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Publd1cd by l\!lcGu1w-Hill Educ;:i tion , 2 Penn Pina, ~,Jr.w York, NY 101 2 1. Copyri gh t C9 2015 by
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Published by McGraw-Hi] I Educ::i tion , 2 Penn Pina , ~,lr. w York, NY 10 l 2 1. Copyri gh t C9 20 l S by

Mc(ir;1vv--l-lill Eclucalion (UK) Limited. A ll righ ts n:scrvcd. No p;irl: of this public::ition may be
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without the prior wr itten co 11scn t of I\/fcGnnv-Hill Eclu c21ti on, including, but not limited l:o, in any
network or other electroni c storngc or transmissio n, or broaclca:;t fo r distance learning.

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(in c;.isc studies or in cxan1pl es) are not intended lo represent any real individual, company, product or
even t.

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f~~#W'ii\fil())ll\!1[])
ft IMOiE is the Robert and i-\n1v,~ I-Joy!.
Desigxiated Professor o.f: Managem.ent at The Obi.fr
St<.:ite University Ile .wa,s previously a professor
in th.e Department of rv:r.anage:i:aen.t at Michig<m
State University and ihe Industrial Relatir;)ililS
('.enter of l:he c:adson Schoo] of J\1axiagf~1ln~·~nJr
tlniw~r;:;).;~y of MinJ.l~~sota. JHe received hi:; BS in
psychology Jro.m The Ohio State Universil.y ;~nd
h.fa 1\1.A and PhD i n psychology frorn [\.1f.ichig<ni
Si:ak~ University. ProfeGsoK ]',fo~ oJndvdD
n:::seard1 and teaches undlP:rt-9:aduatie dl~ !~n-'H
<~:s MBA and PhD students JJJ t1r1JJ.na:n re~3ouroc::
rnanagr.:~mcnJ, n1anagerial sk.ii.Hs, qt1.3u.titaiJ:ive
JW~lhods, hun1an f(~smuoe inform<:i.li.on systenn~:;1
ir;Jtining, en1ployee devk~lopn1enJ, and. rn:gani..
zai:ionaJ. behavior. lk~ has pubJjshed aJ.tidle~;
in. the AcrJ.drnn'! of M1ma9e11renf. Annals, Acuden11!'
• ' {, )
of l\/la1w.gen1enf. Journal, Acudem.y 'f NJ..r1nagemeu.i
Review, Journal of Applied Psychology, Journal o(
Voca1:im1ol l.!el-wvio1~ ;;ind Personnel Psychology Pm··
fessor Noe is o.u:ren.tly on the editor.\al boards o.f
several jmunals hv.::l.uding Personnel Psyclwlogy1
Journal <~f Applied Psychology, a.n.d Journal of Orga.--
niz:ational Behavior. Professor Noe has rC'-.'.Cf~i11ed
awards for his teaching and research exo:-Uence,
induding the En.1J~st: J. McConnidc Aw::ucd for
Distinguished Early Career Contribution ffrorn
the Society for Indusl:rial <.111.d Organi:;:;aii.ona:~
.P~3ycJ.1ology. He i:3 also a fdl:c)w of the Society ()f
bldu:3t.dal and Organizatio:naJ Psycholoq:v~
~ . ~
MJW!J~i! at ~~OJ!LllENB!ECIK
holds the positions of
University D.isti11guished Professor at l\A.1.dligan
Sl:aJe University and Eli Broad Professor of
Management at · the Eli Broad Graduate School
'Of Business Adm.inish'ation. Dr. Hollenbeck
r~:.:~~ived his PhD in , l\/Ianagemen!: frorcn New
Yor.k U:11J.vcrsity in 1984. He served as the act-
ing rc:dJ.t:or a* Organizational Behavior and Human
f)edsion Processes JJ1 1995, the associate edito:r of
Decision Sciences from 1999 to 2004, and the edi-
i~or of Personnel Psychology frrn.11 l996 to 2002. He
has p ublished over 90 arlicks and book chap-
l:et:s on the topics of team decision rnaking and
1NQrk :m.oti.vatio:n. According to ll1e h1shtute for
Scientific Information, this bqdy of work has
been cited over 3,000 times by other research-
•.!
e:rs. Dr. Hollenbeck has been a1A.rardied. fdJow-
ship status jn botl1 the Academy of Moi.nagement
and the American Psychological Association,
and was recognized with the Career A.chieve-
llnent i\-111rard by the HR Division of th.e Academy
of Ma~nagement (2011) and the Early Career
/\~Arard by the Society o:f Indusb:ial and Organi-
zational Psychology (1992). A t Michigan State,
Dr. Hollenbeck has won several teaching awards.
including the Michigan StaJe Di.stinguished Fac-
ulty Avva:rd., the Michigan State Teacher-Scholar
/\JNB.rd, and the Broad MBA Most Outstanding
F<:l.CU Hy J\tft:en1ber.
 ITT:Atrunr eGEIT«ll'U\Ul'ff is Profo3sor of JVfanagement
a.nd Hu1:iom1 Resources and the Bru.oe R. EHig
Disl:ingubhed Chair .i n Pay and OrganizahonaJ
Llffeo.r•·
.L\ 'l"oo·
.. ~-:.."'- 1·-. ..I. ,..,,f·· i\).l"'U
·1··1T!"l'l""' ~)I
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.'C.JiU, ilT1 ·11·~r,o·.,c1·''1l
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A. 1.J'
of Wisconsin-IVfodison. 1-fo ha::; aloo served as
department chair or axea coordinator at CorneU,
Vanderbilt, and Wisconsin . I-Es research interests
jnd.ude compensation., hLnn.ao :resource siJ.'al:egy~
inter.national human resmffces, and employee
rel:enlion. Professor Gerhart received his BS in.
psychology from Bowlfog Green State Univer-
sity and his PhD in industrial relahon.s from the
University of \Nisconsin.-J\/ladison ..His research
t
has been published in a va:riety of outlets in.dud-
l ing the Acaderny of Management Annals, Academy
of Marwgentenl Journal, .Annual Review (!!' Psy-·
chnlogy, Jnl.enwl.io11.a.l fournnf of Human Resmrrce
lV.lmuJgc1Ncnl 1 ]ourna} of Applied f'syclwlogy, Mrm··
agemenI and Org1.m iwtion Review, and Persormd
il
Psychology. He has co-authored l.1No books in
l the area of compensation. I-le s~~rves on the edi-
torial board!> of journals such as thr~ Acaderny of
M1magcment Journal, In.duu!Tial and Labor Relations
R.c:oicw, lnlernational fournal of Hwnan Re(;ource
1\lfrmas,cmrnf, Journal of Applied Psychology, four·
l nal ofTNorld Business, Management .Y Organization
Revir~w, and Personnel Psychology. Professor Ger-
hart: is a past recipient of the I-:Teneman CaP::er
I"
"
,___ Acl1ieveu1e:ni: Awnrd, the Scholarly i\ch.ieve-
n 1enl .Award, and of !J1e lnternationai I-Iu.ma. n
Rer::o11rce Iv1anagemen'v: Scholarly Reseatch
Award, all from. lhe Hu:rnan Resou..rces Divi··
sion, .Acad.emy of :Manage1nent. He is a f-lellow
i
of the Academy of h1fanage,nent, i11e Am.e:rican
i ·p:3ychological Association, and the Soc:i.el.y for
"'' ""' Industrial and Organi?::ational Psychology.
f.
L Zeneca, BT, and BP. He currently serves as a mem-
f.
IPJWff~~(]( M. WllUGllUf is Thomas C. Vandiver
Bicentennial Chair· in the Darla Moore School
of Business at the University of South Carolli1.a.
.-'l _ _ , f'l'ior to joining USC, he served on the faculties
al: Cornell University, Texas A&M University,
and the University of Notre Dame.
Professor Wright teaches, conducts reseaxch,
and consults in the area of Sh·ategic Hurnan
Resource Management (SHRM), particularly
focusing on how firms use people as a srnuce
of competitive advantage and tl1e changing
nature of the Chief HR Officer role. For the past
eight years he has been· sl11dying the CHRO
role through a series of confidential interviews,
1
public podcasts, small discussion groups, ;;m d
conducfing the HR~Moore Survey of Chief HR
Officers. ln addition, he is U1e facu..lty leader for
the Cornell ILR Executive Educatio:n/NJ\J-IR
program, "TI1e Chief HR Officer: Strategies for
Success," aimed at developing potential succes-
sors to the CHRO role. He served as the lead edi-
tor on the recently released book, 'The Chief H.R
Officer: Defining the New Role of Human Resource
Leaders, published by John Wiley and Sons .
He has published more thai.'l 60 research arti.-
des in jumnals as well as more than 20 chapters
in books and edited volumes. He is the lncmning
Editor at the Journal of Management. He has co-
edited a special issue of Research in .Personnel and
Human Resources Management- titled "Strategic
Human Resom·ce Management in t.he 21st Cen-
tury" an.cl guest edited a special issue o.f Hu.man
Resource .Management Review titled "Research in
Sf.ra!:egic I-IRM for the 21st Cent11..ry."
He has conducted programs and consulted
for a number of large organizations, including
Comcast, Royal Dutch Shell, Kermametal, Astra-
ber on the Board of Directors for 1he National
.A.cademy of Human Resources (NAJ·IR). He is
a former board member of HRPS, SHI™ Foun-
dation, and VVorld at Work (formerly An.1erican
Compem1ation Association). In 2011, 2012, and
2013 he was named by HRA1 lviagazin.e as one of
the 20 "Ivfost fofluential Thought Leaders in HR."
"
 The choppy and slow recovery of the U.S. economy means that both con-
sumers and busjnesses are carefully considering their spendll1g patterns and
J
inveshnents. Both.private-and public-sector employers are calling back work-
ers laid off during the recession and/ or cautiously adding new employees if
they see an :increased demand for their products or services. Some companies
are struggling to find qualified, talented, and skilled employees despite the
:rnany workers available due lo the. high unemployment rate. Also, they a.re
continuing to exarnine how H1ey can improve their "bottom line" while reduc-
i.n g costs. This has resulted in not only considering purchasing new technol-
ogy and upgirad:ing equipment, but putting a greate~· emphasis on ensuring
that management p:ractices and working conditions help en1.ployee:3 work
harder and smarter.
Af: · the same time conJ.pa.nies are taJdng steps to deal ·with the current eco- l
nomic conditions, they are also payj11.g closer attention to how to -engage in
business practices t11at nre economically sound but sustainable. That is, busi-
ness practices that are ethical, protect the environment, and conb:ibute to the
communities from which the business draws the financial, physical, and human
r~souxces needed to provide its product and services. Consmner5 are demand-
ing accountability in business practices: making money for shareholders should
not involve abandoning ethics, ruining the environment, or taking advantage of
employees from developing co1mh·i25!
Regardless of whether a company's strategic direction hwolves dm,;rn.sizing,
l'estructuring, growtl1, or a merger or acg_uisihon, hovv h1.un.a11 resouxces are
managed is crucial for providing "value" to customers, shareholders, e:-;mploy-
ees, and the community in which they are located. 0Lff definihon of "value"
includes not only profits but also employee growth and sahsfaction, additional
employment opportunities, stewardship of the enviromnent, and contributions
to conunuruty program.so If a company fails to effectively use its fol.aJ.1.dal capi-
tal, physical capital, and hum.an capital to create "value," it will not survive.
The way a company treats its employees (including those who are forced to l
leave their jobs) will influence the company's public reputation and. brand as
a responsible business, and its abiJily to aHrnct talented employees. For exam-
ple, the human resource practices al: compa11ies such as Google, SAS, PJ:U, and
Wegmans Food Markets helped them earn recognition on Fortune magazine's
recent Hst of the "The Top 100 Companies to Work For." Tius kind of publicity
creates a positive image for these companies, helping them attract new employ-
ees, motivate and retain their current employees, and make their products and
services more desixable to consumers.
We believe i:hat aU aspects of hmnan resource mar1agement-i11dud:ing how
compru.11..ies interact with the -enviromnent; acquire, prepare, develop, and com-
pensate employees; and design and evaluate 1Nork--<:an help companjes meet
their competitive challenges and create value. Meet~1g challenges is necessary
to create value and to gain a compebtive advar1tage.

vi
 Preface 1fii ·

The Competith1e ~ChaHenges

~
. '
.
·",

The challenges that rn:ganizatio:ns face today can be gmuped into three
categories:
'
~ 11h.<l:' suslainabilily d11"1\U~nf;e. Sustainability refers to the ability of a company
to survive and succeed in a dynamic competitive environment. Sustainability
depends on how well a company meets the needs of those who have an inter-
est in seeing that the company succeeds. Challenges to sustainability include
the ability to deal with economic and social changes, engage in responsible
.and ethical business practices, efficiently use nahlTal resources and protect
the environment, provide high-quality products and services, and develop
methods and measrn:es (also known as melxics) to determine if the company
is rn.eeting stakeholder ner~ds. To compete in today's economy companies
use mergers and acquisitions, g,rrowth, <md downsizing. Companies rely on
skilled workers to be productive, creative, and :ilmovative and to provide
~i high-quality customer service; their ·1Nork is demanding and companies can-
Ji not guarantee _job securily. One issue is how to attract and retajn a committed,
productive workforce in. turbulent econornjc conclitions that offer oppor-
tunity for financial success but can also tum. som~ making every employee
expendable. Forward-looking bush1esses are capitaJjz:ing on the strenglhs of
a diverse nlultigenerational VlfOrkforce. 111e experiences of Enson, News of Hie
World, and Lehman Brothers provid1.;: vivid exaxnples of how sustainability
depends on ethical and responsible business practices, including the manage-
ment of human resources. /li.n other important issue is how to meet financial
objectives tlu·ough meeting boH1 cuslrn.ner and employ~e needs. To meet the
sustainability challenge companies must engage ]n hmnan resouxce manage-
ment practices th.al address short-term needs but help ensure the long-term
success of the finn. The developrn.ent and c.h.oice of human resource manage-
1nent practices should support business goals and strategy.
The role of ethical behavior in a co1npany's sustainabilify has led us to
·
.1' '
include more discu ssion and examples of "integrity in action" :in this edition.
The actions of top executives and managers show en1ployees how .serious
they are about: hmnan r·esomce management practices. Also, employees look
at their behaviors to deten:nine if they are merely givi11g "lip service" to ethi-
cal behavior or if they genuinely care about creating an ethical workplace. As
a result, in this edition of the book 1Ne include Integrity in Action boxes that
highlight good (and bad) decisions about 1-:lR praciices made by top execu-
1ives, company leaders, and managers that either reinforce (or 1.mdermine)
the importance of ethical behavior in the compru.1.y.
<ll> The gfobal d.11.aUenge. Companies must be prepared to compete with com-
panies from around the 1i1rorld either in lhe United Slates or abroad. Compa-
nies must both defend their domestic markets from foreign competitors and
t; broaden their scope l:o encompass global maxkets. ~lobalization is a continu-
j ing challenge as companies look to enter ernerging markets in countries such
as Brazil and China to provide their products and services.
01ri Tln<I:" fl:eiehl\llofogy chafilienge. Using new technologies such af3 computer-aided
manufacturing, virtual reality, and social media can give companies an edge.
New technologies can result in employees "working smarter" as well as
11'
~~,,,
'
 1

1
,.

"lfAOi Preface

p roviding high er-(p.J;Jhty p rod ud:s and rn.ore efficient services to customers.
.. Cmi1panies that hav ~: H'•~ H:z.ed the greatest gains from new technology have
h uman resource managernr;;:~nl: prad ices that support the use of technology to
create what: is .kn.own as h.ig.b.-perforrnance work systems. Work, lrairung pro-
grams, and reward systems often :n.1:-~~d to be reconfigured to support employ-
ees' use of new technolor:,11. l11e l:h.n-::£~ important aspects of high-performance
work systems are (1) hmnan n::'som:o2s and tli.eir capabili.ties, (2) new tech-
nology and its op p ortunities, and (3) efficient work structures and policies
that allow employees a.n.d technolo{.:';Y to interact. Companies are also using
social media and e--HRl\!I (eledm:n_i_c H T-\.M) applications to give employees
more ownersfo p of !he e:r.nploy m.ent relat ionship through the ability to enroll
in and par ticipate in lxaining pro~p~ arns, change benefits, communicate with
co-workers and cu stomer:3 onUne, and work "virtually" with peers in geo-
graphically different lod ilions.
We believe that orgm1izalion.:::; n11 1:;t successfully deal with these challenges to
create and maui.tain v :=dn e, ;:ind Jhe I<.:~~y to focing these challenges is a motivated,
well-trained, and con1.ro-1U:ed vmrkforce.

The (hanging Ro~e o'r- ·m:he Human Resource

Managernent flran rctm o~1
TI1.e human resource n:1an agernenJ (I-J.RP\11:) p rofession ru1d practices have under-
gone substantial c..h ange an.d. reddi.nj hon. IV1any articles written h1 both the
academic and prachtioner li1:erall.1rr.:: hav€ been critical of the trad itional HRM
function. Uniort:una!:ely, UI xnany organjzah ons HRM services are not provid-
ing value but jnstead a.re rnircd d.o wp_ iJl m anaging trivial administrative tasks.
' Nhere this is true, HIUVI. d(:::partrnents e:m be replaced with new tec.h.nology or
outsourced to a vendor 1/1.t.ho can provide higher-quality services at a lower cost.
Although this recorrm1endation i;3 cndeed somewhat extreme (and Hu:eatening
to both HRM practiti.oners and JJ.1ose who teach hrnnan resource management!),
it does demonstrate that cmrmanies need to ensure that their HRM functions are
l
A.

creating value for the fi.n.11.

Technology should be used where appropriate to automate routine activities,
and managers should concen tr;:i.t€ on FL~l\11: activilies that can add substanli.al
value to the company. Consider c:rin.ploy€e benefits: Technology is available to
au tomate the process by which em.ployees en roll in benefits programs and to
keep d etailed record s of benefits usage. nu.s use of technology frees up time for
the manager to focus o:n achvities that can create value for the firm (suc.h as how
to control health care costs and reduce w orkers' compensation cl<tims).
Although the in:i.p or tanoe of smne HHIVI departments is being debated, every-
one agrees on the need to successfully :cnana.ge human resources for a company
to maxhnize its cornpe ti.l:iveness. Seve:raJ !:hemes emerge from our conversations
with managers and ow: review of K«2SE'arch on J-H™ practices. Fixst, in today's
organizations, :rn anagers them selvi.:::s a:re becoming more responsible for .rIRM
practices and m ost b eheve H1at people issu es are crilical to business success. Sec-
ond, most managers believe tha.!: !J1(-?ir I-IHJ\1 departments are not well respected
because of a perceived lack of cornpetence, business sense, and contact with
operations. A study by Ddoi.tl:rc consulting an d The Economist· Intelligence Unit
 Preface iK

found that only 23% of busines:-> ext:'n1tiv1.~:.-;. believe that HR currently plays a sig-
nificant role in stTategy and D[Xc-ratfon::d rr-0~::niJ;-; . 'Third,. many rn.anagers believe
that for HRM practices to be cffecti-..1{:~ tbPy n-c>cd. to be related to the strategic
direction of the business. ·n1js k~xt ernph•Jsi.'.!':cs how I-1RI'v1 practices cqi1 and
should contribute to busincs~; soaJ:; a.nd hdp lo i1nprove product and service
quality and effectiveness. An jxnportm.111: v~ray1 1Nhich we highlight throughout
the text, is through using "Big D ata and (:v1deno~-based t.-IRto demonstrate the 1
'

value of HRM practices.

Our intent is to proiride students will1 till'" b::r.ckgrou.nd to be successful HRM
professionals, to manage }nu.Ti.an ·n::5mirc.~:3 ef:fectiveJy, an d to be knowledgeable
consumers of HRM prnduct3. Ma.n;J.ger::; AJ1u:~:t be able to identify effective HRl\1
practices to purchase these s~''l'vicc.s Cron: ;:i consultant, to work with the
HJ{]\A department, or lo d":>Sig,'Il and fr:nptcnH-:nt 1hern personally. The text empha-
sizes how a manager can n1ot"'c~ 11dtecti.vc!y n1anag'e human resources and high-
!.ights important issues in cun.·0nt HRM. p•·:yJjc,::~ .
We think thfa book rep1·esent:: a vah~a.bk approach to teaching ' human
'"'"Sc'·11rc""
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! .. . ·-- ' ·{ _. . .. ....... J.. .

ences of four authors who have i:<:m.~;ht h.urn~rn resurn:oe 1nanage1nent to

undergraduates, h"adjl:ion::.11 day IVG~/.\ ." 'tudenl:s as a required and elective
course, and more experiei.nced uiaru:ig:::r;,~ and professional exnployees in
weekend and even.ing .M BA progr:rni.r:;. Th0 team.work approach gives a depth
an.cl b1:eadth to the covierag•2 tha t is nol: fonnd in 0H1er texts.
"' I·Im:nan resource mm1agiement is vi~::;,vcd af'.• critical to the success of a busi-
ness. The text em.phnsiz:es i.rclJ\N i:hi:~ HRrv1 hmd:ion, as well as the managen1ent
of h11n1;:r1 i·esot11·ce"'
,.,!\. · . - - ·· .1;. n~ojn
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r.• The hook discusses curn~nt isstK'!3 !3nch ~is ~:od.al netv1o rking, talent manage- 0

ment, djversity, and empJo:yee eng;;1geuient ;:1U of which have a major impact 1

on business and HRJ:Vi: prncl:icc

·~ Strategic hurnan resonrcic~ m<mzq:;(:~JTlA::nt in i.ntroduced eRrly in the book and inte-
grated tlmrnghout the t8xL
~ Examples of huw new ledrn ologies ar.e h=:ing u::;ed to improve the efficiency and
effectiveness of HRM pradicr::s are provided l:hroughout the text.
"' VI.Te provide examples of huw co1x1panjes arc •:~va1uahng HRM practices to deter-
mine their value.
<l)The Chapter openers, i.n-texl box'2s, ;;md end-of-chapter materials provide ques-
l:ions that provide students thf~ oppnri:uniiy to di:oCUBS and apply HR concepts to
a broad range of issues including sll·;:itcg:i.\· huml:ln resource management, HR in
small businesses, ethics and HJZ's 1·01(,~ in helping cornpanies achieve sustainabil-
ity, adopt and use l:echnolog:y, adapt lo ginhaJi:.:;1hon, and practice integrity. This
should make the HR da!c.;sroom rno.i.··1':: 1J1if:1:;v:tive and increase students' rmder-
sl:anding of the concep12- and their ::~ppl.i.:.:::1lion .

Human Resource l\IJ.anage111enL Ga ining a Cnmpci:iti'ue Advantage includes an intro-

ductory chapter (Chap ter l) ,1nd fiv.p pad:s.
Chapter 1 provides a detailed di::; 1:nc.oslo;;: 0·; t\1•{' g.1.obal, new economy, stake- 1

hoklex~ and work system challcnw~~' lf.h1l infr;:h:'nc:c: companies' abilities to

 ·-

successfully meet U-1e needs of shareholders, customers, employees, and other

... stakeholders. \Ille discuss how the management of human resources can help
compauies meet IJ1e competitive challenges.
Patl 1 :includes a discussion of the environmental forces that companies face
in attempting lo capitalize on their human resources as a means to gain competi-
tive advmltage. The environn1ental forces in.dude the strategic drrection 'of tl1e
businem3, the legal environment, and the type of work performed and physical
arrangement of the ~,Nork
A key focus o.f tl.-i.e strategic hmnan resource management chapter is highlight-
ing the role tllat staffing, performance management, training and development,
and compensation play in different types of business strategies. A key focus of
the legal chapter is enhand11g managers' understandillg .of laws related to sexual
harassment affitmalive action, and accornmodahons for disabled employees.
The various types of discrimination and ways they have been interpreted by the ~l
cotffts are discussed. 'D1e chapter on <malysis and design of work emphasizes
how work sysl:ems cr1n. U::nprove company competitiveness by alleviating job
sf.Tess and by jmproving employees' motivalion and satisfaction with the..ir jobs.
Part 2 deals with Hi.e acg_uisiti.on and preparation of human resources, includ-
ing human resource planning an.cl recruitment, selection, and trainffig. The
hmnan resource planning chapter illustrates the process of developin.g a human
resource plan. Also, the strengllw and weaknesses of staffing options such as
ouJsou:rcing, use of conhn.gent workers, and downsizing are discussed. SlTat-
egies foll' recruiting talented employees are emphasized. 111.e selection chapter
emph.ar5izes ways to minimize errors in employee selection and pface:me:n~ to
]mprove the company's compehiive position. Selection method standellt'ds such
as validity and reliability are discussed jn easily understand.able terms without
cmnpromisjng the ted1nical complexity of these issues. The chapter discusses
selection m.e thods such as interviews and various types of tests (hi.dueling per-
sonality, honesty, and dn1g tests) and compcu:es them on meam.ues of validit-;1
reliabilily, utility, and legality.
iNe discuss ihe components of effective h'aining systems and ihe manager's
role in determining employees' readiness for training, creating a positive lea.rn-
in.g envirornnent, and ensming that trainfag is used on the job. The advantages
and disadvantages of different train.ing metl1ods are described, such as e-lea.rn-
ing and mobile trafrring.
Part 3 explores how companies can determine the value of employees and
· capitalize on il1eir talents tlu:ough retention and development strategies. The
perfonnance management chapter exrunines the strengths and weaknesses of
performance management methods that use ratings, objectives, or behaviors. ·
The employee development chapter introduces the student to how assessment.,
job experiences, form.al courses, and mentorjng relationships are used to develop
employees. The chapter on retention and separation discusses how managers
can m.aximize employee productivity and satisfaction to avoid absenteeism ru:Rd
tu1nover. Tiw use of employee sw:veys to monitor job and organizational char-
acteristics !hat affect satisfochon and subsequently retention is emphasized.
Part <:i covers re"'\lvarding and compensating human resources, ·including
designing pay structures, recognizing individual contributions, and providing
benefits. Here we explore how managers should decide the pay rate for differ-
ent job5, given the company's compensation strategy and the worth of jobs. The
advantages ai1d disadvantages of m.erit pay, gainsharing, and skill-based pay
~ -·
r" Preface >d

I,': are discussed. The benefit.> chapter highlights the different types of employer-
l··
.-..J:; .... provided benefits an.d discusses ho11v benefit costs can be contained. Interna-
tional comparisons of conipE:nsation and benefit pracfices are provided.
Pad 5 covers special topics in. hu.man resource management, including ~abor­
management relations, internalional lIRM, and managing the HRM function.
The collective bargaining mid labor relations chapter focuses on traditional issues
in labor-management relations, sud1 as union s~ructure ai'l.d membership, the
organizing process, and contrad negoti.ations; it also discusses new union agen-
tlas· and less adversarial approaches to labor-ni.anagement relations. Social and
political changes, such as introduclion of the euro cunency in the European Com-
rmmjty, an~ discussed in the chapl:er on global human resource management.
~)electing, preparing, and :rewarding employees for foreign assignments is also
discuss''~d. 'fhe text cond.1..1des 'with a chaprcer that emphasizes how HRM practices
,,,

' should be aligned to help fhe company meet its business objectives. The chapter
':i ernphasizes foat the HRM. function needs to have a customer focus· to be effective.
k
~-

cirn~~l&~~· '11

A new chapter opener discusses ASML and their HR practices. The updated
Table 1.1 shows the responsibilities of HR departments. TI1ere is a new discus-
sion of the expectations 1.nanagers have of HR, including examples of how HR
is supporting companies' business strategies. A discussion of the use of Big
Data· in. HR and a discussion. of competencies needed for HR professionals
o.re ne~/\r to this edition. The discussion of competencies is based on the SHRM
.cornpel:ency m.odel arid i.s illustrated ]n the new Figure 1.3 which shows the
comp~~tencies and example b(::havio:rs for HR professionals. Table 1.3 outlines
the updated salaries for HR positions. 111e definition and discussion of sus-
tainability and the triple bottom line (e.g. economic, social, and economic
benefits) has been updated along with the discussion of the economy reflect-
ing recent economic and labor market data. 'l11ere are new examples of how
Honeywell is cautiously adding employees. Updated employment projec-
tions from 2012- 2020 oxe discussed in this chapter and reflected in Table 1.4.
Table 1.5 has been revised to show the fastest growing jobs and occupations
and. declining jobs and occupations. There is a discussion of the relationship
betVlreen occupational growth, educational requirements, and wages and
how companies are coping 1.Nith s.kiH deficits (e.g., Broseh and Aegis Sciences
Corporation). New exa:rnpks include Extended Stay of America's facilitating
change to benefit the business, ~ND-40' s learning culture, and Caesars Enter-
tainment use of eviden~e-based HR for analyzing heath care costs. Other
ne1-v examples that haw:'.: been added are Lockheed Martin Missiles and Fire
Control--the 2013 Ivfakolrn Baldrige a1.l\rall"d 'Vlliluling company-and Coke's
use of socially responsible product development practices. Labor force statis-
tics have been revised to reflect the new genders 1 ages, and generations in H1e
workforce, including new figures on i.mmigraiio:n in the population and work-

~
J·:.
force '. A new d.iscussion of generations and generational differences and their
potential impact: in the workplace cm1 be found :in Chapter 1, accompanied
 by a new table showing generations in the workforce. An updated Competing
through Sustainability box focuses on the example of Gilbarie Building Com-
pany's use of "green" practices and offers discussion questions for students.
TI1ere are nrew statisti.cs on unethical conduct in th.e workplace and a_n updated
discussion of legal issues--induding tl1e implications of employers' not offering
employees health insmauce. A new Figm-.e 1.7 illustrates the principles of ethi-
cal companies. The focus on ethics continues with a new Integrity in Action box
(which includes questions for students) tl1at feaiures how the CEO of Dynerg'J
changed the company cultme using HR practices. A new Competing through
Globalization box feahu-es how tl1e CEO of Titan Inten1ational critidzed France
and muon employees. New discussions and examples of U.S. companies'
reshorjng business operations have been added. The issue of cloud cmnputing is
addxessed. The updated Competing tlwough Technology box includes examples
o:f social media tools ht l:lR practices. New dlapf:e:r-ending Look Back questions
return to the opening discussion on ASML. An updated Exercising Strategy case
features the unique and successful Zappos. A new chapter-ending el01:nent-HR
u1 Small Business-presents a case on how HR has been working for a small,
but growing, service firm. Yahoo's controversial act of overturning Hi.e policy
of working from. home provides a discussion in the new Managing People case.

(~maip·~~ir 2
A new chapter opening· case discusses lKEA' s organizational trainsfmmation -1
through strnte&ric HRi'\11. Th.ere is a new Competing through GlobalizaHon box
on GM' s increasing presence in Chi1'"1a. TI1e new Competing thi-ough Technol-
ogy box discusses the risks in innovation, focusing on sustainabiJity in Philips
electronics. There is a new example of Procter and Gamble's acquisition of Gil-
lette. Samsung's open employment, going against the Asian norms of employing
women or individuals from :non-elite educational :institutions, is covered in the
new Integrity in Action. box, .A nevv Competing through Sustainability box dis-
cusses tl1e rjsks of sustainability, focused on ihe failuxe of Solynclra. New end of
- chapter material includes a new Look Back case discussing how IKEA developed ----1
a sh"ategy around .differentiation through innovative products with attractive
designs, and the HR in Small Business case: Radio Flyer Rolls Forwaxd.

Cha111r~eiir l
TI1e chapter opening case on harassment and class action worker lawsuit at
Forever 21 has been added. A Competing through Globalization box sbtow-
ing how China's labor laws may go against empldyees' desires to work
more hours is new to this edition. Figure 3, 1 has been revised to show the
current number of complaints for various types of cliscrimin.atio:n accord-
ing to the EEOC The new Integrity in Action box discusses Best Buy' s CEO
being fired for an inappropriate :relationship with ai1 employee (negative
example of ethical leadership). Safety in the Bangladesh garment industry l
is discussed in the new Competing through Sustainability box. Figure 3.2
has been updated with OSHA information on injuries and deaths at work.
The new Competing through Technology box points out the pros and cons
of working from bed.
 ~··.

t·
i' Preface xiii
~·

!C~na!JJl'~®tr 41.
Th.is chapter opens with a new vigneue Ol1. how changes in organizational
strniehn'e and 1AT0.rkflo1111 design help("d General Motors return to profitabil-
ity in 2012 after years of being rnJt1compeHUve in the automobile industry.
The new Technology box discusses how the use of robots in manufactur-
ing is revniHng the rules :r.iegarding ~:he: r·dationship _between increased
prodi.ici:ivil:y and employme:nJ :rates. The ne1N Globalization box highlights
f~he h.uman oosl: a.ssodated ·w:i.th. "fast fashion." and illustrates why some
forms of competitive advantage ca.in. ofl:en only be achieved at the expense
of workers. In the new [nteg:dly in. Action box, we see how an organiza-
tional culture that trndiHonally ignored safety vvas overhauled, and how ·
this change also helped increase productivity. In the nevv Sustainability box,
we describe how fo.'sfi: re:;ponders can develop sig'11s of Posttraumatic Stress
Disorder 1md the ways to deal with these problems. A revised Exercising
Strategy case illustraten how sm.aUer firms can employ crnss-functional
t
-!::.'.:.
teams located in dose prmcimity l:o their customers to cmnpete successfully
·against :much larger firms, '-'nd an updaJed :Managhi.g People case shows
how m.any companies alt'ie stretdh.:i.n.g job descriptions to the limit of what
manv •Norke:rs can endure. Addition.a~ material has also been added to the
./

text th~t illustrates ho1N private: equity firms employ advanced workflow
,. design methods to rejuvenate faiJjng fin:ns an.dhow ma.ny firms try to struc-
t
l:ure J:hemselves h1 a. fashion that limits the size of sub-Lmits to "D~mbar's
-L Nurn.ber"-reflect:in.g the evolutionary limits to how many people can work
together effidently.
~' ,.

----L
(~~~p·t®n· 5
The new chapter opening vignette descdbes the process of offshoring and
1vhy many organizations that us€d to offshore many jobs are now moving
those jobs back A new Tech.:nology box describes the inner workings of com-
,--- l '

puterized applicant tracking systems and how a well-in.formed job candidate

can jucrease her or his chance of landing an interview by matching the descrip-
tion of their work experience to the a.lgorHhm being used by the system. A
new Globalization box examines the chaUenges of balancing the rights and
responsibilities of labor market newcomers versus established players when
l:ransfonning frmn a histodcally important but non-viable business model to
a new and uncertain business model. lNe also explore 1he impact of new laws
that seek to elhninate illegal immigrant labor and reduce local unemployment
Jin ~~ new Sustainability box, and show •Nhy more often than not, these initia-
tives fail. Jx1. a new Integrity in Action box, we describe why anti-poaching
policies are an attractive, but illegal, prnctfoe when it comes to preventing
orga:n.izatio:nal tun1011er. A revised Exercising Strategy case shows. how the ·
J\Torth Korean govermnen~ "enlists" 1No:rkern for overseas assigrunents and a
. new Managing People case illustrates hov1r "short-work" programs in Europe
help reduce unemployment rates. Additional material has also been added
~L to the text that illustrates how the new Affordable Care Ad is likely to result
in an undersupply of health care woi-kers and an increased demand for part-
~
L• l:inie labor.
Anew opening vigneHr.:: d"°'~'wri&-,1.~:.; 2n ;:iF:rni:, Doi:d1. :Kci.c!y ~uld ·~J,.c ~-u ~phc<:rlion.:3
H1js has for slaHin1~; j0b~5 i•• fhi2 fuh.ire~ . T~-~ ,,~ ~.M:•r,, -~~c:<::bnol0gy box ('.·):::,-,:;:nine::; hmM
''1 · ' · 1"
• I
are ernp1.oyu1g
organ.J.za~Aons
,_;
·
olg u;.;,; : ·· .'JT.'10.' <:0J1:il~u u::r
· l ·1 l 4
Ril8-ly:cr.c xnC:;.:,,·100:;. .;o t~O
l' •

beyond the traditional hrnit; of hnnk\H j1:;dfjUil':~nl when. it cmncs lo xua}ing hix-
. d ecw1011S.
u1g . . T".10/:: IJ~Y~
. ,. .,.-,. . ... ,. ' · ., "°' ·
. ' 1·
t'1nr:1 u_ne!:;)2 · a1;:11: 1J~)v 1: 1ocen t\i. 1.rou.1xc~:<:.: lrt rnaJny
·~

EuxopeaJl contpa11ies ir:t oi:·ck:r o{; 1-nc;n,::1.~' < : Hv,~ nu.1.nbcr of 11'.rorn.'"::n on curporaJte
boards is described in :~. D(''"' ,\~Jr.tbafr;;;~:hon bn;\, nnd the .r-:.::aso:n.c. 1Nhy th:is l1<J.S
been a boon for U.S. v.rr..HH(:r:• i:n:iiuY. i GY Fu.;:op~:a n. -~MOlJi.f:J\ is dieoJs:J-cd. lr.l tb,c
new SustainabRHy bo;c 1Nf: lf~JGJn1is1( : 1,v:1y long bouJs of u:n<::rnployme:nl ntaJ.(e
so:me people m1employabk,; fon,;,wi~ ;1-nd ·what rnn. b~; dor1.c to rt:~vr.;:cY:: ih.b t,rend.
In a new Integrity i11 A.ction box w~; hiDhhgb.t ho1N politica1 .instl.tuhons ·r:;uch
as the European ParUame:n!r ;.11.rr~' often c;Jvg:h! in ;\ bind where hj.ring and fixing
decisions are concerned. /\ rr.c:viso-:;d Ex0.1·d~frng StrateR;v cas<:: describG:;;s hovv· tl1e
SEAL team that fon:nd arid Lmpcl O::::x•n<i bi_n\.,i,dcn ~,;a~; corir>po:::w:d :.i n V:·rrnf. of
not o:nl Jv skills buJ uersonaJjti,r
Ji: .
b:ai.i:s. 1?cli;~j011::.:
-
di:;crh:niJ1a.tion in J:<J.:mn~:e AS th.en
described in. a new Gloh:;ih1~::\hon hm(r ::;h"'""\rin~.: ·wlrlr it is verv difficult for J\iJ.us- 1_· ' J

l:-ns •·o
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new n1aterial that suggt.=~sls H.1at p(:~r:..or.ni.aiJ.C(". in nrgani:z;;:ihons is no·i: norrnally

dishibuted, but instead n·~fl<::: 1 :!:s '" 'povv c;i· Lx>N,'' ;)q<) i:hc i}:ri.pl.i. uJ>i.on~; dris has fnr 1
1

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instead of composj11g tea1ns, is i:i1b1 01.1 th,~ ri:.~c .

The ne1t1l chapter op(:nier kughlights ~he k''Tndng opporttm:ihr:.~s ;xl: F0Lo1ers tnsur-
;:mce Group. There is~~ ne-,v d!~3c1i:3~_~i (•;.~. ,_.,.f how JiJfy-Lube e:inb:ace::: cm1Jin.uons
l "'a1·111"11'g tl1a~·IL sup•)')-1'
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chapter highlights hovv Er.nn4: .'k You11r:('' ch.i d Ie :)n1.int_~ o:Lfitc:c:r ':on:n<.•:ci:~d lcar:n-
ing to business leaders nnd indud12s djsc1.~r::<:rion •Ttv::shons for studci-;L;_ Vis;uxe 7.'2
. " ~l ., . . . - t_,

has been updated, to pn;:](::nt U:1':: sv:: sh•w.::c; ok a-..c :ra1nu1;~ prnu:-1":';, Updated
.1.able 7 .1 SJU.<
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trainmg practices. Table 7.2 has been updBtcd to p1:es~nt gue:3hei1::' h: aDk vir::·n-
! l " ,.., ' . ., ' ·1
d ors anc\l consu.ltaJnts. ·1
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describes the Fifteen Found<1.h0:n .
;:>_nd I~:~< rq::dicahon in /\Jnsterde:u:n. ~ . '
CmTnNaU '
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design faciUtatet:i k~arning ;;i:od H1J'. i.rr.x1,~~!:";r qf 't-;:aining. Up·d.atr2d 1F1igurc '.7.5 pro;
vides an overvie1N of: ~:hr.'? 1xy-; of 1rn~n~Ff:~ :n:ictbod~; acros:.3 ;:;,U ~:;i:2p {~',::nrpanies.
i ' ' I • ' n •p · ~] · ' · •1·· ·
T.wo new exam.p.~es u1 b.u~~ c1~.apt'2r inc~ uo fiOV·T ;J/\r · 13 n~~ung tor::.' :t-p<~o\.'t :ior tranl.- 1
.:

.1ng, an d ·1 f f ' ' '

,: 1e use o · g;;1n:1c:s •.or tr:::ni;nnG· /\ ;y~i.-v Con1pctu1(; l:.1rougo. '--'tooatu::a.h on ~ . l i. , , , J -- •

box il] lJSl1'2les

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'1.ntag£::: .P.o:1. '.'lunu . l.oho:n'.::.
J.

.si:nc:i.] to.<E '

, " '. . ,. 1 1 .
reorgmnzeo c~1scuss1orTt o~ r:: -~:.:;<.nTn.ng,, •.v~::t::".'. )•1::"::o i1;:1uuri.g, anc on;un.r.::: Jea:i:n1ng. ·' ! . n • • .l 1 · ., .
The new Com.peting through 'H.:'.ch.no!ogy h:•:::, whkh i1lc\ud(:;'S sl:ndenJ discuB- .
sion questions, features conio~w1 k's ' i J31; o'. ~;Qdal m~:dia and .:U)US for learn-
ing. An exam.ple of exp-eril".ndal k:0.ri 1jnr 1:n 1,:U1/)1}3 r1~.; ''v(:~U as a n~~;~,7 chs~:ussion
and example<> of Kai:u'n :31·~ aq J-r•h cnJ . 1r'·irnin
- / • I, - L •. ~ .• -·'·. ' · ' " ,.. , I u· '11011·hnd ·u-0 rie1N j-1
·• · •· J:J
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There is an updated discrn:J~:i.on cl ;;ich' icc for r:l\ooe>~rn~ ,_ i:l tr<:\inJn;;~ .. rrv.:~~hod, and
 Preface xv

the use of ROI in trai]\_)in.g evaiuati.on. IExaroples of how Guardian IndustTies

prepares and stays in contact ·w ith expatriate exnployees are now covered in
tl1is chapter. Updated discussions indnd<P ho•N Sodexo manages diversity and
l\BM' s use of online onboarding. /\ ne\t-r figure sho-ws the four steps in ~nboard­
ing. New Table 7.6 shovvs i:he charad<::ds'tics of effective onboarding programs.
I· New end of chapter :materiaUndudie::; Look Back questions focusing ori. Farm.-

~~J . ers Insurance, a M:anagin.g People case focusing on training and learning
at McDonald's, an Exercising Sfrategy casi=:- tl1aJ focuses on growth through
acquisition at SABMillei.~ and HH. in Small Business case focusing on how a
pizza restaurant effectiv~::.'.y il:rains iis employees-.

Clhla~it@r ~
The new chapter opener features how different co'mpanies are evaluating what
employees do as well as how they do it. There is a new Integrity in Action box
including discussion question for students ll1at focuses on how diff'erent com-
parries use listening and feedback skills to enhance employee performance. An
example of how Capital One evaluates employees' behavior based on the corn_-
pany' s core values is new to this edition.. A nevv Competing through Sustain-
ability box features hmN the UK Health Foundation evaluates performance to
insure that il relates to its n onprofit mjssion and goals and includes a discus-
sion question for students. Peer evahrnhon from International Fitness Holdings
is a new example in Chap ter 8. An updatr-;d Competing through Teclmology
bm< includes examples of F<icebook-H.ke applications and social media tools
for pe:donnance manage1nent and discussion questions for students. A new
evidence-based HR features Google and their u se of Big Data for evaluating
m.anagers' performm~oe. New end of chapter content includes A Look Back at
a perfonnance n1anage:i:nent cas(~ vvith qm~stions for students, and an HR in
Small Business case featuring perform;mce management at a telecommunica-
tions group.

(ftnaj?teir 9
111.ere is a new learning objective for using the 9-box gTid for identifying
~here employees fit in the succession plan. TI1_ e new chapter opener highlights
employee development at Philips. TI1ere is a ne1N example of how Brooks Reha-
bilitation uses assessm_ent, action plans, and job experiences for developing
managers. Competing through Technology box has been updated with student
discussion questions. New exa:rnples indude the use of formal education for
development: McDonald's Harnburge]: University, and HCA Inc.'s use of job
experiences for develop1nent.. Updated Table 9.3 shows leadership development
p rograms at GE. 111.e discussion of ruiti_on reimbmsement programs has been
updated. There is a new company example for evidence-based HR: MassMutual
Financial Group's Career Resource Center. New discussions include DiSC as
an assessment toot and H1e te:mpo:rary assig1llnents and examples _from sanofi-
aventis. A discussion of sabba:licals and new company examples from. REI
have been enhanced. There are nev1r examples of PepsiCo's use of temporary
assignments sending employees lo start-up cornpmijes. New research has been
induded regarding coaching and exmnples o.f: coaching from ConAgra Foods.
Preface

New Co:nlpethlg throug-11 Sustainability box features :management devel-

opment: al: New York Pret>byterian Hospital including discussion questions
:for the students. The ne•.v lfitegrity in Action box focuses on General David
Petraeus' s mentoring relationship <cmd in.dudes a student discussion question.
A new discussion of lhe 9-box grid b-1Cludes a new figure illus.trating the grid.
The new end of chapter material includes Look Back questions focusing: on
Philips' employee developrnent,. an Exercising Strategy case on Achmea' s lead-
ership programs, Managing People case featuring management development
at IKEA, and HR in SlnaU Business case featuring a sabbatical at a social ser-
vices cornpany.

(~.111pil:~~· 1ij
This chapl:er opens wHh a. ncvv vignette that describes what is meant by the
term "churning': and 111rhy d.ala from Eurostat indicates that Europeans are less
likely to change jobs than .An1e:ricans. In a new Tedmology box, we describe
the recent advances rn<i.dE: in "telepresence robots" and how thi.s is reshap-
ing huw organization~~ man.age a distributed !Nork.force. We also describe the
recent H<m Hoi riot in China in a new Globalization box, and how this event
--~
re.fleets changing power relationships between employers and workers, as well
as between outsourcing firms and the Chinese goverrunent. In a new Sustain-
ability box we show 1Nhy Yahoo has eliminated its "flextirile programs" despite
evidence from many other companies that these sorts of programs can work in
certain coni:exi:s. Our nP-w Integrity in Action box discusses the role o.f whisHe-
blowing ii1 organizations an.d society, using the recent case of Edward Snowden
as an example. fo our revised Exercising Strategy case, we examine the role of
British Petroleum.' s Hw:nan Resource Department as a contributing factor to the
Gulf Oil disaster,. and :in a revised Managing People case we see how one flight
attendant became a hero form.any ·when he quit his job in a very memorable
way. fo the main section of tll.e text we present new evidence on how job dis:-
satisfaction can be contagious among workers and how the factors that drive
satisfaction among millennials differ dramaticaUy from what drove job satisfac-
tion among then· parents.

Cflna~~te~· 11
The nevv chapter opening vignette and new Globalization box discuss the rea-
sons (labor costs and olhervvisc) global companies choose particula1· counhies
as locations for the:IT proclu.ctlon plants. Data on executive pay and company
performance and on :international wage comparisons have been updated.. TI1e
new Su0tainability box exan1ines whether enthusiasm for Apple produds alone
is enough reason for people to continue to work at Apple stores or whether
Apple's pay policies will need to change. The new Technology box denw:n-
strates how companies are 1X:'li1g "Uig Data" to make better decisions about
how mud1 to pay different onpkJyecs. 111e new fotegrity in Action box e)(plores
what happens when efforts .meant to protect workers are not necessarily ·what
the workers themselves vvani:. 'fhe chapter closes with a new case on the contro-
versial new Dodd-Frank Ad provision requiring companies to disclose the ratio
of CEO pay to worker pay.
 ,

Preface xvii

Cltrlat!1J1:~n· <~ l
The nev•r chapter opening vignette d(~scribe!?- huw Citigroup is using a new bal-
<mced scorecard to n-..easun:: and rev•rard executives for both financial and non.fi-
nancial performance. A ne·w exhibit provides another example of a new balanced
scorecard, in this case at Merck The new T(:O~chnology box describes how orga-
njzatlons adjust their pay for "'hot skills''' jobs (e.g., in infonnaiion teclmology)
that are ]n short supply. .A nev\l Sustainabilii:y box describes how U.S. automah
ers such as Ford and General Ivfotors hav1~ negotiated with the United Auto
INorkers Union to shift ;:\ gn:'ater share of total compensation to profit sharing,
reducing the fixed (wage). component of cash cornpensation. A ne1/ll evidence-
based HR feature explains ho11\.i one company lumed t:o op1:0n book management
t;} hun the cornpany axound by getting more inpu1: frorn employees on hovr
t'o (~('
-~- r l'11 t_,......., ·b \l.:~A.··1·•:."·
X. ·1·1cr-:: 0
M'-l~ .A -1r:>,11r
. 1 YnJ:pnT>hr
-~~ . . .a.1-. _ . .cb'.\.'\,.,...:,.,p
-'-!:J-·d·) 1·11 ..
t }.•1..t . . ,. ho)C
a.~ ,pvarr'i11'-"'
·~/'. ..
'1.. t-·ow
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.. .:J· ~ .<: U .........S .
companies are positi.oning themselves to n~cover comp<:>nsati.on paid to execu-
tive~; who are later found to have taken. actions that h.anned the company and/
or investor:->. The GlobaLi.z.ahon box diescr i.be;; ;:i_ction hy regulators in the Euro-
pean Union to cap the compensation. of rJome bankers (and hmN banks have
reacted). A new section ;;i,nalyzes hov1r incentive des.ign can influence the likeli-
h.ood of exce13sive risk taking by ernployees, J\fo•11r dai:a are included to docmnent
the substantial grovvth (er-;pecially rr:Jative to traditional n1erit pay increases) in
the importance of n1erit bonuses in organi:z.ations. 'I11e chapter co.ndudes with a
new case that ad.dresses lhe question of compensation of the CEO and exnp loy-
ees of RBS.

[ Cha~'lt®tr 1l
The chapter opening vignette smmnar.izes Michelin's use of incentives c.md
penalties to influence employees to make hea.l.thier choices, whid1 can gener-
ate significant health care savings. TI1e new Ted:mology box looks at h0111.1 com-
panies are conlTolling workers compensahon costs. The ne·iN Sustainability box
describes how Google used data analytics to help· employees make healthier
lifestyle choices when visitin.g its lNeU-loved cafeteria. The ne\/l.r Globalization
box highlights some of the unique health issues that expatriates and their fami-
lies can encou.nter overseas and hovv crn:npanies try to address such issues.
The nev\.r eviclence--ba.sed Hf{ feall.ire describes hm·v Caesar's used "Big Data"
to reduce health care costs by reducing employee emergency room visits. New
e)d1ibits describe how companie~:> d1oose benefits objectives and how t11ey com-
municate benefits information to ero.ployees. A ne1N section describes how the
new Affordable Care Ad will affect employers and the chapter doses vvith a.
new case that highlights hov11 ~;ome employers are reacting to the new Act.

(~11ap'fc~rr 114
The new chapter opening vignette taU<s about ·why and how vvorkers are seek-
ing slTonger rights and protectio:r.s through labor unions in Chi.11a ci.nd Bangla-
d esh. A new section describ<::s r1ornmion worker representation systems and how
they compare to uidon :repret3entation systems. 1he new Integrity in Action box
described how retailee:> have reacted to the Rana Plaza tragedy in Bangladesh to
(f'. · aci: to make supplier factories 0afer. The ne111;- Globalization box described hovv
1-..
 I

j
Preface

Renault is. working wit11 its union ·workers to increase production flexibility
(and its ability to comp12:l:<::) in exchange for expanding production in. locations
H1.at ag1ree to 11:hese changes. Tl1.e SustainabiJily box describes how companies
in the trucking, retail food, ai1d construction :industries are working with the
Teams tern and other unions to save worker pensions. TI1e .chapter conch.ides
with a new case that explores how Hostess Brands (maker of fue Twinkie) plans
to exit bankruptcy 11vithout tl1e -i.mionized employees it once had.

CUli&llpt@ir 1)
The ne1v chapter opening ~ase discusses 0-Unese capitalization on ownership
of Mittelstrund cornpm1ies. Table 15.J_ has been updated with the Fortune glpbal
top 25 largest orgmi.izations. Updated hourly cost comparisons across a va{iety
l
of countries are presented. The T.ntegrity in Action box on Rijkrnan Grnenink
(rise and fall of a Jxm_ker) i'3 nevv in this edition. Brazil's use of social ~edia
is disc{issed in the new Cornpeting through Technology box. A new Compet-
l
ing tluough Globalizati.on box describes how Apple is bringing jobs back to Hle
U.S. 1b.e Competing through Sustainability box discusses GreenFox, an offerer
of sustainable solutions. Comparhi_g the cost of living -in different global cities is
the the1ne of tl1e updah.-~d. Table 15.6. TI1e Look Back content as well as ilJ-e HR in
Small Busjness case are ne1N end of chapter material. l
The new Cmnpelixig l:hrough Globalization box looks at what is considered a
bribe ill different cotmtdes. New figuxes -vvith up-to-date examples of strategies,
talent managenient models a.-:i.d leadership models at Goodyear and Kroger
in.dude Figure 16.3, Goodyear 's Customer Centric View of HR; Figuxe 16.5,
Goodyear's Strategic Business Prioriiies; Figw:e 16.6, Goodyear's Global Talent
Management Process; m1d Figure 16.8, Kroger's Leadership ModeL TD Bank's
efforts to create an internal social network are discussed jn the new Competing
through Technology box. A new Competing through Sustainability box is on
how Elecil:olmc uses sustainability efforts to attract and reta-in employees. John
Corzine, CEO of MF Global, and how he purposely or inadvertently encouraged
subordinates to commit ethical and legal violations (negative example of etJ:Uc.al
in
leadership) is covered in the new Jnteg:dly Action box.

Acknowledgn1~nt:s
As this book enters its ninth edition, ii: is im.portant to acknowledge t11.ose
who started it all. 111e first edition of this book would not have been pos-
sible if not for the enh·epreneurial spirit of two individuals. Bill Schoof, presi-
l
dent of Austen Press, gave us Hw resources and had the confidence that four
unpmv~n textbook v11riters could provide a new perspective for teaching
human resouxce n.-1anag·ern.ent. John Vveimeister, our former editor, provided
us wilJl valuable marlkeiing i:nforrn.ation, helped us -in making major decisions
regarding the book, and :rnade writing this book an enjoyable process. Mike
Ablassmeir, our current editor, continues to provide the same high-quality
guidnnce and support vv·(:' rr.:-ceived from John. We also worked with an all-star

Ir---- -- - - - -
· ·~ · .
~
'

t Preface xix

i development and project n11:magement i:eam, including Heather Darr, Jane

;l , ,,_ Beck1 and Susan Lomb.ardi. Their suggestions, patiE~nce, gentle prodding, and
cari~ful ov~rsight kept fhe author team. focused on providing a high-quality
rev~sio n while m.~etin.g pubHcati,on deadline. They also carefolly reviewed the
1
(: .
--"'- rev1se0 inanuscnpL
Vlfe would also like lo thank the professors who gave of their time to review
t: the text and attend focus groups lo help craft this ninth edition.· Their helpful
A conunents and suggestions have greatly helped to enhance this edition:

Vondra Armstcong ~/hchacl Da_ne Loflin Machelle K. Schroeder,

PulaBlci Technical )~Ji'lc Technical College PhD,SPHR
Colh.~~e University of
Pm:oela Mulvey
Olney Central College Wisconsin-Platteville
Brian Bartel
Mid--Stafe Technical Lake Land College Carol S. Steinhaus, PhD
College i.l..11.J''CF'-"}·~ Northern Micltiga11
L "t:J '\.. .0..!Uf:;j,x•
l'V.U :t"-lJ'

/\/orlh Caroiina A&"T State Universii-y

Stacy Campbell
'! •; Kenne::;au1 Slate University J. Bruce Tracey
University Cornell University
j' David M_ l\Tem.i
Sheng Wang
'.3usie Cox Niagara Couni.y
McNeese St:ate ·Comrnuniry College llni-versity of Nevada-
Univcrsif-y Las Vegas
J-J1~1r'1C'
. l:..' ·'·i\Ti7llV'"l)
\::>· ') L -·
. 111. ..- .1<.

Shaun VJ. Dave:n.port Towson University Jenell V\fitlmer, PhD

.High Poin!: University University of Toledo
Thorr1as J_ Normm.1
David Gerth Cal~fornia State Steve Woods
Nashville Slaf:e University~Dominguez
University of
Cmmnunity College Hills Baltimore

Heth .A. Livingston -, . ..

Lra1g 1' .l\usse.1
D I'
Cornell University Universii-y of Oklahoma

Vl./e ·would also like to tb.ank the reviewers and focus group participants who
rnade important suggestions for previous editions of this text. Their comments
have helped to devdop the book from edition to edition:
re
1 Richard Arvey .Alison Barber Joan Benek-Rivera
f\Tational Universih1J of·
'
A1.ichigan State University University of
..:i1ngapore
(' '

Pennsylvania-Bloom.sburg
l 5teve Ash
KathJeen Barnes
L[·. ·11. ·1.·vPr'·if·v ~/ .\" V1-"co-1"'11''
.,.,, ·-"'·· ·.1 c·r:
11 .>J,.,. t .._n 1-
1 Philip Benson
University of Akron Superior Neu; Mexico State
Carlson Austin Ja1ne:3 E Bartlei:J, H University
South Carolina Slate University of South Nai1.cy Bereman
UnJversihl Caroli1w--Columbir.: Wichifa State
1 Janke Bald·win
"

The Universif:y of'Texas

Ron Beaulieu
Central Michigan
University
Chris Berger
af Arlington 1.fniuerslf:y Purdue University
Carol Bibly Ivlichael Crant Donald G. Gardu.er
J
Triton College University of University of Colorado aI
Notre Dame Colorado ·Springs
Ai-:agela Boston
111e University of Texas Shannon Davis Boru1ie Fox Garrity
at Arlington North Carolina Staf;e D'Youville College I
Universif.y I
Wendy Boswell Sonia Goltz
Texas A.&M University Roger Dean lvHchigan Technological
Sarah Bowman
Washington c?' Lee University
Idaho Staf:e University University Bob Graham
John DeleJy Sacred Heart University
Charles JBra:uul.
Universif.-y of Kentucky University of Arkansas Terri Griffith
Fred Dorn Washington University
James Brovitn.e
University of Southern The University of Ke,n.Gross 1
Colorado Mississippi University of
Jermifer Dose Olclahoma:-Normrm.
Ronald Brownie
Purdue University-North Messiah College John Hannon
Central Ton.i. Dougherty
UniversHy af; Buffalo
Jon B1yan
Bridgewater Sl:aJe College
University of Missouri Bob HaHid.d
Jndiana University
l
Benin. Erdogan
Gerald Calvasirna Portland Slate Ala:n Heffnie:r
Soutlzem Utah. University fames J.\/Ionme Cenfrr
University Angela Farrnr Fred Heid.rkh
Martin Caxrigan University ofNevada-La.s
11egas
Black Hills State l
Universit"y of Findlay University
Georgi.a Chao Dyaxme Fe:rk Rob l-Ieneman
Michigan. State tiniversify of Ohio Staf:e llnhJersif:y
Universif:y Jllinois-Springfield
Gary Hens8l
Fay Cocduara Robert Figler McHenry Counf.!J
Arkansas State Universif:y of Akron College
University Kim:Hester
Louis Firenze
LeAnne Coder Norf:hwood Universit.-y Arkansas Sfrtfe
Wesf:ern .Kentucky University
Axt Fischer
University
Pittsburgh State Nancy Higgins
Walter Coleman Universily Montgomery
Florida Southern College College- Rockville
Barry F:rk~dman
Marcy Connerley State University of.New ·wayne Hockwater
Virginia Tech University York at Oswego Florida Stal:e Universit-y
Donna Cooke Cyn1lria Fukami Denise Tanguay Hoyer
Florida Atlantic UniversHy of Denver Eastern Micl1igau.
University~Davis University
Daniel J.. Gallagher
Craig Cowles University of Fred I-:lughes
Bridgewater Sraf.-e College I!linois-..Sprin.gfield Faulkner Univcrsil-y
r~
'~
t
,-.
S'.• Preface xxi

~- Natalie J. Hunter
Porflrmd Stale University
r r
.TU ..le ..H d .,
• .Vh<::
Helen La Van
DePaul Universil.~IJ

Renee Lerc.he
Millicent Nelson
Middle Tennessee State
University

l California State
University, Chico
Sanford Jacoby
University of California,
L1x1 Angeles
Frank .Jeffries
University of
Alaslca~Anchomge
Roy Johnson
Iowa State University
GiNenJones
! ; Fairleigh Dickinson
U11iversif:y
GlNe11dolyn Jones
Univer:;ily of Akron
.Hank Ka:rcp
Hmnpfon llniversif.y
Marianne Koch
Un.iversil?J of Oregon.
.Jarnes ];"'
_,\.o1ace1<::
Pahn Beach Atlantic
Universih;
TomKolenko
Kennesaw State College
Elias Konwufine
Keiser University
Bell1 Koufteros
Texas A&·M University
J Ken Kovach
George Mason
j !" University
Chalmer Labig
. Oklalwma Staf:e
j I
,.'
r
Universif!J
PalTicia Larrier
Universiiy of Louisiana at.
I.afayefle
Vonda Laughl.:i.n
Carsou-New rmm College
University ofMichigan. Lam Nguyen
Palm Beach State College
Nancy Boyd LilJje
Universitv of North Texas Cheri Ostroff
Teachers College
Karen Locke Columbia
William & Mary
Teresa Pahner
Susan Madsen Illinois Staf:e University
Ulalt Valley University
Robert Paul
Larry Ma:instone Kansas State University
Valparaiso University
Tracy Porter
Ann-Marie Majeskey Cleveland State University
Olive College
.Mounf:
Gregory Qtunet
Liz Malatestinic Southern Polytechnic
Indiana University State University
.Patrkia fvfarti.na Sam Rabinowitz
University of Texas-San Ru.i:gers University
Antonio
David Rahn
Nicholas Mathys California Sl:ate
DePaul Universitu
./
University-Chico
Lisa McConneH Jude Rathbum
Oklahoma State University of
University Wisconsin-Milwaukee
Liliana Meneses Katherine Ready ·
Universiry of f\/Imyland University of Wisconsin
UniversihJ College
Herbert Ricardo
fe3sica l\1ethol: Indian River Sf:ate College
Rutgers University
MiI<:e Ritchie
Stuart l\./lilne University of Sou.th
Georgia Institute of
Technology
Carolina
Gwen Rivkin
Ba:rbarn 1v1:insky
Troy Universif:y
Cardinal Stritch Lbiiversily
Mark Roehling
Kelly MoJJica Michigan State UniversihJ
UniverBity of Memphis
Mary Ellen Rosetti
Jim Morgan Hudson Valley
California Sf.at-e Community College
Universily-Ch.ico
Sarah Sanders-Smith
Gaqr J\Aurray Purdue University- North
Rose State College Central
 }

~)C(!itit ~irveJJ Linda Turner

J
.. Miyako '.3chancly
Jefferson c:.ornm1Jn:iiy 1]11i'TJl~rsih1 O'fc</ '
Firo-inia
r')
Mon·isville Sf-ate
College College
.!:\·J~·,fr; SJ)erstaCl
'
Robert 5chappe Chippewa \!alley Technical Linda Urbanski
Universiry of College University of Toledo
Micltiif,an--Derlrborn
<.
:H oward Stanger William Van Lente
.Tad.<: Sd1cenfd.de;_· Cm1isiu;, College Alliant Inlemational
Ivy 'lb:h Com111.1J.11i.f:y Un.iversif:IJ
College ( .J<u.)
:'<-.pr C:t1·oud
'-' .. .

