CHAPTER 14
Managing Human Resources in Organizations
CHAPTER SUMMARY
This chapter explores how organizations manage their human resources. The topics covered in the chapter
include the environmental context of human resource management (HRM) followed by a description of
how organizations attract, develop, and maintain human resources. The chapter concludes with a
discussion of labor relations and emerging issues in human resource management.
LEARNING OBJECTIVES
After covering this chapter, students should be able to:
1. Describe the environmental context of human resource management, including its strategic
importance and its relationship with legal and social factors.
2. Discuss how organizations attract human resources, including human resource planning, recruiting,
and selecting.
The opening case describes the human resource practices at Wegmans Food Market, a family-owned East
Coast supermarket chain that is well-known for its knowledgeable and friendly employees. Wegman’s
employees get the best benefits package in the industry, including fully paid health insurance. This
extends even to the part-timers. Its 37,000 employees cost the company 15-17 percent of its sales, a figure
that is above the industry average of 12 percent. Yet, the company believes that this expense pays off in
giving the company a competitive advantage.
Discussion Starter: Ask students if they have ever worked in a temporary job. If so, what attracted
LECTURE OUTLINE
I. THE ENVIRONMENTAL CONTEXT OF HUMAN RESOURCE MANAGEMENT
Human resource management (HRM) is the set of organizational activities directed at attracting,
developing, and maintaining an effective workforce.
Chapter 14: Managing Human Resources in Organizations
Teaching Tip: Most business programs have a separate course in human resource management, and
many offer a major or specialization in the area. If any of these apply to your school, point them out to
your students.
A. The Strategic Importance of HRM
1. The HRM function has become more and more important over the past several years as
organizations have come to realize the importance of their human resources. Effective
B. The Legal Environment of HRM
Teaching Tip: Table 14.1 summarizes the discussion of employment laws.
Global Connection: Most foreign countries have far fewer laws regulating human resource
management practices than does the U.S.
1. Equal employment opportunity
a) Title VII of the Civil Rights Act of 1964 forbids discrimination on the basis of sex,
Teaching Tip: Note that Title VII was really the beginning of the legal environment regarding HRM.
c) The Equal Employment Opportunity Commission (EEOC) is a federal agency
Discussion Starter: One of the most controversial issues in the United States today is affirmative
action. Some people believe that affirmative action has outlived its usefulness and that it should be
eliminated. Others think it is still necessary. Ask students for their opinions.
f) The Americans with Disabilities Act (ADA) requires employers to make reasonable
Chapter 14: Managing Human Resources in Organizations
b) The Equal Pay Act of 1963 requires that men and women be paid the same amount
for doing the same job if they have the same qualifications
Extra Example: Female workers, on average, make only about 75 percent of what the average male
worker makes. Most of this difference is due to the women’s choice of occupations because the
3. Labor relations
a) The National Labor Relations Act (Wagner Act) establishes guidelines for forming
a union and requires companies to bargain collectively with a properly established
union.
Management Update: President Clinton did, however, order an end to the 1997 strike by American
Airlines pilots. The airline was seen as vital to the continued well-being of the U.S. economy because it
carried 20 percent of all U.S. air passengers on any given day.
4. Health and safety
Discussion Starter: Ask students to comment on the pluses and minuses of each of the various laws
summarized above.
5. Sexual harassment, alcoholism, drug dependence, and AIDS have emerged as significant
legal issues for organizations.
Extra Example: The popular Michael Crichton book and subsequent movie Disclosure (with Michael
Douglas and Demi Moore) featured a case of sexual harassment as its major plot theme.
C. Social Change and HRM
Chapter 14: Managing Human Resources in Organizations
Teaching Tip: Discuss with your students the extent to which the employment-at-will doctrine is more
or less relevant to your state or region.
II. ATTRACTING HUMAN RESOURCES
A. Human Resource Planning
1. Job analysis is a systematic analysis of jobs within an organization.
b) A job specification describes the skills, abilities, and credentials required to
perform the job
2. Forecasting human resource demand and supply requires managers to collect relevant
a) Replacement charts can be used to plan for management positions. These list each
important managerial position, who occupies it now, how long he or she will
probably stay in it before moving up, and who is or soon will be qualified to move
into the position.
Extra Example: A few years ago Disney experienced problems due to the lack of a replacement chart.
shareholders.
b) Employee information systems or skills inventories contain information on each
employee’s education, skills, experience, and career aspirations. They are used to
identify individuals who are ready for a transfer or promotion.
