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Chapter 5: Information for Making Human Resource Decisions

Chapter 5

Information for Making Human

Resource Decisions

Learning Objectives

Opening Case: Forecasting the Future

Chapter Outline

Closing Case: Low Pay for Hazardous Work

Discussion Questions

Additional Resource: We Need a “Moral Operating System”

Learning Objectives

After studying this chapter, the student should be able to accomplish the objectives given below.

2. Discuss strategy as a source of information for making human resource decisions

4. Describe job analysis as a source of information for making human resource decisions

5. Discuss the job-analysis process and identify and summarize common job-analysis

methods

Opening Case: Forecasting the Future

Case Summary

Information plays a vital role in all organizational activities. Marketing managers need

information about customer preferences and competitor products. Operations managers need

information about inventories and product demand. Financial managers need information about

interest rates and cash flows. And human resource (HR) managers need information about all of

these areas so they can insure they have the right employees with the right skills in the right

places at the right times.

Consider, for example, three recent developments related to employment in the United States. In

one, major employers in the U.S. pharmaceutical, financial services, and energy sectors cut more

than 100,000 jobs. Some of these cuts were due to industry slowdowns and corporate

Chapter 5: Information for Making Human Resource Decisions

restructuring. But surprisingly, some of the cuts were also related to improvements in the

economy. In a different sector of the economy, during the last three months of 2017 and again in

Think It Over

1. What industry sectors are most likely to add jobs during a down economy? During an

improving economy?

2. Are there employment sectors that are essentially unaffected by economic fluctuations?

Students’ answers will vary. Some students might state that economic fluctuations affect

Chapter Outline

Introduction

With an understanding of the nature of human resource management (HRM) and the HR

environment as a foundation, it is now possible to begin a more focused and detailed analysis of

the kinds of decisions that HR managers must make and the information they need to make those

decisions.

I. Human Resource Planning as a Source of Information

Chapter 5: Information for Making Human Resource Decisions

Probably the most important factor that affects the HRM function is the labor force (also referred

to as the workforce). The successful management of this component requires human resource

A. Forecasting the Supply of Human Resources

An important first step in HR planning is forecasting the future supply of human resources—

predicting the availability of current or potential employees with the skills, abilities, and

motivation to perform jobs that the organization expects to have available. By looking

B. Labor Force Trends and Issues

Several changes in the labor force continue to emerge and affect HRM. Decades ago, the labor

force in the United States was primarily male and white. Now, however, the workforce is

much more diverse in numerous ways. Several reasons have contributed to this pattern:

• The baby boom generation continues to age.

• Declining birthrates for the post-baby boom generation are simultaneously accounting

for a smaller percentage of new entrants into the labor force.

Chapter 5: Information for Making Human Resource Decisions

in the workforce is also growing but at a much smaller rate. In addition to age, gender, and

ethnicity, other diversity forces are also affecting the labor force.

External data can also be used to predict the supply of labor in specific regions. Immigration

is also an important input in forecasting the supply of labor. But immigration is becoming a

serious political issue all over the world. Thus, forecasting the part of the labor supply coming

from immigration is very difficult right now. Future labor supplies are typically forecast by

C. Forecasting the Demand for Human Resources

In addition to supply, strategic planning requires that HR managers must also develop

forecasts about future demand. In other words, they need to ascertain the numbers and types

of people the organization will actually need to employ in the future. One important

ingredient in this assessment is the organization’s own strategic plans regarding anticipated

growth, stability, or decline.

Chapter 5: Information for Making Human Resource Decisions

Contemporary Challenges in HR: Coming and Going

Managers attempting to forecast the future supply of and demand for jobs and employees

face numerous uncertainties. One major uncertainty for long-term planning is the extent to

which any given job may become more or less popular in the future. Over the course of

the 20th century, the structure of U.S. employment clearly changed enormously, and this

change continued (and perhaps even accelerated) in the first decade of the 21st century.

Think It Over

1. What are some very new kinds of jobs of which you are aware?

Students’ answers may vary. Examples of new jobs include integration specialists,

engineers of business intelligence, brand development associates, onboarding

specialists, and sports massage therapists.

2. What jobs on the 2014 list may be in danger of disappearing in the near future?

Students’ answers may vary. The following jobs may be in danger of disappearing

in the future: teacher’s assistants, stock clerks, and retail supervisors.

