bility that a customer s order might actually become soiled people?
in the store. 4. How would you deal with the store manager?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The Hotel Paris s New Ethics, Justice, and Fair highest ethical standards. Her concerns were twofold. First,
Treatment Process from a practical point of view, there are, in a hotel chain,
The Hotel Paris s competitive strategy is To use superior guest literally thousands of opportunities on any given day for
service to differentiate the Hotel Paris properties, and to guests to have bad ethical experiences. For example, in any
thereby increase the length of stay and return rate of guests, and single hotel each day there are at least a dozen people
thus boost revenues and profitability. HR manager Lisa Cruz (including housekeepers, front-desk clerks, security guards,
must now formulate functional policies and activities that and so on) with easy access to guests rooms, and to their
support this competitive strategy by eliciting the required personal belongings. Guests many younger, and many
employee behaviors and competencies. unwary are continually walking the halls unprotected.
As the head of HR for the Hotel Paris, Lisa Cruz was So, in a service company like this, there is simply no margin
especially concerned about her company maintaining the for ethical errors.
490 PART 5 EMPLOYEE RELATIONS

But she was concerned about ethics for a second reason. vendor to provide a customized, Web-based ethics training
She d been around long enough to know that employees do program, and made it clear that the first employees to par-
not like being treated unfairly, and that unfairness in any ticipate in it were the company s top executives. However, she
form could manifest itself in low morale, commitment, and knew this was just the start.
performance. Indeed, perhaps her employees low morale
and commitment as measured by her firm s attitude
surveys stemmed in part from what they perceived as Questions
unjust treatment by the hotel s managers. Lisa therefore 1. List three specific steps Hotel Paris should take with
turned to the task of assessing and redesigning the Hotel respect to each individual human research function
Paris s ethics, justice, and fair treatment practices. (selection, training, and so on) to improve the level
To do this, Lisa and her team wanted to proceed method- of ethics in the company.
ically through the company s entire HR process, starting with 2. Based on what you read in this chapter, create in outline
recruitment and selection. For example, working with the form a strategy map showing how the Hotel s HR
company s general counsel, they produced and presented functions can foster employee ethics.
to the CEO a new Hotel Paris code of ethics, as well as a 3. Based on what you learned in this chapter, write a short
more complete set of ethical guidelines. These now appear on (less than one page) explanation Lisa can use to sell
the Hotel Paris s careers Web site link, and are part of each to top management the need to improve the hotel chain s
new employee s orientation packet. They contracted with a fairness and justice processes.

KEY TERMS
ethics, 461 Electronic Communications insubordination, 477
distributive justice, 462 Privacy Act (ECPA), 475 termination interview, 481
procedural justice, 462 dismissal, 476 outplacement counseling, 481
organizational culture, 466 termination at will, 476 exit interviews, 482
nonpunitive discipline, 472 wrongful discharge, 476 downsizing, 483

ETHICS QUIZ ANSWERS

Quiz is on page 460.
1. 34% said personal e-mail on company computers is wrong. 8. 35% said a $50 gift to the boss is unacceptable.
2. 37% said using office equipment for schoolwork is wrong. 9. 12% said a $50 gift from the boss is unacceptable.
3. 49% said playing computer games at work is wrong. 10. 70% said it s unacceptable to take the $200 football tickets.
4. 54% said Internet shopping at work is wrong. 11. 70% said it s unacceptable to take the $120 theater tickets.
5. 61% said it s unethical to blame your error on technology. 12. 35% said it s unacceptable to take the $100 food basket.
6. 87% said it s unethical to visit pornographic sites at 13. 45% said it s unacceptable to take the $25 gift certificate.
work. 14. 40% said it s unacceptable to take the $75 raffle prize.
7. 33% said $25 is the amount at which a gift from a 15. 11% reported they lie about sick days.
supplier or client becomes troubling, while 33% said
16. 4% reported they take credit for the work or ideas of others.
$50, and 33% said $100.

ENDNOTES
1. James Stewart, Is Buffett Whitewashing as a Function of Ethical Context and employees, customers, vendors, or to the
Soquel s Exit? The Wall Street Journal, Perceived Organization Support, Journal public; violations of safety regulations;
April 2 3, 2011, p. B7. of Business Research 59, no. 5 (2006), and misreporting of actual time worked.
2. Keith Winstein, Suit Alleges Pfizer Spun pp. 582 588. 2005 National Business Ethics Survey:
Unfavorable Drug Studies, The Wall 4. Paul Schumann, A Moral Principles How Employees Perceive Ethics at Work,
Street Journal, October 8, 2008, p. B1. Framework for Human Resource Man- 2005, p. 25. Copyright © 2006, Ethics
3. Kevin Wooten, Ethical Dilemmas in agement Ethics, Human Resource Man- Resource Center (ERC). In O. C. Ferrell,
Human Resource Management: An Appli- agement Review 11 (2004), p. 94. A third John Fraedrich, and Linog Ferrell, Business
cation of a Multidimensional Framework, survey found that roughly 10% 20% Ethics (Boston: Houghton Mifflin, 2008),
A Unifying Taxonomy, and Applicable of employees observed specific person- p. 61
Codes, Human Resource Management nel-related unethical behaviors at 5. Manuel Velasquez, Business Ethics: Con-
Review 11 (2001), p. 161. See also Sean work, including abusive or intimidating cepts and Cases (Upper Saddle River, NJ:
Valentine et al., Employee Job Response behavior toward employees; lying to Prentice Hall, 1992), p. 9. See also O. C.
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 491

Ferrell, John Fraedrich, and Linda Ferrell, Business: Policies, Programs, and Percep- Henderson in part because he hadn t
Business Ethics (Boston: Houghton Mif- tions (Washington, D.C.: Ethics Resource moved fast enough to telegraph the need
flin, 2008). Center, 1994), p. 54; For other insights for change in the company by changing
6. The following discussion, except as noted, into unethical behavior s causes see, for the company s top management. Jeremy
is based on Manuel Velasquez, Business example, F. Gino, et. al., Nameless * Smerd, A Stalled Culture Change?
Ethics, pp. 9 12. Harmless + Blameless: When Seemingly Workforce Management, December 14,
7. For further discussion of ethics and moral- Irrelevant Factors Influence Judgment of 2009, pp. 1, 3.
ity, see Tom Beauchamp and Norman (Un)ethical Behavior, Organizational 33. This list based on Linda K. Trevino, Gary R.
Bowie, Ethical Theory and Business (Upper Behavior and Human Decision Processes Weaver, and Scott J. Reynolds, Behav-
Saddle River, NJ: Prentice Hall, 2001), 111, no. 2 (March 2010), p. 93 101, and ioral Ethics in Organizations: A Review,
pp. 1 19. J. Camps, et. al., Learning Atmosphere Journal of Management 32, no. 6 (2006),
8. Richard Osborne, A Matter of Ethics, and Ethical Behavior, Does It Make pp. 951 990.
Industry Week, September 4, 2000, Sense? Journal of Business Ethics 94, no. 1 34. R. Bergman, Identity as Motivation:
pp. 41 42. (June 2010), pp. 129 147. Toward a Theory of the Moral Self. In
9. Gary Weaver and Linda Trevino, The 22. Elizabeth Umphress, John Bingham, and D. K. Lapsley & D. Narvaez (Eds.), Moral
Role of Human Resources in Ethics/ Marie Mitchell, Unethical Behavior Development, Self and Identity (Mahwah,
Compliance Management: A Fairness in the Name of the Company: The NJ: Lawrence Erlbaum, 2004), pp. 21 46.
Perspective, Human Resource Management Moderating Effect of Organizational 35. M. E. Schweitzer, L. Ordonez, and
Review 11 (2001): 115. Identification and Positive Reciprocity B. Douma, Goal Setting as a Motivator of
10. Daniel Skarlicki and Robert Folger, Believes on Unethical Pro-Organiza- Unethical Behavior, Academy of Manage-
Fairness and Human Resources Man- tional Behavior, Journal of Applied ment Journal 47, no. 3 (2004), pp. 422 432.
agement, Human Resource Management Psychology 95, no. 4 (2010), pp. 769 770. 36. N. M. Ashkanasy, C. A. Windsor, and
Review 13, no. 1 (2003), p. 1. 23. Ethics Policies Are Big with Employers, L. K. Trevino, Bad Apples in Bad Barrels
11. Gary Weaver and Linda Trevino, The but Workers See Small Impact on the Revisited: Cognitive Moral Development,
Role of Human Resources in Ethics/ Workplace, BNA Bulletin to Management, Just World Beliefs, Rewards, and Ethical
Compliance Management: A Fairness June 29, 2000, p. 201. Decision Making. Business Ethics Quar-
Perspective, Human Resource Management 24. Jennifer Schramm, Perceptions on Ethics, terly 16 (2006), pp. 449 474.
Review 11 (2001), pp. 113 134. HR Magazine, November 2004, p. 176. 37. J. Krohe Jr., The Big Business of Business
12. Weaver and Trevino, The Role of Human 25. From Guy Brumback, Managing Above Ethics, Across the Board 34 (May 1997),
Resources in Ethics/Compliance Manage- the Bottom Line of Ethics, Supervisory pp. 23 29; Deborah Wells and Marshall
ment, p. 115. Management, December 1993, p. 12. See Schminke, Ethical Development and
13. Stephanie Clifford, Wal-Mart Is Being also, E. Umphress et al., The Influence Human Resources Training: An Integrative
Pressed to Disclose How Global Suppliers of Distributive Justice on Lying for and Framework, Human Resource Management
Treat Workers, The New York Times, Stealing from a Supervisor, Journal Review 11 (2001), pp. 135 158.
May 31, 2011, p. B3. of Business Ethics 86, no. 4 (June 2009), 38. Ethical Issues in the Management
14. Ibid. pp. 507 518; and S. Chen, The Role of of Human Resources, Human Resource
15. See http://archives.gov/exhibits/charters/ Ethical Leadership Versus Institutional Management Review 11 (2001), p. 6; see
bill_of_rights.html, accessed May 31, 2011. Constraints: A Simulation Study of Finan- also Joel Lefkowitz, The Constancy
16. http://focus.illinoisstate.edu/modules/ cial Misreporting by CEOs, Journal of of Ethics Amidst the Changing World of
policy/publicpolicy.shtml, accessed Business Ethics 93 part supplement 1 Work, Human Resource Management
September 14, 2011. (June 2010), p. 33 52. Review 16 (2006), pp. 245 268.
17. Jennifer Kish-Gephart, David Harrison, 26. Quoted in Tom Beauchamp and Norman 39. William Byham, Can You Interview for
and Linda Trevino, Bad Apples, Bad Bowie, Ethical Theory and Business Integrity? Across-the-Board 41, no. 2 (March/
Cases, and Bad Barrels: Meta-Analytic (Upper Saddle River, NJ: Prentice Hall, April 2004), pp. 34 38. For a description of
Evidence About Sources of Unethical 2001), p. 109. how the United States Military Academy
Decisions That Work, Journal of Applied 27. James Kunen, Enron Division (and Values) uses its student admission and socialization
Psychology 95, no. 1, 2010, pp. 1 31. Thing, New York Times, January 19, 2002, processes to promote character deve-
18. This section based on Ibid., p. 21 p. A19. For another example, see Heather lopment, see Evan Offstein and Ronald
19. Sara Morris et al., A Test of Environmen- Tesoriero and Avery Johnson, Suit Details Dufresne, Building Strong Ethics and
tal, Situational, and Personal Influences How J&J Pushed Sales of Procrit, The Wall Promoting Positive Character Develop-
on the Ethical Intentions of CEOs, Street Journal (Eastern Edition), April 10, ment: The Influence of HRM at the United
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How Systematic Errors in Person s 74 77. 40. Weaver and Trevino, The Role of Human
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Organization Studies 27, no. 3 (2006), Corporate Governance: Present and The Nexus of Ethics, HR Magazine,
pp. 413 428; and Scott Reynolds et al., Prospective, Human Resource Manage- August 2005, pp. 53 58.
Automatic Ethics: The Effects of Implicit ment 42, no. 3 (Fall 2003), p. 268. 41. Russell Cropanzano and Thomas Wright,
Assumptions and Contextual Cues on 30. Dale Buss, Corporate Compasses, HR Procedural Justice and Organizational
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Psychology 95, no. 4 (2010), pp. 752 760. 31. Eric Krell, How to Conduct an Ethics Resource Management Review 13, no. 1
20. Former CEO Joins WorldCom s Indicted, Audit, HR Magazine, April 2010, pp. 48 51. (2003), pp. 7 40.
Miami Herald, March 3, 2004, p. 4C. 32. Sometimes the most straightforward way 42. Ethical Issues in the Management
21. O. C. Ferrell and John Fraedrich, Business of changing a company s culture is to of Human Resources, Human Resource
Ethics, 3rd ed. (New York: Houghton move fast to change its top management. Management Review 11 (2001), p. 6.
Mifflin, 1997), p. 28; adapted from For example, some observers believe that 43. Weaver and Trevino, The Role of Human
Rebecca Goodell, Ethics in American the General Motors board fired CEO Fritz Resources, p. 123.
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44. Kathryn Tyler, Do the Right Thing, See also Samuel Aryee et al., Antecedents BNA Bulletin to Management, March 25,
Ethics Training Programs Help Employ- and Outcomes of Abusive Supervision: 2004, p. 97.
ees Deal with Ethical Dilemmas, HR Test of a Trickle-Down Model, Journal 75. Andrea Poe, Make Foresight 20/20, HR
Magazine, February 2005, pp. 99 102. of Applied Psychology, no. 1 (2007), Magazine, February 2000, pp. 74 80.
45. M. Ronald Buckley et al., Ethical Issues pp. 191 201. 76. Rita Zeidner, Keeping E-Mail in Check,
in Human Resources Systems, Human 59. Wendy Boswell and Julie Olson-Buchanan, HR Magazine, June 2007, pp. 70 74;
Resource Management Review 11, no. 1, 2 Experiencing Mistreatment at Work: The P. Gralla, Smartphone Privacy: IT
(2001), pp. 11, 29. See also Ann Pomeroy, Role of Grievance Filing, Nature of Caught in the Crossfire, Computerworld
The Ethics Squeeze, HR Magazine, Mistreatment, and Employee Withdrawal, 45, no. 9 (May 9, 2011), p. 16.
March 2006, pp. 48 55. Academy of Management Journal 47, no. 1 77. Frederic Leffler and Lauren Palais, Filter
46. Tom Asacker, Ethics in the Workplace, (2004), pp. 129 139. See also Samuel Aryee Out Perilous Company E-Mails, Society
Training & Development, August 2004, p. 44; et al., Antecedents and Outcomes of for Human Resource Management Legal
http://skillsoft.com/catalog/search. Abusive Supervision. Report, August 2008, p. 3.
asp?title=Business+Ethics&type=Courses& 60. Bennett Tepper et al., Abusive Supervision 78. Bill Roberts, Stay Ahead of the Technol-
submit.x=45&submit.y=15, accessed and Subordinates Organization Deviance, ogy Use Curve, HR Magazine, October
August 11, 2009. Journal of Applied Psychology 93, no. 4 2008, pp. 57 61.
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Ethics Training, Workforce Management, 61. Facebook Harassment: Social Websites Violates Copyrights, Employer Finds,
July 2010, p. 2. May Prompt Need for New Policies, Pro- BNA Bulletin to Management, June 19,
48. Weaver and Trevino, The Role of Human cedures, BNA Bulletin to Management, 2003, p. 193.
Resources, p. 114. July 20, 2010, p. 225. 80. After Employer Found Liable for Worker s
49. Ibid. 62. Eugene Kim and Teresa Glomb, Get Child Porn, Policies May Need to be
50. Michael Burr, Corporate Governance: Smarty-Pants: Cognitive Ability, Personal- Revisited, BNA Bulletin to Management,
Embracing Sarbanes-Oxley, Public ity, and Victimization, Journal of Applied March 21, 2006, p. 89.
Utilities Fortnightly, October 15, 2003, Psychology 95, no. 3 (2010), pp. 889 901. 81. FTC Rules May Make Employers Liable
pp. 20 22. 63. Ibid. for Worker Web Conduct, BNA Bulletin
51. Corporations Drive to Embrace Ethics 64. M. Audrey Korsgaard, Loriann Roberson, to Management, January 19, 2010, p. 23.
Gives HR Leaders Chance to Take Reins, and R. Douglas Rymph, What Motivates 82. Kathy Gurchiek, iPods Can Hit Sour
BNA Bulletin to Management, November 7, Fairness? The Role of Subordinate Assertive Note in the Office, HR Magazine, April
2002, p. 353. Behavior on Manager s Interactional Fair- 2006.
52. Lester Bittel, What Every Supervisor ness, Journal of Applied Psychology 83, no. 5 83. Vega-Rodriguez v. Puerto Rico Telephone
Should Know (New York: McGraw-Hill, (1998), pp. 731 744. Company, CA1, #962061, 4/8/97, discussed
1974), p. 308; and Thomas Salvo, 65. Bennett Tepper et al., Procedural Injustice, in Video Surveillance Withstands Privacy
Practical Tips for Successful Progres- Victim Precipitation, and Abusive Super- Challenge, BNA Bulletin to Management,
sive Discipline, SHRM White Paper vision, Personnel Psychology 59 (2006), April 17, 1997, p. 121. Also see, J. Green-
July 2004, www.shrm.org/hrresources/ pp. 11 23. wald, Monitoring Communications?
whitepapers_published/CMS_009030. 66. W. Chan Kim and Renee Mauborgne, Know Legal Pitfalls, Business Insurance 45,
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Punishment At Last, Harvard Business July/August 1997, pp. 65 75. 529f.3d 892 (Ninth Circuit, 2008),
Review, July/August 1995, pp. 162 178; 67. For disciplinary best practices, see Lester Employers Should Re-Examine Policies
J. F. Mason, Myspace, Yourspace: What Bittel, What Every Supervisor Should in Light of Ruling, BNA Bulletin to
Employers Must Know About Social- Know, op. cit.; Employers Turn to Management, August 12, 2008, p. 263.
Media Risks, National Underwriter (P & C) Corporate Ombuds to Defuse Internal 85. Secret Videotaping Leads to $200,000
115, no. 11 (March 28, 2011), pp. 18, 20. Ticking Time Bombs, BNA Bulletin Settlement, BNA Bulletin to Management,
54. Weaver and Trevino, The Role of Human to Management, August 9, 2005, p. 249. January 22, 1998, p. 17.
Resources, p. 117. 68. Dick Grote, Discipline Without Punish- 86. Bill Roberts, Are You Ready for Bio-
55. Russell Cropanzano and Thomas Wright, ment, Across the Board 38, no. 5 metrics? HR Magazine, March 2003,
Procedural Justice and Organizational (September 2001), pp. 52 57. pp. 95 96.
Staffing: A Tale of Two Paradigms, 69. Milton Zall, Employee Privacy, Journal 87. Charles Muhl, The Employment at Will
Human Resource Management Review 13, of Property Management 66, no. 3 (May Doctrine: Three Major Exceptions,
no. 1 (2003), pp. 7 40. 2001), p. 16. Monthly Labor Review 124, no. 1 (January
56. Suzanne Masterson, A Trickle-Down 70. Morris Attaway, Privacy in the Workplace 2001), pp. 3 11.
Model of Organizational Justice: Relating on the Web, Internal Auditor 58, no. 1 88. Michael Orey, Fear of Firing,
Employees and Customers Perceptions (February 2001), p. 30. BusinessWeek, April 23, 2007, pp. 52 54.
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57. Rudy Yandrick, Lurking in the Shad- Workplace Monitoring: Balancing Busi- Society for Human Resource Management
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cal Perspectives and Industrial Relations: 2003, pp. 3 6; Blogs, Networking Sites Personnel Administration (New York:
Towards a Contextualized and Interdisci- Drive Workplace Privacy Disputes, BNA McGraw-Hill, 1982), pp. 65.3 65.5. See
plinary Approach, British Journal of Bulletin to Management, August 5, 2008, also Carolyn Hirschman, Off Duty, Out
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Supervision, Academy of Management 74. Time Clocks Go High Touch, High Tech 91. Insubordinate and gross conduct acts based
Journal 43, no. 2 (2000), pp. 178 190. to Keep Workers from Gaming the System, on Kenneth Sovereign, Personnel Law
 CHAPTER 14 ETHICS AND EMPLOYEE RIGHTS AND DISCIPLINE 493

(Upper Saddle River, NJ: Prentice Hall, 104. Kemba Dunham, The Kinder Gentler Analysis of Determinants of Just Treatment
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pp. 59 84. Magazine, December 1998, pp. 89 102; Litigation After Layoffs, Attorneys Say,
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sonnel Psychology 50 (1997), pp. 927 953; 106. Peter Hom et al., Challenging Conven- Attraction: Examining Jobseekers Reac-
Nancy Hatch Woodward, Smoother tional Wisdom About Who Quits: tions to Firm Workforce-Reduction Strate-
Separations, HR Magazine, June 2007, Revelations from Corporate America, gies, Human Resource Management 45,
pp. 94 97. Journal of Applied Psychology 93, no. 1 no. 4 (Winter 2006), pp. 585 603.
93. E-Mail Used for Layoffs, Humiliation, (2008), pp. 1 34. 114. Adrienne Fox, Prune Employees
BNA Bulletin to Management, October 2, 107. Joseph Zarandona and Michael Camuso, Carefully, HR Magazine, April 1, 2008.
2007, p. 315. A Study of Exit Interviews: Does the Last 115. Ibid.
94. Jaikumar Vijayan, Downsizings Leave Word Count? Personnel 62, no. 3 (March 116. Grunberg, Moore, and Greenberg,
Firms Vulnerable to Digital Attacks, 1981), pp. 47 48. For another point Managers Reactions to Implementing
Computerworld 25 (2001), pp. 6 7. of view, see Firms Can Profit from Data Layoffs.
95. Paul Falcon, Give Employees the Obtained from Exit Interviews, Knight 117. In one recent year, U.S. employers
(Gentle) Hook, HR Magazine, April Ridder/Tribune Business News, February 13, implemented about 1,300 mass layoffs,
2001, pp. 121 128. 2001, Item 0104 4446. involving a total of almost 133,000 workers.
96. James Coil III and Charles Rice, Three 108. In the recession years of 2008 and 2009 Layoffs: 133,914 Workers Idled by Mass
Steps to Creating Effective Employee combined, employers carried out a total Layoffs in April, BLS Says, BNA Bulletin
Releases, Employment Relations Today, of about 51,000 mass layoffs, idling over to Management, June 3, 2008, p. 181.
Spring 1994, pp. 91 94; Richard Bayer, 5 million workers in total. Mass Layoffs 118. Calling a Layoff a Layoff, Workforce
Termination with Dignity, Business at Lowest Level Since July 2008, BLS Management, April 21, 2008, p. 41.
Horizons 43, no. 5 (September 2000), Says, BNA Bulletin to Management, Janu- 119. Roderick Iversen and Christopher Zatzick,
pp. 4 10; Betty Sosnin, Orderly ary 12, 2010, p. 13. The Effects of Downsizing of Labor
Departures, HR Magazine 50, no. 11 109. See Nancy Ryan, Complying with the Productivity: The Value of Showing Con-
(November 2005), pp. 74 78; Severance Worker Adjustment and Retraining Noti- sideration for Employees Morale and
Pay: Not Always the Norm, HR Magazine, fication Act (WARN Act), Employee Welfare and High Performance Work Sys-
May 2008, p. 28. Relations Law Journal 18, no. 1 (Summer tems, Human Resource Management 50,
97. See, for example, Richard Hannah, The 1993), pp. 169 176; and Emily Nelson, no. 1 (January February 2011), pp. 29 44.
Attraction of Severance, Compensation The Job Cut Buyouts Favored by P&G 120. Ibid., p. 40.
& Benefits Review, November/December Pose Problems, The Wall Street Journal, 121. Steve Weinstein, The People Side of Merg-
2008, pp. 37 44. June 12, 2001, p. B1. See also Rodney ers, Progressive Grocer 80, no. 1 (January
98. Jonathan Segal, Severance Strategies, Sorensen and Stephen Robinson, What 2001), pp. 29 31.
HR Magazine, July 2008, pp. 95 96. Employers Can Do to Stay Out of Legal 122. Based on Theft Is Unethical, HR Solutions
99. Lawyers Say Reasonable Employer Is Trouble When Forced to Implement Lay- 34 (October 2002), p. 66.
Best Defense Against Wrongful Termi- offs, Compensation & Benefits Review, 123. Bureau of National Affairs, Bulletin
nation Claims, BNA Bulletin to Manage- January/February 2009, pp. 25 32. to Management, September 13, 1985,
ment, November 20, 2007, p. 379. 110. Leon Grunberg, Sarah Moore, and p. 3.
100. Court Permits Wrongful Termination Edward Greenberg, Managers Reactions 124. David Gebler, Is Your Culture a Risk
Benefit to Be Paid in Monthly Install- to Implementing Layoffs: Relationship to Factor? Business and Society Review 111,
ments, Benefits Magazine 48, no. 3 Health Problems and Withdrawal Behav- no. 3 (Fall 2006), pp. 337 362.
(March 2011), pp. 59 60. iors, Human Resource Management 45, 125. John Cohan, I Didn t Know and I Was
101. Ibid. no. 2 (Summer 2006), pp. 159 178. Only Doing My Job : Has Corporate
102. Based on Coil and Rice, Three Steps to 111. These are suggested by attorney Ethan Lip- Governance Careened Out of Control?
Creating Effective Employee Releases, sig and discussed in The Lowdown on A Case Study of Enron s Information
pp. 91 94. Downsizing, BNA Bulletin to Management, Myopia, Journal of Business Ethics 40,
103. One More Heart Risk: Firing Employ- January 9, 1997, p. 16. See also Stephen no. 3 (October 2002), pp. 275 299.
ees, Miami Herald, March 20, 1998, Gilliland and Donald Schepers, Why We 126. Gebler, Is Your Culture a Risk Factor?
pp. C1, C7. Do the Things We Do: A Discussion and 127. Ibid.
15
Labor Relations and
Collective Bargaining
Source: Elaine Thompson/AP Images.
LEARNING OBJECTIVES Company s
1. Give a brief history of the American labor movement. Strategic Goals

2. Discuss the main features of at least three major pieces

of labor legislation.
3. Present examples of what to expect during the union
drive and election.
Employee Competencies
4. Describe five ways to lose an NLRB election.
and Behaviors Required
5. Illustrate with examples bargaining that is not for Company to Achieve
in good faith. These Strategic Goals
6. Develop a grievance procedure.

Employee

S
ome people call Costco The Anti-Walmart, because Relations
S
of how Costco treats its workers and unions.1

tra nviro
For example, Walmart is famously anti-union. In

teg nment
E
atio

ic an
comparison, when California grocery store workers

Compens
picketed several chains a few years ago, Costco Wholesale HR Policies and Practices

d Legal
Corp. avoided the fray, quietly renegotiating a separate Required to Produce
contract with its union employees there. The new contract Employee Competencies
boosted Costco workers wages and the firm s contribution and Behaviors
to their pension plans. Then in October 2011 Walmart

nd nt

Re
m

Pla u
c
a g polev

e
me i

cr
announced it was cutting some employee health care benefits,
nin eD tne emt
and eliminating health insurance for future employees working iarT tn
dna
less than 24 hours per week.2

WHERE ARE WE NOW . . .

Chapter 14 focused on employee ethics and
justice important issues in determining
employees tendencies to join unions. The
main purpose of this chapter is to help you
deal effectively with unions and grievances.
After briefly discussing the history of the
American labor movement, we describe the
basic labor law, including unfair labor
practices. We explain labor negotiations,
including the union actions you can expect
during the union campaign and election.
And we explain what you can expect during
the actual bargaining sessions, and how to
handle grievances.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 495
496 PART 5 EMPLOYEE RELATIONS

1 Give a brief history of the

THE LABOR MOVEMENT
American labor movement. Even with the pressures they ve been under the past few years, about 14.7 million U.S.
workers still belong to unions about 11.9% of the total number of men and women
working in this country.3 Many are still blue-collar workers. But workers including
doctors, psychologists, graduate teaching assistants, government office workers,
and even fashion models are forming or joining unions.4 In some industries
including transportation and public utilities, where more than 26% of employees are
union members it s still hard to get a job without joining a union.5 Most union
members are in the public sector, as opposed to the private sector.6
Furthermore, it s a mistake to assume that unions affect employers only
negatively. For example, perhaps by professionalizing the staff and/or systematizing
company practices, unionization may improve performance. Thus in one study,
heart attack mortality among patients in hospitals with unionized registered nurses
was 5% to 9% lower than in nonunion hospitals.7 The accompanying Strategic
Context feature provides another illustration of the potential positives of good
union-management relations.

THE STRATEGIC CONTEXT

The Anti-Walmart
It s not easy competing with Walmart s always-low prices, but Costco may have found a
way. Walmart Stores Sam s Club is actually second in sales to Costco. How does Costco
stay ahead? In part with strong labor relations, low employee turnover and liberal
benefits. 8 For example, Costco pays about 90% of the health insurance costs of its
over 90,000 domestic employees, about $6,000 annually per employee.9 And its
relations with labor unions are comparatively benign. Costco s HR strategy is to fend off
Walmart s low wages and labor costs by eliciting higher productivity and better service
from its employees. The strategy seems to be working. Costco s sales per employee are
about $500,000 a year versus $340,000 at Sam s Clubs.10 Turnover among those
employed with the company at least 1 year is about 6%, far below the retail industry
average.11 Aligning its labor relations strategy with its overall strategic aim to compete
on the basis of better productivity and service seems to be working for Costco.

In any case, support for unions has always ebbed and flowed in America, and today
pressures are building against unions. For example, critical budget problems following
the 2008 2010 recession in states such as Wisconsin and New Jersey prompted those
governments to reduce public employees numbers, pensions, and pay. The number
of U.S. workers belonging to unions actually declined by 612,000 from 2009 to 2010.
We ll look at unions and dealing with them in this chapter.

Why Do Workers Organize?

Experts have spent much time and money trying to discover why workers unionize,
and they ve proposed many theories. Yet there is no simple answer to the question,
partly because each worker probably joins for his or her own reasons.
However, workers don t unionize just to get more pay or better working condi-
tions, though these are important. For example, recent median weekly wages for
union workers was $917, while that for nonunion workers was $717.12 Union workers
also generally receive significantly more holidays, sick leave, unpaid leave, insurance
plan benefits, long-term disability benefits, and various other benefits than
do nonunion workers. Unions also have been able to somewhat reduce the impact
of (but obviously not eliminate) downsizings and wage cuts in most industries.13
Two other factors employer unfairness and the union s power are also important.
In one Australia-based firm, researchers found that individuals who believe that
the company rules or policies were administered unfairly or to their detriment were more
likely to turn to unions. 14 But, to vote pro-union, the employees also had to believe
the union could improve their wages, benefits, and treatment.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 497

THE BOTTOM LINE The bottom line is that the urge

to unionize often boils down to the belief on the part of
workers that it is only through unity that they can protect
themselves from unilateral management whims. When
Kaiser Permanente s San Francisco Medical Center cut back
on vacation and sick leave for its pharmacists and other
workers, the pharmacists union, the Guild for Professional
Pharmacists, won back the lost vacation days. As one staff
pharmacist said, Kaiser is a pretty benevolent employer, but
Source: Library of Congress.

there s always the pressure to squeeze a little. 15 One labor

relations lawyer says, The one major thing unions offer
is making you a for cause instead of an at will employee,
which guarantees a hearing and arbitration if you re fired. 16
So, in practice, low morale, fear of job loss, and arbitrary
management actions help foster unionization. Employers
ignore that at their peril.
Making fenders at an early Ford factory in Ypsilanti, Michigan. In some respects, things have not changed in years. Here is
In addition to heavy physical labor, workers faced health how one writer describes the motivation behind the early
hazards poor lighting, dust, and dangerous machinery. (1900s) unionization of automobile workers:
In the years to come, economic issues would make the headlines when union and
management met in negotiations. But in the early years, the rate of pay was not the
major complaint of the autoworkers. . . . Specifically, the principal grievances of
the autoworkers were the speed-up of production and the lack of any kind of job
security. As production tapered off, the order in which workers were laid off was
determined largely by the whim of foremen and other supervisors. . . . Generally,
what the workers revolted against was the lack of human dignity and individuality,
and a working relationship that was massively impersonal, cold, and nonhuman.
They wanted to be treated like human beings not like faceless clock card
numbers.17

What Do Unions Want?

We can generalize by saying that unions have two sets of aims, one for union security
and one for improved wages, hours, working conditions, and benefits for their members.

UNION SECURITY First and probably foremost, unions seek security for them-
selves. They fight hard for the right to represent a firm s workers, and to be the exclusive
bargaining agent for all employees in the unit. (As such, they negotiate contracts for all
employees, including those not members of the union.) Five types of union security are
possible:
1. Closed shop.18 The company can hire only current union members. Congress
outlawed closed shops in interstate commerce in 1947, but they still exist in some
states for particular industries (such as printing). They account for fewer than 5%
of union contracts.
2. Union shop. The company can hire nonunion people, but they must join the
union after a prescribed period and pay dues. (If not, they can be fired.) These
account for about 73% of union contracts.
3. Agency shop. Employees who do not belong to the union still must pay the union
an amount equal to union dues (on the assumption that the union s efforts benefit
all the workers).

closed shop union shop agency shop

A form of union security in which the A form of union security in which the A form of union security in which employees
company can hire only union members. company can hire nonunion people, but they who do not belong to the union must still
This was outlawed in 1947 but still exists must join the union after a prescribed period pay union dues on the assumption that union
in some industries (such as printing). of time and pay dues. (If they do not, they efforts benefit all workers.
can be fired.)
498 PART 5 EMPLOYEE RELATIONS

4. Preferential shop. Union members get preference in hiring, but the employer can
still hire nonunion members.
5. Maintenance of membership arrangement. Employees do not have to belong
to the union. However, union members employed by the firm must maintain
membership in the union for the contract period. These account for about 4%
of union agreements.
Not all states give unions the right to require union membership as a condition
of employment. Right to work is a term used to describe state statutory or constitu-
tional provisions banning the requirement of union membership as a condition
of employment. 19 Right-to-work laws don t outlaw unions. They do outlaw (within
those states) any form of union security. This understandably inhibits union forma-
tion in those states. There are 23 right-to-work states.20 Several years ago, Oklahoma
became the 22nd state to pass right-to-work legislation. Some believe that this
combined with a loss of manufacturing jobs explains why Oklahoma s union
membership dropped dramatically in the next 3 years.21
IMPROVED WAGES, HOURS, AND BENEFITS Once the union ensures its
security at the employer, it fights to improve its members wages, hours, and working
conditions. The typical labor agreement also gives the union a role in other human
resource activities, including recruiting, selecting, compensating, promoting, training,
and discharging employees.

The AFL-CIO and the SEIU

The American Federation of Labor and Congress of Industrial Organizations
(AFL-CIO) is a voluntary federation of about 56 national and international labor
unions in the United States. The separate AFL and CIO merged in 1955. For many
people in the United States, the AFL-CIO is synonymous with the word union.
There are three layers in the structure of the AFL-CIO and most other U.S.
unions. The worker joins the local union, to which he or she pays dues. The local is in
turn a single chapter in the national union. For example, if you were a teacher in
Detroit, you would belong to the local union there, which is one of hundreds of local
chapters of the American Federation of Teachers, their national union (most unions
actually call themselves international unions). The third layer in the structure is the
national federation, in this case, the AFL-CIO.
The Service Employees International Union (SEIU) is a fast-growing federation
of more than 2.2 million members. It includes the largest healthcare union, with more
than 1.1 million members in the field, including nurses, LPNs, and doctors, and the
second largest public employees union, with more than 1 million local and state
government workers.22
Union federation membership is in flux. Several years ago, the SEIU, the International
Brotherhood of Teamsters, and UNITE HERE left the AFL-CIO and established their
own federation, called the Change to Win Coalition. Together, the departing unions
represented over one-quarter of the AFL-CIO s membership and budget. Change to Win
plans to be more aggressive about organizing workers than they say the AFL-CIO was.23
Then the UNITE HERE union left Change to Win and rejoined the AFL-CIO, possibly
slowing Change to Win s momentum.
Some people think of the federation (such as the AFL-CIO or SEIU) as the most
important part of the labor movement, but it is not. Thus the president of the teachers
union wields more power in that capacity than in his capacity as a vice president of the
AFL-CIO. Yet as a practical matter, the presidents of the AFL-CIO or SEIU do have
political influence in excess of a figurehead president.

UNIONS AND THE LAW

As noted, the history of the American labor movement has been one of alternate expan-
sion and contraction, in response to public policy changes. Until about 1930, there were
no special labor laws. Employers were not required to engage in collective bargaining
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 499

with employees and were virtually unrestrained in their behavior toward unions; the
use of spies and firing of union agitators were widespread. Yellow dog contracts,
whereby management could require nonunion membership as a condition for
employment, were widely enforced. Most union weapons even strikes were illegal.
This one-sided situation lasted until the Great Depression (around 1930).24 Since
then, in response to changing public attitudes, values, and economic conditions, labor
law has gone through three clear periods: from strong encouragement of unions, to
modified encouragement coupled with regulation, and finally to detailed regulation
of internal union affairs. 25

2 Discuss the main features

Period of Strong Encouragement: The Norris-LaGuardia (1932)
of at least three major and National Labor Relations (or Wagner) Acts (1935)
pieces of labor legislation. The Norris-LaGuardia Act of 1932 set the stage for a new era in which union activity
was encouraged. It guaranteed to each employee the right to bargain collectively
free from interference, restraint, or coercion. It declared yellow dog contracts unen-
forceable. And it limited the courts abilities to issue injunctions (stop orders) for
activities such as peaceful picketing and payment of strike benefits.
Yet this act did little to restrain employers from fighting labor organizations by
whatever means they could find. So in 1935, Congress passed the National Labor
Relations (or Wagner) Act to add teeth to Norris-LaGuardia. It did this by (1) banning
certain unfair labor practices, (2) providing for secret-ballot elections and majority rule
for determining whether a firm s employees would unionize, and (3) creating the
National Labor Relations Board (NLRB) to enforce these two provisions.

UNFAIR EMPLOYER LABOR PRACTICES The Wagner Act deemed statutory

wrongs (but not crimes) five unfair labor practices used by employers:
1. It is unfair for employers to interface with, restrain, or coerce employees in
exercising their legally sanctioned right of self-organization.
2. It is unfair for company representatives to dominate or interfere with either the
formation or the administration of labor unions. Among other specific manage-
ment actions found to be unfair under these first two practices are bribing
employees, using company spy systems, moving a business to avoid unionization,
and black-listing union sympathizers.
3. Employers are prohibited from discriminating in any way against employees for
their legal union activities.
4. Employers are forbidden to discharge or discriminate against employees simply
because the latter file unfair practice charges against the company.
5. Finally, it is an unfair labor practice for employers to refuse to bargain collectively
with their employees duly chosen representatives.
Unions file an unfair labor practice charge (see Figure 15-1) with the National Labor
Relations Board. The board then investigates the charge and decides if it should take
action. Possible actions include dismissal of the complaint, request for an injunction
against the employer, or an order that the employer cease and desist.

preferential shop Norris-LaGuardia Act (1932) National Labor Relations Board (NLRB)
Union members get preference in hiring, This law marked the beginning of the era The agency created by the Wagner Act
but the employer can still hire nonunion of strong encouragement of unions to investigate unfair labor practice charges
members. and guaranteed to each employee the and to provide for secret-ballot elections
right to bargain collectively free from and majority rule in determining whether
right to work interference, restraint, or coercion. or not a firm s employees want a union.
A term used to describe state statutory
or constitutional provisions banning the National Labor Relations (or Wagner) Act
requirement of union membership as a This law banned certain types of unfair
condition of employment. practices and provided for secret-ballot
elections and majority rule for determining
whether a firm s employees want to unionize.
500 PART 5 EMPLOYEE RELATIONS

FIGURE 15-1 NLRB Form 501:

Filing an Unfair Labor Practice FORM NLRB 501 FORM EXEMPT UNDER
(2 81) 44 U.S.C. 3512
UNITED STATES OF AMERICA
NATIONAL LABOR RELATIONS BOARD
CHARGE AGAINST EMPLOYER
INSTRUCTIONS: File an original and 4 copies of DO NOT WRITE IN THIS SPACE
this charge with NLRB Regional Director for the CASE NO. DATE FILE
region in which the alleged unfair labor practice
occurred or is occurring.
1. EMPLOYER AGAINST WHOM CHARGE IS BROUGHT
a. NAME OF EMPLOYER b. NUMBER OF WORKERS EMPLOYED

c. ADDRESS OF ESTABLISHMENT (street and number, d. EMPLOYER REPRESEN- e. PHONE NO.

city, State, and ZIP code) TATIVE TO CONTACT

f. TYPE OF ESTABLISHMENT (factory, mine, wholesaler, g. IDENTIFY PRINCIPAL PRODUCT OR SERVICE

etc.)

h. THE ABOVE-NAMED EMPLOYER HAS ENGAGED IN AND IS ENGAGING IN UNFAIR LABOR PRACTICES WITHIN THE
MEANING OF SECTION 8(a), SUBSECTIONS (1) AND OF THE NATIONAL
(list subsections)
LABOR RELATIONS ACT, AND THESE UNFAIR LABOR PRACTICES ARE UNFAIR LABOR PRACTICES AFFECTING
COMMERCE WITHIN THE MEANING OF THE ACT.
2. BASIS OF THE CHARGE (be specific as to facts, names, addresses, plants involved, dates, places, etc.)

BY THE ABOVE AND OTHER ACTS, THE ABOVE-NAMED EMPLOYER HAS INTERFERED WITH, RESTRAINED, AND
COERCED EMPLOYEES IN THE EXERCISE OF THE RIGHTS GUARANTEED IN SECTION 7 OF THE ACT.
3. FULL NAME OF PARTY FILING CHARGE (if labor organization, give full name, including local name and number)

4a. ADDRESS (street and number, city, State, and ZIP code) 4b. TELEPHONE NO.

5. FULL NAME OF NATIONAL OR INTERNATIONAL LABOR ORGANIZATION OF WHICH IT IS AN AFFILIATE OR

CONSTITUENT UNIT (to be filled in when charge is filed by a labor organization)

6. DECLARATION
I declare that I have read the above charge and that the statements therein are true to the best of my knowledge and belief.

By
(signature of representative or person filing charge) (title, if any)

Address
(telephone number) (date)
WILLFULLY FALSE STATEMENTS ON THIS CHARGE CAN BE PUNISHED BY FINE AND IMPRISONMENT
(U.S. CODE, TITLE 18, SECTION 1001)

Such complaints are commonplace. For example, in 2011, the American Guild
of Musical Artists said it would file an unfair labor charge against the New York
City Opera if the latter carried through on its plan to cut staff and move to new
quarters.

FROM 1935 TO 1947 Union membership increased quickly after passage of the
Wagner Act in 1935. Other factors such as an improving economy and aggressive
union leadership contributed to this rise. But by the mid-1940s, after the end
of World War II, the tide had begun to turn. Largely because of a series of massive
postwar strikes, public policy began to shift against what many viewed as union
excesses. The stage was set for passage of the Taft-Hartley Act.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 501

Period of Modified Encouragement Coupled with

Regulation: The Taft-Hartley Act (1947)
The Taft-Hartley (or Labor Management Relations) Act of 1947 reflected the public s
less enthusiastic attitude toward unions. It amended the National Labor Relations
(Wagner) Act by limiting unions in four ways: (1) prohibiting unfair union labor
practices, (2) enumerating the rights of employees as union members, (3) enumerating
the rights of employers, and (4) allowing the President of the United States to bar
temporarily national emergency strikes.

Unfair Union Labor Practices

The Taft-Hartley Act enumerated several labor practices that unions were prohibited
from engaging in:
1. First, it banned unions from restraining or coercing employees from exercising
their guaranteed bargaining rights. (Some union actions courts have held illegal
include stating to an anti-union employee that he or she will lose his or her job
once the union gains recognition, and issuing patently false statements during
union organizing campaigns.)
2. It is also an unfair labor practice for a union to cause an employer to discriminate
in any way against an employee in order to encourage or discourage his or her
membership in a union. For example, the union cannot try to force an employer
to fire a worker because he or she doesn t attend union meetings or refuses to join a
union. There is one exception: Where a closed or union shop prevails (and union
membership is therefore a prerequisite to employment), the union may demand the
discharge of someone who fails to pay his or her initiation fees and dues.
3. It is an unfair labor practice for a union to refuse to bargain in good faith with the
employer about wages, hours, and other employment conditions. Certain strikes
and boycotts are also unfair practices.
4. It is an unfair labor practice for a union to engage in featherbedding (requiring an
employer to pay an employee for services not performed).

RIGHTS OF EMPLOYEES The Taft-Hartley Act protected the rights of employees

against their unions in other ways. For example, many people felt that compulsory
unionism violated the basic right of freedom of association. Legitimized by
Taft-Hartley, new right-to-work laws quickly sprung up in 19 (now 23) states (mainly in
the South and Southwest). In New York, for example, in many printing firms you can t
work as a press operator unless you belong to a printers union. In Florida, such union
shops except those covered by the Railway Labor Act are illegal, and printing shops
typically employ both union and nonunion operators. Even today, union membership
varies widely by state, from a high of 26.8% in New York to a low of 3.2% in North
Carolina.26 The Taft-Hartley act also required the employee s authorization before the
union could have dues subtracted from his or her paycheck.
In general, the Labor Relations (Taft-Hartley) Act does not restrain unions from
unfair labor practices to the extent that the law does employers. It says unions may not
restrain or coerce employees. However, violent or otherwise threatening behavior or
clearly coercive or intimidating union activities are necessary before the NLRB will find
an unfair labor practice. 27 Examples include physical assaults or threats of violence,
economic reprisals, and mass picketing that restrains the lawful entry or leaving of a
work site.

Taft-Hartley Act (1947)

Also known as the Labor Management
Relations Act, this law prohibited unfair union
labor practices and enumerated the rights
of employees as union members. It also
enumerated the rights of employers.
502 PART 5 EMPLOYEE RELATIONS

RIGHTS OF EMPLOYERS The Taft-Hartley Act also explicitly gave employers

certain rights. First, it gave them full freedom to express their views concerning union
organization. For example, as a manager you can tell your employees that in your
opinion unions are worthless, dangerous to the economy, and immoral. You can even
(generally) hint that unionization and subsequent high-wage demands might result
in the permanent closing of the plant (but not its relocation). Employers can set forth
the union s record concerning violence and corruption, if appropriate. In fact, the
only major restraint is that employers must avoid threats, promises, coercion, and
direct interference with workers who are trying to reach a decision. There can be
no threat of reprisal or force or promise of benefit.28
Furthermore, the employer (1) cannot meet with employees on company time
within 24 hours of an election or (2) suggest to employees that they vote against the
union while they are at home or in the employer s office (although he or she can do so
while in their work area or where they normally gather).

NATIONAL EMERGENCY STRIKES The Taft-Hartley Act also allows the U.S.
President to intervene in national emergency strikes. These are strikes (for example,
by railroad workers) that might imperil the national health and safety. The President
may appoint a board of inquiry and, based on its report, apply for an injunction
restraining the strike for 60 days. If the parties don t reach a settlement during that
time, the President can have the injunction extended for another 20 days. During this
last period, employees take a secret ballot to ascertain their willingness to accept the
employer s last offer.

PERIOD OF DETAILED REGULATION OF INTERNAL UNION AFFAIRS:

THE LANDRUM-GRIFFIN ACT (1959) In the 1950s, Senate investigations
revealed unsavory practices on the part of some unions, and the result was the
Landrum-Griffin Act (officially, the Labor Management Reporting and Disclosure Act)
of 1959. An overriding aim of this act was to protect union members from possible
wrongdoing on the part of their unions. Like Taft-Hartley, it also amended the
National Labor Relations (Wagner) Act.
First, the law contains a bill of rights for union members. Among other things, it
provides for certain rights in the nomination of candidates for union office. It also
affirms a member s right to sue his or her union and ensures that the union cannot
fine or suspend a member without due process.
This act also laid out rules regarding union elections. For example, national and
international unions must elect officers at least once every 5 years, using a secret-
ballot mechanism. And it regulates the kind of person who can serve as a union
officer. For example, it bars persons convicted of felonies (bribery, murder, and so on)
from holding union officer positions for a period of 5 years after conviction.
Senate investigators also discovered flagrant examples of employer wrongdoing.
Employers and their labor relations consultants had bribed union agents and
officers, for example. That had been a federal crime starting with the passage of the
Taft-Hartley Act. But Landrum-Griffin greatly expanded the list of unlawful employer
actions. For example, companies can no longer pay their own employees to entice
them not to join the union, and must report use of labor consultants.

3 Present examples of what

THE UNION DRIVE AND ELECTION
to expect during the union It is through the union drive and election that a union tries to be recognized to repre-
drive and election. sent employees. Supervisors need to understand this process, which has five basic
steps.29

Step 1. Initial Contact

During the initial contact stage, the union determines the employees interest in
organizing, and establishes an organizing committee.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 503

The initiative for the first contact between the employees and the union may
come from the employees, from a union already representing other employees of the
firm, or from a union representing workers elsewhere. In any case, there is an initial
contact.
Once an employer becomes a target, a union official usually assigns a representative
to assess employee interest. The representative visits the firm to determine whether
enough employees are interested to make a campaign worthwhile. He or she also iden-
tifies employees who would make good leaders in the organizing campaign and calls
them together to create an organizing committee. The objective here is to educate the
committee about the benefits of forming a union and the law and procedures involved
in forming a local union.
The union must follow certain rules when it starts contacting employees. The
law allows organizers to solicit employees for membership as long as the effort
doesn t endanger the performance or safety of the employees. Therefore, much
of the contact takes place off the job, perhaps at home or at eating places near work.
Organizers can also safely contact employees on company grounds during off hours
(such as lunch or break time). Yet, in practice, there will be much informal organiz-
ing going on at the workplace as employees debate organizing. Sometimes the first
inkling management has of the campaign is the distribution or posting of handbills
soliciting union membership.
Much soliciting today will be via e-mail, but prohibiting employees from sending
pro-union e-mail messages on company e-mail is easier said than done. You can t
discriminate against union activities, so prohibiting only union e-mail may violate
NLRB decisions. And barring workers from using e-mail for all non work-related
topics may be futile if the company actually does little to stop it.

LABOR RELATIONS CONSULTANTS Both management and unions typically

use labor relations consultants. The consultants may be law firms, researchers,
psychologists, labor relations specialists, or public relations firms. Some are former
union organizers who now represent the employers.30
In any case, their role is to provide advice and related services not just when a vote
is expected (although this is when most of them are used), but at other times, too.
For the employer, the consultant s services may range from ensuring that the firm
properly fills out routine labor relations forms to managing the union campaign.
Unions may use public relations firms to improve their image, or specialists to
manage corporate campaigns. (These aim to pressure shareholders and creditors
to get management to agree to the union s demands.)
The widespread use of such consultants only some of whom are actually
lawyers raises the question of whether some have advised their clients to engage
in questionable activities. One tactic, for instance, is to delay the union vote with
lengthy hearings at the NLRB. The longer the delay in the vote, they argue, the more
time the employer has to drill anti-union propaganda into the employees.

UNION SALTING Unions are not without creative ways to win elections. The
National Labor Relations Board defines union salting as placing of union members on
nonunion job sites for the purpose of organizing. Critics claim that salts also often
interfere with business operations and harass employees.31 The U.S. Supreme Court
ruled that union salts are employees under the National Labor Relations Act; the
NLRB will require that employers pay salts if they fire them for trying to organize.32
For managers, the solution is to make sure you know whom you re hiring. However,
not hiring someone simply because, as a member of the local union, he or she might be
pro-union or a union salt would be discriminatory.33

national emergency strikes Landrum-Griffin Act (1959) union salting

Strikes that might imperil the national Also known as the Labor Management A union organizing tactic by which workers
health and safety. Reporting and Disclosure Act, this law aimed who are in fact employed full-time by a union
at protecting union members from possible as undercover organizers are hired by
wrongdoing on the part of their unions. unwitting employers.
504 PART 5 EMPLOYEE RELATIONS

Step 2. Obtaining Authorization Cards

For the union to petition the NLRB for the right to hold an election, it must show that
a sizable number of employees may be interested in organizing. Therefore the next
step for union organizers is to try to get the employees to sign authorization cards
(see Figure 15-2). Among other things, these usually authorize the union to seek a
representation election and state that the employee has applied to join the union.
Thirty percent of the eligible employees in an appropriate bargaining unit must sign
before the union can petition the NLRB for an election (although in Figure 15-2 this
employer has agreed with SEIU to recognize the union without a follow-up vote if a
majority of employees sign the authorization cards).
This is a dangerous time for supervisors. During this stage, both union and
management use propaganda. The union claims it can improve working conditions,
raise wages, increase benefits, and generally get the workers better deals. Management
can attack the union on ethical and moral grounds and cite the cost of union
membership. Management can also explain its accomplishments, express facts and
opinions, and explain the law applicable to organizing campaigns. However, neither
side can threaten, bribe, or coerce employees. And an employer (or supervisor) may
not make promises of benefits to employees or make unilateral changes in terms and
conditions of employment that were not planned to be implemented prior to the
onset of union organizing activity.

STEPS TO TAKE Management can take several steps with respect to the authori-
zation cards. For example, the NLRB ruled an employer might lawfully inform
employees of their right to revoke their authorization cards, even when employees
have not asked for such information. The employer can also distribute pamphlets that
explain just how employees can revoke their cards. However, the law prohibits any
material assistance to employees such as postage or stationery.
Similarly, it is an unfair labor practice to tell employees they can t sign a card. What
you can do is prepare supervisors so they can explain what the card actually authorizes
the union to do including seeking a representation election, designating the union as
bargaining representative, and subjecting the employee to union rules. The latter is
especially important. The union, for instance, may force the employee to picket and
fine any member who does not comply with union instructions. Explaining the serious
legal and practical implications of signing the card can thus be an effective weapon.
One thing managers should not do is look through signed authorization cards if
confronted with them by union representatives. The NLRB could construe that as
an unfair labor practice, as spying on those who signed. Doing so could also later
form the basis of a charge alleging discrimination due to union activity, if the firm
subsequently disciplines someone who signed a card.
During this stage, unions can picket the company, subject to three constraints:
(1) The union must file a petition for an election within 30 days after the start of
picketing; (2) the firm cannot already be lawfully recognizing another union; and
(3) there cannot have been a valid NLRB election during the past 12 months.

FIGURE 15-2
Authorization Card

Source: http://www.seiu503.org/
admin/Assets/AssetContent/
7c8327d7-9acf-4ebd-b068-
c536cbe80e2a/546bfa9e-94e2-495f-
9d30-54cc81f55e47/
65ff6bf4-a58b-4cf8-b1cc-
cd159b9c42b5/1/web%20
ojdcard.pdf, accessed 1/15/10.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 505

Step 3. Hold a Hearing

Once the union collects the authorization cards, one of three things can occur. If the
employer chooses not to contest union recognition at all, then the parties need
no hearing, and a special consent election is held. If the employer chooses not to
contest the union s right to an election, and/or the scope of the bargaining unit, and/or
which employees are eligible to vote in the election, no hearing is needed and the
parties can stipulate an election. If an employer does wish to contest the union s right,
it can insist on a hearing to determine those issues. An employer s decision about
whether to insist on a hearing is a strategic one. Management bases it on the facts
of each case, and on whether it feels it needs more time to try to persuade employees
not to elect a union.
Most companies do contest the union s right to represent their employees, claiming
that a significant number of them don t really want the union. It is at this point that the
National Labor Relations Board gets involved. The union usually contacts the NLRB,
which requests a hearing. The regional director of the NLRB then sends a hearing
officer to investigate. The examiner sends both management and union a notice of
representation hearing (NLRB Form 852; see Figure 15-3) that states the time and place
of the hearing.
The hearing addresses several issues. First, does the record indicate there is
enough evidence to hold an election? (For example, did 30% or more of the
employees in an appropriate bargaining unit sign the authorization cards?)
Second, the examiner must decide what the bargaining unit will be. The
bargaining unit is the group of employees that the union will be authorized
to represent and bargain for collectively. If the entire organization is the bargaining
unit, the union will represent all nonsupervisory, nonmanagerial, and noncon-
fidential employees, even though the union may be oriented mostly toward
blue-collar workers. (Professional and nonprofessional employees can be included
in the same bargaining unit only if the professionals agree.) If your firm disagrees
with the examiner s bargaining unit decision, it can challenge the decision. This
will require a separate NLRB ruling.
The NLRB hearing addresses other issues. These include, Does the employer
qualify for coverage by the NLRB? and Is the union a labor organization within the
meaning of the National Labor Relations Act?
If the results of the hearing are favorable for the union, the NLRB will order hold-
ing an election. It will issue a Notice of Election (NLRB Form 707) to that effect, for
the employer to post.

Step 4. The Campaign

During the campaign that precedes the election, union and employer appeal to
employees for their votes. The union will emphasize that it will prevent unfairness,
set up grievance and seniority systems, and improve wages. Union strength, they ll
say, will give employees a voice in determining wages and working conditions.
Management will stress that improvements like those don t require unions and
that wages are equal to or better than they would be with a union. Management
will also emphasize the financial cost of union dues; the fact that the union is an
outsider ; and that if the union wins, a strike may follow. It can even attack the
union on ethical and moral grounds, while insisting that employees will not be as
well off and may lose freedom. But neither side can threaten, bribe, or coerce
employees.

authorization cards bargaining unit

In order to petition for a union election, The group of employees the union will be
the union must show that at least 30% authorized to represent.
of employees may be interested in being
unionized. Employees indicate this interest
by signing authorization cards.
506 PART 5 EMPLOYEE RELATIONS

FIGURE 15-3 NLRB Form 852:

Notice of Representation
FORM NLRB-852
Hearing (6-61)
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD

Case No.

NOTICE OF REPRESENTATION HEARING

The Petitioner, above named, having heretofore filed a Petition pursuant to Section 9 (c) of
the National Labor Relations Act, as amended, 29 U.S.C. Sec 151 et seq., copy of which Peti-
tion is hereto attached, and it appearing that a question affecting commerce has arisen concern-
ing the representation of employees described by such Petition.
YOU ARE HEREBY NOTIFIED that, pursuant to Section 3(b) and 9(c) of the Act, on the
day of , 20 , at

a hearing will be conducted before a hearing officer of the National Labor Relations Board upon
the question of representation affecting commerce which has arisen, at which time and place the
parties will have the right to appear in person or otherwise, and give testimony.

Signed at on the day of , 20

Regional Director, Region

National Labor Relations Board

Step 5. The Election

The election occurs within 30 to 60 days after the NLRB issues its Decision and Direc-
tion of Election. The election is by secret ballot; the NLRB provides the ballots (see
Figure 15-4), voting booth, and ballot box, and counts the votes and certifies the results.
The union becomes the employees representative if it wins the election, and win-
ning means getting a majority of the votes cast, not a majority of the total workers in
the bargaining unit. (Also keep in mind that if an employer commits an unfair labor
practice, the NLRB may reverse a no union election. As representatives of their
employer, supervisors must therefore be careful not to commit unfair practices.)
Several things influence whether the union wins the certification election. Unions
have a higher probability of success in geographic areas with a higher percentage
of union workers. High unemployment seems to lead to poorer results for the union,
perhaps because employees fear that unionization efforts might result in reduced job
security or employer retaliation. Unions usually carefully pick the size of their bargaining
unit (all clerical employees in the company, only those at one facility, and so on) because
the larger the bargaining unit, the smaller the probability of union victory. The more
workers vote, the less likely a union victory, probably because more workers who are not
strong supporters vote. The union is important, too: The Teamsters union is less likely
to win a representation election than other unions, for instance.34
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 507

FIGURE 15-4 Sample

NLRB Ballot UNITED STATES OF AMERICA
National Labor Relations Board

OF FI CI AL SE CRE T BALL OT
FOR CERTAIN EMPLOYEES OF

Do you wish to be represented for purposes of collective bargaining by

MARK AN S IN THE SQUARE OF YOUR CHOICE

YES NO

DO NOT SIGN THIS BALLOT. Fold and drop in ballot box.

If you spoil this ballot return it to the Board Agent for a new one.

4 Describe five ways to lose an

How to Lose an NLRB Election
NLRB election. Over the years, unions typically won about 55% of elections held each year.35 According
to expert Matthew Goodfellow, there is no sure way employers can win elections.
However, there are several sure ways to lose one.36

REASON 1. ASLEEP AT THE SWITCH In one study, in 68% of the companies

that lost to the union, executives were caught unaware. In these companies, turnover
and absenteeism had increased, productivity was erratic, and safety was poor. Grievance
procedures were rare. When the first reports of authorization cards began trickling back
to top managers, they usually responded with a barrage of letters describing how the
company was one big family and calling for a team effort. 37

REASON 2. APPOINTING A COMMITTEE Of the losing companies, 36% formed

a committee to manage the campaign. According to the expert, there are three problems
in doing so: (1) Promptness is essential in an election situation, and committees are
notorious for moving slowly. (2) Most committee members are NLRB neophytes. Their
views therefore are mostly reflections of hope rather than experience. (3) A committee s
decision is usually a compromise decision. The result isn t necessarily the most knowl-
edgeable or most effective one. This expert suggests giving full responsibility to a single,
decisive executive. A human resource director and a consultant or adviser with broad
experience in labor relations should in turn assist this person.

REASON 3. CONCENTRATING ON MONEY AND BENEFITS In 54% of

the elections studied, the company lost because top management concentrated on the
wrong issues: money and benefits. As this expert puts it:
Employees may want more money, but quite often, if they feel the company treats
them fairly, decently, and honestly, they are satisfied with reasonable, competitive
rates and benefits. It is only when they feel ignored, uncared for, and disregarded
that money becomes a major issue to express their dissatisfaction.38

REASON 4. DELEGATING TOO MUCH TO DIVISIONS For companies

with plants scattered around the country, unionizing one or more plants tends
508 PART 5 EMPLOYEE RELATIONS

to lead to unionizing others. The solution is, don t abdicate all personnel and
industrial relations decisions to plant managers.39 Dealing effectively with
unions monitoring employees attitudes, reacting properly when the union
appears, and so on generally requires centralized guidance from the main office
and its human resources staff.
The other side of the coin is this: What can unions do to boost their chances
they ll win the election?

Evidence-Based HR: What to Expect the Union

to Do to Win the Election
A researcher analyzed data from 261 NLRB elections. She found that the best way for
unions to win is to pursue a rank and file strategy. It includes union tactics such as the
following:40
1. Reliance on a slow, underground, person-to-person campaign using house
calls, small group meetings, and pre-union associations to develop leadership
and union commitment, and prepare workers for employer anti-union strategies
before the employer becomes aware of the campaign.
2. The union will focus on building active rank-and-file participation, including an
organizing committee reflecting the different interest groups in the bargaining unit.
3. The union will press for a first contract early in the organizing process.
4. The union will use inside and outside pressure tactics to build worker commitment
and compel the employer to run a fair campaign.
5. There will be an emphasis during the organizing campaign on issues such as respect,
dignity, and fairness, not just traditional bread-and-butter issues like wages.

The Supervisor s Role

Supervisors are an employer s first line of defense in the unionizing effort. They
are often in the best position to sense evolving employee attitude problems,
for instance, and to discover the first signs of union activity. Unfortunately,
there s another side to that coin: They can also inadvertently hurt their employer s
union-related efforts.
Supervisors therefore need special training. Specifically, they must be knowledge-
able about what they can and can t do legally to hamper organizing activities. Unfair
labor practices could (1) cause the NLRB to hold a new election after your company
has won a previous election, or (2) cause your company to forfeit the second election
and go directly to contract negotiation.
In one case, a plant superintendent reacted to a union s initial organizing
attempt by prohibiting distribution of union literature in the plant s lunchroom.
Since solicitation of off-duty workers in nonwork areas is generally legal, the
company subsequently allowed the union to post literature on the company s
bulletin board and to distribute literature in nonworking areas inside the plant.
However, the NLRB still ruled that the initial act of prohibiting distribution of
the literature was an unfair labor practice, one not made right by the company s
subsequent efforts. The NLRB used the superintendent s action as one reason for
invalidating an election that the company had won.41

SOME TIPS Supervisors can use the acronym TIPS to remember what not to
do during the organizing or preelection campaigns.42 Do not Threaten, Interrogate,
make Promises to, or Spy on employees (for instance, do not threaten that you will
close or move the business, cut wages, reduce overtime, or lay off employees).
Use FORE for what you may do. You may give employees Facts (like what signing
the authorization card means), express your Opinion about unions, explain factu-
ally correct Rules (such as that the law permits permanently replacing striking
employees), and share your Experiences about unions.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 509

Rules Regarding Literature and Solicitation

The employer can legally take steps to restrict union organizing activity.43
1. Employers can always bar nonemployees from soliciting employees during their
work time that is, when the employee is on duty and not on a break.
2. Employers can usually stop employees from soliciting other employees for any
purpose if one or both employees are on paid-duty time and not on a break.
3. Most employers (generally not including retail stores, shopping centers, and
certain other employers) can bar nonemployees from the building s interiors
and work areas as a right of private property owners.44
4. Employers can deny on- or off-duty employees access to interior or exterior areas
only if they can show the rule is required for reasons of production, safety, or
discipline.
Again, such restrictions are valid only if the employer doesn t discriminate against
the union. Thus, if the employer lets employees collect money for baby gifts, to sell Avon
products or Tupperware, or to engage in other solicitation during their working time,
it may not be able lawfully to prohibit them from union soliciting during work time.
Here is one example of a specific rule aimed at limiting union organizing or activity:
Solicitation of employees on company property during working time interferes
with the efficient operation of our business. Nonemployees are not permitted to
solicit employees on company property for any purpose. Except in break areas
where both employees are on break or off the clock, no employee may solicit
another employee during working time for any purpose.45

Decertification Elections: Ousting the Union

Winning an election and signing an agreement do not necessarily mean that the union
is in the company to stay. The same law that grants employees the right to unionize also
gives them a way to terminate legally their union s right to represent them. The process
is decertification. There are around 450 to 500 decertification elections each year, of
which unions usually win around 30%.46 That s actually a more favorable win rate for
management than the rate for the original, representation elections.
Decertification campaigns don t differ much from certification campaigns.47
The union organizes membership meetings and house-to-house visits, mails literature
into the homes, and uses phone calls, e-mails, NLRB appeals, and (sometimes) threats
and harassment to win the election. Employers cannot legally start the decertification
process, but once started management uses meetings including one-on-one meetings,
small-group meetings, and meetings with entire units as well as legal or expert
assistance, letters, improved working conditions, and subtle or not-so-subtle threats to try
to influence the votes.48

THE COLLECTIVE BARGAINING PROCESS

What Is Collective Bargaining?
When and if the union becomes your employees representative, a day is set for
management and labor to meet and negotiate a labor agreement. This agreement will
contain specific provisions covering wages, hours, and working conditions.
What exactly is collective bargaining? According to the National Labor Relations Act:
For the purpose of [this act,] to bargain collectively is the performance of the
mutual obligation of the employer and the representative of the employees to meet
at reasonable times and confer in good faith with respect to wages, hours, and

decertification collective bargaining

Legal process for employees to terminate The process through which representatives
a union s right to represent them. of management and the union meet to
negotiate a labor agreement.
510 PART 5 EMPLOYEE RELATIONS

terms and conditions of employment, or the negotiation of an agreement, or any

question arising thereunder, and the execution of a written contract incorporating
any agreement reached if requested by either party, but such obligation does not
compel either party to agree to a proposal or require the making of a concession.
In plain language, this means that both management and labor are required by law
to negotiate wage, hours, and terms and conditions of employment in good faith.

5 Illustrate with examples

What Is Good Faith?
bargaining that is not Good faith bargaining is the cornerstone of effective labor management relations.
in good faith. It means that both parties communicate and negotiate, that they match proposals
with counterproposals, and that both make every reasonable effort to arrive at an
agreement. It does not mean that one party compels another to agree to a proposal.
Nor does it require that either party make any specific concessions (although as a
practical matter, some may be necessary).49
How can you tell if bargaining is not in good faith? The following are some examples.
Surface bargaining. Going through the motions of bargaining without any real
intention of completing an agreement.
Inadequate concessions. Unwillingness to compromise, even though no one is
required to make a concession.
Inadequate proposals and demands. The NLRB considers the advancement
of proposals to be a positive factor in determining overall good faith.
Dilatory tactics. The law requires that the parties meet and confer at reasonable
times and intervals. Obviously, refusal to meet with the union does not satisfy
the positive duty imposed on the employer.
Imposing conditions. Attempts to impose conditions that are so onerous
or unreasonable as to indicate bad faith.
Making unilateral changes in conditions. This is a strong indication that the
employer is not bargaining with the required intent of reaching an agreement.
Bypassing the representative. The duty of management to bargain in good faith
involves, at a minimum, recognition that the union representative is the one
with whom the employer must deal in conducting negotiations.
Withholding information. An employer must supply the union with information,
upon request, to enable it to discuss the collective bargaining issues intelligently.
Of course, requiring good faith bargaining doesn t mean that negotiations can t
grind to a halt. For example, in 2011, the National Football League accused the NFL
Players Association of not bargaining in good faith, using delays to run out the
clock so that the players association could bring a suit against the NFL.50

The Negotiating Team

Both union and management send negotiating teams to the bargaining table, and both
teams go into the bargaining sessions having done their homework. Both sides today
devote much time to preparations, because contracts today tend to be more detailed
and complex. Union representatives will have sounded out union members on their
desires and conferred with representatives of related unions.
Both sides will use several techniques to prepare for bargaining. First, they prepare
the data on which to build their bargaining positions.51 From compensation survey
sources like those we discussed in Chapter 11, they compile data on pay and benefits that
include comparisons with local pay rates and to rates paid for similar jobs within the
industry. Data on the distribution of the workforce (in terms of age, sex, and seniority,
for instance) are also important, because these factors determine what the company
will actually pay out in benefits. Internal economic data regarding cost of benefits,
overall-earnings levels, and the amount and cost of overtime are important as well.
Management will also cost the current labor contract and determine the
increased cost total, per employee, and per hour of the union s demands. It will
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 511

use information from grievances and feedback from supervisors to determine what
the union s demands might be, and prepare counteroffers and arguments.52 Other
popular tactics include attitude surveys to test employee reactions to various sections
of the contract that management may feel require change, and informal conferences
with local union leaders to discuss the operational effectiveness of the contract and
to send up trial balloons on management ideas for change.

HR AS A PROFIT CENTER
Costing the Contract
Collective bargaining experts emphasize the need to cost the union s demands
carefully. One says,
The mistake I see most often is [HR professionals who] enter the negotiations
without understanding the financial impact of things they put on the table. For
example, the union wants three extra vacation days. That doesn t sound like a
lot, except that in some states, if an employee leaves, you have to pay them for
unused vacation time. [So] now your employer has to carry that liability on their
books at all times.53

Bargaining Items
Labor law sets out categories of specific items that are subject to bargaining: These are
mandatory, voluntary, and illegal items.
Voluntary (or permissible) bargaining items are neither mandatory nor illegal;
they become a part of negotiations only through the joint agreement of both manage-
ment and union. Neither party can compel the other to negotiate over voluntary items.
You cannot hold up signing a contract because the other party refuses to bargain on a
voluntary item. Benefits for retirees might be an example.
Illegal bargaining items are forbidden by law. A clause agreeing to hire union
members exclusively would be illegal in a right-to-work state, for example.
Table 15-1 presents some of the 70 or so mandatory bargaining items over which
bargaining is mandatory under the law. They include wages, hours, rest periods,
layoffs, transfers, benefits, and severance pay. Others, such as drug testing, are added as
the law evolves.

Bargaining Hints
Expert Reed Richardson has the following advice for bargainers:
1. Be sure to set clear objectives for every bargaining item, and be sure you under-
stand the reason for each.
2. Do not hurry.
3. When in doubt, caucus with your associates.
4. Be well prepared with firm data supporting your position.
5. Strive to keep some flexibility in your position.
6. Don t concern yourself just with what the other party says and does; find out why.

good faith bargaining illegal bargaining items mandatory bargaining items

Both parties are making every reasonable Items in collective bargaining that are Items in collective bargaining that a party
effort to arrive at agreement; proposals are forbidden by law; for example, a clause must bargain over if they are introduced
being matched with counterproposals. agreeing to hire union members by the other party for example, pay.
exclusively would be illegal in a
voluntary (or permissible) bargaining items right-to-work state.
Items in collective bargaining over which
bargaining is neither illegal nor mandatory
neither party can be compelled against its
wishes to negotiate over those items.
512 PART 5 EMPLOYEE RELATIONS

TABLE 15-1 Bargaining Items

Mandatory Permissible Illegal

Rates of pay Indemnity bonds Closed shop

Wages Management rights as to union affairs Separation of employees
Hours of employment Pension benefits of retired employees based on race
Overtime pay Scope of the bargaining unit Discriminatory treatment
Shift differentials Including supervisors in the contract
Holidays Additional parties to the contract such
Vacations as the international union
Severance pay Use of union label
Pensions Settlement of unfair labor charges
Insurance benefits Prices in cafeteria
Profit-sharing plans Continuance of past contract
Christmas bonuses Membership of bargaining team
Company housing, meals, Employment of strikebreaker
and discounts
Employee security
Job performance
Union security
Management union
relationship
Drug testing of employees

Source: Carrell, Michael R.; Heavrin, Christina, Labor Relations And Collective Bargaining: Cases, Practices,
And Law, 6th Edition, © 2001. Reprinted by permission of Pearson Education, Incl, Upper Saddle River, NJ.

7. Respect the importance of face saving for the other party.

8. Be alert to the real intentions of the other party not only for goals, but also for
priorities.
9. Be a good listener.
10. Build a reputation for being fair but firm.
11. Learn to control your emotions and use them as a tool.
12. As you make each bargaining move, be sure you know its relationship to all
other moves.
13. Measure each move against your objectives.
14. Remember that collective bargaining is a compromise process. There is no such
thing as having all the pie.
15. Try to understand the people and their personalities.54
16. Remember that excessive bargainer transparency and openness can backfire.55

Impasses, Mediation, and Strikes

In collective bargaining, an impasse occurs when the parties are not able to move further
toward settlement. An impasse usually occurs because one party is demanding more
than the other will offer. Sometimes an impasse can be resolved through a third party
a disinterested person such as a mediator or arbitrator. If the impasse is not resolved in
this way, the union may call a work stoppage, or strike, to put pressure on management.56

THIRD-PARTY INVOLVEMENT Negotiators use three types of third-party

interventions to overcome an impasse: mediation, fact finding, and arbitration. With
mediation, a neutral third party tries to assist the principals in reaching agreement.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 513

The mediator usually holds meetings with each party to determine where each stands
regarding its position, and then uses this information to find common ground for
further bargaining. The mediator is always a go-between, without authority to dictate
terms or make concessions. He or she communicates assessments of the likelihood of a
strike, the possible settlement packages available, and the like.
In certain situations, as in a national emergency dispute, a fact finder may be
appointed. A fact finder is a neutral party who studies the issues in a dispute and
makes a public recommendation for a reasonable settlement.57 Presidential emer-
gency fact-finding boards have successfully resolved impasses in certain critical
transportation disputes.
Arbitration is the most definitive type of third-party intervention, because the
arbitrator often has the power to determine and dictate the settlement terms. With
binding arbitration, both parties are committed to accepting the arbitrator s award.
With nonbinding arbitration, they are not. Arbitration may also be voluntary or
compulsory (in other words, imposed by a government agency). In the United States,
voluntary binding arbitration is the most prevalent.
There are two main topics of arbitration. Interest arbitration centers on working
out a labor agreement; the parties use it when such agreements do not yet exist or
when one or both parties are seeking to change the agreement. Rights arbitration
really means contract interpretation arbitration. It usually involves interpreting
existing contract terms, for instance, when an employee questions the employer s
right to have taken some disciplinary action.58
SOURCES OF THIRD-PARTY ASSISTANCE Various public and professional
agencies make arbitrators and mediators available. For example, the American
Arbitration Association (AAA) represents and provides the services of thousands
of arbitrators and mediators to employers and unions. The U.S. government s Federal
Mediation and Conciliation Service provides both arbitrators and mediators (see
Figure 15-5).59 In addition, most states provide arbitrator and mediation services.
STRIKES A strike is a withdrawal of labor. There are four main types of strikes.
An economic strike results from a failure to agree on the terms of a contract. Unions
call unfair labor practice strikes to protest illegal conduct by the employer.
A wildcat strike is an unauthorized strike occurring during the term of a contract.
A sympathy strike occurs when one union strikes in support of the strike
of another union.60 For example, in sympathy with South Korean Hyundai workers,
the United Auto Workers organized a rally outside of Hyundai s technical center
in Superior Township, Michigan and took steps to hold other rallies.61
The likelihood of and severity of a strike depends partly on the parties willingness
to take a strike. 62 For instance, a number of years ago major-league baseball owners

impasse interest arbitration unfair labor practice strike

Collective bargaining situation that occurs Arbitration enacted when labor agreements A strike aimed at protesting illegal conduct
when the parties are not able to move further do not yet exist or when one or both parties by the employer.
toward settlement, usually because one party are seeking to change the agreement.
is demanding more than the other will offer. wildcat strike
rights arbitration An unauthorized strike occurring during the
mediation Arbitration that interprets existing contract term of a contract.
Intervention in which a neutral third party tries terms, for instance, when an employee
to assist the principals in reaching agreement. questions the employer s right to have taken sympathy strike
some disciplinary action. A strike that takes place when one union
fact finder strikes in support of the strike of another.
A neutral party who studies the issues in a strike
dispute and makes a public recommendation A withdrawal of labor.
for a reasonable settlement.
economic strike
arbitration A strike that results from a failure to agree
The most definitive type of third-party on the terms of a contract that involve
intervention, in which the arbitrator usually wages, benefits, and other conditions
has the power to determine and dictate the of employment.
settlement terms.
514 PART 5 EMPLOYEE RELATIONS

FIGURE 15-5 Online Request

Form for Federal Mediation

were willing to let players strike and lose a whole season, because they had consistently
agreed that the players had been ruining the game by getting too much money and that
only a hard line against such excesses would stop that.63
The number of major work stoppages (strikes involving 1,000 workers or more)
peaked at about 400 per year between 1965 and 1975, and today average around 20.
Picketing, or having employees carry signs announcing their concerns near the
employer s place of business, is one of the first activities to occur during a strike. Its
purpose is to inform the public about the existence of the labor dispute and often to
encourage others to refrain from doing business with the struck employer.
Employers can make several responses when they become the object of a strike. One
is to shut down the affected area and halt operations until the strike is over. A second is
to contract out work in order to blunt the effects of the strike. A third response is to
continue operations, perhaps using supervisors and other nonstriking workers to fill
in for the striking workers. A fourth alternative is hiring replacements for the strikers.
Diminished union influence plus competitive pressures now prompt more employers
to replace (or at least consider replacing) strikers with permanent replacement workers.
One study of human resource managers found that of those responding, 18% would
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 515

Picketing is one of the first

activities to occur during a
strike. The purpose is to inform
the public about the labor
dispute.

Source: Dennis MacDonald/PhotoEdit.

not consider striker replacements in the event of a strike, while 31% called it not very
likely, 23% somewhat likely, and 21% very likely. 64 When the NFL locked out
players in 2011, they also implied that they might use replacement players.65
Employers generally can replace strikers. In one very important labor relations
case known as Mackay, the U.S. Supreme Court ruled that although the National
Labor Relations Act does prohibit employers from interfering with employees right
to strike, employers still have the right to continue their operations and, therefore, to
replace strikers. Subsequent decisions by the National Labor Relations Board put
some limitations on Mackay. For example, employers cannot permanently replace
strikers who are protesting unfair labor practices, and must rehire strikers who apply
for reinstatement unconditionally.

STRIKE GUIDELINES FOR EMPLOYERS When a strike is imminent, the employer

should make plans to deal with it. For example, as negotiations between the Hibbing
Taconite Steel Plant in Minnesota and the United Steelworkers of America headed
toward a deadline, the firm brought in security workers and trailers to house them.
Two experts say that, with a strike imminent, following these guidelines can minimize
confusion:
* Pay all striking employees what you owe them on the first day of the strike.
* Secure the facility. Management should control access to the property. Consider
hiring guards to protect replacements coming to and from work, if necessary.
* Notify all customers, and prepare a standard official response to all queries.
* Contact all suppliers and other persons who will have to cross the picket line.
Establish alternative methods of obtaining supplies.
* Arrange for overnight stays in the facility, and for delivered meals, if necessary.
* Notify the local unemployment office of your need for replacement workers.
* Photograph the facility before, during, and after picketing. If necessary, install
videotape equipment to monitor picket line misconduct.
* Record all facts concerning strikers demeanor and activities and such incidents
as violence, threats, mass pickets, property damage, or problems.
* Gather the following evidence: number of pickets and their names; time, date,
and location of picketing; wording on every sign carried by pickets; and descriptions
of picket cars and license numbers.66

picketing
Having employees carry signs announcing
their concerns near the employer s place
of business.
516 PART 5 EMPLOYEE RELATIONS

OTHER WEAPONS Management and labor each have other weapons to break
an impasse and achieve their aims. The union, for example, may resort to a corporate
campaign. A corporate campaign is an organized effort by the union that exerts
pressure on the employer by pressuring the company s other unions, shareholders,
corporate directors, customers, creditors, and government agencies.67 Thus, the
union might surprise individual members of the board of directors by picketing their
homes, and organizing a boycott of the company s banks.68 The head of the United
Auto Workers recently said the union planned to begin a new campaign to organize
hourly factory workers at foreign-owned car plants in the United States. As part of its
campaign, the union began picketing the U.S. dealerships for Hyundai, Daimler,
Toyota, and Nissan.69
Inside games are another union tactic. Inside games are union efforts to convince
employees to impede or to disrupt production for example, by slowing the work pace,
refusing to work overtime, filing mass charges with government agencies, refusing to do
work without receiving detailed instructions from supervisors, and engaging in other
disruptive activities such as sick-outs.70 Inside games are basically strikes albeit
strikes in which the company continues to pay the employees. In one inside game
at Caterpillar s Aurora, Illinois, plant, United Auto Workers grievances rose from
22 to 336. The effect was to tie up workers and management in unproductive endeavors
on company time.71

Improving Productivity through HRIS

Unions Go High-Tech
E-mail and the Internet means unions can send mass e-mail announcements
to collective-bargaining unit members and use e-mail to reach supporters and
government officials for their corporate campaigns. For example, the group trying
to organize Starbucks workers (the Starbucks Workers Union) set up their
own Web site (www. starbucksunion.org). It includes notes like Starbucks managers
monitored Internet chat rooms and eavesdropped on party conversations in a covert
campaign to identify employees agitating for union representation at the
coffee chain, internal emails reveal. 72
For their part, employers can try to break an impasse with lockouts. A lockout is
a refusal by the employer to provide opportunities to work. It (sometimes literally)
locks out employees and prohibits them from doing their jobs (and being paid). In
2011, the National Football League (NFL) locked out football players when the two
sides couldn t agree on a new contract.73 The NLRB views lockouts as an unfair labor
practice only when the employer acts for a prohibited purpose. It is not a prohibited
purpose to try to bring about a settlement on terms favorable to the employer. Lock-
outs are not widely used today; employers are usually reluctant to cease operations
when employees are willing to continue working.
Both employers and unions can seek a court injunction if they believe the other
side is taking actions that could cause irreparable harm to the other party. An
injunction is a court order compelling a party or parties either to resume or to desist
from a certain action.74

The Contract Agreement

The actual contract agreement may be a 20- or 30-page document; it may be even
longer. It may contain just general declarations of policy, or detailed rules and
procedures. The tendency today is toward the longer, more detailed contract. This is
largely a result of the increased number of items the agreements have been covering.
The main sections of a typical contract cover subjects such as these: (1) management
rights; (2) union security and automatic payroll dues deduction; (3) grievance proce-
dures; (4) arbitration of grievances; (5) disciplinary procedures; (6) compensation rates;
(7) hours of work and overtime; (8) benefits: vacations, holidays, insurance, pensions;
(9) health and safety provisions; (10) employee security seniority provisions; and
(11) contract expiration date.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 517

6 Develop a grievance
DEALING WITH DISPUTES AND GRIEVANCES
procedure. Hammering out a labor agreement is not the last step in collective bargaining. No labor
contract can cover all contingencies and answer all questions. For example, suppose the
contract says you can only discharge an employee for just cause. You subsequently
discharge someone for speaking back to you in harsh terms. Was speaking back to you
harshly just cause ?
The labor contract s grievance procedure usually handles problems like these.
The grievance procedure provides an orderly system whereby both employer and
union determine whether some action violated the contract.75 It is the vehicle for
administering the contract on a day-to-day basis. Remember, though, that this
involves interpretation only: it usually doesn t involve negotiating new terms or
altering existing ones.

