Chapter 12 – Building and Managing Human Resources
12-1
Chapter 12
Building and Managing Human Resources
Learning Objectives 12-2
Key Definitions/Terms 12-2
Chapter Overview 12-4
Lecture Outline 12-4
Lecture Enhancers 12–24
Management in Action 12–27
Building Management Skills 12–29
Managing Ethically 12–31
Small Group Breakout Exercise 12–32
Be the Manager 12–34
Case in the News 12–35
Supplemental Features 12-35
Manager’s Hot Seat 12-35
Instructor’s PowerPoint Slides 12–36
CHAPTER CONTENTS
Chapter 12 – Building and Managing Human Resources
12-2
LO 12-1. Explain why strategic human resource management can help an
organization gain a competitive advantage.
LO 12-3. Discuss the training and development options that ensure
organizational members can effectively perform their jobs.
LO 12-4. Explain why performance appraisal and feedback are such
crucial activities, and list the choices managers must make in
designing effective performance appraisal and feedback
procedures.
LO 12-6. Understand the role that labor relations play in the effective
management of human resources.
cafeteria-style benefit plan A plan from which
formal appraisal An appraisal conducted at a set
time during the year and based on performance
LEARNING OBJECTIVES
KEY DEFINITIONS/TERMS
Chapter 12 – Building and Managing Human Resources
12-3
job analysis Identifying the tasks, duties, and
responsibilities that make up a job and the
knowledge, skills, and abilities needed to perform
type of skills or knowledge they need to acquire.
objective appraisal An appraisal that is based on
facts and is likely to be numerical.
pay structures The arrangement of jobs into
categories reflecting their relative importance to the
organization and its goals, levels of skill required,
and other characteristics.
performance feedback The process through which
mangers share performance appraisal information
with subordinates, give subordinates an opportunity
applicants and their potential for performing well in
a particular job.
strategic human resource management The
process by which managers design the components
manager’s performance.
training Teaching organizational members how to
perform their current jobs and helping them acquire
the knowledge and skills they need to be effective
Chapter 12 – Building and Managing Human Resources
This chapter examines how managers can tailor their human resource management system to their
organization’s strategy and structure. We discuss in particular the major components of human resource
management: recruitment and selection, training and development, performance appraisal, pay and
benefits, and labor relations. By the end of this chapter, students will understand the central role human
resource management plays in creating a high-performing organization.
NOTE ABOUT INSTRUCTOR ‘S
POWERPOINT SLIDES
The Instructor PowerPoint Slides include most Student
PowerPoint slides, along with additional material that
can be used to expand the lecture. Images of the
Instructor PowerPoint slides can be found at the end of
this chapter on page 12–39.
BASIC POWERPOINT SLIDE 1
(INSTRUCTOR’S POWERPOINT SLIDE 1)
Chapter Title
Management Snapshot (pp. 401-402)
Treating Employees Well Leads to Satisfied Customers and Low Turnover at the Four
Seasons
How Can Managers Promote Excellent Customer Service in an Industry Known for High Employee Turnover?
In an industry in which annual turnover rates are relatively high, the turnover rate for full–time employees at Four
Seasons Hotel and Resorts is 12.7%, which is among the lowest in the industry. Evidently employees and customers
alike are satisfied with how they are treated at the Four Seasons. Understanding that the two are causally linked is
perhaps the key to the company’s success.
The founder and chairman of the board of the Four Seasons, Isadore Sharp, sought to provide the kind of personal
service that would really help business travelers on the road. Because of this, employees at the Four Seasons view
each customer as an individual with his or her own needs. In return, customers are likely to be both loyal and highly
satisfied.
Sharp always realized that for employees to treat customers well, the Four Seasons needs to treat its employees well.
Salaries are relatively high at the Four Seasons by industry standards; employees participate in a profit-sharing plan;
and the company contributes to their 401(k) plans. The Four Seasons pays 78% of employees’ health insurance
premiums and provides free dental insurance. Also, a new employee who has worked for the Four Seasons for six
months can stay for three nights free at any Four Seasons hotel or resort in the world. After a year of employment,
this benefit increases to six free nights, and it continues to grow as tenure with the company increases.
