Thoroughly discuss the Pro’s and Con’s of internal and external

Human Resource Management

Human Resource Management

[Author removed at request of original publisher]

UNIVERSITY OF MINNESOTA LIBRARIES PUBLISHING EDITION, 2016. THIS EDITION ADAPTED FROM A WORK ORIGINALLY PRODUCED IN 2011 BY A PUBLISHER WHO HAS REQUESTED THAT IT NOT RECEIVE ATTRIBUTION.

MINNEAPOLIS, MN

Human Resource Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike

4.0 International License, except where otherwise noted.

Contents

Publisher Information viii

Chapter 1: The Role of Human Resources

1.1 What Is Human Resources? 2

1.2 Skills Needed for HRM 11

1.3 Today’s HRM Challenges 15

1.4 Cases and Problems 26

Chapter 2: Developing and Implementing Strategic HRM Plans

2.1 Strategic Planning 29

2.2 Writing the HRM Plan 40

2.3 Tips in HRM Planning 48

2.4 Cases and Problems 52

Chapter 3: Diversity and Multiculturalism

3.1 Diversity and Multiculturalism 55

3.2 Diversity Plans 61

3.3 Multiculturalism and the Law 68

3.4 Cases and Problems 77

Chapter 4: Recruitment

4.1 The Recruitment Process 80

4.2 The Law and Recruitment 89

4.3 Recruitment Strategies 95

4.4 Cases and Problems 107

Chapter 5: Selection

5.1 The Selection Process 111

5.2 Criteria Development and Résumé Review 115

5.3 Interviewing 120

5.4 Testing and Selecting 128

5.5 Making the Offer 134

5.6 Cases and Problems 137

Chapter 6: Compensation and Benefits

6.1 Goals of a Compensation Plan 141

6.2 Developing a Compensation Package 144

6.3 Types of Pay Systems 148

6.4 Other Types of Compensation 165

6.5 Cases and Problems 177

Chapter 7: Retention and Motivation

7.1 The Costs of Turnover 181

7.2 Retention Plans 187

7.3 Implementing Retention Strategies 201

7.4 Cases and Problems 212

Chapter 8: Training and Development

8.1 Steps to Take in Training an Employee 217

8.2 Types of Training 223

8.3 Training Delivery Methods 230

8.4 Designing a Training Program 237

8.5 Cases and Problems 253

Chapter 9: Successful Employee Communication

9.1 Communication Strategies 257

9.2 Management Styles 269

9.3 Cases and Problems 277

Chapter 10: Managing Employee Performance

10.1 Handling Performance 280

10.2 Employee Rights 296

10.3 Cases and Problems 307

Chapter 11: Employee Assessment

11.1 Performance Evaluation Systems 312

11.2 Appraisal Methods 319

11.3 Completing and Conducting the Appraisal 332

11.4 Cases and Problems 341

Chapter 12: Working with Labor Unions

12.1 The Nature of Unions 347

12.2 Collective Bargaining 359

12.3 Administration of the Collective Bargaining Agreement 365

12.4 Cases and Problems 369

Chapter 13: Safety and Health at Work

13.1 Workplace Safety and Health Laws 373

13.2 Health Hazards at Work 382

13.3 Cases and Problems 400

Chapter 14: International HRM

14.1 Offshoring, Outsourcing 404

14.2 Staffing Internationally 418

14.3 International HRM Considerations 423

14.4 Cases and Problems 440

Please share your supplementary material! 443

Publisher Information

Human Resource Management is

adapted from a work produced and

distributed under a Creative Commons

license (CC BY-NC-SA) in 2011 by a

publisher who has requested that they

and the original author not receive

attribution. This adapted edition is

produced by the University of Minnesota Libraries Publishing through the eLearning Support Initiative.

This adaptation has reformatted the original text, and replaced some images and figures to make the resulting

whole more shareable. This adaptation has not significantly altered or updated the original 2011 text. This work

is made available under the terms of a Creative Commons Attribution-NonCommercial-ShareAlike license.

viii

Chapter 1: The Role of Human Resources

Human Resource Management Day to Day

You have just been hired to work in the human resource department of a small company. You heard about the job

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

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

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

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

handle on which human resource processes are already set up.