Franklin University Charles Vance

Joshua Sd.rwar7. Loyola Marymount
1\1iami Univer:;ity-Ohio ·C ynthia Sutton Universihj
i"ndiana University- South
Pat Set11-k
Harper College
Bend
Peg Thomas
Kim Wade
Wasfzington St:ate University l
Chxistina ShaJl~y Pennsylvania Sfal:e Sheng Wang
Geo1:gia Tech U11.iversify-Behrend University of
Richard Shuey Nevada-Las Vegas
'.3h2vcn L. Thomas
'T7 r. re C'
...wmar; 1n•1.W z·
. o.tegc
!Viissouri St.afe Renee Warning
Rkhm:d Sirnp::;on, tfrriversif:y University of Central
llnivcr:;ih/ of Utah Oklahoma
']),::;-n1 Timrn.erman
--,, ' "! C''
l\ornlfla .::>n1g n
,
·ren.nessee Technology Lynn VVilson
Universitt; of li1·1
- - i· 7,n·s1'i·11
7
....., ,
·-· ~ , ,. J ' Saint Leo Un.ivcrsit.y
Wisconsin-lv.lilwaukce George Tompson George Whaley
Erika En g-el Snw}J Universit.-y of Tampa San Jose State University
Coasf:al Cr:r.rolina K. J. TuUis Dani.el Ya.zak
University l br.i1Jersif-y of Central. Montana St·ate
Oklahoma Universily- Billings
l\th1rk Sn.1.ith
J\!Iississi;JrJi
'I
Gulf
.
Dm.l. Turban · Ryan D. Zimmerman
Coa;;f Conmiwlil:y Liniversily of TexasA&M
Collcge-Gulj[1ort Missouri-Columbi.a. University

