PART ONE INTRODUCTION
C H A P T E R O n e
The Strategic Role of
Human Resource
Management1
Lecture Outline
Strategic Overview
The Manager’s Human Resource Management
Jobs
Why is HR Management Important to all
Managers?
Line and Staff Aspects of HRM
Cooperative Line & Staff HRM: An Example
From Line Manager to HR Manager
The Changing Environment of HR Management HR’s Changing Role
A Changing Environment
Measuring HR’s Contribution: Strategy, Metrics, and The HR Scorecard
An Emphasis on Performance
Metrics
The HR Scorecard
The High Performance Work System (HPWS) The New HR Manager
New Proficiencies
The Need to “Know Your Employment Law”
Ethics and HR
HR Certification
HR and Technology
Improving Productivity Through HRIS
The Plan of This Book
The Basic Themes and Features
Overview
Part I: Introduction
Part II: Recruitment and Placement
Part III: Training and Development
Part IV: Compensation
Part V: Employee Relations In Brief: This chapter gives an overview of what Human Resource Management is and how it relates to
the management process. It illustrates how managers can use HR concepts and techniques, line and staff managers’ responsibilities, HR’s
role in strategic planning, and the plan of this book.
Interesting Issues: Human Resources play a key role in helping companies meet the challenges of global competition. Strategic objectives to lower costs, improve productivity and increase organizational effectiveness are enabled by human resource strategies
and technologies. Students will learn
how HR plays a strategic role in creating high performance work systems that employers need today to thrive.
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ANNOTATED OUTLINE
I. The Manager’s Human Resource Management Jobs – The Management
process involves the following functions: planning, organizing, staffing,
leading, and controlling. Staffing involves: conducting job analyses; planning
labor needs and recruiting job candidates; selecting job candidates; orienting
and training new employees; managing wages and salaries; providing
incentives and benefits; appraising performance; communicating; training
and developing managers; building employee commitment; being knowledgeable about equal opportunity, affirmative action, and employee
health and safety; and handling grievances and labor relations.
A. Why Is HR Management Important to All Managers? Managers don’t
want to make mistakes while managing areas such as hiring the wrong
person, having their company taken to court because of discriminatory
actions, or committing unfair labor practices.
B. Line and Staff Aspects of HRM – Although most firms have a human
resource department with its own manager, all other managers tend to
get involved in activities like recruiting, interviewing, selecting, and
training.
1. Line Versus Staff Authority – Authority is the right to make decisions,
to direct the work of others, and to give orders. Line managers are
authorized to direct the work of subordinates. Staff managers are
authorized to assist and advise line managers in accomplishing their
basic goals. HR managers are generally staff managers.
2. Line Managers’ HRM Responsibilities – Most line managers are
responsible for line functions, coordinative functions, and some staff
functions.
C. Cooperative Line and Staff HR Management: An Example – In recruiting
and hiring, it’s generally the line manager’s responsibility to specify the
qualifications employees need to fill specific positions. Then the HR staff
takes over. They develop sources of qualified applicants and conduct
initial screening interviews. They administer the appropriate test. Then
they refer the best applicants to the supervisor (line manager), who
interviews and selects the ones he/she wants.
D. From Line Manager to HR Manager: Line managers may make career
stopovers in staff HR manager positions.
NOTES Educational Materials to Use
II. The Changing Environment of HR Management
A. HR’s Changing Role – Human Resource responsibilities have become
broader and more strategic over time as organizations' human resource
requirements have become more complex. The role of HR has evolved
from primarily being responsible for hiring, firing, payroll, and benefits
administration to a more strategic role in employee selection, training
and promotion, as well as playing an advisory role to the organization in
areas of labor relations and legal compliance,
B. A Changing Environment - Globalization of the world economy and other
trends have triggered changes in how companies organize, manage and
use their HR departments.
1. Globalization – refers to the tendency of firms to extend their sales,
ownership, and/or manufacturing to new markets abroad. For
businesses everywhere, the rate of globalization in the past decade
has been enormous, and has several strategic implications for firms.
More globalization means more competition, and more competition
means more pressure to lower costs, make employees more
productive, and do things better and less expensively.
