978-1305405745 Chapter 20

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Chapter 20: Managing Human Resources

CHAPTER 20: MANAGING HUMAN RESOURCES

CHAPTER OUTLINE

Spotlight: Hired.com

(http://www.hired.com)

Human resource management (HRM) refers to the management of employees,

individually and collectively, in a way that enables them to help the business reach its

strategic objectives.

1) Recruiting Personnel

LO1: Explain the importance of employee recruitment, and list some useful sources

for finding suitable applicants.

a) The Need for Quality Employees

i) No substitute for high-quality employees

ii) Recruitment and selection of employees establish a foundation

iii) Most successful companies move ahead of competition because they

recognize that employees are the business to customers and others

(1) Discuss the availability of employees to small firms in different economic

climates. Ask students if they think people are willing work for lower

salaries in poor economic climates when jobs are difficult to find.

(2) Ask students if employers would find higher quality employees they are

able to hire for a lower salary right after a downturn in the economy.

b) The Lure of Entrepreneurial Firms

i) Requires small firms to identify their distinctive advantages

ii) Small firms are able to offer professional, managerial and technical personnel

greater job variety and freedom than larger businesses

iii) Drawbacks such as limited employee benefits may be offset with potential

advantages

(1) Ask students what they have done or would do to find a job (either part

time as students or full time once they graduate). Then compare the

following sections with their answers.

c) Sources of Employees

i) Internet Options

ii) Schools

iii) Public Employment Offices

iv) Private Employment Agencies

v) Temporary Help Agencies

vi) Employee Referrals

vii) Executive Search Firms (possibly using headhunters)

viii) Walk-ins and Help-Wanted Adverstising

(1) Discuss how the placement office on your campus works with small firms

to help graduates and students find jobs.

d) Diversity in the Workforce

Chapter 20: Managing Human Resources

i) Workforce diversity. The balance is shifting rapidly toward greater workforce

diversity, not only because of the increased participation of racial minorities,

but also because of the higher proportions of women and older workers

entering the labor force.

ii) Diversity in itself can bring innovation and have a positive effect on problem

solving

e) Job Descriptions

i) An owner-manager should not select personnel simply to fit rigid

specifications of education, experience, or personal background.

ii) Job description needed to outline or summarize the work to be performed

iii) Job specifications are a list of skills and abilities needed to perform a specific

job

(1) Discuss how the employer uses the job description, then ask students if

they were looking for a position, how they would use the job description.

2) Evaluating Prospects and Selecting Employees

LO2: Identify the steps in evaluating job applicants.

a) Step 1: Use Application Forms

b) Step 2: Interview the Applicant

i) Behavioral interview appears to be predictive of a candidate’s potential for

success on the job

ii) Structure uses questions (some listed on pages 20-19)

iii) Exhibit 20.1 addresses topics to avoid in an interview

c) Step 3: Check References and Other Background Information

i) Careful checking with former employers, school authorities, and other

references important to avoid hiring mistakes

ii) Background check may be available that provides financial, criminal and

employment history (databases available)

iii) Cautions:

(1) Keep in mind that the Fair Credit Reporting Act requires that the applicant

be notified in writing that the report is being requested

(2) Before you request a check obtain written consent from applicant to

ensure legal compliance and give the applicant the opportunity to

withdraw from further consideration

(3) May be legally prevented from using some of the insights revealed to

reject an applicant

(4) Some entrepreneurs question the accuracy of the information that surfaces

from criminal background checks

iv) Social media is gaining rapid momentum. The use of LinkedIn and Facebook

as recruitment tools is growing so rapidly that is has been cutting sharply into

the sales of traditional job-board services like Monster.com and Career

Builder.com

(1) Many recruiters say they use social networking sites to assess job

applicants and many are rejected because of what is found.

