Human Resources Chapter 1 Homework The Ultimate Responsibility Rests With Line Managers

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CHAPTER 1 Managing Human Resources

Chapter 1

MANAGING HUMAN RESOURCES

Opening Case: Managing Human Resources at Google

Since being founded in 1998 by two people with no employees, the firm now has

over 25,000 employees and worth 150 billion. The firm’s success owes much to

its effective management of human resources and its retention of capable

people. The things that Google has done to manage human resources effectively

include careful planning regarding HR needs over time, finding, training and

developing the very best employees, providing opportunities for employees to

create and innovate, treating the employees the way they want employees to

treat the customers, and holding managers responsible for employee

performance. As a result, employees have stayed with Google because the

corporate culture is built on integrity and trust, employees feel that the company

is honest and ethical, and they are given the opportunity to create and be

innovative.

CHAPTER OUTLINE

I. THE STRATEGIC IMPORTANCE OF MANAGING HUMAN RESOURCES

Human resources are assets that require sound management if the

organization is to remain competitive in the future. “Brainpower” industries,

usually heavily based on technology, continue to grow and dominate the

economy. Attracting and retaining superior human talent is increasingly

important for all organizations–business and non-business alike.

A. Satisfying Multiple Stakeholders

Stakeholders are individuals or groups that have interests, rights, or

ownership in an organization and its activities. Customers, suppliers,

employees, and strategic partners are examples of stakeholder groups

(see Exhibit 1.1). Each stakeholder group stands to benefit from a

company’s successes and be harmed by its failures and mistakes. The

B. Owners and Investors

CHAPTER 1 Managing Human Resources

investors, which is to make money by choosing companies to investment

in, has become increasingly complex as difficult to measure assets have

become more important. Tangible assets are relatively easy to measure

and include such assets as inventory, equipment, real estate, and financial

assets. Intangible human assets are comparatively social in nature and

include such organizational characteristics as an employer-of-choice

reputation, the depth of employee talent and loyalty, and the ability to

innovate and change.

Intangible assets affect an organization’s bottom line through complex

chains of causes and effects. The cause–and-effect chain begins with an

approach to managing human resources that attracts talented employees

Teaching Note: CALPERS, the group that controls the California state

C. Customers

Cisco Systems, Amazon.com, and many other firms have found that

improving customer satisfaction by creating new products, reducing costs

and improving quality is a primary means through which human resource

management practices affect success. There is a direct relationship

CHAPTER 1 Managing Human Resources

between how companies manage their employees and customer

satisfaction.

D. Society

The concerns of the owners of businesses may be different from society in

general. Although economists argue that the primary obligation of

management is to maximize shareholders’ profits, average Americans

believe that firms also have an obligation to society in general. Socially

responsible organizations are more attractive to potential employees and

do not just obey the letter of the law, but seek to have a positive impact on

society.

1. Legal Compliance

Formal laws, regulation by government agencies, and, for companies

operating outside the United States, employment laws in other

2. Community Relations

Effective companies respond to community expectations far beyond,

and often much earlier, than the formal codification of those

expectations that takes place through the enactment of laws. Being

proactive, rather than reactive, is the key here. A commitment to

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E. Other Organizations

Companies are becoming more and more interdependent on other

organizations for their long-term success. Given this, other organizations

are often major stakeholders for an organization.

1. Suppliers

2. Unions

Unions represent the employees of a company in negotiating with

3. Alliance Partners

Cooperative relationships with other firms or joint ventures can help

F. Organizational Members (The Employees)

This group includes all employees—top management, managers and

supervisors, specialists, line employees, part-timers, and so on.

Employees have a variety of concerns that include pay and benefits,

quality of work life, and employability.

1. Pay and Benefits

Employees not only want to be paid well they want to be paid fairly. For

example, a national survey of 40,000 women revealed that many feel

2. Quality of Work Life

Employees want to earn a good living and they also want to enjoy a

good quality of life on the job. Such aspects of human resource

management that contribute to a good quality of working life are the

3. Employability

The rapidly changing environment in which companies must compete

today has increased employee uncertainty, insecurity and anxiety.