Raymond A. N{}ie
JoJ:m R. HoU.enbieck
Barry Gerb.ML'i\:
Patrick IVK. 1.11/Jdlgh~

~~~oba~ Edition ffi\c:kno~,,~~edgements I

The pubU:-:>heim wo1JJd hke to pay sp12d.al thanl<:s to the following conhibutors
for the n1aterial H1ey have provided for this Global Edition:
Judie van B:n:'ukd.en
Universitdi: Nyenrode_, Nef:ha1rm.ds
Robert m.on:une
Universii.eif: Nyen1·ode, Ncthcri'rmds
1
 Thf~ popular boKes "CompC:~ting through Sustainability," "Competing
through Globalir:ation," <'md ''(ornpetinfJ thrrrnigh Technology" have
been updated with new references to recent companies and examples.
Their practical relevance and timeliness to HH i~;sues are essential for
student learning in the classroom. A new box entitled "lnt.eg1i1'} in
Aclion" h<Js also been ;:1dclf~d. This brn( highlights the good {and bad)
HR-related decisions m;)de by company leaders and managers.

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l;~aimk11gobjecti\fes. at the beginning of eac::h chapter TI1rou9hout (~ach chapter, a design element calls out where
inform students about the key concepts they should the learning for each learning objective begins ln the te)(t,
understand after reading through the chapter. This element 1.11~U guide students in their comprehen5ion of
the chapter topics and provide ;,:i reminder of the !earning
objectives throughout the chapter

"E1ridence··Based tm"' sections within the diaptms

highlight the growing trend to demonstr<)t~ how HR
contributes to a company's competitive advantage.
Two of the six MR compf~tm1des of high--perforrning HR·----~.
professionals (credible acl:ivlst. and stmte~liC architect)
ernphasi?:e the need to influr.nc0 rrn:irmgr.rs, share
I E\/IOENCE-6/\HD lift
information, and develop peoph~ stmi:~igies that contribute I /'1 !'lu'.ly ni 11.fU.,.\ 11nw" 1~ .-.:.~td mlnln1i1b in !h1? Vnili:d St.1h~!l f1."t1\i! 1J, ~1 :11dlc
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eol H 1 ~~·l. '1.li.ti!' '"~1•Jd111; r•~-.:~
io thQ busines5. Evidence-Based MR shows how HH i
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decisions are b;:ised on data and not iust iniuition. Th(~ if ;111d higldyt:ml!~!l~('.l'll P"'Y- ,_.,-h!·rt'..'l.'> .~ilfr:ri.. nri:1r.~ 11111.!;: u.i;1<,-.! ";·1.•n•!i\ITT;1~:m"
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company eJ<amples used show how 1-m imKtices intiuimcc
the company's bottom line or key stak(!holdcrs indudin9
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nt-~w, relevant exan1ples of real business problems
or issues that provide background for the issues
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to recall the chapter's ,.,.,, :,.\in!r!; l•h1i•·1·1.JIM 11!;.·:!'f1l-:;;U1 ;·mpl·,;}"l"': tri•.~rJ·.' 11•!.:•r1,-.1,-l1• :.i,lr!,.,,,~ !n.1,,M n ri -i;a t'1N! ;.,...,,111.'!' '" !P..• fc.-

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opi~ning vi911ette <Jnd

rs:n·1· :n rr1,,..·.,F. J.qi1.~ 1J-.,~rt r~ ..~ n•,ir !.1tn, Al!1:11 •·.·~,:, o.vmmo~•!'
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apply it to what they have : ir

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just learned.
ill••~ ".'•'•J1!pt•lo11;--.:o C'I <! high! ~· r:tre~ 1 m1•cJ, hrt,l•ly
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ti<':" 1"i : m . Glvo.'f ' th1• !.'l.Jll.f.T'"J,,!Y .,,.,\ c•;rf'f'l! rivr: 1•11,·l "l"· )<....,. ~. 1•.;.;..1'1' · ·~' ,•.~. \.; r~wrJ,;<J•,,..•! .l •'.1•d~. ~l'<·!'i 1·:~
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C-ll1t!1•!; ,jiff<'.n,.,.,1ly to rrJ111;1! th•! t;'('·rl '!!tru~·h,,...'hlll 1\1'-' ••,,,1'!!.~.~.\.1.i,,\~. r·i:":'f. 1 . •q
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f!;i.• !l; l11mir1~ ~•) !i'>e mr fl1I;.
Manaqi11g P.1mr,!~! cases look at incidents ;;ind nl {l.'111 fr,,:., •q!V.,··

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W1lh 1-.ln~ JJ n_"(lJn'1r.\:t(ld1,.t I" ,~,ti l:-..1.ir-;J th.,t I h.~•.('ll"'!

rr.;11 comp.ank!s and encourn91' '.ituden1.s to \11•,• K.'l.'.l('l•lN it1<.Jt..~lty. ~!-:'tr(• :<nl-.i·~'..l~'J!i If«~ {'C IJ>~J.l!~
h1·• b'llll t:;I J..'Tt.:h!r.tn.~ wlth 1:t:-:;..'tir.\1:r ~·•·fl.·k.,;, 911:i1ilf,
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1il"l•h l·l•:w:r•lt·f',, cJ.:.~: 1! (1.i. ;1f\\\ •.\pplr. IN:. i..wr. t>.-..,'r.
critically evaluate each pfobl0.m ;md ;:;pp!y the 1'.~•ni:.1:. in ,:..~\1..,:. ,,n:J IP!!.rh; ,-J'-'·''-' - fl,, /.-...'lu.,,_r,· ,ii, II !'."
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11
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chapter contents. P:Jd; fr,,_~,!.!-1 tntnj:'•.H•}"
'l~Prl"!< •.>:Hnln.t~
:li't..-l~n~.-:J 1h~1 It~ io1111/\.
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nti rt,_ur~r,. ll'i ,, ~"-' .. ,,.i~1 \:.:Nl•r-~~ l i:-· 11\:o ~i.:1;1!1• ':'5 !c )'•lliN'~c! !n !ig_h! lli 1,)ll) f~T•,'Sf ..il'-1pf-:1i t\ 1U;CJ\.!. ~l\.,lpk
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l~x:erdsing Strategy cases at the end of each ------ ------i___,, , , . ~immgy and llnl\! a! D•ltn Alrlfll!'>
rn ·1~~i 1.op •~'1l""'°! rttntlb.MrU~ fllm-:l"oi.•~:hl Qt~lrmllJ\ IH'I!) d1~ ~f tii'fe":>:" f'...-n J\J1.":!\
_chapter provide additional cases with discussion ~~lf.cdublan.Dnl.M,whfdlb-M~bh«l!!n1m-:I•
,'l'Ll.:o..l Tt.T-11t"11!'7.'l within lh~ Jnd1"try lor ~S h1,;hly
cmbu"r-d np01'\ t~ ~C'!"llhlp 1.3• ~tvGJ'. ,.,hn'!'!l
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c:omm}ll!trl<m>p'r.:;~wM o:J~l~lh1hl~qu~ l ­ 7..9 ~~. comp"ttnh~ t"O")lh !""10nU1;-.~ 11.lrllJ'r'!'J- Imph•
quest:ions. These el<amples pos~~ stra'l:e9ic lty ~~r!n':lcto, fod Jo11.m~ th1>S1flO P?"r. I~
ft'{' hrn rtrr.o~ ymm. A hr,rt pmttm"1 t.f ff.t. ftfT'7.ld'~1
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questions based on real-life practices. hm lnJ!l'?'J ,whld1~!cll~l17fhaOiJ_tfWrt (1l....t.­
fnrs vp fu~<mt,) PtJ'i~o!>Q:ly l~~ (f"'1-°tl-'
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no You ll:w~ Wh<'\l It Th~~g to Work In lln7 ,,,.
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ri:m11'lm1t:fl°tMr, provide a brief exercise for students to complete
Om't~tf! r:CCOT1-CIJ11\>ti1ry- ('<1f' i'TlJ"
Y0> ND .'J. lom"1omll'J\"rtno.ktnnu:r11t 1m11rtr,<f)~t>f
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and evaluate their own skills.
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HR in Small Business ca:>es at the end of each chapt-er / ' ~1Nort~c\l~{l'Ni;),rt1Udi ~dt+.dhy
11,., Oi\=r.f:U Cammbr-tnn on Hnmr.n RetitJW;oni.1<1frt.n
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f.'l'tl'tl"t. Chkrtp;o I' tr.'11 rlf t1.hiY:dl b.l tlntt~lt lhff. 11 1on fctrhclp. Th'ICC'mll'.\o:"J-!eoi.J-imr!i&*'d r1t1<!r:01iJ:l
highlight HR issues and prad:ices in entreprenurial, ,,,./ fJ'r'lln-frlJrcrhnlmi:tlO":'L. anri nf) n-.11-Jma, cl r!:tfo~~·tt!.Jf.til r-t&~

family . owned, and emer9ing businesses. Questions

provoke students to think critically about "people
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lVJ)l)<l "" mi:in M rh• 1'1'1'<,_ fn~tnrr, fat l'I tnl~
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practices" in small businesses. J..od;<r7~'11l!':l."!.t' oo:npl:dJ1_t, f-mol"l-! rd~ fT.P' with-.

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 ~IMSTl!UKTOR'S MANllDA.ft. edition . You'll find a new video produced by the SHRM
The Instructor's Manual contains a lecture outline ;:ind nol:l~s, Foundation, e ntitlr~d "Once the Deal Is Done: Making
answers to the discussion questions, additional questions Mergers Work." Three new videos specifically address
and exercises, teaching suggestions, video notes, and employee benefits: lfGM Cuts Benefits and Pay," "Sulphur
r!c 1
.. answers to the end-of-chapter case questions. Sprin9s Teachers," and "Google Employee Perks. ' Other
' ;

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new vid~~os available for this edition include "E-Learning
UST SA~.m: Enqlish" for the chapter on employee development and
The test bank has been revised and updated to re.fleet Rr-~cession Job Growth" for the chapter on HR planning
0

the content of the 9th edition of the book. Each chapt<-~r
includes multiple-choice, trne/false, and essay que:?stions.
HUST
McGraw-Hill's EZ Test is a fle1dble and easy-to-use 1dectronic
testing program. The program allows instructor'.; to m~ate tests
from book-specific items. It accommodates a wide ranqe of
qw~stion 1ypes and instructors may add their own qu0<;llons,
Multiple versions of the test can be created and any le;t can
be exported for use wil:h <J)t.ff~;e m<.magf~ment systr.m:; sud1 a:;
WebCT, BlackBoard, or Page01.1t The pro9ram is available for
\11/indows and Macintosh environments,
vmrr;:os
:i Human Resource M;:inagement Video DVD volume 3
offers video clips on MRM issues for each chapter of this
mid recruitment.
i?Oi)llJri:~rrnMT
ll1is presentation p1:ogram features detailed slides for each
chapter; which are found on the OIL
O IMlm~ lf:: ~J:AIU~!NG (K;~U~~ (m.q
•n1~nvw"rm~((;9ii'~w-~o~l.co.M~cftlil!h"thol0li{$/ll1l©~~ie
This tr:~)\bpecific website follows the telCt chapt0.r bjl
chaptei: lmtructors and students can access a variety of
online teachin~J and learning tools that are designed to
reinforce and build on the te)ct content Students will have
direct access lo learning tools, such as self~grading quizzes ·
and video clips, while instructor materials are password
protected.

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McGraw-Mill Connect Management i~-> an oniine assignment
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Conhect Management uffeVi a number of powerful tools
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Students want to make the b(~st u:;e of their study time.
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With Conned· Management, creating assig111nents h ieasier
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The Connect Management Instructor Library is your
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J
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The statements contained in Numan Resource
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Unique among publisher-provided self-assessments, our 23
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m".Jlll 51Et'liJ This web application allows instructors to present and 'I
This interacl:lve, video- students to learn the history of management in an engaging A
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watch as 1S real managers apply their yc\lr'.i of e1(perience management a5 we know it today. II
l~
. I~
·'
 Video library OiVDs
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OESnl\~ATIO~J (ri:o!Jl vmlEO§
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 'il Human Resource Management Gaining a
Competitive Advantage 2

1J ·~ Pay Structure Decisions 492

112 Recognizing Employee Contributions
i Strategic Human l~esource 1Nith Pay 534
Management 10 13 Employee Benefits 57 6
J The Legal Environment: Equal
Employment Opportunity and
Safely 108
4. The Analysis and Design of \Nork 158
114 Collective Bargaining and Labor
!~elations 620
115 Managing Human Resources ·
Globally 676
5 Human Resource Planning and 1d51 Strategically Managing the HRM
Recruitment 198 Function 714
if~ Sele·ction and Placement 244
Glossary 755
7 Training 286
Photo Credits 765

l\lame and Company Index 766

Subject lnde)( 778

3 Pe1formance Management 344
9 Employee Development 404
10 Employee Separation and
Retention 450

;oodv
 Preface vi Managing People: Yahoo says "Nope"
to Working at Home 64.
11 !Hlumami ·Resm.1mcie !MlaITTiiUiIDJ!l!me[»tt:
HR in Small Business 65
Gaoning a CompetAthve Ad'Va111rlt@gJJe 2
l\ftotias 65
). > Enter the Wodd of Business: ASML:
HR Boosts Tedmkal kmovatio111 3
l111trnduc1tion 4
What Responsibilities .and Roies !Do
HR Departments Perform? 6
Strategic Role of the MIRM 1Fvm1c::tion B
Demonstrating the Strategic Value of HR: · :l Strategic Human Resource
HR Analytics and Evidence-Based HR 1'i
Mairfllatge111rH.:llnt 10
The HRM Profession: Positions and Jobs ·11
) ') Enter the World of Business:
Education and Experience 12
!KEA IRis~s 71
Competencies and Behaviors 13
Introduction 72
Competitiv~l ChaUengias ~lfl'fh.1te1i1drng HMman
What Is a Business Modal? 72
!Resource l'llltanagemenlt 15
Gm's Aliempt to Survive 73
The Sustainability Challenge '16
What Is Strategic Management? 74
EV!DENCE-BASfED HR 30
Con11pati1111g througlh Giobailia:atiofiil
C<QH1rt1p®th1l9 t&ilrnMgh SMs~UITT!li'ilibi!flfy
GM in China 75
Volunteerism and Going Green Are Reaping
Dividends for Employees, Communities, and Components of the Strategic Management
the Environment 32 Process 76
Rlllltogn·ity !n Adh;i>lfn Linkage Between HRM and the Strategic
Leading a Turnaround Through People Management Process 76
Practices 46
Role of HRM in Strategy Formulation 78
The Global Challenge 46
C©1mpmirrn9 through 1'e1t:hn~~@9y
Compath11g thmllllgRil G~olbaii<i:<ntkmi Sustainability at the Heart of Technological
Bon or No Bon: Is It Better to Criticize or Innovation 79
Adapt to a Count1y Culture? 49 5trat~gy Formulation s·1
The Technology Challenge 49
ilIT!tegr!ty in Action
Compa·tleng tlhrr1)1J1gfl] T10d11nfJ>l@g:y Samsung's Equal Opportunity Employment 83
Connectiveness Enhances HR Practices 51 Strategy Implementation 85
Meeting Competitive Challenges throug~1 HRM Practices 86
HRM Practices 56
Strategic Types 91
Organization of This !Book 59
) >A took Back 60 HRM Needs in Strategic Types 92
EVIDENCE·BASED HR 92
Summary 60
Directional Strategies 93
Key Terms 61
Competing through Stn~tBimiifol~fity
Discussion Questions 61
Sustainable Goal, Unsustainabl~ Business
Seif-Assessment E>mrrch:;a 62 Model 96
Exercising Strategy 62 Strategy Evaluation and Control 97

XJOW
1oui:vn Contents
:-i
The !Roi0 !()lf Mmmarr; IR~so.Mircas orr; PmY"ndnn9 Hrrnt@9rity lllil Acth~rii ·
I
5trategk Cmtrllrr.¢tifo1~ Adv,;;mtag'-'1' 98 Inappropriate Relationship Leads to Ouster of 1

Emergent Strategies 98 Best Buy's CEO and Chairman 136 \

Enhancing Firm Competitiveness 99 !C1U1rrn1i11\ !ssuias Regardi1119 Diversity a1111d Eqllll<ilij

)> A Look !Back 100

!Employment Opportunity 136
Sexual Harassment 136
Summary 100 ' I
Affirmative Action and Reverse
Key Terms 100
Discrimination 139
Discussion Questions ·101
Outcomes of the Americans with Disabilities
Seif-Assessment fEx~rdsa '!01 Act 140
Exercising Strategy 101 ~mpk1ya;ie Safety 141
ManagiR11g People: Is Dell Too Big for Michael
Dell? 102
Comp~tl:lng through Su!iti;\ilnabHnlty 1
Protecting Workers in the Apparel Industry 143
HR in Smail Busi111ess 103 The Occupational Safety and Health Act
Notes 104 (Osha) 143
'
Safety Awareness Programs 146
l llh~ ll~ga~ IEITTlw8irormme!!d~ IEqll.ila~
Empfoym(£:tnrft: Opportunity and
Comp~1l:ilfllg
Unclercovers Work 148
through Ta«::Jmoiogy
1
$.afet:y 10s ) >A look Back 149
) ) !Enter the World! of Eh.1si111®ss: !Forever 21' legai S1UJmm.arry ·150
IP'rnb~ems 109 K~)f TliJ!rm5 150
lrrri:rod1U1ctio111 ·110 Dnsc1.msnon Questions 150
Thie legal System in the !United States 110 Self-Assessment Emercise 151
Legislative Branch 110 Exeirds.ing Strategy 151
Executive Branch 111 Managi1119 People: Segregation in Schools-Have
Judicial Branch ·112 Lessons been Learnt? 152
Equal Employment Opporhmi~J 112 !-111R in Sma!I Business 155
Constitutional Amendments 112 ~\liot~s 155

Comp~tilf!lg tillri0l\ll9f,l Giolba~n..:atiolll\

4 lfha ARila~ysi~ and 0®$~!!JRil of W@irlk 158
i-Working Conditions 113
Congressional Legislation 115
>) Organi:i!ational
~nl:ar the World of Ch.ping~s
Business;: in
Structure and Workflow
Executive Orders 120 IPromotie GM Revival 159
Enforcemerr;t of Equal Empioymeni:
Opportunity ·120
ili1troduction 160
Worl1A::low Analysis and Or9anizatno1r1
l
Equal Employment Oppo1tunity Commission Stmcturn 161
(EEOC) 121
Work-Flow Analysis. 161
Office of Federal Contract Compliance
C1o>r;11111pH&iting throug~ T~dmok:igy
Programs (OFCCP) 122
Robots Attack Okun's Law 165
Types of Discrimination 123
Organization Structure 167
Disparate Treatment 124
Compat!ng throaagh Giolba!!amtl@n
Disparate Impact 127 Is it Time to Slow Down Fast Fashion? 170
Pattern and Prad:ice ·130
Reasonable Accommodation 131
Job All1;;i!ysis 176
The Importance of Job Analysis 176
l
EVIDIENCIE-BASIED HR 134 -1
The Importance of Job Analysis to Line
Retaliation for Par«:idpation alflld Managers 177 I
Opposition 135 Job Analysis Information 177
I
I
 Contents 'tnmvii

Integrity nn .A.ct&olTi! Personnel Policies 220

Running Right While Running Coal '178
Compiating through Sustainability
Job Analysis Methods ·1 so The Myth Behind the Polish Plumber 223
Dynamic Elements of Job Analysis 182 Recruitment Spurces 225
Job Design 183 EVIDENCE-BAS!=D HR 225
Mechanistic Approach 184
Integrity in Action
Motivational Approach 185 Anti-Poaching Agreements Spark Anti-Trust
Biological Approach 187 Lawsuits 227

Competing thiro1,11g~1 S1U1sta!~abft~nt0J Competing through Technology

PTSD: A Major Threat to First Responders '188 Unlocking the Secrets of Applicant Tracking
Systems 229
Perceptual-Motor Approach 188
Recruiters 233
Trade-Offs Among Different Approach1~s to
·Job Design 190 ) ) A look Back 235
) >A look !Bade 191 Summary 236
Summar; 192 Key Terms 236'
Kiey lerms 192 Discussion Questions 236
Discussion Questions 192 Self-Assessment Exercise 236

Sr<ilf-Assassment IE:x.~irdsie 193 IEJCardsing Strategy 237

IE1(erdsin9 Strategy 193 Managing People: Short-Work Programs Buffer
Workers and Firms 238
Managing Paopie: Stretching the Job
Description 194 MIR in Small Business 239
HR ifil Smail 01U1sin<ess ·194 Notes 240
Notes 195
Iii S~~ectfon and P~acememrtt 244
) ) Enter the World of !Business; Non-Native
Workers as a Recipe for Competitive
Advantage 245
introduction 246
Selection Method Standards 246
5 rrllwmman ~esoMrce f?~airrmnng @,}li'lld
R~liability 246
Reu1U1etme1nrt 1913
Vcilidity 251
) ) Ernb.u the World of Business: Giolb<;i~ Dab;;it®: ijs
Thi5 the End of Oflshoring? ·199 C9mpeting through Tr.tclmoig~)f
Our Hiring Manager Is an Algorithm 254
Introduction 200
Generalizability 255
The Human Resourc~ Planning Proc~ss 201
Utility 256
Forecasting 201
EVIDENCE-BASED HR 258
Goal Setting and Strategic Planning 205
Legality 258
Compatung thro1UJ9h GiolbaDizatio1]
Struggling to Find a Custom Fit in an Italian Competing througil Glolbsiii:zatil1Ji111
Town 216 "Pink Quotas" in Europe 262
Program Implementation and Types of Selection Methods 263
Evaluation 218 Interviews 263
The Special Case of Affirmative Action References, Biographical Data, and Application
Planning 2·18 Blanks 266
The Human Resource Racrui'!:m~nt Process 2·19 Physical Ability Tests 268
 xxxviii Contents

Cognitive Ability Tests 269 On-The-Job Training (OJ1) 311

..11
'1 Personality Inventories 270 C<0>mpeti111g 11:1hirou911h Tachnofolgy
Compati1!11g RhmM91~] $Ms1talirn~biiITT:.y
Using Social Media and Apps for
When Do the Unemployed Become Learning 317
Unemployable? 272 Advice for Choosing a Training Method 321
Work Samples 274 Evaluating Training Programs 322
Honesty Tests and Drug Tests 276 EVIDENCE-BASED HR 322
Integrity in Act:iof111 Special Training Issues 325
Hire and Fire: A Political Game 277 Cross-Cultural Preparation 326
)>A look Back 278 Managing Workforce Diversity and
s~nmmaiPJ 27B Inclusion 329
Key T<eirms 278 Onboarding and Socializatiollll 332
rnscus5ion Questio111s 280 )>A look Back 334
Se~f-Assiassment E1um;i5e 280 Summary 334
Exercising Strategy 280 K:ey Tiarms 335
Managing People: Secularism Is Considered Discussion Questions 335
Sacred in France 281 Self-Assessment Exercise 336
HJIR nn Smaii !Business 282 Elmrdsing Strategy 336
Notes 283 Managing People: McDonald's: Expansion
by Learning 337

1 i!l''<rllillllmirn!ffi 286 HR in Small Business 338

) ) Enter the World of Ousinesfi: learning
Opportn.mities for Empijoyei;!:;. Arn No Acddefflit
at Farmers lnsvirance Group of Companies 287
k1rtroduction 288
Training;,!ts Roie Rii\ cl(.An°i:Oill!AOW> learning and
Competitive Advantage 289
Designing Effodive iForma~ Training
Activities 291
Needs Assessment 293
Organizational Analysis 295
Person Analysis 296
h~t~gtrlty in J\f;;tio111
Connecting Learning to Business Leaders 297
Task Analysis 298
Ensurin9 Employees' Readiness For
Training 299
Creating A Leaming Environment 300
t~ompatlrrng tillr<OJMfllri~ SM:!>tllinalbm~y
Fifteen: Using Available and not Recognized
Talent to Create a Business 302
Ensuring Transfer of Training 303
Selecting Training Methods 307
W\lotes 339
~ f®ri@wm@1n1(e Managem!E!lnt 344
) ) Enter the World of Business: Periormanicie
Management Is About Work and Mow .Work
Gets Done 345
Introduction 346
The Practice of Performance Ma1n;eigiement 348
The Process of Performance Management 348
Purposes of Performance Managemielfll1t 350
Strategic Purpose 350
!n1l:a£Jirify in Actlen
Listening and Recognizing a Good Job: Key
Performance Management Practices Modeled
by Company Leaders 351 .
Administrative Purpose 351
Developmental Purpose 352

Comp~t!rng tinmM1i)Jh G~t0ibE1!1;;:"11tAoliil Performance Measures Critieria 352

f\lissan's Virtual Classroom 310 Strategic Congruence 353
-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Contents Juv~in

Compe'tGrng thrcnuiglh GR!\llbaiji<i:a"\l:!l(lllill Key Terms 396

A Mix Cif Metrics is f\leed1:id to Support Local Discussion Questions 396
and Company Petformance 354
:Seif-Assessment Exercise 397
Valid ity 355
Em~rdsing Strategy 397
Reliability 355
Managing People: Performance Management
Acceptability 356 Helps Turn Around a Healthcare Organization 398
Specificity 356 HR in Small Business 399
Approaches to Mea~mring Parformalfilce 357 Notes 400
The Comparative Approach 359
The Attribute Approach 362
~ Employee Development 404
The Behavioral Approach 365
) ) Enter the World of Business: Learning
The Results Approach 369 and Development at Philips 405
The O.uality Approach 373 Introduction 406
Choosing a Sourc® for 1Pe1·formanc~
The Ralationsh,ip among Dievalopment,
Information 377 Training, and Careers 406
Managers 377
Development and Training 406
COlllflli}@ting thro!Ul§JJRl s~n:staullilaiilbi!Uty Development and Careers 40?
The Health Foundation Evaluates Performance
from Different Perspectives to Insure It ~/leets Development Planning Syst((;}ms 409
Its Mission and Goals 378 Approaches, to Employee Draveiopmeillt 413
Peers 379 Competing thwug~ ledtli1oki~y
Subordinates 380 Career Management and Leadership
Development Is Se'rved 24/7 at
Self 381 Intercontinental Hotel Group 414
Customers 381 Formal Education 415
EV!DENCE-IBASIEID HR 382 EVIDENCE-BASED HR 418
Use of Technology iun IPeriormanc"" Assessment 418
Management 383
Job Experiences 424
C©lmpt&tililg tlhitr«:»MrJ~l T~1dn1111Qlo9y
Interpersonal Relationships 430
Social Media Tools Help Make Performance
Management a Daily Event 384 Special Issues in Employee Deveiopm~nt 434
Reducing Rater Errors, Politics, and Increasing Melting the Glass Ceiling 434
Reliability and Validity of Ratings 386 Competing through S@.1nrtaolfllc1'ilbi&ty
Performance f ieedbadt 388 Patient Satisfaction Depends on Management
Development 435
The Manager's Role in an Effective
Performance Feedback Process 388 integrity In Action
Mentoring Gone Awry Ends Rather than Helps
EVIDENCE-BASED MR 390
Careers 437
What Managers Cail Do to Diagnose
Succession Planning 438
Performance Probl~ms and Manag<e
Employees' Performanc<6' 391 ) ) A Look Back 442
Diagnosing the Causes of Poor Performance 391 Summary 442
Actions for Managing Employees' Key Terms 442
Performance 393 Discussion Questions 443
Developing and lmplamanting a System That Seif-Assessment Exercise 443
Follows laga! Guidelines 394 Exercising Strategy: 443
)>A Look Bade 396 Managing People: IKEA: Leadership Leads to
Summary 396 Product Innovation and Globalization 4L14
xi Contents

J}-m in Smail Business 445

Notes 446

10 rEmp~oyee 5epara1toomi ,\;JHJ1id

1Jllf;!r~etnn1:fon 450 1~ rr-~w :S~nJdm"~~ Diedsfimb!lil 492
} >fEnt.ar the World o'f Business: "Churnh1g" LJS"I >> E!il'i:0f the '\l\.¥0dcl of Busin~ss: Decidin9
. Wh~n~ to M21m..1facturn: ,The Rol-e of
nntroduction 452
lalbor Costs 493
Managing !nvoia.m1tary Turnove!f 453
lntrodw:~non 4<?4
Principles of J1;stice 456
'.C<0>mpGU:inl9 11:iuoiugh $u!!>'tt':llonalbmty
Progressive Discipline and Alternative Dispute \f\forking at Apple: Is Servi ng a 'H igher
l\esolution 4513 Purpose' Enough? 495
Employee Assistance and Wellness Eq,.iity Theo!fy <:im! Fairness 496
Programs 459
De1miopiillg Pay IL•ev<eijs 498
Outplacement Counseling 462
Market Pressures 498
Main.aging Voh.JJ111tary Turnover 462
c~mr.~tin-i91 tri~rroll!gh «:ik~lbiafo::atiiO'n
Process of .Job Withdrawal 464 How Much to Produce in China: Labor Costs,
fintiegirity in A<dio~~ Productivity, and Manag ing Risks 500
Whistleblower or Traitor: The li:.ole of HR in Employees as a ResotHce 501
Making the Call 466
Deciding \/\/hat to Pay 50'!
.Job Satisfaction And .Job
Market Pay Surveys 502
Withdrawal 468
Cm1D1p ·.'l'tl:r!1[~ ·~illi r·m'1lgh 'l'e::::frm<0>io;mr
EVIDENCE BASED HR 469
Wh,::n Doe'.; Payin:J More Pay Off: Using Big
Sources of .Job Dissatisfac tion 469 Data ~~03 ·
Compatilfllg thrnMgh GOob.a!ia:a1l:noNb Oeve loping a J ob Structure 504
Riot Puts Spotlight on Working De'!cloping ;3 Pay Structure 505
Conditions 473
Conflicts Betvveen Market fJay Surveys and Job
Comp!f.?tnlfllg t!~rnll.llg~ SMist~!rrtiab~~lt~r Evciluation SOS'
Flextime: Has Its Time Corne and
Gone? 475 Monitorin g Compensation Costs 509
G lobalizatio n, Geographic Regi_on, and Pay ' -...,
CompoUng thrrQ11JJ9h Ttf>c;:hnoiogy
Didn't Your Boss Used to Be a Vacuum Structures 5'!0
Cleaner? 477 P.!iD!El'KE-BA$1.SD HR 512
Measuring and Monitoring .Job The impoi!tancoe of Process: Participation and
Satisfaction 470 Comm1,mki3Jtion 5'13
Survey-Feedback Interventions 479 Pe:11ticipation 513
v~
1. i A look Baek 483 Communication 513
Summar; 484 Currn!lt ChaHlenges 5 14
Key Tarm5 484 Prob lem s with Job-Based Pay
Structure:; 514
Discussion Ouastions 4134
[~espo n ses t o Problem s w ith Job-Based Pay
Self-Assessment EJ{erdse 484
~~tructui-e s 5'15 '
Exeu·cising Strategy 485
C an t he U.S. Labor ForL;e Compete? 517
Managing People: Heading for the Exit : Flight [;~ocut i ve Pay 520 ;(,·1
ji
Altendant Becomes Hero 486 '"""\
Gowm1n11~irt f~e9~1ila'l:km \':lf iEmpioyee
HR i111 Small Business 487 Comp~:in~a~hn 522
Notes LJB8 Equal Employment Opportunity 522
 Contents xii

Minimum Waqe, Overtime, and Preva iling Process and Context Issues 560
Wage .Laws 525 ijntcegrlty 1111 Action
Making Sure Executives Get Paid Only
lrnte~;arricy in Adttd:Ni11
for Real Performance: The Role of
When It Comes to Workin~J Overtime, V\lhat Is
Clawbacks 561
Good for Workers? ~-i26
Employee Participation in Decision
) ) A took Bade 527
Making 561
Summary 527 Competing through Globalizai;iolll
Key Terms 528 Capping Executive Bonuses in Europe: Is It a
Good Idea? 562
Discussion O.uestio-111:;; 52B
Communication 564
Salf-Assess.mont f:Riurdse 528
Pay and Process: Intertwined Effects 564
f:xerds.ing Strater,w '.i2?
Organization Strategy and Compensa1tio111
Managing Plflopl'e: F'or•;che: Wh ere High
Strategy: A O.uestion of Fit 565
Performance Meets Low Cost Liibor 5~'.9
) ) A look Bade 566
HR in Small J3A.1~in>es.:!J; 530
Summary 566 '
Motes 531
Key Terms 567
Discussion Questions 567
11 !RecogllllNlill1[Jj fC~Tl)'l~j)~l\il\l'li:};I!~ (©~1l11IT'O~M0'8:A@llll~
Self-Assessment Exercise 567
with Pay 534
EJmrcising Strategy 568
) '.> Enter the 1\/1,foddl o~ [\QJ1~;~~""''·r;: MR9~1
Perrformam:io is ijo·npon·'(<'1er~: {afilld S.o is Mow Managing People: CEO of RBS 569
You Get. Trriere} 535 MR in Small Business 570
lifltroduction 536 Notes 571
How Does Pay inflln~!iK<'='J ~~idh.ridMari
Employeo:S? 537 13 !Employee Benefits 576
Reinforcement Theo1y 537 )>Enter the World of Businass: Contromng Health
E)(pectancy Theory '.:;37 Care Costs: Employers Turn to 'Cairrots and
Sticks' 577
Agency Theory ~):1l1
~111troduction
578
Mow Do1»s IP'ay 011•fl•,1,~rK0 tabor fo11•::e
Compositio111? ~)39 Reasons for Benefits Growth 578
Pay for Perfo.rm.ano1 Pm~Jr.rmra;:; 540 Banefit~ Programs 581
Incentive Intensity: Promise and Social Insurance (Legally Required) 582

-)l Peril 540

Merit Pay 541
Private Group Insurance 585
11! Competing through Tedmology ,
I~
'
1~
Compiatili1'9J thr~~P,H~pll~ !ft?1doun.;:iiU~J>'£JJf _ Controlling Health Care Costs by Fighting
Paying for 'Hot '.)kilb': The Case of Information Painkiller Abuse: Prescribing a Dose of High-
Technoloc;:w 544 Tech Algorithms 586

Individual Incentives 548 · Retirement 587

Profit Sharing <rnd Ownership 549 Pay For Time Not Worked 592

Comp<t<ting ~rm·.<;:1>M<B1~~ 3;R,1,%t,zii;,M~k~~ii1t;t

Family-Friendly Policies 593
Increasing Labor Cost FleJcibility Using Profit Managing Bena-fits: Employer Objectives
Sharing 550 and Strategies 595
EVIDENCE-BASE.O t-m 552 Surveys and Benchmarking 595
·' •
i' Gainsharin9 1 Group Incentives, and Team Cost Control 596
Awards 555
Competing through Sustainability
Balanced Scorec;:ud .rlil Google Keeps Employees' Stomachs Happy,
Managerial and 1Sw:-J1cqtiv!CJ P<11y 5S7 But Fit Too, Using Data Analytics 600

' 1 ·"
 ;!t:m Contents

Competing throBRgh Giob.aRu;i;:ati!Ollill Union Structure, Administration, and

Helping Employees Cope with 'Airpocalypse'n Membership 630
in China 601
National and International Unions 630
EVIDENCE-BASED HR 602
Local Unions 631
l\Jature of the Workforce 604
American Federation of Labor and Congress of
Communicating with Employees 604
Industrial Organizations (Afl-Cio) 631
General Reguiator;r Issues 608
Union Security 633
Affordable Care Act 608
Union Membersh ip and Bargaining
Nondiscrimination r~ules and Qualified Power 633
Plans 608
Legal Framework. 637 ........,
inblgrlty in Adio1111
Unfair Labor Practices- Employers 639
The Affordable Care Act: How Will Employers
Respond? 610 Unfa ir Labor Practices-Labor Unions 639
Se><, Age, and Disability 610 Enforcement 640
Monitoring Future Benefits l!Jnion a11d Management Interactions:
Obligations 611 Organizing 641 '
>> A !Look Back 612 Why Do Employees Join Unions? 641
Summary 6·12 The Process and Legal Framework of
K.ey Terms 613 Organizing 641 I
Union alilld Management Interactions: Cornrtract
--.l
Discussion Questions 613
Negotiation 646
Self-Asses;;ment IExerdse 613
The f\legotiation Process 647
E'<erdsing Strategy 614
Management's Preparation for
M.aR11aigi11g People: "Shape Up or Pay Up" - Negotiations 648
Companies Who Penalise Employees Who Smoke
for Their Habit 615 Negotiation Stages and Tactics 649

HR in Small Business 6"16 Bargaining Power, Impasses, and Impasse

Resolution 649
Notes 6'17
Co.mp~ti1111si i!:hrnugh Technology
Longshoremen and Automation: Competing
Company and Worker Interests 650
Management's Willingness to Take
a Strike 650
Impasse Resolution Procedures: Alternatives to
14 Coi~edive lalarga~~ilRlfll@ arnull llaborr Strikes 652
Re~at~Oti11$ 620 Union and Management Interactions: Contrnct
Administration 653
) ) !Enter the World of Business: Unkms and
!Evolving Worker Rights in Low-Wage Grievance Procedure 653
Countrias 621 · New Labor-Management Strategies 655
~ntroduction 622 Comp~tilil~ tihiml.llgB1 GlobaPi;i;;ati@lll
The labor Relations Framewod< 622 Renault Plays Fr;mce against Spain in Hopes
of Improving Production Costs
Goals and Strategies. 624 and Flexibility 656
Society 624 labor Ralations Outcomes 658
Management 625 Strikes 659
Labor Unions 626 VI/ages and Benefits 659
~111r!tia9rri1ty irin Aci:n1JJH1 Productivity 660
Who Pays for Cheap Clothing? 627 Profits and Stock Performance 661
EViDIENCE~BASED.M!RI 628
Thia ifilt®mattionai Cont@xt 662

I\'
Ill·
 Contents xliii

Competinig 1th1ntnaglhi SM!.btaiwmbiOnty · ) ) A look Back 707

Saving Multi-Employer Pensions: Employees Summary 707
Pay the Price 663
Key Ttarms 707
The Public S<ectm· 664 Discussion Questions 707
Nonunion Representation Systems 665
Self-Assessment Exercise 708
) ) A look Back 666 Exercising 'Strategy 708
Summary 667 Managing People: The Toyota Way to
Key Terms 667 f\lo. 1 709 ·
Discussion Questions 667 HR in Small Business 71'1
Self-Assessment Exorcise 667 Notes 712
Exorcising Strategy 668
Managing People: Twinkies, HoHos, and Ding ·~ 6 StrategkaHy Ma111agillll9 the tll!JtM
Dongs: No Treat for Labor Unions 669 f1UJnctio1111 714
HR in Small Business 670 ) ) Enter the World of Business: Googling HR 715
Motes 671 Introduction 7·16
Activities o'f HRM 716
15 Managun~g HMmmura Re~olll.lrcEis
Strategic Management of t he MRM
Globa~By 676
function 717
) ) !Enter the World of BllJsiness: China Go es
Competing thrn1.n9h Giobaii;'l;;;;;i\tkm
.S hopping in Germany 677
When Is a Bribe a Bribe? 718
lntroductiol!Tl 678
Building an HR Strategy 720
Current Global Changes 679
The Basic Process 720
European Union 680
Involving Line Executives 722
North American Free Trade Agreement 680
Characterizing HR Strategies 722
The Growth of Asia 680
Measuring HRM Effectiveness 723
General Agreement on Tariffs and Trade 681
Approaches for Evaluating Effectiveness 724
Factors Affocting HRM in Global Markets 681
improving HRM Effectiveness 729
Culture 681
Restructuring to Improve HRM
Integrity illl A.dl<J>ITT Effectiveness 730
The Rise and Fall of a Banker 685
Outsourcing to Improve HRM
EVIDENCE-BASED HR 686 Effectiveness 732
Education-Human Capital 686 Improving HRM Effectiveness through Process
Compstiirag t~mnugfll! T®dmology Redesign 733
Brazil Becomes the Social Media Capital 687 Improving HRM Effectiveness through Using
Comp12t1:nng thn:mglhi Gl<0>bafiiza-~fio1!11 t\lew Technologies-HRM Information
Samsung and the Growing Trend of Systems 736
"lnsourcing" 688
Competing through TedmlOl!ogy
Political-Legal System 688 TD Bank Creates Internal Connections 737
Economic System 689 Software Applications for HRM 737
Managing Employees in a Giobai Improving HRM Effectiveness through New
ConteJlt 691 Technologies-E-HRM 737
Types of International Employees 69'1 Competing through Sustai1111ablli'll:y
Levels of Global Participation 691 Electrolux Leads the Sustainable Way 742
Competing t~~ro11J1gh s~ostalnalbu~o'd.y Th~ Future for HR Professionals 743
GreenFox: A New Life for Lighting Fil~tures 693 The Role of the Chief Human Resow·ce
Managing Expatriates In Global Markets 696 Officer 744
xfo,r Contents

~ITTfi:<R~rlty fflrn Acti([))Rl HIR ina Smaiiij 8R.miness 753

MF Global's Illegal Trans.fer 747
Notr.;i% 754
/ ) A took ISack 748
S1.nmmmy 748 GiOS!\816)' 755
l\<8)y Terms 748 IPl1101tQ Credits 765
D!s.cw;sion Quiastiolflls 749
Nam1,9 afilld Compa1r1y index 766
S0~f-Assessmant IExerdsa 749 Stibject l1111de.K 778
!Exierdsnng '.Strntiegy 750
Managiflg People: Saving Starbucks' Soul 751

·l

!
I
-1,
I
I
i
-1-
.'E("' :

...

t
GA ~tt\~H~~G fa\ CO~/IPET~T~VE ADVANTAGE

' ...
ii
1:·
 Afa:?r r<-'!acling this chapter, you should be able to:

LO Vil Discuss the roles and activities of a company's human

resource man agement function . page 6

lO 11-2 Discuss the implications of the economy, the makeup of the

labor force, and ethics for company sustainability. page 16

llO '11-'.3 Discuss how human resource management affects a

company's balanced scorecard. page 29

ILO 'il-4 Discuss what companies should do to compete

in the global marketplace. page 46

LO 1-5 Identify how new technology, such as soda! networking, is

influencing human resource management. page 50

tO 1~0i Discuss human resource management practices that

support high-perfo rmance. work systems. page 53

ILO 'ff ~1 Provide a brief description of human resource

management practices. page 56

2
 Most of you wh o have a person;;il computer or a
laptop are not awa re that the integrated circuits
and chips inside your computer are probably man-
ufactured with equ ipment 11vhich is built by a rat her
, unknown enterprise located in a tiny village ca lled
\f(.;ldhoven in the south of th12 Metherlands. This
enterprisf::, ASML, is one of t he 'Mork!'::; leading pro-
viders of lithography systerns for the semiconduc--
1
tor industry and manufactures cornple>< machines
that are critical to the production of ini:e9ratr::id
circuits or chips. ASl\~L has ov('"r si)(ty service points
~1 11 over the world . Custome1·s are rr1am.1fa1cttwers of
integrated circuits and chips such as Intel. Most
of its turnover is earned in Asia (66%) and the US
(25%). According to an ASl\~L spokesman: ' ASl'v1L
pertains to follow M oore's law to provide produc-
tion 0quiprnent of smaller, cheap0r, 111orr0 power-
?;: ful and econornica l chips which are conditiona l
-- · t ·
" i; ;
\'.·.
for our customers' competitive advantage . ASML
takes pride in providing possibilities for producing
affordable mic ro-e l <~ct:ron i cs which makes it pos-
sible to im prove the quality of life."
As such, ASML invests much money in Research
and Development. Huge investments in high-tech
knowledge and equipment demand a labor
force that is able to make the highest returns pos-
sible on these investments. Tho demand for chips
and integrated circuits often shows high peaks of
•. demand and sharp downturns often not in line
with worldwide economic ckNelopments. Also,
11
II'
high investments in time-consuming education
~ or t raining of many people are necessary before
employees become productive in high--tech envi-
ronments. However, 1111hat to do with these people
in pr~ riod!> of economic decline? And, how does
ASML make sure that the right numbers of highly
educated and trained people are aboard whGn
.~
l t he market demand suddenly increases? Thes8 arra
~mportant challenges for ASML
t . ..~mllf,'!/:f.;;!l;o•11n~r.nr._rp::-~,'1.~r..;.:r.<.-::m.v.p~P;:r,~~'f!t.'!r-:'.1W.~~·~."J~~rnr.-1P-.•.!'!,~!'~-f'.'fi'Em.!r'"''.•4."l:UP,.,t.t.• UJ;sa,.c-..u_,_u,4m.nt~.rr.~{'Jf.J.,,t .... ,,JJt,• .r;9_ 1._f_t.1•_,,.,;, g,. c.% ·!:t:.":.!'!'·~..,,__, _ ,
Hence, HR is an important condition for
.6..SML's success and HRM is as strategically impor~
t.ant:. ASML's workforce consists of 2500 employ-
ees of whi ch about 82% are highly educated
with a bachelor's degree o r higher, In the attrac-
t ion, selection and employment of employees, 11
,t\SML is focusing on th e most creative and bril-1 i.
liant thinkers in physics, mr.ithematics, chem istry, · l
mechatronics, Oftics, indust rial :nanufact.uring, i
fl.oftwar0 :and IC!. ASML has an immense attrnc- il
tion for highly educated engineers and scientists IJ
vvho are gtanding in a queue to work for ASML
1
101ven in times of ~conomic prosperity. W hat binds I
the vvorkforce in Veldhrn~1:.m is the love for tech~ ~
1
no!ogy, even among staff employie,~s. ~
An impo1tant characteristic of ASM~ HR!V1 strat- fj
egy is the use of a fle>cible workfon:: a. lns1:;;illed Im. . . !I 0
2002, between 20% and 40% of all workers of ASML
belong tot.his workforce since Dutch law employees I.
with a labor contract for an indefinite period are
protected from immediate dismissal. ll1is flexible
workforce enables ASML to adjust the number of
employees to its production capacity and market
demand. Most of the people who belong to this
f!Endble workforce are deployed in the manufacturing
process of lithographic equipment. Most of these
employees who are in research and development
have a contract for an indefinite period securing tl1e
continuity of R&D and retention of knowledge. But,
how does ASML guarantee that flexible workforce
workers return to ASML when they are wanted?
According to Hany de Vos, vice-president, HR is the
most: important condition for attracting highly valu-
able people as well as a ·Flexible workforce to invest
in the attractiveness of ASML.
Harry de Vos .believes th at the first point of
attraction is that ASML is willing to invest money
in the competencies of all the people working for
1-\ SML, including people of the flexible workforce.
." .' ""·'·"'· '
COl\ITll\!UED
3
 Introduction education and training programs
vary bet11Veen one and a half ;:md three years -an12:l
during these p rog rams, employees w ork 1.md0.ff
supervision on a real p iece of equipment which
costs about fifty million Euros.
Every two yea rs, ne111r technology is launched with
an increasing complexity; hence, besides the intro-
duction program, continuous education and training
for employees is necessary. lnve51ments in educa~
and d evelop. Employees are w orkin9 o n a daily
basis in multi-disciplinary teams in which people
listen to each othe1~ learn from each other and
exchange ideas and knowledge. In addition, peo-
ple of collaborating partners with ASML including
universities, knowledge centers and customers
can be involved in these teams which make the
learning experiences even greater. Leadership
j
is focused on nourishing these intense collabo- ,.--(

tion and training are extremely high and therefore
continuous vvorking on state-of:-th1a-art knowledge
r and ~:;kills is ve1y attractive for flexible workers to
~rr'J. rotum to ASML when asked, but also for the workers
vvith a definite contract. Accordioq to Harry . de Vos,
i! ~
rntions which provide an environment in wh ich
people can develop and grovv.
Furthermore, ASML offers a program e ntitled
"Career Tracks" with which employees can keep
track of their progress in line vvith agreements

aitraction of workers for the flexible vvorkforce is not 1A1ith their direct supervisors. ASML ensures as a
11 <:ln issue and turnover rates of staff are lovv. As an rule of thumb that at least 15 percent gel: pro-
iI i:-~;cample, with the start of the economic crisis in 2009 moted and another 15 p ercent move to ;:mother
I 'l 100 Ile)( workers were discharged. More than 60%
1 job with the same salary per annum. In sum ,
i
f1 returned to ASML in 2012 when demand increased. this entails that everyone moves to another job
The second point of attraction is the pack., within three years. Strategic HRM withi n /.\SML

I
!
fj
!I
age of labor conditions including salaries and
bonuses. ASML is known for paying high salaries
is an important condition for its success a11d
ASMl's story entails an optimal use of HRM in
\ _
ri and bonuses which are competitive in compari- accomplishing its goa ls and strategy. However,
~ son v11ith other European high-tech companies. the question of whether there are any loose

~I
i
Also, ASML pays attention to the different age- ends still remains. Harry de Vos states: "ThE:~
catc.;igories and the possibilities these offer for ongoi ng process of knowledge creation remains

~
;
deployment in the workforce. In contrast to some
other high tech organizations, t hey b elieve older
our challenge in relation to the increasing com-
plexity of technology."
p(~ople are highly acclaimed because of their vast
and robust knowledge. SOURCE: Schaap, J. & Groothengel, P. (2013). Harry de Vo s, ASML:
We zijn strenger op non-performance. Managefnentscope (5-.11-2013);
The most important point of attraction is the RTL (2014). Recordomzet ASML in vierde kwartaal. www.rtlnieuws.nf/
high-tech environment in which people can lea rn economie/home/recordomzet-asmf-vierde-kwartaal.
; J 6 .•. , ''* i>· 1160 .P. .J i\'.\lilf '· "' •.• ~ 1. .... l.l .. !IO)fl'.Jt< .. U. ~J . ff,( P.\1\~1- .. c

Cl\Jlmpatiithte>fi\le!ts
A company's ability to
maintain and gain ma1'-
l<et share in its industry.
~ntroduction
Mars Incorporated illustrates the key role that human resource management
(HRM) plays in determiiung the swvival, effectiveness, and competitiveness of
U.S. businesses. O;:m11.p~ititihrentesi51 refers to a company's ability to maintain and
gain market share in its :industry. Mars' hwnan resource management practices
are helping support the company's business strategy and provide services tl1.e
customer values. TI1e value of a product or service is deterrnined by its quality
and how closely the product fits customer need s.
Cmnpetitiveness is related to company effectiveness, which j.s deter-
mined by whether the compan y satisfies the n.eeds of stakeholders (groups
affected by business practices). Important stakeholders include stockholders,
who want a return on their investment; customers, who want a high-quality
 ...
CHAPTIER '~ Human Resource Management: Gaining a Competitive Advantage 5

f S \liOUlf~ 1l "1l
Human Resource l\lianagf!lllent Practices

. .'(~ ~~( ;;
:mt ::
.-., f;
CompalTlly
:·' ·· Prarrform.ance
.: .: t.

prod ud or service; and employees, who desire friterest.ing work and reason-
able compen6alion for !heir ~;ervices. The community, which wants the com-
pany to 12ont:xibute to activities and projects and minimize pollution of the
eITvirom1ient i.s also an irnportant stakeh.older. Companies that do not meet
stakeholders' need s are un.like1y to have a competitive advantage over other
firms in their industry.
Jl-fom.airn Jt"C::Jtl~~;iroe lllm«1\Jt1ag~AJ!1t1c:rnt ~HIDVJJ) refer3 to the policies, practices, and sys- Ma..M1rnali1 ~~se>Mli'<ee
tems that influence employees' behavio1~ attitudes, and performance. Many com- iMall1lf;l£Jemelllt
panies refer to HRIVI as involving "people practices." Figure 1.1 emphasizes that (Mh'(M)
!here are sev,~ral important HR!\1 practices. TI1e strategy l.mderlying these practices Policies, practices,
and systems that
needs to be considered to n:1aYir.o.iz~~ their ixifluence on company performance. As inHuence employees'
the figure sh01N::;, I~ill]\1 practices include analyzing and designing work, determin- behavior, attitudes,
ing human re::;ource needs (Fm planning), attracting potential employees (recruit- and performance.
ing), d1oosing employees (selection), teaching employees how to perfonn their
jobs and preparing thern for the futuxe (ITainh1g and development), rewarding
ernployees (cornpensation), evaluating d1eir performance (performance manage-
ment), and creating a po~>itive work envirornnent (employee relations). 111e HRM
practices d:ifscuf,;;sed in this chapter's opening highlighted how effective HRM
practices support busines~3 goals and objectives. That is, effecfive HRM practices
are stral:egid :Effech ve HRl\I{ has been shui:,yn to enhance company performance by
conlxibul:ing to crnployee arid customer satisfaction, :innovation, productivity, and
devdopm.ent of a favorable rf:Jmtation :Un the firm's community. 1 111e potential
role of HRM in company performan.ce has only recently been recognized.
We begin by discussing the roles ax1d skills tl1at a human resource manage-
ment deparhnent and/ or managers need for any company to be competitive.
The second seclio.n of the chapter identifies the competitive challenges that U.S.
cmnpaniec; currently face, which. influence fJ-1e:ix ability to meet the needs of
shareholders, custom.ers, employees, and other stakeholders. We discuss how
these competitive challenges are jn_fluencix1g HRJYL The chapter concludes by
highlighting the HRM praclices covered i:n thjs book and the ways they help
companies compete.
 ...

6 CHAPTEIR 1 Human f~ esource Management: Gai ning a Competitive Advantage

What Responsijbnitie:s and Ro~es Do

lO 1~']
Discuss the roles and
activities of a com-
p<m/s human resource
management function .
.men t depencUng on the size of the company, the characteristics of the w ork-
liUHO!l lfl"tl.;n., rA i:::urt
!1f'Uill ·m
~Y/1'.'!j,;,;' f\("'' t!Mlr;J . ,
6 n'i}~ Do erJ.liin mrmr. ')
\~i* rPl,,om\'~ 111···~,;;.·1'1 ~''M1 ., .
bi,;;
Only recently have companies looked at H.RiVI as a means to contribute to prof-
itability, quality, and other business goals through enhancin g and su pporting
business operations.
'fa ble 1.1 shows the respo:nsibiHties of hu1nan resource departments. How
rnan y I-m professionals should a company employ? High perfonning smaU
companies (fewer than 100 employees) have approxiinately 6 human resource
staffers p er 100 employees, while in high performing large companies w ith
50,000 ernployees or more the ratio is 1 I-IR staffer per 100 employees. 2
The HR deparhnent is solely responsible for outplacement, labor lmN co1Ttpli-
ance, record keeping, testing, unemployment compensation, and some aspects
of benefits adrninistration. Tii.e HR department is most likely to coUaborate w ith
other company functions on employment interviewing, performance manage-
ment and discipline, and efforts to hnprove quality and productivity. Large
co:rnpanies are more likely than small ones to employ HR specialists, with ben-
efits specialists being the most prevalent. Otl1er common specializations include
recruitment, compensation, and training and development.3
Many different roles and responsibilities can be performed by the HR depatt-
force, th~:: indushy, and the value system of company management The HR

F~esponsibilities of HH Departments

\Nage! tmd salary <o1dn1ir1istration, inCBhtive pay, insurance, vacation,

IT:tit:dmer)tplans, ; ~~ mfitsha rihg, . health and Wellnest, .stock plans

Legal corripllahee Policif:;s to ensur.e lawfu l behavior; safety inspections, accessibility

accor:nrnodat ions, :xivac olider;, ethics · ·

SOU!(CES: Based on Bureau of L<:ibrn· Statistics, U.S. Department of l.~bor, Occupal:iona / Outlook Handbool<, 2012-13 Edition, "Human Resources
Specialists," on the Internet at www.b ls.gov/ooh/bu si ness-and-financial/human-reso urces- specialists.htm, visited March 26, 2013; SHRM -Bf\JA
Survey no. 66, "Policy and Practice Forum: Human Resource A c.1i vitie:;, Budgets, and Staffs, 2000-2001," Bulletin to Management, Bu r·eau of
National Affairs Policy and Practice Series 0Nash ington, DC: Bureau o{· l\lal:io1v1I Affc irs, June 28, 200'1).
 ...
CIHAPTIEIR 1 Human Resource Management: Gaining a Competitive Advantage 7

department may take full responsibility for human resource activities in some
companies, ·whereas in others it may share the roles and responsibilities with
managers of other departments such as finance, operations, or information tech-
nology. fo some companies the HR department advises top-level management;
in others the HR department may make decisions regarding staffing, training,
and cornpensation after top managers have decided relevant business issues.
One way to think about 1lie roles and responsibilities of HR departments
is to consider HR as a business within the company with three product lines.
Egure 1.2 shows U1e Hu·ee product lines of HR. TI1e first product line, administra-
tive services and transactions, is the h·.aditional product that HR has historically
provided. 111e newer HR products-business partner services and the strategic
par11i.er role-·are the I-IR functions that i:op managers want HR to deliver.
For example. at Move foe., an online real estate company with armmd 1,000
employees, the chief financial officer and HR leaders work on annual busjness
plans and budgeting, including decisions about merit pay hi.creases.4 HR used
data to make a business case for not havjng annual merit :increases rather ihan
emphasizing that merit pay increases had to be given to employees because of
past practice. At Ingersoll Rand, a compm.l.y 11vith 25,000 employees a:i,i.d oper-
ations in moire than 60 cmxntries, HR was transfonned fTom just doing h·adi-
tional x~m. work such as recruitment, benefits, training, and compensation into
a team of consultants wh.ose job \/\las ~o work wit11 managers to understand the
is~:>nes and problems they :faced in. n:i.anaging the company's hmnan capital.s As
consultants, FIR focuse8 on identifying gaps or baniers preventing employees
and. managers .from attaining lousiness goals, findin:g ways to fill the gaps, and
developing and delivering talent manageme'nt soluti.ons that include drawing
from traditional FIR responsibilities but in. a problem-focused way. For example,
Ingersoll-Rand's business strategy is to grow ir1. emerging markets around the
world . 'Jb be successful requires highly talented managers. HR is contributing
to meeting the need for highly talented managers by using workforce plan-
nmg to determine hmv m<:my managers are needed and in what locations. HR

If fJ\!;t!l!Jllr® 11 ol
HH as a Ousiness with Three Produ ct Lin es

SOU[~CE: /\daptccl from Figure ·1, "HR Product Lines," in E. F.. L8wler, "From Human Resource Management to Organizational Effectiveness,"
/-luman !?esource Managem entLl4 (2005), pp. 165-69'."

----- -

B CHAIP'lER 'i Human Resource rv1ana9ernent: C3~ining a Competitive Advantage
sri~arnl\ll ~(f)!lf'lfk~
modi~]~
A way to organize
the /-//~ function that
include:> centers of
expertise, service
centers, and business
/:Jartners.
:Sa!f·l'><l?lnfiicQ:~
Giving employees
011/ine access to /-!R
information.
01U11tr..00,m:,:nKng
The practice of having
another company pro-
vide senrices.
...
is wo:ddng with ma_nager~:; to identify the competencies, skills, and knowledge
needed by high performing company managers. The competencies and sldll3
profiles are used to rc:vaJ.uate potential corn1try managerial job candidates from
outside the company as ~NeU as to develop plans for current employees who
have the potential to becon1.e country managers. ·
St~"ateg~c Ro~e oif the HRM function
The mnounl of tirne !:hat lfo:- }-JRIVI function devotes to adrninistrahve tasb
is dea-easmg, and its rolies as a strategic business parlner, change agent, and
employee advocaJe are increasing.6 HR managers face two important challenges:
shifting lheir focus h'on1 CV.JI.T ent operations to strategies for tli.e fulure 7 and pre~
paring non.-HR mm1ager;:; to develop and implement hwnan resouxce practices
(recall H1e role of HR in Mars' success from the chapter-opening story). To ensure
rchat human r.esoilm::es contr.i.butes to the company's competitive advamtage m&Y.y
I-lR de1Jartments axe on:an:ized on the basis
ji_ ~> ,.-
of a shared service model. 'Til.e sha.ired
service :model can help control costs · and improve the business relevance and
ti.meliness of I-Il.Z pradices. A 6Il11.a11.·ed sieJLvi<Cie model is a way to organize th.e HR
ih..mction that includes centers of expertise or excellence, service centers, and busi-
J1.1ess partners. 5 Centers of expertise or exceUence include HR specialists jn areas
such as staffin.g or 'i:raining who provide their services companywide. Service cen-
lters are a central. pfacr.:c for 9drninistrative and transactional tasks such as enroll-
]ng nl !J..·an1ing prognnns or \'Ji.anging benefHs that employees and man.agers can
aocess online. Bur3iness partners are J-ll{ staff members who work ·with bus:iness-
unit inanagern on strategic issues sud1 as creating new compensation plans or
development prograrn.s for preparing high-level managers. We will discuss the·
shared service model is mo:re detajJ jn Chapter 16.
The role of HRtv{ in adininistrahon is decreasing as teclmology is used for
many administrative pmvoses, such as managing employee rec9rds and allow-
ing employees to get h1formation about <m.d em·oll in training, benefits, and
other programs, 'TI1e avaiJability of the lnten1et has decreased the HRJ\1 role
in maintainu1g records ;.md providh1g self-service to employees; 9 5df-s~nrkr~
:refers to giving employ€cs onUne access to, or apps which provide, information
about HR issues such as training, benefits, compensation, and contracts; enroU-
ing onfo:lle in progrm:n s 2111d .services; and completing on.line attitude surveys.
Companies H1at 1me the services of ADP can download a free mobile app that
enables employees to anx~s;J their payroll and benefits information. 10 Employ-
ees can use the app to fiH out theix time sheet or look up their retirement plan
conl:ril1utions and balance. The app can also be used by companies to deliver
news l:o employees or offer a direct01y with contact information. VVa.tson Phar-
maceuticals has developed an app for its corporate mriversity, allovving phar-
maceutk:al repn~scntatives to access h·ahi.fog videos and product knowledge
from their :ITYhones.n
Many companies a:re also contracting with human resource service provid-
ers to conduct hnporhmt but administrative human resource functions such as
payroll processing, as weU i.'IB to provide exp ertise in strategically hnportant
practk·e areas such as recruitfr1g. Oiu1~Bfj)11JJ.r.d.ll1l.g refers to the practice of hav-
ing another company (a ~Fend.or, third party or consultant) provide services.
 ...

CMAIPTER ·1 Human Resource Management: Gaining a Competitive Advantage 9

The most cornmonl.y outsourced activHies .include those related to benefits

achninistration (e.g., flexible spending accounts, heallll plan eligibility status),
relocation, and payroll. 11112 major reasons that company executives choose to
outsource human resou.rce pradioes include cost savings, increased ability to
recruit and manage talent, h11proved HR service quality, and protection of the
company from potential lawsuits by standarclizit•g processes such as selection
and recrui.trnenl:Y· ADP, HewiiJt, IBM, and Accenture are examples of leading
outsource providers.
Goodyear Tire aJ1d Rubber Company reenergized its recruitment and hlrmg
prachces iluough outsou.rdng recrn.iting practices.1 3 1l1e recnri.ting outsource
provider ·worfoed with the company &o understand its culture, history, and its
employees' recm:i.hnent experiences. TI1e recruiting outsourcing service provider
was able to help Goodyear streamline the recruiting process through provid-
ing hiring man.agee3 with online access to create new job :requisitions, providing
intervie1N feedback, sd1eduhi.1.g :Ln.tervj_ew:\ generating customized job offer
lette1·sr and gaining .a rea.Hirne perspective on job candidates' progress in the
recrnitrnenl: process. Goodyear recognized several benefits from outsourcing
recruihnent :induding irnp:roving the tl.mehness of job offers, diversity and qua},.,
ily of 111:~¥1 hires, and reducing turnover.
TradiiionaUy, thelU{J\/J[ department (also known as "Personnel" or "Employee
Relahons") •flras primarily an admhust.ralive expert and employee advocate.
The department took caxe of employee problems, made sure employees were
paid. correctly, odrn.inish~red labor contracts, and avoided legal problems. The
HRM department ensuH~d that employee-related issues did not interfere with
the manufachu~ing or sales of products or services. Human resource manage-
ment was prunarily reaclive; ffi.at is, hmnan resouxce issues were a conce1n
only if rch.ey direcl:Iy affected ihe business. That still remains the case in many
cornpanies tha.1: have yet to :recognize the competitive value of human resource
ni.anagement, or among HR professionals who lack the competencies and skills
or understanding needed to anticipate problems and contribute to the business
si:ra tegy. lfo~Never, other companies believe that fIPM is important for busmess
sucoess .cmd therefore have expanded the !1.'0le of HR.M as a change agent and
sfrategic parh1e:r.
A discussion group of company HR direct.ors and academic thought-leaders
reported that increasingly HR is expected to lead efforts focused on talent
inanagemenl and performance management 14 Abo, HR should take the lead
in helping companies atl:ract, develop, and i'etain talent in. order to create the
global workforces l:hai: companies need to be successful. HR professionals
have to be able to use and <.malyze data to make a business case for ideas and
problern solutions. In many companies top HR managers report directly to the
('EO, president, or board of. diredms to answ~:;r questions about how people
strategies drive value for tlh.e company. !~or ~~xample, at Yahoo the executive
vice president of p eople and developmen.t"s goal is to help tum around the
c-ompany. 15 One of her jobs is to help integrate employees from small firms
that Yahoo acquires to bring in top engineering talent and software developers.
A.cquisition of small start-up companies and their talent is part of Yahoo CEO
Marissa Ivlayer's plan to revitalize the company. Another job is to fix Yahoo's
compensation structure that motivated l:op employees to leave the company
for its competitors.
 ..
10 CHAPTER 1 Human Resource Managerner~t: Gaining a Competitive Advantage

Consider the role of HR at VF Cmvoration. 16 TI1e CEO of VJ? Co1poration, a ·

global dotlling business 1nduding Nautica., Lee, and w·ran.gler brands, under-
stands that he needs strong finances, wiruu.ng brands, and taJent to driv12 business
growtl1. HR' s role is to develop talent, focusing on the top managern.ent group of
l,500 people. 1li.e company conducts senior talent assessment revievrs tlJVO limes
each yea_r. These reviews jJ1.dude meeting with the company's operating comni.it-
tee, the vice president for human resources, business leaders, and tt1e head o:f HR
for each business unit. Top rnanagers axe each individually reviewed to dj~5cuss
theix strengths and weal<n.esses, how to improve i::hem1 and theil possibilities for
career advancement This is critical for the company to prepare and have ready
the necessary managemen~ talent necessary to rn.eet two key growth drivers for
the company: global expansion and aggressive acquisitions of oilier businesses.
Also, the vice president for human resouxces plays a key role in developing the
time frame for expansion and preparing managers for intem.ationaJ positions_ Jn
addition, the vice president for hum.an resoun:::es plays an ilnport.an.t role in help-
ing understand the available talent in companies targeted for acquisihon as 'WeU
as taking steps to retain. talented employees in the acquired company needed to
support tli.e brand. 111e vice president for human resources aJ..so is responsible for
gaihering information about changes in business expectations a_nd grm..,rH1 proj-
ects from tl1e vice presidents for human resources at the business w1it level and
conum.micating that ]nformation to the CEO.
Table 1.2 provides several questions that managers can use to detennine if
HRIVJ: is playing a strategic role in the business. If these questions ha vie not been
considered., it is highly ml.likely that (1) the company is prepared to deal ·with
competitive challenges or (2) humax1 resources are being strategica.Uy used l:o
help a .company gain a. competitive advantage. The bottom line for evaluating
the relationship b etV1reen hmnaJ1 resource management and the business strat-
egy is to consider this question: "What is HR doing to ensure that t.he right peo-
ple with ilie right skills are doing the right things in the jobs that are import.ant
for the execution of the business strategy?"17 We will discuss strategic hmn.an
resource management in more detail h1 Chapter 2.
W11y have HRM roles chari.ged? Managers see HRJl.A as the most important
lever for companies to gain a competitive advantage over both domestic and

T.mlb~e 1.l
01Jes1:ions to
Ask: Are Human
Resource5 Playing a
Strategic Role in the
Business?

SOURCES: Based on A. Halcrow, "Survey Shows HR in Transition," Workforce, June 1988, p. 74; P. Wright,
/-luman Resource Strategy: Adapting to the Age of Globalization (Alexandria, VA: Society for Hurnan Resource
Management Foundation, 2001l) ; .J. Mundy, "Be :oi Strategic Performance Consultant," HR Magazine, March 2013,
pp. 44-46.
 ...

CMAiPTEff~ 1 Hurnan Resource Management: Gaining a Competitive Advantagf.~ 11

foreign competitors. We believe Hus is because HRM praclices are d irectly

:related to companies' sw:cess in m.eeting competitive challenges. These chal-
lenges and their im plications for HP.JV! axe discussed later i:n. the chapter.

DfEMONSTRAT~NG THE SlfRAlrEG~C VAUJt Of ~m:

m~ ANALYTICS AN[) IEVIDlENCIE~BAS~D rrm
For HR to contribute to business goals there is increasing recognition tl1at it is nec-
essary lo use data to ans1A.rer questions such as "W11ich practices are effective?"
11
VV't1ich practices are cost effective?" and to project the outcomes of changes
h1 practices on employees' attitudes, behavio1~ and company profits and costs.
'Hus helps show that time and money invested in HR programs are worthwhile
·1;r;· ·
.i .,f;~" and HR is as important to the business as finance, marketing, and acco_unting!
'
it JEvii.ftrence-basetd H R refers to the demonstration that human resources prac- Evnd<eiliil11:~"g;g~iJ<P.Jci
Wlllf.!
~'. ; tices have a p ositive inJh.:ienc-e on the corn.p;:m y' s bottom or key stakeholders Demonstrating that

-· 1r.
1' ~
(employees, customers, cmmnunity, shareholders). Evidence-based HR requires human resource
p ractices have r.i posi-
the use of HR or workforce analytics. ftlR ~Jw W«JJ:trkforce ~nalytiics refers to the

I
~.·. pracl:ic.e of using quanhtalive rn.etl.1ods and scientific method s to analyze data
tive in fluence on the
company's bottom
(somefones called Big Data) from. hum.an resource databases, corporate financial line o r lcey stal<ehold-
~
'
statements, employee surveys, and other data sources to make evidence-based e rs (employees, cus-
human resource decisions a11.d show that HR practices influence the organiza- tomers, community,
~. tion's "bottom line" including profits and costs.1° For example, consider how shareholders).
,.
\'
. Catalyst IT Services is usfr1g and ful.alyzing Big Data.19 Catalyst IT Services, a Hiit Qr W@rlrt@r'l:®l
~
technology outsourcing company th.at assembles teams for progranuning jobs, A111alytk:;;
predicts that it 'Will screen mo:re than 10,000 job candidates this year. Traditional The practice of using
recruiting methods talce too long and the subjective hiring choices of manag- data from HR data-
bases and other data
ers often result in ne1N employees who perfonn poorly or are dissatisfied and sources to make
leave the company becau~ie their skrns don't match the job. As a result, Catalyst evidence-based human
now asks job candidates to complete an on.line assessment that collects informa- resource decisions.
lion about the candidate. 1lte assessment might give a math problem to a job
candidate, w h o is not expected to know hmN to answer it. However, Catalyst
is interested in how much time the applicant spends on the question (do they
answer quickly, skip ii:, or review it later?) as an indicator of h ow they will deal
i L •
with challenges. Analyzing the assessment data can help show what attributes
,.--i. :
candidates have that fit in specific sih1alions such as a job requiring a careful,
~'
methodological approach to be f3uccessful. As a result of the use of analytics,
~· turnover at Catalyst is only 1!Y% per year compared to more than 30% for its U.S.
'. competitors. Because evidence-based HR and .:uialytics are important for show-
,:__ 1·.·. ·.
'.
ing the value of HR practices and how they conh·ibute to business strategy and
i goals, tluoughout each chapter of the b ook vve provide examples of companies'
-t use of workforce analytics to make evidenced-based HR d ecisions or to evaluate
~ HR practices. · ·
~.

There are many d ifferent types of jobs in tli.e HJZtv'I profession. Table 1.3 shows
various HRM positions and tlu~ir salaries. A survey conducted by the Society
of Human Resource Managern.ent to better understand what HR professionals
~
 ...
ll 2 CHAPTER 1 Hurnan Resource Management: Gaining a Competitive Advantage

lfabRe 'llnl
Median Salaries for
HRM Positions

SOURCE: Based on data from Salary Wizard, www.salary.com, accessed March 26, 2013.

do found that th.e p:i:irnary activities of HR professionals axe perforn.1.ing ll1e HR

generalist rnle (providjng a wide range of HR services), with fewer :involved in.
other aclivities such as the I-IR fm1ction at the executive level of Hie com.pany,
h:aining and development, HR consulUng, and administrative activities. 20 Pro-
jedions suggest thal: overall em.ployment in human resource-related positioIIB
is expected' to grow by 2l percent. between 2010 and 2020, much faster than th.e
occupational average.2l
Salaries for HR professionals vary according to position, level of experience,
training, location, and firm size. As you. can see from Table 1.3, some positions
involve work in specialized areas of HR1Vi like recruiting, ttaining, or labor and
industrial relations. I-IR generalists u.sua).ly make between $31,000 and $80,000
depending on. theil' experiP.J1ce and education level. HR generalists perform a,
wide .range of activities including recruiting, selection, training, labor relations,
and benefits ad_ministration. HR specialists work in one specific functional ru:ea
such as training or compensation. Although HR generalists tend to be found ·u1
smalle1· companies, many mid- to large-size companies employ HR generalists
at the plant or business levels and HR specialists at the corporate,, ptoduct, or
regional levels. Most HR professionals chose HR as a career because they found
HR appealing as a caxeex~ they wanted to work witl1 people, or they were asked
by chance to perform HR tasks and responsibilities. 22

EDUCATION A~U» fE!CfEllUENO:

A college degree is held by the vast majority of HRM professio:nrusr many of
whom also have completed postgraduate work. Busin{:'.!ss typically fa the field
of study (human resouxces o:r industrial relations), although some HRM pro-
fessionals have degrees in the social sciences (economics or psychology), the
humcuuties, or law. TI10se who have completed graduate work have :master's
degrees in HR manage:ment, business management, indusirial organizational
psychology or a simiJ.ar field. This is important because to be successful in HR,
you need to speak the same language as t.he other business functions. You have
to have cTedibHity as a buGiness leader, which means understanding business
~
 0-i!J\PTIEIR 1 Human Resource Management: Gaining a Competitive Advantage 13

fo.ri.damentals such as how the company makes 1noney m1.d who the competition
and customers are. TI•is is necessary to build a business case for f-IR activities.
Professional certification in HRM is less common than membership in profes-
sional associations. A well-rounded educational background will likely serve a
person well in an IIRJ.V1 position. As one ffi{ professional noted, "One of the
biggest misconceptions is that it is all warm and fuzzy conununications with the
workers. Or tha t H is creative and involved in making a more congenial atmo-
Gphere for people at work:. Ach1ally it is bot11 of tl1.0se some of the time, but most
of the lime it is a big mountain. of paperwork ·w hich calls on a myriad of skills
besides the 'people' type. It is law, accounting, phjJ.osophy, and logic as well as
psychology,spirill1alily, tolerance, and hmnility."73

HR professionals need to have the nine competencies shov·m in Figure 1.3. These
are the most recent competencies developed by the Society for Hmnan Resow·ce
Management (SHRM). SFIB.M developed the competencies based on a litera-
h1re review, input :f:mrn ovE~l' 1,200 HP." professionals, and a survey of over 32,000
respondents.24 11i.e :foll 1Ternion of the co:1.11p2f:ency rnodel, which can be found on
the SI-IBJ\;I vvebsite (www.shrm.org), provides :rnore del:aikd information on each
competency, behavimfJ, and st.andaxdt> for proficiency for HR professionals at
entry; IYdd, seni01~ and executive career stages. Dexnonstrating these competencies
can help HR professionals shovv managers th.al: tl-iey are capable of helping the HR
.fundion create value, cOlJttribute to the business sb~ategy, and shape the company
cuHure. TI:ley also help i:he l:lR depa.rflnent effectively an.cl efficiently provide the
three HR products cliscussed earlier and shown in Figure 1.2. TI1.ese competencies
and behaviors show that alfl'l.Ough the levi~J of expertise required may vary by
career level, all I-IR professionals need to have a ivorldng knowledge of strategic
business management, hmnan :resource plmming, development, compensation
and benefits, risk inanagement (safety; quality, etc.), labor relations, HR teclmol-
ogy, evidence-based decision making, and global human resources. HR profes-
sionals need to be able to interact and coach employees and managers, yet engage
in ethical practice thxough maintaining confidentiality and acting with integrity.
Many top-level managers and HR professionals believe that the best way to
develop competencies of the future effective professionals needed in HR is to
txain employees or put them into experiences that help them understand the
business and BR's role in contributing to it. Consider how Google and South-
west: Airlines are developing l11e right nux of HR skills and experience to best
contribute to the bus:iness. 25 At Google, approximately one-third of the HR
team's employees have I-IR backgrounds and expertise ili. specialty skill areas
such as ernploymenl la1iV, compensatio:n, and benefits. Another one-third have
little or no human resource experience and were recruited from consulting firms
or within Google's engineeriri.g or sales hmctions. The final one-third is a work-
force analytics group with employees who have doctorates in finance, statistics,
and organizational psychology. Each group has its strengths. For example, HR
staff who have limited HR experience are very skilled in problem solving and
how the company work5 outside HR. To capitalize on the ltnique perspectives
and skills that each group brings to working on hum.an resource issues, the vice
president of global people operations encourages interactions and knowledge
 ...
114 CHAIP'TER 1 Human Re::;ource Managemen t : Gaining a Competitive Advantage

Ii
fmgiurn 1"3
Competencies and Example 13ehaviors for HR Profe:;sionals
J
Eircirnple bahavio1s:
Flomalns current on
relevant laws . legal
rnllngs, and regulations;
develops and
r:mimple belmvlors: utilizes Liest prnctices Example behaviors:
Demonstrates a cspacily for Provides customer servlr.e to
understanding the business operations organizational stalmholders,
and !unctions within tile org•:mlzation, Insures alignment within HF!
understands organlw1101ml me!lics when delivering services and
and their rnlalionshlp to IJusln~ss information to the organization
success. II
,fi
-<

,,
II

J
Example behaviors:
Servos as a wor111'orce
Example llohavlm!>: and people managsmont
Gathom crlllr,al lnformallon, en.part. dmrelops
makes sound decioiOns consultallve and
basod on evaluation of coaching sl111ls
available lnlormnlion Comp"'toncies
for MR
Profo-ssi.onals

fj
Example lmhavlors:
.J.;
Examplo b9hovioro:
Maintains conlldantiallty, Fosters collaboraUon, ·
acts wlH1 personal, · exhibits behe.vlors conslsWnl
professional, and with and conforming to U1e
belle.vloml Integrity . organlrntion culture

El<!lmple behavior$: r:mi.mple 11aha.viors:

Embmc(ls Inclusion, Provides construclive feedback
worlts effac11vely with <:iffeclively, helps managers
diverse cultures and communicate not just on HA
populations Issues
SOURCE: Based on SHRM Ele ments for HR Success, Society for Hu man Resource Ma n;igement, 2012, accessed from www.shrm.org, March 2 1, 2013.
.
.ID

sharing among the entire group of team members. Google develops hmnax1
resources or key people operations staff thTough a year-long trailling program
that includes HR specialist training, a business curriculum_, and development
of skills related to working w ith clients, communicating with senior executives,
and solving business problems. The h·aining is designed for HR employees with
at l east two years of expe:rienoe and is taught by People Operations depart-
ment e:mployees. Google recruits top MBA program graduates, enticing them
to consider HR because the opportunHy to influence change in the company
is greater 1fom is com:mou in other sped3Jn; areas and career advancement is
faster. Southwest Airlines was concerned that its HR function had become too
d istant from the company's business units. To develop a stronger team of HR
generalists and get dJeuo "~o be valued parb.1.ers and consultants to operations,

"i
-- _., _. __ __ _ __ _
 CIHArTrEIR: 11 Human F~esource Management: Ga ining a Competitive Advantage 15

manager:), and other internal cuslomers, Sou tknvE:st Airlines retrained and relo-
cated lIR specialists into the field. Southwest recogruzes that to deal with the
fas t pace of change in !:he airline industry I-IR generalists need to have a con-
tin uous improvement philosophy, business savvy, and both interpersonal and
strateP:,ic skms.
L

The prima ry profe::mionaJ organization for HR1v1. is the Society for Human
Resource Man agen icnt {SHRM). SHRl\1 is the ·world's largest human resou rce
1nan agem ent associaJion vvith. more than 2!50,000 professional and student
members th n'.m ghout the v•Iorld. H you a:n~ interested in HR, you should join
SHRM! SHRM provide:3 cclucatim1 and in formation services, conferences
and seminars, government m:1d rnedia representation, and online services
and i:iu
.
blkations (such ::1::; _HR Ma9/Jzine
G
and free videos and reports from the
SHRTv1 fiour1d 8J:ioin). You ·~an vi~ii~ SHRlvrs website to see their services at
. ww1r.t.s hrrn . or9 .

R"
1
/,, r. ~" !?If r; ~/il "
~!?'10!Rl~Jllet B'1UwlfCE'.: 4\"'"~11a™r~enges. r~fn ~ i~uenat:mng
-IC'>fj

H~nrnarrn ~(E:£<ilru~r:rce in/IJana g eITT111en'"~C

Three com petitive d1aUenge~> thai: con-1pm1ies nt:r1N face will increase the impor-
i:am:e of htuna:n resource rn;;1nagemenl practioes: the challenge of sustamability,
the global chaJJen[!;e,. and the hC'chnoiogy chaUenge. 'D1ese chaJJenges axe shov-vn
in Figure l A .

1\:iQ>flli~ifJ'ir~(i;iR'ilBJ ~~11n'<OlM$iJfi~ f~©m!f11i;,~ilfll~ t~~rnl\llgtt~ C<Olmp~tang through IFagur~ 11."1!.

S1uff>tairrni3lbA~i1i:~f rGiroll:rn1ii:i:<lli!:i1Q1111 Tachnology Compet itive
Challenges ·
lnAuencing U.S.
Companies

16 CHAPTER 1 H uman Resou rce Manage rTH~n t: (3a ining a Competitive Advantage
S1U11rtai1118lbi!ii.]'
A company's ability to
meet its needs without
sacrificing the ability of
future generations to
meet their needs.
'.SitaUrn!hiQftdll'frr;
The various inter'-
est groups who have
n::ilationships with, and
consequently, whose
int~ml'sts am tied to
t/le 01~ganization (e.g.,
employees, supplier;,,
customers, sharehold-
ers, community).
ll.O ~-~
Discuss the implica-
tions of t he economy,
the makeup of the
labor force, and eth-
ics for com pany
susl:ainabil ity.
;,·
As you ivLU see in H1e follovvin.g discussion, these competitive challenges
are directly linked to the I·lR challenges that companies axe facing indurun_g
developing, aUrncting,. and retahling taJ.ented .employees, finding employees
w ith 1he neoessaxy skiUsr and breaking down cultural barriers to create a global
company. 26
THE SUSIA~NABUJiiY c ri~AUJ:~!GE
Traditionally, sustainabiW:y has been viewed as o:n.e aspect of corporate social
responsibility related to the impact of the business on the enviromnenJ. 27 How-
eve1~ we take a broader view of sustainability. Sustainabiliil.y refers to the
company's ability to n1eet its needs without sacrificing the ability of futu.re gen-
erations to meel: their n eeds.28 Organizations pursuing a sustainable strategy
pursue the "triple bottom line": econmnk, social, and environmental benefits.
Company success is based on how weU the company meets the neE'ds of Us
stakeholders. S~.ail<:d11.t\lRdtt:jlJ:i\ refers to shareholders, the commu:nity, customers,
employees, and all of the other pm:Hes that have an interest j_n seeh1g fuat the
coxnpasiy succeeds. SusJ:afoabUity jndudes ihe abmty to deal witl1. econ.ornic and
I
sod.al changes, practice envirnnmental responsibility, engage in responsible and i
el:hical business pracbi.ces\ provide high-qualii:y products and services, and put --';
il1 place methods to determine if the compan y is meeting stakeholders' needs;
that is, I-IR system.s that create Hu: skills, motivation , values, and cultrn:e tl.1at
help the company achieve its "triple bottom line" and insu re the long·-term ben-
efits for the organizations stakeholders.
1·
'The economy has imporl:aA-i.t jmplications for human resow:ce management. '\.
Some key stalisti.cs about the economy and th e workforce are shown in Table UL ctI
These :iJnclude the struchm2 of the economy, t11e develop ment and spread of
r:~1
social networking, and growth in professional and service occupations. Growth
in these occupations means that skiU demands for jobs h ave changed, with l
knowledge bec01ning more valuable. Not on).y have sld ll demands changed,
but rema:in.ing competitive in a global economy requires demandjng work
hours and changes jn trcad:i.ti.onal employment patterns. Th e creation of nevv
jobs, agli1g employees leaving the workforce, slow population growth, and a
lack of employees who have the skills :needed to perform the high-demand jobs
means that companies need to give more attention to HR practices that hlflu.-
ence attracting and retaining employees.
lfhe IEcolf'!omy
'Th.e recession experienced jn t11e United States between 2007 aJ.1.d the sum-
mer of 2009 was one of the worst ever with the unemployment rat€ reach~ng
over 10 per.cent in October 2009 .29 Although many experts believe that falling
b ack into another recession is unlikely, d1e recovery of the U .S. .econo1ny since
the recession of 2009 can be characterized as slow and ch oppy. 111is is due
to several reasons. Positive signs for the economy include the unemployment
rate which, at around 7.7%r i ~3 at its lowest level in four years. The Dow Jones
Industrial Average reached 11 record in March 2013, and en couragu1g signs sug-
gest growth ill. the gross domestic product (GDP), the total of all goods and
services produced..3° If GDP growth occurs it will be due to recovery in the
 ..
iCHAPTEfe ·~ Hurnan ffosource Management: Ga ining a Competitive Advanta9e 17

T~bRie 1l .4