LECTURE OUTLINE
Chapter 12 – Building and Managing Human Resources
I. Strategic Human Resources Management
Human resource management includes all the
activities managers engage in to attract and retain
employees and to ensure that they perform at a high
level and contribute to the accomplishment of
organizational goals.
Strategic human resource management is the
process by which managers design the components of
an HRM system to be consistent with each other, with
other elements of organizational architecture, and
with the organization’s strategy and goals.
The objective of strategic HRM is the development of
an HRM system that enhances efficiency, quality,
innovation, and responsiveness—the four building
blocks of competitive advantage.
As part of strategic human resources management,
some managers have adopted “Six Sigma” quality
improvement plans. These plans ensure that its
organization’s products and services are as free of
error or defects as possible through a variety of
human resources-related initiatives.
A. Overview of the Components of HRM
1. Managers use recruitment and selection to
attract and hire new employees who have the
abilities, skills, and experiences that will help an
process because of changes in technology, the
environment, and organizational goals and
LO 12-1: Explain why
strategic human
resource
management can
help an
organization gain
a competitive
advantage.
POWERPOINT SLIDES 12-4
TO 12-6
TEXT REFERENCE
MANAGEMENT INSIGHT:
Recruitment Selections and
Training at Zappos
Nothing is conventional about
the online retailer Zappos.
Think accountants running
Pinewood Derby car races
during the workday, a
conference room that a team
decorated to simulate a log
cabin, and employees ringing
cowbells and blowing horns
during visitor tours. As a
philosophy at Zappos is having
a happy workforce of satisfied
employees who actually want
Chapter 12 – Building and Managing Human Resources
a. Performance appraisal can provide
managers with the information they need to
make good human resources decisions.
b. It also allows managers to regularly
evaluate their subordinates’ performance in
order to provide them with valuable
information about their strengths and
weaknesses.
c. On the basis of performance appraisals,
managers distribute pay to employees.
d. By rewarding high-performing
organizational members, managers increase
the likelihood that these human resources are
motivated to continue their high level of
performance and are more likely to stay with
the organization.
4. Benefits such as health insurance are important
outcomes that employees receive by virtue of
a. Managers must ensure that all five of these
components fit together and complement their
national laws and regulations that organizations
have an equal opportunity to obtain employment
regardless of their sex, age, race, country of
origin, religion, age, or disabilities.
Zappos goes to great lengths to
effectively manage human
resources. Potential new hires
are interviewed by human
resources and by the
department doing the hiring. If
human resources and the hiring
manager disagree in their
assessments of an applicant,
Hsieh interviews the applicant
himself and makes the final
decision.
Newly hired employees receive
extensive training. Experienced
employees are encouraged to
continue to grow and develop
on the job.(pp. 394-395)
Managing Human Resources
at Semco
Education.
4. Other laws, such as the Occupational Safety
and Health Act of 1970, require managers to
ensure that employees’ health is protected from
workplace hazards and safety standards are met.
5. EEO laws and their enforcement make the
effective management of diversity a legal
imperative.
Department of Justice that enforces most of
the EEO laws and handles discrimination
complaints.
employees and employees with AIDS.
III. Recruitment and Selection
Recruitment includes all the activities that managers
Selection is the process by which managers determine
the relative qualifications of job applicants. Before
actually recruiting and selecting employees, managers
Semco prides itself on being a
premier provider of goods and
services in its markets and has
loyal customers. The head of
the firm, Ricardo Semler, is the
first to admit that Semco’s
track record of success is due
to its human resources—its
employees. Semco has no
rules, regulations, or
in other companies.