Teaching Note: The implicit employment contract between firms and

employees has been changing over the past few decades. In the past,

employees often believed that they would remain with the same company

forever, now the average worker will change jobs more than 5 times. How

many of your students have changed jobs? For what reasons? Have they

noticed a change within their own company (if they have been working

there for a long time)?

G. Creating Win-Win Situations

Although the interests of stakeholder groups can vary, they often have

shared interests as well. Managers are learning that a company’s human

resource practices can potentially create synergies between key

stakeholders. In many cases, effective human resource practices can

create win-win solutions for multiple stakeholders in organizations.

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II. GAINING AND SUSTAINING A COMPETITIVE ADVANTAGE

A company has competitive advantage when its customers prefer its products

and/or services over those of its competitors in the marketplace. Human

resources can be used to achieve and sustain competitive advantage in a

number of different ways.

A. Employees Who Are a Source of Added Value

Employees add value by using their skills and knowledge to transform

other resources to produce products and services that improve the bottom

line. “Core” employees are those most closely associated with activities

B. Employees Who Are Rare

If all of its competitors can successfully access the same pool of human

talent as a given organization, there is no advantage for that organization.

By being an “employer of choice” an organization can gain access to the

Teaching Note: Top management teams have been proven to be a source

of sustained competitive advantage. For example, even though Jack Welch

of GE published books about his management style, other companies were

unable to duplicate his success.

C. A Culture that Can’t be Copied

A company culture that is easily duplicated by competitors offers little

advantage. Usually, the most difficult cultures to copy are those that have

evolved over time to suit the specific needs of the organization. Southwest

Airlines (SWA) and FedEx are two examples. At SWA, employees

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III. A FRAMEWORK FOR MANAGING HUMAN RESOURCES

Human resources are all of the people who currently contribute to doing the

work of the organization, as well as those people who potentially could

contribute in the future, and those who have contributed in the recent past.

The best companies understand managing human resources effectively

requires a long-term perspective that is responsive not only to current

employees, but to potential future employees and those who have recently

left the organization. Exhibit 1.2 presents an overall framework that identifies

the various HR activities (e.g., ensuring fairness and legal compliance,

compensating employees) and how they are related to a larger organizational

environment (e.g., leadership, strategy, structure) and external environment

(e.g., economic and political trends, laws and regulations) in the satisfaction

of stakeholder needs (e.g., quality, financial returns, long-term employability).

A key point that is illustrated by this model is that HRM does not occur in a

vacuum.

A. The Importance of the External and Organizational Environments

1. The External Environment in which organizations function and

compete includes labor markets, industry dynamics and economic

2. The Organizational Environment

The organizational environment can also influence HRM activities.

Characteristics such as leadership, company culture, technology and

business strategy all shape how a firm manages its people. The text

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B. Activities for Managing Human Resources

HR activities include the formal HR policies developed by the company as

well as the actual way these policies are implemented. When polices and

practices are not aligned, the company is less than effective. The HRM

activities that companies need to understand include:

1. HR Planning for Alignment and Change—aligning HR practices

with external and organizational environments and with each other

(see Chapter 4 for more information).

2. Job Analysis and Competency Modeling—allocating work to jobs

3. Recruitment and Retaining Qualified Employees—attracting and

keeping qualified employees in the organization (see Chapter 6 for

more information).

4. Selecting Employees to Fit the Job and the Organization—sorting

5. Training and Developing a Competitive Workforce—ensuring that

6. Conducting Performance Management—ensuring that employees

are performing their jobs at a satisfactory level and that they

receive appropriate developmental feedback and recognition (see

Chapter 9 for more information).