II. Strategy as a Source of Information

The need for human resources in an organization depends to a large extent on the organization’s

overall strategy. In each case, it is up to the human resource manager to implement the chosen

strategy. Therefore, there are implications of each strategy for HRM decisions.

A. Implications of a Growth Strategy

A strategy of growth indicates growing sales, increasing demand, and expanding operations

for the organization. When the organization is growing and expanding, it most likely needs to

hire new employees in the future. In some cases, the organization may be able to hire

employees readily without additional work.

Chapter 5: Information for Making Human Resource Decisions

B. Implications of a Stability Strategy

In many ways, a stability strategy may be the easiest for the HR manager to implement

because the organization presumably must do what it has been doing all along. But, even here,

C. Implications of a Reduction Strategy

In some cases, an organization may find itself facing reductions. Sometimes these reductions

can be handled through normal attrition processes. A popular alternative to terminations and

layoffs, especially for managers, is early retirement. Clearly, the actual strategy chosen is an

III. Economic Conditions as a Source of Information

The economy influenced the supply of and demand for different types of employees, but the

economy also has a more general effect on the workforce that the HR manager must consider.

Many factors could affect a person’s decision to enter the labor market and seek employment.

A. Unemployment Rates

The rate of unemployment (or the rate of employment) is an important determinant of an

individual’s employment choices. The national unemployment rate is, of course, relevant, but

the local unemployment rate is more closely linked to an individual’s choices. There is

Chapter 5: Information for Making Human Resource Decisions

hand, when there are few attractive jobs available, there may be a short-term shortage of

qualified workers if people get discouraged and stop looking for work.

B. Market Wage Rates

A related factor that will influence decisions about joining the labor force is the market wage

rate. The differences in salaries and wage rates partly result from differences in the cost of

living, but they also are caused by different levels of competitiveness for talent in the market.

Figure 5.2 illustrates the range of salaries paid for different jobs in different parts of the

United States.

C. Human Capital Investments

Just as a firm can differentiate itself by paying higher wages, individuals can differentiate

themselves as well by making human capital investments. In other words, individuals can

invest in themselves, through training and education, to increase their value to employers.

These investments must be made in areas that an employer considers valuable enough to pay

more for, but general education is usually a worthwhile investment and will yield a higher

wage.

Chapter 5: Information for Making Human Resource Decisions

IV. Job Analysis as a Source of Information

Job analysis is the process of gathering and organizing detailed information about various jobs

within the organization so that managers can better understand the processes through which the

jobs are performed most effectively. It is a fundamental input and building block of the planning

process, but, as illustrated in Figure 5.3, it also relates to other HRM processes.

Under the Americans with Disabilities Act (ADA), job analysis has taken on an even more

important role in the selection of new employees in many companies. The ADA does not require

an organization to hire someone who cannot perform the job in question, of course, but it does

Figure 5.3 also indicates that job analysis relates to performance appraisal. This relationship

stems from the understanding of what an employee should be capable of doing in a job before

one can assess how well that employee is actually performing. Job analysis similarly affects

training and development because it provides information that helps managers better understand

the kind of training and development programs that are necessary to enhance employee

Chapter 5: Information for Making Human Resource Decisions

involved in hiring and appraisal decisions, they must rely on the information provided by job

analysis to help determine who should be hired and how well employees are doing their jobs.

Job analysis provides fundamental input to the HR manager by defining the kinds of both general

work and specific jobs that the organization currently relies on and will be relying on in the

future. Whereas the focus of job analysis is typically an individual job, in many organizations the

tasks and responsibilities on some jobs may be similar to those on other jobs. Likewise, the

knowledge, skills, and abilities (KSA) requirements may be similar for a set of jobs. As a

result, for planning purposes, organizations often try to form job families—groups of jobs that

have task and KSA requirements that are quite similar.

These job families can be quite useful in several ways. First, if the jobs within a job family have

similar KSA requirements, then it might be possible to train employees so that they can apply

what they have learned to the entire family of jobs, making them much more flexible resources

for the organization.