(a) The most objectionable turn-offs were:

(i) Posting inappropriate information or photos

(ii) Exposing evidence of drinking or illicit drug use

Chapter 20: Managing Human Resources

(iii)Demonstrating poor communication skills

(iv) Badmouthing a previous employer

(b) Privacy issues surround the evaluation of applicants via social media.

d) Step 4: Testithe Applicant

i) Validity and reliability of any performance testing must be checked

ii) Interpreting tests or adapting them to a particular business may be questioned

e) Step 5: Require Physical Examinations

i) To check the ability of applicants to meet the physical demands of specific

jobs.

ii) Drug screening of applicants is permitted by the law but it’s expensive and

unnecessary despite overwhelming evidence indicating that drug use is

prevalent and creates unnecessary risks and costs for the employer.

3) Training and Developing Employees

LO3: Describe the roles of training and development for both managerial and

nonmanagerial employees.

a) Basic Components of Training and Development

i) Employee training refers to planned efforts to help workers master the

knowledge, skills, and behaviors, that they need to perform the duties for

which they were hired.

ii) Management development is more focused on preparing employees for future

roles in business and emphasizes the formal education, job experiences,

relationship formation, and performance assessment necessary to reach long-

term career goals and fulfill managerial potential.

b) Orientation for New Personnel

i) New employee introduction to the job

ii) Recognize employee sensitivity

c) Employee Training

i) Training designed to promote high-quality workmanship

ii) Ongoing supervision with special classes and seminars helpful to all

employees

iii) On-The-Job Training

(1) May be used to identify abilities or skills required for particular jobs

(2) Job Instruction Training (Exhibit 20-2 Steps in Job Instruction Training)

d) From Training to Implementation

i) Barriers to implementation of training based in human nature

ii) If you want to get a better return on training and development spending, you

must create a workplace environment that encourages people to use that

training once they’re back on the job. To show how that can be accomplished,

Harry J. Martin suggests the following:

(1) Put it on paper. Employees should develop a personal action plan for

implementing the training they receive.

(2) Measure results. Employees will be more likely to put training to use if

they know their performance will be assessed in light of the new concepts

learned.

(3) Get peers to help. Peer support has the greatest impact on the effective

translation of training to workplace application.

(4) Involve supportive superiors. Management involvement increases the

odds that trainees will use what they learn.

(5) Provide access to experts. Lingering questions can be answered by

providing access to reference materials, additional information on training

topics, and experts within the company or from outside resources.

e) Development of Managerial and Professional Employees

i) Management development programs require serious consideration of the

following factors:

(1) The need for development

(2) A plan for development

(3) A timetable for development

(4) Employee counseling

4) Compensation and Incentives for Employees

LO4: Explain the various types of compensation plans, including the use of

incentive plans.

Ask students how they determine what amount of money they need to make when

they apply for a job. Then discuss the following bringing in the employee

viewpoint and the employer viewpoint on each.

a) Wage and Salary Levels

i) Small firms must be competitive in order to attract well-qualified personnel

ii) Payments based on increments of time or vary with the output of the

employees (commission basis)

b) Financial Incentives

i) Designed to motivate employees to increase their productivity

ii) Piecework is pay based on number of units products

iii) Keys to developing effective bonus plans

(1) Set attainable goals

(2) Include employees in planning

(3) Keep updating goals

c) Stock Incentives

i) Sometimes used to attract and hold key personnel

ii) ESOPs may provide employees a share of ownership in the business which

should result in improvements in productivity

d) Employee Benefits

i) Supplements to compensation

ii) May include such things as vacation time, holidays, health insurance,

retirement compensation

iii) A limited but growing number of small business now use flexible benefit

programs (or cafeteria plans) which allow employees to select the types of

benefits they wish to receive.

5) Special Issues in Human Resource Management

LO5: Discuss the human resource issues of co-employment, legal protection,

labor unions, and the formalizing of employer-employee relationships.

a) Co-Employment Agreements

Chapter 20: Managing Human Resources

i) An alternative to direct hiring

ii) Professional employer organizations (PEOs)

b) Legal Protection of Employees

i) Civil Rights Act

(1) Education an prompt response to complaints are the best tools for avoiding

sexual harassment and the possibility of liability claims. The following are

some practical action steps:

(a) Establish clear policies and procedures regarding sexual harassment in

the workplace, and publish this information in an employee handbook.