Group Exercise: Have students brainstorm examples of the most important information that should be
included in an employee information system or skills inventory.
3. Matching human resource supply and demand requires managers to plan and deal with
predicted human resources shortfalls or overstaffing.
B. Recruiting Human Resources
2. External recruiting attracts persons outside the organization to apply for jobs. External
recruiting offers firms the chance to introduce new ideas into the company, but it is
riskier.
Chapter 14: Managing Human Resources in Organizations
Teaching Tip: Most business sectors were expanding through the late 1990s, so many firms were
Teaching Tip: Bring in the “help wanted” section from a local paper and read a few ads to your
3. Realistic job previews provide applicants with a real picture of what it is like to perform
the job. They can be used to make sure that they have an accurate understanding of the
job being offered so that their expectations can be met by the job
Teaching Tip: Before they start work, Wal-Mart shows all of its potential new employees a two-hour
C. Selecting Human Resources
1. The organization wants to select applicants that have a high probability of success on the
job. Therefore they gather information about factors that are predictive of future success.
Validation determines the ability of information to predict job performance and the
success of an applicant. There are two types of validation.
a) Predictive validation involves collecting the scores of employees or applicants on
Teaching Tip: If possible, obtain a blank employment application and discuss its content with your
students. Point out what it asks (e.g., education and experience) and what it does not ask (e.g., gender,
ethnicity).
b) Tests measure ability, skill, aptitude, or knowledge that is relevant to the job.
c) Interviews are a popular selection device but a poor predictor of job success.
Extra Example: Tenneco is another example of a firm that makes frequent use of assessment centers
to identify and select managers for promotion to higher levels in the organization.
Chapter 14: Managing Human Resources in Organizations
Extra Example: Another increasingly popular selection test today is honesty tests. Organizations are
III. DEVELOPING HUMAN RESOURCES
After an organization has hired new employees, it then usually invests in developing them so that
they can make more contributions to the firm’s performance.
A. Training and Development
1. Training occurs when the firm teaches operational or technical employees how to do the
job for which they were hired.
Global Connection: Note that Japanese firms tend to spend far more on training than do typical U.S.
firms.
Extra Example: Chaparral Steel emphasizes training. New employees without a high school degree
Extra Example: American Airlines uses a mock airplane cabin to train its flight crews. Trainers play
the roles of passengers, observe how flight crew members handle various assignments and problems,
and then provide feedback.
Teaching Tip: Many business schools have on-site management or executive development centers.
Among the most noteworthy are those at Northwestern, Stanford, the University of Pennsylvania, and
the University of Michigan. Note whether your school has a center or conducts similar programs for
managers.
3. Firms usually have a training plan, which consists of several steps.
a) Assessing training needs is the first step, and it determines what training is needed.
b) Managers must select the methods they will use for training. Common methods
c) Managers must then evaluate the effectiveness of training.
Chapter 14: Managing Human Resources in Organizations
B. Performance Appraisal
Performance appraisal is a formal assessment of how well employees are doing their jobs.
Teaching Tip: Most colleges and universities use teaching evaluations at the end of the semester. Note
Extra Example: Disney and American Express each use a performance appraisal system in which
1. Common appraisal methods usually fall into one of two types: objective and judgmental.
a) Objective measures include actual output, sales, or any other concrete measure of
performance.
Teaching Tip: If possible, obtain a copy of a graphic rating scale that is used to measure performance.
Display it for your students, noting how it is used and its strengths and weaknesses.
Extra Example: An extension of the BARS that some firms are trying is called a Behavioral
Observation Scale, or BOS. Like BARS, a BOS uses behavioral anchors, but also provides an
assessment of the frequency with which various behaviors are exhibited by the employee.
2. In any kind of rating or ranking system, errors or biases can occur.
a) Recency error can occur when an evaluator makes a judgment based on only the
most recent performance.
Chapter 14: Managing Human Resources in Organizations
Teaching Tip: Providing performance feedback is often a difficult undertaking for many managers.
IV. MAINTAINING HUMAN RESOURCES
A. Determining Compensation
Compensation is the financial remuneration given by the organization to its employees in
exchange for their work. Wages are hourly compensation, while salary is pay for total
contribution, not just hours worked. Incentive compensation is pay tied to specific
performance requirements such as bonuses.
1. The wage-level decision is a management decision about whether the firm wants to pay
above, at, or below the going rate for labor in the industry or the geographic area.