Sources of Grievances
From a practical point of view, it is probably easier to list those items that don t
precipitate grievances than to list the ones that do. Employees may use just about
any factor involving wages, hours, or conditions of employment as the basis of a
grievance.
However, certain grievances are more serious, since they re usually more difficult
to settle. Discipline cases and seniority problems including promotions, transfers, and
layoffs would top this list. Others would include grievances growing out of job evalu-
ations and work assignments, overtime, vacations, incentive plans, and holidays.76
Here are three examples of grievances:
* Absenteeism. An employer fired an employee for excessive absences. The em-
ployee filed a grievance stating that there had been no previous warnings related
to excessive absences.
* Insubordination. An employee on two occasions refused to obey a supervisor s
order to meet with him, unless a union representative was present at the meeting.
As a result, the employee was discharged and subsequently filed a grievance
protesting the discharge.
* Plant rules. The plant had a posted rule barring employees from eating or drinking
during unscheduled breaks. The employees filed a grievance claiming the rule was
arbitrary.77
A grievance is often a symptom of an underlying problem. Sometimes, bad
relationships between supervisors and subordinates are to blame: This is often the
cause of grievances over fair treatment, for instance. Organizational factors such as
ambiguous job descriptions that frustrate employees also cause grievances. Union
activism is another cause; the union may solicit grievances from workers to under-
score ineffective supervision. Problem employees are yet another underlying cause
of grievances. These are individuals, who, by their nature, are negative, dissatisfied,
and prone to complaints. Discipline and dismissal, discussed in Chapter 14 (Ethics),
are also both major sources of grievances.

corporate campaign inside games injunction

An organized effort by the union that exerts Union efforts to convince employees A court order compelling a party or parties
pressure on the corporation by pressuring to impede or to disrupt production for either to resume or to desist from a certain
the company s other unions, shareholders, example, by slowing the work pace. action.
directors, customers, creditors, and
government agencies, often directly. lockout grievance procedure
A refusal by the employer to provide oppor- Formal process for addressing any factor
boycott tunities to work. involving wages, hours, or conditions of
The combined refusal by employees and employment that is used as a complaint
other interested parties to buy or use the against the employer.
employer s products.
518 PART 5 EMPLOYEE RELATIONS

The Grievance Procedure

Most collective bargaining contracts contain a specific grievance procedure. It lists the
steps in the procedure, time limits associated with each step, and specific rules such as
all charges of contract violation must be reduced to writing. Virtually every labor
agreement signed today contains a grievance procedure clause. (Nonunionized
employers need such procedures, too, as explained in Chapter 14, Ethics.)
Union grievance procedures differ from firm to firm. Some contain simple,
two-step procedures. Here, the grievant, union representative, and company
representative meet to discuss the grievance. If they don t find a satisfactory solution,
the grievance goes before an independent, third-party arbitrator who hears the case,
writes it up, and makes a decision. Figure 15-6 shows a grievance record form.
At the other extreme, the grievance procedure may contain six or more steps. The
first step might be for the grievant and shop steward to meet informally with
the supervisor of the grievant to try to find a solution. If they don t find one, the

FIGURE 15-6 Sample Online

Grievance Form
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 519

employee files a formal grievance, and there s a meeting with the employee, shop
steward, and the supervisor s boss. The next steps involve the grievant and union
representatives meeting with higher-level managers. Finally, if top management and
the union can t reach agreement, the grievance may go to arbitration.

Guidelines for Handling Grievances

The best way for a supervisor to handle a grievance is to develop a work environment
in which grievances don t arise in the first place. Hone your ability to avoid, recognize,
diagnose, and correct the causes of potential employee dissatisfaction (such as unfair
appraisals or poor communications) before they become grievances.
Given that many factors including union pressures prompt grievances, it
would be naïve to think that grievances arise only due to supervisor unfairness.
However, there s little doubt that the quality of the interpersonal relations among
you and your subordinates will influence your team s grievance rate. You should be
thoroughly familiar with our discussions of supervisory fairness in Chapter 14,
Ethics.
The supervisor is on the firing line and must steer a course between treating
employees fairly and maintaining management s rights and prerogatives. One
expert has developed a list of supervisor do s and don ts as useful guides in handling
grievances.78 Some critical ones include:

Do:
1. Investigate and handle each case as though it may eventually result in arbitration.
2. Talk with the employee about his or her grievance; give the person a full hearing.
3. Require the union to identify specific contractual provisions allegedly violated.
4. Comply with the contractual time limits for handling the grievance.
5. Visit the work area of the grievance.
6. Determine whether there were any witnesses.
7. Examine the grievant s personnel record.
8. Fully examine prior grievance records.
9. Treat the union representative as your equal.
10. Hold your grievance discussions privately.
11. Fully inform your own supervisor of grievance matters.

Don t:
1. Discuss the case with the union steward alone the grievant should be there.
2. Make arrangements with individual employees that are inconsistent with the
labor agreement.
3. Hold back the remedy if the company is wrong.
4. Admit to the binding effect of a past practice.
5. Relinquish to the union your rights as a manager.
6. Settle grievances based on what is fair. Instead, stick to the labor agreement.
7. Bargain over items not covered by the contract.
8. Treat as subject to arbitration claims demanding the discipline or discharge
of managers.
9. Give long written grievance answers.
10. Trade a grievance settlement for a grievance withdrawal.
11. Deny grievances because your hands have been tied by management.
12. Agree to informal amendments in the contract.
520 PART 5 EMPLOYEE RELATIONS

THE UNION MOVEMENT TODAY AND TOMORROW

About 35% of the non-farm U.S. workforce belonged to unions in the 1960s. Today,
that figure is about 12%. Why has this drop occurred and what is the future for the
union movement?

Why Union Membership Is Down

Several things contributed to union membership declines. Laws like OSHA and
Title VII reduced the need for union protection. Increased global competition and
new technologies like just-in-time production systems forced employers to reduce
inefficiencies and cut costs often by reducing payrolls by automating or by
sending jobs abroad. New foreign-owned auto plants from Toyota and Daimler
largely stayed union free. Only about 15% of U.S. workers now work in
manufacturing and construction, so unions traditional membership sources
shrank. The 2008 recession triggered budget cuts in both the public and private
sectors, prompting anti-union public policy attitudes, and the loss of about one
million public sector union jobs.
All of this squeezes unions. For example, for years the head of Ford s United
Auto Workers union fought for increased benefits for his members. More recently, he
urged his colleagues to accept productivity-enhancing plans, such as outsourcing
Ford s factory jobs to lower paid workers. Ford is in a desperate situation, he says.
If this company goes down, I want to be able to look in the mirror and say I did
everything I could. 79

An Upswing for Unions?

However, the news is not all bleak. For one thing, we saw that it s not unusual for
public policy attitudes to rotate from pro- to anti-union, and back. For another, the
membership drop masks unions real impact. Union membership varies widely
by state, so unions are still quite influential in some states (such as Michigan
and New York). Furthermore, about 35% of the nation s blue-collar workers in
particular those in manufacturing and construction jobs belong to unions.
Furthermore, a slight majority of all union members (about 51%) are now white-
collar workers, which suggests unions are tapping this growing portion of the
workforce. For example, an optical physicist at the National Aeronautics and Space
Administration is also the president of his local union.80 White-collar union
members include about 40% of all college faculty members, 45,000 physicians, and
50,000 engineers. Almost 100,000 nurses belong to unions (as do most major league
baseball, football, basketball, and hockey players). And, we ll see that unions themselves
are becoming much more aggressive.

Unions are making inroads into

traditionally hard-to-organize
worker segments like profes-
sionals and white-collar workers.
Source: Stephen Chernin/iStockphoto.com.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 521

Card Check and Other New Union Tactics

Unions are pushing Congress to pass the Employee Free Choice Act. This would
make it more difficult for employers to inhibit workers from organizing. Instead of
secret-ballot elections, the act would institute a card check system. Here, the
union would win recognition when a majority of workers signed authorization
cards saying they want the union. (Several large companies, including Cingular
Wireless, have already agreed to the card check process.)81 The act would also
require binding arbitration to set a first contract s terms if the company and union
can t negotiate an agreement within 120 days.82
Unions are also using class action lawsuits to support employees in nonunion-
ized companies to pressure employers. For example, unions recently used class
action lawsuits to support workers claims under the Fair Labor Standards Act and
the Equal Pay Act.83 As another example, UNITE filed a $100 million class action
suit against Cintas Corp. Then, Cintas workers in California filed a lawsuit claiming
that the company was violating a nearby municipality s living wage law. UNITE
then joined forces with the Teamsters union, which in turn began targeting Cintas
delivery people.84

UNIONS GO GLOBAL Walmart, a company that traditionally works hard to pre-

vent its stores from going union, recently had to agree to let the workers in its stores in
China join unions. Walmart s China experience stems in part from efforts of global
union campaigns by the Service Employees International Union (SEIU). These cam-
paigns reflect the belief that, as SEIU puts it, huge global service sector companies
routinely cross national borders and industry lines as they search for places where
they can shift operations to exploit workers with the lowest possible pay and benefits.
SEIU is therefore strengthening its alliances with unions in other nations, with
the goal of uniting workers in specific multinational companies and industries
around the globe.85 For example, SEIU recently worked with China s All China Feder-
ation of Trade Unions (ACFTU) to help the latter organize China s Walmart stores.86
Recently, the United Steelworkers merged with the largest labor union in Britain to
create Workers Uniting to better help the new union deal with multinational
employers.87 And the UAW is training activists about how to organize rallies and
protests in support of union campaigns, and sending them abroad to help organize
workers at car plants overseas.88
So, any company that thinks it can avoid unionization by sending jobs abroad
may be in for a surprise. In fact, more U.S. companies are bringing jobs back home,
in part due to rising wages abroad.

High-Performance Work Systems, Employee

Participation, and Unions
Many employers encourage employees to work together in teams. The aim is to help
solve work-related problems and create high-performance work systems. In one such
program, at UPS, hourly employees in self-directed teams establish priorities on how
to do their jobs. Many unions believe that the result, if not the motive, of such
programs is to usurp unions traditional duties.
That presents a problem for employers. The National Recovery Act (1933) tried
to give employees the right to organize and to bargain collectively. This triggered an
increase in unions that were actually company-supported sham unions aimed at
keeping legitimate unions out. Subsequent legislation outlawed such sham unions.
Employers can take steps to avoid having courts view their participation
programs as sham unions. For example,89
* Involve employees in the formation of these programs.
* Continually emphasize to employees that the committees exist only to address
issues such as quality and productivity, not to deal with mandatory bargaining-type
items such as pay.
522 PART 5 EMPLOYEE RELATIONS

* Don t establish such committees when union organizing activities are beginning
in your facility.
* Fill the committees with volunteers rather than elected employee representatives,
and rotate membership.
* Minimize management s participation in the committees day-to-day activities.
A recent review of union research and literature provides an additional insight. The
author concludes that unions that have a cooperative relationship with management
can play an important role in overcoming barriers to the effective adoption of
practices that have been linked to organizational competitiveness. 90 However, she
also concludes that employers who want to capitalize on that potential need to change
their way of thinking, avoiding adversarial industrial relations and emphasizing a
cooperative partnership.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 523

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. The labor movement is important. About 14.7 million from soliciting other employees when both are on duty
U.S. workers belong to unions around 11.9% of the time and not on a break.
total. Workers unionize not just to get more pay or 4. The employer and union hammer out an agreement via
better working conditions; employer unfairness and the the collective bargaining process. The heart of collec-
union s power are also important. Unions aim for union tive bargaining is good faith bargaining, which means
security, and then for improved wages, hours, and work- both parties must make reasonable efforts to arrive at
ing conditions and benefits for their members. Union agreement, and proposals are matched with counterpro-
security options include the closed shop, union shop, posals. Both negotiating teams will work hard to under-
agency shop, preferential shop, and maintenance of stand their respective clients needs and to quantify their
membership arrangement. The AFL-CIO plays an demands. In the actual bargaining sessions, there are
important role in the union movement as a voluntary mandatory bargaining items such as pay, illegal bargain-
federation of about 56 national and international labor ing items, and voluntary bargaining items such as
unions in the United States. benefits for retirees. If things don t go smoothly during
2. To understand unions and their impact, it s necessary collective bargaining, the parties may utilize third-party
to understand the interplay between unions and the intermediaries, including mediators, fact finders, and
law. In brief, labor law has gone through periods arbitrators. Strikes represent a withdrawal of labor.
of strong encouragement of unions, to modified encour- There are economic strikes resulting from a failure to
agement coupled with regulation, and finally to agree on the terms of the contract, as well as unfair labor
detailed regulation of internal union affairs. Today, the practice strikes, wildcat strikes, and sympathy strikes.
legal environment seems to be moving toward During strikes, picketing may occur. Other tactics
increased encouragement of unions. Historically, the include a corporate campaign by the union, boycotting,
laws encouraging the union movement included the inside games, or (for employers) lockouts.
Norris-LaGuardia and National Labor Relations 5. Most managers become involved with grievances during
(Wagner) Acts of the 1930s. These outlawed certain their careers. Most collective bargaining agreements
unfair employer labor practices and made it easier for contain a specific grievance procedure listing the steps in
unions to organize. The Taft-Hartley or Labor the procedure. In general, the best way to handle a griev-
Management Relations Act of 1947 addressed keeping ance is to create an environment in which grievances
unions from restraining or coercing employees, and don t occur. However if a grievance does occur, things to
listed certain unfair union labor practices. In the do include investigate, handle each case as though it may
1950s, the Landrum-Griffin Act (technically, the Labor eventually result in arbitration, talk with the employee
Management Reporting and Disclosure Act) further about the grievance, and comply with the contractual
protected union members from possible wrongdoing time limits for handling the grievance. On the other
on the part of their unions. hand, don t make arrangements with individual employ-
3. When unions begin organizing, all managers and super- ees that are inconsistent with the labor agreement or
visors usually get involved, so it s essential to understand hold back the remedy if the company is wrong.
the mechanics of the union drive and election. The 6. Membership is down but in some ways unions are
main steps include initial contact, obtaining authoriza- becoming more influential today, so it s important to
tion cards, holding a hearing, the campaign itself, and understand the union movement today and tomorrow.
the election. Supervisors need to understand their role For example, unions are becoming more aggressive in
at each step in this process. Follow the acronym TIPS terms of pushing Congress to pass the Employee Free
do not threaten, interrogate, make promises, or spy. And Choice Act, which, among other things, would enable
follow FORE provide facts, express your opinions, employees to vote for the union by signing authorization
explain factually correct rules, and share your experi- cards, rather than going through a formal union election.
ences. Managers need to understand rules regarding New union federations, such as Change to Win, are being
literature and solicitation. For example, employers can more aggressive about organizing workers, and unions
always bar nonemployees from soliciting employees are going global, for instance, by helping employees in
during their work time, and can usually stop employees China organize local Walmart stores.
524 PART 5 EMPLOYEE RELATIONS

DISCUSSION QUESTIONS
1. Why do employees join unions? What are the advantages 5. Explain in detail each step in a union drive and
and disadvantages of being a union member? election.
2. Discuss five sure ways to lose an NLRB election. 6. What is meant by good faith bargaining? Using examples,
3. Describe important tactics you would expect the union explain when bargaining is not in good faith.
to use during the union drive and election. 7. Define impasse, mediation, and strike, and explain the
4. Briefly illustrate how labor law has gone through a cycle techniques that are used to overcome an impasse.
of repression and encouragement.

INDIVIDUAL AND GROUP ACTIVITIES

1. You are the manager of a small manufacturing plant. The (3) write four multiple-choice exam questions on this
union contract covering most of your employees is about material that you believe would be suitable for inclusion in
to expire. Working individually or in groups, discuss how the HRCI exam; and (4) if time permits, have someone
to prepare for union contract negotiations. from your team post your teams questions in front of the
2. Working individually or in groups, use Internet resources class, so the students in other teams can take each others
to find situations where company management and the exam questions.
union reached an impasse at some point during their 4. Several years ago, 8,000 Amtrak workers agreed not to
negotiation process, but eventually resolved the impasse. disrupt service by walking out, at least not until a court
Describe the issues on both sides that led to the impasse. hearing was held. Amtrak had asked the courts for a
How did they move past the impasse? What were the final temporary restraining order, and the Transport Work-
outcomes? ers Union of America was actually pleased to postpone
3. The HRCI Test Specifications Appendix (pages 633 640) its walkout. The workers were apparently not upset
lists the knowledge someone studying for the HRCI certifi- at Amtrak, but at Congress, for failing to provide
cation exam needs to have in each area of human resource enough funding for Amtrak. What, if anything, can an
management (such as in Strategic Management, Work- employer do when employees threaten to go on strike,
force Planning, and Human Resource Development). not because of what the employer did, but what a third
In groups of four to five students, do four things: (1) review party in this case, Congress has done or not done?
that appendix now; (2) identify the material in this chapter What laws would prevent the union from going on
that relates to the required knowledge the appendix lists; strike in this case?

EXPERIENTIAL EXERCISE
The Union-Organizing Campaign at Pierce U.
Purpose: The purpose of this exercise is to give you practice cards. Zimmer even observed this during working hours as
in dealing with some of the elements of a union-organizing employees were going about their normal duties in the dormi-
campaign.91 tories. Zimmer reports that a number of her employees have
come to her asking for her opinions about the union. They
Required Understanding: You should be familiar with the told her that several other supervisors in the department had
material covered in this chapter, as well as the following told their employees not to sign any union authorization
incident, An Organizing Question on Campus. cards and not to talk about the union at any time while they
INCIDENT: An Organizing Question on Campus: Art Tipton were on campus. Zimmer also reports that one of her fellow
is human resource director of Pierce University, a private supervisors told his employees that anyone who was caught
university located in a large urban city. Ruth Zimmer, a talking about the union or signing a union authorization card
supervisor in the maintenance and housekeeping services would be disciplined and perhaps dismissed.
division of the university, has just come into Art s office Zimmer says that her employees are very dissatisfied with
to discuss her situation. Zimmer s division is responsible for their wages and with the conditions that they have endured
maintaining and cleaning physical facilities of the university. from students, supervisors, and other staff people. She says that
Zimmer is one of the department supervisors who supervise several employees told her that they had signed union cards
employees who maintain and clean on-campus dormitories. because they believed that the only way university administra-
In the next several minutes, Zimmer proceeds to express tion would pay attention to their concerns was if the employees
her concerns about a union-organizing campaign that has had a union to represent them. Zimmer says that she made a
begun among her employees. According to Zimmer, a repre- list of employees who she felt had joined or were interested in
sentative of the Service Workers Union has met with several of the union, and she could share these with Tipton if he wanted
her employees, urging them to sign union authorization to deal with them personally. Zimmer closed her presentation
cards. She has observed several of her employees cornering with the comment that she and other department supervisors
other employees to talk to them about joining the union and need to know what they should do in order to stomp out the
to urge them to sign union authorization (or representation) threat of unionization in their department.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 525

How to Set Up the Exercise/Instructions: allotted discussing the issues. Then, outline those issues,
Divide the class into groups of four or five students. as well as an action plan for Tipton. What should he
Assume that you are labor relations consultants the do next?
university retained to identify the problems and issues If time permits, a spokesperson from each group
involved and to advise Art Tipton on the university s rights should list on the board the issues involved and the group s
and what to do next. Each group will spend the time recommendations. What should Art do?

APPLICATION CASE
NEGOTIATING WITH THE WRITERS GUILD OF AMERICA
The talks between the Writers Guild of America (WGA) and the WGA leadership. . . . The WGA leadership apparently
the Alliance of Motion Picture & Television Producers has no intention to bargain in good faith. 96 As evidence, the
(producers) began tense, and then got tenser. In their first producers claimed that the WGA negotiating committee left
meeting, the two sides got nothing done. As one producer one meeting after less than an hour at the bargaining table.
said, Everyone in the room is concerned about this. 92 Both sides knew timing in these negotiations was very
The two sides were far apart on just about all the issues. important. During the fall and spring, television series pro-
However, the biggest issue was how to split revenue from new duction is in full swing. So, a strike now by the writers would
media, such as when television shows move to DVDs or the have a bigger impact than waiting until, say, the summer to
Internet. The producers said they wanted a profit-splitting strike. Perhaps not surprisingly, some movement was soon
system rather than the current residual system. Under the discernible. In a separate set of negotiations, the Directors
residual system, writers continue to receive residuals or Guild of America reached an agreement with the producers
income from shows they write every time they re shown (such that addressed many of the issues that the writers were
as when Seinfeld appears in reruns, years after the last original focusing on, such as how to divide the new media income.97
show was shot). Writers Guild executives did their homework. Then, the WGA and producers finally reached agreement.
They argued, for instance, that the projections showed The new contract was the direct result of renewed negotia-
producers revenues from advertising and subscription fees tions between the two sides, which culminated Friday with a
had recently jumped by about 40%.93 marathon session including top WGA officials and the heads
The situation grew tenser. After the first few meetings, one of the Walt Disney Co. and News Corp. 98
producers representative said, We can see after the dogfight
whose position will win out. The open question there, of
course, is whether each of us takes several lumps at the table, Questions
reaches an agreement, then licks their wounds later none the 1. The producers said the WGA was not bargaining in
worse for wear or whether we inflict more lasting damage good faith. What did they mean by that, and do you
through work stoppages that benefit no one before we come think the evidence is sufficient to support the claim?
to an agreement. 94 Even after meeting six times, it seemed 2. The WGA did eventually strike. What tactics could the
that, the parties only apparent area of agreement is that no producers have used to fight back once the strike began?
real bargaining has yet to occur. 95 What tactics do you think the WGA used?
Soon, the Writers Guild asked its members for strike 3. This was a conflict between professional and creative
authorization, and the producers were claiming that the people (the WGA) and TV and movie producers.
guild was just trying to delay negotiations until the current Do you think the conflict was therefore different
contract expired (at the end of October). As the president of in any way than are the conflicts between, say, the
the producers group said, We have had six across-the-table Autoworkers or Teamsters unions against auto and
sessions and there was only silence and stonewalling from trucking companies? Why?
the WGA leadership. . . . We have attempted to engage on 4. What role (with examples) did negotiating skills seem
major issues, but no dialogue has been forthcoming from to play in the WGA producers negotiations?

CONTINUING CASE
CARTER CLEANING COMPANY
The Grievance said George. I m really upset, but around here the store
On visiting one of Carter Cleaning Company s stores, manager s word seems to be law, and it sometimes seems
Jennifer was surprised to be taken aside by a long-term like the only way anyone can file a grievance is by meeting
Carter employee, who met her as she was parking her car. you or your father like this in the parking lot. Jennifer was
Murray (the store manager) told me I was suspended for very disturbed by this revelation and promised the
2 days without pay because I came in late last Thursday, employee she would look into it and discuss the situation
526 PART 5 EMPLOYEE RELATIONS

with her father. In the car heading back to headquarters, she 2. Based on what you know about the Carter Cleaning
began mulling over what Carter Cleaning Company s alter- Company, outline the steps in what you think would be
natives might be. the ideal grievance process for this company.
3. In addition to the grievance process, can you think of
Questions anything else that Carter Cleaning Company might do to
1. Do you think it is important for Carter Cleaning Company make sure grievances and gripes like this one are expressed
to have a formal grievance process? Why or why not? and are heard by top management?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The Hotel Paris s New Labor Relations Practices were already unionized, and unions in this area were quite
The Hotel Paris s competitive strategy is To use superior guest active. For example, as they were surfing the Internet to better
service to differentiate the Hotel Paris properties, and to thereby gauge the situation, Lisa and the CFO came across an interest-
increase the length of stay and return rate of guests, and thus ing Web site from the Boston Hotel Employees and Restaurant
boost revenues and profitability. HR manager Lisa Cruz must Employees Union, Local 26 (http://hotelworkersrising.org/
now formulate functional policies and activities that support Campaign/). It describes their success in negotiating contracts
this competitive strategy by eliciting the required employee and their accomplishments at several hotels, including ones
behaviors and competencies. managed by the Westin and Sheraton chains. The CFO and
Lisa Cruz s parents were both union members, and she Lisa agreed that it was important that she and her team
had no strong philosophical objections to unions. However, as develop and institute a new set of policies and practices that
the head of human resources for the Hotel Paris, she did feel would enable the Hotel Paris to reduce the likelihood of
very strongly that her employer should do everything legally further unionization and deal more effectively with their
possible to remain union-free. She knew that this is what the current unions. They set about that task with the aid of a
hotel chain s owners and top executives wanted. Furthermore, labor management attorney.
the evidence seemed to support their position. At least one
study that she d seen concluded that firms with 30% or more Questions
of their eligible workers in unions were in the bottom 10% 1. How should the details of the Hotel Paris s strategy
in terms of performance, while those with 8% to 9% of eligible influence the new union-related HR practices (perhaps
workers in unions scored in the top 10%.99 The problem was such as grievance procedures) it establishes?
that the Hotel Paris really had no specific policies and proce- 2. List and briefly describe what you believe are the three
dures in place to help its managers and supervisors deal with most important steps Hotel Paris management can take
union activities. With all the laws regarding what employers to reduce the likelihood unions will organize more of its
and their managers could and could not do to respond to a employees.
union s efforts, Lisa knew her company was a problem waiting 3. Write a detailed 2-page outline for a What You Need to
to happen. She turned her attention to deciding what steps she Know When the Union Calls manual. Lisa will distribute
and her team should take with regard to labor relations and this manual to her company s supervisors and managers,
collective bargaining in the United States. telling them what they need to know about looking out
Lisa and the CFO knew that unionization was a reality for for possible unionizing activity, and how to handle actual
the Hotel Paris. About 5% of the hotel chains U.S. employees organizing process related supervisory tasks.

KEY TERMS
closed shop, 497 National Labor Relations decertification, 509
union shop, 497 Board (NLRB), 499 collective bargaining, 509
agency shop, 497 Taft-Hartley Act (1947), 501 good faith bargaining, 510
preferential shop, 498 national emergency strikes, 502 voluntary (or permissible)
right to work, 498 Landrum-Griffin Act (1959), 502 bargaining items, 511
Norris-LaGuardia Act (1932), 499 union salting, 503 illegal bargaining items, 511
National Labor Relations authorization cards, 504 mandatory bargaining items, 511
(or Wagner) Act, 499 bargaining unit, 505 impasse, 512
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 527

mediation, 512 economic strike, 513 corporate campaign, 516

fact finder, 513 unfair labor practice boycott, 516
arbitration, 513 strike, 513 inside games, 516
interest arbitration, 513 wildcat strike, 513 lockout, 516
rights arbitration, 513 sympathy strike, 513 injunction, 516
strike, 513 picketing, 514 grievance procedure, 517

ENDNOTES
1. For example, see http://articles.money 18. Arthur Sloane and Fred Witney, Labor org/steps-form-union, accessed June 29,
central.msn.com/Investing/Extra/Costco Relations (Upper Saddle River, NJ: Prentice 2011.
TheAntiWalMart.aspx?page=1, accessed Hall, 2007), pp. 335 336. 30. Kris Maher, Unions New Foe: Consul-
June 29, 2011. 19. Benjamin Taylor and Fred Witney, Labor tants, The Wall Street Journal, August 15,
2. Christine Frey, Costco s Love of Labor: Relations Law (Upper Saddle River, NJ: 2005, p. B1.
Employees Well-Being Key to Its Suc- Prentice Hall, 1992), pp. 170 171; www. 31. Some Say Salting Leaves Bitter Taste for
cess, www.seattlepi.com/default/article/ dol.gov/whd/state/righttowork.htm, Employers, BNA Bulletin to Management,
Costco-s-love-of-labor-Employees-well- accessed June 5, 2010. March 4, 2004, p. 79; and www.nlrb.gov/
being-key-1140722.php, accessed June 29, 20. www.dol.gov/whd/state/righttowork. global/search/index.aspx?mode=s&qt=sal
2011; Steven Greenhouse and Reed Abelson, htm, accessed June 5, 2010. (Indiana ting&col=nlrb&gb=y, accessed January 14,
Wal-Mart Cuts Some Health Care Bene- applicable only to school employees.) 2008. For a management lawyer s pers-
fits, The New York Times, (October 21, 21. Paul Monies, Unions Hit Hard by Job pective, see www.fklaborlaw.com/union_
2011), pp. B1,5 Losses, Right to Work, The Daily salt-objectives.html, accessed May 25,
3. www.bls.gov/news.release/union2.nr0. Oklahoman (via Knight Ridder/Tribune 2007.
htm, accessed June 5, 2011. Business News), February 1, 2005. 32. Spurned Union Salts Entitled to Back
4. Ibid.; Union Membership Rises, Compen- 22. www.seiu.org/our-union/, accessed June 1, Pay, D.C. Court Says, Affirming Labor
sation & Benefits Review, May/June 2008, 2011. Board, BNA Bulletin to Management,
p. 9. 23. Steven Greenhouse, 4th Union Quits June 21, 2001, p. 193.
5. Ibid. AFL-CIO in a Dispute over Organizing, 33. D. Diane Hatch and James Hall, Salting
6. Stephen Greenhouse, Most US Union The New York Times, September 15, 2005, Cases Clarified by NLRB, Workforce,
Members Are Working for the Govern- p. A14. August 2000, p. 92. See also www.fklaborlaw.
ment, New Data Shows, The New York 24. Some trace early U.S. labor relations com/union_salt-objectives.html, accessed
Times, January 23, 2010, pages B1 B5. legislation back to a fire at the Triangle May 25, 2007.
7. Michael Ash and Jean Seago, The Effect of Shirtwaist factory in 1911. Following that 34. Edwin Arnold et al., Determinants of
Registered Nurses Unions on Heart Attack tragedy, in which 146 people died, New Certification Election Outcomes in the
Mortality, Industrial and Labor Relations York State passed a number of legal Service Sector, Labor Studies Journal 25,
Review 57, no. 3 (April 2004), pp. 422 442. reforms covering not only safety but also no. 3 (Fall 2000), p. 51.
8. http://articles.moneycentral.msn.com/ issues such as low wages, child labor, and 35. Number of Elections, Union Wins
Investing/Extra/CostcoTheAntiWalMart. long hours. New York City and New York Increased in 2002, BNA Bulletin to
aspx?page=1, accessed September 15, State soon adopted 36 new laws, and Management, June 19, 2003, p. 197.
2011. many view these laws as the basis for and 36. This section is based on Matthew Good-
9. Ibid. precursor to the U.S. labor legislation fellow, How to Lose an NLRB Election,
10. Ibid. efforts that began in earnest in the 1930s. Personnel Administrator 23 (September
11. Ibid. The Birth of the New Deal, The Economist, 1976), pp. 40 44. See also Matthew Good-
12. www.bls.gov/news.release/union2.nr0. March 19, 2011, p. 39. fellow, Avoid Unionizing: Chemical
htm, accessed June 1, 2011. 25. The following material is based on Arthur Company Union Election Results for
13. Dale Belman and Paula Voos, Changes in Sloane and Fred Witney, Labor Relations 1993, Chemical Marketing Reporter 246
Union Wage Effects by Industry: A Fresh (Upper Saddle River, NJ: Prentice Hall, (July 18, 1994), p. SR14; Gillian Flynn,
Look at the Evidence, Industrial Relations 2001), pp. 46 124. When the Unions Come Calling,
43, no. 3 (July 2004), pp. 491 519. 26. www.bls.gov/news.release/union2.nr0. Workforce, November 2000, pp. 82 87.
14. Donna Buttigieg et al., An Event History htm, accessed June 1, 2011. 37. Ibid.
Analysis of Union Joining and Leaving, 27. Michael Carrell and Christina Heavrin, 38. Ibid.
Journal of Applied Psychology 92, no. 3 Labor Relations and Collective Bargaining 39. Harry Katz, The Decentralization of
(2007), pp. 829 839. (Upper Saddle River, NJ: Prentice Hall, Collective Bargaining: A Literature
15. Kris Maher, The New Union Worker, 2004), p. 180. Review and Comparative Analysis,
The Wall Street Journal, September 27, 28. Sloane and Witney, Labor Relations, p. 121. Industrial and Labor Relations Review 47,
2005, pp. B1, B11. 29. For examples from the unions point of no. 1 (October 1993), p. 11; and F. Traxler,
16. Robert Grossman, Unions Follow Suit, view, see www.twu.org/international/ Bargaining (De)centralization, Macro-
HR Magazine, May 2005, p. 49. steps, accessed June 29, 2011; www.opeiu. economic Performance and Control over
17. Warner Pflug, The UAW in Pictures org/NeedAUnion/StepstoCreatinga the Employment Relationship, British
(Detroit: Wayne State University Press, UnionWorkplace/tabid/71/Default.aspx, Journal of Industrial Relations, 41, no. 1
1971), pp. 11 12. accessed June 29, 2011; and http://ufcwone. (March 2003), pp. 1 27.
528 PART 5 EMPLOYEE RELATIONS

40. The following are adapted and/or quoted 49. www.nlrb.gov/nlrb/shared_files/brochures/ 61. www.autoblog.com/2010/12/06/report-
from Kate Bronfenbrenner, The Role of basicguide.pdf, accessed January 14, 2008. uaw-to-hold-sy mpathy-strike-
Union Strategies in NLRB Certification 50. For preceding examples of bad-faith for-hyundai-workers-in-korea/, accessed
Elections, Industrial and Labor Relations bargaining see Carrell and Heavrin, June 1, 2011.
Review 50 (January 1997), pp. 195 212; Labor Relations and Collective Bargaining, 62. This is based on Arthur Sloane and Fred
see also, J. Fiorito, et. al., Understanding pp. 176 177; see also www.bloomberg. Whitney, Labor Relations (Upper Saddle
Organising Activity Among US National com/news/2011-02-14/nfl-files-unfair- River, NJ: Prentice Hall, 2010), p. 213
Unions, Industrial Relations Journal, 41, labor-practice-charge-against-union. 63. Ibid.
no. 1 (January 2010), pp. 74 92. html, accessed June 1, 2011. 64. Striker Replacements, BNA Bulletin to
41. Frederick Sullivan, Limiting Union 51. John Fossum, Labor Relations (Dallas: Management, February 6, 2003, p. S7.
Organizing Activity Through Supervi- BPI, 1982), pp. 246 250; Arthur Sloane 65. http://profootballtalk.nbcsports.com/
sors, Personnel 55 (July/August 1978), and Fred Witney, Labor Relations, op cit., 2011/03/21/league-doesnt-rule-out-
pp. 55 65. See also Edward Young and pp. 197 205. replacement-players-during-lockout/,
William Levy, Responding to a Union- 52. Boulwareism is the name given to a strat- accessed June 29, 2011.
Organizing Campaign: Do You and Your egy, now generally held in disfavor, 66. Stephen Cabot and Gerald Cuerton, Labor
Supervisors Know the Legal Boundaries by which the company, based on an Disputes and Strikes: Be Prepared,
in a Union Campaign? Franchising exhaustive study of what it believed its Personnel Journal 60 (February 1981),
World 39, no. 3 (March 2007), pp. 45 49. employees wanted, made but one offer at pp. 121 126. See also Brenda Sunoo, Man-
42. Ibid., pp. 167 168. the bargaining table and then refused to aging Strikes, Minimizing Loss, Personnel
43. Jonathan Segal, Unshackle Your Super- bargain any further unless convinced by Journal 74, no. 1 (January 1995), pp. 50ff.
visors to Stay Union Free, HR Magazine, the union on the basis of new facts that 67. Some labor lawyers report an increase in
June 1998, pp. 62 65. See also www.nlrb. its original position was wrong. The the use by unions of corporate campaigns.
gov/workplace_rights/nlra_violations.as NLRB subsequently found that the Janet Walthall, Unions Increasingly
px, accessed January 14, 2008. practice of offering the same settlement Using Corporate Campaigns, BNA Bul-
44. Whether employers must give union to all units, insisting that certain parts of letin to Management, February 16, 2010,
representatives permission to organize on the package could not differ among p. 55.
employer-owned property at shopping agreements, and communicating to the 68. For a discussion, see Herbert Northrup,
malls is a matter of legal debate. The U.S. employees about how negotiations were Union Corporate Campaigns and Inside
Supreme Court ruled in Lechmere, Inc. going amounted to an illegal pattern. Games as a Strike Form, Employee Rela-
v. National Labor Relations Board that Fossum, Labor Relations, p. 267. tions Law Journal 19, no. 4 (Spring 1994),
employers may bar nonemployees from 53. Kathryn Tyler, Good-Faith Bargaining, pp. 507 549.
their property if the nonemployees have HR Magazine, January 2005, p. 52. 69. Matthew Dolan, UAW Targets Foreign
reasonable alternative means of commu- 54. Reed Richardson, Collective Bargaining Car Plants in US, The Wall Street Journal,
nicating their message to the intended by Objectives (Upper Saddle River, NJ: December 23, 2010, p. B3.
audience. However, if the employer lets Prentice Hall, 1977), p. 150. Both sides 70. Northrup, Union Corporate Campaigns
other organizations like the Salvation will try to manipulate the media to and Inside Games, p. 513.
Army set up at their workplaces, the NLRB jockey for better positions; for example 71. Ibid., p. 518.
may view discriminating against the see J. McCafferty, Labor-Management 72. www.starbucksunion.org, accessed
union organizers as an unfair labor prac- Dispute Resolution & the Media, Dispute January 14, 2008.
tice. See, for example, Union Access to Resolution Journal, 56, no. 3 (August/ 73. The Owners Take a Punt, The Econo-
Employer s Customers Restricted, BNA October 2001), pp. 40 47. mist, March 12, 2011, p. 40.
Bulletin to Management, February 15, 55. Many negotiators pride themselves on 74. Clifford Koen Jr., Sondra Hartman, and
1996, p. 49; Workplace Access for Unions being open, honest, and straightforward Dinah Payne, The NLRB Wields a
Hinges on Legal Issues, BNA Bulletin in their negotiations, but at least one study Rejuvenated Weapon, Personnel Journal,
to Management, April 11, 1996, p. 113. suggests that this can backfire. Specifically, December 1996, pp. 85 87; and D. Silver-
45. Union Access to Employer s Customers people who are inclined to be straightfor- man, The NLRA at 70: A New Approach
Restricted, pp. 4 65. The appropriateness ward may also develop a greater concern to Processing 10(j)s [NLRA at Seventy
of these sample rules may be affected for their counterpart s interest, which in conference in New York City, 2005],
by factors unique to an employer s turn can lead to greater concession Labor Law Journal, 56, no. 3 (Fall 2005),
operation, and they should therefore be making during the negotiation. D. Scott pp. 203-206.
reviewed by the employer s attorney DeRue et al., When Is Straightforward- 75. Sloane and Witney, Labor Relations, 10th
before implementation. ness a Liability in Negotiations? The Role ed., pp. 221 227.
46. Clyde Scott and Edwin Arnold, Deau- of Integrative Potential and Structural 76. Carrell and Heavrin, Labor Relations and
thorization and Decertification Elections: Power, Journal of Applied Psychology 94, Collective Bargaining, pp. 417 418.
An Analysis and Comparison of Results, no. 4 (2009), pp. 1032 1047. 77. Richardson, Collective Bargaining by
Working USA 7, no. 3 (Winter 2003), 56. With or without reaching a solution, Objectives.
pp. 6 20;www.nlrb.gov/nlrb/shared_ impasses and union management 78. M. Gene Newport, Supervisory Manage-
files/brochures/rpt_september 2002.pdf, conflict can leave union members ment (St. Paul, MN: West Group, 1976),
accessed January 14, 2008. demoralized. See, for example, Jessica p. 273; see also Walter Baer, Grievance
47. Carrell and Heavrin, Labor Relations and Marquez, Taking Flight, Workforce, Handling: 101 Guides for Supervisors,
Collective Bargaining, pp. 120 121. June 9, 2008, pp. 1, 18. (New York: American Management Associ-
48. See, for example, David Meyer and Trevor 57. Fossum, Labor Relations, p. 312. ation, 1970); and Mark Lurie, The Eight
Bain, Union Decertification Election Out- 58. Carrell and Heavrin, Labor Relations and Essential Steps in Grievance Processing,
comes: Bargaining Unit Characteristics and Collective Bargaining, p. 501. Dispute Resolution Journal, 54 no. 4
Union Resources, Journal of Labor Research 59. http://fmcs.gov/assets/files/annual%20 (November 1999), pp. 61 65.
15, no. 2 (Spring 1994), pp. 117 136; Arthur reports/FY2006_Annual_Report.pdf, 79. Jeffrey McCracken, Desperate to Cut
Sloane and Fred Witney, Labor Relations, accessed January 14, 2008. Costs, Ford Gets Union s Help, The Wall
(Upper Saddle River, NJ: 2007), p. 96. 60. Fossum, Labor Relations, p. 317. Street Journal, March 2, 2007, pp. A1, A9.
 CHAPTER 15 LABOR RELATIONS AND COLLECTIVE BARGAINING 529

80. Kris Maher, The New Union Worker, 86. Mei Fong and Kris Maher, US Labor 92. Chris Pursell, Rhetoric Flying in WGA
The Wall Street Journal, September 27, Chief Moves into China, The Wall Street Talks, TelevisionWeek, July 23, 2007,
2005, pp. B1, B11. Journal (Asia), June 22 24, 2007, p. 1. pp. 3, 35; Peter Sanders, In Hollywood, a
81. The Limits of Solidarity, The Econo- 87. Steven Greenhouse, Steelworkers Merge Tale of Two Union Leaderships, The Wall
mist, September 23, 2006, p. 34. with British Union, The New York Times, Street Journal, January 7, 2008, p. B2.
82. Kris Maher, Specter Won t Support July 3, 2008, p. C4. 93. Pursell, Rhetoric Flying in WGA
Union-Backed Bill, The Wall Street Jour- 88. Matthew Dolan and Neil Boudette, Talks.
nal, March 20, 2009, p. A3. UAW to Send Activists Abroad, The 94. Ibid.
83. Unions Using Class Actions to Pressure Wall Street Journal, March 23, 2011, p. B2. 95. James Hibberd, Guild Talks Break with
Nonunion Companies, BNA Bulletin to 89. Employer s System of Worker Empower- No Progress, TVWeek 26, no. 38 (October
Management, August 22, 2006, p. 271. ment Does Not Fall Prey to Labor Act, 8, 2007), pp. 1, 30.
Some believe that today, long-term NLRB Rules, BNA Bulletin to Manage- 96. Ibid.
observers see more bark than bite ment, August 2, 2001, p. 241. 97. DGA Deal Sets the Stage for Writers,
in organized labor s efforts to revitalize. 90. Carol Gill, Union Impact on the Effective TelevisionWeek, January 21, 2008,
For example, Robert Grossman, We Adoption of High Performance Work pp. 3, 33.
Organized Labor and Code, HR Maga- Practices, Human Resource Management 98. WGA, Studios Reach Tentative Agree-
zine, January 2008, pp. 37 40. Review 19 (2009), pp. 39 50. ment, UPI NewsTrack, February 3,
84. Andy Meisler, Who Will Fold First? 91. Raymond Hilgert and Cyril Ling, Cases 2008.
Workforce Management, January 2004, and Experiential Exercises in Manage- 99. Brian Becker et al., The HR Scorecard
pp. 28 38. ment (Upper Saddle River, NJ: Prentice (Boston: Harvard Business School Press,
85. Ibid, p. 6. Hall, 1996), pp. 201 203. 2001), p. 16.
16
Employee Safety
and Health
Source: US Coast Guard.
LEARNING OBJECTIVES Company s
1. Explain the supervisor s role in safety. Strategic Goals

2. Explain the basic facts about safety law and OSHA.

3. Answer the question, What causes accidents?
4. List and explain five ways to prevent accidents.
5. Minimize unsafe acts by employees. Employee Competencies
6. List five workplace health hazards and how to deal with and Behaviors Required
them. for Company to Achieve
These Strategic Goals
7. Discuss the prerequisites for a security plan and how
to set up a basic security program.

Employee

O
n April 20, 2010, an explosion and fire on British Relations
S
Petroleum (BP) s Deepwater Horizon rig in the

tra nviro
n

teg nment
Gulf of Mexico took the lives of 11 workers.1

E
atio

ic an
Compens
Reports from the scene said a malfunctioning
HR Policies and Practices

d Legal
blowout preventer failed to activate, causing the disaster.
Past critics of BP s safety practices weren t so sure. Required to Produce
Employee Competencies
and Behaviors

nd nt

Re
m

Pla u
c
a g polev

e
me i

cr
nin eD tne emt
iarT tn
dna

WHERE ARE WE NOW . . .

Safety, as are ethics and labor relations, is an
important factor in the quality of employees
work lives. The main purpose of this chapter
is to provide you with the basic knowledge
to deal with workplace safety and health
issues. We discuss the Occupational Safety
and Health Act, and explain three causes
of accidents: chance occurrences, unsafe
conditions, and unsafe acts; as well as
techniques for preventing accidents;
and important employee health problems
such as workplace violence.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 531
532 PART 5 EMPLOYEE RELATIONS

SAFETY AND THE MANAGER

Why Safety Is Important
Safety and accident prevention concern managers for several reasons, one of which is
the staggering number of workplace accidents. While accident rates are falling, in one
recent year 4,551 U.S. workers died in workplace incidents.2 Workplace accidents in the
United States cause over 3.8 million occupational injuries and illnesses per year
roughly 3.6 cases per 100 equivalent full-time workers.3 Such figures may actually
underestimate the real number of injuries and illnesses by two or three times.4 More
than 80% of the workers in one survey ranked workplace safety as more important than
minimum wages, sick days, and maternity leave.5
Injuries aren t just a problem in dangerous industries like construction. For
example, new computers contribute to airtight sick building symptoms like
headaches and sniffles. And office work is susceptible to things like repetitive trauma
injuries related to computer use.

THE HIDDEN STORY But even facts like these don t show the human suffering
incurred by the injured workers and their families or the real economic costs incurred
by employers.6 For example, the direct injury costs of a forklift accident might be
$4,500. However, the indirect costs for things like lost production time, maintenance
time, and emergency supplies could raise that to $18,000 or more.7

Management s Role in Safety

On the next few pages, we ll see that reducing accidents often boils down to reducing
accident-causing conditions and accident-causing acts. However, safety always starts at
the top. Telling supervisors to watch for spills and employees to work safely is futile
unless everyone knows management is serious about safety.8
Historically, for instance, DuPont s accident rate has been much lower than
that of the chemical industry as a whole. This good safety record is partly due to an
organizational commitment to safety, which is evident in the following description:
One of the best examples I know of in setting the highest possible priority for
safety takes place at a DuPont Plant in Germany. Each morning at the DuPont
Polyester and Nylon Plant, the director and his assistants meet at 8:45 to review the
past 24 hours. The first matter they discuss is not production, but safety. Only after
they have examined reports of accidents and near misses and satisfied themselves
that corrective action has been taken do they move on to look at output, quality,
and cost matters.9

What Top Management Can Do

Policies like these start at the top.10 The employer should institutionalize top management s
commitment with a safety policy, and publicize it. It should give safety matters high
priority in meetings: Louisiana-Pacific Corp., which makes building products, starts all
meetings with a brief safety message.11 Georgia-Pacific reduced its workers compensation
costs by requiring managers to halve accidents or forfeit 30% of their bonuses. The accom-
panying Strategic Context feature provides another example.

THE STRATEGIC CONTEXT

Deepwater Horizon
To many critics of BP s safety practices, the Deepwater Horizon disaster in the Gulf
wasn t just due to a malfunctioning blowout preventer. To them, rightly or wrongly,
the accident reflected the fact that BP s corporate strategy had long emphasized cost
cutting and profitability at the expense of safety. For example, 5 years earlier, a report
by the Chemical Safety Board blamed a huge blast at BP s Texas City, Texas, oil refin-
ery on cost cutting, and on a safety strategy that aimed to reduce accidents but left
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 533

in place unsafe and antiquated equipment. To the Board and to some others who
studied BP s safety practices, Deepwater was another example of how encouraging
safe employee behavior must start at the top, and how top management s strategy
can trump even earnest efforts to improve employee safety behaviors.12

Safety is not just a case of legality or humanitarianism. One study concluded that
safety activities paid for themselves by a ratio of 10 to 1, just in direct savings of
workers compensation expenses over 4 years.13

1 Explain the supervisor s role

The Supervisor s Role in Safety
in safety. After inspecting a work site where workers were installing pipes in a 4-foot trench,
an OSHA inspector cited an employer for violating the rule requiring employers
to have a stairway, ladder, ramp, or other safe means of egress in deep trench
excavations.14 In the event the trench caved in, workers needed a quick way out.
As in most such cases, the employer had the primary responsibility for safety,
and the local supervisor was responsible for the day-to-day inspections. In this case
the supervisor did not properly inspect for safety. The trench collapsed, injuring
several employees.
The moral is that safety inspections should always be part of the supervisor s
daily routine. For example, a daily walk-through of your workplace whether you
are working in outdoor construction, indoor manufacturing, or any place that poses
safety challenges is an essential part of your work. 15 What to look for depends on
the situation. However, in general you can use a checklist of unsafe conditions such as
the one in Figure 16-5 (page 541) to spot problems.

2 Explain the basic facts about

OCCUPATIONAL SAFETY LAW
safety law and OSHA. Congress passed the Occupational Safety and Health Act of 1970 to assure so far as
possible every working man and woman in the nation safe and healthful working
conditions and to preserve our human resources. 16 The only employers it doesn t
cover are self-employed persons, farms in which only immediate members of the
employer s family work, and some workplaces already protected by other federal
agencies or under other statutes. The act covers federal agencies, but usually not state
and local governments.
The act created the Occupational Safety and Health Administration (OSHA)
within the Department of Labor. OSHAs basic purpose is to administer the act and to
set and enforce the safety and health standards that apply to almost all workers in the
United States. The Department of Labor enforces the standards, and OSHA has
inspectors working out of branch offices to ensure compliance.

OSHA Standards and Record Keeping

OSHA operates under the general standard clause that each employer:
. . . shall furnish to each of his [or her] employees employment and a place of
employment which are free from recognized hazards that are causing or are likely
to cause death or serious physical harm to his [or her] employees.

Occupational Safety and Health Act Occupational Safety and Health

of 1970 Administration (OSHA)
The law passed by Congress in 1970 to The agency created within the Department
assure so far as possible every working man of Labor to set safety and health standards
and woman in the nation safe and healthful for almost all workers in the United States.
working conditions and to preserve our
human resources.
534 PART 5 EMPLOYEE RELATIONS

FIGURE 16-1 OSHA Standards Guardrails not less than 2" * 4" or the equivalent and not less than 36" or more than
Example
42" high, with a midrail, when required, of a 1" * 4" lumber or equivalent, and toeboards,
Source: www.osha.gov/pls/oshaweb/ shall be installed at all open sides on all scaffolds more than 10 feet above the ground
owadisp.show_document?p_id=972 or floor. Toeboards shall be a minimum of 4" in height. Wire mesh shall be installed
0&p_table=STANDARDS, accessed in accordance with paragraph [a] (17) of this section.
June 1, 2011.

To carry out this basic mission, OSHA is responsible for promulgating legally
enforceable standards. These are contained in five volumes covering general industry
standards, maritime standards, construction standards, other regulations and proce-
dures, and a field operations manual.
The standards are very complete, covering in detail just about every conceivable
hazard. (Figure 16-1 presents a small part of the standard governing guardrails for
scaffolds.) The regulations don t just list standards to which employers should adhere.
They also lay out how. For example, OSHAs respiratory protection standard also
covers employee training.
Under OSHA, employers with 11 or more employees must maintain records of
and report certain occupational injuries and occupational illnesses. An occupational
illness is any abnormal condition or disorder caused by exposure to environmental
factors associated with employment. This includes acute and chronic illnesses
caused by inhalation, absorption, ingestion, or direct contact with toxic substances
or harmful agents.

WHAT THE EMPLOYER MUST REPORT As summarized in Figure 16-2, emplo-

yers must report all occupational illnesses.17 They must also report most occupational
injuries, specifically those that result in medical treatment (other than first aid), loss

FIGURE 16-2 What Accidents

Must Be Reported Under the If a case Note: A case must involve
Occupational Safety and a death, an illness, or an
injury to an employee.
Health Act?

Results from a work Does not result

accident or from an from a work accident
exposure in the or from an exposure
work environment in the work
and is environment

A death An illness An injury that

involves

Medical
Restriction
treatment Loss of Transfer to None of
of work
(other than consciousness another job these
or motion
first aid)

Then case
Then case
is not
must be
to be
recorded
recorded
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 535

of consciousness, restriction of work (one or more lost workdays), restriction of

motion, or transfer to another job.18 If an on-the-job accident results in the death of an
employee or in the hospitalization of five or more employees, all employers, regardless
of size, must report the accident to the nearest OSHA office.
OSHAs current record-keeping rules allow the employer to conclude that an event
needn t be reported if the facts so warrant such as if a worker breaks an ankle after
catching his foot on his car s seat belt when not at work and parked on the company lot.19
However, OSHAs record-keeping requirements are still broader than you might
expect.20 Examples of recordable conditions include food poisoning suffered by an
employee after eating in the employer s cafeteria and ankle sprains that occur during
voluntary participation in a company softball game at a picnic the employee was
required to attend. Figure 16-3 shows the OSHA form for reporting occupational
injuries or illness.

Inspections and Citations

OSHA enforces its standards through inspections and (if necessary) citations. The
inspection is usually unannounced. OSHA may not conduct warrantless inspections
without an employer s consent. However, it may inspect after acquiring an authorized
search warrant or its equivalent.21 With a limited number of inspectors, OSHA recently
has focused on fair and effective enforcement, combined with outreach, education
and compliance assistance, and various OSHA employer cooperative programs (such
as its Voluntary Protection Programs ).22

INSPECTION PRIORITIES OSHA takes a worst-first approach in setting

inspection priorities. Priorities include, from highest to lowest, imminent dangers,
catastrophes and fatal accidents, employee complaints, high-hazard industries
inspections, and follow-up inspections.23 In one recent year, OSHA conducted just
over 39,000 inspections. Referrals prompted about 8,000 of these.24
Under its priority system, OSHA conducts an inspection within 24 hours when a
complaint indicates an immediate danger, and within 3 working days when a serious
hazard exists. For a nonserious complaint filed in writing by a worker or a union,
OSHA will respond within 20 working days. OSHA handles other nonserious com-
plaints by writing to the employer and requesting corrective action.

THE INSPECTION The inspection begins when the OSHA officer arrives at the
workplace.25 He or she displays credentials and asks to meet an employer representative.
(Always insist on seeing the credentials, which include photograph and serial number.)
The officer explains the visit s purpose, the scope of the inspection, and the standards
that apply. An authorized employee representative accompanies the officer during
the inspection. The inspector can also stop and question workers (in private, if
necessary). The act protects each employee from discrimination for exercising his or her
disclosure rights.26
OSHA inspectors look for all types of violations, but some potential problem
areas grab more attention. The five most frequent OSHA inspection violation areas
are scaffolding, fall protection, hazard communication, lockout/tagout (electrical dis-
engagement), and respiratory problems.
Finally, after checking the premises and employer s records, the inspector holds
a closing conference with the employer s representative. Here the inspector
discusses apparent violations for which OSHA may issue or recommend a citation
and penalty. At this point, the employer can produce records to show compliance
efforts. In one recent year, inadequate scaffolding/fall protection was one frequently
cited hazard.

occupational illness citation

Any abnormal condition or disorder caused Summons informing employers and
by exposure to environmental factors employees of the regulations and standards
associated with employment. that have been violated in the workplace.
536
Attention: This form contains information relating to
OSHA s FORM 301 employee health and must be used in a manner that
protects the confidentiality of employees to the extent
possible while the information is being used for U.S. Department of Labor
Injury and Illness Incident Report occupational safety and health purposes. Occupational Safety and Health Administration

Form approved OMB no. 1218-0176

Information about the employee Information about the case

This Injury and Illness Incident Report is one of the

1) Full name 10) Case number from the Log (Transfer the case
first forms you must fill out when a recordable work- number from the Log after you record the case.)
related injury or illness has occurred. Together 2) Street
with the Log of Work-Related Injuries and City State 11) Date of injury or illness / /
ZIP
Illnesses and the accompanying Summary, these
3) Date of birth / / 12) Time employee began work AM/PM
forms help the employer and OSHA develop
a picture of the extent and severity of work- 4) Date hired / / 13) Time of event AM/PM
related incidents. Check if time cannot be determined
Within 7 calendar days after you receive 5) Male
information that a recordable work-related Female
injury or illness has occurred, you must fill out
this form or an equivalent. Some state workers
compensation, insurance, or other reports 14) What was the employee doing just before the incident occurred?
Information about the physician or other health care Describe the activity, as well as the tools, equipment, or material the employee
may be acceptable substitutes. To be considered professional was using. Be specific. Examples: climbing a ladder while carrying roofing
an equivalent form, any substitute must contain all materials ; spraying chlorine from hand sprayer ; daily computer key-entry.
the information asked for on this form. 6) Name of physician or other health care professional
According to Public Law 91-596 and 29 CFR 15) What happened? Tell us how the injury occurred. Examples: When ladder
1904, OSHA s recordkeeping rule, you must keep slipped on wet floor, worker fell 20 feet ; Worker was sprayed with chlorine
7) If treatment was given away from the worksite, where was it given?
this form on file for 5 years following the year to when gasket broke during replacement ; Worker developed soreness in
which it pertains. Facility wrist over time.
If you need additional copies of this form, you Street
may photocopy and use as many as you need. 16) What was the injury or illness? Tell us the part of the body that was
City State ZIP affected and how it was affected; be more specific than hurt, pain, or sore.
8) Was employee treated in an emergency room? Examples: strained back ; chemical burn, hand ; carpal tunnel syndrome.

Yes
No 17) What object or substance directly harmed the employee?
Completed by Examples: concrete floor ; chlorine ; radial arm saw, If this question does
9) Was employee hospitalized overnight as an in-patient?
not apply to the incident, leave it blank.
Yes
Title No
18) If the employee died, when did death occur?
Date of death / /
Phone ( ) .. Date / /

Public reporting burden for this collection of information is estimated to average 22 minutes per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of
information. Persons are not required to respond to the collection of information unless it displays a current valid OMB control number. If you have any comments about this estimate or any other aspects of this data collection, including suggestions for reducing this burden,
contact: US Department of Labor, OSHA Office of Statistical Analysis, Room N-3644, 200 Constitution Avenue, NW, Washington, DC 20210. Do not send the completed forms to this office.

FIGURE 16-3 Form Used to Record Occupational Injuries and Illnesses

Source: U.S. Department of Labor.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 537

PENALTIES OSHA can impose penalties. These generally range from $5,000 up to
$150,000 for willful or repeat serious violations. However, penalties can be far
higher $1.5 million after a tragedy at Ford s Rouge Michigan plant, for instance.27
The parties settle many OSHA cases before litigation, in precitation settlements. 28
Non-serious violations may carry no penalties.
In general, OSHA calculates penalties based on the gravity of the violation and
usually takes into consideration factors like the size of the business, the firm s compli-
ance history, and the employer s good faith.29 In practice, OSHA must have a final order
from the independent Occupational Safety and Health Review Commission (OSHRC)
to enforce a penalty.30 An employer who files a notice of contest can drag out an appeal
for years. Many employers do appeal, at least to the OSHA district office.31
To the chagrin of some employers, OSHA is publicizing its inspection results
online. For example, OSHAs Web site (www.osha.gov) gives you easy access to your
company s (or your competitors ) OSHA enforcement history.32
MANAGERS INSPECTION GUIDELINES What should you do when OSHA
inspectors unexpectedly show up? Guidelines include the following:

Initial Contact
* Restrict admittance until the manager in charge is on site.33
* Check the inspector s credentials.
* Ask the inspector why he or she is inspecting your workplace. Is it complaints?
A scheduled visit?
* If the inspection stems from a complaint, you are entitled to know whether the
person is a current employee, though not the person s name.
* Notify your counsel, who should review all documents and information.

Opening Conference
* Establish the focus and scope of the planned inspection.
* Discuss the procedures for protecting trade secret areas.
* Show the inspector you have safety programs in place. He or she may not even go
to the work floor if your paperwork is complete and up to date.

Walk-Around Inspection
* Accompany the inspector and take detailed notes.
* If the inspector takes a photo or video, you should, too.
* Ask for duplicates of all physical samples and copies of all test results.
* Be helpful and cooperative, but don t volunteer information.
* To the extent possible, immediately correct any violation the inspector identifies.34
One survey asked 12 safety experts to identify the 10 best ways to get into trouble with
OSHA.35 The top three were:
1. Ignore or retaliate against employees who raise safety issues.
2. Antagonize or lie to OSHA during an inspection.
3. Keep inaccurate OSHA logs and have disorganized safety files.
OSHA S FREE ON-SITE INSPECTIONS OSHA provides free on-site safety and
health services for small businesses.36 Employers can contact their nearest OSHA area
office to speak to the compliance assistance specialist. According to OSHA, it issues no
citations or penalties based on these inspections.
There is an opening conference with an OSHA safety expert, a walk-through, and
a closing conference to discuss the expert s findings. The expert then sends a detailed
report explaining the findings. The employer s only obligation is to commit to correcting
serious job safety and health hazards in a timely manner.
 538 PART 5 EMPLOYEE RELATIONS

Responsibilities and Rights of Employers

and Employees
Both employers and employees have responsibilities and rights
under the Occupational Safety Health Act. Employers are
Source: Dimitry Kalinovsky/Shutterstock.

responsible for providing a workplace free from recognized

hazards, for being familiar with mandatory OSHA standards,
and for examining workplace conditions to make sure they
conform to OSHA standards. Employers have the right to seek
advice and off-site consultation from OSHA, request and
receive proper identification of the OSHA compliance officer
before inspection, and to be advised by the compliance officer
of the reason for an inspection.
Employees also have rights and responsibilities, but OSHA
can t cite them for violations of their responsibilities. Employees
Employees have rights and
responsibilities under OSHA
are responsible, for example, for complying with all applicable OSHA standards, for
standards, such as to wear their following all employer safety and health rules and regulations, and for reporting
hard hats, but OSHA can t cite hazardous conditions to the supervisor. Employees have a right to demand safety and
them if they violate their health on the job without fear of punishment. The act prohibits employers from
responsibilities. punishing or discriminating against workers who complain to OSHA about job safety
and health hazards. (See the accompanying OSHA safety poster in Figure 16-4.)
FIGURE 16-4 OSHA Safety
Poster
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 539

DEALING WITH EMPLOYEE RESISTANCE Although employees have a respon-

sibility to comply with OSHA standards, they often resist; the employer usually
remains liable for any penalties. The refusal of some workers to wear hard hats typifies
this problem.
Employers have attempted to defend themselves by citing worker intransigence.
In most cases, courts still hold employers liable for workplace safety violations.
Yet employers can reduce their liability, since courts have recognized that it is
impossible to totally eliminate all hazardous conduct by employees. 37 In the event of a
problem, the courts may consider whether the employer s safety procedures were
adequate; whether the training gave employees the skills required to perform their duties
safely; and whether the employer required employees to follow the procedures.
The employer can bargain with its union for the right to discipline any employee who
disobeys OSHA standards.38 A formal employer employee safety arbitration process
and discussing with employees the reasons for their resistance are other options.
The independent three-member Occupational Safety and Health Review
Commission that reviews OSHA decisions says employers must make a diligent effort
to discourage, by discipline if necessary, violations of safety rules by employees. 39
However, the only surefire way to eliminate liability is to make sure that no accidents occur.

WHAT CAUSES ACCIDENTS?

There are three basic causes of workplace accidents: chance occurrences, unsafe
conditions, and employees unsafe acts. Chance occurrences (such as walking past a
window just as someone hits a ball through it) are more or less beyond management s
control. We will therefore focus on unsafe conditions and unsafe acts.

What Causes Unsafe Conditions and Other

Work-Related Safety Problems?
Unsafe conditions are a main cause of accidents. They include:
* Improperly guarded equipment
* Defective equipment
* Hazardous procedures in, on, or around machines or equipment
* Unsafe storage congestion, overloading
* Improper illumination glare, insufficient light
* Improper ventilation insufficient air change, impure air source40
The solution here is to identify and eliminate the unsafe conditions. The main aim
of the OSHA standards is to address these mechanical and physical accident-causing
conditions. The employer s safety department (if any), and its human resource managers
and top managers should take responsibility for identifying unsafe conditions.

DANGER ZONES While accidents can happen anywhere, there are some high-
3 Answer the question, danger zones. About one-third of industrial accidents occur around forklift trucks,
What causes accidents?
wheelbarrows, and other handling and lifting areas. The most serious accidents usually
occur by metal and woodworking machines and saws, or around transmission
machinery like gears, pulleys, and flywheels. Falls on stairs, ladders, walkways, and
scaffolds are the third most common cause of industrial accidents. Hand tools (like
chisels and screwdrivers) and electrical equipment (extension cords, electric
droplights, and so on) are other major causes of accidents.41
Certain jobs are inherently more dangerous. For example, the job of crane operator
results in about three times more hospital visits than does the job of supervisor.42

unsafe conditions
The mechanical and physical conditions that
cause accidents.
540 PART 5 EMPLOYEE RELATIONS

Work schedules and fatigue also affect accident rates. Accident rates usually don t
increase too noticeably during the first 5 or 6 hours of the workday. But after that, the
accident rate increases faster. This is due partly to fatigue and partly to the fact that
accidents occur more often during night shifts. In part due to reduced headcount and
more people with second jobs, employee fatigue is a growing problem today.43 Many
employers are therefore taking steps to reduce employee fatigue, such as banning
mandatory overtime.
Some of the most important working-condition related causes of accidents
involve workplace climate or psychology. One researcher reviewed the official
hearings regarding the fatal accidents offshore oil workers suffered in the British North
Sea.44 A strong pressure to complete the work as quickly as possible, employees
who are under stress, and a poor safety climate for instance, supervisors who never
mention safety were some of the psychological conditions leading to accidents.
Similarly, accidents occur more frequently in plants with high seasonal layoff rates,
hostility among employees, many garnished wages, and blighted living conditions.

What Causes Unsafe Acts? (A Second Basic Cause

of Accidents)
Unsafe employee acts can undo even the best attempts to reduce unsafe conditions.
The problem is that there are no easy answers to the question of what causes people
to act recklessly.
It may seem obvious that some people are simply accident prone, but the research
isn t clear.45 On closer inspection it turns out some accident repeaters were just
unlucky, or may have been more meticulous about reporting their accidents.46
However, there is growing evidence that people with specific traits may indeed be
accident prone. For example, people who are impulsive, sensation seeking, extremely
extroverted, and less conscientious (in terms of being less fastidious and dependable)
are more likely to have accidents.47
Furthermore, the person who is accident prone on one job may not be so on another.
Driving is one example. Personality traits that correlate with filing vehicular insurance
claims include entitlement ( think there s no reason they should not speed ), impatience
( were always in a hurry ), aggressiveness ( the first to move when the light turns green ),
and distractibility ( frequently distracted by cell phones, eating, and so on ).48
We ll turn to how employers can reduce unsafe acts and conditions next.

4 List and explain five ways

HOW TO PREVENT ACCIDENTS
to prevent accidents. In practice, accident prevention boils down to two basic activities: (1) reducing unsafe
conditions and (2) reducing unsafe acts. In large firms, the chief safety officer (often
called the Environmental Health and Safety Officer ) is responsible for this.49
In smaller firms, managers, including those from human resources, plant management,
and first-line managers, share these responsibilities.

Reducing Unsafe Conditions

Reducing unsafe conditions is always an employer s first line of defense in accident
prevention. Safety engineers should design jobs to remove or reduce physical hazards.
In addition, we saw that supervisors and managers play a role. Checklists like those
in Figures 16-5 and 16-6, or the self-inspection checklist in Figure 16-8 (pages 566 569),
can help identify and remove potential hazards.
Employers increasingly use computerized tools to design safer equipment. For
example, Designsafe (from Designsafe Engineering, Ann Arbor, Michigan) helps
automate the tasks of hazard analysis, risk assessment, and identifying safety options.
Designsafe helps the safety designer choose the most appropriate safety control device
for keeping the worker safe, such as adjustable enclosures, presence-sensing devices,
and personal protective equipment.50
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 541

I. GENERAL HOUSEKEEPING

Adequate and wide aisles no materials protruding Material piled in safe manner not too high or too close to
into aisles sprinkler heads
Parts and tools stored safely after use not left in Floors clean and dry
hazardous positions that could cause them to fall Fire ghting equipment unobstructed
Even and solid ooring no defective oors or ramps Work benches orderly
that could cause falling or tripping accidents Stockcarts and skids safely located, not left in aisles or
Waste cans and sand pails safely located and passageways
properly used Aisles kept clear and properly marked; no air lines or
electric cords across aisles

II. MATERIAL HANDLING EQUIPMENT AND CONVEYANCES

On all conveyances, electric or hand, check to see that the following items are all in sound working conditions:
Brakes properly adjusted No loose parts
Not too much play in steering wheel Cables, hooks, or chains not worn or otherwise defective
Warning device in place and working Suspended chains or hooks conspicuous
Wheels securely in place; properly in ated Safely loaded
Fuel and oil enough and right kind Properly stored

III. LADDERS, SCAFFOLD, BENCHES, STAIRWAYS, ETC.

The following items of major interest to be checked:
Safety feet on straight ladders Properly stored
Guardrails or handrails Extension ladder ropes in good condition
Treads, not slippery Toeboards
Not cracked, or rickety

IV. POWER TOOLS (STATIONARY)

Point of operation guarded Tool or material rests properly adjusted
Guards in proper adjustment Adequate work space around machines
Gears, belts, shafting, counterweights guarded Control switch easily accessible
Foot pedals guarded Safety glasses worn
Brushes provided for cleaning machines Gloves worn by persons handling rough or sharp materials
Adequate lighting No gloves or loose clothing worn by persons operating
Properly grounded machines

V. HAND TOOLS AND MISCELLANEOUS

In good condition not cracked, worn, or otherwise Correct for job

defective Goggles, respirators, and other personal protective
Properly stored equipment worn where necessary

VI. WELDING

Arc shielded Adequate ventilation

Fire hazards controlled Cylinder secured
Operator using suitable protective equipment Valves closed when not in use

VII. SPRAY PAINTING

Explosion-proof electrical equipment Fire extinguishers adequate and suitable; readily
Proper storage of paints and thinners in approved accessible
metal cabinets Minimum storage in work area

VIII. FIRE EXTINGUISHERS

Properly serviced and tagged Adequate and suitable for operations involved
Readily accessible

FIGURE 16-5 Checklist of Mechanical or Physical Accident-Causing Conditions

Source: Courtesy of the American Insurance Association. From A Safety Committee Man s Guide, pp. 1 64.

Sometimes the solution for eliminating an unsafe condition is obvious, and

sometimes it s more subtle. For example, slips and falls are often the result of debris
or slippery floors.51 Obvious remedies include floor mats and better lighting.
Perhaps less obviously, personal safety gear, like slip-resistant footwear with grooved
soles, can also reduce slips and falls. Cut-resistant gloves reduce the hazards of
working with sharp objects.52 (Hand injuries account for about 1 million emergency
department visits annually by U.S. workers.53)
542 PART 5 EMPLOYEE RELATIONS

FIGURE 16-6 Online Safety

Inspection Checklist
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 543

FIGURE 16-6 (Continued)

(Continued)

JOB HAZARD ANALYSIS Recently, a Yale University science student, working

late in a lab, was critically injured when her hair became caught in a spinning lathe.
Job hazard analysis involves a systematic approach to identifying and eliminating

job hazard analysis

A systematic approach to identifying
and eliminating workplace hazards before
they occur.
544 PART 5 EMPLOYEE RELATIONS

FIGURE 16-6 (Continued)

such hazards before they cause accidents. According to OSHA, job hazard analysis
focuses on the relationship between the worker, the task, the tools, and the work
environment, and ends by reducing the potential risks to acceptable levels.54
Consider a safety analyst looking at the Yale science lab, with the aim of identifying
potential hazards. Performing a job hazard analysis here might involve looking at the
situation and asking these questions:
* What can go wrong? A student s hair or clothing could come into contact with
the lathe, a rotating object that catches it and pulls it into the machine.
* What are the consequences? The student could receive a severe injury as his or
her body part or hair is caught and drawn into the spinning lathe.
* How could it happen? The accident could happen as a result of the student leaning
too close to the lathe while working at the bench, or walking too close to the lathe,
or bending to reach for an article that fell close to the lathe.
* What are other contributing factors? Speed is one contributing factor. The
problem would occur so quickly that the student would be unable to take evasive
action once the lathe ensnarled the hair.
The job hazard analysis should provide the basis for creating countermeasures. Given
the speed with which any such accident would occur, it s unlikely that training by
itself would suffice. Instead, the lathe area here should be ensconced in its own
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 545

protective casing, and changes made to ensure that the lathe can t spin unless the
student takes action via a foot pedal to keep the lathe power on.
OPERATIONAL SAFETY REVIEWS After the Fukushima nuclear power plant in
northern Japan exploded in 2011, many wondered if the International Atomic Energy
Agency (IAEA) had conducted the necessary operational safety reviews. Operational
safety reviews (or safety operations reviews) are conducted by agencies to ascertain
whether units under their jurisdiction are complying with all the applicable safety laws,
regulations, orders, and rules. For example, under IAEAs Operational Safety Review
Program, international teams of experts conduct in-depth reviews of operational
safety performance at a nuclear power plant. 55
PERSONAL PROTECTIVE EQUIPMENT Getting employees to wear personal
protective equipment (PPE) is a famously difficult chore.56 Wearability is important.
In addition to providing reliable protection, protective gear should fit properly; be
easy to care for, maintain, and repair; be flexible and lightweight; provide comfort and
reduce heat stress; have rugged construction; be relatively easy to put on and take off;
and be easy to clean, dispose of, and recycle.57 Many employers, such as Kimberly-
Clark and MCR Safety, are tapping into the new fibers and fabrics used by runners,
skiers, and NASCAR drivers to design easier wearing high-tech solutions.58 Including
employees in planning the safety program and addressing comfort issues contribute
to employees willingness to use the protective gear.59
Of course, it makes sense to require wearing the personal protective equipment
before the accident, rather than after it. For example, a combustible dust explosion at
a sugar refinery killed 14 employees and burned many others. The employer subse-
quently required that all employees wear fire resistant clothing, unfortunately too late
for the victims.60

MANAGING THE NEW WORKFORCE

Protecting Vulnerable Workers
In designing safe and healthy environments, employers should pay special attention to
vulnerable workers. Among others, these may include young, immigrant, aging, and
women workers.61 (The Fair Labor Standards Act strictly limits young people s exposure
to dangerous jobs, but about 64 workers under age 18 died from work-related injuries
in one recent year.62) For example, as the CEO of one safety engineering company
said, For decades, women essentially were ignored when it came to designing eye
and face protection. Today, more products are available in smaller sizes.63
Similarly, with more workers postponing retirement, older workers are doing
more manufacturing jobs.64 They can do these jobs very effectively. However, there
are numerous potential physical changes associated with aging, including loss
of strength, loss of muscular flexibility, and reduced reaction time.65 This means
that employers should make special provisions such as designing jobs to reduce
heavy lifting, and boosting lighting levels.66 The fatality rate for older workers is
about three times that of younger workers.67

But again, reducing unsafe conditions (such as enclosing noisy equipment) is

always the first line of defense. Then use administrative controls (such as job rotation
to reduce long-term exposure to the hazard). Only then should you turn to PPE.68
Reducing unsafe acts by emphasizing safety and through screening, training, or
incentive programs, for example is the second basic way to reduce accidents. Let s
look at how to do this.

operational safety reviews

Reviews conducted by agencies to ascertain
whether units under their jurisdiction are
complying with all the applicable safety laws,
regulations, orders, and rules.
 546 PART 5 EMPLOYEE RELATIONS

Reducing Unsafe Acts

Although reducing unsafe conditions is the first line of defense, human
misbehavior can short-circuit even the best safety efforts. Sometimes the
misbehavior is intentional, but often it s not.69 In one accident, a mainte-
nance worker obeyed the plant s lockout/tagout procedure, by calling the
control room to have them shut off the roof exhaust fan he was about to
work on. When he arrived on the roof, he noticed the fan was still turning,
and assumed that the wind was turning the blades. After waiting several
minutes, he wrapped a rag around his hand and tried to stop the blade with
his hand, causing serious injury. He had obeyed the procedure by calling
the control room. But the employer should have emphasized in its training
Source: iStockphoto.com.

that the point of the procedure was not to disconnect the power, but to
make sure that the fan is not turning before you touch it. 70
For machinery, employees can use emergency stop devices like the one
in the accompanying photo to cut power to hazardous machines.71 But
ironically, making a job safer with machine guards or PPE lowers people s
risk perceptions and thus can lead to an increase in at-risk behavior. 72
Emergency stop devices, such As mentioned earlier, the manager plays a central role in reducing unsafe acts.
as buttons, override other For example, supervisors should:
machine controls to remove
power from hazardous machine * Praise employees when they choose safe behaviors;
motion. * Listen when employees offer safety suggestions, concerns, or complaints; and
* Be a good example, for instance, by following every safety rule and procedure.73
Unfortunately, praising employees is usually not enough to banish unsafe acts.
Instead, it requires a process. First, identify and try to eliminate potential risks, such as
unguarded equipment. Next, reduce potential distractions, such as noise, heat, and stress.
Then, carefully screen, train, and motivate employees, as we explain next.

5 Minimize unsafe acts

Reducing Unsafe Acts through Selection and Placement
by employees. Proper employee screening and placement reduces unsafe acts. Here, the employer s
aim is to identify the traits that might predict accidents on the job in question,
and then screen candidates for this trait. For example, the Employee Reliability
Index (ERI) (see http://www.ramsaycorp.com/catalog/view/?productid=208) measures
reliability dimensions such as emotional maturity, conscientiousness, and safe job
performance.74 Though not definitive, using the ERI in selection did seem to be
associated with reductions in work-related accidents in one study. Others use job
simulation tests (which attempt to measure the applicant by simulating physically
demanding work activities) and physical capabilities tests (which measure muscle
strength and motion) to predict who will have more accidents.75
Similarly, behavioral interview questions can be revealing. For example, ask,
What would you do if you saw another employee working in an unsafe way?
and What would you do if your supervisor gave you a task, but didn t provide any
training on how to perform it safely? 76
Under the Americans with Disabilities Act (ADA) it is unlawful to inquire (prior
to hiring) about an applicant s workers compensation injuries and claims. You also
cannot ask applicants whether they have a disability, or about taking prescription
drugs or require them to take tests that tend to screen out those with disabilities.
However, you can usually ask, Do you know of any reason why you would not be able
to perform the various functions of the job you are seeking? 77

Reducing Unsafe Acts through Training

Safety training reduces unsafe acts, especially for new employees. You should instruct
employees in safe practices and procedures, warn them of potential hazards, and work
on developing a safety-conscious attitude. OSHAs standards require more than training.
Employees must demonstrate that they actually learned what to do. (For example,
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 547

OSHAs respiratory standard requires that each employee demonstrate how to inspect,
put on, and remove respirator seals.78 OSHA has two booklets, Training Requirements
under OSHA and Teaching Safety and Health in the Workplace. )
However, note that the main aim of safety training is not to meet OSHA training
standards. Rather, it is to impart the knowledge and skills required to reduce acci-
dents. OSHA, the National Institute for Occupational Safety and Health (NIOSH),
and numerous private vendors provide online safety training solutions.79
The nature of the safety training is important. Although lectures and online learning
may be efficient, one study found that the most effective safety training demanded high
employee engagement.80 In this study, the least engaging programs included lectures,
films, reading materials, and video-based training. Moderately engaging programs
included computer interface instruction with feedback. The most engaging included
behavioral modeling, simulation, and hands-on training.

MANAGING THE NEW WORKFORCE

Safety Training for Hispanic Workers
With increasing numbers of Spanish-speaking workers in the United States, experts
are focusing more closely on their safety.81 For example, many construction
companies are offering specialized training programs for Hispanic workers. One
example is a 40-hour training course at the Dallas Fort Worth airport. Based on this
program s apparent success, there are several useful conclusions one can draw
about what a program like this should look like.
First, the program should speak the workers language.
Second, the employer should also recruit instructors who are from the ethnic
groups they are training.
Third, provide for some multilingual cross-training for specific phrases. For
example, the course teaches non-Hispanic trainees to say peligro (danger)
or cuidado (be careful).82
Fourth, don t skimp on training. Because of the added cultural and multilingual
aspects, experts contend that a 24-hour course is the absolute minimum. The
40-hour course at the Dallas Fort Worth airport cost about $500 tuition per
student (not counting the workers wages).

Employers also turn to the Web to support their safety training programs.83 For
example, PureSafety (www.puresafety.com) enables firms to create their own training
Web sites, complete with a message from the safety director. Once an employer installs
the PureSafety Web site, it can populate the site with courses from companies that supply
health and safety courses via that site. The courses themselves are available in various
formats, including digital versions of videotape training, and PowerPoint presentations.84
CREATING A SUPPORTIVE ENVIRONMENT Although safety training is a key
safety preventive method, a recent study suggests that creating a supportive supervisory
environment is more important. Organizations can develop a supportive environment
by training supervisors to be better leaders, emphasizing the importance of teamwork
and social support, and establishing the value of safety. 85

Reducing Unsafe Acts through Motivation: Posters,

Incentives, and Positive Reinforcement
Employers also use various tools to motivate workers to work safely. Safety posters are
one. However, although safety posters can increase safe behavior, they are no substitute
for a comprehensive safety program. Employers should combine them with other
techniques (like screening and training) to reduce unsafe conditions and acts, and
change the posters often.
 548 PART 5 EMPLOYEE RELATIONS

Incentive programs are also useful.86 Management at Tesoro Corporation s

Golden Eagle refinery in California instituted one such plan. Employees earn
WINGS (an acronym for Willing Involvement Nurtures Greater Safety)
points for engaging in one or more specific safety activities, such as taking
emergency response training. Employees can each earn up to $20 per month
by accumulating points.87
Some contend that safety incentive programs are misguided. OSHA has
argued, for instance, that such programs don t cut down on actual injuries or
illnesses, but only on injury and illness reporting. One expert argues that by
encouraging habitual behavior they can lull employees into letting their guard
down.88 One option is to emphasize nontraditional incentives, like recognition.
For instance, recognize employees for identifying hazards.89 In any case, the
incentive program needs to be part of a comprehensive safety program.90

RESEARCH INSIGHT: POSITIVE REINFORCEMENT Many employers

Source: Shutterstock.

successfully use positive reinforcement programs to improve safety. Such

programs provide workers with continuing positive feedback, usually in the
form of graphical performance reports and supervisory support, to shape the
workers safety-related behavior.
Researchers introduced one program in a wholesale bakery.91 The new safety
One way to motivate and program included training and positive reinforcement. The researchers set and
encourage safety in a factory communicated a reasonable safety goal (in terms of observed incidents performed
is to tell employees how much safely). Next, employees participated in a 30-minute training session by viewing pairs
management values it: This of slides depicting scenes that the researchers staged in the plant. One slide, for
safety poster on an exterior example, showed the supervisor climbing over a conveyor; the parallel slide showed
factory wall tells employees how the supervisor walking around the conveyor. After viewing an unsafe act, employees
well they are doing. had to describe, What s unsafe here? Then the researchers demonstrated the same
incident again but performed in a safe manner, and explicitly stated the safe-conduct
rule ( go around, not over or under, conveyors ).
At the conclusion of the training phase, supervisors showed employees a graph with
their pretraining safety record (in terms of observed incidents performed safely) plotted.
Supervisors then encouraged workers to consider increasing their performance to the new
safety goal for their own protection, to decrease costs, and to help the plant get out of its
last place safety ranking. Then the researchers posted the graph and a list of safety rules.
Whenever observers walked through the plant collecting safety data, they posted
on the graph the percentage of incidents they had seen performed safely by the group
as a whole, thus providing the workers with positive feedback. Workers could compare
their current safety performance with both their previous performance and their
assigned goal. In addition, supervisors praised workers when they performed selected
incidents safely. Safety in the plant subsequently improved markedly.

Reducing Unsafe Acts through Behavior-Based Safety

Behavior-based safety means identifying the worker behaviors that contribute to
accidents and then training workers to avoid these behaviors. Tenneco Corporation
(which manufactures Monroe brand suspensions) implemented a behavior-based
safety program. The firm selected internal consultants from among its quality managers,
training managers, engineers, and production workers. After training, the internal
consultants identified five critical behaviors for Tenneco s first safety program, such as, Eyes
on task: Does the employee watch his or her hands while performing a task? The consultants
made observations and collected data regarding the behaviors. Then they instituted
training programs to get employees to perform these five behaviors properly.92

Reducing Unsafe Acts through Employee Participation

Employees are often your best source of ideas about what the safety problems are and
how to solve them. For example, when the International Truck and Engine Corp.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 549

FIGURE 16-7 Employee Safety

Responsibilities Checklist Employee Safety Responsibilities Checklist

Source: Reprinted from Know what constitutes a safety hazard.

www.HR.BLR.com with permission Be constantly on the lookout for safety hazards.
of the publisher Business and Legal Correct or report safety hazards immediately.
Resources, Inc., 141 Mill Rock Road Know and use safe work procedures.
East, Old Saybrook, CT © 2004. Avoid unsafe acts.
BLR® (Business and Legal
Keep the work area clean and uncluttered.
Resources, Inc.).
Report accidents, injuries, illnesses, exposures to
hazardous substances, and near misses immediately.
Report acts and conditions that don t seem right even if
you aren t sure if they re hazards.
Cooperate with internal inspections and job hazard
analyses.
Follow company safety rules.
Look for ways to make the job safer.
Participate actively in safety training.
Treat safety as one of your most important job
responsibilities.

began designing its new robot-based plant in Springfield, Ohio, management chose
to involve employees in designing the new facility.93
Management appointed joint labor management safety teams for each department.
These worked with project engineers to start designing safeguards for the robot equip-
ment. The company even sent one safety team to Japan to watch the robot machines
in action, and to identify items that the safety teams needed to address. Back in Ohio, this
team worked with employees to identify possible hazards and to develop new devices
(such as color-coded locks) to protect the employees.94
Once they are committed to the idea of safety, a checklist such as the one shown
in Figure 16-7 can provide employees with a useful reminder.

