Chapter 10 – Human Resources Management
10-1
10
chapter
Human Resources Management
Learning Objectives 2
Key Student Questions 3
Class Roadmap 4
Bottom Line 13
Social Enterprise 14
Lecturettes 15
CHAPTER CONTENTS
Chapter 10 – Human Resources Management
10-2
1 Discuss how companies use human resources management to
gain competitive advantage.
2 Give reasons why companies recruit both internally and external-
ly for new hires.
3 Identify various methods for selecting new employees.
LEARNING OBJECTIVES
Chapter 10 – Human Resources Management
10-3
Most students are very interested in Human Resources Management (HRM) because they have personal
experience with HR policies or practices that they feel are unfair. Downsizing, performance manage-
ment, and legal issues are especially likely to create conversation. Questions you might hear include:
1. “How do companies decide who to lay off during a downsizing?
How you answer these questions depends on whether your class needs more specific examples to under-
stand concepts, or if you want to move away from the individual situation, and get the class to consider a
broader, more strategic approach to Human Resources.
• To get more specific examples, ask the student asking the question if they will be willing to
tell the class a little more about why they are asking the question. Have them elaborate on the
situation and background, and then ask the class what they think. When answering the ques-
• When trying to get students to look at the bigger question from the perspective of either cor-
porate strategy or general laws, ask them to take a step back and consider the question they
are asking from another perspective. For example, students who ask the question “How do
companies decide who to lay off during a downsizing?” are likely to have been laid off them-
The third question (“What should I do if I’m asked an illegal question during an interview?”) deserves
special mention. One response to this question is, “Answer the question, proceed with the interview,
Teaching Tip:
The Nolo Press in Berkeley offers an excellent collection of articles and books that summarize the
laws pertaining to today’s employment relationships. Before teaching this class, go to
1 Steingold, Fred S., The Employer’s Legal Handbook (7th Edition), Nolo Press, 2005.
KEY STUDENT QUESTIONS
Chapter 10 – Human Resources Management
10-4
Management in Action
How Google Lands the Best Employees in a Tough Job Market
We continue to hear that U.S. universities are not preparing enough software developers and en-
gineers to meet employers’ demands, yet Google receives about 2 million job applications a year
and hires the best of the best. What is their secret? Part of the answer is found in how the com-
LO 1: Discuss how companies use human resources management to gain competitive ad-
vantage.
A. Human Resources Management (HRM) deals with formal systems for managing people at
work.
B. People and management policies, like other resources, become a competitive advantage for a
company when they:
1. create value
E.G.
Use Example 10.1 – Human capital here
D. The HR planning process (Exhibit 10.2)
CLASS ROADMAP
Chapter 10 – Human Resources Management
10-5
1. The HR planning process occurs in three stages:
a. Planning ensures that the right number and types of people are available, where the com-
pany is headed, in what businesses it plans to be, what future growth is expected, and so
2. Demand forecasts
a. Determine how many and what types of people are needed.
3. Labor supply forecasts
a. Estimates of how many and what types of employees the organization actually will have.
4. Reconciling supply and demand
a. Once managers have a good idea of both the supply and demand for various types of em-
ployees, they can start developing approaches for reconciling the two.
b. Organizations may find that they need more people than they currently have.
c. Organizations may find that they have more people than they need.
5. Job analysis
a. It tells the HR manager about the job itself: the essential tasks, duties, and responsibilities
involved in performing the job.
LO 2: Give reasons companies recruit both internally and externally for new hires.
A. Recruitment
1. Recruitment activities help to increase the pool of candidates that might be selected for a job.
2. Internal recruitment advantages – employers know their employees, and employees know
Chapter 10 – Human Resources Management
10-6
LO 3: Identify various methods for selecting new employees.
B. Selection
1. Selection builds on recruiting and involves decisions about whom to hire. (See Exhibit 10.3.)
2. Applications and resumes provide basic information to prospective employers. Typically
include information about the applicant’s name, educational background, citizenship, work
experience, certifications, and the like.
3. Interviews are the most popular selection tool. Structured interviews conduct the same in-
7. Drug testing has become more complicated for employers in the growing number of states
that have legalized the use of marijuana for legal purposes. However, most state medical ma-
rijuana laws do not include employment protections for workers.
8. Cognitive ability tests measure a range of intellectual abilities, including verbal comprehen-
sion and numerical aptitude. (Exhibit 10.4)
9. Performance tests are procedures in which the test taker performs a sample of the job.
E.G.
Use Example 10.3 – Selection tests here
C. Workforce reductions
1. Layoffs are a result of the massive restructuring of American industry brought about by mer-
gers and acquisitions, divestiture, and increased competition. Outplacement is the process of
D. Legal Issues and Equal Employment Opportunity (See Exhibit 10.6)
Chapter 10 – Human Resources Management
10-7
1. Fair Labor Standards Act (1938) – Distinguishes between exempt and non-exempt employ-
ees, creates child labor laws.
2. Equal Pay Act ( 1963) – Prohibits gender-based discrimination.
5. Executive Orders 11246 and 11375 (1965) – Prohibits employment discrimination by federal
contractors, created Office of Federal Contract Compliance Programs.