2. The wage-structure decision is an attempt to place a value on a job and then group
together the jobs that have similar values. This is frequently accomplished with the use of
3. Individual wage decisions concern how much to pay each employee in a particular job.
Extra Example: Professional sports teams provide a good source of examples to illustrate individual
B. Determining Benefits
Benefits are things of value (other than compensation) provided by the organization to its
workers such as sick leave, vacation, holidays, and unemployment compensation.
1. Recently, organizations have begun to offer nontraditional benefits in an effort to attract
Management Update: Benefit costs—especially for healthcare—are becoming an increasingly critical
area of concern for many organizations. As a result, many are moving to HMOs and other managed
healthcare arrangements.
Teaching Tip: Summarize for students the kinds of benefit options that are provided to faculty at your
college or university.
C. Career Planning
Chapter 14: Managing Human Resources in Organizations
Extra Example: General Electric and Xerox are both recognized for having outstanding career
planning programs for their employees.
V. MANAGING LABOR RELATIONS
Teaching Tip: Note for your students the relative strength and importance of unions in local and
regional business. For example, unions tend to be stronger and more prevalent in the north and
northeast and less prevalent in the south and southwest.
A. How Employees Form Unions
1. Employees must be interested in having a union.
2. Thirty percent of employees must indicate their interest by signing authorization cards. If
5. The union recruits members and elects officers.
B. Collective Bargaining
Collective bargaining is used to reach an agreement on a labor contract between management
and the union that is satisfactory to both parties.
Labor contracts are enforced by the grievance procedure. If an employee feels mistreated, he
Global Connection: Labor relations in England tend to be much more antagonistic than is currently the
case in the United States. English unions are often affiliated with political parties, and strikes tend to be
very common.
VI. NEW CHALLENGES IN THE CHANGING WORKPLACE
A. Managing Knowledge Workers
1. Knowledge workers are employees whose contributions to an organization are based on
B. Contingent and Temporary Workers
1. A contingent worker is anyone not employed full or part time. They are independent
Chapter 14: Managing Human Resources in Organizations
END OF CHAPTER QUESTIONS
Questions for Review
1. Describe the steps in the process of human resource planning. Explain the relationships between the
steps.
The first step is job analysis, in which the content and requirements of each of the organization’s jobs is
2. Describe the common selection methods. Which method or methods are the best predictors of future
job performance? Which are the worst? Why?
Common selection methods include application blanks in which applicants provide factual
interviewer biases and lack of relation to job requirements.
3. Compare training and development, noting any similarities and differences. What are some
commonly used training methods?
Training and development both involve teaching skills to employees. However, training focuses on
4. Define wages and benefits. List different benefits that organizations can offer. What are the three
decisions that managers must make to determine compensation and benefits? Explain each decision.
Wages are one type of compensation and refer to the hourly compensation paid to operating
Questions for Analysis
5. The Family and Medical Leave Act of 1993 is seen as providing much-needed flexibility and security
for families and workers. Others think that it places an unnecessary burden on business. Yet another
opinion is that the act hurts women, who are more likely to ask for leave, and shuffles them off to a
lowpaid “mommy track” career path. In your opinion, what are the likely consequences of the act?
You can adopt one of the viewpoints expressed above or develop another. Explain your answer.
Some students will describe the benefit to workers, organizations, and society that come with the
Chapter 14: Managing Human Resources in Organizations
6. How do you know a selection device is valid? What are the possible consequences of using invalid
selection methods? How can an organization ensure that its selection methods are valid?
The information gained from a selection device must be able to predict future job success, which is
7. In a right-to-work state, workers are permitted to decide for themselves whether to join a union. In
other states, workers may be required to join a union to obtain certain types of employment. If you
live in a right-to-work state, do you agree that the choice to join a union should be made by each
individual worker? If you do not live in a right-to-work state, do you agree that individuals should
be required to join a union? Finally, if the choice were yours to make, would you join a union?
Explain your answers. (Hint: Right-to-work states are generally in the South, Midwest, and parts of
the West. If you do not know whether you live in a right-to-work state, visit the National Right to
Work Legal Defense Foundation website at www.nrtw.org/rtws.htm.)
