978-0134728391 Chapter 10 Part 1

Chapter 10: Human Resource Management and Labor Relations

Chapter Overview

Human resource management involves a steady stream of activities. An HR manager’s job

revolves around a set of functions including HR planning, staffing, developing employees,

appraisal, and compensation and benefits.

This chapter covers each of these functions, including how managers plan for their

organization’s HR needs and ways in which organizations select, develop, and appraise

employee performance. The chapter also describes the main components of a compensation

system and some of the legal issues involved in hiring, compensating, and managing

workers. Finally, the chapter discusses workforce diversity, the management of knowledge

workers, the use of a contingent workforce, and why workers organize into labor unions.

A career in HR management can be rewarding, but given the dynamic nature of the external

environment, keeping abreast of changes and incorporating those necessary changes into

these HR management functions is also challenging.

Learning Objectives

10-1. Define human resource management, discuss its strategic significance, and explain

how managers plan for their organization’s human resource needs.

10-3. Identify the steps in staffing a company and discuss ways in which organizations

recruit and select new employees.

10-5. Describe how managers develop the workforce in their organization through

training and performance appraisal.

10-7. Explain why workers organize into labor unions and describe the collective

bargaining process.

LIST OF IN-CLASS ACTIVITIES: INSTRUCTOR’S CHOICE

Activity

Description

Time Limit

1. Ice-Breaker: Writing a Job

Description

Students write a job description for both

the instructor’s job and the student’s

job.

45 min.

2. Up for Debate: Performing

Appraisals, Laying It On the Line

Students are divided into teams to

discuss the steps involved in

determining whether to fire someone.

30 min.

3. Small-Group Discussion: What

Motivates Employees?

Students consider what incentives might

motivate workers.

30 min.

CHAPTER OUTLINE

Learning Objective 10-1:

Define human resource management, discuss its strategic significance, and explain how

managers plan for their organization’s human resource needs.

The Foundations of Human Resource Management

Human resource management (HRM) is the set of organizational activities directed at

attracting, developing, and maintaining an effective workforce.

A. The Strategic Importance of HRM

Human resources are the people comprising an organization’s workforce. They are

critical for effective organizational functioning. The importance of HRM has grown

dramatically in the last several years due in part to the recognition that human resources

are a valuable means for improving productivity, and today’s awareness of the costs

associated with poor human resource management. Effectiveness of HR performance

B. HR Planning

Human resource planning is the starting point for attracting qualified new employees.

1. Job analysis. Job analysis is a systematic analysis of jobs within an organization.

The job analysis results in: (a) the job description, which lists the duties and

2. Forecasting HR Demand and Supply. Forecasting the supply of labor involves

forecasting the internal supply—the number and type of employees who will be in

the firm at some future date—and the external supply—the number and type of

c. Forecasting the external supply of labor requires information from outside

3. Matching HR Supply and Demand. After comparing future demand and internal

supply, managers can make plans to manage predicted shortfalls or overstaffing.

Hiring new employees, retraining present employees, and investing in productivity-

enhancing systems, can help meet shortfalls. Overstaffing can be handled by

transferring employees, not replacing employees who quit, encouraging early

KEY TEACHING TIPS

 Remind students that HRM is the set of organizational activities directed at

attracting, developing, and maintaining an effective workforce.

 Students often confuse these terms: A job description lists what you do in the job,

including the duties and responsibilities; a job specification lists the skills and

abilities you bring with you to the job.

 Remind students that forecasting the supply of labor includes both an internal and

external forecast.

QUICK QUESTIONS

 Why has the role of human resource management increased in importance in the

last several years?

 How can an HR manager benefit from the use of a replacement chart?

 How can an HR manager benefit from the use of an employee information system?

Use In-Class Activity 1: Ice-Breaker: Writing a Job Description

Time Limit: 45 minutes

Learning Objective 10-2:

Discuss the legal context of human resource management and identify contemporary

legal issues.

The Legal Context of HR Management

A number of laws regulate various aspects of employee-employer relations, especially in the

areas of equal employment opportunity, compensation and benefits, labor relations, and

occupational safety and health.

A. Equal Employment Opportunity

Title VII of the Civil Rights Act of 1964 forbids discrimination in all areas of the

employment relationship. The intent of Title VII is to ensure that employment decisions

are made on the basis of an individual’s qualifications rather than on the basis of

personal biases.

The Equal Employment Opportunity Commission (EEOC) has responsibility for

actively recruit, hire, and develop members of underused groups.

B. Compensation and Benefits

The Fair Labor Standards Act sets a minimum wage and requires the payment of

overtime rates for work in excess of 40 hours per week. The Equal Pay Act of 1963

C. Labor Relations

Union activities and management’s behavior toward unions constitute another heavily

regulated area. The National Labor Relations Act (also known as the Wagner Act),

passed in 1935, sets up a procedure for employees to vote on whether to have a union.