Reducing Unsafe Acts by Conducting Safety

and Health Audits and Inspections
Reducing unsafe acts is no substitute for eliminating hazards. Managers should therefore
routinely inspect for problems using safety audit/checklists (as in Figures 16-6 and 16-7)
as aids. Also, investigate all accidents and near misses. Set up employee safety committees
to evaluate safety adequacy, conduct and monitor safety audits, and suggest ways
for improving safety.95 Managers expedite safety audits by using personal digital
assistants (PDAs).96 For example, Process and Performance Measurement (PPM) is a
Windows application for designing and completing safety audit questionnaires. To use
this application, the manager gives the safety audit a name, enters the audit questions,
and lists possible answers. Typical questions for a fire extinguisher audit might include,
Are fire extinguishers clearly identified and accessible? and Are only approved fire
extinguishers used in the workplace? 97 The supervisor or employee then uses his or her
PDA to record the audit and transmit it to the firm s safety office.
With respect to safety and health, evidence-based management means identifying
crucial metrics and then monitoring them. Metrics might include, for instance, the
percent conformance to safety critical behaviors and processes, the level of exposure
present in the workplace as measured through valid samples, and the rate of adverse
outcomes such as injury rates.98
SAFETY AWARENESS PROGRAMS Employers also use safety awareness
programs to improve employee safety behavior. A safety awareness program enables

behavior-based safety safety awareness program

Identifying the worker behaviors that Program that enables trained supervisors
contribute to accidents and then training to orient new workers arriving at a job site
workers to avoid these behaviors. regarding common safety hazards and simple
prevention methods.
550 PART 5 EMPLOYEE RELATIONS

Source: www.workzonesafety.org, accessed September 2011.

trained supervisors to orient new workers arriving at a job site regarding common
safety hazards and simple prevention methods. For example, the Roadway Safety
Awareness Program covers trucker safety issues such as stopping distances required
at various speeds (see the accompanying screen grab).
Table 16-1 summarizes suggestions for reducing unsafe conditions and acts.99

Controlling Workers Compensation Costs

In the event an accident does occur, the employee may turn to the employer s workers
compensation insurance to cover his or her expenses and losses.100 We addressed workers
compensation in Chapter 13 (Benefits), but address several safety-related points here.
BEFORE THE ACCIDENT The time to start controlling workers compensation
claims is before the accident happens.101 For example, LKL Associates, Inc., of Orem,
Utah, cut its workers compensation premiums in half by communicating written safety
and substance abuse policies to workers and then strictly enforcing those policies.102

TABLE 16-1 Reducing Unsafe Conditions

and Acts: A Summary
Reduce Unsafe Conditions
Identify and eliminate unsafe conditions.
Use administrative means, such as job rotation.
Use personal protective equipment.
Reduce Unsafe Acts
Emphasize top management commitment.
Emphasize safety.
Establish a safety policy.
Reduce unsafe acts through selection.
Provide safety training.
Use posters and other propaganda.
Use positive reinforcement.
Use behavior-based safety programs.
Encourage worker participation.
Conduct safety and health inspections regularly.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 551

AFTER THE ACCIDENT The injury can be traumatic for the employee, and how
the employer handles it is important. As noted in Chapter 13 (Benefits), moving
aggressively to support the injured employee and to get him or her back to work
quickly is important. The involvement of an attorney and the duration of the claim
both influence the workers claim cost.103
It is important to be supportive and proactive. Provide first aid, and make sure
the worker gets quick medical attention; make it clear that you are interested in the
injured worker; document the accident; file required accident reports; and encourage
a speedy return to work.104 The HR as a Profit Center feature illustrates other steps
HR can take.

HR AS A PROFIT CENTER
Reducing Workers Compensation Claims
Claims-tracking software helps employers understand and reduce their workers
compensation claims. For example, a health services agency in Bangor, Maine,
purchased CompWatch, a workers compensation claims management and tracking
program. The agency entered all its previous claims, and used CompWatch to
analyze trends. The agency discovered some of its auto accidents were apparently
due to its drivers need for training, so the agency introduced a driver safety
program. In one department, this apparently led to a 42% reduction in auto
accidents from one year to the next.105

6 List five workplace health

WORKPLACE HEALTH HAZARDS: PROBLEMS
hazards and how to deal AND REMEDIES
with them.
Most workplace hazards aren t as obvious as unguarded equipment or slippery
floors. Many are unseen hazards (such as mold) that the company inadvertently
produces as part of its production processes. Other problems, such as drug abuse,
employees may create for themselves. Both such hazards can be as or more dangerous
to workers health and safety than are obvious hazards like slippery floors. Typical
workplace exposure hazards include chemicals and other hazardous materials,
temperature extremes, biohazards (including those that are naturally occurring,
such as mold, and man-made, such as anthrax), and ergonomic hazards (such as
uncomfortable equipment).106

Exposure to asbestos is a major

potential source of occupational
respiratory disease. This worker
wears protective clothing and a
respirator to remove asbestos
from ceiling panels in a
classroom.
Source: Stefan Hard/AP Images.
552 PART 5 EMPLOYEE RELATIONS

TABLE 16-2 OSHA Substance-Specific Health Standards

Substance Permissible Exposure Limits*

Asbestos .1001
Vinyl chloride .1017
Inorganic arsenic .1018
Lead .1025
Cadmium .1027
Benzene .1028
Coke oven emissions .1029
Cotton dust .1043
1,2-Dibromo-3-chloropropane .1044
Acrylonitrile .1045
Ethylene oxide .1047
Formaldehyde .1048
4,4'-Methylenedianaline .1050
Methylene chloride .1051
*The actual measurement yardstick is substance-specific. For example, the yardstick for asbestos is Permissible
Fiber per cubic centimeter, and for formaldehyde it is Parts formaldehyde per million parts of air
Source: John F. Rekus, If You Thought Air Sampling Was Too Difficult to Handle, This Guide Can Help
You Tackle Routine Sampling with Confidence, Part I, Occupational Hazards, May 2003, p. 43. See also
www.osha.gov/SLTC/pel/, accessed June 30, 2011.

The Basic Industrial Hygiene Program

OSHA standards list exposure limits for about 600 chemicals. Table 16-2 lists some
OSHA substance-specific health standards. Hazardous substances like these require air
sampling and other preventive and precautionary measures.
Managing such exposure hazards comes under the area of industrial hygiene
and involves recognition, evaluation, and control. First, the facility s health and safety
officers (possibly working with teams of supervisors and employees) must recognize
possible exposure hazards. This typically involves conducting plant/facility walk-
around surveys, employee interviews, records reviews, and reviews of government
(OSHA) and nongovernmental standards.
Having identified a possible hazard, evaluation involves determining how severe
the hazard is. This requires measuring the exposure, comparing the measured
exposure to some benchmark (as in Table 16-2), and determining whether the risk is
within tolerances.107
Finally, hazard control involves eliminating or reducing the hazard. Note that
personal protective gear is generally the last option for dealing with such problems.
The employer must first install engineering controls (such as process enclosures or ven-
tilation) and administrative controls (including training and improved housekeeping).

Asbestos Exposure at Work

There are four major sources of occupational respiratory diseases: asbestos, silica, lead,
and carbon dioxide. Of these, asbestos is a major concern, in part because of publicity
surrounding asbestos in buildings constructed before the mid-1970s. Major efforts are
still underway to rid these buildings of the substance.
OSHA standards require several actions with respect to asbestos. Employers must
monitor the air whenever they expect the level of asbestos to rise to one-half the
allowable limit (which is 0.1 fibers per cubic centimeter). Engineering controls
walls, special filters, and so forth are required to maintain an asbestos level that
complies with OSHA standards. Only then can employers use respirators if additional
efforts are required to achieve compliance.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 553

Infectious Diseases
With many employees traveling to and from international destinations, monitoring
and controlling infectious diseases has become an important safety issue.
Employers can take steps to prevent the entry or spread of infectious diseases into
their workplaces. These steps include:108
1. Closely monitor Centers for Disease Control and Prevention (CDC) travel alerts
about health concerns. Access this information at www.cdc.gov.
2. Provide daily medical screenings for employees returning from infected areas.
3. Deny access to your facility for 10 days to employees or visitors returning from
affected areas.
4. Tell employees to stay home if they have a fever or respiratory system symptoms.
5. Clean work areas and surfaces regularly.
6. Stagger breaks. Offer several lunch periods to reduce overcrowding.
7. Emphasize the importance of frequent hand washing and make hand sanitizers
easily available.

Air Quality
One of the downsides of opting for environmentally green office buildings is that
sealed buildings can produce illnesses such as itchy eyes and trouble breathing, a
phenomenon some call sick building syndrome. The problem is that emissions
from printers and photocopiers and other chemical pollutants, left unmonitored,
can dramatically reduce air quality.109 The solution is to institute continuous
monitoring systems.

Alcoholism and Substance Abuse

Alcoholism and substance abuse are problems at work. About two-thirds of
people with an alcohol disorder work full-time.110 Some studies estimate that almost
13 million workers use drugs illicitly.111 About 15% of the U.S. workforce (just over
19 million workers) has either been hung over at work, been drinking shortly before
showing up for work, or been drinking or impaired while on the job at least once
during the previous year. 112 Employee alcoholism may cost U.S. employers
about $226 billion per year, for instance, in higher absenteeism and accidents.113
(Increasingly, it s not intoxicated drivers but intexicated employees causing the
problem. Studies indicate that cell phone activity probably contributes to over
636,000 motor vehicle crashes per year. Many businesses are therefore banning cell
phone use and texting activities among their drivers.)114

EFFECTS OF ALCOHOL ABUSE The effects of alcoholism on the worker and

work are severe.115 Both the quality and quantity of the work decline in the face of a
sort of on-the-job absenteeism. The alcoholic s on-the-job accidents usually don t
increase significantly, apparently, because he or she becomes much more cautious.
However, the off-the-job accident rate is higher. Morale of other workers drops, as
they have to shoulder the alcoholic s burdens.
Recognizing the alcoholic on the job is a problem. Early symptoms such as tardi-
ness are similar to those of other problems and thus hard to classify. The supervisor is
not a psychiatrist, and without specialized training, identifying and dealing with
the alcoholic is difficult.
As you can see in Table 16-3, alcohol-related problems range from tardiness in the
earliest stages of alcohol abuse to prolonged absences in its later stages.

SUPERVISOR TRAINING Training supervisors to identify alcoholics or drug

abusers and the problems they create is advisable. However, supervisors are in a tricky
position: They should be the company s first line of defense in combating workplace
554 PART 5 EMPLOYEE RELATIONS

TABLE 16-3 Observable Behavior Patterns Indicating Possible

Alcohol-Related Problems
Alcoholism Some Possible Signs Some Possible Alcoholism
Stage of Alcoholism Problems Performance Issues

Early Arrives at work late Reduced job efficiency

Untrue statements Misses deadlines
Leaves work early
Middle Frequent absences, especially Mondays Accidents
Colleagues mentioning erratic behavior Warnings from boss
Mood swings Noticeably reduced performance
Anxiety
Late returning from lunch
Frequent multi-day absences
Advanced Personal neglect Frequent falls, accidents
Unsteady gait Strong disciplinary actions
Violent outbursts Basically incompetent performance
Blackouts and frequent forgetfulness
Possible drinking on job

Sources: Gopal Patel and John Adkins Jr., The Employer s Role in Alcoholism Assistance, Personnel Journal 62,
no. 7 (July 1983), p. 570; Mary-Anne Enoch and David Goldman, Problem Drinking and Alcoholism: Diagnosis
and Treatment, American Family Physician, February 1, 2002, www.aafp.org/afp/20020201/441.html, accessed
July 20, 2008; and Ken Pidd et al., Alcohol and Work: Patterns of Use, Workplace Culture, and Safety,
www.nisu.flinders.edu.au/pubs/reports/2006/injcat82.pdf, accessed July 20, 2008.

drug abuse, but should avoid becoming detectives or diagnosticians. Guidelines

supervisors should follow include the following:
* If an employee appears to be under the influence of drugs or alcohol, ask how the
employee feels and look for signs of impairment such as slurred speech. (See
Table 16-3.) Send an employee judged unfit home.
* Make a written record of your observations and follow up each incident. In addition,
inform workers of the number of warnings the company will tolerate before
requiring termination.
* Refer troubled employees to the company s employee assistance program.

DEALING WITH SUBSTANCE ABUSE For many employers, dealing with alcohol
and substance abuse begins with substance abuse testing. As we saw in Chapter 6, it s
unusual to find employers who don t at least test job candidates for substance abuse
before hiring them. And many states are instituting mandatory random drug testing
for high-hazard workers, such as electrical workers.116 Several states also have laws
making drug-test fraud a crime.117
Preemployment tests pick up only about half the workplace drug users, so ongoing
random testing is advisable. One study concluded that preemployment drug testing
had little effect on workplace accidents. However, a combination of preemployment
and random ongoing testing was associated with a significant reduction in workplace
accidents.118 Preemployment drug testing also discourages those on drugs from applying
for work or going to work for employers who test.119
Disciplining, discharge, in-house counseling, and referral to an outside agency
are the four traditional prescriptions when a current employee tests positive.
Most professionals seem to counsel treatment rather than outright dismissal, at
least initially. Employers often make available employee assistance programs (EAPs)
to provide the counseling necessary to support employees with alcohol or drug
abuse problems.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 555

SUBSTANCE ABUSE POLICIES The employers should establish and communicate

a substance abuse policy. This policy should state management s position on alcohol and
drug abuse and on the use and possession of illegal drugs on company premises.
It should also list the methods (such as urinalysis) used to determine the causes of
poor performance; state the company s views on rehabilitation, including workplace
counseling; and specify penalties for policy violations. Additional steps employers take
include conducting workplace inspections (searching employees for illegal substances)
and using undercover agents.
Whether the alcohol abuse reflects a disability under the ADA depends on several
things, including whether the person is alcohol dependent.120 In general, employers can
hold alcohol dependent employees to the same performance standards as they hold
nonalcoholics. However, there are other legal risks. Employees have sued for invasion of
privacy, wrongful discharge, defamation, and illegal searches. Therefore, before imple-
menting a drug control program employers should use employee handbooks, bulletin
board/intranet postings, and the like to publicize their substance abuse plans, and to
explain the conditions under which testing might occur and what accommodations you
make for employees who voluntarily seek treatment.

Stress, Burnout, and Depression

Problems such as alcoholism and drug abuse sometimes reflect underlying psychological
causes such as stress and depression. In turn, a variety of workplace factors can lead to
stress. These include work schedule, pace of work, job security, route to and from work,
workplace noise, poor supervision, and the number and nature of customers or clients.121
Personal factors also influence stress. For example, Type A personalities people
who are workaholics and who feel driven to be on time and meet deadlines
normally place themselves under greater stress than do others. Add to job stress the
stress caused by nonjob problems like divorce, and many workers are problems
waiting to happen.
Job stress has serious consequences for both employer and employee. Human
consequences include anxiety, depression, anger, cardiovascular disease, headaches,
accidents, and even early onset Alzheimer s disease.122 A Danish study recently found
that nurses working under excessive pressure had double the risk for heart attacks.123
For the employer, consequences include diminished performance, and increased
absenteeism and turnover. A study of 46,000 employees concluded that high-stress
workers health care costs were 46% higher than those of their less-stressed coworkers.124
Yet only 5% of surveyed U.S. employers say they re addressing workplace stress.125

REDUCING JOB STRESS There are a number of ways to alleviate dysfunctional

stress. These range from commonsense remedies (such as getting more sleep) to reme-
dies like biofeedback and meditation. Finding a more suitable job, getting counseling,
and planning and organizing each day s activities are other sensible responses.126 In his
book Stress and the Manager, Dr. Karl Albrecht suggests the following ways for a person
to reduce job stress:127
* Build rewarding, pleasant, cooperative relationships with colleagues and employees.
* Don t bite off more than you can chew.
* Build an especially effective and supportive relationship with your boss.
* Negotiate with your boss for realistic deadlines on important projects.
* Learn as much as you can about upcoming events and get as much lead time as
you can to prepare for them.
* Find time every day for detachment and relaxation.
* Take a walk around the office to keep your body refreshed and alert.
* Find ways to reduce unnecessary noise.
* Reduce the amount of trivia in your job; delegate routine work when possible.
* Limit interruptions.
556 PART 5 EMPLOYEE RELATIONS

* Don t put off dealing with distasteful problems.

* Make a constructive worry list that includes solutions for each problem.
* Get more and better quality sleep.128
Meditation is another option. Choose a quiet place with soft light and sit comfortably.
Then meditate by focusing your thoughts (for example, count breaths or visualize a
calming location such as a beach). When your mind wanders, bring it back to focusing
your thoughts on your breathing or the beach.129
The employer and its human resource team and supervisors also play a role in
reducing stress. Supportive supervisors and fair treatment are two obvious steps. Other
steps include reducing personal conflicts on the job and encouraging open communi-
cation between management and employees. Huntington Hospital in Pasadena,
California, introduced an on-site concierge service to help its employees reduce work-
related stress. It takes care of tasks like making vacation plans for the employees.130
Some employers use resilience training to help employees deal with stress. As one
example, participants consider previous stressful situations in their lives that they
have overcome and identify factors that made the situations manageable. 131
One British firm has a three-tiered employee stress-reduction program.132 First is
primary prevention. This focuses on ensuring that things like job designs and
workflows are correct. Second is intervention. This includes individual employee
assessment, attitude surveys to find sources of stress, and supervisory intervention.
Third is rehabilitation, which includes employee assistance programs and counseling.

BURNOUT Burnout is a phenomenon closely associated with job stress. Experts

define burnout as the total depletion of physical and mental resources caused by
excessive striving to reach an unrealistic work-related goal. Burnout builds gradually,
manifesting itself in symptoms such as irritability, discouragement, exhaustion,
cynicism, entrapment, and resentment.133
Employers can head off burnout, for instance, by monitoring employees in
potentially high-pressure jobs.134 What can a burnout candidate do? In his book How
to Beat the High Cost of Success, Dr. Herbert Freudenberger suggests:
* Break your patterns. First, are you doing a variety of things or the same one
repeatedly? The more well-rounded your life is, the better protected you are
against burnout.
* Get away from it all periodically. Schedule occasional periods of introspection
during which you can get away from your usual routine.
* Reassess your goals in terms of their intrinsic worth. Are the goals you ve set for
yourself attainable? Are they really worth the sacrifices?
* Think about your work. Could you do as good a job without being so intense?
RESEARCH INSIGHTS If you re thinking of taking a vacation to reduce your
burnout, you might as well save your money, according to one classic study.135 In this
study, 76 clerks in the headquarters of an electronics firm in Israel completed
questionnaires measuring job stress and burnout twice before a vacation, once during
the vacation, and twice after the vacation.
The clerks burnout did decline during the vacation. The problem was the
burnout quickly returned. Burnout moved partway back toward its pre-vacation level
by 3 days after the vacation, and all the way by 3 weeks after they returned to work.136
One implication, as these researchers point out, is that mini vacations during the
workday such as time off for physical exercise, meditation, power naps, and reflec-
tive thinking might help reduce stress and burnout. A later study concluded that
the quality of a vacation for instance, in terms of relaxation and nonwork hassles
affected the vacation s fade-out effects.137
One way to reduce burnout is to forget about your job once you go home.
In one study, researchers measured psychological detachment from work during
nonwork time with items such as during after-work hours, I forget about work. 138 Lack
of psychological detachment from work while off the job predicted higher emotional
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 557

exhaustion one year later. The bottom line seems to be to leave your job behind
once you go home (and to provide more time-off benefits for employees).

EMPLOYEE DEPRESSION Employee depression is a serious problem at work.

Experts estimate that depression results in more than 200 million lost workdays in the
United States annually, and may cost U.S. businesses $24 billion or more per year just
in absenteeism and lost productivity.139 Depressed people also tend to have worse
safety records.140
Employers need to work harder to ensure that depressed employees utilize avail-
able support services. One survey found that while about two-thirds of large firms
offered employee assistance programs covering depression, only about 14% of
employees with depression said they ever used one.141
Employers therefore need to train supervisors to identify depression s warning signs
and to counsel those who may need such services to use the firm s employee assistance
program.142 Depression is a disease. It does no more good to tell a depressed person to
snap out of it than it would to tell someone with a heart condition to stop acting tired.
Typical depression warning signs (if they last for more than 2 weeks) include persistent
sad, anxious, or empty moods; sleeping too little; reduced appetite; loss of interest in
activities once enjoyed; restlessness or irritability; and difficulty concentrating.143

Solving Computer-Related Ergonomic Problems

Although many workers use computers at work, OSHA has no specific standards that
apply to computer workstations. It does have general standards that might apply,
regarding, for instance, radiation, noise, and electrical hazards.144
NIOSH provided general recommendations regarding computer screens. Most
relate to ergonomics or design of the worker equipment interface. These include:
* Employees should take a 3 5 minute break from working at the computer every
20 40 minutes, and use the time for other tasks, like making copies.
* Design maximum flexibility into the workstation so it can be adapted to the
individual operator. For example, use adjustable chairs with midback supports.
Don t stay in one position for long periods.
* Reduce glare with devices such as shades over windows and recessed or indirect
lighting.
* Give workers a complete preplacement vision exam to ensure properly corrected
vision for reduced visual strain.145
* Allow the user to position his or her wrists at the same level as the elbow.
* Put the screen at or just below eye level, at a distance of 18 to 30 inches from the
eyes.
* Let the wrists rest lightly on a pad for support.
* Put the feet flat on the floor or on a footrest.146

Repetitive Motion Disorders

According to the U.S. National Institutes of Health, repetitive motion disorders include
disorders such as carpal tunnel syndrome, bursitis, and tendonitis, and result from too
many uninterrupted repetitions of an activity or motion, or from unnatural motions
such as twisting the arm or wrist, or incorrect posture. It usually affects people who
perform repetitive tasks such as assembly line or computer work. Employers can reduce
the problem, for instance, with programs to help workers adjust their pace of work.147

burnout
The total depletion of physical and mental
resources caused by excessive striving to
reach an unrealistic work-related goal.
558 PART 5 EMPLOYEE RELATIONS

Workplace Smoking
Smoking is a serious health and cost problem for both employees and employers.
For employers, these costs derive from higher health and fire insurance, increased
absenteeism, and reduced productivity (as when a smoker takes a 10-minute break
behind the store). The California Environmental Protection Agency estimated that each
year in the United States, secondhand smoke causes 3,000 deaths due to lung cancer and
35,000 to 62,000 illnesses due to heart problems (not all work related).148
WHAT YOU CAN AND CANNOT DO In general, you can probably deny a job to
a smoker as long as you don t use smoking as a surrogate for some other kind of discrim-
ination.149 A no-smokers-hired policy does not, according to one expert, violate
the Americans with Disabilities Act (since smoking is not considered a disability),
and in general employers adoption of a no-smokers-hired policy is not illegal under
federal law. Most employers these days ban indoor smoking, often designating small
outdoor areas where smoking is permitted. Many states and municipalities now ban
indoor smoking in public areas (see http://en.wikipedia.org/wiki/List_of_smoking_
bans#United_States for a list).
Some firms take a hard-line approach. WEYCO Inc., a benefits services company
in Michigan, first gave employees 15 months warning and offered smoking secession
assistance. Then they began firing or forcing out all its workers who smoke, including
those who do so in the privacy of their homes.150
WELLNESS PROGRAMS We discussed wellness programs in Chapter 13
(Benefits), but for many employers, wellness is part of their safety and health initia-
tives. Wegman s food markets Inc. has various health and fitness campaigns, and, for
instance, encourages its employees to eat 5 cups of fruit and vegetables and walk
10,000 steps each day.151 The accompanying HR as a Profit Center feature illustrates
one program s advantages.

HR AS A PROFIT CENTER
Wellness Pays
The payback for wellness programs isn t theoretical. For example, over the past 20 or
so years, the percentage of employees at Johnson & Johnson who smoke has
dropped by more than two-thirds, in part thanks to J&J s comprehensive wellness
effort. It s been reported that the company s leaders estimate that such wellness
programs have saved the company about $250 million on health care costs from 2002
to 2008, a return of about $2.71 for every dollar spent on the wellness programs.152

Violence at Work
Violence against employees is an enormous problem at work. Homicide is the second
biggest cause of fatal workplace injuries. Surveys by NIOSH found that nonfatal work-
place assaults resulted in more than 1 million lost workdays in one recent year. While
robbery was the main motive for homicide at work, a coworker or personal associate
committed roughly one of seven workplace homicides.153 In one survey, over half of
human resource or security executives reported that disgruntled employees had threat-
ened senior managers in the past 12 months.154 Sadly, much of this violence involves acts
by one intimate partner against another. For example, the U.S. Centers for Disease Con-
trol reported almost 5 million such attacks against women (and 3 million against men)
recently (not all at work).155 Women (and men) should have access to domestic crisis
hotlines, such as www.ndvh.org, and to the employer s employee assistance programs.
WHO IS AT RISK? Violence is associated with some jobs more than others. In one
study, researchers constructed a risk for violence scale. Jobs with a high likelihood for
violence include those jobs that involve physical care of others or decisions that influence
other people s lives, handling guns, security functions, physical control over others,
interacting with frustrated individuals, and handling weapons other than guns.156
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 559

Although men have more fatal occupational injuries than do women, the
proportion of women who are victims of assault is much higher. The Gender-
Motivated Violence Act imposes significant liabilities on employers whose women
employees become victims. 157 Most women (many working in retail establish-
ments) murdered at work were victims of random criminal violence by an assailant
unknown to the victim, as during a robbery. Coworkers, family members, or previous
friends or acquaintances carried out the remaining homicides.
You can predict and avoid many workplace incidents. Risk Management magazine
estimates that about 86% of past workplace violence incidents were apparent earlier
to coworkers, who had brought them to management s attention. Yet, in most cases,
management did little or nothing.158 Employers can take several steps to reduce
workplace violence. Let s look at them.
HEIGHTENED SECURITY MEASURES Heightened security measures are an
employer s first line of defense. NIOSH suggests the following: Improve external lighting,
use drop safes to minimize cash on hand and post signs noting that only a limited amount
of cash is on hand, install silent alarms and surveillance cameras, increase the number of
staff on duty, provide staff training in conflict resolution and nonviolent response,
and close establishments during high-risk hours late at night.159 Employers can also issue
a weapons policy, for instance, barring firearms and other dangerous weapons.
Because about half of workplace homicides occur in the retail industry, OSHA
issued voluntary recommendations aimed at reducing homicides and injuries in such
establishments. The suggestions include the following: Install mirrors and improved
lighting, provide silent and personal alarms, reduce store hours during high-risk
periods, install drop safes and signs that indicate little cash is kept on hand, erect
bullet-resistance enclosures, and increase staffing during high-risk hours.160 Adopt
a workplace violence policy that outlines unacceptable employee behavior and a zero-
tolerance policy toward workplace violence.161
IMPROVED EMPLOYEE SCREENING That testing can screen out workplace
aggressors is clear. In one study, researchers concluded that measurable individual
differences like attitude toward revenge account for more than 60% of the variance
in our measure of the incidence of workplace aggression. 162 (We discussed bullying
in Chapter 14, Ethics.)
At a minimum, carefully check references. Obtain a detailed employment
application. Verify the applicant s employment history, educational background, and
references. A personal interview, personnel testing, and a review and verification of
all information should also be included. Sample interview questions might include,
What frustrates you? and Who was your worst supervisor and why? Remember
that certain questions, for instance concerning arrest records may violate one or
more equal employment laws.163
Certain background facts suggest the need for a more in-depth background
investigation (but note that the EEOC is preparing new guidelines for evidence-based
violence background checks, to replace what are often checks made on untested
assumptions ):164
* An unexplained gap in employment
* Incomplete or false information on the résumé or application
* A negative, unfavorable, or false reference
* Prior insubordinate or violent behavior on the job
* A criminal history involving harassing or violent behavior
* A prior termination for cause with a suspicious (or no) explanation
* A history of significant psychiatric problems
* A history of drug or alcohol abuse
* Strong indications of instability in the individual s work or personal life, for
example, frequent job changes or geographic moves
* Lapsed or lost licenses or accreditations165
560 PART 5 EMPLOYEE RELATIONS

Workplace Violence Supervisory Training

Employers should also train supervisors to identify the clues that typically precede
violent incidents. These include:166
* Typical profiles. The typical perpetrator is male, between the ages of 25 and 40,
and exhibits an inability to handle stress, manipulative behavior, and steady
complaining. Of course, many nonviolent people exhibit such traits, too.
However, perpetrators also tend to exhibit behaviors such as the following.
* Verbal threats. They harbor grudges and often talk about what they may do, such
as, That propane tank in the back could blow up easily.
* Physical actions. Troubled employees may try to intimidate others, gain access to
places where they do not belong, or flash a concealed weapon.
* Frustration. Most cases involve an employee who has a frustrated sense of
entitlement to a promotion, for example.
* Obsession. An employee may hold a grudge against a coworker or supervisor,
and some cases stem from romantic interest.167
Vendors offer video violence training programs. These explain what workplace violence
is, identify its causes and signs, and offer tips to supervisors on how to prevent it and
what to do when it occurs.
Specific behaviors to watch out for include:
* An act of violence on or off the job
* Erratic behavior evidencing a loss of awareness of actions
* Overly defensive, obsessive, or paranoid tendencies
* Overly confrontational or antisocial behavior
* Sexually aggressive behavior
* Isolationist or loner tendencies
* Insubordinate behavior with a suggestion of violence
* Tendency to overreact to criticism
* Exaggerated interest in war, guns, violence, catastrophes
* The commission of a serious breach of security
* Possession of weapons, guns, knives at the workplace168
* Violation of privacy rights of others, such as searching desks or stalking
* Chronic complaining and frequent, unreasonable grievances
* A retribution-oriented or get-even attitude169

ORGANIZATIONAL JUSTICE At work, violence often occurs in response to a

perceived personal affront.170 Consider one executive suspected of sabotaging his
former employer s computer system, thus causing about $20 million in damage. He d
been earning $186,000 a year. A note he wrote anonymously to the president said this:
I have been loyal to the Company in good and bad times for over thirty
years. . . . What is most upsetting is the manner in which you chose to end our
employment. I was expecting a member of top management to come down from
his ivory tower to face us directly with a layoff announcement, rather than sending
the kitchen supervisor with guards to escort us off the premises like crimi-
nals. . . . We will not wait for God to punish you we will take measures into our
own hands.171

DEALING WITH ANGRY EMPLOYEES What do you do when confronted by

an angry, potentially explosive employee? Here are some suggestions:172
* Make eye contact.
* Stop what you are doing and give your full attention.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 561

* Speak in a calm voice and create a relaxed environment.

* Be open and honest.
* Let the person have his or her say.
* Ask for specific examples of what the person is upset about.
* Be careful to define the problem.
* Ask open-ended questions and explore all sides of the issue.
* Listen: As one expert says, Often, angry people simply want to be listened to.
They need a supportive, empathic ear from someone they can trust. 173

DISMISSING VIOLENT EMPLOYEES You should use caution when firing or

disciplining potentially violent employees.
In dismissing potentially violent employees:

* Analyze and anticipate, based on the person s history, what kind of aggressive
behavior to expect.
* Have a security guard nearby when the dismissal takes place.
* Clear away furniture and things the person might throw.
* Don t wear loose clothing that the person might grab.
* Don t make it sound as if you re accusing the employee; instead, say that according
to company policy, you re required to take action.
* Maintain the person s dignity and try to emphasize something good about the
employee.
* Provide job counseling for terminated employees, to help get the employee over the
traumatic post-dismissal adjustment.174
* Consider obtaining restraining orders against those who have exhibited a tendency
to act violently in the workplace.175

LEGAL ISSUES IN REDUCING WORKPLACE VIOLENCE It is sensible to

try to screen out potentially violent employees, but doing so incurs legal risks. For
example, courts have interpreted Title VII of the Civil Rights Act of 1964 as
restricting employers from making employment decisions based on arrest records,
which may be discriminatory.
Aside from federal law, most states prohibit discrimination under any cir-
cumstances based on arrest records and on prior convictions unless a direct
relationship exists between the prior conviction and the job, or the employment
presents an unreasonable risk. 176 And developing a violent employee profile
could end up merely describing a mental impairment and violate the Americans
with Disabilities Act.177

7 Discuss the prerequisites for

OCCUPATIONAL SECURITY AND SAFETY
a security plan and how A majority of employers have security arrangements.178 A SHRM survey found that
to set up a basic security about 85% of responding organizations now have some type of formal disaster plan.179
program.
Many firms have also instituted special handling procedures for suspicious mail pack-
ages and hold regular emergency evacuation drills.
Many of these actions stemmed from employers heightened focus on risk
management in the past few years. Identifying security and other corporate risks falls
within the domain of enterprise risk management, which means identifying risks, and
planning to mitigate and actually mitigating these risks. Thus, as part of its risk
management, Walmart asks questions such as, What are the risks? And what are we
going to do about these risks? 180 Eliminating crime and enhancing facility security
are two important issues here.
 562 PART 5 EMPLOYEE RELATIONS

Basic Prerequisites for a Crime Prevention Plan

As one corporate security summary put it, workplace security involves more than
keeping track of who comes in a window, installing an alarm system, or employing
guards for an after-hours watch. Organizations that are truly security conscious
plan and implement policies and programs that involve employees in protecting
against identified risks and threats. 181
Ideally, a comprehensive corporate anticrime program should start with the
following:

1. Company philosophy and policy on crime In particular, make sure employees

understand that no crime is acceptable and that the employer has a zero-tolerance
policy with respect to workers who commit crimes.
2. Investigations of job applicants Conduct full background checks as part of your
selection process for every position.
3. Crime awareness training Make it clear, during training and orientation, that
the employer takes a tough approach to workplace crime.
4. Crisis management Establish and communicate the procedures employees
should follow in the event of a bomb threat, fire, or other emergency.

Setting Up a Basic Security Program

In simplest terms, instituting a basic facility security program requires four steps:
analyzing the current level of risk, and then installing mechanical, natural, and
organizational security systems.182 Many organizations establish cross-functional
threat assessment teams to monitor and address potential threats. At one university,
for instance, The team meets regularly to discuss issues relating to violence, security
and potential threats directed at students, faculty and staff at the Metropolitan
Campus. 183
Security programs ideally start with an analysis of the facility s current level of risk.
The employer, preferably with security experts, should assess the company s exposure.
Here, start with the obvious. For example, what is the neighborhood like? Does your
facility (such as the office building you re in) house other businesses or
Many employers install video security cameras
to monitor areas in and around their premises.
individuals (such as law enforcement agencies) that might bring unsafe
activities to your doorstep? As part of this initial threat assessment, also
review these six matters:

1. Access to the reception area, including number of access points, and

need for a panic button for contacting emergency personnel;
2. Interior security, including possible need for key cards, secure
restrooms, and better identification of exits;
3. Authorities involvement, in particular emergency procedures
developed with local law enforcement authorities;
Source: Courtesy of Getty Images Stockbyte, Royalty Free.

4. Mail handling, including how employees screen and open mail and
where it enters the building;
5. Evacuation, including a full review of evacuation procedures and
training; and
6. Backup systems, such as those that let the company store data off site
if disaster strikes.

Having assessed the potential current level of risk, the employer then
turns its attention to assessing and improving natural, mechanical, and
organizational security.184

NATURAL SECURITY Natural security means capitalizing on the

facility s natural or architectural features in order to minimize security
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 563

problems. For example, does having too many entrances mean it is difficult to
control facility access?

MECHANICAL SECURITY Mechanical security is the utilization of security

systems such as locks, intrusion alarms, access control systems, and surveillance
systems to reduce the need for continuous human surveillance.185 Technological
advances are making this easier. Many mail rooms now use scanners to check
the safety of incoming mail. And for access security, biometric scanners that
read thumb or palm prints or retina or vocal patterns make it easier to enforce plant
security.186

ORGANIZATIONAL SECURITY Finally, organizational security means using

good management to improve security. For example, it means properly training and
motivating security staff and lobby attendants. Also ensure that the security staff has
written orders that define their duties, especially in situations such as fire, elevator
entrapment, hazardous materials spills, medical emergencies, hostile intrusions,
suspicious packages, civil disturbances, and workplace violence.187 Other questions to
ask include: Are you properly investigating the backgrounds of new hires? Are you
requiring the same types of background checks for the contractors who supply
security and other personnel to your facility? And, do you provide new employees
with security orientations?

Evacuation Plans
The possibility of emergencies prompted by fires, explosions, and similar issues
means that employers need facility notification and evacuation plans. 188 Such
plans should cover early detection of a problem, methods for communicating the
emergency externally, and communications plans for initiating an evacuation and for
providing information to those the employer wants to evacuate. Ideally, an initial
alarm should come first. The employer should then follow the initial alarm with an
announcement providing specific information about the emergency and letting
employees know what action they should take next. Most use social networks or
text messaging.189

Company Security and Employee Privacy

Security programs have been accompanied by a significant rise in the monitoring of
employee communications and workplace activities; this has prompted many to ask, are
employee privacy rights being violated?
As noted in earlier in this book, employers must consider employee privacy when
using monitoring to control or investigate possible employee security breaches.
Ideally, employers should get employees consent for monitoring. But the employer
may also monitor if it s clear from the firm s existing policies and notices that employees
should have known monitoring might take place.
The employer can take steps to make it easier to legally investigate employees for
potential security breaches. These include:190
1. Distribute a policy that (a) says the company reserves the right to inspect
and search employees as well as their personal property, electronic media, and
files; and (b) emphasizes that company-provided conveniences such as lockers
and desks remain the property of the company and are subject to its control
and search.
2. Train investigators to focus on the facts and avoid making accusations.
3. Remember that employees can request that an employee representative be present
during the investigative interview.
4. Make sure all investigations and searches are evenhanded and nondiscriminatory.
564 PART 5 EMPLOYEE RELATIONS

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Safety and accident prevention concerns managers for 4. Most workplace health hazards aren t obvious, like
several reasons, one of which is the staggering number unguarded equipment.
of workplace accidents. Because of this, all managers
Typical exposure hazards include, for instance, chemi-
need to be familiar with occupational safety law.
cals, biohazards, and improperly designed equipment.
The Occupational Safety and Health Act was passed
Managing exposure hazards like these comes under the
by Congress in 1972 to ensure so far as possible every
area of industrial hygiene, and involves recognition,
working man and woman in the nation safe and
evaluation, and control. Obvious areas of concern
healthful working conditions and to preserve human
include asbestos exposure and infectious diseases.
resources. The act created the Occupational Safety and
Managers need to be familiar with alcoholism,
Health Administration (OSHA). OSHA, in turn, prom-
substance abuse, and their manifestations at work
ulgates thousands of specific policies and standards
and particularly be familiar with signs of these
with which employers must comply. It enforces these
problems and how to deal with them.
standards via a system of inspections and citations
Stress, burnout, and depression are more serious at
and, where necessary, penalties. Inspectors cannot
work than many people realize, and both the
make warrantless inspections, and managers need to
employee and employer can take steps to deal with
make sure a designated OSHA coordinator is present if
them. Employers especially need to train supervisors
an inspector demands admittance.
to identify depression s warning signs and to counsel
2. There are three basic causes of workplace accidents:
those who may need special services.
chance occurrences, unsafe conditions, and employees
Violence against employees is an enormous problem.
unsafe acts. Unsafe conditions include things like
Women in particular are at risk. Heightened security
improperly guarded equipment and hazardous proce-
measures are an employer s first line of defense and
dures. Unsafe acts sometimes reflect personality traits
include, for instance, improving external lighting
such as impatience and distractibility.
and using drop safes to minimize cash on hand.
3. In practice, how to prevent accidents boils down to
Improved employee screening can reduce the risk of
reducing unsafe conditions and reducing unsafe acts.
hiring potentially violent employees. However,
Reducing unsafe conditions is always the first line of
employers also need to provide workplace violence
defense and includes using checklists and following
training (for instance, including what to watch for
OSHA standards. Once all necessary steps are taken,
such as verbal threats) and enhanced attention to
employers need to encourage employees to use personal
employee retention and dismissal processes.
protective equipment. There are then several basic
approaches to reducing unsafe acts, for instance, 5. Most employers today have occupational security and
through proper selection and placement, training, moti- safety programs. Instituting a basic facility security
vation and positive reinforcement, behavior-based program involves analyzing the current level of risk, and
safety, employee participation, and conducting safety then installing mechanical, natural, and organizational
and health audits. security systems.

DISCUSSION QUESTIONS
1. Explain how to reduce the occurrence of unsafe acts on 4. Explain what causes unsafe acts.
the part of your employees. 5. Describe at least five techniques for reducing accidents.
2. Discuss the basic facts about OSHA its purpose, stan- 6. Explain how you would reduce stress at work.
dards, inspections, and rights and responsibilities. 7. Describe the steps employers can take to reduce work-
3. Explain the supervisor s role in safety. place violence.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 565

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, answer the question, about willful violations of OSHA standards to the U.S.
Is there such a thing as an accident-prone person? Department of Justice (DOJ). In one 20-year period,
Develop your answer using examples of actual people OSHA referred 119 fatal cases allegedly involving willful
you know who seemed to be accident prone on some violations of OSHA to the DOJ for criminal prosecu-
endeavor. tion. The DOJ declined to pursue 57% of them, and
2. Working individually or in groups, compile a list of the some were dropped for other reasons. Of the remaining
factors at work or in school that create dysfunctional 51 cases, the DOJ settled 63% with pretrial settlements
stress for you. What methods do you use for dealing involving no prison time. So, counting acquittals, of the
with the stress? 119 cases OSHA referred to the DOJ, only 9 resulted in
3. The HRCI Test Specifications Appendix (pages 633 640) prison time for at least one of the defendants. The
lists the knowledge someone studying for the HRCI Department of Justice is a disgrace, charged the
certification exam needs to have in each area of human founder of an organization for family members of
resource management (such as in Strategic Manage- workers killed on the job. One possible explanation for
ment, Workforce Planning, and Human Resource this low conviction rate is that the crime in cases like
Development). In groups of four to five students, do these is generally a misdemeanor, not a felony, and the
four things: (1) review that appendix now; (2) identify DOJ generally tries to focus its attention on felony cases.
the material in this chapter that relates to the required Given this information, what implications do you think
knowledge the appendix lists; (3) write four multiple- this has for how employers and their managers should
choice exam questions on this material that you believe manage their safety programs, and why do you take that
would be suitable for inclusion in the HRCI exam; position?
and (4) if time permits, have someone from your team 5. A 315-foot-tall, 2-million-pound crane collapsed on
post your team s questions in front of the class, so the a construction site in East Toledo, Ohio, killing four
students in other teams can take each others exam ironworkers. Do you think catastrophic failures
questions. like this are avoidable? If so, what steps would you
4. A safety journal presented some information about suggest the general contractor take to avoid a disaster
what happens when OSHA refers criminal complaints like this?

EXPERIENTIAL EXERCISE
How Safe Is My University?
Purpose: The purpose of this exercise is to give you practice conditions in and around the school building. Each group
in identifying unsafe conditions. will spend about 45 minutes in and around the building you
Required Understanding: You should be familiar with are now in for the purpose of identifying and listing possible
material covered in this chapter, particularly that on unsafe conditions. (Make use of the checklists in Figures 16-5,
unsafe conditions and that in Figures 16-5 (page 541), 16-6 16-6, and 16-8.)
(pages 542 544), and 16-8 (pages 566 569). Return to the class in about 45 minutes. A spokesperson
How to Set Up the Exercise/Instructions: for each group should list on the board the unsafe conditions
you have identified. How many were there? Do you think
Divide the class into groups of four. Assume that each group these also violate OSHA standards? How would you go
is a safety committee retained by your college s or university s about checking?
safety engineer to identify and report on any possible unsafe
566 PART 5 EMPLOYEE RELATIONS

GENERAL ACTION
OK NEEDED
1. Is the required OSHA workplace poster displayed in your place of business as required where all
employees are likely to see it?
2. Are you aware of the requirement to report all workplace fatalities and any serious accidents
(where five or more are hospitalized) to a federal or state OSHA office within 48 hours?
3. Are workplace injury and illness records being kept as required by OSHA?
4. Are you aware that the OSHA annual summary of workplace injuries and illnesses must be posted
by February 1 and must remain posted until March 1?
5. Are you aware that employers with 10 or fewer employees are exempt from the OSHA record-
keeping requirements, unless they are part of an official BLS or state survey and have received
specific instructions to keep records?
6. Have you demonstrated an active interest in safety and health matters by defining a policy for your
business and communicating it to all employees?
7. Do you have a safety committee or group that allows participation of employees in safety and health
activities?
8. Does the safety committee or group meet regularly and report, in writing, its activities?
9. Do you provide safety and health training for all employees requiring such training, and is it
documented?
10. Is one person clearly in charge of safety and health activities?
11. Do all employees know what to do in emergencies?
12. Are emergency telephone numbers posted?
13. Do you have a procedure for handling employee complaints regarding safety and health?

WORKPLACE ACTION
ELECTRICAL WIRING, FIXTURES, AND CONTROLS OK NEEDED
1. Are your workplace electricians familiar with the requirements of the National Electrical Code (NEC)?
2. Do you specify compliance with the NEC for all contract electrical work?
3. If you have electrical installations in hazardous dust or vapor areas, do they meet the NEC for
hazardous locations?
4. Are all electrical cords strung so they do not hang on pipes, nails, hooks, etc.?
5. Is all conduit, BX cable, etc., properly attached to all supports and tightly connected to
junction and outlet boxes?
6. Is there no evidence of fraying on any electrical cords?
7. Are rubber cords kept free of grease, oil, and chemicals?
8. Are metallic cable and conduit systems properly grounded?
9. Are portable electric tools and appliances grounded or double insulated?
Develop 10. Are all ground connections clean and tight?
your own
checklist. 11. Are fuses and circuit breakers the right type and size for the load on each circuit?
12. Are all fuses free of jumping with pennies or metal strips?
These 13. Do switches show evidence of overheating?
are only 14. Are switches mounted in clean, tightly closed metal boxes?
sample 15. Are all electrical switches marked to show their purpose?
questions.
16. Are motors clean and kept free of excessive grease and oil?
17. Are motors properly maintained and provided with adequate overcurrent protection?
18. Are bearings in good condition?
19. Are portable lights equipped with proper guards?
20. Are all lamps kept free of combustible material?
21. Is your electrical system checked periodically by someone competent in the NEC?

FIGURE 16-8 Self-Inspection Safety and Health Checklist

 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 567

ACTION Develop
EXITS AND ACCESS OK NEEDED your own
1. Are all exits visible and unobstructed? checklist.
2. Are all exits marked with a readily visible sign that is properly illuminated?
3. Are there sufficient exits to ensure prompt escape in case of emergency? These
are only
4. Are areas with restricted occupancy posted and is access/egress controlled by persons
sample
specifically authorized to be in those areas?
questions.
5. Do you take special precautions to protect employees during construction and repair
operations?
ACTION
FIRE PROTECTION OK NEEDED
1. Are portable fire extinguishers provided in adequate number and type?
2. Are fire extinguishers inspected monthly for general condition and operability and
noted on the inspection tag?
3. Are fire extinguishers recharged regularly and properly noted on the inspection tag?
4. Are fire extinguishers mounted in readily accessible locations?
5. If you have interior standpipes and valves, are these inspected regularly?
6. If you have a fire alarm system, is it tested at least annually?
7. Are employees periodically instructed in the use of extinguishers and fire
protection procedures?
8. If you have outside private fire hydrants, were they flushed within the last year and
placed on a regular maintenance schedule?
9. Are fire doors and shutters in good operating condition?
Are they unobstructed and protected against obstruction?
10. Are fusible links in place?
11. Is your local fire department well acquainted with your plant, location, and specific
hazards?
12. Automatic sprinklers:
Are water control valves, air, and water pressures checked weekly?
Are control valves locked open?
Is maintenance of the system assigned to responsible persons or a sprinkler
contractor?
Are sprinkler heads protected by metal guards where exposed to mechanical
damage?
Is proper minimum clearance maintained around sprinkler heads?

HOUSEKEEPING AND GENERAL ACTION

WORK ENVIRONMENT OK NEEDED
1. Is smoking permitted in designated safe areas only?
2. Are NO SMOKING signs prominently posted in areas containing combustibles and
flammables?
3. Are covered metal waste cans used for oily and paint-soaked waste?
Are they emptied at least daily?
4. Are paint spray booths, dip tanks, etc., and their exhaust ducts cleaned regularly?
5. Are stand mats, platforms, or similar protection provided to protect employees from
wet floors in wet processes?
6. Are waste receptacles provided and are they emptied regularly?
7. Do your toilet facilities meet the requirements of applicable sanitary codes?
8. Are washing facilities provided?
9. Are all areas of your business adequately illuminated?
10. Are floor load capacities posted in second floors, lofts, storage areas, etc.?
11. Are floor openings provided with toe boards and railings or a floor hole cover?
12. Are stairways in good condition with standard railings provided for every flight
having four or more risers?
13. Are portable wood ladders and metal ladders adequate for their purpose, in good
condition, and provided with secure footing?
14. If you have fixed ladders, are they adequate, and are they in good condition and
equipped with side rails or cages or special safety climbing devices, if required?
15. For loading docks:
Are dockplates kept in serviceable condition and secured to prevent slipping?
Do you have means to prevent car or truck movement when dockplates are in place?

FIGURE 16-8 (Continued) (Continued)

568 PART 5 EMPLOYEE RELATIONS

MACHINES AND EQUIPMENT ACTION

1. Are all machines or operations that expose operators or other employees to rotating OK NEEDED
parts, pinch points, flying chips, particles, or sparks adequately guarded?
2. Are mechanical power transmission belts and pinch points guarded?
3. Is exposed power shafting less than 7 feet from the floor guarded?
4. Are hand tools and other equipment regularly inspected for safe condition?
5. Is compressed air used for cleaning reduced to less than 30 psi?
6. Are power saws and similar equipment provided with safety guards?
7. Are grinding wheel tool rests set to within 1 8 inch or less of the wheel?
8. Is there any system for inspecting small hand tools for burred ends, cracked handles, etc.?
9. Are compressed gas cylinders examined regularly for obvious signs of defects, deep
rusting, or leakage?
10. Is care used in handling and storing cylinders and valves to prevent damage?
11. Are all air receivers periodically examined, including the safety valves?
12. Are safety valves tested regularly and frequently?
13. Is there sufficient clearance from stoves, furnaces, etc., for stock, woodwork, or other
combustible materials?
14. Is there clearance of at least 4 feet in front of heating equipment involving open flames,
such as gas radiant heaters, and fronts of firing doors of stoves, furnaces, etc.?
15. Are all oil and gas fired devices equipped with flame failure controls that will prevent
flow of fuel if pilots or main burners are not working?
16. Is there at least a 2-inch clearance between chimney brickwork and all woodwork or
other combustible materials?
17. For welding or flame cutting operations:
Are only authorized, trained personnel permitted to use such equipment?
Have operators been given a copy of operating instructions and asked to follow them?
Are welding gas cylinders stored so they are not subjected to damage?
Are valve protection caps in place on all cylinders not connected for use?
Are all combustible materials near the operator covered with protective shields or
otherwise protected?
Is a fire extinguisher provided at the welding site?
Do operators have the proper protective clothing and equipment?

Develop MATERIALS ACTION

your own OK NEEDED
checklist. 1. Are approved safety cans or other acceptable containers used for handling and
dispensing flammable liquids?
These 2. Are all flammable liquids that are kept inside buildings stored in proper storage
are only containers or cabinets?
sample 3. Do you meet OSHA standards for all spray painting or dip tank operations using
questions. combustible liquids?
4. Are oxidizing chemicals stored in areas separate from all organic material except
shipping bags?
5. Do you have an enforced NO SMOKING rule in areas for storage and use of
hazardous materials?
6. Are NO SMOKING signs posted where needed?
7. Is ventilation equipment provided for removal of air contaminants from operations
such as production grinding, buffing, spray painting and/or vapor degreasing, and is
it operating properly?
8. Are protective measures in effect for operations involved with x-rays or other radiation?
9. For lift truck operations:
Are only trained personnel allowed to operate forklift trucks?
Is overhead protection provided on high lift rider trucks?
10. For toxic materials:
Are all materials used in your plant checked for toxic qualities?
Have appropriate control procedures such as ventilation systems, enclosed opera-
tions, safe handling practices, proper personal protective equipment (such as
respirators, glasses or goggles, gloves, etc.) been instituted for toxic materials?

FIGURE 16-8 (Continued)

 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 569

ACTION
EMPLOYEE PROTECTION OK NEEDED
1. Is there a hospital, clinic, or infirmary for medical care near your business?
2. If medical and first-aid facilities are not nearby, do you have one or more employees
trained in first aid?
3. Are your first-aid supplies adequate for the type of potential injuries in your
work-place?
4. Are there quick water flush facilities available where employees are exposed to
corrosive materials?
Develop 5. Are hard hats provided and worn where any danger of falling objects exists?
your own 6. Are protective goggles or glasses provided and worn where there is any danger of
checklist. flying particles or splashing of corrosive materials?
7. Are protective gloves, aprons, shields, or other means provided for protection from
These sharp, hot, or corrosive materials?
are only
sample 8. Are approved respirators provided for regular or emergency use where needed?
questions. 9. Is all protective equipment maintained in a sanitary condition and readily available
for use?
10. Where special equipment is needed for electrical workers, is it available?
11. When lunches are eaten on the premises, are they eaten in areas where there is no
exposure to toxic materials, and not in toilet facility areas?
12. Is protection against the effect of occupational noise exposure provided when the
sound levels exceed those shown in the OSHA noise standard?

FIGURE 16-8 (Continued)

APPLICATION CASE
THE NEW SAFETY AND HEALTH PROGRAM
At first glance, a dot-com company is one of the last places The cables and wires are only one of the more obvious
you d expect to find potential safety and health hazards or potential accident-causing conditions. The firm s programmer,
so the owners of LearnInMotion.com thought. There s no before he left the firm, had tried to repair the main server while
danger of moving machinery, no high-pressure lines, no cut- the unit was still electrically alive. To this day, they re not sure
ting or heavy lifting, and certainly no forklift trucks. How- exactly where he stuck the screwdriver, but the result was that
ever, there are safety and health problems. he was blown across the room, as one manager put it. He was
In terms of accident-causing conditions, for instance, all right, but it was still a scare. And while they haven t received
the one thing dot-com companies have are cables and wires. any claims yet, every employee spends hours at his or her
There are cables connecting the computers to screens and to computer, so carpal tunnel syndrome is a risk, as are a variety
the servers, and in many cases separate cables running from of other problems such as eyestrain and strained backs.
some computers to separate printers. There are 10 tele- One recent accident particularly scared the owners. The
phones in this particular office, all on 15-foot phone lines firm uses independent contractors to deliver the firm s book-
that always seem to be snaking around chairs and tables. and DVD-based courses in New York and two other cities.
There is, in fact, an astonishing amount of cable considering A delivery person was riding his bike east at the intersection
this is an office with fewer so-called wireless connections of Second Avenue and East 64th Street in New York when he
and with fewer than 10 employees. When the installation was struck by a car going south on Second Avenue. Luckily,
specialists wired the office (for electricity, high-speed cable, he was not hurt, but the bike s front wheel was wrecked, and
phone lines, burglar alarms, and computers), they estimated the narrow escape got the firm s two owners, Mel and
they used well over 5 miles of cables of one sort or another. Jennifer, thinking about their lack of a safety program.
Most of these are hidden in the walls or ceilings, but many of It s not just the physical conditions that concern the two
them snake their way from desk to desk, and under and over owners. They also have some concerns about potential
doorways. Several employees have tried to reduce the nui- health problems such as job stress and burnout. Although
sance of having to trip over wires whenever they get up by the business may be (relatively) safe with respect to physical
putting their plastic chair pads over the wires closest to conditions, it is also relatively stressful in terms of the
them. However, that still leaves many wires unprotected. In demands it makes in hours and deadlines. It is not at all
other cases, they brought in their own packing tape and tried unusual for employees to get to work by 7:30 or 8 o clock in
to tape down the wires in those spaces where they re particu- the morning and to work through until 11 or 12 o clock at
larly troublesome, such as across doorways. night, at least 5 and sometimes 6 or 7 days per week.
570 PART 5 EMPLOYEE RELATIONS

The bottom line is that both Jennifer and Mel feel quite What should they do to reduce the potential severity of the
strongly that they need to do something about implement- top five hazards?
ing a health and safety plan. Now, they want you, their man- 2. Would it be advisable for them to set up a procedure for
agement consultants, to help them do it. Here s what they screening out stress-prone or accident-prone individuals?
want you to do for them. Why or why not? If so, how should they screen them?
3. Write a short position paper on the subject, What
should we do to get all our employees to behave more
Questions safely at work?
1. Based upon your knowledge of health and safety matters 4. Based on what you know and on what other dot-coms
and your actual observations of operations that are similar are doing, write a short position paper on the subject,
to theirs, make a list of the potential hazardous condi- What can we do to reduce the potential problems of
tions employees and others face at LearnInMotion.com. stress and burnout in our company?

CONTINUING CASE
CARTER CLEANING COMPANY
The New Safety Program A chronic problem the Carters (and most other laundry
Employees safety and health are very important matters in owners) have is the unwillingness on the part of the
the laundry and cleaning business. Each facility is a small cleaning/spotting workers to wear safety goggles. Not all
production plant in which machines, powered by high- the chemicals they use require safety goggles, but some
pressure steam and compressed air, work at high temperatures like the hydrofluoric acid used to remove rust stains from
washing, cleaning, and pressing garments, often under very garments are very dangerous. The latter is kept in special
hot, slippery conditions. Chemical vapors are produced plastic containers, since it dissolves glass. The problem is
continually, and caustic chemicals are used in the cleaning that wearing safety goggles can be troublesome. They are
process. High-temperature stills are almost continually somewhat uncomfortable, and they become smudged easily
cooking down cleaning solvents in order to remove impuri- and thus cut down on visibility. As a result, Jack has always
ties so that the solvents can be reused. If a mistake is made found it almost impossible to get these employees to wear
in this process like injecting too much steam into the still their goggles.
a boilover occurs, in which boiling chemical solvent erupts
out of the still and over the floor, and on anyone who happens
to be standing in its way. Questions
As a result of these hazards and the fact that chemically 1. How should the firm go about identifying hazardous
hazardous waste is continually produced in these stores, conditions that should be rectified? Use checklists such
several government agencies (including OSHA and the as those in Figures 16-5 and 16-8 to list at least 10 possi-
Environmental Protection Agency) have instituted strict ble dry-cleaning store hazardous conditions.
guidelines regarding the management of these plants. For 2. Would it be advisable for the firm to set up a procedure
example, posters have to be placed in each store notifying for screening out accident-prone individuals? How
employees of their right to be told what hazardous chemi- should they do so?
cals they are dealing with and what the proper method 3. How would you suggest the Carters get all employees
for handling each chemical is. Special waste-management to behave more safely at work? Also, how would you
firms must be used to pick up and properly dispose of the advise them to get those who should be wearing goggles
hazardous waste. to do so?

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The New Safety and Health Program Although hazardous conditions might not be the first
The Hotel Paris s competitive strategy is To use superior guest thing that comes to mind when you think of hotels, Lisa
service to differentiate the Hotel Paris properties, and to Cruz knew that hazards and safety were in fact serious issues
thereby increase the length of stay and return rate of guests, and for the Hotel Paris. Indeed, everywhere you look from the
thus boost revenues and profitability. HR manager Lisa Cruz valets leaving car doors open on the driveways to slippery
must now formulate functional policies and activities that areas around the pools, to tens of thousands of pounds of
support this competitive strategy by eliciting the required ammonia, chlorine, and other caustic chemicals that the
employee behaviors and competencies. hotels use each year for cleaning and laundry hotels
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 571

provide a fertile environment for accidents. Obviously, haz- morale, or the cost of litigation (as when, for instance, one
ardous conditions are bad for the Hotel Paris. They are inhu- guest accidentally burned himself with chlorine that a pool
mane for the workers. High accident rates probably reduce attendant had left unprotected). The CFO authorized Lisa to
employee morale and thus service. And accidents raise the develop a new safety and health program.
company s costs and reduce its profitability, for instance in
terms of workers compensation claims and absences. Lisa
knew that she had to clean up her firm s occupational safety Questions
and health systems. 1. Based on what you read in this chapter, what s the first
Lisa and the CFO reviewed their company s safety step the Hotel Paris should take as part of its new safety
records, and what they found disturbed them deeply. In terms and health program, and why?
of every safety-related metric they could find, including 2. List 10 specific high-risk areas in a typical hotel you
accident costs per year, lost time due to accidents, workers believe Lisa and her team should look at first, including
compensation per employee, and number of safety training examples of the safety or health hazards that they should
programs per year, the Hotel Paris compared unfavorably look for there.
with most other hotel chains and service firms. Why, just in 3. Give three specific examples of how Hotel Paris can use
terms of extra workers compensation costs, the Hotel Paris HR practices to improve its safety efforts.
must be spending $500,000 a year more than we should be, 4. Write a 1-page summary addressing the topic, How
said the CFO. And that didn t include lost time due to acci- improving safety and health at the Hotel Paris will
dents, or the likely negative effect accidents had on employee contribute to us achieving our strategic goals.

KEY TERMS
Occupational Safety and Health Act occupational illness, 534 operational safety reviews, 545
of 1970, 533 citation, 535 behavior-based safety, 548
Occupational Safety and
unsafe conditions, 539 safety awareness program, 549
Health Administration
(OSHA), 533 job hazard analysis, 543 burnout, 556

ENDNOTES
1. BP Oil Spill Timeline, guardian.co. committed to workplace safety likely Behavior Management 21, no. 2 (2001),
uk, July 22, 2010, www.guardian.co.uk/ influence employee safety behavior and, pp. 79 98.
environment/2010/jun/29/bp-oil-spill- subsequently, injuries. Jeremy Beus et al., 14. Ibid. In a similar case, in 2008 the owner
timeline-deepwater-horizon, accessed Safety Climate and Juries: An Examina- of a Brooklyn, New York, construction
June 29, 2011. tion of Theoretical and Empirical Rela- site was arrested for manslaughter when a
2. Figures for 2009. www.bls.gov/iif/oshwc/ tionships, Journal of Applied Psychology worker died in a collapsed trench.
cfoi/cfch0008.pdf, accessed June 1, 2011. 95, no. 4 (2010), pp. 713 727. Michael Wilson, Manslaughter Charge
3. All data refer to 2009. www.bls.gov/ 9. Willie Hammer, Occupational Safety in Trench Collapse, The New York Times,
news.release/archives/osh_10212010.pdf, Management and Engineering (Upper June 12, 2008, p. B1.
accessed June 1, 2011. Saddle River, NJ: Prentice Hall, 1985), 15. A Safety Committee Man s Guide, Aetna
4. BLS Likely Underestimating Injury and pp. 62 63. See also DuPont s STOP Life and Casualty Insurance Company,
Illness Estimates, Occupational Hazards, Helps Prevent Workplace Injuries and Catalog 87684, pp. 17 21.
May 2006, p. 16; Tahira Probst et al., Incidents, Asia Africa Intelligence Wire, 16. Based on All About OSHA (Washing-
Organizational Injury Rate Underreport- May 17, 2004. ton, DC: U.S. Department of Labor, 1980),
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tional Safety Climate, Journal of Applied Leadership Paradigm, Occupational Haz- 2008.
Psychology 93, no. 5 (2008), pp. 1147 1154. ards, June 2000, pp. 63 66. See also, for 17. OSHA Hazard Communication Standard
5. Workers Rate Safety Most Important example, Josh Williams, Optimizing the Enforcement, BNA Bulletin to Manage-
Workplace Issue, EHS Today, October Safety Culture, Occupational Hazards, ment, February 23, 1989, p. 13. See also
2010, p. 17. May 2008, pp. 45 49. William Kincaid, OSHA vs. Excellence
6. See, for example, Workplace Fatalities: 11. Sandy Smith, Louisiana-Pacific Corp. in Safety Management, Occupational Haz-
The Impact on Coworkers, Occupational Builds Safety into Everything It Does, ards, December 2002, pp. 34 36.
Hazards, March 2008, p. 18. Occupational Hazards, November 2007, 18. What Every Employer Needs to Know
7. David Ayers, Mapping Support for an pp. 41 42. About OSHA Record Keeping, U.S.
E. H. S. Management System, Occupational 12. See the BP case in the Appendix for Department of Labor, Bureau of Labor
Hazards, June 2006, pp. 53 54. further discussion. Statistics (Washington, DC), Report
8. One study recently concluded that, 13. Donald Hantula et al., The Value of 412 3, p. 3.
employee perceptions of the extent to Workplace Safety: A Time Based Utility 19. Arthur Sapper and Robert Gombar,
which managers and supervisors are Analysis Model, Journal of Organizational Nagging Problems under OSHAs New
572 PART 5 EMPLOYEE RELATIONS

Record-Keeping Rule, Occupational example, OSHA recently sent about 15,000 as Well as Other Nurse and Patient Out-
Hazards, March 2002, p. 58. letters to employers telling them that their comes, Personnel Psychology 50, no. 9
20. Brian Jackson and Jeffrey Myers, Just injury and illness rates were much higher (2006), pp. 847 869.
When You Thought You Were Safe: OSHA than the national average. ( OSHA Sends 45. Duane Schultz and Sydney Schultz,
Record-Keeping Violations, Management 15,000 Letters to Employers with High Psychology and Work Today (Upper Saddle
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How to Survive an OSHA Inspection, Inspections, OSHA, www.osha.gov/ the Safest Bet for the Job? Find Out Why
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Oil USA, with Murphy paying just over Occupational Hazards, January 2006, p. 59. Occupational Hazards, June 2008, pp. 45 47.
$179,000 in OSHA fines for a variety of 40. A Safety Committee Man s Guide, 54. www.osha.gov/Publications/osha3071.
violations, and OSHA proposed a penalty Aetna Life and Casualty Insurance Com- pdf, accessed, April 21, 2011.
of $195,200 against a masonry contractor pany, Catalog 87684. See also Dan 55. www-ns.iaea.org/reviews/op-safety-
with a total of 21 violations. See Enforce- Petersen, The Barriers to Safety Excel- reviews.asp, accessed April 21, 2011.
ment Briefs, Occupational Hazards, lence, Occupational Hazards, December 56. For example, when asked what accounted
March 2008, p. 13. 2000, pp. 37 39. for injuries such as cuts and lacerations,
28. www.osha.gov/Publications/osha2098. 41. Did This Supervisor Do Enough to contusions, and chemical exposure at
pdf+OSHA+inspection+priorities&hl= Protect Trench Workers? Safety Compli- their facilities, most employees concluded
en&ct=clnk&cd=1&gl=us, accessed Jan- ance Letter, October 2003, p. 9. either that workers were not wearing the
uary 19, 2008. 42. Julian Barling et al., High-Quality Work, proper protective equipment or had been
29. Enforcement Activity Increased in 1997, Job Satisfaction, and Occupational Injuries, given the wrong protection for the task.
BNA Bulletin to Management, January 29, Journal of Applied Psychology 88, no. 2 Brian Perry, Don t Invite an OSHA Cita-
1998, p. 28. See also www.osha.gov/as/opa/ (2003), pp. 276 283. tion with Lower Quality PPE, EHS Today,
osha-faq.html, accessed May 26, 2007. 43. The Dawning of a New Era, Workforce January 2011, p. 23.
30. Enforcement Activity Increased. Management, December 2010, p. 3. 57. James Zeigler, Protective Clothing: Explor-
31. For a discussion of how to deal with cita- 44. For a discussion of this, see David ing the Wearability Issue, Occupational
tions and proposed penalties, see, for Hofmann and Adam Stetzer, A Cross- Hazards, September 2000, pp. 81 82.
example, Michael Taylor, OSHA Citations Level Investigation of Factors Influencing 58. Sandy Smith, Protective Clothing and
and Proposed Penalties: How to Beat Unsafe Behaviors and Accidents, Personnel the Quest for Improved Performance,
the Rap, EHS Today, December 2008, Psychology 49 (1996), pp. 307 308. See also Occupational Hazards, February 2008,
pp. 34 36. David Hofman and Barbara Mark, An pp. 63 66.
32. Employers with high injury rates may also Investigation of the Relationship Between 59. Tim Andrews, Getting Employees Com-
be subject to additional monitoring. For Safety Climate and Medication Errors fortable with PPE, Occupational Hazards,
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 573

January 2000, pp. 35 38. Note that per- 74. Gerald Borofsky, Michelle Bielema, and Wings at Golden Eagle, Occupational
sonal protective equipment can backfire. James Hoffman, Accidents, Turnover, Hazards, February 2006, pp. 17 25; and
As one expert says, making a job safer and the Use of a Preemployment Screen- www.tsocorp.com/TSOCorp/SocialResp
with machine guards or PPE lowers peo- ing Inventory: Further Contributions to onsibility/HealthandSafety/Healthand-
ple s risk perceptions and thus can lead to the Validation of the Employee Reliability Safety, accessed June 30, 2011.
an increase in at-risk behavior. Therefore, Inventory, Psychological Reports, 1993, 88. See, for example, Josh Cable, Safety
also train employees not to let their guard pp. 1067 1076; http://www.ramsaycorp. Incentives Strategies, Occupational Haz-
down. E. Scott Geller, The Thinking and com/catalog/view/?productid=208, ards 67, no. 4 (April 2005), p. 37; Geller,
Seeing Components of People-Based accessed October 26, 2011. The Thinking and Seeing Components
Safety, Occupational Hazards, December 75. Ibid., p. 1072. See also Keith Rosenblum, of People-Based Safety.
2006, pp. 38 40. The Companion Solution to Ergonom- 89. James Nash, Construction Safety: Best
60. Laura Walter, FR Clothing: Leaving ics: Pretesting for the Job, Risk Manage- Practices in Training Hispanic Workers,
Hazards in the Dust, EHS Today, January ment 50, no 11 (November 2003), p. 26(6). Occupational Hazards, February 2004,
2010, pp. 20 22. 76. Dan Hartshorn, The Safety Interview, pp. 35 38.
61. Sandy Smith, Protecting Vulnerable Occupational Hazards, October 1999, 90. Ibid., p. 37.
Workers, Occupational Hazards, April pp. 107 111. 91. Judi Komaki, Kenneth Barwick, and
2004, pp. 25 28. 77. Gaye Reese and Joy Waltemath, Workers Lawrence Scott, A Behavioral Approach
62. Katherine Torres, Challenges in Protecting Compensation Manual for Managers and to Occupational Safety: Pinpointing
a Young Workforce, Occupational Hazards, Supervisors: A Guide to Effective Workers and Reinforcing Safe Performance in a
May 2006, pp. 24 27. Compensation Management (Chicago, IL: Food Manufacturing Plant, Journal of
63. J. P. Sankpill, A Clear Vision for Eye and CCH Incorporated, 1996), pp. 22 23; and Applied Psychology 63 (August 1978),
Face Protection, EHS Today, November J. Greenwald, Safety Concern Doesn t Bar pp. 434 445. See also Anat Arkin, Incen-
2010, p. 29. Claim for Hiring Bias, Business Insurance, tives to Work Safely, Personnel Manage-
64. See, for instance, Laura Walter, Training 42 no. 28 (July 14 2008,) pp. 3 6. ment 26, no. 9 (September 1994), pp. 48 52;
the Older Worker, EHS Today, February 78. John Rekus, Is Your Safety Training Pro- Peter Makin and Valerie Sutherland,
2011, p. 39. gram Effective? Occupational Hazards, Reducing Accidents Using a Behavioral
65. Robert Pater, Boosting Safety with an August 1999, pp. 37 39; see also, http:// Approach, Leadership and Organizational
Aging Workforce, Occupational Hazards, www.osha.gov/Publications/osha2254.pdf, Development Journal 15, no. 5 (1994),
March 2006, p. 24. accessed October 25, 2011. pp. 5 10; Sandy Smith, Why Cash Isn t
66. Michael Silverstein, M.D., Designing the 79. Laura Walter, Surfing for Safety, Occu- King, Occupational Hazards, March 2004,
Age Friendly Workplace, Occupational pational Hazards, July 2008, pp. 23 29. pp. 37 38.
Hazards, December 2007, pp. 29 31. 80. Michael Burke et al., The Dread Factor: 92. Stan Hodson and Tim Gordon, Tenneco s
67. Elizabeth Rogers and William Wiatrowski, How Hazards and Safety Training Influ- Drive to Become Injury Free, Occupational
Injuries, Illnesses, and Fatalities Among ence Learning and Performance, Journal Hazards, May 2000, pp. 85 87. For another
Older Workers, Monthly Labor Review of Applied Psychology 96, no. 1 (2011), example, see Terry Mathis, Lean Behavior-
128, no. 10 (October 2005), pp. 24 30. pp. 46 70. Based Safety, Occupational Hazards, May
68. The Complete Guide to Personal Protec- 81. James Nash, Rewarding the Safety 2005, pp. 33 34.
tive Equipment, Occupational Hazards, Process, Occupational Hazards, March 93. Tim McDaniel, Employee Participation: A
January 1999, pp. 49 60. See also Edwin 2000, pp. 29 34. Vehicle for Safety by Design, Occupational
Zalewski, Noise Control: It s More 82. Quoted in Josh Cable, Seven Suggestions Hazards, May 2002, pp. 71 76.
Than Just Earplugs: OSHA Requires for a Successful Safety Incentives Pro- 94. For another good example, see Christo-
Employers to Evaluate Engineering and gram, Occupational Hazards 67, no. 3 pher Chapman, Using Kaizen to Improve
Administrative Controls Before Using (March 2005), pp. 39 43. See also Jill Safety and Ergonomics, Occupational
Personal Protective Equipment, Occupa- Bishop, Create a Safer Work Environment Hazards, February 2006, pp. 27 29.
tional Hazards 68, no. 9 (September 2006), by Bridging the Language and Culture 95. Lisa Cullen, Safety Committees: A Smart
p. 48(3). You can find videos about personal Gap, EHS Today, March 2009, pp. 42 44. Business Decision, Occupational Hazards,
protective products at SafetyLive TV 83. See, for example, Ron Bruce, Online from May 1999, pp. 99 104. See also www.osha.
at www.occupationalhazards.com, accessed Kazakhstan to California, Occupational gov/Publications/osha2098.pdf, accessed
March 14, 2009. Hazards, June 2008, pp. 61 65. May 26, 2007; and D. Kolman, Effective
69. Robert Pater and Ron Bowles, Directing 84. Michael Blotzer, PDA Software Offers Safety Committees, Beverage Industry 100,
Attention to Boost Safety Performance, Auditing Advances, Occupational Hazards, no. 3 (March 2009), pp. 63 65.
Occupational Hazards, March 2007, December 2001, p. 11. See also Erik 96. www.aihaaps.ca/palm/occhazards.html,
pp. 46 48. Andersen Automating Health & Safety accessed April 26, 2009.
70. Jimi Michalscheck, The Basics of Lock Processes Creates Value, Occupational 97. Michael Blotzer, PDA Software Offers
Out/Tag Out Compliance: Creating an Hazards, April 2008, pp. 53 63. Auditing Advances, Occupational Haz-
Effective Program, EHS Today, January 85. Jennifer Nahrgang et al., Safety at Work: ards, December 2001, p. 11.
2010, pp. 3 37. A Meta-Analytic Investigation of the Link 98. Thomas Krause, Steps in Safety Strategy:
71. Mike Carlson, Machine Safety Solutions Between Job Demands, Job Resources, Executive Decision-Making & Metrics,
for Protecting Employees and Safeguarding Burnout, Engagement, and Safety Out- EHS Today, September 2009, p. 24.
Against Machine Hazards, EHS Today, comes, Journal of Applied Psychology 96, 99. Note that the vast majority of workers
July 2009, p. 24. no. 1 (2011), p. 86. injury-related deaths occur not at work,
72. Geller, The Thinking and Seeing Com- 86. See, for example, Cable, Seven Sugges- but when the employees are off the job,
ponents of People-Based Safety. tions for a Successful Safety Incentive often at home. More employers, including
73. William Kincaid, 10 Habits of Effective Program. See also J. M. Saidler, Gift Johnson & Johnson, are therefore imple-
Safety Managers, Occupational Hazards, Cards Make Safety Motivation Simple, menting safety campaigns encouraging
November 1996, pp. 41 43. See also Occupational Health & Safety 78, no. 1 employees to apply safe practices at home,
Sandy Smith, Breakthrough Safety (January 2009), pp. 39 40. as well as at work. Katherine Torres,
Management, Occupational Hazards, 87. Don Williamson and Jon Kauffman, Safety Hits Home, Occupational Haz-
June 2004, p. 43. From Tragedy to Triumph: Safety Grows ards, July 2006, pp. 19 23.
574 PART 5 EMPLOYEE RELATIONS

100. Michele Campolieti and Douglas Hyatt, Drug Abuse Blamed for Heightened Risk 131. William Atkinson, Turning Stress into
Further Evidence on the Monday Effect in the Workplace, Business Insurance 40 Strength, HR Magazine, January 2011,
in Workers Compensation, Industrial (October 23, 2006), p. 6. p. 51.
and Labor Relations Review 59, no. 3 119. William Current, Pre-Employment 132. Going Head to Head with Stress,
(April 2006), pp. 438 450. Drug Testing, Occupational Hazards, July Personnel Today, April 26, 2005, p. 1.
101. See, for example, Rob Wilson, Five Ways 2002, p. 56. See also William Current, 133. See, for example, Christina Maslach and
to Reduce Workers Compensation Claims, Improving Your Drug Testing ROI, Michael Leiter, Early Predictors of Job
Occupational Hazards, December 2005, Occupational Health & Safety 73, no. 4 Burnout and Engagement, Journal of
pp. 43 46. (April 2004), pp. 40, 42, 44. Applied Psychology 93, no. 3 (2008),
102. Strict Policies Mean Big Cuts in Premiums, 120. Beth Andrus, Accommodating the Alco- pp. 498 512.
Occupational Hazards, May 2000, p. 51. holic Executive, Society for Human Resource 134. Christina Maslach and Michael Leiter,
103. Workers Comp Research Provides Insight Management Legal Report, January 2008, Early Predictors of Job Burnout and
into Curbing Health Care Costs, EHS pp. 1, 4. Engagement, Journal of Applied Psychology
Today, February 2010, p. 18. 121. Eric Sundstrom et al., Office Noise, Sat- 93, no. 3 (2008), pp. 498 512.
104. See, for example, Reese and Waltemath isfaction, and Performance, Environment 135. Mina Westman and Dov Eden, Effects of
Workers Compensation Manual for Man- and Behavior, no. 2 (March 1994), a Respite from Work on Burnout: Vaca-
agers and Supervisors, pp. 36 39. pp. 195 222; and Stress: How to Cope tion Relief and Fade-Out, Journal of
105. Donna Clendenning, Taking a Bite Out with Life s Challenges, American Family Applied Psychology 82, no. 4 (1997),
of Workers Comp Costs, Occupational Physician 74, no. 8 (October 15, 2006). pp. 516 527; these results notwithstand-
Hazards, September 2000, pp. 85 86. 122. Failing to Tackle Stress Could Cost You ing, more employers are endeavoring to
106. This is based on Paul Puncochar, The Dearly, Personnel Today, September 12, provide more time off benefits o head off
Science and Art to Identifying Workplace 2006; www.sciencedaily.com/releases/2007/ burnout. See for example, S. Shellen-
Hazards, Occupational Hazards, Septem- 06/070604170722.htm, accessed Novem- barger, Companies Retool Time-Off
ber 2003, pp. 50 54. ber 3, 2009. Policies to Prevent Burnout, Reward
107. Ibid., p. 52. 123. Tara Parker-Pope, Time to Review Work- Performance, Wall Street Journal,
108. Sandy Smith, SARS: What Employers place Reviews? The New York Times, (January 5, 2006), p. D1.
Need to Know, Occupational Hazards, May 18, 2010, pp. D5. 136. Westman and Eden, op cit., p. 516.
July 2003, pp. 33 35. 124. Drug-Free Workplace: New Federal 137. Ibid., p. 526. See also Charlotte Fritz
109. Gareth Evans, Wireless Monitoring for a Requirements, BNA Bulletin to Manage- and Sabine Sonnentag, Recovery,
Safe Indoor Environment, EHS Today, ment, February 9, 1989, pp. 1 4. Note that Well-Being, and Performance-Related
December 2010, pp. 35 39. the Drug-Free Workplace Act does not Outcomes: The Role of Workload and
110. Based on the report Workplace Screening mandate or mention testing employees for Vacation Experiences, Journal of
and Brief Intervention: What Employers illegal drug use. See also www.dol.gov/ Applied Psychology 91, no. 4 (July 2006),
Can and Should Do About Excessive elaws/drugfree.htm and www.dot.gov/ p. 936(10).
Alcohol Use, www.ensuringsolutions.org/ ost/dapc (this site contains detailed guide- 138. Sabine Sonnentag et al., Staying Well
resources/resources_show.htm?doc_id=67 lines on urine sampling, who s covered, and Engaged When Demands Are High:
3239, accessed August 11, 2009. etc.), both accessed May 26, 2007. The Role of Psychological Detachment,
111. Employers Can Play Key Role in Prevent- 125. Few Employers Addressing Workplace Journal of Applied Psychology 95, no. 5
ing Painkiller Abuse, But Many Remain Stress, Watson Wyatt Surveys Find, (2010), pp. 965 976.
Reluctant, BNA Bulletin to Management, Compensation & Benefits Review, May/June 139. Todd Nighswonger, Depression: The
February 15, 2011, p. 49. 2008, p. 12. Unseen Safety Risk, Occupational Haz-
112. 15% of Workers Drinking, Drunk, or 126. See, for example, Elizabeth Bernstein, ards, April 2002, pp. 38 42.
Hungover While at Work, According to When a Coworker Is Stressed Out, 140. Ibid., p. 40.
New University Study, BNA Bulletin to The Wall Street Journal, August 26, 2008, 141. Employers Must Move from Awareness
Management, January 24, 2006, p. 27. pp. B1, B2. to Action in Dealing with Worker
113. Samuel Bacharach et al., Alcohol Con- 127. Karl Albrecht, Stress and the Manager Depression, BNA Bulletin to Manage-
sumption and Workplace Absenteeism: (Englewood Cliffs, NJ: Spectrum, 1979). ment, April 29, 2004, p. 137.
The Moderating Effect of Social Support, For a discussion of the related symptoms 142. See, for example, Felix Chima, Depression
Journal of Applied Psychology 95, no. 2 of depression, see James Krohe Jr., An and the Workplace: Occupational Social
(2010), pp. 334 348. Epidemic of Depression? Across-the- Work Development and Intervention,
114. Teresa Long, Intexicated Drivers and Board, September 1994, pp. 23 27; and Employee Assistance Quarterly 19, no. 4
Employer Liability, EHS Today, September Todd Nighswonger, Stress Management, (2004), pp. 1 20.
2009, pp. 22 23. Occupational Hazards, September 1999, 143. Ibid.
115. See, for example, Kathryn Tyler, Happi- p. 100. 144. www.OSHA.gov, downloaded May 28,
ness from a Bottle? HR Magazine, May 128. Sabine Sonnentag et al., Did You Have a 2005.
2002, pp. 30 37. Nice Evening? A Day-Level Study on 145. Anne Chambers, Computer Vision Syn-
116. New Jersey Union Takes on Mandatory Recovery Experiences, Sleep, and Affect, drome: Relief Is In Sight, Occupational
Random Drug Tests, Record (Hacken- Journal of Applied Psychology 93, no. 3 Hazards, October 1999, pp. 179 184; and
sack, NJ), January 2, 2008. (2008), pp. 674 684. www.OSHA.gov/ETOOLS/computerwork
117. Diane Cadrain, Are Your Employees Drug 129. Meditation Gives Your Mind Permanent stations/index.html, downloaded May 28,
Tests Accurate? HR Magazine, January Working Holiday; Relaxation Can Improve 2005.
2003, pp. 41 45. Your Business Decisions and Your Overall 146. Sandra Lotz Fisher, Are Your Employees
118. Frank Lockwood et al., Drug Testing Pro- Health, discussed in Investors Business Working Ergosmart?, Personnel Journal,
grams and Their Impact on Workplace Daily, March 24, 2004, p. 89. See also December 1996, pp. 91 92. See also
Accidents: A Time Series Analysis, Journal Meditation Helps Employees Focus, www.cdc.gov/od/ohs/Ergonomics/comp
of Individual Employment Rights 8, no. 4 Relieve Stress, BNA Bulletin to Manage- ergo.htm, accessed May 26, 2007.
(2000), pp. 295 306; and Sally Roberts, ment, February 20, 2007, p. 63. 147. w w w . n i n d s . n i h . g o v / d i s o r d e r s /
Random Drug Testing Can Help Reduce 130. Kathryn Tyler, Stress Management, HR repetitive_motion/repetitive_motion.htm,
Accidents for Construction Companies; Magazine, September 2006, pp. 79 82. accessed February 28, 2010.
 CHAPTER 16 EMPLOYEE SAFETY AND HEALTH 575

148. Ronald Davis, Exposure to Environmen- pp. 79 82; Chuck Mannila, How to 174. Shari Caudron, Target HR, Workforce,
tal Tobacco Smoke: Identifying and Avoid Becoming a Workplace Violence August 1998, pp. 44 52.
Protecting Those at Risk, Journal of the Statistic, Training & Development, July 175. Diane Cadrain, And Stay Out! Using
American Medical Association, December 9, 2008, pp. 60 64. Restraining Orders Can Be an Effective
1998, pp. 147 148; see also Al Karr, Light- 162. Scott Douglas and Mark Martinko, and Proactive Way of Preventing Work-
ing Up, Safety and Health 162, no. 3 (Sep- Exploring the Role of Individual Differ- place Violence, HR Magazine, August
tember 2000), pp. 62 66. ences in the Prediction of Workplace 2002, pp. 83 86.
149. However, note that some experts believe Aggression, Journal of Applied Psychology 176. Feliu, Workplace Violence, p. 393.
that in some circumstances the EEOC 86, no. 4 (2001), p. 554. 177. Louis P. DiLorenzo and Darren J. Carroll,
might see a smoking addiction as similar 163. Dawn Anfuso, Deflecting Workplace The Growing Menace: Violence in the
to use of illegal drugs, and thus possibly Violence, Personnel Journal, October 1994, Workplace, New York State Bar Journal,
covered by the ADA. Policies to Not Hire pp. 66 77; M. J. Camardella, Interview January 1995, p. 27; and Fay Hansen,
Smokers Raise Privacy, Bias Issues, BNA Questions to Avoid; Accommodations for Burden of Proof, op cit.
Bulletin to Management, December 14, Prospective Employees; Preventing Work- 178. This is based on New Challenges for
2010, p. 399. place Violence, Employment Relations Health and Safety in the Workplace,
150. Steve Bates, Where There Is Smoke, Today 29, no. 1 (Spring 2002), pp. 103 109. Workplace Visions (Society for Human
There Are Terminations: Smokers Fired 164. Alfred Feliu, Workplace Violence and the Resource Management), no. 3 (2003),
to Save Health Costs, HR Magazine 50, Duty of Care: The Scope of an Employer s pp. 2 4. See also J. L. Nash, Protecting
no. 3 (March 2005), pp. 28 29. Obligation to Protect Against the Violent Chemical Plants from Terrorists: Opposing
151. Susan Wells, Does Work Make You Fat? Employee, Employee Relations Law Views, Occupational Hazards, February
HR Magazine, October 2010, p. 28. Journal, 20, no. 3 (Winter 1994 5), p. 395; 2004, pp. 18 20.
152. Leonard Berry et al., What s the Hard Fay Hansen, Burden of Proof, Workforce 179. Survey Finds Reaction to September 11
Return on Employee Wellness Programs? Management 89, no. 2 (February 2010), Attacks Spurred Companies to Prepare
Harvard Business Review, December 2010, pp. 27 28, 30, 32 33. for Disasters, BNA Bulletin to Manage-
p. 105. 165. Ibid., p. 395. ment, November 29, 2005, p. 377.
153. Guy Toscano and Janice Windau, The 166. Preventing Workplace Violence, BNA 180. Sources of external risk include legal/
Changing Character of Fatal Work Bulletin to Management, June 10, 1993, regulatory, political, and business environ-
Injuries, Monthly Labor Review, October p. 177. See also Paul Viollis and Doug Kane, ment (economy, e-business, etc.). Internal
1994, p. 17. See also Robert Grossman, At-Risk Terminations: Protecting Employ- risks include financial, strategic, opera-
Bulletproof Practices, HR Magazine, ees, Preventing Disaster, Risk Management tional (including safety and security), and
November 2002, pp. 34 42; and Chuck 52, no. 5 (May 2005), p. 28(5). integrity (embezzlement, theft, fraud, etc.).
Manilla, How to Avoid Becoming a 167. Quoted or paraphrased from Beverly William Atkinson, Enterprise Risk Man-
Workplace Violence Statistic, Training & Younger, Violence Against Women in the agement at Wal-Mart, www.rmmag.com/
Development, July 2008, pp. 60 64. Workplace, Employee Assistance Quarterly MGTemplate.cfm?Section=RMMagazine&
154. Kelly Gurchiek, Workplace Violence on the 9, no. 3/4 (1994), p. 177, and based on rec- NavMenuID=128&template=/Magazine/
Upswing, HR Magazine, July 2005, p. 27. ommendations from Chris Hatcher. See also DisplayMagazines.cfm&MGPreview=1&V
155. www.cdc.gov/ncipc/dvp/ipv_factsheet. Viollis and Kane, At-Risk Terminations. olume=50&IssueID=205&AID=2209&Sh
pdf, accessed February 28, 2010. 168. Florida has passed a law giving employees owArticle=1, accessed April 1, 2009.
156. Manon Mireille LeBlanc and E. Kevin the right to carry guns in cars parked at 181. Focus on Corporate Security, BNA HR
Kelloway, Predictors and Outcomes of work. See Right to Carry Guns in Cars Executive Series, Fall 2001, p. 4.
Workplace Violence and Aggression, Parked at Work Becomes Loaded Issue in 182. Unless otherwise noted, the following
Journal of Applied Psychology 87, no. 3 Florida, Elsewhere, BNA Bulletin to including the six matters to address is
(2002), pp. 444 453. Management, May 13, 2008, p. 153. based on Richard Maurer, Keeping Your
157. Kenneth Diamond, The Gender-Moti- 169. Feliu, Workplace Violence, pp. 401 402. Security Program Active, Occupational
vated Violence Act: What Employers 170. Karl Aquino et al., How Employees Hazards, March 2003, pp. 49 52.
Should Know, Employee Relations Law Respond to Personal Offense: Effect of 183. http://view.fdu.edu/default.aspx?id=
Journal 25, no. 4 (Spring 2000), pp. 29 41. Blame Attribution, Victim Status, and 3705, accessed February 28, 2010.
158. Paul Viollis and Doug Kane, At Risk Offender Status on Revenge and Recon- 184. Maurer, Keeping Your Security Program
Terminations: Protecting Employees, ciliation in the Workplace, Journal of Active, p. 50.
Preventing Disaster, Risk Management Applied Psychology 86, no. 1 (2001), 185. Ibid.
Magazine 52, no. 5 (May 2005), pp. 28 33. pp. 52 59. See also M. Sandy Hershcovis 186. Bill Roberts, Are You Ready for Bio-
159. Workplace Violence: Sources and Solu- et al., Predicting Workplace Aggression: metrics? HR Magazine, March 2003,
tions, BNA Bulletin to Management, A Meta-Analysis, Journal of Applied pp. 95 99.
November 4, 1993, p. 345. See also Cre- Psychology 92, no. 1 (2007), pp. 228 238. 187. Maurer, Keeping Your Security Program
ating a Safer Workplace: Simple Steps 171. Eve Tahmincioglu, Employers Maintain- Active, p. 52.
Bring Results, Safety Now, September ing Vigilance in the Face of Layoff Rage, 188. Craig Schroll, Evacuation Planning: A
2002, pp. 1 2; and L. Claussen, Disgrun- The New York Times, August 1, 2001, Matter of Life and Death, Occupational
tled and Dangerous, Safety & Health pp. C1, C6. Hazards, June 2002, pp. 49 51.
180, no. 1 (July 2009), pp. 44 47. 172. Donna Rosato, New Industry Helps 189. Maurer, op cit., p. 52; and Li Yuan et al.,
160. OSHA Addresses Top Homicide Risk, Managers Fight Violence, USA Today, Texting When There s Trouble, The
BNA Bulletin to Management, May 14, August 8, 1995, p. 1. Wall Street Journal, April 18, 2007, p. B1.
1998, p. 148. See also www.osha.gov/ 173. Helen Frank Bensimon, What to Do 190. Louis Obdyke, Investigating Security
Publications/osha3148.pdf, accessed About Anger in the Workplace, Training Breaches, Workplace Theft, and Employee
May 26, 2007. & Development 51, no. 9 (September Fraud, Society for Human Resource Man-
161. Jean Thilmany, In Case of Emer- 1997), pp. 28 32. See also Viollis and agement Legal Report, January February
gency, HR Magazine, November 2007, Kane, At-Risk Terminations. 2003, pp. 1 2.
17
Managing Global Human
Resources
Source: Shutterstock.
LEARNING OBJECTIVES Company s
1. List the HR challenges of international business. Strategic Goals

2. Illustrate with examples how intercountry differences

affect HRM.
3. List and briefly describe the main methods for staffing
global organizations.
Employee Competencies
4. Discuss some important issues to keep in mind in
and Behaviors Required
training, appraising, and compensating international for Company to Achieve
employees. These Strategic Goals
5. Explain with examples how to implement a global
human resource management program.