Well-conceived job families can also be used to help organizations in career planning. Thus,

V. The Job-Analysis Process

The job-analysis process itself is generally clear and straightforward. It generally follows three

steps:

• Determining information needs

• Determining methods for obtaining information

• Determining who will collect information

The first step is determining the organization’s precise information needs. The exact type and

nature of the information obtained, however, depend on both the intended purposes of the job-

Chapter 5: Information for Making Human Resource Decisions

perform the job.

Other useful information that may be collected includes details regarding the job context

(physical working conditions such as exposure to dust, heat, and toxic substances; the indoor

environment versus outdoor environment, and so forth). Information may also be collected

regarding the organizational context and social context of the job. In addition, details regarding

work schedule, various financial and nonfinancial incentives, and personal requirements (job-

related attributes such as specific skills, education, and training; work experience and related

jobs; physical characteristics and aptitudes) are usually desirable pieces of information.

The next step in the job-analysis process is to determine how that information will be collected.

The most common methods of collecting job-analysis information include the observations of

task and job behaviors, interviews with job incumbents, and the use of questionnaires and

checklists. For example, the individuals who perform the job analysis—job analysts—can

sometimes gather the desired information on jobs simply by observing people performing them.

This method is especially useful for unskilled manual jobs but is less relevant for jobs involving

creative thought and analytic skills.

For each occupation, information is provided about the relative importance of worker

characteristics, including fifty-two separate abilities for effective job performance. These

abilities are classified as representing:

Chapter 5: Information for Making Human Resource Decisions

• Sensory abilities such as peripheral vision, heat sensitivity, and speech clarity

In addition, information is provided about appropriate worker requirements such as knowledge

(52 cross-occupation knowledge areas), skills (including 10 basic skills such as writing and

speaking, and 36 cross-functional skills such as negotiating, persuading, and time management),

A. Job Analysis Techniques

The most commonly used methods are the straight narrative, the Fleishman job-analysis

system, task-analysis inventory, functional job analysis, the Position Analysis Questionnaire,

the Managerial Position Description Questionnaire, and the critical incidents approach.

• Narrative Job Analysis—the most common approach to job analysis is simply to have

one or more SMEs prepare a written narrative or text description of the job. To some

extent, the quality of the information depends on the writing skills of the job analyst.

Chapter 5: Information for Making Human Resource Decisions

B. Job Descriptions and Job Specifications

A job description lists the tasks, duties, and responsibilities that a particular job entails. A

job specification focuses more on the individual who will perform the job. Specifically, a job

specification indicates the knowledge, abilities, skills, and other characteristics that an

individual must have to perform the job.

C. Modeling Competencies and the End of the “Job”

Given the rate of change in work, some scholars and other HR experts have argued that the

nature of work is changing so much that the concept of a “job” is becoming obsolete. In these

settings, people usually work on teams where the focus is on getting the tasks accomplished

rather than on specific task requirements. Thus, there is reason to suggest that one should

D. Legal Issues in Job Analysis

Because job analysis is a critical building block for much of the HRM process, it should not

be surprising that numerous legal issues have been raised with regard to job analysis. In fact,

federal guidelines on selection include discussion of the appropriate ways to conduct job

Chapter 5: Information for Making Human Resource Decisions

analysis and the statement that any attempt to establish the job relatedness of a selection

instrument must begin with a careful analysis of the jobs in question. Most of the specific

cases, in fact, have been concerned more with the failure of an organization to perform a job

analysis.

Several issues regarding the accuracy of job-analysis information have potential legal

implications. Perhaps the most troubling of these issues relates to potential gender

discrimination in job analysis. Specifically, evidence suggests that jobs occupied primarily by

male incumbents are more likely to be rated as more complex and of a higher level than

similar jobs occupied primarily by female incumbents.

