Please click here to access the new HRM Failures case associated with this chapter. HRM
Failures features real-life situations in which an HR conflict ended up in court. Each case
includes a discussion questions and possible answers for easy use in the classroom. HRM
Failures are not included in the text so that you can provide your students with additional
real-life content that helps engrain chapter concepts.
Chapter Summary
This chapter discusses the role of the Human Resource Management (HRM) function in the
corporate effort to gain a competitive advantage. The chapter first discusses the roles and skills
that a human resource management department and/or managers need for any company to be
competitive. The second section of the chapter identifies the competitive challenges that U.S.
companies currently face, which influence their ability to meet the needs of shareholders,
customers, employees, and other stakeholders. We discuss how these competitive challenges are
influencing HRM. The chapter concludes by highlighting the HRM practices covered in this
book and the ways they help companies compete.
Learning Objectives
After studying this chapter, the student should be able to:
1. Discuss the roles and activities of a company’s human resource management function.
2. Discuss the implications of the economy, the makeup of the labor force, and ethics for
company sustainability.
3. Discuss how human resource management affects a company’s balanced scorecard.
4. Discuss what companies should do to compete in the global marketplace.
5. Identify how new technology, such as social networking, is influencing human resource
management.
6. Discuss human resource management practices that support high performance work systems.
7. Provide a brief description of human resource management practices.
Extended Chapter Outline
Note: Key terms are boldface and are listed in the “Chapter Vocabulary” section.
Opening Vignette:
Mars Incorporated: HR Practices Help Create Sweet Success
Mars Incorporated is a company we are all aware of through products such as M&M’s,
Snickers candy bars, Wrigley’s Juicy Fruit gum, Uncle Ben’s Converted Rice, or Lifesavers
(everyone has heard of Lifesavers!). What we might not be aware of is that Mars Inc. is the 3rd
largest private company in the United States employing 72,000 employees across the US and
72 other countries, they compete in 6 business segments (food, drinks, pet care, chocolate, gum
and confections, and symbioscience), that they own 11 brands that generate over $1 billion in
revenue each.
Their success is in part due to excellent human resource practices that allow them to attract,
develop, and retain some of the best employees in the business (in fact, they are #95 on the
2013 Fortune 100 Best Companies to Work For list). The success of these employees is guided
by 5 principles: Quality, Responsibility, Mutuality, Efficiency and Freedom—which are also
the foundations of the company culture and business approach. The company enjoys a 5%
turnover in sales force employees and $33 billion in global revenue produced by their
employment force who refer to themselves as “Martians”.
One might think employees at such a profitable company would expect perks like stock
options, game rooms, or private chefs on staff. Not at Mars – employees simply love the
company culture and the products they produce. The company does provide vending machines
with free candy and encourages employees to chew Wrigley’s gum at meetings! In terms of
monetary incentives, if a team at Mars performs well, employees on that team can earn
upwards of 20% of their annual salary in bonus pay. New employees learn about the Five
Principles through “The Essence of Mars” training and many eventually attend “Mars
University” for further training in functional topics and leadership skills. Other facets include
encouragement from the company to be involved in the community, mentoring programs, open
books management, and a Mars Ambassadors program (where select employees spend 6 weeks
working with Mars partners in developing areas of the world).
Discussion Questions
1. Think about the Five Principles of Mars. How does this company translate those
principles into action? What types of benefits does the firm enjoy as a result of those
principles? What do these principles translate into in terms of benefits for employees?
Student answers may vary but certainly look for evidence that students understand the
relationship between Human Resource Management practices, an organization’s guiding
I. Introduction
A. Competitiveness refers to a company’s ability to maintain and gain market share
in its industry.
1. Competitiveness is related to effectiveness, which is determined by
whether the company satisfies the needs of stakeholders (groups affected
by business practices).
B. Human Resource management (HRM) refers to policies, practices and systems
that influence employees’ behaviors, attitudes and performance. (See Figure 1.1)
1. Effective HRM practices have been shown to relate to company
performance by contributing to employee and customer satisfaction,
innovation, productivity, and development of a favorable reputation in the
community in which the firm is located.
2. The HRM contribution has only recently been recognized.
II. What responsibilities and roles do HR departments perform?
A. Responsibilities that the HR department is solely responsible for include
B. Many different roles and responsibilities can be performed by the HR department
C. HRM as a Business with Three Product Lines (See Figure 1.2):
1. Administrative services and transactions: compensation, hiring, staffing.
An emphasis is placed on resource efficiency and service quality.
2. Business partner services: developing effective HR systems and helping
implement business plans, talent management.