l-li~1h l iqhts of .20·1 0 -2020 f:rnployment Projections

~ Tot;:il employment will rise from20 10to 2020 fro m 143.'I mill iontof~3\§:~rUj6:Q. { > ·......... , . ; .. ;;?> .>
·. ·~ Tht1 fa1<:;testjob growth is <''>><peci:(Kli n health care, personal care, and : cstf:t.MLJ.hit)r '~nd?Q.cia.l : set\(i9~$

!~~~~~~~~:~Ji~j~~;
· .l'hedistdbt.i1:ici11'
·
6 f:;~;;i;~~~~, ~:;":;."c ~~',f,\~f.~b~~;J~~i~~~J~~~!~Qffi~~~~~!'~~i:
i,11 :gog,OU'." · .... ·. .•·· . ·.··
<.ifj6b$acro~s ·lti'dustries is projededfo b,b 'sin"1i1.a r
% ! ~.
< ., • • • ·.·· .. • ;- •• /
1

.,. 33.7·millioi1 .iobo1±ienings wil l resuttfrorn the nes,d toreplacewo rkers'X'th'? ·p~·rrti,<1~ent1,v1eave a11 :occ~~ ·< <

,...· <>Today, appi-01<itJ1Cit0lyi!-:3%-of jobs mquir~; a·high school deg1'e·e for ~nt!)'r/1~.(fi a·Ba<:;helor'sidegreE:.. •.. .·.· ·. ··.•
.,;~ t.
·1'···.·.·.·
!; ;}',. .
.
"iThe rnedianage of t hEi laborfo rce will increase to 42Jl years old; t he highestt:v~r, ..· ·. . ... . . . .. · •·· ·.· . i .,< ,
l ;~ '. " The IE1bodorce is expected t o increase by ·10.5 mill ion in the ne)(tcJetacj~ · r~~chiqg J64A rY)illio11 ih.· 2p29{ . ,
":".i ..

SOURCE: D. Sommers and .L Fr<inklin, " Over,1iew of Projection s to 2020," Monthly Labo r Revie w, .Janua1y 2012, pp. 3-20; C. Lockard and
M. Wolf, "Occupation Employment Proj ections to 2020," Mon thly Labor Review, January 20 '12, pp . 84-108; M. Toossi, " Lab or Force Proj ection s
to 2020: A More Slowly Growing Workfo rce," Mo nth ly Labor l~e view, January 20'12, pp . 43-64; R. Henderson, " Industry Employment and Ou tput
Projections to 2020," Monthly Labor l?e11iew, .J;inu<iry 2012, pp. 6'."i-83.

housiI1g market, increasQd consumer co11fidence, business jnvestmentin work-

ers and capital such as plant, equipment, and technology, and expansion of
exports of U.S. goods to other count:ries.31 Less optimistic signs are that many
employers are delaying hiring, millions of Arn.ericans are still finding it dif-
ficult to get a job, and the long-term unen:1ploy1nent rate remains high. Many
workers including college graduates are tmderemployed, d oing jobs that
require less than their levd of education.37- The number of job openings has
jncreased to levels not seen since before 1l1e financial crisis but jobs are staying
unfilled longer than before pre--finandal \:risis levels, Sorne of this may be due
to the mismatch between the skills required by the jobs and skills held by the
1i:ne1nployed h ut it also is due to employers waiting to fill job openings due
to uncertainties until there are higheK' levels of eco:nornk grmvth and agree-
ment on federal fiscal poHcies.33 For example, in January 2013, 12.3 million U.S.
workers wanting a job could not find one. The rate of long-term employment,
around 3 percent, is still three times the 2001-07 average and for over 30 con-
secutive months more unemployed workers stopped looking for a job than
found one. Long-term unemployment might shdnk if the economy grows and
the U.S. gets further out of the recession. Long-term unemployment.is difficult
to predict even if new jobs are created because employers may have eliminated
some jobs during Hue recession thxough replacing v\rork ers with automation or
combining job responsibilities.
Unfortunately, the economic recovery vvill likely remains slow for some time
and could stop entirely if a solution is not found for the debt crisis in Europem1
coun tries as 11\reU as the huge budget deficit. in the Un:ited States.
Thel'e axe several hnplica:tlons of thjs economic period for human resource
rnana.gement. Despite the n~duction :in numbi.::r of layoffs, hiring remains slow as
many companies are finding ways to increase productivity and efficiency with-
out having to add new employees. Also, companies are waiting for product and
18 CHAPTER 11 Human Resource Management: Gaining a Competitive Advantage

service demand to improve and if and when it does they will first call back laid-
off employees and restore pay cuts and benefits such as paid h.olidays before
hirin g nevir employees. For ~xample, Honeyvvell InternationaJ , which makes
products for aviation, automobiles, and residential and commercial heat sys~
terns has only been hiring nvo employees for every four w ho leave the com-
pany.Ji HoneyvveU plans to slovv its hfrjng unliJ the U.S. GDP grows from its
current rate to dose to 3%. LiJ<:e other laxge U.S. companies, profits h.ave been
increasing faster than. sak5. HoneyweU has increased p rofits through cutting
costs, chaxging higher prices for its products, or .reducing employees. Also,
H on eyweU plans to raise its p rofit margffi through increasing sales from inter-
national markets such as the Middle East and China where growth rates are
high er. Since 2009 Honeyvvell has added 10,000 jobs globally while eJjxnjnating
2000 positions in the United States,
Many HR departments are helping companies recover from the recession
and prepar1ng them to be wen-positioned as business conditions improve, I,or
example, Capital One asks its managers to determine current workloads mld
staffing needs. 35 ~projects changes in H1e workforce based on IJ.us inionna-
tion. This has allowed Capital One to forecast labor needs with more precision,
helpin g the company avoid hiring new employees only to potenliaUy have to
lay them off
During th e :recession, Philips Elecb:onics cut its training budget bui: continued
to offer its Inspire program. for high-potential employees, emphasizing busi-
ness strategy and personal leadership topics.36 Philips believes that inves1ing
in leadership development will better position the company to retain top talent
and meet demands for managerial talent as business grows and th.e economy
recovers. _J
Also, companies are under pressure to increase employee produclivity to
alleviate higher costs such as healfl1. ca:re.37 To control costs and increase the
effectiveness of the U.S. health care system, Presidertt Obama signed the Patient
Protection and Affordable Care Act. However, provisions of this act are now just
bejng implemented. Compaiues are uncertain as to the implications of the act
11
for their h ealth care costs, and continue to look for ways to cut costs, indudin.g
-~
:redu cing employee and n::tiree heaJ.th care benefits and pension contributions
and increasing the employee conlTibution to pay for these benefits. Employers '
ind ucUng Sears Hold:ing Corporali.on and Darden Restaurants Inc., ovvner of
Olive Garden and Red Lobster restaurm1t chains, are giving employees a mon-
J
etary allocation to u se towasd health benefits.3B This aJlows them to decide to
pay more monthly premiums for more expensive plans or choose cheaper ones
which have higher deductibles for certain services, requiring them to pay more
out-of-pocket fees. Many employees are willing to choose lower-priced pl.ans
that require them to pay more out of their pockets for healfo care. We discuss
what companies are doing to offset health care and pension costs in Chapter 13,
Employee Benefits.
I-ffi programs and the lJR function are m1der pressure to relate to the busi-
ness sb:ategy and shm/\r a retu1n on investment. Customer focus needs to be
ind u ded it"'l all HRM pradicf'S. New tedmology means that admmislralive and
h·m15actional I-IR activities will be delivered via technology, creating less need
for HR professionals to provide these activities. 111e aging workforce combined
with reduced hrunigrntion because of security concerns may lead ernployers to
 ..
CHAf 'TEH 1i Human r~esource Management: Gaining a Competitive Advantage 1.9

focus more on retraining ernployees or encournging older, sblied workers to

delay retixement or v•mrk pari:-Hme.39
Table l/l: highlights 2010-2012 employment projections. Otu· discussion
of employmenl: projections is based on the work done by the U.S. Bureau of
Labor Statistics.10 Population is ~he most important factor in determining the
size and cornposition of the labor fo:irce. Th.e size of the labor force will increase
but less than levels experienced over the previous 10 years. 111e median age of
the workforce ~Nill be the h.:i.ghest ever. Because the U.S. population is expected
to become increasingly dive:r.se so is the ·workforce. Inunigration is expected to
. adCl 1.5 mmion person~3 every year from 2010--2020 to the U .S. population ..As a
result every race and ·e:!Jinkiiy vviH gro·w from 2010-2020 but the share of non-
white Hispanics is expected i:o ded.ine (we discuss the diversity aild aging of the
workforce in inore detail later in this chapter).
The importance of the service sector in the U.S. economy is emphasized
by considering indusbry and occupational employment rates and future pro-
jections. Ahnosl: 80% of job~3 are in the service sector. Currently, the largest
percentage of jobs are found in health care and social assistance, leisure and
hospitaliiy, si:ate and local govermnent,. profession.al and business services,
and retail trade. The si::~rv1ke-provichng seci:or is expected to have the most
job grov1rth from 2010--2020 vvHh the number of v•1age and salary workers
increasing from 112.7 1nilhon lo 130.'.l million. Health. care and social assis"-
tance sect.or and the professional and business seJvices sector will add more
than one-t:hird of rn~"IM jobs and wiH accounJ for almost 25% of total employ-
ment by 2020.
Table 1.5 provides examples of the largest percentage growth in jobs from
2010-2020. Overallr the occup atiom with the largest increase in jobs include
heaHh care support and personal care, commmub; and social services, consh-itc-
l<
ji l:ion and extraction, and computer and rnathem.atical occupations. TI.1e fastest
' '.fi·
\~
;
:1
growing jobs in these occupations include jobs such as personal care aids (pro-
.l ]·
vide services such as cooking meals), home health aids (provide services such
. :1
'.\ a::.::. administering medicines), veJ:erinaxy tedmologist and technicians, software
" di=velopers, m arriage and fa1nily therapists, and brick masons. Ten of the fastest

~. · 1~
,) "
i
30 growing occupations are from either the health care practitioner and techni-
cal occupations group or the health care support occupations group. The growth
of these occupaiions is likely due to increased demand for health care from the
; aging U.S. population's heaHli. care demands. In the case of the growth of the

·~,,'.·
construclion and exh:action occupations some of it is due to the recovery of jobs
,~;· ,
· ,;t
lost during the recession as well as the gr01vth in new jobs.
,.: :; There are several occupational groups that are projected to experience declines
in jobs. Farmers; ranchers, and agricultural managers will lose over 96,000 jobs,
more than any other occupation, as technological improvements and consoli-
dal:ion in the food indush:y reduce the numbers of workers needed. Textile,
apparel, and furnishings occupations wm experience declines due to increased
imports of furniture, shoes, and dolfong. Occupations and jobs related to the
postal service are also e)(pecl:ed to decline as i:he U.S. Postal Service continues
to cut costs.
Education plays a:n inlportant role h1 n.1eeting occupahonal or job require-
rnenls and in e1nployee earnings. Job growth v1rill be faster for occupations
that need some type of post-secondary edncation. Across all occupations the
 ..
20 CHAPTER 1 Hurnan Resource Management: Gaining i:l Competitive Advantage

1l";Jilbiffe 'llS
Exam 1:>le:> of the
Occupations with
the La rgest Growth
in Jobs

Pen;ona l care aides . 607 71 Less :than high school

sch681
Bachelor's de9 re e
school
J
Helpers: carpenter·s 26 56 Les~; than l~igh scho;I .
L'jo;2

Reinforcir;g iron and rebar 9 49 High school diploma

or eqi.1lvaient
> A~.s()qi ~te's. de9re~
H0lpers: pipe fitters ; . 26 45 High school diplorna
p lurYibers or equivalent
c:le~1 vee

SOUHCE: Based on C. Lockard and M. Wolf, "Occupation Employment Projections to 2020," Monrhly L2bor
Review, January 2012, pp. 04-1 Ofi.

greatest growth is expected in those requiring a Master's degree. For the 30

fastest growing occupations, a Bachelor's or graduate degree is needed for 12
of the occupations, 5 require an associate' s degree, and 13 need a high school
diplmna or less. However, those th.at require ,a high school diploma xnay _I
also require additional training such as an apprenticeship for construction
occupations such as brkkrnasons, stonemasons, and reinforcing iron work-
ers. Today, the median annual wage for jobs with less than high school 1vas
estimated to be approximately $20,000 compared to $34,000 for those with
J
a high school diploma, $44,000 for those with some colfege, $61,000 for an
associate's degree, $63,000 for a Bachelor 's degree and $87,000 for a doctorate
degree. 111.e discrepancy jn earnings by degree is expected to rem.a.in the.same
J
in the future.
The :futu.Lre U.S. labor market vvm be both a lrnowledge economy <md a ser-
vice economy. 41 TI1ere will be many high-education professional and managerial
J
jobs an.d low-education service jobs. High-tech manufacturing jobs will require
specialized skills such as blue print reading, repail~ troubleshooting, operations
ofcmnputerized machfoes, and. rn1derstanding how to improve quality and pro-
J
ductivity on the facto1y floor. Bou.ndm:ies bei:i:Neen knowledge and service work
are blw:ring, creating " technoservke" occupations that combine .s ervice tech-
nology and software application. Sofiware application engineers, tech.n_ical sup-
J
port, engineering, and scientific consulting jobs work directly with customer:;;,
and custorners influence the product design process. J
.

1,l1
 ..
rCH#.\h?Tfff-l: 1 Human Resourne Management: Gaining a Competitive Advantage 21

Despite the availability of unemployed r.md u:nderemployed workers and

new high school and coUege graduates, companies ar:e having a difficult time
finding employees with the :right skills. Severa]. studies illustrate the skill defi-
cit companies are expedencu1g. 42 A study by the Busin~ss Roundtable found
that 62% of employern repori: !hey are having; difficulty finding qualified job
applicants to fill job openings. IV!.ore thru.1 haJf indicated that at least 16% of
their virorkforce has skUl.s gap~=> H1aJ adversely affect productivity. Similarly a
study by a consortium of 5od.ety for HtuJtvn1 H~;sourct<-~ JVlanagement, American
Society for Training an<l Drc:..,relopme:nt, The ( '.onfer-'.5io:: Board; and Corporate
Voices for Working Fa:nxiHes fmu1d thaJ regarclk.~.ss o{ their education level only
half the companies s1.n·v•::y•2d rated n.e11v ernployees as adequately prepared
for work. Companies' g:ircalesl: basic skiUr; needs were in reacting, writing, and
rnath. Man.y employers a.!so feel that they are having a difficult time findil1g
employees wHh the right "sofl: s1<JUs" such as work elli.ic, teamwork, and com-
municahons that they belk;v-e are n1ore impori:a:nl: for suocess on the job than
job-specific or "hard skiUs" 0nch i:l !] bhneprint reachng or vv:riti.ng. Inte1personal
skilJs, the ability lo lea:n11, cr6Jitivity, and problem solving are especially impor-
tant in the service "=economy biernnse employees have responsibility for the final
product. or service provided.
The skills sh0rl:age is V1mdd1Nide" Bill C;a!:es and other business leaders have
expressed concerns about the comparahvely Iov11 numbers of U.S. students in
the science .and en.gi:rn'!:erin1g fields and the lGw nmnbers of U.S. engineering
gradua.l:es compared to countries Gnch as Ko:rc€a. 13 Due to xnigrati.on, educa-
homil systems that hav~,~ inconsistent qualily, or dedining birtlu:ates, countries
in developing 12".':onorn.iies such as Lndia and fl'JJssfa, as well as Japan and Western
Europe are experiencing; difficulties in finding ·workers for the skilled h·ades,
sJ.les, technicians, engineers, and managers. 1M
SkiU defidl:s are nol hrnited to any one business sector, size of company
industTy, or job. Compa:nieG such as Broseh and Aegis Sciences Corporation are
eitJ1er training their e.rnpl.oyees or workir1g in partnerships with schools to help
develop t11e skills that iernployees need.'1.5 B:rnseh and 20 other manufacturers
parlrte:red wHh 18.rranJ Cmnnnmily College to create a nine-week course. The
course teaches blueprint and gauge reading, 1na!h skills, work etlucs, and com-
puter numeric control to d-.~velop xnachin.ists who nse machines to help form
m.etal parts. The companieG donated machinery so the students can get hands-
on experience. AU of lhe rnachinists who completed i11e program have been
hired. Aegis Sciences Corporation vviH1 580 employees conducts d1ug-screeru11g
services and forensic tesHng. ::Jcientist and lab technician positions remain
unfiUed because the company cannot find enough experienced employees for
those jobs. As a result, .Aegis Sciences is hiring and n·a:ini.ng recent chemistry
graduates who lack experience ·workiu.g at a professional lab with high stan-
dards for qua.lily control and consistency. The t~raduates are h·atned in needed
skills such as how to extrnd materials fro:m. blood or urine and analyze t11e drug
content of the samples .

.fo.creased ~kdue Placed mP- .fofr1;.ngible .A.ssds and Hu.rrum C14pital. Today more
and more companies arie interested in using intangible assets and human capital
as a way to gain an achranl:age over competitors. A company's value includes three
types of assets that are critkal for the cmnpany to provide goods and se1.vices:
financial assets (cash and securities), physiGal aGt'eis (property, plant, equipment),

22 CIHAPTER 1
ninrll:.ainn9ibR1£1 All>!>~'ttl>
A type o{ company
asset including human
capita/, customer capi-
ta/, social capital, and
intellectual capita/.
E)<amples of
Intang ible Assets
.-,~
;:,
(!
'i
Human Resource Managernent Ck1inirnJ 0 Competitive A,c\vantag e
]
and_ intangible assets_ 'fable 1-6 provides i::~xmnp1es of intangible assets. blftain.gible
<rn.sell:s include hurnan capilat custo:nner capHaJr social capital, and intellecll:ual
capital Intangible ass1~ts m'c equally or even n1ore valuable than financial and
physical assets but they axe difficult lo dupLkal<E' or imit.ate.46 By one estimate, up
to 75 percent ofthe souxce of value in a company is in intangible assets. 4J
Intangible assets have been shov1.r1l to be responsible for a company's corn-
petitive advantage. -I-huna:n reson_1_·02 rnal1agernent practices such as t:ra:iningr
sdedio:n, perfor:m_ance r11anagen1enl:, a.:nd ~:m::npe:nsation have a direct hu1uence
t-
on ,_n..un_an an d. soo.a_ ' 1 capr(nJ_
. -· 1Jn·ougt1
' - nHxU£::nr.::mg
' fl .
custmner sen1Jcer . 1
lNOf;<;:-re 1atec1
know-how and competence, imd •Nork r.daiionships. Consider the effort that
Macy's put into developing hurnm1 capital, social capital and customer capi-
·~La l .'1!l A] - ,;;'-
-·mJo,, - r lf' CA
1. lt.ld. -1°·•/ s r:J,.,--)
-,c x.MKU~_; , .t.,_, a1·1-1 ., ~ - ,_c; j-.01Y-'·~ r._u,.<-;i·r
_u.ent - · " • cmnp
_.Jme1 · J_mnl,-:i
. "-c• aJ.e
' f ocuoe!"".!
• "c' -~
on interactions wHh sales associates. 'fo cut cr;sls to survive d1iring the recession
rv1acy':3 dosed stores and invested in tr~d·i_n_ology to improve efficiency which
diverted attention away frmn customer s<:svice. But novv Macy's is lnaking a
considerable invesbcnent in b:aining its sales as::mciates to p:rovide b etter cus-
tomer servke. 111-e new trainJng prognnn. r-:=.:quire:3 :new sa.les associates to attend
a thxee-hour training session and indudes refresher cournes and coaching from
managers when they are ·working on Hie sale:; flobr. Thr~ Magic Selling Program
(Magic stands for meel: and niake a connecUon, ask questions and listenr give
options an_d a_dvicer inspi.re io bu.y~ and celelJraJe the purchase) is desi.gned to
help sales associates :irn.akr: n:1Dre perwnal co.nnedions witl1 shoppers. Posi-
tive interactions with sales associate~; contrUnxte to the nmnber of items that
Hurnan capital
<ii '.focit knowledge
~ fJ,d .u<~at!.o.n
., Work-related know-how
, $(')d;JFtapifal
" Corpor2lt:ticulture
" ~~cinagement ph ilosc:iphy
"' Managernerrtpractices
"' Informal netv•orkln9 systerns
•~ Coi1chin
SOUF\CES: Based on L Weatherly, Human Capii'.ul: The Elusivr, /-lsset (Ale)rnndria, VA: 2003 SHRM Res0arch Quar-
terly); E. Holton and S. Naquin, "f'iew Metrics fo1- Cmr)!oyee o,,\leloprnent," Performance Improvement Quarterly
17 (2004-), pp. 56-80; M. l-lus•3lid, [3_ B•ccker, :Jncl k_ [3,~atly, T/ic \Nor/dorce Scorecard(Boston: Harvard University
Press, 2005).
 ...

CfrU\!P'TEIR 'i Hurnan Resou rce Management: Gaining a Competitive Advanta9e · 23

a custrn:neI" purchar:;e:;; and can help enh.ance Macy's service reputation as cus-
to1ners sh.are '~xpericnc~~s o:n sodal ne!:v1rork sites such as Twitter and Facebook.
Macy's effor: ha~:; paid off in stxong sales growth.
Jnl:angiblc asset:3 J1;_:;ve been shown to be related to a company's bottom line.
A study by the An1E:rican ~-locid:y for Training and Developmen t of more than
SOO publicly traded [J.S.--based comp<:mi:es found that companies that invested
the rno::>i: in JJ:~;\ining An d d12veloprnent had a shareholde.r rehrrn 86% higher than
companiet3 in l:h1~ boltorn half and 46% higher than the market average. 49
One vvay <::orn.pani(~r,: h:y ri:o increase intangible assets is tlu·ough attract-
ing, developing, and retaining l<:nuwledge ·wmkers. JKn.owledge workers are l(rrnowl~dlgia
ernployces who cont:dbute to d1e company not through manual labor, but Worlrnrn
through vihnt they knff'N about <.."'ustom.e rs or a. specialized body of knowledge. Employees who own
the intellectual means
Employees canno·t [>frnply be ordered to perfom1 tasks; they must share knowl-
of producing a product
edge and collaborate on solutions. Knowledge workers contribute specialized or service.
knowledge l:baJ th.eir n1a1\agers may not have, such as information· about cus-
tomer::;. Man,agc:r.·3 clcpcnd on H1em to share information. Knowledge workers
have many jd:/oppori~~-ui!Ji.es. H tJ1ey ch oose, they can leave a company and take
IJ1eir b101/\1lcdi~(~ lo a competil:or. Knmvledge ·workers are in demand because
t...J -· ,_,.

cornpanjer:; ri,eed thcfr :3k:Ub and jobs requiring them are growing (see Table 1.5).

iEw1rn~1lflttc1i:SB:S riJlH~ ~.:'.rtilllfPlO~IH'~~lTRl1\1mirff: mnd (fllITTl'tt:Rffl!\ll(\}lQnS llJe<Dift"llilH!fllgj

'fr1 co.n1p.letely benefil: from e:mployees' knowledge requires a management style
tbal :foc n::;e~:. on devdopi.ng and ernpmvering employees. Empowering means ~ rm1\[pQW®llAliil!8J
giving 1~1npl oyc.:.:;s responsibility and authority to make decision s regarding Giving employees
all ~~sp1:'1:ts of product development or customer service.50 Employees are then responsibility and
authority to make
held <J.Ccountabie for products m.i.d services; in return, ill.ey share the rewards
decisions.
and losses of !:he results. ]:;or e:rnpmNe:nnent to be successful, managers must be
trained ~:o link eI"nployr.::cs 1::0 resources within and outside the company (people,
websites, etc.), help ernployees interact with their fellow employees and manag'."
cm ij: hxoughout the company; and ensirre that employees are updated on impor-
tani: :issuerJ anc1 coopr.c>rak: with each other. Emp loyees must also be h·ained to
understand h ow to use rifo~ VVcb, e-mail, and other tools for conurn.micating, col-
leci:lng, and shadnij information.
As inore cmupanies becm:ne knowledge-based, it's important that ~ey pro-
rnole conJinuous learn:ing ai: H1e employee, terun , and company levels. A learning l~rllf."111~1iil9J
!J.:Pfg;.;))nn1?:..t;lti.dJ1llTl en1brace;; :a cultuxe of lifelong learning, enabling all employees to Organill!:ollltlorrn
continually acquire and share knowledge. Improvemei1ts in product or seivice A culture of lifelong
quality do n ol: stop when formal training is completed.51 Employees need to learning in which
Employees are continu--
ha ve !lie finandal, tinw, and con tent resources (cotU"ses, experiences, develop- ally trying to learn new
ment opporl unities) available to increase their knowledge. Managers take an things.
active role in identifying training needs and helping to ensure that employees
use training i:n their ~Nork. A1so .. employees should be actively encouraged to
identify proh len1sr rn,ake decisions, continuously experiment, and improve.
Al Ch.eesecake Fa.dm-y Inc., ·;Nh.id1 operates about 170 restaurants in the
UnH~x1 Stales, the focuB is on. driving continuous learning related to guest saiis-
facU.on, perfect food, and execution of the m any dishes on its m enu.52 To do so,
the company is creating interactive learning content that employees access at
1Nork Through the VideoCafe employees can upload and shru:e short videos on
topics such as custom.er greetings and tood preparation. The company plans to
 ...

:24 CHAPTER 11 Human Resource Management: Gaining a Competitive Advantage

develop mteractive gam.es :including a shnulation for building the perfect h.am-
buxger. Hands-on employee-dxiven learning is supported by managers observ-
ing employees and pirovi.ding coaching. and feedback to help them develop new
skills and reinforce tli.eir use in tl1e workplace.
Social collaboration and social netvvorking technology are also contributing to
the development of a learning organization.53 CareSource uses Wik.is, websites
wifh content created by users, and discussion boru:ds to encourage employees
to engage in cxitical thinl.dng and learn. from each other by sharing idea.B about
how to apply skills that H1ey have acquiJ:ed in formal training programs. Cold-
well Banker en.coru:ages its real estate pmfessionals to develop and shaxe videos
of best sales techniques using the company's video portal. ColdweH Bank.er also
uses communities of practi.ce to encom:age employees to share best pract.ices
and provide :insights on how to best a.pproadi specific types of job assigru_uents.
in-Venhv Health Inc. uses tooh on Facebook to help sales employees share nlfor-
mation and update lessons lean1ed.

Clhi<\\ITi\gw Need fo Adaipt-to Change Clh~lli\fS£! refers to the adoption of a new idea or behav-
The adoption of a new ior by a company. Technological advances, changes in the workforce or gov-
idea o r behavior by a erru.n ent regulations, giobali.zaHon, and ne"iv comp etitors are among the meny
c;ompan.ir.
factors that require companies to change. Change is inevitable in companies as
products, compan.i.es, and entire indushies experience shorter life cydes. 54 TI1J.s
has played a major role ~n reshaping the employment relationship.55 New rnr
emergent business strategies that result from these changes cause companies to
merge, acquire new companies, grow, and jn some cases downsize and reshuc-
ture. This has resulted in changes in the employment relationship. Companies
demand excellent customer service and high productivity levels. Employees are
J
expected to take more responsibUity for their own cru:eers, from seeking train-
ing to balandng work and family. In exchange for top performance and work-
ing longer hours without job security, employees want companies to provide
flexible work schedules, corniortable working conditions, m.ore autonomy in .
accomplishir1tg work, training and development opportuniti.es, and financial
incentives based on how the company performs. Employees realize t.hat compa-
j '

rlies cannot provide employment security, so they want employability-that is,

they want tli.eir company to provide 1Taining and job experiences to help ensure
that e1nployees can find other employment opportunities. TI1e human resource
management ·challenge is how to build a committed, productive workforce in
.economic conditions that offer opportunity for financial success bu.t can also
quicklly tmi.1 sour, making every employee expendable.
Consider how 1he CEO of Extended Stay America is trying to facilit.ate change
to benefit !fle business. 56 Ai: Extended Stay America, the hotel d1ainr many
employees were fearful and stuck in sm·vival mode after the company emerged
from ba.nkmptcy. 1.bey avoided decisions that might cost t11e company money
such as repairing properties or giving an uuhappy guest a free night's stay. To
change t.his culhue, Jim Donald, the new CEO, created "Get out of jail, free"
cards and is handing them ou t to e.mployees. Employees can use the caxd when
they take a large risk on behalf of the company. This encournges employees
wm
to talce :risks in hopes that tJ1ey generate new ideas that lead to business
growth and hmovations. For example, one manager twned :in her card after she
cold~caUed a movie production company that was filming in the local area. They
ended up booking $250,0IJO wo:rth of busjness at the hotel!
 ...
CMAPTE~ '~ Human Resource Management: Gaining a Competitive Advf)ntage 25

Concems o:.vith fanployee Engagement. JEmpfoye~ eng.aigement refers to the IEmploy!S!El

degree to which employees a:re fully involved in their work and t.he strength of IEl!1l9a9amell1\t
their commitment to their job <:md the company.57 Employees who are engaged The degree to which
employees are fully
in their work and commiUed to the company they ·vvork for give companies
involved in their work
competitive advantage in.duding higher pmductivity1 better customer service, and the strength of
and lower lurnov er.58 What is the state of employee engagement in U.S. compa- their job and company
nies"? One survey of 32,000 employees found that 63% of workers are not fully commitment.
engaged.59 Forl.y-du-ee percent reported tha~ managers failed to remove perfor-
mance obstacles and. only 26% believe that managers involve them. in decisions
that affect them .
Many companies shlJ try:ing to recover from 111e recession have not given
much attention to employee i:!ngagement in recent years, but some survey
results suggest that less than one-third of employees considered themselves as
engaged. StjJl, some companies have managed to sustain and improve engage-
ment levels d u r]ng the :recession by systematically gathering feedback from
employees, analyzing their responses, .and implementing changes. In these com-
panies engagement measures are considered as importan~: as customer service
or finandaI d ata ..f<or exm:nple, al: Pitney Bowes, about 80% of its employees
complete th.e survey eac.h. year, vvhich gives them a chance to share theirfeelings
and perceptions and help the cmnpany addxess pmblems.60 The survey is also
used to determine if the cornpany is dojng enough to help employees reach theiT
career goals. Based on survey resuHs the company is b:-ying out a program that
is designed to help managers hnprove tfo~ir skiJls in listening, change manage-
ment, and problem solving. Pitney-Bowes :i.nanagers are held accmmtable for
helping employees with their careers and thfa program insures they have the
skills necessary for success.
Perhaps the best way to llnderstand engagem~~nt is to consider how companies
measure employee engagement Companies measure employees' engagement
Ievels with attitude or opinion surveys (we discuss these in detail in Chapter 10).
Although tl1e types of questions asked on these surveys vary from company to
company, research suggesl:s the questions generally measure 10 common themes
shown in Table 1.7. As you probably :realize after reviewing the themes shown jn
Table 1.7, employees' engager:nent iB influenced by how managers treat employ-
ees as wen as h uman resource praclices such as recruiting, selection, training and

TaibDe 11 .1
Common Themes
of Employee
Engagement

SOUflC:lo: Based on R. Vance, fmployee fngagement and Commitment (Alexandria, VA: Society for Human
Resource Mnnagement, 2006).

- - - -- - - - - - - - ---- ---·- --- ------


~~(., CHAPTER 1
T.ui~anut Ma1111a91~migfitl'R:
A systematic p lanned
strategic effort by a
comp any to a"ltrad:,
retain, deve/01:>,
and motivate high ly
skilled employees.
and managers.
..
Human Resou rce Management: Gaining a Competitive Adva ntag e
development, performance management, work design, and compensation. For
example, companies should recruit and select employees who rn:e able to per-
form the job, are willing to work towaxd achieving the company strategy, and
will read favorably to t:he work environment. Performance management systems
need to provide en1ployees with opportunities to receive performance feedbad(
· and recognition for their accomplishments. Comperisation including jnce:n:tives,
benefits, and nonfii1ancial. perks such as on-site day care or travel discounts co:n-
b:ibute to employee engagement. Trafrling and development gives employees the
opportunity for personal growth within fue company. Work that is designed to be
mearu11gful and allows employees to use a vaJ.iety of theil' skills relates to several
different aspects of engagement induclli_a.g satisfaction, intention -to stay, pride,
ari.d opportunity to perform. d1allenging work
'JJdenff: J\tffanagemen.L l'alenit maltilag;emte11.-n.t refers to the systematic pl<irmed
strategic effort by a company to use bundles of human resource management
practices including acquiring and assessing employees, learning an.d develop-
ment, performance management, and compensation to atb.'act, tetain, develop,
and molival:e highly skiJJed employees and managers. 111is means n::cogt~izing
that all HR practices are h1Jer-related, aligned with business needs, and help the
organization manage talent to meetbusiness goals. For example, at Quakom.m,
a San Diego compaJ.lY, t;dent management is organized around core V<31ues H1al:
emphasize recruiting smart, motivated employees and creating a work environ-
ment that: allows them to nmovate, execute, partr1e1~ and lead.61 When Qual-
conun wanted to inb:oduce technology for its performance management process
human resources generaJists worked together with organizational development
and information technology specialists to ensuxe !hat what employees were
being evaluated on (perfonnance management) and what employees were paid
and rewarded for (compensation and rewards) were aligned. HR trained m<:m-
agers to use the performance management system and now focus on :identifying
employee skills gaps to identify opportunities to improve pe1~formance.
Survey results suggest that opportunities for career growth, 'learning, and
development and performing exciting and challenging work are some of il1e
most important facl:ors in deterrruning employees' engagement and corrunit-
rnent to their cur.rent employer.62 As the economy improves, high-a.clueving
employees may be looking to leave companies if they do not feel they have
adequate opportunities to develop or move to positions in which UJey can best
utilize their skills. WD-40 has been changing its talent managem.ent strategy to
create a cultuxe that allows all employees to capitalize on their talent 'ND-40
has a leru:ning cultuxe which includes supporting any employee 111rJ.1-o wan.ts
to be a leader. 63 Employees can participate in a Leadership Academy whkh
also requh'es them to teach classes and coach other employees for lwo years.
Employees can also participate h1 its Leaders Coaching Leaders program. In tlu.s
program employees are matd1.ed with another employee who has the expertise
in their area of interest. In the company's 111e Food 4 Tii.oµght training series
managers discuss workplace issues based on a scenaiio !hey are given to review.
Managers learn from ead1 oilier by discussing and evaluating the scena.rio an.d
agreeing on. how to best handle it. AH employees have access .to the same co"l.ch
used by tl1e company CEO. If the coach notices employees reaching out to lUm
for the sam.e reasons he provides flus information to human resources so they
can create a course to address the issue or provide useful guidance. ·
 ...
C MAIPTIER 1 Human Resource Management: Ga ining a Competitive Advantage 27

u:se (J!f.Altenmtive l.ATork AIPTmigemenf;;. ARft®mOit\UVte W@Jrk atnamgem.e:nts include Aitiern~~hu@ W(l)r~~
independent contradors, on.-caU workers, tempo:rary V'J orkers, and contract com.- Arrmng!ft111rmr1rrt1'"
pany workers. The Buxcau. of Labor Statistics estimates tlmt alternative work Independent contrac-
tors, on-call workers,
arrangements n1ak e up ll'Yo of total. employment.64 There are 10.3 million inde- temporary worlcers,
pendent contractors, 2.5 million on-can workers, 1.2 million temporary help and contract company
agency workers, and apprnxirn.atdy 813,000 workers employed· by contract workers wllo are not
firms. Contingent v1rorkers, or 'Norkers wlho do n.ot expect their jobs to last or employed fi.11/-time by
who believe thefr jobs are ~ernpori.lJJ.--y, a.ccou:nt for approx:llnately 2 to 4% of total the company.
employirnent. Companies tl-iat provide temporrury employees, such as Manpower,
Kelly Services, and Adecco .are reporting high demand for tli_err services. 65 One
of the reasons for the gTowH1 of: tJ~e use of oontingent workers fa because com-
panies are adding temporarir 1Norkers as !11e economy begins to improve but are
delaying adding new permanent employees until economic growth is more stable
and certain. Also, companies want to avoid going through the painful layoffs that
occuxn::d duxing the n~cession.
More workers in altemative employment relationships .are choosing these
arrangements. Af te:r.native work anangements cm1 benefit both individuals and
employers. More and more individuals don't want to be attached to any one com-
pany. They v1ran t the fl.ex.ibiJi l:y i:o 1Nork v\Th1?10t and where they choose. They may
want to ~Nork fewer h.ou:n:s to effectively bulan.ce '\Nork and family responsibili-
hes. Also, individuals v11ho ha.vie been downsized. n.i.ay choose alternative work
an:an.geme:n.ts while !they m'f! seeking foU-iim.e te].nploy1ment. From the couapany
pernpective, it is easier to add tellnpoJCmy employees when they are needed and
easier lo termin ate H1eir em.pfoymen.t V\ThP...n iJ1ey ;ue not needed. Part-time work-
ers can be a valuable source of skills that cm.rent employees may not have and
are needed for a spedfi.c project that has a set completion date. Part-time workers
can be less expensive tl1an permanent employees because they do not receive
eni.ployer healtli. benefits or parlicipaie in pension plans. Employing part-tirne
1Norkers such as interns aJlows the com.pany to determine if the worker meets
performance requirements and fits :h1. vvith the company culture, and if so, to offer
. f:he employee a pe1.manent position. For example, Verigy, a semiconductor manu-
facturer in Cali.£01.nia, employs only a small nmnber of pennanent employees
;-md nonessential jobs are outsouTced. V\nlen d emand for its product-s increases,
engineers and otl1er high-tech emp loyees are hired through staffing companies
or as independent co:nlrado:rs. 66 Alternative work arrangements have potential
disadvantages. These indude concerns about work quality, inability to maintrun
!:he company cultuxe or team environment, and lega1 liability.67

JDem.mnding Wod,, biaf: wiOn Mfoin? Flexibility. The globalization of the world
economy and the development of e-co1nmerce have made the notion of a
40-hour work week obsolete. As a result, companies need to be staffed 24 houTs
a day, seven days a week. fanployees in manufacturing environments and ser-
vice call centers are being asked to m ove fi:om 8- i:o 12-hour days or to work
afternoon .or :midnight shifts. Su:nilarly, professional employees face long hours
and and work d emands H1at spill over :in.to thefr personal lives. Personal digital
, assistants (PDA s), pagers, and iPhones bombard employees with infonnation
an d work demands. fo lhe car, on vacaH01~, on plar1es1 and even in the bath-
room, empl.oyees ca11. be inJenrupted by work demands. More demanding work
resuHs in greater employee sb:ess, less sati.sfi.ed £mployees, loss of p roductivity,
<md higher tumover·-·--aU of which are cor3.Hy fo:r ccmn.panies.
1

":

: t".
'-· ;·i·.1.l.··:···· '
20 CHAPTER 1 Human Resource Management : Gaining a Competitive Advantage

One study found that because of work demands 75% of employees repod ~,
having not enough time for thefr dukh·en, and 61 % report not having enough
I
time for. then· husbands and "'Wives. How€ver, only half of employees in 1he
United States strongly agree that they have the flexibility they need to suc- j .

I
cessfully manage theix work and personal or family lives. 63 Many compa- i
11ies aii:e recognizing the ben.efiJs that can be gajned by bol:h the company and
employees through providing flexible work schedules, allowing work-at-home .
axrangemer~ts, protecting employees' free time,. and more productively using
J
employees' work lime. 09 The benefits include the ability to have an advan-
tage in attracting and retaiii-:Ung talenh::d employees, reduced stress r~s1lltii."'lg
in healthier employees, and a rested wm+·.Jorce tli.at can ma,'Cimit.e the use of
iheir skills. Approximately 9.5% or 13.4 milli.on U.S. employees are working at
home at least one day a week 70 One in four home-based employees axe in man-
agement, business, and finai--i.ce, and half are self-employed. AmerisureMutual
J
Insurance in Farmington Hills, Mich.i.ga:n, built a. work environment and pro-
vides flexible programs designed to increase employee retention and engage-
menL71 A new computer system makes it easier for employees to work at home
by giving Hlem access to -.;,110ft:l<:: files using their home computers. Employees
meet with tl1eir managern to discuss l:he feasibility of workixtg off-site and how
their performance ~Nill be evaluated. AJ.n.erisu:re also allows employees to taJ(e
J
days off each year for volunteer work, ai-:1.d provides five paid days each year ~ I
for famHy commibnents related to rn.eclical care such as ill grandparents and _I
immediate family members. 1he company's turnover rate has dropped from
18% to 10% and employee engagement s1uvey scores have increased. FenWick
& West LLP, a law fixm in San Francisco, California, with 2·15 employees has ere~
ated special position.s known as "workflow coordinators" axid "balai1ced hour
advisors" who regularly review attorney's houxs to ensuTe that employees on
reduced .assigmnents are not overworked or overlooked for key assigrunents.
KPMG uses WelJness Scorecards to determine if consultants are working too
much overtime or skipping vacations. Employees at Salesfo~·ce.com Jnc. can.
work from home and use Chatter, a Facebook-type appJicahon, to coordinate
projects.n Managers can monitor whether employees Working at home have J
answered questions and finished reports.
TI1e use of alternative work arrangements and work-at-home has resulted in [
the development of co-working sites where diverse .workers such as designers,
,J
artists, freelancers, consultants, and other L.-idependent contractors pay a daily
or monthly foe for a guaranteed work space. 73 TI1e co-working site is eqw.ppedi
with desks and wireless Internet and some provide access to copy machines,
faxes, and conference rooms. Co-working sites help facilitate independent con-
tractors and, employees 1Norking at home, traveling, or telecouunuting, who
have feelings of isolation, and give them the ability to collaborate and interad,
provide a more professional worl<lng ab:nosphere than coffee shops1 and help
decrease traffic and pollution. !l
Jl,
Meetnng ithe Needs uf' Stalkehoid~rsff Sh~rnhokl!E.H'$, .
(Ms'tJJMi111e1rsR Empi~Q.)Q~~s;" mnd Comwmmfity
As we mentioned earlier, company effectiveness and competitiveness . are
.
1 .

determined by whether the company satisfies the needs of stakeholders.

Stakeholders include sto~ldwlders (who want a return on their invesbnent),
 ...
CMAIP'TlER -~ Human Resource Management: Gaining a Competitive Advantage 29

customers (wh o vvant a high-quality prod ud: or service), and employees

(who desire interesting work and reasonable compensation for their ser-
vices). The comrmmiti which wanl:s thr::~ company to contribute to .activities
and projects and l!ninimize pollution of the environment, is also an impor.:.
tant stakeholder.
Measuring Pen.formomo; to S:ta}r:du1l«lers; 'Jfhe lBalomced Sconxard. The balanced IB~!a11u::~dl SG:~R·~r;::~rrcl
scm:ecru:'d gives manage:rn an indication of the performance of a company based A means of perfor-
on the degree to vd1ich stakeholder need s ore satisfied; it depicts the com- mance measurement
that gives managers a
pany froin the perspective ok internal and external customers~ employees, chance to /oo/c at their
.··:.t 1~~~·· and sha.rehold ers. 74 The halanoed scnr.c~caxd is important because it brings company from the
;;ft i\:;<·.·: togeiher most of the features ili.at a company needs i:o focus on to be competi- perspectives of internal
tive. These :indude being custoxn.er-focused, improving quality, emphasizing and external custom-
teamvvork, red ucing ne1N produd: and service development times, and man- ers, employees, and
shareholders.
aging for ~he long ternll..
The balanced scorecard differs frorn tTaditi.onal measures of company per-
formance by emphasizing H1at the criHcal indicators chosen are based on the
company's business strategy a.nd cmnpetitive demands. Companies need to
customize their balanced scorecards based on different market situations, prod-
ucts, and competil:ive env~:r.onn1e:nts. ·
The balanced scorecard should be t-ised to (1) link human resource man- S..01~3
agement activities to thQ 1:ompany·'-' b-u.siness strategy and (2) evaluate the Discuss how human
e)(tent to ~Nhich the HJ·\l\/I- fun ction is .help:h-ig the company meet its strate- resource management
affects a company's
gic objectives. ConnnlJJJucaling the scorf::card to employees gives them a balanced scorecard.
frm.n ev110rk that helps J:hem ~;;ee the goals arid strategies of the company, how
these goals an d sh·ategie~:> are measured, and how they influence the criti-
cal indicators. Measures of HRIV1 prnctkes primarily relate to productivity,
people, and process. 75 Productivity measures involve determining output per
employee (such as revenue per ernployee). Measuring people includes assess-
ing employees' behavior, .attitudes, or knowledge. Process measures focus on
assessing employees' satisfaction 1;,rith people system.s within the company.
People systems can ~J1dude the performance management system, the com-
pensal:ion and benefits ~3ystcm, and the development system. To show that
HRM ad:ivitie~; contribute to a company's com.petitive advantage, managers
need to consid er the questions shown in 1able l.8 and be able to identify criti-
cal indicators or metrics related to human resources. As shown in the last col-
mnn of Table 1.8, critical indicators of HR p ractices primarily relate to people,
productivity, and procem.>es.
For example, a!: Tellabs, a company that provides communication service
products (such as optical nclworking) around the world, key results tracked on
the balanced scorecard :i.ndude revenue g:rowl:h, customer satisfaction, time to
market for nevv produds, and employee satisfaclion.76 Every employee has a
bonus plan; bonuses are tied to perfor mance as measured by the scorecard. TI1e
;i ~:· ·. performance appraisal ptocern:i 1neasm:es €mployee performance according to
__,,)j '{' departmental objectives that support the scorecard. At quarterly meetings, how
l. employee perfonnance is evaluated according to the scorecard is shared with
\!· '.
every employee, and l:he hlformalion is also available on the company intranet:
website. Some physicians employed by OhioHealt.h, a hospital system, receive
up to 10% of their pay based on a haJanced scorecard consisting of quality,
service, financial perfo:rrnance, and employee ,engagement. 77
 ...
30 CHAPTER 1 Human Resource Management : Gaining a Competitive Advantage

Tabnie 1.2
--1
The Balanced Scorecard

~ -~[
.. I
,Ji
lnnovatk.it"i. Cari we cor'rtinue lrnprovezoperatin gefficiency, .1

and learning to improv<~ and . iauridl new ptodLiftS; <;'.()ritihUOU5 ·

c1·<;1atev;:ilue?
~~&~~f rnert~, ei:OPC!Y')3[iq%~Jion

SOURCE: Based on B. Becker, M. Huselid, and D. Ulri ch, The /-IR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business
School Press, 2001).

Caesars Entertaimnent is trying to understand how employees use health care in

oi·der to reduce costs yet provide effective treatment options for its employee5.7B
Caesarn analyzes employees and their family members' health insurance claim
data. The data includes how employees use medical services such as emergency
, room visits and whet.her they cli.oose generic or brand name chugs. Analysis of
the insurance claim data identified locations where employees tended to use
more expensive emergency room visits rather than relying on less expensive
and as effective urgent care facilities. I-IR communicated a reminder to employ-
ees of the high cost of emergency room services and provided a list of alten1a-
tive urgent care facilities. Since Caesars began tracking and analyzing the data
the company has saved over $4 million by shifting employees with emergencies
to urgent care services!

Social Resp<msibUUy, Increasingly, companies are recognizing that social

responsibility can help boost a company's image with customei·s, gain access
to new .markets, and help attract and retain talented employees. Compa-
nies thus h'Y to meet shareholder and general public demands that t.hey be
more socially, ethically, and environmentally responsible. For example, Bill
Gates, former chief executive officer and Microsoft Corporation founder,
through personal involvement in a charitable foundation dedicated fo bring-
ing science and techJ.1ology to improve lives around the world, has improv~d
 ...
CHAIPTEIR; 1 Huma n Resource Management: Gaining a Competitive Advantage 31

Microsoft's corporate reputation. Coke is <llpplying its product development

expertise along v11ith its supply chain and distribution network to make
essential nutrition accessible to people in need. 79 Coke offers a ready-to-drink
fortified juice product, 1\Tursha, that ad.dresses unicronuh·ient deficiencies in
schoolchildren in Colombia an.d Ghana under the global trademark name
Nurisha. Coke is also working to ec;:onornically empower women. In the Phil-
ippines, women own or operate more than 86% of the small neighborhood
stores that sell Coke products. Companies arl" realizing that helping to pro-
tect the planet can also save money. 80 International Paper, a global paper and
packaging company, has focused. on using less water and energy its manu- at
facturing operations. International Paper cut fossil fuel purchases by 21 % by
burning tree limbs and debris from tree processing. PepsiCo is introducing
use of all-electric trucks in several places including California and Texas. The
trucks will cut PepsiCo's diesel consumption by 500,000 gallons per year, sig-
njficantly reduce annual maintenance costs, and help preserve the climate by
reducing greenhouse gas emissions.
Tfo: "Competing th.rough Sustainability" box highlights the sustait-iable busi-
ness practices of several companies.

OJstlDlmer Service and QMa~nW !Emphaisns

Companies' customers judge quality and p erformance. As a result, customer
excellence requires attention to product and service features as well as to inter-
actions with customers. Customer-driven. excellence includes understanding
what the customer wants and anticipating future needs. Customer-driven excel-
lence includes reducing defects and errors, meeting specifications, and reducing
complaints. How the company recovers from defects and errors is also impor-
tant for retaining and attracting customers.
Due to increased availability of knowledge and competition, consumers are
very knowledgeable and expect excellent service. This presents a challenge for
ernployees 1Nho interact with customers. The vray in which clerks, sales staff,
front-·desk personnel, and service providers interact with customers influences
a company's reputation and financial performance. Employees need product
knowledge and service skills, 1:md th.ey need to be clear about the types of deci-
sions they can make when dealing with customers.
To compete in today's economy, whether on a local or global level, companies
need to provide a quality product or service. If companies do not adhere to quality
standards, their ability to sell their product or service to vendors, suppliers, or cus-
tomers will be reshicted. Some countries even ha:ve quality standards that com-
parries must meet to conduct business there. ToitaJ quality mairn.agement (TQM) is Total· Q11,u111ity
a companywide effort to continuously improve the ways people, machines, and Managamiant
systems accomplish workt:n Core values of TQM include the following:82 (TQM)
A cooperative form of·
0 Methods and processes are designed to meet the needs of internal and exter- doing business that
na·l customers. relies on the talents
(JlEvery employee in the company receives training in quality. and capabilities of
both labor and man-
(!>Quality is designed into a product or service so that enors are preve:ntedfrom agement to continually
occurring rather than being detected and conected. improve quality and
•} I he company promotes cooperation with vendors, suppliers, and customers productivity.
to improve quality and hold dmAm costs.
(lJManagers measure progress with feedb?}ck based on data.

----·---· ·-······· - - - - -- -
Voh.llITT1teerasm and Going Greell1l Are H'.eaipRng Drn~fad«:Nrnds
foir ER11ployees" CommllllfllRties" ~nd tlhle Enviro1t1mrent
A growing number of compa-
nies have made sust ainability
an important part of their busi-
ness strategy. Genera l Elec-
tric's health care unit identified
maternal and infant m o1tality
as frequent causes of death in
India . For e)<ample, t he infant
mortality rate for India, a coun -
try with. 1.2 billion p eople is 55
children for every 1 ,000 births.
GE worked with nonprofit
organizations and hospitals to
understand patient and health
care needs. As a result, GE
identified opportun ities to help
as well as gain a potential mar-
ket for new products. About
700 million people can't afford
maternal or birth services. Also,
to bring to market a product
required overcoming several
obstacles including power
outages, a lack of money and
space in hospitals for large,
costly equipment, high levels
of dust and pollution, and dif-
ficulty of getting rnp lacement
parts through government
bureaucracy. GE, deve loped a
baby warmer, called t he Lullaby,
which provides heat for cradles.
The Lullaby is targeted to help
people and communities with
few financial assets. The Lul-
laby is easy to use: it uses only
buttons with pictures indicating
their function.
At Genera l Mills, volun-
teerism is one of the ways that
the company lives its corporate
32
values. The CEO and senior
leaders serve on nonprofit
boards and are involved in the
community.
For example, employee vol-
unteers are helping improve the
efficiency of a plant in Malawi
which produces a high-nutrient
peanut butter paste that is dis-
tributed to malnourished chil-
dren across the country. Malawi
has 13 million people, most are
farm families living in poverty.
Pharmaceutical company
Novartis supports REPSSI, an
African-based philanthropic
organization t hat provides
emotional and psychological
support for children who lose
their parents or guardians to
AIDS. The program began in
a single district in Tanzania
and has expanded to ·13 sub-
Saharan African countries. The
company's trainers provide
REPSSl's employees with lead-
ership development training.
REPSSI managers need train ing
in communication skills, pro-
viding feedback, intercultural
skills, and project management.
Novartis t ransformed its cor~
porate training programs into
a form useful for REPSSI. The
training content is delivered
through instructor-led courses
and e-learning . Novartis and
training vendor partners, includ-
ing business schools, send
speakers at t heir own expense
to Africa. Instructors are also
- - - - - - - --
available for follow-
up after each course is
completed .
Gilbane Building Company,
J
a construction business head-
,··.•
quartered in Rhode Island, ' ·]·.·:
~
•'
has a strong commitment td . i
'
sustainability. Gilbane's High,
Performance Building Program -';.·.··~·l
is a service offered to clients to I
assist them with the develop-
ment and implementation of ·1
--"
energy efficiency and sustairi-
abilhy goa ls in a project. Using
building practices in which cpn -
struction wastes fewer materials
and uses less energy helps to
- I
protect the environment as well ;j
as providing customers with i ~
available tax breaks for build-
ing "green" and lower heati~g
and cooling costs. As a result,
Gilbane can be both socially'
responsible and profitable.
DISCUSSION QUESTDOIN .. ~!
How do companies sustainability
efforts help a company attract,
l
retain, and develop employees?
Explain your answer.
1
SOURCES: Based on M. Weinstein,
"Charity Begins@Work," Training, May 2008,
pp. 56--58; M. Laff, "Triple Bottom Line,"
T + D, February 2009, pp. 34--39; M. Bahree,
"GE Remodels Business in India," The Wall
Street Journal, April 26, 2011, p. BS; Wel-
come to Cifa:enship@Novartis fro m www
.corporatecitizenship.novartis.com, April 26,
2011; General Mills Corporate Social Respon -
sib ility Report 2011 , from www.generalmills
.com, accessed April 26, 2011; "Commitment
to Sustainability," from www.gilbaneco.com,
accessed March 22, 2013.
,
. '·1
,.'
: ·~
'"""
-
 ...

CHAPTER 'fl Human Resource Man;;igement: Gaining a Competitive Advantage 33

One way H1at compmlies c<.u1 improve the quafrly of their products or ser~ Mak@lm l!!aiclrriglSl'
vices is lluough competing for the l\./Kakolm llbJdrigie Nation.ail Quality Award Natio1rml Qu.aiiil:y
or gaining certification in the ISO ~000:20()«} standards. The Baldrige award, cre- Award
ated by public law, is the highest level of national recognition for quality that a An award established
in 1987 to promote
U.S. company can receive. To become eligible fo1· the Baldrige, a company must quality awareness,
complete a detailed application that consists of basic information about the firm to recognize quality
as well as an in-depth presentation of how H addresses specific criteria related to achievements of U.S.
quality improvement.83 The categories and point values for the Baldrige Award companies, and to
are found in Table 1.9. The a.ward is not given for specific products or services. publicize successful
quality strategies.
Organizations can compete for the Baldrige Award in one of several different
categories, including: manufacturing, service, small business, education, health
ISO 9000:2000
care and non-profit. The Baldrige Award is given annually in each of the cat-
Quality standards
egories with a total limit each year of 18 awards. All applicants for the Bald- adopted worldwide.
rige Award undergo a rigorous examination process that takes from 300 to 1,000
hours. Applications are reviewed by an in.dependent board of about 400 exam-
m.ers who come primarily from the private sector. One oft11e major benefits of
applying for the Baldrige Awaxd is the feedback report from the examining team
noting the company's sh·engl:hs and areas for improvement. 84

Categories and
Point Values for the
Malcolm Baldrige
National Quality
Award Examination

SOURCE: Based on "2013-2014 Criteria for Performa nce Excellence" from t he website for the National Institute of
Standards and Technology, www.nist.gov/baldrige.
 .. ·__J

34 CHAPTIER 1 Human Resource Management: Gaining a Competitive Advantage

_J
The Baldrige Award Hrhmers usually excel at hmnan resource praclicer3.
Fox example, consider Lockheed Martin Missiles and Fire Control (M_FC), a
2013 award recipient.mi J\.AFC designs, develops, manufactures,. a_nd supports
advanced coinbat, missile, rocket, and sensor systems for the U.S. and also
1
foreign militaries. The company's workforce of over 10,000 employees pro-
duces and delivers products thxough contracts in more than 60 cmn1tries. MFC
is headquartered in the Dallas, Texas, area with another facility li1 Orlando,
Florida. From financial, productivity, and quality perspechves M.FC is impres-
sive. MFC has attained a leading market share and sustained. growth.' over the
past f01.li' years in each of its liries of business. Time reductions as a result of
process and performance improvement programs have occm:red in all lines
of MFC's businesses, yielding an estimated saving of $225 million arn.mally.
Return. on inveshnent has grown at a 23 percent compotmd ami_ual rate, faster
than the :industry-best competitor at 13.7 percent. From 2006 to 2011, ami.ual
orders from repeat customers have increased by 32 percent and internaiional
orders have increased by almost 400 percent. MFC's HR practices support its
quest for quality. To ensute ethical behavior at every site, all MFC .employees
receive annual ethics aw;ueness training. Results from employee surveys show
that MFC employees believe they are prepared to handle situations that might
violate MFC's standards of ethical conduct. MFC organizes its workforce in
a matTix structure to accomplish its goals and meet the changing needs of its
custom.ers. Tiuoughout each product's life cycle; cross-functional teams plan,
design, develop, produce, and support the product. MFC's performance evalu-
ation system for top company managers is based on objectives, goals, and mel:-
rics that are aligned with the strategic plan. Performance evaluation is '1Neighted
70% on meeting conunitments and 30% on behaviors related to the company's
mission, vision, and values. Approximately 85% of employees said f11at they
were proud to work for MFC. Employee retention, which MFC considers a
measure of employee engagement, was 94% in 2012. MFC employees have rec-
ognized the need to "pay forward" to the communities in which they work and
live. Employees donated more than $11 million over five yea.ts to ch.arities in
their local commmuties.
ISO (International Organization for Standardization),. a network of national
standaxds i11slitutes including 160 countries With a central governing body :in
Geneva, Switzerland, is the world's largest developer and pubUsher of frnterna-
tional stai1.dards.B6 111.e ISO develops standards related to management, as well
as a wide variety of other areas including education, music, shi.ps, and even pro-
tecting children! ISO standards axe voluntaiy butcounh"ies may decide to adopt .~
i
ISO standards in their regulations and as a result they may become a requfremenl:
to compete in the market. The ISO 9000 is a family of standards related to quaHl~y
(ISO 9000, 9001, 9004, and 10011). TI1e ISO 9000 quality standards address what
the company does to meet regulatory requirements and tli_e custorner's quality
requirements while striving to improve customer satisfaction and continuous
improvement The standards represent an international consensus on quality
management practices. ISO 9000:2000 has been adopted as the quality, standard
in nearly 100 counties aronnd the world meaning that companies have l:o follow , ·1
:l
the standards to conduct business in those countries. 'TI1e quality iuanagement
standards of the ISO 9000 are based on eight quality n;ianagement principles
including customer focus, leadership, people involvement, a process approach,
a systems approad1 to r11anagement, continuous ll:nprovement, twing facts to
 ...
C:H·1'PTEH 1 Hurn 2rn Resourc:e Management: Gain ing a Competitive Advantage 35

make decisions, and establishing 1nutually beneficial relationships with suppli-

ers. ISO 9001:2008 is the rnosi: co1nprehensive :3tandard because it provides a
sel: of requirements for a quality managen1ent system for all organizations both
private and public. The t30 9001:2003 has been implemented by over 1 million
organizations in 176 colmtrk'. ~~. f50 900 11 provides a guide for companies that
want to improve.
Why are standards usefi1l? Customers may 1Nant to check that the product
they ordered from a oupphcr meets th.e purpose for which it is requited. One
of the most efficient ways lo do this is when the specifications of the product
have been defined jn an Jnteniahonal Stand.<:m:L That '\JI.ray, both supplier and
customer are on l:he sarne wavelength, evc:;:n if they are based in different coun"
tries, because they are both uf>ing the same references. JVIany products require
testing for confonnance with sp,,:~cifical:ions or compliance with safety or other
regulahon.s before they cm1 be put on many nrnrkets. In_ addiiion, national legis-
la;tion may require such testing to be carried out by independent bodies, particu-
larly -w hen the products concerned have he;:i,Hh. or environmental imp~ications.
One example of ~m ISO shuida.rd is on t11'2 back 1:over of this book and nearly
every other book. On th<:: hack <:over is sorn.ethi1.""lg called an ISBN. ISBN stands
for International Standard BooI<. ['lumber. Publishers a11d booksellers are very
familiar with ISBNs, because they are the n1ethod thxough which books are
oi·dered and bought. Try buying a hook on fhe Internet, and you will soon lean1
the value of the ISBN-there is a unique number for the book you want! And it
is based on an ISO standanl
J.n addition to c01npeti_11g for quaht.y awards and seeJrJng ISO certifica-
tion, many companies OJ.re using th0 Six Sigrna process and lean thinking. The
Six Sigma process refers to a pt·occc;s of measuxing, analyzing, improving, and Sm Sigma IP'rocess
then controlling proccs~3es onoe l:hf~Y have been b:rought within the nan·ow Six System of measuring,
Sigma quality tolerances or ~>tandards. The objective of Sh Sigma is to create a analyzing, improving,
and controlling pro-
total business focus on serving the custo:me1~ that is, to deliver what customers cesses once they meet
really 1;v m1t when they \!\rant it For example, at General Electric inh"oducing the quality standards.
Sbc Sigma quality initiative meant going from approximately 35,000 defects per
million operations-which is average for most companies, .including GE-to
fewer than four defects per million in every element of every process GE busi-
nesses perform---from inanufacl:udng a locomotive part to servicing a credit
card account to processing a inortgage application to answering a phone.87
Training is an important component of quality programs because it teaches
employees statistical process control and how to engage in ''lean thinking." For
example, Six Sigrna involves hi17;h.ly trained employees known as Champions,
Master Black Belts, Black Bells, and C:reen Belts who lead and teach teams that
are focusing on an ever-growing nnniber of quality projects. 1ne quality projects
focus on Improving efficiency and rr::ducing er:rorn J.n products and services. The
Six Sigma quality inil:iativc has produced n1.o:re l:hcu1 $2 billion in benefits for
GE. tean ~hinld.ng is a ·way to do more with less effort:, time, equipment, and l~an lrMnldillg
space, but s1ill provide cnsto:m.crs vrith what !hey need and want. Part of lean A process used to
thinking includes h·aining workr.~1;s in ne-iN skills or how to apply old skills in determine how to use
less e ffo rt, time, equip-
new ways so they can quickly take over new responsibilities or use new skills to ment, and space but:
help fill custmner orders. In the par:,; thF~e years, Cardinal Fastener & Specialty still meet customers'
Co. Inc.'s sah::[l to wind !urbirw: nvm.ufactun::J·s have grown more than 900%.88 requirements.
The growth of the CkveLu1d, Ohi"J, based cornpany started over 10 years ago
when under the leadershi ..p o{ the 'company't>
.. . . . f(nmder m1_d ..president, Cardinal
 ...
36 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage -~

began using "Lean Tiunking/' involving all employees in the process of what
they refolTed to a.s "blowing up the company." The goal was to eliminate waste j
!
from the entire operalion including manufacturing, administration, and sales.
As a result, manufacturing lead limes w:ent from six weeks to five days, produc-
tivity improvement increased 50%, and haJJ of all sales now come from orders J
that are manufactured and shipped the same day the order is tal<en. Because of
the company's reputation for fast turnaround of specialty manufactru:ed fasten-
ers they received an order ·for a wind tu.rbine project in Iowa. As a result of lean ]. ,

tlunking, machines we.re moved. so that operators could make a bolt or fastener
complete from start to finish, resulting in. a decrease in the lime it takes to make .. .]
.. !I

a fimshed product. Quali.ty is near perfect, and inventory was reduced 54%. .) ]
In addilion to developing products or providing services that meet customer
needs, one of the most important ways to improve customer satisfaction is to
improve the quality of employees' work experiences. Research shows that satis- ]
fied employees are more likely to provide high-quality customer service. Cus-
tomers who receive high-quality service axe more likely to be repeat customers.
As Table 1.10 shows, companies that are recognized as providing elite customer
service emphasize state-of-the-art human resource practices including rigorous
employee selection, employee loyalty, training, and keeping employees satisfied
by offering generous benefits. ·

·rabij~ 1.11 o l i )i
'~.-' ..'1\!

Examples of HR Wegrnans . .. . .. . . . .. . . . . .· <

Practices That Gives aV.1ay $59 rni!llo11 in ·schbla r·ships to '19,0QO ·empl;:>yE:es.· s·e'f'.1,i{1r<tn'C1nagerssit
Enhance Customer side~by-skle . in on phblles in 'the c:orf\ ariy's'call tent\':or.
Service
·1;
·•.llj
M
Se'ason,rf,Hoh.:lt . . .·· . .. . . > . .· . . . .·.. . .
·· Noeinplbyeegets,ajob·b eforepassing .founinterviews; E21qh:e.rriployee receives
a free r1.ights' stay forbim~elfror · 10erself an.d a·.g0.:~o;t1 along;vvi;th.free tlifjnera:t
· er:nployee ~Hi.eptati,on . : Th e free ?.t?y1h(?,lp$/~rnP leye~s,,tn.ost. sf. vv h C>tti : Qtherwise '·
.
I
·:I
'
.coiJ lcJ no:taffor(J tp stay at . thehqtel ; , unders~0n~Ly~i;.sitbeij?r;j .a..cp:s.~.9')"l~(feels. 1 ike .•. I
:rhey ~'"~~~,~~'"rJ~~1wif;~·i ~:f,·i~~c~h~~f~~~t~~~·,~~9'•~ ~~81)t;~..t.9.·•a.fr\~~··;219d·:n.urnb.Ejr.· 6fs·· · .~
~~l

SO URCE: Based on J . McGregor, "Cu ~tomer· Service Champs," BusinessWeek, March 5, 2007, pp. 52---64.

. ·1''.,.!0'j+.
~L!
 ...
CMAPTlEIR '1 Hu man Resource Management: Gaining a Competitive Advantage 37

Changing Demogrnphks mul1 Oh;eirsity of the Workforce

Company performance on the balanced scorecaxd is influenced by l:he character-
istics of its labor force. The labor force of curn~nt employees is often referred to
as the in.U:ernal labor forcir. Employers identi:h; <md select new employees from lnbllrnal lalboir
the external labor market thmugh recrniting and selection. TI1e extenaal labor Forice
market includes persons adively seeking employment. As a result, the skills Labor force of current
employees.
and motivation of a co:mpany' s internal labor force are influenced by the com-
position of the available labor mark£t (the external labor market). The skills and
ExtEimal Laboir
motivation of a. company's :internal labor force determine the need for training
Markia-1l:
and development practices and the effectiveness of the company's compensa-
Persons outside the
tion and reward systems. firm.who are actively
Important changes in the demot'Taphics and diversity of the workforce are seeking employment.
projected. First:, the average age of the wo:rkforce will increase. Second, the work-
force will become more diverse in terms of gender, race, and generations, and·
third, irrunigration will. continue to affect the size and diversity of the.workforce.
Aging of the Woikfm'Ce, The labor force will contixme to age and the number
of workers age 55 and older will grow from 19 to 25% by 2020. 111.is is slightly
over two times the size of !:he 5.5 and older workforce :in 1990.89 Figure 1.5 com-.
pares the projected distribution of the age of J:he workforce in 2010 and 2020.
Tii.e labor force participation of those 55 years and older is expected to grow
because older individuals me leading healthier and longer lives than in the past,
providing tl1e opportunity to work more years; the high cost of health insrn:-
ance and decrease in healt:h benefits causes many employees to keep working
to keep theil" employer-bas~d insurance or to retmn to work after retirement to
obtain health insurance through their employer; and the h·end toward pension
plans based on individuals' contributio:ns to tl1em rather than years of service
provides an incentive for older employees to continue working. The aging labor
force means companies are
likely to employ a growing share of older workers-
many in U1eir second or third career. Older people want to work and many say
l:hey plan a working retixement Despite myths to the contrary, worker perfor-
mance and learning are not adversely affected by aging.9 o Older employees are
willing and able to learn new technology. An emerging trend is for qualified
older workers "to ask to work part-time or for oPly a few months at a time as
a means to h"ansition to retiTement. Employees and companies are redefining
the meaning of retireme~,t to include second careers as· well as part-time and

Fiigi1U.11rie 1 .5
Comparison of the
Age Distribution of
the 2010 and 2020
16 to 24 years old
Labor Force
'!J,~ 25 to 54 years old
55 years and older

2010 2020
SOURCE: Based on M. Toossi, ''Labor Force Projections to 2020: A More Slowly Growing Workforce," Monthly
L1bor Review, Janua1y 2012, pp. 43- 64.

---- -----
38 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage I
I
I

tempormy work assignments. An aging workforce means that employers iiVill.

increasingly face HRM issues such as career plateauitl.g, retirement planning,
and retraining older workers to avoid skill obsolescence. Companies will strug-
gle with how to control the rising costs of benefits and health care. Companies
face competing challenges with older workers. Companies will have to ensure
that older workers are not discriminated against in hiring, !raining, and work-
.force reduction decisions. At the same time companies will want to encourage
retirement and make it financially and psychologically acceptable.
Many companies are offering special programs to capitalize on older employ-
ees' skills and accommodate their needs.91 CVS/pharmacy has stores in every
climate and region in the U ..S. CVS created its Snowbirds Program to allow o~der
employees to move among locations according to their preferences. nus is espe-
cially important for older employees who spend winters in the southern states
and summer in the norl:hen1 states. Over 1,000 employees including retail clerks,
pharmacists, and managers have participated in the program.
As many older workers leave the workforce permanently or decide to work
part-tini.e, another challffige companies face ·is how to capture their unique
knowledge and expertise so it can be used and shared with remaining employ-
ees. Recognizing that many talented employees would .soon be retiring and their
knowledge would be lost or forgotten, LyondellBasell, a polymer manufacturer
located :in Clinton, Iowa, asked key employees to record what they had learned
during their tenure, especiatly knowledge that they knew was not already doc-
umented. Employees were interviewed to better understand difficult tasks that
lacked well-documented procedures. For example, an interview with a chemical
specialist revealed that when a chemical reaches a specific fluidity and color it is
ready to use. TI1at part of the mterview was taped so that future employees woitld
have a reference to the conrect color of the solution.92 Special People in Northeast,
Inc. (SPIN), a nonprofit that provides services for persons with disabilities, uses
"eleclronic how-to" manuals and flowchaxts provided by key employees to ensure
that cun-ent practices and procedures are available to employees with less experi-
ence who are succeeiling expert employees who are leaving the organizatio:ri.93

Gerierat-iomll Differences. Because employees are working longer the work-

force now has five generations, each one with unique characteristics and char-
acteristics similar to the olthers. In Table 1.11 the yearborn, nicknames, and ages j
of each generation are shown. Consider some of the attributes that are believed
to characterize each generation. 94 For example, Millennials grew up with access
to computers at home and school and access to the Internet. They grew up with
diversity in their schools and were coached, praised, and encouraged for par-
ticipation ra1J1er than accomplishment by t:heiJ: Baby Boomer parents. Millen-
:nials axe characterized as being optimistic, willing to work and leai'Il, eager to
please, technology literate, globally awaxe and as valuing diversity. They are
also believed to have high levels of self-esteem and narcissism. Generation Xers
grew up duTing a time when the divorce rate doubled, the number of women
working outside the home increased, and the personal computer was invented.
J
l11ey were often left to their uwn after school (latchkey kids). TI1ey value skepti~
cism, info:rmaJily, practicality, seek work/life balance, and dislike close supervi-
sion. TI1ey tend to be impatient and cynical. They have experienced change all
of Hi.eir lives (in terms of parents, homes, and cities). Baby Boomers, tlLe "Me" ·1
/1
generation, maxched against the establislunent" for equal rights and an end to J
~'"1:.x:·· .·
' t. ;,~ \';
~ f. :."\:i.· . ~

CHAJ:·')TE~ ..~ Human Resource Management: Gaining a Competitive Advantage 39

Generations in the
Workforce

'.)i/46d64
1'/65--80

· · G~·nkrafitJ~ y ·
E~hcYEfooni eni·
1996 C3eneration l.
Oi9 ital f\Jatives

lhe Vietnam \Alar. They value social conscientiousness and independence. TI1ey
are competitive, hard wo:rking, run.cl con cerned with tJ1e fair treatment of all
employees. They are often con.sidered. to be w0rkah0Jics a.nd rigid in conform-
ing to rules. Traditionalists grew up during th.e Great Depression and Jived dm:-
ing World 'Afar TI. They lend to value frugalif.:',r, are pah"iotk and loyal, adhere to
rules, are loyal to ernployers, and take responrnlbility' ;md sacrifice for the good
of the company.
Mernbern of each generaiion m.ay have mj.sper·c eptions of. each oi:her causing
tensiot1s and mim.mdersi:anding in thC:: virorkpftace. 95 For example, lVliUenniaJs rnay
• ·• --, ' ·v !\.... • • ] " ' • • . . d • tl
t luni<: t-.enen1.b.o:n A :u1an.agers axe aY1ti:e:1~ Jac1.e'"l, aora.srve, unlnteDeste m 1em,
:J l T 1 • .--. Ii ~ ,.. •,.J
anu poor c.e egaJors. 1n hitXlll, ine!JT '\...:;;en~'.a._on .A UiiLnagers cons1u.ier
.•l Mill ·ais
e~u "'
too needy for aUentiora,. demanding, and overly seff·i:orJfid::nL IVAillennials might
believe that Ba.by Boomers are 1:00 1igid and follow company rules too closely.
They beUeve ernployees in the older generations .b.ave been too slow ill adopting
sodal 1111edia tools .and ove~rvalu.e benu.re rather thail. ICinov•Tledge and performance.
Traditionalists and Baby Boomers beH<eV!c' than; l\1illen.n..i..a!s don't have a strong
work etlh.k because ll1ey axe too concerned 1Nith work-life balance. Also, members
of the ymmger genera.lions 1.1Jay resent Baby Bomners and Traditi.ona.Jists who are
working longer l-1efore retiring, biocking promotions and career moves.
a fa .important l:o :not c !:hat although generati.onal differences likely exist,
1

roembers of the sc.un.e genera.lion axe no m.o:r~ aHk,e thrul rn.embers of the same
gender or race. This means that you should be cautious in attributing differ-
ences in <~1nployee behaviors and attitudes to generational dHforences or expect-
ing all employees of a generation to have similar values.. Resf~arch suggests· that
the generations of employf~es have sitrdJaii.ties as wen as differences.% Although
differences ill. work eillic have been found ~mong Baby Boomers, Generation
.Xers, a.nd MillenniaRs, Ivlillenn_fo.1 e;.nployees a:re mo.n~ sin1U.ar than different
from other genernlions in H11eJi.r ~11rolt'k beliefs, job va~ues, and gender beliefs.
Most employees view 'Work as a means to more fully use H1eir sldlls and abili-
ties_. XO.f~et thefr interests, and ai.luv11 them to fore a desirable lifestyle. They also
value work.-Hfo balr.!n.ce, n.11.r.;~anin.g Hex]b]e 'Work poH.des .a.rz:; necessary to allow
them to choose ·where and ·when ·work is Der:fon.ned. I.

Gr.:mr.lef amd J-f.tu:ilfd Compositi.iarn 1r4 f:ffgi.e Mforkfon::.;r; As F}gu.re 1.6 shows, by
2020 the workforce is expected to be 79% white, 12%1 .African American, 6%
As.ian, and 3<>;;, other groups, which indudes in.dividuals of multiple racial mi-
gin, American Jndhun, Alai.skim. Native or NaHve Ha.waiiaJn, aud other Pacific
 ...
40 CHAPTER 1 Human Resource IVlcmagement: G<:iining a Competitive Advantage

f.nigi1µ1rie 'Jl .(.ii)

The U.S. Workforce,
2020
White
/\frican /\merican
Asian
Other groups

SOURCE: Base d on M . Toossi, "Labor Force Projections to 2020: A More Slowly Growing Workforce," Month.fl'
. tabor Review, .January 2012, pp. 11.]-64.

Islanders.97 'Dir~ diversity of the workforce is expected to .increase by 2020. As

a result of different fiertUJty rates and differences in immigration patterns,~ race