The National Labor Relations Board (NLRB) was established by the Wagner Act to

enforce its provisions. Following a series of severe strikes in 1946, the Labor-

Management Relations Act (also known as the Taft-Hartley Act) was passed in 1947

to limit union power.

D. Health and Safety

The Occupational Safety and Health Act of 1970 holds that every employer has an

obligation to furnish each employee with a place of employment that is free from

hazards that cause or are likely to cause death or physical harm.

E. Other Legal Issues

1. AIDS in the Workplace. Employers cannot legally require an AIDS test or any other

2. Sexual Harassment. Sexual harassment is defined by the EEOC as unwelcome sexual

advances in the work environment. The employer is responsible for changing the

3. Employment at Will. The concept of employment at will holds that both employer and

4. The Patriot Act. In response to the terrorist attacks of September 11, 2001, the U.S.

government passed legislation to increase its powers to investigate and prosecute

suspected terrorists. The HRM implications are that certain individuals (including ex–

convicts and aliens from other countries deemed by the U.S. State Department to have

repeatedly provided support for acts of international terrorism) are ineligible to work

with potentially dangerous biological agents. Other sections grant government

investigators access to previously confidential personal and financial records.

KEY TEACHING TIPS

 Reiterate that protected groups consist of individuals who share characteristics—

such as race, color, religion, gender, age, disability status, and national origin—as

indicated by a given law.

 Reinforce that sexual harassment includes (a) quid pro quo, in which the harasser

offers something of value for sexual favors, and (b) hostile work environment, in

which lewd behavior displayed by another employee is offensive. Also, remind

students that harassment definitions have been broadened to include age, religious,

and ethnic harassment.

QUICK QUESTIONS

 What is the purpose of an affirmative action plan?

 What does OSHA guarantee?

Learning Objective 10-3:

Identify the tasks in staffing a company and discuss ways in which organizations

recruit and select new employees.

Staffing the Organization

When managers have determined that new employees are needed and understand the legal

context in which they operate, they can then turn their attention to recruiting and hiring the

right mix of people. This involves two processes: (1) acquiring new employees from outside

the company and (2) promoting current employees from within. Both external and internal

staffing, however, start with effective recruiting.

A. Recruiting Employees

Recruiting is the process of attracting qualified persons to apply for the jobs that are

open. Recruiting decisions go both ways: an organization is recruiting an employee,

while the prospective employee is selecting a job.

1. Internal Recruiting. Internal recruiting means considering present employees as

candidates for openings.

2. External Recruiting. External recruiting involves attracting people outside of the

organization to apply for jobs.

applicant with a real picture of what performing the available job would be like.

B. Selecting Employees

The intent of the selection process is to gather from applicants the information that will

predict their job success and then to hire the candidates likely to be most successful.

2. Tests. Tests of ability, skill, aptitude, or knowledge relevant to a particular job are

3. Interviews. In a structured interview, questions are written in advance, and all inter-

4. Other Techniques. Organizations often require applicants to take physical exams

KEY TEACHING TIPS

 Remind students that new employees are found both internally and externally in the

recruitment process.

 Remind students that all applicant information gathered in the selection process can

be used to predict job success.

QUICK QUESTIONS

 What are the benefits and drawbacks of internal recruiting? External recruiting?

 When do you think tests are useful in the selection process?

 Why are interviews sometimes a poor predictor of job success? In what way(s)

might an interview be an accurate predictor of job success?

HOMEWORK

Interview a Manager

Now might be a good time to assign Application Exercise 10 from the end-of-chapter

materials as homework. This assignment asks students to interview an HR manager at a

local company and identify the steps in the selection process for an open position at that

company.

Note: To give students greater insight into the work of an HR manager, they may also want

to ask the following questions:

 What are the greatest challenges facing someone in your position?

 What is the best and least favorite part of your job?

 What advice would you give someone who wants to get into this line of work?

Learning Objective 10-4:

Describe the main components of a compensation and benefits system.

1. Wages and Salaries

Wages are paid for time worked. A salary is an amount paid per month or year for

2. Incentive Programs

Incentive programs are special pay programs designed to motivate high

performance.

a. Individual Incentives. A bonus may be awarded to employees upon their

reaching a sales quota or performance goal. Merit salary systems link raises to

to employees. Gainsharing plans distribute bonuses to employees when a firm’s

costs are reduced through greater work efficiency. Pay-for-knowledge plans

distribute pay to workers who learn new skills and become proficient at different

jobs.

3. Benefits Programs

Benefits are compensation other than wages and salaries, including health,

disability, and life insurance, and paid vacations and holidays. Most companies are

required by law to provide Social Security retirement benefits and workers’

toward retirement accounts while others have transitioned employees to riskier

401(k) plans.

b. Containing the Costs of Benefits. To contain the costs of benefits, employees

can select from a variety of benefit alternatives in what is known as a cafeteria

benefits plan. A certain dollar amount of benefits per employee is set aside so

that each employee can choose from a variety of alternatives.