Employee
Relations
S

tra nviro
n

teg nment
E
atio

ic an
Compens
W
HR Policies and Practices

d Legal
almart Stores, always resistant to unions,
recently had a surprise. Opening stores in Required to Produce
China at a fast clip, it tried to dissuade the local Employee Competencies
and Behaviors
unions from organizing Walmart employees.

nd nt

Re
However, the All China Federation of Trade Unions (ACFTU), m

Pla u
c
a g polev

e
me i

cr
with strong government backing, quickly established itself in nin eD tne emt
iarT tn
several Walmart stores. At first, it seemed that the union dna
would succeed in unionizing many Walmart Chinese workers.
But Walmart s strategy has long included avoiding unions as
one means of reducing costs, so the company was vigorously
resisting.1 WHERE ARE WE NOW . . .
More managers and employers today find
themselves managing people internationally.
The purpose of this chapter is to improve
your effectiveness at applying your human
resource knowledge and skills when global
issues are involved. The topics we ll discuss
include the internationalization of business,
intercountry differences affecting HR,
improving international assignments through
selection, and training and maintaining
international employees.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 577
578 PART 5 EMPLOYEE RELATIONS

1 List the HR challenges

The Manager s Global Challenge
of international business. With the globalization of the world economy, even small firms are discovering that
success depends on marketing and managing abroad.2 But expanding abroad
requires putting in place management systems to control overseas activities. These
systems include managerial controls, planning systems, and, of course, human
resource management systems for recruiting, selecting, training, appraising, and
compensating workers abroad.
Managing human resources internationally creates challenges. For one thing,
differences in cultures and economic and legal systems influence employer HR
practices from country to country. For example, How should we appraise and pay
our local employees? How should we deal with the unions in our offices abroad?
How do we identify and get the right talent and skills to where we need them? and
How do we spread state-of-the-art knowledge to our operations abroad? 3
Challenges like these don t just come from the vast distances involved (though this
is important). The bigger issue is coping with the cultural, political, legal, and
economic differences among countries. In China, for instance, government-backed
unions are relatively powerful, and in Europe, firing an employee could take a year or
more. The bottom line is that it s impossible to effectively manage human resource
activities abroad without understanding how countries differ culturally, economically,
and legally. The accompanying Strategic Context feature illustrates this.

THE STRATEGIC CONTEXT

Unionizing Walmart Stores in China
Walmart Stores competitive strategy is to be retailing s low-cost leader, and avoiding
unions has been one of its main tactics for keeping costs down. With more than
2.1 million employees,4 Walmart wants to keep a tight reign on employee staffing,
performance, wages, and benefits. Unions probably would drive up Walmart s labor
costs, and impede its ability to make personnel changes.
With its powerful government-backed All-China Federation of Trade Unions,
China s cultural, political, and labor relations and legal systems are a world away
from what Walmart dealt with in America. Not surprisingly, therefore, several years
ago the first trade union in Walmart China formed, followed by the firm s other
stores.5 Walmart China soon experienced the difference unions can make. The
company offered three options transfers to outlets in other cities, demotions, or
leaving the company to 54 local managers it wanted to transfer.6 Not wanting to
change, the China managers sprang into action. One led 11 colleagues to the local
municipal federation of trade unions for assistance. Whatever they did, it worked.
Walmart apparently halted its planned reshuffle. Walmart would definitely have
to revise its HR strategy for China, and probably adjust its competitive strategy for
China too.

2 Illustrate with examples how

ADAPTING HUMAN RESOURCE ACTIVITIES
intercountry differences TO INTERCOUNTRY DIFFERENCES
affect HRM.
Companies operating only within the United States generally have the luxury of
dealing with a relatively limited set of economic, cultural, and legal variables. The
United States is a capitalist, competitive society. And while the U.S. workforce reflects a
multitude of cultural and ethnic backgrounds, shared values (such as an appreciation
for democracy) help to blur cultural differences. Different states and municipalities
certainly have their own employment laws. However, a basic federal framework helps
produce a predictable set of legal guidelines regarding matters such as employment
discrimination, labor relations, and safety and health.
A company operating multiple units abroad doesn t face such homogeneity.
For example, minimum legally mandated holidays range from none in the United
Kingdom to 5 weeks per year in Luxembourg. And while Italy has no formal
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 579

FIGURE 17-1 Critical

Intercountry Differences That
Influence International Cultural
HR Practices

Labor
Political Relations
Intercountry
differences
influencing
international
HR practices

Legal Economic

requirements for employee representatives on boards of directors, they re usually

required in Denmark. The point is that managers have to be cognizant of and
generally adapt their human resource policies and practices to the countries in
which they re operating. Figure 17-1 sums up critical intercountry differences.

Cultural Factors
When Google founders Sergey Brin and Larry Page visited India a few years ago,
they reportedly came across as college backpackers. 7 They just seemed too infor-
mal, given their responsibilities for managing Google. Their experience illustrates
the fact that countries differ widely in their cultures in other words, in the basic
values their citizens adhere to, and in how these values manifest themselves in the
nation s arts, social programs, and ways of doing things.8 Cultural differences
manifest themselves in differences in how people from different countries think,
act, and expect others to act. For example, in a study of about 330 managers from
Hong Kong, Mainland China, and the United States, the U.S. managers tended to be
most concerned with getting the job done. Chinese managers were most concerned
with maintaining a harmonious environment. Hong Kong managers fell between
these extremes.9

Employers need to adapt their

HR practices to the cultures
of the countries where they
do business.
Source: Felipe Dupouy/Thinkstock.
580 PART 5 EMPLOYEE RELATIONS

THE HOFSTEDE STUDY A classic study by Professor Geert Hofstede illustrates

other international cultural differences. For example, Hofstede says societies differ on
five values, which he calls power distance, individualism, masculinity, uncertainty
avoidance, and long-term orientation. Thus, power distance represents the extent
to which the less powerful members of institutions accept and expect an unequal
distribution of power.10 He concluded that acceptance of such inequality was higher
in some countries (such as Mexico) than in others (such as Sweden).11 In turn, such
differences manifest themselves in different behaviors. To see how your country s culture
compares with others, go to www.geert-hofstede.com/hofstede_dimensions.php.
Such cultural differences influence human resource policies and practices. For
example, Americans heavier emphasis on individuality may help to explain why
European managers have more constraints, such as in dismissing workers.12 As
another example, in countries with a history of autocratic rule, employees often had
to divulge information about their coworkers. Here, whistleblower rules, popular in
America, are frowned upon.13

Economic Systems
Economists distinguish among market, planned, and mixed economies. In market
economies (such as the United States), governments play a relatively restrained role in
deciding things such as what will be produced and sold, at what prices. In planned
economies (such as North Korea), the government decides and plans what to produce
and sell, at what price. In mixed economies (such as China), many industries are still
under direct government control, while others make pricing and production decisions
based on market demand.
Differences in economic systems (and therefore in how hands off the govern-
ment wants to be) tend to translate into differences in human resource management
policies. For instance, eurozone countries tend to put more restrictions on things
such as dismissing employees and allowable work hours per week. Portuguese workers
average about 1,980 hours of work annually, while German workers average 1,648
hours. Labor costs also vary widely. For example, hourly compensation costs (in U.S.
dollars) for production workers range from $2.92 in Mexico to $6.58 in Taiwan,
$24.59 in the United States, $29.73 in the United Kingdom, and $37.66 in Germany.14
The United Kingdom and Germany require substantial severance pay to departing
employees, usually equal to at least 1 year s service in Germany.

Legal, Political, and Labor Relations Factors

Employers going abroad must be familiar with the labor law systems in the countries
they re entering. For example, in India, companies with more than 100 workers must
get government permission to fire anyone.15 In Brazil, some labor laws stem from the
labor code of pre World War II Italy, and can be fantastically costly to employers.16
Legal differences blindside even sophisticated companies. After spending billions
expanding into Germany, Walmart discovered that Germany s commercial laws
discourage ads based on price comparisons. It soon left Germany.
As other examples, the U.S. practice of employment at will does not exist in Europe,
where firing or laying off workers is usually expensive. And in many European countries,
work councils replace the worker management mediations typical in U.S. firms. Work
councils are formal, employee-elected groups of worker representatives that meet
monthly with managers to discuss topics ranging from no-smoking policies to layoffs.17
Codetermination is the rule in Germany and several other countries. Codeter-
mination means employees have the legal right to a voice in setting company policies.
Workers elect their own representatives to the supervisory board of the employer.18
In the United States, by comparison, HR policies on most matters (such as wages and
benefits) are set by the employer, or in negotiations with its labor unions.
Managing globally also requires monitoring political risks. Political risks are any
governmental actions or politically motivated events that could adversely affect the
long run profitability or value of the firm. 19 For example, the president of Venezuela
moved to nationalize his country s oil industries.
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 581

Ethics and Codes of Conduct

Employers also need to make sure their employees abroad are adhering to their firm s
ethics codes. Doing so isn t easy. Exporting a firm s ethics rules requires more than
having employees abroad use versions of its U.S. employee handbook. For example,
few countries abroad adhere to employment at will . Therefore even handbooks that
say we can fire employees at will may not be enough to enable one to dismiss
employees.20 Instead of exporting the employee handbook, some recommend creating
and distributing a global code of conduct.
Often, the employer s main concern is establishing global standards for adhering to
U.S. laws that have cross-border impacts. For example, in 2011, IBM paid $10 million
to settle accusations that it had bribed Chinese and South Korean officials to get
$54 million in government contracts.21 Such employers should set global policies on
things like discrimination, harassment, bribery, and Sarbanes-Oxley.

HR Abroad Example: The European Union

Over the past four decades, the separate countries of the former European Community
(EC) unified into a common market for goods, services, capital, and even labor called the
European Union (EU). Tariffs for goods moving across borders from one EU country
to another generally disappeared, and employees (with some exceptions) now move
freely between jobs in EU countries. The introduction of a single currency (the euro)
further blurred differences.
Companies doing business in Europe must adjust their human resource policies
and practices to EU directives, as well as to country-specific employment laws. The
directives are basically EU-wide laws. The directives objectives are binding on all
member countries (although each country can implement the directives as they
wish). For example, the EU directive on confirmation of employment requires
employers to provide employees with written terms and conditions of their employ-
ment. However, these terms vary from country to country.22 In England, a detailed
written statement is required, including things like rate of pay, date employment
began, and hours of work. Germany doesn t require a written contract, but it s still
customary to have one specifying most particulars about the job.
This interplay of directives and country laws means that an employer s human
resource practices must vary from country to country. For example:23
* Minimum EU wages. Most EU countries have minimum wage systems. Some set
national limits. Others allow employers and unions to work out their own minimum
wages.
* Working hours. The EU sets the workweek at 48 hours, but most EU countries
set it at 40 hours a week.
* Termination of employment. Required notice periods when dismissing employees
in Europe range from none in Spain to 2 months in Italy.

HR Abroad Example: China

For many years, employers inside and outside China relied on that country s huge
workforce to provide products and services at very low cost. Part of the reason for the
low labor cost was the relative lack of labor laws governing things like severance pay,
minimum wages, and benefits.
Now that is changing. Several years ago, the People s Republic of China implemented
its new labor contract law. This law adds numerous new employment protections for
employees, and makes it correspondingly more expensive for employers in China to
implement personnel actions such as layoffs. For example, multinational companies

codetermination
Employees have the legal right to a voice
in setting company policies.
582 PART 5 EMPLOYEE RELATIONS

doing business in China argue that the new law will reduce employment flexibility, raise
labor costs, and make it difficult to lay off employees by instituting new large severance
package requirements.24
All employers in China deal with issues including problems retaining good
employees and an increasingly active union movement. However, how they deal with
these issues depends on the ownership of the firm. State-owned enterprises use
fewer modern human resource management tools than do giant Chinese multi-
nationals like Lenova, for instance. There are therefore wide variations in human
resource management practices among companies in China, and between Chinese
and Western firms.25

RECRUITING Because of governmental constraints on migration and other legal

constraints, it is relatively difficult to recruit, hire, and retain good employees. At least
until recently, sporadic labor shortages were widespread and will likely return. China s
Employment Contract Law requires, among many other things, that employers report
the names, sexes, identification numbers, and contract terms for all employees they
hire within 30 days of hiring to local labor bureaus.26
In China, recruiting effectiveness depends largely on non-recruitment human
resource management issues. Employees are highly career oriented and gravitate toward
employers that provide the best career advancement training and opportunities.27
Firms like Siemens China, with impressive training and development programs, have
the least difficulty attracting good candidates. Poaching employees is a serious matter in
China. The employer must verify that the applicant is free to sign a new employment
agreement.

SELECTION The dominant employee selection method involves analyzing the

applicant s résumé and then interviewing him or her. The ideal way to do this, as we
saw in Chapter 6 (Interviewing), is to institute a structured interview process, as many
of the foreign firms in China have done.

APPRAISING Employee appraisal is particularly sensitive to the cultural realities in

China. The appraisal therefore needs to follow the formalities of saving face and avoiding
confrontational, tension-producing situations. In general, it s best to talk in terms
of objective work data (as opposed to personal comments like you re too slow ).

COMPENSATION Although many managers endorse performance-based pay

in China, many employers, to preserve group harmony, make incentive pay a small
part of the pay package. And, as in other parts of Asia, team incentives are advisable.28

3 List and briefly describe the

STAFFING THE GLOBAL ORGANIZATION
main methods for staffing Employers focus today is increasingly on managing human resource activities locally.
global organizations. In other words, their main concern is on selecting, training, appraising, and managing
the in-country employees where they do business.
However, deciding whether to fill local positions with local versus expatriate
( imported ) employees has been and continues to be a major concern. The process
involves identifying and selecting the people who will fill the positions, and then placing
them in those positions.

International Staffing: Home or Local?

Companies doing business internationally employ several types of international
employees. Locals are citizens of the countries where they are working. Expatriates
( expats ) are noncitizens of the countries in which they are working (an American
working in France is an expat).29 Home-country nationals are citizens of the country
in which the multinational company has its headquarters (so an American working
for GM s subsidiary in China is a home-country national, as well as an expat).
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 583

Third-country nationals are citizens of a country other than the parent or the host
country for example, a British executive working in the Tokyo branch of a U.S.
multinational bank.30 Expatriates still represent a minority of multinationals
managers. Locals fill most positions.31

USING LOCALS There are many reasons employers rely more on locals. For one
thing, the cost of using expatriates is usually far greater than the cost of using local
workers.32 In one survey, employers reported a 21% attrition rate for expatriate
employees, compared with an average of 10% for their general employee populations.33
Local people may view the multinational as a better citizen if it uses local management
talent; some governments even press for staffing with local management.34 There may
also be a fear that expatriates, knowing they re at the foreign subsidiary for only a few
years, may overemphasize short-term results.35 Some companies are surprised at what
it costs to post someone abroad. Agilent Technologies routinely estimated that it cost
about three times the expatriate s annual salary to keep the person abroad for 1 year.
When Agilent outsourced its expatriate program, it discovered that the costs were much
higher. The firm then dramatically reduced the number it sent abroad, from about
1,000 to 300 per year.36
It s also become more difficult to bring workers into the United States from abroad.
Under rules now in effect, U.S. employers must try to recruit U.S. workers before filing
foreign labor certification requests with the Department of Labor. In particular,
employers must post open positions in the Department of Labor s job bank and
(at least) run two Sunday newspaper advertisements before filing such requests.37

USING EXPATS Yet there are also reasons for using expatriates either home-
country or third-country nationals for staffing subsidiaries. The main reason is
usually that employers can t find local candidates with the required technical qualifi-
cations. Multinationals have also viewed a successful stint abroad as a required step
in developing top managers. Control is another reason for using expatriates.
The assumption is that home-country managers are already steeped in the firm s
policies and culture, and thus more likely to apply headquarters ways of doing things.
However, for the past 10 years or so the trend has definitely been toward using
locals or other (non-expat) solutions. Posting expatriates abroad is expensive, security
problems increasingly give potential expatriates pause, returning expatriates often
leave for other employers within a year or two of returning, educational facilities are
turning out top-quality candidates abroad, and the recent global recession made
the cost of posting employees abroad even more unattractive. As a result, new expatri-
ate postings are not only down, but many employers are bringing them home early.38
Another survey found that about 47% of U.S. multinationals were maintaining the size
of their expat workforces; 18% were increasing it, and 35% were decreasing the
number of expatriates.39 The human resource team needs to control expat expenses, as
the accompanying HR as a Profit Center explains.

HR AS A PROFIT CENTER
Reducing Expatriate Costs
Given the expense of sending employees (often, dozens or hundreds of employees)
abroad for overseas assignments, the employer s human resource team plays a
central role in controlling and reducing expatriate costs. A recent survey by Mercer
(Mercer s International Assignments Survey 2010) shows some of the steps HR
managers are taking to reduce these expenses. (Mercer provides consulting,
outsourcing, and investment services to employers worldwide.)40 First, companies
(continued)

expatriates (expats) home-country nationals third-country nationals

Noncitizens of the countries in which Citizens of the country in which the Citizens of a country other than the parent
employees are working. multinational company has its headquarters. or the host country.
584 PART 5 EMPLOYEE RELATIONS

are upping the numbers of short-term assignments they make. This lets them use
lower cost short-term assignments to replace some long-term assignments
that require supporting expats (and their families) abroad for extended periods.
Fifty percent of the companies Mercer surveyed are also replacing some expatriate
postings with local hires. With an eye on cutting costs, many employers were
reviewing their firms policies regarding such things as housing, education and
home leave, along with expatriate allowances and premiums (cost-of-living
allowance and mobility/quality-of-living premiums).41

OTHER SOLUTIONS The choice is not just between expatriate versus local
employees. For example, there are other short-term or commuter solutions. These
involve frequent international travel but no formal relocation.42
One survey found that about 78% of surveyed employers had some form of
localization policy. This is a policy of transferring a home-country national
employee to a foreign subsidiary as a permanent transferee. Here the employer
doesn t treat the employee (who assumedly wants to move abroad) as an expatriate,
but instead as a local hire.43 For example, U.S. IBM employees originally from India
eventually filled many of the 5,000 jobs that IBM recently shifted from the United
States to India. These employees elected to move back to India, albeit at local India
pay rates. Other firms use Internet-based video technologies and group decision-
making software to enable global virtual teams to do business without either travel or
relocation.44

USING TRANSNATIONAL VIRTUAL TEAMS Managing internationally may

require the services of a transnational team, one composed of employees whose
locations and activities span many countries.45 For example, a European beverage
manufacturer formed a 13-member European Production Task Force with members
from its facilities in five countries. Its task was to analyze how many factories the firm
should operate in Europe, what size they should be, and where to place them.46
Often, such teams don t meet face to face, but work in virtual environments.
Virtual teams are groups of geographically dispersed coworkers who interact using a
combination of telecommunications and information technologies to accomplish an
organizational task.
Virtual teams are popular. Strategic partnerships and joint ventures often require
employees of partner companies to act together as a team, although they work for
different companies and in different locales.47 To facilitate the merger of Marion
Laboratories and Merrell Dow Pharmaceuticals the companies created a global
virtual team comprised of members from production sites in Asia, Europe, and
North America. The team helped overcome potential merger integration problems,
and produced improved productivity and profits.48
Virtual teams depend on information technology. With desktop videoconferencing
systems often the heart of such systems, communication among team members can
embrace the body language and nuances of face-to-face communications.49 Such teams
also use collaborative software systems. Microsoft offers a NetMeeting conference
system. When combined with products like Framework Technologies Corp.s Active-
Project 5.0, virtual team members can hold live project reviews and discussions and
then store the sessions on the project s Web site.50
But the main challenges that virtual teams face are people related. These include
building trust, cohesion, team identity, and overcoming the isolation among team
members. Success therefore depends on various human resource management-related
actions. In particular, train virtual team members in leadership, conflict management,
and meetings management, and to respond swiftly to virtual teammates.51 Give virtual
team members a realistic preview of the potential for feeling detached. Select
virtual team members using behavioral and situational interviews, where they describe
how they d respond to illustrative virtual team situations. And, use current virtual
team members to help recruit and select new team members; and empower the
virtual team to do its job.52
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 585

Offshoring
As explained in Chapter 4 (Recruiting), offshoring is an important international
staffing issue. Offshoring means having local employees abroad do jobs that the firm s
domestic employees previously did in-house. For example, IBM recently announced
that it was shifting about 5,000 U.S. software and sales jobs to India.53
Offshoring is a uniquely human resource management dependent activity. Firms
once went abroad primarily to develop new markets or to open up new manufacturing
facilities. Here marketing, sales, and production executives played the pivotal roles.
Offshoring, on the other hand, depends on human resource management. Employers
look to their HR managers to help identify high-quality, low-cost talent abroad,
and to provide information on things like literacy, foreign wage rates, and working
conditions. The human resource manager must also see that employees receive
the screening, training, and compensation that they require. The firm may have
to retain local legal counsel, both to navigate local laws and for advice on local hiring
practices.54

Management Values and International Staffing Policy

Various factors like technical competence determine whether firms use locals or
expatriates abroad. But (for better or worse) it s not just hard facts that influence
such decisions. The top executives personal inclinations and values also play a
role. Some executives are just more expat-oriented. For example, some experts
classify top executives values as ethnocentric, polycentric, or geocentric. We ll look
at each.

ETHNOCENTRIC PRACTICES In an ethnocentrically oriented corporation, the

prevailing attitude is that home-country attitudes, management style, knowledge,
evaluation criteria, and managers are superior to anything the host country might
have to offer. 55
Such values translate into particular employment practices. With an ethno-
centric staffing policy, the firm fills key management jobs with parent-country
nationals.56 Reasons given for ethnocentric staffing policies include lack of qualified
host-country senior management talent, a desire to maintain a unified corporate
culture and tighter control, and the desire to transfer the parent company s core
competencies (for instance, a specialized manufacturing skill), to a foreign subsidiary
more expeditiously.57

POLYCENTRIC PRACTICES In the polycentric corporation, there is a conscious

belief that only host-country managers can ever really understand the culture
and behavior of the host-country market; therefore, the foreign subsidiary should be
managed by local people. 58
A polycentric-oriented firm would staff its foreign subsidiaries with host-country
nationals, and its home office with parent-country nationals. Such polices may reduce
the local cultural misunderstandings that might occur if it used expatriate managers.
It will also almost undoubtedly be less expensive.59

GEOCENTRIC PRACTICES Geocentric executives believe that the best manager

for a specific position anywhere may be in any of the countries in which the firm
operates. Thus, Sony Corporation appointed as CEO someone from Wales who d run
the firm s U.S. operations.

virtual teams ethnocentric polycentric

Groups of geographically dispersed The notion that home-country attitudes, A conscious belief that only the host-country
coworkers who interact using a combination management style, knowledge, evaluation managers can ever really understand the
of telecommunications and information criteria, and managers are superior to culture and behavior of the host-country
technologies to accomplish an organizational anything the host country has to offer. market.
task.
586 PART 5 EMPLOYEE RELATIONS

A geocentric staffing policy seeks the best people for key jobs throughout the
organization, regardless of nationality. 60 This can let the global firm use its human
resources more fully by transferring the best person to the open job, wherever he or
she may be. Such cross-pollination can also help build a stronger and more consistent
culture and set of values among the entire global management team.

Selecting Expatriate Managers

The processes that firms use to select managers for their domestic and foreign
positions obviously have many similarities. For either assignment, candidates need
the technical knowledge and skills to do the job, and the intelligence and people skills
to be successful managers.61 Testing, interviewing, and background checks are as
applicable for selecting expatriates as for domestic assignments.
However, selection for foreign assignments is different. For example, there is the
stress that being alone in a foreign land can put on the single manager. And if spouse
and children will share the assignment, there are the pressures that the family will
have to confront abroad. Furthermore, it s not just how different culturally the host
country is from the person s home country. Rather, the person s adaptability is
important. Some people adapt anywhere; others fail to adapt anywhere.62
How do firms select global managers? Recent analyses of expatriate practices
across countries suggest several things. Traditionally, most selection of expatriates
appears to be done solely on the basis of successful records of job performance in the
home country. 63 However, best practices in international assignee selection now
include providing realistic previews to prospective international assignees, facilitating
self-selection to enable expatriate candidates to decide for themselves if the assign-
ments are right for them, and traditional selection procedures focusing on traits such as
openness.64 Over the past two decades there s also been an increase in the number
of expatriate selection criteria that companies use. Selection criteria include technical/
professional skills, expatriates willingness to go, experience in the country,
personality factors (including flexibility), leadership skills, the ability to work with
teams, and previous performance appraisals in the selection process. There has also
been a big decline in U.S. companies premature return rates, suggesting that employers
are more successful at sending expatriates abroad.65

SELECTION TESTING Selecting managers for assignments abroad therefore

means testing them for traits that predict success in working abroad. Research
here is evolving. An early study asked 338 international assignees from various
countries to specify which traits were important for the success in a foreign assignment.
They identified five factors: job knowledge and motivation, relational skills,
flexibility/adaptability, extra-cultural openness, and family situation (spouse s
positive opinion, willingness of spouse to live abroad, and so on). Figure 17-2
shows some of the specific items that comprise the five factors. Family situation
was the most important.66
Subsequent research focused on one of these factors, adaptability. Adaptability
screening aims to assess the assignees (and spouses ) probable success in handling
the foreign transfer, and to alert them to issues (such as the impact on children) the
move may involve.67 Here, experience is often the best predictor of future success.
Employers therefore look for overseas candidates whose work and nonwork experi-
ence, education, and language skills already demonstrate a commitment to and
facility for living and working with different cultures. Even several summers traveling
overseas or participating in foreign student programs might suggest that the potential
transferee can adjust when he or she arrives overseas.
More recent research focuses on identifying what it takes to succeed in a global
environment. In one study, researchers interviewed 200 senior international
managers, and surveyed 5,000 managers worldwide.68 They report that success
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 587

FIGURE 17-2 Five Factors

I. Job Knowledge and Motivation Flexibility
Important in International
Managerial ability Emotional stability
Assignee Success and Their
Organizational ability Willingness to change
Components
Imagination Tolerance for ambiguity
Source: Based on Arthur Winfred Jr. Creativity Adaptability
and Winston Bennett Jr., The Administrative skills Independence
International Assignee: The Relative Alertness Dependability
Importance of Factors Perceived to Responsibility Political sensitivity
Contribute to Success, Personnel
Psychology 18 (1995), pp. 106 107. Industriousness Positive self-image
Initiative and energy
IV. Extracultural Openness
High motivation
Variety of outside
Frankness
interests
Belief in mission and job
Interest in foreign cultures
Perseverance
Openness
II. Relational Skills Knowledge of local
Respect language(s)
Courtesy Outgoingness and
Display of respect extroversion
Kindness Overseas experience
Empathy
V. Family Situation
Nonjudgmental
Adaptability of spouse
Integrity
and family
Confidence
Spouse s positive opinion
III. Flexibility/Adaptability Willingness of spouse
Resourcefulness to live abroad
Ability to deal with stress Stable marriage

abroad hinges on having a global mind-set, a mind-set that has intellectual,

psychological, and social components:
intellectual capital, or knowledge of international business and the capacity to
learn; psychological capital, or openness to different cultures and the capacity
to change; and social capital, the ability to form connections, to bring people
together, and to influence stakeholders including colleagues, clients, suppliers,
and regulatory agencies who are unlike you in cultural heritage, professional
background, or political outlook.69
Many firms use tests such as the Overseas Assignment Inventory (OAI). This
identifies the characteristics and attitudes international assignment candidates
should have. Its publisher establishes local norms and conducts ongoing validation
studies.70 Figure 17-3 illustrates the OAI. Realistic previews are also important.
These should cover the problems to expect in the new job (such as extensive travel)
as well as the cultural benefits, problems, and idiosyncrasies of the target country.
The rule, say experts, should always be to spell it all out ahead of time.71

LEGAL ISSUES In selecting employees for assignments abroad, managers need to

consider the legal issues. As we explained in Chapter 2 (EEOC), American equal
employment opportunity laws, including Title VII, the ADEA, and the ADA, affect
qualified employees of U.S. employers doing business abroad, and foreign firms doing
business in the United States or its territories.72 If equal employment opportunity
laws conflict with the laws of the country in which the U.S. employer is operating, the
laws of the local country generally take precedence.73

geocentric adaptability screening

The belief that the firm s whole management A process that aims to assess the assignees
staff must be scoured on a global basis, (and spouses ) probable success in handling
on the assumption that the best manager a foreign transfer.
of a specific position anywhere may be in any
of the countries in which the firm operates.
588 PART 5 EMPLOYEE RELATIONS

Sample excerpt from the

OVERSEAS ASSIGNMENT INVENTORY
Welcome!
Enter the login information you were provided in the box on the left. This will direct you to a registration page before proceeding to your survey.

This site contains:

Overseas Assignment Inventory A tool designed to assess cultural adaptability for employees and spouses going on international
expatriate assignments.

Global Assessment Inventory A development tool designed to assess factors related to success in multicultural interactions.

Demographics
Please complete the demographic information requested. Note, your answers will not impact the survey results. Upon completion, you will be directed to
the survey.

Background Information

Employee or Spouse/Partner: Employee Spouse/Partner

Gender: Male Female

Nationality:

Age:

Number of Children:

Have Traveled Outside of Country of Citizenship: Yes No

Have Lived Outside of Country of Citizenship: Yes No

Employment

Destination Country:

Current Country Location:

Submit

Survey Questions (page 1 of 6)

Read each survey question carefully and select the bubble that corresponds to your choice. When answering the questions, keep in mind that there are
no right or wrong answers. Choose the response that is reflective of what you think and do most of the time. Some of the questions appear similar;
actually no two are exactly alike. Please answer each one without regard to the others.

Strongly Agree Agree Uncertain Disagree Strongly Disagree

1 2 3 4 5

1. I do not want to compromise my present standard of living. 1 2 3 4 5

2. The environment I am comfortable with is similar to that in my destination country. 1 2 3 4 5

3. Generally, my spouse/partner and I understand each other. 1 2 3 4 5

4. I am generally one of the first to speak and take charge in a group. 1 2 3 4 5

5. It is very clear to me how my work on this assignment will be evaluated. 1 2 3 4 5

6. I am fluent in the language spoken in my destination country. 1 2 3 4 5

FIGURE 17-3 Overseas Assignment Inventory

Source: Copyright © 2008. Prudential Relocation. Reprinted with permission of Prudential Relocation. All rights reserved. May
not be further copied, reproduced, or republished in any medium without the express written permission of Prudential Relocation.
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 589

Avoiding Early Expatriate Returns

A major criterion of expatriate assignment failure is the early, unplanned return of the
expatriate. Systematizing the entire expatriate management process is the first step
in avoiding an early return. For example, employers should have an expatriate policy
covering matters such as compensation and transfer costs. Have procedures, for
instance, requiring that the managers responsible for the expat s budget obtain all chain
of command approvals.74 Similarly, before selecting someone to send abroad,
understand where the main potential problems lie.

TRAITS OF SUCCESSFUL EXPATRIATES As noted earlier, having the right

traits improves the odds the expat will succeed. For example, in a study of 143
expatriate employees, extroverted, agreeable, and emotionally stable individuals were
less likely to leave early.75 Furthermore, intentions are important; people who want
expatriate careers try harder to adjust to them.76 Similarly, expatriates who are more
satisfied with their jobs are more likely to adapt to the foreign assignment.77 Some
people are so culturally at ease that they adapt easily. 78

FAMILY PRESSURES Nonwork factors like family pressures loom large in expatriate
failures. In one study, U.S. managers listed, in descending order of importance for
leaving early: inability of spouse to adjust, managers inability to adjust, other family
problems, managers personal or emotional immaturity, and inability to cope with
larger overseas responsibility.79
Such findings underscore a truism about selecting international assignees:
The problem is usually not incompetence, but family and personal problems.
Yet, as noted, employers still often select expatriates mostly based on technical
competence.80
Given the role of family problems in expatriate failures, the employer should
understand just how unhappy and cut off the expatriate manager s spouse can feel
in a foreign environment. Here is how the spouse of one expat put it:81

It s difficult to make close friends. So many expats have their guard up, not want-
ing to become too close. Too many have been hurt, too many times already,
becoming emotionally dependent on a friend only to have the inevitable
happen one or the other gets transferred. It s also difficult to watch your
children get hurt when their best friend gets transferred. Although I have many
acquaintances, I have nowhere near the close friends I had in the States.
My spouse therefore has become my rock.82

One study identified three things that make it easier for spouses to adjust. First is
language fluency, since spouses will feel even more cut off if they can t make themselves
understood. Second, having preschool-age children (rather than school-age children or
no children) seemed to make it easier for the spouse to adjust. This suggests that
younger children, perhaps because of their increased dependency, help spouses retain
that part of their social identities: as parents, their responsibilities for these children
remain the same. 83 Third, it helps that there be a strong bond of closeness between
spouse and expat partner. This provides the continuing emotional and social support
many spouses find lacking abroad.

WHAT EMPLOYERS CAN DO So, employers can do several things to boost the
odds that assignments abroad will go smoothly. Providing realistic previews of what
to expect, carefully screening expat and spouse, improved orientation, and improved
benefits packages are obvious solutions. Another is simply to shorten the length of the
assignment. Person job match is also important, insofar as expatriates who are more
satisfied with their jobs are more likely to adapt to the foreign assignment.84 Helping
spouses get jobs abroad and providing more support to the expat and his or her
family are also important.85 Some employers set up global buddy programs. Here
local managers mentor new expatriates.86
 590 PART 5 EMPLOYEE RELATIONS

4 Discuss some important

TRAINING AND MAINTAINING EMPLOYEES ABROAD
issues to keep in mind Orienting and Training Employees
in training, appraising,
and compensating
on International Assignment
international employees. When it comes to the orientation and training required for expatriate success overseas,
the practices of most U.S. employers reflect more talk than substance. Executives tend
to agree that international assignees do best when they receive the special training
(in things like language and culture) that they require. Fewer actually provide it.
However, numerous training vendors do offer packaged cross-cultural pre-
departure training programs. In general, the programs use lectures, simulations,
videos, and readings to prepare trainees. Their offerings illustrate the aim and content
of such programs. One program aims to provide the trainee with (1) the basics of the
new country s history, politics, business norms, education system, and demographics;
(2) an understanding of how cultural values affect perceptions, values, and communi-
cations; and (3) examples of why moving to a new country can be difficult, and how
to manage these challenges.87 Another aims to boost self-awareness and cross-
cultural understanding, to provide opportunities for anxieties to be addressed, and
to reduce stress and provide coping strategies.88 A third prepares individuals and their
families to interact successfully in daily life and business situations abroad;
understand the impact various factors have on cultural behaviors and attitudes
to make the most of the living abroad experience; and to raise awareness of the
challenges of moving abroad, culture shock and how to deal with exposure to new
cultural experiences. 89
Some employers use returning managers as resources to cultivate the global
mind-sets of those departing. For example, Bosch holds regular seminars, where new
arrived returnees pass on their experience to managers and their families going abroad.

ONGOING TRAINING Beyond such pre-departure training, more firms are

providing continuing, in-country cross-cultural training during the early stages of an
overseas assignment.
For example, managers abroad (both expats and locals) continue to need tradi-
tional skills-oriented development. At many firms, including IBM, such development
includes rotating assignments to help overseas managers grow professionally. IBM
and other firms also have management development centers around the world where
executives can hone their skills. And classroom programs (such as those at the
London Business School or at INSEAD in France) provide overseas executives
the educational opportunities (to acquire MBAs, for instance) that similar stateside
programs do for their U.S.-based colleagues.
In addition to honing these managers skills, international development activities
hopefully have other, less tangible benefits. For example, rotating assignments can
Many global employers bring help managers form bonds with colleagues around the world. These can help the
their international managers managers form the informal networks they need to make cross-border decisions
together periodically for training more expeditiously.
seminars. PepsiCo encourages expatriates to engage in local social
activities, such as Latin dance lessons in Mexico City and table
tennis tournaments in China, to help them become acclimated
faster to local cultures.90

Appraising Managers Abroad

No single best practice global appraisal standard seems
to exist, given the diversity of country environments and firm-
specific differences involved.91 However, several issues must be
Source: Shutterstock.

addressed.
The question of who actually appraises managers abroad
is crucial.92 Local management must have some input, but
cultural differences may distort the appraisals. Thus, host-
country bosses might evaluate a U.S. expatriate manager
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 591

in India somewhat negatively if they find his or her use of participative decision
making culturally inappropriate. On the other hand, home-office managers may be so
out of touch that they can t provide valid appraisals. Similarly, the procedure may be
to measure the expatriate by objective criteria such as profits and market share.
However, local events (such as political instability) may affect the manager s perform-
ance while remaining invisible to home-office staff. Some suggestions for improving
expatriate appraisals follow.
1. Stipulate the assignment s difficulty level, and adapt the performance criteria to
the situation.
2. Weigh the evaluation more toward the on-site manager s appraisal than toward
the home-site manager s appraisal.
3. If the home-office manager does the actual written appraisal, have him or her use a
former expatriate from the same overseas location for advice.

Compensating Managers Abroad

The whole area of international compensation presents some tricky problems. On the
one hand, there is logic in maintaining company-wide pay scales and policies so that,
for instance, you pay divisional marketing directors throughout the world within
the same range. This reduces the risk of perceived inequities, and simplifies the job
of keeping track of country-by-country wage rates.
Yet not adapting pay scales to local markets will produce more problems than it
solves. The fact is it can be enormously more expensive to live in some countries (like
Japan) than others (like India); if these cost-of-living differences aren t considered, it
will be almost impossible to get managers to take high-cost assignments. One way
to handle this problem is to pay a similar base salary company-wide, and then add on
various allowances according to individual market conditions.93
However, determining equitable wage rates in many countries is not simple.
There is a wealth of packaged compensation survey data available in the United
States, but such data are not so easy to come by overseas. As a result, one of the great-
est difficulties in managing multinational compensation is obtaining consistent
compensation measures between countries.
Some multinational companies conduct their own local annual compensation
surveys. For example, Kraft conducts an annual study of total compensation in
Belgium, Germany, Italy, Spain, and the United Kingdom. It focuses on all forms of
compensation paid to each of 10 senior management positions held by local nationals
in these firms.

THE BALANCE SHEET APPROACH The most common approach to formulating

expatriate pay is to equalize purchasing power across countries, a technique known as
the balance sheet approach.94 More than 85% of North American companies reportedly
use this approach.
The basic idea is that each expatriate should enjoy the same standard of living he
or she would have had at home. The balance sheet approach addresses four groups
of expenses income taxes, housing, goods and services, and discretionary expenses
(child support, car payments, and the like). The employer estimates each of these four
expenses in the expat s home country, and in the host country. The employer then
pays any differences such as additional income taxes or housing expenses.
The base salary will normally be in the same range as the manager s home-
country salary. In addition, however, there might be an overseas or foreign service
salary premium. The executive receives this as a percentage of his or her base salary,
in part to compensate for the cultural and physical adjustments he or she will have
to make.95 There may also be several allowances, including a housing allowance and
an education allowance for the expatriate s children. To help the expatriate manage
his or her home and foreign financial obligations, most employers use a split pay
approach; they pay, say, half a person s actual pay in home-country currency and
half in the local currency.96
592 PART 5 EMPLOYEE RELATIONS

TABLE 17-1 The Balance Sheet Approach (Assumes U.S.

Base Salary of $160,000)
Shanghai, China
Annual Expense Chicago, U.S. (US$ Equivalent) Allowance

Housing & utilities $35,000 $44,800 $9,800

Goods & services 6,000 7,680 1,680
Taxes 44,800 57,344 12,544
Discretionary income 10,000 12,800 2,800
Total $95,800 $122,624 $26,824

Table 17-1 illustrates the balance sheet approach for someone transferring from
Chicago to Shanghai, China. The U.S. Government State Departments estimates the
cost of living in Shanghai at 128% of the U.S. cost of living.97 In this case, the manager s
base salary is $160,000, and she faces a U.S. income tax rate of 28%. Other costs are
based on the index of living costs abroad published in the U.S. Department of State
Indexes of Living Costs Abroad, Quarters Allowances, and Hardship Differentials,
available at http://aoprals.state.gov/content.asp?content_id= 186&menu_id=81.
Employers also pay their expatriates and local managers abroad performance
incentives. Executive compensation systems around the world are becoming more
similar.98 U.S. firms that offer overseas managers long-term incentives often use overall
corporate performance criteria (like worldwide profits) when awarding incentive pay.

EXPATRIATE PAY EXAMPLE As a specific example, expats working for the

company CEMEX:
get foreign service premium equal to a 10% increase in salary. Some get a hardship
premium, depending on the country; it ranges from zero in a relatively comfortable
posting to, for example, 30% in Bangladesh. We pay for their housing. We pay for
their children s schooling up to college. There s home leave a ticket back to their
home country for the entire family once a year. There are language lessons for the
spouse. And we gross up the pay of all expats, to take out the potential effects of
local tax law. Say you have an executive earning $150,000. This person would cost
close to $300,000 as an ex-pat.99

INCENTIVES Employers use various incentives in international compensation.

First, as mentioned, employers pay various incentives to encourage the employee to
take the job abroad. For example, foreign service premiums are financial payments
over and above regular base pay. These typically range from 10% to 30% of base pay,
and appear as weekly or monthly salary supplements. Hardship allowances compen-
sate expatriates for hard living and working conditions at certain foreign locations.
(U.S. diplomats posted to Iraq receive about a 70% boost in base salary, among other
incentives.100) Mobility premiums are typically lump-sum payments to reward
employees for moving from one assignment to another.
In terms of buying power, American managers don t rank near the top in terms of
managerial pay. Companies are operating in an increasingly open and competitive
global economy, and emerging markets are offering managers higher disposable
incomes than established countries. Average disposable income for managers ranges
from about $72,000 in Indonesia to $98,000 in France; $105,000 in the United States;
$124,000 in Brazil; $149,000 in the Ukraine; and $229,000 in Saudi Arabia.101

STEPS IN ESTABLISHING A GLOBAL PAY SYSTEM Balancing global

consistency in compensation with local considerations starts with establishing a
rewards program that makes sense in terms of the employer s overall strategic
needs.102 Then the employer can turn to more micro issues, such as, is how we re
paying our employees abroad competitive? And are we basing our overseas pay
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 593

decisions on credible and defendable market data ?103 Steps to follow in creating a
global pay system include these:104
Step 1: Set strategy. First, formulate strategic goals for the next five years, for
instance, in terms of improving productivity or boosting market share.
Step 2: Identify crucial executive behaviors. Next, identify the actionable behaviors
you expect your executives to exhibit in order to pursue these strategic goals.
Step 3: Global philosophy framework. Next, step back and ask how you want each
pay component to contribute to prompting those executive actions and
achieving the company s strategic goals.
Step 4: Identify gaps. Next, review your existing rewards programs around the
world. The question is, To what extent do our pay plans around the world
support our strategic aims?
Step 5: Systematize pay systems. Next, create more consistent performance assess-
ment practices, and establish consistent job requirements and performance
expectations for similar jobs worldwide.
Step 6: Adapt pay policies. Finally, review your global pay policies (for setting
salary levels, incentives, and so forth). Conduct surveys and analyses to
assess local pay practices. Then, fine-tune the firm s global pay policies
so they make sense for each location.

Labor Relations Abroad

Firms opening subsidiaries abroad face substantial differences in labor relations practices
among countries and regions. This is important, because while union membership is
dropping in the United States, it is still relatively high abroad, and unions abroad thus
tend to be more influential. Walmart, for instance, has successfully neutralized attempts
to organize its U.S. employees, but had to accept unions in many of its stores in China.
As an example, unions in Europe are influential and labor management
bargaining and relations reflect this fact. In general, four issues characterize European
labor relations:
* Centralization. Collective bargaining in Western Europe tends to be industry-
wide, whereas in the United States it generally occurs at the enterprise or plant
level.
* Employer organization. Due to the prevalence of industry-wide bargaining
in Europe, employers tend to bargain via employer associations, rather than as
individual employers.
* Union recognition. Union recognition is less formal than in the United States.
For example, even if a union represents 80% of an employer s workers, another
union can try to organize the other 20%.
* Content and scope of bargaining. U.S. labor management agreements specify
wages, hours, and working conditions. European agreements tend to be brief and
to leave individual employers free to institute more generous terms.

Terrorism, Safety, and Global HR

TERRORISM Whether it s off the coast of Somalia or walking down the street in
Brazil, businesspeople may be subject to express kidnapping , wherein they re kid-
napped, hopefully for just long enough to get a ransom payment from a bank or ATM.105
Even stationing employees in assumedly safe countries is no guarantee there won t
be problems. A few years ago workers (certainly not terrorists) in French factories
of Sony Corp., Caterpillar Inc., and 3M Co. took their managers hostage in order to

foreign service premiums hardship allowances mobility premiums

Financial payments over and above regular Payments that compensate expatriates Typically, lump-sum payments to reward
base pay, typically ranging between 10% for exceptionally hard living and working employees for moving from one assignment
and 30% of base pay. conditions at certain locations. to another.
594 PART 5 EMPLOYEE RELATIONS

negotiate better benefits for laid off employees.106 Developments like these had already
prompted employers to take steps to protect their expat and foreign employees better,
for instance, evacuation plans to get employees to safety, if that becomes necessary.

TAKING PROTECTIVE MEASURES Legally, employers have a duty of care for

protecting international assignees and their dependents and international business
travelers.107 Employers are doing so in a variety of ways. Many employers purchase
intelligence services for monitoring potential terrorist threats abroad. The head of
one intelligence firm estimates such services as costing $6,000 $10,000 per year.108
Many employers retain crisis management teams services. They then call on these
teams, for instance, when criminal elements kidnap one of their managers. As one
insurance executive puts it, When you have a specialist, there s a better chance to
get the person back. 109
Retaining risk management companies ahead of time can prove valuable in a volatile
world. For example, when the protests erupted in Egypt in February 2011, Medex Global
Solutions evacuated more than 500 client employees from Egypt, and had already been
advising their employer clients about the possibilities for political unrest.110

KIDNAPPING AND RANSOM (K&R) INSURANCE Hiring crisis teams and

paying ransoms can be prohibitively expensive for all but the largest firms, so many
employers buy kidnapping and ransom (K&R) insurance. Various events may trigger
payments under such policies. The obvious ones are kidnapping (for instance, the
employee is a hostage until the employer pays a ransom), extortion (threatening bodily
harm), and detention (holding an employee without any ransom demand).
The insurance typically covers several costs associated with kidnappings, abduc-
tions, or extortion. These costs might include hiring a crisis team, the actual cost of the
ransom payment to the kidnappers or extortionists, insuring the ransom money
in transit, legal expenses, and employee death or dismemberment.111
Keeping business travelers out of crime s way is a specialty all its own, but suggestions
here include the following.112
* Provide expatriates with general training about traveling, living abroad, and the
destination, so they re more oriented when they arrive.
* Tell them not to draw attention to the fact that they re Americans by wearing
flag emblems, for instance.
* Have travelers arrive at airports as close to departure time as possible and wait in
areas away from the main flow of traffic.
* Equip the expatriate s car and home with security systems.
* Tell employees to vary their departure and arrival times and take different routes
to and from work.
* Keep employees current on crime and other problems by regularly checking the
State Department s travel advisory service (click on Country Specific Information
at http://travel.state.gov/).
* Advise employees to remain confident at all times: Body language can attract
perpetrators, and those who look like victims often become victimized.113

Repatriation: Problems and Solutions

One of the most worrisome facts about sending employees abroad is that 40% to 60%
of them will probably quit within 3 years of returning home.114 Given the investment
the employer makes in training and sending these high-potential people abroad, it
makes sense to try to make sure they stay with the firm. For this, formal repatriation
programs can be useful.115 One study found that about 5% of returning employees
resigned if their firms had formal repatriation programs, while about 22% of those left
if their firms had no such programs.116
Probably the simplest thing the employer can do to improve repatriates retention
is to value their experience more highly. As one returnee put it: My company was,
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 595

in my view, somewhat indifferent to my experience in China as evidenced by a

lack of monetary reward, positive increase, or leverage to my career in any way.
Such feelings then prompt the person to look elsewhere for opportunities.117
Before repatriating the manager, it s essential that the expatriate and his or
her family not feel that the firm left them adrift. To that end, AT&T has a 3-part
repatriation program, one that starts before the employee goes abroad.118 First,
AT&T matches the expat and his or her family with a psychologist trained in repa-
triation issues. The psychologist meets with the family before they go abroad.
The psychologist discusses the challenges they will face abroad, assesses with
them how well he or she thinks they will adapt to their new culture, and stays in
touch with them throughout their assignment. (Other firms provide written
repatriation agreements. These guarantee in writing that the company won t
keep the expat abroad for more than some period, such as 3 years, and that on
Source: M. Thatcher/Shutterstock.

return he or she will receive a mutually acceptable job.)

Second, AT&T makes sure that the employee always feels that he or she is still
in the loop with what s happening back at the home office. For example, AT&T
assigns the expatriate a mentor. It also periodically brings the expat back to the
home office to meet with and to socialize with colleagues.
Third, once it s time for the expatriate employee and his or her family to
return home, AT&T provides formal repatriation services. About 6 months before
the overseas assignment ends, the psychologist and an HR representative meet
AT&T makes sure that the with the expat and the family, to start preparing them for the return. For example,
employee always feels that he they help plan the employee s next career move, help the person update his or her
or she is still in the loop with
résumé, and begin putting the person in contact with supervisors back home. They
what s happening back at the
home office.
work with the person s family on the logistics of the move back. Then, about a month
after returning home, the expat and family attend a welcome home seminar, to
discuss matters like the stress of repatriation.119

Improving Productivity through HRIS

Taking the HRIS Global
For global firms, it makes particular sense to expand the firm s human resource informa-
tion systems to the firm s operations abroad. For example, when Buildnet, Inc., decided to
automate and integrate its separate systems for things like applicant tracking, training, and
compensation, it chose a Web-based software package called MyHRIS from NuView, Inc.
(www.nuviewinc.com). This Internet-based system includes human resource and benefits
administration, applicant tracking and résumé scanning, training administration, and
succession planning and development.120 With MyHRIS, managers at any of the firm s
locations around the world can access and update more than 200 built-in reports such as
termination summary or open positions. 121 The firm s home-office managers can
access data on and monitor global human resource activities on a real-time basis.
Similarly, employers are taking their employee self-service HR portals interna-
tional. For example, consider Time Warner s Employee Connection portal. It lets
Time Warner s 80,000 worldwide employees self-manage much of their benefits,
compensation planning, merit review, and personal information updating online.122

5 Explain with examples

MANAGING HR LOCALLY: HOW TO PUT
how to implement a global INTO PRACTICE A GLOBAL HR SYSTEM
human resource
management program.
With employers increasingly relying on local rather than expatriate employees, trans-
ferring one s selection, training, appraisal, pay, and other human resource practices
abroad is a top priority. But, given the cross-cultural and other differences, one could
reasonably ask, Is it realistic for a company to try to institute a standardized human
resource management system in its facilities around the world?
A study suggests that the answer is yes. In brief, the study s results show that
employers may have to defer to local managers on some specific human resource
management policy issues. However, the findings also suggest that big intercountry
596 PART 5 EMPLOYEE RELATIONS

FIGURE 17-4 Best Practices

for Creating Global HR Systems

Implement the Develop the

international HR international HR
system and practices, system, such as by
such as by allocating forming global
adequate resources networks

Take steps to ensure

the system is
acceptable to those
who must implement
it, such as by investigating
pressures to differentiate practices

HR practice differences are often not necessary or even advisable. The important
thing is how you implement the global human resource management system.
In this study, the researchers interviewed human resource personnel from six
global companies Agilent, Dow, IBM, Motorola, Procter & Gamble, and Shell Oil
Co. as well as international human resources consultants.123 The study s overall
conclusion was that employers who successfully implement global HR systems do so
by applying several best practices. The basic idea is to develop systems that are
acceptable to employees in units around the world, and ones that the employers can
implement more effectively. Figure 17-4 summarizes this. We ll look at each of these
three requirements best practices.

Developing a More Effective Global HR System

First, these employers engage in two best practices in developing their worldwide
human resource policies and practices.
Form global HR networks. To head off resistance, human resource managers
around the world should feel that they re part of the firm s global human resource
management team. The researchers found that in developing global HR systems,
the most critical factor is creating an infrastructure of partners around the world
that you use for support, for buy-in, for organization of local activities, and to help
you better understand their own systems and their own challenges. 124 Treat the
local human resource managers as equal partners. For instance, they formed
global teams to help develop the new human resources systems.
Remember that it s more important to standardize ends and competencies
than specific methods. For example, IBM uses a more or less standardized
recruitment and selection process worldwide. However, details such as who
conducts the interview (hiring manager vs. recruiter), or whether the prescreen
is by phone or in person, differ by country. 125

Making the Global HR System More Acceptable

Next, employers engage in three best practices so that the global human resource systems
they develop will be acceptable to local managers around the world. These practices
include:
Remember that truly global organizations find it easier to install global systems.
For example, truly global companies require their managers to work on global teams,
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 597

and to identify, recruit, and place the employees they hire globally. As one Shell
manager put it, If you re truly global, then you are hiring here [the United States]
people who are going to immediately go and work in the Hague, and vice versa. 126
This global mind-set makes it easier for managers everywhere to accept the wisdom
of having a standardized human resource management system.
Investigate pressures to differentiate and determine their legitimacy. Local
managers will insist, You can t do that here, because we are different culturally.
These researchers found that these differences are usually not persuasive.
For example, when Dow wanted to implement an online recruitment and
selection tool abroad, the hiring managers there said that their managers would
not use it. After investigating the supposed cultural roadblocks, Dow successfully
implemented the new system.127
The operative word here is investigate. Carefully assess whether the
local culture or other differences might in fact undermine the new system.
Be knowledgeable about local legal issues, and be willing to differentiate where
necessary.
Try to work within the context of a strong corporate culture. Companies that
create a strong corporate culture find it easier to obtain agreement among
far-flung employees. For example, because of how P&G recruits, selects, trains,
and rewards them, its managers have a strong sense of shared values. For
instance, new recruits quickly learn to think in terms of we instead of I.
They learn to value thoroughness, consistency, self-discipline, and a methodical
approach. Because all P&G managers worldwide tend to share these values, they
are in a sense more similar to each other than they are geographically different.
Having such global unanimity in values makes it easier to implement
standardized human resource practices worldwide.

Implementing the Global HR System

Finally, two best practices helped ensure success in actually implementing the globally
consistent human resource policies and practices.
You can t communicate enough. There s a need for constant contact with the
decision makers in each country, as well as the people who will be implementing
and using the system. 128
Dedicate adequate resources. For example, don t require the local human
resource management offices to implement new job analysis procedures unless
the head office provides adequate resources for these additional activities.

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. The internationalization of business influences 2. Staffing the global organization is a major challenge.
employers HR processes. The big issue is coping with Companies may use expatriates, home-country nationals,
the cultural, political, legal, and economic differences or third-country nationals. Offshoring means having local
among countries. For example, citizens of different employees abroad do jobs that domestic employees
countries adhere to different values, and countries have previously did in-house. Employers seeking to gain cost
differing economic systems as well as different legal, advantages by offshoring rely on their HR managers
political, and labor relations systems. to help identify high-quality, low-cost talent abroad.
598 PART 5 EMPLOYEE RELATIONS

Top management values will influence how they staff Labor relations tend to be different abroad from
their operations abroad. Ethnocentric companies tend what they are in the United States. For instance,
to emphasize home-country attitudes, polycentric com- there s a much greater emphasis on centralized
panies focus more on host-country employees, and bargaining in Europe.
geocentric employers try to pick the best candidates from With terrorism a threat, most employers today take
wherever they might be. Selecting employees to success- protective measures, including buying kidnapping
fully work abroad depends on several things, most and ransom insurance.
importantly on adaptability screening and on making sure To reduce the chronic problem of turnover among
that each employee s spouse and family get the realistic newly returned employees, it s important to have
previews, counseling, and support necessary to make well-thought-out repatriation programs. These
the transition abroad. Successful expatriates tend to be emphasize keeping employees in the loop as far as
extroverted, agreeable, and emotionally stable individuals. what s happening in their home offices, bringing
3. After selecting the employees to send abroad, attention them back to the office periodically, and providing
turns to training and maintaining your expatriate formal repatriation services for the expatriate
employees. and his or her family to start preparing them for
the return.
In terms of pre-departure preparation, training efforts
ideally first cover the impact of cultural differences; 4. With employers increasingly relying on local rather
then, the focus moves to getting participants to than expatriate employees, it s important for managers
understand how attitudes influence behavior, to understand how to implement a global HR system.
providing factual knowledge about the target Studies suggest that it is realistic for a company to try to
country, and developing skills in areas like language institute standardized human resource management
and adjustment. practices at their facilities around the world, although it
In compensating expatriates, most employers use the may be necessary to fine-tune them to the needs
balance sheet approach; this focuses on four groups of the specific facility. The basic approach involves
of expenses: income taxes, housing, goods and three steps. (1) Develop a more effective global HR
services, and discretionary expenses. The balance sheet system (by forming global HR networks and remem-
approach aims to provide supplements in such a way bering that it s more important to standardize ends
that the employee s standard of living abroad is about rather than specific methods). (2) Make the global HR
what it would have been at home. It s usual to apply system more acceptable (for instance, by taking a global
incentives such as foreign service premiums and approach to everything the company does, by investi-
hardship allowances to get employees to move abroad. gating pressures to differentiate and determining their
Distance complicates the issue of appraising expatriate legitimacy, and by creating a strong company culture).
managers, so it s prudent to let both the home-office (3) Implement the global system (by emphasizing con-
supervisor and the manager s local superior contribute tinuing communications and by ensuring that adequate
to the appraisal. resources are available).

DISCUSSION QUESTIONS
1. You are the president of a small business. What are some 5. What special training do overseas candidates need? In
of the ways you expect going international will affect what ways is such training similar to and different from
HR activities in your business? traditional diversity training?
2. What are some of the specific, uniquely international activi- 6. How does appraising an expatriate s performance differ
ties an international HR manager typically engages in? from appraising that of a home-office manager? How
3. What intercountry differences affect HRM? Give several would you avoid some of the unique problems of
examples of how each may specifically affect HRM. appraising the expatriate s performance?
4. You are the HR manager of a firm that is about to send 7. As an HR manager, what program would you establish
its first employees overseas to staff a new subsidiary. to reduce repatriation problems of returning expatriates
Your boss, the president, asks you why such assignments and their families?
often fail, and what you plan to do to avoid such failures.
How do you respond?

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, outline an expatria- 2. Give three specific examples of multinational corpora-
tion and repatriation plan for your professor, whom tions in your area. Check on the Internet or with each firm
your school is sending to Bulgaria to teach HR for the to determine in what countries these firms have opera-
next 3 years. tions. Explain the nature of some of their operations, and
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 599

summarize whatever you can find out about their interna- would be suitable for inclusion in the HRCI exam;
tional employee selection and training HR policies. and (4) if time permits, have someone from your team
3. Choose three traits useful for selecting international post your team s questions in front of the class, so
assignees, and create a straightforward test to screen the students in other teams can take each others exam
candidates for these traits. questions.
4. Use a library or Internet source to determine the relative 6. An issue of HR Magazine contained an article titled
cost of living in five countries as of this year, and explain Aftershocks of War, which said that soldiers returning
the implications of such differences for drafting a pay to their jobs from Iraq would likely require HR s
plan for managers being sent to each country. assistance in coping with delayed emotional trauma.
5. The HRCI Test Specifications Appendix (pages The term delayed emotional trauma refers to the person-
633 640) lists the knowledge someone studying for ality changes such as anger, anxiety, or irritability and
the HRCI certification exam needs to have in each area of associated problems such as tardiness or absenteeism
human resource management (such as in Strategic that exposure to the traumatic events of war sometimes
Management, Workforce Planning, and Human Resource triggers in returning veterans. Assume you are the
Development). In groups of four to five students, do four HR manager for the employer of John Smith, who is
things: (1) review that appendix now; (2) identify the returning to work next week after 1 year in Iraq. Based
material in this chapter that relates to the required on what you read in this chapter, what steps would you
knowledge the appendix lists; (3) write four multiple- take to help ensure that John s reintegration into your
choice exam questions on this material that you believe workforce goes as smoothly as possible?

EXPERIENTIAL EXERCISE
A Taxing Problem for Expatriate Employees
Purpose: The purpose of this exercise is to give you practice expatriate s U.S. federal income tax liabilities. Go to the Inter-
identifying and analyzing some of the factors that influence nal Revenue Service s Web site, www.irs.gov. Scroll down to
expatriates pay. Individuals, and go to Overseas Taxpayers. Your team is the
expatriate-employee compensation task force for your com-
Required Understanding: You should be thoroughly familiar pany, and your firm is about to send several managers and
with this chapter and with the Web site www.irs.gov. engineers to Japan, England, and Hong Kong. What informa-
tion did you find on the site that will help your team formulate
How to Set Up the Exercise/Instructions: expat tax and compensation policies? Based on that, what are
Divide the class into teams of four or five students. Each team the three most important things your firm should keep in
member should read the following: One of the trickiest aspects mind in formulating a compensation policy for the employees
of calculating expatriates pay relates to the question of the you re about to send to Japan, England, and Hong Kong?

APPLICATION CASE
BOSS, I THINK WE HAVE A PROBLEM
Central Steel Door Corporation has been in business for He tried for 3 weeks to find a sales manager by advertising
about 20 years, successfully selling a line of steel industrial- in the International Herald Tribune, which is read by busi-
grade doors, as well as the hardware and fittings required for nesspeople in Europe and by American expatriates living and
them.129 Focusing mostly in the United States and Canada, working in Europe. Although the ads placed in the Tribune
the company had gradually increased its presence from the also ran for about a month on the Tribune s Web site,
New York City area, first into New England and then down Mr. Fisher so far has received only five applications. One
the Atlantic Coast, then through the Midwest and West, and came from a possibly viable candidate, whereas four came
finally into Canada. The company s basic expansion strategy from candidates who Mr. Fisher refers to as lost souls
was always the same: Choose an area, open a distribution people who seem to have spent most of their time traveling
center, hire a regional sales manager, and then let that aimlessly from country to country, sipping espresso in side-
regional sales manager help staff the distribution center and walk cafés. When asked what he had done for the last 3 years,
hire local sales reps. one told Mr. Fisher he d been on a walkabout.
Unfortunately, the company s traditional success in Other aspects of his international HR activities have
finding sales help has not extended to its overseas opera- been equally problematic. Fisher alienated two of his U.S.
tions. With the introduction of the new euro European sales managers by sending them to Europe to temporarily
currency in 2002, Mel Fisher, president of Central Steel run the European operations, but neglecting to work out a
Door, decided to expand his company abroad, into Europe. compensation package that would cover their relatively high
However, the expansion has not gone smoothly at all. living expenses in Germany and Belgium. One ended up
600 PART 5 EMPLOYEE RELATIONS

staying the better part of the year, and Mr. Fisher was rudely notice, and the local authorities here are really up in arms.
surprised to be informed by the Belgian government that Boss, I think we have a problem.
his sales manager owed thousands of dollars in local taxes.
The two managers had hired about 10 local people to staff
each of the two distribution centers. However, the level of Questions
sales was disappointing, so Fisher decided to fire about half 1. Based on this chapter and the case incident, compile a
the distribution center employees. That s when he got an list of 10 international HR mistakes Mr. Fisher has made
emergency phone call from his temporary sales manager in so far.
Germany: I ve just been told that all these employees 2. How would you have gone about hiring a European
should have had written employment agreements and that sales manager? Why?
in any case we can t fire anyone without at least 1 year s 3. What would you do now if you were Mr. Fisher?

CONTINUING CASE
CARTER CLEANING COMPANY
Going Abroad As he drove home to have dinner with Jennifer, he began
With Jennifer gradually taking the reins of Carter Cleaning to formulate the questions he would have to ask before
Company, Jack decided to take his first long vacation in years deciding whether to expand abroad.
and go to Mexico for a month in January 2008. What he
found surprised him: While he spent much of the time
basking in the sun in Acapulco, he also spent considerable Questions
time in Mexico City and was surprised at the dearth of 1. Assuming they began by opening just one or two stores in
cleaning stores, particularly considering the amount of air Mexico, what do you see as the main HR-related challenges
pollution in the area. Traveling north, he passed through he and Jennifer would have to address?
Juarez, Mexico, and was similarly surprised at the relatively 2. How would you go about choosing a manager for a new
few cleaning stores he found there. As he drove back into Mexican store if you were Jack or Jennifer? For instance,
Texas, and back toward home, he began to think about would you hire someone locally or send someone from
whether it would be advisable to consider expanding his one of your existing stores? Why?
chain of stores into Mexico. 3. The cost of living in Mexico is substantially below that of
Aside from the possible economic benefits, he liked what where Carter is now located: How would you go about
he saw in the lifestyle in Mexico and was also attracted by the developing a pay plan for your new manager if you
idea of possibly facing the sort of exciting challenge he had decided to send an expatriate to Mexico?
faced 20 years ago when he started Carter Cleaning in the 4. Present a detailed explanation of the factors you would
United States: I guess entrepreneurship is in my blood, look for in your candidate for expatriate manager to run
is the way he put it. the stores in Mexico.

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
Managing Global Human Resources abroad, they had to return her abruptly when the family
The Hotel Paris s competitive strategy is, To use superior guest complained bitterly of missing their friends back home. Lisa
service to differentiate the Hotel Paris properties, and to knew this was no way to run a multinational business. She
thereby increase the length of stay and return rate of guests, and turned her attention to developing the HR practices her com-
thus boost revenues and profitability. HR manager Lisa Cruz pany required to do business more effectively internationally.
must now formulate functional policies and activities that On reviewing the data, it was apparent to Lisa and the
support this competitive strategy by eliciting the required CFO that the company s global human resource practices
employee behaviors and competencies. were probably inhibiting the Hotel Paris from being the
With hotels in 11 cities in Europe and the United States, world-class guest services company that it sought to be. For
Lisa knew that the company had to do a better job of manag- example, high-performing service and hotel firms had
ing its global human resources. For example, there was no for- formal departure training programs for at least 90% of the
mal means of identifying or training management employees employees they sent abroad; the Hotel Paris had no such
for duties abroad (either for those going to the United States programs. Similarly, with each city s hotel operating its own
or to Europe). As another example, recently, after spending local hotel HR information system, there was no easy way for
upwards of $600,000 sending a U.S. manager and her family Lisa, the CFO, or the company s CEO to obtain reports on
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 601

metrics like turnover, absences, or workers compensation incoming employees from abroad, like those in the
costs across all the different hotels. As the CFO summed it Hotel Paris s management development program, will
up, If we can t measure how each hotel is doing in terms of adapt to their new surroundings.
human resource metrics like these, there s really no way to 2. In previous chapters you recommended various
manage these activities, so there s no telling how much lost human resource practices Hotel Paris should use.
profits and wasted efforts are dragging down each hotel s Choose one of these, and explain why you believe they
performance. Lisa received approval to institute new global could take this program abroad, and how you suggest
human resources programs and practices. they do so.
3. Choose one Hotel Paris human resources practice that
you believe is essential to the company achieving its
Questions high-quality-service goal, and explain how you would
1. Provide a 1-page summary of what individual hotel implement that practice in the firm s var ious ho-
managers should know in order to make it more likely tels worldwide.

KEY TERMS
codetermination, 580 virtual teams, 584 adaptability screening, 586
expatriates (expats), 582 ethnocentric, 585 foreign service premiums, 592
home-country nationals, 582 polycentric, 585 hardship allowances, 592
third-country nationals, 583 geocentric, 586 mobility premiums, 592

ENDNOTES
1. http://talkingunion.wordpress.com/2008/ (1992), pp. 664 671. See also P. Christopher 19. Helen Deresky, International Manage-
09/27/is-union-reform-possible-in- Earley and Elaine Mosakowski, Cultural ment (Upper Saddle River, NJ: Prentice
china, accessed March 25, 2009. Intelligence, Harvard Business Review, Hall, 2008), p. 17.
2. See, for example, Kimberly Manion, October 2004, pp. 139 146. 20. Donald Dowling Jr., Export Codes of Con-
Venturing Abroad, HR Magazine, June 10. www.geert-hofstede.com/, accessed June 1, duct, Not Employee Handbooks, Society for
2008, pp. 86 90. 2011. Human Resource Management Legal Report,
3. See, for example, Chris Rowley and 11. See also Vas Taras, Bradley Kirkman, and January/February 2007, pp. 1 4.
Malcolm Warner, Introduction: Global- Piers Steel, Examining the Impact of 21. www.nytimes.com/2011/03/19/business/
izing International Human Resource Culture s Consequences: A Three Decade, global/19blue.html, accessed June 30,
Management, International Journal of Multilevel, Multi-Analytic Review of 2011.
Human Resource Management 18, no. 5 Hofstadter s Cultural Value Dimensions, 22. Phillips Taft and Cliff Powell, The European
(May 2007), p. 703(14). Journal of Applied Psychology 95, no. 3 Pensions and Benefits Environment: A
4. www.hoovers.com/company/Wal-Mart_ (2010), pp. 405 439. Complex Ecology, Compensation & Benefits
Stores_Inc/rrjiff-1.html, accessed June 1, 12. Chris Brewster, European Perspectives on Review, January/February 2005, pp. 37 50.
2011. Human Resource Management, Human 23. Ibid.
5. First Wal-Mart Union Begins in China, Resource Management Review 14 (2004), 24. Lisbeth Clause, What You Need to Know
www.huffingtonpost.com/2008/08/03/fir pp. 365 382. About the New Labor Contract Law of
st-wal-mart-union-begi_n_116629.html, 13. SOX Compliance, Corporate Codes of China, SHRM Global Law Special
accessed June 30, 2011. Conduct Can Create Challenges for U.S. Report, October to November 2008.
6. Based on Wal-Mart s Reshuffle Plan in Multinationals, BNA Bulletin to Manage- 25. See, for example, Syed Akhtar et al., Strate-
China Falters, www.chinadaily.com.cn/ ment, March 28, 2006, p. 97. gic HRM Practices and Their Impact on
china/2009-04/21/content_7699105.htm, 14. Annual 2007 figures, www.bls.gov/news. Company Performance in Chinese Enter-
accessed June 30, 2011. release/pdf/ichcc.pdf, accessed February 19, prises, Human Resource Management 47,
7. Claire Miller, New Book on Google 2010. no. 1 (Spring 2008), pp. 15 32.
Shows Gaps in China, The New York 15. In India,101 Employees Pose Big Problems, 26. Andreas Lauffs, Chinese Law Spurs
Times, April 1, 2011, p. B3. Bloomberg Businessweek, January 17 23, Reforms, HR Magazine, June 2008,
8. A. L. Lytle, J. M. Brett, Z. Barsness, C. H. 2011, p. 13. pp. 92 98.
Tinsley, and M. Janssens, A Paradigm for 16. Employer Beware, The Economist, 27. See, for example, Kathryn King-Metters
Quantitative Cross-Cultural Research in March 12, 2011, p. 43. and Richard Metters, Misunderstanding
Organizational Behavior, in B. M. Staw & 17. See, for example, www.fedee.com/ewc1. the Chinese Worker, The Wall Street
L. L. Cummings (Eds), Research in Organi- html, accessed November 4, 2009. Journal, July 7, 2008, p. R11.
zational Behavior 17 (1995), pp. 167 214. 18. This is discussed in E. Gaugler, HR Man- 28. Gary Dessler, Expanding into China?
9. David Ralston, David Gustafson, Priscilla agement: An International Comparison, What Foreign Employers Entering China
Elsass, Fannie Cheung, and Robert Personnel, 1988, p. 28. E. Poutsma et al., Should Know About Human Resource
Terpstra, Eastern Values: A Comparison of The Diffusion of Calculative and Colla- Management Today, SAM Advanced
Managers in the United States, Hong Kong, borative HRM Practices in European Management Journal, August 2006. See
and the People s Republic of China, Firms, Industrial Relations 45, no. 4 also Joseph Gamble, Introducing Western-
Journal of Applied Psychology 71, no. 5 (October 2006), pp. 513 546. Style HRM Practices to China: Shop Floor
602 PART 5 EMPLOYEE RELATIONS

Perceptions in a British Multinational, 45. Charles Snow, Scott Snell, Sue Canney 62. Sunkyu Jun and James Gentry, An
Journal of World Business 41, no. 4 Davison, and Donald Hambrick, Use Exploratory Investigation of the Relative
(December 2006), pp. 328 340; and Transnational Teams to Globalize Your Importance of Cultural Similarity and
Adrienne Fox, China: Land of Opportu- Company, Organizational Dynamics, Personal Fit in the Selection and Perfor-
nity and Challenge, HR Magazine, Sep- Spring 1996, pp. 50 67. mance of Expatriates, Journal of World
tember 2007, pp. 38 44. 46. Ibid. Business 40, no. 1 (February 2005),
29. John Daniels and Lee Radebaugh, 47. Anthony Townsend, Samuel DiMarie, and pp. 1 8. See also Jan Selmer, Cultural
International Business (Upper Saddle Anthony Hendrickson, Virtual Teams: Novelty and Adjustment: Western Busi-
River, NJ, Prentice Hall, 2001), p. 767. Technology and the Workplace of the ness Expatriates in China, International
30. Arvind Phatak, International Dimensions of Future, Academy of Management Executive Journal of Human Resource Management
Management (Boston: PWS Kent, 1989), 12, no. 3 (1998), pp. 17 29. Christina Gib- 17, no. 7 (2006), pp. 1211 1222.
p. 106. See also Charles Hill, International son and Susan Cohen, Virtual Teams That 63. Mary G. Tye and Peter Y. Chen, Selection of
Business: Competing in the Global Market- Work: Creating Conditions for Virtual Team Expatriates: Decision-Making Models Used
place (Burr Ridge, IL: Irwin McGraw-Hill, Effectiveness (Jossey-Bass: San Francisco, by HR Professionals, Human Resource
2001), pp. 564 566. 2004), provides practicing managers with Planning 28, no. 4 (December 2005), p.
31. Daniels and Radebaugh, International valuable insights into organizing and man- 15(6).
Business, p. 767. aging virtual teams. Many companies use 64. Paula Caligiuri et al., Selection for Interna-
32. Ibid., p. 769; Phatak, International Dimen- international virtual teams to coordinate tional Assignments, Human Resource Man-
sions of Management, p. 106. research and development type projects. agement Review 19 (2009), pp. 251 262.
33. Survey Says Expatriates Twice as Likely Bjorn Ambos and Bodo Schlemglmich, 65. Zsuzsanna Tungli and Maury Peiperl,
to Leave Employer as Home-Based The Use of International R&D Teams: An Expatriate Practices in German, Japanese,
Workers, BNA Bulletin to Management, Empirical Investigation of Selected Con- UK and US Multinational Companies: A
May 9, 2006, p. 147. tingency Factors, Journal of World Business Comparative Survey of Changes, Human
34. Phatak, International Dimensions of Man- 39, no. 1 (February 2004), pp. 37 48. Resource Management 48, no. 1 (January
agement, p. 108. 48. Michael Harvey et al., Challenges to Staffing February 2009), pp. 153 171.
35. Daniels and Radebaugh, International Global Virtual Teams, Human Resource 66. Winfred Arthur Jr. and Winston Bennett
Business, p. 769. Management Review 14 (2004), p. 281. Jr., The International Assignee: The Rela-
36. Leslie Klass, Fed Up with High Costs, 49. Ibid., p. 20. tive Importance of Factors Perceived to
Companies Winnow the Ranks of Career 50. Christa Degnan, ActiveProject Aids Contribute to Success, Personnel Psychology
Expats, Workforce Management, October Teamwork, PC Week, May 31, 1999, p. 35. 48 (1995), p. 110; Gretchen Spreitzer,
2004, pp. 84 88. 51. Except as noted, this is based on informa- Morgan McCall Jr., and Joan Mahoney,
37. DOL Releases Final Rule Amending Fil- tion in Bradley Kirkman et al., Five Chal- Early Identification of International
ing, Processing of Foreign Labor Certifi- lenges to Virtual Team Success: Lessons Executive Potential, Journal of Applied
cations, BNA Bulletin to Management, from Sabre, Inc., Academy of Management Psychology 82, no. 1 (1997), pp. 62 69.
January 11, 2005, p. 11. Executive 16, no. 3 (2002), p. 70. 67. Phatak, International Dimensions of Manage-
38. Michelle Rafter, Return Trip for Expats, 52. This item based on Bradley Kirkman et al., ment, p. 119. See also Arno Haslberger, The
Workforce, March 16, 2009, pp. 1, 3. The Impact of Team Empowerment Complexities of Expatriate Adaptation,
39. See Workforce Trends: Companies Con- on Virtual Team Performance: The Moder- Human Resource Management Review 15,
tinue to Deploy Ex-Pats, Compensation ating Role of Face-To-Face Interaction, no. 2 (June 2005), pp. 160 180.
& Benefits Review 42, no. 1 (January/ Academy of Management Journal 47, no. 2 68. Mansour Javidan, Mary Teagarden, and
February 2010), p. 6. (2004), pp. 175 192. David Bowen, Making It Overseas,
40. Mercer s International Assignments 53. William Bulkeley, IBM to Cut US Jobs, Harvard Business Review 88, no. 4 (April
Survey 2010, www.imercer.com/products/ Expand in India, The Wall Street Journal, 2010), pp. 109 113.
2010/intl-assignments-survey.aspx, March 26, 2009, p. B1. 69. Ibid.
accessed June 2, 2011; Companies Juggle 54. Mary Medland, Setting Up Overseas, 70. www.performanceprograms.com/Surveys/
Cost Cutting with Maintaining Competi- HR Magazine, January 2004, p. 71. Overseas.shtm, accessed January 31, 2008.
tive Benefits for International Assign- 55. Phatak, International Dimensions of Man- 71. Blocklyn, Developing the International
ments, www.amanet.org/training/articles/ agement, p. 129. Executive, p. 45. See also Eric Krell, Evalu-
C o m p a n i e s - Ju g g l e - c o s t - c u t t i n g - 56. Charles Hill, International Business: ating the Returns on Expatriates, HR Mag-
with-Maintaining-Competitive-Benefits- Competing in the Global Marketplace azine 50, no. 3 (March 2005), pp. 61 65.
for-International-Assignments.aspx, (Burr Ridge, IL: Irwin, 1994), p. 507. 72. The Equal Employment Opportunity
accessed June 2, 2011. 57. Ibid., pp. 507 510. Responsibilities of Multinational Employ-
41. Mercer s International Assignments 58. Ibid. ers, The U.S. Equal Employment Oppor-
Survey 2010, Companies Juggle Cost 59. Ibid., p. 509. tunity Commission, www.EEOC.gov/facts/
Cutting with Maintaining Competitive 60. Ibid. See also M. Harvey et al., An Innova- multi-employers.html, accessed February 9,
Benefits for International Assignments. tive Global Management Staffing System: 2004.
42. Helene Mayerhofer et al., Flexpatriate A Competency-Based Perspective, Human 73. See Donald Dowling Jr., Choice of Law
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Staffing, International Journal of Human 2000), pp. 381 394. Society for Human Resource Management
Resource Management 15, no. 8 (Decem- 61. Mason Carpenter et al., International Legal Report, October November 2008,
ber 2004), pp. 1371 1389; and Martha Assignment Experience at the Top Can pp. 1 2.
Frase, International Commuters, HR Make a Bottom-Line Difference, Human 74. Chuck Csizmar, Does Your Expatriate
Magazine, March 2007, pp. 91 96. Resource Management 30, no. 223 (Summer Program Follow the Rules of the Road?
43. Timothy Dwyer, Localization s Hidden Fall 2000), pp. 277 285. See also Gunter Compensation & Benefits Review, January/
Costs, HR Magazine,June 2004, pp.135 144. Stahl and Paula Caligiuri, The Effectiveness February 2008, pp. 61 69.
44. Michael Harvey et al., Global Virtual of Expatriate Coping Strategies: The Moder- 75. P. Caligiuri, The Big Five Personality Char-
Teams: A Human Resource Capital ating Role of Cultural Distance, Position acteristics as Predictors of Expatriates
Architecture, International Journal of Level, and Time on the International Assign- Desire to Terminate the Assignment and
Human Resource Management 16, no. 9 ment, Journal of Applied Psychology 90, no. 4 Supervisor-Rated Performance, Personnel
(September 2005), pp. 1583 1599. (2005), pp. 603 615. Psychology 53, no. 1 (Spring 2000), pp. 67 88.
 CHAPTER 17 MANAGING GLOBAL HUMAN RESOURCES 603

See also Margaret A. Shaffer, David A. 92. See, for example, Jie Shen, Effective Inter- 108. Fay Hansen, Skirting Danger, Workforce
Harrison, Hal Gregersen, J. Stewart Black, national Performance Appraisals: Easily Magazine, January 19, 2009, pp. 1, 3.
and Lori A. Ferzandi, You Can Take It Said, Hard to Do, Compensation & Bene- 109. Frank Jossi, Buying Protection from
with You: Individual Differences and Expa- fits Review, July/August 2005, pp. 70 78. Terrorism, HR Magazine, June 2001,
triate Effectiveness, Journal of Applied Psy- 93. See, for example, Victor Infante, Three pp. 155-160.
chology 91, no. 1 (January 2006), p. 109(17). Ways to Design International Pay: Head- 110. Unrest in Egypt Highlights Importance
76. Jan Selmer, Expatriation: Corporate quarters, Home Country, Host, Workforce, of Crisis Management Plans, Experts
Policy, Personal Intentions and Interna- January 2001, pp. 22 24; and Gary Parker Say, BNA Bulletin to Management,
tional Adjustment, International Journal and Erwin Janush, Developing Expatriate February 8, 2011, pp. 41 42.
of Human Resource Management 9, no. 6 Remuneration Packages, Employee Benefits 111. Frank Jossi, Buying Protection from
(December 1998), pp. 997 1007. Journal 26, no. 2 (June 2001), pp. 3 51. Terrorism, op cit.,
77. Hung-Wen Lee and Ching-Hsing, Deter- 94. Stephenie Overman, Focus on Interna- 112. These are based on or quoted from Samuel
minants of the Adjustment of Expatriate tional HR, HR Magazine, March 2000, Greengard, Mission Possible: Protecting
Managers to Foreign Countries: An Empi- pp. 87 92; Sheila Burns, Flexible Interna- Employees Abroad, Workforce, August
rical Study, International Journal of tional Assignee Compensation Plans, 1997, pp. 30 32. See also Z. Phillips,
Management 23, no. 2 (2006), pp. 302 311. Compensation & Benefits Review, May/June Global Firms Consider Additional Cover
78. Sunkyu Jun and James Gentry, An 2003, pp. 35 44; Thomas Shelton, Global for Overseas Execs, Business Insurance 43,
Exploratory Investigation of the Relative Compensation Strategies: Managing and no. 23 (June 15 22, 2009), pp. 4, 22.
Importance of Cultural Similarity and Administering Split Pay for an Expatriate 113. Ibid., p. 32.
Personal Fit in the Selection and Perfor- Workforce, Compensation & Benefits 114. Carla Joinson, Save Thousands Per
mance of Expatriates, Journal of World Review, January/February 2008, pp. 56 59. Expatriate, HR Magazine, July 2002,
Business 40, no. 1 (February 2005), pp. 1 8. 95. Phatak, International Dimensions of p. 77. A survey by accountants KPMG
See also Jan Selmer, Cultural Novelty and Management, p. 134. See also China to found that only about 4% of the 430
Adjustment: Western Business Expatriates Levy Income Tax on Expatriates, Asia human resource executives surveyed
in China, International Journal of Human Africa Intelligence Wire, August 3, 2004, believed they were effectively managing
Resource Management 17, no. 7 (2006), Item A120140119. the repatriation process. Tanya Mohn,
pp. 1211 1222. 96. Thomas Shelton, Global Compensation The Long Trip Home, The New York
79. Discussed in Hill, International Business, Strategies: Managing and Administering Times, March 10, 2009, p. 86.
pp. 511 515. Split Pay for an Expatriate Workforce, 115. Kathryn Tyler, Retaining Repatriates,
80. Barbara Anderson, Expatriate Selection: Compensation & Benefits Review, January/ HR Magazine, March 2006, pp. 97 102.
Good Management or Good Luck? Inter- February 2008, pp. 56 59. 116. Quoted in Leslie Klaff, The Right Way
national Journal of Human Resource Manage- 97. http://aoprals.state.gov/content.asp? to Bring Expats Home, Workforce, July
ment 16, no. 4 (April 2005), pp. 567 583. content_id=186&menu_id=81, accessed 2002, p. 43.
81. Margaret Shaffer and David Harrison, July 1, 2011. 117. Maria Kraimer et al., The Influence of
Forgotten Partners of International Assign- 98. See, for example, More Multinational Orga- Expatriate and Repatriate Experiences on
ments: Development and Test of a Model nizations Are Taking a Global Approach to Career Advancement and Repatriate
of Spouse Adjustment, Journal of Applied Compensation, Compensation & Benefits Retention, Human Resource Manage-
Psychology 86, no. 2 (2001), pp. 238 254. Review, May/June 2008, p. 5. ment 48, no. 1 (January February 2009),
82. Ibid., p. 251. 99. Luis Hernandez, On Why Ex-Pat Assign- pp. 27 47.
83. Ibid., p. 250. ments Succeed or Fail, Harvard Business 118. Ibid., p. 43.
84. Hung-Wen Lee and Ching-Hsing, Deter- Review, March 2011, p. 73. 119. Ibid.
minants of the Adjustment of Expatriate 100. Mark Schoeff Jr., Danger and Duty, 120. Diane Turner, NuView Brings Web-
Managers to Foreign Countries: An Empi- Workforce, November 19, 2007, pp. 1, 3. Based HRIS to Buildnet, Workforce,
rical Study, International Journal of Manage- 101. Managers Are Paid More in Emerging December 2000, p. 90.
ment 23, no. 2 (2006), pp. 302 311. Economies, Compensation & Benefits 121. Jim Meade, Web-Based HRIS Meets
85. Gary Insch and John Daniels, Causes Review, September/October 2007, p. 19. Multiple Needs, HR Magazine, August
and Consequences of Declining Early 102. Robin White, A Strategic Approach 2000, pp. 129 133. See also Dynamic HR:
Departures from Foreign Assignments, to Building a Consistent Global Rewards Global Applications from IBM, Human
Business Horizons 46, no. 6 (November Program, Compensation & Benefits Review, Resource Management 48, no. 4 (July/
December 2002), pp. 39 48. July/August 2005, p. 25. August 2009), pp. 641 648.
86. Eric Krell, Budding Relationships, HR 103. Recommendations for Managing Global 122. Drew Robb, Unifying Your Enterprise
Magazine 50, no. 6 (June 2005), pp. 114 118. Compensation Clause in a Changing with a Global HR Portal, HR Magazine,
87. Adapted from www.interchangeinstitute. Economy, Hewitt Associates, www. March 2006, pp. 119 120.
org/html/cross_cultural.htm, accessed hewittassociates.com/_MetaBasicCMAs- 123. Ann Marie Ryan et al., Designing and
July 1, 2011. setCache_/Assets/Articles/2009/hewitt_p Implementing Global Staffing Systems:
88. Adapted from www.kwintessential.co.uk/ ov_globalcomp_0109.pdf, accessed Part 2 Best Practices, Human Resource
cultural-services/articles/expat-cultural- March 22, 2009. Management 42, no. 1 (Spring 2003),
training.html, accessed July 1, 2011. 104. White, A Strategic Approach, pp. 23 40. pp. 85 94.
89. www.global-lt.com/en/us/cultural-training/ 105. For Employers Conducting Business 124. Ibid., p. 89.
cultural-training-expatriate-training-courses. Abroad, Kidnappings Remain an Ongoing 125. Ibid., p. 90.
html#60Countries, accessed July 1, 2011. Concern, BNA Bulletin to Management, 126. Ibid., p. 86. See also M. Schoeff, Adopting
90. Lynette Clemetson, The Pepsi Challenge: November 23, 2010, p. 369. an HR Worldview, Workforce Manage-
Helping Ex-Pats Feel at Home, Workforce 106. Jessica Marquez, Hostage-Taking in ment 87, no. 19 (November 17, 2008), p. 8.
Management, December 2010, p. 36. France has U.S. Observers on Their 127. Ryan, Designing and Implementing
91. Jie Shen, Effective International Perfor- Guard, Workforce Management, April 20, Global Staffing Systems, p. 87.
mance Appraisals: Easily Said, Hard to 2009, p. 10. 128. Ibid., p. 92.
Do, Compensation and Benefits Review 107. Lisbeth Claus, International Assignees at 129. Written by and copyrighted by Gary
37, no. 4 (July/August 2005), pp. 70 79. Risk, HR Magazine, February 2010, p. 73. Dessler, PhD.
604 PART 1 INTRODUCTION

18
Managing Human
Resources in Small and
Entrepreneurial Firms
Source: Bob Daemmrich/Alamy.
LEARNING OBJECTIVES Company s
1. Explain why HRM is important to small businesses and Strategic Goals
how small business HRM is different from that in large
businesses.
2. Give four examples of how entrepreneurs can use
Internet and government tools to support the HR effort.
3. List five ways entrepreneurs can use their small size Employee Competencies
to improve their HR processes. and Behaviors Required
for Company to Achieve
4. Discuss how you would choose and deal with a These Strategic Goals
professional employee organization.
5. Describe how you would create a start-up human
resource system for a new small business.
Employee
Relations
S

tra nviro
n

teg nment
E
atio

ic an
Compens
H
HR Policies and Practices

d Legal
is high school teacher told him he d never make it
in business. But today Carlos Ledezma owns two Required to Produce
Chevrolet dealerships in Kansas City.1 Those dealer- Employee Competencies
and Behaviors
ships are more profitable than most, a fact that

nd nt

Re
Mr. Ledezma attributes in no small part to his approach to m

Pla u
c
a g polev

e
me i

cr
human resource management. His business strategy was nin eD tne emt
iarT tn
to boost profits by building repeat business from customers dna
who like dealing with friendly, long-term employees, and
that s what he s achieved.