VI. Data Analytics and Big Data

In recent years, there has been a growing interest in what has been termed “data analytics” or

sometimes referred to as big data. This refers, not so much to a different type of data for decision

making, but more to a different way of thinking about data. Analytics is simply the discovery and

communication of meaningful patterns in data. Generally, analytics relies on statistics, computer

Chapter 5: Information for Making Human Resource Decisions

Big data is not without risks. Companies interested in exploiting these data must have available

to them, the analytical skills needed to deal with those data. Hiring or training such talent may be

expensive and, since the term “big data” is often used loosely, there are vendors who are selling

services that are not really very different from what was available before. In addition, the bigger

the data set is, the bigger the risk when a company uses unreliable or inaccurate data. There is

Closing Case: Low Pay for Hazardous Work

Case Summary

Business magazines and newspapers regularly publish articles about the changing nature of work

in the United States and about how many jobs are being changed. Because so much has been

made of the shift toward service-sector and professional jobs, many people might assume that the

number of unpleasant and undesirable jobs has declined. In fact, nothing could be further from

Chapter 5: Information for Making Human Resource Decisions

unhealthy. The work space itself is so tight that the workers often cut themselves—and

sometimes their coworkers—with the knives, scissors, and other instruments they use to perform

their jobs. Jobs such as these in the chicken-processing facility are actually becoming

increasingly common.

Think It Over

1. How relevant are the concepts of competencies to the jobs in a chicken-processing plant?

2. What information sources would be of most significance regarding jobs in a chicken-

processing plant?

3. Are dirty, dangerous, and unpleasant jobs an inevitable part of any economy?

Students will admit that certain jobs must be performed in any economy or any society,

and that some of them have undesirable characteristics. For example, someone must clean,

Discussion Questions

1. Describe the essential elements of forecasting the supply of and demand for human

Chapter 5: Information for Making Human Resource Decisions

resources.

2. Summarize the basic implications for HR decisions of three different strategies.

Implementing a growth strategy usually requires a company to hire more personnel as the

3. What are the basic economic conditions that are especially relevant to HR managers?

The economy affects the workforce by influencing the decisions that potential employees

make about labor markets and work. The rate of unemployment can influence

4. How do changing attitudes about immigration affect projections about labor force

availability?

Future labor supplies are typically forecast by developing mathematical trend models using

data from the past, with appropriate adjustments for migratory trends and predictions.

5. Compare job descriptions and job specifications.

A job description lists the tasks, duties, and responsibilities that a particular job entails. A

6. Compare the major techniques that organizations use for job analysis.

Narrative job analysis is the most common approach to job analysis in which one or more

subject matter experts (SMEs) prepare a written narrative or text description of the job.

These narratives are typically individualistic, making it difficult to compare the tasks of

one job with the tasks of another. This method does not require a great deal of training for

someone to complete a narrative job analysis.

The task-analysis inventory method actually refers to a family of job-analysis methods,

each with unique characteristics. However, each one focuses on analyzing all the tasks

performed in the focal job. SMEs generate a list of tasks performed in a job, and the job

analyst subsequently evaluates each task on dimensions such as relative amount of time

spent on the task, frequency with which the task is performed, the relative importance of

Chapter 5: Information for Making Human Resource Decisions

The Position Analysis Questionnaire (PAQ) is a standardized job analysis instrument that

consists of 194 items that reflect work behavior, working conditions, and job

characteristics that are assumed to be generalizable across a wide variety of jobs.

The items that make up the PAQ are organized into six sections: information inputs, mental

processes, work output, relationships with other people, job context, and other

characteristics. The analyst rates each item on six scales: extent of use, amount of time,

importance of the job, possibility of occurrence, applicability, and special code. The PAQ

7. Can all jobs be analyzed? Why, or why not?

All jobs can be analyzed to some extent. However, some jobs are easier to analyze than

others. Simple jobs or jobs requiring observable behaviors such as mechanical skills are

8. Are there circumstances when managers might choose not to have job descriptions or job

specifications?

Managers may choose not to have job descriptions or job specifications for some jobs, but

it is probably not a good idea. Jobs that have flexible tasks, duties, and responsibilities may

9. Distinguish between job behaviors and job competencies.

Job behaviors describe the actions that workers will take up as they fulfill their jobs. Job

behaviors would include items such as preparing reports, welding, or administering

medication. Job behaviors would be an important part of a job description, which lists the

10. Summarize the basic legal issues related to job analysis.

Chapter 5: Information for Making Human Resource Decisions

Most of the federal regulations governing human resource management practices require

that any action undertaken by an organization must be for job-related reasons. That is,

employees can only be hired, promoted, compensated, and terminated for reasons related to

Additional Resource

We Need a “Moral Operating System”

Watch Damon Horowitz’s talk titled We Need a “Moral Operating System” at TEDx. The link is