III. Strategic Role of the HRM Function
A. The amount of time that the HR function is devoting to administrative tasks is
decreasing and its role as a strategic business partner, change agent, and employee
advocate are increasing.
B. Shared Services Model refers to a way to organize the HR function that includes
centers of expertise, service centers, and business partners.
1. Centers of expertise or excellence include HR specialists in areas such as
staffing or training who provide their services companywide.
2. Service centers are a central place for administrative and transactional tasks
such as enrolling in training programs or changing benefits that employees
and managers can access online.
3. Business partners are HR staff members who work with business unit
managers on strategic issues such as creating new compensation plans or
development programs for preparing high-level managers.
C. Advancement in technology is enhancing self-service. Self-service is the process of
giving employees control of HR transactions. This allows employees to take greater
responsibility for their own careers.
1. Also involves providing apps that give them information about issues like
training, benefits, compensation and contracts; online enrollment for programs
and services; and completing online attitude surveys.
D. Outsourcing refers to the practice of having another company provide services.
1. Most common outsourced activities are related to benefits administration,
relocation, and payroll.
2. Reasons for outsourcing include cost savings, increased ability to recruit and
manage talent, improve service quality, and protecting the company from
lawsuits by having standardized processes such as selection and recruitment.
E. Are Human Resources Playing a Strategic Role in the Business?
1.Table 1.2 provides a list of 8 questions a manager can ask to determine if the
HR function is providing a strategic role in the business or not.
F.Concerning demonstrating the strategic value of HR, organizations are recognizing that
data is necessary to answer the question of whether or not HR is contributing to
business goals.
G.Evidence-based HR refers to demonstrating that human resources practices have a
positive influence on the company’s bottom line or key stakeholders.
H.Evidence-based HR requires the use of HR or workforce analytics which is the
practice of using data from the HR databases and other sources such as financial
statements and employee surveys to make evidence-based human resource
decisions.
I.The HRM Profession
1. There are many different types of jobs in the HRM profession. (See Table 1.3
for a list of positions and median salaries)
2. The primary professional organization for HRM is the Society for Human
Resource Management (SHRM).
J.The nine competencies and behaviors that were developed through a literature review
by SHRM are presented in Figure 1.3.
VI. Competitive Challenges Influencing Human Resource Management (See Figure 1.4)
A. The Sustainability Challenge
1. Sustainability refers to the ability of a company to survive and succeed in
a dynamic competitive environment.
2. Company success is based on how well the company meets the needs of
its stakeholders. Stakeholders refer to shareholders, the community,
customers, and all of the other parties that have an interest in seeing that
the company succeeds.
3. Several changes in the economy have important implications for human
resource management. Some key statistics about projections up to 2020 in
the economy and the workforce are shown in Table 1.4.
4. The competition for labor is affected by the growth and decline of
industries, jobs, and occupations. Competition for labor is also
influenced by the number and skills of persons available for full-time
work. (See Table 1.5)
a. The most significant percentage change in employment from 2010
to 2020 is expected to be health care support and personal care,
community and socials services, construction and extraction, and
computer and mathematical occupations.
b. The fastest growing jobs in these occupations include jobs such
as personal care aids (provide services such as cooking meals),
home health aides (provide services such as administering
medicines), veterinary technologist and technicians, software
developers, marriage and family therapists, and brick masons.
6. Increased Value Placed On Intangible Assets and Human Capital
a. Intellectual assets refer to a type of company asset including
human capital, customer capital, social capital, and intellectual
capital. (See Table 1.6).
b. Knowledge workers are employees who own the intellectual
means of producing a product or service.
7. There is an increased emphasis on empowerment and continuous learning.
a. Empowerment means giving employees responsibility and
authority to make decisions regarding all aspects of product
development or customer service.
b. As more companies become knowledge-based, they must promote
and capture learning at the employee, team, and company levels.
c. A changing environment means that all employees must embrace a
philosophy of learning. A learning organization embraces a
culture of lifelong learning, enabling all employees to continually
acquire and share knowledge.
8. Need to Adapt to Change
a. Change refers to the adoption of a new idea or behavior by a
company. With increasingly shorter industry lifecycles, change
is an inevitable part of organizational life which has impacted the
employment relationship. Things like mergers, downsizing,
acquisitions and growth all play a role.
9. Concerns with Employee Engagement
a. Employee engagement refers to the degree in which employees
are fully involved in their work and the strength of their job and
company commitment. (See Table 1.7).
b. Employees who are engaged in their work and committed to the
company they work for give companies competitive advantages
(higher productivity, better customer service, lower turnover).