Human resources strives to
ensure that all selection
be hired. The result is that both
Semco and new hires make
informed decisions and are
mutually committed to making
the relationship a success.
which they rotate through
different positions and units of
their own choosing for about a
year. In this way, the new
Chapter 12 – Building and Managing Human Resources
a. Demand forecasts estimate the
qualifications and numbers of employees an
organization will need, given its goals and
strategies.
b. Supply forecasts estimate the availability
and qualifications of current employees now
and in the future, as well as the supply of
qualified workers in the external labor
market.
2. Managers sometimes decide to outsource to fill
some HR needs. Outsourcing is when managers
contract with people who are not members of
their organization to provide goods and services.
a. Managers sometimes outsource because it
b. Outsourcing does have disadvantages;
managers may lose some control over the
quality of goods and services.
2. A job analysis can be done in a number of
ways, including observing current employees as
demonstrate that they are
making valuable contributions
and deserve to be “rehired.”
Employees also can choose
how they are paid from a
combination of 11 different
compensation options. (pp.397-
398)
LO 12-2: Describe the
steps managers
take to recruit
and select
organizational
members
POWERPOINT SLIDES 12-10
TO 12-13
a. Often managers rely on questionnaires
compiled by jobholders and their managers
that ask about the skills and abilities needed
to perform the job, job tasks and the amount
of time spent on them, responsibilities,
supervisory activities, equipment used,
reports prepared, and decisions made.
C. External and Internal Recruitment
1. External Recruiting: When managers recruit
externally, they look outside the organization for
people who have not worked for the organization
previously.
a. In spite of the many downsizings and
corporate layoffs that have taken place in
recent years, external recruiting remains a
difficult task because job seekers often do not
have the skills and abilities to fill positions
that are open.
i. Both job seekers and employees are
relying with increasing frequency upon
employment websites on the Internet to
make connections with each other.
fresh approach to problems and be up to date
with technology.
c. Disadvantages include the high cost of
external recruitment, the external recruit’s
lack of knowledge about the inner workings
of the organization, and the uncertainty as to
whether they will actually be good
performers.
responsibility or authority levels, or a promotion.
POWERPOINT SLIDE 12-14
TO 12-15
POWERPOINT SLIDES 12-16
TO 12-18
Chapter 12 – Building and Managing Human Resources
i. Internal applicants are already familiar
with the organization, managers already
have information about candidates’ skills
and actual behavior, and it can help boost
levels of employee motivation.
ii. For those who may not be ready for a
promotion, a lateral move can alleviate
boredom.
iii. Also, internal recruiting is normally
less time-consuming and expensive.
c. Disadvantages of internal recruiting
include a pool of candidates that may be
limited, a tendency among those candidates to
be “set” in the organization’s ways, and a
lack of suitable internal candidates.
D. The Selection Process: Managers need to find out
whether each applicant is qualified for the position
and whether he or she is likely to be a good
performer. If multiple candidates meet these two
conditions, managers must determine which are likely
to be better performers than the others. They have
several selection tools to help them sort out the
relative qualifications and appraise their potential to
be good performers.
1. Background Information: To aid in the
selection process, managers obtain background
information from resumes and job applications.
a. This information can be helpful both to
screen out applicants who are lacking key
qualifications and to determine which
qualified applicants are more promising than
others.
POWERPOINT SLIDE 12-19
TO 12-20
Chapter 12 – Building and Managing Human Resources
c. An unstructured interview proceeds more
like an ordinary conversation. Instead of
asking fixed questions, the interviewer asks
probing questions to determine what the
candidate is like.
d. Structured interviews are superior to
unstructured interviews because they are
performance, such as verbal comprehension.
b. Personality tests measure personality
traits and characteristics relevant to job
performance. Use of personality tests for
hiring is controversial.