and ethnic groups will show different trends in labor force growth. Behveen
2.008 <Jx1.d 2018 the projected annual growth rates for Hispanics (3.0%)' and
Asians (2.7%) are higher for African Am.ericans and other groups. .
Many U.S. industries, including meatpacking, construction, farming, and
service, rely on immigrants from Mexico and other countTies to perform
short-term or labor-intensive jobs. Immigration contributes to the diversity of
the U.S. population aw:i workforce. One estimate is that there are 40 niillion
inunigrants u1 the U.S. (13% of the population). The labor force includes 16%
of immigrants who have been granted status to work in the U.S. a.swell as
5% or 8 .million who are unauthorized.9 5 U.S. inuxti,grants come from coun~ ·
tries arm.md the wodd but most come from Asia, the Americas, and Central
America. Although a com111on belief is that immigrants have few skills, the
percentage of highly skilled im1nigrants now exceeds the percentage of luw~
skilled irmnigrants. While the U.S. goverrunent is debating how to deal with
illegal immigration, many companies would face a labor c:d~is if they were
forced l:o teirntinate employment of illegal inunigrants, xitany of whom have
lived and worked in the United States for years but lack the work authoriza-
J
tions an.d visas needed to work legally in this country. For example, an oyster-
processing operation in Marylartd brings in workers from Mexico to perform
tl1e dirty and smelly work needed to shuck oysters from October to February.
1
TI1e famHy-owned business has tried to hire U.S. workers but so far has had
little success although the typka.Jworker makes $12 per hour.99 Many busm.ess
owners believe the armual cap on visas is too low because they cru.u1ot find
enough employees to fill their jobs. ·~
The implications of the changing labor market for managing human 1(
resources are far-reaching. Managing diversity involves many different adivi-
. ties, including creating an organizational culture that values diversity, en.sur-
ing that BRM systems are bias-free, facilitating higher career involvement of
wmne:n, promoti.11g kn.owl.edge and acceptance of cultural differences, ensmr-
ing involvement in education both within and outside the comp.any, and
dealin.g with e:mployces' resistance to diversity.mo Table 1.12 presents ways
that ma.n.aging cultuxal diversi1y can. provide a competitive advantage. How
diversity issues are managed has implications for creativity, problem solving,
retaining good employe~ s,. and developing markets for the firm's products
 ...
CMAPTIEIR Ii Human Resou rce Management: Gaining a Competitive Advantage 41

'lf~bA® 1 :JJ :l
:As
0
mom diver'se, the cost How Managing
in inteqrating vvorkers will increase. lhose who Cultural Diversi'ly
we ll wilLthus crqate cost advantages over those \"tho dorl'.t. Can Provide
Competitive
Advantage

lhe insigh1: and cul turbl sensitivity that diverse eir),p 9yees·
brihg to t:hc~ marketing effort 'should help the compahi enter
new 11\arkets and develop prodC1cts .and services for diverse

S. Problem-solvinq 1-faterog (:lneity ih decisirJns and problem-solving grbups

;,1r9ument potenlfal ly produces better decisions through a vvider:range
of perspectives and mcjre thorough critical of issues .
. (,,

SOUIKES'. Academy of M anagement Execuf'ive, by T. H. Cm< and S. Blake, 1991 ; N. Lockwood, Workplace Diver~
.c.ity: /.GYP.raging the Power o f Difference for Compc:?tit.ive Advaniage (1'.\lelmndriil, VA: Socie1y for rlurnan Resource
Manngernent, 2005).

and services. To successfully manage a diverse 11vorkforce, managers must

develop a new set of skills, including;
L Comm.u:nicating effectively wi.tl1 employees :from a vvi.de vm:iety of cultural
backgrounds.
2. Coaching and developing employees of different ages, educational back-
grounds, ethnicity, physical ability, and race.
3. ProvicHng performance feedback t hat is based on objective outcomes rather
than values and stereotypes that work against ·women, minorities, and
handicapped persons by p rejudging these persons' abilities and talents.
4. Cre<;lling a work enviromnent that makes H: comfortable for employees of all
backgrounds to be creative and innovative.
5. Recognizing and responding !:o generational issues.101
Diversity is importan1 for tapping all employees' creativer cultm:al, and com-
munication sldlls and using tli\Ose skills to provide competitive advantage as
shm.~rn in Table l .12. For exarn.ple, the Latino Employee Net work at Frito-Lay
played a key role during the development of Drn.itos Guacamole Ha.vored Tor-
tilla Chips.1 02 The chips generated more than $500 million hl sales dming their
first year, making this one of the most successful product launches jn the compa-
ny's history. Network members provided feedback on the taste and packaging
to ensm-e that the product would be seen as aut11.entic in the Latino commu-
nity. Disabled vrorkers can also be a so mce of comp etitive advantage. Wiscra{t
Inc., .a Milwaukee company~ contrao1:s with companies s1.lch as Briggs & Sh·atton
C01voration and Harley-Davidson to do .assembly~ packaging, and machining
work.103 Ai: least 75 percent of V\fiscraft's employees are legally blind. But the
company is not a cha:d.ty. H competes with other compm1.ies .for contracts. It
 ...
42 CMAPTER 1 Human Resource Management: Gaining a Competitive Advantage

receives n o subsidies frmn IocaJ state, or federal governments. Employees have

1

to rely on pub he: transportation or friends or relatives to get to work Kathy \1Val-
ters said she could have worked at another company but chose vViscraft because
of its supporlive culture. Walters, who is legally blind, believes she would have
had b:ouble finding a job that offered healtl1 benefits and paid as well as her job
at '1\/iscroJt. The company has received ISO 9001:2000 certification, evidence that
it provides h]gh-quaJjty 1Nork and can compete internationally.
To make sure employees understand generational differences and how to
connect and communicate with employees from different generations, Aflac,
the insurnnce provider, offers a trail-Ung program called "Connecting Genera-
tions."104 Aflac believes that employees in all age groups will be more effective
if they understand how m.embers of each generation approach their jobs. The
program reviews the characteiistics of each generation represented in the 1Nork-
place. It also describes the effects of family and world events on each generati.on,
analyzes their work styles and employment characteristics, and helps show con-
nections to bridge generation gaps.
TI1e botton1 line is tl1at to gain a competitive advantage, companies must har-
ness the power of the diverse workforce. TI1ese practices m:e needed not only to
m eet employee needs but to reduce tu:mover costs and ensure that customers
receive the best senrice possible. The implication of diversity for HRM practices
will be highlighted tJurnughout this book. For example, from a staffing perspec-
tive, it is important lo ensure that tests used to select employees are not biased
against minorily groups. From a work design perspective, employees need flex-
ible schedules H1at allow them to meet nonwork needs. From a iTau11ng per-
spective, it is clear foat all employees need to be made aware of the potential
damaghlg effects of stereotypes. From a compensation perspective, new benefits
such as elder care and day care need to be included in reward systems to accom.-
m odate the needs of a diverse workforce. --

leg.a~ ~SSllH:~s
There '"'ill
likely be development and debate .of new employment laws and reg-
ulations, as well as increased emphasis on eniorcing specific aspects of cmTent
laws an:d regulations.1°5 An emphasis on eliminating discrirnination in recruit-
ment and hiring will continue. The focus will likely be on pre-employment tests,
criminal backgrom1d screenmg, and on]ine searches that migh~ reveal the age of
job applicants. Also, greater attention will be given to eliminating discrimina-
tion based on disability, pay rates, job category, and harnssment. There a:re Hkely
to be more challenges of sex and race discrimination because of lack of access
to training and development opporlunjties that are needed for promotions to
better payi11g jobs or higher level management positions. Eliminating discrimi-
nation against veterans and people with disabilities, especially among federal
conlTactors, is Jikely. '
V\Torkplace safety will get more attention as new regulations are conside:i;ed,
requiring companies to identibJ workplace hazards and either fix them or pro-
vide em.ployees with protection. Companies in industries that are considered to
be 1he most dangerous for e:m.ployees will be asked to meet additional reportiJ1g
and h1spection requirements. · ·
Health care refonn w ill drive compliance issues. Starting in 2015, employers
with 50 or more fuJJ-tjme elnployees who decide not to offer health care coverage

'•
 ...
CHAIPTIER 1 Human Resource ~/lanagement: Gainin8 a Competitive Advantage ll.3

will have to pay a penalty of $2,000 per em.ployee. Companies will look to HR
for answers to whether it makes sense from a competitive perspective to offer
health insurance, which avi:i:rages about $6,000 for an individual plan. TI1e cost
savings from not offering health caxe may be offset by the company's inability
to attract and retain talented employees ~Nho expect company-sponsored health
care benefits which offer aUTactive options not likely found in federal govern-
ment plans. HR professionals and managers will have to work with legal coun-
sel and benefits experts to understand :new health care regulations and the form
lhat health care will take, if they decide to provide it.
Scrutiny of companies who employ unlawful immigrants or abuse laborers
will continue to increase. Companies can face criminal charges if immigration
and customs officials can show that they knowingly employed undocumented
and illegal hrnnigrants.111e number of company audits conducted by the Immi-
gration and Customs Enforcement (ICE) has increased over the. past several
years, resulting :in over $10 nullion ]n fines.
The publication of classified documents by \t\JikiLeaks an.cl Wall Street insider
trading probes have resulted in companies more carefully scrutinizing data-
security practices and increased. concerns about protecting intellectual property.
111is will likely influence human resource practices related to performance man-
agement such as the use of electronic monitoring and surveillance of knowl-
edge workers. Vile may see rnore litigation related to employee privacy rights
and intellectual p roperty rights as a result of companies terminating employees
c'>r taking disciplinary action agajnst them for data-security b reaches, discuss-
ing employment practices u sing sod.al medfat, or sharing or stealing :intellectual
propel'ly for personal gain. Et&iik3
The fundarnentai
principles of right
IEtMiczi~ ~SSl\Jl!E!S and wrong by which
Many decisions :related to 1nanaging human rer.oun:es are charncterized by uncer- employees and compa-
nies interact.
tainty. Hhii.cs can be considered the fundamental principles of right and wrong
by which employees and companies interact. 106 TI1ese principles should be con-
SiillirbP.ifll\N:l·OYi:~~y
sidered in making business decisions and interacting witl1 clients and custom-
Act of 2i002
ers. Ethical, successful com.panies can be characterized by four principles shown A congressional act
in Figun~ 1.7.1°7 F:i:rsl:, in their relationships vvith customers, vendors, and clients, passed in res1::ionse t:o
these companies emphasize rnutual benefits. Second, employees assume respon- illegal and unethical
sibility for the ad.ions of ihe company. Third, such companies have a sense of behavior by managers
pmpose or vision the employees value and use in their day-to-day work. Finally, and executives. The
act sets stricter rules
tl1ey emphasize failness; that is, another person's interests count as much as their for business especially
own. HR and business decisions should be ethical but that is not always the case. accounting practices
A recent survey of employees found that 45% had witnessed some fonn of uneth- including requiring
ical conduct at their workplace. Uris probably helps explain the results of a Gal- more open and con-
lup poll on honesty and ethics in 21 professions. The poll results showed that only sistent disclosu,-e of
financial data, CEOs'
18% of Americans rated busjness executives high or very high on honesty and assurance that the data
ethical behavior and close to f:vlrice as many rat€d them low or very low.108 It is is completely accurate,
important to note that ethics refers to behavior that is not dearly right or wrong. and provisions that
Compliance means that the compaI1y is not violating legal regulations. But a com- affect the employee-
pany can be compliant and still have employees engaging in unethical practices. ernployer relationship
The Sarbanes-Oxley Ad: of 2002 sets str ict rules for corporate behavior
(e.g., development
of a code oF conduct
and sets heavy fines and prison tenns for noncompliance: otganizations are for senior financial
spending millions of dollars each year to comply with regulations under the o fficers) .
,44 CMAPTER 11 Human Resource Managermmt: Gaining a Competitive Advantage

fFigurr~ 11.1
Principles of Ethical
Companies

Sar.banes-Oxley Act, 1Nhich imposes criminal penalties for corporate govemillg

and accounting lapses, including retaliation against ·whistle-blowers :reporting
. I
viola.lions of Security and Exd1ax1ge Commission rules. 109 Due to Sarban.es-Oxley
and new Security and Exchange Commission :regulaifons that impose strider J
standards for disclosing executive pay, corporate boards are paying more atten-
tion to executive pay as 'i·1reJJ. as issues hke leadership development and succes- I
sion planning.no This has :resulted h1 an increase in the number of HR executives .J~

and individ1ials wifu HR expertise who are being asked to serve on corporate
boards to provide data and analysis. For exrunple, a CEO or chief financial officer '~
(CFO) who falsely represents company finances may be fined up to $1 million :Jl.,
and/ or :imprisoned for up to 10 years. TI1e penalty for willful violations is up to
$5 million and/ or 20 years imprisonment. The law reqillres CEOs an.d CFOs to
· certify corporate financial reports1 prohibits personal loans to officers an.d direc-
tors, and prohibits insid~r trading during pension fund blackout periods.m A
"blackout" is any period of more than thxee consecutive business days during
which the company temporarily stops 50% or more of company plan partid-
pants or beneficiaries from acquiring, selling, or transferring an jnten.~st in any
of the company's equity secmities jn the pension plan. ·The law also requires
retention of all documents :relevant to a government investigation.
1he law also has a number of provisions that diiectly affect the employer-
employee relationship.m. For exrunple, the a.ct prohibits retaliation against
whistle-blowers (individuals who have huned in the company or one of its offi-
cers for an illegal ad) and govemm.ent informants. The act also requires that pu.b-
lically lrnded compa:.niies disclose whether they have a.c ode of ethks.113 other
.federal guidelines sud.1 as H1e Federal Acquisition Regulation also requfre or
provide inoentiv-es to encouxage all businesses to adopt codes of conduct, tratn
employees on these codes, and. create effective ways to audit and report eHl.ical
and unethical behavior. Jhm means thal: companies, ·with HR taldng the lead,
.

-·· -··-·-·-- ---

 ...
CMAiPTiE!R 'l Human Hesource !\llana~~ernent: Gaining a Competitive Advantage 45

should develop oodes of conduct H1at deady deiin.12 e!J1irn and professional
responsibility tIR pli."ofessionafo along; 'Nith other ~op--levd man.agers _usually
play a key role in h elping conduct elhks au dits, i.k,vdop ethical codes of conduct,
and respond to ethical violations. GuideJ_ines for disciplinary aclions for employ-
ees guilty of unethical behavior and conduct need to be developed. Managers
and employees will need to be traixied on ethic3 policies to ensure that business
processes and procedures are corredly foUow(~d. 1-:IR. professionals Vlrill need to
document t:he fact that einployr.:::es have received these pohcies and have attended
trainfog to ensure their cmnpliance ·with lhe acL Because of the potential liability
for retaliation in the context of disoiminatJ.on and ha.rassmenl:, policies should
include assurances that an employee will not be retaliated against for making
· a complaint or for serving m1 a witness. Executive cornpensation programs will
need to be monitored to e1isure that the p:mgTam is h1 compliance with the no
personal loans and no sales of pension funds during blad<:out period provisions.
Consider the policies and practicer:> than: con1panies are using to help ensure
an ethical wmkplace.11 4 ['\ratiorrwide, ffn ir1s1u-.mKe provider located in Colmn-
bus, Ohio, developed and ad.opted a detajJed Code of Conduct. The Code of
Conduct applies 11.:o all employees,, il: protedr:> emptoyeeG 11\,rho:report code viola-
tions from n~taliation, and it guides empfoyf:es' decision making when the cor~
red action is unclear. The Code of Condrnt covers discrimh1ation, conflicts of
interest, financial reporting1 business records, honesty in business communica-
tions, handJfr1.g company aBsets, and political acb.vities inchJ.djng gifts to public
officials. I\.fal:io.n1Aride has established an Office of Ethics and code violations can
he reported to them using e··mail, fax, or l:ekph.onr.::. Cisco Systems has taken
steps to make its ethics and. compliance prog:rams more engaging and foterest-
ing for employees. Cisco >ATorked with a ccnsu.Hing finn to cn~ate a four-episode
tmfrring ~module based on the A.merican Idol popalar television show. The epi-
sodes ilwolve decisions related to shar.ing prop:dei:a.ry Jnformation from former
ernploye:r.s, how to pick new vendors, entertaining potential customers, and
accepting gifts from vendors. Employees 1N<;1tch each of the "contestants" talk
about a different ethical sHuation and ]j13ten vvhile the three judges each provide
their opinion.. Employees a:re then asked lo vote on which of the three judges
gave the best nc>sponse l:o each sHuation and thE;y can ill.st.antly see how theh-
respons e matched up to the responses of other Cisco employees who have par-
ticipated in the eth.ics train:iJ·1g. ,c\t IJ1e end of each episode Cisco's ethics office
provides the correct response to the silual.ion based on H1e company's ethics and
compliance standards. The new trajning pmg:rarn helped increase the visibility
of Cisco' s ethics office and raised employee~/ awareness that the right answer to
each ethical dilemma they rnay encmmter is not always obvious.
Human resource managers rnust satisfy th:ree basic standards for their prac-
tices to be considered eHiical. 115 First, FIRM practices must result in the gi·eat-
est good for !:he la.rgeGt nvJm:ber of p«:ople. Second, employn,ent practices must
n:sped basic human rights of privacy. due process, co:nsenic, and free speech.
Third, managers must treat employees and oistonH:>rs equiJably a.n d fairly.
To call attention to the important role of ethics in the ·workplace, throughout
the pook 'Ne include "Integrity in Action{' boxes that highlight the good (and
bad) decisions, related l:o ethical HR practkE:D made !oy company leaders and
managers. The "Integrity ]n Action'·'. box sho1Ns how Hie CEO of Dynergy has
made changes to the company cultu:rre and used HR practices to try to revitalize
a failing company ~.
 Many CEOs don't practice what
they preach but this is not thr2
case for Ben Verwaaijen, previ·-
ous CEO of PTI Telecom, the
state-owned Dutch tel ecoms
group. Du ring his career he was
in char9e of many reorganiza-
tions and turnarounds.
condition for a successful cul- process. In the
tural changr;) and transformation. communication the
Change is an ongoing process leader's own conduct
Iii
which is necessary to keep up is importan.t and effective leader-
with the dynamics and altera- sh ip entails leading by example.
Ji
tions in the direct and contextual In the third point he emphasizes
environment of a company:
"Leadership is the art to connect
the importance of the right ;
person in the right position, the
j.
.

His first assignment as CEO
of PTT Telecom was to trans-
forrn the public or9anization
into a private organization
within five years. This transfor-
mation demanded a change
in strat egy alongside orga-
nizational structure-cu ltural
change in an environment which
was dominated by the introduc- ·
tion of new comple)( te lecom-
. . munication t echnology and the
privatizing of organizations and
services in the public domain.
Ben was commissioned to turn
the organization from an inter-
nally focused into an external
customer-driven enterprise. In
this transformation process cul-
tural change was an important
keystone for success.
Ben Vervvaaijen stresses
that people practices are a key
skills, intuition and knowledge
of people into effectiveness. As
a leader you have to provide
the conditions for employees
that they are going for the. e)(tra
mile. Only intense teamwork
and collaborr.ltion lead to the
accomplishment of goa ls, and
henceforth to customer satis-
faction". According to Ben, a
leader has to focus on three
points ...
The first is the development
of a vision for people to move
to a certain point in the future.
This is important because a good
and strong vision ca n mobilize
creative energy among people
which is crucial in the change pro-
cess. The second is how leaders
communicate w ith their employ-
ees, answering difficult issues
regarding the transformation
organization of learning and criti-
cal reflection and to give way to
talent
As a CEO Ben gave direction
to immense transformations of
big enterprises and as a resuli:
there were better perforrnances
.and profit. Although the effec-
tiveness of change is hard
to 'measure , the enterprises
showed a change in culture and
financial pe1formance.
Explain your choices.
SOURCE: Van Weegen & Groothengel,
P. (2013). Ben Verwaayen; 'Leiders zijn slechts
beperkt houdbaar'. Managementscope
(13-05-2013).

THE GlOBAl CHAILlENGR:

n.o 1-.i Companies are finding that to survive they must compete in intemational mar-
Discuss what com- kets as well as fend off foreign corporations' attempts to gain ground in the
panies should do to
United States. To m eet il1ese challenges, U.S. businesses must develop global
compete in the globa l
marketplace. markets, use their practices to improve global competitiveness, and better pre-
pare employees for global assigmnents.
Every business must be prepared to deal with the global economy. Global
business expansion has been made easier by tedmology. The hlter:net allows
data and information to be instantly accessible and sent around the .world. The
foternet, e-mail, social nehvorking, and video conferencing enable business
deals to be completed bel:v\ieen companies thousands of miles apart.
Globalization is not limited to any particular sector of the economy, product
market, or company size. 11 6 Companies without international operations may

46
 ..
CHAIP'TE~ 1 Human Resource l\~anagement: Gaining a Competitive Advantage 47

buy or use goods that have been produced overseasr hixe employees with ruverse
backg1uund0, or compete wiHl foreign--own.ed compm1jes operating within the
United Stales.
Businesses around the world are attempting to increase tl1.eir competitive-
ness and value by increasing their global presence, often through mergers and
acquisitions.

lfoten"nng lnterna·Uona~ Man·~u~ts

Many companies are entering international markets by exporting their products
oven:;eas, building manufacturing facilities or service centers in other countries,
entering into alliances with foreigx-l companies, and engaging in e-commerce.
One estimate is that developing economies and emerging markets such as those
found in l:he BRIC nal-ions (Bra:;..:il, Russia, hidia, axkl China) ·will be responsible
for 68% of lhe growth of tlw~ world's economy.117 The importance of globaliza-
bon is seen in :recent hiring patterns of large U.S. multinational corporations
· th;:i.t have increased their overseas work.force, particularly in Asia.U!l i\Aarkets in
Brazit Chh1a, and India have resulted in 60% of General Electric' s business out-
side the United States wii:h 54'1o of employees overseas. Gap Inc. plans lo open
as many as 20 r.nore Old Navy stores in Japan in 2013.119 Old Navy opened its
firs t store outside of Nor !l1. AJ.nerica in Tokyo in 2012. The brand will launch
sl:m:f;:3 iJ1 key areas of Japan, including Nagoya, Kobe, Osaka and Yokohama.
Gap befo,~ves it needs to expand its intemahonal presence because the U.S. mar-
ket fa mah..ffi:ng and has many competitors. Yurn! Brands, parent company of
KFC and Pizza Hut, has ovex 3,700 stores in China conlTibuting to $1 billion in
operaiing profit. More than one store is opened eve1y day :ln China as .the com-
pany strives for its goal of 20,000 restaurant.s1120
Global companies are struggling both to find and retaht talented employ-
eer;, especially in emerging markets. Companies are moving into China, India,
eastern Eurnpe, the Middle East, Soulli.east Asia, and Latin America, but the
demand for talented employees exceeds supply..AJso, companies often place
:;;uc0:;:3sful U.S. m anagers in. drnrge of overseas operations, but these managers
lack the cultural understanding necessary to ath·act, motivate, and retain tal-
ented employees. To cope with these problems, companies are taking actions to
better prepare their managers and thefr famjlies for overseas assignments and
to ensure thal: training and development: opportunities are available for global
employees. Cross-cultural h·ainmg prepares employees and their families to
u nderstand llle cultw:e and norms of the country they are bei11g relocated to and
to :return l:o t11eir home country after the assignment. Cross-culh.l.ral training is
discussed in Chapter 10.
IBM obtains rnore llrn.n two-U'lirds of its :revenue from outside the United
States and is seeking to build team leadership in order to compete in emerg-
ing rnarkets around the world. IBM's Corporate Service Program donates the
l:i:me and service of about 600 employees for p rojects in countries such as T1u--
key, Romania, Ghana, Vietnmn, lhe Phillipines, and Tanzania.1 21 The goal of the
program is to develop a leader.ship learn that .learns a.bout the needs and cul-
li.ire of these countries, al: the same time providing valuable community service.
Por example, eight IBM employees from five counlTies traveled to Timisoara,
Romania. Each employee was asf:Jigned to help a dH.ferent company or non-
profii: organization . One soflware-developmenl manager helped GreenForest,
 ....
43 CMAPTIER 1 Hum;;:in f~esource l\~anagemr~nt: (iaining a Competitive Advantage

a n:i.a.nufacturer of office1 h.otoet school, and indush'ial furnihme, reach. its goaJ
of cutlin.g costs and becoming more efficient by recommending compl,1.ter
equipm.ent and sysle1w3 needed to increase production and exports to -western
Europe ..Another employee worked vvith a nonprofit organization that offers
.\I
·· ;

.':ti
.···y
I

senrkes to disabled adults. Besides benefiting the companies, the employees

have also found that the experience has helped them understand cultuxal dif-
ferences, :improve f11eil' comnnmication and teamwork skills/ and gain. insights
on global marketing and s~rategy. 'n1e "Competing Tluough Globalization" box
shows how frustrations with cultural differences, h:i this case France, can under-
mine global business expoo.1gion.

OHsJnownn-ng & Re:s;hm'Rlfil9,

OffahoirlITTl!9l Offoh.m·.ilng refers to the exporl:li1g of jobs from developed countries, su.ch as the
Exporting jobs from United States, to countries where labor au.cl other-costs are lower. India, Canada,
developed to less China1 Russia, Iireland, l\!Kexico 1 Brazil, and the Philippines are some of Hi.€ desh-
developed countries.
nahon cov1ntries for offahored jobs. vVhy are jobs of.fshored?11z 11_1e main reasw1 is
labor costs. Woxkers in 0H1er countries ea1n a fraction of the wages of 1'.\JJ.11erica_n
workers pe:dorming the sa.me job. For exa.i.-nple, Indian computer prog:ranuners
receive about $10 an horn: compared to $60 per hour ean1ed by U.S. program-
mers. O!Ji\er reasons include the availabilin; of a highly skilled an.d m.otivated
workforce. Both ln.dia and Ch.irw. have high numbers of engineering a:nd science
g-iaduates. China graduates about four times as many engineers as the United
States, although they are not all trained at the same level as U.S. engineers.123
Japan 51Taduates tvvice as rnany engineers and South Korea graduates :nearly ~i
'Jlt,
as many engineers as the United States. Each year, fodia grnduates 2 million
English-speakhlg students wJ.th strong teclmical and quantitative skUJs.121 Also,
sldlled tedmical workers ofl:en have difficulties obtaining work visas. Currently1
only 65,000 H--lB visas for persons in highly skilled and tedmical occupations
are avaHabk each year. finally~ cheap global telecommunications costs allow
compaxlies with engineers 6,000 1nUes away to complete design 'w ork and inter-
act with. other engineers as if they were located in the office down the hall.
The largest number of H -1B visas are issued for computer-related occupa-
tions (4'.J<Yo). U.S.-based Microsoft and Cisco Systems are two of the top 10 com-
panj_es using H-lB visas but most are used by Indian companies such as Infosys
Tedmologies and Wipro lJ:d .125
Although compaxlies rnay be attwcted to offshoring because of potential
IR~ffi~M'.lff'ifill~ lower labor costs, r~shm.'i\Jmg is becoming more common. There are several rea-
Moving jobs from over- sons for this, including concerns about the level o:f service customers receive
seas to the U.S. froxn overs<~as operations, demoralizing effects on U.S. employees, potential
negative affects of offsho:dng on the company's ·public image, i:he need for
e1np!oyees to be located dose to business partners, and rising wages overseas
(e.g., China).J.26 For example, DeU opened a call center in Twin Falls Ida.ho, after
1

dosjng one in India because of customer complamts. K'Nex Brands has moved
the production of its plastic building toys back to Hatfield, Pennsylvania1 from
subcontractors in China.127 l('Nex believes that moving production closer to the
U.S. retail market can help it deliver popular toys quickly to the marlket and
pl'ovide greater control over quality and materials, which is an important safety
issue. Also, wages and transportation costs are increasing in China, reduch1g
cost advantages of producil1g there.
 Maurice Taylor is chairman and
CEO of Titan International ,
which was considering buy-
ing a tire factory in northern
France. He is known for his no·-
nonsense management style.
Titan wanted to buy an unprofit·
e><amplr:!, he pointed out that
the French workforce gets paid
high. wages but works only three
hours a day. The other hours are
spent on lunch, breaks, and dis-
cussion among employees. In
the letter he went on to suggest
related to layoffs, and
limit the time employees can
appeal layoff decisions.
Will France lose all of its
industrial business as claimed
by Taylor? In response to
Taylor's letter, Frano-) Industry

~'~''1 .
able factory p ut up fo r sale by
Goodyear Tina &. Hubber. But
it decided to pul l out of nego-
;!L - tiations for the factory when
·union employees \l\lould not
'Nork longer hours t o save jobs.
th at France was not a competi-
tive country fo1- U.S. investment
and state d that Titan was going
to purcha se a Chinese or Indian
tire factory, pay less than one
eum per hour vvages (less than
Minister Arnaud Montebourg
responded that France ranks as
one of the leading destinations
for company investment. He
also pointed out that Taylor's
comments were both extreme

,~; ·'
Taylor had visited the factory
several times and offered to
..:.: .•....
keep about half the factory staff
1' ' for tvvo years, but his proposal
was rejected by the union,
which '"1anted t hei r jobs secure
for seven years. In respon se to
his frustration at being unable
to negotiat<~ favorable terms
for the purchase of the factory,
three dollars), and ship all the
tires that France needs without
having to em ploy their workers.
France does have labor laws
that make it <~)<pensive to fire
employees. Recently, recogniz-
ing the potential barrier that
employment regulations pose
to getting fore ign businesses to
locate there, France has moved
and insulting and illustrated his
ignorance of France.
D~SCUSSDOINl QU!lESTnOfi\!1
Should the CEO have insisted
that the French adopt work
hours and rules that were sim ilar
to wh at we have in the U.S.?
Why or Why not? What th ings
could he have done to reach a

3i'r laylor sent a letter t o France's

Industry Minister, who had
to ptJsh employers to try to
agree with unions on more flex-
deal for t he plant that was more
close ly aligned with U.S. work
~;';,;,, requested that Taylor continue ible conditio ns of employment. pol icies and practices?
Jl·t ,~!'.F.::
t o ne9otiate for the plant. His France's President Francois
t~' ;;~r'.:· · ; SOURCE: G. Parussini, "U.S. CEO to France
letter harshly criticized France Hollande's lab()r reform plans How Stupid Do You Think We Are?" Wall

~~' ..
and the union . He stated the:1t
it would be stupid to operate
in a country where workers get
high wages for little work. For
include all owing companies to
reduce employees' hours and
wages in difficult economic
conditi ons, chanqe regulations
Street Journal, February 21, 2013, p. B1 ; E.
Jarry and C. Bremer, "U.S. Tire Executive Calls
French Slackers," The Columbus Dispatch,
February 22, 2013, p. A2.

nu I!ECHNOLOGY CHAU.ff:NGrL:
Technology has reshaped H1e way we play, communicate, plan om· Jives, and
where we work Many compani~w' business models include e-conunerce which
allmNs consumers to purchase products .and services online. 'D1e futemet is a
global collection of computer networks that allows users to exchange data and
information. Americans' use of the Internet has doubled over the last five years
with 48% reporting using the Intern.et more thru.1 one hour per day. Sixty percent
visit Google during the week and 43% have a Facebook page.128 Using Facebook,
TvviHe1~ LinkedJn, an.cl oi!:her social nelwo:d<:n1g tools available on the Inte1net

49
 ....

SO CMA?TlEIR 1 Human l\esource Mana~y:o-mcnt: (-ic. ining a Competitive Advantage

a~~.c>-::s~;ed J:hmugh iFhonrc::·r Btackberr.i.e~>, or personal computers, companies can

conned with job candidate~.:> and employers can connect w:ith friends, family,
and co- wo r.kers. 0

Sod~ri tt\!e11~.M t\JJr~irrn~1

il.O 'w-!5i
Identify how new tech-
nology, s1Jch as social
networking, is influenc-
ing human resource
rn;;m agernent.
:Stt.l>d<.'l~ li\l!C't1M©>lfi{ulill~J
Websites and biogs
that faci litate interac-
tions between people.
Advances in sophishcated teclu-i.ology alo:ng with reduced costs for Ht€ tedmol-
ogy are changing nw.ny a[:;prccts o{ hu.man resotffce management. Teclmologi-
cal advances 1n ele\.~tronics a.nd co:rmnunications software have made possible
m obile t~x:hnology ;3vcb as p~:r3onal digital assistants (PDAs), Wads,. .and iPods
and 12.i\rJianced thi:..: Internci: UJ.rough developing enhanced capability . for social
networking. S(lldP..\]_1i_1l/t:~:<:<;·1mrlkirci\g xefers to websites such as Facebook, Twitter,
and U:n_kedfo, Wikis, .\l'nd_hlogs that facilitate interactions between people usu-
aUy arouJ.1d shar<:.<l intereshs. Ta.bk~ 1.13 shows some of the potential issues i:hal: l
can he addressed by using social networkit"'lg.m Jn general, social nehvorking
facilitates con:untilrdcaJio:ns, d€centralized decision making, and coUabornti.on.
Social ne!:tNorking c;,111 be Utjeful for conr1echng to customers and valuable for
busy em_p loyees to share knowledge m1_d ideas with the:U: peers and rrwrnage:rs
with whmn they may not h.~ve much lime to h1teract face-to-face on a <la.Hy basis. ll
Employees, espedaHy young workers from the Millennial or Gen-Y generations ' lilt,
have learned to use social n etwodd.ilg tools such as Facebook thxoughoul theiT
livlf:s and see theni. as valuable tools for both theix work and nonwork hves. The
"CompeOng through Technology" box shows how companies are using social
n etworking for 1-IIZ prad]ces indudjng recruiting, training and development,
scheduling, and rneasvrh1g employee attiru_des.
Despite Hs potential advantages, rn.ru1y co1x1panies are uncertain as to whefJ1er
they should embrace social n·etworking.J30 They fear that social netvvorldJJ_g will
result in employees wasting time or offending or harassing their co-1Norkers.
Or11er co1npaii.1.ies believe that the benefits of u sing social netvvorking for HR

'ffliflfblU~ 1l "113
Potentia l Uses of
Social i\!etworking
l ·(J. ,:,:· o·.l' c•x1·""'
-· ,.):"J . ~·I '1't l)' 1·1rJ·. w1Pt'i~("•d111-~
J <::; ~I ,. - , ._,. l'o
_~ _·;}·_,.
... . - ,

retii"E:i'n(~ITt

· . , i$!1;i:ir&1!~.Qe~/e r~ ff?r::rc2r·nqr1t·
Identify ;)nd prorTWtE~ ernployee

SOURCES: Based on P. Brotherson, "Social Networks Enhance Emp loyee Learn ing," T + D, April 20 11, pp. 18-19;
T. 13ingham and M. Co nnm, The New Social Leaming (Ale;;and ria, VA: American Society for Training &
Develop me nt, 2010); M. De n1en, "SociiJI f\ietwork ing: A Frame fm Develop ment," T + D, Ju ly 2009, pp. 58--63;
M. Wein stein , "Are Yo u Linke d In?" Traiu.ing; Septembe r/ Octo ber, 201 0, pp. 30-33.
 Social networks such as
1 Facebook and TiNitter help
i
i people satisfy their need to be
connected to their friends. Rec-
, ognizing this importance of "con-
I
ined:iveness," companies of all
! sizes and in various industries are
j using social networks not only for
I a marketing platform, interacting
j
with existing and potential cus-
j tomers, but to enhance many d if-
I
.!
'
ferent HR pracl:ices. Examples of
thedsed inclu de: recruiti~gd, training
an eve 1opment, scne · u1ing,
I
j
I
alongside enhancing employees'
engagement. Recruiters can use
j
social networking to connect and
I communicate with job candi-
dates, create online communities
! for job candidates to learn about
jthe company, and monitor nevvs
I such as store closings or layoffs,
! which can provide a potential
( group of new employees.
I An example of this is shown
l'.
1
within t he company Albert
Heijn, a supermarket chain ,
! founded in Oostzaan, Nether-
j lands. The cha in uses Twitter to
l post r.inswers to complaints and
! to reach out to customers for
11 ·1cjeas concerning
· d l
new pro · uc:s
! and improvements. Staff plan-
j ning agtnt Randstad
I its ernp oyee engagement anc
I provides scheduling through the
I use of an app, vvhich is used to
! ch ·- I .I ·_
I ·> ow _its e~p oyees t 1~11 _sen~~ -
ule, Vdcanc1es and contacts wi th
I 1•11"!"'"'"""·"'11•.~r;11,;,·:m1,(iol!f<!n<1,~:11tt;1:1,,,11r1,;~111>!1•<',~•lr.rt:11r1!(:•1Ni~J111.~.;,~~<:11".'rri."'l1''!"'!'~'r.1'f:::;.~fi•'."":"~r".~i•!:'."~·,.-;1,;!!-$i;::~f'li/$.'!"i".~""-""'i"".':"'~·•!i'6-~;:s.-,;;.,_~-:,;,-,; : :,-, ;._., ,;,~~~-,,,~~~~~.,_~~~-~··••<:!f:zl;:;;:>;;-:"1.~~~~., , ,.::h-~~~~-l:l$=!.~l,~;::=.~"=::~~l
- .,-;/;11mr.
practices and allowin.g employees to access social nenl\Torks at work outweigh
·the risks. 1bey trust employees to use soc~al networking productively and are
proactive in developing policies about personal u se and training employees
about privacy settings and social nelwo:di;: etiquette. They :realize that employ-
ees 1Nill likely ch.eek their Twitter, Facebook, or Linkedln accounts but ignore it
locations. The highly acclaimed
Michelin star restaurant Beluga
in Maastricht, Netherlands addi-
tionally uses "connectiveness"
by quickly creating a schedu le
for its guests; this is then posted
to a website and t he schedule is
automatically sent out.
Senrers can also make
employee schedule changes
and the system which performs
this operation can track hours
to ensure t hat colledagues do
not exceec1a 11owe overtime
work hours. Mortgage brokers
o n the other hand provide an
internal social networking site
for real estate agents to seek
he lp and discuss. issues such as
how to deal with a specific bank
to secure finaqci ng, trends in
the current rea l estate market,
and the best way to handle
properties sold for less than the
amount owed on the mortgage
to avoid foreclosure (short sales).
Deloitte, a professional ser-
vices network wh ich provides
audit, tax, co1isult ing, enterprise
risk and financial advisory ser-
vices, uses social networking.
t I
· oo s to tram emp oyees to sup-
· I
port new products a nd devices.
enhance~ Biogs, forhum s, and lea ming co m-
munities e 1p insure t1at1 emp 1oy-
ees are ready to p articipate in
customer projects effectively,
I D I " / j..f
P.
en~~~.~ e o'.~e s wor '- 1 or~~· an
fac1lttat.e pee1 -to-peer lea1 ning.
Biogs make avail-
able information
and updates on wireless
devices, FAQs (frequently asked
questions), how-to videos, and
troubleshooting tips.
Within many organizations,
forums enable-employees to
learn from peers and product
manufacturers. Employees can I
ask questions, share issues, ~
post tips, make suggestions,
a nddadccess prod uct expe.rts.
1n a ition to t 11ese too 1s,
I
I
l
employees sometimes have
access to 'My Network', a iI
device used for collaborating
with their peers, sharing know!-
edge and documents, and
i.
~
creating working groups. Some I
instructors also use it for post- I
ing supplemental content for I
learners' use. I
,
DISCUSSION Q.QJJ!l;~~Oft\~ i
What are some of the p otential
disadvantages of using social
networks or microblogs such as
Twitter for HR practices?
SOURCES: Rim.:ebos, P. (2013). Socia le
media maken strijd tegen grate org anisa-
ties eerlijker. Elsevier. www.e lsevie r.ni/Tech/
blogs;201318150 ciale-me dia-make n-strijd- ,
tegen-machtige-organisaties-eerlijker- I
~;~i~~!:~:0::a;:,~ ~l~u~~~~,1 ~)1g;~i;1~ ,:.~f·!
Jumbo. www.t eamnijhuis. ni/vakpraat/tn-facts/ ~
social-media-facts-over-albert-heijn- c1000-
en-Jd·um bo-t~fact; Blodmd, R (2h0 11J. Hoe social
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51
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52 CHAPTER 1l Human Resource Management: Gaining a Competit ive Advantage

u11.less productivity is decreasing. fa some 1111ays, social networking has become

l:he electronic substitute for daydrea.1ning at one's desk or walking to the break
room to socialize with co-workers!
Robotics, tracking systems, radio frequency identification, a11d nanoteclmol-
ogy are transforming work.131 1ed1110J.ogy has also m ade it easier to monitor
env:i.ronmental. conditions and employees and operate equipment. A Japanese
conunerd.al fann, Shinpuku SeHrn, relies on computer readings from. monitors
placed out in iJ1e fields which report temperahll'e, soil, and moisture levels to the
farmers. m Con'lputer analysis of these data alerts farmers when to start planting
o.r identifies specific crops that may grow best in eaffi field. Farm workers can
also use their mobile phones lo take pictures of potential diseased or infected
crops which are uploaded to the computer for diagnosis by crop experts. The
workers' phones also include a global positioning system, allowing the com- f' j
pany to deterrrune if workers are taking the m.ost efficient routes between fields .it
or slacking: off on the job. To understand 1Nhether personal interactions b etween
employees made a difference, Bank of America asked call center employees to
wear badges that contained sensors to record t.heir movements and tone of thefr
conve:rsations.133 The data showed that the most productive employees belonged
f:o cohesive teams and they spoke frequently to their peers. To get employees to
interact more the bank sd1eduled employees for group breaks. As a result pro-
ductivity :iJ.i.c.reased more than 10%.
I
I•
'n.;l'I
.... \1

Use «Jf Hms. Cfo[!Jld Comp~ting, am!l HR Dashboards

Cumpanies continue lo use hmnan resource information systems to store large
quantities of employee data including personal information, training records,
skJlls, cornpensalion rates, absence records, and benefits usages and costs. A
11!1.
IHlMmm1 RiHO>Mrce lmmmll ::r~stlllurce infol\.l\Iil~fo))lll\ sy5tem fHJRIS) is a computer system u sed to ''
nITTfotmi'ltkm Sy10tem acquixe, store, xetrieve, and dish'i.bute information related to a company's h.11man
(HR!S) resources. D 4 An HRIS can support sh'ategic decision making, help the company -
A system used to avoid lmNsU.i.ts, provide data for evaluating policies and program.s, and sup-
acquire, store, manipu-
late, analyze, retrieve,
port day-to-day I-IR <ledsio:ns. Florida Power /Jr. Light Company, based in Jnno
and disi;ribute /-IR Beach, Flodda, uses HRJS applications to provide information to employees
information . and to support decision making by managers. More than 10,000 employees in
20 states can use the information system to learn about their benefits. Managers
use the system to lTack eni.ployees' vacation and sick days and to make changes
ii1 staffing and pay. UsiJ"'lg the HfilS, managers can request the HRIS system to
automatically prepare a personnel report; t11ey no longer have to contact the I-ffi
department to request one.135
Today, most companies mAm their own software :md hru:dware <md keep
H1ein onsit.e in their facilities. Howeve:t~ cloud computing" allows companies
/1

to lease software and hardware and employees don't even know the location of
computers, databases, a.r1.d applications they are using (tl1ey are in the "cloud").
C~ol\lld Computing Cfoud (:ompu.Hng refers to a computing system that provides hi.formation
A computing system technology :iJ.1.frastructure over a netw ork in a self-service, modifiable, and on-
that p1011ides infor- demand model. 136 Clouds can be delivered. on-demand via the Internet (public
mation technology
cloud) or reshi.cted to .use by a :single company (private cloud). Cloud comput-
infrastructure over
a networlc in a self- ing gives con1panies and th.eir employees access to applications and :information
senrice, modifiable, from smart phones and tablets rather than relying soley on personal computers.
and on-demand m ode l. It also allows groups to •Noxk toge1J1er h1 new ways, can make employees more

-- -----
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'-mi;:;: '
\
productiV4~ by aJJowing them tr_~ :nnore easily share docun1ents a_nd inforrnal:ion,
~i;: : · and provides greater acce~>rJ tu large;:" con11xmy databases. TI1is means that tools
for conducting workforce analytics using nidrics on h.irnover, absenteeiiem, and
; tit'.~.
performance and soda] In,2dia and coU8bo:ration tools such as Twitte1~ blog;:_;,
Google docrnnents, and YouTube 1ridcos 'NiJl be ni.ore eas:Uy accessible and
available for use. Cloud (:ornpui:in-g abo c.1n ;11ak.;:; it easier for employee:::> to
access training prognuns ~r<:HTl <1 variety of vend.ors and educational instJ.tuti.ons-
More sophisticated syste:i:ns r.:'xtend rnailMgen.·1,,,;nt applications to decision
making in areas sudl as cornpcnsation and perfon:n;::incf: rnf.!Jiag~:rnent. J\1anag-
ern can schedule job interviciN~'> or perfon::na:no:' apprnisa.ls, guidi~d by the syr-; -
tem. to provide t:he n<!cer.;:>a:ry inl.o.rruahon and foUmN every :-ih::p c;:illed for by
the procedure.137 One of the n:ioc;t i_111porta:n1: uses of Intcrnd: tedmology is the
development of HR dashboard~:.: ..An HR dZ1sR1hilJl.?ilird is a series of indicators or ~-m !!);21sihir.:cGr:1rd
11-=>ve ·-cc <'<:; , '1-0 nn tho l'Oll''l-:>?'11Y 1'1·1~:r"'.'1Pi::
1.'r'e;·1·~c"'
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._ 1-_oJu . --'·" -.:>,,~ -·-·~! .-.i.J. _ • l.~<-lil. HP m0tric(; suc!i as pro-
(/ui::r;,.}i;'·y ::H1d ab s<~tTi:ee ­
OJl' human resource infor.mahon ~::y:->i:em. The I-H?, dashboard prc)vidcs accer:>s to
isrn ti 1,.·;-r ;.r r;~ accessible
important HR n:tetriG;; fm: conduding 1,1\rorkforoe anaJyt.ics. I-IR dashboards are by .-0n·ir· f::'J_v""·Y~S .oru-1
important for detern1]111ing the value o_f 1cU~ practices and hov.r they contribute ko nwna~.w1-s i·hrough the
business goals. As a result, the 1JBe of dashboardr3 is critical for evidence-based cOl1\0~H'1y in1.;·.anet or
HR discussed earlier in the chapter. For example, Cisco System.s views building hurnan r.,:source infor-
t11ation :::y!;f:r~?rn.
talenl: as a priority : :; o it ha:'; added l:o its dashboard of people measu:res a rnetric
to track huw many peopJ<:: n1ove and the reasons ·why_1 3n This alJ.01.vs Ci~;co to
identify divisions that are devekJping ne-v-.r talent.

1
HngNl !Perfonrfilau-n(e M~Um·n\ '.S]lS'it~~inm:s r.11rn:Jl. Vnra:Mail l<ea1r1111:s
New tedmolor:,7 causes changes in skill reqltirements and work roles and
often results in redesigning 'll\rmk structures (e.g., u.si·ng work teai:ns).139 High-- rr·;ia~?JUrl·-.:PGirK~~\Fffili-Uafi11ti::C3.'
piet'Jfoirm~.nce w@irk sys~~ms in.:-vcur.ize thd:~ fit between the company's social sys- 'fHpr~1~ :S:~f5'\t 12HiB1~
tem (ernployees) and its lec_h.11.-i:ical syster.n.14° For example·, computer-ix1.tegrated \!Vorf:: sys~·c·.rTJs that
Fnaxjrn.iz:e the {;[·
manufacturing uses robot3 and cornpuJers to automate the manufad1Jiing
b.-0·DN~~'.::}f1 1~-l-1.r:} cornp:a-
process. The cffmputer aHo-vvs the production of diffen~nt products simply by ny:-; ~;o cial syste1n and
reprogramming the compn~:er. /\;_,,a result . Iabore1~ :material handle1~ operator/ technic.:il .':}'si:(;~'n1
assemble!.~ and m.aintenanc1C jobs rnay be 1ne:rr~ed into ori.ir:: porsihon. Comput:er··
iniegrated manufacturi:nt; requi:;·cs employees to Inonitor equipment and h·ou-
·b· 1<""1100- i. jJ.1·ol).l011T1
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employees, and understand the relnlion0hips beh111een an components of the biscu:;;s hurn;:in
manufadm·ing proces~;.M 1 Connider ihc changes Canon hw., knovm for office restJurce in;:1n;;1gen1ent

imaging, cornpul:er peripherals,. and carne.nrn, has made to speed up the ch":vel-- practice:; tl1r)1: support
high-perfornHnce work
op1nent and production p-roo:::ss. M2 Canon is ur:>ing a procedure called concur- s y$t('-? rT1!;.
rent engiJwedng, where production u:>:nghH.01c:: rr:J wo:r.k together with designers.
'TI1is allows thern to more ca.sily cxch<inge ideas l:o improve a product or make
it easier l:o inanufadure. Ca.non also nmA.r has prnduchon employees ·1Nork in
"cells," "Where they perfo:nn nmH·iplr.; i:nsks and can more easily improve the pro- T<o-i110:; iha t -1r19
duction process. Prcviouniy, 1:;1nployeef; wmd{:ed in <in. a~:;:3embly fo1e conb:olled Sf~·1:.1arored L1y tin-1e,
by a conveyor belt. The ne"w c[;;ll. r~ysbern requires lower parts inventory r.md less geo!.?raphic c.1i:;tan ce,
space, cutting factory op<":;rai:ing UI1.d real estate costs. Also, employees are more culture and/or orga-
satisfied working in cells b1ccau~;e the·11r feel 1non~ resnonsibilih,7 for foeir work. ni:rntional boundaries
• .ll •
arid rely e:<ciu::;ively on
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one or In.ore ot11er como:=1ni•~i~- J
VQK'/,:n]r.'1.7'. i:e<1o:r~:.>..... refer to h:\1n1~1 that are senarated ~
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interad and comple;:·e llif!ir projed3, VfrtuaJ tean1s can be formed witllin one com-
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imi i tog~:: 1J:1er th e neo=:mwry talent cornpkl:e a projt~d or speed the delivery of to •'·
a product to lhe rna d,:<::fpL.i -::1:'. Pr.i.1:ewah:dlo•.t~c·l.::Coopers's learning and education
depaTIJ:nenl: ha.::; 190 ·e inp lnyce::s v'fho a.re loca h:cl in 70 offices h1 different cilie~.143 j .

These ernpJoyee::> 1Nor J;. iq':dhcr on virtual team;:; that range in size from 5 to 50
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. . ·i ',, . •... · 1 ·' 1 .·<., i·· 1 " ' q ,,..\I (' 'l 'P<' i.1 '-' .j , JJ,· 1 ok•r""el fu . ,, p 1·fot•·,,..an 'e
uJ.11..EJ ..,1.d.•..u. :u11.:11H.:1.:i..•. u c"'"" .,c ~ ... .. ::./ ,.a1, . s.c. ·=· u.1.. _ . 1r ··'· J"' 1. v1 ... _ 1
.L.: . ,. . .• • ' eu. ""·-- ..1..u. c:: 0

and cornpany per.fonn;_:i.no,~. -

In high pe]·fl;)rmm1ce work systerns, previously established boundades between
n1anager~:; and ernployees,. ei:nployees a11d custon1ers, employees and vendors,
... .<..·j.. 'Ji.
;111 C• .• -..., .f1n1r"·"-'t'
•..• .-.10 ··11''l_J.O"S' " ·1M . , ,1·.1·l'1 __ 1..·J.,.l L'·]··1·'- "' rr.) ._ , 1.11··J J <LI. '-'"·1v ) ;->w-' "·'1"~u. ·1donecl - • Em1Jloy •1.:. es r inan-
0 1 0
. ·' ·' "-.. Ltu. "- ·-''··- oi.L .. . .
1
;10-
... b P ''- J.''. : TF'·'·· 1<·~.4. o·J~Vr
1~1 1. "'- ·'- . ···r·· c1 0
·- - 1·i.J ·te"'"' ,JJl.A~- '"'~r--
-v.- l~/ ·1 n ,. . •Ji. ....,Jj'-.·
·. :' ~:l-J.l1Pr~
{ .. U.•,.l __ -~ --0 'fl\T<'r1· . toaefl1°1· to 11 J •. .J. ., . .' nprove serv1·ce and
/.:)- '!V. , • ,. •

p roduct quaHty and l:o create new products and se1vices. Line employees are
h'ain ed tn rnultiple jobs, conmlUJ.1.i.cate direci:ly w ith suppliers and customers, and
h1teracl: frequently 11\ritb enginieer:s, c1uabJ:y experts, m1d e1np loye€S from. other
func tions.
1 ·1:,' 1 ''''"i ..J,. c·· .,,, ·,rv 'Jlo j\' ·f· 'ls r~
,.-)
, n e OI( 1•.-]· .. le .. JOOS
. t ···'· C'
,.1x y
·01Ul.12.t8J Al":::Cu..c ,;, ..:1I-..e.. 1.tl • .,._ -111 01.
Y"
ac ili'ty m . F''112>dm.on1., . J.
South (~;n·ohna, involves ~using ;:i computer-controlled machine to bu1n small
 ...
CHAPTIE!R 'n Human Resou rce Management: Gaining a Competitive Advantage 55

. . . :''~ 1failb>R® 1"1MJ.

StafH.n g n t:rnpk:'.v.::ces particip2:ite in se k~ cli1·1'.::1 new employees, e.g., peer How HRM Practices
interview·>. Support High-
Performance Work
Systems

Trainin9 " C1n9oinc1 i:r-aininq crnpl1:3sizr:x:J ancl rewarded.

,, Traini11~~i in finance and quality contro l methods.

" Ernploy•"!CS n::~cei"''~ perforrnance and an::' actively

Mana9oment involved in the perfonn ance irnprovement process.
··:;· ..;:··. .._..," ... r,·... . .

SOURCl::S: Bas0cl on I(. Birdi, C. Clem" M. f'::rlle r:;on, A. Robi1Y;on, C. Stride, T. Wall, and S. Wood, "The Impact of
Human Resource and OpEffationa l Management Practices on Cornpnny l'md uc:tivit.y: /I, Longitudinal Study," Person-
nel Psychology 61(2008), pp. 467.. -~;01; /\. ladnr;itos, J. Barling, and R. Iverson, "l-li9h Performance Work Systems
and Occupational Safety," .Journ;i/ of Applied i,sycholouy 90 (20('5), pp. 77-93; S. Way, "High Perfo rmance Work
Systems and Intermediate lnciicai:ors o-f l'r,irforrmnce li'!ithin the LI .S. Sma ll Busines5 Sector," Journal of Manage-
rnent 28 (2002), pp. l{,5-8 5; M.A. Huselid, "The Impact of Human Resource Management Practices on Turnover,
F'roductivity, :md Corpnrnte Financial f-'ed'o rn-,;:1nc" ," Academy of Mzna9ement Journa l 33 (1995), pp. 635-72.

cooling holes in 3-:inch iong turbine blades for jet engines.143 Most of the holes in
each blade are thinner Hl<Ul a human hair! Employees are responsible for choos-
ing who gets hired. They tntenriew job candidates and observe tli.em in "games"
that involve working in n tem:n to build a helicopter from blocks. Employee
teams can adjust the hne operation to remove bottlenecks and n1aximize pro-
ductivity. For example, a h~a:rn idenJHied .o_ way lo increase the speed of washing
turbine blades. The plant leader aHowred the temtn to buy equipment to wash the
blades based on. their rcconunendati.ons.
Consider how human riesouxce :m anage:ment practices support the high.-
performance work sysl:ern at l:l1e Global Engineering Manufacturing Alliance
(GEMA) plant in Dundee, Michigan.1 49 GEMA is a wholly ovvned subsidiary
of Chrysler LLC/Fiat. The plant is more .automated and employs fewer work-
ers than most engine pfo.nts 275 compared 1Nith 600 to 2,000 employees at
1

other engine plants. The goal of the plan~: is to be the xnost productive engine
plant in the world. The U!-\VV endorsed the high-performance workplace
because it recognized J:hat l:h'.!;~ corn.pany needs J:o be competitive to avoid los-
. JO
mg . b s. Chr
_ .y l er G roup 'cU._
.. ,..., vv1'l' . · li"!
..1. Jnves1; ;· rm· 1·1_ion
·J)_. 70 · to .l aunc l1 pro d uchon
.
of a fuel-efficient engim; .fo:r fri.e f\Tori:h Arn e:ri.can n1arkei: that vvill be built a-~
1

GEMA. The implications of this lA.Tod; sysl:ern for labor relations is discussed
in Chapter 14.

56 CHAPTER 1 Hum an Resou re<-} Management Gaining a Competitive Advantage
fi,O 'il"7'
Provide a brief descrip-
tion of hu rna11 resource
management practices.
...
The p lant's hourly employees rol:ai:e jobs and shifts, increasing the company's
flexibilily. TI1e plant's C1..dtuxe emphasizes problem solving and that anyone can
d o anytlUng, a.nyti:rw~, anr1\rh ere. Everyone has tl1e same title: team member or
team leader. By rntatin.g jobs tll.e plant wants to keep workers motivated in their
work and avoid :injtll'ies. Team leaders <md engineers don't stay in their offices;
they are expeded l:o vrnrk on H1e shop floor as part of six-person teams. Con-
tractors are also seen as par t of the team., worbn g alongside assembly workers
and engineers and wearing th e same uniforms. Most auto plants have a day
and night shift with senior workers usuaUy choosing to work the day shift. At
GEMA, employees rotate shifts hi. crews of Huee, working 10 hours per day,
fom days p er week, aHe:r.nating befween days and :nights. Every tlwd ·w-eek of
their rotation IJ1ey get five d ays off in addition to any vacation time. Coun.5eJ.ffig
is availabk~ to h.elp employees adjust to the rotating work schedule. TI1e work
sched ule aUows the plant to be in operation 21 h ours per day, 6 days per week,
294 days a year. JBut employees 1Nork only 196 days a year. The alternating shHts
also help employees to know and work with each other and salaried employees,
who work only du.ring dayfune.
'fo hixe employees who could work h1 a team envirnnment emphasizing
problem solving and .flexibil-Hy, GEMA recruited using local newspapers witlun
70 nUles of Dundee. GEMA worked wilb local civil .lights organizations to
.find d iverse candidates. N onexempt employees whose wages start at $21 and
increase to $30 withiJ1. five yearn must have a two-year technical degree, a skilled
journeyman's card, or five years' experience in advanced machining.
Job candJdates have to nrnke it th.rough a difficult screening process that
takes 12 hours. The process requires candidates to take tests, participate jn team
aclivilies in whid1 they coniron t challenges fadng the plant (e.g., process u1the
plant is inefficient), and inJerviews with operations managers and team leaders.
'VI/hen tlu~ plant is ahead of its p roduction schedule employees receive training
hi. class and o:n. the shop :floor in topics such. as how to assemble an engine to
math skills.
GEMA gives ernployees access to tedmology that helps them monitor pro-
ductivity. Large electronic screens hanging fa:om the plant ceiling provide
alerts of any mach.i11ery p arts that are ending th.eir life span and need to be
rep laced before they malfunction. A performance management system avail-
ab le on personal computers, as well as a display board, alerts employees to
d elays or breakdovvns in p roductivity. This is different from most engjne
plants where only managers h ave access lo ilus information. The technol-
ogy empowers all employees to fix problems, not just managers or engineers.
GEMA provides rewards an.d bonuses for employees who d evelop imi.ovative
p roblem solufi:ion5. · ·
~ftieet~m1g Comp~t~tmve Cha~~~nges
t~ lib UD~lf.il rM'l rf.l,"'
m ~rougn ~--i!l1trul\f'f,1 ~1~ ~"a! C tu::e~
Vile have discussed the global, stakeholdert~ nev1T economy, and high-performance
vvork system chaUenges lU.S. companies are fac:img. Vve have emphasized th.aJ
management of hmnan resources plays a critical role i11 determinfo.g compa-
n ies' success in meeting th.ese challenges. HRM practices have not tsaditio:n.-
aUy been seen as providing econonuc value to the company. Econom.iie value is
 ...
CMAf'TH~ 'l Human Resource Management: Gaining a Competitive Advantage 57

usually associated with equipment, technology~ and facilities. Howeve1~ HRJ.\11

practices have been shrn'ir.n to be valuable. Compensation_, staffing, training m1d
development, performance management, a:n.d other tlR.l\1 practices a-re in.vest-
ments that directly affed employees' n1otivatlon and ability to provide products
and services that are valued by custorners. Research has shoVim that companies
that attempt to increase 1J1eir competil:iveness by investing .in new technology
and becoming 1nvolved in the quality move1nent also invest in state-of-the-art
staffing, training, and coimpensation. p:ractices.150 l~igtu-e 1.8 shows examples of
hmnan resource management pradices that help companies deal with the three
challenges. l=lor example, l:o rneel: the sustru11ability challenge, companies need to
identify tlwough their selection processes vvhethe1· prospective employees value
cus tomer Jl'dations a.i.1.d hav~~ a:he levels of :inte1personal.skills necessruy to work
with fellow employees in teaJns. lo :rneet all t:hiee challenges, companies need to
capitalize on the diversity of values, abililies, and .perspectives that employees
bdng lo the workplace"

rFigm'~ 11 .a
E.J<amples of How
HRM Prac tices Can
Help Companies
Meet Competitive
Challenges

]~l-~l_l.n~)lc;~g~/
(;l,;,1lhm9,;;
 ..
58 CHAIPTER 1 Human Resource Management: Gaining a Competitive Advantage ' . I,
·,::
·'A

lfij\9)1\Alf~ 'ft n~J

Major Dimensions
of HRM Practices
Contributing
t o Company
Competitiveness

I-IIUvI practices that help companies deal with the competitive cpallenges can
be grouped into the foux dimrensions shown in Figure 1.9. These di1nensions
include the hun1ai1 resource environment, acquiring and prepa.rjng hu.man
resources, assessment and de.v dopment of hmnan resouTces, and compensati11.g
hmnan resou:rces. In addition, some companies have special issues :related t.o
labo:r-managev.ne:nt relations, inte111ational hmnan resource management, and
managing the human resouxce funchon.

M~ma~JRITTlg th~ HllJ!maan RteSiQ>IUlu·ce t1111virnll]me11t

1\'1anagjng internal and external envi.rorunental factors allows employees to
make the greatest possible conb:ibution to company productivity and competi-
tiveness. Creating a positive enviromnent for human resouxces involves
"' Linkhl.g HRM practices to the company's business objectives-that is, sb:ate-
gic hm.nan resow:ce management.
'!I Ensuring l11at I-IRM practices comply with :federal, state, and local laws.
1' Designing work that motivates and satisfies the employee as well as maxi-

mizes customer service, quality, and produ.ctiviiy.

t\(qMh'ijITTlg and! P'rnpllrJllfRITTig IHlumairni 1Re:,;01tmcie:s;

Cust.ome:r needs for ne~N products or services influence the munber and .type
of ernployees businesses need to be successful. Terminations, promotions, and
Jl'elil:ements also influence human resource requirements. Managers need to
predict the number and type of employees who axe needed to meet customer
demands for products and services. Managers must also identify cuxren,t or
potential employees v•1ho can successfully deliver products and services. Ui.is ·1·,l~iH'i
.\
area of human resomce management deals with I

<!\ Identifying human resouxce requ.i.reinents-that is, human resouxce plan-

nh1gr rec1uiling employees, and selecting employees.
ro Training employees to have the skiUs needed to perform. their jobs.

A:sse:>smeB-nt Qind Oeve~opm~irut of Ht1.mmin ~esources

Managers need to ensure that employees have the necessary skills to perform
currenil: and future jobs. As we discussed eaxlier, because of new technology rui.d
the quality movement, m any com.panies are redesigning work so that it iB per-
formed by teams. As s. result, managers an.d employees may need to develop
new skills to succeed in ~a rerun enviromnent.. Companies need to create a work . .
t .
 CMAIP'TER 'i Human Resource Management: Gaining a Competitive Advantage !5'9

environment that supports employees' work 1md nonwork activities. This area
of human reso1u-ce management addresses
" Measuring employees' performance-
(; Preparnl.g employees for future work roles m1d identih;ing employees' work
interests, goals, values, and other career issues.
~ Creating an employment relationship and ·work environment that benefits
both the company and tl1e employee.

Compa.msatBng Ha.um.arm Resmuc®$

Besides interesting work, pay and benefits are the most :important :incentives
that companies can offer employees in exchange for contributing to produc-
tivity, quality, and customer senrice. Also, pay and benefits are used to reward
employees' membership m the company and auract new employees. The posi-
tive influence of new work designs, new teclmology, and the quality movement
on productivity can be damaged if employees are not satisfied with the level of
pay and benefits or believe pay and benefits are unfairly distributed. This area
of human resom·ce management :includes
~ Creating pay systems.
o Rewarding employee contributions.
11' Providing employees with benefits.

Spedal ~ssues
In some companies, employees are represented by a labor union. Managing
human resources in a union enviromnent requires knowledge of specific laws,
contract administration, and the collective bargaining process.
Many companies are globally expanding their business through joint ven-
tures, mergers, acquisitions, and establishing new operations. Successful global
expansion depends on the extent to whidi HRl\A practices are aligned with cul- .
tural factors as well as rnanagement of employees sent to work in another coun-·
try. Hwnan resource rnaJ.1agemen.t practices must contribute to organizational
effectiveness.
Human resource management: practices of both managers and .the human
resource function must be aligned and contribute to the company's sfrategic
goals. The final chapter of the book explains how t.o effectively integrate human
resource management practices.

Organization o·~: ihi5 Book

- , :·
11le topics in this book are organized according to the four a.Teas of human
resource management and special issues. Table L15 lists the chapters covered
in t:hebook
1h~ content of each chapter is based on academic research and examples of
effective company practices. Each cJlapter includes examples of how the human
resource management practice covered in the chapter helps a company gain a.
cornpeiilive advantage by addressing sustainability, global, and technological
challenges. Also, each chapter includes an example of a company that demon-
strates how HR practices add value (eviqence-based I-:IH.).
 ...
60 CHAPTER 1 Human f\esource Management: Gainin9 ;3 Competitive Advantage

1r<P111JiA~ 1l .15
Ti::>pics Covered in
This Book The Hurnm1 Re'.>OUJ"Ct~ Envimnrnr::mt
2 Strategic Hurnan F:e:.sou 1·cE~ iVlana9ernent ·. . . .
3 The Le9al t:nvironrnent: Equal EmploymentOpp9rtLi11i;ty and S~fet)r
The Analysis .· · · ··

111 . /'.\::>sessment and Developrnent of HFdl/l

8 Pei"fcil'inance fvl2<na9ement
9

V Spo~ial Topics in Hun1;.m fa~source Managerneht

·14 Colledive 13ai}}:JiniN) and Labor i~elations
Managinsi Human Resou rces Globally
Mana <;~ i n~1tr112 HRM Functior1

v
v
v
AS Ml
ASML is trying to preserve its cornpany culture:~ an d its attractiveness in building
knowledge in relation to an increasinq complexity in its technology.
QlUH!;STROH\~S

11. What HR practices do you believe are critical for ASML to maintain the culture
and its attractiveness for retention and ernployn;ient? ·
2" Could ASML re mai n successful v11ithout its current HR practices? Explain.
J. Do you think that ASML's HF~ practices can also help the bottom line at
companies in other industries such as health care, food, or automqtive?
Explain why or why not.
4. ASML is a public company "owned" by its shareholders. What advantages
{or disadvantages) can th is provide for developing ·effective HR practices
compared to a privately held company?

1Thi.s chapter introduced the roles and. activii:ie3 o{
a compm1y's human resource management fu.nc~
tion and. emphasized l:hat effective management
of human resources can conJ.ribute to a company':;
business sl:raJegy and competitive adv.antag£. HR
can be viewed as having tlu:ee product lines: adrn:ixi.·
ist.r<.1.frve services, businr..:c5s partner services, «md
strategic services, To successfully manage human
resources, individuals need personal cred).bility,
b1.1siness knowledge, understanding of the busit1iess
sl:rn.1:<2gy, l:edmolog;y knowledge, and th.e abHHy to
d.eJiver HR services. Hwnan resource management
practices should be evidence-based, !:hat is, based on
data s.hov1ring the relationship between the prifcRke
r~,,

J_l.I!:..,

.... ,
...
CIHAiP'Tlt:~ --~ Hum.::\n Resource Management: Gaining a Competitive Advantage 61

and business outcom.es related '.i:o key cc;.:tnpm1~1 syste:n1:3,. ;1nd implementing social networking and
stakeholde:rs (cuslo1r1e:r:';, shan:-hoi(lii:':r::-, r2n1ph:r';;'i'J2!3-. hunu:u• resource information system.s.
communil:y). ln addition to <::o:nlribvhng tc ;o;, ::om- 111e chapter _o::includes by showing ho•Ar th0 book
p any's busines3 strategy, hu_ni a:n. ri2srnx:ro:: p-ractj_o::r:\ fts organized. TI1e book includes four topical aJ'€as: th.re
are important for hdpin[; ~:ompri.nie:: de;,1J v1j_~:h huJ.nan resource environment (sfTategic f-IRM, legal._,
sl1stainability, globalization, •md t<~chnoJogy chul- analysis and design of work), acquisition and prepm:a-
lenges. The sustainability chaUenges are related to tion of hn1--nan. resources (HR planning and rec.mitmcnt,
the economy, the chc:u.·aderistic;i <ind expectation~} selection, training), assessment and development of
of the labor force, how and Vt'h(~l'·f~ wm·k is don•2, the hun1an resources (performance management,. develop-
value placed on intangible asscls and hmnan c.apit;'J, ment, training), compensation of human resources (pay
and 1neehng stakeholder H(X:dr, (efhkaJ p•·actice:;, structu.r.es, recognizing employee contribulions with
high-quality prod-uclB <.111d s-2r·1rkc::s, :rei urn to '."hr:iri'> pay, benefits), and special topics (coJleC'cive hargffining
holders, and social responsihiJity) . Glob">J chaUeng<:~_; and labor relations, managing hmnan reso1.rrces glob-

~{
include ente.d.ng intenrni:ionul rnarkds, ic-rxu.ni.gr ;:i-- ally, and strategically managing the HR function) ..All
tion, and offshoring. Technology challenges indnd(~-­ ·of the topical areas are important for companies to ck:rJl
; H;,:,. using new technologies lo suppor.t Hc-;1ible :.:tnd vi;_·-- ·with the competitive challenges and contribute to busi-
tual work arrangements, h~gh--perfor.ma:nce •f'ro:rk ness strategy.
~,: ,
? )'. :'.) .:

Competiliveness, 4 Change, 24 Ethics, 43

Human resouxce management Employee E:r1gagement., 25 Sarbanes-Oxley Ad: of 2002, 43
(HRf:v'.l), 5 'Tb.Jent rnanage111.ent, 26 Offshoring, 48
Shared service m.odel, B Alternativ e woi·k a_n :angements, 27 Reshoring, 48
Self-service, 8 Balanced scorecard, 2.9 Social networking, .50
Outsourcing, B Total quality mmiagement Human resource infonnation
Evidence-based HR, 11 (TQ lVf), Tl system (I-IRIS), 52
f.--IR or workforce analytics, U Ivlakohn Tia1dsige National Cloud computing. 52
Sustainability; 16 Qu.i:1lity /\ward.- 33 HR dashboard, 53
St:a_kehoklern, 16 ISi) 9000:2000, .13 High-performance work
Intangible asset5, 22 5_br Sigrroa l)ftJC{::8~3 .. 35 systems, 53
Knowledge work0rs, 23 L1::;an thinking, 35 Virtual teruns, 53
Empowering, 23 Ini:ernal labor force, 37
Learning organization, 23 External labor .m arket, :37

1. Traditionally, humm1. resource inanagi:;menf: prac-
lices were developed and adrn.inisl.1?red by the com-
pany's human resource deparbnent lVIami{;ers BT·'~
now playing a major role in devdopL.-.g and imple-
menting HRM practices. V\!hy do you think non-HF
managers are becoming more in>rolved in develop-
ing and implernenl:ing HRM practices'?
2. Staffing, h'aining, compensation, ;:;nd }X'TtmrnanG~
rnanagement are importmlc: HRTvi hmctionb. HrnA'
can each of these functi.onro help <~01np<i.i1_ir,,,s :;uc--
ceed in meeting the gli)lKd drnll.<:-:nge, the cfo:iHe:ng,2
of using new !:ed:mology, and lfo:: su~:t.airn1bi1i.ty
cha JJenge? ~.
3. \/ln:i.at are :intangible assets? How 8..-re they iuflu-
enced by human resource management practices?
fl_ What is "evidence-based I--IB"? VVhy rrught an ElJ7,.
department resist becoming evidence-based?
5. VI/hat types of workforce analytics would you cal-
led arid analyze to understand why an employer
was experiencing a high turnover rate?
6. 1Nhkh HR practices can benefit by the use of soc.i.al
colfaboralion tools like T-witter and Facebook? Iden-
tify the FIR practices and explain the benefits gained.
7. Do you agree witl1 the statement "Employee engae;e--
rnent is something companies should be concerned
::i.bout onJ.y if they are making money"? Explain.
 ...

62 CHA PTER '! Human !'(~ source Management: Gaining a Competitive Advantage

n. 'Jhi.s book <:overs fow· huma n resource management

pracb.ce areas: m.anaging the human resource envi.-
10.1.1mtcnt, acquiJ:jng and p1-ep;;ir:ing human res0111.-:es,
u.s;;cssn:H::nt and devdopn1ent o{ human X"esouxces,
;J.nd conlpensahng human resources. Vl/hich 3Tea do
yoll believe conl:r.ibvtes m.osl: to helping a crn.npany
gai_n. a cornpelil.ive advan tage? i/Vh.i.ch area do you
beJjeve conlTibutes the least? iNhy'!'
9. i'Vhal: is the bnlanced scorecard? Identi.fy the
four perspectives included in the balano<:d score-
cn1:rd. ffow can HRJ\1 pra.d.ices influence the four
perspectives'?
JO_ ls FIRM becoxning more ~;l.rntegic? Explain youx
anc:rvvr.-~r-
:n . \NhaJ is sustainability? How can I--:lR practices help
;, company become rnore sociaUy and environ--
n.1 enl:aHy conscious'?
12. ExpJain lJi.e implications of each of the following
labor force trends for BRM: (1) a3ing workforce,
J
(2) diverse w orkforce, (3) skill. defide:nd.-es.
13. W11aJ role d o HRM practices play in a. bush1ess
decision to expand internationally?
14. 1/\nrnt. aught a quality goal and high-performance
1Nork system.3 have h'"l common in terms of t:'IR1'A
praclices7
15. What disadvantages might result fr·om outsomc-
J
ing H.Rl\I{ practices? From employee self-service?
From increased line m anager involvement u1
de3igning and using HR practices'? ·
J
16. V1n1at factors should a company conskler befor·e
reshor:ing? 11\That are the advantages and disad-
vantages of reshoring?

Do You Have Whai: ~t Takes to Work in HR'?

Yes No 7. I have a willingness to lear.n.
Yes No . 8. I listen to issues before re<icl:ing wHh
No J. l have le<J.dership and managemen.t. solutions.
skills I have developed lluough prior Yes No 9. I can collect and analyze data for busi-
job expedences, extracuxricular adj.vi-
ness solutions.
tie3, corrlmlll1.i.l:y servi.ce, or other non-
Yes No 10. I am a good. team mernbe1:
course activities.
Yes No 11. I have knowledge of local and global
Yes 2. I .have excellent co.nu.n.unicatio:n.s, dis-
e conornic trends.
pute resolution, and :inte1versonaJ. skills.
Yes No 12. I demonstrate accountabilily for my
Yes .l\Jo :J. l ca11 den1.011slTai:e an understancting of II'1'
actions.
t11e fundamentals of ru.nniJ1g a business J f
'

and making a profit. Scorfo.g: The gr~ater the number of yes answers, the
No 1. I can use spread.sheets and the V\Torld better prepared you are to work as an H R profes-
Wide Web, w.1d I asn famjhar with infor- l~l
sional. Fo:r questions you answered 11.0, you should. Jt
mation systems tedmology. seek courses and experiences to change your answer
Yes No 5. l can work effeclj.vely with people of to yes-and better prepare yourself for a career in JHR1
different cultural backgrounds.
SOURCE: Based on B. E. Kaufman, "What Companies Want from HR
Yes No 6. I have exp ertise :iJ'l. more than one a:rea Graduates," HR Magazine, September 1994; SHRM Elements for. HR
of hurnan resource rna_nagem.ent. Success Competency Model, 2012, from iVV.rw.shrm.org, March 21,':1012.

b 1ppos faces Competitive Challenges

Ziippos, lx'l;:;ed in Las Veg<1s, is an on.Hne retailer wifo
l:he initial goal of trying to be lhe b est website fo1· bu.y-
ing shoes by offer.i:ng a wide vax.iety of brands, sJ:yks,
colors, sizes, and. widths. The zappos.com brand has
grnvvH 1:0 offes shoes, han dbags, eyewem~ watche:3,
;1nd ;1cccisor.\er> for onHne puxchase. Zappos' vision is
that jn. the future, online sales will account for 30% of
aU re!:a.il sales in tJ1e United States, and Za.ppos will be
the con1pany with the best service and selection. The
comp3ny' s goal is to provide the best service on.line, IL
n.ol: just i.n shoes but in any product ca'iegmy. Zappos I!
~
be:Heves that the speed at which a custom.er rr;!ceiv€s
r
I!:"
 ..
CHAiP'lllER ·u Hum <:111 Resource i\/lanagement: Ga in ing a Competitive /.\dvantage 63

an online puxchase plays a c!i.·itical r<::!le i_n h<rw that ::1nd \/'\That's your theme song?- to find employees
cust.mner thinks about shoppins online again in the who an: cr.ealive and have strong individuality. Zap-
future, so they are focusing on n1al.dng stu:r:: the itei.ns pos provides free lunch in the ca.feterio. (cold cuts) and
get delivered to oux customers as g11ickly as possible. a full-time life coach (employees have tc sit on a red
Jn 2009, Zappos was acquired by.th01\ma.zon.com, vdvet tlu·one to complain), managers a.r·~ encouraged
Inc., family of companies 1Nhich also share a strong to spend time with employees outside of the office,
passion for custorner seJ:vke. Tn 20l0, Zappos expe·- a.net' any employee can reward anotlw:1: employee a
ri<~nced lTemendous growth resvJl;i_ng iJl the n•?.ed ~o $50 bonus for good performance: Most of the 1,'.H3
i·1-~ntructure the company. Zappos ·wi'ls reslJ·uctnred ':employees at Zappos are hourly. Every new hire
into 10 separate cmnpan:ies 1.mckr the Zappos fanwy undergoes four weeks of tr·aini.ng, du.ring which the
umbrella including Zappos.<:o:m, foe. (l:he rnanage·- cornpany coJ.ture must be committed to memory, and
ment company) and compa:nks devoted to rel:ai.1, gift spends two v1reel(s dealing with cu:>tomers by worhng
cards, merchandising, and ord:;cr fu.lfiILment. the telephones. New recruits a.re offered $2,000 to I.eave
Zappos CEO 1bny J-ki:3h has shaped the company's the company during lTaini.ng to weed out i.Ildividuals
cusl:ouner-service focused o.1llT1ri2, brand, and business - ·who VI.rill not be happy working at the company. Zap-
strategy around J.O core values. They arc~ : pos provides free breakfast, lunch, snacks, coffee, tea,
a_nd vending machine snacks. Work is characterized
Deliver WOW through servke.
by constant change, a loud, open office envirorunent,
Embrace and drive change.
and :interacting in teams. Employees a.t Zappos move
Create fun and a little weird11ess.
21ro1md. For example, in the call center employees can
·. Be adventurous, creative, and open--mindcd.
bid for different shifts every month;
Pursue grovvllt and leaming.
To reinforce the importance of the 10 core values
Build open and honest relationships with con1:1.nu.n.i.c~.hon.
Zappos' performance management system asks mn.n -
Bui.I.cl a positive team and frnnily spixit.
agers · to evaluate how well employees' behaviors
Do more with less.
demonstrate the core values such as being h1m1ble or
De passionate and detenrnined.
expressing their persoi:mlities. To evaJ.1mte task per-
Be humble.
formance managers are asked to reguJ.arly provide
Deliver WOW through Senrice rneans that call ce.n - employees w ith status reports on such things as how
l:er employees need to provide exoeUent custom.e1· ser- ·much lime they spend on the telephone ·with custom-
vice. Call center ernployees encourage callers to order ers. The status reports and evaluations of the core
more than one size or color because shjpp:ing and values are informational or used to idenUfy training
return shipping is free. They are also encouraged to needs. Zappos also believes in helping others under-
1.rne their imaginations to meel: cusl:orn.er needs. :3tand what inspired the company culture. Tile com-
Zappos has received many ff\Nards for its work- pany created the Zappos.com Hbrary wh:i.ch provides
place culhJre and practices including being recog- a collection of books about creating a passion for
nized as the 31st Best Cornpany to Y./ork for ill Fortune customer service, products, and local communities.
magazine's 2013 ranking of lJ1e 100 Best Corn.panics to TI1ese books can be found in the front lobby of Zappos
V\Fork For. HR's job al Zappor3 i.s u i.ore tfo.m just a rnle offices and are widely read and discussed by company
enforcer. HR's job is to protect the culture and to ed t.J·- employees.
cal:e employees. HR focuses on interaclions viii.th i.nan- Corporate cullure is more than a set of values, and
agers <lnd employees to understand vvhat tlley need ii: is maintained by a complex web of human iI1terac-
from. HR (HR is e ven invited. to attend work tearrw' hons. At Zappos, tl.1e liberal 1~se o:f social media includ-