7. Developing an Approach to Total Compensation—providing base

8. Using Performance-Based Pay to Achieve Strategic Objectives—

linking monetary and non-monetary rewards with the performance

of employees in order to enhance their motivation and productivity

(see chapter 11 for more information).

9. Providing Benefits and Services—Providing incentives for

organizational membership such as health insurance and various

10. Promoting Workplace Safety and Health—creating a work

11. Unionization and Collective Bargaining—developing effective

partnerships with labor unions in order to achieve organizational

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IV. THE HR TRIAD

In successful firms, managing human resources is done through partnership,

using the skills and knowledge of line managers, human resource

professionals, other administrative staff, and all first-line employees in every

department. These firms recognize that all company managers are

responsible for managing people. No single department alone can effectively

manage a company’s human resources. As a saying at Merck goes, “human

resources are too important to be left to the HR department.” This book treats

managing HR as being shared by everyone in the organization.

This “HR Triad,” as it is called, must be a partnership in order for human

resource management activities to effective. The Exhibit entitled, “The HR

Triad: Roles and Responsibilities for Managing Human Resources,” provides

a summary of what each of the three players must do to support this

partnership.

A. Line Managers Have Always Been Responsible

The owner of a new, small business must wear many hats. Part of that

broad range of responsibilities includes having necessary HR expertise,

B. HR Professionals Provide Special Expertise

People with substantial specialized and technical knowledge of HR issues,

laws, policies, and practices are referred to as HR professionals. A college

degree in HR and/or accreditation from a professional association may

indicate special expertise in HR. See Exhibit 1.3 for the roles played by

HR professionals.

1. Key HR Competencies

Research conducted at the University of Michigan Business School

during the past two decades has identified five major types of

competencies that HR professionals need to be effective:

2. HR Competencies for Global Firms

As companies expand globally, it is important that HR competencies

3. Ethical Behavior

Ethical organizations have an edge in recruiting and retaining the best

employees which ensures the best work force possible to achieve the

Teaching Note: The classic example is Arthur Anderson, the accounting

firm that had been responsible for auditing Enron’s books. One of the top

5 accounting firms at the time, it is no longer in existence due to the

scandal resulting from Enron’s (and their) unethical behavior.

HR professionals are guided by the HR profession’s code of ethics

(see Exhibit 1.4 for the SHRM code of ethics). Specifically, they are

expected to:

• thoroughly understand problems and undertake whatever

C. Employees Share Responsibility

Even non-specialists share the HR responsibility. Employees often write

their own job descriptions, for example. They must assess their own

needs and values, manage their own careers, and provide input for their

own performance appraisals. Other examples of this shared responsibility

are summarized and compared in the HR Triad: Rules and

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Responsibilities for Managing Human Resources exhibit.

V. LOOKING AHEAD: FIVE SPECIAL THEMES

A. Managing Teams

Surveys reveal that managers believe that teamwork is very important for

success as an organization. Exhibit 1.5 lists some of the more common

reasons for using teams at work.

B. Managing the Multicultural Workforce

The issue of cultural diversity has become increasingly important for

employers in recent years. Different dimensions include gender, ethnicity,

religion, sexual orientation, family/marriage status, and other life

C. Managing Globalization

Over the past few decades more and more firms have gone from being

strictly domestic to being truly global. This evolution generally takes three

steps:

• Export goods to 1 or 2 foreign markets

• Manufacture those goods overseas

• Set up operations close to foreign markets

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D. Managing Ethics and Corporate Social Responsibility

Organizations must develop and enforce a code of ethics. HR

professionals can assist with these efforts by developing HR activities that

E. Managing with Metrics

“If you can’t measure it, it doesn’t exist!”—HR professionals use a variety

VI. CURRENT ISSUES

A. Social Media

Social media refers to a set of technologies and communication channels

targeted at forming and enabling a potentially massive community of

Complexity results from rapidly evolving global competition, constant

innovations in products and services, changing organizational structure

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QUESTIONS FOR DISCUSSION AND REFLECTIVE THINKING

1. What has Google been doing that demonstrates the value of managing

human resources? Why do employees stay with Google?