10. Talent management is a systematic planned strategic effort by a
company to attract, retain, develop, and motivate highly skilled
employees and managers.
a. Companies report that one of the most important talent
management challenges they face is developing existing
employees for managerial positions and attracting and retaining top
level managers in leadership positions.
11. Use of Alternative Work Arrangements
a. Alternative work arrangements include use of independent
contractors, on call workers, temporary workers, and contract
company workers.
12. Demanding Work, but with More Flexibility
a. The globalization of the world economy and the development of
e-commerce have made the notion of a 40-hour work week
obsolete.
b. Many companies are taking steps to provide more flexible work
schedules, protect employees’ free time, and more productively
use employees’ work time.
13. The balanced scorecard: Measuring performance to stakeholders (See
Table 1.8)
a. The balanced scorecard gives managers the opportunity to look at
the company from the perspective of internal and external
customers, employees and shareholders.
b. The balanced scorecard should be used to link human resource
management activities to the company’s business strategy and
evaluate the extent to which the human resource function is
helping the company’s meet its strategic objectives.
Evidence-Based HR: Ceasars Entertainment
Caesars Entertainment is trying to understand how employees use health care in order to reduce
costs yet provide effective treatment options for its employees. Caesars analyzes employees
and their family members’ health insurance claim data. The data includes how employees use
medical services such as emergency room visits and whether they choose generic or brand
name drugs. Analysis of the insurance claim data identified locations where employees tended
to use more expensive emergency room visits rather than relying on less expensive and as
effective urgent care facilities. HR communicated a reminder to employees
of the high cost of emergency room services and provided a list of alternative urgent care
facilities. Since Caesars began tracking and analyzing the data the company has saved over $4
million by shifting employees with emergencies to urgent care services!
Class Exercise
Have the students break into small groups of three to four each, and have them discuss
the following question: What specific lessons does the case of Ceasars Entertainment
present about employee engagement? To what extent does it matter that employees
understand how their actions and their decisions relate to the business strategy? How
does the case of Ceasars Entertainment, presented in this Evidence-Based HR vignette,
illustrate the effects of employee engagement?
Answers could include the following:
Effective employee engagement practices communicate to employees how their actions
positively contribute to the strategy of the business. When employees feel that their
13. Customer Service and Quality emphasis
a.Customer excellence requires attention to product and service features as well as
to interactions with customers.
b.Total Quality Management can be defined as “a cooperative form of doing
business that relies on the talents and capabilities of both labor and
management to continually improve quality and productivity using work
teams.” This is one strategy companies are currently using.
c.The TQM movement has alerted management to the key role HRM plays in the
achievement of quality.
d.The Malcolm Baldrige National Quality Award was established by President
Reagan to publicize successful quality strategies. (See Table 1.9 for the
award criteria)
Example: One of the 2013 Baldridge award winners was Lockheed
Martin Missiles and Fire Control (MFC), headquartered in the Dallas,
Texas area with another facility in Orlando, Florida. MFC designs,
develops, manufactures, and supports advanced combat, missile, rocket,
and sensor systems for the U.S. and also foreign militaries. The company’s
workforce of over 10 thousand employees produces and delivers products
through contracts in more than 60 countries. MFC has attained a leading
market share and sustained growth over the past four years in each of its
lines of business. Time reductions as a result of process and performance
improvement programs have occurred in all lines of MFC’s businesses,
yielding an estimated saving of $225 million annually. Return on
investment has grown at a 23 percent compound annual rate, faster than
the industry-best competitor at 13.7 percent. From 2006 to 2011, annual
orders from repeat customers have increased by 32 percent and
international orders have increased by almost 400 percent. The company
also utilizes various HR practices, such as annual ethics training and
performance evaluations geared towards steering employees to meet
commitments and achieve the company’s mission, vision, and values.
c. The ISO 9000:2000 standards were developed by the International
Organization for Standardization in Geneva, Switzerland. ISO 9000 is
the name of a family of standards (ISO 9001, ISO 9004) that includes
requirements such as how to establish quality standards and document
work processes to help workers understand quality system requirements.
ISO 9000:2000 has been adopted as a quality standard in nearly 100
countries.
d. The Six Sigma process refers to a system of measuring, analyzing,
improving, and then controlling processes once they have been brought
within the narrow Six Sigma quality tolerances or standards. The
objective of Six Sigma is to create a total business focus on serving the
customer—that is, deliver what customers really want when they want it.
e. The idea of lean thinking is a way to do more with less effort, time,
equipment, and space, but still provide customers with what they need
and want. The process may include training workers in new skills,
learning how to apply old skills in new ways so workers can quickly take
over new responsibilities, or using new skills to help fill customer
orders.
f. Table 1.10 provides examples of HR practices companies use to enhance
customer service.