happy hours!). Zappos' employrncnt practices help ing blogs and Tu.ritter facilitates the network that li.nl(s
pc1vetual:e its company calture. Only about one out of en1ployees with one another and vvith the compai.•.y's
100 applicants passes a hiring process H1at is equally customers. Zappos tal<es the p ulse of tJ1e organization
weighted on job skills and on the potential to work ill monthly, measuring the health o.f the culture with a
Zappos' culture. Some rnanagers at Zappos believe happiness survey. Employees respond to such mW.kely
that if you want to get a job tl1~ moGI: ilnportant value questions as whether they believe that the company
to demonslnJ.te is "be hi.u:nbl.12" :i.nducUng a focw; on hns a higher purpose than profits, 1;11he!fo~r U1ei:r own
"1Ne" instead of "I." Job candid<i·l:es are intenri.e"'.r~d role has meaning, whether they feel in contrnl of their
for cultm:-al fit and a 1vil.lingnes~:l to chani;e <tnd I<~m:n. rn..reer path, whether th::y consider H1eir co-workers to
For exmnple, they observe whetl.1er at lunch job e<Jndi.- be hke family and friends, and whether they are happy
dales talk with. others or j1rnt i·he person ~:hey thi.nl' i::1 i.n tli.ei.•.· jobs. Results from the survey a:re broken down
rnaking l:he hirinr~ decision. Th(' HR learn u~1e:'; imus1.u1l by department, and opportu11itfos for development ·
interview questions·-sudl ;:i01 Huw 'Afcird ar0. you'! an:: identified and acted upon. Fm exan,.ple: \/llh\n it
 1G1i0. CMA~:\llrfEIR: '~ Human Resource Management: Gaining a Competitive Advantage

wa3 dear f-J:om the sw:vey that one depaxlruent h<i.d
Ii1 va::ered off cotITse au.d feU jsofated frorn th_e 11esfc of !Jae
.,
! orcganizaH01:t, <). prng:n:am wa:::: insti.luted ~hal: ienabRed
j11divi.duals in the group to leat·n mme about how
jni:<egral lheil' WOJ'k was. 'I'o I((.~ep the v:ihrant company
CEO !tony JH!sieh. fa spending $350 :miJJJion !o devdop
a neighbm:hood in do-wnt.own Las Vegas i-,r.fhid< wm he
tbe h-;;nne of Zappos.com.'s new head.qua:irlem. I-faei.h
wants l:o p:rovide employees with a gueat pface l:o wod(
as wdJ ar; J:o Hve and socialize.
rn.anagement practices help Zappos rn.e£t tl.Kse
c.hallengoes?
2. Do yon think that employ'212s o{ Zappos have hJi.gh
levels oif engagement? Why?
3. 11\ni_kh of Zappos' 10 core values do you bdieve iJ:hqiJ:
human resomce practices can mfluen.ce 1he most?
111e least? Vi!hy? For each of the con_;e valu-es, iden-
tify the HR praclices that are related l:o it Expkun
ho-w ead'o. of the _HR praclice(s) yon idenlified fa
rd<).J:ed l:o tl1e core values.

SOURCES: Bas<::d on website for Zappos, www.;r..appos.com; J. O'B:d"11,

QIUJ~$'lf~O.IM$ "Zappos Knows How lo Kkk It," Farl.mre, Pebruruy 2, 20'09, pp. 55-<iG;
:t z:appos seems to be well-po:3Hioned1 to have a com- M. Moslmwib; snd R Levering, "TI1e 100 Best Comp:mfos to '\!\fork
petitive advantage ovcJ[' olher online J['etailem. V\Thul _ fm," Fortu11c, Fsbru.ary 4, ZOD, pp. 85-96; D. Ri.drn.t:d, "At Zap pos,
· Cultur.'9 Pays," S!:mt·egi1+ B11siwss, August 2010, p. G-0, v\'l'.rw.sl:r~tegy­
dnllenges discussed in Chapter 1 pose Hae biggest business.com, accessed March 25, 2.013; K. Gurchiel:-:, "DeJiv€dng HR
threat to Zappo5' ability to maintain and enhmnc~ at Zappos," Hit lVIagaziile, J1me 2011; and R. Pyrillis, "The R0Vie-wG Ate
its competitive position? How can hmn::m 11'2souixce ln," "Warlcj-arce f'?lm;agemenl," MA.y 20U, pp. 20-?.5.

Yahoo's CEO M.axissa May.ex· decided as one pm:~: ofr home. Cisco System.s found that employe.r n whp could
her phm i:o revitalize i:he company that she ·wruJtl:ed work remotely from home experienced .an m.crea.s:e
to '2nd the company's work-from-home policy. Jn an ju thei< qualil:y of: hfe. This could rrnult _from reduc-
interrn-J i_ uienM) f-.ro:m Jackiie R.ene::>, Yahoo's eJ(€CJ.~1':jve ine; tl.ite ha.ssfos of commuting to worl~ and allowing
vice pn::side:nt of people F.!nd development, wod<ing a!: ernploye€s to betl:er bafance work and life :respOinsi-
i~he office rall1e.r tl1an at home was necessary because bili.ties such as drildcare, running errands, or d.eaJ1ing
ofr the need for employees lo co:rnnumicate andl collab- with a sick child, spouse, or family member. Another
oxa.te and to reduce l11e chance that speed and quality - study showed that when employees of a Clurn::se
would be diminished. Yahoo received mndll negative RJCmrel ae;ency were allowed to wmk from_ home they
press fr.on1 the dedsi.o:n to no longer allow employees were more productive, resulting in cost savings off
to work at home· including comm.ents from Rid1;,xd $2,000 per employee each year. FinaJJ3r, a study fotmd
Branson, head of Virgin Group and Worlci.ng Mofh.er that office employees who work from home may work
magazine. Some of th e criticimn focused on the mes- 57 hours each week befon=~ they feel as jf their work-
sage lfo1t not allowing home work sent to employees: Jjfo is out of balance compared to 38 homs .for iempkiy-
Managem can't trust yon to get the wo:rk done. ees who work at their offi.ce.
The reality i.s Hml: 1Norking at home is becoming Woddng at home also may have signiikariJ: disad-
rno:i:e prevalent m the U.S. workplace. More employ- vantages. 'TI1e disadvantages include employees tak-
ees ;:ire worl-Jng from home at least one day each ing <l.d.vantage of the policy to extend their weekends
iNeek. One estimate is that 20 to 30 million Americans by not working in the office on Fridays or Mondays,
1'\rork from home a.I; least one day each week. Hom.e- and loss of potential benefit from hav.ing foc-e-l:o-fo.ce
based workers are more likely to be employed ~n pd.- nnteracHons Vvith colleagues that are usefoJ for sh.w.ing
val:<~ companies than in pub1Lic secl:or jobs. Employees knowledge and generating creafivie solutions to prod-
in m.anagement, business and finm1ce, senrke, .and uct or service problems. Being in the office is esped.,,.'llly
saks occupations are most able to 111rork from home. important today because many jobs requixie dose ool-
En~ployees in health care and. installation, mainte-· foboraJjou wHh peers or working on team project3.
nance, and repair occupations are the least likely lo Also, unp.bn.ne<l personal Jnteracl:ions occw:rihg al:
1No.rk from. home.
Hw office Gm lead to new ideas o:r improved -l~ro:rk­
IVI<my employees ·wan!: to ·work at home, so corn- i11g relaJjonshipr.. TI1e biggest problem for employees
p.::v.1.i.er.> arc using w orking aJ hoine as a benefit l:haJ: working .from honl.e is overconung otll.101· 0J.npJ.oyees'
helps n-; cnrit and 1."dain l:alented employees. Seve.ra1 .(ll11d 1na.n.age.rn' pexceplions that they axe .1.'ot 95 pro-
sl:mUes have demonstrated benefits from wo1dcing at dud:i:ve as they could be, they lack focus, and they lose
 ..
CHAIP'l'fEIR 1 Hurnnn Resource Management: Gaining a Competitive Advantage
"face-time," w hich leads io fe,Ner opportunitk s for
prornolions.
Q.11JF2ST~Q~WS
l. Do you think that companies should have a p oUcy
l11at allows all employee~, i:o vmrk at honi.e? 1Nhy
or why not? How would you d.eierm:ine vvhid1 jobr;
are best suited for worl~in5 at home? .
2.. What :role can tedmology play in allowing en1p1oy-
ees to work at home? Do you beUeve Hrnt Jii;:era!>
lion using tedmology can :replace jnterperso:nal
foce-to··foce interaction beti.,vcen employei,;s 01·
between exnployees and their :n1anager?
Managing MR at a Growin9 Semke Compah]y
Susan K. Dubill describes herself as smneonc ·who
enjoys h elp:U1g others and mabJ1g her company a
positive p lace to w ork Those atlih1.des have provided
;;i strong basis foJr h er s1v:cessfuJ_ c~ire~cr _i_n h u.D1an
re:muxce management Iu i:wo di.fforr..:n.i: contp.a.nj.r:;r;;,
Dubin took on responsibilities for paymU, training,
and employee relations. As she built her 0xperiencc,
she established a strong working :rdationnh ip w .iJh
Danone Simpson, an insurance ageni:.
Dubin was imp rc5Bed with what she sa~N as
Simpson's "com n1ilment l:o dient services." So when
'.3impson prepared to open her own insi1r.a11ce services
business, Dubin w as interested in sJ.grdng on. For sev-
eral yem·s now, Dubjn has been l-:1R ctiJ:edor for D~.uonr~
Simpson Insurance Services, 1Nhich operates :from
offices in Woodland Hills, California. She also answers
questions from clients who can the Ggency' s H R h otlinr.::.
Dubin sees herself as contributing l:o the fo sl:-
gTowing company 's success. For exa1nple, slw looks
for the best deals in benefiJs pmgrn.ms in order lo hav'2
room in her budget for ll1e Hitl.e things that con l.:ributf to
an employee-.friendly wo.rkpJ.ace: monthly lun d.112o:ns,
raffle prizes, and breaJ<: rooms. That's a priority, Dubin
says, because employees who are "happy at w ork" are
"more produdive, so everybody wins." Simp son see::.
that balance betvveen n1u·turiug and prncLi calil:y i.n
Dubin. According to Simpson, Dubin is supporliv'~ but
~1:: 1. A S. Tsui and L. R. Gomez-IVIeji<i, "Evaluatiu g Hm nan
Resollrce Effectiveness," in Human Resource J\11miagf.-
f1i· · rmmt: Evolving Rulf.s and Respo11sibilitic;;, ed . L. Dyer
~l;,fl~j,
(Washington, DC: BNA Dooks, 1985), pp. IJ8'.7--22:;·;
i :·
. \\1. A Hitt, B. V'.f. Keats, '1:nc! S. M. Del\1a:ri.e, "N~ vir;;i. Ung
;
;;,
,r
65
3. \/\!hat :role should HR play in helping a compa.-:ly's
lead ers decide if a work-at-home policy is appro-
priate? \!Vhat ldnd of information shouJd I-IR pro-
vide to help in the decision making?
SOURCES: Based on B. Goldsmith, "Yahoo's Work-from-Home Ban
Stirs Backfash," The Col11mb11s Dispntclz, Febmar)r 27, 2013, p. A5;
P. Marinoira, "1Nho Worl<s from Home and When," Febmary :LB, 2013,
www.cnn.com, accessed Febmary 28, 2013; C. Suddath, ''Work-from-
.H ome Trnths, Half-truths, and Myths," Bloom/mg B11sirTessWeek, March
1--10, 2013, p. 75; R. Silverman and Q. Fottrell, "The Home Office in the
Spotlight," Wall Street Jo1m111l, Febn.mry 27, 2013, p. B6; N. Shah, "More
Am.e1icans Working from Home Remotely," Wnlf SlTeel· Jo11rnal, April 6,
2013, p. A.3 .
also firm in enforcing standards: "She doesn't put up
with any nonsense ... but does it in a wonderful way."
Perhaps -the Careers page of Danone Simpson's web-
siJl~ puts it best. Besides promoting the agency as an "hon-
cJl: and hardworl<ing team," it sn.ys sii-n.ply, "Pleas~ be
advi.sed that our organization cares about ils employees."
O.U1651r~OIM5
1. Uased on the description in this ca.se, how well
would you say Susan Dubin appredates the scope
of human resource management? \/\That, if any,
adcli1fonal skills of an BR professional would yon
encourage her to develop?
2. Look up descriptions of HR jobs by s12arching
under "human resources" in the latest edition of
the Bureau of Labor Statistics' Occupational Out-
loolc Handbook (available online at vvww.bls.gov /
OCO /). 'What position in the handbooJ~ best
matches Dubin's job, as desaibed in ll1is case?
3. H ow would you expect Dubin's job jn a small ser-
vices company to be different from a similar posi-
i:ion in a large manufacturing company?
SOURCES: Danone Simpson Insurance Services, corporal:e websi.te,
accessed June 1, 2011; and Mark R. Madler, "Valley's Top Htuna.n
Resomces Professionals: Susan K Dubin,'' Snn Fcmrmdn Valle,~ !Jusim:ss
Journal, April 13, 2009, Business & Company Resource Center, h ttp:/ I
galenet.galegroup.com.
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of Human Resource Management Practices on Perceptions
 ...
.()(;, CHAPTE~ 1 Human f\esource Managen1ent: (3a ini119 a Cornpetiti\le /},dva ntage
of Oxganizational Pex-fonrnmce," .Ac11dcmy of f\.1.fa11agc111 rn i
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It Be?" 11\!orkforce 1i1rmagemem', M.i.l)' '27, 21Ji 0, w>vw
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10'.7. Ibid.
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ers for 1/\Torken; ovH 50/' an:ess~xl J\'1a.y 6 1 20H; A A.RF
webdl.c, WW1·V.f"Hl.rp.oq}, "2Ul.i'.) 1\/\1\P Bes!: Empl0>}"2rs for
'\/\forker::: O ver !"30," <K-ccmJed ivfoy 61 20U; 3. HmNl.eU, L
Sh. cd.l'irt, 11~1d J{. S-n_iu.1brc:J.'{;r "~IJu~'\r G~cn. ":_{ ,{Ji: IlDQ1.TIEr:~ 1\THJ
f.\Esh.npe ·yn~ u., /\g~2nd:J,' f~atTi1r;·d Business .Revhrro, Ju ·~- Y­
1
/\uguf}~: 20(JS\ pp~ 71-76.
9~L I- ThJJmrmy, "l':a:::iai.ng on /(no;.1;Jed Jy~.-" FfR Alfaga2ine, Ju_;;;<.'
7.003, pp. JJJ\l -101:.
'.!3. M. VVcincitcin, "]\foU:i.ng Kn•J'N..lfo.w," 1)·pim:ng, ~:Jspi-::;jJl...
br:r/Octob0r ?OJ.Or pp. 26-29.
JJe1"/J~H., Sherbi.n, ;Jnr} S11.1jinbri;;.rgr · X·Jo~v (;,c-11 ~{ /~r. H-oonl.'2fD
0
1Ni.H FeeJiD.pc Y(nir J\gcnda."; ./\ . .Fox, 11.M.bci.ng H Up" fff"
U 2. D. J.:hrns, ''Cmvorate Compar>ses," HR Magazine 49 (6)
(2C!.H}, pp. 126.. ·32.
113. E. J.::td1, ''How to CDnduct an Ethia; Aud1t," HR lv1a.gazinc,
1
.Ap:dl 2010, pp. 1J::H30.
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U5, G. f:I. Cavanc1v.gh, D. Moberg, ;.md IvL VeJ.a3qne1., 11TJ.1e EH1-
irn of Oxgan.U::ati.uTh11 Politi.1:s1 " Academy ·of Mm.iagermm.t
Ber1iew 6 {191H),. pp. 362-74.
116. "Mrun1fo.d:m;ng: Engin.e of US I.nnoval:i.o:o.,'' Nmio1ml
AsaocitJJion of Mmmfac/:uring, Odobe.« 1±, 20D6, w-:r-.rw.nrun
.nrg, ,,,ccef3sed January 21, 201J9.
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...
CMAIP'11EIR 1 Human Resource Management: Gaining' a Competitive Advantage
117. S. Kennedy, "U.S. Won't Doo:iinate New World Econ-
omy," The Co/um/ms Dispatch, January 16, 2011, p . G2.
11!3. 0. Wessel, ''Big U .S. Fir ms Shift Hiring Abroad," Wall
Street Journal, April 19, 2011, pp. Bl, B2.
119. "Gap Inc. Announces Expansion of Old Navy in Japan ,"
Press Release, :March l, 2013, accessed at www.gapinc
.com, March 21, 2013.
120. "Ymn! China," w\llrw.yum.com/brands/china.asp, accessed
Mard1 21, 2013.
121. C. Hymowitz, "IBM Combines Volunteer Service, Team-
work to Cultivate Emerginf Markets," The W"ll Street
Journal, August 4, 2005, p. D6.
122. J. Sdu·amm, "Offshori.ng," Workplace Visions 7. (.AJ.exan.-
dria, VA: Society for Hm:nan Resom·ce Management,
2004,); P. Babcock~" America's Ne11vest E)(port: White Col-
lar Jobs," HR Magazine 49 (4) 2004, pp. 50-57.
123. "Manufacturing: Engine of U.S. Innovation", National,
Association of Mam.t.facturin~, October 4, 2D06. Available
;it website WW\<\r.na:m.org, Ja.nuan; 21, 2009.
124. F. Hansen, "U.S. Firms Going Wherever the Knowledge
Workers Are," Workjorcr. Management, October 2005,
pp. 43-44.
.125. R. Zeidner, "Does the United States Need Foreign Work-
ers?" HR Magazine, June 2009, pp. 42-47; U.S. Departi:nent
of Homeland Security, Yearbook of Immigmtio11 Stat:isl:ics:
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126. M. Hess, "Homeward Bound," T/\forlcforce Ma11ageme11l,
February 2013, pp. 26- 31.
12'7. J. Hagerty, "No p lace like Home for Toy Make1/' Wa ll
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128. L. Morales, "Nearly Half of Americans Are Frequent Inter-
net Users," January 2, 2009, www.gallup.com; L. Morales,
"Google and Facebook Users, Skew Young, Affluent and
:-,~
..... ~ ' . Educated," February 17, 20J.J., www.gallup .com.
;~ ir·. 129. IVi. Derven, "Social Networking: A h:ame for Develop ..
ment," T + D, July 2009, pp. 58--63; J. Arnold, "Twitter-
ing and facebooking While They Work," HR Magazine,
tij If t· December 2009, pp. 53-55.
'Ji'~!it·' : .
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130. C. Goodman, "Employers Wrestle w ith Social-Media Poli-
cies," The Co/1tmlms Dispatch, J;muary 30, 2011, p. D3.
131. I. Brat, "A Joy(stick) to Behold," The Wall Streel Journal,
June 23, 2008, p. R5.
132. D. Wakabayashi, "Japanese Farms Look to the 'Cloud,"'
Wall Street Journal, January 18, 2011, p . B5.
133. R. Silverman, "Tracking S£nsors Invade the Workplace,"
Wall Street journal, March 7, 2013, pp. Bl, B2.
134. M. J. Kavanaugh, H. G. Guel<lJ., and S. I. Tannenbamn,
Human Resource Infor111atio11 Systems: Developmenl and
k Application (Boston: PWS-Kent, 1990).
"':;~~fl~/
·.'~'•· 135. Bill Roberts, "Empowerment or Imposition?" HR Maga-
zine, June 2004, from Infotrnc at http:/ /web7.infoh·ac
'~2-t:: . .galegroup.com .
136. A. McAfee, "What Evely CEO Needs to Know about the
Cloud," Harvard IJusineos Revilw, November 2011, pp. 121!-
132; B. Roberts, "The Grand Convergence," HR Magazinr~,
(;i9
October 2011, pp. 39-46; M. Paino, "All Generations Learn
iu the Cloud," Chief Leaming Officet~ September 28, 2011,
http:/ /blog.clomedia.com, accessed October J.1, 2011.
137. L. Weatherly, "HR Technology: Leveraging the Shift to
Self-Service," HR Magazine, Marcl1 2005.
138. N. Lockwood, Maximizing Human Capital: Demonslral-ing
HR Value with Key Petfomumce Indicators (Alexandria, VA:
SHRM Research Quarterly, 2006).
139. P. Choate and P. Linger~ 77ie High-Flex Societ-y (New York:
Knopf, 1986); P. B. Doeringer, Turbulence in the American
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140. J. A Neal and C. L. Tromley, "From Incremental 01ange
to Retrofit: Creating High-Performance Work Systems,"
Academy of Management Executive 9 (1995), pp. 42-54.
141. K. A. Miller, Retraining the A merican Workforce (Reading,
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J42. S. Moffett, "Separation .AnYJety," 77w Wall Street Journal,
September 27, 2004,p. Rll .
143. J. Gordon, "Do Your Virtual Teams Deliver Only Virtual
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1'15. M. A Huselid, "The Impact of Human Resource Manage-
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(1995), pp. 635-72; U.S. Dept. of Lab01~ High-Perfonnm1ce
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U .S. Govenunent Printing Office, 1993); J. Combs, Y. Liu,
A Hall, and D. Ketchen, "How Mucl1 Do High-Perfor-
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Effects on Organizational Performance," Personnel Psy-
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146. B. Becker and M. A Huselid, "High-Performance Work
Systems and Firm Performance: A Syntl1esis of Research
and Managerial Implications," in Research in Person-
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(Stamford, CT: JAI Press, 1998), pp. 53-101; A. Zacharatos,
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147.
ogy 90 (2005), pp. 77-93.
B. Becker and B. Gerhart, "The Impact of Hllil1an Resource
Management on Organizational Performance: Progress
and Prospects," Academy of Management Jownal 39 (1996),
pp. 779-801.
148. P. Coy," A Renaissance in U.S. Manufacturing," Bloomberg
Businessweek, May 9-15, 2011, pp. 11-13.
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July 17, 2006, pp. 20-30; from Global Engineering Manu-
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and Human Resource Management: A Human Capital
Perspective," Academy of Manageinent Journal 35 (1992),
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D. P. Lepak, "Human Resource Management, Manufac-
turing Strategy, and Firm Performance," Academy of Man-
agement journal 39 (1996), pp. 836-66.
 ·11:
- - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - · - , - - -- -- 'ii
J[
After reading this chapte1~ you should be able to:

Describe t he differences between strategy formulation

and strategy imp lementation. page 74

ILO 2"2 List the components of the str·ategic management process. page 76

!LO 2"3 Discuss the role of the HRfY1 fund:ion in strat egy formulation . page 78

tO 2-4 Describe the linkages between Hl~M and strategy fo rm ulation . page 79

lO 2"5 Discuss th e mo re p o pula r typologies of gener·ic strateg ies and

the va rious HRM practices associated w ith each. page 85

llO 2"45> Describe the different HRM issues and practices associated
with vario us directiona l strategies. page 93
j

70
IKEA was founded in 1943 bv lnqvar Kamrad in
Sweden and the company 1Mas named after the
initials of t he founder's narne (ijngvar Kamp rad),
the farm where he r,:1re1N up (ff:lrntaryd) and his
home parish (Agunnaryd). H<EA is tl 1t~ world 's larg-
est furniture retailer and sdls ready to assemble
furniture . IKEA is known for its attention to cost
control , operational rr1ana~y::J111Gnt focus and prod-
uct innovation which allo1N1:-x:l the c:ornpany to
lower its prices two or three perccqt in the !.::1st ten
years. llCE/.\ is known hx it; qlobal e)cparn;ion and
has locations all over the \Arodd. In t!1.;:; period frorn
c,010 un·'[·1·1 L'1Q1 ~-t:'1. l't't=A
L. 't'\.. -
I ' e'(''Y
-··'
0 1l''lP("
i_,,(_4
1
j ~ 'J,",7
u -.• J J'1··0·1·r .(-·~ .- ·' .C"C'~r1.:
,:q_~_/'
1 •'::;>
.• . ..

in 25 countries to 349 sto r~x;, in 43 countrie:L differences are minimized. This transparency invites
The rise and global expansion of !KE/\ is a worbo:rs to think about t he company and to come
ston; which emp has iz~:!s the strateg ic impo~-tance up vvith new ideas for improving operations and
cf Human Resources. In ll(EI\ HPM has an impor- for developing new products and services. Con-
tant job in the design of a vmy structured way of t inuous innovation is one of the hallmarks of IKEA's
innovative worki n~J- Collaboration and innovation strategy.
are keywords . This chapter e)<plores how firms seek to al ign
Strategic HRM means tl1t:! support and th~' thei1- human resources with strategy through ·
confirmation of an o rqanizat:tona! cuiture in which ;;.: process called strategic hu man resource
co-workers have a voice and the hierarchica l mana9ement.

71
 ..
12 CMA PTfEIR 2 Strategic Hu1mm Resource M anagement

As the Samsung example just illu strated, business organizations exist in an

environment of corn.petition. 111ey can use a number of resources to compete
with other companies. TI1ese resources are physical (such as plan t, equipment,
techn ology, an d geographic location), organization al (the sh·uchm~, 'plan-
ning, controlling, and coordinating system s, and grou p relations), a.i1.d h uman
(the experience, skill, and in telligen ce of employees). Itis these resouxces under
J:h.e conb:ol of the company that p rovide comp etitive advantage.I
TI1e goal of strategic rnanagem ent in an organization is to d eploy and allocate
resources in a way that g ives it a competitive advantage. AB you can see, two
of the three classes of resou rces (organizational and h uman) are d irectly tied to
th e hum an resou rce managemen t hm.ction. As Chapter 1 pojnted out, the role
of human resouxce managern:e1'lt is to ensm·e th at a company's hmnan resources
p rovide a competitive advantage. Chapter 1 also pointed out some of the major
com petitive challenges ihat compani es face today. These ch allen ges require
companies to take a proacHve, strategic approach jn the marketplace.
To be maximaU.y effective, the HRM fun ction m u st be integr aUy involved
in tl1e company's sb:a!:egic managem.ent process.2 This m eans that h umru1
resou rce managers shouJ.d (l) have input into the strategic plan, both :in te1nm of
p eop le-related issu es and jn term s of the ability of the human resource p ool to
implement particu lar siTategic alternatives; (2) h ave specific kn ow ledge of the
organization's sb:ategic goals; (3) know what types of employee skills, beh av-
iors1 and attitudes are n eeded to support tl1e strategic p lan; and (4) d evelop p ro-
grams to ensure that employees have those skills, beh aviors, and attitudes.
We begin this chapter by discussing the concepts of business m odels an d
strategy and by d epicting the strategic m anagem ent process. Th en , w e discuss
the levels of integration between the HRJ:VI function and the st.Tategic manage-
ment p rocess in strategy form ulation. Next, we review some of the more com-
m on sh·ategic models and, within th e context of these m od els, discu ss the
variou s ty-_pes of employee skills, behaviors, and attitudes, arid th e ways H RM
practices aid in implementing th e sb.·ategic plan. Pinally, we discuss the role of
HR in creatin g competitive ad vantage.

A business model is a story of how the firm will create v alue for custom ers and,
more im portant, h ow it will do so profitably. vVe often h ear or read of comp anies
that h ave "transformed their business model" in one way or another, but what G~
that m eans is not always d ear. To understand this, we n eed to grasp a few bask ~
accounting concepts.
First, fixed costs are gen erally considered the costs that are incurred regard.-
less of the number of tmits p rod uced. For in.stan ce, if you are produdng w id -
gets in a factory, you have the rent you pay for th e factory, d epreciation of the
machines, the utilities, the p roperty taxes, and so on . In addition, you gen erally
have a set number of employees who work a set numb er of h ours w ith a speci-
J
fied level of benefits, an d w hile you nught be able to vary t hese over time on 1

a regular basis you pay the smne total labor costs w h ether your factory runs at \
70% capacily or 95%, ca.pc-1dty. .~
 CHAIPTlER 2 Strategic Human Resource Management 73

Second, you have a number of variable costs, which are those costs tha t vary
directly witll the units produced. For :instance, all of the materials that go into
.the widget might cost a to~:al of $10, 1Nhich means that you have to charge at
least $10 per widget, or you can:n.ot even cover 1.:he variable costs of production.
ThiTd is the concept of.., contribution margins," or margins. l'VIargjns are the dif-
ference behveen what you d1m:ge for your product and the variable costs of that
product. 1h~y are called contribution margin."> because they ate what conb:ibutes
to your ability to cover yom fixed costs. So, for instance, if you charged $15 for
each 1Nidgel:, your conlTibution margin would be .$5 ($15 price - $10 variable
cost).
Fourth, the gross margfrt is the total amount of margh-i you made and is cal-
culated as the number of units sold times the coniTibutiqn maTgin. If you sold
1,.000,000 units, youx gross margin would then 1~~. $5,000,000 . Did you m ake a
profit? That depends. ProfiJ refers to what is left after you have paid your vru.'i-
able costs and your fixed costs. ][f your gross margin was $5,000,000, and your
fi xed costs were $6,000,000, then you lost $1,000,000.

Let's look at how a business m odel plays out with the recent d1allenges faced by
CeneraI l\/Iotors (GM). Critics of GM talk about the fact that GM has higher labor
costs than their foreign compet:Hors. 111-is Jls frue, but mjsleading. GM' s average
hourly \l\Tage for their existing workforce is reasonably competitive. Howeve1~
the two aspects that make GM uncompetitive are their benefit costs (in particu-
lar, health care) and most important, the cost of their legacy w orkforce.
A legacy workforce describes the former workers (i.e., those no longer work-
ing for the co1npany) to w hom the fhn1 still owes financial obligations. GM and
the United Auto ·w orkers (UAW) union have negotiated conh·acts over the years
that provide substantial retirement benefits for former GM workers. In particu-
lm~ retired GM workers have defined benefit plans that. guarantee a certam per-
centage of their final (preretirement) salary as a pension payment as long as they
live as well as having the company pay for their health insurance. In ad dition,
lhe contract specifies tlmt workers are entitled. to retire at full pension after 30
years of service.
TI1is might have seemed sustainable when the projections were that GM
would continue growing Hs sales and margins. However, since the 1970s, for-
eign competitors have been eating away at GM's market share to the extent
that GM' s former 50% of the market has shrunk to closer to 20%. In ad dition,
with the current economic crisis, the market itself has been shrinkm g, leav-
ing GM with a decreasing percentage of a diecreasing market. For instance, in
Decemb(~f of 2005, GM sold 26% of the cars in the global market but by 2012
that market share had slu1.mk to 17.9°/r1. Thus, in addition lo the legacy work-
force, they had a significant nllmber of plants with tl1ousands of employees
that were completely unnecessary, given the volume of cars Cl.VI can produce
and sell.3A
If you look at Figm:e 2.1, you'U see that the Bolid fu"'l.es represent the old GM
business model, which was based on projedions that Gl\11 would be able to sell
4 nilllion units at a reasonably high margin.. and thus completely cover its fL'<ed
costs to make a strong profit Howeve1~ the reality was in.at its products didn't
sell at the higher prices, so to lTy to sell 4 million vehicles, GI\1 offered discounts,
 ...

7'tiJ. CHAPTER 2 Strategic Human Resource fv1anagement

~I
Jl
An Illustration of a GM
.Business Model for 21.1isiniess
l
.

GM Modd .

']
J

.,
~,,':;;,.¥;;;;;,,;:::,111';J:,,;~;,-;:;'.~1!1'- - ~~~~!- - ~

which cut int0 its maTgins. VVhen GM ended up selling only 35 million vehicles,
and those were sold at a lmver margin, the company could not cover its fixed
costs, resulting in a $9 billion loss in 2008 (t:his is illush·ated by the dotted blue
line in the figure). So, when GM refers to the "redesigned business model/' what
it is referring to is a sign.ifica.nt reduction in fixed costs (through closing plants
and cutting workers) to get the fixed-cost base low enough (the dotted brown
line) to be able to still be profitable selling fewer cars at lower margins (again,
the dotted blue line). ·
. One can easily see how, given the large component that labor costs are to
most companies, reference to business models almost inevitably leads to discus-
sions of labor costs. Th.ese can be the high cost associated with cul'rent unionized
employees in developed counrries within North America or Europe or, in some
cases1 the high costs associated-with a legacy workforce. For in.stance, fue Big
Three automakers have huge numbers of retired o,r laid-off workers for whom
U1ey still have the liability of paying pensions and health care benefits. Tilis is a
significant component of their fixed-cost base, which makes it difficult for them
to compete with other automakers that either have fewer retirees to cover or
have no comparable costs because their home governments provide pensions
and health care. In fad, this changing business model at G_M has driven them
to locate more manufactuxing outside of the United States. The "Competing
Tlu:ough Globalization" box describes GM' s increasing investment in China.

\Nhat ~s Strategic mVianagement?

lO~~'ll Many auJhors ha.ve noted that in today's competitive market, orgru.-tlzation.s
Describe the differ- must engage in slxategic p lanning to survive and prosper. SIJ:ategy comes from
ences between strategy the Greek word strategos, whi.ch has its roots in military language. It refers to a
formulation and strat-
egy implementation.
general's grand design behuvJ. a 1Nar or battle. ill fact, Webster's J'..Tew American
Ii
Dictionary defines strategy <.1~1 the "'8kill.ful employment and coordJ_nation of
taclics" and as "artful planning and management." J
 As China becomes th e. largest wil l b e able t o produce 400,000 w ith an estimated
purch aser of automob iles, vehi cles and engi nes each 15 m illion vehicl es in
!i.

I
Genera l Motors Co rpo rati on is
making an even heavier invest-
year. This fa ctory will hel p GM
to achieve its goa l of ann uall y
th e U.S. This illustrates
that the globalization of com-
j rn ent in that market. GM is cur- producing 2 mil lion veh icles by pan ies is not just ab out find ing
i rently the largest automaker by 2015. In additio n to the plant , lower labo r costs, b ut rather,
'l
·1"
ll
;..
volum e in Ch ina, and it wants
to mainta in that po sit ion . C1M
currently operat es tvvo assem··
G M plans to op en an ad d itio nal
600 dealerships in order t o
meet t he qoal of 3,500 dealers
going where t he customers are .

DHSCl!JSSION O.lll ~S'f~O~I

I
g
1
! bly plants in China, as \Nell as a t hat sell its brands. W hat are some of th e implica- i
I ,$252 mill ion t est t rack. W hy th ehuge investments in ti ons of· g loba lizatio n for th e· ·I
II GM and its Ch inese joint ven- China? First, GM's sa les in China st rateg ic management of a I
! ture part ners wil l invest $1 bi l- o utstrip its sa le s in t he US. com pany's w o rkforce? i
!I
lion to build a thi rd comm ercial
I I f I
I ve 1ic e ac l:ory in C 1o ngqi 119
Second, C h ina's light vehicl e
" I " . d .
"'a e .~ ate expecte t o g row t o
SOURCE· .. M
. J. Bennett, G Pans
.. ..
1 ,.1 81 11 ion
Investment in China," Wall Street Journal
III
L,m~.:,~. ~:.'":.~.:::.,. '.:., ~,~.~,.~.~"' ":.~_:,,~:.:.'.~ ~~ , . ~,,~:.,,,:.~~.i::.:.:,~.~~:~~~~~~==~-~~~=:~:~1 ~~=~_J
Strategic managem.ent. is a process, an approach to addressing th e competi-
tive challenges an organ..izaiion faces. It can be thought of as m ana,ging the
"paUen1 or plan that integrates an organization 's major goals, policies, and
action sequences' into a cohesive whole." 5 These sh·ategies can be either the
generic approach to competin g or the specific adjushn ents and actions taken to
deal with a particular situation.
First, business organizations engage :in generic strategies that often fit into some
strntegic type. One example is"cost, differentiation, or focus." 6 Another is " d efender,
analyzer, prospectm~ or reactor." 7 Different organizations witlun the same indushy
often have different generic ~trategies . 111ese generic strategy types describe the
consistent w ay tl 1.e company attempts to position itself relative to competitors.
How ever, a generic strategy is only a small p art of sh·ategic managem ent.
The second. asp ect of strategic management is the process of developing strat-
egies for achieving the company's goals in light of its cm.Tent enviromnent.
Thus, business organizati.ons engage in generic sh·ategies, but they also make
choices about such tfongs as how to sca:re off com pelitors, h ow to keep com-
peW:ors w eaker, how to read to and influence p ending legislation, how to deal
vvith various stakeholders and special interest groups, how to lower productfon
costs, how to raise revenues, what technology to implement, and how m any and
what types of p eop le to employ. Each of these decisions m ay present competi-
tiire challenges that h ave to be considered.
S1rntegic management is :riaore than a collection of strategic types. It is a process
for analyzjng a company's competitive sil1.1.ation, developing the company's strate-
gic goals, and devising a pLm of aci:ion m1d allocation of resources (human, organi-
zational, and physical) that wiU increase the Hkelihood of achieving those goals. Tius
kind of sb:ategic approach. should be emphasized in human resouxce m anagement.
HR managers should be b:ained to identify the competitive iSsues the company
faces wilh regaxd to human resources and thiuk strategically about how to respond.

75

16 CHAPTER 2
:£fcrn1t~gn~ Hn.nmal!1l
~o;·H;11Mn1n1".:"'1l
£"~'la1111ag~mtllR~t
{SilHRM)
A pattern of planned
human resource
deployments and
activities intended to
enable an organization
to achieve its goals.
l02~2
List the components of
the strategic manage-
ment process.
I
Strratagy
1FIQ\rrm~Ila11:!m11
The process of decid-
I on the chosen slTategy This consists of strn.ctw·ing the organization, allocating
ing on a strategic
I· direction by defining
a company's mis-
sion and goals, its
eJCtemal opportunities
and threats, and its
internal strengths and
weaknesses.
5trnt®gJ:lf
~mpili>'meotafi:iollll
The process of devis-
ing structures and ·
a/locating resources
to enact the strategy a
company has chosen.
·, .
Strategic Human RiO!source Management
t
Stt.;n.~egk ~mmzu'(JI il'es.rw;r1.x llc<i" fil!J..;J1.Ttl<11312H11c1rn.ft 1SHRM)
can be thought of as ~'the
p attern of planned husnan resourcr.=: deployments and activities intended to
enable an organization to achieve its goals./1 3 For example, many {inns have
d eveloped integrated m anufacturing systems such as advanced manufactu.r-
ing technology; just-in-time inventory conh·ol, and total quali.ly managetjient
in an effort to increa~~c i:heir competitive position. However, these systems
must be run by people. SHRM h1 these cases entails assessing the employee
skills required to run H1i.:'s.e systems and engaging :in HRM practices, such as
selection and trnining, that d evelop these skills in employees.9 To take a stra-
tegic approach to fu'ZM, w e must first u.--:lderstand the role of HR1V£ in the
sh:ategic managernent process.
J
COMPONENTS Of l~E Sll"RAJJEGK MAU\IAGE:ME~JT PROCESS
The strntegic management process has two d istinct yet interdependent phases:
strategy formu1ation and strategy in1plementation. During slrategy foRmub.ti.IQJJ[1l ",;]
jJ
the sh·at:egic planning groups decide on a strategic direction by defining~ the
company's 1nission and goals, its extema1 opportunities and threats, and its
inten1al st:renglhs an.d vreaknesses. They then generate various strategic alterna-
ti.ves and. compare those alt0~rnatives' ability to achieve the company's mission
J
and goals. During sb:alt~gy ~_mplemePJ.hi.tiilJJlll1, the organization foUows through
resources, ensuring that th'2' firm has skilled employees in place, and developing
reward sysi:ems that align ernployee behavior with the organization's strategic
goals. Both of these strategic management phases must be perfo1med effecti·~iely.
It is impodai.-it to note tha t !:his process does not happen sequentially. As we will
]
discuss later with regmd to emergent strategies, this process entails a constant
cycling of information an d d ecision making. Figure 2.2 presents the sh'a.tegk
m<magement process.
]
In tecent years organizations have recognized that the success of the strategic
. m anagement process depends largely on the extent to which -the HRM function
\s involvecLIO
j
U~.H<AGIE BIElfV\frE!i:H\ij MIRM A~~O THlE STRAlfEGK MANAGIEMENT PIRIQl(ESS J
TI1e sh·ategic choice really consists of answering questions about competi.tion-
th at is, how the firm will compete to acbleve its missions and goals. TI1ese dleci-
siqns consist of addressing the issues of .where to compete, how to compete, and
with what lo compete, w hich are described in Figure 2.3.
Although these decisions are all im.portan.t, strategic decision makers often
pay less attention to Hi.e "with what will we compete" issue, resulting in
poor strategic dedsio:ns. For example, PepsiCo in the 1980s acquired the f~st­
food chains of Kentucky Fried Chicken, Taco Bell, and Pizza Hut ("where to -~
_ij
compete" decisions) in an effort to increase its customer base. Howeve1~ it failed
to adequately recognize the differences between its existing workforce (mostly
p rofessionals) and that of the fo.st-.food indushy (lower skilled people and high
schoolers) as weU as its abUity to manage such a workforce. This was one reason
that PepsiCo, in 1998, spun o.ff the fast-food chains. In essence, it had made a
decision about where to compete without f11lly understanding what :resources
would be needed to cornpete in that market. J
 tf)

"'<llu
,_0
(l_
,_,
c:
<ll
E
0)
en
rt.J
c
rv
2
\)

f"".I
{j,l
~!'r.
'"''
W1/fIi

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%,li,1~ <(

' . 77
 ...
?713 CHAPTIEIR 2 Strategic Human Resource Ma nagement

IFR@llVlrn l.3
Strategy-Decisions
about Competition

. .
I
.
.

Boeing illustrates ho•N failing to address -the "with what" issue resulted, in
problems h1 its "how to compete" decisions. When the aerospace fixm' s con-
sumer products division entered into a price war with Airbus hldushi.e, it was
forced to move away from its traditional customer service sh·ategy toward
emphasizfrig cost reduction.11 The strategy was a success on the sales end as
Boeing received large munbers of orders fot· aircraft from firms such as Delta,
Continental, Southwest, and Singapore Aidi...'"1es. However, it had recently gone
t:lu·ough a large workforce reduction (thus, it didn't have enough people to fill
the orders) and did not have the production tedmology to enable the necessary
increase i:n productivity. The riesult of this faih.U"e to address "with what will
we compete" in ma.king .a decision about how to compete resulted in the firm's
inability to meet delivery deadlli11.es .and the ensuing penalties it had to pay to
its custorners. 1ll.e end resillt is that after all the h"avails, for the fu:st ti.me in tfoe
history of the indust1y, Airbus sold more planes than Boeing in 2003. Luckily,
Boeing was able to overcome tlus stumble, in large part because of a number
of stumbles on tl1e paxt of its chief rival, Aixbus. Howeve1~ Boeing has faced
difficulties as its new Dreamliner was grounded for fires starting in the wiring.
The "Competing Through Technology" box illustrates the risks associated with
innovative technologies.

.::i

ROlE Of HRM l~J SlRATfEGY fOIRMUlATION

ll.02<t As.lfo~ prececU11g examples illustrate, often the "with what will we compete"
Discuss the role of the questions present ideal avenues for HRM to :influence the strategic manage-
HRM function in strat- ment process. Tius might be th.rough either limiting strategic options or ford11g
egy formulation.
thoughtfulness among the executive team regarding how and at what cost the
firm might gain or develop the human resources (people) necessary for such a
strategy to be successful. i~or example, HRM executives at PepsiCo could have
noted that the finn had no expertise in managing the workforce of fast-food
restaurants. The limiting role would have been for these executives to argue
against the acguisition because of this lack of resources. On the other hand, they
might have influenced the decision by educating top executives as to the costs ~ii\
I
(of hiring, h"aining, and so on) associated with gaining people who had the right
skills to manage such a workforce.
A fixm' s strategic management decision-making process usually takes place ·~I
iEl
at its top levels, with a strategic planrung group consisting of the chief execu-
tive office1~ the chief financial officeJ.~ tfo~ president, ai1d various vice presidents.
Howeve1~ each component of the process involves people-related business issues.
Philips, one of the worldwide
major players in electronic:;,
was one of the first compa-
nies to define specific goals
around green p roduct rev-
enues (50% o f t o ta l turnover
in 2015). Robert Metzke, h1aad
of the sustainable innovation
program withi n Philips, says:
"Their big breakthrough in
sustainability thi nking cam e
by understand ing sustainable
development is not just about
green, but about the balance
between socia l and environ --
mental perform ance." -
With the mission of in1provin9
people's health and wellbeing it
was possible to al ign profit and
purpose, and to co nsider sup-
prni:ing ecosyst ems as crucial in
this alignment. M etze e)cplains
t his as follows; "We developed
a methodology to understand
which part of th(~ Ph ilips brand
value is driv0n by sustainability
to assess if there is a correlation
between perception and per-
formance. \ /\le found ourselves
positioned as a 'silent hero'-
doing a lot on susta inability
but not g eiting much public
recognition for it. So we recog-
nize there's work tci b1:: done,
especially novy t.hat sustain ability
is core to the company's pur-
pose of 'improving lives through
meaningful innovation' " .
Philips is up to thG chal--
lenge of int egrating sustain-
ability, the improvement of the
lives of pc~ople worldwide and
developing and b alancing th e
product portfolio. Innovation is
key, d riven by sustainabi lity. As
Metzke quest ions: "Rather th an
just trying t o sell as many light
b ulbs as you can, hovv can you
p rovide adequate
and sustainable light-
ing solutions, selling light
as a service?" However, this
seem s to be more challenging
than at first sight. Technology
push by R&D was a main d river
for product development while
this new vision sets sustainability
as t he center of innovation. It is
interesting to see how Philips
will grow into this new strategy.
DBSUSS~Oif'J QUfeS1fflOfM
What are some of the implica-
tions of this ambition for Philips'
strategic management of the
workforce?
SOURCE: Salter, N, and Combes, G. "A
Green light for Innovation", Directions 2012,
pp. 8-9, Salterbaxter www.sa lte rbaicter
.com/wp-co ntent/uploads/2012/10/
Directions_B-9_A_Green_light_innov.pdf.
Accessed 6th M;;iy 2014.

Therefore, the HRM function needs to be involved in each of those components.

One recent study of 115 strategic business units within. Fortune 500 corporations
found that between 49 and 69% of the companies had some link between HRM
and the strntegic p lannin.g process.12 However, the level of linl<age varied, and it
is important to understand these different levels.
Foux levels of integration seem to exist behveen the I-IRlVI function and the
strategic management function: adminish·ativr2 linli;age, one-way linkage, two-
way linkage, and integrnlive linkage.1 3 These levels of linkage Y'1ill be discussed
in relation to the different components of strategic management. The linkages
are illustrated in Figure 2.4.

AdmanistJatove Unlk.<i:1lgie
..,
Jn administrative linkage (the lowest level of integra1ion), the HRM function's l02rn4
attention is focused on day-to-day activities. TI1e HRM executive has no time Describe the linkages
or opportunity to take a sh'ategic outlook trnNard HRM issues. The company's be1ween HRM and
strategy formulation.
strategic business planning fw1cl:ion exists 1111ithout any input from the HRM
department. TI111s, in H:lis level of integration, the flR1'v1 department is com-
pletely divorced f-rnm any c:o:mponent o( th€ r3trategic management process in
both strategy formulation and strategy impleni_entation. The deparhnent simply
engages in adm inistrative v1rork u:nxelated to the compm.1y' s core business needs.

79
80 CHAPTER 2 Strategic Human Resource Ma nagement

flgi11.are :l"~ Atclmnlfl1is11:r21ta"'v"-" 011111<:Mrrs<113,r ifWllO'-Wkl}f

~n~lh:;;igi~ ~imika!@l'1' ~urnik"1l!l~ int egrative
Linkages of Strategic
~in k:.oisie.
Planning and HRM

HH~/i HRM HRM

function functi on function I '
'

SOURcr::: Adapted from I(. (•o lden an d I/. Rama nujam, "Betwe en a Dream and a Nigh tma re: On the
Integration of the Human Resource Function and the Strateg ic Business Planning Process," Human
/?esource Management 24 (198'.5), pp. 47-9-5 ·1.

One-V!Pay U01ka~e
In one-vvay linJ<age, the hnn's strategic business plarming function d evelops
the strategic plan and th~~n informs the HRM function of the plan. Many believe
this level of integration constitutes strategic HRM- that is, the role of the HRM '.]'
', ~

,J

fonction is to design systems and / or progra1ns that implement the strategic '
plan. Although one-way linkage does recogruze the ·importance of human
resources in implementing the strategic plan, it precludes the company fro,m
considering human resource issues while formulating the sh'ategic plan. This
level of integral-ion often leads to strategic plans that the company ca.rmot suc-
cessfully implement.

lfwo-lftf.ay u~]~<age j
Two-way li11J.<:age allows for consideration of human resource issues during the
strategy fonnulahon process. TI-us integration occurs in tlu·ee sequential steps.
First, the strategic planning team. informs the HRM function ofthe various sh~at­ ·.•J.).!
i I
egies the company is considering. ·TI-ten HRM executives analyze the human
resource implications of the various strategies, presenting t.he results of this
analysis to the strategic planning team. Finally, after the strategic decision has ]
.

been made, the strategic plan is passed on to the HRM executive, who develops
programs to implement it. The strategic planning function the HRM func- . and
lion are interdependent in two-way linkage. ·

hln:egrntii)fe tiHlk~ge
Integrative linkage J.s d ynamic and multifaceted, based on continuing rather than
sequential interaction. In most cases the HRM executive is an integral member
of the senjor rnanagement teaJ.n. Rather than an iterative process of inJormation
exchange, companies witl1 integrative linkage have their HRM fonctions built
right into the sixategy formulation and implementation processes. It is th.i.s role
.
that we will discuss HU"oughoui the rest of this chapter.
i
.
'
 ..
CHAPTER 2 Strategic Human Resource Management 81

Thus, in strategic J.-J[RJ\/I, fhe 1-IRJVI fuut1ctior1 is i-r1.volved in both strategy for-
mula1ion and strategy illlpleme.nt.ation. The HRM executive gives strategic
planners :information about the company's hu.J.J.lan resou.rce capabilities, and
these capabilities are usuaHy .a direct function of the HRl\A practices.14 This in.for,..
mation about hurna.n resource capabilities helps top managers d1oose the best
strategy because they can consider hoMr weU ead1 strategic alternative would be
implemented. Once th.e strategic choice has been determined, the role of HRM
changes lo the development and alignment oJ 1IRiv1 practices that will give the
company employees having the Ji.'lecessary skills to implement the strategy. is In
addition, JI--J[.RJ.\1 practices li.nust be designed to .elicit actions from employees :in
the company. 16 In lhe next hvo sections of th_i.s chapter we show how HRJM can
provide a competitive advantage h-1. t11e strate0'i.c management process.

Strategy formu~atmorn
Five major components of the strate&ri.c inanage:ment process are relevant to
strategy formulation.17 11lese components are depkt.ed in Figure 2.5. TI1e first
component is the organ:izati.01n's missi.on. Tiw mjssion is a statement of the orga-
nization's reason for being; it usuaJJ.y specifies the customers served, the needs
satisfied and/ or the values received by the custmners, and tJ1e tedmology used.
The mission statement is often accompanjed by a statement of a company's
vision and/or values. For exmnpk, Table 2.1 illuslTates the mission and values

IFigunm 2.5
Strategy Formulation

---··-- -·-·---- · -·--- --· -·-·· ·- ----- -·---- · -·-·-· - --- · --·- ------~·-- .

--- ----·-------·- -·-----···---·--·---·-····-·-·-·-··-·-· - · -·--J-·---·---~-- ----

SOLJr~CE: Adapted from I(. Golden and V. Rarnanuj am, " Between a Dream and a l\lightmare, " Human
Resource Management 24 (1905), pp. 429- 51. .

:;' .
82 CHAPTER 2 Strategic Hu1mm Resource Management

'Jl.<:R~)!l~~ :::to1J
f\/lerck g<Co.'s
IVlission and Values
···~1e rck & C::o., Inc. is a leading researchc.driven pharmaceuti;a produc;ts:ahd :servkes
cornpany. Merck dlscovr~rs, devef ops, rnanufactui·es ahdrµcirkets §8roadta11ge of ·..·...... . : i~
ii111ovati\/eproducts·. to improve hurrian.·abd ·anirrial health.TheMerc;k"Medco ManagE?d.· ···
Ca1·e D ivi$ion ·iT1ana~jes pharmacy benefits for; more than 40:tf1lllio6A1nerica('is; encour.,;•··• . .
aging the aprjropriate use of rnedk:ines and; proy iding :diseaserneinag~roent'progri3rh$;~··' '

Th e mission of Merck is to provide societfvyith su~erior,.prqduetsand; sGry.ke?~ > ··· ··

1
innovatiqns and solution:; tha t irnprove thequality.ofllf8 and.satisfy customer ·
rn~eds·-,-to provide employee s with rneaningfl.Jl work·and advancerne rrt 6ppottuni~
ties and · ·
iJ,1Ai·;.:v~D !1@H/\¥%":v¥!:1«~.Wx~il~1$IM

l
Weare d~dii:ated 'h> the hioheifle\r~fof sti<;;rt·~ifi~ e){ce .ei1teand.cn11il11i'I: ' ;•
001···r~search. to 'im pn:nring ··hyr~<:in · a1~d animal .h~~!th ~nd ·th~ qu~-i!itji · offife: ·.·.· ·
We strive to idm1tify the rnost <:ritical heeds of cons.u mers andtustoniers; we ·7
devote our resources to rneetlr1C ti 5(3 needs. ·
·. ·. i·. ~'l!
·~

We recognize that the abiH1z9'tc:( '> .·.·.·. -to mc:;st cornpe1:ii;ively rne1?tsodety~s ·.·· .
:cmd cushm10rs' nr~~edt,--,"-dt:ip~11d~.9i1/thff inte91~ity, ~ol/ll!e(i9~, iniaglnatkm, ..
skill, .diversity, t1nd team\Ndrk of employ~.e~i-~~d 'N~ ·val~te'ttjE:}f>fl'.: qu,~;liti~s' m.~Ft .•·

~~;r;f'r~~~~~0~2~~::;,;:~~~~J(1il~filirl~iSii1!6g'
··•1.:lj!·•1
•, I

;.<.·:·.:. :. -, .···. ·: ·. - . ~:. .-

S OUf~CE: Courtesy of Mercie.

of Merck &-r Co., hlc. In a,dditi.on, H1e "fotegrity in AcHonubox describes how
Samsung's "New Mana.ge.rnent" philosophy articulated and changed the values.
Go;;nb An organizati.on':s gl\Jl.afo are what it hopes to achieve in'the medium- to long-
'
What an organization
hopes to achieve in t:he
medium- to long-term
term future; they rdled: how the mission will be operationalized. The overarch-
h1g goal of .1.nost profi.t-making companjes in the United States is to maximize
.
I i(

·Future.
si:ockhoJ.der wealth. But companies have to sei: or11er long-term goaJ.s in order i;o

18l'ru:0nw1~ 1llma~y'.>nl'>
maximize stoclrJwlder wealth.
E:xtrennaX ruil.aily5Jir" consist<J ok exar11J1liing fl1e orgaxuzalion' s opera.ling envi:mn-
'
'

~
Examining the orga- meni: to identify the :5lJ:ategic oppodm1ihes and thxeats. Examples of opportunities
nization's operating
environment to identi~r
strate_gic opportunities
are cu.stomer markets that axe not being served, technological advm1ces that can aid
the con1pany, and labor pools tha~ have not been tapped. 11u"eats include poten- l '

'

i'lnd threats. tial labor short.ages, new competitors ente:ring the maxket, pending legislaaon that
:inight adversely affect fhe company;. and competitors' technologkal in:novati.ons.

,,
~
.

',
 Part of Samsung's transforma-
tion consisted of a chan~:ie in
value systems that was driven
from the top by Chairman Lee.
One of the imprntant values h<-')
. embraced was "humanism," in
terms of recognizing the value of
I all people. Chairman Lee Kun-
I Hee was once quoted as saying,
! ;'V\/hen people who should be
j workinq hard have lost hope
' due to discrimination, it is a loss
J for the company and a loss for
~ society. If a company's competi-
l tiveness is tied to its people, it
·I is of the utmost priority that all
I cli'.:;crirninatrny practices are abol-
·I ished. Only then can you com-
! pE)te against the world's leading
his words, Samsu ng has always discrimination
valued the provision of fair and totally eradicated
diverse opportun ities to all. in employment,
Thi s led Samsung to become but the same wage system
the first Korean company to was applied to both men and
implement equal opportuni- women, a groundbreaking
ties for women in 1993, giving · move for the times. Further-·
capable women the opportunity more, women in major ck=:p;;irt--
to exhi bit their abilities. This was ments were assigned important
a reflection of the Chairman's tasks, and those who showed
declaration of reform: "Women outstanding abilities were pro--
must be given the same work moted to executive positions.
and t he same opportunities to
rise within the company as men. liJ~SCUSSBOINl 011..Dr:!ST~Oli'\n
While men and women stride Do you think Samsung's open
together in advanced countries, employment policy provided
men c:1re strugqling alqne in them with a competitive advan-
Korea." With the announcemen~ tage? Why or why not?
of the open HR reform plan SOURCE: Personal Communicaiion,

t. ":::.~,:.'.:~.:.:~:~,,,.~.:.:,.~:.~:'.~.:.:'~"~~::~:,,. ,.~~" ".'.:,.~~~:~~-:=~::.::~.~~:~:_:~:n~:~~~N"~~=::::~~.~~~=··~,.~~"' '~ '"'"• ~"~""' " .,,,"J

b1~~ll'Jtll<Rft
.anaAys:is attempts to identify ~:he organization's siTengths and ~nterna~ .!\!iii.ziiyffii~
weaknesses. It focuses on the quantity and quality of :resources available to the Th~ process ot exam-
organization-financial, capHal, technological, and human resources. Organiza- ining an organiza-
tion's strengths and
tions have to honestly and accurately assess each resource to decide whether it
weaknesses.
is .a slJ:ength or a weakness.
External analysis and internal analysis combined constitute what has come
to be called the SWOT (s1.Tei1gths, 1Neaknesses, opporhnuties, threats) analysis.
Table 2.2 shows an example of a SWOT analysis for Google. After going tlu-ough
the SWOT analysis, the strategic plam1ing team has all 1l1e :information it needs

Tab~e i.i
SWOT Analysis fix
Google, Inc.

SOURCE: GlobalData.

' . 83

84 CIHlAPTER 2 Strate£~ic
S·";n·<J1te91k Choia:®
The organization's strat-
egy; the ways an orga-
nization will attempt
to fulfill its mission and
achieve itslong··lerm
g oals.
...
Human Resource Management
to generate a number of sb:ategic alternatives. The sil'ategic managers compaire
these alter.nafives' ability to attain the organization's strategic goals; then :they
make their s~ir.;ll.fi:iegk d.wk~ . TI1e sh·ategic choice is the organization's strategy;
H describes the ways th~ organization vvill attempt to fulfill its mission, and
achieve its long-term_ goals.
Many of the opportunities and threats l11 the exte:mal environment are people-
J
related. Vlfith .fewer and fewer highly qualified individuals entering the labor
market, organization.s compete not just for customers but for employees. · It is I
-l
H.Rfv'[' s role to keep dose tabs on t11e external envirorunent for human resource-
related opporl:tmilies ;;ind threats, especially those directly related to the HRlv!
function: potenhal labor shortages, competitor wage rates, government regula.-
tions affecting employment, and so on. For example, as discussed in Chapter 1,
J
U.S. companies axe finding that more and more high school graduates lack the
basic skills needed to work, which is one source of the "human capital short-
age."13 I-Tmvever, not recognizing this environmental threat, m311y companies
l
have encouraged the exit of olde1~ more skilled workers while hiring less skilled
younger workers who require basic skills training.1 9 ]
- An analysis of a company's iJ1te1nal strengths and weaknesses also requires
input from the HRM function. Today companies are increasingly reaJi.zing that
th~ir human resources are one of their inost important assets. In fact, one esti-
mate is that overone-third of the total growth in U.S. gross national product
J
(GNP) between 194:3 and 1990 was the result of increases in hwnan capital.
A company's failure to consider the slTengths and weaknesses of its workforce
m.ay result in its choosing strntegies it is not capable of pursuing. 20 However,
sorne research .has demonstrated that few companies ,have achieved this level of
linJcage. 21 For example, one comp<my chose a sh:ategy of cost reduction tlm:mgh
technological improvements. It built a plant designed around a computer:-
i:ntegrated manufact.uxing system with statistical process controls. Although this
choice may seem like a good one, the company soon lea1ned otherwise. It •dis- .:!
J,
covered that its employees could not operate tl1e new equipment because 25%
of the workforce was functionally illiterate.22
Thi..w, with an integrative linkage, strategic pla1mers consider all the people-
related business issues before making a strategic choice. 111ese issues are iden- l
tified with regard to the mission, goals, opportunities, tlu:eats, strengtli.s, 'and
weal'-..nesses, leading the sl.rategic plaiu-U11g tea.in to make a more intelligent
strategic choice. Altl1ough this process does not guarantee success, companies
J
that address these issues are more likely to make choices that will ultimately
succeed.
Recent research has supported the need, to have HRM executives integrally l
involved in strategy formulation. One study of U.S. peh·ochemical refoleries
found that the level of HRM involvement was positively related to the refin-
ery manager's evaluation of the effectiveness of the HRM fundion.23 A second
study of manufacturing fixms found that HR:l\li involvement was highest when
top rna11agers viewed employees as a sh·ategic asset and associated them vvith
reduced turnover. 24 Howevei~ both studies found that HRM involvem.ent ·was
m1Telated to operating tU.1..it financial performance.
Research has indicated that few companies have fully hitegrated I-IRivl :i.nto
the strategy formulation process.25 .As we've mentioned before, c01npm1ies are
begL.--ining to recognize that in an intensely competitive environment, manag-
ing human resources strategically can provide a competitive adv;mt.age. Thus,
l
 if•

CHl\iP'lPER 2 Strategic Human Hesource Manag<;:,ment 85

companies al the ;-vJrni:n_ish·;:1Jivr0 Jinkagr"· Jev~I wi)J either b~:i:orne more inte-
grated m· face extinciion. In i~.ddihon, cmnp.ornief; 'Nill move iowm:d becoming
integratively linked in an (;Hort to maJl.'-< f~r,: hm:nan r.esources slrategicaHy.
It is of uhnost impodm-ice Una:: alJ p(;;ople·-rdated business issues be consid-
ered during strategy forn1nlation. These i.s:Ju!2~s are idenhfied jn ll1e HRl:V1 func--
tio:n. Mechanisms or stn1cbJT·e~:; for integTn.hng ihc HRM function into strategy
fonnulalion may help the s::ra.1:..::gi( plaxming tc;:,m rnske !Ji.e rnost effective sh·a-
tegic choiG::. Ono~ foal: slr:al ·<:~gic cb.oice ·i;;:: dd·ernuncdl J:{Ri\1 must take an aclive
role in implementing it 1lii~3 i:ol!"' will be discw1~;c:d in the ne::(t .sec1iorL

Aft·e·J" ··1··1 Ol""""'l"">J:,,.,.,l"l~Oll l"'<J<' ''('0"'1''1"' 1"'·" ''·'-"'? lP"'\l 't .\.11.
. i .. !,., . 51..1. .llc/.JU.~·-~ ~.~.d "i.•.• ·1-·<J<'
~.•·· '-'···'· - ~~) ...•:) .. t..
,:')a_J_.r_ , - ._CL1'1·..c>- fh::-01· c(T""ll"."CtJ.J
o f''/',l2
~[)J•' A .. '.,.'11-·
- -~ -t.X4... d.J..!C ..
0
u,O 2~~i
make it come to life in its day-·to·-day workings. The strategy a con1p;.my pursues Discuss the more popu-
dictates certain I-lR needs. Fo•· a con1pm1y i:o lv1vr..; a good slxat1~g1r foundation, lar t.yprJl09 ies of g eneric
slr~lE'.:Ji(~s .:md the
certain tasks must be accornphsh·::;d. in pcffS•.lliM: of the cun1pany's goals, individ- various H l~ M p1·actices
c: " I.,....,,,
ual 1. ) .• .. fJO''SC'"'"
-'-~.v ~•-
u C'-'J' l···1·1"11
<....
..,i.J._) °· r-i J"
1 1
,_,J,_.J .... i·o 1-
....... :- .. t .. -".J•J'--· '"""" k'-•.-'r r:u. l•l
_,,._ __ __ 1;_. ·•·]1""''·'
··1(',..frJr-··1 J. -. ~ ..... ·u··l"'"'"
. , ..__ve .u''rl:i'·v1·(.-l1•al 0
•.C.:tJ ...
0
, , ,•. t ~ _· .A.C
0
· associated with each.
must be motivated to perform their sldJJs .;~H1:>ci:iv<c::(~1.
1
The basic premi.sP. behind siraJegy i.1:npk::1nentahon is th.at ' an. organization
has a variety of sl:rudural fon:ns and orgax1tzahonal processes to choose from
wh~n implementing a givr.~n sh-ategy," ;1nd \li.e0-.:· c::hoices rnake aJ1. econmnk
difference.26 Five ixnportant variables deterrni1v: succe:3s in sh:ategy implemen·-
l:ati.on: organizational slTuctu:re; tnsk design; the selection, i:raining, and devel-
oprnent of people; reward sysh~ni;;; and types of iJi..formation and information
system::::.
As we see in Hg1.u:e 2.6, Hif...f\;f ha:'; prini.ary responsibilHy for three of these
five irnplem.entation v;:n:iablcs: task, people, a.nd re1Nard syste.rns. In addition,
llRl\11 can directly a.ff~ct J:h(:: two rr~maining variables: structure and in.forma-
tion and de<;ision proo~sses. Fir5t, for th(~ strategy to be successfully imple-
.mented, the tasks m1.:wt be designed and g;rouped i_nJo jobs Ln a way that is

lFll~f.~Jlfi"f.:;'!· :lJ~
Variables to Be
ConsidHred
in Strategy
lmplement21tion

.,.
:! .
 :-~

..
136 CHAIP'TEIR 2 Strategic Human Resource ~/Jcm arp'? 1r1 ~ 11t

efficient and effcctiv'l::'.2:• hi J we :r1 11U examine how this can. be do.ne (Jk~jJh:r
l:hr.ough thit-~ prOC!i-~SS{-: ~ ; or job ;;1:nalydn mid job design. Second, H1.e HRl\1 func-
tion iuust ensuxe H:i.ai: ·'.Jy~ organizatkrn is ::.:taHed 11:rvith people who have the
k"J '~"lfl,re"1o-c. ~:<;j--;·1i ,,}-,J' 1 i~V
...{..J1...Jr '];~,-] ~.i:.r.J.J_;_.,.i
·1.:J·harr· p- a•·'- -in U...!~a..-:-·
Y>p1Pffi0n .·'-· ' ~f~Q"
0

'"''"'""-"''<;'"''IT
J! t..._.fl_ ..... ,::>r.~-f).IJLJ' •.•,....w..•.v·~.Jlt-•t.LL-/"-." ..U rl;..2)
'1'... w\IL·1 • .• i.(I
1.-_ "<PJ'f""'lT"
J:··--... l\Jl .11. •. / .il •..._ .llll ..ll.Jlf• •

the stll'ategy. This goal fa ar.hjevied plirnariJy thJ:ough recruibnent, sekchon and
placement, tr.airnLu.g, devd.opm.enri:r an.cl carf:er management-topics covered
in Chapters 5, 6,, 7 <ln.d 9. In ~)d.dih{ff~ 1 Lhe !.-Imv1 hmdion must devdop per-
1

fon.x1ance ina:nageij_IJcn;: .ind reJ.-~rard Gy::>t<S:rns that lead employees to v1rork for
' l1J(1
c _ . .•. ·~'ti\. X . ·- tlv'
.,..,1·1J·port .... r.~:. ,.
,::d......,,., "c- f:~
;i..1..~.P.;::~ ..,;"-~.,.. _;_""'~ ., .. ,,
Y.~.f~j~~-- T'
. . l.1.~:.
.-, 1::;-_
~ l-v'ci
_~ - :-.:-.. _.;!_.li:.;,,
J~'\-. '3) _t"c' nf·
"' T'..,,if'S '.-> •per·fo·t·mance
·- . ...."''1-..age•niP•·1t
.;- l .Ju.v.i .!lr .c:.11. .11.

systems ar·e coven.':d in (~h<>.pt~:r :J, and iJ1112 rnrnny issues involved in developin.g
reward e>ystcm.s are ch:~o.~~:;:.v2d in Chapters fJ through 13. In other 1:ivords, th.e
role of l:he I-m.iVi foncUo.n b~:coJn('B one uf (1) ensuring that the com.pany 11.as
th e prop.~r nun1ber of ~:p1~'~.r.:.ry!f:~£s 'Nitti i:hr.:: h~ve.b and lypes of skills requfred by
the $l::l:at~gj.c plm•w and (2) dr-~velopi1ng "'con.ti.·01' syst1Cm.s thatensuie that tl.1os.e
1

exnployees are adin.g in v 1 ays H1at pron11Jh: the e.<.:hi.evement of the goals sped.-
fied in the sl:rateP,ic c
planJ9
..
In .essence, this is 1Nhai has been ref~.:tJi··:~d tp as l:he ''vertical aJignrnenf' of
lU:;.t, 1NiHl strategy. 'V'.r.::r1:icai ::~.lig.osncnl :rne•Fk' that the HR practices and ·pro-
ce •.'<''"'' ''I'"' a;JJ.•ed '-"l' ·•ckjr-,p,o<;j·q~l'
, _,., ... ~_ .. ) C <. .. 'L. ... ~- _11..,.u ,_ .. .r• .f'J l-l ·w qfr·1'P(,""''
.ll.. •••, _ t . l .. r._,l J ••• fl'"Pc;i«·
... ,.. .... .._ .... o·{: tl1e busu·1PS<',J. B·1u{-
~~-- · .P... , "
1..... ,. • • {;.~~ -\.....0
1 1 ~-TI(
U 1e .llllU\ i.)o • _. ,

beh1rer::r1 sb:ategy and llR p:<:acHc,.~s )3 prinnariJy through people. For instance, as
lB:~,/J[ UJ.IJIV£d foorn b eiug; ;3 D:V·JiJlUfc.ictun~f of personal computers to being a fully
iJU. D.\..... • Ol ....... .ft. '""'TI""IT.1..C"' 11·~•'0Vl(:~1:"fi'
i1'-PP'l"''°i't-
0
1 1(
JC
,J·L-.J. " . ,:.r ·J!
_ 1\ _.!J.l\1-'J_ --·. J!'L.i _ of
. ...... ~yr·"'"': rl"'!)'J'
., J_.'I_
•• •} •.
1
. J. .t.._r-~ .;t
.a. '"l ded. ci"anged ''1° tJAllll...l
n-11~;.i::C""""~~V J • Jl
00
'~-;IC .\.l . , ;:) UJ\.f.11,. • •

11 1"'j·n;:-cn J. Of
•..,;r!l,..x., .:ii.. ,_,~·""'6Jlo1~·n•J•
/-'Utn.5 fif
1-.t.X.ll.JI ..iOi]!''-:IU
... . . Jic
~-· · P«i"]'~ ·Of >1\f(W 1
<,oi·;.;
.- A"''-"·'·_ ·op •· 1·1an1
.l'.JI.
. P. ..A.1..i
1fach•r:m
<:
" · · g·v 0'1' "'"S"'IDblv J .ll..'L!( C: A .ILi. .J.1. r.-..t'.t!i1 ~- •

plants, Klll\ll incr~;a.s]ngly Qll 2r;-xled r30Jtwaxe engineers to help write new " nriddle- 0

warerr prograrns, m1d .m11 .;:ix.1ncft.y of (:m1Bultm1.ts 1-\rho could help their corporate .- \·

custonlE:rn !:o irnplem.eni r!11£se sy::;leni.~} . In addiifon1 as IBM increasjngly di.ffeJ:-

enHa.ted il:sdf as bei.n1.; lhr.-~ "'integni.ted sohition:3" provider {meaning it could sell
tlte hardware, softv·m1-.e, 1.:0;1sl1Hh1g, and servke for a company's entire infonna-
lioh technology needs), (::~!1 ~ploy12en n12~!ded a m~w mindset which emphasized
cooperntn.ng across djJkrcnJ busin('SS divisiorw rather than numi.ng 1.ndepen-
denUy. Thus, the change :i.n ::,~brategy required. d ifferent khlds of sl<lJJs, different
kinds of employees, and diJfer,~r~t kinds of behavirn:s.
How does the HRM fun. cl:i.on irnplen1.e:nt strategy? As I1igure 2.7 shows, it RS
111rough admin.istering HRl\ 1 pnv:tices: job analysis/ design, reciuitment, selec- 1

tion systems training and developn.1.ent programs, performance management

1

systems, rewm:d systen.1.s, ~lnd labor rela-Hons programs. The details of each of
these BRM practices are fh.e fo1;us of the rest of this book However, at this poin.t
it is h:nportant lo pres<2nt a ge:neraJ. ove1:vjew of the I-IRM practices and illeh'. role ·I
-(
b1 s!Tal:egy imp.lementat'i.on. Vve then discuss the various strategies companies
pursue and the types of HJRJ\11. L~yste:mn cong1.Tl12nt ·vvii:h those strategies. First we
focus on h01N the strah~gk typer:> axe irnplc:men~:ed; then we discuss H1e HRJ.V[
practioes associated virifh ·11;.u'ioHs dfreo:i.:tional strntegies.

J
The HRM fru1ction can bt'. tb1JHight oJ as having six r:nenus of 1-:JP...M prac-
tices, f.rorn whJch co:m.pan:i.1.;::s can. ch.oose the on.es m.ost appropriate for
imple11:nenOng their sl:ra.t :;sy. Ea.ch of thr.?>se rne:nuri :refers to a. parhcular func~ 1

tio:nal area of HRM: job nnriJ.ysis I detiig11., 1:ecruihne:nt/ selection, lrainin.g and
J
 CH/\IPT!ER 2 Strategic Human Resource Management 87

IFage.~re i. 7l
Strategy Implement ation

I
I
I

------------------ -·--------·--·-·-----·------ -·--·--------- ------·-y_________________________________ _i_ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ j

'------ Emergent strategies

development, p erformance managemen t,. pay structure/incentives/benefits,

and labot-employee relations_Jn These menus are presented in Table 2.3.

Jc>b Au~alysis mull Desif~nn

Companies produce a given product or service (or set of products or services),
and the manufacture of these products requires that a number of tasks be per-
formed. These tasks axe grouped together to form jobs. Job a:naly5it5 is the pro- Jolb Anaiysi$
cess of getting d el:ailed information about jobs. JIQllb desig11\ addresses what tasks The process of getting
should be group ed h1l:o a particular job . TI1e v•.ray that jobs are designed should detailed information
about' jobs.
have an important tie to the slr~'ri:egy of .an organizahon because the sfrategy
requires either new ax1d differen[ tasl<s or different 1vays of performing the same
Joibi0Hi$l)fll
tasks. hl addition, because irnmy strategies entail the inti:oduction of new tech-
The process of defin-
nologies, this affects Ille 1Nay that work is p erformed.31 ing the way wori< will
In general, jobs can vary froro having a narrow range of tasks (most of which be performed and
are simplified and require a h.mited range of skills) lo havLng a broa.d array of the tasks that i"lill be
complex tasks requiring muJtiple skills. m the past, the narrow design of jobs has required in a given job.
been used to increase efficiency, while the bro<-1d design of jobs has been associ-
atiecl wiH1 efforts to increase innovation. I--foweve1~ with the advent of total quality
management mefl1ods and 11 vad2ty of employee involvement programs such as
quality circles, many jobs are mov:nng towaxd the broader end of the spechum.32
 .. .•.::.:?!...

..
88 CHAPTER 2 Strategic Human Resource Management
"
'.
r:
l;albiR~ :l.3l
IVlenu of HRM
Practice Options
Sirripletasks
f=evv skillsyeqLii1-ed
~qific job des<:d tio11s

cr-1·,,,rrn- in~~nliV~s .H
inte rnaL~llufty H
Individua l incentives

SOURCES: Adapted from R. S. Schuler and 5. F. Jackson, "Linking Competitive Strategies with Human Resource
M<inagernent Practices," Academy of Management E)(ecutive 1 (1987), pp. 207-19; and C. Fisher; L. Schoenfeldt,
and B. Shnw, l-lur)lan Resource Management, 2nd ed. (Boston: Houghton Mifflin, 1992).

fEmp~oyee Recmntme11Dit allld Se~edioo

IR0cruitmefillt JReieruHm~:nt is the process tlu·ough which the organization seeks applicants
The process of seeking for poi:ential employmerlt. :Sekction refers to the process by which it attempts
applicants for potential to identify applicants witl1 the necessary knowledge, skills, abilities, and other
employment.
characteristics that will help the company achieve its goals. Companies engag-
siai~ctiorn
jng in di~ferent strategies need different types and numbers of employees. Thus,
The proce:;s by which f:he strategy a company is pursuing will have a direct impact on the types of ·
an organization employees that it seeks to recruit aJJd select.33
attempts to identify
applicants with the
necessa1y knowledge,
IEmp~IO}riee lfn:~Rlfnhng m11d DeiPe~IOl~m!B! nn1t
skills, abilities, and
other characteristics A number of skill.s are i.nshHed in employees tluough training and development.
that will help it achieve Tm:iimlng refers to a planned effort to facilitate the learning of job-related Jr..nowl-
its goals. edge1 skills, and bchavfor by e1nployees. Development involves acquiring
 ..
C~iAPTER 2 Strategic Human Resource Mana!:Jernenl: 89

knowledge, skills, and behavior that ilnprove ern.ployees' ability to meet the Tran1111nr;119
challenges of a variety of existing jobs or jobs that do not yet exist. Changes in A planned effort to
facilitate the learning
strategies often require change:3 in the types, levels, and mixes of skills. Tims, the
of job-related knowl-
acquisition of siTategy-ndated skill.s is an essential element of 1he imple;men ta·· edge, skirls, and behav-
tion of strategy. For example, inany ccnnpanies have recently emphasized qual- ior by employees.
ity in their products, engaging tn. total quality :management programs. TI1ese
programs require e)(tensi.ve l:rainjng of all employees in the TQM philosophy,
D~~flf.l'ttGi}-'IJl~i\elii'lt
methods, and often ol:her skills Hrnl: ensuxe quality.34 The ac:quir;ition of
Through rccruihnent, seledion, training, and development, companies can l<no1Nleclge, ski/ls, and
obtain a pool of human resources capable of implementing a given strategy.35 behaviors that improve
an -employee's ability
to meet changes in
job requirements and
Perfon11mll11ce Millmng~~n111H~1rn-~ in client: and customer
.Pedm·uri.a:n.11.ce JJ.irnmonagemienft is used l:o ensme tha,t -employees' activities and out- demands.
comes are congruent with the organization's objectives. It entails specifying
those activities and outcmnes that w :Ul result :b.1 the firm's successfully imple-
W~r<ilf fonollalfi1\1Cfi?
menting the strater:;y. For -example, companies that are "steady state" (not diver-
M.t1ritt<>~l9!m~r;ut
sified) l:end to havie evalu ation systerns H1at caU for subjective performance Th e means throu9h
assessments of managers. This ste:ms frorn the fact that those above t11e fixst- which managers ensure
levet :m.anagers :in the h.ierarchy have r.:'xt~nsivie k:nowledge about how t.he work that employees' activi-
should be perfonned. On the other hand, d.iversified companies are more Wcely ties and outp ut~; are
to use quantitati.ve measures of perfonnmi.ci::: to evaluate managers because top congruent with the
organizat:ion's goals.
managers have less kno•wledge about how 1-vork should be performed by tl1ose
belov.; them in the hierarchy.JG
Similarly, executives who have extensive knowledge of the behaviors fl1at
lead to effective performance use performance inanagement systems that focus
on the behaviors of their subordinate managers. Howevei~ when executives are
unclear about the specific behaviors that lead to effective performance, they
l:end to focus on evaluating the objective pi:'rformance results of their subordi-
nate mmi.agers.3'7
An example of how perfmmance management cm1 be aligned with strategy ·
is provided in E gure 2.8. This comes from a finn in the healtl1 care industry
whose strategy consisted of five "strategic in1perati.ves,'"' or things that the com-
pany was trying to accomplish. In this compru.P.y all individuals set perfonnance

IFA~Ulllnt!! 2 .8
Percentage .of Objectives Identified in Individual Performance Plans That Are Tied to Each Strate9ic lrYl[X.,rative

~~·tn:rtes1k: J

----~:r:,ratlvo ~~~!:'.'..'.'..'.~!::.. ~':::~Z::~--~---~':'~_n_mtlc,mal .l~P.gal . ·.1·1.·· .. · H.f,\".'.'fil:"·;._!~1te.rp,r. ii>:<_

1
hwc$hnent Finan<::«
(\d1levast:;pri!rlr>r lO,!'
.>% z.
1 5o,.t>.·.
., ''lri' . . ... ·1•.·.60.:~.··.·.·. · 11 4% p 1< ! '7\0
i'ii!'li'.Hd!l p~irf61'm1:1ilte' '·' · ·'"·' ·•··· .' · '"' '" '··
-u+i;:~Zi\l:ly &~;~·;·:;,~;- --·--·-~·;:::: •· -----~1-~=·-1 - ·---- ~-/.-:O~- ----···1-"' '>P' -l~·~.l~Q-.J~Q,/~0. ...._~~
.7.~.?~<»~O+----- --·----------·--
CfJ!lf:<Jr\'l'.irS ; . t .. rto '" . .<.10 · " · - ' '" .r.. .;.t<> 1< «.. -" 18.9o/o 19.5')\> 2:3,'/'}{,
----..------ --. --- -
..... ,____., ......... -----·--··-·-·-··" -·· ______ __ .---- - ·--- ---·----·-......

_____:~-'-~---·----·~-I-- -----··'·I--~
.
_,.., ---------~-

Cr~ate great prodt.1dG ' 9 !.l"'/c · S;Qo/o. 1cid%' • · 1G.3.% I

--~;.~~~:.~':':.~.--.-·--~
"('7(
--- "
6 'lo/. 1, ··01.

0 ~
8.9%
II_ __
6/i"'/o
__ ,
Create a winnin!:f
erl\frrO!lfl'WOt.
,,-, -..0 ,
'"' .f ,o
.,> ,,,
.;.. • •7 ' 0
•• ""' 'l'"
.,, ~._ " ' 2-.<;.•._·.r"o'a
/C
30
• . ,.>JO . 33
.,01. •roL
. " ;p "'°'' 4."'tO .,' 1,.,> •,.,,1.
" '."
. .
., '"
.,.., .7 ro
•CJ •
01

·---..··---···-..·-··---..····--- ·--···-·-···---·--··-· -------···----· ·- ---..... ---·--·-····· -···-·--·---+-----+- ----- - - -- - - - - -

E~ti.lblli:h· u <:m;t '.:l'U,\% 1.4.!.1% ?0.$% ll(\~So/o· ~1', 3%'! i~;io/~ , S;.% 3f.l.G% 31.7%
..
-~~;;:i1!~~.!:. ---·-~-·-·-- _. _____1ixi% ---··'w:YX:T----·---1(}0~~ -· -· ~~:;'<1~;b 1''" ~~o·~·~~·''.' ,.~·· ~-"·"o·~0~01<-o'"i"'-~~_,_-1.o_o_"_v,,..,....,_~100°1..,
 "'"""
...
90 CHAPTER 2 St rategic Human Resource fvlanagement

objectives ead:1 yeru~ and each of their objectives have to be tied to at least one of
the strategic imperatives. The senior VP of HR used the firm's technology sys- :iJ
tem to ·c~xamine the exten t to which each business unit or function was focused
on each of the imperatives. The figure illustrates the percentage of objectives Hrnt
were tied to ead1 imperative across the different units. It allows the company to
determine if the mix of objectives is right ente1prisewide as well as within ·ead1_
business unit or function.
."l
Pay Strncturn, ~ncentfiv<e!Su alllld f31f;miefn1l:s
TI1e pay system has an_ important role in implementing strategies.- Firs!:, a high
:1
level of pay ruld/ or benefits relative to that of competitors can ensure that t.he
company attracts and retains high-quality employees, but this might haye a
negative impact on the company's overall labor costs.3B Second, by tying pay
to performance, the company can elicit specific activities and levels o:f perfor-
mance from employees.
In a study of how compensation practices are lied to strategies, research-
ers examined 33 high-tech and n traditional companies. They classified tl1em
by whetl1er they we:re in a growth stage (greater than 20% inflation-adju,s ted
increases in annual sales) or a maturity stage. They found that high-tech com-
parues in the growth stage used compensation systems that were highly geared
I
I. toward incentive pay, wil:h a lower percentage of total pay devoted to salary
and benefits. On the other hand, corn.pensation systems ainong malure compa-
nies (botl1 high-tech and h"aclitional) devoted a lower percentage of total P"'-Y to
incentives and a high percentage to benef-its.39
'.
:.· 1"1_
l

labor al!ld IEmphlyee Rela11:il{ms

Whether companies a:re muonized or not, tl1e general approach to relations
with employees can ·strongly affect their potential for gairtjng competitive
advantage. -
Companies can choose to treat employees as an asset that requires investment
of resources or as an expense to be nunimized. 40 They have to mal<e choices
about how much employees can and should participate in decision making, l

what rights employees have, and what the company's responsibility is to them. -__··. 1I
]

The approach a company takes in making these decisions can result ill it either
successfully achieving its short- and long-term goals or ceasing to exist.
Recent research has begun to examine how companies develop sets of I-:IRl\t:l:
practices that maximize performance and productivity. For: example, one study
of automobile assembly plants around the world found that plants tli_at exhib-
ited both high productivity and high quality used "HRM best practices," such as
heavy emphasis on recruitment and hiring, compensation tied to performance,
low levels of status differentiation, high levels of training for both new and expe-
rienced employees, and employee participation through shuclures such as work
tea.ms and problem-solvjng groups. 41 Another study found that HRM: systems
composed of selection testing, h·aining, contingent pay, performance appraisal,
attitude surveys, employee participali.on, and information sharing result11d :Ln
higher levels of productivity and corporate financial performance, as well as
lower employee tumover.42 Finally, a recent study found that companies iden- !H

tified as some of the "b~t places to work" had higher financial performances . '11
 if•

CMAIPTER 2 Strategic Human Resource Management 91

than a set of matched companies that did not: make the list.'13 Similar results have
also been observed in a nmnber of other studies. 44
In addition to the relationship between HR practices and performance in gen-
eral, in today's fast-changing ernrfrorunent, busirn~sses have to change quickly,
requiring changes in employees' skills and behaviors. h1 one study the research-
ers found that the flexibility of HR practices, employee skills, and employee
behaviors were all positively related to firm financial performance, but only
the skill flexibility was related to cost efficiency.15 While these relationships are
promising, the causal direction has not yei: been proven. For instance, while
effective HR practices should help firms perform better, it is also h'ue that highly
profitable fil"ms can invest lnore in HR practices.46 TI1e research seems to indi-
cate that while the relationship between practices and performance is consis-
tently positive, we should not go too far out on a limb arguing that increasing
the use of lIRM practices vvill automatically res11lt li1 increased profitability. 47

STRATEGK TYPES
As we previously discussed, companies can be classified by the generic sh'ate-
gies they pursue. It is irnportant to note !hat these genelic "strategies" are not
what we m.ean by a straiegic plan. They are merely similarities in the ways
companies seek to compete in their in.dustries. Various typologies have been