Students’ opinions will vary, of course. Those in favor of right-to-work legislation may point out
Questions for Application
8. Choose three occupations that interest you. (The Labor Department’s website has a full list, if you
need help choosing.) Then access the Department of Labor, Bureau of Labor Statistics, online
Occupational Outlook Handbook at www.bls.gov/oco. What are the job prospects like in each of
these fields? Based on what you read at the website, do you think you would enjoy any of these
occupations? Why or why not?
Clearly, students’ answers will vary. Here is an example response: “One occupation that interests
9. Consider a job that you have held or with which you are familiar. Describe how you think an
organization could best provide a realistic job preview for that position. What types of information
and experiences should be conveyed to applicants? What techniques should be used to convey the
information and experiences?
Students will offer a variety of answers to this question. Their responses should include a
Chapter 14: Managing Human Resources in Organizations
10. Contact a local organization to determine how that organization evaluates the performance of
employees in complex jobs such as middle- or higher-level manager, scientist, lawyer, or market
researcher. What problems with performance appraisal can you note?
Most of the answers will revolve around the individual’s contributions to the department or
END OF CHAPTER EXERCISES
Building Effective Decision-Making Skills
I. Purpose
This decision-making exercise is designed to provide students with practice in data analysis and
choice in issues related to career planning.
II. Format
This exercise should be performed by individual students outside of class and should take about 30
minutes to complete. Questions 6 and 7 may be used as the basis of an in-class discussion.
III. Follow-Up
B. Next, record the hourly salary data for each of your three choices, and then use the hourly salary
to project an expected annual income. (Hint: Full-time jobs require about 2,000 hours annually.)
C. Based purely on salary information, which occupation would be the “best” for you?
Students’ answers will vary, depending on the occupations they choose and the information
they find. The students will agree that, if salary is the only variable under consideration, higher
salaries are preferable to lower ones.
F. Is there any conflict between your answers to Questions 3 and 5? If so, how do you plan to
resolve it?
For some students, the highest-paid occupation also has the most desirable other
characteristics. However, some students will find that their most desired jobs are not the most
Chapter 14: Managing Human Resources in Organizations
highly-paid. Students will have a variety of answers to the second part of the question ranging
G. Are there any job characteristics that you desire strongly enough to sacrifice compensation in
order to get them? What are they? What are the limits, if any, on your willingness to sacrifice
pay for these job characteristics?
Opinions will vary. Every student, however, will identify some “floor” of acceptable pay and
Building Effective Technical Skills
I. Purpose
This exercise will develop the students’ understanding of the issues that must be considered when
selecting job candidates.
II. Format
This technical skills exercise is best performed individually and should take about 20–30 minutes.
III. Follow-Up
A. Identify the most basic skills needed to perform each of the two jobs effectively.
B. Identify the general indicators or predictors of whether a given individual can perform each job.
performance on skills assessments, and personality traits, among others.
C. Develop a brief set of interview questions that you might use to determine whether an
applicant has the qualifications for each job.
D. How important is it for you, as a manager hiring an employee to perform a job, to possess the
technical skills to perform the job that you’re trying to fill?
Most students will reply that it is not important to have the technical skills. Managers often do
MANAGEMENT AT WORK
THE TEMPTATIONS OF TEMPING
The case describes the nature of temporary employment and profiles various people who have either
chosen or were forced to go in for temporary jobs. The case also describes the phenomenon of temp–to–
perm job – a route that offers benefits to both the employee and the organization.
Chapter 14: Managing Human Resources in Organizations
Discussion Starter: Ask students if they have ever worked in a temporary job. If so, what attracted
them to such a job? What were the drawbacks to holding a temporary job? It is also useful to have
students look at temporary jobs from the employer’s viewpoint. How do you motivate such
employees?
1. Case Question 1: You’re a senior manager at a growing business and you’re ready to add
employees. Your HR manager has recommended a temp-to–perm policy. You know the advantages
of this approach, but what might be some of the disadvantages?
A temp-to–perm policy means that the firms hires temporary workers and make permanent those
2. Case Question 2: Assume that you’re a prospective job seeker (which you may very well be).
What do you personally see as the advantages and disadvantages of taking a temp-to-perm position?
Under what circumstances are you most likely to take a temp-to-perm position?
The key advantage is that one can try various jobs before settling on one. One can look at the skills
3. Case Question 3: What sort of challenges are likely to confront a manager who supervises a mix of
temporary and permanent employees? In what ways might these challenges differ if the temporary
workers have been hired on a temp-to-perm basis rather than on a strictly temporary basis?
There are motivation and performance evaluation issues present when a manager manages both