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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
The chapter discusses the various roles and activities of the HR function first. Then it examines
how to develop a market- or customer- oriented HR function. Next, the chapter describes the
current structure of most HR functions. Finally, the chapter concludes with a discussion of new
technologies that can improve HR effectiveness, including the Internet, expert systems,
groupware, imaging, and various software applications.
Learning Objectives
After studying this chapter, the student should be able to:
1. Describe the roles that HRM plays in firms today and the categories of HRM activities.
2. Discuss how the HRM function can define its mission and market.
3. Explain the approaches to evaluating the effectiveness of HRM practices.
4. Describe the new structures for the HRM function.
5. Describe how outsourcing HRM activities can improve service delivery efficiency and
effectiveness.
6. Relate how process reengineering is used to review and redesign the HRM practices.
7. Discuss the types of new technologies that can improve the efficiency and effectiveness
of HRM.
8. List the competencies the HRM execution needs to become a strategic partner in the
company.
Extended Chapter Outline
Note: Key terms appear in boldface and are listed in the "Chapter Vocabulary" section.
Opening Vignette:
Googling HR
Google has been recognized over 100 times in the last five years as an exceptional employer,
including being name the #1 Best Company to Work for in the United States (and many other
countries), and the Top #1 Diversity employer. Laszlo Bock leads Google’s People Operations
function, which has responsibility for all areas related to the attraction, development, and
retention of “Googlers.” Block joined Google after holding a number of executive leadership
positions at companies like GE Capital and McKinsey and Company. Block came to Google
unencumbered by the traditional administrative HR mindset, and he sought to create an
innovative and impactful People function.
Discussion Question
1. How did Bock’s lack of direct HR experience actually serve as a facilitative aspect of his
success in imagining, creating and leading “People Operations” for Google?
When Bock came to Google, he had served in leadership positions, but he had not held
HR positions. This means that his frame of reference about Human Resources was,
Google employees, or “Googlers.” As evidenced by the many awards that the company
I. Introduction—Human resource management practices can help companies gain a
competitive advantage. Virtually every HR function in top companies is going through a
transformation process to create a function that can play this new strategic role while
successfully fulfilling its other roles.
II. Activities of HRM
A. Categories of HRM Activities
1. Transactional activities are the day-to-day transactions a company makes.
These activities are low in their strategic value.
2. Traditional activities are the nuts and bolts of HR such as performance
management, training, recruiting, selection, compensation, and employee
relations. These activities have moderate strategic value.
3. Transformational activities create long-term capability and adaptability for
the firm. These activities include knowledge management, management
development, cultural change, and strategic redirection and renewal.
These activities comprise the greatest strategic value for the firm (Text
Figure 16.1).
Competing Through Globalization:
When Is a Bribe a Bribe?
This vignette describes the issues organizations are frequently facing when doing business
overseas – deciding which activities (such as giving gifts or other tokens of recognition or
appreciation to people abroad) are legal or illegal according to the Foreign Corrupt Policies Act.
A 130 page document was released by the US Department of Justice and the Securities and
Exchange Commission in order to provide further guidance as to where the line of being
unethical or illegal is. Since 2009, 50 companies have been prosecuted and fined (with upwards
of $2 billion in fines being paid).
Discussion Question
1. How can a global HR function determine how to operate in compliance with its values
and laws across countries that don’t share those values or laws?
Students will have a variety of views on this topic. It is important to remember that
III. Strategic Management of the HRM Function
For the HR function to become truly strategic in its orientation, it must view itself as
being a separate business entity and engage in strategic management in an effort to
effectively serve the various internal customers.
A. A customer orientation is one of the most important changes in the HR function’s
attempts to become strategic. The most obvious example of HR customers is the
line managers who require HR services. Others include strategic planning team
and employees (Figure 16.2 and 16.3).
B. The products of the HR department must be identified. For example, line
managers want to have high-quality employees committed to the organization.
C. The technologies through which HR meets customer needs vary depending on the
need being satisfied. For example, selection systems ensure that applicants
selected for employment have the necessary knowledge, skills, and abilities to
provide value to the organization.
IV. Building an HR Strategy
A. The Basic Process – Figure 16.4 depicts the basic process for HR strategy (Figure
16.5 shows Goodyear’s strategic business priorities). From these issues, the HR
strategy team needs to identify the specific people issues that will be critical to
address in order for the business to succeed. Finally, the HR strategy is
communicated to the relevant parties, both internal and external to the function.
B. Involving Line Executives – Because the HR strategy seeks to address business
issues, involving those in charge of running the business can increase the quality
of information from which the HR strategy is created. Involvement can occur in a
few ways:
1. Line executives could simply provide input.
2. Line executives could be members of a team that develops HR strategy.
3. Once strategy is developed, line managers could receive communications
with the HR strategy information.