offered, but we focus on the t1No generic strategies proposed by Porter: cost and
. differentiation.4!3
According to Michael Porter of Harv;ud, competitive advantage stems from.
a company's being able to create value in its production process. Value can. be
created in one of hl\TO ways. Fixst, value can be created by reducing costs. Sec-
ond, value can be created by differentiating a product or service in such a way
that it allows the company to charge a premium price relative to its competitors.
This leads to two basic strategies. According to Porte1~ the "overall cost leader-
ship" strategy focuses on becoming the lowest cost producer in an industry. Tius
strategy is achieved by constructing efficient laxge-scale facilities, by reducing -
costs through capitalizing on the experience cw:ve, and by conh'olling overhead
costs and costs in such areas as research and development, service, sales force,
and advertising. This slTategy provides above-average returns within an indus-
try, and it tends to bar otl1er firms' entry into the industry because the firm can
lower its prices below competitors' costs.
The "differentiation" strategy, according to Porter, attempts to create the
impression that the company's product or service is different from that of others
in the industry. The perceived differentiation can come from creating a brand
im.age, from technology, from offering unique features, or from unique customer
service. ff a company succeeds in differentiating its product, it will achieve
above-average returns, and fhe differentiation may protect it from price sensi-
tivity. For instance, Dell Computer Company built its reputation on providing
the lowest cost computers through leveraging Hs supply chain and direct selling
model. Howeve1~ recently they have seen share eroding as the consmner market
grows and HP has offered more differentiated, stylish-looking computers sold
through retail outlets whi~re customers can touch and feel them. In addition,
Apple h as differentiated itself lluough its ovvn operating system fhat integrates
well w ith peripheral devices such as the iPod and iPhone. In both cases, these
companies can charge a pn~mitu:n (albeit ~ugher for Apple) over Dell's pricing.49
 .,_..,
'"
92 CHAPTER 2 Strategic Human Re.source Management

HIRM l\]IEIEDS ~W\J STRATEGK TYPES

While all of the strategic rypes require competent people in a generic sense,
each of the strategies also requires different lypes of employees wilh different
types o.f behaviors and attitudes. As we noted earlie1~ different strategies require
employees with specific skills and also requrre these employees to exhibit dif-·
IR@ie IB~havioirs ferent "role behaviors."50 R<l}Xie behavioirs are t11e behaviors reqllired of an indi-
Behaviors that are vidual in his or her tole as a jobholder in. a social work environment. These role
required of an individc behaviors var.y on a. munber of di!nensions. Additionally, different role behav-
ual in his or her role as
iors axe :required by the different sixategies. For example, companj,es engaged
a jobholder in a social
work environment. in a cost strategy require employees to have a high conce1n for quantity and a
short-term focus, to be co.mfortable with stability, and to be risk averse. These
employees are expected to exhibit role behaviors that are relatively repetitive
and performed independently or autonomously.
Thus, corn.pai1ies engaged fo' cost sb~ategies, b ecause of the focus on efficient
production, tend to specifically define the skills they requiJ:e and invest in train~
ing employees in these sldH areas. They also rely on behavioral performance
management systems 1Nith a large performance-based compensation compo·· J
n enL These companies pror.note internally and develop inten1ally consistent
pay systems with high pay differentials between sup eriors and subordinates.
TI1ey seek efficiency tJ1uough worker participation, soliciting employees' ideas
·J
on how l o achieve more efficient production.
On the other hand, employees in companies with a differentiation strategy
n eed to be highly creative and, cooperative; to have only a moderate concen1
for quan.tily, a long-tenn focus, and a tolexance for ambiguity; and to be risk
takers. Employees in these companies are expected to exhibit role behaviors that
include cooperating witlll others, developjng new ideas, and taldng a balanced J
approach to process and results.
Thus differentiation companies will seek to generate more creativity through
-t,.
+l
b roadly defined jobs w iil1 general job desc1i.ptions. They may recruit more from "
outside, engage in limited socialization of n ewcomers, and provide broader
career paths. Training and development activities focus on cooperation. ·The
compensation system is geared toward external equity, as it is heavily driven by
recruiting needs. These companJes develop results-based performance manage-
ment: system and divisional-corporate performance evaluations to encourage
risk taking on the p art of managers.SI

A study of HRM among sted minimiHs in the United States found ·that mills
pursuing different st.Tategies used different systems of HRM. Mills seeking cost
leadership tended to use control-oriented HRM systems that were characterized
]
by high centralization, low pru.:ticipation, low training, low wages, low benefits,
and highly contingent payr whereas differentiator mills used "commitment"
BRM systerns, characte:dzed as the opposite on each of those dimensions. A
later study from the same sa:mple revealed th.at the mills with tl1e cornJrnitrµent.
systems had higher productivity, lower scrap rates, and lower employee tum.-
over than tl10se with the control sy5ten:ts.
SOURCE: J, Arthur, "The Link between Business Strategy and Industrial Re lations Systems in American Steel Mini-
Mills," Industrial and Labor Relations Review 45 (1992), PP. 408-506.

----- --· - - - - -- -
 if'

CHAPTER 2 Strategic Human Resource Management 93

· DIR.IECTIONAL STRATEG~IES
As discussed earlier in this chaptex~ strategk: typologies are useful for classifying l02-6
the ways different organizations seek to compete within an jndustry. However, Describe the different
it is also necessary to tmdcrstand how increasing size (growth) or decreasing it HRM issues and prac-
tices associated with
(downsizing) affects the fl.RJv1 function. For exa1npie, the top management team various directional
might decide that they need to invest n1rn·r.:~ iu. product development or to diver- strategies.
sify as a means for growth. 1/\Jith these types of strategies, it is more useful for
the HRM function to aid h1. evaluating Uu~ feasibility of the various alternatives
and to develop programs that support the strategic choice.
Companies have u sed four possible categories of directional strategies to
meet objeclives.52 SlJ:ategies ernphasizing market share or operating costs are
considered "concenl.rntion" sh·al:egies. VVith this type of strategy, a company
.aUempts l:o focus on what ii does bes!: ~NithJ.n its .!=_s.tablished maTkets and can be
thought of as "stidd.ng to its knitting." Strategies focusing on market develop-
ment, product development, irmovation, or joint ventures make up the "inter-
nal growth" strategy. Companies with an jntern.al. growth sh·ategy channel their
resources toward building on existing strengths. Those attempting to integrate
vertically or horizontaUy m lo diversify are e1dlibiting an "external growth" iExtsrn.:>1Il Gro¥1rttfi~
:stirategy, usually through mergers or acquisitions. Tius strategy attempts to Strn'l;<'<llgy
expand a company's resources or to strengthen its market position throu gh An emphasis on
acquiring or creating new businesses. FLnaU.y, a "divesln1ent," or downsizing, acquiring vendors and
suppliers or buying
strategy is one made up of reiTendu:i.1enl:, divestib1n~s, or liquidation. These businesses that allow
strategies are observed anwng companies facing serious economic difficulties a company to expand
and seeking to pare down 1fo~ir operations. 'Ihe human resource implications of into new markets.
each of these slTategies are quite different.

Concentration StR"ategnes
toncenh'aHon strntegiies require that the company ma:inla:in the current skills Conit:afll1trratio11
llrnt exist in the organization. Tlus requU:es that training programs provide Strat~9y
a means of keeping those skills sharp among people in the organization and A strategy focusing
that compensation progra.1.ns focus on retahi.ing people who have those skills. on increasing market
share, reducing costs,
Appraisals in th.is stTal:egy tend to be n-1.ore behavioral because the envirorunent or creating and main-
is more certain, and the behaviors necessary for effective performance tend to be taining a market niche
established tlu-ough extensive experience. for products and
services.

internal Growth StR·ategies

· fole1rnal growth strategies present unique staffing problems. Growth requires !ntarm;~I !Grrowttri~
that a company constantly hire, transfe1~ and promote individuals, and expan- Stra'i:~5nr
sion into different markets may change the necessary skills that prospective A focus on new market
employees must have. In addition, appraisals often consist of a combination and product develop-
ment, innovation, and
of behaviors and results. 111e behavioral appraisal emphasis stems from the joint ventures.
knowledge of effective behaviors in a particular product market, and the results
appraisals focus on aclueving growtl-1 goals. Compensation packages are heav-
ily weighted toward incentives for achieving growth goals: Training needs differ
depending on the w ay the company attempts to grnw internally. For example,
if the organization seeks to expand its rn.arkets, training will focus on knowl-
edge of each market, particularly when the con1pany is expanding into inter-
national markets. On the other hand, 1Nh'i:n the company is seeking iiu1ovation
 ..
94 CHAPTER 2 Strateg ic Human Resource Management

or product development, b:aining will be of a more technical nature, as well as

focusing on interpersonal skills such as team building. Joint ventures requixe
extensive h·aining in conflict resolution techniques b ecause of the problems
associated with combining people from two distinct organizational cultures.

Mergiew:s. anld AcquisitioITTs

Increasingly we see both consolidation within industries and mergers across
indusiTies. For example, Procter and Gamble's acquisition of Gillette represented
~I
a consolidation, or reducli.on in the nw.T1her of firms within the indushy On the
other hand, Citicorp's merger with Traveller's Group to form Citigroup repre-
sented firms from different itn.dustries (pure financial services and irwuran.ce)
combining to change the dynamics vvithin both. Whatever the type, one thing
is for sure- mergers and acquisitions are on the increase, and HRM needs fo be
involved.53 Jn addition, these"rnergers more fJ:equently consist of global :mega.-
mergers, in spite of some warnings that these might not be effective.
According to a report by Hie Conference Board, "people issues" may be one
of the major reasons that mergers do not always live up to expectations. Some
companies now heavily weigh firm cultures before embarking on a merger
or acquisition. For example, prior to acquiring ValueRx, executives at Express
Scripts lnc. intenrievved senior executives and middle managers at tl1e potential
target fin:n h1 order to get a sense of its culture. 51 In spite of this, fewer than one-
third of the HRM executives surveyed said that they had a major influence in.
how mergers 3:re plmmed., yet 80 percent of them said that people issues have a
signifirnnt impact after file deals are finalized .55
fo addition to the desirabilily of HRM playing a role in evaluating a. mergeTL'
opporttmi.ty, HRIVI certainly has a role in the actual implementation of a merger
or acquisition. Trafo.:i11g in conflict resolution is also necessary when companies
engage in an external growU-1 sh·ategy. All the options for external growth con-
sist of acquiring or developing new businesses, and these businesses often have
distinct cultures. Thus many HRM programs face problems in ~tegrating an.d
standardizing practices across the company's businesses. The 'ielative value of
standardizing practices across businesses must be weighed against the unique
env:iromnental requiJ:ements of each business and the extent of desired integra-
tion of the two firms. For example, with regard to pay practices, a company may
desire a consistent inten1al wage slTucture to maintain employee perceptions of
equity jn the larger organi zation. In a recent new business developed by IBM,
t11e employees pressured tl1e company to maintain the same wage structure
as IBM's main operation. I-Iowever, some businesses may function in environ-
ments where pay practices are driven heavily by market forces. Requixing these
businesses to adhere to pay practices in other environments may result in an
ineffective wage structure.

Dovim:siliing .
Of increasing importance to organizations in today's competitive environment
lO>OWlfll!liR:i::iu~g is H.RM's role in d.owl!'wizing or "rightsizing." The .number of organizations
The pla nnf~d elimina- undergoing downsizing increased significantly from the third to the fourth
tion of large numbers quarter of 2008, and while Htls trend has slowed, layoffs are still significa.i."lt
of personnel, designed
to enhance organiza-
(see Figure 2.9). 56 ln fact, some of these layoffs are due to outright bankruptcies
tional effectiveness. because firms simply did not have sustainable business models. For instance the
"Competing Through Sus.tainabHity" box describes how Solyndra had a sus-
tainable product but an unsustainable business model.
 ..
CHAPTER 2 Strategic Human Resource Management 95

fig1u1rre :.? .~
Layoff Events and Separations 2004-2011
Layoffs over the past 7 years
fl00 ,000 - · .. ----- ·-·-------·---·---- ----·----~--·----------------------------r 4,000

700,000-- - 3 ,500

600,000 - -- 3,000
Separations

500,000 - 2,500

Ul
r
OJ
.gc 400,000. - 2,000 'Ci
::r,
~~ Cl)

fil· 300,000-- 1,500 Qi

:::i
.-+
VI (/l

200,000-- ·1,000

100,000-. 500

0
,_
ITT
r~
:::i
-o
CL
\II
u '-
m •IJ
c
:1
0-
~'
v
(\)
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ru
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r::
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CL
II'
u
(!) Ill
r::
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(!) :s ~o c
:.1
-,
0.
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u
Cll :u c
::i
0..
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(\) '-

2 Cl :~ 0 "'<:
0\fl 2 \.I 2 0 2 0 '- c u
(~
,_I_
I/)
.J. I
.~ 10 .. .!.
V>
.1L
""-.
I .~ I I I ] 1./1
.J. (\)
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If)
I I 1a.. \/)
.J. .,I. "' :.J
(.L
m CIJ

"'
---,
Cl.
<( --, 0u
:J
<ll
-, <(
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r:: CL :I tJ
"' <f
-, -,
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ro
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<r:
~1 0
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ti ruc1:
0 -, <( -,_o
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tJ c
ro Ci ;:;
0 -, <{ -, 0
2004 2005 2006 2007 2008 2009 2012
r = revi sed p = preliminary

SOURCE: www.bls.gov/ news.release/mslo.nr0.h1rn.

One would have g;reat dillicuhy ignming t11e massive "war for talent" that
went on during the late 1990s, particulru'ly v1rith the notable dot-com craze.
Finns during this lime sought to become "employers of choice," fo establish
"employment brands," and to develop "employee value propositions" as ways
to ensure that they would be able to attract and retain talented employees.
111e current econmnic crisis :m.e.cms that one inlporta:nt question facing firms
is, I-:fow can we develop a reputation as an employer of choice, and engage
employees to the goals of rhe firm, while laying off a significant portion of our
workforce? How firms answer this question will determine how they can com-
pete by meeting the stakeholder needs of their employees.
In spite of the increasing frequency of doV1msizing; research reveals that it is
far from universally successfol for achieving the goals of increased productiv-
ity and increased profitability. For example, Table 2.4 illusfrates the results of
a survey conducted by the American Management Association indicating that
only about one-Hurd of the companies tlmt went through downsizings actu-
ally achieved their goal of increased productivity. Another survey by the AMA
folUld that over two-thirds of !:he companies that downsiie repeat the effort a
year later. 57 Also, research by the consulting firm Mitchell & Company found
that companies that downsized during the 1980s lagged the industry average
stock price in 1991.55 11-ms it is import.ant to understand the best ways of manag-
ing downsizings, particularly from the stand.point of HRM.
Downsizing presents a number of challenges and opportunities for HRM.59 In
terms of challenges, the HRM Junction must "surgically" reduce the workforce
by cutting only the workers who are less valuable in tl.1eh' performance. Acluev-
ing this is difficult because the best workers are most able (and often willing)
 Solyndrn was a company that
tlH~ Obama adrninisl:ration
pointed to as a model of the
public-private partnership, until
ils bankruptcy, which ca used
Republirnn s to point to the
fol ly of a green-en ergy poiicy.
H owever, knowledge of busi-
industry and falling prices to the. increased
the point t hat o ne compet itor competition,
\1vas able to p roduce panels at Solyndra's revenues
less than a quarter of the cost of dropped, both from fewer sales
Solyndra . in foct, in 2009 Solyn- and lower margins. By late 201 'I
dra lost $1 72.5 m illion on rev-
enue of $1 00.5 mill ion. This le-ft
the company was forced to file
for bankruptcy and lay off 1, 100 ,.l
l
them with the choice of either employees. I

ness rnodels can help to better finding ways to reduce costs with In summa ty, while the com- ., ~.

~!)!'•.
understand what happened at the exist ing factory or building pany offered a sustainable
So lyndra and reveal that it may a larger brand nevv:foctory that product, increased competition ii{
~

have been the loan from the
government that, in fact, caused
·;:ho company's failure .
Solyndra was foun ded in
2005 based on a clever technol-
ogy that could capita lize on the
I risi nq interest in solar power.
l<ather than use flat sola r panels,
1. i:hE:: company developed a tech-
noloqy with multiple long and
thin tubes <:1ble to absorb the
sun's ray:~. With a product lighter
;cind potentially easy and cheap
to install, it attracted al most $1
billion· from influential backers.
By 2009 the company faced
an increasinqly competitive
might give them the ability to
gain economies of scale. Given
the Obai-na adm inistration's stim-
ulus package pa1-tially aimed at
promoting "green Jobs," Solyn-
dra was able to acquire a $535
million loan guarantee, encour-
a9ing the CEO Chris Gronet to
9amble on t he new facto1y.
One forn1er e)<ecutive st.:ited,
"The mindset of t he manage-
ment was if we make it, people
\Mil l buy it " However, with the
new factory cam e increased fixed
costs, including payroll (more
employees), lease payments,
and larger utility bills. And given
'
impacted its sales and its mar-
gins at the same time that it took .~!'
on greater fixed costs. In othe1- ~
words, while the company's goal .,1,:
was sustainabil ity, its business
model was unsustainable. . vti
rD~scussio~n o..u112s110~,1
How should companies balance
sustainability from a 9reen f:Jer-
spective with sustainability from
a financial perspective?
. f
SOURCE: Y. Chernova, "Loan Was Solyndra:s ~ ::.. ''~1111:;:
Undoin g," Wall Street Journal, September 16, ~ '. ;~l
2011, http://online.wsj.com/article/SB1000 ~- ~!
14240531119044917045765728722567729
48.htmL

to find alternative employment and may leave voluntarily prior to any layoff.
For example, in 1992 General Motors and the United Auto Workers agreed to an
early retirement program for individualS between the ages of 51 and 65 who had.
been employed for 10 or more years. The program provided those who agreed
to retire their full pension benefits, even if il1ey obtained employment elsewhere,
and as much as $13,000 toward the purchase of a GM car.60 ~s mentioned earli.er
in. the chapte1~ thi.s is part of GM's labor cost problem.
Early retirement programs, although humane, essentially reduce the work-
force with a "grenade" approach. This type of reduction does not distinguish

~
between good and poor performers but rather elixninates an entire group of
employees. In fact, recent research indicates that when companies dmvnsize
by offering early retirernenl: programs, they usually end up rehiring to replace '' i
I
I
essential talent within a yPar. Often the company does not ach.i.eve i.ts cost-
,I' !1
cutti.n.g goals because it spends 50 to 150% of the deparlin.g employee's salary 1n I.
::I ""'
hiring aI1d retraini.i.1.g new 1Norkers.6 1
Another HIZl\.1 challenge is to boost the morale of employees who remain after
t.he reduction; this is chscus.:s ed in greater detn.il in Chapter 5. Survivors may feel .t
96
r·
 ...
CMAIPTER 2 Strategic Human Resource Management 97

ir.~d~Re 2.4
Effects of
Downsizing on
Desired Outcomes
Reduced expe nses
·..•Jh<:'r¢i!f$i*~ii!?fMN$ > •.
_lrnprove~ _c.~.~h. fl.c)~/ ,, 24
.·. lnii~~~p@:~l};!P!iq#)\;i~{i,yifu\z _;.;,-.,
Increased return Oh investment 21

f<edu; ed bL1re ~ucr~<:y ·11

.:; 1hfri1:&;+~2Lil~.;hiMWmth1~1sihfa ····
lncrea~~ed satisfaction '14
. ···· 1'·,···;,>" .. :•.1· ~1 1 \fa- "
ncreA,11; e.e; ::,>f:l. E.. , ·.
lncre~ised

TechnologiSal advances
· · ln¢:i-¢0s.~a:rri·~'b~~ti¢;h : <'.··· .·
Avoido:mrn of a t r.1 keover 6

SOURCE: From \/Vall Street Journal by News Corporation; Dow Jone~; 8< Co, .J une 6, 199·1. Heproduced w ith per-
mission of Dow Jones Ile Company vi<i Copyright Clearance Center.

guilt over keeping the:ix jobs when their friends have been .laid off, or they may
envy tl1eir friends who have retired with aUr<1.ctive severance and pension ben-
efits. Their redu ced satisfaction vvith and co:rrnnitment to the organization may
:interfere with w ork performance. Thus the HR1VI function must maintain open
communication wi1l1 remaining employees to build their trust and commitment
rather than vvith holding informaiion. 62 All employees should be informed of the
purpose of the d oVlmsizing, the costs to be cut, tl1e duration of the downsizing,
and the strategies to be puxsued. ln addition, companies going through down-
sizing often develop compensation programs th.at tie the individual's compen-
sation to the company's · success. Employee ownership programs often r~sult
frmn downsizing, and gainshariin.g plans such as the Scanlon plan (discussed in
Chapter 12) originated. in cm:npanies facing economic difficulties.
Jn spite of these challenges, downsizing provides opportunities for HRM.
Fll"st, it often allows the com.pany to "get iid of dead wood" and make way
for fresh ideas. In addition, downsizing is often a unique opportunity to
change an organ ization's culture. In firms characterized by antagonistic labor-
1nanagement relations, downsizing can force the parties to cooperate and to
develop new, positive relal:ionships.63 Finally~ dov11nsizing can demonstrate to
top-management decision makers the value of the company's humrui. resources
to its ultimate success. The role of HRM is to effectively manage the process in a
WflY that makes tlus value lmdeniable. VIJe discuss the implications of downsiz-
ing as a labor force managernent strategy in Chapter 5.

A final component to the strategic management process is that of strategy evalu-

~ ·· · a Hon and control. Um.s far we have focused on the planning and implementa-
~\' tion of sh·ategy. Howeve1; ii is extremely ltnportant for the firm to constantly
:i:;~
.:;:~.~~
 ...
93 CHAPTER 2 Strategic Human Resource Management

monitor the effectiveness of both the strategy and the implementation process.
111.is monitoring makes it possible for the company to identify problem areas
and either revise existing structures and strategies or devise nevv ones. In this
process we see emergent strategies appear as well as the critical nature of human
resources in competitive advantage. · '

The Ro~e of Human Resouirces in Providing :

Stm"ategic Co~npetitive Advantage
Tims far we have presented the strategic mm1agement process as. including a
step-by-step procedure by which HRM issues are raised prior to deciding. on
a strategy and then HRM practices are developed to implement that strategy.
Howeve1~ we must note that human resources can provide a strategic competi-
tive advantage in two additional 'ways: tlu·ough emergent strategies and through
enhancing competitiveness.

IEMERGIEMl STRATIEG~E5
Having discussed lhe process of strategic management, we also must distingilish
between i_ntended strategies and emergent sb:ategies. Most people tlun.1<. of strate-
gies as beingproactive, rational decisions aimed towru.'d some predetermined goal.
TI1e view of strategy we have presented thus far in.the chapter focuses on intended
strategies. Intended slTategies are the result of the rational decision-maldng pro-
cess used by top managers as they develop a strategic plan. 1his is consistent with . w.~l:
, I
the definition of strategy as "the pattern or plan that integratesan organization's . ·-9

major goals, policies, and action sequences into a cohesive whole." 64111e idea of
emergent strategies is evidenced by the feedback loop in Figure 2.2'. >·m
,:i·r~ll
Most strategies that companies espouse are intended strategies. For example, ) '

when Hovvard Sd.iuJt.:: fotmded Starbucks, he had the idea of ~reating a third
place (between work and home) where people could enjoy tr·aditional Italian-
style coffee. I-le knew that the smell of the coffee and the deeper, darke1~ stronger
taste 1would attrad a new set of customers to enjoy coffee the way he thought it
should be enjoyed. This worked, but as Starbucks grew, customers began asking
if they could have non-fat rnilk in tl1eir lattes, or if they could get flavor shots in
their coffees. Schultz swore that such things would essentially pollute the coffee
and refused to offer them. Finally, after repeated requests from his store managers ·,l·:m·
1
:·h
who kept hearing customers demanding such things~ Schultz fmaJly relented.65 ,';;;

Emergent strategies, on the other hand, cons.i st of the strategies that evolve
from the grassroots of the organization and can be thought of as what orga- ]
nizations actually do, as opposed to what they intend to do. Strategy can also -'.l
be thought of as "a pattern hi_ a stream of decisions or actions." 66 For example,
when Honda Motor Company first entered the U.S. market with its 250-cc and
350-cc motorcycles in 1959, it believed that no market existed for its smaller 50:..cc
bike. However, the sales on the larger motorcycles were sluggish, and Japanese
executives running errand s around Los Angeles on Honda 50s atlTacted a lot
of attention, including that of a buyer with Sears, Roebuck. Honda found a
previously midiscovered market as well as a new distribution outlet (general
retailers) that it had not planned on. This emergent slTategy gave Honda a 50% '
·~-'(™
:,.' lj·~
•.
market share by 1964.67 ... ;.
 iCHt:\PTER .2 Strategic Human Resource Management 99

The distinction. between i11ir.::rvl·~~d «•1d c11xierg,2n1· strategies has importanl:

implications for fo.una:n ri::source man<igiem.Pnt.65 ]11E~ ne w foctlls on sh·ategic
1

HRl'A has tended t:o focufJ prhnari1y on i-nh;ir1dcd strategies. TITus HRM's role
has been seen as idenUiyinr; for top rn<inagem(>nt the people-related business
issues relevant to strategy foo:;onlation and then ckveloping tTRM systems that
aid in the implementation of the ~;h·ategic plan.
However, most emergent slTategi(;s ;:i,:re kknUfi.ed by those lower in the orga-
nizational hierarchy. n is ofi:en the rank-and-Gk~ e:rnployees VI.rho provide ideas
for new markets, new prnduds, and 1y21N ~;f-Tah~gjPs. l-IBJVI p lays an important
role in facilitaling communication lhruughou.t ihe organization, and it is this
communication that allows for <~~f~~ctiv,c: ·r:ni •-Tgcri t strategies to make their
way up to top 1nanage;rnenL Por ~~;1<nnple, Starbu ck~' F:rappucino was a drink
invented by one of the store .employees in CaJiJorn.ia; Starbucks leaders (inclu d-
ing Schultz) thought it vv-as a terrible idea. They frrught it in a number of m eet-
ings, but the employee kept getling more and 1nore inJor:mation supporting her
case for how much custornern ~:ice med to libc ii: Thr: leaders fo1.ally gave the go-
2head to begin producing il:, and iJ has bccorni::: a $1 billion a year product, and
one that has contributed to the Starbud<:s h1-<Jnd.69

A related way in which hurn<.m r.e2onn.:cs e<u1 be a somce of co1npetitive advan.-

tage is through d eveloping a bunion c:"pital pool 1J1at gives the company the
unique ability to adapl to nn evtt:r-dwnging enviro:nment. Recently managers
have become interested. i_n the idea of a ''learning organization," in which peo-
ple continually exp<:md. their cn.pacily to :oicbi~ve the rem1lts l11ey desire.7o Uris
requires the company to be in a constant stat0 of learning thTough monitor-
ing the environment, ·assisniJating inforn13tion, 1.11.aking decisions, and flexibly
resh"Ucturing to compete in fha i: ehvlron.m.enL Con1panies !:hat develop such
learning capability have a ieompetili.ve advantage. Although certain organi-
zational information-processing systf"ms can be 8.n aid, ultimately the people
(human capital) who make up the 1:ornpany prov ide !:he ravv mateda]s in a
learning organization.71
Thus, the role of hmna:n resoun.'€S in cornpeU tive advantage should continue
to increase because of the fast-paced chm1g;e characterizing today's business
environment. It is becoming increasingly dear thnt even. as U.S. automakers have
improved the quality of !:hei_r ca.rs to cornp:!c with the Japanese, these competi-
tors have developed such {Jexihk' micl ad0pi:able rnanufacturing systems that
they can respond to customer needs 111on~: gukk1yJ7 'Th3s flexibility of the manu-
facturing process allows the eKnergenl: strategy to cmne cfo:ectly from the mar-
ketplace by d el:erm.ining and responding lo the exact rrux of customer desires. It
requires, however, that the cornpany have people in place who have the skills to
s:D.J:lilarly adapt quickly. 7::1 As _Hov.rard Schultz. the founder and chairman of Star-
bucks, says, "If peop le relaJe l:o the compa.ny tlH:'.J' •.vork for, if they fonn an emo-
tional tie to it and buy :into its dreams, ::lvC'.y v.rffJ pour ;·heir heart into making it
better. When employees ho.Ve seH-•::ostecm and c>·;.~1f··•-2Gp1.~ct 111.ey can conh·ibute
so much more; to their cmnpany. tn Hwis ;knnily;. to ::h(' world." 74 'TILi.s statement
exemplifies the iJ.1.crea~:,;ing iJJtprnrLrmcc of i unnc;n w:::;co1:u·ces in d.eveloph1g and
maintaining competitive adv;:ui!ag{" .:15
 ..
100 CHAPTER 2 Strategic Human Resource Ma nag ement

\ /
""\,/
'\/
UO:A's Sitrrategk HHRM
A ccording to WEA, stratesJi C Hf~ [\~ means the suppo1t and the confirmation of ~n
o rganizational culture in whi ch the hierarchical differences are minimized and in
vvh ich co-workers have a voice. Managers have an important role in setting these
cul t ural conditions for inn ovati () n. Transparency about what is going on with!n
I ll<EA is key. This t ransparen cy invites vvorkers to think about the company and to
co tTie up with new ideas in ;rnp roving operations and in developing new prod-
ucts and services. Therefore~ , from a str"ate9ic HR perspective ll<EA tries·to attract,
select and hire people wh o ;:ire will in9 to make a contribution to this continuous
innovation.
ll<EA has become the v11orld's· -largest furniture reta il er. Due to this focus on
innovation, ll<EA is known for its attention to cost control , operational manage-
rnent focus and product innovation. ll<E/~ is known for its global expansion and
ha s locations all over the vvorld, with more than 349 stores in 43 countries.
QnJ[:ST~ONS

'L What clo you think has mad<~ ll<E:A so successful?

2. How long can 1l<EA continu e its expansion over the world and what will be
the possib le issues?
2L \/\Jhat will be the hurnan resource implications to these .issues?

.A strategic ap p roach to h uman resource manage-
ment seeks to proactively provide a competitive
advantage through the company's mos I: importanl.
asset: its human resoui:ccs. V\Thil.e h uman resources
are i:he ni.ost imp ortant asset, they are abo usually
the single largest controllable cost within the finn's
business model. The HRM function needs to be inte··
grally involved in the formulation of sh'ategy t.o iden-
tify the people-related business issues tJ.1e company
faces . Once the stra tegy has been detern1ined, HRM
has a profound impact on the irnplementation of
the p lan by developing <ind align_i11g HRivi prachces
!Jia t ensure tha.t the company has motivated employ-
ees witl1 the necessary skills. Finally, the emerg-
in g strategic role of the HRM function requires l:hctt
H R professionals iJJ the future- develop business,
p rofessional-tedmkal, change management, and
integration competencies. As you will see more
d early in later chapters, tltis strategic approach
requfre5 more than simply developing a valid selec-
tion procedure or state-of-the-art performance man-
agement systems. Only lltrough these competencies
ca.n the I-IR professional take a strategic approachto
h u m.art. resource.m.an agement.

Strategic human resomce Strategic choice, '.H Performance management, 89

management (SHH.M), 76 Job analysis, 87 Role behaviors, 92
Strategy formulation, 76 Job design, 37 External growth strategy, 93
Strategy implementation, 76 Recruib:nent, US Concentration strategy, 93
Goals, 82. Selection, 88 Internal growth strategy, 93
ExternaJ analysis, l:l2 Training, 89 Dovvnsizing, 94
Internal analysis, 83 qevelopm.ent, B9
 ;.·
CMAPlfE~~ 2
1. Pick one of youx un.ive:rsily's nia.jor sports t.enms ":t How can strategic management within the HRM
(like football or basketban). How would you cl1aJ:-
aderize that team's generic strategy? How does the
composition of the tem:n inembem (in terms of size,
speed, ability, and flO on) :relate to . thaJ sl:tategy? 5. What i:ypes of specific sl<ills (such as knowledge
Wha t: are uu~ strengths and lNIC?i'.llm.esses of the team?
How do they didah:. the lerulll's g;enerk sbrategy
and its approach to a pan::i(."t.dax gai:ne'?
2. Do you think that it is easier l:o l:ie hmnm:l :iresou.rc£s
to the sb·af:egic management process il1 large or in
small organizations? \!\Thy'?
3. Consider one of the organizatio:rw you have heell,
affiliated with. Wh at a.re rJmne examples of human
resown~ practices that were consistent with tlmt.
organization's strategy? 1flfhal: axe examplea of p rac-
tices lhat were inconsistent lArith im sb·a~eg-y?
Think of a company you have worked for, o.r find.
an allmual repolt for a crn:npany you ru:e :inl:er·ested
in wor.king fm: (Many compITTlies post their ru.mual
reports on.Hne at their website.) 111en answer th e fol-
lowing queslion.s.
O.U~STIONSi
1. How has tl1e company been affected by the trends
discussed in this chapter?
Strategy and HRM at Deita Airlines
In 1994 top executives at Delta /ill Lines faced a crucial
strategic d ecision. Delta, which had established an umi-
valed reputation within l11e i.i.":l.dustry for having highly
committed employees who delivered the highest qual-
ily customer service, had losl: more than $10 per share
for hrvo straight yeru-s. A large portion of its financial
trouble was due to th e $491 million acquiSition of Pan
lvn in 1991, w hkh vv-ti.s followed by tlw GuU V\Tar (driv-
ing up fuel cosi:s) and the early l990s 1'£cession (caus--
ing people to fly less). Its coat per available sent mile
(the cost to fly one passen.gi;:..'f one mile) w as 92.S r::ent>,
arnong lhe highest jn the industry. In ad.di.hon, it was
tlrreatened by new discount cmnpetih::rr;:i with sign.ifi-
cantly lower cosh1'·-in pmticuhr, VaJ.ujet, whid1 flew
out of Delta's Atlan ta hub. lfow could Delta snnrive
and tlirive in such an en.v:ixornnent? DeterilliPing foe
sixategy for doing so was the t:op executives' cha.Uengi~.
Strategic Human Resource Management 1 O'i
department ensure . 1.hat HRM plays an effec-
fore role in the company's strategic man,agement
process?
of financial accounting methods) do you think
I-IR professionals will n eed to h ave the business,
profossional-t.echni.cal, change management, and
integrative competencies necessary ill tl1e future?
Where can you develop each of these sldlls?
6. What are some of the key environmental variables
that you see changing in the business world today?
Vlfhat impact will. those changes have on the BRM
function in organizations?
2. Does the company use the HR practices recom-
mended in this chapter?
3. VI/hat else should the company do to deal ·with the
challenges posed by the trends discussed in this
dw.pter?
Chairman and chief executive officer Ron Allen
e.mbarked upon the "Leadership 7.5" strategy, whose
goal was to reduce the cost per available seat mile to
7.5 cents, comparable with Southwest Airlines. Imple-
menting this strategy required a significant dovvnsiz-
ing over the following tlrree years, trimming 11,458
people from if:s 69,555~mployee workforce (the latter
:number representing an 8% reduction from two years
earlier). Many experienced customer service 1·epre-
senl:ati.ves were laid off and replaced with lower paid,
inexperienced, part-tim e workers. Cleaning service of
planes as well as baggage handling were outsourced,
rermlting in layoffs of long-term Delta employees. 111e
numbers of maintenance worke.rs and flight atl-en-
dants were reduced substantially.
11le results of the strategy were mixed as financial
performance improved . but opera1ional performa.."1.ce
 ..
102 CHAPTER 2 Strategic Human Resource Management

plunrmeted. Since it began its cost cutting, its stock The present state of Delta provides further support
price more than doubled in just over two years and t:o f.hese conclusions. 'With the family ab.nosphere dis-
its debi: was upgraded. On the other hand, custom.er solved and the bond between management and rank-
complaints about dirty airplanes rose from 219 in 1993 a_nd-fil.e employees broken, employees have begun to
i:o 358 in 1994 and 634 in 1995. On-lime perforrnanclO seek other ways to gain voice and security. By fall,2001
·was so bad that passen gers joked !hat Delta stands for Delta had hNo union organizing drives under ·way
"Doesn't Ever Leave The Airport." Delta slipped from with both the flight attendants and the mechanics. In
fourth to seventh among the top 10 carriers in bag- <3.ddition, labor costs have been driven up as a n,::sult
gage handling. Employee morale hit an all-time Jo;Ar, of ihe union activity. The pilots signed a lucrative'five-
and unions were beginning l:o make headway toward year contrnct that will place them at the highest pay
organizing some of Delta's employee groups. In 1996 in the industry. In an effort to head off the organiz-
CEO Allen was quoted as saying, "This has tested our jng drive, the mechanics were recently given raises to
p eople. There have been some morale problems. But similarly put them at the industry top. Now the ~ght
so be it. You go back to the question of survival, and ii; attendants are seeking indushy-leading pay regru:d-
makes the decision ver<J easy." • l~ss of, but certainly encouraged by, the union drive.76
Shortly after, employees began donning cy.njca.I 'Die Delta Air Lines stmy provides a p erfect
"so be it" buttons. Delta's board saw union organiz- example of the perils that can await firms that fail to
ers stirring blue-collar discontent, employee m orale adequately address human resource issues in the for-
destroyed, the customer service repui:al:ion in n_1221r mulation and implementation of strategy.
shambles, and senior managers exiling i:he corn.-
pa.i1y in droves. Less than one year later, Allen wa.s O.tUJ ~STfiOINIS
fired despite Delta's financial turnaround. His firing 1. How does tl1e experience of Delta Air Lines illus-
was "not because the company was going broke, but trnte the interdependence between strategic deci-
because its spirit was broken ." sions of "how to compete" and "with what to
I. Delta's Leadership 7.5 strategy destroyed the firm.'3 compete"? Consider this with regard to both strat-
core competence of a highly experienced, highly egy formulation and strategy implementation.
skill.ed, and highly conunitted workforce that delivered 2. If you were in charge of HRM for Delta Air Lines
Jfo.; highest quality customer service in the industry now, what would be your major priorities?
BRM might have affected the strntegy by pointing out
SOURCES: M. Bramugan and E. De Lisser, "Cost Cutting at Delta
the negative impact that this strategy would have on Raises the Stock Price but Lowers the Service," The Wall Street fo1m1al,
the firm. Given the strategy and competitive environ- June 20, 1996, pp. Al, A8; M. Brannigan and J. White, "So Be It: Why
ment, Delta might have sought to implement the cost Delta Air Lines Decided It Was Tune for CEO to Take Off," The Wall
cutting differently to reduce the cost structure but pr.e- Street Jo11mal, May 30, 1997, p. Al.
s~rve its source of diiferentiation. ··

Is Dell Too Big for Michael Dell?

He's back in charge-and he may have the tough-
est job in the computer business. Welcome back,
Michael. Don't get too comfortable.
By returning to the top job at DeU Inc., replac ..
ing departing d1ief executive Kevin Rollins, founder
Michael S. Dell takes on pel'haps the toughest job i_n
the computer industry. Since mid-2005 the PC m aker
has battled problems wi.U1 customer sen.rice, quality;
and the effectiveness of its direct-sak~s model. Latdy
rivals Hewk~tt~Packru·d Co. and Apple Inc have bce.n
gaining in sales and market share. On January 31, ihe
day Rollins' s deparhlre was announced, the Round
Rock (Texas) company disclosed that its fourth·
quarter earnings and sales would fall short of analyst
estimates. It's also under scrutiny by tl'l.e Secusilies ~~r:
Exchange Commission and a U.S. alto.mey for accotmt-
i.ng frreguJ.arities.
As recently as last NoveJ:l1be1~ Dell insisted to Busi-
ness Week that Rollins's job was safe. Now, in an inter-
view, he insists the decision to p ush Rollins out started
1
Nith him. "I recommended to our board that I become
the CEO," Dell says. For years, Dell and Rollins 1!\Tere
held up as a prime example of the company's "two-
.i n-a-box" management structure, in whi.cl1 J:>A10 leaders
w orked together :i.n lockstep. When Rollins was presi-
dent, Midi.ad DeU was CEO; when Ro.liins was pro-
rno l:ed to CEO in 2004, Michael remained chamnan.
But financial performance has been deterioraling for
a whjJe now, m1.d Michael Dell apparenHy ran out of
patience in light of tl1e latest disappoinlment. "People
 CHAPTER 2
are looking forward to a d 1ange," said an analyst at
one of Dell's largest institutional shareholders. Indeed,
the company's share price jumped 3.6% in the couple
of hours after the shift was mmounced.
But does Michael Dell have what it takes to turn
the company around? It's been years si11ce he shoul-
dered day-to-day operational responsibility on his
own. Since the early 1990s, Dell has always had a
strong No. 2; back then, the company had less -than
$3 billion in yearly sales. Today it is a $60 billion com-
pany. But Dell says he has a dear plan. He believes the
company's supply chain and manufacturing can be
improved. "I think you're going to see a more stream-
lined organization, with a 1nuch dearer strategy."
But none of the paths to improve performance will
be easy. Dell doesn't have the innovation DNA of a11
Apple or even an HP, should it want to overhaul its
utilitalian products and services. Any effort to crank
up R&D would crimp m argins. Trying to win over
more consumers, the fastest-growing part of tl1e mar-
ket, may well require a move away from its direct-sales
model into retail. Tii.at could prove costly as well. Dell
himself says he doesn't anti.cipate leaving the direct-
sales model behind: "It's a significant strength of the
company." Nor d oes a b:ig acquisition seem to be an
option, given tl1at Dell has never done one in the past.
Slots to fill But standing in place also looks haz-
ardous, since Dell may n ow be slipping in its core
corporate business, too. According to a January
30 study done by Goldman, Sachs f!x. Co., Dell is
Spyker Cars
From its inception, Spyker Cars, a Dutch builder of
exclusive sports cars, has seen a histo1y of struggle
when it comes to business continuity. 111e company
was founded in 1999 by enlTeprenems Victor Muller
and Maarten de Bruijn. The name "Spyker" refers to
a car arid aeroplane manufacturing company w hich
was founded in 18130 and which went bankrupt in
1926. The Spyker logo displays the rotai.7 engine of
an airplane, as a reference to its illustrious predece_s-
sor. Spyker Carn has been involved in tJ1e business of
building sports cars from 2000 onwards~ In 2.005,-head
designer Maarten de Bruijn left the company, leaving
Victor Muller behind as Spyker Cars' CEO.
Profitability has been a challenge from Spyker's
latmch in 1999 because the company has always been
looking for equity to compensate its losses. In 2004,
Spyker Cars was listed on the Euxonext Amsterdam
Stock Exchange. Howeve1~ due to severe 10sses suf-
fered in ihe period from 7..0CJLl until 2011, Spyker was
Strategic Human Resource Management 103
losing share in business spending for PCs. (Hewlett-
Packard .is also losing share of spending, while
Lenovo and Apple are gaining.) "Dell's troubles seem
to be bleeding into its corporate business, which, up
un til now, had been a slTonghold," the report said.
Dell has also lost the top spot in the worldwide PC
market-share rankings. In the fourth quarter,
Hewlett-Packard's worldwide market share grew to
18.1 %, while Dell's share dropped to 14.7%, accord-
ing to market researcher IDC.
Dell also has several slots to fill in the executive
suite; Rollins is only the latest departure among key
managers. But for the first time in years, the tough
d1oices will be solely in the lap of the man who started
the company in his University of Texas dorm room
back in 1984. "I'm not hiring a COO or a CEO," Dell
says, "I'm going to be the CEO for the next several
years." He adds: "We're going to fi'< this business."
QU!l':ST~OINIS
l. How does the case d escribe Dell's trnnsformed
strategy over the years in terms of where to com-
pete, how to compete, and with what to compete?
2. What are the major p eople issues that exist as
Michael Dell retakes the reins at Dell?
3. How w ould HR help in addressing the issues that
Dell faces? ·
SOURCE: From L. Lee and P. Burrows, "Is Dell Too Big for Michael
Dell?" Business Week, April 4, 2007. Used with pemussion of Bloomberg
L. P. Copyright© 2013. All rights reserved.
finally removed from the Stock Exchange in 2013 ·
after failing to sign and implement a restrncturihg
agreement. In that same p eliod, Spyker also tried to
attract private equity. Attracted by Spyker's image
and persuaded by the charismatic Victor Muller, many
investors bought themselves in-but also left, feeling
disappointed. In addition, the brief adventure of tak-
ing over Swedish car manufacturer Saab failed to help
Spyker Cars in strengthening its financial position.
Looking for ways to cut costs and expenses, Spyker
Cars moved its entire production from Zeewolde (I\TL) to
Whitley, Covenb:y (UK), where in 2010 assembly work
took place in partnership with CPP Manufacturing. Vic-
tor Muller announced this as follows: "In these challeng-
ing times, a small manufacturer like Spyker has to find
ways to reduce costs as well as improve its efficiency.
By relocating vehide assembly to CPP (Manufacturing),
which was Spyker's very first conb:acting partner at
th(:! inception of our company in 2000 and has been one

...
104 CHAPTEIR :2 Strategic Human Resource Management
of our most trusted partners ever since, we secure the
future of our business." Departments such as Engineer-
ing, Sales, After-Sales, Corporate Staff and. Marketing
the "Spyker Squadron" remained in Zeewolde.
Sili.ce 2010, Spyker Cars has never stopped sl:nJ1.g-
gtiJ.11,; in its efforts to become profitable. Although the
company reported humble profits in 2012 and 2013, :i:n
Zeewolde much effort is currently being put in.to l<:eep-
ing up workforce morale. An engaged workforce detei:-
mfoes the quality and reputation of ?-high end produd,
but after the move of Spyker's production deparlmenl:s
to the UK, employees continue to feel distanced fro:oJ
the production process of the cars of which they .are
fond and to which they are much attached. However,
Spyker Cars is still soldiering on, and the fuhl.fe seems
to become brighte1~ albeit step by step.
l. J. Barney, "Fim:i. ResoUl'ces and Sustained Competitive
Advantage," Journal of Management 17 (1991), pp . .99-120.
2.. L. Dyer, "Strategic Human. Resource Management a..•d
Planning," in Research in Persmmd and Humrm Re5ouras
J\1anagement, ed. K. Rowland and G. Ferris (Greenwkh,
CT: JAI Press, 1985), pp. 1- 30.
3. P. Ingrassia, "GM's Plan: Subsidize Our 48-Yea:r-Old Refo·-
ces," Wall Street Journal, February 19, 2009, hltp://onlinc.
wsj .com I article /SB123500874299418721 .html.
4:. S. Terlep, and N. King, "Bondholders say GM's Plan Fails
to Tackle Jssues," Tiie Wall Street Journal, February 19, 2009,
h tip: I I online.wsj. com/ article I SB 123500467245718075.
html ?mod== testMod.
5. J. Quinn, Strategies for Change: Logirnl Incrementalism
(Homewood, IL: Richard D. Irwin, 1980).
6: M. Porter, Compelitive Stratcgij: Techniques for A nalyzing
Industries and Competitors (New York: Free Press, 1980).
7. R. Miles and C. Snow, Organizational Stralegi;, Structu re,
and Process (New York: McGraw-Hill, 1978).
8. P. Wright and G. McMahan, "TI1eoretical Perspectives for
Strategic Human Resource Management," Journal of M1m-
ageme11t 18 (1992), pp. 295- 320.
9. D. Guest, "Human Resource Management, Corporate
Performance and Employee Well-Being: Building the
Worker into HRM," Journal of Industrial Relations 44 (2002),
pp. 335-58; B. Becker, M. Huselid, P. Pi.nckus, and M.
Spratt, "HR as a Source of Shareholder Value: Research
and Recommendations," Hum.an Resource l\1anagemc:n t 36
(1997), pp. 39-47.
:ro. P. Iloxall and J. Purcell, Strategy and Human Resource Ma11.-
ageme11t (Basingstoke, I-Iants, U.K.: Palgrave MacMillan,
2003).
11. F. Biddle and J. Helyar, "Behind Boeing's Woes: Omnky
As3embly Line, Price War with .Airbus," The Wall Streel
12.
Journal, April 24, 1998, pp. Al, A16.
K. Martell and S. Carroll, "How Strategic Is HP.Jv17 "
Hunum Resource Managemerit 34 (1995), pp. 253-67.
13. K. Golden and V. Ramanujam, "Between a Dream ancl. a
Nightmare: On the Integration of the Hu.man Re3ourc!~
::·~
·_.,J
,.)
.. ::
~­
i". ~-.m
.· I
QUllEST!Oii\'15
l. How couJ.d a Human Resource manager h elp
Spyker Cm:s gei a maximum benefit from the moti-
vation.al efforts described int.his case?
2. Do you think outsourcing would ·be harder on
employees jn a small. company such as Spyker Cars
tlwn in a large corporation? Why or why not? How
could HRl\II help to smoothen the transition? j
3. W11at addiiional developments described in Lthi:3
chapte1· could help Spyker Cars live out the high
value it attributes to learning and umovalion?
SOURCES: Spyker verhuist naar Engeland. www.auloblog.nl/
J
archive/2009 /11 /20 I spyker-verhuist-naar-engela.nd; Spyke.r verdwijnr
van de bems. www.volkskrant.nl/vk/ nl/2680/Economie/article/ ·
tletail/3493710/2013/08/ 16/Spyker-verdwijnt-van-de-beurs.dhtn:i)..
]
.Accessed 6111 May 2014.
Function and the Strategic Business Planning Process,"
Human Resource Management 24 (1985), pp. 429-51.
14:. P. Vlhight, B. Dunford, and S. Snell, "Contributions of the
Rcsomce-Bascd View of the Firm to tJ1e Field of Sb:ategk
I-m.Ivl: Convergence of Two Fields," Jormzal of Management J
27 (2001), pp. 701- 21.
15. J. Purcell, N. Kinnie, S. Hutchinson, B. Rayton, and
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j
16. P. M. Wright, T. Gardner, and L. Moynihan, "111e Impact
of Human Resolll'ce Practices on Business Unit Operating
and Financial Performance," Human Resource At1.tmagement ': I
j
Joumal 13, no. 3 (2003), pp. 21-36.
17. C. Hilland G. Jones, Strategic Management Theory: An Inie-
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15. W. Johnston and A. Packer, Workforce2000: Worlc and Work-
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19. "Labor Letter," I11e Wall Street Journal, December 15, 1992,
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Huma;z Resource Manage111e11f 5 (1994), pp. 301-26. J
21. P. Buller~ "Successful Partnerships: HR and Strategic Plan-
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22. M. Hitt, R. Hoskisson, and J. Har rison, "Strategic Compet-
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23. P. Wright, G. McMahan, B. McConnick, and S. Shennan,
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Determinants of HR Effectiveness and Refinery Perfor-
mance." Paper presented at the 1996 International Fed-
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J
2.4. N. Bennett, JJ. Ketchen,· and E. Schultz, "Antecedents
and Consequences of Human Resource fotegration wilh
St:rate/P.c Decision Making." Paper presented at the 1995
' ;{. "I
 ...
CHAPTEIR 2
Academy of Management j\l!eeting, Vancouver, DC,
Canada.
25. Golden and Ramrumjarn, "Betv1reen a Dream and 'J
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26 . .J. Galbraith and R. Kazanjian, Strategy Implementation:
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27. 13. Schneider and A. Konz, "Sirategic Job Analysis," Human
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28. P. Wright and S. Snell, "1crward an Integraliv" View of
Strategic Human Resource Management," Human Resource
Ma1111geme11t Review l (1991), pp. 203--25.
29. S. Snell, "Control Theory in Strategic Human Resource
Management: The Mediating Effect of Administrative
.lnformalion," Academy of Managemenl' Journal 35 (1992),
pp. 292-327.
30. R. Schuler, "Personnel and Human Resource Manage-
ment Choices and Organizational Strategy," in Readingp_ ,
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H.. Schuler, S. Youngblood, and. V. Huber (St. Paul, MN:
West, 1988).
31. J. Dean and S. Snell, "Integrated Manufacturing and Job
Design: Moderating Effects of Organizational Inertia,"
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33. J. Olian and S. Rynes, "Orsanizational Staffing: Integrat-
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34. G. Smith, "Quality: Small and i\1idsize Companies Seize
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36. J. Ken~ "StrategicControl through Performance Appraisal 49. C. Lawton, "How HP Reclaimed Its PC Lead over Dell,"
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37. Snell, "Control Theory in Strategic Human Resource
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38. B. Gerhart and G. Mill.wvich, "Employe£ Compensa-
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39. D. Balkin and L. Gomez-Mejia, "Toward a Contingency
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10.
1 S. Cronshaw and R. Alexande1~ "One Answer to the
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41. P. l.VlacDuffie, "Human Resource Bundles and Manufac-
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'11. M. Huselid, "TI1e Impact of Human Resource Manage-
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(1995), pp. 635-72.
43. B. Fulmc1~ B. Gerhart, and K. Scott, "Are the 100 Best
Better? An Empirical Investiga1ion of the Relationship
Strategic Human Resource Management 105
between Being a 'Great Place to Work' and Finn Perfor-
mance," Personnel Psychology 56 (2003), pp. 965-93.
14. J. E. Delery and D. H Doty, "Modes of Theorizing in
Strategic Humal). Resource Management: Tests of Univer-
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·work Practices, Turnove1~ and Productivity: Evidence
from New Zealand," Academy of Management Journal 44
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"Business-Unit-Level Relationship between Employee
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Capital Index®: Human Capital as a Lead Indicator of
Shareholder Value" (2002).
45. M. Bhattacharya, D. Gibson, and H. Doly, "The Effect5 of
Flexibility in -Employee Skills, Employee Behaviors, and
Human Resource Practices on Firm Performance," Jormial
of Management 31 (2005), pp. 622-40.
Resource Management and Corpotate Performance in
the UK," British Journal of Induslrial Rela.l:ions 41 (2003),
pp. 291-314; P. Wright, T. Gardner, L. Moynihan, and
M. Allen, "The HR-Performance Relationship: Examin-
ing Causal Direction," Personnel Psychologtj 58 (2005),
pp. 409-76.
47. P. Wright, No Strategy: Adaptive to tlze Age of Globalization
(Arlington, VA: SHRM Foundation, 2008).
48. M. Porter, Competitive Advantage (New York: Frei? Press,
1985).
June 2007; "Can Dell's Turnaround Strategy Keep HP
at Bay?" September 2007, Knowledge@Wharto11, http:/ I
knowledge. wharton . upenn.edu I article.cfm?article
id=1799. -· ··
50. R. Schuler and S. Jackson, "Linking Competitive Strategies
with Human Resource Management Practices," Academy
of Management Executive 1 (1987), pp .. 207- 19.
51. R. Miles and C. Snow, " Designing Strategic Human
Resource Management Systems," Organizational Dynamics
13, no. 1 (1984), pp. 36-52.
52. A.· Thompson and A. Strickland, Strategy Fonnulation and
Implementation: Tasks of the General lv1.anager, 3rd ed. (Plano,
TX: BPI, 1986).
53. J. Schmidt, Making Me1gers Work: The Strategic Importance of
People (Arlington, VA: SHRM Foundation, 2003).
54. G. Fairclough, "Business Bulletin," The Wall Street Jounwl,
March .5, 1998, p. Al.
55. P. Sebastian, "Business Bulletin," The Wall Street Journal,
October 2, 1997, p. Al.
56. W"lNw.bls.gov I news.release/mslo.nro.gov.
57. S. Pearlstein, "Corporate Cutback Yet to Pay Off," Wash-
ington Post, January 4, 1994, p . B6.
58. K Cameron, "Guest Editor's Note: Investigating Orga-
nizational Dov.msizing-Fundamental Issues," Human
Resource Management 33 (1994), pp. 183-88.
.59. 1/1/. Cascio, Responsible Restructuring: Creative and Profit-
able Alternatives to Layoffs (San Francisco: Berrett-Koehler,
2002.).
 '"
106 CHAPTER 2 Strategic Human Resource Management
60. N. Templin, "UAW to Unveil Pact on Slashing GM's Pay-
roll," TI1e Wall Street Journal, December 15, 1992, p. A3.
61. J. Lopez, "Managl,ng: Early-Retirement Offers Lead to
Renewed Hiring," Tiie Wall Street Joumal, Janumy 26, 1993,
P· Bl.
62. A. Church, "Organizational Downsizing: \lllhat Is the Role
of the Practitioner?" Ind1l5trial-Organi:zational Psychologisf
33, no. 1 (1995), pp. 63-74.
63. N. Templin, "A Decisive Response lo Crisis Brought Ford
Enhanced Productivity," TI1e Wall Street Journal, December
15, 1992, p. Al.
64. Quinn, Strategies for Change.
65. H. Schultz and D. Yang, Pour Your Heart Into It (New York:
Hyperion, 1987).
66. R. Pascale, "Perspectives on Strategy: The Real Story
behind Honda's Success," California Management Review 26
(1984), pp. 47-72.
67. Templin, "A Decisive Response to Crisis."
68. P. Wright and S. Snell, "Toward a Unifying Framework fo r
Exploring Pit and Flexibility in Strategic Human Resource
Management," Academy of Ma·11agement Review 23, no. 4
(1998), pp. 756-72.
' '
69. H. Behar, It's Not about tlie Coffee: Lessons for Putting Peo-
ple First from a Life at Starbucks (New York, l.\JY: Penguin.
Group, 2007).
70. T. Stewart, "Brace for Japan's Hot New Strateg-y,'' Fo,-t:une,
September 21, 1992, pp. 62- 76.
71. B. Dunford, P. Wright, and S. Snell, "Contributions of the
Resource-Based View of the Firm to the Field of Strategic
l-m.M: Convergence of Two Fields," Journal of Mariagemenl
27 (2001), pp. 701-21.
72. C. Snow and S. Snell, Staffing as Strategy, vol, 4 of Personnel
Selection (San Francisco: Jossey-Bass, 1992).
73. T. Batten, "Education Key to Prosperity-Report," Houston
Chronicle, September 7, 1992, p. lB.
74. Sdml.tz and Yang, Pour Your Hearl Into It. -
75. G. McMal1an, University of Texas at Arlington, personal
communications.
76. M. Brannigan, "Delta Lifts Mechanics' Pay to Top
.·.~1
:' \
of Industry Amid Push by Union," The Wall Street
Journal Interactive, August 16, 2001; M. Adams, ''Delta
May See Second Big Union," USA Today, August. 27,
2001, p. rn.
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1-\fter reading this chapter; yo u shou ld be abl<:! to: ·"·;·:H.·~.·

lO 3-~ Identify the three branches of 9ove rnme nt and the role each plays in ~
influencing the le9al envirornn<?ni of human resource man;:igement pa9e 1 '/I] · ; ~~
:\~

;.·,~·:;
List t he major fede1-;-) l laws t hat require equal employment oppo1-tuni1..y
and the protection s p rovided by each of these laws. page 112
;;: 11~
tl.03-3 Discuss tlw roles, r9 sponsib ilitir~s, r.111d requi r,3rnents of the foder<:1I agenci•~:. · ' 1'.~
ti~
responsible for enforcing equal employment opportunity lavvs. page J.20

Identify the three theories of discrimination under Titl e VII of the Civil Rights );: ii
Act and apply these theo ri es l:o different discrimination situation'3. page '/ 23 :: i~
·l ~· l
ILO 3,.5 Discuss the legal issues involved w ith preferential
treatrnerrt programs. page 13.5

LO 3°6 Identify behavior th at constitutes seJ<ual harassment, and list things

that (.lri o rgar1izatio11 can do to eliminate or minimize it , eage LJ6

ILO :~Fl Identify the rnajo r 1:11·ovisions of the Occupr:;tional Safety and Health /..\ct
('l 970) and the right s o f e111p loy(~ (:;s t hat are 9ua ran teed by this act. page 14 'i

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Popular re~tail(:'ff Forever;;: 1 i::: no '.ltrarn::,it~r to the ei rtFJloyees are still teenagers. Like most t eenag-
court roorn - · it h a ~; already !-)<X~ n •;iJc d sevc2 ra ! er3 \Nho need money to pay fol' their growing
tirm"s for copyriqht irrfrin;3ctTH:nt. Th i~3 tirrK; how· indeFK~n clence they started working. fo r Forever
evor~ t hing<.; are difFe rr;,:nt bc-)e<:1w;c it i~:; bc:i n1_ :J :;ucd 21 vvhi lst the y were still in hig h school and under
in a ckl'.3'.> action !aw::;uit in ~~ an h·;Jncisco Su pc'· the a~y:c) of 18. A.s with most young peopk-: they
rior Court by its o wn e ni ploye"Y>. /\ cla s:>·-a ctio n " - bftcn d o not understand their rights when they
iawsuit i ~; w fK~n :c;e v2 ral pcop k~ r:wt to9eth(-: 1 lo sl:a 1-1: wockin9 . H owever th ere are rul es because
fi9ht for srnneth in9 that ha:; happenr;;d to a iarq E' thi~se employees are su pposed to be in hi9h
group ')f pf-)op!c. schooi, doing other th ings and not just vvorking.
In tiv-} c<Jse ol Fo nc:vor 2 i, five yrnm9 E)rnp ioy- These employees are young and vulnerable and
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afl:er thei r '.:;hill'.i h ad enck~d or du rinq thoi1 h inch Ernploye1--:is have the right to be tre::rt,,?.cl in a
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bag chr::ckc_; :,cl th;~1l: the: corripa nv c;,w1 ::_;e<:l rch fur vvhich en·>ures the employees have appropri--
sto k,' n r<K·rdvmck;') ::inc! i hi· =. i:: :>upf::>Os::;r~l 1.:-1 !:y~ ate interview questions and cover discrimination
don1.=; l:)1c.fun:: th e wurker:; dock 01 .1 ;:_ ba";ed on age, race, disability, sex, nationa l o rigin,
1--l oi.AJ(!W~ r, the cn11::iloyct01'.:; dailn t h;::it Fon.:;vc:r n-:li9ion, pay and worki ng conditions, benefits,
2 ·1 frer:p J<mtly ke pt th lml in the store~; <:Tite r ll )•c;i r leave, privacy, h ealth and safet.;, injuries and ill-
sh ifr i1 ;1 cl (;nde d o r du rinq t h (~ir lunch brn.:)ks to ness, and co ntinue until the employee leaves thr::,~
,;earch for ~ •tolo n n1erc h a11dis:,~. Tfv~y leGI th ;i i: \ob. Do you think Forever 21 took advantage of
the lx1q checks we1<2 p;Jri: of tl10ir ~:;:-rnployrncnt i l:s ornployees?
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dv:.~cb should bn corni)<:'!n::>atcd und d '.i thc~y had
already docked o ut, thi:; ;:H•·iountxl to unpaid
l;1bor an d so thr:y an'' '.:>cdc_i119 ck1n1acy:):e,; frorn thr:
co m pany.
The c•·,'..i 8 is ~lbout e rr1olov<:)C rioht; a nd
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http://www.r·euters.com/article/20 12/01/19/tagblogsflndl<iwcom201 ~2-
frcesnte rprise-idUS339218840820120119; http://kwhs.'Nharton.
11penn. 8du/201 ;:/01 /a-forever-21-lawsui t-highlights-the-importance-
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...
110 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety

J.n. the opening chapte1~ -i:vc discussed. ~he enviromnent of the HRlV[ fun.d:ion,
and we noted that several envfronmental factors affect an organization's I-fPJ\fj(
function. One is the legal environment, particularly the laws affecting the rr\<f- _J,
I

agement of people. As the troubles at vVahna.rt indicate, legal issues CaJll cause
serious problems for a company's success and survival. In this chapte1~ we fiTst I
present an ovenriew of the U.S. legal system, noting the different legislative
bodies, regulatOl)' agenc:les, and judicial bodies that determine the legality of
J
certain HfRM practices. Vlfe then discuss the major laws and executive orders
that govem. these practices. _
One point to make dear at the outset is that managers often want a hst of" dos
and don'ts" that will keep them out of legal trouble. They rely on rules such as
"Don't ever ask a female applii;:<:l!lt if she is married" witl1out understandin.g the
"why" beh.jnd these rules. Clearly, certain practices are illegal or in.ad.vi.sable,
and this chapter will provide some valuable tips for avoiding discri:m.inatiol!l
lawsuits. Howeve1~ such lists are not compatible witl1 a strategic approach to
HRM and m:e certainly :not the route to developing a competitive advantage.
J
They are simply medlanical reactions to the situations. Our goal is to provide
an understanding of how tl1e legislative, regulatory, and judicial systems work
to define equal employment opportunity law. Armed with this tmderstanding, a
manager is better prepared to manage people within the limits jmposed by the
legal system. Doing so effectively is a source of competitive advantage. Doing so
ineffectively results in. competitive disadvantage. Rather U1m viewing the legal
system. as a constraint, firms illat embrace tl1e concept of diversity can often find '
that they are able to leverage the differences among people as a tremendous ::~
jJI
competitive tool.

The legal System mn the Unmted States . ' .

llO 3~'11
Identify the three
TI1e foundation for the U.S. legal system is set forth in the U.S. Constitution,
which affects HRM in two ways. Fil'st, it delineates a citizen's constitutional J
branches of govern-
rights, on which the government crumot impinge.1 Most individuals are aware
ment and the role each
plays in influencing
the legal environment
of the Bill of Rights, the first 10 amendments to the Constitution; but other
amendments, such as the f ow~teenth Am.endment, also influence HRM prac-
j
of human resource tices. 11u~ Fourteenth Amendment, called the equ.al protection dause, states that
management. all individuals are entitled to equal protection under the law.
Second, the Constitution established three major governing bodies: tl.11.e leg- J
islative, executive, and judicial brandi.es. TI1e Constitution· explicitly defines
tl1e roles and responsibilities of ea.ch of ihese branches. ·Each branch has its
own areas of autl1ority, but these areas have often overlapped, and the borders
between the branches a.re ofteAi blun:ed.

The legislative branch of U1e federal govenunent consists of the House of Rep-
resentatives and lhe Senate. 'These bodies develop laws that govern many HRl\1
J
activities. Most of the laws stem from a perceived societal need. For example,
during the civil rights movement of the early 1960s, the legislative branch
~
 ...
CMAIPTfEli't 3 The Legal Environment: Equal Employment Opportunity and Safety 111

moved to ensure thal: various minority grou.ps received equal opportunities

in many areas of life. One of U1ese areas v1Tas employment, and thus Congress
enad:ed Title VII of the Civil Rights AcL Shnilar perceived societal needs have
brought about labor laws such as the Oocupalional Safeiy and Health Act, the
Employee Retirement Incorne Secw·H:y Ad, H1e Age Discrinrination in Employ-
ment Act, and, more recently, !he J\m.edcauns vvith Disabiliiies Act of 1990 and
the Civil Rights Act of 1991.

EXECUTIVE BRANCH
The executive bran.ch consists of the president of lhe United States and the many
regulato1y agencies the president oversees. Although the legislative branch
passes the laws, the executive branch affects these laws in many ways. First~
the president can propose bills to Congress that,:n passed, would become laws.
Second, the president has lhe powe:r to veto any law passed by Congress, thus
enmuing t11at few lml\TS are passed \Nithout presidential approval-which allows
tl1e >.president to influence how lia~Ns are WlliU:en.
Third, H1e regulatory agencies, under the authority of the president, have
responsibility for enforcing the laws. TI-ms, a president can influence w h at
types of violations are pursued. For example, many laws affecting employ-
ment discrimination are enforced by the Equal Employment Opportunity
Commission under the Departm.ent oif Justice. Du.ring President Jimmy
Carl:er's administration, the Deparh:nent of Justice brought a lawsuit against
Birmingham, Alabama's, fire department for not having enough black fire-·
figMien.>. This suit :resulted in a consent decree that required blacks to receive
prefere:nlial breatmenf: :in hhing and p:rnmolion decisions. Two years later,
du:dng Ronald Reagan's administration, the Department of Justice sided with
white firefighters in a fa'lNSuit against ili.e city of Birn.1jngham, alleging that the
preferential treatment required by llhe con.sent dectee ·discriminated against
white firefighters.z
l1omth, the president can issue executive orders, which sometimes regulate
the adivities of organizations that have contracts with the federal government.
For example, Executive Order 11246, signed by President Lyndon Johnson,
requb:ed aU ·federal contractors and subcontractors to engage in affirmative
action programs design.ed to hire and p:rmnote women and minorities within
their orgauizaHons. Fifth.,. the president ran influence foe Supreme Court to
interpret laws in certain ways. When pm:ticulady sensitive cases come before
the Couxt, the attorney generall, representing the executive branch, argues
for cedain preferred ouJcomes. Fm' examph:, one court case involved a white
female schoolteacher lNhO was laid off from her job in favor of retaining a black
schoolteacher with. equal se:nio:rity and pedormance with the reason given as
"diversity.'' 1he white woman filed a fawmui~ in federal com't and the (first)
Bush administration filed a brief on he1· behalf, arguing that diversity was not a
legitimate reason to use :rcace in dedsion ma.kin.go She won in federal court, and
the school district appealed. Tlhe CJinton admiuislTation.,. having been elected in
the meantime, filed a brief on behalf of the school dishict, arguing that diver-
sity was a legitimate defense.
Finally, the p resident appoints aU the judges iil tli.e federal judicial system,
subject: to approval from 1th.e legislative b:ranch. This affects the inta.p retation of
many laws.

"/ '
 ...
112 CHAPTER 3 The LH9al Environment: Equal Employment Opportunity and Safety

'
I
I•
!

IlJ) :l~2 Equa.~ Emn~1!oymen't Opporturrdty

List the major federal
laws that require equal
employment oppo1~
tunity and the protec-
tions provided by each
of these laws.
IEqllllaR IEmpHoymelilt
Off>pcrt11J1lill~li.)f (IEIEO}
The government's
attempt to c~nsure that
all individuals have an
. equal opportunil.y for
employment, regardless
of race, color, reli9ion,
se!<, age, disabilit)r, or
national origin.
lEq.uru ierw.llpfoym~Dllt iopp@diuurnify (iEJEO) refern to the goverrunent's atieu1pi: to
en3ure thai: all individuoJs have an equal chance for employment, :regru:cUess of
race, cofo:i.~ religion, sex, age, disabillty, or national origin. To accomplish this,
111.e federul govermment has used constitutional amendments, legislation1 and
executive orders, as weU as the court decisions that interpret these laws. (How-
ever, equal employment la1Ns are not the same in aJJ countries.) TI1e major EEO
laws we ,Jiscuss a:re swnmarized in Table 3.J..
co~~S1lTlfllJJ'fl((JllMAl AME~JIDMER\ns
Thnrtem11f(ri] Arn10n11dmelfil[
11.i.e Thfrt.eenth Am.endxnent of the Constitution abolished slavery :in lhe United
States. Though one might be hard-pressed to cite an example of race-based slav-
ery in Ilic United States today, the Thirteenth Amendment has been applied
iPods, iPhones, iPads, and
i-everythings have become
almost ubiquitous in pop culture.
While consumer demand for t he
products continues to incr~}ase,
some are focusing more atl:<.:?n--
tion on the 1/\lorkin9 conditions
under which they are produc-ed.
One of Apple's major sup-
pliers is Fo)(conn , also known
as Hon Hai Precision Industry
Co., located in Shem:en, China.
In 201 ·1 fourteen employeAs at
Fo)(conn either committed oi-
tried to commit :<>uicicle by jump··
in9 from th1:} bui ldi ng. While the:!
suicide rate was not beyond that
of th e suicide rate of the la1·g<:ir
Chinese population, the suicides
were attri buted to th<~ lonq
working hours. The company's
initial response was to put nets
to catch would-be jurnpers.
An audit of its workplace prac-
t:ict~s found that Foxcorm \f\fr1 S
in violation of Chines(~ law and
Apple's policies at three plants,
and the company pledged to
bring its overtime policies into
alis1nment 1Nith China's legal
requirements, which require that
employees work no more than
nine hours of overtime per vveek.
While this sounds positive, in
fact a number of employees do
not like the ne\IV limits.
/:\ number of employees at the For instance, Hon Hai's labor
plant want to \Nork more than 15
hours of ove1·time per vveek. One
ernploy<~e noted, "I think a lot
to the more experienced people
from the technology production
l im~s \Mi ll leave," once the over-
time limit s:1oes into effect.
One th'a o ne hand, the
increasingly t ight labor market
is causing a numbe r of Chinese
companies to pay hi9her wages
and invest in better vvorking
conditions in order to attrad: and
retain en1ployees. For instance,
Hon Hai ha~:; increased wages,
opened an office with mental
health professionals to counsel
employees, added recreational
facilities, and offers training
courses as well
as high-school and
college degree programs~
However, the increasing costs
cut intQ their margins, causing
them to eJCplore moving their
· operations to lower cost coun-
tries such as Viet11am or Me)cico.
costs will increase by rough ly
$1.4 billion, but its operating
profit margin has declined. All
this highlights the challenge
that globalization poses for
companies seeking to compete
through low labor costs.
DISCUSSION OUIESTllQN
How much should U.S.-
based companies irnpose an
"American" vi~;}W of what con-
stitutes "acceptable workin9
conditions" in countries and
with workers who do not neces-
sarily see its importance?
SOURCE: P. Mozur, "Foxconn Wo rke rs Sa)r,
'Keep Our Overtime,"' \Nall Street Journa l,
December 12, 2<H2, p. 81 ..

in cases ·where 111.e discrimfoation ii•volved !he "badges" (symbols) and "inci-
dents" of slavery.

fmu·teenir~h Amem:i1m1elfirfi:
The Fomteentll Amendment fm;bids the states fJ:om taking life, liberty, or prop-
erly without due process of law and prevents the states from denying equal
protection of the laws. Pa~>sed imniediately after the Civil \Alar, flus amendment
originally applied only to discrimination against blacks. It was soon broad-
ened to proted other grou.ps such as aliens and Asian-Americans, and more
recently it has been applied to the protection of virhites in allegations of reverse
discrirninalion. In Bakke v. California Board <f Regents, Alan Bald<e alleged that
he had been discriminated againBi: in the selection of entrants to the Univer-
sity of California al: Davis medical sdlool. 4 The university had set aside 16 of
the available 100 p laces for "disadvantaged/! applica.n ts who were members of
racial minority groups. Under lhis quota system, Bakke was able to compete for
only 8<1 positions, whereas a minority applicant v\Tas able to compete for all 100.

.
...

- - ----- -
 ..
11 (J, CHAPTER 3 The Leqal Environment: Equal Employment Opportunity and Safety

with respect to his cmnpe:nsati.on, terms, conditions, or privileges of e:mploy-

ment because of such individual's race, color, religion, sex, or national origin, or
(2) to limit, segregate, or classify his employees or applicants for employment in
1: .
.

any '111ay that would deprive or tend to deprive· any individual of employment
opportunities or otherwise adversely affect his status as an emplOyee because
of such individual's race, colm~ religion, sex, or national origin." The act applies
:1
to organizations with J5 or more employees woi:king 20 or more weeks a year
that are ]nvolved :in iriterntate commerce, as weU as state and local govenunents, ·il
!.i i
: J .,
''ii
em.ployment agencies, and labor organizations. • '. 11

Age Dns;cwnmination iITTl IEmp~oyment Ad (AD!EA)

Passed. in 1967 and amended in 1986, this act prohibits discrimination aga:i11st
e.1.nployees over the age of 40. 11:1.~ act almost exactly rrtin:ors Title VII in terms of
its substantive provisions and the procedures to be foJlowed in pursuing a case. 6 . ':.~

As with Title VU, the EEOC is responsible for enforcing tllis act
The ADEA was designed to protect older employees when a firm reduces
its v1..rorkforce through layoffs. By targeting older employees, who tend to have
higher pay, a firm can substantially .cut labor costs. Recently, fums have often
offered early retirement in.centi.ves, a possible violation of the act because of 1l1e
focus on older employees. Early retirement incentives require employees to sign
an ag1:eement waiving their rights to sue under the ADEA. Courts have tended
to. uphold tl''l.e use of early retiremeni:incenlives and waivers as long as the indi-
viduals -vvere no1t coerced into signing the agreements, the agreements were pre-
sented in a way that the employees could understand, and the en1ployees were
given enough lirne to mal<e a decision. 7
However, age discrimination complaints make up a large percentage of H1e
complainJ:s fiJed with the Equal Employment Opportunity Co1mnission, and
the number of complaints continues to grow whenever the economy is sluw.
For example, as we see in Figure 3.1, the cases increased during tlle early 1990s

IFR!fJMff'<£' 3. 'ii
Age Discrimination Complaints, '199 1-2012
r.·.
25,000 . 24,582 23 "''5
J~~-
-;
""'""' "• 23,264 ';,::::'· 22 857

IF
Jill
15,719 15,705 JC. 1"1

' ~",;.E
·~ !)-

1997 i9!!8 1999 2000 2001 2002

SOU RCE: Equal Employment Opportunity Commission, at http://eeoc.gov/stats/adea .html.
 '"
CHAP'fHt 3 The Legal Environment: Equal Employ'.11ent Opportunity and Safety 1·~1

when many fir.ms were downsizing, but 111e number of cases decreased as the
economy expanded. 'U11e number of charges increased agah1 as th.e economy
began slowing again. in 2000 and again '!Arith the recent recession in 2008. This.
ofi:en stems from firms seeking to lay off older (and thns higher paid) employees
when fhey are downsizing. The~>e rnses can be ir.ostly; most cases are settled out
of court, but such seUlem.ents n . m from $50,.000 1to $400,000 per employee.8 Xn.
one recent case, Scherin.g--Plough fired 3S-year employee Fred Maiorino after
· he twice failed l:o acc.ept an early retiJ.;ement offer made to aU sales representa-
tives. After he.axing testimony fhat Maimino' s boss had plastered his file with
negative paperwork aimed al: fid.ng h.ii..m , rather than. hying to help him improve
his perfonna:nce, the jurors unanimously decided he had been discriminated
against because of his age. Th.~~y .r:n11rarded him $435,000 in compensatory dam-·
ages a:nd $8 million in punitive darHages. 9

The VoGJ1tuoU11.a~ IR~hailbifl~ita~norrn Arct of 'fi 973

This ac! covers· executive agencies and contxaci:ors aun.d subcontxactors that
receive more H1a:n $2,500 annually fmrn the federcaJ. government. It requires
them. lo engage in affinnative adion. for in.dividuals with disabilities. Congress
. designed this acl: to encourage employers to actively recruit qualified individ-
uals 1N.ith dRsabHities and to n1.ake l\',~asonabh-:: accommodations to allow them
to become active members of the labor market. The Employment Standards
Adminit:;lration of the Depaxtnien.t of Labor enforces lthjs ad.