WHERE ARE WE NOW . . .

Most people work for small businesses or
create new small businesses of their own,
and such businesses have special human
resource management needs. The main
purpose of this chapter is to help you apply
what you know about human resource
management to running a small business.
The main topics we ll address include the
small business challenge; using Internet and
government tools to support the HR effort;
leveraging small size with familiarity, flexibility,
fairness, and informality; using professional
employer organizations; and managing HR
systems, procedures, and paperwork.

Access a host of interactive learning aids at

www.mymanagementlab.com to help strengthen
your understanding of the chapter concepts.

MyManagementLab 605
606 PART 5 EMPLOYEE RELATIONS

THE SMALL BUSINESS CHALLENGE

Why Small Business Is Important
In some respects there s nothing small about small business. More than half the
people working in the United States about 68 million out of 118 million work for
small firms.2 Small businesses as a group also account for most of the 600,000 or
so new businesses created every year, as well as for most of the business growth
(small firms grow faster than big ones). And small firms create most of the new jobs
in the United States.3
Statistically speaking, therefore, most people graduating from college in the
next few years will work for small businesses those with less than 200 or so
employees. Anyone interested in human resource management thus needs
to understand how managing human resources in small firms is different from
doing so in huge multinationals.

1 Explain why HRM is How Small Business Human Resource Management Is

important to small Different
businesses and how small
business HRM is different
Managing human resources in small firms is different for four main reasons: size,
from that in large priorities, informality, and the nature of the entrepreneur.
businesses.
SIZE For one thing, it would be very unusual to find a very small business say,
under 90 or so employees with a dedicated human resource management profes-
sional.4 The rule of thumb is that it s not until a company reaches the 100-employee
milestone that it can afford an HR specialist. Yet even five- or six-person retail shops
must recruit, select, train, and compensate employees. So in such situations, it s
usually the owner and (sometimes) his or her assistant that does all the HR paper-
work and tasks. SHRM s Human Capital Benchmarking Study found that even firms
with under 100 employees often spend the equivalent of two-or-so people s time each
year addressing human resource management issues.5 But, that time is usually just
coming out of the owner s very long workday.

PRIORITIES It s not just size but the realities that drive many small business man-
agers and entrepreneurs (the men and women who provide the vision and spark
that starts a new business) to expend more time and resources on non-HR issues.
After studying small e-commerce firms in the United Kingdom, one researcher
concluded that, as important as human resource management is, it simply wasn t a
high priority for these firms:

Given their shortage of resources in terms of time, money, people and expertise, a
typical SME [small- and medium-size enterprise] manager s organizational
imperatives are perceived elsewhere, in finance, production and marketing, with
HR of diminished relative importance.6

INFORMALITY One effect of this is that human resource management tends

to be more informal in smaller firms. For example, one study analyzed training
practices in about 900 family and non-family small companies.7 Training tended
to be informal, with an emphasis on methods like coworker and supervisory
on-the-job training.
Such informality isn t just due to a lack of expertise and resources (although
that s part of it); it s also partly a matter of survival. Entrepreneurs must be able
to react quickly to changes in competitive conditions. Given that, there s logic in
keeping things like compensation policies flexible. The need for small businesses
to adapt quickly to competitive challenges often means handling matters like
raises, appraisals, and time off on an informal, reactive basis with a short time
horizon. 8
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 607

THE ENTREPRENEUR Entrepreneurs are people who create businesses under

risky conditions, and starting new businesses from scratch is always risky. Researchers
believe that small firms relative informality partly stems from entrepreneurs unique
personalities. Entrepreneurs tend (among other things) to be controlling: Owners
tend to want to impose their stamp and personal management style on internal
matters, including the primary goal and orientation of the firm, its working condi-
tions and policies, and the style of internal and external communication and how this
is communicated to the staff. 9

IMPLICATIONS These four differences have several human resource management

related implications for small businesses.

* First, their more rudimentary human resource practices may put small business
owners at a competitive disadvantage. A small business owner not using tools like
Web-based recruiting is accumulating unnecessary costs, and probably deriving
inferior results compared to larger competitors.
* Second, there is a lack of specialized HR expertise.10 In most (larger) small
businesses, there are at most one or two dedicated human resource management
people. This makes it more likely that they ll miss problems in specific areas, such
as equal employment law, or occupational safety. This may produce legal or other
problems.
* Third, the smaller firm often hasn t the time or specialized expertise to under-
stand the legal implications for instance, of innocently (but inappropriately)
asking a female job candidate if she s thinking of starting a family.
* Fourth, the small business owner may not be fully complying with
compensation regulations and laws. Examples include paying compensatory
time for overtime hours worked, and distinguishing between employees and
independent contractors.
* Fifth, paperwork duplication leads to data entry errors. Small businesses often
don t use human resource information systems, so employee data (name, address,
marital status, and so on) often appears on multiple human resource forms
(medical enrollment forms, W-4 forms, and so on). Any personal data change
requires manually changing all forms. This is time-consuming and inefficient,
and can trigger errors.

Why HRM Is Important to Small Businesses

Entrepreneurs and all small business managers need to take these implications to
heart. Small firms need all the advantages they can get, and effective human resource
management is a competitive necessity. Small firms that have effective HR practices do
better than those that do not.11 For example, researchers studied 168 family-owned
fast growth small- and medium-size enterprises (SMEs). They concluded that success-
ful high-growth SMEs placed greater importance on training and development,
performance appraisals, recruitment packages, maintaining morale, and setting
competitive compensation levels than did low-performing firms: These findings
suggest that these human resource activities do in fact have a positive impact on
performance [in smaller businesses]. 12
For many small firms, effective human resource management is also manda-
tory for getting and keeping big customers. Most suppliers (and therefore
their suppliers) must comply with international quality standards. Thus, to
comply with ISO-9000 requirements, large customers either directly checked
for the presence of certain HR policies, or, satisfying their service demands
indirectly necessitated changes in, for example, [the small vendor s] training
and job design. 13 The accompanying Strategic Context feature provides an
illustration.
608 PART 5 EMPLOYEE RELATIONS

THE STRATEGIC CONTEXT

The Dealership
Carlos Ledezma s strategy was to boost profits by building repeat business from
customers who like dealing with friendly, long-term employees.14 He knew his
success therefore depended on building a dedicated and customer-oriented
staff, and getting them to stay. To achieve that, he put in place an integrated,
customer-oriented human resource management strategy. He tests each
employment candidate to make sure the job is the right fit. There s a weeklong
new-employee orientation that introduces them to their jobs and to the firm s
mission and culture. Then he gives each new employee a senior employee to
shadow for 90 days.15 This person teaches by example. For the first 90 days,
mentors receive $50 to $100 for each vehicle their trainee sells. In one recent
year, Ledezma spent $150,000 on training.
Ledezma s HR strategy pays off in profits that are well above the industry average.
Customers like dealing with dedicated, competent, long-term employees. His
employee turnover is about 28%, and the average employee stays about 8 years,
both much better than the industry average.

We turn in this chapter to methods entrepreneurs and small business managers

can use to improve their human resource management practices, starting with Internet
and government tools.

2 Give four examples of how

USING INTERNET AND GOVERNMENT TOOLS
entrepreneurs can use TO SUPPORT THE HR EFFORT
Internet and government
tools to support the City Garage is an expanding service company in Texas. The firm s managers knew
HR effort. they would never implement their firm s growth strategy without changing how they
tested and hired employees.16 They needed mechanics who were comfortable
interacting directly with customers in City Garage s open service area format. The
old hiring process consisted of a paper-and-pencil application and one interview,
followed by a hire/don t hire decision. The process ate up valuable management time,
and was not effective. City Garage s solution was to purchase the Personality Profile
Analysis (PPA) online test from Thomas International USA. Now, after a quick
application and background check, likely candidates take the 10-minute, 24-question
PPA. City Garage staff then enter the answers into the PPA Software system, and
receive test results in less than 2 minutes. These show whether the applicant is high
or low in four personality characteristics.
Like City Garage, no small business owner needs to cede the advantage to big
competitors when it comes to human resource management. One can level the terrain by
using Internet-based HR resources, including the free resources of the U.S. government.
We ll next look at how small firms can do this.

Complying with Employment Laws

Complying with federal (and state and local) employment law is a thorny issue for
entrepreneurs. For example, under the law, the entrepreneur needs to know, What
can I ask a job candidate? Must I pay this person overtime? and, Must I report
this injury?
Addressing such issues requires deciding which federal employment laws apply to
the company. For example, Title VII of the Civil Rights Act of 1964 applies to employers
with 15 or more employees, while the Age Discrimination in Employment Act of 1967
applies to those with 20 or more.17 Small business owners will find the legal answers
they need online at federal agencies Web sites like the following.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 609

City Garage s managers knew

they would never implement
their firm s growth strategy
without changing how they
tested and hired employees.

Source: PaulRapson/Alamy.

THE DOL The U.S. Department of Labor s FirstStep Employment Law Advisor
(see www.DOL.gov/elaws/firststep/) helps small businesses determine which laws
apply to their business. First, the elaws wizard takes the owner through questions such
as What is the maximum number of employees your business or organization
employs or will employ during the calendar year? (See Figure 18-1.)
Proceeding through the wizard, the results page says, Based on the informa-
tion you provided in response to the questions in the Advisor, the following
employment laws administered by the Department of Labor (DOL) may apply to
your business or organization. 18 For a typical small firm, these laws might include
the Consumer Credit Protection Act, Employee Polygraph Protection Act, Fair
Labor Standards Act, Immigration and Nationality Act, Occupational Safety and
Health Act, Uniformed Services Employment and Reemployment Rights Act,
and Whistleblower Act.
A linked DOL site (www.dol.gov/whd/flsa/index.htm) provides information on
the Fair Labor Standards Act (FLSA). It s elaws Advisors provide practical guidance
on questions such as when to pay overtime. Figure 18-2 presents, from this Web site,
a list of elaws Advisors.

FIGURE 18-1 FirstStep

Employment Law Advisor

Source: www.dol.gov/elaws/firststep,
accessed June 2008.
610 PART 5 EMPLOYEE RELATIONS

FIGURE 18-2 Sample DOL

The Coverage and Employment Status Advisor helps identify which workers are
Elaws Advisors
employees covered by the FLSA.
Source: Adapted from www.dol. The Hours Worked Advisor provides information to help determine which hours
gov/whd/flsa/index.htm, accessed spent in work-related activities are considered FLSA hours worked and, therefore,
September 15, 2011. must be paid.
The Overtime Security Advisor helps determine which employees are exempt from
the FLSA minimum wage and overtime pay requirements under the Part 541 overtime
regulations.
The Overtime Calculator Advisor computes the amount of overtime pay due in a
sample pay period based on information from the user.
The Child Labor Rules Advisor answers questions about the FLSAs youth
employment provisions, including at what age young people can work and the jobs
they can perform.
The Section 14(c) Advisor helps users understand the special minimum wage
requirements for workers with disabilities.

THE EEOC The U.S. Equal Employment Opportunity Commission (EEOC)

administers Title VII of the Civil Rights Act of 1964 (Title VII), the Age Discrimination
in Employment Act of 1967 (ADEA), Title I of the Americans with Disabilities Act
of 1990 (ADA), and the Equal Pay Act of 1963 (EPA). Its Web site (www.EEOC.gov/
employers/) contains important information regarding matters such as:
* How do I determine if my business is covered by EEOC laws?
* Who may file a charge of discrimination with the EEOC?
* Can a small business resolve a charge without undergoing an investigation or facing
a lawsuit?
As the EEOC says, While the information in this section of our website applies to
all employers, it has been specifically designed for small businesses which may not have
a human resources department or a specialized EEO staff. (www.eeoc.gov/employers)
The site provides small business owners with practical advice. For example, What
should I do when someone files a charge against my company?
OSHA The DOL s Occupational Safety and Health Administration site (www.
OSHA.gov/) similarly supplies small business guidance. (See Figure 18-3.) OSHAs

FIGURE 18-3 OSHA Web Site

Source: www.osha.gov/dcsp/
smallbusiness/index.html,
accessed September 15, 2011.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 611

site provides, among other things, easy access to the OSHA Small Business Handbook.
This contains practical information, including industry-specific safety and accident
checklists.

Employment Planning and Recruiting

Internet resources can make small business owners as effective as their large competi-
tors at writing job descriptions and building applicant pools. As we saw in Chapter 4
(Job Analysis), the Department of Labor s O*NET (http://online.onetcenter.org)
illustrates this. Its online wizard enables business owners to create accurate and
professional job descriptions and job specifications quickly.

WEB-BASED RECRUITING Similarly, small business owners can use the online
recruiting tools we discussed in Chapter 5. For example, it s easy to post positions on
Internet job boards such as Careerbuilder.com, on the sites of professional associations,
or on the sites of local newspapers.

Employment Selection
As with the earlier City Garage example, some tests are so easy to use they are particularly
good for smaller firms. An example is the Wonderlic Personnel Test, which measures
general mental ability. With questions somewhat similar to the SAT, it takes less than
15 minutes to administer the four-page booklet. The tester reads the instructions, and
then keeps time as the candidate works through the 50 problems. The tester scores
the test by totaling the number of correct answers. Comparing the person s score with the
minimum scores recommended for various occupations shows whether the person
achieved the minimally acceptable score for the job in question.
The Predictive Index is another example. It measures work-related personality
traits, drives, and behaviors in particular dominance, extroversion, patience, and
blame avoidance. A template makes scoring simple. The Predictive Index program
includes 15 standard benchmark personality patterns. For example, there is the social
interest pattern, for a person who is generally unselfish, congenial, persuasive, patient,
and unassuming. This person would be good with people and a good personnel
interviewer, for instance.
Many vendors, including Wonderlic and the Predictive Index, offer online
applicant compilation and screening services. Wonderlic s service (which costs
about $8,500 per year for a small firm) first provides job analyses for the
employer s jobs. Wonderlic then provides a Web site the small businesses applicants
can log into to take one or several selection tests (including the Wonderlic Personnel
Test). Figure 18-4 shows a partial report for a sample applicant. The following
are suggestions from Inc. magazine for supercharging a small business s recruiting
and screening processes.
* Keep It in the Industry. Use online job boards that target a particular industry or
city to minimize irrelevant applicants.19 For example, Jobing.com maintains 41 city-
specific job sites in 19 states. Beyond.com hosts more than 15,000 industry-specific
communities.
* Automate the Process. Automated applicant processing systems are inexpensive
enough for small employers. For example, systems from Taleo, NuView Systems,
and Accolo accept résumés and help automate the screening process. NuView,
which costs about $6 to $15 per month per user, can instantly ask applicants
questions, and bump out those without, for instance, the required education.20
* Test Online. Use online tests, for instance, to test an applicant s typing speed,
proficiency at QuickBooks, or even ability to sell over the phone. For example,
PreVisor and Kenexa offer close to 1,000 online assessments, charging from several
dollars to $50 a test.21
612 PART 5 EMPLOYEE RELATIONS

FIGURE 18-4 Wonderlic Score Percentile in Total Population

= Strong Fit
Personnel Test: Part of a Sample 35th
Report

Source: Wonderlic
= Moderate Fit

= Weak Fit
17 IQ Equivalent
95
(www.wonderlic.com).

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Score Interpretation
Job Fit: Test takers who score in this range do not meet the cognitive ability requirements identified for this job.
The complexity present within this position may make it difficult for these individuals to meet minimum standards
for job performance.

Training Potential: This test taker is likely to receive maximum benefit from training that follows a programmed
or mastery approach to learning. Given enough time, this individual may have the ability to learn a limited number
of lengthy, routine procedures. Allow for sufficient time with hands-on-training before requiring this individual to
work independently.

* Poll Your Inner Circle. Tap friends and employees for recommendations and
use social networking sites such as LinkedIn, Facebook, and MySpace. Many
employers announce job openings through LinkedIn. One says, I get people
vouching for each applicant, so I don t have to spend hours sorting through
résumés, he says.22
* Send a Recording. InterviewStream, in Bethlehem, Pennsylvania, records online
video interviews for about $30 to $60. InterviewStream sends the candidate an
e-mail invitation with a link. When he or she clicks the link, a video interviewer
asks the company s prerecorded questions. A Webcam captures the candidate s
answers. Employers can let candidates rerecord their answers. Hiring managers
can review the videos at their leisure.23

COMPLYING WITH THE LAW Particularly when using tests at work, the
employer must comply with equal employment laws. Unfortunately, given the time
pressures facing most small business owners, confirming the validity of those tests
one buys online or through office supply stores is probably the exception, not the
rule. As Chapters 2 and 5 explained, there is no rational basis upon which to expose
applicants to tests or devices, the validity of which are unknown. Many test providers
will assist the employer in setting up a testing procedure. For example, as we noted,
Wonderlic will review your job descriptions as part of its process.

Employment Training
Internet training can provide, at a relatively low cost, employee training that used to be
beyond most small employers reach.

PRIVATE VENDORS The small business owner can tap hundreds of suppliers of
prepackaged training solutions. These range from self-study programs from the
American Management Association (www.amanet.org) and SHRM (www.shrm.org),
to specialized programs. For example, the employer might arrange with PureSafety
to have its employees take occupational safety courses from www.puresafety.com.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 613

FIGURE 18-5 Some Online

Courses Offered by the Small
Business Administration s Virtual
Campus for Small Business
Training

Source: http://www.sba.gov/category/
navigation-structure/starting-
managing-business/managing-
business/running-business/human-
resources, accessed September 18,
2011.

SkillSoft is another example (http://skillsoft.com/catalog/default.asp). Its courses

include software development, business strategy and operations, professional effective-
ness, and desktop computer skills. As an example, the course interviewing effectively
targets managers, team leaders, and human resource professionals. About 2 1/2 hours
long, it shows trainees how to use behavioral questioning to interview candidates.24
The buyer s guide from the American Society of Training and Development
(www.astd.org/) is a good place to start to find a vendor (check under Resources).
THE SBA The federal government s Small Business Administration (www.SBA.gov/
training/) provides a virtual campus that offers online courses, workshops, publications,
and learning tools aimed toward supporting entrepreneurs.25 For example, the small
business owner can link under Small Business Planner to Writing Effective
Job Descriptions, Employees versus Contractors: What s the Difference? and The
Interview Process: How to Select the Right Person (see Figure 18-5).
NAM The National Association of Manufacturers (NAM) is the largest industrial trade
organization in the United States. It represents about 14,000 member manufacturers,
including 10,000 small and mid-sized companies.
NAM s Virtual University (www.namvu.com) helps employees maintain and
upgrade their work skills and continue their professional development. It offers
almost 650 courses.26 There are no long-term contracts to sign. Employers simply pay
about $10 $30 per course taken by each employee. The catalog includes OSHA,
quality, and technical training as well as courses in areas like business and finance,
personal development, and customer service.

Employment Appraisal and Compensation

Small employers have easy access to computerized and online appraisal and compen-
sation services. For example, Oracle Corporation s ePerformance (http://www.oracle.
com/us/products/applications/peoplesoft-enterprise/hcm-resource-library/051027.pdf)
614 PART 5 EMPLOYEE RELATIONS

facilitates the performance management process by enabling managers to formalize the

employee s goals and then assess progress toward meeting those goals.
The eAppraisal system from Halogen Software (http://www.halogensoftware.
com/products/halogen-eappraisal/) is another example.27
Similarly, lack of easy access to salary surveys once made it difficult and time-
consuming for smaller businesses to fine-tune their pay scales. Today, sites like
onetonline.org facilitate the job analysis process and www.salary.com makes it easy
to determine local pay rates.

Employment Safety and Health

Safety is an important issue for small employers. One European study found that the
majority of all the workplace accidents and serious workplace accidents occur in firms
with less than 50 employees.28 OHSA provides several free services for small employers.

OSHA CONSULTATION29 OSHA provides free on-site safety and health services
for small businesses. Employers can contact their nearest OSHA area office to speak
to the compliance assistance specialist. (Employers can also check out the OSHA
Training Institute training available in Chicago or in one of about 20 education
centers located at U.S. colleges and universities.)
The employer triggers the process by requesting a voluntary consultation. There
is an opening conference with a safety expert, a walk-through, and a closing confer-
ence at which the employer and safety expert discuss the latter s observations. The
consultant then provides a detailed report explaining the findings. The employer s
only obligation is to commit to correcting serious hazards in a timely manner.

OSHA SHARP The OSHA Sharp program is a certification process. OSHA certi-
fies that small employers have achieved commendable levels of safety awareness.30
Employers request a consultation and visit, and undergo a complete hazard identifi-
cation survey. The employer agrees to correct identified hazards, and to implement
and maintain a safety and health management system. OSHA s on-site project
manager may recommend that OSHA exempt the Sharp employer for 2 years from
scheduled inspections.

3 List five ways entrepreneurs

LEVERAGING SMALL SIZE: FAMILIARITY, FLEXIBILITY,
can use their small size to FAIRNESS, INFORMALITY, AND HRM
improve their HR processes.
Because small businesses need to capitalize on their strengths, they should capitalize on
their smallness when dealing with employees. Smallness should translate into personal
familiarity with each employee s strengths, needs, and family situation. And it should
translate into being flexible and informal in the human resource management policies
and practices the company follows.31

Simple, Informal Employee Selection Procedures

Just as small business managers can use Internet-based recruitment and selection
tools,32 many low-tech tools are also available. We ll look at two, streamlined interviews,
and work-sampling tests.

A Streamlined Interviewing Process

The small business owner, pressed for time, may use the following practical, streamlined
employment interview process.33

PREPARING FOR THE INTERVIEW Even a busy entrepreneur can quickly

summarize the kind of person who would be best for the job. One way to do so is to focus
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 615

on four basic required factors knowledge and experience, motivation, intellectual

capacity, and personality. To proceed this way, ask the following questions:
* Knowledge and experience: What must the candidate know to perform the job?
What experience is necessary to perform the job?
* Motivation: What should the person like doing to enjoy this job? Is there anything
the person should not dislike? Are there any essential goals or aspirations the person
should have?
* Intellectual capacity: Are there any specific intellectual aptitudes required (mathe-
matical, mechanical, and so on)? How complex are the problems the person must
solve? What must a person be able to demonstrate he or she can do intellectually?
* Personality factor: What are the critical personality qualities needed for success on
the job (ability to withstand boredom, decisiveness, stability, and so on)? How
must the job incumbent handle stress, pressure, and criticism? What kind of
interpersonal behavior is required in the job?

SPECIFIC FACTORS TO PROBE IN THE INTERVIEW Next, ask a combination

of situational questions plus open-ended questions to probe the candidate s suitability
for the job. For example:
* Knowledge and experience factor: Probe with situational questions such as How
would you organize such a sales effort? or How would you design that kind
of Web site?
* Motivation factor: Probe such areas as the person s likes and dislikes (for each thing
done, what he or she liked or disliked about it), aspirations (including the validity
of each goal in terms of the person s reasoning about why he or she chose it), and
energy level, perhaps by asking what he or she does on, say, a typical Tuesday.
* Intellectual factor: Ask questions that judge such things as complexity of tasks the person
has performed, grades in school, test results (including scholastic aptitude tests, and so
on), and how the person organizes his or her thoughts and communicates.
* Personality factor: Probe by looking for self-defeating behaviors (aggressiveness,
compulsive fidgeting, and so on) and by exploring the person s past interpersonal
relationships. Ask questions about the person s past interactions (working in a
group at school, working with fraternity brothers or sorority sisters, leading the
work team on the last job, and so on). Also, try to judge the person s behavior
in the interview itself Is the candidate personable? Shy? Outgoing?

CONDUCTING THE INTERVIEW Devise and use a plan to guide the interview.
According to interviewing expert John Drake, significant areas to touch on include
the candidate s:
* College experiences
* Work experiences summer, part-time
* Work experience full-time (one by one)
* Goals and ambitions
* Reactions to the job you are interviewing for
* Self-assessments (by the candidate of his or her strengths and weaknesses)
* Military experiences
* Present outside activities34

FOLLOW YOUR PLAN Perhaps start with an open-ended question for each topic,
such as Could you tell me about what you did when you were in high school? Keep
in mind that you are trying to elicit information about four main traits knowledge
and experience, motivation, intelligence, and personality. You can then accumulate
the information in each of these four areas as the person answers. Follow up by asking
questions like Could you elaborate on that, please?
616 PART 5 EMPLOYEE RELATIONS

MATCH THE CANDIDATE TO THE JOB You should now be able to draw
conclusions about the person s knowledge and experience, motivation, intellectual
capacity, and personality, and to summarize the candidate s strengths and limits.
Next, compare your conclusions to the job description and the list of requirements
you developed when preparing for the interview. This should provide a rational basis
for matching the candidate to the job one based on an analysis of the traits and
aptitudes the job actually requires.

Work-Sampling Tests
What should you do if you are trying to hire, say, a marketing manager, and want a
simple way to screen your job applicants? Devising a work-sampling test is one solu-
tion. A work-sampling test means having the candidates perform actual samples of the
job in question. Such tests have face validity (clearly measure actual job duties) and are
easy to devise. Break down the job s main duties into component tasks. Then have the
candidate complete a sample task. For example, for the marketing manager position,
ask the candidate to spend an hour designing an ad for a hypothetical product.

Flexibility in Training
One study of 191 small and 201 large firms in Europe found that smaller firms were much
more informal in their approaches to training and development.35 Many of the small
firms didn t systematically monitor their managers skill needs, and fewer than 50%
(as opposed to 70% of large firms) had career development programs. The smaller firms
also tended to focus any management development training on learning specific firm-
related competencies (such as how to sell the firm s products).36 They did so due to
resource constraints and a reluctance to invest too much in managers who may then leave.
FOUR-STEP TRAINING PROCESS Limited resources or not, small businesses
need training procedures. A simple but effective four-step training process follows.
Step 1: Write a Job Description. A detailed job description is the heart of a training pro-
gram. List the tasks of each job, along with a summary of the steps in each task.
Step 2: Develop a Task Analysis Record Form. Rather than the full form we discussed
in Chapter 8 (Training) the small business owner can use an abbreviated
Summary Task Analysis Record Form (Table 18-1) containing four columns to
guide the required coaching.
* In the first column, list specific tasks. Include what is to be performed
in terms of each of the main tasks, and the steps involved in each task.
* In the second column, list performance standards (in terms of quantity,
quality, accuracy, and so on).
* In the third column, list trainable skills required things the employee
must know or do to perform the task. Include skills (such as Keep both
hands on the wheel ) that you want to emphasize in training.
* In the fourth column, list aptitudes required. These are the human aptitudes
(such as mechanical comprehension) the employee must have to be
trainable, and for which he or she should be screened.
Step 3: Develop a Job Instruction Sheet. Next, develop a Job Instruction Sheet for
the job. As in Table 18-2, a Job Instruction Sheet shows the steps in each task
as well as key points for each.
Step 4: Prepare Training Program for the Job. At a minimum, the job s training
manual should include the job description, Task Analysis Record Form, and
Job Instruction Sheet, all compiled in a training manual. Perhaps also include
a brief overview/introduction to the job, and a graphical and/or written
explanation of how the job fits with other jobs in the plant or office.
In terms of media, an on-the-job training program using current employees or
supervisors as trainers often requires only the written materials we just listed. However,
the job may require special training media. For many jobs, vendors like those we
discussed in Chapter 8 provide packaged multi-media training programs.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 617

TABLE 18-1 Sample Summary Task Analysis Record Form

Task List Performance Standards Trainable Skills Required Aptitudes Required

1. Operate paper cutter

1.1 Start motor Start by push-button To start machine without accidentally Ability to understand written
on first try attempting re-start while machine is running and spoken instructions
1.2 Set cutting distance Maximum */+ tolerance Read gauge Able to read tolerances
of 0.007 inches on numerical scale
1.3 Place paper on Must be completely even Lift paper correctly At least average
cutting table to prevent uneven edges manual dexterity
1.4 Push paper up to Must be even with blade Check that paper is flat against blade At least average
paper cutter blade manual dexterity
1.5 Grasp safety release 100% of the time, Must keep both hands on releases Ability to understand
with left hand for safety to prevent hand contact with cutting blade written and spoken warnings

Note: This shows the first five steps in one of the tasks (operate paper cutter) for which a printing factory owner would train the person doing the
cutting of the paper before placing the paper on the printing presses.

INFORMAL TRAINING METHODS Training expert Stephen Covey says small

businesses can do many things to provide job-related training without actually
establishing expensive formal training programs. His suggestions include:37
* Offer to cover the tuition for special classes
* Identify online training opportunities
* Provide a library of tapes and DVDs for systematic, disciplined learning during
commute times
* Encourage the sharing of best practices among associates
* When possible, send people to special seminars and association meetings for
learning and networking
* Create a learning ethic by having everyone teach each other what they are learning

Flexibility in Benefits and Rewards

The Family and Work Institute surveyed the benefits practices of about 1,000 small and
large companies.38 Not surprisingly, they found that large firms offer more extensive
benefits packages than do smaller ones. However, many small firms overcame this by

TABLE 18-2 Sample Job Instruction Sheet

Steps in Task Key Points to Keep in Mind

1. Start motor None

2. Set cutting distance Carefully read scale to prevent wrong-sized cut
3. Place paper on Make sure paper is even to prevent uneven cut
cutting table
4. Push paper up to cutter Make sure paper is tight to prevent uneven cut
5. Grasp safety release Do not release left hand to prevent hand from being caught
with left hand in cutter
6. Grasp cutter release Do not release right hand to prevent hand from being caught
with right hand in cutter
7. Simultaneously pull Keep both hands on corresponding releases avoid hands being
cutter and safety releases on cutting table
8. Wait for cutter Keep both hands on releases to avoid having hands on
to retract cutting table
9. Retract paper Make sure cutter is retracted; keep both hands away from releases
10. Shut off motor None
618 PART 5 EMPLOYEE RELATIONS

At Ward Furniture, workers can

share job responsibilities and
work part-time from home.

Source: Bill Aron/PhotoEdit.

offering more flexibility. They ve discovered how to turn tiny into tight-knit, earning
employees trust by keeping them in the loop on company news and financials, and
their loyalty by providing frequent feedback on performance. 39 At ID Media, with
90 employees, CEO Lynn Fantom gives all new employees a welcome breakfast on their
first day. Internet startup appssavvy Inc. s CEO foregoes PowerPoint presentations
in favor of humorous YouTube videos.40

A CULTURE OF FLEXIBILITY Basically, the study found that small business

owners, by personally interacting with all employees each day, did a better job of
understanding when work/life issues emerge. 41 Wards Furniture in Long Beach,
California, exemplifies this. Many of its 17 employees have been with the firm for
10 to 20 years. Brad Ward, an owner, attributes this partly to his firm s willingness
to adapt to its workers needs. For example, workers can share job responsibilities, and
work part-time from home.

WORK LIFE BENEFITS Here are some examples:42

* Extra time off. For example, Friday afternoons off in the summer.
* Compressed workweeks. For example, compressed summer workweeks.
* Bonuses at critical times. Small business owners are more likely to know what s
happening with their employees. Use this knowledge to provide special bonuses,
for instance, if an employee has a new baby.
* Flexibility. For example if an employee is having a personal problem, help him
or her create a work schedule that allows the person to solve problems without
feeling like they re going to be in trouble. 43
* Sensitivity to employees strengths and weaknesses. The small business owner
should be attuned to his or her employees strengths, weaknesses, and aspirations.
For example, ask them which jobs they feel most comfortable doing, and give
them an opportunity to train for and move into the jobs they desire.
* Help them better themselves. For example, pay employees to take a class to help
them develop their job skills.
* Feed them. Provide free meals every now and then, perhaps by taking your
employees to lunch.
* Make them feel like owners. For example, endeavor to give your employees input
into major decisions, let them work directly with clients, get them client feedback,
share company performance data with them, and let them share in the company s
financial success.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 619

* Make sure they have what they need to do their jobs. Having motivated employees
is only half the challenge. Also ensure they have the tools they need to do their
jobs for instance, the necessary training, procedures, computers, and so on.
* Constantly recognize a job well done. Capitalize on your day-to-day interactions
with employees to never miss an opportunity to give your employees the recognition
they deserve. 44
RECOGNITION Studies show that recognition can often be as powerful as financial
rewards. The personal nature of small business interactions makes it easier to recognize
employees. A short list includes:45
* Challenging work assignments
* Freedom to choose own work activity
* Having fun built into work
* More of preferred task
* Role as boss s stand-in when he or she is away
* Role in presentations to top management
* Job rotation
* Encouragement of learning and continuous improvement
* Being provided with ample encouragement
* Being allowed to set own goals
* Compliments
* Expression of appreciation in front of others
* Note of thanks
* Employee-of-the-month award
* Special commendation
* Bigger desk
* Bigger office or cubicle
SMALL BUSINESS BENEFITS FOR BAD TIMES The recession hit smaller
businesses benefits particularly hard.46 Thus, when the monthly cost of a family
policy for Brennan s Prime Meats, a meat wholesaler and retailer with six employees
in Brooklyn, jumped almost 30%, to $1,780, its owner switched to a less expensive
plan. Participating employees will have to absorb new co-payments and possibly pick
up half of the premium cost.
With the recession, more firms were also focusing their retention efforts on anything
they can do to get high performers to feel appreciated. 47 For example, Intuit shifted
its employee recognition awards programs from several vendors to Globoforce. The
move allowed us to build efficiencies and improved effectiveness into the programs
management, says Intuit.48
SIMPLE RETIREMENT BENEFITS Access to retirement benefits is more prevalent
in large firms than small ones. About 75% of large firms offer them, while only about
35% of small ones do.49
There are several ways for small firms to provide retirement plans. The Pension
Protection Act of 2006 provides for a retirement benefit that combines traditional
defined benefit and 401(k) (defined contribution) plans.50 Only available to employ-
ers with less than 500 employees, it exempts employers from the complex pension
rules to which large employers must adhere. The employees get a retirement
plan that blends a defined pension, plus returns on the part of the investment that plan
participants contributed.51
The easiest way for small businesses to provide retirement benefits is through a
SIMPLE IRA plan. With the SIMPLE (for Savings Incentive Match Plan for Employees)
IRA, employers must (and employees may) make contributions to traditional
620 PART 5 EMPLOYEE RELATIONS

employee IRAs. These plans are for employers or small businesses with 100 or fewer
employees and no other retirement plan.
SIMPLE IRAs are inexpensive and simple. The owner contacts an eligible financial
institution and fills out several IRS forms. The IRS needs to have previously approved
the financial institution. However, banks, mutual funds, and insurance companies that
issue annuity contracts are generally eligible.52 The plan has very low administrative
costs. Employer contributions are tax-deductible.53 A typical employer contribution
might match employee contributions dollar for dollar up to 3% of pay. The financial
institution usually handles the IRS paperwork and reporting.

Improved Communications
Effective communications are especially important in small businesses. With a
thousand or more employees, one or two disgruntled employees may get lost in the
shuffle. But with 5 or 10 employees, one or two disgruntled employees can destroy
the business s service. That s why simple programs, like the one in the accompanying
HR as a Profit Center feature, are important.

HR AS A PROFIT CENTER
IHOP
Half of all restaurant employees are less than 30 years old, and turnover of more than
100% per year is the norm.54 So, when Joe Scripture, whose company runs 11 IHOP
restaurants around Atlanta, looked at the industry s turnover statistics, he knew
he and his partner needed to do something to get staffing costs down. But what?55
Seeking to shield their 11 IHOP restaurants from the industry s sky-high turnover
rates, the owners hit on an HR solution. They dramatically reduced turnover with a
new online system that lets new employees anonymously report their opinions
about the hiring process.56 Feedback from that simple communication tool enabled
them to recalibrate their firm s hiring, training, and orientation methods, and
to reduce turnover by about a third.

NEWSLETTER Mel s Gourmet Diner in Bonita Springs, Florida, keeps employees

informed with a quarterly newsletter. It distributes copies at the chain s 10 locations,
but also posts it on the company Web site. It sounds like a cliché, but our people are
the keys to our success, says the owner. We want to make sure we give them all the
information and tools they need. 57

ONLINE Each time employees of Tampa, Florida based Let s Eat! go to one of the
firm s computers to input a guest s order, they can quickly review the chain s menu
changes, special promotions, and mandatory employee meetings.58

THE HUDDLE Sea Island Shrimp House in San Antonio, Texas, keeps employees in its
seven restaurants communicating with its cascading huddles. As in football parlance,
the huddles are very quick meetings. At 9 A.M. top management meets in the first of the
day s huddles. The next huddle is a conference call with store managers. Then, store
managers meet with hourly employees at each location before the restaurants open, to
make sure the news of the day gets communicated. It s all about alignment and good,
timely communications, says the company.59

Fairness and the Family Business

Most small businesses are family businesses, since the owner (and often one or more
managers and employees) are family members.
Being a non-family employee here isn t easy. The tendency to treat family and
non-family employees differently can undermine perceptions of fairness and morale.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 621

If so, as one writer puts it, It s a sure bet that their lower morale and simmering
resentments are having a negative effect on your operations and sapping your
profits. 60 Reducing such fairness problems involves several steps, including:61
* Set the ground rules. One family business consultant says,
During the hiring process the [management] applicant should be informed as
to whether he or she will be essentially a placeholder, or whether there will be
potential for promotion. At a minimum, make the expectations clear, regarding
matters such as the level of authority and decision-making the person can
expect to attain.62
* Treat people fairly. Work hard to avoid any appearance that family members are
benefiting unfairly from the sacrifice of others. 63
* Confront family issues. Discord and tension among family members distracts
and demoralizes employees. Family members must confront and work out their
differences.
* Erase privilege. Family members should avoid any behavior that would lead
people to the conclusion that they are demanding special treatment in terms
of assignments or responsibilities. 64 Family employees should come in earlier,
work harder, and stay later than other employees stay.

4 Discuss how you would

USING PROFESSIONAL EMPLOYER ORGANIZATIONS
choose and deal with a As we explained in Chapter 13 (Benefits), many small business owners look at the issues
professional employee involved with managing personnel, and decide to outsource most of their human
organization. resource functions to vendors.65 These vendors go by the names professional employer
organizations (PEOs), human resource outsourcers (HROs), or sometimes employee or
staff leasing firms.

How Do PEOs Work?

These vendors range from specialized payroll companies to those that handle all an
employer s human resource management requirements.66 At a minimum, these firms
take over the employer s payroll tasks.67 Usually, however, PEOs assume most of the
employer s human resources chores. By transferring the client firm s employees
to the PEO s payroll, PEOs become co-employers of record for the employer s
employees. The PEO can then fold the client s employees into the PEO s insurance
and benefits program, usually at a lower cost. The PEO usually handles employee-
related activities such as recruiting, hiring (with client firms supervisors approvals),
and payroll and taxes. Most PEOs focus on employers with under 100 employees, and
charge fees of 2% to 4% of a company s payroll. HROs usually handle these functions
on an administrative services only they re basically your HR office, but your
employees still work for you.68

Why Use a PEO?

Employers turn to PEOs for several reasons:

LACK OF SPECIALIZED HR SUPPORT Small firms with fewer than about

100 employees typically have no dedicated HR managers. The owner has most of the
human resource management burden on his or her shoulders.

PAPERWORK The Small Business Administration estimates that small business

owners spend up to 25% of their time on personnel-related paperwork, such as
background checks and benefits sign-ups.69 Because the PEO takes over most of this,
many small businesses conclude that it s cheaper for them just to pay the employee
leasing firm s fees.
622 PART 5 EMPLOYEE RELATIONS

FIGURE 18-6 Guidelines for

Employers should choose and manage the PEO relationship carefully. Guidelines for
Finding and Working with PEOs
doing so include:
Sources: Based on Robert Beck Conduct a needs analysis. Know ahead of time exactly what human resource concerns
and J. Starkman, How to Find a your company wants to address.
PEO that Will Get the Job Done,
National Underwriter 110, no. 39 Review the services of all PEO firms you re considering. Determine which can meet all
(October 16, 2006), pp. 39, 45; your requirements.
Lyle DeWitt, Advantages of Human Determine if the PEO is accredited. There is no rating system. However, the Employer
Resource Outsourcing, The CPA Services Assurance Corporation of Little Rock, Arkansas (www.Escorp.org), imposes
Journal 75, no. 6 (June 2005), p. 13; higher financial, auditing, and operating standards on its members. Also check the
www.peo.com/dmn/, accessed
April 28, 2008; Layne Davlin, National Association of Professional Employer Organizations (www.NAPEO.org),
Human Resource Solutions for the and www.PEO.com.
Franchisee, Franchising World 39, Check the provider s bank, credit, insurance, and professional references.
no. 10 (October 2007), p. 27. Understand how the employee benefits will be funded. Is it fully insured or partially
self-funded? Who is the carrier? Confirm that employers will receive first-day
coverage.
See if the contract assumes the compliance liabilities in the applicable states.
Review the service agreement carefully. Are the respective parties responsibilities and
liabilities clear?
Investigate how long the PEO has been in business.
Check out the prospective PEO s staff. Do they seem to have the expertise to deliver
on its promises?
Ask, how will firm deliver its services? In person? By phone? Via the Web?
Ask about upfront fees and how these are determined.
Periodically get proof that payroll that taxes and insurance premiums are being paid
properly and that any legal issues are handled correctly.

LIABILITY Legally, PEOs generally contractually share liability with clients and
have a vested interest in preventing workplace injuries and employee lawsuits. 70 The
PEO should thus help ensure the small business fulfills its Title VII, OSHA, COBRA,
and Fair Labor Standards Act responsibilities.71

BENEFITS As we saw in Chapter 13, insurance and benefits are often the
big PEO attraction. Getting health and other insurance is a problem for smaller
firms. That s where the leasing firm comes in. A small business owner may be able
to get insurance [as well as benefits like a 401(k)] for its people that it couldn t
otherwise.72

PERFORMANCE Finally, the professionalism that the PEO brings to recruiting,

screening, training, compensating, and maintaining employee safety and welfare will
hopefully translate into improved employee and business results.

Caveats
There are several potential downsides to these firms. If your PEO is poorly managed, or
goes bankrupt, you could find yourself with an office full of uninsured workers. 73
Many employers view their human resource management processes (like training new
engineers) as a strategic advantage, and aren t inclined to turn over tasks like these to
outsiders. Another potential problem is determining who s responsible if things go
wrong. For example, who is responsible if an employee gets hurt, the PEO or the
employer? The contract should address this.74

WARNING SIGNS Several things may signal problems with the prospective PEO.
One is lax due diligence. For example, because they share liability with the employer,
they should question you extensively about your firm s workplace safety and human
resource policies and practices.75 Figure 18-6 summarizes guidelines for finding and
working with PEOs.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 623

5 Describe how you would

MANAGING HR SYSTEMS, PROCEDURES,
create a start-up human AND PAPERWORK
resource system for a new
small business. Introduction
Consider the paperwork required to run a five-person retail shop. Just to start with,
recruiting and hiring an employee might require a help wanted advertising listing, an
employment application, an interviewing checklist, various verifications of education
and immigration status, for instance and a telephone reference checklist. You then
might need an employment agreement, confidentiality and noncompetition agree-
ments, and an employer indemnity agreement. To process the new employee you might
need a background verification, a new employee checklist, and forms for withholding
tax and to obtain new employee data. And to keep track of the employee once on board,
you d need just to start a personnel data sheet, daily and weekly time records, an
hourly employee s weekly time sheet, and an expense report. Then come all the
performance appraisal forms, a disciplinary notice, an employee orientation record,
separation notice, and employment reference response.
In fact, the preceding list barely scratches the surface of the policies, procedures,
and paperwork you ll need to run the human resource management part of your
business. Perhaps with just one or two employees you could keep track of everything
in your head, or just write a separate memo for each HR action, and place it in a folder
for each worker. But with more employees, you ll need to create a human resource
system comprised of standardized forms. As the company grows, you ll then have
to computerize various parts of the HR system payroll, or appraising, for instance.

Basic Components of Manual HR Systems

Very small employers (say, with 10 employees or less) will probably start with a
manual human resource management system. From a practical point of view, this
generally means obtaining and organizing a set of standardized personnel forms
covering each important aspect of the HR recruitment, selection, training,
appraisal, compensation, safety process, as well as some means for organizing all
this information for each of your employees.

BASIC FORMS The number of forms you would conceivably need even for a
small firm is quite large, as the illustrative list in Table 18-3 shows.76 One simple
way to obtain the basic component forms of a manual HR system is to start with
one of the books or CDs that provide compilations of HR forms. The forms you

TABLE 18-3 Some Important Employment Forms

New Employee Forms Current Employee Forms Employee Separation Forms

Application Employee Status Retirement Checklist

New Employee Checklist Change Request Termination Checklist
Employment Interview Employee Record COBRA Acknowledgment
Reference Check Performance Evaluation Unemployment Claim
Telephone Reference Report Warning Notice Employee Exit Interview
Employee Manual Vacation Request
Acknowledgment Probation Notice
Employment Agreement Job Description
Employment Application Probationary Evaluation
Disclaimer Direct Deposit Acknowledgment
Employee Secrecy Agreement Absence Report
Disciplinary Notice
Grievance Form
Expense Report
401(k) Choices
Acknowledgment
Injury Report
624 PART 5 EMPLOYEE RELATIONS

want can then be adapted from these sources for your particular situation. Office
supply stores (such as Office Depot and Staples) also sell packages of personnel
forms. For example, Office Depot sells packages of individual personnel forms as
well as a Human Resource Kit containing 10 copies of forms such as Application,
Employment Interview, Reference Check, Employee Record, and Performance
Evaluation. 77 Also available is a package of Employee Record Folders. Some
employers still use such folders to maintain files on each employee; on the outside
of the pocket is a place for recording information such as name, start date,
company benefits, and so on.

OTHER SOURCES Several direct-mail catalog companies similarly offer HR

materials. For example, HRdirect (www.hrdirect.com) offers packages of personnel
forms. These include, for instance, Short- and Long-Form Employee Applications,
Applicant Interviews, Employee Performance Reviews, and Absentee Calendars and
Reports. Also available are various legal-compliance forms, including standardized
Harassment Policy and FMLA Notice forms, as well as posters (for instance, covering
legally required postings for matters such as the Americans with Disabilities Act).
G. Neil Company, of Sunrise, Florida (www.gneil.com), is another direct-mail
personnel materials source. In addition to a complete line of personnel forms, docu-
ments, and posters, it also carries manual systems for matters like attendance history,
job analyses, and for tracking vacation requests and safety records. It has a complete
HR start-up kit containing 25 copies of each of the basic components of a manual
HR system. These include, for instance, Long Form Application for Employment,
Attendance History, Payroll/Status Change Notice, Absence Report, and Vacation
Request & Approval, all organized in a file box.

Automating Individual HR Tasks

As the small business grows, it becomes unwieldy to rely on manual HR systems. It is
therefore at this point that most small- to medium-sized firms begin computerizing
individual human resource management tasks.

PACKAGED SYSTEMS Here again a variety of resources are available. For

example, at the Web site for the International Association for Human Resource
Information Management (www.ihrim.org) you ll find, within the Buyers Guide
tab, a categorical list of HR software vendors.78 These firms provide software
solutions for virtually all personnel tasks, ranging from benefits management to
compensation, compliance, employee relations, outsourcing, payroll, and time and
attendance systems.
The G. Neil Company sells software packages for monitoring attendance, employee
record keeping, writing employee handbooks, and conducting computerized employee
appraisals. HRdirect offers software for tasks such as writing employee policy manuals,
writing performance reviews, creating job descriptions, and tracking attendance and
hours worked for each employee. For example, the Gradience® Records software they
offer helps small businesses maintain employee records (including name, address, marital
status, number of dependents, emergency contact and phone numbers, hire date, and
job history).
As the company grows, the owner may decide to transition to an integrated
human resource management system; we discuss this next.

Human Resource Information Systems (HRIS)

We can define an integrated human resource information system (HRIS) as interrelated
components working together to collect, process, store, and disseminate information
to support decision making, coordination, control, analysis, and visualization of an
organization s human resource management activities.79 There are several reasons
for installing an HRIS. The first is improved transaction processing.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 625

Improved Transaction Processing

The day-to-day minutiae of maintaining and updating employee records take
an enormous amount of time. One study found that 71% of HR employees time
was devoted to transactional tasks like checking leave balances, maintaining
address records, and monitoring employee benefits distributions.80 HRIS packages
substitute powerful computerized processing for a wide range of the firm s HR
transactions.

Online Self-Processing
HR information systems also make it possible (or easier) to make the company s
employees part of the HRIS. For example, at Provident Bank, an HR compensation
system called Benelogic lets the bank s employees self-enroll in all their desired benefits
programs over the Internet at a secure site. It also support[s] employees quest for what
if information relating to, for example, the impact on their take-home pay of various
benefits options. 81 That s all work that HR employees would previously have had to do
for Provident s employees.

Improved Reporting Capability

Because the HRIS integrates numerous individual HR tasks (training records,
appraisals, employee personal data, and so on), installing an HRIS boosts HR s
reporting capabilities. For example, reports might be available (company-wide and
by department) for health care cost per employee, pay and benefits as a percent of
operating expense, cost per hire, report on training, volunteer turnover rates,
turnover costs, time to fill jobs, and return on human capital invested (in terms
of training and education fees, for instance).

HR System Integration
Because the HRIS s software components (record keeping, payroll, appraisal, and so
forth) are integrated, they enable the employer to reengineer its HR function. The
system PeopleSoft (now part of Oracle Corporation) installed in its own offices
provides an illustration. For example, its HRIS electronically routes salary increases,
transfers, and other e-forms through the organization to the proper managers for
approval. As one person signs off, it s routed to the next. If anyone forgets to process a
document, a smart agent issues reminders until the task is completed. Installing the
system in term enabled PeopleSoft to reorganize how the firm did these tasks.

HRIS Vendors
Many firms today offer HRIS packages. The Web site for the International Association
for Human Resource Information Management (www.ihrim.org/), for instance, lists
Automatic Data Processing, Inc., Business Information Technology, Inc., Human
Resource Microsystems, Lawson Software, Oracle Corporation, SAP America, Inc., and
about 25 other firms as HRIS vendors.

HR and Intranets
Employers increasingly use intranet-based HR information systems. For example,
LG&E Energy Corporation uses its intranet for benefits communication. Employees
can access the benefits homepage and (among other things) review the company s
401(k) plan investment options, get answers to frequently asked questions about the
company s medical and dental plans, and report changes in family status. Other uses for
human resource intranets include, for instance, automating job postings and applicant
tracking, setting up training registration, providing electronic pay stubs, publishing an
electronic employee handbook, and letting employees update their personal profiles
and access their accounts, such as 401(k) accounts.
626 PART 5 EMPLOYEE RELATIONS

REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com
to continue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

1. Many people reading this book will work for or own their businesses, it s important to make sure that nonfamily
own small businesses, so it s important to understand the members are treated fairly, something that requires set-
small business challenge. In terms of managing human ting ground rules (for instance, regarding promotions),
resources, small businesses are different in terms of size treating employees fairly, dealing with family discord and
(not enough employees for a dedicated HR manager), issues, and erasing privilege. Small businesses can also use
priorities (sales come first), informality, and the nature simple methods for improving communications, for
of the entrepreneur. Without effective human resource instance, online newsletters.
management, small business owners run the risk that 4. After reviewing all the challenges of managing human
they ll be at a competitive disadvantage or that without resources, many small business owners turn to using
the necessary HR expertise they may commit mistakes professional employer organizations. Also called
that lead to litigation. human resource outsourcers, or employee or staff leasing
2. Being small, small businesses can particularly capitalize firms, these firms generally transfer the client firm s
on freely available Internet and government tools employees to the PEO s own payroll and thus become
to support their HR efforts. For example, you can use the employer of record for the employer s employees.
Department of Labor elaws advisers to answer overtime Reasons to turn to the PEOs include a lack of specialized
questions, the EEOC s Web sites for answers on ques- HR support, a desire to reduce the paperwork burden,
tions like How can we resolve the charge? and the avoiding HR-related liability, obtaining better benefits
Department of Labor s OSHA Web site to review, for for employees, and providing improved employee and
instance, their small business handbook. To better business results.
compete, small business owners can also use online 5. Small business managers need to understand how their
recruiting tools like those we discussed in Chapter 5 and HR systems, procedures, and paperwork will evolve.
training programs available online from companies At first, there may be a simple manual human resource
such as puresafety.com, and from the SBA and National management system, for instance, with employee
Association of Manufacturers. records compiled on forms from office supply compa-
3. Small businesses need to capitalize on their strengths, and nies and maintained in manual files. The employer then
in this case, it means capitalizing on familiarity, flexibil- may purchase one or more packaged systems for
ity, and informality. For example, in many respects it s automating individual HR tasks, for instance, such as
easier for small businesses to be flexible about extra time applicant tracking and performance appraisal. As com-
off, compressed workweeks, and job enrichment. They panies grow, they will look to integrate the separate
can also use relatively informal but still effective employee systems with a human resource information system,
selection procedures such as the work-sampling test i.e., interrelated components working together to
we discussed. Informal training methods include online collect, process, store, and disseminate information
training opportunities, encouraging the sharing of best to support decision making, coordination, control,
practices among associates, and sending employees analysis, and visualization of the company s human
to seminars. Because small businesses are often family resource management activities.

DISCUSSION QUESTIONS
1. How and why is HR in small businesses different than 5. Discuss what you would do to find, retain, and deal with
that in large firms? a professional employee organization on an ongoing
2. Explain why HRM is important to small businesses. basis.
3. Explain and give at least four examples of how entrepre- 6. Describe with examples how you would create a start-
neurs can use Internet and government tools to support up, paper-based human resource system for a new small
the HR effort. business.
4. Explain and give at least five examples of ways entrepre-
neurs can use small size familiarity, flexibility, and
informality to improve their HR processes.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 627

INDIVIDUAL AND GROUP ACTIVITIES

1. Form teams of five or six persons, each with at least one you could use to provide training to them, at no cost
person who owns or has worked for a small business. to you or to them.
Based on their experiences, make a list of the inadequate- 4. The HRCI Test Specifications Appendix (pages
HR risks the business endured, in terms of competitive 633 640) lists the knowledge someone studying for the
disadvantage, lack of specialized HR expertise, workplace HRCI certification exam needs to have in each area
litigation, compensation laws compliance, and paper- of human resource management (such as in Strategic
work/data-entry errors. Management, Workforce Planning, and Human
2. You own a small business, and you are confused about Resource Development). In groups of four to five
which of your employees is eligible for overtime pay. students, do four things: (1) review that appendix now;
The employees in question include your secretary, two (2) identify the material in this chapter that relates to
accounting clerks, one engineer, and two inside sales- the required knowledge the appendix lists; (3) write four
people. Individually or in groups of four or five students, multiple-choice exam questions on this material that
use the DOL s Overtime Security Advisor and DOL s you believe would be suitable for inclusion in the HRCI
Calculator to determine who gets overtime pay. exam; and (4) if time permits, have someone from your
3. You have about 32 employees working in your factory. team post your team s questions in front of the class,
Working individually or in teams of four or five so the students in other teams can take each others
students, find and create a list of five online sources exam questions.

EXPERIENTIAL EXERCISE
Building an HRIS
Purpose: The purpose of this exercise is to give you practice than 40 employees and have been taking care of all types
in creating a human resource management system (HRIS). of HR paperwork informally, mostly on little slips of paper
and with memos. They want you to build them a human
Required Understanding: You should be fully acquainted resource management information system how computer-
with the material in this chapter. ized it is will be up to you, but they can only afford a budget of
How to Set Up the Exercise/Instructions: Divide the class $5,000 upfront (not counting your consulting), and then
into teams of five or six students. Each team will need access about $500 per year for maintenance. You know from your
to the Internet. HR training that there are various sources of paper-based and
online systems. Write a 2-page proposal telling them exactly
Assume that the owners of a small business come to you what your team would suggest, based on its accumulated
with the following problem. They have a company with less existing knowledge, and from online research.

APPLICATION CASE
NETFLIX BREAKS THE RULES 82
Why did Netflix survive as a startup when the dot-com (An HR officer must approve time off in excess of 30 days
bubble burst in the late 1990s? Probably because, from the annually.) As a Netflix employee, your pay isn t tied to
day he started Netflix, founder Reed Hastings believed in performance appraisals, or even to a compensation plan.
breaking the rules. His direct-to-consumer mail and video Frequent market salary surveys and pay hikes keeps everyone s
streaming business model certainly helped Netflix to survive. pay aligned with Silicon Valley competitors. Each employee
But the firm s unorthodox human resource management decides whether to take his or her pay in cash or in Netflix
practices helped the company to attract and keep the high stock. Options vest immediately. Netflix doesn t recruit much
producers who design the products that are the firm s at college job fairs, instead hiring mostly highly experienced
lifeblood. Hastings knew that top Silicon Valley workers professionals. There s no training, professional development,
could choose where they worked, and high pay is pretty much or career planning at Netflix (except for legally required train-
standard throughout the Valley s industries. How to set ing, such as diversity training). You re in charge of your own
oneself apart? Hastings and his start-up colleagues believed career.
that a culture that balanced a flexible work environment with But with freedom like that comes responsibilities. The
few constraints and high responsibility was the answer. They company expects its salaried employees to work hard to do
called the policy Freedom and Responsibility. the jobs of three or four people as one report put it. And
Just how unorthodox are the Netflix HR practices? Netflix doesn t have the frat party free-wheeling atmosphere
Consider this: As a Netflix professional you get unlimited that many dot-coms do. It s an adult environment. Netflix
vacations. One engineer takes 5-week vacations to Europe, does not coddle underperformers. Yearly 360-degree perform-
because he likes (as he says) to take his time off in big chunks. ance reviews provide direct and honest feedback. Those that
628 PART 5 EMPLOYEE RELATIONS

aren t cutting it are quickly let go, but (whenever possible) based on market surveys. You offer no training and develop-
amicably. Rather than the sorts of litigiousness that often ment. And you don t track vacation time, more or less.
characterizes dismissals in other firms (having to prove the If someone s not doing well, you just pay them to leave, with
person was incompetent, for instance), Netflix writes a check. no hassles. Netflix seems to have hit upon its own version
The company believes that a handsome severance payment of Netflix High-Performance Work Practices. Given that,
helps maintain the person s dignity, makes it easier for super- answer the following questions (please be specific).
visors to make tough calls with underperformers, and, of
1. What (if anything) is it about Netflix that makes its HR
course, minimizes blowback from those it dismisses. It s more
practices work for Netflix?
like a no-fault divorce, as one observer put it.
2. Would you suggest using similar practices in other busi-
nesses, such as, say, a new restaurant? Why?
3. List the criteria you would use for deciding whether
Questions another company is right for Netflix-type HR practices.
In many respects, the Netflix HR strategy seems like a dream 4. What argument would you make in response to the
come true for small businesses. You don t need a pay plan; following: Netflix just lucked out; they d have done
instead, you just update each person s pay every few months even better with conventional HR practices.

CONTINUING CASE
CARTER CLEANING COMPANY
Cleaning in Challenging Times The question therefore naturally arose as to whether
As the economic downturn worsened, revenues at the Carter the Carters could cut their employment expenses without
stores fell steeply. Many of their customers were simply out dismissing too many people. Jennifer Carter has several
of work and didn t need (or couldn t afford) dry cleaning. questions for you.
Working customers were cutting back wherever they could.
The Carters actually found themselves giving away some free
cleaning services. They started a new program wherein exist- Questions
ing customers could get one suit or dress cleaned free each 1. Assume that we don t want to terminate any of our
month if they needed it for a job interview. employees. What work-scheduling related changes could
In the midst of this downturn, the Carters knew they we make that would reduce our payrolls by, say, 20% per
had to do something to get their employment costs under week but still keep all our employees on board?
control. The problem was that, realistically, there wasn t 2. We are currently handling most of our personnel-related
much room for cutting staffing in a store. Of course, if a activities, such as sign-ons, benefits administration, and
store got very slow, they could double up by having a appraisals manually. What specific suggestions would
cleaner/spotter spend some of his or her time pressing, or you have for us in terms of using software systems to
having the manager displace the counter person. But if sales automate our HR processes?
only fall 15% to 20% per store, there really wasn t much 3. Suggest at least five free Internet-based sources we could
room for reducing employee head count because each store turn to for helping us to lower our total employment
never really employed that many people in the first place. costs.

TRANSLATING STRATEGY INTO HR POLICIES & PRACTICES CASE

THE HOTEL PARIS CASE
The Hotel Paris s competitive strategy is To use superior guest with huge centralized systems that easily and economically
service to differentiate the Hotel Paris properties, and to handled reservations requests from throughout the world.
thereby increase the length of stay and return rate of guests, By comparison, the Hotel Paris still handled reservations much
and thus boost revenues and profitability. HR manager Lisa as hotels did 20 years ago, either with separate Web sites for
Cruz must now formulate functional policies and activities each of their hotel locations, or by phone. Their human
that support this competitive strategy by eliciting the required resource management information systems were similarly
employee behaviors and competencies. primitive. Lisa had managed to install several separate infor-
Challenging economic times brought the drawbacks of mation systems, such as for performance appraisals. However,
the Hotel Paris s relatively small size into sharp relief. Large as she discussed one day over lunch with the CFO, these
chains like Marriott had vast online reservations capabilities systems were not integrated. Therefore, if an employee changed
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 629

his or her name, for instance, through marriage, people in her human resource management operations? To what
Lisa s office had to execute all those name changes manually on extent does the Hotel Paris s quality service orientation
all the various employee rosters and benefits plans. enter into how Lisa s metrics should compare?
This lack of integration was bad enough in boom times, 2. Throughout this textbook, we ve discussed various
but was increasingly unacceptable as the economy soured. specific examples of how human resource manage-
In one of the most difficult discussions she ever had with the ment departments have been reducing the cost of
CFO, he pointed out to her that the amount of money they delivering their services. Keeping in mind the Hotel
were spending on human resource management administra- Paris s service quality orientation, please list and
tion was about 30% higher than it was at larger chains such as explain with examples how Lisa Cruz could use at least
Marriott. He understood that large size brings economies of five of these.
scale. But on the other hand, he believed there had to be some- 3. Focusing only on human resource information systems
thing they could do to bring down the cost of administering for a moment, what sorts of systems would you suggest
human resource management. Lisa consider recommending for the Hotel Paris?
4. Explain with detailed examples how Lisa can use free
online and governmental sources to accomplish at least
Questions part of what you propose in your previous answers.
1. Using any benchmark data that you can find, including 5. Give three examples of fee-based online tools you suggest
information from this textbook, what are some benchmark Lisa use.
metrics that Lisa could be using to assess the efficiency of 6. Do you suggest Lisa use a PEO? Why?

ENDNOTES
1. Based on Donna Harris, Mentors Cut to Work All Night, Harvard Business Management 49, no. 2 (March April
Turnover Costs, Boost Sales, Loyalty, Review 87, no. 1 (January 2009), pp. 27. 2010), pp. 241 264.
Automotive News 64, no. 18 (June 28, 10. Points 2 5 based on Kathy Williams, Top 13. Dietz et al., HRM Inside UK E-commerce
2010), p. 10. HR Compliance Issues or Small Busi- Firms.
2. Statistics of U.S. Businesses and Non- nesses, Strategic Finance (February 2005), 14. Based on Harris, Mentors Cut Turnover
Employer Status, www.sba.gov/advo/ pp. 21 23. Costs.
research/data.html, accessed November 5, 11. However, one study concluded that the 15. Ibid.
2009. increased labor costs associated with high- 16. Gilbert Nicholson, Automated Assessments
3. Small Business Economic Indicators performance work practices offset the for Better Hires, Workforce (December
2000, Office of Advocacy, U.S. Small productivity increases associated with 2000): 102 107.
Business Administration (Washington, high-performance work practices. Luc Sels 17. www.EEOC.gov/employers/overview.
D.C., 2001), p. 5. See also Small Business et al., Unraveling the HRM Performance html, accessed February 10, 2008.
Laid Foundation for Job Gains, www.sba. Link: Value Creating and Cost Increasing 18. www.DOL.gov/elaws, accessed February 10,
gov/advo, accessed March 9, 2006. Effects of Small-Business HRM, Journal 2008.
4. Studies show that the size of the business of Management Studies 43, no. 2 (March 19. Daren Dahl, Recruiting: Tapping the
impacts human resource activities such 2006), pp. 319 342. For supporting evi- Talent Pool . . . without Drowning in
as executive compensation, training, dence of HR s positive effects on small Resumes, Inc. 31, no. 3 (April 2009),
staffing, and HR outsourcing. Peter companies, see also Andrea Rauch et al., PP. 121 122.
Hausdorf and Dale Duncan, Firm Size Effects of Human Capital and Long- 20. Ibid.
and Internet Recruiting in Canada: Term Human Resources Development 21. Ibid.
A Preliminary Investigation, Journal of and Utilization on Employment Growth 22. Ibid.
Small-Business Management 42, no. 3 of Small-Scale Businesses: A Causal Analy- 23. Ibid.
(July 2004), pp. 325 334. sis, Entrepreneurship Theory and Practice 24. Paul Harris, Small Businesses Bask
5. SHRM Human Capital Benchmarking 29, no. 6 (November 2005), pp. 681 698; in Training s Spotlight, T*D 59, no. 2
Study 2007, Society for Human Resource Andre Grip and Inge Sieben, The Effects (Fall 2005), pp. 46 52.
Management, p. 12. of Human Resource Management on 25. Ibid.
6. Graham Dietz et al., HRM Inside UK Small Firms Productivity and Employee s 26. Ibid.
E-commerce Firms, International Small Wages, Applied Economics 37, no. 9 27. www.halogensoftware.com/products/
Business Journal 24, no. 5 (October 2006), (May 20, 2005), pp. 1047 1054. halogen-eappraisal, accessed January 10,
pp. 443 470. 12. Dawn Carlson et al., The Impact of 2008.
7. Bernice Kotey and Cathleen Folker, Human Resource Practices and Compen- 28. Jan de Kok, Precautionary Actions within
Employee Training in SMEs: Effect of Size sation Design on Performance: An Analy- Small- and Medium-Sized Enterprises,
and Firm Type Family and Nonfamily, sis of Family-Owned SMEs, Journal of Journal of Small Business Management 43,
Journal of Small-Business Management 45, Small Business Management 44, no. 4 no. 4 (October 2005), pp. 498 516.
no. 2 (April 2007), pp. 14 39. (October 2006), pp. 531 543. See also 29. Sean Smith, OSHA Resources Can Help
8. Dietz et al., HRM Inside UK E-commerce Jake Messersmith and James Guthrie, Small Businesses Spot Hazards, Westchester
Firms. High Performance Work Systems in County Business Journal (August 4, 2003),
9. Ibid. See also N. Wasserman, Planning a Emergent Organizations: Implications pp. 4. See also www.osha.gov/as/opa/
Start-Up? Seize the Day . . . Then Expect for Firm Performance, Human Resource osha-faq.html, accessed May 26, 2007.
630 PART 5 EMPLOYEE RELATIONS

30. www.osha.gov/dcsp/smallbusiness/sharp. Less, Financial Executive 21, no. 9 Property and Casualty Risk and Benefits
html, accessed February 17, 2010. (November 1, 2005), p. 10. Management 104, no. 18 (May 2000), p. 12.
31. Dietz et al., HRM Inside UK E-commerce 50. www.dol.gov/ebsa/pdf/ppa2006.pdf, 75. Max Chafkin, Fed Up with HR? Inc. 28,
Firms. accessed February 18, 2008. no. 5 (May 2006), pp. 50 52.
32. Adrienne Fox, McMurray Scouts Top 51. Bill Leonard, New Retirement Plans for 76. For a more complete list, see, for exam-
Talent to Produce Winning Results, HR Small Employers, HR Magazine 51, no. 12 ple, Sondra Servais, Personnel Director
Magazine 51, no. 7 (July 2006), pp. 57. (December 2006), pp. 30. (Deerfield Beach, FL: Made E-Z Prod-
33. This is based on John Drake, Interviewing 52. Kristen Falk, The Easy Retirement Plan ucts, 1994); and www.hoovers.com/
for Managers: A Complete Guide to Employ- for Small Business Clients, National business-forms/ pageid_16436 /
ment Interviewing (New York, AMACOM, Underwriter 111, no. 45 (December 3, global-mktg-index.xhtml?cm_ven=
1982). 2007), pp. 12 13. PAID&cm_cat=GGL&cm_pla=FRM&c
34. Ibid. 53. Ibid. m_ite=employment_contract_forms,
35. Colin Gray and Christopher Mabey, 54. Dina Berta, Job Trekker s Odyssey Offers accessed July 20, 2008.
Management Development: Key Differ- HR Insights, Nation s Restaurant News 77. Office Depot, Winter 2003 Catalog (Delray
ences Between Small and Large Busi- 42, no. 6 (February 11, 2008), pp. 1, 12. Beach, FL: Office Depot, 2003).
nesses in Europe, International Small 55. Dina Berta, IHOP Franchise Employs 78. www.ihrim.org, accessed April 28, 2008.
Business Journal 23, no. 5 (October 2005), Post-Hiring Surveys to Get Off Turnover 79. Adapted from Kenneth Laudon and Jane
pp. 467 485. Treadmill, Nation s Restaurant News 41, Laudon, Management Information Systems:
36. Ibid. See also Essi Saru, Organizational no 39 (October 1, 2007), p. 6. New Approaches to Organization and Tech-
Learning and HRD: How Appropriate 56. Dina Berta, IHOP Franchisee Employs nology (Upper Saddle River, NJ: Prentice
Are They for Small Firms? Journal of Post-Hiring Surveys to Get Off Turnover Hall, 1998), p. G7. See also Michael Barrett
European Industrial Training 31, no. 1 Treadmill, Nation s Restaurant News 41, and Randolph Kahn, The Governance of
(January 2007), pp. 36 52. no. 39 (October 1, 2007), p. 6. Records Management, Directors and Boards
37. From Stephen Covey, Small Business, 57. Kate Leahy, The 10 Minute Manager s 26, no. 3 (Spring 2002), pp. 45 48; Anthony
Big Opportunity, Training 43, no. 11 Guide to . . . Communicating with Employ- Hendrickson, Human Resource Informa-
(November 2006), pp. 40. ees, Restaurants & Institutions 116, no. 11 tion Systems: Backbone Technology of
38. Gina Ruiz, Smaller Firms in Vanguard of (June 1, 2006), pp. 22 23. Contemporary Human Resources, Journal
Flex Practices, Workforce Management 58. Ibid. of Labor Research 24, no. 3 (Summer 2003),
84, no. 13 (November 21, 2005), pp. 10. 59. Ibid. pp. 381 395.
39. Kira Bindrum, Little Firms Redefine Cul- 60. Phillip Perry, Welcome to the Family, 80. HR Execs Trade Notes on Human
ture of Work, Crain s New York Business Restaurant Hospitality 90, no. 5 (May 2006), Resource Information Systems, BNA Bul-
25, no. 49 (December 7 13, 2009), p. 20. pp. 73, 74, 76, 78. letin to Management (December 3, 1998),
40. Ibid., pp. 7 13. 61. Ibid. p. 1. See also Brian Walter, But They Said
41. Ruiz, Smaller Firms in Vanguard of Flex 62. Ibid. Their Payroll Program Complied with the
Practices. 63. Ibid. FLSA, Public Personnel Management 31,
42. These are from Ty Freyvogel, Operation 64. Ibid. no. 1 (Spring 2002), pp. 79 94.
Employee Loyalty, Training Media Review, 65. Jane Applegate, Employee Leasing Can Be 81. HR Execs Trade Notes on Human
September October 2007. a Savior for Small Firms, Business Courier Resource Information Systems, BNA
43. Ibid. Serving Cincinnati Northern Kentucky Bulletin to Management (December 3,
44. Ibid. (January 28, 2000), p. 23. 1998), p. 2. See also Ali Velshi, Human
45. Based on Bob Nelson, 1001 Ways to Reward 66. Robert Beck and Jay Starkman, How to Resources Information, The Americas
Employees (New York: Workmen Publish- Find a PEO That Will Get the Job Done, Intelligence Wire (February 11, 2004).
ing, 1994), pp. 19. See also Sunny C. L. Fong National Underwriter 110, no. 39 82. Copyright Gary Dessler, PhD, 2011; based
and Margaret A. Shaffer, The Dimension- (October 16, 2006), pp. 39, 45. on information in Michelle Conlin, Net-
ality and Determinants of Pay Satisfaction: 67. Layne Davlin, Human Resource Solutions flix: Flex To The Max, September 24,
A Cross-Cultural Investigation of a Group for the Franchisee, Franchising World 39, 2007, www.businessweek.com/magazine/
Incentive Plan, International Journal of no. 10 (October 2007), pp. 27 28. content/07_39/b4051059.htm, accessed
Human Resource Management 14, no. 4 68. Beck and Starkman, How to Find a PEO. July 3, 2011; Robert J. Grossman, Tough
(June 2003), p. 559(22). 69. Lyle DeWitt, Advantages of Human Love at Netflix, April 1, 2010, www.shrm.
46. Judith Medina, No Help in Sight for Soar- Resources Outsourcing, The CPA Journal org/Publications/hrmagazine/Editorial-
ing Costs, Crain s New York Business 26, 75, no. 6 (June 2005), pp. 13. Content/2010/0410/Pages/0410grossman3.
no. 2 (January 11 17, 2010), pp. 10, 13. 70. Max Chafkin, Fed Up with HR? Inc. 28, aspx, accessed July 3, 2011; and David F.
47. Michelle V. Rafter, Back in a Giving no. 5 (May 2006), pp. 50 52. Larcker, Allan McCall, and Brian Tayan,
Mood, Workforce Management 88, no. 10 71. Ibid. Equity on Demand: The Netflix Approach
(September 14, 2009), pp. 25 29. 72. Ibid. to Compensation, January 15, 2010, http://
48. Ibid. 73. Ibid. hbr.org/product/equity-on-demand-the-
49. Jeffrey Marshall and Ellen Heffes, Bene- 74. Diana Reitz, Employee Leasing Breeds netflix-approach-to-compensat/an/CG19-
fits: Smaller Firm Workers Often Getting Liability Questions, National Underwriter PDF-ENG, accessed July 3, 2011.
 CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 631

PART 5 VIDEO CASES APPENDIX

Video Title: Union-Management Relations (UPS)

SYNOPSIS
The former human resources head for UPS describes what it s like (for both an
employer and an employee) to work with a labor union. The roles and functions
of labor unions are discussed, and the advantages and disadvantages that can accrue
to both employees and management are explained. The future of unions, and other
arrangements that fulfill some of the same roles, are also discussed.

Discussion Questions
1. From what you know about UPS, what do you think would make the union
believe that the company was ripe for being organized?
2. Do you agree that unions stifle creativity ? Why or why not?
3. Do you agree that employees who excel in nonunion environments earn more
than they would in unionized companies? Why?
4. What other replacements for unions have helped reduce union membership,
according to the chapter?

Video Title: Safety (California Health Foundation)

SYNOPSIS
Company initiatives to promote safety and emergency preparedness are discussed. These
include proactive measures to encourage employee health and to prevent injuries, espe-
cially ergonomic ones. Different methods of preventing injuries are discussed, including
employee health programs that reimburse employees for gym memberships, smoking
cessation, weight loss, and other programs. When the company helps foster better
employee health, they are more likely to perform well and remain free of injuries.

Discussion Questions
1. What are some ways of lowering stress that the California Health Foundation
emphasizes?
2. How are the employees at the California Health Foundation involved
in ensuring an adequate response to an emergency?
3. Why are proactive measures the most appropriate for addressing ergonomic
injuries?
4. Based on what you ve seen to this point, how comprehensive would you say that
the company s safety program is? What suggestions would you make for additional
steps it should take?
5. What are the other economic side effects of accidents?
6. Do you agree that safety in the office is a matter of attitude ? Why or why not?
7. What other steps would you suggest the company take to boost safety?; for
instance, what would you have supervisors do to improve the company s
safety and accident record?

Video Title: Safety (City of Los Angeles)

SYNOPSIS
In this video, Randall Macfarlane says, among other things, that they use four methods to
ensure safety and health: training, providing personal protective equipment, providing
a special 8-hour training course for their staff, and holding biweekly safety meetings.
632 PART 5 EMPLOYEE RELATIONS

He also says they train supervisors to recognize behaviors or other things that may
be warning signs. Furthermore, an in-house review every year aims to make sure all
information and videos, etc., are current. He also focuses on ergonomics in order to
prevent problems like carpal tunnel syndrome. The company has periodic reviews from
California s Occupational Safety and Health Administration.