6. Age Discrimination in Employment Act (1967) – Prohibits employment discrimination against
people older than 40.
LO 4: Evaluate the importance of spending on training and development.
A. Training and development annual spending by employers on formal training is over $164 bil-
lion.
1. Overview of the training process
a. Training usually refers to teaching lower-level employees how to perform their present
jobs.
2. Types of training
a. Orientation training is typically used to familiarize new employees with their new jobs,
work units, and the organization in general
b. Team training has taken on more importance as organizations reorganize to facilitate in-
Multiple Generations at Work
Developing Soft Skills Will Help College Students’ Career Prospects
Chapter 10 – Human Resources Management
A recent study suggests that many college students expect their newly acquired hard skills, like the ability
to design a website, develop a recruiting plan, or use the latest accounting software, to be enough to
E.G.
Use Example 10.4 – Types of training here
Management in Action –
Progress Report
Just as Google built its business on sorting through vast amounts of data to provide computer users the
information they need, Google’s approach to hiring and training is based on analyzing data about employ-
ees. What does Google look for when hiring candidates? According to Laszlo Bock, Chief People Officer,
it boils down to the following attributes: 1) ability to learn and apply knowledge to solve problems, 2)
willingness to lead and follow others, 3) humility when faced with new or opposing information, and 4)
desire to take ownership and defend ideas.
• Discuss why you think Google wants to hire people who possess the four attributes mentioned above.
Google needs employees who are quick to learn and apply problem solving skills. In a world of consist-
• How could Google’s approach to management training address the training needs of its nonmanage-
ment employees?
For management employees, Google studied data from employee surveys, managers’ performance ap-
LO 5: Explain alternatives for who appraises an employee’s performance.
1. Performance appraisal is the assessment of an employee’s job performance.
2. Performance appraisal has two basic purposes:
a. Administrative purposes
b. Developmental purposes.
A. What do you appraise?
Chapter 10 – Human Resources Management
10-9
1. Trait appraisals involve subjective judgments about employee performance. They contain
dimensions such as initiative, leadership, and attitude, and ask raters to indicate how much of
each trait the employee possesses.
2. Behavioral appraisals focus more on observable aspects of performance. They focus on spe-
cific, prescribed behaviors, which can help ensure that all parties understand what the ratings
B. Who should do the appraisal?
1. Managers and supervisors are the traditional source of appraisal information since they are
often in the best position to observe an employee’s performance.
2. Peers and team members see different dimensions of performance.
E.G.
Use Example 10.5 – 360-degree appraisal here
C. How do you give employees feedback?
1. Providing growth and development requires understanding and support; however, the manag-
er must be impersonal and be able to make tough decisions.
2. A useful PA interview format to use when an employee is performing below acceptable
standards is as follows:
a. Summarize the employee’s specific performance.
b. Describe the expectations and standards, and be specific.
g. Document the meeting.
3. Follow-up meetings may be needed. Guidelines for giving feedback to an average employee:
a. Summarize the employee’s performance, and be specific
Chapter 10 – Human Resources Management
10–10
LO 6: Describe the fundamental aspects of a reward system.
A. Pay decisions (See Exhibits 10.10 & 10.11)
1. Pay level refers to the choice of whether to be a high-, average-, or low-paying company.
B. Incentive systems and variable pay
1. Individual incentive plans consist of an objective standard against which a worker’s perfor-
mance is compared. It is the most common type of incentive plan.
2. Gainsharing plans concentrate on saving money.
E.G.
Use Example 10.6 – Incentive pay systems here
C. Executive Pay and Stock Options
1. The gap between the executive pay and the average pay of employees has widened considera-
D. Employee benefits
1. Three basic required benefits are:
a. Workers’ compensation
V. Designing Reward Systems
Chapter 10 – Human Resources Management
spend on benefits that fit their unique needs
E. Legal Issues in Compensation and Benefits
1. The Fair Labor Standards Act (FLSA) of 1938 set minimum wages, maximum hours, child
labor standards, and overtime pay provisions.
2. The Equal Pay Act (EPA) of 1963 prohibits unequal pay for men and women who perform
F. Health and safety
The Occupational Safety and Health Act (OSHA) of 1970 requires employers to pursue work-
place safety.
Teaching Tip:
LO 7: Summarize how unions and labor laws influence human resources management.
A. Labor relations is the system of relations between workers and management
B. Labor laws
1. The National Labor Relations Act ushered in an era of rapid unionization by:
a. Declaring labor organizations legal.
C. Unionization
VI. Labor Relations
Chapter 10 – Human Resources Management
10–12
1. Through a union organizer or local union representative, workers learn what benefits they
may receive by joining.
2. Why do workers vote for a union:
a. Economic factors.
D. Collective bargaining
1. Arbitration uses a neutral third party to resolve a labor dispute.
E.G.
Use Example 10.7 – Collective bargaining here
E. What does the future hold?
1. In recent years, union membership has declined to about 11 percent of the U.S. labor force.
2. Elimination of inefficient work rules, the introduction of profit sharing, and a guarantee of no
Management in Action –
Onward
Google is now facing competition for hiring the best employees from other hot high-tech companies such
as LinkedIn and Dropbox. How will Google keep its employees from leaving for these and other firms?