4. Line managers could formally approve a strategy.
C. Characterizing HR Strategies – Four categories of the HR-business relationship
can be identified (Figure 16.7):
1. HR-focused HR functions
2. People-linked HR functions
3. Business-linked HR functions
4. Business-driven HR functions
V. Measuring HRM Effectiveness – Having good measures of the function’s effectiveness
provides the following benefits:
1. Marketing the function – evaluation is a sign that the HR function cares about
the organization as a whole and is trying to support operations, production,
marketing, and other functions in the company.
2. Providing accountability – evaluation helps determine whether the HRM
function is meeting its objectives and effectively using its budget.
A. Approaches for Evaluating Effectiveness - There are two commonly used approaches for
evaluating the effectiveness of HRM practices.
1. Audit approach – focuses on reviewing the various outcomes of
the HR functional areas. Both key indicators and customer satisfaction
measures are typically collected (see Table 16.1). One important source of
effectiveness data can be the customers.
a. One important internal customer is the employee of the firm.
Employees often have both direct and indirect contact with the HR
function. However, the problem with assessing effectiveness only
from the employees’ perspective is that often they are responding
not from the standpoint of the good of the firm, but rather from
their own individual perspective. Many firms have gone to
surveys of top-line executives as a better means of assessing the
effectiveness of the HR function (Figure 16.9 and 16.10).
2. Analytic Approach – focuses on either (1) determining whether
the introduction of a program or practice has the intended effect or (2)
estimating the financial costs and benefits resulting from an HR practice.
a. Evaluating a training program is one strategy for determining
whether the program works.
b. The second strategy involves determining the dollar value of the
training program, taking into account all the costs associated with
the program (Table 16.2).
c. The analytical approach is more demanding than the audit
approach because it requires the detailed use of statistics and
finance.
VI. Improving HRM Effectiveness
Once a strategic direction has been established and HR’s effectiveness evaluated, leaders
of the HR function can explore how to improve its effectiveness in contributing to the
firm’s competitiveness. Figure 16.11 depicts this process. Table 16.4 depicts an example
of analysis needed to determine the dollar value of a selection test.
A. Restructuring To Improve HRM Effectiveness- Figure 16.12 depicts a generic
structure for the HRM function. depicts the process of improving HRM
effectiveness. The HRM function effectively is divided into three divisions:
1. The Centers for Expertise usually consist of the functional specialists in
the traditional areas of HR such as recruitment, selection, training, and
compensation. These individuals ideally act as consultants in the
development of state-of-the-art systems and processes for use in the
organization.
2. The Field Generalists consist of the HRM generalists who are assigned to
a business unit within the firm.
3. The Service Center consists of individuals who ensure that the
transactional activities are delivered throughout the organization.
B. Outsourcing to Improve HRM Effectiveness – Outsourcing entails contracting
with an outside vendor to provide a product or service to the firm, as opposed to
producing the product using employees within the firm.
1. Usually this is done for one of two reasons: Either the outsourcing partner
can provide the service more cheaply than it would cost to do it internally,
or the partner can provide it more effectively than it can be performed
internally.
2. Firms primarily outsource transactional activities and services of HR such
as pension and benefits administration as well as payroll.
C. Improving HRM Effectiveness Through Process Redesign – Process redesign
enables the HRM function to more effectively deliver HRM services.
Reengineering is a complete review of critical work processes and redesign to
make them more efficient and able to deliver higher quality. The reengineering
process, shown in Figure 16.13 has four steps:
1. Identify the Process – Managers who control the process should be
identified and asked to be part of the reengineering team.
2. Understand the Process – A variety of techniques are available to help with
this step, such as data flow diagrams (Figure 16.14), data-entity
relationship diagrams, senario analyses, surveys or focus groups, and
cost-benefit analyses.
3. Redesign the Process – During this phase, the team develops models, tests
them, chooses a prototype, and determines how to integrate the prototype
into the organization.
4. Implement the Process—The company should try out the new process in a
controlled setting before introducing it widely.
D. Improving HRM Effectiveness Through Using New Technologies – HRM
Information Systems
1. New technologies are current applications of knowledge, procedures, and
equipment that have not previously been used.
2. Transaction Processing—Computations and calculations used to review
and document HRM decisions and practices. These include documenting
employee relocation, payroll expenses, and training course enrollments.
Summarized information can be provided for government reports such as
EEO-1.
3. Decision Support Systems—These are systems designed to help
managers solve problems. They usually include a "what if" feature.
4. Expert systems are computer systems incorporating the decision rules of
people deemed to have expertise in a certain area.
Competing Through Technology:
TD Bank Creates Internal Connections
This vignette describes the growing pains being experienced by TD Bank. TD Bank was
founded in Canada, but through a series of expansions and acquisitions now has locations
throughout the U.S. as well as Canada, with the majority of their locations in the U.S.. TD Bank
has utilized software known as “Connections” that was developed by IBM in order to help
facilitate employees acting as one unified North American bank.