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

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

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

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

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

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

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

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

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

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

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

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

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

away writing the strategic human resource management plan.

1

1.1 What Is Human Resources?

Learning Objectives

1. Explain the role of HRM in organizations.

2. Define and discuss some of the major HRM activities.

Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash,

valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory,

while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have

one thing in common: they must have people to make their capital work for them. This will be our focus

throughout the text: generation of revenue through the use of people’s skills and abilities.

What Is HRM?

Human resource management (HRM) is the process of employing people, training them, compensating them,

developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone

many changes over the last twenty years, giving it an even more important role in today’s organizations. In

the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and

making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic

role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru,

sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is

important in good times, HR is defined in hard times” (Frasch, et. al., 2010).

It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating

to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t

perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation,

and retention of employees—making these aspects not only part of HRM but also part of management. As a result,

this book is equally important to someone who wants to be an HR manager and to someone who will manage a

business.

Human Resource Recall

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

2

The Role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform, which is what

makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM

plays in organizations. These are described in the following sections.

Staffing

You need people to perform tasks and get work done in the organization. Even with the most sophisticated

machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves

the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are

four main steps:

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

based on revenue expectations.

2. Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace

is becoming more and more important, as we have many more people from a variety of backgrounds in

the workforce.

3. Recruitment. This involves finding people to fill the open positions.

4. Selection. In this stage, people will be interviewed and selected, and a proper compensation package

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

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM

is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and

executives are involved in the process. For example, the HRM professional will likely recognize the need for a

policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to

employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to

involve all other departments in the organization. Some examples of workplace policies might be the following:

• Discipline process policy

• Vacation time policy

• Dress code

• Ethics policy

• Internet usage policy

1.1 What Is Human Resources? 3

These topics are addressed further in Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and

Motivation”, Chapter 8 “Training and Development”, and Chapter 9 “Successful Employee Communication”.

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to

entice people to work for the organization. Compensation includes anything the employee receives for his or her

work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing

similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years

with the organization, years of experience, education, and similar aspects. Examples of employee compensation

include the following:

• Pay

• Health benefits

• 401(k) (retirement plans)

• Stock purchase plans

• Vacation time

• Sick leave

• Bonuses

• Tuition reimbursement

Since this is not an exhaustive list, compensation is discussed further in Chapter 6 “Compensation and Benefits”.

Retention

Retention involves keeping and motivating employees to stay with the organization. Compensation is a major

factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for

the following reasons:

1. Issues around the job they are performing

2. Challenges with their manager

3. Poor fit with organizational culture

4. Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010). As a result,

managers often try to change their compensation packages to keep people from leaving, when compensation isn’t

the reason they are leaving at all. Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment”

discuss some strategies to retain the best employees based on these four factors.

4 Human Resource Management

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the

job but also continue to grow and develop new skills in their job. This results in higher productivity for the

organization. Training is also a key component in employee motivation. Employees who feel they are developing

their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training

programs might include the following:

• Job skills training, such as how to run a particular computer program

• Training on communication

• Team-building activities

• Policy and legal training, such as sexual harassment training and ethics training

We address each of these types of training and more in detail in Chapter 8 “Training and Development”.

Dealing with Laws Affecting Employment

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

with some of these laws:

• Discrimination laws

• Health-care requirements

• Compensation requirements such as the minimum wage

• Worker safety laws

• Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and

then communicate those changes to the entire management organization. Rather than presenting a chapter focused

on HRM laws, we will address these laws in each relevant chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting

federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements

for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection

requirements and ensure the workplace is meeting both federal and union standards. Worker protection issues

might include the following:

• Chemical hazards

1.1 What Is Human Resources? 5

• Heating and ventilation requirements

• Use of “no fragrance” zones

• Protection of private employee information

We take a closer look at these issues in Chapter 12 “Working with Labor Unions” and Chapter 13 “Safety and

Health at Work”.

Figure 1.1

Caption: Knowing the law regarding worker protection is generally the job of human resources. In some industries it is extremely

important; in fact, it can mean life or death.

ReSurge International – Tom Davenport Operating On A Patient – CC BY-NC-ND 2.0.

Communication

Besides these major roles, good communication skills and excellent management skills are key to successful

human resource management as well as general management. We discuss these issues in Chapter 9 “Successful

Employee Communication”.