2. Technological Advances – have been forcing, and enabling, firms to
become more competitive. HR faces the challenge of quickly
applying technology to the task of improving its own operations.
3. Exporting Jobs – has been prompted by competitive pressures and
the search for greater efficiencies.
4. The Nature of Work – is changing due to new technological demands.
In addition, the shift from producing products to producing and
delivering services is a contributor to the change from “brawn to
brains”. Dramatic increases in productivity have allowed
manufacturers to produce more with fewer employees. In general,
the jobs that remain require more education and more skills. The
shift to using nontraditional workers such as those who hold multiple
jobs, “contingent” or part-time workers or people working in
alternative work arrangements has enable employers to keep costs
down.
5. Human Capital – refers to the knowledge, education, training, skills,
and expertise of a firm’s workers. There is a growing emphasis on
the importance of knowledge workers and human capital and the HR
management systems and skills needed to select, train, and motivate
these employees.
6. Workforce demographics – are changing. The workplace is
becoming more diverse as increased numbers of women, minority-
group members, and older workers enter the workforce. The aging
labor force presents significant changes in terms of potential labor
shortages, and many firms are instituting new policies aimed at
encouraging aging employees to stay, or at attracting previously
retired employees.
NOTES Educational Materials to Use
III. Measuring HR’s Contribution: Strategy, Metrics, and the HR Scorecard – HR’s central task is always to provide a set of services that make sense in
terms of the company strategy. Trends of globalization, increased competition, a changing workforce and more reliance on technology have
two main implications for how companies now organize, manage, and rely on
their HR operations. First, HR managers must be more involved in partnering with their top managers in designing and implementing their
companies’ strategies. Second, the focus on operational improvements
means that all managers must be more adept at expressing their departmental plans and accomplishments in measurable terms.
A. An Emphasis on Performance – Management expects HR to provide
measurable, benchmark-based evidence for its current efficiency and
effectiveness, and for the expected efficiency and effectiveness of new
or proposed HR programs. Management expects solid, quantified
evidence that HR is contributing in a meaningful and positive way to
achieving the firm’s strategic aims.
B. Metrics – HR managers need a set of quantitative performance
measures (metrics) they can use to assess their operations. These
metrics allow managers to measure their HR units’ efficiency.
C. The HR Scorecard – is a concise measurement system, showing
quantitative standards or “metrics” used to measure HR activities,
employee behaviors resulting from these activities, and to measure the
strategically relevant organizational outcomes of those employee
behaviors. The scorecard highlights the causal link between HR
activities, emergent employee behaviors, and the resulting firm-wide
strategic outcomes and performance.
D. The High Performance Work System (HPWS) – The general aim of the
HPWS is to maximize the competencies and abilities of employees
throughout the organization.
NOTES Educational Materials to Use
IV. The New HR Manager
A. New proficiencies – are required of the HR Manager today in: human
resources, business, leadership, and learning.
B. The Need to “Know Your Employment Law” – is increasingly important
as a growing web of HR related laws effects virtually every HR decision.
Equal employment laws, occupational safety and health laws, and labor
laws are among the areas in which HR professionals need to be
knowledgeable.
C. Ethics and HR – have gained increasing exposure as a result of ethical
lapses in corporate behavior. It is clear that ethics needs to play a bigger
role in managers’ decisions. HR has an important role in promoting
ethical behavior at work and will be explored more fully later in the text.
D. HR Certification – through the Society of Human Resource Management
has become increasingly important as human resource management is
becoming more professionalized. Certifications of PHR (professional in
HR) and SPHR (senior professional in HR) are earned by those who
successfully complete all the requirements of the certification program.
E. HR and Technology – Technology improves HR functioning in four main
ways: self-service, call centers, productivity improvement, and
outsourcing. More firms are installing Internet and computer-based
systems for improving their HR operations. Technology also makes it
easier to outsource HR activities to specialist service providers by
allowing them to have real-time Internet-based access to the employer’s
HR database.