Discussion Question
1. In what ways can an HR function leverage internal social media technology to
increase organizational effectiveness?
Student’s responses here will likely be creative. Having tremendous familiarity with
the use and functions of social media, students today can be very creative in their use
VII. Software Applications for HRM:
A. Improving HRM Effectiveness through New Technologies –E-HRM
1. Since the mid 1990’s, HRM functions sought to play a more strategic role
in organizations. The first task was to eliminate transactional tasks in
order to free up time to focus on traditional and transformational activities
(Figure 16.11).
2. The speed requirements of e-business force HRM managers to explore
how to leverage technology for the delivery of traditional and
transformational HRM activities.
B. Recruitment and Selection
1. Traditional recruitment and selection processes have required considerable
face-to-face communications. Technology has transformed these
processes.
2. Technology has enabled firms to monitor hiring processes to minimize the
potential for discriminatory hiring decisions.
C. Compensation and Rewards
1. Compensation systems in organizations probably reflect the most
pervasive of bureaucracy within HRM.
2. Leveraging technology may allow firms to better achive their
compensation goals with considerably less effort.
D. Training and Development
1. A number of firms have begun delivering training via the Web. Some types of
training can be done effectively via the Internet or an intranet, while others
might not.
2. The challenge of speedy delivery of HRM services brings the concept of
Internet-based training to the forefront. Firms compete to attract and
retain both customers and talented employees. How well a firm develops
and treats existing employees largely determines how well it achieves
these outcomes.
3. Technology allows firms to deliver training and development for at least
some skills or knowledge faster, more efficiently, and possibly more
effectively. It can quickly merge training, communication, and immediate
response to strategic contingencies.
Competing Through Sustainability:
Electrolux Leads the Sustainable Way
Swedish-based Electrolux has been names by the Dow Jones Sustainability Index as the durable
household products sector leader for six consecutive years. Efforts such as providing customers
with an “ecosavings” calculator on their website (which allows customers to calculate improved
environmental impacts by replacing older appliances) and setting environmental goals for the
company itself have allowed them to be on that list. These efforts also provide benefits outside
of environmental issues such as building the company brand, customer loyalty, etc.
Discussion Question
1. How can HR functions help to support a firm’s sustainability efforts?
Students may come up with creative ways to respond to this question. One issue that
VIII. The Future for HR Professionals – The future for careers in the HR profession seems
brighter than ever. Firms need to seek the balance between attracting, motivating, and
retaining the very best talent and keeping labor and administrative costs as low as
possible. Finding such a balance requires HR leaders who have a deep knowledge of the
business combined with a deep knowledge of HR issues, tools, processes, and
technology.
IX. The Role of the Chief Human Resource Officer
The CHRO is responsible for several functions including leading the human resource
function and ensuring that HR systems and processes deliver value to the organization.
CHRO’s play seven roles (Figure 16.17 depicts the percentage of time CHRO’s spend in
each role) as identified in a recent survey:
1. Strategic advisor - A role of the CHRO that focuses on the formulation and
implementation of the firm’s strategy.
2. Talent architect - A role of the CHRO that focuses on building and identifying the
human capital critical to the present and future of the firm.
3. Counselor/Confidante/Coach - A role of the CHRO that focuses on counseling or
coaching team members or resolving interpersonal or political conflicts among team
members.
4. Leader of the HR Function - A role of the CHRO that focuses on working with HR
team members regarding the development, design, and delivery of HR services.
5. Liaison to the Board - A role of the CHRO that focuses on preparation for board
meetings, phone calls with board members, and attendance at board meetings.
6. Workforce Sensor - A role of the CHRO that focuses on identifying workforce morale
issues or concerns.
7. Representative of the Firm - A role of the CHRO that focuses on activities with external
stakeholders, such as lobbying, speaking to outside groups, etc.
Integrity in Action:
MF Global’s Illegal Transfer
This vignette depicts the events that took place at investment bank MF Global in October 2011.
A former governor and U.S. Senator, John Corzine, who headed the firm at the time, called a
mid-level employee and explained to her, in vague terms, that it was important to transfer funds
to cover overdrafts. The employee transferred customer funds to cover the investment bank’s
overdrafts, an act that was illegal. Corzine later claimed he did not instruct the employee to do
so and was not informed she had. The question is whether or not he encouraged the act, and if
so, he is in violation of the law as well.
Discussion Question
1. What must HR functions do to ensure that leaders do not encourage employees to engage
in behavior that is not in compliance with the firm’s values or legal requirements?
There are many directions this conversation can take depending on students’ ethical and
moral compass. One way that HR can contribute to protecting employees from these