KEY TEACHING TIPS

 Point out that a compensation system includes more than just wages and salaries; it

includes incentives and employee benefit programs.

 Students often confuse the types of incentive plans: Profit-sharing plans distribute

profits earned above a certain level to employees; gainsharing plans distribute

bonuses to employees who achieve greater work efficiency; and pay-for-knowledge

plans encourage workers to learn new skills.

QUICK QUESTIONS

 In what way(s) is variable pay a better motivator than a merit raise?

 How can an organization benefit from offering incentive programs to its employees?

 How does a cafeteria benefit plan allow a company to cut costs?

Use In-Class Activity 3: Small-Group Discussion: What Motivates Employees?

Learning Objective 10-5:

Describe how managers develop the workforce in their organization through training

and performance appraisal.

Developing the Workforce

A. Training

Training usually refers to teaching operational or technical employees how to do the job

for which they were hired. Development refers to teaching managers and professionals

the skills needed for present and future jobs.

1. Assessing Training Needs. The first step in developing a training plan is to

determine what needs exist. Not all performance issues are due to lack of training;

2. Common Training Methods. After a company hires new employees, it must

acquaint them with the firm and their new jobs. Lectures, readings, role-playing,

3. Evaluation of Training. Typical evaluation approaches include measuring one or

more relevant criteria (such as attitudes or performance) before and after the training,

and determining whether the criteria changed as a result of the training and

development. Trainees may say that they enjoyed the training and learned a lot, but

the true test is whether their job performance improves after their training.

B. Performance Appraisal

Performance appraisals are designed to show workers precisely how well they are

doing their jobs. Employees’ performances should be evaluated regularly for many

reasons. One reason is that a performance appraisal may be necessary for validating

selection devices or assessing the impact of training programs. A second, administrative

reason is to aid in making decisions about pay raises, promotions, and training. Still

another reason is to provide feedback to employees to help them improve their current

performance and plan their future careers.

1. Common Appraisal Methods. Two basic categories of appraisal methods

commonly used in organizations are objective methods and judgmental methods.

2. Errors in Performance Appraisal. Errors or biases can occur in any kind of rating

or ranking system. One common problem is recency error, the tendency to base

judgments on the subordinate’s most recent performance because it is most easily

recalled. But an appraisal is meant to evaluate performance over an entire time period.

Halo error is allowing the assessment of an employee on one dimension to “spread” to

ratings of that employee on other unrelated dimensions.

One interesting innovation in performance appraisal used in some organizations today is

called 360-degree feedback, in which managers are evaluated by everyone around

them—their boss, their peers, and their subordinates.

3. Performance Feedback. The last step in most performance appraisal systems is

giving feedback to subordinates about their performance. This is usually done in a

1. What types of training are offered at your place of work?

2. What do you think would be the biggest challenges of giving an employee

performance appraisal?

Use In-Class Activity 2: Up for Debate: Performing Appraisals, Laying It On the Line

Time Limit: 30 minutes

Learning Objective 10–6:

Discuss workforce diversity, the management of knowledge workers, and the use of a

contingent workforce as important changes in the contemporary workplace.

New Challenges in the Changing Workplace

New challenges arise as the economic and social environments of business change.

A. Managing Workforce Diversity

Workforce diversity is the range of workers’ attitudes, values, beliefs, and behaviors that

differ by gender, race, age, ethnicity, physical ability, and other relevant characteristics;

many U.S. organizations are now creating more diverse workforces, embracing more

women, ethnic minorities, and foreign-born employees than ever before. As diversity

can be a competitive advantage, knowing how to manage it in the workforce is vital.

B. Managing Knowledge Workers

Traditionally, employees added value to organizations because of what they did or

because of their experience; today, however, many employees add value because of

what they know. Knowledge workers, which include computer scientists, engineers,

physical scientists, and game developers require extensive training. Ongoing training is

a continuing need, as updating skills is necessary to maintain the competitive advantage

as technical skills change.

C. Contingent and Temporary Workers

1. Trends in Contingent and Temporary Employment. A contingent worker is a

person who works for an organization on something other than a permanent or full-

2. Managing Contingent and Temporary Workers. The keys to understanding how

to use such workers involve careful planning and understanding their advantages and

KEY TEACHING TIP

Remind students that workforce diversity is the range of workers’ attitudes, values, beliefs,

and behaviors that differ by gender, race, age, ethnicity, physical ability, and so on.

Remind students that training is a vital responsibility of the firm, to create and maintain

competitive advantage, enhance productivity, and increase job satisfaction among

employees.

Students should understand that performance appraisals, while often uncomfortable, are a

necessary part of the evaluation process and work to ensure good communication and

performance by employees by providing feedback to them.

Remind students that temporary and contingent workers are valuable assets to the

organization.

QUICK QUESTIONS

 How can an organization benefit from welcoming a diverse workforce?

 How do knowledge workers add value to an organization?

 What are some advantages and disadvantages of hiring contingent workers?