One way Google has addressed this issue is through lucrative compensation, but tech workers care also
about the excitement of helping to build something new. Google uses its expertise to analyze the work-
ing conditions and benefits that matter most to employees. The company also analyzed data about attrition
among female employees to find out what would keep them onboard.
• How is Google’s approach to employee benefits more effective than a simple decision to offer the big-
gest benefits package?
Knowledge workers care about more than compensation. Simply piling on benefits would add to
• Do you think Google’s HR strategy will enable it to maintain a competitive advantage? Why or why
not?
Answers will vary. In explaining their opinion, students should consider the validity and reliability of
Chapter 10 – Human Resources Management
10–13
p. 333: How might an organization identify candidates with innovative ideas?
Answers will vary, and thinking about this question introduces the relevance of selection methods, dis-
cussed next. It’s not enough simply to hire outside candidates, because not every outside candidate will be
equally creative or have the necessary knowledge to apply innovation constructively. Some methods that
p. 344: How might you measure quality improvements from training salespeople?
Answers will vary. This question applies an important point about training: it should be conducted not
just to add to knowledge, but to give employees knowledge and skills they will use to deliver better per-
p. 350: What kind of feedback is most likely to be effective?
The text mentions feedback that is specific and constructive—that is, related to clear goals for behaviors
p. 353: Think about the activities of a store employee. What could a Walmart employee do to earn a bo-
nus for meeting quarterly profit goals?
Answers will vary. Some students will be more familiar than others with the work of a retail employee,
but every student should have observed store workers at some point. Some hourly employees in a
p. 355: What benefits have you received from an employer? Did you ever consider the cost of those bene-
fits?
BOTTOM LINE
Chapter 10 – Human Resources Management
10–14
Are Business School Graduates Willing to Work for Social Enterprises?
1. Assume you were the manager of a social enterprise like Greenling. How would you go
about attracting individuals to work for your organization?
It is important that individuals are found that believe in the mandate of Greenling, and are
that may not have the highest pay for someone that may be inexperienced.
2. To what degree would you or your fellow students consider working for a social enter-
prise?
SOCIAL ENTERPRISE
Chapter 10 – Human Resources Management
10–15
LECTURETTE 10.1: EO/AAP
EEO/AAP DEFINED
1. Equal Employment Opportunity (EEO) legislation makes it unlawful to discriminate on the basis of
age, sex, race, color, religion, or national origin in all employment practices including hiring, firing,
layoffs, promotions, wages, training, disciplinary action, and other terms, privileges, conditions, or
MAJOR EEO LEGISLATION
1. Title VII of the Civil Rights Act of 1964, as amended in 1972, and the Equal Employment Act of
1978-outlawed discrimination in employment decisions based on race, color, sex, religion, and
national origin for employers of 15 or more employees in both the public and private sectors.
2. Executive Orders 11141, 11246, and 11375 outlawed discrimination in employment decisions, based
on age, sex, race, religion, and national origin for federal government contractors and subcontractors.
3. Equal Pay Act of 1963 – outlaws wage discrimination on the basis of sex and requires equal pay for
equal work.
LECTURETTE 10.2: The Pros and Cons of Employee Turnover
A FRAMEWORK FOR ANALYZING EMPLOYEE TURNOVER
1. Employee turnover is inherently costly, and employers should carefully document those costs.
2. Employee turnover is a controllable and manageable challenge for today’s manager.
2 1 Adapted from Andrew Abrams and Gary Tidwell, “Affirmative Action,” Business & Economic Review, October- December 1989,
27-29; Aaron Bernstein, ‘Comparable Worth: It’s Already Happening,” Business Week, April 28,1986, 52-54; Gene Burton and Dev
LECTURETTES
Chapter 10 – Human Resources Management
10–16
POSITIVE CONSEQUENCES OF EMPLOYEE TURNOVER
1. Positive Consequences for the Organization
➢ The opportunity to replace leavers with superior performers.
➢ The opportunity for the infusion of new knowledge and new technology through replacements.
2. Positive Consequences for Individual Leavers
➢ Increased earnings.
➢ Career advancement.
3. Positive Consequences for Individual Stayers
➢ Increased opportunity for internal mobility.
4. Positive Consequences for Society
➢ Mobility to new emerging industries is essential to continued economic growth.
NEGATIVE CONSEQUENCES OF EMPLOYEE TURNOVER
1. Negative Consequences for the Organization
➢ Increased costs of recruitment, selection, hiring, assimilating, and training replacements.
Chapter 10 – Human Resources Management
➢ Out-processing costs include separation pay and the potential costs of group performance decline
2. Negative Consequences for Individual Leavers
➢ Loss of seniority and related perquisites.
➢ Loss of non-vested benefits.
3. Negative Consequences for Individual Stayers
➢ Disruption of social and communication patterns.
4. Negative Consequences for Society
➢ Increased costs of production.
➢ Regional inability to keep or attract an industry.3