Improving Productivity Through HRIS – The HR Portal. HR
portals provide employees with a single access point or “gateway” to
all HR information. Portals streamline the HR process, enables HR
to redeloy its assets focus more on strategic issues
NOTES Educational Materials to Use
IV. The Plan of This Book – Each topic interacts with and affects the others, and all should fit with the employer’s strategic plan.
A. The Basic Themes and Features
- HR is the responsibility of every manager
- HR managers must defend plans and contributions in measurable
terms
- HR systems must be designed to achieve the company’s strategic
aims
- HR increasingly relies on technology to achieve the strategic aims
- Virtually every HR decision has legal implications
- Globalization and diversity are important HR issues today
V. Overview
A. Part 1: Introduction
1. Chapter 1: The Strategic Role of Human Resource Management
2. Chapter 2: Equal Opportunity and the Law
3. Chapter 3: Strategic Human Resource Management and the HR Scorecard
B. Part 2: Recruitment and Placement
1. Chapter 4: Job Analysis
2. Chapter 5: Personnel Planning and Recruiting
3. Chapter 6: Employee Testing and Selection
4. Chapter 7: Interviewing Candidates
C. Part 3: Training and Development
1. Chapter 8: Training and Developing Employees
2. Chapter 9: Performance Management and Appraisal
3. Chapter 10: Managing Careers
D. Part 4: Compensation
1. Chapter 11: Establishing Strategic Pay Plans
2. Chapter 12: Pay for Performance and Financial Incentives
3. Chapter 13: Benefits and Services
E. Part 5: Employee Relations
1. Chapter 14: Ethics, Justice, and Fair Treatment in HR Management
2. Chapter 15: Labor Relations and Collective Bargaining
3. Chapter 16: Employee Safety and Health
4. Chapter 17: Managing Global Human Resources
NOTES Educational Materials to Use
DISCUSSION QUESTIONS
1. Explain what HR management is and how it relates to the management process. There
are five basic functions that all managers perform: planning, organizing, staffing, leading, and controlling. HR management involves the policies and practices needed to carry out the staffing (or people) function of management. HR management helps the management process avoid mistakes and to get results.
2. Give examples of how HR management concepts and techniques can be of use to all
managers. HR management concepts and techniques can help all managers to ensure that they get results--through others. These concepts and techniques also help you to avoid common personnel mistakes such as: hiring the wrong person; experiencing high turnover;
finding your people not doing their best; wasting time with useless interviews; having your company taken to court because of discriminatory actions; having your company cited under federal occupational safety laws for unsafe practices; have some employees think their salaries are unfair and inequitable relative to others in the organization; allow a lack of training to undermine your department’s effectiveness, and commit any unfair labor practices.
3. Illustrate the HR responsibilities of line and staff managers. Line managers are
someone's boss; they direct the work of subordinates in pursuit of accomplishing the organization's basic goals. Some examples of the HR responsibilities of line managers are: placing the right person on the job; starting new employees in the organization (orientation);
training employees for jobs that are new to them; improving the job performance of each person; gaining creative cooperation and developing smooth working relationships;
interpreting the company’s policies and procedures; controlling labor costs; developing the abilities of each person; creating and maintaining department morale; and protecting employees’ health and physical conditions. Staff managers assist and advise line managers in accomplishing these basic goals. They do, however, need to work in partnership with each other to be successful. Some examples of the HR responsibilities of staff managers
include assistance in hiring, training, evaluating, rewarding, counseling, promoting, and firing
of employees, and the administering of various benefits programs.
4. Why is it important for a company to make its human resources into a competitive
advantage? How can HR contribute to doing so? Building and maintaining a competitive
advantage is what allows a company to be successful, and to remain profitable and in business. HR can make a critical contribution to the competitive advantage of a company by
building the organizational climate and structure that allows the company to tap its special
skills or core competencies and rapidly respond to customers' needs and competitors' moves.
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INDIVIDUAL AND GROUP ACTIVITIES
1. Working individually or in groups, develop several lists showing how trends like work
force diversity, technological trends, globalization, and changes in the nature of work
have affected the college or university you are now attending. Present in class. The
list might include items such as the growth of adult (non-traditional aged) students, the use of
computer and communications technology, diversity issues, and others.