5. Performance Tests: Performance tests
measure job applicants’ performance on actual
in a variety of activities over a few days.
b. Throughout the process, current managers
observe the candidates’ behavior and measure
Chapter 12 – Building and Managing Human Resources
6. References: Applicants for many jobs are
required to provide references from former
employers or other sources who know the
applicants’ skills, abilities, and other
characteristics. These individuals are asked to
provide candid information about the applicant.
a. References are often used at the end of the
selection process to confirm a decision to
hire.
b. Several recent lawsuits filed by applicants
have caused managers to be increasingly
wary of providing any kind of negative
information in a reference, even if it is
accurate.
ii. The reliability of interviews can be
increased if two or more different
interviewers interview the same
candidate.
b. Validity is the degree to which a tool or
test measures what it claims to measure.
new responsibilities, and adapt to changing
conditions.
2. Training primarily focuses on teaching
organizational members to perform their current
jobs and helping them acquire the knowledge and
skills they need to be effective performers.
3. Development focuses on building the
knowledge and skills of organizational members
so that they will be prepared to take on new
responsibilities.
4. Training tends to be used more often at lower
levels in the organization. Development tends to
be used more frequently with professionals and
managers.
5. Before creating training and development
programs, managers should perform a needs
assessment to determine which employees need
training or development and what type of skills or
knowledge to need to acquire.
A. Types of Training: There are two types of
training: classroom instruction and on-the-job
instruction, employees acquire knowledge and
skills in a classroom setting.
a. This may take place within the
organization or out side it.
b. Some organizations establish their own
LO 12-3: Discuss the
training and
development
options that ensure
organizational
members can
effectively perform
their jobs
POWERPOINT SLIDES 12-22
TO 12-27
Chapter 12 – Building and Managing Human Resources
ii. During role-playing, trainees either
directly participate in or watch others
perform actual job activities in a
simulated setting.
iii. In a simulation, key aspects of the
work situation and job tasks are
duplicated as closely as possible in an
artificial setting.
2. On-the-job training: In on-the-job training,
learning occurs in the work setting as employees
perform their jobs.
a. Co-workers or supervisors can provide on-
the-job training, or it occurs simply as
jobholders gain experience doing the job.
b. Managers often use on-the-job training on
a continuing basis to ensure that their
subordinates keep up-to-date with changes in
goals, technology, products, or customer
1. Varied Work Experiences: Top managers
need to understand and have expertise in different
functions, products and services, and markets.
a. To develop managers who will have this
expertise, employees with high potential are
given a wide variety of job experiences in
both line and staff positions.
b. With organizations becoming more global,
managers need to develop an understanding
Chapter 12 – Building and Managing Human Resources
have found that formal mentorship programs
can make valuable contributions to the
development of managers and employees.
2. Formal Education: Many large corporations
reimburse employees for tuition expenses they
incur while taking college courses and obtaining
advanced degrees.
a. This is an effective way to develop
employees who are able to take on new
responsibilities and more challenging
positions.
b. To save time and travel costs, managers are
increasingly relying on long distance learning
to formally educate and develop employees.
c. Videoconferencing technologies are being
used to teach courses on video screens in
corporate conference rooms and business
schools are customizing courses and degrees
to fit the development needs of employees in
a particular company.
C. Transfer of Training and Development:
Whenever training and development takes place off
the job or in a classroom setting, it is vital for
managers to promote transfer of the knowledge and
skills to the actual work situation.
V. Performance Appraisal and Feedback
Performance appraisal is the evaluation of
employees’ job performance and contributions to the
information on which to base human
resources decisions.
and list the
choices managers
must make in
Chapter 12 – Building and Managing Human Resources
12–16
b. Performance appraisal can help managers
determine which workers are candidates for
training and development.
c. Performance feedback encourages high
levels of employee motivation and
performance.
d. Performance feedback can provide both
good and poor performers with insight into
their strengths and weaknesses.
A. Types of Performance Appraisal: Performance
appraisal focuses on the evaluation of traits,
behaviors, and results.
1. Trait Appraisals: When trait appraisals are
used, mangers assess subordinates on personal
characteristics that are relevant to job
performance, such as skills, abilities, or
personality.
a. The disadvantages of trait appraisals are as
follows:
i. Possessing a certain trait does not
ensure that the characteristic will actually
be used on the job and result in high
designing
effective
performance
appraisal and
feedback
procedures.