The things that Google does to manage human resources effectively include:

➢ Careful planning regarding HR needs over time.

Reasons why employees have stayed with Google may include:

➢ The corporate culture is built on integrity and trust.

2. Refer to the list of stakeholders and their objectives in Exhibit 1.1. For

each stakeholder group, state at least one additional concern that you

think might shape how organizations manage human resources. Then,

give one specific example of how each stakeholder’s concerns could

affect a major HR activity (e.g., planning, recruitment, compensation,

training, safety and well-being or unionization).

Stakeholder

Additional Concern

How Concern Could Affect HR

Society

Preserving the

environment

This could impact the performance

appraisal system in organization

Owners and

Investors

Stock price

This could impact the compensation

system in an organization because it

would reward managers or employees

based on the financial performance.

Organization

Members

Opportunities for

advancement

by the HR policies and practices of the

terms of recruiting and hiring employees

who can work effectively with a diversity

This could impact the planning function

in terms of determining the needs of the

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3. Give some examples to illustrate the possible consequences that occur

when the daily HR practices of managers are inconsistent with the

organization’s formal HR policies.

One example would be when line managers do not follow the company’s

4. Which member of the HR Triad has the most responsibility for ensuring

that organizations effectively manage their human resources? Explain

your answer.

Although all three members share responsibility, it is ultimately the line

managers who have the most responsibility for effectively managing human

resources. In small companies, or firms that are just starting, there often is no

5. Why are the themes of managing teams, managing multicultural

workforce, managing globalization, managing ethics and CSR, and

managing with metrics so important today? Which of these challenges

are likely to increase in importance over the next decade? Why?

All of the challenges listed above are critical today as they are requirements

for organizational success. As work is becoming more complex and

interdependent, various team structures are needed. The demographics of

the workforce reflect a trend toward greater diversity in terms of age, gender,

CASE STUDY: CAN KNIGHTS APPAREL SATISFY ALL OF ITS

STAKEHOLDERS AND SURVIVE?

DISCUSSION QUESTIONS:

1. Who are the primary stakeholders of Knights Apparel?

Stakeholders mentioned in the case study include the following:

• Joe Bozich, CEO of the privately held firm.

• Spartanburg, SC: the city where the firm is based.

• The 30 factories worldwide with which the firm has contracts.

2. For each stakeholder group, what are their major concerns?

The case study clearly identified the concern of some stakeholders for the

treatment of apparel workers. Although the concerns of other stakeholders were

not clearly identified, it is likely that they may have economic concerns of their

own and not just that of the workers.

• Stakeholders concerned about treatment of apparel workers include

the following.

– Joe Bosich, CEO: sought a higher purpose for the privately held firm.

– Scott Nova and the universities that he represented.

3. Describe the key roles and responsibilities of HR professionals at Knight

Apparel.

4. Do you think this factory will succeed and become a model for

competitors, such as Nike and Adidas? Why, or why not?

CHAPTER 1 Managing Human Resources

VIDEO CASE STUDY: FRUIT GUYS

Instructors: The following video case can be found on the companion DVD. The

video can be used in class as an introductory activity or a post-lecture activity, as

well as an online assignment for those students using CourseMate.

DISCUSSION QUESTIONS:

1. When Chris started Fruit Guys in 1998, his leadership qualities included

vision, value and a mission. Why was that not enough to prevent the

problems his firm encountered in 2001?

2. In the early period of his firm, Chris realized that he had trained

someone to become his competitor. How did that impact on his HR

management?

3. In selecting people for his executive team, Chris seeks not only

qualified people but also those who he can trust to reflect the company

culture. Why is that especially important in a company that is growing

and undergoing change?

4. Chris and his sister have grown their organization internally thus far.

From an HR perspective, would you recommend growth through M &A –

mergers and acquisitions?

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