2. Working individually or in groups, contact the HR manager of a local bank. Ask the HR
manager how he or she is working as a strategic partner to manage human resources,
given the bank’s strategic goals and objectives. Back in class, discuss the responses
of the different HR managers. The students should the HR manager to discuss how his/her
role as a strategic partner is improving the bank’s performance, and if the bank’s culture is
more innovative and flexible as a result of the strategic partnership.
3. Working individually or in groups, interview an HR manager; based on that interview
write a short presentation regarding HR's role today in building a more competitive organization. The response here will, of course, depend upon the organization and HR manager interviewed. Hopefully items such as work force diversity, technological trends, globalization, high performance work systems, HR metrics or ethics will be mentioned.
4. Working individually or in groups, bring several business publications such as
Business Week and the Wall Street Journal to class. Based on their content, compile a
list entitled, “What HR managers and departments do today.” The students should look
for articles and advertisements that deal with any of the following topics: conducting job analyses, planning labor needs and recruiting job candidates; selecting job candidates;
orienting, training, and developing employees; managing wages and salaries; providing incentives and benefits; appraising performance; communicating; training and developing managers; building employee commitment; equal opportunity; affirmative action; employee health and safety; and labor relations.
5. Based on your personal experiences, list ten examples showing how you did use (or
could have used) human resource management techniques at work or school.
Depending on the degree of their work experience, students will cite a wide range of examples possibly including some of the following: 1) situations where they have improved
the efficiency of their work through the use of technology made available to them through
human resource systems; 2) employed the services of non-traditional workers (or been employed as a non-traditional worker); 3) developed metrics to measure how they have added value in terms of human resource contributions; 4) kept themselves abreast of employment law in order to minimize risk to their company; 5) Utilized self-service HR technology; 6) employed High Performance Work Systems concepts in their job/department. 6. Laurie Siegel, senior vice president of human resources for Tyco International took
over her job in 2003, just after numerous charges forced the company’s previous Board of Directors and top executives to leave the firm. Hired by new CEO Edward Breen, Siegel had to tackle numerous difficult problems starting the moment she assumed office. For example, she had to help hire a new management team. She had to do something about what the outside world viewed as a culture of questionable ethics at her company. And she had to do something about the company’s top management compensation plan, which many felt contributed to the allegations by some that the company’s former CEO had used the company as a sort of private ATM. Siegel came to Tyco after a very impressive career. For example, she had been head of executive compensation at Allied Signal, and was a graduate of the Harvard business School. But, as strong as her background was, she obviously had her work cut out for her when she took at the senior vice president of HR position Tyco.
Working individually or in groups, conduct an Internet search and library research to answer the following questions: What human resource management- related steps did Siegel take to help get Tyco back on the right track? Do you think she took the appropriate steps? Why or why not? What, if anything do you suggest she do now?
Tyco’s top executives, (the Chairman/Chief Executive as well as the CFO) had been accused of playing fast and loose with corporate accounting and of using the company’s coffers as personal piggy banks. Upon taking office, Breen, fired the entire board of directors, and then dismissed the entire headquarters staff of 125 people. He recruited a new, completely independent board of directors and hired a CFO, an ombudsman and a vice president of corporate governance who reports directly to the board.
Breen’s directive to Siegel was that her first priority was to set up corporate-governance and compensation systems and controls, then to transition "to really driving the talent machine."
Siegel first step was to draft a strict company code of ethics. She then arranged to have it taught simultaneously at a special ethics training day to every Tyco employee. She advised the compensation committee on how to replace Tyco’s old salary and bonus policy, which rewarded acquisition-based company growth. The new system is based on measurable company performance. Bonuses and restricted-stock grants are linked to objective measurements, including each business unit’s earnings before interest and taxes, and Tyco International’s overall performance. Top officers are required to hold company stock worth 3 to 10 times their yearly base salary. They must hold 75 percent of their restricted stock and stock options until a minimum level has been reached. Above that level, they must hold 25 percent for at least three years. Severance pay is limited to two times an individual’s yearly salary plus bonus. Post-handshake perks like consulting contracts and free transportation in company aircraft have been abolished.