POWERPOINT SLIDES 12-28
TO 12-34
Chapter 12 – Building and Managing Human Resources
a. Behavior appraisals are especially useful
when how workers perform their jobs is
important.
b. Behavior appraisals have the advantage of
providing employees with clear information
about what they are doing right and wrong
and how they can improve their performance.
c. Also, performance feedback from behavior
appraisals is more likely to lead to
performance improvements since behaviors
are much easier for behaviors to change than
traits.
3. Results Appraisals: With results appraisals,
when results are being appraised because
results tend to be easier to quantify than
traits or behaviors.
b. Subjective appraisals are based on
managers’ perceptions, there is always
the chance that they are inaccurate.
ii. Managers and researchers have devoted
considerable time and effort to determine the best
Performance appraisal is an important part of most
managers’ job duties. However, appraisals by
managers can be augmented by appraisals from other
sources.
1. Self, Peer, Subordinates, and Clients
a. Self-appraisals involve an employee
assessing his or her own performance.
i. The self-appraisal is a supplement to
the manager’s appraisal.
b. Peer appraisals are provided by an
employee’s co-workers and can be
motivational to employees who work in
groups or teams.
i. Many companies are now asking
subordinates to appraise their managers’
performance.
c. Sometimes customers provide assessments
d. Although appraisals from each of these
sources can be useful, there are drawbacks.
Subordinates sometimes may be inclined to
inflate self-appraisals. Managers who are
appraised by their subordinates may fail to
take needed but unpopular actions out of fear
that their subordinates will appraise them
negatively.
evaluations from these sources.
b. Trust is a critical ingredient if this type of
performance appraisal is going to be
effective.
c. Research suggests that 360-degree
appraisals should focus on behaviors rather
than traits or results, and that managers need
to carefully select appropriate raters.
d. Appraisals tend to be more accurate when
Chapter 12 – Building and Managing Human Resources
been trained in how to use 360-degree
appraisal forms.
e. Managers need to think carefully about the
extent to which 360-degree appraisals are
suitable for certain jobs and be willing to
modify any system they implement when
they become aware of unintended problems
the appraisal system may create.
C. Effective Performance Feedback: In order for
the performance appraisal and feedback to encourage
and motivate high performance, managers must
provide their subordinates with performance
feedback. Managers can use both formal and informal
appraisals.
1. Formal appraisals are conducted at set times
during the year and are based on performance
dimensions and measures that have been specified
in advance.
a. An integral part of a formal appraisal is a
meeting between the manager and the
subordinate in which the subordinate is given
feedback on performance.
b. Because they realize the value of
ongoing progress.
3. Guidelines for effectively giving performance
feedback include the following:
worker’s ability to improve.
b. Approach performance appraisal as an
Chapter 12 – Building and Managing Human Resources
finding, not criticizing.
c. Express confidence in a subordinate’s
ability to improve.
d. Provide performance feedback both
formally and informally.
e. Praise instances of high performance and
areas of a job in which a worker excels.
f. Avoid personal criticisms and treat
subordinates with respect.
g. Agree to a timetable for performance
improvements.
VI. Pay And Benefits
Pay includes employees’ base salaries, pay raises, and
bonuses. It is determined by a number of factors,
including characteristics of the organization and of
the job and levels of performance.
Employee benefits are based on membership in an
organization. They include sick days, vacation days,
medical and life insurance.
A. Pay Level: Pay level is a broad, comparative
concept that refers to how an organization’s pay
incentives compare, in general, with those of other
organizations in the same industry employing similar
kinds or workers.
1. Managers must decide whether they want to
offer relatively high, average, or low wages. High
2. Low wages give a company a cost advantage
LO 12-5: Explain the
issues managers
face in
determining
levels of pay and
benefits
POWERPOINT SLIDE 12-35
TO 12-38