Discussion Questions
1. What should the city do prior to issuing personal protective equipment,
according to Chapter 16?
2. What do you think of the safety program? What else would you suggest, and why?
3. What are some of the issues and caveats the employer and its supervisors
should follow when dealing with a visit from the Occupational Safety and
Health Administration?
4. If you were asked to put together a list of items that supervisors should keep
in mind with respect to supervising safety and health at work, what would you
include on your list?

Video Title: Global HR Management (Joby)

SYNOPSIS
Joby is best known for its line of flexible camera tripods, called Gorillapods, and
for its flexible flashlights, called Gorillatorches. Joby has only a few dozen employees,
but has offices on three continents. It is often called the smallest global company
in the world.

Discussion Questions
1. Describe Joby s approach to managing globally. How does it coordinate design,
manufacturing, and distribution in key world markets?
2. How does a small company like Joby hire employees to work in its facilities
all over the world?
3. Based on what you read in Chapter 17, what suggestions would you make
for improving this company s global HR practices?
APPENDIX A
PHR and SPHR knowledge Base
The PHR and SPHR exams are created using the following PHR and SPHR
Knowledge Base, which outlines the responsibilities and knowledge needed
to be a viable HR professional. The PHR and SPHR Knowledge Base is creat-
ed by HR subject matter experts through a rigorous practice analysis study
and then validated by HR professionals working in the field through an exten-
sive survey instrument. The PHR and SPHR Knowledge Base periodically is
updated to ensure it is consistent with current practices in the HR field. All
questions appearing on the exams are linked to the responsibility and knowl-
edge statements outlined below.

IF LAWS CHANGE
We realize that employment laws change constantly. Candidates are responsible for
knowing the HR laws and regulations that are in effect as of the start of each exam period.
The percentages that follow each functional area heading are the PHR and SPHR
percentages, respectively.

01 Strategic Business Management (12%, 29%)

Developing, contributing to and supporting the organization s mission, vision, values,
strategic goals and objectives; formulating policies; guiding and leading the change
process; and evaluating HR s contributions to organizational effectiveness.

RESPONSIBILITIES:
01 Interpret information related to the organization s operations from internal
sources, including financial/accounting, business development, marketing,
sales, operations, and information technology, in order to contribute to the
development of the organization s strategic plan.
02 Interpret information from external sources related to the general business
environment, industry practices and developments, technological developments,
economic environment, labor pool, and legal and regulatory environment,
in order to contribute to the development of the organization s strategic plan.
03 Participate as a contributing partner in the organization s strategic planning
process.
04 Establish strategic relationships with key individuals in the organization to
influence organizational decision-making.
05 Establish relationships/alliances with key individuals and organizations in the
community to assist in achieving the organization s strategic goals and objectives.
06 Develop and utilize metrics to evaluate HR s contributions to the achievement
of the organization s strategic goals and objectives.
07 Develop and execute strategies for managing organizational change that
balance the expectations and needs of the organization, its employees, and all
other stakeholders.
08 Develop and align the organization s human capital management plan with its
strategic plan.
09 Facilitate the development and communication of the organization s core values
and ethical behaviors.
10 Reinforce the organization s core values and behavioral expectations through
modeling, communication, and coaching.
633
634 APPENDIX A

11 Develop and manage the HR budget in a manner consistent with the organization s
strategic goals, objectives, and values.
12 Provide information for the development and monitoring of the organization s
overall budget.
13 Monitor the legislative and regulatory environment for proposed changes and
their potential impact to the organization, taking appropriate proactive steps
to support, modify, or oppose the proposed changes.
14 Develop policies and procedures to support corporate governance initiatives
(e.g., board of directors training, whistleblower protection, code of conduct).
15 Participate in enterprise risk management by examining HR policies to evaluate
their potential risks to the organization.
16 Identify and evaluate alternatives and recommend strategies for vendor selection
and/or outsourcing (e.g., human resource information systems [HRIS], benefits,
payroll).
17 Participate in strategic decision-making and due diligence activities related
to organizational structure and design (e.g., corporate restructuring, mergers
and acquisitions [M&A], offshoring, divestitures). SPHR ONLY
18 Determine strategic application of integrated technical tools and systems (e.g.,
HRIS, performance management tools, applicant tracking, compensation tools,
employee self-service technologies).

KNOWLEDGE OF:
01 The organization s mission, vision, values, business goals, objectives, plans, and
processes.
02 Legislative and regulatory processes.
03 Strategic planning process and implementation.
04 Management functions, including planning, organizing, directing, and controlling.
05 Techniques to promote creativity and innovation.
06 Corporate governance procedures and compliance (e.g., Sarbanes-Oxley Act).
07 Transition techniques for corporate restructuring, M&A, offshoring, and
divestitures. SPHR ONLY

02 Workforce Planning and Employment (26%, 17%)

Developing, implementing and evaluating sourcing, recruitment, hiring, orientation,
succession planning, retention, and organizational exit programs necessary to ensure
the workforce s ability to achieve the organization s goals and objectives.

RESPONSIBILITIES:
01 Ensure that workforce planning and employment activities are compliant with
applicable federal, state, and local laws and regulations.
02 Identify workforce requirements to achieve the organization s short- and long-term
goals and objectives (e.g., corporate restructuring, M&A activity, workforce expan-
sion or reduction).
03 Conduct job analyses to create job descriptions and identify job competencies.
04 Identify and document essential job functions for positions.
05 Establish hiring criteria based on job descriptions and required competencies.
06 Analyze labor market for trends that impact the ability to meet workforce require-
ments (e.g., SWOT analysis, environmental scan, demographic scan). SPHR ONLY
07 Assess skill sets of internal workforce and external labor market to determine
the availability of qualified candidates, utilizing third-party vendors or agencies
as appropriate.
 APPENDIX A 635

08 Identify internal and external recruitment sources (e.g., employee referrals,

online job boards, resume banks) and implement selected recruitment
methods.
09 Evaluate recruitment methods and sources for effectiveness (e.g., return on
investment [ROI], cost-per-hire, time to fill).
10 Develop strategies to brand/market the organization to potential qualified
applicants.
11 Develop and implement selection procedures, including applicant tracking,
interviewing, testing, reference, and background checking, and drug screening.
12 Develop and extend employment offers and conduct negotiations as necessary.
13 Administer post-offer employment activities (e.g., execute employment agree-
ments, complete I-9 verification forms, coordinate relocations, schedule physical
exams).
14 Implement and/or administer the process for non-U.S. citizens to legally work
in the United States.
15 Develop, implement and evaluate orientation processes for new hires, rehires,
and transfers.
16 Develop, implement, and evaluate retention strategies and practices.
17 Develop, implement, and evaluate succession planning process.
18 Develop and implement the organizational exit process for both voluntary and
involuntary terminations, including planning for reductions in force (RIF).
19 Develop, implement and evaluate an AAP, as required.

KNOWLEDGE OF:
08 Federal/state/local employment-related laws and regulations related to workforce
planning and employment (e.g., Title VII, ADA, ADEA, USERRA, EEOC Uniform
Guidelines on Employee Selection Procedures, Immigration Reform and Control
Act, Internal Revenue Code).
09 Quantitative analyses required to assess past and future staffing effectiveness
(e.g., cost-benefit analysis, costs-per-hire, selection ratios, adverse impact).
10 Recruitment sources (e.g., Internet, agencies, employee referral) for targeting
passive, semi-active and active candidates.
11 Recruitment strategies.
12 Staffing alternatives (e.g., temporary and contract, outsourcing, job sharing,
part-time).
13 Planning techniques (e.g., succession planning, forecasting).
14 Reliability and validity of selection tests/tools/methods.
15 Use and interpretation of selection tests (e.g., psychological/personality, cogni-
tive, motor/physical assessments, performance, assessment center).
16 Interviewing techniques (e.g., behavioral, situational, panel).
17 Relocation practices.
18 Impact of total rewards on recruitment and retention.
19 International HR and implications of global workforce for workforce planning
and employment. SPHR ONLY
20 Voluntary and involuntary terminations, downsizing, restructuring, and
outplacement strategies and practices.
21 Internal workforce assessment techniques (e.g., skills testing, skills inventory,
workforce demographic analysis) and employment policies, practices, and
procedures (e.g., orientation and retention).
22 Employer marketing and branding techniques.
23 Negotiation skills and techniques.
636 APPENDIX A

03 Human Resource Development (17%, 17%)

Developing, implementing and evaluating activities and programs that address
employee training and development, performance appraisal, talent and performance
management, and the unique needs of employees to ensure that the knowledge, skills,
abilities and performance of the workforce meet current and future organizational
and individual needs.

RESPONSIBILITIES:
01 Ensure that human resource development programs are compliant with all
applicable federal, state, and local laws and regulations.
02 Conduct a needs assessment to identify and establish priorities regarding
human resource development activities. SPHR ONLY
03 Develop/select and implement employee training programs (e.g., leadership
skills, harassment prevention, computer skills) to increase individual and
organizational effectiveness. Note that this includes training design
and methods for obtaining feedback from training (e.g., surveys, pre- and
post-testing).
04 Evaluate effectiveness of employee training programs through the use of
metrics (e.g., participant surveys, pre- and post-testing). SPHR ONLY
05 Develop, implement and evaluate talent management programs that include
assessing talent, developing talent and placing high-potential employees. SPHR
ONLY
06 Develop/select and evaluate performance appraisal process (e.g., instruments,
ranking and rating scales, relationship to compensation, frequency).
07 Implement training programs for performance evaluators. PHR ONLY
08 Develop, implement and evaluate performance management programs and
procedures (e.g., goal setting, job rotations, promotions).
09 Develop/select, implement and evaluate programs (e.g., flexible work arrange-
ments, diversity initiatives, repatriation) to meet the unique needs of employees.
SPHR ONLY

KNOWLEDGE OF:
24 Applicable federal, state, and local laws and regulations related to human
resources development activities (e.g., Title VII, ADA, ADEA, USERRA, EEOC
Uniform Guidelines on Employee Selection Procedures).
25 Career development and leadership development theories and applications.
26 Organizational development theories and applications.
27 Training program development techniques to create general and specialized
training programs.
28 Training methods, facilitation techniques, instructional methods, and program
delivery mechanisms.
29 Task/process analysis.
30 Performance appraisal methods (e.g., instruments, ranking and rating scales).
31 Performance management methods (e.g., goal setting, job rotations,
promotions).
32 Applicable global issues (e.g., international law, culture, local management
approaches/practices, societal norms). SPHR ONLY
33 Techniques to assess training program effectiveness, including use of applicable
metrics (e.g., participant surveys, pre- and post-testing).
34 E-learning.
35 Mentoring and executive coaching.
 APPENDIX A 637

04 Total Rewards (16%, 12%)

Developing/selecting, implementing/administering and evaluating compensation and
benefits programs for all employee groups that support the organization s strategic
goals, objectives, and values.

RESPONSIBILITIES:
01 Ensure that compensation and benefits programs are compliant with applicable
federal, state, and local laws and regulations.
02 Develop, implement, and evaluate compensation policies/programs and pay
structures based upon internal equity and external market conditions that
support the organization s strategic goals, objectives, and values.
03 Administer payroll functions (e.g., new hires, deductions, adjustments, termi-
nations).
04 Conduct benefits programs needs assessments (e.g., benchmarking, employee
survey).
05 Develop/select, implement/administer, and evaluate benefits programs that sup-
port the organization s strategic goals, objectives, and values (e.g., health and
welfare, retirement, stock purchase, wellness, employee assistance programs
[EAP], time-off).
06 Communicate and train the workforce in the compensation and benefits
programs and policies (e.g., self-service technologies).
07 Develop/select, implement/administer, and evaluate executive compensation
programs (e.g., stock purchase, stock options, incentive, bonus, supplemental
retirement plans). SPHR ONLY
08 Develop, implement/administer, and evaluate expatriate and foreign national
compensation and benefits programs. SPHR ONLY

KNOWLEDGE OF:
36 Federal, state and local compensation, benefits, and tax laws (e.g., FLSA, ERISA,
COBRA, HIPAA, FMLA, FICA).
37 Total rewards strategies (e.g., compensation, benefits, wellness, rewards, recog-
nition, employee assistance).
38 Budgeting and accounting practices related to compensation and benefits.
39 Job evaluation methods.
40 Job pricing and pay structures.
41 External labor markets and/or economic factors.
42 Pay programs (e.g., incentive, variable, merit).
43 Executive compensation methods. SPHR ONLY
44 Non-cash compensation methods (e.g., stock options, ESOPs). SPHR ONLY
45 Benefits programs (e.g., health and welfare, retirement, wellness, EAP, time-
off).
46 International compensation laws and practices (e.g., expatriate compensation,
entitlements, choice of law codes). SPHR ONLY
47 Fiduciary responsibility related to total rewards management. SPHR ONLY

05 Employee and Labor Relations (22%, 18%)

Analyzing, developing, implementing/administering, and evaluating the workplace
relationship between employer and employee, in order to maintain relationships and
working conditions that balance employer and employee needs and rights in support
of the organization s strategic goals, objectives, and values.
638 APPENDIX A

RESPONSIBILITIES:
01 Ensure that employee and labor relations activities are compliant with applicable
federal, state, and local laws and regulations.
02 Assess organizational climate by obtaining employee input (e.g., focus groups,
employee surveys, staff meetings).
03 Implement organizational change activities as appropriate in response to
employee feedback.
04 Develop employee relations programs (e.g., awards, recognition, discounts,
special events) that promote a positive organizational culture.
05 Implement employee relations programs that promote a positive organizational
culture.
06 Evaluate effectiveness of employee relations programs through the use of metrics
(e.g., exit interviews, employee surveys).
07 Establish workplace policies and procedures (e.g., dress code, attendance, com-
puter use) and monitor their application and enforcement to ensure consistency.
08 Develop, administer and evaluate grievance/dispute resolution and performance
improvement policies and procedures.
09 Resolve employee complaints filed with federal, state, and local agencies involving
employment practices, utilizing professional resources as necessary (e.g., legal
counsel, mediation/arbitration specialists and investigators).
10 Develop and direct proactive employee relations strategies for remaining
union-free in non-organized locations.
11 Participate in collective bargaining activities, including contract negotiation
and administration. SPHR ONLY
KNOWLEDGE OF:
48 Applicable federal, state, and local laws affecting employment in union and
nonunion environments, such as antidiscrimination laws, sexual harassment,
labor relations, and privacy (e.g., WARN Act, Title VII, NLRA).
49 Techniques for facilitating positive employee relations (e.g., employee surveys,
focus groups, dispute resolution, labor/management cooperative strategies and
programs).
50 Employee involvement strategies (e.g., employee management committees,
self-directed work teams, staff meetings).
51 Individual employment rights issues and practices (e.g., employment at will,
negligent hiring, defamation, employees rights to bargain collectively).
52 Workplace behavior issues/practices (e.g., absenteeism and performance
improvement).
53 Unfair labor practices (e.g., employee communication strategies and management
training).
54 The collective bargaining process, strategies and concepts (e.g., contract negoti-
ation and administration). SPHR ONLY
55 Positive employee relations strategies and non-monetary rewards.

06 Risk Management (7%, 7%)

Developing, implementing/administering, and evaluating programs, plans and poli-
cies that provide a safe and secure working environment and protect the organization
from liability.
RESPONSIBILITIES:
01 Ensure that workplace health, safety, security, and privacy activities are compliant
with applicable federal, state, and local laws and regulations.
 APPENDIX A 639

02 Identify the organization s safety program needs.

03 Develop/select and implement/administer occupational injury and illness
prevention, safety incentives and training programs. PHR ONLY
04 Develop/select, implement, and evaluate plans and policies to protect employees
and other individuals and to minimize the organization s loss and liability
(e.g., emergency response, evacuation, workplace violence, substance abuse,
return-to-work policies).
05 Communicate and train the workforce on the plans and policies to protect
employees and other individuals and to minimize the organization s loss and
liability.
06 Develop and monitor business continuity and disaster recovery plans.
07 Communicate and train the workforce on the business continuity and disaster
recovery plans.
08 Develop internal and external privacy policies (e.g., identity theft, data protection,
HIPAA compliance, workplace monitoring).
09 Administer internal and external privacy policies.

KNOWLEDGE OF:
56 Federal, state and local workplace health, safety, security, and privacy laws and
regulations (e.g., OSHA, Drug-Free Workplace Act, ADA, HIPAA, Sarbanes-
Oxley).
57 Occupational injury and illness compensation and programs.
58 Occupational injury and illness prevention programs.
59 Investigation procedures of workplace safety, health, and security enforcement
agencies (e.g., OSHA, National Institute for Occupational Safety and Health
[NIOSH]).
60 Workplace safety risks.
61 Workplace security risks (e.g., theft, corporate espionage, asset and data protec-
tion, sabotage).
62 Potential violent behavior and workplace violence conditions.
63 General health and safety practices (e.g., evacuation, hazard communication,
ergonomic evaluations).
64 Incident and emergency response plans.
65 Internal investigation, monitoring, and surveillance techniques.
66 Issues related to substance abuse and dependency (e.g., identification of symp-
toms, substance-abuse testing, discipline).
67 Business continuity and disaster recovery plans (e.g., data storage and backup,
alternative work locations and procedures).
68 Data integrity techniques and technology (e.g., data sharing, firewalls).

Core Knowledge Required By HR Professionals

69 Needs assessment and analysis.
70 Third-party contract negotiation and management, including development of
requests for proposals (RFPs).
71 Communication skills and strategies (e.g., presentation, collaboration, influencing,
diplomacy, sensitivity).
72 Organizational documentation requirements to meet federal and state require-
ments.
73 Adult learning processes.
74 Motivation concepts and applications.
640 APPENDIX A

75 Training techniques (e.g., computer-based, classroom, on-the-job).

76 Leadership concepts and applications.
77 Project management concepts and applications.
78 Diversity concepts and applications.
79 Human relations concepts and applications (e.g., interpersonal and organiza-
tional behavior).
80 HR ethics and professional standards.
81 Technology to support HR activities (e.g., HRIS, employee self-service, e-learning,
ATS).
82 Qualitative and quantitative methods and tools for analysis, interpretation, and
decision-making purposes (e.g., metrics and measurements, cost/benefit analysis,
financial statement analysis).
83 Change management methods.
84 Job analysis and job description methods.
85 Employee records management (e.g., electronic/paper, retention, disposal).
86 The interrelationships among HR activities and programs across functional areas.
87 Types of organizational structures (e.g., matrix, hierarchy).
88 Environmental scanning concepts and applications.
89 Methods for assessing employee attitudes, opinions, and satisfaction (e.g., opinion
surveys, attitude surveys, focus groups/panels).
90 Basic budgeting and accounting concepts.
91 Risk management techniques.

Source: Used with permission of the HR Certificate Institute.

APPENDIX B
Comprehensive Cases
BANDAG AUTOMOTIVE*
Jim Bandag took over his family s auto supply business in 2005, after helping his father,
who founded the business, run it for about 10 years. Based in Illinois, Bandag employs
about 300 people, and distributes auto supplies (replacement mufflers, bulbs, engine
parts, and so on) through two divisions, one that supplies service stations and repair
shops, and a second that sells retail auto supplies through five Bandag Automotive
auto supply stores.
Jim s father, and now Jim, have always endeavored to keep Bandag s organization
chart as simple as possible. The company has a full-time controller, managers for each
of the five stores, a manager that oversees the distribution division, and Jim Bandag s
executive assistant. Jim (along with his father, working part-time) handles marketing
and sales.
Jim s executive assistant administers the firm s day-to-day human resource manage-
ment tasks, but the company outsources most HR activities to others, including an
employment agency that does its recruiting and screening, a benefits firm that admin-
isters its 401(k) plan, and a payroll service that handles its paychecks. Bandag s human
resource management systems consist almost entirely of standardized HR forms
purchased from an HR supplies company. These include forms such as application and
performance appraisal forms, as well as an honesty test Bandag uses to screen the staff
that works in the five stores. The company performs informal salary surveys to see what
other companies in the area are paying for similar positions, and use these results
for awarding annual merit increases (which in fact are more accurately cost-of-living
adjustments).
Jim s father took a fairly paternal approach to the business. He often walked
around speaking with his employees, finding out what their problems were, and even
helping them out with an occasional loan for instance, when he discovered that one
of their children was sick, or for part of a new home down payment. Jim, on the other
hand, tends to be more abrupt, and does not enjoy the same warm relationship with
the employees as did his father. Jim is not unfair or dictatorial. He s just very focused
on improving Bandag s financial performance, and so all his decisions, including
his HR-related decisions, generally come down to cutting costs. For example, his
knee-jerk reaction is usually to offer fewer days off rather than more, fewer benefits
rather than more, and to be less flexible when an employee needs, for instance, a few
extra days off because a child is sick.
It s therefore perhaps not surprising that over the past few years Bandag s sales
and profits have increased markedly, but that the firm has found itself increasingly
enmeshed in HR/equal employment type issues. Indeed, Jim now finds himself
spending a day or two a week addressing HR problems. For example, Henry Jaques,
an employee at one of the stores, came to Jim s executive assistant and told her he was
irate about his recent firing and was probably going to sue. Henry s store manager
stated on his last performance appraisal that Henry did the technical aspects of his job
well, but that he had serious problems interacting with his coworkers. He was
continually arguing with them, and complaining to the store manager about working
conditions. The store manager had told Jim that he had to fire Henry because he was
making the whole place poisonous, and that (although he felt sorry because he d
heard rumors that Henry suffered from some mental illness) he felt he had to go. Jim
approved the dismissal.

*© Gary Dessler, Ph.D.

641
642 APPENDIX B

Gavin was another problem. Gavin had worked for Bandag for 10 years, the last
two as manager of one of the company s five stores. Right after Jim Bandag took over,
Gavin told him he had to take a Family and Medical Leave Act medical leave to have
hip surgery, and Jim approved the leave. When Gavin returned from leave, Jim told
him that his position had been eliminated. Bandag had decided to close his store and
open a new, larger store across from a shopping center about a mile away, and had
appointed a new manager in Gavin s absence. However, the company did give Gavin
a (nonmanagerial) position in the new store as a counter salesperson, at the same
salary and with the same benefits as he had before. Even so, This job is not similar to
my old one, Gavin insisted. It doesn t have nearly as much prestige. His contention
is that the FMLA requires that the company bring him back in the same or equivalent
position, and that this means a supervisory position, similar to what he had before he
went on leave. Jim said no, and they seem to be heading toward litigation.
In another sign of the times at Bandag, the company s controller, Miriam, who
had been with the company for about 6 years, went on pregnancy leave for 12 weeks
in 2005 (also under the FMLA), and then received an additional 3 weeks leave under
Bandag s extended illness days program. Four weeks after she came back, she asked
Jim Bandag if she could arrange to work fewer hours per week, and spend about a day
per week working out of her home. He refused, and about 2 months later fired her.
Jim Bandag said, I m sorry, it s not anything to do with your pregnancy-related
requests, but we ve got ample reasons to discharge you your monthly budgets
have been several days late, and we ve got proof you may have forged documents.
She replied, I don t care what you say your reasons are, you re really firing me because
of my pregnancy, and that s illegal.
Jim felt he was on safe ground as far as defending the company for these actions,
although he didn t look forward to spending the time and money that he knew it
would take to fight each. However, what he learned over lunch from a colleague
undermined his confidence about another case that Jim had been sure would be a
slam dunk for his company. Jim was explaining to his friend that one of Bandag s
truck maintenance service people had applied for a job driving one of Bandag s dis-
tribution department trucks, and that Jim had turned him down because the worker
was deaf. Jim (whose wife has occasionally said of him, No one has ever accused Jim
of being politically correct ) was mentioning to his friend the apparent absurdity of a
deaf person asking to be a truck delivery person. His friend, who happens to work for
UPS, pointed out that the U.S. Court of Appeals for the Ninth Circuit had recently
decided that UPS had violated the Americans with Disabilities Act by refusing to
consider deaf workers for jobs driving the company s smaller vehicles.
Although Jim s father is semi-retired, the sudden uptick in the frequency of such
EEO-type issues troubled him, particularly after so many years of labor peace.
However, he s not sure what to do about it. Having handed over the reins of the
company to his son, he was loath to inject himself back into the company s opera-
tional decision making. On the other hand, he was afraid that in the short run these
issues were going to drain a great deal of Jim s time and resources, and that in the long
run they might be a sign of things to come, with problems like these eventually
overwhelming Bandag Auto. He comes to you, who he knows consults in human
resource management, and asks you the following questions.

Questions
1. Given Bandag Auto s size, and anything else you know about it, should we reorganize the
human resource management function, and if so why and how?
2. What, if anything, would you do to change and/or improve upon the current HR systems,
forms, and practices that we now use?
3. Do you think that the employee that Jim fired for creating what the manager called a
poisonous relationship has a legitimate claim against us, and if so why and what should
we do about it?
4. Is it true that we really had to put Gavin back into an equivalent position, or was it
adequate to just bring him back into a job at the same salary, bonuses, and benefits as
he had before his leave?
 APPENDIX B 643

5. Miriam, the controller, is basically claiming that the company is retaliating against her for
being pregnant, and that the fact that we raised performance issues was just a smokescreen.
Do you think the EEOC and/or courts would agree with her, and, in any case, what should
we do now?
6. An employee who is deaf has asked us to be one of our delivery people and we turned him
down. He s now threatening to sue. What should we do, and why?
7. In the previous 10 years, we ve had only one equal employment complaint, and now in the
last few years we ve had four or five. What should I do about it? Why?
Based generally on actual facts, but Bandag is a fictitious company. Bandag source notes: The Problem Employee:
Discipline or Accommodation? Monday Business Briefing, March 8, 2005; Employee Says Change in Duties After
Leave Violates FMLA, BNA Bulletin to Management, January 16, 2007, p. 24; Manager Fired Days After Announcing
Pregnancy, BNA Bulletin to Management, January 2, 2007, p. 8; Ninth Circuit Rules UPS Violated ADA by Barring
Deaf Workers from Driving Jobs, BNA Bulletin to Management, October 17, 2006, p. 329.

ANGELO S PIZZA*
Angelo Camero was brought up in the Bronx, New York, and basically always wanted
to be in the pizza store business. As a youngster, he would sometimes spend hours at
the local pizza store, watching the owner knead the pizza dough, flatten it into a large
circular crust, fling it up, and then spread on tomato sauce in larger and larger loops.
After graduating from college as a marketing major, he made a beeline back to the
Bronx, where he opened his first Angelo s Pizza store, emphasizing its clean, bright
interior; its crisp green, red, and white sign; and his all-natural, fresh ingredients.
Within 5 years, Angelo s store was a success, and he had opened three other stores and
was considering franchising his concept.
Eager as he was to expand, his 4 years in business school had taught him the
difference between being an entrepreneur and being a manager. As an entrepreneur/
small-business owner, he knew he had the distinct advantage of being able to person-
ally run the whole operation himself. With just one store and a handful of employees,
he could make every decision and watch the cash register, check in the new supplies,
oversee the takeout, and personally supervise the service.
When he expanded to three stores, things started getting challenging. He hired
managers for the two new stores (both of whom had worked for him at his first store
for several years) and gave them only minimal how to run a store type training, on
the assumption that, having worked with him for several years, they already knew
pretty much everything they needed to know about running a store. However, he was
already experiencing human resource management problems, and he knew there was
no way he could expand the number of stores he owned, or (certainly) contemplate
franchising his idea, unless he had a system in place that he could clone in each new
store to provide the manager (or the franchisee) with the necessary management
knowledge and expertise to run their stores. Angelo had no training program in place
for teaching his store managers how to run their stores. He simply (erroneously, as it
turned out) assumed that by working with him they would learn how to do things on
the job. Since Angelo really had no system in place, the new managers were, in a way,
starting off below zero when it came to how to manage a store.
There were several issues that particularly concern Angelo. Finding and hiring good
employees was number one. He d read the new National Small Business Poll from the
National Federation of Independent Business Education Foundation. It found that 71%
of small-business owners believed that finding qualified employees was hard.
Furthermore, the search for qualified employees will grow more difficult as demo-
graphic and education factors continue to make it more difficult to find employees.
Similarly, reading The Kiplinger Letter one day, he noticed that just about every type of
business couldn t find enough good employees to hire. Small firms were particularly
in jeopardy; the Letter said: Giant firms can outsource many (particularly entry-level)
jobs abroad, and larger companies can also afford to pay better benefits and to train
their employees. Small firms rarely have the resources or the economies of scale to allow

*© Gary Dessler, Ph.D.

644 APPENDIX B

outsourcing or to install the big training programs that would enable them to take
untrained new employees and turned them into skilled ones.
Although finding enough employees was his biggest problem, finding enough
honest ones scared him even more. Angelo recalled from one of his business school
courses that companies in the United States are losing a total of well over $400 billion
a year in employee theft. As a rough approximation, that works out to about $9 per
employee per day and about $12,000 lost annually for a typical company. Furthermore,
it was small companies like Angelo s that were particularly in the crosshairs, because
companies with fewer than 100 employees are particularly prone to employee theft.
Why are small firms particularly vulnerable? Perhaps they lack experience dealing with
the problem. More importantly: Small firms are more likely to have a single person
doing several jobs, such as ordering supplies and paying the delivery person. This
undercuts the checks and balances managers often strive for to control theft.
Furthermore, the risk of stealing goes up dramatically when the business is largely
based on cash. In a pizza store, many people come in and buy just one or two slices and
a cola for lunch, and almost all pay with cash, not credit cards.
And, Angelo was not just worried about someone stealing cash. They can steal
your whole business idea, something he learned from painful experience. He had been
planning to open a store in what he thought would be a particularly good location, and
was thinking of having one of his current employees manage the store. Instead, it
turned out that this employee was, in a manner of speaking, stealing Angelo s brain
what Angelo knew about customers, suppliers, where to buy pizza dough, where to buy
tomato sauce, how much everything should cost, how to furnish the store, where to
buy ovens, store layout everything. This employee soon quit and opened up his own
pizza store, not far from where Angelo had planned to open his new store.
That he was having trouble hiring good employees, there was no doubt. The
restaurant business is particularly brutal when it comes to turnover. Many restaurants
turn over their employees at a rate of 200% to 300% per year so every year, each
position might have a series of two to three employees filling it. As Angelo said, I was
losing two to three employees a month. As he said, We re a high-volume store, and
while we should have [to fill all the hours in a week] about six employees per store,
we were down to only three or four, so my managers and I were really under the gun.
The problem was bad at the hourly employee level: We were churning a lot at the
hourly level, said Angelo. Applicants would come in, my managers or I would hire
them and not spend much time training them, and the good ones would leave in frus-
tration after a few weeks, while often it was the bad ones who d stay behind. But in
the last 2 years, Angelo s three company-owned stores also went through a total of
three store managers They were just blowing through the door, as Angelo put it,
in part because, without good employees, their workday was brutal. As a rule, when a
small-business owner or manager can t find enough employees (or an employee
doesn t show up for work), about 80% of the time the owner or manager does the job
himself or herself. So, these managers often ended up working 7 days a week, 10 to
12 hours a day, and many just burned out in the end. One night, working three jobs
himself with customers leaving in anger, Angelo decided he d never just hire someone
because he was desperate again, but would start doing his hiring more rationally.
Angelo knew he should have a more formal screening process. As he said,
If there s been a lesson learned, it s much better to spend time up front screening out
candidates that don t fit than to hire them and have to put up with their ineffective-
ness. He also knew that he could identify many of the traits that his employees
needed. For example, he knew that not everyone has the temperament to be a waiter
(he has a small pizza/Italian restaurant in the back of his main store). As Angelo said,
I ve seen personalities that were off the charts in assertiveness or overly introverted,
traits that obviously don t make a good fit for a waiter a waitress.
As a local business, Angelo recruits by placing help wanted ads in two local news-
papers, and he s been shocked at some of the responses and experiences he s had in
response to the ads. Many of the applicants left voicemail messages (Angelo or the other
workers in the store were too busy to answer), and some applicants Angelo just axed
on the assumption that people without good telephone manners wouldn t have very
 APPENDIX B 645

good manners in the store, either. He also quickly learned that he had to throw out a
very wide net, even if only hiring one or two people. Many people, as noted, he elimi-
nated from consideration because of the messages they left, and about half the people
he scheduled to come in for interviews didn t show up. He d taken courses in human
resource management, so (as he said) I should know better, but he hired people based
almost exclusively on a single interview (he occasionally made a feeble attempt to check
references). In total, his HR approach was obviously not working. It wasn t producing
enough good recruits, and the people he did hire were often problematical.
What was he looking for? Service-oriented courteous people, for one. For example,
he d hired one employee who used profanity several times, including once in front of a
customer. On that employee s third day, Angelo had to tell her, I think Angelo s isn t the
right place for you, and he fired her. As Angelo said, I felt bad, but also knew that
everything I have is on the line for this business, so I wasn t going to let anyone run this
business down. Angelo wants reliable people (who ll show up on time), honest people,
and people who are flexible about switching jobs and hours as required.
Angelo s Pizza business has only the most rudimentary human resource manage-
ment system. Angelo bought several application forms at a local Office Depot, and
rarely uses other forms of any sort. He uses his personal accountant for reviewing the
company s books, and Angelo himself computes each employee s paycheck at the end of
the week and writes the checks. Training is entirely on-the-job. Angelo personally
trained each of his employees. For those employees who go on to be store managers, he
assumes that they are training their own employees the way that Angelo trained them
(for better or worse, as it turns out). Angelo pays a bit above prevailing wage rates
(judging by other help wanted ads), but probably not enough to make a significant
difference in the quality of employees that he attracts. If you asked Angelo what his
reputation is as an employer, Angelo, being a candid and forthright person, would
probably tell you that he is a supportive but hard-nosed employer who treats people
fairly, but whose business reputation may suffer from disorganization stemming from
inadequate organization and training. He approaches you to ask you several questions.
Questions
1. My strategy is to (hopefully) expand the number of stores and eventually franchise, while
focusing on serving only high-quality fresh ingredients. What are three specific human
resource management implications of my strategy (including specific policies and practices)?
2. Identify and briefly discuss five specific human resource management errors that
I m currently making.
3. Develop a structured interview form that we can use for hiring (1) store managers, (2) wait
staff, and (3) counter people/pizza makers.
4. Based on what you know about Angelo s, and what you know from having visited pizza
restaurants, write a one-page outline showing specifically how you think Angelo s should
go about selecting employees.
Based generally on actual facts, but Angelo s Pizza is a fictitious company. Angelo s Pizza source notes: Dino Berta,
People Problems: Keep Hiring from Becoming a Crying Game, Nation s Business News 36, no. 20 (May 20, 2002),
pp. 72 74; Ellen Lyon, Hiring, Personnel Problems Can Challenge Entrepreneurs, Patriot-News, October 12, 2004; Rose
Robin Pedone, Businesses $400 Billion Theft Problem, Long Island Business News. 27 (July 6, 1998), pp. 1B 2B; Survey
Shows Small-Business Problems with Hiring, Internet, Providence Business News 16 (September 10, 2001), pp. 1B;
Finding Good Workers Is Posing a Big Problem as Hiring Picks Up, The Kiplinger Letter 81 (February 13, 2004).

GOOGLE*
Fortune magazine named Google the best of the 100 best companies to work for, and
there is little doubt why. Among the benefits it offers are free shuttles equipped with
Wi-Fi to pick up and drop off employees from San Francisco Bay area locations,
unlimited sick days, annual all-expense-paid ski trips, free gourmet meals, five on-site
free doctors, $2,000 bonuses for referring a new hire, free flu shots, a giant lap pool,
on-site oil changes, on-site car washes, volleyball courts, TGIF parties, free on-site

*© Gary Dessler, Ph.D.

646 APPENDIX B

washers and dryers (with free detergent), Ping-Pong and foosball tables, and free
famous people lectures. For many people, it s the gourmet meals and snacks that
make Google stand out. For example, human resources director Stacey Sullivan loves
the Irish oatmeal with fresh berries at the company s Plymouth Rock Cafe, near
Google s people operations group. I sometimes dream about it, she says. Engineer
Jan Fitzpatrick loves the raw bar at Google s Tapis restaurant, down the road on the
Google campus. Then, of course, there are the stock options each new employee
gets about 1,200 options to buy Google shares (recently worth about $480 per share).
In fact, dozens of early Google employees ( Googlers ) are already multimillionaires
thanks to Google stock. The recession that began around 2008 did prompt Google
and other firms to cut back on some of these benefits (cafeteria hours are shorter
today, for instance), but Google still pretty much leads the benefits pack.
For their part, Googlers share certain traits. They tend to be brilliant, team oriented
(teamwork is the norm, especially for big projects), and driven. Fortune describes them as
people who almost universally see themselves as the most interesting people on the
planet, and who are happy-go-lucky on the outside, but type A highly intense and goal
directed on the inside. They re also super-hardworking (which makes sense, since it s
not unusual for engineers to be in the hallways at 3 A.M. debating some new mathemati-
cal solution to a Google search problem). They re so team oriented that when working on
projects, it s not unusual for a Google team to give up its larger, more spacious offices and
to crowd into a small conference room, where they can get things done. Historically,
Googlers generally graduate with great grades from the best universities, including
Stanford, Harvard, and MIT. For many years, Google wouldn t even consider hiring
someone with less than a 3.7 average while also probing deeply into the why behind any
B grades. Google also doesn t hire lone wolves, but wants people who work together and
people who also have diverse interests (narrow interests or skills are a turnoff at Google).
Google also wants people with growth potential. The company is expanding so fast that
it needs to hire people who are capable of being promoted five or six times it s only, the
company says, by hiring such overqualified people that it can be sure that the employees
will be able to keep up as Google and their own departments expand.
The starting salaries are highly competitive. Experienced engineers start at about
$130,000 a year (plus about 1,200 shares of stock options, as noted), and new MBAs
can expect between $80,000 and $120,000 per year (with smaller option grants). Most
recently, Google had about 10,000 staff members, up from its beginnings with just
three employees in a rented garage.
Of course, in a company that s grown from three employees to 10,000 and from zero
value to hundreds of billions of dollars, it may be quibbling to talk about problems, but
there s no doubt that such rapid growth does confront Google s management, and
particularly its people operations group, with some big challenges. Let s look at these.
For one, Google, as noted earlier, is a 24-hour operation, and with engineers and
others frequently pulling all-nighters to complete their projects, the company needs
to provide a package of services and financial benefits that supports that kind of
lifestyle, and that helps its employees maintain an acceptable work life balance.
As another challenge, Google s enormous financial success is a two-edged sword.
Although Google usually wins the recruitment race when it comes to competing for
new employees against competitors like Microsoft or Yahoo!, Google does need some
way to stem a rising tide of retirements. Most Googlers are still in their twenties and
thirties, but many have become so wealthy from their Google stock options that they
can afford to retire. One 27-year-old engineer received a million-dollar founder s
award for her work on the program for searching desktop computers, and wouldn t
think of leaving except to start her own company. Similarly a former engineering
vice president retired (with his Google stock profits) to pursue his love of astronomy.
The engineer who dreamed up Gmail recently retired (at the age of 30).
Another challenge is that the work not only involves long hours but can also be very
tense. Google is a very numbers-oriented environment. For example, consider a typical
weekly Google user interface design meeting. Marisa Meyer, the company s vice president
of search products and user experience, runs the meeting, where her employees work out
the look and feel of Google s products. Seated around a conference table are about a
 APPENDIX B 647

dozen Googlers, tapping on laptops. During the 2-hour meeting, Meyer needs to
evaluate various design proposals, ranging from minor tweaks to a new product s entire
layout. She s previously given each presentation an allotted amount of time, and a large
digital clock on the wall ticks off the seconds. The presenters must quickly present their
ideas, but also handle questions such as what do users do if the tab is moved from the
side of the page to the top? Furthermore, it s all about the numbers no one at Google
would ever say, for instance, the tab looks better in red you need to prove your point.
Presenters must come armed with usability experiment results, showing, for instance,
that a certain percent preferred red or some other color. While the presenters are
answering these questions as quickly as possible, the digital clock is ticking, and when it
hits the allotted time, the presentation must end, and the next team steps up to present.
It is a tough and tense environment, and Googlers must have done their homework.
Growth can also undermine the outlaw band that s changing the world culture that
fostered the services that made Google famous. Even cofounder Sergi Brin agrees that
Google risks becoming less zany as it grows. To paraphrase one of its top managers, the
hard part of any business is keeping that original innovative, small-business feel even as
the company grows.
Creating the right culture is especially challenging now that Google is truly
global. For example, Google works hard to provide the same financial and service
benefits every place it does business around the world, but it can t exactly match its
benefits in every country because of international laws and international taxation
issues. Offering the same benefits everywhere is more important than it might initially
appear. All those benefits make life easier for Google staff, and help them achieve a
work life balance. Achieving the right work life balance is the centerpiece of Google s
culture, but this also becomes more challenging as the company grows. On the one
hand, Google does expect all of its employees to work super hard; on the other hand,
it realizes that it needs to help them maintain some sort of balance. As one manager
says, Google acknowledges that we work hard but that work is not everything.
Recruitment is another challenge. While Google certainly doesn t lack applicants,
attracting the right applicants is crucial if Google is to continue to grow successfully.
Working at Google requires a special set of traits, and screening employees is easier
if it recruits the right people to begin with. For instance, Google needs to attract
people who are super-bright, love to work, have fun, can handle the stress, and who
also have outside interests and flexibility.
As the company grows internationally, it also faces the considerable challenge of
recruiting and building staff overseas. For example, Google now is introducing a new
vertical market based structure across Europe, to attract more business advertisers to
its search engine. (By vertical market based structure, Google means focusing on key
vertical industry sectors such as travel, retail, automotive, and technology.) To build
these industry groupings abroad from scratch, Google promoted its former head
of its U.S. financial services group to be the vertical markets director for Europe;
he moved there recently. Google is thus looking for heads for each of its vertical
industry groups for all of its key European territories. Each of these vertical market
heads will have to educate their market sectors (retailing, travel, and so on) so Google
can attract new advertisers. Google already has offices across Europe, and its London
office had tripled in size to 100 staff in just 2 years.
However, probably the biggest challenge Google faces is gearing up its employee
selection system, now that the company must hire thousands of people per year.
When Google started in business, job candidates typically suffered through a dozen
or more in-person interviews, and the standards were so high that even applicants
with years of great work experience often got turned down if they had just average
college grades. But recently, even Google s cofounders have acknowledged to security
analysts that setting such an extraordinarily high bar for hiring was holding back
Google s expansion. For Google s first few years, one of the company s cofounder s
interviewed nearly every job candidate before he or she was hired, and even today one
of them still reviews the qualifications of everyone before he or she gets a final offer.
The experience of one candidate illustrates what Google is up against. A 24-year-old
was interviewed for a corporate communications job at Google. Google first made
648 APPENDIX B

contact with the candidate in May, and then, after two phone interviews, invited him
to headquarters. There he had separate interviews with about six people and was treated
to lunch in a Google cafeteria. They also had him turn in several homework assign-
ments, including a personal statement and a marketing plan. In August, Google invited
the candidate back for a second round, which it said would involve another four or five
interviews. In the meantime, he decided he d rather work at a start-up, and accepted
another job at a new Web-based instant messaging provider.
Google s new head of human resources, a former GE executive, says that Google is
trying to strike the right balance between letting Google and the candidate get to know
each other while also moving quickly. To that end, Google recently administered a
survey to all Google s current employees in an effort to identify the traits that corre-
late with success at Google. In the survey, employees responded to questions relating to
about 300 variables, including their performance on standardized tests, how old they
were when they first used a computer, and how many foreign languages they speak. The
Google survey team then went back and compared the answers against the 30 or 40 job
performance factors they keep for each employee. They thereby identified clusters
of traits that Google might better focus on during the hiring process. Google is also
moving from the free-form interviews it used in the past to a more structured process.
Questions
1. What do you think of the idea of Google correlating personal traits from the employees
answers on the survey to their performance, and then using that as the basis for screening
job candidates? In other words, is it or is it not a good idea? Please explain your answer.
2. The benefits that Google pays obviously represent an enormous expense. Based on what
you know about Google and on what you read in this book, how would you defend all
these benefits if you re making a presentation to the security analysts who were analyzing
Google s performance?
3. If you wanted to hire the brightest people around, how would you go about recruiting
and selecting them?
4. To support its growth and expansion strategy, Google wants (among other traits) people
who are super-bright and who work hard, often round-the-clock, and who are flexible
and maintain a decent work life balance. List five specific HR policies or practices that you
think Google has implemented or should implement to support its strategy, and explain
your answer.
5. What sorts of factors do you think Google will have to take into consideration as it tries
transferring its culture and reward systems and way of doing business to its operations
abroad?
6. Given the sorts of values and culture Google cherishes, briefly describe four specific
activities you suggest they pursue during new-employee orientation.
Source notes for Google: Google Brings Vertical Structure to Europe, New Media Age, August 4, 2005, p. 2; Debbie
Lovewell, Employer Profile Google: Searching for Talent, Employee Benefits, October 10, 2005, p. 66; Google
Looking for Gourmet Chefs, Internet Week, August 4, 2005; Douglas Merrill, Google s Googley Culture Kept Alive
by Tech, eWeek, April 11, 2006; Robert Hof, Google Gives Employees Another Option, BusinessWeek Online,
December 13, 2005; Kevin Delaney, Google Adjusts Hiring Process as Needs Grow, The Wall Street Journal,
October 23, 2006, pp. B1, B8; Adam Lishinsky, Search and Enjoy, Fortune, January 22, 2007, pp. 70 82;
www.nypost.com/seven/10302008/business/frugal_google_cuts_perks_136011.htm, accessed July 12, 2009. Adam
Bryant, The Quest to Build a Better Boss, New York Times, March 13 2011, p. 1, 7.

MUFFLER MAGIC*
Muffler Magic is a fast-growing chain of 25 automobile service centers in Nevada.
Originally started 20 years ago as a muffler repair shop by Ronald Brown, the chain
expanded rapidly to new locations, and as it did so Muffler Magic also expanded the
services it provided, from muffler replacement to oil changes, brake jobs, and engine
repair. Today, one can bring an automobile to a Muffler Magic shop for basically any
type of service, from tires to mufflers to engine repair.

*© Gary Dessler, Ph.D.

 APPENDIX B 649

Auto service is a tough business. The shop owner is basically dependent upon the
quality of the service people he or she hires and retains, and the most qualified mechanics
find it easy to pick up and leave for a job paying a bit more at a competitor down the
road. It s also a business in which productivity is very important. The single largest
expense is usually the cost of labor. Auto service dealers generally don t just make up the
prices that they charge customers for various repairs; instead, they charge based on
standardized industry rates for jobs like changing spark plugs or repairing a leaky
radiator. Therefore, if someone brings a car in for a new alternator and the standard
number of hours for changing the alternator is an hour, but it takes the mechanic
2 hours, the service center s owner may end up making less profit on the transaction.
Quality is a persistent problem as well. For example, rework has recently been
a problem at Muffler Magic. A customer recently brought her car to a Muffler Magic
to have the car s brake pads replaced, which the service center did for her.
Unfortunately, when she left she drove only about two blocks before she discovered
that she had no brake power at all. It was simply fortuitous that she was going so
slowly she was able to stop her car by slowly rolling up against a parking bumper.
It subsequently turned out that the mechanic who replaced the brake pads had failed
to properly tighten a fitting on the hydraulic brake tubes and the brake fluid had run
out, leaving the car with no braking power. In a similar problem the month before
that, a (different) mechanic replaced a fan belt, but forgot to refill the radiator with
fluid; that customer s car overheated before he got four blocks away, and Muffler
Magic had to replace the whole engine. Of course problems like these not only
diminish the profitability of the company s profits, but, repeated many times over,
have the potential for ruining Muffler Magic s word-of-mouth reputation.
Organizationally, Muffler Magic employs about 300 people, and Ron runs his
company with eight managers, including himself as president, a controller, a purchasing
director, a marketing director, and the human resource manager. He also has three regional
managers to whom the eight or nine service center managers in each area of Nevada
report. Over the past 2 years, as the company has opened new service centers, company-
wide profits have diminished rather than increased. In part, these diminishing profits
probably reflect the fact that Ron Brown has found it increasingly difficult to manage his
growing operation ( Your reach is exceeding your grasp is how Ron s wife puts it).
The company has only the most basic HR systems in place. It uses an application
form that the human resource manager modified from one that he downloaded from the
Web, and the standard employee status change request forms, sign-on forms, I-9 forms,
and so on that it purchased from a human resource management supply house. Training
is entirely on-the-job. Muffler Magic expects the experienced technicians that it hires to
come to the job fully trained; to that end, the service center managers generally ask
candidates for these jobs basic behavioral questions that hopefully provide a window
into these applicants skills. However, most of the other technicians hired to do jobs like
rotating tires, fixing brake pads, and replacing mufflers are untrained and inexperienced.
They are to be trained by either the service center manager or by more experienced
technicians, on-the-job.
Ron Brown faces several HR-type problems. One, as he says, is that he faces the
tyranny of the immediate when it comes to hiring employees. Although it s fine to
say that he should be carefully screening each employee and checking their references
and work ethic, from a practical point of view, with 25 centers to run, the centers
managers usually just hire anyone who seems to be breathing, as long as they can
answer some basic interview questions about auto repair, such as, What do you think
the problem is if a 2001 Camry is overheating, and what would you do about it?
Employee safety is also a problem. An automobile service center may not be the
most dangerous type of workplace, but it is potentially dangerous. Employees are
dealing with sharp tools, greasy floors, greasy tools, extremely hot temperatures (for
instance, on mufflers and engines), and fast-moving engine parts including fan
blades. There are some basic things that a service manager can do to ensure more
safety, such as insisting that all oil spills be cleaned up immediately. However, from a
practical point of view, there are a few ways to get around many of the problems
such as when the technician must check out an engine while it is running.
650 APPENDIX B

With Muffler Magic s profits going down instead of up, Brown s human resource
manager has taken the position that the main problem is financial. As he says, You get
what you pay for when it comes to employees, and if you compensate technicians
better then your competitors do, then you get better technicians, ones who do their jobs
better and stay longer with the company and then profits will rise. So, the HR manager
scheduled a meeting between himself, Ron Brown, and a professor of business who
teaches compensation management at a local university. The HR manager has asked this
professor to spend about a week looking at each of the service centers, analyzing the
situation, and coming up with a compensation plan that will address Muffler Magic s
quality and productivity problems. At this meeting, the professor makes three basic
recommendations for changing the company s compensation policies.
Number one, she says that she has found that Muffler Magic suffers from what she
calls presenteeism in other words, employees drag themselves into work even when
they re sick, because the company does not pay them if they are out; the company
offers no sick days. In just a few days the professor couldn t properly quantify how
much Muffler Magic is losing to presenteeism. However, from what she could see at
each shop, there are typically one or two technicians working with various maladies
like the cold or flu, and it seemed to her that each of these people was probably really
only working about half of the time (although they were getting paid for the whole
day). So, for 25 service centers per week, Muffler Magic could well be losing 125 or 130
personnel days per week of work. The professor suggests that Muffler Magic start
allowing everyone to take 3 paid sick days per year, a reasonable suggestion. However,
as Ron Brown points out, Right now, we re only losing about half a day s pay for each
employee who comes in and who works unproductively; with your suggestion, won t
we lose the whole day? The professor says she ll ponder that one.
Second, the professor recommends putting the technicians on a skill-for-pay plan.
Basically, she suggests the following. Give each technician a letter grade (A through E)
based upon that technician s particular skill level and abilities. An A technician is a team
leader and needs to show that he or she has excellent diagnostic troubleshooting skills,
and the ability to supervise and direct other technicians. At the other extreme, an E
technician would typically be a new apprentice with little technical training. The other
technicians fall in between those two levels, based on their individual skills and abilities.
In the professor s system, the A technician or team leader would assign and
supervise all work done within his or her area but generally not do any mechanical
repairs himself or herself. The team leader does the diagnostic troubleshooting,
supervises and trains the other technicians, and test drives the car before it goes back
to the customer. Under this plan, every technician receives a guaranteed hourly wage
within a certain range, for instance:
A tech * $25 $30 an hour
B tech * $20 $25 an hour
C tech * $15 $20 an hour
D tech * $10 $15 an hour
E tech * $8 $10 an hour
Third, to directly address the productivity issue, the professor recommends that
each service manager calculate each technician-team s productivity at the end of each
day and at the end of each week. She suggests posting the running productivity total
conspicuously for daily viewing. Then, the technicians as a group get weekly cash
bonuses based upon their productivity. To calculate productivity, the professor recom-
mends dividing the total labor hours billed by the total labor hours paid to technicians,
in other words, total labor hours billed divided by total hours paid to technicians.
Having done some homework, the professor says that the national average for
labor productivity is currently about 60%, and that only the best-run service centers
achieve 85% or greater. By her rough calculations, Muffler Magic was attaining about
industry average (about 60% in other words, they were billing for only about
60 hours for each 100 hours that they actually had to pay technicians to do the jobs).
(Of course, this was not entirely the technicians fault. Technicians get time off for
 APPENDIX B 651

breaks and for lunch, and if a particular service center simply didn t have enough
business on a particular day or during a particular week, then several technicians may
well sit around idly waiting for the next car to come in.) The professor recommends
setting a labor efficiency goal of 80% and posting each team s daily productivity
results in the workplace to provide them with additional feedback. She recommends
that if at the end of a week the team is able to boost its productivity ratio from the
current 60% to 80%, then that team would get an additional 10% weekly pay bonus.
After that, for every 5% boost of increased productivity above 80%, technicians
would receive an additional 5% weekly bonus. So, if a technician s normal weekly pay
is $400, that employee would receive an extra $40 at the end of the week when his
team moves from 60% productivity to 80% productivity.
After the meeting, Ron Brown thanked the professor for her recommendations
and told her he would think about it and get back to her. After the meeting, on the
drive home, Ron was pondering what to do. He had to decide whether to institute the
professor s sick leave policy, and whether to implement the professor s incentive and
compensation plan. Before implementing anything, however, he wanted to make sure
he understood the context in which he was making his decision. For example, did
Muffler Magic really have an incentive pay problem, or were the problems more
broad? Furthermore, how, if at all, would the professor s incentive plan impact the
quality of the work that the teams were doing? And should the company really start
paying for sick days? Ron Brown had a lot to think about.
Questions
1. Write a one-page summary outline listing three or four recommendations you would make
with respect to each HR function (recruiting, selection, training, and so on) that you think
Ron Brown should be addressing with his HR manager.
2. Develop a 10-question structured interview form Ron Brown s service center managers can
use to interview experienced technicians.
3. If you were Ron Brown, would you implement the professor s recommendation addressing
the presenteeism problem in other words, start paying for sick days? Why or why not?
4. If you were advising Ron Brown, would you recommend that he implement the
professor s skill-based pay and incentive pay plan as is? Why? Would you implement
it with modifications? If you would modify it, please be specific about what you think
those modifications should be, and why.
Based generally on actual facts, but Muffler Magic is a fictitious company. This case is based largely on information
in Drew Paras, The Pay Factor: Technicians Salaries Can Be the Largest Expense in a Server Shop, as Well as the
Biggest Headache. Here s How One Shop Owner Tackled the Problem, Motor Age, November 2003, pp. 76 79; see also
Jennifer Pellet, Health Care Crisis, Chief Executive, June 2004, pp. 56 61; Firms Press to Quantify, Control
Presenteeism, Employee Benefits, December 1, 2002.

BP TEXAS CITY*
When BP s Horizon oil rig exploded in the Gulf of Mexico in 2010, it triggered tragic
reminders for experts in the safety community. In March 2005, an explosion and fire
at British Petroleum s (BP) Texas City, Texas, refinery killed 15 people and injured
500 people in the worst U.S. industrial accident in more than 10 years. That disaster
triggered three investigations: one internal investigation by BP, one by the U.S. Chemical
Safety Board, and an independent investigation chaired by former U.S. Secretary of State
James Baker and an 11-member panel that was organized at BP s request.
To put the results of these three investigations into context, it s useful to under-
stand that under its current management, BP had pursued, for the past 10 or so years
before the Texas City explosion, a strategy emphasizing cost-cutting and profitability.
The basic conclusion of the investigations was that cost-cutting helped compromise
safety at the Texas City refinery. It s useful to consider each investigation s findings.
The Chemical Safety Board s (CSB) investigation, according to Carol Merritt, the
board s chairwoman, showed that BP s global management was aware of problems

*© Gary Dessler, Ph.D.

652 APPENDIX B

with maintenance, spending, and infrastructure well before March 2005. Apparently,
faced with numerous earlier accidents, BP did make some safety improvements.
However, it focused primarily on emphasizing personal employee safety behaviors and
procedural compliance, and on thereby reducing safety accident rates. The problem
(according to the CSB) was that catastrophic safety risks remained. For example,
according to the CSB, unsafe and antiquated equipment designs were left in place, and
unacceptable deficiencies in preventive maintenance were tolerated. Basically, the CSB
found that BP s budget cuts led to a progressive deterioration of safety at the Texas City
refinery. Said Ms. Merritt, In an aging facility like Texas City, it is not responsible to
cut budgets related to safety and maintenance without thoroughly examining the
impact on the risk of a catastrophic accident.
Looking at specifics, the CSB said that a 2004 internal audit of 35 BP business
units, including Texas City (BP s largest refinery), found significant safety gaps they all
had in common, including for instance, a lack of leadership competence, and systemic
underlying issues such as a widespread tolerance of noncompliance with basic safety
rules and poor monitoring of safety management systems and processes. Ironically, the
CSB found that BP s accident prevention effort at Texas City had achieved a 70%
reduction in worker injuries in the year before the explosion. Unfortunately, this
simply meant that individual employees were having fewer accidents. The larger, more
fundamental problem was that the potentially explosive situation inherent in the
depreciating machinery remained.
The CSB found that the Texas City explosion followed a pattern of years of major
accidents at the facility. In fact, there had apparently been an average of one employee
death every 16 months at the plant for the last 30 years. The CSB found that the
equipment directly involved in the most recent explosion was an obsolete design
already phased out in most refineries and chemical plants, and that key pieces of its
instrumentation were not working. There had also been previous instances where
flammable vapors were released from the same unit in the 10 years prior to the explosion.
In 2003, an external audit had referred to the Texas City refinery s infrastructure and
assets as poor and found what it referred to as a checkbook mentality, one in which
budgets were not sufficient to manage all the risks. In particular, the CSB found that
BP had implemented a 25% cut on fixed costs between 1998 and 2000 and that this
adversely impacted maintenance expenditures and net expenditures, and refinery
infrastructure. Going on, the CSB found that in 2004, there were three major accidents
at the refinery that killed three workers.
BP s own internal report concluded that the problems at Texas City were not of
recent origin, and instead were years in the making. It said BP was taking steps to address
them. Its investigation found no evidence of anyone consciously or intentionally taking
actions or making decisions that put others at risk. Said BP s report, The underlying
reasons for the behaviors and actions displayed during the incident are complex, and the
team has spent much time trying to understand them it is evident that they were many
years in the making and will require concerted and committed actions to address. BP s
report concluded that there were five underlying causes for the massive explosion:
A working environment had eroded to one characterized by resistance
to change, and a lack of trust.
Safety, performance, and risk reduction priorities had not been set and
consistently reinforced by management.
Changes in the complex organization led to a lack of clear accountabilities
and poor communication.
A poor level of hazard awareness and understanding of safety resulted in
workers accepting levels of risk that were considerably higher than at
comparable installations.
Adequate early warning systems for problems were lacking, and there were no
independent means of understanding the deteriorating standards at the plant.
The report from the BP-initiated but independent 11-person panel chaired by former
U.S. Secretary of State James Baker contained specific conclusions and recommendations.
 APPENDIX B 653

The Baker panel looked at BP s corporate safety oversight, the corporate safety culture,
and the process safety management systems at BP at the Texas City plant as well at BP s
other refineries.
Basically, the Baker panel concluded that BP had not provided effective safety
process leadership and had not established safety as a core value at the five refineries
it looked at (including Texas City).
Like the CSB, the Baker panel found that BP had emphasized personal safety in
recent years and had in fact improved personal safety performance, but had not
emphasized the overall safety process, thereby mistakenly interpreting improving
personal injury rates as an indication of acceptable process safety performance at its
U.S. refineries. In fact, the Baker panel went on, by focusing on these somewhat
misleading improving personal injury rates, BP created a false sense of confidence that
it was properly addressing process safety risks. It also found that the safety culture at
Texas City did not have the positive, trusting, open environment that a proper safety
culture required. The Baker panel s other findings included the following.
BP did not always ensure that adequate resources were effectively allocated
to support or sustain a high level of process safety performance.
BP s refinery personnel are overloaded by corporate initiatives.
Operators and maintenance personnel work high rates of overtime.
BP tended to have a short-term focus and its decentralized management system
and entrepreneurial culture delegated substantial discretion to refinery plant
managers without clearly defining process safety expectations, responsibilities,
or accountabilities.
There was no common, unifying process safety culture among the five refineries.
The company s corporate safety management system did not make sure there
was timely compliance with internal process safety standards and programs.
BP s executive management either did not receive refinery-specific information
that showed that process safety deficiencies existed at some of the plants, or did
not effectively respond to any information it did receive.1
The Baker panel made several safety recommendations for BP, including the following.
1. The company s corporate management must provide leadership on process
safety.
2. The company should establish a process safety management system that identifies,
reduces, and manages the process safety risks of the refineries.
3. The company should make sure its employees have an appropriate level of
process safety knowledge and expertise.
4. The company should involve relevant stakeholders in developing a positive,
trusting, and open process safety culture at each refinery.
5. BP should clearly define expectations and strengthen accountability for process
safety performance.
6. BP should better coordinate its process safety support for the refining line
organization.
7. BP should develop an integrated set of leading and lagging performance indica-
tors for effectively monitoring process safety performance.
8. BP should establish and implement an effective system to audit process safety
performance.
9. The company s board should monitor the implementation of the panel s
recommendations and the ongoing process safety performance of the refineries.
10. BP should transform into a recognized industry leader in process safety
management.
1
These findings and the following suggestions based on BP Safety Report Finds Company s Process Safety
Culture Ineffective, Global Refining & Fuels Report, January 17, 2007.
654 APPENDIX B

In making its recommendations, the panel singled out the company s chief executive
at the time, Lord Browne, by saying, In hindsight, the panel believes if Browne had
demonstrated comparable leadership on and commitment to process safety [as he did
for responding to climate change] that would have resulted in a higher level of safety
at refineries.
Overall, the Baker panel found that BP s top management had not provided
effective leadership on safety. It found that the failings went to the very top of the
organization, to the company s chief executive, and to several of his top lieutenants.
The Baker panel emphasized the importance of top management commitment,
saying, for instance, that it is imperative that BP leadership set the process safety tone
at the top of the organization and establish appropriate expectations regarding
process safety performance. It also said BP has not provided effective leadership in
making certain its management and U.S. refining workforce understand what is
expected of them regarding process safety performance.
Lord Browne, the chief executive, stepped down about a year after the explosion.
About the same time, some BP shareholders were calling for the company s executives
and board directors to have their bonuses more closely tied to the company s safety
and environmental performance in the wake of Texas City. In October 2009, OSHA
announced it was filing the largest fine in its history for this accident, for $87 million,
against BP. One year later, BP s Horizon oil rig in the Gulf of Mexico exploded,
taking 11 lives.
Questions
1. The textbook defines ethics as the principles of conduct governing an individual or a
group, and specifically as the standards one uses to decide what their conduct should be.
To what extent do you believe that what happened at BP is as much a breakdown in the
company s ethical systems as it is in its safety systems, and how would you defend your
conclusion?
2. Are the Occupational Safety and Health Administration s standards, policies, and rules
aimed at addressing problems like the ones that apparently existed at the Texas City plant?
If so, how would you explain the fact that problems like these could have continued for so
many years?
3. Since there were apparently at least three deaths in the year prior to the major explosion,
and an average of about one employee death per 16 months for the previous 10 years, how
would you account for the fact that mandatory OSHA inspections missed these glaring
sources of potential catastrophic events?
4. The textbook lists numerous suggestions for how to prevent accidents. Based on what
you know about the Texas City explosion, what do you say Texas City tells you about the
most important three steps an employer can take to prevent accidents?
5. Based on what you learned in Chapter 16(Safety), would you make any additional recom-
mendations to BP over and above those recommendations made by the Baker panel and
the CSB? If so, what would those recommendations be?
6. Explain specifically how strategic human resource management at BP seems to have sup-
ported the company s broader strategic aims. What does this say about the advisability of
always linking human resource strategy to a company s strategic aims?
Source notes for BP Texas City: Sheila McNulty, BP Knew of Safety Problems, Says Report, The Financial Times,
October 31, 2006, p. 1; CBS: Documents Show BP Was Aware of Texas City Safety Problems, World Refining & Fuels
Today, October 30, 2006; BP Safety Report Finds Company s Process Safety Culture Ineffective, Global Refining &
Fuels Report, January 17, 2007; BP Safety Record Under Attack, Europe Intelligence Wire, January 17, 2007; Mark
Hofmann, BP Slammed for Poor Leadership on Safety, Oil Firm Agrees to Act on Review Panel s Recommendations,
Business Intelligence, January 22, 2007, p. 3; Call for Bonuses to Include Link with Safety Performance, The Guardian,
January 18, 2007, p. 24; www.bp.com/genericarticle.do?categoryId=9005029&contentId=7015905, accessed July 12,
2009; Steven Greenhouse, BP Faces Record Fine For 05 Blast, The New York Times, October 30, 2009, pp. 1, 6. Kyle
W Morrison,, Blame to go around, Safety & Health v. 183 no. 3 (March 2011) p. 40.
GLOSSARY
action learning A training technique by which management play roles in a simulated situation, and are then given feedback
trainees are allowed to work full-time analyzing and solving and praise by their supervisor.
problems in other departments. behavior modification Using contingent rewards or punishment
adaptability screening A process that aims to assess the to change behavior.
assignee s (and spouse s) probable success in handling a foreign behavioral interviews A series of job-related questions that focus
transfer. on how the candidate reacted to actual situations in the past.
ADDIE Process In training, Analyze the training need, Design behaviorally anchored rating scale (BARS) An appraisal method
the overall training program, Develop the course, Implement that aims at combining the benefits of narrative critical incidents
training, Evaluate the course s effectiveness. and quantified ratings by anchoring a quantified scale with
adverse impact The overall impact of employer practices that specific narrative examples of good and poor performance.
result in significantly higher percentages of members of minori- behavior-based safety Identifying the worker behaviors that
ties and other protected groups being rejected for employment, contribute to accidents and then training workers to avoid
placement, or promotion. these behaviors.
affirmative action Making an extra effort to hire and promote benchmark job A job that is used to anchor the employer s pay
those in protected groups, particularly when those groups are scale and around which other jobs are arranged in order of
underrepresented. relative worth.
Age Discrimination in Employment Act of 1967 (ADEA) The benefits Indirect financial and nonfinancial payments employees
act prohibiting arbitrary age discrimination and specifically receive for continuing their employment with the company.
protecting individuals over 40 years old. bias The tendency to allow individual differences such as age,
agency shop A form of union security in which employees who race, and sex to affect the appraisal ratings employees receive.
do not belong to the union must still pay union dues on the bona fide occupational qualification (BFOQ) Requirement that
assumption that union efforts benefit all workers. an employee be of a certain religion, sex, or national origin
alternation ranking method Ranking employees from best to where that is reasonably necessary to the organization s normal
worst on a particular trait, choosing highest, then lowest, until operation. Specified by the 1964 Civil Rights Act.
all are ranked. boycott The combined refusal by employees and other interested
alternative dispute resolution or ADR program Grievance parties to buy or use the employer s products.
procedure that provides for binding arbitration as the last step. broadbanding Consolidating salary grades and ranges into just a
alternative staffing The use of nontraditional recruitment few wide levels or bands, each of which contains a relatively
sources. wide range of jobs and salary levels.
Americans with Disabilities Act (ADA) The act requiring bullying Singling out someone to harass and mistreat them.
employers to make reasonable accommodations for disabled bumping/layoff procedures Detailed procedures that determine
employees; it prohibits discrimination against disabled persons. who will be laid off if no work is available; generally allow
annual bonus Plans that are designed to motivate short-term employees to use their seniority to remain on the job.
performance of managers and which are tied to company burnout The total depletion of physical and mental resources
profitability. caused by excessive striving to reach an unrealistic work-related
applicant tracking systems Online systems that help employers goal.
attract, gather, screen, compile, and manage applicants. business process reengineering Redesigning business processes,
application form The form that provides information on educa- usually by combining steps so that small multi-function process
tion, prior work record, and skills. teams using information technology do the jobs formerly done
appraisal interview An interview in which the supervisor and by a sequence of departments.
subordinate review the appraisal and make plans to remedy candidate-order (or contrast) error An error of judgment on the
deficiencies and reinforce strengths. part of the interviewer due to interviewing one or more very
apprenticeship training A structured process by which people good or very bad candidates just before the interview in question.
become skilled workers through a combination of classroom career The occupational positions a person has had over many
instruction and on-the-job training. years.
arbitration The most definitive type of third-party intervention, career development The lifelong series of activities that con-
in which the arbitrator usually has the power to determine and tribute to a person s career exploration, establishment, success,
dictate the settlement terms. and fulfillment.
authority The right to make decisions, direct others work, and career management The process for enabling employees to better
give orders. understand and develop their career skills and interests, and to
authorization cards In order to petition for a union election, the use these skills and interests most effectively.
union must show that at least 30% of employees may be career planning The deliberate process through which some-
interested in being unionized. Employees indicate this interest one becomes aware of personal skills, interests, knowledge,
by signing authorization cards. motivations, and other characteristics and establishes action
bargaining unit The group of employees the union will be plans to attain specific goals.
authorized to represent. case study method A development method in which the manager
behavior modeling A training technique in which trainees are is presented with a written description of an organizational
first shown good management techniques in a film, are asked to problem to diagnose and solve.
655
656 GLOSSARY

cash balance plans Defined benefit plans under which the corporate-level strategy Type of strategy that identifies the
employer contributes a percentage of employees current pay portfolio of businesses that, in total, comprise the company
to employees pension plans every year, and employees earn and the ways in which these businesses relate to each other.
interest on this amount. criterion validity A type of validity based on showing that
central tendency A tendency to rate all employees the same way, scores on the test (predictors) are related to job performance
such as rating them all average. (criterion).
citation Summons informing employers and employees of the reg- critical incident method Keeping a record of uncommonly good
ulations and standards that have been violated in the workplace. or undesirable examples of an employee s work-related behavior
Civil Rights Act of 1991 (CRA 1991) The act that places the and reviewing it with the employee at predetermined times.
burden of proof back on employers and permits compensatory cross training Training employees to do different tasks or jobs
and punitive damages. than their own; doing so facilitates flexibility and job rotation.
classes Grouping jobs based on a set of rules for each group or data mining The set of activities used to find new, hidden, or
class, such as amount of independent judgment, skill, physical unexpected patterns in data.
effort, and so forth, required. Classes usually contain similar Davis-Bacon Act (1931) A law that sets wage rates for laborers
jobs. employed by contractors working for the federal government.
closed shop A form of union security in which the company can decertification Legal process for employees to terminate a
hire only union members. This was outlawed in 1947 but still union s right to represent them.
exists in some industries (such as printing). deferred profit-sharing plan A plan in which a certain amount
coaching Educating, instructing, and training subordinates. of profits is credited to each employee s account, payable at
codetermination Employees have the legal right to a voice in retirement, termination, or death.
setting company policies. defined benefit pension plan A plan that contains a formula for
collective bargaining The process through which representa- determining retirement benefits.
tives of management and the union meet to negotiate a labor defined contribution pension plan A plan in which the
agreement. employer s contribution to employees retirement savings
college recruiting Sending an employer s representatives to funds is specified.
college campuses to prescreen applicants and create an diary/log Daily listings made by workers of every activity in
applicant pool from the graduating class. which they engage along with the time each activity takes.
compa ratio This equals an employee s pay rate divided by the digital dashboard Presents the manager with desktop graphs and
pay range midpoint for his or her pay grade. charts, and thus a computerized picture of where the company
comparable worth The concept by which women who are stands on all the metrics from the HR Scorecard process.
usually paid less than men can claim that men in comparable direct financial payments Pay in the form of wages, salaries,
rather than in strictly equal jobs are paid more. incentives, commissions, and bonuses.
compensable factor A fundamental, compensable element of a discrimination Taking specific actions toward or against the
job, such as skills, effort, responsibility, and working conditions. person based on the person s group.
competency model Consolidates, usually in one diagram, a dismissal Involuntary termination of an employee s employment
precise overview of the competencies (the knowledge, skills, with the firm.
and behaviors) someone would need to do a job well. disparate rejection rates A test for adverse impact in which it
competency-based job analysis Describing a job in terms of the can be demonstrated that there is a discrepancy between rates
measurable, observable, and behavioral competencies an of rejection of members of a protected group and of others.
employee must exhibit to do a job well. distributive justice The fairness and justice of a decision s result.
competency-based pay Where the company pays for the diversity The variety or multiplicity of demographic features
employee s range, depth, and types of skills and knowledge, that characterize a company s workforce, particularly in
rather than for the job title he or she holds. terms of race, sex, culture, national origin, handicap, age, and
competitive advantage Any factors that allow an organization to religion.
differentiate its product or service from those of its competitors downsizing The process of reducing, usually dramatically, the
to increase market share. number of people employed by a firm.
competitive strategy A strategy that identifies how to build and early retirement window A type of offering by which employees
strengthen the business s long-term competitive position in the are encouraged to retire early, the incentive being liberal pension
marketplace. benefits plus perhaps a cash payment.
compressed workweek Schedule in which employee works earnings-at-risk variable pay plan Plan that puts some portion
fewer but longer days each week. of employees normal pay at risk if they don t meet their goals,
content validity A test that is construct valid is one that demon- in return for possibly obtaining a much larger bonus if they
strates that a selection procedure measures a construct and exceed their goals.
that construct is important for successful job performance. economic strike A strike that results from a failure to agree on
controlled experimentation Formal methods for testing the the terms of a contract that involve wages, benefits, and other
effectiveness of a training program, preferably with before- conditions of employment.
and-after tests and a control group. Electronic Communications Privacy Act (ECPA) Intended in
corporate campaign An organized effort by the union that exerts part to restrict interception and monitoring of oral and wire
pressure on the corporation by pressuring the company s other communications, but with two exceptions: employers who can
unions, shareholders, directors, customers, creditors, and show a legitimate business reason for doing so, and employers
government agencies, often directly. who have employees consent to do so.
 GLOSSARY 657

electronic performance monitoring (EPM) Having supervisors family-friendly (or work life) benefits Benefits such as child
electronically monitor the amount of computerized data an care and fitness facilities that make it easier for employees
employee is processing per day, and thereby his or her to balance their work and family responsibilities.
performance. Federal Violence Against Women Act of 1994 Provides that a
electronic performance support systems (EPSS) Sets of person who commits a crime of violence motivated by gender
computerized tools and displays that automate training, shall be liable to the party injured.
documentation, and phone support; integrate this automation financial incentives Financial rewards paid to workers whose
into applications; and provide support that s faster, cheaper, production exceeds some predetermined standard.
and more effective than traditional methods. flexible benefits plan/cafeteria benefits plan Individualized
employee assistance program (EAP) A formal employer program plans allowed by employers to accommodate employee
for providing employees with counseling and/or treatment preferences for benefits.
programs for problems such as alcoholism, gambling, or stress. flextime A plan whereby employees workdays are built around
employee compensation All forms of pay or rewards going to a core of mid-day hours, such as 11:00 A.M. to 2:00 P.M.
employees and arising from their employment. forced distribution method Similar to grading on a curve;
employee orientation A procedure for providing new employees predetermined percentages of ratees are placed in various
with basic background information about the firm. performance categories.
employee recruiting Finding and/or attracting applicants for foreign service premiums Financial payments over and above reg-
the employer s open positions. ular base pay, typically ranging between 10% and 30% of base pay.
Employee Retirement Income Security Act (ERISA) Signed 4/5ths rule Federal agency rule that minority selection rate less
into law by President Ford in 1974 to require that pension than 80% (4/5ths) of that for the group with highest rate is
rights be vested and protected by a government agency, the evidence of adverse impact.
PBGC. 401(k) plan A defined contribution plan based on section
employee stock ownership plan (ESOP) A qualified, tax- 401(k) of the Internal Revenue Code.
deductible stock bonus plan in which employers contribute functional authority (or functional control) The authority exerted
stock to a trust for eventual use by employees. by an HR manager as coordinator of personnel activities.
Engagement The commitment and dedication of a firm s functional strategies Strategy that identifies the broad activities
employees. that each department will pursue in order to help the business
Equal Employment Opportunity Commission (EEOC) The accomplish its competitive goals.
commission, created by Title VII, is empowered to investigate job gainsharing plan An incentive plan that engages employees in a
discrimination complaints and sue on behalf of complainants. common effort to achieve productivity objectives and share the
Equal Pay Act of 1963 The act requiring equal pay for equal gains.
work, regardless of sex. gender-role stereotypes The tendency to associate women with
ethics The principles of conduct governing an individual or a certain (frequently nonmanagerial) jobs.
group; specifically, the standards you use to decide what your geocentric The belief that the firm s whole management staff
conduct should be. must be scoured on a global basis, on the assumption that the
ethnocentric The notion that home-country attitudes, manage- best manager of a specific position anywhere may be in any of
ment style, knowledge, evaluation criteria, and managers are the countries in which the firm operates.
superior to anything the host country has to offer. globalization The tendency of firms to extend their sales,
executive coach An outside consultant who questions the ownership, and/or manufacturing to new markets abroad.
executive s boss, peers, subordinates, and (sometimes) family golden parachute A payment companies make in connection
in order to identify the executive s strengths and weaknesses, with a change in ownership or control of a company.
and to counsel the executive so he or she can capitalize on good faith bargaining Both parties are making every reasonable
those strengths and overcome the weaknesses. effort to arrive at agreement; proposals are being matched with
exit interviews Interviews with employees who are leaving the counterproposals.
firm, conducted for the purpose of obtaining information good faith effort strategy Employment strategy aimed at changing
about the job or related matters, to give the employer insight practices that have contributed in the past to excluding or
about the company. underutilizing protected groups.
expatriates (expats) Noncitizens of the countries in which grade definition Written descriptions of the level of, say, respon-
employees are working. sibility and knowledge required by jobs in each grade. Similar
expectancy A person s expectation that his or her effort will lead jobs can then be combined into grades or classes.
to performance. grades A job classification system like the class system, although
expectancy chart A graph showing the relationship between test grades often contain dissimilar jobs, such as secretaries,
scores and job performance for a group of people. mechanics, and firefighters. Grade descriptions are written
fact finder A neutral party who studies the issues in a dispute and based on compensable factors listed in classification systems.
makes a public recommendation for a reasonable settlement. graphic rating scale A scale that lists a number of traits and a
fair day s work Standards of output which employers should range of performance for each. The employee is then rated
devise for each job based on careful, scientific analysis. by identifying the score that best describes his or her level of
Fair Labor Standards Act (1938) This act provides for minimum performance for each trait.
wages, maximum hours, overtime pay, and child labor protec- grievance procedure Formal process for addressing any factor
tion. The law has been amended many times and covers most involving wages, hours, or conditions of employment that is
employees. used as a complaint against the employer.
658 GLOSSARY

group life insurance Provides lower rates for the employer or internal wage curve Shows how each job s points relates to its
employee and includes all employees, including new employees, current pay rate.
regardless of health or physical condition. intrinsic motivation Motivation that derives from the pleasure
halo effect In performance appraisal, the problem that occurs someone gets from doing the job or task.
when a supervisor s rating of a subordinate on one trait biases job aid A set of instructions, diagrams, or similar methods available
the rating of that person on other traits. at the job site to guide the worker.
hardship allowances Payments that compensate expatriates for job analysis The procedure for determining the duties and skill
exceptionally hard living and working conditions at certain requirements of a job and the kind of person who should be
locations. hired for it.
health maintenance organization (HMO) A prepaid health care job classification (or grading) method A method for categorizing
system that generally provides routine round-the-clock medical jobs into groups.
services as well as preventive medicine in a clinic-type arrange- job description A list of a job s duties, responsibilities, report-
ment for employees, who pay a nominal fee in addition to the ing relationships, working conditions, and supervisory
fixed annual fee the employer pays. responsibilities one product of a job analysis.
high-performance work system An integrated set of human job enlargement Assigning workers additional same-level activities,
resources policies and practices that together produce superior thus increasing the number of activities they perform.
employee performance. job enrichment Redesigning jobs in a way that increases the
home-country nationals Citizens of the country in which the opportunities for the worker to experience feelings of respon-
multinational company has its headquarters. sibility, achievement, growth, and recognition.
HR audit An analysis by which an organization measures where job evaluation A systematic comparison done in order to
it currently stands and determines what it has to accomplish determine the worth of one job relative to another.
to improve its HR function. job hazard analysis A systematic approach to identifying and
HR Scorecard Measures the HR function s effectiveness and eliminating such hazards before they occur.
efficiency in producing employee behaviors needed to achieve job instruction training (JIT) Listing each job s basic tasks,
the company s strategic goals. along with key points, in order to provide step-by-step training
human capital The knowledge, education, training, skills, and for employees.
expertise of a firm s workers. job posting Publicizing an open job to employees (often by
human resource management (HRM) The policies and practices literally posting it on bulletin boards) and listing its attributes,
involved in carrying out the people or human resource aspects like qualifications, supervisor, working schedule, and pay rate.
of a management position, including recruiting, screening, job-related interview A series of job-related questions that
training, rewarding, and appraising. focus on relevant past job-related behaviors.
human resource metric The fundamental financial and job rotation Systematically moving a worker from one job to
nonfinancial measures you will use to assess the HR unit s another to enhance work team performance and/or to broaden
status and progress. his or her experience and identify strong and weak points to
illegal bargaining items Items in collective bargaining that are prepare the person for an enhanced role with the company.
forbidden by law; for example, a clause agreeing to hire union job sharing Allows two or more people to share a single full-time
members exclusively would be illegal in a right-to-work state. job.
impasse Collective bargaining situation that occurs when the job specifications A list of a job s human requirements, that is,
parties are not able to move further toward settlement, usually the requisite education, skills, personality, and so on another
because one party is demanding more than the other will offer. product of a job analysis.
indirect financial payments Pay in the form of financial benefits job withdrawal Actions intended to place physical or psycholog-
such as insurance. ical distance between employees and their work environments.
in-house development center A company-based method for Landrum-Griffin Act (1959) The law aimed at protecting
exposing prospective managers to realistic exercises to develop union members from possible wrongdoing on the part of their
improved management skills. unions.
injunction A court order compelling a party or parties either lifelong learning Providing employees with continuing learning
to resume or to desist from a certain action. experiences over their tenure with the firm, with the aims of
inside games Union efforts to convince employees to impede or ensuring they have the opportunity to learn the skills they need
to disrupt production for example, by slowing the work pace. to do their jobs and to expand their horizons.
instrumentality The perceived relationships between successful line authority The authority exerted by an HR manager by direct-
performance and obtaining the reward. ing the activities of the people in his or her own department and
insubordination Willful disregard or disobedience of the boss s in service areas (like the plant cafeteria).
authority or legitimate orders; criticizing the boss in public. line manager A manager who is authorized to direct the work of
interest arbitration Arbitration enacted when labor agreements do subordinates and is responsible for accomplishing the organiza-
not yet exist or when one or both parties are seeking to change the tion s tasks.
agreement. lockout A refusal by the employer to provide opportunities to
interest inventory A personal development and selection device work.
that compares the person s current interests with those of management assessment center A simulation in which man-
others now in various occupations so as to determine the agement candidates are asked to perform realistic tasks in
preferred occupation for the individual. hypothetical situations and are scored on their performance.
 GLOSSARY 659