As a result of the above steps, Tyco is now aiming for higher marks in ethics. It has written and circulated a multi-page ethics policy, and hired more than 100 internal auditors to enforce it. It has a new corporate ombudsman, to address employee concerns about ethics or policies.
All of Tyco’s employees attended mandatory one day ethics seminars, and more detailed programs are in the works for its 25,000 managers. In the past, the practice was to award huge bonuses to anyone who “somehow drove the numbers up.” The new system assesses
how well managers set and meet goals. As a result, Tyco’s bonus budget for the fiscal year 2003 was reduced by $90 million.
Students will probably agree that in general Siegel took the appropriate steps, and the turnaround and recovery of Tyco’s finances, profits and stock prices are testimony to the effectiveness of her approach. Suggestions for what Siegel should do moving forward may include continued ethics training, HR strategies and scorecards that drive the appropriate employee behaviors are in support of the business strategy.
EXPERIENTIAL EXERCISES & CASES
Experiential Exercise: Helping “The Donald”
1. Divide the class into teams of three to four students.
2. Read this: As you may know by watching “the Donald” as he organizes his business teams for “The Apprentice”, human resource management plays an important role in what Donald Trump, and the participants on his separate teams, need to do to be successful. For example, Donald Trump needs to be able to appraise each of the participants. And, for their part, the leaders of each of his teams needs to be able to staff his or her teams with the right participants, and then provide the sorts of training, incentives, and evaluations that help their companies succeed and that therefore make the participants themselves (and especially the team leaders) look like a “winner” to Mr. Trump.
3. Watch several of these shows (or reruns of the shows), and then meet with your team and answer the following questions:
a. What specific HR functions (recruiting, interviewing, and so on) can you
identify Donald Trump using on this show? Make sure to give specific
examples based on the show.
Recruiting, interviewing, candidate evaluation, selection, and termination are the
obvious functions that Donald Trump uses throughout the series. Students will
give specific examples related to the episode they selection. Challenge students
to evaluate whether Donald Trump effectively utilized these practices in the
examples they cite, and why or why not.
b. What specific HR functions can you identify one or more of the team
leaders use to help manage his or teams on the show? Again, please make
sure to give specific answers.
Examples may include team leaders employing human resource strategies,
planning labor needs, selecting job candidates, training and development of team
members, developing compensation models, appraising performance, building
commitment, implementation of high performance work system concepts,
identifying and reporting metrics and/or scorecards.
c. Provide a specific example of how HR functions (such as recruiting,
selection, interviewing, compensating, appraising, and so on) contributed
to one of the participants coming across as particularly successful to Mr.
Trump? Can you provide examples of how one or more of these functions
contributed to a participant being told by Mr. Trump, “you’re fired”?
Encourage students to identify specifically what was done effectively in the
example they cite from an HR perspective, and how that would be viewed in a
true organizational setting. There are mixed views of the effectiveness of both
Trump’s and team leaders approach and implementation of human resource
functions in terms of “best practice”. Many critics have suggested that if what
was portrayed on the show were carried out in the “real world”, the
consequences would be lawsuits and significant dollars laid out both in direct and
indirect costs. Have students reflect on this idea and facilitate discussion on
what both “The Donald” and team leaders could have done more effectively from
a human resource perspective in the examples cited.
d. Present your teams conclusions to the class.
Solicit feedback from the class on each team’s conclusion and facilitate a
discussion on reactions to each group’s presentation. Ask the following
questions:
i. Do you agree with the team’s conclusions? Why or Why Not?
ii. Do you agree with Donald’s decision to fire/not fire?
iii. If you were the team leader in this example, what would you have done
differently?
Application Case: Jack Nelson's Problem
1. What do you think was causing some of the problems in the bank home office and
branches? There is clearly a problem with communication, and the effects are felt in the area of employee commitment. Additional contributing factors include the lack of consistency in the policies and procedures of various locations. There is no cohesiveness to the staffing activities of this organization.
2. Do you think setting up a HR unit in the main office would help? Of course we think it
would! Since there are HR-related problems both in the home office and in the branches, it is clear that if a personnel office were set up, it would need to help to coordinate the HR activities in the branches.