(b) Define sexual harassment in the handbook and state in no uncertain

terms that it will not be tolerated and that wrongdoers will be

disciplined or fired.

and require employees to report incidents of harassment to

management immediately.

(d) Explain that any and all complaints of sexual harassment will be

investigated fairly and fully (while assuring claimant confidentiality)

and that retaliation against anyone who complains about sexual

harassment will not be tolerated.

(e) Conduct sessions at least once a year to teach employees and managers

(separately) about sexual harassment and the company’s complaint

procedure, and encourage them to use the procedure if harassment

should occur.

ii) Occupational Safety and Health Act

iii) Fair Labor Standards Act (FLSA)

iv) Family and Medical Leave Act

c) Labor Unions

i) Unionization less common in service businesses

ii) Labor unions complicate the relationship between the small company and its

employees

d) Formalizing Employer-Employee Relationships

i) As employees are added the benefits of informality decline and the costs

increase

ii) Goals must be specific, measurable, achievable, realistic, and time-bound

e) The Need for a Human Resource Manager

i) Small firms may not be able to afford a full-time specialist

ii) Certain conditions favor the appointment of a human resource manager in a

small business

(1) Substantial number of employees (100 or more suggested as a guideline)

(2) Employees are represented by a union

(3) Labor turnover rate is high

(4) Need for skilled or professional personnel creates problems in recruitment

or selection

(5) Supervisors or operative employees require considerable training

(6) Employee morale is unsatisfactory

(7) Competition for personnel is keen

Chapter 20: Managing Human Resources

iii) Owner typically functions as human resource manager in small business

ADDITIONAL DISCUSSION QUESTIONS

1. Why is it so important to have high-quality employees?

2. What factor or factors would make you cautious about going to work for a

small business? Could these reasons for hesitation be overcome? How?

3. In what ways is the workforce becoming more diverse, and how do these

changes affect recruitment by small companies?

4. What do you think are the most serious weaknesses in the interviewing

process as conducted at many small businesses? How could these be

remedied?

5. What are the positive and negative features of background checks? How

important are these checks to the selection of high-quality employees?

Background checks are important to businesses to help avoid hiring mistakes.

Employers should check with former employers, school authorities, and other

6. What steps and/or topics would you recommend for inclusion in the

orientation program of a printing firm with 65 employees?

7. What problems are involved in using incentive plans in a small company?

How would the nature of the work affect management’s decision

concerning the use of such a plan?

Some problems are the conflicts between management and labor over

standards, the necessary record keeping, and the negative effects on quality

8 Is the use of an employee stock ownership plan desirable in a small

business? What might lessen such a plan’s effectiveness in motivating

employees?

If the small firm is highly profitable and its total employee group is fully

cohesive, the use of an employee stock ownership plan may be desirable.

9. How does a professional employer organization differ from a temporary

help agency? What are the greatest benefits of co-employment?

Temporary help agencies supply employees who are needed only on a

Chapter 20: Managing Human Resources

2. What adjustments would a small company need to make to its selection

practices if it decided to take on unpaid interns in place of hiring regular,

paid employees?

3. Do you see any ethical issues that should be considered when hiring unpaid

interns? Read the U.S. Departmentof Labor’s Fact Sheet #71, fiInternship

Programs under the Fair Labor Standards Act” (www.dol.gov/whd/regs/

compliance/whdfs71.htm). Do you think Abelson’s use of interns is in

compliance with these regulations?

SUGGESTED SOLUTION TO CASE 20: JASON FRIED AND HIRING

PRACTICES AT 37SIGNALS

1. Do you think Fried’s hiring methods are reasonable? Will they lead to good

hires for his growing company? What are the best features of his approach

(if you believe there are any)?

Fried’s hiring methods offer a very dedicated and systematic approach to

evaluating and retaining the very best candidates for his organization. With a

operational implications to his business.

2. Do you think it is a good idea for Fried to take a pass on the fiperfect” job

candidate because he doesn’t have an attractive job open for them at the

moment? Is it smart for Fried to let talented employees get away by refusing

to create more suitable positions to keep them?