It usually also involves testing and the use of management National Labor Relations Board (NLRB) The agency created by
games. the Wagner Act to investigate unfair labor practice charges and
management development Any attempt to improve current or to provide for secret-ballot elections and majority rule in deter-
future management performance by imparting knowledge, mining whether or not a firm s employees want a union.
changing attitudes, or increasing skills. negligent hiring Hiring workers with questionable backgrounds
management game A development technique in which teams of without proper safeguards.
managers compete by making computerized decisions regarding negligent training A situation where an employer fails to train
realistic but simulated situations. adequately, and the employee subsequently harms a third party.
management process The five basic functions of planning, 9-box matrix In workforce planning, this displays three levels of
organizing, staffing, leading, and controlling. current job performance (exceptional, fully performing, not yet
manager The person responsible for accomplishing the organi- fully performing) across the top, and also shows three levels
zation s goals, and who does so by managing the efforts of the of likely potential (eligible for promotion, room for growth in
organization s people. current position, not likely to grow beyond current position)
managing diversity Maximizing diversity s potential benefits down the side.
while minimizing the potential barriers that can undermine nonpunitive discipline Discipline without punishment, usually
the company s performance. involving a system of oral warnings and paid decision-making
mandatory bargaining items Items in collective bargaining that leaves in lieu of more traditional punishment.
a party must bargain over if they are introduced by the other Norris-LaGuardia Act (1932) This law marked the beginning of
party for example, pay. the era of strong encouragement of unions and guaranteed
market competitive pay system A pay system where the to each employee the right to bargain collectively free from
employer s actual pay rates are competitive with those in the interference, restraint, or coercion.
relevant labor markets. occupational illness Any abnormal condition or disorder
market/external wage curve Compares job points with market caused by exposure to environmental factors associated with
pay rates for these jobs. employment.
Markov analysis Mathematical tool that involves creating a matrix Occupational Safety and Health Act The law passed by
that shows the probabilities that employees in the chain of feeder Congress in 1970 to assure so far as possible every working
positions for a key job will move from position to position and man and woman in the nation safe and healthful working
therefore be available to fill an end-point key position. conditions and to preserve our human resources.
mass interview A panel interviews several candidates simulta- Occupational Safety and Health Administration (OSHA) The
neously. agency created within the Department of Labor to set safety
mediation Intervention in which a neutral third party tries to and health standards for almost all workers in the United States.
assist the principals in reaching agreement. Office of Federal Contract Compliance Programs (OFCCP) This
mentoring Formal or informal programs in which mid- and office is responsible for implementing the executive orders and
senior-level managers help less experienced employees ensuring compliance of federal contractors.
for instance, by giving them career advice and helping them on-demand recruiting services (ODRS) Services that provide
navigate political pitfalls. short-term specialized recruiting to support specific projects
merit pay (merit raise) Any salary increase awarded to an without the expense of retaining traditional search firms.
employee based on his or her individual performance. on-the-job training Training a person to learn a job while working
miniature job training and evaluation Training candidates on it.
to perform several of the job s tasks, and then evaluating the operational safety reviews (or safety operations reviews) Reviews
candidates performance prior to hire. conducted by agencies to ascertain whether units under their
mission statement Summarizes the answer to the question, jurisdiction are complying with all the applicable safety laws,
What business are we in? regulations, orders, and rules.
mixed motive case A discrimination allegation case in which the organization Consists of people with formally assigned roles
employer argues that the employment action taken was motivated, who work together to achieve the organization s goals.
not by discrimination, but by some nondiscriminatory reason organization-person fit The goal of matching (1) the organi-
such as ineffective performance. zation s values, culture, and ways of doing things with (2) the
mixed standard scales In performance appraisal, similar to prospective employee s knowledge, skills, abilities and
behaviorally anchored scales, but mixed scales generally list competencies.
just a few (usually three) behavioral examples (or standards ) organization chart A chart that shows the organization-wide
for each of, say, three performance dimensions, and the distribution of work, with titles of each position and intercon-
employer then mixes the resulting behavioral statements in necting lines that show who reports to and communicates to
listing them. whom.
mobility premiums Typically, lump-sum payments to reward organizational culture The characteristic values, traditions, and
employees for moving from one assignment to another. behaviors a company s employees share.
national emergency strikes Strikes that might imperil the organizational development A special approach to organiza-
national health and safety. tional change in which employees themselves formulate and
National Labor Relations (or Wagner) Act This law banned implement the change that s required.
certain types of unfair practices and provided for secret-ballot organization-wide incentive plans Plans in which all or most
elections and majority rule for determining whether or not a employees can participate, and that generally tie the reward to
firm s employees want to unionize. some measure of company-wide performance.
660 GLOSSARY

outplacement counseling A systematic process by which a predictive workforce monitoring Paying continuous attention
terminated person is trained and counseled in the techniques to workforce planning issues.
of self-appraisal and securing a new position. preferential shop Union members get preference in hiring, but
paired comparison method Ranking employees by making a the employer can still hire nonunion members.
chart of all possible pairs of the employees for each trait and preferred provider organizations (PPOs) Groups of health care
indicating which is the better employee of the pair. providers that contract with employers, insurance companies,
panel interview An interview in which a group of interviewers or third-party payers to provide medical care services at a
questions the applicant. reduced fee.
pay (or rate) ranges A series of steps or levels within a pay grade, Pregnancy Discrimination Act (PDA) An amendment to
usually based upon years of service. Title VII of the Civil Rights Act that prohibits sex discrimi-
pay (or wage) grade A pay grade is comprised of jobs of approx- nation based on pregnancy, childbirth, or related medical
imately equal difficulty. conditions.
Pension Benefits Guarantee Corporation (PBGC) Established procedural justice The fairness of the process.
under ERISA to ensure that pensions meet vesting obligations; process chart A workflow chart that shows the flow of inputs to
also insures pensions should a plan terminate without sufficient and outputs from a particular job.
funds to meet its vested obligations. productivity The ratio of outputs (goods and services) divided
pension plans Plans that provide a fixed sum when employees by the inputs (resources such as labor and capital).
reach a predetermined retirement age or when they can no profit-sharing plan A plan whereby employees share in the
longer work due to disability. company s profits.
performance analysis Verifying that there is a performance programmed learning A systematic method for teaching job
deficiency and determining whether that deficiency should be skills involving presenting questions or facts, allowing the
corrected through training or through some other means person to respond, and giving the learner immediate feedback
(such as transferring the employee). on the accuracy of his or her answers.
performance appraisal Evaluating an employee s current and/or protected class Persons such as minorities and women protected
past performance relative to his or her performance standards. by equal opportunity laws, including Title VII.
performance management Taking an integrated, goal-oriented psychological contract An unwritten agreement that exists
approach to assigning, training, assessing, and rewarding between employers and employees governing each party s
employees performance. expectations regarding the other.
person-job fit The goal of matching (1) the knowledge, skills, qualifications (or skills) inventories Manual or computerized
abilities (KSAs), and competencies that are central to performing records listing employees education, career and development
the job (as determined by job analysis) with (2) the prospective interests, languages, special skills, and so on, to be used in
employee s knowledge, skills, abilities and competencies. selecting inside candidates for promotion.
personnel appraisal process A 3-step appraisal process involving qualified individuals Under ADA, those who can carry out the
(1) setting work standards, (2) assessing the employee s actual essential functions of the job.
performance relative to those standards, and (3) providing ranking method The simplest method of job evaluation that
feedback to the employee with the aim of helping him or her to involves ranking each job relative to all other jobs, usually
eliminate performance deficiencies or to continue to perform based on overall difficulty.
above par. ratio analysis A forecasting technique for determining future
personnel replacement charts Company records showing staff needs by using ratios between, for example, sales volume
present performance and promotability of inside candidates and number of employees needed.
for the most important positions. reality shock Results of a period that may occur at the initial
picketing Having employees carry signs announcing their career entry when the new employee s high job expectations
concerns near the employer s place of business. confront the reality of a boring, unchallenging job.
piecework A system of pay based on the number of items recruiting yield pyramid The historical arithmetic relationships
processed by each individual worker in a unit of time, such as between recruitment leads and invitees, invitees and inter-
items per hour or items per day. views, interviews and offers made, and offers made and offers
point method The job evaluation method in which a number of accepted.
compensable factors are identified and then the degree to reliability The consistency of scores obtained by the same
which each of these factors is present on the job is determined. person when retested with the identical tests or with alternate
polycentric A conscious belief that only the host-country forms of the same test.
managers can ever really understand the culture and behavior restricted policy Another test for adverse impact, involving
of the host-country market. demonstration that an employer s hiring practices exclude a
portability Making it easier for employees who leave the firm protected group, whether intentionally or not.
prior to retirement to take their accumulated pension funds reverse discrimination Claim that due to affirmative action
with them. quota systems, white males are discriminated against.
position analysis questionnaire (PAQ) A questionnaire used to right to work A term used to describe state statutory or constitu-
collect quantifiable data concerning the duties and responsibilities tional provisions banning the requirement of union membership
of various jobs. as a condition of employment.
position replacement card A card prepared for each position in rights arbitration Arbitration that interprets existing contract
a company to show possible replacement candidates and their terms, for instance, when an employee questions the employer s
qualifications. right to have taken some disciplinary action.
 GLOSSARY 661

role playing A training technique in which trainees act out parts the employee competencies and behaviors the company needs
in a realistic management situation. to achieve its strategic aims.
safety awareness program This enables trained supervisors to strategic management The process of identifying and executing
orient new workers arriving at a jobsite regarding common the organization s mission by matching its capabilities with the
safety hazards and simple prevention methods. demands of its environment.
salary survey A survey aimed at determining prevailing wage strategic plan The company s plan for how it will match its
rates. A good salary survey provides specific wage rates for internal strengths and weaknesses with external opportunities
specific jobs. Formal written questionnaire surveys are the and threats in order to maintain a competitive advantage.
most comprehensive, but telephone surveys and newspaper strategy The company s long-term plan for how it will balance
ads are also sources of information. its internal strengths and weaknesses with its external opportu-
savings and thrift plan Plan in which employees contribute a nities and threats to maintain a competitive advantage.
portion of their earnings to a fund; the employer usually strategy-based metrics Metrics that specifically focus on
matches this contribution in whole or in part. measuring the activities that contribute to achieving a company s
Scanlon plan An incentive plan developed in 1937 by Joseph strategic aims.
Scanlon and designed to encourage cooperation, involvement, strategy map Diagram that summarizes the chain of major
and sharing of benefits. activities that contribute to a company s success.
scatter plot A graphical method used to help identify the stress interview Interviewer seeks to make the applicant
relationship between two variables. uncomfortable with occasionally rude questions.
scientific management Management approach based on strictness/leniency The problem that occurs when a supervisor
improving work methods through observation and analysis. has a tendency to rate all subordinates either high or low.
severance pay A one-time payment some employers provide strike A withdrawal of labor.
when terminating an employee. structured (or directive) interview An interview following a set
sexual harassment Harassment on the basis of sex that has the sequence of questions.
purpose or effect of substantially interfering with a person s work structured sequential interview An interview in which the
performance or creating an intimidating, hostile, or offensive applicant is interviewed sequentially by several persons; each
work environment. rates the applicant on a standard form.
sick leave Provides pay to an employee when he or she is out of structured situational interview A series of job-oriented
work because of illness. questions with predetermined answers that interviewers ask of
situational interview A series of job-related questions that focus all applicants for the job.
on how the candidate would behave in a given situation. succession planning The ongoing process of systematically
situational test Examinees respond to situations representative identifying, assessing, and developing organizational leadership
of the job. to enhance performance.
Social Security Federal program that provides three types of supplemental pay benefits Benefits for time not worked such as
benefits: retirement income at the age of 62 and thereafter; unemployment insurance, vacation and holiday pay, and sick
survivor s or death benefits payable to the employee s depend- pay.
ents regardless of age at time of death; and disability benefits supplemental unemployment benefits Provide for a guaranteed
payable to disabled employees and their dependents. These annual income in certain industries where employers must shut
benefits are payable only if the employee is insured under the down to change machinery or due to reduced work. These ben-
Social Security Act. efits are paid by the company and supplement unemployment
staff authority Gives the manager the right (authority) to advise benefits.
other managers or employees. sympathy strike A strike that takes place when one union strikes
staff manager A manager who assists and advises line managers. in support of the strike of another.
standard deviation rule In selection, the standard deviation rule Taft-Hartley Act (1947) Also known as the Labor Management
holds that as a rule of thumb, the difference between the Relations Act, this law prohibited unfair union labor practices
numbers of minority candidates we would have expected to hire and enumerated the rights of employees as union members.
and whom we actually hired should be less than two standard It also enumerated the rights of employers.
deviations. Take a strike Degree to which parties in a labor dispute are
standard hour plan A plan by which a worker is paid a basic willing to tolerate employees going on strike.
hourly rate but is paid an extra percentage of his or her rate for talent management The goal-oriented and integrated process of
production exceeding the standard per hour or per day. Similar planning, recruiting, developing, managing, and compensating
to piecework payment but based on a percent premium. employees throughout the organization.
Standard Occupational Classification (SOC) Classifies all task analysis A detailed study of a job to identify the specific skills
workers into one of 23 major groups of jobs which are subdi- required.
vided into minor groups of jobs and detailed occupations. task statements Show what the worker does on a particular job
stock option The right to purchase a stated number of shares of task, how the worker does it, and for what purpose.
a company stock at today s price at some time in the future. team (or group) incentive plan A plan in which a production
straight piecework An incentive plan in which a person is paid standard is set for a specific work group, and its members are
a sum for each item he or she makes or sells, with a strict paid incentives if the group exceeds the production standard.
proportionality between results and rewards. termination at will Without a contract, either the employer
strategic human resource management Formulating and or the employee could terminate at will the employment
executing human resource policies and practices that produce relationship.
662 GLOSSARY

termination interview The interview in which an employee is video-based simulation A situational test in which examinees
informed of the fact that he or she has been dismissed. respond to video simulations of realistic job situations.
test validity The accuracy with which a test, interview, and so on virtual classroom Special collaboration software used to enable
measures what it purports to measure or fulfills the function it multiple remote learners, using their PCs or laptops, to participate
was designed to fill. in live audio and visual discussions, communicate via written text,
third-country nationals Citizens of a country other than the and learn via content such as PowerPoint slides.
parent or the host country. virtual teams Groups of geographically dispersed coworkers who
Title VII of the 1964 Civil Rights Act The section of the act that are assembled and who interact using a combination of tele-
says an employer cannot discriminate on the basis of race, color, communications and information technologies to accomplish
religion, sex, or national origin with respect to employment. an organizational task.
training The process of teaching new employees the basic skills vision statement A general statement of the firm s intended
they need to perform their jobs. direction that shows, in broad terms, what we want to
transfers Reassignments to similar positions in other parts of become.
the firm. Vocational Rehabilitation Act of 1973 The act requiring
trend analysis Study of a firm s past employment needs over a certain federal contractors to take affirmative action for
period of years to predict future needs. disabled persons.
turnover The rate at which employees leave the firm. voluntary (or permissible) bargaining items Items in collective
unclear standards An appraisal that is too open to interpretation. bargaining over which bargaining is neither illegal nor
unemployment insurance (or compensation) Provides benefits mandatory neither party can be compelled against its wishes
if a person is unable to work through some fault other than his to negotiate over those items.
or her own. wage curve Shows the relationship between the value of the job
unfair labor practice strike A strike aimed at protesting illegal and the average wage paid for this job.
conduct by the employer. Walsh-Healey Public Contract Act (1936) A law that requires
uniform guidelines Guidelines issued by federal agencies charged minimum wage and working conditions for employees
with ensuring compliance with equal employment federal legis- working on any government contract amounting to more than
lation explaining recommended employer procedures in detail. $10,000.
union salting A union organizing tactic by which workers who are wildcat strike An unauthorized strike occurring during the term
in fact employed full-time by a union as undercover organizers of a contract.
are hired by unwitting employers. work samples Actual job tasks used in testing applicants
union shop A form of union security in which the company can performance.
hire nonunion people, but they must join the union after a work sampling technique A testing method based on measuring
prescribed period of time and pay dues. (If they do not, they performance on actual basic job tasks.
can be fired.) work sharing Refers to a temporary reduction in work hours by
unsafe conditions The mechanical and physical conditions that a group of employees during economic downturns as a way to
cause accidents. prevent layoffs.
unstructured (or nondirective) interview An unstructured workers compensation Provides income and medical benefits
conversational-style interview in which the interviewer pursues to work-related accident victims or their dependents regardless
points of interest as they come up in response to questions. of fault.
unstructured sequential interview An interview in which each workflow analysis A detailed study of the flow of work from job
interviewer forms an independent opinion after asking different to job in a work process.
questions. workforce analysis Employers use workforce analysis to obtain
utility analysis The degree to which use of a selection measure and to analyze the data regarding the firm s use of protected
improves the quality of individuals selected over what would versus non protested employees in various job classifications.
have happened if the measure had not been used. workforce analytics Employers use workforce analytics (or
utilization analysis The process of comparing the percentage of talent analytics ) software applications to analyze their
minority employees in a job (or jobs) at the company with the human resources data and to draw conclusions from it.
number of similarly trained minority employees available in workforce (or employment or personnel) planning The
the relevant labor market. process of deciding what positions the firm will have to fill, and
valence The perceived value a person attaches to the reward. how to fill them.
validity generalization The degree to which evidence of a workplace flexibility Arming employees with the information
measure s validity obtained in one situation can be generalized technology tools they need to get their jobs done wherever
to another situation without further study. they are.
value chain Identifies the primary activities that create value for wrongful discharge An employee dismissal that does not comply
customers and the related support activities. with the law or does not comply with the contractual arrange-
variable pay Any plan that ties pay to productivity or profitability, ment stated or implied by the firm via its employment application
usually as one-time lump payments. forms, employee manuals, or other promises.
N A M E / O R G A N I Z AT I O N I N D E X
Note: Page numbers with n indicate American Federation of Labor and Association of Executive Search
footnotes. Congress of Industrial Consultants, 157
Organizations (AFL-CIO), 498, 523 AstraZeneca PLC, 380
A American Federation of Teachers, 498 Athavaley, Anjali, 210n95, 234n28
AARP, 163 American Guild of Musical Atkins, Paul, 317n21
ABB, 145 Artists, 500 Atkinson, William, 418n22, 574n131,
Abbott Laboratories, 444 American Insurance Association, 541 575n180
Abel, Amy Lui, 281n109 American Journal of Industrial Atlantic American, 108
Abelson, Reed, 527n2 Medicine, 211n119 AT&T, 595
Abosch, Kenan, 418n17 American Management Attaway, Morris, 492n70
Abrahamson, Eric, 281n126 Association, 184, 209n33, 264, 612 Atwater, Leanne, 317n25
Academy of Management Journal, American Psychological Association Atwood, Christee, 171n32
211n107, 234n44, 419n76, 455n121, (APA), 183 Austin, John, 281n122
491n35, 492n58 59 American Psychologist, 153, 209n29 Austin-Hayne Corporation, 300
Accenture, 325, 326, 380 American Skandia, 399 Authoria, 86
Accolo, 611 American Society for Training Automatic Data Processing, Inc., 151, 625
Accounting Horizons, 280n70 and Development, 253, 255, 613 Automotive News, 134n10, 419n45, 629n1
Achille, Roger S., 388n76 Amos Tuck Business School, Avery, Derek, 173n126
Across-the-Board, 208n4, 491n39 Dartmouth University, 265 Ayers, David, 571n7
ActiveStrategy Company, 82 Anders, G., 172n91 Aytemur, Janset Özen, 345n57
Adams, Gary, 173n125 Andersen, Erik, 573n84
Adler, Seymour, 210n81 Anderson, Barbara, 603n80 B
ADP, 199, 259, 442 Anderson, Eric, 100n44 Babcock, Pamela, 172n85, 345n69
Advances in Developing Anderson, Howard, 67n75 Bacharach, Samuel, 574n113
Human Resources, 279n19 Andrews, Tim, 572n59 Bachmann, Duane, 387n8
Aetna Life and Casualty Insurance Andrus, Beth, 574n120 BadReferences.com, 196
Company, 411, 445, 571n15 Anfuso, Dawn, 575n163 Baglieri, Terry, 453n35
Agilent Technologies, 583, 596 Ante, Spencer, 171n1 Bahlis, Jay, 279n27
Agnvall, Elizabeth, 172n53, Antila, Elina, 99n14 Baier, Jens, 29n42
280n81 Antonioni, David, 317n22, 317n24 Bain, Trevor, 528n48
Aguinis, Herman, 209n22, 317n8 Apex Door, 277 Bain & Company, 220 221, 246, 266
Ahmad, Afra, 234n54 Apex Environmental, 231 Baker, Steven, 99n31
Akhtar, Syed, 601n25 Appel, Timothy, 28n23 Bakke, Allen, 60
Alamo Rent-A-Car, 50 Apple, 77, 78, 268, 343 Ball Corporation, 286
Alansky, Kevin, 280n71 Applebee s, 323 Ballmer, Steve, 375
Albertsons Markets, 82, 94 Applegate, Jane, 630n65 Baltes, Boris, 456n136
Albrech, C, 419n49 Apple s App Store, 219 Bamberger, Peter, 387n12
Albrecht, Karl, 555, 574n127 Aquino, Karl, 67n58, 575n170 Bank of America, 15, 384
Alder, Stoney, 318n48 Aragon-Sanchez, Antonio, 281n141 Barada, Paul, 493n105
Aldrich, Clark, 280n66 Arch Wireless Operating Co., 492n84 Barker, Tim, 235n81
All China Federation of Trade Unions Armour, Stephanie, 29n39, 173n120 Barling, Julian, 572n42
(ACFTU), 521, 577 578 Armstrong, Claire, 68n107 Barra, Mary, 6
Allen, W. Clayton, 279n19 Armstrong-Stassen, Marjorie, 65n7 Barrick, Murray, 173n135, 209n53, 234n34
Allen, Woody, 189 Arndt, Michael, 29n51 Barron, Tom, 279n25
Alliance of Motion Picture & Television Arnold, Edwin, 527n34, 528n46 Barsness, Z., 601n8
Producers, 525 Arnold, Jennifer, 172n43, 172n52, Bartol, Kathryn, 420n86
Alliant Techsystems, 87 279n6 7, 280n79, 387n18 Baruch, Yehuda, 345n39
Allied Signal, 26 Arthur, Winfred, Jr., 602n66 Barwick, Kenneth, 573n91
Allmerica Financial Corp., 330 Asacker, Tom, 492n46 BASF Corp., 91
Amazon, 74 Ash, Michael, 527n7 Bates, Steve, 28n5, 317n33,
Ambrose, Maureen, 318n48 Ashkanasy, N. M., 491n36 317n36, 575n150
Amerada Hess, 145 Ashworth, Steven, 281n134 Baudville, 399
American Airlines, 176 Asia Africa Intelligence Bauer, Talya, 209n30, 279n3
American Arbitration Wire, 317n11, 571n9, 603n95 Baxter Healthcare Corporation, 57
Association (AAA), 513 Asia Pacific Journal, 173n137 Bayo-Moriones, Alberto, 420n91
American Banker, 233n13, Association for Women in Science, 59 Bean, Leon Leonwood, 18
418n38 Association Management, 235n75, 280n70 Beatty, Richard, 491n29

663
664 NAME/ORGANIZATION INDEX

Beauchamp, Tom, 491n7, 491n26 Bobko, Philip, 67n67, 210n62 Bureau of Labor Statistics (BLS), 144, 369,
Beck, Robert, 622, 630n66 Boca Raton, City of, 42 453n3, 453n15, 571n18
Becker, Brian, 99n28, 100n50, 528n99 Boeing Corp., 230, 442 Bureau of National
Beehr, Terry, 67n59 Bohner, Robert, Jr., 172n78 Affairs, 235n59, 493n123
Beer, Michael, 281n126 Bolch, Matt, 234n21, 346n75 Burger, Jerry, 234n45
Beeson, John, 280n97 Bolino, Mark C., 233n19 Burke, Mary, 455n123
Belcher, David W., 388n62 Bolles, Richard, 345n37 Burke, Michael, 573n80
Belcourt, Monica, 279n37 Bompey, Stuart, 68n103 104 Burlingame, Harold, 455n97
Bell, Cecil, Jr., 281n133 Bond, Michael, 454n61 Burlington Industries, 42
Bell, James, 210n91 Borofsky, Gerald, 573n74 Burns, Sheila, 603n94
Belman, Dale, 527n13 Bosch, 590 Burr, Michael, 492n50
Belogolovsky, Elena, 387n12 Boselie, Paul, 29n70 Bush, George H.W., 35
Belson, Ken, 453n14 Boston Business Journal, 345n51 Business and Legal Resources, Inc., 124
Benelogic, 442 Boston Hotel Employees and Restaurant Business and Society Review, 493n124
Ben & Jerry s, 445 Employees Union, 526 Business Courier Serving
Bennett, Winston, Jr., 587, 602n66 Boswell, Wendy, 29n71, 100n47, Cincinnati Northern Kentucky,
Bensimon, Helen Frank, 575n173 173n99, 492n59 630n65
Berdahl, Jennifer, 66n49, 67n58 Boudette, Neil, 528n88 Business Ethics Quarterly, 491n36 37
Bergel, Gary, 389n85 Boudreau, John, 29n53 Business Horizons, 65n11, 280n97,
Bergman, Mindy D., 67n56 Bovis Lend Lease, 272 420n100, 603n85
Bergman, R., 491n34 Bowen, David, 602n68 Business Information Technology, Inc., 625
Bergmann, Thomas, 453n2 Bowie, Norman, 491n7, 491n26 Business Insurance, 454n57
Berka, Chris, 211n117 Bowles, Ron, 573n69 BusinessWeek, 317n32, 419n80, 492n88
Berkshire, Jennifer, 172n47 Bowling, Nathan, 67n59 Buss, Dale, 491n30
Berkshire Hathaway, 459 460 Boyle, Matthew, 455n120 Buttigieg, Donna, 527n14
Berliner, William, 279n42 BP. See British Petroleum (BP) Byham, William, 491n39
Bernardin, John, 211n107, 319n68 Brady, Diane, 281n114
Bernstein, Elizabeth, 574n126 Breaugh, James, 172n67, 172n69, C
Bernthal, Paul R., 235n66 172n71 72, 173n94, 173n102, Cable, Daniel, 68n86, 281n130
Berry, Christopher, 211n108, 173n136, 210n75 Cable, Josh, 454n68, 573n88
234n35, 317n16 Breen, Edward, 26 Cabot, Stephen, 528n66
Berry, Leonard, 575n152 Brennan s Prime Meats, 619 Cadrain, Diane, 209n56, 211n116, 387n30,
Bersin, Josh, 280n55 Brett, J. M., 601n8 418n18, 574n117, 575n175
Berta, Dina, 280n59, 630n54 56 Bretz, Robert, Jr., 173n93, 386n7 Caldwell, David, 234n45
Best Buy, 88 Brewster, Chris, 29n65, 601n12 California Association of Realtors, 63
Bethlehem Steel Company, 67n76 Bright, Jim, 345n32 California Environmental Protection
Better Business Bureau, 156 Brin, Sergey, 579 Agency, 558
Betz, Nancy, 208n12 British Journal of Industrial Relations, California Federal Savings and Loan
Beus, Jeremy, 571n8 420n105, 492n57 Association, 65n10
Bevilacqua, Christine, 420n82 British Medical Journal, 29n68 California Health Foundation, 348, 631
Bielema, Michelle, 573n74 British Petroleum (BP), 130 131, 259, Caligiuri, Paula, 209n55, 280n98,
Bindrum, Kira, 630n39 288, 338, 531, 532 533 602n64, 602n75
Bingham, John, 491n22 Brockbank, Wayne, 20, 29n73 Callender, John, 235n62
Bingham, Tony, 99n3 Bronfenbrenner, Kate, 528n40 Camardella, M. J., 575n163
Bittel, Lester, 492n52, 492n67 Bronx Lebanon Hospital, 474 475 Campbell, David, 492n53
Bjorkman, Ingmar, 99n14 Brotherton, Phaedra, 173n121 Campbell, John P., 210n59, 418n12
Blackwell, Wiley, 66n45 Brown, Barbara, 235n66 Campion, James, 235n71
Blakley, Barry R., 209n44 Browne Sanders, Anucha, 63 64 Campion, Michael, 66n44, 135n44,
Blanchard, P. Nick, 279n21 22, Bruce, Ron, 573n83 233n9 10, 234n38, 235n66, 235n71
279n28, 280n60 Brumback, Guy, 491n25 Campolieti, Michele, 574n100
Bland, Timothy, 68n102 Buchenroth, Peg, 387n34 Camuso, Michael, 493n107
Bledsoe, Beth, 280n97 Bucher, Richard, 69n120, 69n122 Canas, Kathryn, 68n109
Block, Sandra, 173n120 Buckley, M. Ronald, 233n19, Cannon-Bowers, Janice A., 279n34
Blood, Milton, 318n41 318n65, 492n45 Canon Corp., 377
Bloomberg Businessweek, 26, 78, 99n8, Buddin, Richard, 455n124 Capelli, Peter, 209n35
99n31, 144, 281n114, 601n15 Buffett, Warren, 459 Capital One Bank, 260, 448
Blotzer, Michael, 572n50, 573n84, 573n97 Buildnet, Inc., 595 Capital One University, 260
Blue Cross and Blue Shield, 433 Bulkeley, William, 234n27, 418n37, CareerBuilder, 150, 370
Blue Cross of Northeastern 602n53 Career Development Quarterly, 345n36
Pennsylvania, 483 Bull, Rebecca A., 234n38 Carlson, Dawn, 629n12
 NAME/ORGANIZATION INDEX 665

Carlson, Kevin, 173n107 Christiansen, Neil, 210n58 602n74, 603n91, 603n94, 603n96,
Carlson, Leah, 99n13 Chu, Kathy, 418n4 603n101 102
Carlson, Mike, 573n71 Chun, Rosa, 345n25 Computerworld, 345n45 46, 389n92,
Carlson, R. E., 234n42 43 CIBC, 444 492n76, 493n94
Carneval, Tone, 28n36 CIGNA Behavioral Health, 443 Condeluci, Christopher, 454n59
Carpenter, Mason, 602n61 Cingular Wireless, 521 Conley, Chip, 101, 456
Carr, Linda, 135n44, 281n134 Cintas Corp., 521 Conlin, Bob, 419n56
Carrell, Michael, 68n109, 388n44, Cisco Systems, Inc., 88, 219, 258, 259 Conlin, Michelle, 630n82
512, 527n27 Citibank, 12 Connerley, Mary, 173n137
Carroll, Darren J., 575n177 Citigroup, 384 Conoco, 294
Carter, Jack, 27, 64, 96, 207, 232, 277 278, Citizen s Banking Corporation, 216 Conseco, 407
315, 343, 385, 416 417, 451, 600 City Garage, 185, 608, 609, 611 Consolidated Freightways
Carter, Jennifer, 27 28, 64, 96, 133, 170, City of Boca Raton, 42 of Delaware, 210n90
207, 232, 277 278, 315, 343, 385, Civil Service Commission, 61 Constans, Joseph, 318n42
451, 489, 525 526, 600, 628 Clark, Don, 419n75 Constantin, S. W., 234n38
Carter, Nancy, 345n58 Clark, Laura, 389n106 Container Store, 160
Carter Cleaning Centers, 27, 64, 96, 133, Clark, Ruth, 280n78 Cook, Andy, 99n10
170, 207, 232, 277 278, 315, 343, Clause, Lisbeth, 601n24, 603n107 Cooke, Donna, 211n107
385, 416 417, 451, 489, 525 526, Clemetson, Lynette, 603n90 Corporate Board, 388n69
570, 600, 628 Clendenning, Donna, 574n105 Costco Wholesale Corp., 495 496, 527n2
Cascio, Wayne, 135n15, 319n68 Clifford, James, 134n8 Cotter, Michael, 455n87
Case Western Reserve University, 292 Clifford, Stephanie, 491n13 Covas, Mark, 171n9
Casey, Judith, 173n116 117 Cnnmoney.com, 369 Covey, Stephen, 617, 630n37
Casey, Matthew, 279n22 Cobb, Anthony, 99n16 Cox, Taylor, Jr., 68n110, 69n120
Casio, 74 Cocchiara, Faye, 69n121 Cox, Walter, Jr., 420n97
Castagnera, James, 210n91 Cofsky, Kathryn, 389n84 Coy, Bill, 99n38
Caterpillar Inc., 12, 246, 266, 516, 593 Cohan, John, 493n125 Coy, Peter, 99n8
Caterpillar University, 246 Cohen, Alan, 454n63 Coyle-Shapiro, Jacqueline, 420n90
Cauldron, Shari, 172n80, 575n174 Cohen, Jonathan, 389n106 CPA Journal, The, 235n76, 280n67, 630n69
CCH Incorporated, 67n57 Cohen, Laurie, 211n104 CPA Magazine, 344n10
CEMEX, 592 Cohen, Susan, 602n47 Craig, S. Bartholomew, 317n17
Central Oregon Community Coil, James, III, 493n96 Crain s Chicago Business, 453n1
College, 284 285 Colella, Adrian, 68n116 Crain s New York Business, 630n39, 630n46
Central Steel Door Corporation, 599 600 Collins, Denis, 420n96 Crawford, Marnie Swerdlin, 209n44
Cerner, 266 Collins, Judith, 211n108 Crawford, Richard, 28n29
Chadd, Charles, 572n37 Compass Group PLC, 312, 325 Criterion, Inc., 331
Chafkin, Max, 630n70, 630n75 Compensation, 387n25, 387n28 Cropanzano, Russell, 491n41, 492n55
Chambers, Anne, 574n145 Compensation and Benefits Review, 28n37, Cruz, Lisa, 134, 170, 207 208, 232 233,
Chan, T. S., 68n114 29n41, 68n95, 279n9, 305, 316n3, 278, 316, 343 344, 385 386, 417,
Change to Win Coalition, 498 317n31, 317n38, 318n54, 319n71, 452, 489 490, 526, 570 571,
Chapman, Christopher, 573n94 346n76, 378, 387 388n37, 387n9, 600 601, 628 629
Chapman, Derek, 233n2 387n11, 387n32, 387n34, 388n45, Csizmar, Chuck, 602n74
Chapman, Mindy, 279n9 388n47, 388n67 68, 388n70, Cuerton, Gerald, 528n66
Chappell, Lindsay, 134n10 388n73, 388n80 82, 389n84 85, Cullen, Lisa, 573n95
Charles Schwab, 411 389n87, 389n89, 389n91, 389n102, Cullen, Steven, 317n34
Chaudhuri, Anita, 234n40 389n104, 389n106, 389n107 108, Cullison, Jessica, 455n123
CheckMATE, 76 389n110, 418n3, 418n7 8, 418n13, Culpepper, Steven, 209n22
Cheesecake Factory, The, 149, 151, 191, 259 418n17, 418n20, 418n26, Cummings, L. L., 601n8
Chelan County Public Utility District, 142 419n39 40, 419n46, 419n56, Cummings, Thomas, 281n126
Chemical Engineering, 153 419n60, 419n63 64, 419n72, Curcio, James, 454n56
Chemistry Education Research and 420n82, 420n86 88, 420n93, Current, William, 574n119
Practice, 280n51 420n97, 420n99, 420n104, 420n107, CVS pharmacy, 340
Chen, Peter Y., 602n63 421n108, 421n113, 421n116, 453n3, Czarnowsky, Mike, 281n100
Cheung, Fannie, 601n9 453n16, 453n21, 453n25, 453n28,
Chicago Police Department, 354 453n32 33, 454n51, 454n54, D
Childs, J. T., Jr., 68n117 454n56, 454n61, 454n63, 454n65, Dahl, Daren, 629n19
Chili s Bar & Grill, 66n55 454n69, 454n76 77, 454n81, Daily Camera, 173n119
Chima, Felix, 574n142 455n83, 455n86 87, 455n89, Daily Oklahoman, The, 527n21
Ching-Hsing, 603n77, 603n84 455n91 92, 455n97 98, 455n113, Daimler, 103, 107, 128, 134n1, 520
Christadore, Robert, 454n77 527n4, 574n125, 601n22, 602n39, Dalessio, Anthony, 234n37
666 NAME/ORGANIZATION INDEX

Danaher, Maria, 345n71 Dietz, Graham, 629n6 EHS Today, 280n59, 571n5, 572n22,
Daniel, Jeff, 169 Digh, Patricia, 69n120 572n31, 572n56, 573n60,
Daniels, Aubrey, 418n13 DiLorenzo, Louis P., 575n177 573n63 64, 573n70 71, 573n82,
Daniels, John, 602n29, 603n85 DiMarie, Samuel, 602n47 573n98, 574n103, 574n109, 574n114
Dartmouth University Amos Tuck Dipboye, Robert, 234n39 Eisenberger, Robert, 344n15
Business School, 265 Directors Guild of America, 525 Eisenstat, Russell, 281n126
Dash, Eric, 420n106 Discovery Communications, 398 Electronic Arts (EA), 153
Dash, Julekha, 345n45 Disneyland, 150 Ellig, Bruce, 419n72
Davenport, Thomas, 99n35 Dixon, Marlene, 233n18 Ellin, Abby, 173n126
David, Fred, 99n2 Dizik, Alina, 173n134 Ellis, Christine, 279n11
Davidshofer, Charles, 208n10, 208n13 14, Dodes, Rachel, 279n13 Elop, Stephen, 268, 269
208n17, 209n19, 233n17 Doerpinghaus, Helen, 172n82 Elsass, Priscilla, 601n9
Davies, Gary, 345n25 Dofasco, 255 Emerson, Sandra, 389n91
Davis, Greg, 172n55 Doherty, Lynn, 172n75 Emory University, 353
Davis, Ronald, 575n148 Doherty, Michael, 234n38 Employee Assistance Quarterly, 173n116,
Davison, Sue Canney, 602n45 Dolan, Matthew, 528n69, 528n88 455n108, 455n117, 574n142,
Davlin, Layne, 622, 630n67 Dole Food Co., Inc., 148 575n167
Dayan, Kobi, 210n69 Dolezalek, Holly, 280n95, 281n110 Employee Benefits News, 389n109, 456n128
DDI Development Dimensions Donahue, M., 280n79 Employee Relations Law Journal, 68n103,
International, Inc., 135n44 Donovan, Michelle, 462 135n32, 211n101, 235n58, 528n68,
De Avila, J., 171n39, 172n46 Doody, Michael, 345n55 572n37, 575n164
Deci, Edward, 393, 394, 413, 418n10 Dougherty, Christopher, 389n98 Employee Relations Today, 209n42, 211n117,
Decker, Diane L., 173n131 Dougherty, Thomas, 235n62 211n121, 234n44
DeConinck, James, 387n8 Douglas, Scott, 575n162 Employee Responsibilities and Rights,
DeCotiis, Thomas, 318n40 Doverspike, Dennis, 279n22 68n108, 234n55
Dee, Thomas S., 418n25 Dow Chemical, 88, 596, 597 Employer Services Assurance
Degnan, Christa, 602n50 Dowling, Donald, Jr., 601n20, 602n73 Corporation, 622
DeGroot, Timothy, 234n47 Drake, Larry, 66n47 Employment Background
Delaney, Jim, 277 Drucker, Peter, 13, 28n30 Investigations, 199
Delaney, Kevin, 208n1 Druskat, Vanessa, 317n14 Employment Law, 67n62, 67n64
De La Torre, Phillip, 318n64 Dube, Lawrence E., Jr., 210n88 Employment Law Learning
Dell, 11, 13, 257 Ducharme, Mary Jo, 316n3, 418n14 Technologies, 260
Dell omo, Gregory, 493n92 Dudley, Jennifer, 389n104 Employment Relations Today, 172n56,
Deloitte & Touche, 150, 339 Duke Power Company, 34, 61, 65n15 493n96, 575n163
Deloitte & Touche Tohmatsu, 146, 150 Duncan, Dale, 629n4 Engineering News Record, 572n21
Delta Air Lines, 29n80 Dunford, Benjamin, 419n74 Enron Corp., 465, 488 489
Demby, Elayne Robertson, 386n1 Dunham, Kemba, 493n104 Environmental Protection Agency, 570
DeNisi, Angelo, 318n63 Dunkelberger, Karli, 454n51 Environmental Tectonics Corporation, 259
Denton, Nick, 240 Dunkin Donuts, 95 Environment and Behavior, 574n121
Department of Homeland Dunn, Bonnie, 220 Equal Employment Opportunity
Security, 204, 211n129, 215 Dunnette, Marvin D., 418n11 Commission (EEOC), 32, 33,
Deresky, Helen, 601n19 DuPont, 532 34 37, 38, 39 43, 45, 49, 51 54, 61,
DeRue, D. Scott, 528n55 Dvorak, Phred, 419n75 602n72, 610
Derven, Marjorie, 278n1 Dwyer, Timothy, 602n43 Erdem, Ferda, 345n57
Designsafe Engineering, 540 Dychtwald, Ken, 345n73 Esen, Euren, 455n123
Dessler, Gary, 601n28, 630n82 Esposito, Jewel, 455n92
Deutsch, Claudia, 346n75 E Esso Workers Union, Inc., 211n125
Deutsche Bank, 335 336 Earhart, Kelli, 455n117 Estate Planning, 420n103
Developing and Training, 280n52 EBay, 29n80 Etkind, Steven, 420n103
Developing and Training Human Resources Eckberg, Steve, 453n19 European Community (EC), 581
in Organizations, 279n31 Economist, The, 281n111, 344n1, 528n73, European Union (EU), 11, 581
Development Dimensions International 528n81, 601n16 European Venture Capital Journal, 99n10
(DDI), 324 EContinuum, 86 Europe Intelligence Wire, 346n80
DeViney, Nancy, 279n15 Eden, Dov, 574n135 Evans, Gareth, 574n109
DeVries, George, 454n69 Eder, Paul, 344n15 Evered, James, 135n28
DeWitt, Lyle, 622, 630n69 Education Management Corporation, 261 EWeek, 135n12, 172n61
Dial Corp., 49 Effective Training, 279n21 22, 279n28, Exchange Bank, 201
Diamond, Kenneth, 575n157 280n56, 280n60, 280n62 Executive Compensation, 419n67
Dickmeyer, William, 172n57 58 Egon Zehnder International, 157 Express Auto, 415
DiColo, Jerry, 419n75 EHarmony.com, 187 Exxon Corp, 203, 211n125
 NAME/ORGANIZATION INDEX 667

F Flint, Charles, 321 Gaugler, Barbara, 210n67

Facebook, 12, 18, 150, 198, 343, 375, Flynn, Gillian, 453n29 Gaugler, E., 601n18
475, 612 Focus Pointe, 456 457 Gawker Media, 240 241
Facteau, Jeffrey, 317n17 Fogelman College of Business and Gay.com, 59
Facts, Adrienne, 344n23 Economics, 385 GE. See General Electric (GE)
Fahlander, Anders, 29n42 Fogli, Lawrence, 318n41 Gebler, David, 493n124
Fair Trade USA, 326 Folger, Robert, 491n10 Geisel, Jerry, 454n57, 455n97
Falcon, Paul, 493n95 Folker, Cathleen, 629n7 Gelfand, Michele, 66n52
Falk, Kristen, 630n52 Fong, Mei, 528n86 GE Medical, 162, 371
Family and Work Institute, 617 Fontenelle, Gail, 234n39 General Electric (GE), 12, 78, 157, 158,
Famularo, Joseph, 492n90 Foote, David, 345n46 263, 266 267, 294, 309
Fandray, Dayton, 491n28 Foote, Kevin, 388n81 General Mills, 377 378, 383
Fantom, Lynn, 618 Forbes, 172n85 General Motors (GM), 6, 258, 260, 491n32
Fast Company, 388n78 Ford Motor Company, 66n48, 75, 76, 192, Gentry, James, 602n62, 603n78
FBI. See Federal Bureau 257, 391, 444 Georgia-Pacific, 532
of Investigation (FBI) Fortune, 15, 29n40, 152, 172n66, Gerbman, Russell, 211n131, 281n110
FBI Academy, 264 173n113, 210n66, 279n47, 294, Gerhart, Barry, 387n14
Federal Aviation Agency, 47 455n120, 468 Gettman, Hilary, 66n52
Federal Aviation Authority, 475 Fossum, John, 528n51 Giancola, Frank, 389n109, 419n40
Federal Bureau of Investigation Foulke, Edwin, Jr., 572n22 Gibson, Christina, 602n47
(FBI), 165, 200 Foulkes, Fred K., 28n3 Gill, Carol, 528n90
Federal Mediation and Conciliation Fox, Adrienne, 29n43, 210n92, 318n51, Gill, Colin, 209n48
Service, 513 493n114, 630n32 Gilliland, Stephen, 235n79
Federal Regulation of Personnel and Human Fraedrich, John, 491n21 Gilster, Paul, 172n58
Resource Management, 208n14 Framework Technologies Corp., 584 Gladis, Steve, 281n111
FedEx, 324, 471 France, Angela, 492n72 Glairon, Susan, 173n119
FedEx Ground, 355 Franchising World, 630n67 Glassman, Myron, 421n108
Feild, Hubert, 67n66, 209n23 Frase, Martha, 66n33, 454n72 Glater, Jonathan, 418n27
Feinberg, Mortimer, 308 Frase-Blunt, Martha, 173n92, Glendinning, Peter, 316n7,
Feldacker, Bruce, 65n3, 65n18 173n104, 233n16 319n70, 418n7
Feldman, Daniel, 172n64, 172n82, 173n121 Frauenheim, Ed, 28n14, 99n30, 99n33, Glomb, Teresa, 492n62
Feliu, Alfred, 575n164 171n20, 172n42, 172n50, 209n39, Glover, William, 234n38
Felsenthal, Edward, 66n51 279n6, 281n120 Glynn, Christopher, 279n12
Fernandez, Maria, 231 French, Wendell, 281n133 GM. See General Motors (GM)
Fernandez-Araoz, C., 171n39 Freudenberger, Herbert, 556 G. Neil Company, 180, 624
Ferrari, 77 Frey, Christine, 527n2 Gnyawali, Devi, 99n16
Ferrell, O. C., 491n21 Freyvogel, Ty, 630n42 Goffin, Richard, 29n70
Fidelity, 440 Friedman, Jeffrey, 387n25, 387n28 Goldsmith, Howard, 388n67, 419n60
Fiester, Margaret, 69n124, 211n129 Friedman, Laurie, 278 279n2 Goldwasser, Donna, 279n40
Figura, Susannah, 572n51 Friedman, Steven, 420n93 Gombar, Robert, 571n19
Fike Corporation, 201 Frito-Lay, 416 Goodfellow, Matthew, 507, 527n36
Financial Accounting Standards Frito-Lay North America, 77, 78 Goodman, J. S., 279n34
Board, 381 Fritz, Charlotte, 574n137 Goodyear Tire & Rubber Company, 53,
Financial Executive, 345n30, Fritz, Norma, 211n106 68n96 97, 387n15
419n65, 630n49 Fry, Richard, 211n114 Google, 28n8, 33, 65n8, 74, 87, 88, 142,
Financial Executives Institute, 369 Fuhrmanns, Vanessa, 454n71 175, 176 177, 343, 368, 375, 398,
Finch, Ron, 454n65 Fukushima nuclear power plant, 545 406, 445, 579
Finder, Alan, 210n94 Furst, Stacie, 281n130 Goomas, David T., 318n49
Fink, Alexis A., 135n44 Gooty, Janaki, 234n47
Finkel, Ed, 492n47 G Gordon, Tim, 573n92
Finkelstein, Lisa, 67 68n85 Galagan, Pat, 99n3, 280n68 Gorman, Charles, 234n38
First Advantage, 199 Gale, Sarah, 172n65, 209n38, 279n11 Gotsill, Gina, 281n124
First Tennessee Bank, 400 Gallup organization, 326 Graham-Moore, Brian, 420n96
First USA Bank, 330 Galvin, Kim, 348 Grant, Dennis, 453n28
Fisher, Jill, 453n32 Garcia, Maria Fernandez, 68n116 Graphic Media, 259
Fisher, Mel, 599 600 Gardner, A. C., 420n99 Graves, Laura, 233n3
Fisher, Sandra Lotz, 29n54, 574n146 Garner, Kathleen, 234n39 Gray, Colin, 630n35
Fitzpatrick, Laura, 389n97 Garvey, Charlotte, 279n3 Great Western Bank, 220
Fleischmann, Scott T., 234n44 Gates, Henry Louis, Jr., 58 Green, Paul, 235n70
Fleites, Luis, 346n76 Gatewood, Robert, 66n43, 67n66, 209n23 Greenberg, Edward, 493n110
668 NAME/ORGANIZATION INDEX

Greenberg, Herbert, 173n127 100n44, 135n37, 171n39, 281n117, Hispanic Online, 59

Greene, Barbara, 345n31 281n126, 326, 345n25, 345n58, Hodgetts, James C., 385
Greengard, Samuel, 99n9, 210n83, 345n73, 381, 421n113, 492n53, Hodgkinson, Gerard, 209n48
603n112 492n66, 575n152, 602n68, 603n99, Hodson, Stan, 573n92
Greenhaus, J. H., 68n114 629n9 Hoffman, Brian, 317n15
Greenhouse, Steven, 527n2, 527n6, Harvard Business School, 26, 400 Hoffman, James, 573n74
527n23, 528n87 Harvard Graduate School Hoffman, Valerie, 172n55
Greguras, Gary, 318n60 of Business Administration, 265 Hofmann, David, 572n44
Grensing-Pophal, Lin, 99n37, 455n85 Harvey, Michael, 602n44, 602n48 Hofmann, Jennifer, 280n77
Groce, Donald, 572n53 Harvey, Tim, 345n60 Hofrichter, David, 389n89
Grossman, Neil, 453n33 Hasbro, 265 Hofstede, Geert, 580
Grossman, Robert, 28n10 11, 29n64, Hastings, Reed, 627 Hogan, Joyce, 209n48
135n48, 171n2, 173n124, 210n73, Hatch, D. Diane, 527n33, 572n26 Holland, John, 328
453n16, 527n16, 572n34, 630n82 Haus, Mick, 211n113 Hollingsworth, Steve, 572n21
Grote, Dick, 492n68 Hausdorf, Peter, 629n4 Hom, Peter, 493n106
Grunberg, Leon, 493n110 Hautelook, 240, 348 Home Depot, 163, 379, 409, 445
Guild for Professional Pharmacists, 497 Hay Associates, 360, 363, 369, 481 Honda, 193, 408
Gully, Stanley, 67n66, 135n28, 135n40, Hayes, Bill, 345n51 Honoree, Andre, 387n9
171n6, 208n7, 209n26, 344n3 Health-Care Financial Management, 345n55 Hooters of America, 47
Gulotta, Michael, 455n97 Healthcare Management Group, 387n18 Hopkins, Willie, 455n117
Gundy, Peter, 419n53 Heath, Chip, 317n20 Hotel and Motel Management, 280n70
Gurchiek, Kathy, 173n133, Heavrin, Christina, 388n44, 512, 527n27 Hotel Paris, 96 98, 134, 170, 207 208,
455n116, 492n82 Heffes, Ellen, 630n49 232 233, 278, 316, 343 344,
Gurchiek, Kelly, 575n154 Heidrick and Struggles, 157, 369 385 386, 417, 452, 489 490, 526,
Gustafson, David, 601n9 Heilman, Madeline, 234n51, 318n58, 570 571, 600 601, 628 629
318n59, 345n48 Hough, Leaetta M., 418n11
H Heizer, Jay, 418n1 House, Robert J., 281n132
Ha, K. Oanh, 418n21 Heller, Matthew, 210n79 Houston Business Journal, The, 234n57
Haaland, Douglas, 572n47 Henderson, Fritz, 491n32 Howe, Nancy, 172n81
Hagan, Christine, 317n27 Henderson, Norman, 209n43 HR Focus, 99n17, 99n21, 99n27, 279n15,
Hagmann, Laura, 420n86 Henderson, Richard, 108, 135n11, 279n42, 453n4, 454n44, 454n62,
Hahn, Jeffrey M., 211n101 386n2, 418n19 455n101, 455n125
Haines, Victor, III, 29n55 Hendrickson, Anthony, 602n47 HR Magazine, 28n5, 28n8, 28n10, 29n40,
Hakel, Milton, 135n20 Heneman, Herbert, III, 318n40 29n43 44, 29n60, 29n69, 65n12,
Hall, James, 527n33, 572n26 Heneman, Robert, 388n80, 389n87 66n33, 66n41, 67n60, 67n70, 68n102,
Halogen Software, 300, 614 Henley, Terry, 345n69 69n124, 69n126, 99n14, 99n23 24,
Hambrick, Donald, 419n76, 602n45 Hernandez, Luis, 603n99 99n28, 100n46, 135n48 49, 171n2 3,
Hammer, Willie, 571n9 Herold, David, 281n126 171n5, 171n11, 171n14, 171n25,
Hannah, Richard, 493n97 Herzberg, Frederick, 109, 393 394, 413 171n32, 171n37, 172n43, 172n47,
Hannay, Maureen, 455n113 Hewitt Associates, 150, 369, 380, 172n52 53, 172n55, 172n81 83,
Hansen, Fay, 171n8, 172n78, 208n6, 400, 418n2 172n85, 172n87, 172n89 91, 173n92,
388n73, 418n26, 420 421n107, Hewlett-Packard, 220 173n97, 173n104 105, 173n123 124,
603n108 Hibberd, James, 528n95 173n127, 173n133, 208n2, 209n24,
Hantula, Donald, 571n13 Hibbing Taconite Steel Plant, 515 209n36, 209n42, 209n56, 210n72 73,
Harbin, Julie, 172n85 Hicks, Sabrina, 278n2 210n78, 210n80, 210n84, 210n92,
Harpe, Lisa, 172n56 Hicks, Sheila, 279n4 210n96, 211n110, 211n115 116,
Harper, Scott, 455n104 Higgins, Chad, 234n50 211n129 131, 233n1, 233n16,
Harris, Donna, 419n45, 629n1 Higgs, A. Catherine, 281n134 234n21, 234n24, 235n75, 279n3,
Harris, Jeanne, 99n35 Hijazi, Syed Tahir, 388n70 279n6 7, 279n33, 279n41, 280n72,
Harris, Michael, 387n13, 418n24 Hilbert, Dan, 139 280n79, 280n81, 280n85, 280n89,
Harris, Paul, 280n64, 281n121, 629n24 Hilgert, Raymond, 528n91 280n99, 281n106, 281n110, 281n122,
Harrison, David, 69n124, 69n125, 344n22, Hill, Charles, 602n56 317n28 29, 317n33, 317n36,
491n17, 603n81 Hillmer, Barbara, 344n4 318n46 47, 318n50 51, 318n62,
Harrison, Michelle, 171n4 Hillmer, Steve, 344n4 318n65, 344n23, 345n24, 345n40,
Hart, Kevin, 209n36 Hills, Frederick, 453n2 345n47, 345n72, 346n75, 346n79,
Hartley, Darin, 135n13 Hira, Nadira, 29n40, 279n47 387n18, 387n30, 416, 418n18,
Hartman, Sondra, 528n74 Hireright, 199 419n47, 453n16, 453n20, 453n22,
Hartshorn, Dan, 573n76 Hirschman, Carolyn, 171n3, 171n5, 454n60, 454n70, 454n72 73, 454n77,
Harvard Business Review, 28n3, 28n30, 172n83, 454n79, 455n90, 454n79 80, 455n90, 455n105 106,
29n42, 67n61, 68n117, 90, 99n35, 455n106, 456n129 455n109, 455n112 113, 455n119,
 NAME/ORGANIZATION INDEX 669

456n129, 456n138, 491n24, ID Media, 618 Jaffee, Cabot, 209n42

491n30 31, 491n40, 492n44 45, IHOP, 620 Jago, I. Ann, 209n44
492n57, 492n71, 492n73, 492n75 76, Ilies, Remus, 209n51 Jaguar, 76
492n78, 492n82, 492n86, 492n91, Imbermann, Woodruff, 420n100 Jain, Chaman, 171n9
493n92, 493n95 96, 493n98, Immelt, Jeffrey, 267 Janov, Jathan, 67n60
493n105, 493n114, 527n16, 528n43, Immigration and Naturalization Janssens, M., 601n8
528n53, 572n34, 574n115, 574n117, Service (INS), 203 204 Javidan, Mansour, 602n68
574n130 131, 575n150 151, Inc., 611, 630n75 Jawahar, I. M., 318n55
575n154, 575n161, 575n175, Industrial and Labor Relations Review, Journal of Business and Psychology 173n131
575n186, 601n2, 601n26, 602n42 43, 527n7, 527n39, 574n100 JCPenney s, 332
602n54, 603n86, 603n94, 603n107, Industrial Management, 171n4 Jenkins, Andrew, 209n34
603n109, 603n114 115, Industrial Psychology, 135n38 JetBlue Airways, 88, 160
603n121 122, 630n32, 630n51 Industrial Relations, 455n124, 527n13 Jobing.com, 611
HR Management, 28n11 Industrial Safety and Hygiene News, 572n46 Job Star, 369
HR Scorecard, The, 528n99 Industry Week, 491n8 Joby, 632
HRSmart, 151 Ingram, Albert, 280n70 Johns Hopkins, 358
HR Solutions, 493n122 Insch, Gary, 603n85 Johnson, Stefanie, 68n110
HSBC, 375 INSEAD, 590 Johnson & Johnson, 267, 466, 558, 573n99
Huff, Charlotte, 418n35 Institute for Corporate Productivity, 19 Joie de Vivre Hospitality (JDV), 101, 456
Huffcutt, Allen, 234n53 Institute for Electrical and Electronic Joinson, Carla, 345n40, 603n114
Hulin, Charles, 318n41 Engineers (IEEE), 154 Jones, Casey, 210n60
Human Resource Certification Institute, 6 Insurance and Technology, 455n102 Jones, John, 211n105
Human Resource Management, 28n9, Intel Corporation, 144, 268, 294, 406 Jossi, Frank, 603n109, 603n111
28n12, 29n55, 29n65, 66n40, 68n85, Internal Auditor, 492n70 Jourden, Forest, 317n20
68n107, 68n117, 69n121, 99n1, International Association for Human Journal of Accountancy, 280n49
172n64, 173n99, 173n106, 173n135, Resource Information Journal of Applied Psychology, 28n33,
173n140, 210n74, 233n3, 279n37, Management, 624, 625 66n48 49, 66n52, 67n56, 67n58 59,
316n2, 317n25, 317n27, 318n53, International Association of Official 67n67, 67n85, 68n86, 69n119,
346n77, 420n90 91, 491n29, Human Rights Agencies, 65n3 69n124 125, 100n47, 135n16,
493n119 International Atomic Energy Agency 135n20, 173n96, 173n100, 173n121,
Human Resource Management (IAEA), 545 209n22, 209n48 49, 209n51 54,
Journal, 209n34 International Brotherhood 210n59, 210n68, 233n3, 233n9,
Human Resource Management Review, of Teamsters, 498 234n32, 234n38 39, 234n41 42,
29n60, 29n70, 68n109, 99n16, International Coach Federation, 266 234n49 51, 234n53, 235n62,
134n9, 135n17, 135n23, 135n26, International Herald Tribune, 153, 599 235n66, 235n77, 279 280n48,
172n67, 173n136, 210n64, 210n75, International Journal of Human Resource 279n3, 279n5, 281n108, 281n126,
233n5, 280n98, 318n48, 318n65 66, Management, 100n47, 281n141, 601n3 281n130, 317 318n39, 317n14,
345n39, 389n91, 490n3 4, International Journal of Human 317n16 18, 317n20, 318n41 42,
491n9 11, 491n38, 491n41 42, Resources Development 318n52, 318n58 59, 318n63 64,
492n45, 492n55, 493n111, 528n90, and Management, 418n14 345n48, 345n50, 386 387n7,
601n12, 602n48 International Journal 387n13, 418n9, 418n24, 421n109,
Human Resource Microsystems, 625 of Management, 456n137 456n136, 462, 491n17, 491n22,
Human Resource Planning, 29n72, International Labor Review, 211n114 492n56, 492n58, 492n60, 492n62,
281n136, 344n4 International Small Business 492n64, 493n106, 527n14, 528n55,
Human Resource Selection, 67n66, 209n23 Journal, 629n6 571n4, 571n8, 572n42, 573n80,
Humphrey, Stephen, 135n16, 135n20 International Truck and Engine 573n85, 573n91, 574n113, 574n128,
Hunt, Steven, 135n39 Corp., 548 549 574n133 135, 574n137 138,
Huntington Hospital, 556 Interstate/Johnson Lane Corp., 54 575n156, 575n162, 575n170, 601n9,
Huselid, Mark, 99n28, 100n50 InterviewStream, 612 601n11, 602n66, 603n81
Hutcheson, Peggy, 345n43 Intuit, 260, 619 Journal of Banking and Financial
Hyatt, Douglas, 574n100 ION Geophysical, 246 Services, 345n32
Hyundai, South Korea, 513 Irlenbusch, Bernd, 420n89 Journal of Business
IRS, 446 447 Ethics, 491n25, 493n125
I ITrack Solutions, 151 Journal of Business & Psychology, 233n10,
Ibarra, Herminia, 345n58 Iversen, Roderick, 493n119 234n37 38, 234n47, 235n65, 318n49
IBM, 9, 11, 18, 19 20, 56, 88, 104 105, Journal of Business Research, 387n8, 490n3
130, 137, 139, 148, 158, 229, 246, J Journal of Business Strategy, 456n128
248, 260 261, 262, 266, 321, 324, Jackson, Brian, 572n20 Journal of Human Resource
342, 344n1, 427, 465, 581, 584, 585, Jackson, Katherine A., 233n19 Management, 317n10
590, 596 Jacobs, Roger, 572n38 Journal of Human Resources, 389n98
670 NAME/ORGANIZATION INDEX

Journal of Labor Research, 420n90 Klaas, Brian, 172n64, 493n92 Larcker, David F., 630n82
Journal of Management, 234n21, 234n46, Klaff, Leslie, 603n116 Larraza-Kintana, Martin, 420n91
317n24, 344n15, 344n17, 491n33 Klass, Leslie, 602n36 Lasek, Marja, 208n4
Journal of Management Klein, Howard, 278n2 Latham, G., 235n66, 279n31
Studies, 99n6, 100n49 Kleps, Kim, 280n63 Latino Web, 59
Journal of Managerial Issues, 344n14 Klinefelter, John, 67n65 Laudon, Jane, 630n79
Journal of Occupational K.M.S. Investments, 176 Laudon, Kenneth, 630n79
and Organizational Knight Ridder/Tribune Business News, Lauffs, Andreas, 601n26
Psychology, 233n14, 317n12 172n85, 173n128, 235n81, 418n21, Lavelle, Louis, 419n80
Journal of Organizational Behavior, 173n125 420n85, 454n82, 455n114, 455n126, Law, Kenneth, 173n137
Journal of Organizational 493n107 Lawler, Edward, 99n9, 268
Behavior Management, 571n13 Knudsen, Liana, 345n31 Lawson Software, 625
Journal of Property Management, 492n69 Kobata, Mark, 66n23 Lazarus, Harold, 420n104
Journal of Small-Business Management, Koch, Dana, 280n83 Leahy, Kate, 630n57
629n4, 629n12, 629n28 Koelling, C. Patrick, 420n101 Learning Tree International, 259
JP Morgan, 261 Koen, Clifford, Jr., 528n74 LeBlanc, Manon Mireille, 575n156
Judge, Timothy, 68n86, 209n49, 209n51, Kohl, John, 65n11 LeBlanc, Peter, 388n80, 389n87
234n50, 344n8, 455n121 Kok, Jan de, 629n28 Ledbetter, Lilly, 53
Jun, Sunkyu, 602n62, 603n78 Komaki, Judi, 573n91 Ledezma, Carlos, 605, 608
Koonce, Richard, 68n109 Ledford, Gerald, Jr., 388n82, 389n84 85
K Korsgaard, M. Audrey, 492n64 Ledvinka, James, 65n17, 66n43, 208n14
Kahanar, Eileen, 454n53 Kotey, Bernice, 629n7 Lee, Hung-Wen, 603n77, 603n84
Kaiser Permanente, 160, 497 Kotter, John P., 281n126 Lee, Kendra, 279n36
Kakkonen, Anne, 99n14 Kraft, 591 Leffler, Frederic, 492n77
Kaleba, Kermit, 279n44 Kraimer, Maria, 603n117 Lefkowitz, Joel, 491n38
Kalkstein, Harold Murray, 420n104 Kranz, Garry, 279n12, 280n69 Leiter, Michael, 574n133, 574n134
Kammeyer-Mueller, John, 279n5, 493n113 Krause, Thomas, 573n98 Lekus, Eric, 455n97
Kamp, John, 184 Krell, Eric, 172n70, 346n79, 491n31, 603n86 Lengnick-Hall, Mark, 66n40
Kane, Doug, 575n158 Kristof, A. L., 234n49 Lenovo, 11, 582
Kanfer, Ruth, 418n11 Kristof-Brown, Amy, 234n46 Lenox Hill Hospital, 169
Kapur, Kanika, 455n124 Krohe, J., Jr., 491n37 Leonard, Bill, 69n126, 172n91, 211n110,
Kara, Dan, 171n10 Kroll, Karen M., 99n23 454n80, 630n51
Karren, Ronald, 233n3 Krueger, James, 389n107, 419n64 Leonard, Declan, 492n72
Katz, Harry, 527n39 Kulik, Carol, 28n12 Let s Eat!, 620
Kauffman, Jon, 573n87 Kunen, James, 491n27 Leung, Alicia, 345n49
Kaul, Pamela, 235n75 Kurbanoglu, N. Izzet, 280n51 Levin-Epstein, Michael, 67n75
Kearney, Deborah, 135n32 Kurlander, Peter, 420n107 Levinson, Edward, 345n36
Keaveny, Timothy, 66n50, 317n39 Levi Strauss & Co., 13, 392, 400, 408
Keller, Christine, 454n59 L Lewin, Kurt, 269
Keller, Eric, 389n102 Labor Guide to Labor Law, 65n18 LG&E Energy Corporation, 625
Kelloway, E. Kevin, 575n156 Labor Law Journal, 572n38 Li, Jessica, 281n109
Kelly Services, 155 Labor Relations and Collective Bargaining, Liao, Hui, 493n113
Kenexa, 611 528n47, 528n76 Liddick, Betty, 454n77
Kesselring, Randall, 211n123 Labor Studies Journal, 527n34 Liden, Robert, 173n100
Ketter, Paula, 280n53, 280n87, 345n28 Lacy, D.Aaron, 65n7 Liebowitz, S. Jay, 281n136
KeyBank, 183 Ladd, Scott, 419n47 Liemandt, Joe, 169
Keys, Benjamin J., 418n25 Ladika, Susan, 29n56, 211n130, 280n85 Lievens, Filip, 173n96
Kiger, Patrick, 99n9, 345n42, Laff, Michael, 134n3, 171n30, Light, Joe, 172n41
455n100, 455n115 280n60, 455n123 Lincoln Electric Company of Ohio, 410
Kilgour, John, 388n45, 455n83 LaFleur, Genevieve, 29n55 Linenberger, Patricia, 66n50
Kim, Eugene, 492n62 Lambert, Susan, 455n121 Ling, Cyril, 528n91
Kim, Seongsu, 420n90 Lance, Charles, 318n52 LinkedIn, 15, 19, 150, 612
Kim, Soonhee, 171n30, 171n34 Land Rover, 76 Lipsig, Ethan, 493n111
Kim, W. Chan, 492n66 Lands End, 15 Liptak, Adam, 68n94, 69n129
Kimberly-Clark, 545 Lane, Irving, 209n42 Lisko, Richard, 211n123
Kincaid, William, 573n73 Langdale, John, 234n41 LKL Associates, Inc., 550
King, Eden, 234n54 Lanza, Robert, 492n89 L.L. Bean, 3, 4, 17 18, 22, 29n51
King-Metters, Kathryn, 601n27 La Piana Associates, Inc., 99n38 Locke, Edwin, 399
Kirkman, Bradley, 602n52 Lapolice, Christelle, 135n34 Lockheed Martin Corp., 88, 230, 465, 468
Kish-Gephart, Jennifer, 491n17 Lapowsky, Issie, 171n28 Lockwood, Frank, 574n118
Kiviat, Barbara, 419n60 Lapsley, D. K., 491n34 Loftus, Paul, 29n57
 NAME/ORGANIZATION INDEX 671

London, Manuel, 318n53 Maroney, Kevin, 454n54 Medex Global Solutions, 594
London Business School, 590 Marquez, Jessica, 29n80, 171n27, 344n13, Medina, Judith, 630n46
London House, Inc., 200 387n35, 421n115, 455n88, 455n94, Medland, Mary, 602n54
Long, Teresa, 574n114 456n137, 528n56, 603n106 Meinert, Dori, 210n84
Long Island Business News, 455n107 Marriott, 428 Meisler, Andy, 528n84
Longnecker, Brent, 389n107, 419n64 Marshall, Jeffrey, 630n49 Melchers, K. G., 235n66
Long Realty, 18 Martin, David, 319n67 Mel s Gourmet Diner, 620
Lorillard Corporation, 67n77 Martin, Jean, 281n117 Melton-Meaux, Antone, 68n95
Louisiana-Pacific Corp., 532 Martineau, Jennifer, 279n45 Meltzer, Mark, 388n67, 419n60
Lowe, Linda, 133 Martinez, Arthur, 135n17 Mendelow, Aubrey, 281n136
Lowry, Phillip, 235n68 Martinez, Michelle, 172n89 Mendelsohn, Susan, 209n30 31
Lublin, Joann, 171n1 Martinko, Mark, 575n162 Men s Wearhouse, The, 254
Lubrizol Corporation, 459 460 Martocchio, Joseph, 388n41, 389n83, Mercedes-Benz, 77, 107
Luchak, Andrew, 346n77 420n95, 453n6 Mercer, 89, 327, 435, 583 584
Luecke, Richard, 335, 345n53 Maslach, Christina, 574n133 134 Meredith, Robyn, 172n85
Lünser, Gabriele K., 420n89 Maslow, Abraham, 393, 413 Meriac, John, 210n68
Luo, Sonjun, 419n46 Mason, J. F., 492n53 Meritor Savings Bank, FSB, 42
Luthans, Fred, 421n109 Masterson, Suzanne, 492n56 Merrell Dow Pharmaceuticals, 584
Luxottica, 259 Mathews, A., 454n51 Merrill Lynch, 384
Lyness, Karen, 318n58, 345n48, 345n50 Mattioli, D., 171n23 Merriman, K., 420n88
Lytle, A. L., 601n8 Matusewitch, Eric, 68n90 Messmer, Max, 344n10
Mauborgne, Renee, 492n66 Metters, Richard, 601n27
M Maurer, Todd, 235n68 Meyer, David, 528n48
Mabey, Christopher, 630n35 May Department Stores Co., 243 Miami Herald, 491n20, 493n103
Macan, Therese, 233n5, 235n77 Mayer, David, 69n119 Miceli, N. S., 234n55
MacDonald, Randall, 9, 19 20 Mayer, Merry, 210n78 Michalak, Donald, 280n49
MacDonald, Scott, 211n114, 455n108 Mayerhofer, Helene, 602n42 Michalscheck, Jimi, 573n70
Macfarlane, Randall, 631 632 Mayfield, Jacqueline, 65n11 Microsoft, 73, 87, 162, 218, 220, 268,
Macy s Inc., 88, 243, 246 247 Mayfield, Milton, 65n11 269, 294, 375, 376, 398, 404, 411,
Madhani, Pankaj, 419n50 Mayo Clinic, 244 467, 584
Madison Square Garden, 63 64 McAfee, 381 Middendorf, Catherine, 235n77
Mael, Fred, 173n137 McCall, Allan, 630n82 Middlemist, R. Dennis, 455n117
Magellan Health Services, 443 McCall, Morgan, Jr., 602n66 Midvale Steel Company, 392
Maher, Kris, 235n80, 527n15, 527n30, McCarthy, Julie, 233n9, 234n30, 235n65 Miklave, Matthew, 68n90
528n80, 528n82, 528n86 McCormick, Ernest J., 135n38 Miller, Claire, 601n7
Mahoney, Joan, 602n66 McCracken, Jeffrey, 528n79 Miller, Joseph, 280n50
Mahony, Douglas, 173n140 McCunney, R. J., 211n119 Miller, Rockley, 280n70
Maier, Ayesha, 281n107 McDaniel, Michael, 210n64, Miller, Ron, 135n12
Maier, Norman, 281n107 211n124, 233n3 Miller, Stephen, 172n81
Makino, 155 McDaniel, Tim, 573n93 Miner, Nanatte, 280n77
Maltby, Emily, 234n29 McDonald, James, Jr., 66n29 Minorities Job Bank, 59
Mamaghani, Farrokh, 456n137 McDonald s, 95, 150 Minton-Eversole, Theresa, 173n105
Management Development, 281n132 McDonnell-Douglas Corporation, 46, 62 Mirabile, Richard, 135n46
Management Review, 29n47, 135n27, McElligott, James, Jr., 454n76 Mitchell, Marie, 491n22
281n109, 572n20 21 McEntire, Lauren, 135n26 Moen, Phyllis, 345n33
Managers Magazine, 235n61 McFarland, Lynn, 210n62, 234n46 Mohn, Tanya, 603n114
Manion, Kimberly, 601n2 McGann, Anthony, 317n39 Moncarz, Roger, 28n17, 28n24
Manjoo, Farhad, 388n78 McGowan, Kevin, 65n1 Mone, Edward, 318n53
Mann, Everett, 68n109 McGregor, Jena, 317n32 Monies, Paul, 527n21
Mann, Phil, 133 McIntyre, Nina, 419n39 Monster, 151, 168
Manolopoulos, Dimitris, 388n79 McKay, Jim, 172n85 Monthly Labor Review, 28n17, 144,
Marakas, George, 99n34 McKay, Patrick, 68n115, 173n126 492n87, 573n67, 575n153
Marchetti, Michele, 418n7 McKinsey & Co., 312, 381 Montier, Richard, 279n24
Marion, Craig, 280n54 McLarney, William, 279n42 Moore, Celia, 66n49
Marion Laboratories, 584 McNabb, Robert, 100n49 Moore, Linda, 173n128
Mark, Barbara, 572n44 McNamara, Paul, 235n80 Moore, Sarah, 493n110
Markham, Steven, 420n97 McQueen, M. P., 66n34 Moran, John, 67n62, 67n64
Markowich, M. Michael, 453n19 McRoberts, Gale, 344n4 Morath, Ray, 173n137
Marks, Susan, 421n118 MCR Safety, 545 Morgeson, Frederick, 135n16, 135n20,
Marlowe, Cynthia, 234n51 Meade, Jim, 317n29, 345n47, 603n121 209n57, 233n10, 234n38
672 NAME/ORGANIZATION INDEX

Morris, David, 345n67 Network World, 235n80 Occupational Safety and Health Review
Morris, Sara, 491n19 Neveu, Robert, 173n114, 211n134 Commission (OSHRC), 537, 539
Morrison, Kathryn, 209n30 31 New Hampshire Business Review, 99n40 O Connell, Bill, 419n49
Moskowitz, Rachel, 66n47 Newport, M. Gene, 528n78 O Connell, Joseph, 455n107
Motorola, 596 News Corporation, 75, 525 Odman, Ronald B., 135n44
Muczyk, J. P., 280n51 New York City Administration for Office Depot, 624, 630n77
Muhl, Charles, 492n87 Children s Services, 154 Office of Federal Contract Compliance
Muldowney, Patrick, 454n51 New York City Opera, 500 Programs (OFCCP), 33
Mullich, Joe, 173n98 New York Knicks, 63 Offstein, Evan, 99n16
Munniksma, Lisa, 173n97 New York Times, The, 63, 68n94, 69n129, Oh, Hao Zhao, 173n100
Murdoch, Rupert, 75 171n1, 172n74, 172n77, 172n91, Oh, Sue, 317n16
Murphy, Kevin, 208n10, 208n13 14, 173n126, 210n94, 346n75, 386n6, Okimoto, Tyler, 318n59
208n17, 209n19, 233n17, 418n27, 453n14, 491n13, 491n27, O Leary, Brian, 68n108
317n18, 318n42 527n6, 527n23, 528n87, 571n14, O Leonard, Karen, 280n55
Murphy Oil USA, 572n27 574n123, 575n171, 601n7, 603n114 Olson, Madeline Hess, 420n99
Myers, Jeffrey, 572n20 NFL. See National Football League (NFL) Olson-Buchanan, Julie, 492n59
MySpace, 612 NFL Players Association, 510 O Neill, Ann M., 211n121
Ng, Thomas, 173n121 Ones, Deniz, 210n58
N Nichols, Gail, 455n86 O*Net, 329, 342
Nahrgang, Jennifer, 573n85 Nicholson, Gilbert, 629n16 Optima Air Filter Company, 133
Nancherla, Aparna, 233n15, 279n46 Nicholson, Nigel, 421n113 Oracle Corporation, 613, 625
Narvaez, D., 491n34 Nighswonger, Todd, 572n49, 574n139 Oracle PeopleSoft, 442
NASCAR, 545 Nightly Business Line, 384 Ordonez, L., 491n35
Nash, G. N., 280n51 Nike, 155 Orey, Michael, 492n88
Nash, James, 572n35, 573n81, 573n89 Nishii, Lisa, 69n119 Organizational Behavior and Human
Natchez, Meryl, 281n124 Nobile, Robert, 387n32 Decision Processes, 68n114
National Aeronautics and Space Nokia, 268, 269, 270, 281n123 Organizational Behavior and Human
Administration, 520 Nooyi, Indra, 75 Performance, 234n38
National Association of Manufacturers Northam, Melissa, 455n113 Organizational Dynamics, 172n82, 420n96
(NAM), 613 Northrop Grumman Corp., 445 Organization Development, 281n133
National Association of Professional Northrup, Herbert, 528n68 Organization of Chinese Americans, 164
Employer Organizations, 622 Northwestern University, 63 Orlitzky, Marc, 173n93
National Black MBA Association, 164 Novak, C. James, 416 Osborne, Richard, 491n8
National Council on Aging, 340, 444 Novartis China, 325 Ostroff, Sheri, 317n20
National Electrical Manufacturer s Novartis Pharmaceuticals Corp., 31 Otte, Fred, 345n43
Association, 363 Nucor Corp., 413, 421n119 Outback Steakhouse, 184 185
National Federation of the Blind, 37 Nutt, Paul, 99n6 Overman, Stephenie, 172n90, 603n94
National Football League (NFL), 510, NuView, Inc., 595, 611 Owens, Donna, 455n109
515, 516 Nye, David, 68n105
National Institute for Occupational Safety P
and Health (NIOSH), 547, 557, O Paauwe, Jaap, 29n70
558, 559 Obama, Barak, 32 Pace, Ann, 280n69, 345n52
National Job Bank, 154 Obdyke, Louis, 575n190 Pacific Gas & Electric Company
National Labor Relations Board (NLRB), Occupational Hazards, 571 572n19, 571n4, (PG&E), 264
358, 499 500, 503 508, 515, 528n44 571n6 7, 571n10 11, 571n17, Pacific Timesheet, 354
National Society of Hispanic MBAs, 164 572n21, 572n27, 572n33, 572n35, Page, Larry, 579
National Trade Association, 363 572n39 40, 572n49 53, 572n57 59, Palais, Lauren, 492n77
National Underwriter, 630n52, 630n66 573n61 62, 573n65 66, 573n68 69, Palmer, David, 235n71
National Urban League, 59 573n73, 573n76, 573n78 79, Palo Alto Software, 76
Nation s Restaurant News, 172n45, 172n51, 573n81 84, 573n87 89, 573n92 97, Panepento, Peter, 172n85
280n59, 630n54 56 573n99, 574n101 102, 574n105 106, Papa John s, 77
NCR, 12 574n108, 574n119, 574n139, Pappas, Michael, 68n103 104
Neary, D. Bradford, 316n2 574n145, 575n182, 575n188 Paradise, Andrew, 279n18
Needleman, Sarah, 209n37 Occupational Outlook Quarterly, 13, Parasuraman, S., 68n114
Nelson, Bob, 418n36, 630n45 28n24 25, 28n34 35, 66n47, Paris International Hotel, 87
Nelson, Carnot, 234n51 144, 456n133 Park, Heejoon, 317n24
Nelson, Emily, 493n109 Occupational Safety and Health Parker-Pope, Tara, 574n123
Nelson, Millicent, 387n11 Administration (OSHA), 533 539, Parmenter, Eric, 455n98
NES Rentals Holdings, Inc., 423, 425 546 547, 557, 564, 570, 610 611, Patagonia, 100, 241
Netflix, 627 628, 630n82 614 Pater, Robert, 572n46, 573n65, 573n69
 NAME/ORGANIZATION INDEX 673

Patterson, Maureen, 209n42 Pfizer Inc., 144, 461 Purcell, Patrick, 454n82
Payne, Dinah, 528n74 Pflug, Warner, 527n17 PureSafety, 547, 612
Payne, Richard, 235n83 Phatak, Arvind, 602n30 Pursell, Chris, 528n92
Peak, Martha, 281n109 Phillips, Geneva M., 135n44 Pursell, Elliot, 235n66
Pearson Corporation, 6 Phillips, Jack, 281n140 Putka, Dan, 210n59
Pearson Education, 119 Phillips, Jean, 67n66, 135n28, 135n40, Pyrillis, Rita, 68n91
Pedigo, Leslie, 209n42 171n6, 208n7, 209n26, 344n3
Peiperl, Maury, 602n65 Phillips, Patti, 281n140 Q
Pell, Arthur, 235n61 Pierce, Charles, 209n22 Quaker Oats North America, 77, 78
Pelled, Lisa Hope, 344n17 Pierce, F. David, 571n10 Quinones, Miguel, 209n44, 210n67
Pensions and Investments, 455n97 Pilat NAI, 148
People and Strategy, 99n9 Pitt-Catsouphes, Marcie, 173n116 117 R
PeopleClick, 86 Pittman, Jeffrey, 211n123 Radebaugh, Lee, 602n29
PeopleFilter, 86 Piturro, Marlene, 493n105 Rafter, Michelle, 418n33, 602n38, 630n47
People Management, 453n23 Pizza Hut, 77 Raices, Maxene, 347
PepsiCo, 75, 77, 78, 590 Plachy, Roger, 135n28, 388n47 Railton, W. Scott, 572n21
PepsiCo Beverages North America, 77 Plant Engineering, 29n57 Ralston, David, 601n9
PepsiCo International, 77 Plateau Systems, 260 Ramstad, Peter, 29n53
Performance Improvement Quarterly, 279n22 Pletz, John, 453n1 Raphel, Todd, 281n138
Perry, Bill, 279n26 Ployhart, Robert, 208n17 Rau, Barbara, 173n125
Perry, Brian, 572n56 Podolsky, Mark, 418n14 Raytheon Co., 465
Perry, Elissa, 28n12 Poe, Andrea, 492n75 Reaser, Azure, 28n24
Perry, Phillip, 630n60 Poerio, Mark, 389n102 Recreation Equipment, Inc., 204
Personnel, 66n50, 135n28, 209n30, Pohley, Katja, 210n67 Recruiting-Online, 59
211n106, 493n107 Poignand, Courtney, 211n117 Recruitment Today, 211n105
Personnel Administrator, 66n43, 527n36 Pomeroy, Ann, 29n60, 280n99, 281n106, Reda, James, 388n69, 419n65
Personnel and Organizational 318n65, 456n138 RedCarpet, 246
Psychology, 209n42 Poole, Patricia, 572n33 Red Robin Gourmet Burgers, 51
Personnel Director, 630n76 Porter, Michael, 78, 99n7 Reese, Gaye, 573n77
Personnel Journal, 66n23, 172n80 81, Porter, Tom, 171n24 Reider, Matthew H., 233n10, 234n38
210n83, 210n88, 210n91, 234n24, Portman Hotel, Shanghai, 71, 72, 82, 84, Reilly, Nora, 234n37, 234n39
235n66, 420n99, 528n66, 528n74, 94, 96, 99n1 Reis, Matthew, 280n90
574n146, 575n163 Posthuma, Richard, 66n44 45, 233n10, 305 Reiter-Palmon, Roni, 135n23
Personnel Law, 68n92, 173n132 Postol, Lawrence, 66n39 Rekus, John, 573n78
Personnel Psychology, 66n44 45, 68n115, Powell, Cliff, 601n22 Render, Barry, 418n1
135n20, 135n34, 135n39, 135n43, PreVisor, 185, 611 Renn, Robert, 317n12
135n44, 173n93, 173n107, 173n126, Prezant, Fran, 234n56 Restaurant Hospitality, 630n60
173n137, 189, 208n4, 209 210n57, Prichard, Robert, 418n12 Restaurants and Institutions, 630n57
209n17, 209n30, 209n35, Pridgen, Nancy, 455n89 Review of Business, 210n81
209n43 44, 209n48, 209n55, PR Newswire, 99n21 Reynolds, Russell, 157
210n58, 210n60, 210n62, 210n67, Probst, Tahira, 571n4 Reynolds, Scott J., 491n33
210n69, 210n98, 211n108, 211n124, Procter & Gamble (P&G), 596, 597 Rhapsody restaurant, 261
211n133, 233n2, 233n9 10, 233n19, Progressive Grocer, 493n121 Rice, Charles, 493n96
234n34 35, 234n37, 234n43, Provident Bank, 625 Richardson, Reed, 511, 528n54
234n45, 234n54, 235n66 68, Prudential Relocation, 588 Risher, Howard, 317n31, 319n71,
235n71, 235n79, 278 279n2, PR Week, 150 389n108, 421n116
279n34, 280n51, 280n84, 281n113, Psychological Assessment Resources, Risk Management, 573n75, 575n158
281n134, 317n15, 317n20 23, Inc., 180 Ritz-Carlton Company, 71, 72, 82
317n26, 317n34, 318n40, 318n55, Psychological Testing, 208n10, 208n13 14, Robb, Drew, 318n46 47, 455n105, 603n122
318n60, 319n68, 344n22, 387n12, 208n17, 209n19, 233n17 Robbins, Stephen, 344n8
419n74, 455n121, 492 493n91 92, Psychology and Work Today, 233n6 Roberson, Loriann, 492n64
492n65, 572n44, 602n66, 602n75 Public Personnel Management, 67n65, Robert Half International, 324
Personnel Review, 99n14 68n109, 134n8, 135n11, 171n30, Roberts, Bill, 100n46, 171n11, 171n14,
Personnel Today, 173n118, 171n34, 209n54, 211n106, 233n18, 171n37, 210n80, 454n73, 492n78,
574n122, 574n132 235n68, 316n7, 319n67, 319n70, 492n86, 575n186
Peters, Lawrence, 318n63 345n57, 345n67, 418n25 Robins, Gary, 234n26
Petersen, Dan, 572n40 Public Utilities Fortnightly, 492n50 Robinson, Alan, 421n114
Peterson, Coleman, 210n74 Puerto Rico Telephone Company, 492n83 Rockwell International, 54
Peterson, Suzanne, 421n109 Pulakos, Elaine, 188, 210n61, 291 Rodgers, Douglas, 234n24
Pfau, Bruce, 317n28 Puncochar, Paul, 574n106 Rodgers, Johanna, 455n102
674 NAME/ORGANIZATION INDEX