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may

6 Human Resource Management

affect the organization. Outside forces, or external factors, are those things the company has no direct control

over; however, they may be things that could positively or negatively impact human resources. External factors

might include the following:

1. Globalization and offshoring

2. Changes to employment law

3. Health-care costs

4. Employee expectations

5. Diversity of the workforce

6. Changing demographics of the workforce

7. A more highly educated workforce

8. Layoffs and downsizing

9. Technology used, such as HR databases

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

For example, the recent trend in flexible work schedules (allowing employees to set their own schedules) and

telecommuting (allowing employees to work from home or a remote location for a specified period of time, such

as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues,

so they can develop policies that meet not only the needs of the company but also the needs of the individuals.

Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with

this bill has huge implications for HR. For example, a company with more than fifty employees must provide

health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care

insurance to their employees (Cappelli, 2010). Because health-care insurance will be mandatory, cost concerns

as well as using health benefits as a recruitment strategy are big external challenges. Any manager operating

without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not

understanding the external factors can also mean breaking the law, which has a concerning set of implications as

well.

Figure 1.2

1.1 What Is Human Resources? 7

An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make

strategic decisions based on changes in the external environment. To develop this understanding, reading various publications is

necessary.

One way managers can be aware of the outside forces is to attend conferences and read various articles on the

web. For example, the website of the Society for Human Resource Management, SHRM Online1, not only has job

postings in the field but discusses many contemporary human resource issues that may help the manager make

better decisions when it comes to people management. In Section 1.3 “Today’s HRM Challenges”, we go into

more depth about some recent external issues that are affecting human resource management roles. In Section

1.1.2 “The Role of HRM”, we discuss some of the skills needed to be successful in HRM.

Figure 1.3

8 Human Resource Management

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

external and outside forces.

Key Takeaways

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

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

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

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

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

1.1 What Is Human Resources? 9

Exercises

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

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

1Society for Human Resource Management, accessed August 18, 2011, http://www.shrm.org/Pages/default.aspx.

References

Cappelli, P., “HR Implications of Healthcare Reform,” Human Resource Executive Online, March 29, 2010,

accessed August 18, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509.

Frasch, K. B., David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Human Resource Executive

Online, June 30, 2009, accessed September 24, 2010, http://www.hreonline.com/HRE/

story.jsp?storyId=227738167.

Rivenbark, L., “The 7 Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10,

2010, http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406.

10 Human Resource Management

1.2 Skills Needed for HRM

Learning Objectives

1. Explain the professional and personal skills needed to be successful in HRM.

2. Be able to define human resource management and the certifications that can be achieved in this profession.

One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal

with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need

to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource

department.

The first skill needed is organization. The need for this skill makes sense, given that you are managing people’s

pay, benefits, and careers. Having organized files on your computer and good time-management skills are crucial

for success in any job, but especially if you take on a role in human resources.

Like most jobs, being able to multitask—that is, work on more than one task at a time—is important in managing

human resources. A typical person managing human resources may have to deal with an employee issue one

minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task

or one part of the business, human resources focuses on all areas of the business, where multitasking is a must.

As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most

important skills for achieving success at any job. Being able to manage a variety of personalities, deal with

conflict, and coach others are all in the realm of people management. The ability to communicate goes along with

people skills. The ability to communicate good news (hiring a new employee), bad news (layoffs), and everything

in between, such as changes to policy, makes for an excellent manager and human resource management (HRM)

professional.

Keys to a successful career in HRM or management include understanding specific job areas, such as managing

the employee database, understanding employment laws, and knowing how to write and develop a strategic plan

that aligns with the business. All these skills will be discussed in this book.

A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far

in advance and look at trends that could affect the environment in which the business is operating. Too often,

managers focus on their own area and not enough on the business as a whole. The strategic HR professional is

able to not only work within his or her area but also understand how HR fits into the bigger picture of the business.

Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that examines the

moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and

union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics

11

standards within the organization. Many HR managers are required to work with highly confidential information,

such as salary information, so a sense of ethics when managing this information is essential. We discuss ethics

from the organizational perspective in Section 1.1.2 “The Role of HRM”.

Dilbert and the Evil HR Director

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