3. What specific functions should it carry out? What HR functions would then be carried
out by supervisors and other line managers? What role should the Internet play in the new HR organization? There is room for quite a bit of variation in the answers to this question. Our suggested organization would include: HR Unit: job analyses, planning labor needs and recruiting, providing advising and training in the selection process, orientation of new employees, managing wage and salary administration, managing incentives and benefits, providing and managing the performance appraisal process, organization-wide communications, and providing training & developing services. Supervisors and Other Line Managers: interviewing and selection of job candidates, training new employees, appraising performance, departmental & personal communications, and training & development.
Internet and HR: shift some activities to specialized online service portals and/or providers. Running Case: Carter Cleaning Company
1. Make a list of 5 specific HR problems you think Carter Cleaning will have to grapple
with?
Potential answers could include the following:
1) Staffing the company with the right human capital by identifying the skills and
competencies that are required to perform the jobs and the type of people that should be
hired. Sourcing candidates and establishing an efficient and effective recruiting and selection process will be an important first step.
2) Planning and establishing operational goals and standards and developing rules and
procedures to support business goals and strategies. Failure to do so will result in a lack of clarity around performance expectations down the line as each store becomes operational.
3) Implementing effective Performance Management through setting performance
standards, high quality appraisal of performance, and providing ongoing performance coaching and feedback to develop the abilities of each person and support positive employee relations.
4) Designing an effective compensation system that will give the company the ability to
attract, retain and motivate a high quality workforce, providing appropriate wages, salaries, incentives and benefits. A poorly designed system will result in difficulty in attracting candidates, turnover and low employee morale.
5) Training and developing employees both at the management and employee level to be
able to perform the job to meet the performance expectations. This should include a new hire orientation program as well as a program for ongoing training and development.
Lack of attention to this component may result in errors, increase in operational costs, turnover, and morale problems.
2. What would you do first if you were Jennifer?
Answers will vary, however probably the most important first step is to ensure that the staffing process is well designed and targeting the right mix of skills and abilities needed among candidates. A thorough job should be done in analyzing the requirements of each job, developing a complete job description for each role, and sourcing candidates that meet those requirements. Significant time should be invested in the hiring process to ensure that the candidates hired meet the requirements and possess the skills and abilities to do the job.
KEY TERMS
management process The five basic functions of management are: planning,
organizing, staffing, leading, and controlling.
human resource The staffing functions of the management process. Or, the management(HRM)policies and practices needed to carry out the "people" or human
resource aspects of a management position, including recruiting,
screening, training, rewarding, and appraising.
authority The right to make decisions, to direct the work of others, and
give orders.
line manager Authorized to direct the work of subordinates-they're always
someone's boss. In addition, line managers are in charge of
accomplishing the organization's basic goals.
staff manager Assist and advise line managers in accomplishing the basic
goals. HR managers are generally staff managers.
line authority Authority to direct the activities of people in his or her own
department.
implied authority The authority exerted by virtue of others' knowledge that he or
she has access to top management.
functional control The authority exerted by a personnel manager as a coordinator
of personnel activities.
employee advocacy HR must take responsibility for clearly defining how management
should be treating employees, make sure employees have the
mechanisms required to contest unfair practices, and represent
the interests of employees within the framework of its primary
obligation to senior management.
globalization The tendency of firms to extend their sales or manufacturing to
new markets abroad.
nontraditional workers Those who hold multiple jobs, or who are “contingent” or part-
time workers, or people working in alternative work
arrangements.
human capital Knowledge, education, training, skills, and expertise of a firm’s
workers.
strategy The company’s long-term plan for how it will balance its internal
strengths and weaknesses with its external opportunities and
threats to maintain a competitive advantage.
metrics Quantitative performance measures that are used to assess
operations
HR Scorecard A concise measurement system which shows the quantitative
standards or “metrics” a firm uses to measure HR activities, to
measure the employee behaviors resulting from these activities,
and to measure the strategically relevant organizational
outcomes of those employee behaviors.
outsourcing Letting outside vendors provide services.