Rodriguez, Andrea, 234n56 Scarpello, Vida, 453n2 Shaw, Jason, 418n9

Roehling, Mark, 66n44 Schawn, 263 Shay, Robin, 345n70
Roehling, Patricia, 345n33 Schmidt, Conrad, 281n117 Shell China, 312, 325
Rogers, Elizabeth, 573n67 Schmidt, Eric, 142 Shellenbarger, Sue, 173n122,
Rolex, 74 Schmidt, Frank, 211n108, 234n32 173n124, 453n31
Rosato, Donna, 575n172 Schmidt, Jacqueline, 280n50 Shell Oil Co., 159, 596, 597
Rose, Josee, 172n48 Schmidtke, James M., 173n131 Shelton, Thomas, 603n96
Rosen, Dean, 66n25, 66n27 Schminke, Marshall, 491n37 Shen, Jie, 603n91
Rosenblum, Keith, 573n75 Schneider, Benjamin, 281n134 Sheraton hotels, 526
Ross, Timothy, 420n96 Schneider, Sandra, 234n51 Shippmann, Jeffrey, 135n43
Rossler, Paul, 420n101 Schoeff, Mark, Jr., 603n100 Shipton, Helen, 29n70
Roth, Philip, 67n67, 210n62, 234n53 Schoenfelt, Elizabeth, 209n42 Shkolnikova, Svetlana, 67n84
Rothstein, Mitchell, 29n70 Schramm, Jennifer, 29n42, 491n24 Shore, Lynn, 68n109
Rotundo, Maria, 67n59 Schroeder, Dean, 421n114 Short, Larri, 454n53
Rowe, Mary, 67n61 Schroll, Craig, 575n188 Shuit, Douglas, 280n96
Rowe, Patricia, 234n39 Schultz, Duane, 233n6, 280n51, 572n45 Sibson Consulting, 400
Rowley, Chris, 601n3 Schultz, Sydney, 233n6, 280n51, 572n45 Siegel, Laurence, 209n42
Ruggeberg, Brian J., 135n44 Schulz, Eric R., 418n25 Siegel, Laurie, 26
Ruiz, Gina, 172n49, 173n112, 630n38 Schumann, Paul, 490n4 Siegfried, Robert, Jr., 345n30
Russell, Robert, 572n46 Schwab, Donald, 318n40 Siemens, 95
Ryan, Ann Marie, 173n106, 208n4, Schweitzer, M. E., 491n35 Siemens China, 582
603n123 Science Applications International Corp., 150 Siemens Power Transmission
Ryan, Nancy, 493n109 Scott, Clyde, 528n46 and Distribution, 255
Rymph, R. Douglas, 492n64 Scott, Dana R., 99n40 Signicast Corp., 247
Rynes, Sara, 173n93, 387n14 Scott, John C., 318n53 Silkroad Technology, 151
Scott, K. Dow, 420n97 Silva, Christine, 345n58
S Scott, Lawrence, 573n91 Silverhart, Todd, 234n37
Sackett, David, 29n68 Scripture, Joe, 620 Silverman, Rachel, 389n99
Sackett, Paul, 211n108 Scroggins, W. A., 209n54 Silverstein, Michael, 573n66
Safelite Glass Corp., 396 Seagate Technology, 300 Simester, Duncan, 100n44
Safety and Health, 211n113 Seago, Jean, 527n7 Simmons, Annette, 318n56
Safety Compliance Letter, 572n41 Sea Island Shrimp House, 620 Simon, Mark, 280n76
Safeway, 352 Seaman, Richard, 420n87 Sims, E. Norman, 172n75
Saidler, J. M., 573n86 Searcey, Dionne, 419n73 Singh, Gangaram, 387n37
Saks, Alan, 235n65, 279n37 Sears, 162 Singh, Parbudyal, 134n9, 420n82
Salary.com, 354, 369, 370 Second Life, 150, 220, 246, 259 Sitzmann, Traci, 280n84
Salasko, Elizabeth, 172n78 Securities and Exchange Commission Skarlicki, Daniel, 491n10
Sales and Marketing Management, 418n7 (SEC), 381 Skelton, Brian, 418n29
Sales Management, 153 Security Management, 211n123, 572n47 SkillSoft, 260, 613
Salopek, Jennifer, 279n23 24, Segal, Jonathan, 171n25, 318n50, 493n98, Skinner, B. F., 393, 394 395, 413
280n88, 280n92 528n43 Sloane, Arthur, 527n18, 527n25, 528n62
Salvo, Thomas, 492n52 Selection Assessment Methods, 210n61 Small, Bruce, 233n14
Sammer, Joanne, 318n62 Selmer, Jan, 345n49, 603n76 Small Business Administration, 613, 621
Sam s Clubs, 496 Seminerio, Maria, 172n61 Smerd, Jeremy, 28n4, 280n86, 491n32
San Antonio Business Journal, 345n31 Serco, 371 Smith, Allen, 67n70
Sanchez, Juan, 318n64 Servais, Sondra, 630n76 Smith, Dean, 29n62
Sandberg, Jorgen, 135n37 Service Employees International Smith, Jack, 135n20
Sanders, Peter, 528n92 Union (SEIU), 498, 504, 521 Smith, Max, 419n67
Sanders, Wm. Gerard, 419n76 Sesil, James, 420n105 Smith, Rita, 279n10, 280n97
San Diego Business Journal, 171n24, 172n85 7-Eleven, 146 Smith, Sandy, 571n11, 572n58, 573n61,
Sands, S. Scott, 419n52 Shaffer, Margaret, 344n22, 603n81 574n108
Sankpill, J. P., 573n63 Shaller, Elliot H., 66n25, 66n27 Smith, Sean, 572n36, 629n29
SAP America, Inc., 625 Shand, Dawne, 389n92 Smith, William, 420n104
Sapper, Arthur, 571n19, 572n39 Shanghai Portman Hotel, 71, 72, 82, 84, Smither, James, 281n113, 317n23, 317n26
Sarchione, Charles, 209n54 94, 96, 99n1 Snell, Scott, 602n45
Saruwatari, Lois, 234n51 Shannon, Jones, 171n4 Snow, Charles, 602n45
SAS Institute, Inc., 87, 444 Shapiro, Carolyn, 455n126 Society for Human Resource Management
Saulney, Susan, 172n74 Shapiro, Jenessa, 67n85 (SHRM), 6, 20, 22, 28n15 16,
Scalia, Antonin, 41 Shapiro, Jeremy, 99n35 28n31, 29n42, 69n120, 86, 89,
Scanlon, Joseph, 409 Sharp Electronics, 248 99n22, 144, 160, 195, 197, 266, 369,
 NAME/ORGANIZATION INDEX 675

387n24, 389n105, 453n20, 454n45, Supervisory Management, 135n28, 491n25 Tormey, Douglas, 388n68
612, 629n5 Sutter Health Corporation, 151 Torpey, Elka Maria, 456n133
Society for Human Resource Management Suutari, Vesa, 317n10 Torres, Katherine, 573n62, 573n99
Legal Report, 172n55 Sweetwater State University, 314 315 Toscano, Guy, 575n153
Society for Industrial and Organizational Switzer, Fred, 67n67 Toulouse, Chad, 12, 13
Psychology, 180 Towers Perrin, 80, 326, 437
Society of Hispanic Engineers, 59 T Towers Watson, 400
Software Magazine, 171n10 Taft, Phillips, 601n22 Townsend, Anthony, 602n47
Solamon, Jerry, 235n68 Tahbanainen, Marja, 317n10 Toyota, 11, 37, 77, 262, 520
Solem, Allen, 281n107 Tahmincioglu, Eve, 575n171 Toyota Motor Manufacturing
Solomonson, Andrew, 318n52 Talentwise, 199 of Kentucky, Inc., 66n37
Sondak, Harris, 68n109 Taleo Corporation, 151, 611 Toyota Motor USA, 244, 286
Sonnentag, Sabine, 574n128, 574n137 138 Tamiami Trail Tours, 67n71 Training, 279n11, 279n37, 279n40,
Sony Corporation, 585, 593 Tammaro, Pat, 234n57 280n52, 280n77, 280n95, 630n37
Southern California grocery workers, 451 Tanguay, Denise Marie, 418n25 Training and Development, 28n36, 99n3,
South Florida Sun-Sentinel, 370 Target, 77 134n3, 135n13, 135n46, 171n4,
Southwest Airlines, 78, 82 84, 176 Taskesenligil, Yavuz, 280n51 171n30, 171n32, 233n15,
Sovereign, Kenneth, 68n92, 173n132, Tata, 76 278 279n2, 278n1 2, 279n4,
209n32, 492n91 Taussig, Reed, 421n113 279n10, 279n12, 279n15 16,
Sozbilir, Mustafa, 280n51 Tayan, Brian, 630n82 279n18, 279n23 27, 279n37,
Spector, Bert, 281n126 Taylor, Benjamin, 527n19 279n44 46, 280n50, 280n53,
Spencer, James, 209n46 Taylor, Frederick, 392 280n55, 280n60, 280n63 68,
Spicer, Carol, 135n49 Taylor, Michael, 572n31 280n73 74, 280n76 78, 280n83,
Sporting News, 342 Taylor, Paul, 210n98, 233n14, 281n108 280n87 88, 280n90, 280n92,
Spreitzer, Gretchen, 602n66 T+D, 280n69, 280n71, 281n109, 280n97, 281n100, 281n102,
Spychalski, Annette, 210n67 281n140, 316n5 281n111, 281n121, 281n124,
Stahl, Gunter, 171n21, 319n76 Teagarden, Mary, 602n68 318n56, 345n28, 345n52, 455n123,
Standard & Poor s, 12, 152 Tech Planet, 230 492n46, 575n173
Stanton Corporation, 200 TelevisionWeek, 528n92, 528n97 Training and Development Journal,
Staples, 624 Tenneco Corporation, 548 68n109, 280n49
Starbucks, 95, 516 Tepedino, Linda, 99n14 Training Media Review, 630n42
Starkman, J., 622, 630n66 Tepper, Bennett, 492n58, 492n60, 492n65 Transocean Ltd., 405 406
Starkman, Paul, 135n32 Terpstra, David, 387n9 Trevino, Linda, 318n66, 491n9, 491n11,
Staw, B. M., 601n8 Terpstra, Robert, 601n9 491n17, 491n33, 491n36
Stern, Gary, 172n54 Terris, William, 211n105 Triana, Maria del Carmen, 68n116
Stern, Ithai, 234n44 Tesco PLC, 312 Triandis, Harry C., 418n11
Stetz, T. A., 135n11 Tesoro Corporation, 548 Trilogy Enterprises Inc., 169
Stetzer, Adam, 572n44 Tett, Robert, 210n58 Trump, Donald, 26
Stevens, C. K., 234n49 Texas Instruments, 444 TRW, 283, 287
Stewart, James, 490n1 Textile World, 418n22 Tucker, David, 234n39
Stewart, Thomas, 173n113 Thacker, James, 279n21 22, 279n28, 280n60 Tulgan, Bruce, 28n38
Stivarius, Teresa Butler, 211n103 Thilmany, Jean, 575n161 Tuna, C., 208n3
Stock, Kyle, 211n112 Thomas, Barry W., 420n99 Tungli, Zsuzsanna, 602n65
Stoneman, Bill, 233n13 Thomas, David, 68n117 Turban, Daniel, 235n62
Strack, Rainer, 29n42 Thomas, Isiah, 63 Turnasella, Ted, 318n54, 418n8
Stradley, Ben, 419n67 Thomas, Stephen, 386n7 Turner, Diane, 603n120
Strategic Management, 99n2 Thomas International USA, 185, 608 Turnley, William, 172n82
Strategic Staffing, 67n66, 135n40, 208n7, Thompkins, James, 67n65 TVWeek, 528n95
209n26, 210n76 Thompson, Donna, 345n50 Tyco International, 26
Strauss, Susan, 234n21 Thomson Reuters Company, 86 Tye, Mary G., 602n63
Stretch, Leslie, 419n51 Thornburg, Linda, 234n24 Tyler, Kathryn, 29n40, 172n82, 209n42,
Stuart, Spencer, 157 Thornton, George, III, 345n67 279n33, 279n41, 345n24, 492n44,
Stuller, Jay, 208n4, 234n49 3M Co., 593 528n53, 574n115, 574n130, 603n115
Sudbury, Deborah A., 235n58 TIAA-CREF, 384
Sugrue, Brenda, 279n15 16 Tiffin, Joseph, 135n38 U
Sullivan, Frederick, 528n41 Time, 419n60 UC San Diego Medical Center, 245
Sullivan, John, 99n27 Time Warner, 411, 595 Ulrich, Dave, 20, 21, 28n9, 29n73,
Sundstrom, Eric, 574n121 Tinsley, C. H., 601n8 100n50
Sun Microsystems, 255, 387n31, 413 Tippins, Nancy, 173n106, 211n133 Umphress, Elizabeth, 491n22
Sunoo, Brenda Paik, 454n82 Toh, Soo Min, 100n47 Unicru, 185
676 NAME/ORGANIZATION INDEX

Unilever, 312 Vijayan, Jaikumar, 493n94 Weiner, Nan, 389n91

UNITE, 521 Viollis, Paul, 575n158 Weinstein, Steve, 493n121
United Airlines, 48, 67n78 VisionPoint, 262 Weintraub, Robert, 279n45
United Auto Workers, 444, 513, 516, 520 Volvo, 77 Weirick, Kristen, 233n1
United Kingdom Driver and Vehicle Voos, Paula, 527n13 Weitz, Joseph, 234n41
Licensing Agency, 428 Vosburgh, Richard, 29n72 Welch, Jack, 309, 319n69
United Parcel Service (UPS), 13, 100, Vroom, Victor, 393, 394, 413 Wellins, Richard S., 135n44
255 256, 475, 521, 631 VUE Software, 402 Wellner, Alison, 173n123
U.S. Armed Forces, 258 259 Wells, Deborah, 491n37
U.S. Army, 160 W Wells, Samantha, 211n114
U.S. Bureau of Labor Statistics (BLS), 144, Wade, Nicholas, 386n6 Wells, Susan, 29n69, 66n41, 171n32,
369, 453n3, 453n15, 571n18 Wagner, William, 209n45 172n87, 345n72, 454n70, 455n112,
U.S. Centers for Disease Control Wah, Louisa, 135n27 575n150 151
and Prevention (CDC), 553, 558 Walgreens, 437 Westchester County Business
U.S. Congressional Budget Office, 144 Walker, Alan, 317n23 Journal, 572n36, 629n29
U.S. Department of Commerce, 16 Walley, Edwin, 235n76 Westin hotels, 526
U.S. Department of Energy, 200 Wall Street Journal, The, 15, 26, 28n23, Westman, Mina, 574n135
U.S. Department of Health 29n40, 66n34, 66n51, 153, 171n9, Westphal, James, 234n44
and Human Service, 410 171n23, 171n39, 172n46, 172n48, Wexley, Kenneth, 279n31
U.S. Department of Homeland Security, 173n122, 173n134, 208n1, 208n3, WEYCO Inc., 558
204, 211n129, 215 208n5, 209n37, 209n46, 210n95, Wheeler, Gary, 101
U.S. Department of Justice, 61, 200 211n104, 211n112, 234n27, 234n28, Whetzel, Deborah, 210n64
U.S. Department of Labor, 22, 61, 114, 234n29, 235n80, 279n13, 389n99, Whirlpool, 213, 214, 437
115 117, 123, 130, 135n36, 154, 164, 418n4, 418n37, 419n73, 419n75, Whitaker, Judith, 428, 453n23
255, 369, 453n3, 453n25, 533, 536, 420n92, 453n31, 454n51, 454n71, Whitcomb, Chris, 281n102
571n18, 583, 609 610 455n93, 460, 490n1 2, 491n27, White, Brenda, 69n126
U.S. Department of Transportation, 203 493n104, 493n109, 527n15, 527n30, White, Richard, Jr., 211n106
U.S. Federal Trade Commission, 475 528n69, 528n79 80, 528n82, White, Robin, 603n102
U.S. Marines, 187 528n86, 528n88, 528n92, 574n126, Whitehouse, Kaja, 420n92
U.S. National Institutes of Health, 557 575n189, 601n27, 602n53 Whitfield, Keith, 100n49
U.S. Navy, 117 118, 445 Walmart, 11, 77, 78, 156, 193, 323, 351, Wiatrowski, William, 573n67
U.S. Office of Personnel Management, 369 352, 360, 400, 462, 495, 496, 521, Wiener, Richard, 66n48
U.S. Treasury, 455n83 577 578, 593 Wilk, Steffanie, 209n35
United Steelworkers of America, 515, 521 Walsh, W. Bruce, 208n12 Williams, Charles, 318n55
UNITE HERE, 498 Walt Disney Co., 525 Williams, Josh, 571n10
University of California at Davis Waltemath, Joy, 573n77 Williams, Kathy, 629n10
Medical School, 60 Walter, Laura, 572n52, 573n60, Williamson, Don, 573n87
University of Cincinnati, 246 573n64, 573n79 Williamson, Laura Gollub, 233n9
University of Memphis, 385 Walthall, Janet, 528n67 Wilson, Cynthia, 216
University of Michigan, 60 Wanberg, Connie, 279n5, 492 493n91 92 Wilson, David, 344n14
University of Richmond Law School, 63 Wanek, James, 211n108 Wilson, Michael, 571n14
UPS. See United Parcel Service (UPS) Ward, Brad, 618 Wilson, Rob, 574n101
Ursel, Nancy, 65n7 Ward Furniture, 618 Wilson, Thomas, 418n20
USAA, 442 Warner, Malcolm, 601n3 Wilson Learning, 347
USA Today, 12, 29n39, 173n120, 575n172 Warren, Martin, 492n89 Winchester, Rob, 314 315
Watkins, Muriel, 99n14 Windau, Janice, 575n153
V Watson, Bobby, Jr., 387n37 Windsor, C. A., 491n36
Valentino, Lou, 346n76 Watson Wyatt Data Services, 369 Winfred, Arthur, Jr., 279n48, 587
Valero Energy, 139 140, 145 Watson Wyatt Worldwide, 326 Wingrove, Clinton, 317n38, 319n72
VanDerhei, Jack, 455n93 Waxer, Cindy, 279n43 Winkler, Connie, 99n24
Vanguard, 440 WD-40 Company, 77 Winstein, Keith, 490n2
Van Hoye, Greet, 173n96 Weather Channel, The, 240, 349 Wiscombe, Janet, 421n117
Van Iddekinge, Chad, 208n17, Weathington, Bart, 68n108 Witness.org, 347
210n59, 233n9 Weaver, Gary, 318n66, 491n9, 491n11, Witney, Fred, 527n18 19, 527n25, 528n62
Vanthournout, Don, 280n83 491n33 Witt, L. A., 209n52
Velasquez, Manuel, 490n5 491n6 Weaver, Natasha, 278n2 Woehr, David, 317n15
Vellios, George, 279n37 Weekley, Jeff, 210n60 Wolf, Alison, 209n34
Vera-Munoz, Sandra, 280n70 Wegman s Food Markets, Inc., 351, 352, Wolf, Michael G., 28n17
Verizon Communications, 442 359, 558 Wolf, Steven, 317n14
Vettori, F. L., 280n51 Weinberger, Theodore, 421n116 Wolkinson, Benjamin, 135n32
 NAME/ORGANIZATION INDEX 677

Wolkinson, Sarah, 135n32 418n35, 420 421n107, 421n115, Yerkes, Leslie, 418n34
Wolters-Kluwer Company, 67n57 456n137, 528n84, 602n36, 630n38, Yeung, Arthur, 99n1
Women s Wear Daily, 153 630n47 York, Kenneth, 65n19
Wonderlic, Inc., 86, 180, 182, 611, 612 WorkingUSA, 528n46 Young, Jane Patterson, 210n91
Wood, Jennifer L., 173n131 Workplace Visions, 28n15 16, 28n31, Younger, Beverly, 575n167
Wood, Robert, 317n21 29n42, 171n16, 387n24, YouTube, 150, 477
Woodward, Nancy, 28n8, 65n12, 235n75 389n105, 454n45
Wooten, Kevin, 29n60, 490n3 World Health Organization, 434 Z
Workday.com, 246, 329 Worley, Christopher, 281n126 Zacharatos, Anthea, 28n33
Workforce, 68n90, 99n9, 172n50, Wright, Al, 389n110 Zalewski, Edwin, 573n68
172n57 58, 172n65, 172n70, Wright, Aliah D., 208n2 Zall, Milton, 492n69
172n75, 172n78, 209n38, 209n45, Wright, Benjamin, 28n17 Zappe, John, 172n79
210n89, 211n134, 234n56, 281n138, Wright, Greg, 280n72 Zarandona, Joseph, 493n107
345n42, 421n117 118, 453n29, Wright, Thomas, 491n41, 492n55 Zaslow, Jeffrey, 29n40
491n28, 527n33, 528n56, 572n26, Writers Guild of America (WGA), 525 Zatzick, Christopher, 493n119
575n174, 602n38, 603n100, Wuittner, Jeremy, 418n38 Zeidner, Rita, 29n44, 210n96, 211n115,
603n108, 603n112, 603n116, Wyatt, Lindsay, 455n90 280n89, 453n22, 492n71,
603n120, 629n16 Wymer, John F., III, 234n58 492n73, 492n76
Workforce Management, 28n4, 28n9, Zeigler, James, 572n57
28n14, 28n27, 29n56, 29n61, 29n80, X Zheng, Ye Yang, 69n126
68n91, 99n9, 99n27, 99n30, 99n33, Xin, Katherine R., 344n17 Zielinski, Dave, 209n24,
135n37, 171n8, 171n20, 171n27, 210n72
172n42, 172n44, 172n49, 172n54, Y Zimmerman, Eileen, 210n89
172n60, 172n78 79, 172n88, Yager, Edwin G., 280n49 Zimmerman, Ryan, 173n135, 208n5,
173n95, 173n98, 173n112, 173n114, Yahoo!, 73, 74, 468 209n55, 234n32
208n6, 210n79, 211n100, 279n6, Yale University, 543 544 Zipcar, 241
279n12, 279n38, 279n43, 280n66, Yancey, George, 419n63 Zonneveld, John, 280n73
280n69, 280n86, 280n96, 281n120, Yandrick, Rudy, 455n119, 492n57 Zugelder, Michael, 66n53
344n13, 386n1, 387n35, 418n33, Yegge, Steve, 418n28 Zweig, David, 233n2
 SUBJECT INDEX
Note: Page numbers with f indicate figures; Alternative dispute resolution or ADR Audits
those with t indicate tables. program, 54 claim, 437
Alternative staffing. See Temp agencies human resources, 89 90
A and alternative staffing safety and health, 549 550
Absenteeism, 517 American Federation of Labor and in strategic planning, 74 75, 74f
Accidents Congress of Industrial Authority, 6
danger zones, 539 540 Organizations (AFL-CIO), 498 Authorization cards, 504, 504f
preventing, 540 550 (See also Unsafe acts; American Management Association, 612
Unsafe conditions) American Society of Training B
safety checklists, 542 544f and Development (ASTD), 613 Baby Boomers, 15
workers compensation costs, 550 551 Americans with Disabilities Act (ADA) Background checks, 194 204
Achievement tests, 190 ADA Amendments Act of 2008 applicant tracking systems in, 204
Action learning, 264 (ADAAA), 38, 38f defamation, 195 196
Action research, 270 applicant s workers compensation effectiveness of, 195
ADA Amendments Act injuries and claims, inquiring graphology used in, 201, 202f
of 2008 (ADAAA), 38, 38f about, 546 honesty testing used in, 200 201
Adaptability screening, 586 employee compensation laws, 358 human lie detectors, 201
ADDIE five-step training process, 247 insurance benefits, 435 immigration law, complying
Adverse impact, 43 46 mental impairments and, 36 37 with, 203 204
disparate rejection rates, 44 qualified individuals, 37 methods of, 196 198
example, 46 reasonable accommodation, 37, 37f physical exams, 201 202
4/5ths rule, 44 traditional employer defenses, 37 38 polygraph used in, 199 200
McDonnell-Douglas test, 46 Annual bonuses preemployment information services
methods used to show, 44 eligibility, 404 used for, 199
population comparisons, 45 46 formula, 405, 406 privacy issues, 196
restricted policy, 45 fund size, 404 405 reasons for performing, 194 195
standard deviation rule, 44 45 individual performance, 405 reference checking form, 197f
Advertising for employment multiplier approach, 405, 406t social networks and, 198 198
candidates, 152 154 Anti-retaliation provisions, 339 substance abuse screening, 202 203
help wanted ads, 153 154, 153f Applicant metrics, tracking, 85 86 Balance sheet approach, 591 592, 592t
media, 153 Applicant tracking system (ATS), 151, 204 Bargaining unit, 505
Affirmative action, 59 61 Application forms, 50, 164 167 Behavioral interview, 216
defined, 33 applicant exaggeration, 166 Behaviorally anchored rating
vs. EEO opportunity, 59 EEO law and, 166 scale (BARS), 296 299
reverse discrimination, 60 61 guidelines for using, 166 advantages/disadvantages of, 299, 305t
Affirmative action program, 59 61 job performance predicted by, 167 developing, steps in, 296
employee resistance, 59 mandatory arbitration, 167 example of, 298f
online recruitment of minorities, 59 purpose of using, 164 165 performance dimensions in, 297 298
program evaluation, 60 sample off, 165f Behavioral questions, 216
steps in, 60f video résumés, 166 Behavior-based safety, 548
Age as BFOQ, 47 Applications service providers (ASPs), 260 Behavior modeling, 265
Age Discrimination in Employment Act Appraisal. See Performance appraisal Behavior modification, 394 395
of 1967 (ADEA), 33, 358 Appraisal interview, 214, 306 309 Benchmarking, 86 87, 86f
Agency shop, 497 checklist, 3085 Benchmarks jobs, 361, 364
Air quality, 553 conducting, 306 307 Benefits, 424 452
Albemarle Paper Company v. Moody, 35 criticizing a subordinate in, 308 309 defined, 424
Alcoholism and substance abuse, 553 555 of defensive subordinate, 308 domestic partner benefits, 445
dealing with, 554 defined, 306 educational subsidies, 445
effects of, 553 realistic appraisals in, 309 employee assistance programs, 443
observable behavior patterns sample employee development plan, 307f executive prerequisites, 445
indicating, 553 555 , 555t types of, 306 flexible benefits programs, 446 449
screening for, in background written warnings and, 309 in small businesses, 617 620
checks, 202 203 Apprenticeship training, 255, 255f for bad times, 619
substance abuse policies, 555 Aptitude tests, 187 flexibility in, 618
All China Federation of Trade Arbitration, 54, 167, 513 recognition, 619
Unions (ACFTU), 521 Asbestos exposure, 552 retirement benefits, 619 620
Alternation ranking method, 294, 305t Audiovisual-based training, 257 work-life benefits, 618 619

678
 SUBJECT INDEX 679

Web sites, 442 temp agencies and alternative See also Mentoring skills
See also Family-friendly (or work-life) staffing, 155 156 Codetermination, 580
benefits; Insurance benefits walk-ins, 160 Cognitive ability tests, 186 187
Benefits purchasing alliances, 437 in small businesses, 616 Collective bargaining, 509 516
Bias, 182 See also Interviews contract agreement, 516
in performance appraisals, 304 Can t do/won t do problems, 250 corporate campaign, 516
in promotion decisions, 338 339 Career, defined, 327 defined, 509 510
in testing of employees, 182 Career centers, 329 good faith bargaining, 510
Big five personality dimensions, 189 Career coaches, 330, 331 grievances, 517 (See also
Body piercings, 51 See also Coaching skills Grievance procedure)
Bona fide occupational Career development, defined, 327 hints, 511, 512
qualification (BFOQ), 46 47 Career management, 327 333 items, 511, 512t
age as, 47 careers terminology, 327 328 mass e-mail communication in, 516
gender as, 47 careers today, 328 mediation, 512 513, 514f
national origin as, 47 defined, 327 negotiating team, 510 511
religion as, 47 employee s role in, 328 329 See also Impasse; Strikes
Boycott, 516 employer s role in, 329 College recruiting, 158 159
Broadbanding, 378 379, 379f gender issues in, 332 333 Combination plan, 401 402
Broad-based stock option plan, 411 manager s role in, 333 Commission plan, 401
Burden of proof, 36 psychological contract, 328 Common-law protections against invasion
Burlington Industries v. Ellerth, 42 Career management systems, 329 332, 330f of privacy, 475
Burnout, 556 557 career centers, 329 Comparable worth, 380 381
Business necessity, 47 48 career coaches, 330, 331 Compa ratio, 372
Business process reengineering, 108 109 career-oriented appraisals, 331 332, 332f Compensable factors, 364 366
career planning workshops, 330 assigning, 365
C employee career planning form, 331f convert percentages to points for each, 365
Cafeteria benefits plan, 446 447 lifelong learning budgets, 330 defined, 360
Candidate-order (or contrast) online programs, 331 degrees of, 366
error, 222 223 Career-oriented appraisals, 331 332, 332f determining and assigning
Candidates for Career planning, defined, 328 points, 366, 366t
employment, 147 160 Career planning workshops, 330 selecting, 364 365, 365f
diversity in, 162 164 Case study method, 264 Compensation. See Employee
disabled, 164 Cash balance plans, 440 compensation
minorities, 163 164 Cause/no cause in EEOC enforcement Competence
older workers, 163 process, 53 in promotion decisions, 337 338
single parents, 162 163 Caveats in Scanlon plan, 409
welfare-to-work, 164 mentoring, 334 Competencies
internal, 147 148 personality tests, 189 appraisal standards based on, 288
finding, 147 professional employer organizations, 622 of HR manager, 21, 21f
forecasting supply of, 142 144 Central tendency, 303 Competency-based appraisal
pros and cons of using, 147 Change to Win Coalition, 498 forms, 293, 293f
rehiring, 147 Charge acceptance in EEOC enforcement Competency-based job
succession planning, 148 process, 53 analysis, 128 131
outside, 149 160 Child care, subsidized, 444 model of, 129f
advertising, 152 154 China, HRM in, 581 582 purpose of, 128 129
college recruiting, 158 159 Citation. See Inspections and citations skills matrix used in, 130 131, 130f
employment agencies, 154 155 Civil Rights Act of 1991 (CRA 1991), 35 36 writing, 130 131
executive recruiters, 157 158 burden of proof, 36 Competency-based pay, 376 378
forecasting supply of, 144 mixed motive cases, 36 bottom line on, 378
HRIS approach to recruiting, 148 money damages, 36 defined, 376
Internet recruiting (See Online Claim audits, 437 General Mills example, 377
recruitment) Classes, 362 in practice, 377
military personnel, 160 Cliff vesting, 441 reasons for using, 377
offshoring and outsourcing, 157 Clinical prevention programs, 437 Competency models in talent
on-demand recruiting Closed shop, 497 management, 248 249
services (ODRS), 158 Coaching, defined, 333 Competition trends in HRM, 11 12
recruiting source use and Coaching skills, 333 336 Competitive advantage, 77
effectiveness, 160 building, 333 334 Competitive strategy, 77
referrals, 159 160 career coaches and, 330, 331 Compressed workweeks, 448
telecommuters, 160 self-evaluation checklist, 335t Computer-based training (CT), 258
680 SUBJECT INDEX

Computerized business planning FirstStep Employment Law wrongful discharge, 476 477
software, 76 Advisor, 609, 609f wrongful discharge suits,
Computerized interview, 219 220 job analysis techniques, quantitative, avoiding, 478 480
Computerized job evaluation 115 116, 116t See also Layoffs and downsizing;
methods, 363 364 sample elaws Advisors, 609, 610f Termination interview
Computerized performance small businesses and, 609 610 Disparate impact, 43 44
appraisals, 300 301, 301 302f Depression, employee, 557 Disparate rejection rates, 44
Computerized tests, 185 Deregulation, 12 Disparate treatment, 43
Conciliation in EEOC Diary/logs, 114 Distributive justice, 462
enforcement process, 53 Differential pay increases, 397 Diverse workforce, 162 164
Construct validity, 179 Differentiation, 77 disabled workers, 164
Consumer-driven health Digital dashboard, 83 minorities, 163 164
plans (CDHPs), 436 Direct financial payments, 352 older workers, 163
Content validity, 179 Disabled workers single parents, 162 163
Contingent workers, insurance disability insurance, 434 welfare-to-work, 164
benefits for, 438 in diverse workforce, 164 Diversity
Continuing case job applicants, interviews and, 224 benefits of, 56
benefits plan, 451 See also Americans with Disabilities defined, 55
career planning program, 343 Act (ADA) downsides of, 55
challenging economic times, 628 Discipline of employees. See Fair training, 262
discrimination, 64 discipline guidelines See also Diverse workforce;
fair treatment, 489 Discrimination, 43 51 Managing diversity
global human resources, managing, 600 allegations, 43 48 Domestic partner benefits, 445
grievances, 525 526 adverse impact, 43 46 Downsizing. See Layoffs and downsizing
high-performance work system, 96 bona fide occupational qualification Dress, 50
HR challenges, 27 28 (BFOQ), 46 47 Due diligence stage of M&A planning, 80
incentive plan, 416 business necessity, 47 48
interviewing, 232 defenses against, 43 E
job descriptions, 133 disparate impact, 43 44 Early retirement, 442
pay plan, 385 other considerations in, 48 Early retirement window, 442
performance appraisal, 315 defined, 55 Earnings-at-risk pay plan, 410 411
recruitment process, 170 in employment practices, 48 51 Economic strike, 513
safety program, 570 recruitment, 49 Economic systems in global HRM, 580
testing, 207 sample promotion, transfer, Economic trends in HRM, 16 17, 16f
training program, 277 278 and layoff practices, 50 51 Educational requirements in employee
Controlled experimentation, 272 selection standards, 49 50 selection, 49
Corporate campaign, 516 supervisor s considerations in, 51 Educational subsidies, 445
Corporate-level strategy, 77 what federal fair employment laws Effective Psychology for Managers
Corporate universities, 266 allow/do not allow, 48 49 (Feinberg), 308
Cost-containment specialists, 435 See also Affirmative action; Equal Elaws Advisors (DOL), 609, 610f
Cost leadership, 77 Employment Opportunity Elder care, 444
Crime prevention plan, 562 Commission (EEOC) Electronic Communications Privacy Act
Criterion validity, 179 Discrimination testers, 224 (ECPA), 475
Critical incident method, 295 296, Dismissal of employees, 476 485 Electronic eavesdropping, 475
296t, 305t angry or violent employees, 561 Electronic performance monitoring
Cross training, 262 dismissal, defined, 476 (EPM), 301
Cultural factors in global grounds for, 477 478 Electronic performance support
HRM, 579 580 changed requirements of job, 477 systems (EPSS), 257 258
Current training needs analysis, 248 gross misconduct, 477, 477f E-mail
insubordination, 477 478 in collective bargaining, 516
D lack of qualifications, 477 workplace monitoring and, 475
Data mining, 88 unsatisfactory performance, 477 E-mail monitoring acknowledgment
Davis-Bacon Act (1931), 354 handbook acknowledgment statements, 475, 476f
Decertification, 509 form, 478 479, 480f Employee appraisal. See Performance
Defamation, 195 196 mergers and acquisitions, 485 appraisal,
Deferred profit-sharing plan, 440 personal liability for supervisory Employee assistance program (EAP), 443
Defined benefit pension plan, 439 actions, 480 481 Employee career planning form, 331f
Defined contribution pension plan, 439 security measures, 478 Employee compensation
Demographic trends in HRM, 14, 14t severance policies, 478, 479f aligned reward strategy, 352, 353t
Department of Labor (DOL), 609 610 termination at will, 476 in China, 582
 SUBJECT INDEX 681

contemporary topics in, 376 (See also strategic, 247 Employee safety responsibilities
Competency-based pay) task, 248, 249t checklist, 549f
automating strategic compensation process of, 244 245 Employee selection
administration, 382 purpose of, 244 careful, importance of, 176
board oversight of executive pay, 381 technology, 246 in China, 582
broadbanding, 378 379, 379f Employee participation, unsafe acts discrimination in, 49 50
comparable worth, 380 381 reduced through, 548 549, 549f ethics and fair treatment promoted by, 467
managing compensation allocations, 380 Employee performance in training needs person and job/organization fit, 176
total rewards and tomorrow s analysis, 249 250 reducing unsafe acts through, 546
pay programs, 381 382 Employee privacy in small businesses, 611 612, 614
defined, 352 background checks, 196 standards, 49 50
equity and, 353 354 common-law protections against application forms, 50
geographic differences in cost invasion of privacy, 475 arrest records, 50
of living, 359 company security and, 563 educational requirements, 49
for managers (See Executive pay) employee data, 143 144, 144f garnishment, discharge due to, 50
pay policies, 358 359 ethics and, 474 height, weight, and physical
for professional employees, 375 376 testing of employees, 183 184 characteristics, 49 50
in small businesses, 614 Employee recruiting, 146 147 preference to relatives, 49
See also Incentives; Job evaluation applications for managers, 161t tests, 49
Employee compensation laws, 354 358 challenges in, 146 workplace violence and, 559
Age Discrimination in Employment in China, 582 work sampling technique for, 190
Act, 358 defined, 146 Employee stock ownership
Americans with Disabilities Act, 358 effective, need for, 146 plan (ESOP), 411, 440
Davis-Bacon Act, 354 importance of, 146 Employee testing
Employee Retirement Income Security organizing, 146 147 bias in, 182
Act, 358 recruiting yield pyramid, 145 146, 145f computerized multimedia candidate
Equal Pay Act, 357 supervisor s role in, 146 147 assessment tools, 192
exempt/nonexempt See also Application forms; Online employers use of, 184 185
employees, 355, 356, 357f recruitment of expatriates, 586 587, 587f
Fair Labor Standards Act, 354 355 Employee retention, 322 349 job previews used in, realistic, 193
Family and Medical Leave Act, 358 comprehensive approach to, 324 management assessment
federal wage garnishment law, 358 job withdrawal, 325 326 centers for, 191 192
independent contractor, 355, 356f reducing voluntary turnover, miniature job training and evaluation, 193
Social Security Act of 1935, 358 strategies for, 323 online, 185
Title VII of the 1964 Civil Rights talent management and, 325 privacy issues, 183 184
Act, 354 See also Employee turnover reliability in, 177 178
unions and labor relations laws, 358 Employee Retirement Income Security Act rights of test taker, 183 184
Walsh-Healey Public Contract Act, 354 (ERISA), 358, 411, 435, 441 summary of assessment methods, 194t
workers compensation laws, 358 Employee rights techniques for managers, 193
Employee data, privacy employment laws, 463 utility analysis in, 182
in, 143 144, 144f public policy, 462 463 validity in (See Validity)
Employee depression, 557 unalienable rights, 462 video-based simulation, 192
Employee discipline. See Fair discipline Employee safety See also Tests in employee selection
guidelines Deepwater Horizon disaster Employee training. See Training
Employee engagement, 19, 326 327 example, 532 533 Employee turnover, 322 325
actions that foster, 326 global safety concerns, 593 594 costs of, 322
defining, 327f kidnapping and ransom insurance, 594 involuntary, 325
importance of, 326 protective measures, 594 reasons for, 323f
monitoring, 326 terrorism, 593 594 voluntary, 322 323
Employee Free Choice Act, 521 Hispanic workers, safety training for, 547 Employment agencies, 154 155
Employee handbook, 244 245 importance of, 532 private, 154 155
Employee health. See Workplace management s role in safety, 532 533 public and nonprofit, 154
health hazards safety checklist, 542 544f Enterprise incentive management (EIM)
Employee leasing firms, 447 448 in small businesses, 614 systems, 400
Employee monitoring, 474 475 supervisor s role in, 533 Enterprise risk management. See
Employee orientation, 244 246 workers compensation costs, Occupational security and safety
checklist, 245f controlling, 550 551, 551t Equal Employment Opportunity
employee handbook, 244 245 See also Accidents; Occupational Safety Commission (EEOC), 32
goals of, 244 and Health Administration (OSHA); enforcement process, 51 54, 52f
needs analysis, 247 248 Occupational security and safety; management guidelines for addressing
current, 248 Unsafe acts; Unsafe conditions claims, 54f
682 SUBJECT INDEX

Equal Employment Opportunity performance appraisal, 468 bullying and victimization, 469 470
Commission (EEOC) (continued) reward and disciplinary systems, 468 employee input on, 470 471
mandatory arbitration, 54 law and, 461 4-point hot stove rule when applying
questions to ask, 53f manager s role in, 19, 461 discipline, 473
small businesses and, 610 morality involved in, 461 nonpunitive discipline, 471 473
voluntary mediation, 53 54 in strategic into HR policies and progressive penalties, 471, 472f
Equal employment opportunity (EEO) laws practices, 489 490 rules and regulations, 471
affirmative action programs, 59 61 Wall Street Journal workplace summary of, 474f
Age Discrimination in Employment ethics quiz, 460f supervisory actions influencing, 470
Act of, 33 See also Employee rights; Ethical choices, Fair Labor Standards
Americans with Disabilities Act, 36 37 factors influencing Act (FLSA), 354 355, 395
application forms and, 166 Ethnocentric staffing, 585 Family and Medical Leave Act
Civil Rights Act of 1991, 35 36 Ethnocentrism, 55 of (FMLA), 429 431
court decisions regarding, early, 34 35 European Union, HRM in, 581 compensation decisions influenced
discrimination, 43 51 Evacuation plans, 563 by, 358
diversity management, 55 Evidence-based HR, 90 91 guidelines, 430, 431
EEOC enforcement process, 51 53, 52f incentives, effective, 402 Request for Leave form, online, 430f
Equal Pay Act of 1963, 33 measuring recruiting effectiveness, 161 rights under, 429f
federal agency guidelines, 34 sick leave, tracking, 428 Family-friendly (or work-life)
Genetic Information test validity, 180 182 benefits, 443 445
Nondiscrimination Act, 39 Executive coaches, 266 bottom line, 445
international employees and, 39 Executive pay, 374 375 child care, subsidized, 444
Pregnancy Discrimination Act of, 34 board oversight of, 381 elder care, 444
sexual harassment, 39 43 compensating, 374 sick child benefits, 444
state and local EEO laws, 39 determining, 374 375 in small businesses, 618 619
summary of, 40t elements of, 375 Faragher v. City of Boca Raton, 42
Title VII of the Civil Rights Act, 32, 50 51 job evaluation, 375 Federal Violence Against Women
video case (UPS), 100 101 for managers abroad, 591 593 Act of 1994, 40
Vocational Rehabilitation Act of, 33 balance sheet approach, 591 592, 592t Federal wage garnishment law, 358
Equal Pay Act of 1963, 33, 357 expatriate pay example, 592 File charge in EEOC enforcement
Equity in employee global pay system, 592 593 process, 52 53, 52f
compensation, 353 354 incentives, 592 Financial incentives, 392
equity theory of motivation, 353 Executive prerequisites, 445 First impressions (snap judgments), 222
issues in, 353 354 Executive recruiters, 157 158 FirstStep Employment Law Advisor
Equity theory of motivation, 353 Exempt/nonexempt (DOL), 609, 609f
Ethical choices, factors employees, 355, 356, 357f Flexible benefits plan/cafeteria benefits
influencing, 463 466 Exit interview, 214, 482 483, 483f plan, 446 449
company pressures, 464 Expatriates (expats), 582, 583 584 cafeteria benefits plan, 446 447
ethics policies and codes, 465 compensating, 592 employee leasing firms, 447 448
organization s culture, 465 466 defined, 582 flexible work schedules, 448 449
outside, 464 466 early returns of, avoiding, 589 online survey of employees benefits
personal traits, 464 family pressures, 589 preferences, 446 447f
pressures from boss, 465 global buddy programs, 589 Flexible work schedules, 448 449
research findings, 463 464 legal issues, 587 compressed workweeks, 448
suggestions for managers based on, 466 vs. locals, 582, 583 584 effectiveness of, 448
Ethics Overseas Assignment Inventory, 588f flextime, 448
Berkshire Hathaway example, 460 selection testing in, 586 587, 587f job sharing, 448 449
defined, 461 traits of successful, 589 workplace flexibility, 448
employee monitoring, 474 475 Expectancy, 394 work sharing, 449
fair and just treatment, 461 462f, Expectancy chart, 181 Flextime, 448
489 490 (See also Fair discipline Focusers, 77
guidelines) F Forced distribution method, 294 295, 305t
in family businesses, non-family Facebookrecruiting, 12 Forecasting
employees and, 620 621 Fact finder, 513 personnel needs, 139 142
in global HRM, 581 Fair and just treatment, 461 462f, Markov analysis, 141 142
HR management methods 489 490 ratio analysis, 140
to promote, 467 468 See also Ethics scatter plot, 140 141, 141f
employee selection, 467 Fair day s work, 392 trend analysis, 140
ethics training, 468 Fair discipline guidelines, 469 474 qualifications (or skills) inventories
managing ethics compliance, 468 appeals procedure, 471, 473f used in, 142
 SUBJECT INDEX 683

supply of inside candidates, 142 144 Good faith bargaining, 510 Human resource information
computerized skills inventories, 143 Good faith effort strategy, 59 systems (HRIS)
personnel replacement Grade definition, 362 global, 595
charts and, 142, 143f Graded vesting, 441 improving productivity through
position replacement cards, 142 Grades, 362 succession and talent planning
privacy in employee data, 143 144, 144f Graphic rating scale, 290 293, 303, 303t systems, 148
supply of outside candidates, 144 advantages/disadvantages of, 305t learning management systems, 260
Foreign service premiums, 592 form, sample of, 291f productivity improved through
4/5ths rule, 44 with unclear standards, 303, 303t computerized business planning
401(k) plan, 439 440, 440f what to rate, 292 293f software, 76
Functional strategies, 78 Graphology, 201, 202f tracking applicant metrics, 85 86
Grievance procedure, 517 519 in small businesses, 624 625
G grievance form, online, 518f Human resource management (HRM)
Gainsharing plan, 410 grievance procedure, 517, 518 519 chapter contents overview, 23 24, 24f
Garnishment, discharge due to, 50 guidelines for handling, 519 defined, 4
Gender as BFOQ, 47 Griggs v. Duke Power Company, 34 35 evidence-based, 20
Gender issues in career Gross misconduct as grounds for importance of, 5 6
management, 332 333 dismissal, 477, 477f introduction to, 2 28
Gender-role stereotypes, 55 Gross national product (GNP), 16, 16f line and staff aspects of, 6, 9 10
Generation X, 15 Group life insurance, 438 organizational development
Generation Y, 14 15 applications in, 271
Genetic Information Nondiscrimination H organizing, 8 9, 8f, 9f
Act (GINA), 39, 435 Hair, 50 51 specialties, 8
Geocentric staffing, 585 586 Halo effect, 303 strategic planning in (See Strategic HRM)
Global buddy programs, 589 Handbook acknowledgment talent management approach to, 19
Global HRM, 577 601 form, 478 479, 480f themes and features of book, 22
appraising managers abroad, 590 591 Hardship allowances, 592 trends in (See Trends in HRM)
best practices of, 595 597 Health hazards. See Workplace health video case (Patagonia), 100
acceptability, 596 597 hazards Human resource manager. See Manager
developing, 596 Health Insurance Portability and Human resource metric, 92
global HR networks, 596 Accountability Act (HIPAA), 435 Hygiene factors, 394
implementing, 597 Health maintenance organization
summary of, 596f (HMO), 434 I
challenges of, 578 Health promotion and disease prevention Identity, 409
compensating managers abroad, 591 593 programs, 437 Illegal bargaining items, 511
balance sheet approach, 591 592, 592t Health savings accounts (HSA), 436 Immigration law, 203 204
expatriate pay example, 592 Height in employee selection, 49 50 Impasse, 512 516
global pay system, 592 593 Help wanted ads, 49 arbitration, 513
incentives, 592 High-performance HR policies boycott, 516
competition trends and, 11 12 and practices, 92 93 corporate campaign, 516
EEO laws and, 39 High-performance work system, 91 92, 92t injunction, 516
HRIS in, 595 High-tech jobs, 13 inside games, 516
labor relations broad, 593 Hispanic workers, safety training for, 547 lockout, 516
repatriation, 594 595 Hofstede study, 580 mediation, 512 513, 514f
safety concerns, 593 594 Holiday benefits, 427 third party assistance, 513
kidnapping and ransom insurance, 594 Home-country nationals, 582 See also Strikes
protective measures, 594 Honesty testing, 200 201 Incentives
terrorism, 593 594 Horizontal promotion decisions, 338 financial incentives, 392
staffing (See Staffing global HR audits, 89 90 for individual employees, 396 400
organization) HR as a Profit Center, 14, 56, 82, 88, 108, job design, 400
training and maintaining employees 162, 183, 220, 274, 286, 322, 359, merit pay, 396 398
abroad, 590 412, 428, 479, 511, 551, 558, 583, 620 online and IT-supported awards, 400
workforce and demographic trends, 15 16 HR certification, 22 piecework plan, 396
See also Intercountry differences HR organization chart, 9f for professional employees, 398
in global HRM HR performance measures, 19 20 recognition programs, 398 399, 400f
Goals See also Metrics legal issues in, 395
hierarchy off, 72, 73f HR Scorecard, 82 83 for managers and executives, 403 407
mission translated into, 75 Human capital, 13 abroad, 592
in planning process, 72 Human lie detectors, 201 golden parachutes, 407
Golden parachutes, 407 Human process applications, 271 large loans, 407
684 SUBJECT INDEX

Incentives (continued) disability insurance, 433 434 technostructural, 271

long-term incentives, strategic, 403 404, employers offering health benefits-change Interviews, 214 241
406 407 (See also Stock options) over time, 433t administering, 218 221
Sarbanes-Oxley, 404 health, 433 434 appraisal, 214, 306 309
short-term incentives (See Annual HMOs, 434 behavioral, 216
bonuses) hospitalization, 433 434 behavior of interviewer, 224 225
nonfinancial rewards, 398 399 law, 434 435 candidate-order (or contrast)
incentives managers can use, 399, 400f Americans with Disabilities Act, 435 error, 222 223
recognition programs, 398 399 COBRA, 435, 436f classifying, 214
organization-wide incentive Employee Retirement Income computerized, 219 220
plan, 409 411 Security Act, 435 content of, 215 218
plans, designing effective, 411 413 Genetic Information designing, 225 226
five building blocks of, 412 413 Nondiscrimination Act, 435 disability of applicant, 224
HR as a Profit Center example, 412 Health Insurance Portability discrimination testers, 224
in practice, Nucor example, 413 and Accountability Act, 435 EEOC aspects of, 215
for sales people, 400 402 Newborn Mother s Protection Act, 435 effective, conducting, 226 229
combination plan, 401 402 Patient Protection and Affordable errors made in, 221
commission plan, 401 Care Act, 434 435 evaluation form, 237f
evidence of effective incentives, 402 Pregnancy Discrimination Act, 435 exit, 214, 482 483, 483f
maximizing sales force results, 402 life insurance, 438 first impressions (snap judgments), 222
salary plan, 401 long-term care, 437 438 guidelines for, 111, 112
strategy and performance mental health benefits, 434 impression management, 223
linked to, 392 393 for part-time and contingent workers, 438 job analysis, 110 113
for teams (See Team (or group) PPOs, 434 job-related, 217
incentive plans) workers compensation, 432 433 job requirements, clarifying, 222
terminology, 395 Integrated case scenarios, 264 mass, 218
See also Benefits; Motivation Integrated strategic management, 271 nonverbal behavior, 223
Inclusiveness, encouraging, 57, 58f Integration stage of M&A planning, 80 one-on-one, 218
Indebtedness, 12 Intelligence (IQ) tests, 186 187 out-of-control, 231 232
Independent contractor, 355, 356f Intelligent tutoring systems, 257 panel, 218
Indexed stock options, 406 407 Intentional discrimination, 43 44 personal characteristics, effect of, 223 224
Indirect financial payments, 352 Interactive learning, 259 phone, 218 219
Industrial hygiene, 552 Interactive multimedia training, 258 pros and cons, 111
Infectious diseases, 553 Intercountry differences in global HRM questions in, 111
Informal learning, 255 cultural factors, 579 580 behavioral, 216
In-house development center, 266 economic systems, 580 profile-oriented, 229
Injunction, 516 ethics and codes of conduct, 581 puzzle, 218
Inside games, 516 Hofstede study, 580 situational, 215
Inspections and citations HR abroad examples supplementary, 228f
OSHA, 535, 537 China, 581 582 sample applicant interview
safety and health, 549 550 European Union, 581 form, 216 217f
Instrumentality, 394 labor relations factors, 580 serial, 218
Insubordination legal issues, 580 situational, 215
defined, 477 political factors, 580 Skype, 219
grievance procedures and, 517 Interest arbitration, 513 in small businesses, 614 616
as grounds for dismissal, 477 478 Interest inventories, 189 190 conducting, 615
Insurance benefits, 432 438 International Brotherhood of Teamsters, 498 preparing for, 614 615
cost control, 435 437 International employees. See Expatriates specific factors to probe, 615
benefits purchasing alliances, 437 (expats); Global HRM stress, 217 218
claim audits, 437 International staffing policies, 585 585 structured, 111
communication ethnocentric practices, 585 structured situational, 221, 225 226
and empowerment, 436 437 geocentric practices, 585 586 termination, 481 483
consumer-driven health plans, 436 offshoring, 585 trait assessments, 221
cost-containment specialists, 435 polycentric practices, 585 types of, 214
health savings accounts, 436 Internet-based job analysis, 116 118 unstructured, 214 215
limited plans, 437 Internet-based training, 259 260 video/web-assisted, 219
medical tourism, 437 Internet recruiting. See Online recruitment Intrinsic motivation, 394
outsourcing, 437 Interventions in organizational Investigation/fact-finding conference in
wellness programs, 437 development, 270 271, 270t EEOC enforcement process, 53
coverage, 433 434 strategic, 271 Involvement system, 410
 SUBJECT INDEX 685

J Job redesign, 109 reinforcing, 252

Job aid, 258 Job-related interview, 217 SHRM learning system, 266
Job analysis, 105 Job requirements simulated, 258 259
basics of, 105 106 changes in, as grounds for dismissal, 477 transfer of to job, ensuring, 253
competency-based, 128 131, 129f clarifying in interviews, 222 Learning management systems (LMS), 260
conducting, 107 110 Job rotation, 109, 263 Learning portals, 260
business process reengineering Job sharing, 448 449 Lectures, 256
in, 108 109 Job specifications, 110, 126 128 Legal issues
job descriptions and specifications based on judgment, 126 127 expatriates, 587
in, 110 based on statistical analysis, 127 in global HRM, 580
job redesign in, 109 task statements used in, 127 28 incentives, 395
organization chart in, 107 for trained vs. untrained personnel, 126 intercountry differences
process chart in, 107, 108f Job withdrawal, 325 326 in global HRM, 580
workflow analysis in, 107 108 Just treatment, 461 462f, 489 490 promotion decisions, 339
Daimler Alabama example, 107 See also Ethics; Fair discipline guidelines in promotion decisions, 339
defined, 105 tests in employee selection, 49
guidelines, 110 K workplace violence, 561
information, methods Kidnapping and ransom (K&R) See also Law
for collecting, 110 118 insurance, 594 Lewin s change process, 269
diary/logs, 114 Knowledge work, 13 Life insurance, 438
Internet-based job analysis, 116 118 Lifelong learning, 261
interview, 110 113 L budgets, 330
observation, 114 Labor relations Limited plans, 437
quantitative job analysis abroad, 593 Lincoln incentive system, 410
techniques, 114 116 consultants, 503 Line authority, 6
questionnaires, 113 114 factors in global HRM, 580 Line manager, 6, 7, 9 10
information, uses of, 106, 106f Landrum-Griffin Act (1959), 502 Literacy training, 261
job descriptions, writing, 118 125 Law Loans as incentive, 407
job specifications, writing, 126 128 application forms, EEO and, 166 Lockout, 516
Job classification (or grading) ethics, 461 Long-term care, 437 438
method, 362 363, 363f federal wage garnishment, 358
Job descriptions, 110, 118 125 immigration, 203 204 M
ADA compliant, 122 insurance benefits, 434 435 Management assessment center, 191 192
Internet used for, 122 125 plant closing, 483 Management by objectives
job identification, 118, 119 120 unions and labor relations (MBO), 300, 305t
job summary, 119, 120 laws, 358, 498 502 Management development, defined, 263
posting accounts payable accurately, 122 See also Legal issues Management development programs,
relationships statement, 121 Layoffs and downsizing, 483 485 implementing, 263 268
responsibilities and duties, 121 122 adjusting to, 485 leadership development at GE, 266 267
sample forms of, 119f, 120f, 121f alternatives to, 485 off-the-job training, 264 266
standards of performance and working bumping/layoff procedures, 484 485 on-the-job training, 263 264
conditions, 122 defined, 483 strategy and development, 263
Job enlargement, 109 effects of, 484 Management games, 264
Job enrichment, 109 plant closing law, 483 Management malpractice, 51
Job evaluation, 359 364 preparing for, 484 Management process, 4
compensable factors, 360 process, 483 484 Manager
defined, 360 Learning competencies of, 21, 21f
vs. market-based approaches, 359 360 action, 264 defined, 4
methods informal, 255 duties of, 7 9
computerized, 363 364 intelligent tutoring systems, 257 employee engagement, 19
job classification, 362 363, 363f interactive, 259 ethics and, 19
point method, 363 Internet-based, 260 HR certification, 22
ranking, 262t, 361 362 lifelong, 261 HR organization chart, 9f
preparing for, 360 361 meaningful, 252 HR performance and results
Job hazard analysis, 543, 544 545 mobile, 260 261 measured by, 19 20
Job Instruction Sheet, 616, 617t motivational environment for, line manager, 6, 7, 9 10
Job instruction training (JIT), 255 256 creating, 251 252 new trends in, 17 19
Job instruction training sheet, 255 objectives, 250 251 specialties, 8
Job offshoring, 12 portals, 260 staff manager, 6, 9 10
Job posting, 147 programmed, 256 257 in strategic planning
686 SUBJECT INDEX

Manager (continued) expectancy theory, Vroom s, 394 inspection priorities, 535

departmental, 78 80 hierarchy of needs, Maslow s, 393 inspection procedures, 535
top, 78 positive reinforcement programs, 548 opening conference, 537
value added by, 20 self-determination theory, Deci s, 394 penalties, 537
Managing diversity, 56 61 two-factor theory, Herzberg s, 393 394 walk-around inspection, 537
example, 57 unsafe acts reduced through, 547 548 record keeping rules, 533 535, 534f
inclusiveness, encouraging, 57, 58f See also Incentives accidents reported under, 534 535, 534f
multicultural consciousness, Motivator factors, 394 form used to record occupational
developing, 58 59 Motor and physical abilities tests, 187 injuries and illness, 536f
top-down programs, 56 57 Moving stage of organizational general standard clause, 533 534
See also Affirmative action; Affirmative change, 269 270 respiratory standard requirements, 547
action program Multicultural consciousness, responsibilities and rights
Managing the New Workforce, 122, 224, developing, 58 59 of employers/employees, 538
262, 355, 545, 547 safety poster, 538f
Mandatory bargaining items, 511 N Sharp program, 614
Market competitive pay system, 367 Narrative forms, 296, 297f small businesses and, 610 611, 610f, 614
Markov analysis, 141 142 National Association of Manufacturers substance-specific health standards, 552t
Mass interview, 218 (NAM), 613 asbestos exposure, 552
McDonnell-Douglas test, 46 National emergency strikes, 502 industrial hygiene, 552
Mechanical security, 563 National Institute for Occupational Safety Occupational Safety and Health Review
Mediation and Health (NIOSH), 547 Commission (OSHRC), 537
in collective bargaining, 512 513, 514f National Labor Relations (or Wagner) Occupational security and safety, 561 563
in EEOC enforcement process, 53 54 Act, 499 500 company security and employee
Medical tourism, 437 National Labor Relations Board privacy, 563
Mental health benefits, 434 (NLRB), 499 500 crime prevention plan, 562
Mental impairments, ADA and, 36 37 ballot, sample of, 507f evacuation plans, 563
Mentoring, defined, 333 election, 507 508 security program, setting up, 562 563
Mentoring skills, 334 336 Form 501: Filing an Unfair Labor analysis of the facility s current level
effective mentoring, 334, 335 336 Practice, 500f of risk, 562
mentoring caveats, 334 Form 852: Notice of Representation mechanical security, 563
protégé s responsibilities, 336 Hearing, 506f natural security, 562 563
Merger and acquisition (M&A), 79 80 National origin as BFOQ, 47 organizational security, 563
dismissal of employees, 485 Natural security, 562 563 See also Workplace violence
due diligence stage of planning, 80 Negligent hiring, 176 Office of Federal Contract Compliance
integration stage of planning, 80 Negligent training, 246 Programs (OFCCP), 33
Meritor Savings Bank, FSB v. Vinson, 42 Newborn Mother s Protection Offshoring, 157, 585
Merit pay (merit raise), 396 398 Act of 1996, 435 Off-the-job training, 264 266
differential pay increases, 397 Newsletters for small business behavior modeling, 265
options, 397 398, 398t communications, 620 case study method, 264
Metrics, 84 87 9-box matrix, 337 corporate universities, 266
applicant metrics, tracking, 85 86 Nonpunitive discipline, 471 473 executive coaches, 266
HR performance and results Nontraditional workers, 15 management games, 264
measured by, 20 Nonverbal behavior in interviews, 223 outside seminars, 264 265
human resource, 92 Norris-LaGuardia Act (1932), 499 role playing, 265
strategy and strategy-based, 87 Notice of Election, 505 SHRM learning system, 266
types of, 85, 85f Notice to sue in EEOC enforcement Onboarding. See Employee orientation
Military personnel, 160 process, 53 On-demand recruiting services
Miniature job training and evaluation, 193 (ODRS), 158
Minorities, online recruitment of, 59 O One-on-one interview, 218
Mission statement, 75 Objective tests, 192 O*NET, 123 125, 124 125f
Mission translated into goals, 75 Observation, 114 Online benefits management systems, 442
Mixed motive cases, 36 Occupational illness, 534 Online career management programs, 331
Mixed standard scales, 299 Occupational Safety and Health Online communications in small
Mobile learning, 260 261 Act of 1970, 533 businesses, 620
Mobility premiums, 592 Occupational Safety and Health Online recruitment, 149 152
Money damages, 36 Administration (OSHA), 533 applicant tracking system (ATS), 151
Monitoring of employees, 474 475 employee resistance, dealing with, 539 dot-jobs domain, 150
Morality in ethics, 461 inspections and citations, 535, 537 effectiveness of, improving, 152, 152f
Motivation, 393 395 free on-site inspections, 537 job boards, 149f
behavior modification principle, guidelines for managers, 537 pros and cons, 151
Skinner s, 394 395 initial contact, 537 texting, 150
 SUBJECT INDEX 687

virtual job fairs, 150 151 evaluate jobs, 367 process, 285
Online survey of employees benefits for expatriates, 592 reasons for, 285
preferences, 446 447f grades for pay, developing, 371, 373t in small businesses, 613 614
On-site health care services, 437 market competitive pay system, 367 talent management practices
On-the-job training (OJT), 253 254 out-of-line rates, correcting, 373 374 and, 311 312
action learning, 264 pay (or rate) ranges, techniques, 290 302
coaching/understudy approach, 264 establishing, 371 373, 372f, 373t alternation ranking method, 294
management development remaining jobs addressed, 373 behaviorally anchored rating
programs, 263 264 review job descriptions and job scale, 296 299
process, 254 specifications, 366 computerized and Web-based,
types of, 254 wage curves, 367 373 300 301, 301 302f
Operational safety reviews, 545 See also Wage curves critical incident method, 295 296, 296t
Organization, 4 Pay (or rate) ranges, 371 373, 372f, 373t electronic performance monitoring, 301
Organizational change, leading, 269 270 Pension Benefits Guarantee forced distribution method, 294 295
moving stage, 269 270 Corporation (PBGC), 441 graphic rating scale, 290 293, 303, 303t
refreezing stage, 270 Pension plans, 438 442 management by objectives, 300
unfreezing stage, 269 cash balance plans, 440 mixed standard scales, 299
Organizational change programs, 268 271 deferred profit-sharing plan, 440 narrative forms, 296, 297f
leading organizational change, 269 270 defined benefit pension plan, 439 paired comparison method, 294, 295f
moving stage, 269 270 defined contribution pension plan, 439 in practice, 291f, 301, 302
refreezing stage, 270 early retirement, 442 tools in, advantages/
unfreezing stage, 269 Employee Retirement Income Security disadvantages, 304, 305t
Lewin s change process, 269 Act of, 441 Performance appraisers, 288 290
other changes, 268 269 employee stock ownership plan, 440 peers, 288 289
strategic changes, 268 401(k) plan, 439 440, 440f rating committees, 289
Organizational culture, 465 466 membership requirements, 441 self-ratings, 289
Organizational development, 270 271 PBGC, 441 subordinates, 289
human process applications, 271 portability, 439 degree feedback, 289 290, 290f
human resource management savings and thrift plan, 440 Performance-contingent restricted
applications, 271 vesting, 441 442 stock, 406
interventions, 270 271, 270t Performance achievement plan, 407 Performance evaluation in strategic
strategic interventions, 271 Performance analysis, 249 250 planning, 76
technostructural interventions, 271 Performance appraisal Performance management, 309 310
Organizational justice, 461, 560 appraisers (See Performance appraisers) defined, 286 287
Organizational security, 563 best practices in, checklist for, 305f information technology used to
Organization chart, 107 career-oriented, in career support, 310, 310f
Organization-wide incentive plans, 407 411 management, 331 332, 332f vs. performance appraisal, 309 310
earnings-at-risk pay plan, 410 411 in China, 582 process report, 310f
employee stock ownership plan, 411 defined, 284 285 TRW s performance management
gainsharing plan, 410 diary used in, 304 system, 287
profit-sharing plan, 409 effective, guidelines for, 287 288 Personal appearance regulations
Scanlon plan, 409 410 ethics and fair treatment of Title VII, 50 51
Out-of-line rates, correcting, 373 374 promoted by, 468 Personality tests, 188 190
Outplacement counseling, 481 482 fairness in, ensuring, 305 big five personality dimensions and, 189
Outsourcing feedback in, importance of, 286 caveats, 189
alternative staffing, 157 interviews in (See Appraisal interview) interest inventories, 189 190
benefits management, 437 job descriptions in, role of, 288 performance predicted by, 189
Overseas Assignment Inventory (OAI), 588f legally defensible, 306, 306f projective, 188
Overtime pay, 395 of managers abroad, 590 591 sample online, 188f
vs. performance management, 309 310 self-reported, 188
P plan for, agreement on, 304 Personal protective equipment (PPE), 545
Paired comparison method, 294, 295f problems, 302 306 Person and job/organization fit, 176
Panel interview, 218 bias, 304 Personnel replacement charts, 142, 143f
Part-time workers, insurance benefits central tendency, 303 Personnel services, 443
for, 438 graphic rating scale with unclear Phantom stock plans, 407
Pay-for-performance, 395 standards, 303, 303t Philosophy of cooperation, 409
Pay (or wage) grade, 371, 373t halo effect, 303 Phone interview, 218 219
Pay plans, creating, 364 374 learning and understanding, 304 Physical capabilities tests, 546
benchmarks jobs, choosing, 364 recency effects, 304 Physical characteristics in employee
compensable factors in, 364 366 strictness/leniency, 303 304 selection, 49 50
688 SUBJECT INDEX

Physical exams, 201 202 retirement, 340 pension plans, 438 442
Physiological needs, 393 transfers, 339 in small businesses, 619 620
Picketing, 514 vertical vs. horizontal vs. other, 338 Social Security, 438
Piecework plans, 396 Protected class, 34 Retirement planning, 340
pros and cons, 396 Psychological contract in career Reverse discrimination, 60 61
standard hour plans, 396 management, 328 Rewards
straight piecework, 396 Public policy, 462 463 aligned reward strategy, 352, 353t
Plant rules, 517 Puzzle questions, 218 ethics in, 468
Point method, 363 nonfinancial, 398 399
Policy issues, 424 Q incentives managers can use, 399, 400f
Political factors in global HRM, 580 Qualifications, lack of as grounds recognition programs, 398 399
Polycentric staffing, 585 for dismissal, 477 in small businesses, 617 620
Polygraphs, 199 200 Qualifications (or skills) inventories, 142 total rewards and tomorrow s
Population comparisons, 45 46 Qualified individuals, ADA and, 37 pay programs, 381 382
Portability, 439 Quantitative job analysis Rights arbitration, 513
Position analysis questionnaire techniques, 114 116 Rights of employees. See Employee rights
(PAQ), 114 115, 115f Questionnaires Right to work, 498
Position replacement card, 142 for developing job descriptions, 113 114 Risk level, analysis of the facility s, 562
Positive reinforcement programs, 548 O*NET, 123 125 Role playing, 265
Practices Behaviors Strategy Pyramid, 81f position analysis
Predictive Index, 611 questionnaire, 114 115, 115f S
Preemployment information services, 199 Questions in interviews Safety awareness program, 549 550
Preferential shop, 498 behavioral, 216 Safety of employees. See Employee safety
Preferred provider organizations profile-oriented, 229 Salary plan, 401
(PPOs), 434 puzzle questions, 218 Salary surveys, 368 370
Pregnancy Discrimination Act, 34, 435 situational questions in, 215 commercial, professional,
Premium priced stock options, 407 supplementary, 228f and government, 369
Prepotency process principle, 393 Quid pro quo harassment, 41 defined, 368
Privacy issues Internet-based options, 369 370, 369t
in background checks, 196 R Sarbanes-Oxley, 404
in employee data, 143 144, 144f Ranking method, 262t, 361 362 Savings and thrift plan, 440
employee privacy violations, types of, 474 Ratio analysis, 140 Scanlon plan, 409 410
Procedural justice, 462 Reality shock, 330 Scatter plot, 140 141, 141f
Process chart, 107, 108f Reasonable accommodation, 37, 37f Scientific management movement, 392
Productivity, 392 Recency effects, 304 Security, need for, 393
Professional employees, Record keeping rules. See under Security program, setting up, 562 563
compensating, 375 376 Occupational Safety and Health analysis of the facility s current level
Professional employer organizations Administration (OSHA) of risk, 562
(PEOs), 447 448, 621 622 Recruiting yield pyramid, 145 146, 145f mechanical security, 563
benefits of, 447 448 Recruitment natural security, 562 563
caveats, 622 discriminatory practices in, 49 organizational security, 563
function of, 447, 621 622 help wanted ads, 49 Selection of employees. See Employee
guidelines for finding and working misleading information, 49 selection
with, 622f word-of-mouth, 49 Selection testing of expatriates
lax due diligence, 622 See also Employee selection (expats), 586 587, 587f
reasons for using, 621 622 Reference checking form, 197f Self-actualization, 393
Profile-oriented questions, 229 Referrals, 159 160 Self-esteem, 393
Profiles in talent management, 248 249 Refreezing stage of organizational Self-reported personality tests, 188
Profit-sharing plan, 395, 409 change, 270 Seminars, outside, 264 265
Program development, 253 Rehiring, 147 Sequential interviews, 218
Programmed learning, 256 257 Reliability, test, 177 178 Serial interview, 218
Projective personality tests, 188 Religion as BFOQ, 47 Serve notice in EEOC enforcement
Promotion decisions, 337 340 Repatriation, 594 595 process, 53
based on competence, 337 338 Required and discretionary, 425t Service Employees International
vs. based on seniority, 337 Restricted policy, 45 Union (SEIU), 498
defining and measuring, 337 338 Restricted stock plans, 407 Service jobs, 13
bias in, 338 339 Retaliation, 339 Severance pay, 431 432
formal vs. informal process of, 338 Retention. See Employee retention Sexual harassment, 39 43
legal issues in, 339 Retirees, 15 defined, 40 41
practical considerations in, 338 Retirement benefits, 438 employee options, 43
 SUBJECT INDEX 689

hostile environment, 41 42 software packages, 624 Strategic fit, 78

legal requirements, 42 43 training, 612 613, 616 617 Strategic HRM, 72 98
proving, 41 flexibility in, 616 617 Albertsons example, 82
Supreme Court decisions, 42 four-step process of, 616 benchmarking in, 86 87, 86f
Sham unions, 521 522 informal training methods, 617 and company s strategic plan, link
Sharing of benefits formula, 410 Job Instruction Sheet, 616, 617t between, 81f
SHRM learning system, 266, 612 NAM, 613 data mining in, 88
Sick child benefits, 444 private vendors, 612 613 defined, 80 81
Sick leave, 427 428 SBA, 613, 613f evidence-based HR in, 90 91
Simulated learning, 258 259 Summary Task Analysis Record goal-setting in, 72, 73f
advantages, 259 Form, 616, 617t high-performance HR policies
other examples, 259 transaction processing, 624 and practices in, 92 93
U.S. Army example, 258 259 work-sampling tests, 616 high-performance work systems
Situational interview, 215 216 Smoking in the workplace, 558 in, 91 92, 92t
Situational judgment tests, 191 Social needs, 393 HR audits in, 89 90
Situational questions, 215 Social networks, background checks HRIS used to improve productivity, 76
Situational tests, 191, 192 and, 198 198 human resource strategies in, 82
SkillSoft, 613 Social recognition, 399, 400f managers role in, 78 80
Small Business Administration Social Security, 438 merger and acquisition planning
(SBA), 613, 613f Social Security Act of 1935, 358 in, 79 80
Small businesses, 606 629 Software metrics in, 84 87
benefits and rewards, 617 620 computerized business planning, 76 Practices Behaviors Strategy Pyramid
challenging economic times, 619 small business, 624 in, 81f
flexibility in, 618 workforce/talent analytics, 87 88 Shanghai Portman Hotel example, 72
recognition, 619 Spurlock v. United Airlines, 48 strategic planning, 73 76, 73f
retirement benefits, 619 620 Staff authority, 6 tools, 82 83, 83f
work-life benefits, 618 619 Staffing global organization, 582 digital dashboards, 83
communications in, improved, 620 home-country nationals, 582 HR Scorecard, 82 83
differences in, 606 607 localization policy, 584 strategy map, 82, 83f
employee compensation, 614 locals, 583 types of strategies in, 76 78
employee safety and health, 614 short-term or commuter solutions, 584 video case (Joie de Vivre Hospitality), 101
employment laws, complying staffing policies (See International workforce/talent analytics, 87 88
with, 608 611 staffing policies) Strategic interventions in organizational
DOL, 609 610 third-country nationals, 583 development, 271
EEOC, 610, 612 transnational virtual teams, 584 Strategic management, 73
OSHA, 610 611, 610f, 614 See also Expatriates (expats) Strategic plan, defined, 73
employment planning and recruiting, 611 Staff leasing firms, 447 448 Strategic planning, 73 76, 73f
employment selection, 611 612, 614 Staff manager, 6, 9 10 audits, 74 75, 74f
entrepreneur in, 607 Standard deviation rule, 44 45 define current business, 74
fairness and family businesses, Standard hour plan, 396 formulate strategies, 76
non-family employees and, 620 621 Standard Occupational Classification goals in, 72, 75
HR and intranets, 625 (SOC), 121 122, 123 implement strategies, 76
HR forms, 623 624, 623t State and local EEO laws, 39 managers role in
HRIS in, 624 625 Stereotyping, 55 departmental, 78 80
HR materials, 624 Stock appreciation rights (SARs), 407 top, 78
HRM in, importance of, 607 608 Stock options mission statement, 75
HR system components, 623 624 broad-based, 411 performance evaluation, 76
HR system integration, 625 indexed options, 406 407 and strategic human resource
HR tasks, automating, 624 performance achievement plan, 407 management, link between, 81f
importance of, 606 performance-contingent restricted SWOT chart in, 75, 75f
interviewing process, 614 616 stock, 406 vision statement in, 75
conducting, 615 phantom stock plans, 407 Strategic planning managers, 78 80
matching candidate to job, 616 premium priced options, 407 Strategic training needs
preparing for, 614 615 problems with, 406 analysis, 247
specific factors to probe, 615 restricted stock plans, 407 Strategy, defined, 73
online self- processing, 624 stock appreciation rights (SARs), 407 Strategy, translating into HR policies
performance appraisals, 613 614 Straight piecework, 396 and practices
professional employer organizations Strategic Context, The, 17, 72, 107, 139, benefits plan, 452
used in, 621 622 176, 214, 246, 287, 324, 352, 392, career management system, 343 344
reporting capability, 625 425, 460, 496, 532, 578, 608 challenging economic times, 628 629
690 SUBJECT INDEX

Strategy, translating into HR policies T objective tests, 192

and practices (continued) Taft-Hartley Act (1947), 501 502 physical capabilities tests, 546
compensation plan, 385 386 Talent management, 19 reliability of, 177 178
ethics, justice, and fair treatment career and succession planning situational judgment tests, 191
process, 461 462f, 489 490 integrated with, 336 337 situational tests, 191, 192
global human resources, defined, 104 105 validity of, 179, 180 182
managing, 600 601 employee retention and, 325 work-sampling tests, in small
high-performance work system, 96 97, 98t mission-critical employees, 267 268 businesses, 616
incentive plan, 417 performance appraisals and, 288, 311 312 See also Employee testing;
interviewing, 232 233 actively managing employees, 311, 312f Personality tests
job descriptions, 134 based on required competencies, 288 Test takers rights, 183 184
labor relations practices, 526 segmenting and actively managing Test validity, 179, 180 182
performance management system, 316 employees, 311 312 Third-country nationals, 583
recruitment process, 170 predictive workforce monitoring, 144 145 Third party assistance in collective
safety and health program, 570 571 process, 104 bargaining, 513
testing, 207 208 Talent management profiles Time series design, 272
training program, 278 competency-based, 128 131, 129f Title VII of the 1964 Civil Rights Act,
Strategy-based metrics, 87 competency models and, 248 249 32, 354
Strategy map, 82, 83f employee interviews, 229 EEOC, 32
Strategy types, 76 78 Task analysis, 248, 249t personal appearance regulations, 50 51
competitive, 77 Task statements, 127 who it covers, 32
corporate-level, 77 using, 127 128 Tokenism, 55
at each company level, 76f Tattoos, 51 Top-down programs, 56 57
functional, 78 Team (or group) incentive plans, 407 411 Top managers, 78
human resources as competitive designing, 407 408 Traditional employer defenses, 37 38
advantage, 77 78 engineered standards in, 408 Training
strategic fit and, 78 HR inequities that undercut, 408 409 defined, 246
Stress, 555 556 pros and cons of, 408 effort, evaluating, 272
Stress interview, 217 218 See also Organization-wide incentive plans controlled experimentation, 272
Strictness/leniency problems, 303 304 Team training, 262 designing the study, 272
Strikes, 513 515 Technical training, 262 form, 273 274f
defined, 515 Technological trends in HRM, 12 graph used in, 272f
employer response, 514 Technostructural interventions, 271 impact of training, judging, 274
employers replacing strikers, 514 515 Telecommuters, 160 training effects, measuring, 273
guidelines for employers, 515 Telephone monitoring acknowledgment of employees abroad, 590
likelihood of and severity of, 515, 516 statements, 475 process, 246 253 (See also Learning)
picketing, 514 Temp agencies and alternative ADDIE five-step training process, 247
types of, 515 staffing, 155 156 defined, 246
Structured (or directive) interview, 215 concerns of temporary employees, 156 ensuring transfer of learning to job, 253
Structured sequential interview, 218 legal guidelines, 156 making skills transfer obvious
Structured situational interview, 225 226 pros and cons, 156 and easy, 252
Substance abuse. See Alcoholism Termination at will, 476 other design issues, 253
and substance abuse Termination interview, 481 483 performance and, 247
Substance-specific health standards defined, 481 program design, 250 253
(OSHA), 552t exit interview, 482 483, 483f program development, 253
Succession planning, 148, 263 guidelines for, 481 skills transfer, obvious and easy, 252
Summary Task Analysis Record outplacement counseling, 481 482 strategic training, 246 247
Form, 616, 617t Terrorism, 593 594 vestibule training, 257
Supplemental pay benefits, 425 432 Testing. See Employee testing program, implementing, 253 262
Family and Medical Leave Act, 429 431 Test security, 183 184 (See also Learning)
severance pay, 431 432 Tests in employee selection apprenticeship training, 255, 255f
sick leave, 427 428 achievement tests, 190 audiovisual-based, 257
supplemental unemployment aptitude tests, 187 computer-based training, 258
benefits, 432 of cognitive abilities, 186 187 diversity training, 262
unemployment insurance, 425 426, 426t computerized tests, 185 electronic performance support
vacations and holidays, 427 evaluation of, 194t systems, 257 258
Supplemental unemployment benefits, 432 intelligence (IQ) tests, 186 187 Internet-based training, 259 260
Supplementary questions, 228f legal issues in, 49 job instruction training, 255 256
SWOT chart, 75, 75f McDonnell-Douglas, 46 lectures, 256
Sympathy strike, 513 motor and physical abilities tests, 187 literacy training, 261
 SUBJECT INDEX 691

on-the-job training, 253 254 Change to Win Coalition, 498 reducing, 546 550
team training, 262 election, 505 508 by conducting safety and health audits
technical training, 262 decertification, 509 and inspections, 549 550
videoconferencing, 258 losing, 507 508 summary of, 550t
virtual classroom, 261 NLRB ballot, sample of, 507f through behavior-based safety, 548
in small businesses, 612 613, 616 617 winning, 508 through employee participation,
flexibility in, 616 617 hearings, 505 548 549, 549f
four-step process of, 616 NLRB Form 852: Notice through motivation, 547 548
informal training methods, 617 of Representation Hearing, 506f through safety awareness
Job Instruction Sheet, 616, 617t initial contact, 502 503 programs, 549 550
NAM, 613 labor relations consultants, 503 through selection and placement, 546
private vendors, 612 613 union salting, 503 through supportive environment, 547
SBA, 613, 613f literature and solicitation, through training, 546 547
Summary Task Analysis Record rules regarding, 509 Unsafe conditions
Form, 616, 617t Notice of Election, 505 causes of, 539
unsafe acts reduced through, 546 547 supervisor s role in, 508 check list, 541f
Training needs analysis, 247 248 Unions danger zones, 539 540
can t do/won t do problems, 250 AFL-CIO, 498 defined, 539
competency models in, 248 249 aims of reducing, 540 545
current, 248 improved wages, hours, and benefits as first line of defense, 540, 541
performance, of current wanted by, 498 job hazard analysis, 543, 544 545
employees, 249 250 security, 497 498 operational safety reviews, 545
profiles in, 248 249 card check system, 521 personal protective equipment, 545
strategic, 247 class action lawsuits supporting employees safety inspection checklist,
task, 248, 249t in nonunionized companies, 521 online, 542 544f
Trait assessments in interviews, 221 elections (See Union drive and election) summary of, 550t
Transfers, 339 globalization of, 521, 578 vulnerable workers, protecting, 545
Transnational virtual teams, 584 going high-tech, 516 Unsatisfactory performance as grounds
Trend analysis, 140 labor movement and, 496 498 for dismissal, 477
Trends in HRM, 10 17, 11f laws of (See Unions and labor Unstructured (or nondirective)
demographic, 14, 14t relations laws) interview, 214 215
economic, 16 17, 16f membership Unstructured sequential
Generation Y, 14 15 from 1935 to 1947, 501 interview, 218
globalization and competition declines, 520 Utility analysis, 182
trends, 11 12 variations, 520 Utilization analysis, 45
high-tech jobs, 13 security wanted by, 497 498
indebtedness and deregulation, 12 SEIU, 498 V
knowledge work and human capital, 13 sham unions, 521 522 Vacation benefits, 427
nontraditional workers, 15 See also Collective bargaining Valence, 394
retirees, 15 Union salting, 503 Validity, 178 179
service jobs, 13 Unions and labor relations construct validity, 179
technological, 12 laws, 358, 498 502 content validity, 179
workers from abroad, 15 16 Employee Free Choice Act, 521 criterion validity, 179
Turnover. See Employee turnover Landrum-Griffin Act, 502 generalization, 183
national emergency strikes, 502 test validity, 179, 180 182
U National Labor Relations (or Wagner) Value added by manager, 20
Unalienable rights, 462 Act, 499 500 Variable pay, 395
Unclear standards, 303, 303t National Recovery Act, 521 Vertical promotion decisions, 338
Unemployment insurance Norris-LaGuardia Act, 499 Vested funds, 441 442
(or compensation), 425 426, 426t rights of employees, 501 Vestibule training, 257
Unfair labor practice strike, 513 rights of employers, 502 Video-based simulation, 192
Unfreezing stage of organizational Taft-Hartley Act, 501 502 Videoconferencing, 258
change, 269 unfair employer labor practices, 499 Video/web-assisted
Uniform guidelines, 34 unfair union labor practices, 501 502 interviews, 219
Uniforms, 51 See also National Labor Relations Violence at work. See
Unintentional discrimination. Board (NLRB) Workplace violence
See Adverse impact Union shop, 497 Virtual classroom, 261
Union drive and election, 502 509 UNITE HERE, 498 Virtual reality training, 258
authorization cards, obtaining, 504, 504f Unsafe acts See also Simulated learning
campaign, 505 causes of, 540 Virtual teams, 584
692 SUBJECT INDEX

Vision statement, 75 Word-of-mouth recruitment, 49 employee depression, 557

Vocational Rehabilitation Workers compensation, 432 433 industrial hygiene, 552
Act of 1973, 33 benefits, determining, 432 infectious diseases, 553
Voluntary (or permissible) bargaining costs, controlling, 432 433, observable behavior patterns
items, 511 550 551 indicating, 553 555, 555t
before the accident, 550 occupational illness, 534
W after the accident, 551 repetitive motion disorders, 557
Wage curves, 367 373 techniques, 432 433 in small businesses, 614
current pay rates adjusted laws, 358 smoking in the workplace, 558
by comparing, 370, 371f, 372f Workers from abroad, 15 16 stress, 555 556
defined, 367 See also Expatriates (expats); See also Alcoholism
external, 368 370, 370f Global HRM and substance abuse
internal, 368, 368f Workflow analysis, 107 108 Workplace violence, 558 561
plotting, 368f Workforce analysis, 45 angry or violent employees
Walk-ins, 160 Workforce (or employment or personnel) dealing with, 560 561
Wall Street Journal workplace planning, 138 146 dismissing, 561
ethics quiz, 460f action plan developed to match labor employee screening, 559
Walsh-Healey Public Contract supply and demand, 145 legal issues in reducing, 561
Act (1936), 354 talent management and predictive organizational justice, 560
Web-based performance workforce monitoring in, 144 145 security measures,
appraisals, 300 301, 301 302f Workforce/talent analytics, 87 88 heightened, 559
Web-based recruiting used Workplace flexibility, 448 supervisory training for identifying
by small businesses, 611 Workplace health hazards, 551 561 potential, 560 561
Weight in employee selection, 49 50 air quality, 553 victims of, risk factors for, 558 559
Wellness programs, 437 asbestos exposure, 552 Work samples, 190
for preventing illnesses, 437 burnout, 556 557 Work sampling technique, 190
safety and health initiatives, 558 computer-related ergonomic Work sharing, 449
Wildcat strike, 513 problems, 557 Wrongful discharge, 476 477
Wonderlic Personal Characteristics dealing with, 554 Wrongful discharge suits,
Inventory, 611, 612f effects of, 553 avoiding, 478 480