Vietnam fErn Veterarn ':s ~<Gadl.~~H$tme!rfft Aa:t of 19741-

Shn:iJar to the Rehabilitation Ad, ~his ad requires federal contractors and sub-
contractors to take affrr:m.ative action l:owaxd employing Vietnam veterans
(those serving between Augmit 5, 1964, and May 7, 1975). TI1e Office of Federal
Contract Compfomoe Programs (OFCCP),. discussed. later in this chapte1> has
auth.oritv
-'
to enforce this act

Pregnlam:y Disuijmiffnatnon-fl .Aa:~a:

Tite Pregnancy Discrimination Act ii.s an amendment to Title VIl of the Civil
. Rights Ad. H: makes illegal discrinunation on the basis of pregnancy, childbirth,
or related medical conditions as a form of unlawful sex discrimination. An
employer cannot refuse to hire a pregnant woman because of her pregnancy, a
pregnancy-related condition, or tl1e prejudices of co-workers, clients, or custom-
ers. for instance, in. a recent court case, the retail store Mof11erhood Maternity,
a Philadelphia-based maternity clothes retaile1~ settled a pregnancy discrimi- ·
nation and retaliation lawsuit brought by ~he Equal Employment Opportunity
Commission (EEOC). U1ie EEOC had charged that H-1.e company refused to hire
qualified female applicants because they were pregnant. As a result of the set- ·
tlement, Motherhood Mate:i::nily agreed to a Hm~e-year consent decree requir-
ing them to pay plaintiffs $375,000, adopt and distribute~ an. anti.discrimination
policy specificaUy p rnhibitin.g discrin1inatio:n on the basis of pregnancy, train its
Florida eimployees on the n£V\l policy, post a notice of resolution of the lawsuit,
and provide hllTke a year reports to the EEOC on any pregnancy discrimination
complaints.10

- -- -- - - -- · ~ --
 ...
113 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety

fo addition, regarding pregit1<u1cy a_nd 1natemity leave, employers may not

single out pregnancy-related condiHons for special procedures to deter:mine an
employee's ability to work, and if an einployee is temporarily una]Jle to perform
during her pregnancy, the employer must h'eat her the same as any temporar-
ily disabled employees. The act also :requfres that any health insurance must
cover expenses for pregn..ou.1_cy-related conditions on the same basis as costs for
other medical cond_itions. Fin.ally, pregnancy-related benefits cannot be limited
to married employees, and if an employer provides any benefits to workers on
leave, they must also provide f:he same benefits for those on leave for pregnancy-
related conditions.
Recently i.he EEOC fifod suit against HCS Medical Staffing, Inc., for alleg-
edly discriminating against a p regnant employee an_d then firing her while she
was ·on maternity leave. According to the EEOC' s suit, owner Ch arles Sisson
engaged in escalating negative'-€omments about !:he upcoming mate1nily leave
of HCS bookkeeper Roxy Leger. He allegedly j11sisted that Leger 's pregnancy
w as a joke, described her maternity leave as "vacation," and insisted that n1ater-
njty leave should be no longer fr1an two days. Sisson then allegedly tenninated
Lege1~ who had no prior negative co:n:nnents on her work performance, seven
days after she gave birth by caesarean section.11

(~VH~ Raghts Ad o~ 19~H

The Civil Rights Act of 1991(CR/\1991) runends Title Vil of the Civil Rights Ad
of 1964, Section 1981 of fhe Civil Rights Act of 1866, the Americans with Dis-
abilities Ad, and the .Age Discrimination in Employment Act of 1967. One major
change in EEO law unde:r CRA 1991 has been the addition of compensatory and
punitive damages :in cases of disc1im:ination under Title Vil and the Americans
with DisabjJities Act. Before CRA 1991, Title VII limited damage claims to equi-
table relief such as back pay, lost benefits, front pay in some cases, and attor-
neys' fees. and costs. CRA 1991 allows compensatory and punitive damages
when intentional or reckless discrimination is proven. Compeilsatory damages
include such things as future pecuniary loss, emotional pain, suffering, and loss
of enjoyxnent of life. Punitive damages are meant to discourage employers from
discrimin.ati:ng by providing for payments to the plaintiff beyond the actual
damages suffered.
Recognizjng that one or a fe"v\r discrimination cases could p u t an organization
out of business, tlms adversely affecting many hmocent employees, Congress
has put llimits on tl1e amount of punitive damages. Table 3.2 depicts these funits.
As can be seen, damages range from $50,000 to $300,000 per violation, depend-
ing on the size of the organization. Punitive damages are available only if the

Maximum Punitive
Damages Allowed
under the Civil
Rights Act of 1991
 CMAPllEFt 3 The Le gal Environment: Equal Employ_ment Opportunity and Safety 1 ·17

when many finns were downsizing, but !he number of cases d ecreased as the
economy expanded. The number of charges increased agall.1 as the economy
began sfowing agai.n in 2000 and a.gain ·viritll th.e recent recession m2008. Tilis.
ofl:en stems from firms seeki.ng· to lay off okJer (and iJms higher p aid) employees
when they are downsizi:ng. Ther.>e cases can he .r.osHy; most cases are settled out
of court, but such settlements .nu.1 from mso,ono ito $400,000 per employee.8 In
one recent case, Scherdng-Pfough fixed 3Ei-yea:r employee Fred Maiorino after
· he lwice failed to accept an early retiiement offer made to aU sales representa-
tives. After hearing testimony that Ivfo.iorino's boss had plastered his file with
negative paperwork aimed al: foing him, r.a!h~r than hyh'"lg to help him improve
his performa:no~, the jurors .unanimously decided he had be.en discriminated
against because of his <:1ge. Th.~~y av r<.Ltded hinc1. $435,000 ill compensatory d am..
1

ages and $8 million in purtH:ive daiuages. 9

n1e Vocatncm.a~ 1!1~h4:n lbin~nta~:liofill Atet 11Ji' 191'3

This ad covers· executive tl.gencies and omlTaci:ors run.cl subcontractors tl1at
receive more t11an $2,500 annually from the fedenal government. It requires
!:hem lo engage in affirmative adion for :individuals with disabilities. Congress
. designed this act to encourage employers to actively renu it qualified individ-
uals 1Nith dRsa.bHities and to make n~asonabk:: accommodations to allow them
to become active members of the labor mark.et. The Employment Standards
Ad.J.niillsliration of the Depmt1nen.t of Labor enforces ah~s ad.

Vietnam fErn Veternrn':s R~~~~~ ~flstment Ac~ of 1974

Si:rnilar to the Rehabilitation Ad, Hus act r£quires federal contractors and sub-
contractors to take affir:rnat:i.ve action l:owaxd employing Vietnam veterans
(those serving between Augumt 5, 1964, and May 7, 1975). TI1e Office of Federal
Contract Compliance ProgJC.ams (OFCCP),. discussed later :in this chapter, has
auth.oritv to enforce this acL
J

Pregm~m::y Dis 1(:n·nm ornatno w~ .~\(ca:

The Pregnancy Discri.Ininahon Act Jis an amendment to Ti.tle VU of the Civil
Rights Ad. ll: makes illegal discr:inunation on the basis of pregnancy, childbirth,
or related medical conditions as a form of unlawful sex disc1imination. An
employer cannot :refuse to hire a pregnant woman because of her pregnancy, a
pregnancy-related condition, or foe prejudices of co-workers, clients, or custom-
ers. for instance, in a recen.l: court case, the retail store Mof11erhood Maternity,
a Philadelphia-based maternity clothes ret:aile1~ settled a pregnancy discrimi-
nation and retaliation. lawsuit brought by the Equal Employment Opportunity
Commission (EEOC). 'H1ie EEOC had charged that tl-1.e company refused to hire
qualified female applicants because they V1rere pregnan t. As a result of the set-
tlement, l\foth.erhood Maternity agTeed to a Hm~e-year consent decree requix-
ing them to pay plaintiffs $375,000, adopt and d.islribute an. anti.discrimination
policy specifically prohibiting disc:rin1inalion on t:he basis of pregnancy, train its
Florida employees on the new policy, post a notice of resolution of the lawsuit,
and. provide twice a year reports to the EEOC on any pregnancy discrimination
complaints.10
 ...
1118 CHAPTER 3 The Legal Enviro nment: Equal Employment Opportunity and Safety

fo addition, regarding pregnancy and 1naternity leave, employers imay not

single ouJ pregnancy-related condiHons for special procedm:es to determine m1
employee's ability to work, and if an employee is temporarily una~Jle to pe:d01m
during her pregnancy, the employer must treat her the same as any temporar-
ily disabled employees. The act also requires that any health insurance must
cover expenses for pregn.au.1.cy-related conditions on the same basis as costs for
oiher medical conditions. fin.ally, pregnancy-related benefits cannot be limited
to married employees, and if an employer provides any benefits to w orkers on
leave, they must also provide the same benefits for those on leave for p regnancy-
related conditions.
Recently the EEOC filed suit against HCS Medical Staffing, Inc., for alleg-
edly discrilninating aga:hwt a p regnant employee and then firing her while she
w as ·on maternity leave. According to the EEOC' s suit, ovvner Charles Sisson
engaged in escalating negative'·€Omments about the upcoming mate1nily leave
of HCS bookkeeper Roxy Leger. He a.Hegedly h1sisted that Leger 's pregnancy
w as a joke, described her :maternity leave as "vacation," and insisted that. mater-
nity leave should be no longer fr1.an two days. Sisson then allegedly terminated
Lege1~ who had no prior negative corm.nents on her work perform.a.i.o.ce, seven.
days after she gave birth by caesarean section.11

Cnvi~ RHghts Ad o~ 19~H

The Civil Rights Act of 1991 (Cilt\ 1991) runends Title VII of the Civil Rights Acl:
of 1964, Section 1981 of the Civil Rights .Act of 1866, the Americans with Dis-
abilities Act, and the Age Discdminalion in Employment Act of 1967. One major
change in EEO law unde1' CRA 1991 has been the addition of compensatory and
punitive damages in cases of d.isc1i.m.ination under Title VU and the Arnericans
w ith Disabilities Act. Before CRA 1991, Title VU limited damage claims to equi-
table relief. such as back pay, lost benefits, front pay in some cases, and attor-
neys' fees and costs. CR.A J.991 allows compensatory and punitive damages
when intentional or reckless discrimination is proven. Compeilsatory damages
include such things as future pecuniary loss, emotional pa.in, suffering, and loss
of enjoym.ent of life. Punitive damages are meant to discourage employers from
discriminating by providin.g for payments to the plaintiff beyond the actual
damages suffered. ·
Recognizing that one or a few discrimination cases could put an organization
out of business, thus adversely affecting many innocent emplbyees, Congress
has put limits on the amount of punitive damages. Table 3.2 depicts these funi.t5.
As cam be seen, damages range from $50,000 to $300,000 per violation, depend-
ing on the size of the organization. Punitive damages are available only if the

Ma)(imum Punitive
Damages Allowed
under the Civil
Rights Act of 1991

--- ---·-·- - -- - - -
 CH/.-\PTH~ 3 The Legal Environment: Equal Employment Opportunity and Safety 1! 19

. ernployer intentionally discrirninated against the plaintiff(s) or if the employer

discriminated with rnalice or reckless indifference to the employee's federally
protected rights. TI1ese damages are excluded for an employment practice held
to be unlawful because o:f its disparate impact.1 2
The addition of dan:iages to CRA 1991 has had two immediate effects. First,
by increasing the potenlial payoff for a successful discrimination suit, it has
increased the nurnber of suits filed against businesses. Second, organizations
are nmv more likely to grant all employees an equal opportunity for employ-
ment, regardless of their race, sex, religion, or national origm. Many organiza-
tions have felt the need to rr1.ake the composition of their workforce mirror the ·
general population !:o avoid costly lawsuits. This act adds a financial incentive
for doing so.

Amerncim:s wTit~ll roas.f]~mitot0s J~c!: (ADA) iof 19.91Dl

One of H1e rnost far-:reach:ing ads concerning the management of human
resources i~> l:h.e All1tM~l!."n~~mntr3 wiriiJh Diis<i\billiltiiic[l. .Ad. 'This act protects individuals Am'fffl'i(aUlm wtttii
with disabilities from being discr:i.rninated against :in the workplace. It prohibits Dlsalblllftt:aes Act
discrimination based on disability in all employment practices such as job appli- (ADA) t0f 1990
cation procedures, hiring, hril1g, p romotions, compensation, and h'aining-in A 1990 act prohibit-
ing individuals with
addition to other ernploy1ne:nt activities such as advertish--ig, recruitment, ten- disabilities from being
ure, layoff, leave, and fringe benefits. Because 1J1is act is so new, we will cover its d iscriminated against
various stipulations individually. in the workplace.
'Hie ADA defo1es a disability as aphyskal or mental impairment that substan-
l:ially limits one or more major liie achvilies, a record of having such an impair-
menl, or being regarded as having such an impairment. The first part of the
definition refers to individuals who have serious disabilities-such as epilepsy,
blindness, deafness, or paralysis-that affecl: their ability to perform major life
. acl:ivil:ies sncb a~:> walking, seeing, performing manual tasks, leaining, caring for
oneself, and working. 111e second part refers to individuals who have a history
of disability, such as sonu~one v11ho has had cancer but is currently in remissionr
somPon~~ 'with a history of rnenl:al illness, and someone with a history of heart
disease. '01.e third part: of the definition, "being regarded as having a disability,"
refers, for example, to an individual who is severely disfigured and is denied
ernployrnent because an employer fears negative reactions from others.13
Thus the ADA covers specific physiological disabilities such as cosmetic dis-
figurement and anatomical loss affecting the neurological, musculoskeletal, sen-
t>ory, respiratory, cardiovascular, reproductive, digestive, genitourinary, hemic,
or lymphatic systems. In addition, it covers mental and psychological disorders
such as rnental retr:irdation, organic brain syndrome, emotional or mental ill-
ness, and learning disabHities. However, conditions such as obesity, substance
abuse, eye and hair colo1~ axi.d leftha:ndedness are not covered.14
In addition, the Ai:nedo:ms •Nith Disabilities Act Amendments Act (ADAAA),
effective January 1, 2009, broadened the scope of who is considered to be an
individual with a disability. It states tl1al: the definition of disability should be
broadly consh:uecl and that the "questi_on of whether an individual's impair-
ment Is a disabilify under the ADA should not: demand extensive analysis."
111e Supreme Comt had interpreted the term "substantially limited" in a major
hfe activity to require the :individual to be "signilicantly restricted," but the
AD AAA state~;; l:hat this is too high a standard and directs H1e EEOC to revise its
'
I·

I
I
I
..
I ~ 20 CMAPTER 3 The Legal Environment: Equ<ll Employment Opportunity and Safety

regulations to set a lower 3tandard. Also, regaJ:ding the term "regal'ded as dis-
abled," previously employers could avoid liability by showing that ifo:~ impafr-
ment did not substantially limit a major life activity. However, the ADAAA
states that an employee can prove he or she was subjected to
an illegal ·act ' ! ·~
''·..
'·.·.. ~
"because of an actual or perceived physical or mental impairment whether m i ~

n ot the impainnent limits or is perceived to limit a major life activity." lln fact, in
response to the ADAAA, the EEOC has clarified and somewhat redefined "dis-
ability." According to their mosi: recent guidelines, a disability is defined along
three so-called "prongs": a physical or mental impairment that "substantially
limits one or more major life activity," a record or past histmy of such an impair-
ment; a~1d/ or being "regarded as" having a disability by an employer whether
you have one or not, usuaUy in terms of hiring, firing, or demotion. In essence,
a person is considered disabled not only if he or, she cannot DO sometlring,
but just because he or she has· a medical condition whether or not it impairs
fundi.oning.15

Executive orders are directives issued and a.Jn.ended unilaterally by the ptes- ~
ident. These orders do not requll'e congressional approval, yet they have the Jl
force of law. Two executive orders directly affect HRM.

Exett:Mtnve OnjJer 1124~

President Johnson issued this executive ordet~ whid1 prohibits discri:n1i.n.ation
based on. race, colo:rr, religion , sex, and national origin. Unlike Title VJJ, this o.r<leR'
applies only to federaJ conLTactors and subcontractors. Employers receiving
more H1an $10,000 f-rom the federal government must take affirmative action .
to ensure against discrim.ination, and those with conlTacts greater than $50,000.
must develop a wri.tten affirmative action plan for each of their establishments
.
. JI
within 120 days of the beginning of the contract. The Office of Federal Contract
Compliance Programs enforces this execulive order.

-
!Executive Order 1141S.
President Richard M. Nixon issued this order,. which requires the federal gov-
ermnent to base all its employment policies on merit and· fitness, and specifies
that race, color, sex, religion, and national origin should not be considered. (The
U.S. Office of Pe:rsmmel Management is in charge of this.) The order also extends
to all contractors and subcontractors do1ng $10,000 worth of business with the
federal government. (TI1e relevant govenurient agencies have the responsibility
to ensure that the contractors and subcontractors comply with the order.)

ILO 3-3
Discuss the roles, Enforceme.nt of t{laua~ Emp~oyment
responsibilities, and
requirements of the Opporta1u11ity · :·1··,,
".;_ ·.1iJ
iJ,
federal agencies ' ,. ii~
responsible for enforc-
As discussed previously, the executive branch· of the federal government
ing equal employment bears ~nost of the responsibility for enforcing aJl EEO laws passed by the
opportunity laws. legislative branch. In addition, the executive branch must enforce the
 CHAiPTE~ :1 The Legal Environment: Equal Employment Opportunity and Safety 121

executive.orders issued by the p:resid.enL The tvvo agencies responsible for the
~nforcement of these laiA~s and execufore orders are the Equal Employment
Opportunity Cornxnission and the Office of Federal Contract Compliance Pro-
, grams, respectively.

EQUAl EMPLOYMENT OPPO~TUMHY COMMIS510ti\ij (EEOC) !Eqiwai Empioym~1r11t

Opportulllify
An independent federal agency, the EEOC is responsible for enforcing most of Commimsl@in (IEIEOC)
the EEO laws, such as Title VTI, the Equal Pay Act, and the Aroericans with Dis- The government com-
abilities Act. The EEOC has Huee major responsibilities: investigating and resolv- mis;ion to ensure that
ing discrimfrmtion complaints, gathering information, and issuing guidelines. all individuals have an
equal opportunity for
employment, regard-
less of race, color,
im1estn9atio01 m11d Resoh.fl'&Qoirn religion, sex, age,
Individuals who feel they have been discriminated against must file a complaint disability, or national
with the EEOC or a sinlilar state agency with.1.n 180 days o.f the incident. Fail- origin.
Uie to file a complaint 'NiiJ1in the 180 days results in the case's being dismissed
imm.ediately, with certain exceptions, such as the enactment. of a seniority sys-
tem that has an intentionaHy discrin.unatory purpose. For instance, the recent
Lilly Ledbeiter Fair Pay Act signed by President Obama was crafted in direct
response to the 180-day window. Ledbetter had been an area manager at the
C:oodyear Tire and Rubber plant in P.Jabama frmn 1979 to 1998, during which
time she received lower raises than the males. The differences were such that by
the end of her ·G:U"eer she was making $6,700 less per year than her male coun-
terparts, and because pension payrncnts were related to the salary at the time of
retirement, she received smaller pension payments. When she filed the lawsuit,
the Supreme Court ruled Iha.I the illegal acts were tJ1.e pay raise decisions them-
sebre::~ (which foll far outside the 180-day window); Ledbetter wanted to argue
that every time she received a pension check lower than her peers it served as an
act of d iscrimination. Thus, Congress passed the act specifying that an "illegal
act:" occurs when (1) a discriminatory compensation decision is adopted; (2) an
employee becomes subject to the decision; or (3) an employee is affected by it
application, including each time eompensation is paid.
Once the complaint is Wed, the EEOC takes responsibility for investigating
the claim of discrllnination. TI1e complainant must give the EEOC 60 days to
investigate the complaint. lf tl1e EEOC either does not believe the complaint
to be valid or fails to complete t11e ]nvestigalion, the complainant may sue in
federal court. H the EEOC determines that discrimination has taken place, its
representatives will attempt to provide a reconcilialion between the two pal'ties
without. burdening the court system with a lawsuit. Sometimes the EEOC enters
into a consent decree wiH1 the disclimiriating organization. This decree is an
agreen-.ent between the agency ;md the organization that the organization will
cease certain discdnunatory practic-es and possibly inBti.tute additional affirma-
tive action practices to rectify its history of discrimination.
lf the EEOC cannot com~~ to an agreement 'iNith the organization, it has two
options. Erst, ii: can issue a "right to sue" Jtetter to the alleged victim, which
certifies that the agency has investigated an.d fmmd validity in the victim's alle-
gaiions. Second, although kss likely, the agency may aid the aJleged victim in
bringing suit in federal court
 122 CHAPTER 3 The Legal Environment: Equal Em1:)loyment Opportunity and Safety

~11dormatk~H11 Gatherh119
111e EEOC also plays a :role in monitoring ihe hiring practices of organizatio115.
Each year organizations w ith 100 or more employees must file a n~port (EEO~l)
witl1 the EGOC that provides the number of women and minodties employed
in nine different job categories. The EEOC computer analyzes these reports
to identify patterns of discrimination that can then be attacked through class-
aclion suits.

~ssuairAoe of GlUndelalfftes
A third responsibility of the EEOC is to issue guidelines that help employers
determine when il1e:ir decisions are violations of the laws enforced by the EEOC.
These guidelines are not la1Ars them.selves, but the courts give great deference ;to
them when hem:jng employment d.iscrim.iJ.1ali.on cases. ·
For example, the Uniform Guidelines on Employee Selection Procedures is a set
of guidelines issued by the EEOC, the Department of Labor, the Deparbnent ~~·fr~
of Justice, and the U.S. Civil Service C01m1ussion.l6 111is document provides
guidance on the ways an organization should develop. and administer selec- : 11~ .?
.· ~
tion systems so as not to violate Title VU. The courts often refer to the Unifonn

· i1}~
-'~,,.
Q,~-~i
Guidelines to determine whetl1tT a company has engaged in discriminatory con- ·=

duct or to determine the validity of the procedures it used to validate a selection '
system. Another example: Since tl1e passage of the ADA, employers have been •
. ·i.:-• •

1. somewhat confused about the act's implications for their hiring prncedures. . ~~!i
': .· vtl~·
'
Therefore, the EEOC issued guidelines in the Federal Register that provided. more •.

detailed information regarding what the agency will consider legal and illegal ·~
employment practices concerning disabled individuals. Although companies
are well advised to follow these guidelines, .it is possible that courts wiU inter-
pret the ADA differently from the EEOC. 1fo1s, through the issuance of guide-
lines the EEOC gives employers directions for making employment decisions
that do not conflict with existing laws.

OFFKE Of flEDIERAl COINITRACT COMPUA~~CIE PROGRAMS (OfCCI?)

1Ultiii:zatiom1 Anaiyg;is The OFCCP is tbe agency responsible for enforcing the executive orders that
A comparison of the cover companfos doing b usiness ·with the federal govenunent. Businesses with
race, sex, and ethnic contracts for mo.re than $50,000 cannot discrh-n.inate in employment based on
composition of an
employer's workforce
race, colo1~ religion, national origin, or sex, and they must have a written affir-
with that of the avail- mative action plan on file.
able labor supply. These plans have three basic components.17 First, the utmzatiou analysfa
compares the race, sex and eifo.uc c01..nposition of the employer's workforce
1
Goaijs .n1T1Jdl
wi!:h that of the available labor supply. For each job group, the employer must
T!matalb~a$
identify H-1.e percentage of its iNOd<force with that characteristic (e.g., female)
The pa1t of a writ-
ten affirmative action and identify the percentage of ·workers in the relevant labor market with that
plan that specifies the characteristic. If the percen.tage in the employer's workforce is much less than
percentage of women the percentage in the comparison group, then that minority group is considered
and minorities that 1
to be 'm.1derutili.zed."
an employer see/cs to Second, the employer must develop specific goals and lime~ables for achiev-
have in each job group
and the date by which ing balance in the workforce concerning these charm::teristics (particularly where
that percentage is to underutilization exists). Goals and timetables specify the percentage of women
be attained. and m.inorities that the employer seeks to have in each job group and the date
 ...
CMAPTIEG~ 3 The Legal Environment: Equal Employment Opportunity and Safety 123
.
by which that percentage is to b e attained. 'These are not to be viewed as quotas,
whidl entail setting aside a specific number of positions to be filled only by mem-
bers of the protected class. Goals and timetables are much more flexible, requiring
only that tl1e employer have specific goals and take steps to achieve those goals.
Jn fact, one study that examined companies with the goal of :increasing black
employment foun d that only 10% of them actually achieved their goals. Although
this may sound discouragingly low, it is important to note that these companies
jncreased their black employment more than companies that set no such goals.18
Titixd, employers will1 federal contracts must develop a Ust of action steps Adiolil £11:1flps
they will take tow ard attai."'l.ing their goals to reduce underutilization. The com- The written affirmative
pany"s CEO must make it dear to the entire organization that the company is plan that specifies what
an employer plans to
·committed to reducing underutilization, and all management levels must be do to redL1ce under-
involved in the planning process. For example, organizations can communicate utilization of protected
job openings to women and minorities through-publishing the company's affir- groups.
mative action policy, recr uiting at predominantly female or minority schools,
participating in progrnms designed to increase employment opportunities for
underemployed groups, and removing mmecessary barriers to employment.
Organizations must also take .affirmative steps toward hiring Vietnam veterans
and individuals with disabilities.
The OFCCP ammally audits goven1ment contractors to ensure that they
actively pursue the goals in their plans. These audits consist of (1) examining the
company's affiTmative action plan and (2) conducting on-site visits to examine
how individual employees perceive the company's affirmative action policies. If
the OFCCP finds that the contractors or subcontractors axe not complying with
the executive o:rde1~ then its representatives may notify the EEOC (if there is evi-
dence that Title VII has been violated), advise the Department of Justice to insti-
tute crinunal proceedings, request that the Secretary of Labor cancel or suspend
any current contracts, and forbid the firm from bidding on futuTe contracts. 111is
last penalty, called debarment, is the OFCCP' s most potent weapon.
Having discussed ille major laws defining equal employment opportunity .
and the agencies that enforce tl1ese laws, we now address the various types ' ·
of discrimination .and the w ays these forms of d iscrimination have been inter-
preted by the courts in a number of cases.

Types of Discrimh1ation
How would you know if you had been discriminated against? Assume that you LO 3-Jil
have applied for a job and were not hired. How do you know if the organization Identify the three theo-
decided not to hire you becau se you are unqualified, because you are less quali- ries of discrimination
under Title VII of the
fied than the individual ultimately hired, or simply because the person in charge
Civil Rights Act and
of the hiring decision "didn't like your type"? Discrimination is a multifaceted apply these theories to
issue. It is often not easy to determine the extent to which unfair discrimination different discrimination
affects an employer's decisions. situations.
Legal scholars have identified tlwee il1eories of discrh11.ination: disparate treat-
ment, disparate impact, and reasonable accommodation. In addition, there is pro-
tection for those participating in discrimination cases or opposing discriminatory
actions. In the act, these theories are stated in very general terms. -However, the
court system has defined and delineated these theories tbxough the cases brought
before it. A comparison of tl1e theories of discrimination is given in Table 3.3.
 ;,·

124 CHAPTER 3 The Legal Environment: Equal Emplo yment Opportunity and Safety

T~bmie 3.3
Comparison of Discrimination Theories

Employer's defensEi Pn:iduce a legitimate, non·· Pro~,;:~· that the employment

cHscri rnin afory teasonfor" practice bear~s a mani- busin ess necessity,
the employtr;ent decision fest relationship 1Nith job undu e har·dship, or
oi· showbona fid e occupc1- pe rformance direct· t hre at to health or<

Equitable relief (e.fh bci ck Compensatory and

pay) punitive damages (if
discrfrninatlon was irrten- .
tiona l or employer fa iled >

to show good faith

efforts

DISPA~AJE TREATMENT
Dnsparnte Dispmcai\:e ltreal"ntcent. exists when individuals in similar situalions are treated
Trnatm11m1l: differently and the different treah:nent is ba.3ed on the individual's race, coloi:,
A theo1y of discrimina- religion, sex, national origin, age, or disability status. If two people with the
·.~ll"
-~' i ·~·

' il iJ
tion baS€!d on diffe rent
same qualifications apply for a job and the employer decides whom to hire
treatments given to
individuals because
based on one individual's race, the individual not hired is a victim of dispaxatle
of their race, color; treabnent In the disparate treatment case 111.e plaintiff must prove that there was
religion, se)(, national a discriminatory motive--that is, that tli.e employer intended to discriminate.
origin, age, or disability Whenever individuals are treated differently because of their race, sexr or the
status. W<e, tllere is disparate t]['eabment For example, if a company fails to hire women
.w ith school~age children (dain:dng the ·women will be frequently absent) but.
hires men with school-age children, the applicants are being treated differently
based on sex. Another example would be an employer who checks tl.11.e :refer··
ences and investigates the conviclion records of minority applicants but does
not do so for white appli0:mts. Why are managers advised not to ask about
marital status? Because in most cases, a 1nanager will either ask only the female
applicants 01~ if the manager asks boH1 m.ales <md feinales, he or she will make
different assumptions about. fern.ales (such as "She will have to move if her hus-
band gets a job elsewhere") ~'1.nd males (such as "He's very stable"). fo all these
 ...
CMAl?Tft:J~: 3 TIFJ Legal Environment: Equal Employment Opportunity and Safety '125

examp les, notice t hat (J ) peoplii:' are being trcealed differently and (2) there is an
actual intent to treat tlvan differ•2n.d y. "9
· :for instance, 11te Timken Company n::cenfly agreed to a $120,000 settlement
ove}: a sex and dis;;)bility d.iscri.Injrn1tion suit. In 2007, Carmen Halloran applied
for a full-time positior~ at UK~ Timken Company, after having worked at the
facility as a pmt-tiJTK~ procefo:~ aSf3odatc for four years. 'TI1e EEOC alleged that
the c01npany refused to hire l~follora..n becau:3e managers believed Hi.at Halloran,
who is the mother of a disabled child, wou1d be mmble to work full-time and
care for her disabled chiJd . They also alleged i:hat this decision was based on an
unfounded gen der stereotype tlKl.t the 1nothcx of a disabled child would neces-
sarily be the primary can.~givec b:scause they did hire men with disabled chil-
dren. "1he EEOC is con1J·niJted to fighting discrilnrr1ation in t11e workplace," said
Lyn.etl:e .A. Barnes, regional aH:or.ney for the EEOC's Charlotte District Office.
"Ernuloyers
.l n1u si: be carefoJ nol: lco avolv
_,. A .) stereonrves against women based on
~.-.r A

perceptions that they rnu~~t ahvays bie the primary caregivers and therefore are
umeliable em p loyei=:s ...,20
To understand. hovv disparabe trea lrnenl: is applied in the law, let's look at
. how an. actual court cmK).' Wed under dfap a:rnte treatment wouJd proceed.

n~e U")~afitnifrff s [$1lJrnT~~1U\l

As jn any legal case, the plaintiff hm> the burden of proving that the defendant
has committed an illegal act This is the idea of a prima facie" case. In a dispa-
11

rate h:eahnent case, the plaintiff nieets the pru11a facie burden by showing four
things:
l. 111.e plaintiff be.longs io a protected group.
2. TI1e plaintiff applied for .and was qualified for the job.
3. Despite posses5jng the qualifications, tb.e pl<:dntiff was rejected.
4. After the p laintiJf 1..vas rejected, the position r•~ma:ined open and the employer
continued to seek applicants with sirnilar qualifications, or the position was
filled by someone wiJh similar quaHiications.
Although these four elements rnay seem easy to prove, it is important to
note that w hat the CO'lut is b:-yil1g to do is rule out the most obvious reasons for
rejecting the plaintiff's daim {for <£)(ample, the plaintiff did not apply or was
not qualified, or the position was alread y filled or had been eliminated). If these
alternative explm1ations axe :n:!led outf the court assumes that the hiring decision
was based on a diso:hninal:ory .motive.

The IDefondanfs IP~it~~oJtt~a~

Once the p lain.tiff has made the prima. fade case for discrimination, the bur-
den shifts to the defendant The burden is different depending on whether
the p rima facie case presents only circumstantial evidence (there is no direct
evidence of discrimination such as a formal policy to discriminate, but rather
disc:rilninatory intent must be inferred) or direct evidence (a formal policy of
discrilnination for ;some perceived legit imal:·e reason). In cases of circumstantial
evidence, the d efendanl: ~irnply mu;:> l: produce a legihmate, non.discriminatory
reason, such as that, although the plaintiff was qualified, the individual hired
was more qualified.
 ...
126 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety J
However, in cases where direct evidence exists, such as a formal policy of
hii:ing only women fo:r wa\tress jobs becaus~ the business is aimed at cateripg J
to male customers, then the defendant is more likely to offer a different defense.
This defense argues that for this job, a factor such as sex or religion was a lb>o.an<ll.
18olflla f8dl® fide IOlccupati.oltlal qumiific«11.tion (IllFOQ). For example, if orte weJre hking an
Ql(;t;:Mif>~ti'o1111ai individual to hand out towels in a women's locker room, being a woman might
Qlllla~nfkatnoill be a BFOQ. However, ffo?re are very few cases in which sex qualifies as a BfO;Q,
~lllfFOO>.) and in these cases it must be a necessary, rather than simply a preferred. charac-
A job qualification teristic of the job. ,
based on sex, religion,
and so on, that an
UAW v. Johnson Controls, .lnc., illustrates the difficulty :in us:ing a Bl~OQ as
employer asserts is a a defense.:n Johnson Conh·ols, a manufacturer of car batteries, had institut.ied
necessary qualification a "fetal protection" policy that excluded women of childbearing age from a
for the job. number of jobs in whid1 tJ1ey would be exposed to lead, which can cause birth
]
I

.
defects in children. The company argued that sex was a BFOQ essential to main~
taining a safe workplace. The Supreme Court did not uphold the company's
policy, arguing that BFOQs are limited to policies that are directly related to a
worker's ability to do the job.
Interestingly, some factors are by no means off-limits when it comes to c4s-
crirnination . For instance, a recent survey by Newsweek of 202 hiring man.agers
revealed that almost 60% said that qualified, yet unattractive, applican~s face a
harder time getting hired ..In addition, two-thirds believe that managers hesitate
before luring qualified, but oveiweight, candidates.22

ihie IP~anrnti'Wfus lfRelbMttFcn~

If the defendant provides a legitimate, nondiscriminatory reason for its employ-
ment decision, the bmden shifts back to the plaintiff. The plaintiff must now
show that the reason offered by the defendant was not in fact the reason for its
decision but merely a "pretext" or excuse for its actual discrirn.illatory dedsioifi-_
111.is co.ul.d entail providing evidence that white applicants with very similar
qualifications to the plaintiff have often been hired while black applicants with '
very similar qualifications were all rejected. To illusb·ate disparate treatment, . ·. iu.
Jj
let's look at the first J.najor case dealing with di.sparate treatment, McDonnell 1

Douglas Corp. v. Green.

McDmmell Douglas Cmp. v. Gre1.m. Tius Supreme Court. case was the first to
delineate the four criteria for a prima facie case of discrimination. From 1956
to 1964, Green had been an employee at. McDonnell Douglas, a manufactur-
ing plant in St. Louis, Missouxi, that employed about 30,000 people. fo 1964
he was laid off during a general workforce reduction. While unempfoyed, he.
participated in some activities that the company undoubtedly frowned upon: a
"lock-in,'' where he and others placed a chain and padlock on the front door of a
building to prevent 111e employees from leaving; and a "stall-m," where a group
of employees stalled their cars at tl1e gates of the plant so that no one could enter
or leave the parking lot. About three 1Neeks after the lock-in, McDonn.ell Doug-
las advertised for qualified mechanics, Green's trade, and he reapplied. When
the company rejected his application, he sued, arguing that the company didn't
h.U:e him because of his race .and because of hls persistent involvement in thie
civil rights movement. ·
In ma:YJng his p1ima fa.de case, Green had no problem showing that. he was a
member of a p~otected group, that he had applied for and w as qualified for 1thie

------
 ...
CHAPTIEIR 3 The Legal Environment: Equal Employment Opportunity and Safety 127

job (having akeady worked in the job), that he was rejected, and that the com-
pany continued to advertise the position. The company's defense was that the
plaintiff '\Vas not hixed because he participated in the lock-:in and the stall-in. In
other words, the company was merely refusing to hire a troublemaker.
The plaintiff responded that the company's stated reason for not hiring him
was a pretext for discrimination. He pointed out that white employees who
had pmticipat:ed in the sru:ne activities (the lock-in and stall-in) were rehired,
whereas he was not. 'D1e court found in favor of the plaintiff.
This case illustrates how similaTly situated jndividuals (white and black) can
be treated differently (whites were hired back whereas blacks were not) with the
differences in treatment based on race. As •Ne discuss later, most plaintiffs bring
cases of sexual harassment unde:r this theory of discrirnination, sexual harassment
being a situation where individuals are heated differenily because of their sex.

Mbmd-Motive Cases
In a mixed-motive case, the defendant acknowledges that some discrimina-
tory motive exisl:ed but argues that the same hiring decision would have been
reached even without the discrirni.A--i.atory motive. In Hopkins v. Price Waterhouse,
Ann Hopkins was an accountant who had applied for partnership in her firm .
.Although she had brought in a large amount of business ai-id had received high
praise from her clients, she was tuxned dtrn.Arn for ;;r partnership on two sepa-
rate occasions. hl her performance reviewsr she had been told to adopt more
ferninine dress and spee<:h and received many other comments that suggested
gender-based stereotypes. In court, the company admitted that a sex-based ste-
reotype existed but argued that it would have come to the same decision (not
promoted Hopkins) even if th.e sl:exeot.ype had not. existed.
One of the main questions that came out of this case was, Who has the burden
of proof? Does the plaintiff have to prove that a different decision would have
been made (that Hopkins would have been promoted) in the absence of the dis-
criminatory motive? Or does the defendant have to prove tl1at the same decision,
would have been made?
According to CRA 1991, if the plain.tiff demonstrates that race, sex, color, reli- ·
gion, or national origin was a motivating factor for any employment practice,
the prima fade burden has been met, and the buxden of proof is on the employer
to demonstrate that the same decision would have been made even if the dis-
criminatmy motive had not been present. If the employer can do this, the plain-
tiff cannot collect compensatory or punitive damages. However, the court may
order the employer to quit using the discriminatory motive in its future employ-
ment decisions.

OIS?ARAT!E IMPACT
Dimparratl! Bmpact
The second type of discrunination is called dfaparatie iimp.!!d. It occurs when A theol}' of discrimina-
a facially neutral employment practice disproportionately excludes a protected tion based on facially
group from employment oppOl'tunities_ l\ facially neutral employment prac- neutral employment
tice is one that lacks obvious discriminatory ·content. yet affects one group to practices that dispro-
portionately eJcc/ude
a greater extent than 0U1er groups, such as m .1 employment test.. Although the a protected group
Supreme Court inferred disparate impact from Titlr- VII in the Griggs v. Duke from employment
Power case, it has since been codified into the Civil m.ghts Act of 1991. opportunities.
 ;,.

'n:a CMAPTEIR 3 The Legal Environment: Equa l Employment Opportunity and Safety

There is an important disth1ction between disparate impact and disparnte

treatment disc1irnination. For there to be discrimination under disparate treat-
ment, there has to be :intentional discrimination. Under disparate impact, intent

~'m
is irrelevant. The important criterion is that the consequences of the employ-
ment practice are discri.minatmy. .·•··.::. \1
'.1'

For example, if, for some practical reason, you hfred individuals based on ' '• . ~

thefr height, you may not have intended to discTirninate against anyone, and yet . 11
using height "Would have a disproportionate impact on certain protected groups. :llR
Women tend to be shorter. than men, so fewer women will be hfred. Certain eth-
nic groups, such as those o( Asian ancesuy, also tend to be shorter tlw.l""l those of
European ancestry. Tims, your facially neutral employment practice ·wjJl have a
disparate impact on certain protected gro1llps.
Titls is not to imply fuat simply because a selection practice has dispi:l.J--:ate
impact, it is necessarily illegaL .Some characteristics (such as height) m:e not
equally distributed across race and gender groups; however, the important
question is whether the characteristic is related lo successful performance on the
job. Jo hdp you understand. how disparate impact works, let's look at a court
p roceeding involving a disparate ilnpact claim.

The IP~.anmr~nff°s
ffh11wde0]
In. a disparate impact case, the plaintiff must make fue prima facie case by shmAr-
ing th.at the employment p ractice in. question disproportionately affects a pro-
tected grnup relative to the majority group. Toiliustrate this theory, let's assum.e
that you are a manager who has 60 positions to fill. Your applicant pool has 80
white and 40 blackapplkants. You use a test that selects 48 of the white and 12
of the black applicants. Is this a disparate jmpact? Two alternative quantitative
analyses axe often used to determine whether a test has adverse impact
fr©rnr-fifths IRMie The four-fifths .n.llR~ states that a test: has disparate impact if the hiring rate
A rule that states that for tJ1e minority group is less than four-fifths (or 80%) of the hi:I:!11g rate for the
an employment test majority group. Applying this analysis to the preceding example, we would first
has disparate impact
if the hiring rate for a
calculate the hiring rates for each gmup:
minoriiy group is less
than four-fifths, or Whites = 48 I 80 = 60%
BO percent, of the hir- Blacks= 12./40 = 30%
ing ra!e for the majority
group. Then we would compare the hiring rate of the minority group (30%) with
St<i1m:!lllird Piavlation that of Hi.e majmily group (60%) . Using the four-fifths rule, we would deter-
!Miw!e mine that the test has adverse irnpact if the hiring rate of the minority group
A rule used to analyze is less than 80% of the hiring rate of the majority group. Because it is less (i.e.,
employment tests to 30%/60% = 50%, wlrich is less than 80%), we would conclude that tlle test has
cletwmine disparate
hripact; it uses the dif-
adverse impact. The foux-fif-lh~ rule is used as a rule of thumb by the EEOC in
ference beiween the d etennining adverse impact
expected representa- The sla1rn.daird devialbil!llJ11 rnfo uses actual probability distributions to deter-
tion for minority groups mine .adverse impact. 1bis analysis uses the difference between the expected
and the actual repre- representation (or hiring rates) for minority groups and the actual representa-
sentation to determine
tion (or hiring rate) to determine vvheH1,er the difference between these two val-
whether the difference
between I.h e l.wo is ues is great.er than would occur by chance. Thus, ]n our example, 33% (40of120)
greater than would of the applicants were blacks, so one 'iN,ould expect 33% (20 of 60) of those rused
occur by chance. to be black Hmveve1~ only 12 block C1pphcan.ts were hired. To det:ermin.e if the
 CHAIP'TEIR 3 The Legal Environment: Equal Employment Opportunity.and Safety 129

difference between fhe expected representation and the actual representation is

greaten: than we would expect by chance, we calculate the standard deviation
(which, you might remember from youx statistics class, is the standard deviation
in a binonual. distribution.):
- - - - - - - · - · - - -· - · - -- - - - - - -- - - - - - - - - - - : - -
Number of Number of
1ni.norHy applicanJs nomninority applicants
umber hired >< ----- X - - - - - - - - - - -
Number of total applicants Number of total applicants

or in this case:

'1
j I 40
60 >< _.- >< -
120 120
80
= 3.6

If tl1e difference between the actual representation and the expected represen-
tation (20 - 12 = 8 in this case) of blacks is greater than 2 standard deviations
(2 X 3.6 = 7.2 in this case), we would conclude that the test had adverse impact
against blacks, because 1/1.re would expect this result less fuan 1 time in 20 if the
test were equall.y difficult for both whites and blacks.
The Wards Cove Paclcing Co. v. Atonio case involved an interesting use of sta-
tistics. The plainHffs showed that the jobs in the caimery (lower paying jobs)
were filled primarily with 1nii."1ori.ly applicants (in this case, American Eskimos).
Howevel!', only a small pe:rcent.agre of Hive noncannery jobs (those witl1 higher
pay) were filled by nonm:inorilies. lhe plaintiffs axgued that this statistical dis-
parity in tlu~ racial makeup of Hie cannery and noncannery jobs was proof of
discrimmalion. The federal district, appellate, and Supreme Courts all found for
the defendant, stating that this dispasity was not proof of discrimination.
Once the plaintiff has demonstrated adverse impact, he or she has met the
burden of a p:dma fade rnse of cliscriminal:ion. 23

0
De·Wenda111t s Riebuttai
According to CRA 1991, once the plaintiff has made a prima fade case, the bur-
den of proof shifts to the defendant, who must show fuat the employment prac-
tice 'is a "business necessity." This is accomplished by showing that the practice
bears a relationship w:ith some legitimate employer goal. With respect to job
selection, this relationship is demonstrated by showing the job relatedness of
the test, usually by reporting a validity study of some type, to be discussed in
Chapter 6. For now, suffice it to say that the employer shows tl1at tlie test scores
are significantly correlated with measuxes of job performance.
Measures of job performance used :in validation studies can include such
things as objective measQres of output, supervisor ratings of job performance,
and success in tra:ining. 24 Norm.ally, performance appraisal ratings are used,
but these ratings must be valid for the court to accept the validation results. For
example, in Albemzarle Paper v. l\lloody, the employer demonstrated that the selec-
tion battery predicted performance (measured with supervisors' overall rankings
of employees) in only some of the 13 occupational groups in which it was used.
In this case, tl1e court was. especially critical of the supervisory :i:atings used as
the measure of job performance. The court stated, "Jbere is no way of knowing
precisely what criteria of job performance tJa.e supervisors were considering."25
 ..
130 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and·Safety

0
PlaintifW $ Rebutta!
If the employer shows l::hat the employment practice is the result of some busi-
ness necessity, the plaintiff's lastresort is to argue that other employment pxac-
tites could sufficiently meet the employer's goal without adverse impact. Thus,
if a plaintiff can demonstrate ihat selection tests other tl1an the one used by the
employer exist, do not have adverse impact, and con-elate with job performance
as highly as the employer's test, then the defendant can be found guilty of dis-
crimination. Many cases deal with standardized tests of cognitive ability, so it
is ilnportant to examine alternatives to these tests that have less adverse impact
while still meeting the employer's goal. At least two separate studies reviewing
alten1ative selection devices such as interviews, biographical data,· assessment
centers, and work sample tests have concluded that none of tl1em met both crite-
ria.26 It seems that when the employment practice in question is a standardized
test of cognitive ability, plaintiffs will have a difficult time rebutti11g tl1e defen-
dant's rebuttal.
Griggs v. Duke Powe~·- To illustTate .how this proce1:1s works, let's look at the
Griggs v. Duke Power case.27 J?oUowing the passage of Title VII, Duke .Power i_nsti-
tuted a new system for making selection and promotion decisions. The system.
required either a high school diploma or a passing score on two p:rofession-
ally developed tests (the Wonderlic Personnel Test and the Bem1eli: Mechanical
Comprehension Test). A passing score was set so that it would be equal to the
national median for high school graduates who had taken the tests. 1

The plaintiffs met their prima fade burden showing that both the high school
diploma requirement and the test battery had adverse impacts on blacks.
According to the 1960 census, 34:% of white males had high school diplomas,
compared with only 12% of black males. Sim.Uarly, 58% of white males passed
the test battery, whereas only 6% of blacks passed.
Duke Power was unable to defend its use of these employment practices. A
company vice president testified that the company had not studied the relation-
ship between th~se employment practices and the employees' ability to perform
the job. In addition, employees already on the job who did not have high school
diplomas and had never talcen the tests were performing satisfactorily. Thus,
Duke Power lost the case.
It is interesting to note that the court recognized that the company ha~ n(Jt
:intended to discriminate, mentioning th.at the company was making special
efforts to help undereducated employees through financing tw0:-thirds of the
cost of tuition for high school training ..TI1is illush·ates the importance of the con-
sequences, as opposed to t.he motivation, in determirting 'discrimination under
the disparate impact theory.

PAITERN AND PRACTKE

In showing class action pattern and practice lawsuits, the plaintiffs attempt to
show three things. First, they show some statistical disparities between the com-
position of some group within the company compared to some other relevant
group. For instance, the openffig case described how the plaintiff's lawyers
pointed to two comparative statistics as evidence of .discrimination. First, they
compru·ed the female representation in the non-managerial (63.4 %) vs the mana.-
gerial (33.6%) employee groups. They also compared the female representation in,
 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety 131

the managerial group (again, 33.6%) with that in their top 20 competitors (56.5%).
TI1ey also calculated 111.al hourly female workers were paid, on average, $1,100
less than men and salaried women received $14,500 less. However, Walmart dis-
putes the list of comparison companies, arguing tJ1at if a broader group is used,
reflecting Walmarl:' s wide geographic footprint and variety of products offered,
it does not differ from that group. It also claims that if it had claimed its highest-
/1
level hom·ly-wage supervisors as managers" on its EE0-1 forms, as many of the
comparison companies do, the entire disparity disappears. TI1eyalso note that of
the applicants for managerial positions, only 15% are female, and that of those
promoted, 18% are female. Finally~ regarding pay, VValmart' s experts suggested
that the plaintiff's pay comparisons did not account for crucial factors such as the
number of hours worked or whether fli.e work was night-shift work, which pays
more. Their analyses suggesfJ::'d that when pay was compared at the department
level, where pay decisions are determined, 92.8%-@f all stores showed no statisti-
cally significant pay dispaiities, and that of the remainder, 5.2% showed dispari-
ties favoring men while 2.0% shmved disparities favoring women.
Second, the plaintiff h·ies to show that there are individual acts of intentional
discrimination that suggest that the statistical disparity is a function of the larger
culture. h1 U1e Dukes case, the plaintiffs argued that at Monday morning meet-
ings of high-level Sam's Club executives, fern.ale store employees were referred
to as "Janie Q 's," and that this continued even after a woman executive com-
plained that she found the term demeaning.
Finally, ll1e plaintiff usually tries to make the case that the promotion and/ or
pay procedures leave too much discretion to managers, pmviding the avenue
through which their tmconsci.ous biases cain play a part. In the Dukes case the
plainli.ffs brought in e;cperl: witnesses t:o argue that l11e performance manage-
ment processes were extTemely subjedive, and that male managers have sub-
conscious tendencies to favor male over female employees.

REASONABLE ACCOMMODAT~O~~
Reasonable accommodaition presents a relatively new theory of discrimina- R<1»e1sol11lab!e
tion. It began witl1 regard to religious discrimination, but has recently been both Accommodation
expanded and popularized wil11 the passage of the ADA. Reasonable accom- Making facilities read-
modation differs from these two theories in that rather than simply requiring an ily accessible to and
usable by individuals
employer to refrain from some action, reasonable accorrunodation places a spe- with disabilities.
cial obligation on an employer to affirmatilrely do something to accommodate
an individual's disability or religion. This theory is violated when an employer
fails to make reasonable accorn1nodation, where that is required, to a qualified
person with a disability or to a person's religious observation and/ or practices.

Relagion and Accmnmodatio!n

Often individuals with strong religious beliefs find that some observations and
practices of their religion come into direct conflict with theiT work duties. For
example, some religions forbid inclividu;;\ls from working on the sabbath day
when the employer scheduJes them for work Others might have beliefs that
preclude them from shaving, which might <;onflict with a company's dress code.
Although Title VII forbids discrimination on the basis of religion just like race
or sex, religion also receives spedaI treatment Iequiring employers to exercise
 ...
132 CHAPTER 3 The Legal Environment: Equal Employm ent O p p ortunity and Safety

lf~gurie 31.l
l~eligious Discrimination Complaints, 1991-201 2

4,500·-
4, 15 '1

4,000 --

3,500 · -

3,000 --

2,500 --

2,000 -

'l,500 -

1,000 -

500·· -

SOURCE: www.eeoc.gov/stats/religion.html.

an affirmative duty to accorrunodate individuals' religious beliefs and practices.

As Figure 3.2 shows, the number of religious discrimination charges has consis-
tently increased over the past few years. ·
In cases of religious discrimination, an employee's burden is to demonstrate
that he or she has a legitimate religious belief and provided the employer with
. notice of the need to accommodate the religious practice, and that adverse con-
sequences occurred due to the employer 's failure to accommodate. In such cases,
the employer's major defense is to assert that to accommodate the employee
would require an uxtdue hardship.
Examples of reasonably accommodating a person's religious obligations
might include redesigning work schedules (most often accommodating those
who cannot work on their sabbath), providing alternative testing dates for appli-
cants, not requiring union membership and/or allowing payment of "charita-
ble contributions" in lieu of union dues, or altering certain dress or grooming
requirements. Note that although an employer is required to make a reasonable
accommodation, it need not be the one that is offered by the employee. 28
In one case, Walmart agreed to settle with a former employee who alleged
that he was forced to quit in 1993 after refusing to work on Sunday. Walmart
agreed to pay the form.er employee unspecified damages, to instruct managers on
employees' rights to have their religious beliefs accommodated, and to prepare a
computer-based manual describing employees' iights and religious harassment.29
Following the attack of 9 /11, a number of cases sprang up with regard to
discrimination against Muslims, partly accounting for the significant increase in
 CHAfTEIR 3 The Legal Environment: Equal Employment Opportunity and Safety 133
.
religious discrimination complaints in 2002. In one case, foe EEOC and Elech·o-
·lux Group settled a religious accommodati.on case brought by Muslim workers
from Somalia. 111e Islamic faith requires l\1uslirns to offer five prayers a day,
wit:h two of tl1ese prayers offered within .restricted time periods (early morning
and sunset). Muslim employees alleged that they ~Nere disciplined for using an
unscheduled break haditionally offered to line employees on an as-needed basis
to observe their sunset prayer. Electrolux worked with the EEOC to respect the
needs of its Muslim workers 1Ni1hout creating a business hardship by affording
U1em with an opportunity to obsei:ve theiT sunset prayer. 30
Religion and accorrunodation also bring up the question as to what to do when
different rights collide. Fm insi:ano2, John Nemecek had been a respected business
professor at Spring Arbor University for 15 years. Sprjng Arbor is an evangelical
college in Michigan which began to take issu€ with some of his behavior. After
he beg;-m wearing earrings and mal(eup and aski.. ng friends to call him "Julie"
he found -himself demoted and fired because his womanly appearance violated
'.' Christian behavior. fo. 2004, a doctor diagnosed Prof Nen1ecek with a "gender-
11

idenlity disorder/' in v•rhich one's sexual identity differs from one's body. Soon
afi:ei~ the school began taking away some of his responsibili.ties, and then issued
lllin a contraci: revoking his dea:n' s post,. reassigning bin1 to a non-tenure-track
role in which he would work. from honi.e, 1:eachix1.g online. It also required him
to not wear any makeup o:r female doi:hin.g or to display any ouJ:v.1ru·d signs of
femininity vvhen visiting campus. Gayle Beebe, the muversity's president, said
"We felt tlu·ough a job rea~:isigmnentwe could giw! him the space to work on this
jssue." Prof. Nemecek signed the cont.ract but then violated it by showing up
on campus wil11 earrings and makeup on four separate occasions. The professor
.filed his complaint with the EEOC and the university then declined to renew his
contract Prof. Nemecek, ·w hose Bap1ist church ;ilso asked him to leave the con-
gregation, says of the 1m.iversity, "Essentially, they're saying they e<m define who
is a Clu·istian. I don't agree that our biology determines our gender."31

Oisabiiity and Acccm11modatHorn

As previously discussed, the ADA made dfacri.mination against individuals
with disabilities illegal. However, the act it.self states that the employer is obli-
gated not just to refrain fl:om discriminating, but to take affirmative steps to
accommodate individuals vvho ar~ protected under the act.
Under disability claims, the plaintiff must sh.ow that she or he is a quali-
fied applicant with a disabihty and that adverse action was taken by a covered
entity. The employer's defense ill.en depends on whether the decision was made
without regard to the disability or in Jight of the disability. For example, if the
employer argues that the plaintiff is not qualified,. then it has met the burden,
and the question of reasonable accornm.odation becomes irrelevant.
ff, hmvever, the decision was made "in light of" the disability, t11en the ques-
tion becomes one of whether t11e person could perform adequately with a reason-
able acco:rnn1odation. This leads t.o three potential defenses. First, the employer
could allege job-relatedness or business necessity 111.rough demonstrating, for
example, that ii is using a tesl: that assesses ability to perform essential job func-
tiorns . .However, then the question arises of ·whether the applicant could per-
form the essential job functions with a reasonable accommodation. Second, the
empfoyer could claiJn an undue hardship to accommodate the jndividual. In
essence, this argues that the accommodation necessary is an action requiring
~ 34 CHAPTER 3 . The Legal Environment: Equal Employment Opportunity and Safety

significant difficulty or expense. Finally, the employer could argue that the indi-
vidual witl1 the disability mi.ght pose a direct threat to his own or others' healU1
· or safety in tl1e workplace. This requfres examining the duration Qf the risk, the
nature and severity of potential harm, the probability of the harm occurrin:g,
and the inunine:nce of the potential harm. For instance, Walmart was sued by
one of its employees who was a filling room attendant with cerebral palsy and
confined to a wheelchair. TI1e employee requested to use a grabber and a shop-
ping cart to help her pick up and hold clothes. However, she was prevented
fi:om using both by the manager, who then implemented progressive discipline
ending in the attendant's tennination.32
What are some examples of reasonable accorrunodation with regard to dis-
abilities? First is providing readily accessible facilities such as ramps and/ or ele-
vators for disabled individuals to enter the workplace. Second, job resb.ucturing
might include eliminating margmal tasks, shifting these tasks to other employ-
ees, redesigning job procedures, or altering work schedules. Third, an employer
might reassign a disabled employee to a job with essential job functions he or
she could perform. Fourth, an employer might accommodate applicants for
employment who must take tests through providing alternative testing formats,
providing readers, or providing additional time for taking the test. Fifth, read-
ers, interpreters, ,or technology to offer reading assistance might be given to a
disabled employee. Shth, an employer could allow employees to provide their
own accommodation such as bringing a guide dog to work.3 3 Note that. most
accommodations are inexpensive. A study by Sears Roebuck & Co. found that
69% of aJJ accorrunodations cost nothing, 29% cost less than $1,000, and only 3%
cost more than $1,00Q.34

As information technology becomes more and more ubiquitous in the work:..

place, some have begun lo explore the implications for people w~th disabilities.
Researchers at the Employment and Disability Institute at Cornell University
recently re-viewed the accessibility of 10 job boards and 31 corporate e-recruiting
websites using Bobby 3.2, a software program designed to check for errors that
cause accessibility concerns. lhey fonnd that none of the job boards and only a
small minority of the e-recruiijng sites met the Bobby standards.
In phase 2 of the study, they surveyed 813 I-IR professionals who were mem-
bers of the Society for Human Resom·ce Management (SHRM). Between 16 and
46% of the HR professionals were fruniliar with six of the most common assis-
tive l:eclmologies to adapt computers for disabled individuals (screen magni-
fiers, speech recognitions software, video captioning, Braille readers/displays,
screen readers, guidelines for web design). In addition, only 1 in 10 said they
knew that their firm had evaluated the websites for accessibility to people with
disabilities.
TI1is study indicates that while firms may not have any intention of dlscrimi-
nating against people with disabilities, the rapid expansion of infonnati.on tech-
nology combined with fui :inattention to and/ or lack of education regarding
accessibility issues may accidentally lead them to.do so.
SOURCE: S. Bruyere, S. Erickson, and S. VanLooy, "Information Technology and t he Workplace: Impli cations for
Persons with Disabilities," Disability Studies Quarterly 25, no.' 2 (Spring 2005), at www.dsq-sds.org .
 ...
CHAPTER 3 The Legal Environrnent: Equal EmploymentOpportunity and Safety 135

, RetaUartion fo~' Partmcipat.mo~1 and Oppositnon

Suppose you overhear a :m.pervisor jn your workplace teHing someone that he lOJ~5
refuses to hire women because he knows they are just not cut out for the job. Discuss the legal
issues involved with
Believing this to be illegal discrimination, you face a dilenuna. Should you come
preferential treatment
forward and report this statement? Or if smneone else fil-;s a lawsuit for gender programs.
discrimination, should you testify on behalf of the plillntiff? What happens if
your employer threatens to fire you if you do anythfrlg?
Title VU of the Civil Rights ./\ct of 1964 protects you. It states that employ-
ers cannot retaliate against employees for either "opposing" a perceived illegal
employment practice or "participating i.n a proceeding" related to an alleged ille-
gal employment practice. Opposition refers to expressing to someone through
proper channels that you believe that an iUegal employment act has taken place
or is taking place. Participation refers to actuaUy.testifying in an investigation,
hearing, or court proceeding regarding m1. illegal employment act. Clearly, the
purpose of this provision is to protect employees from employers' threats and
other forms of intimidation aimed at discouxaging the employees from bringing
to light acts they believe to be megal.
Recently the EEOC filed suit against Dillard's, a major department store
chain, for firing a business manager as retaliation for filing a discrimination
charge. In 2008, Shontel Mayfield filed a charge with the EEOC in which she
alleged lhat Dillard's management had discriminated agains t her because of
her race. She had begm1 v1rorking for Dillard's in July 2001, and earned a pro-
motion to business manager of the Estee Lauder counter in 2006. However,
in September 2008, Mayfield complied with a Jefferson County, Texas, man-
datory evacuation order and evacuated the area in advance of Hurricane Ike.
She :returned to .Jefferson County consistent. with the directives of the county's
"disaster dedaratio:ns." After Mayfield rel1;irned to work she was told that
she was being fired for the stated reason of "excessive absenteeism." On her
termination paperwork, she 11\Tas accused of having "'failed to maintain ver-
bal communication concerning her absence~:> vvith either the store manager or
the operations manager." Yet telephone records showed that Mayfield placed
numerous calls to Dillard's "disaster recovery,., number, as well as to the cel-
lular telephones of the store manager and the operations manager during the
evacuation period.35
These cases can be extremely costly for companies because they are alleg-
ing acts of intentional discrilnh1ation, and therefore plaintiffs are entitled to
punitive damages. For example, a 41-year-old former Allstate employee who
claimed that a company official told her that the company 1Nanted a "younger
and cuter" image was awarded $2.8 million in damages by an Oregon jury. The
jury concluded llrnt the employee was forced out of the company for opposing
age discrimination against other employees. 36
In one case, Target Corporation agreed to pay $775,000 to a group of black
workers who charged that al: one store, the company condoned a racially hostile
work environment exemplified by :inappropriate comrnents and verbal berating
based on race. "\fl!hen one of the black employees ob.iected 'co this treatment, h e
was allegedly retaliated against, forcing him to resign.37
This does nol: mean that employees have a.n unlimited right to taJk about how
racist or sexist their employers are. The courts tend to frovvn on employees whose
activiti.es result in a poor public image for the company unless those employees
~nappiroprnate Reiationshnp leads fco
of !Best Buy's CIEO ~rrftd Chakmzm
Both the CEO and Cha ir-
man of Best Buy were ousted
from their roles as a result of
an inappropriate relationship
betwee n the CEO and a lower-
level female employee. CEO
Brian Dunn, a married father
of three, gave the wom an tick-
ets to concerts and spo rting
events, met numerous times for
drinks and meals, and on two
overseas trips Dunn contacted
the 29-year-old employee at
least 224 times. While Dunn
and the woman denied that
their relationship was "romantic
or otherwise improper,"" ...
Oll~s:~er
reflected extremely poor judg-
ment by the CEO" accord ing to
an investigative report to Best
Buy's Board of Directors. While
th0xe was no misuse of com-
pany resou rces, Dunn resigned
in response t o the scandal.
Founder and Chairman
l\ichard Schulze vvas caug ht in
the storm by his response to
a formal complaint filed by an
employee regarding the rela-
tionship. Rather than forward
the complaint to t he company's
legal counsel, ethics officer, or
head of HI<, Schulze showed
the signed written state-
the employee
who authored the
statement as well as those
named open to potential for
retaliation.
This raises two questions:
First, if Dunn did not harass
the employee and did not use
any company resources, should
he have been pushed out?
Second, what should Schulze
have done differently once he
received the complaint?
SOURCE: T. Webb, "Best Buy Cha ir-
man Schulze Out in CEO Scandal; Dunn
to Get $6.6 mi ll ion," www.twincities.com/ '. ~
ci_20619263/best-buy-chairman-out-wake-
:c•
;.

the relationship nevertheless ment to D unn, thus leaving ceo-scandal, May 14, 2012. ·:, r.Mi'i

,'.llli
··11,,

had attempted to use the organization's inte1nal channels-approachin.g one's . },fil

manage1.~ raising the issue with the BRM department, and so on-before going
public
It is important to note that deciding when an employee has done something
wrong is often difficult to both know and prove. The "Integrity:In Action" box
illustrates the problems in determining when an action deserves punishment,
and the proper process for investigating it.

Current. RsstH~$ Regarding ·Diversit)(

and Equal Emph)yment Opportunutlf
flQ JM(), Because of recent changes in the labor market, most organizations' demographic
Identify behavior that composilfons are becoming increasingly diverse. A study by the Hudson Insti-
constitutes sexual tute projected that 85<Yo of 1he new entrants into the U.S. labor force over the next
harassment, and list
things that an organiza-
decade will be females and minorities.3S Integrating these groups into organiza-
tion can do to elimi- tions made up predominantly of able-bodied white males will bring attention to ·'
···?
ilate or minimize it. important issues like sexual harassment, affirmative action, and the ":reasonable
acconunodation" of employees with disabilities.

SEXUAIL !tflARASSMIEiWif
Clarence Thomas's Supreme Court confirmation · hearings in 1991 brought
the issue of sexual harassm.ent into h1creased prominence. Anita Hill, one of

136
 ...
CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety 137

fugruure 3.3l
Sexual Harassment Cha rges, ·199·1-2011
15.836 '15,475
1'3,000 -

12,000

4,000-

;,;;!'~~Numl1er of charges
·% Hied by men

SOURCE: www.eeoc.gov/stats/harass.html.

TI1omas' s former employees, alleged that he had sexually harassed her while
she was working under his supervision at the Department of Educalion and
the Equal Employrn.ent Opportuniiy Commission. .Although ich.e allegations
were never substantiated, 1fo:· hearing made many people more aware of how
often employees are sexually harassed in the workplace and, combined with
other events, resulted in a h·emendous increase in the number of sexual harass-
ment complaints being fiJ.ed with the EEOC, as we see in Figure 3.3. ln addition,
after President Clinton took office and faced a sexual harassment lawsuit by
Paula Corbin Jones for his alleged proposition to her in a Little Rock hotel room,
the number of sexual harassment complaints took another jump from 1993 to
1994-again, potentially due to the tremendous amount of publicity rega:rdin.g
sexual harassment. Howeve1~ the number of cases filed has achmlly decreased
substantially since 2000.
Sexual harassment refers to unwelcome sexual advances (see Table 3.4). It can
take place in two basic. ways. "Quid pro quo" harassment occurs when some

'lfiS!bfi~ 3.41,
EEOC Definition of Sexual Harassment

2. Subnii~sion t o orrejectiotJ ofsuch conduct by an ind ividual is used as the basis for employment
dE~cisiors affectln such indi,viduaLor

SOUHCE: EEOC guideline based on the Civil Rights Act of 1964, Tith VII.
 ..
133 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety

kind of be.1.i.efit (or pun:i.slunent) is made contingent on the employee's submit-

ting (or not submitting) to sexual advances. For example, a male manager tells
his female secretary that if she has sex with him, he will help her get promoted,
or he threatens to fire her if she fails to do so; these are clearly cases of quid pro
quo sexual harnssment.
111e Bundy v. Jackson case illustTates quid pro quo sexual harassment.39
Sandra Bundy was a personnel clerk with the District of Columbia Depart-
men t of Corrections. She received repeated sexual propositions from Delbert
Jackson, who was at the time a fellow employee (although he later became the
director of the agency). She later began to receive propositions from two of
her supervisors: Arthur Buxton and James Gainey. When she raised the issue
to their :mpenrisor, Lawrence Swain, he dismissed her complaints, telling her
that "any man in his right mind would want to rape you," and asked· her to
begin a sexual relationship with.·him. VI/hen Bundy became eligible for a pro-
motion, she was passed over because of her "inadequate work performance,"
although she had never been told that her work performance was unsatis-
factory. The U.S. Court of Appeals found that Bundy had been discrhninated
against because of h er sex, thereby extending the idea of discrimination to
sexu al harassment.
A more subtle, and possibly more pervasive, form of sexual harnssment is
"hostile working environment." This occurs when someone's behavior :in the
workplace creates an environment that makes it difficult for someone of a par-
ticular sex to work. Many plaintiffs in sexual harassment lawsuits have alleged
that men ran their fingers through the plaintiffs' hair, made suggestive remarks,
and p hysically assaulted them by touching their intimate body parts. Other
examples include having pictmes of naked women posted in the workplac~,
using offensive sexually explicit language, or using sex-related jokes or innuen-
does in conversations.4-0
Note that these types of behaviors are actionable under Title VIl because
they treat ii.1.dividuals differently based on their sex. In addition, although most
harassment cases involve male-on-female harassment, any individual can be
harassed. For example, male employees at Jenny Craig alleged that they were
sexually harassed, and a federal jury found that a male employee had been sex-
ually harassed by his male boss.41
Jn addition, Ron Clark Ford of .Amarillo, Texas, recently agreed to pay $140,000
to six male plaintiffs who alleged that they and others were subjected to a sexu-
ally hostile work environment and different treatment because of their gender
by male managers. Evidence gathered showed that the men were subjected to
lewd, inappropriate conunents of a sexual natme, and had their genitals and
buttocks grabbed against lheir will by their male managers. The defendants
argued that the conduct was "harmless horseplay."42
Finally, Babies 'R' Us agreed to pay $205,000 to resolve a same-sex suit. The
lawsuit alleged th.at Andres Vasquez was subjected to a sexually hostile work-
ing environment and was tl1e target of unwelcome and derogatory c01runents as
well as behavior that mocked him because he did not conform to societal stereo-
types of how a male should appear or behave. .
Sexhal h arassment charge filings \fl.Tith the EEOC by men have increased to
16.4% of all filings in 2010, from 10% of filings in 1994. While the commission
does not track same-sex, male-on-male charges, anecdotal evidence shows that
most harassment allegations by men are against other men.43 .
 ...
CHAPTIER 3 The Legal Environment: Equal Employment Opportunity and Safety 139

There are three critical issues in these cases. First, the plainlili carmot have
"invited or incited" the advances. Often the plaintiff's sexual history, whether
she or he wears provocative clothing, and whether she or he engages in sexu-
ally explicit conversations a:re used to prove or disprove that the advance was
unwelcome. However, in the absence of substantial evidence that the plaintiff
invited the behavio1~ courts usually lean toward assuming that sexual advances
do not belong in the workplace and thus are unwelcome. In 1111..eritor Savings Bank
v. l!inson, Michelle Vinson daim.ed that during the fou:r years she worked at a
bank she was continually harassed by the bank's vice president, who repeatedly
asked her to have sex with him (she eventually agreed) and sexually assaulted
her.44 The Supreme Court ruled that the victim's voluntary participation in sex:.
ual relations was not the major issue, saying that the focus of the case was on
whether the vice president's advances were unwelcome.
A second critical issue is that the harassment ill.ust have been severe enough
to alter tl1e terms, conditions, and privileges of employment. Although it has not
yet been consistently appHed, many courts have used the "reasonable woman"
standard in determining the severity or pervasiveness of the harassment. This
consists of assessing whether a reasonable woman, faced with. the same situa-
tion, would have reacted similarly. The reasonable woman standard recognizes
that: behavior that might be considered. appropriate by a man (hl<e off-color
jokes) :might not be considered appropriate by a woman.
The third issue is that the courts must determine whether the organization is
liable for the actions of its employees. In doing so, the court usually examines
two things. First, did the employer lmow about, or should he or she have known
about, the harnssment? Second, did the employer act to stop the behavior? If the
employer knew about it and the behavior did not stop, the court usually decides
that the employer did not act appropriately to stop it.
Sexual harassment suits can be quite costly for companies. For instance, Aar-
on's Inc., the furniture :rental company, faced a sexual harassment suit filed by
a female employee who claimed that her manager groped her, exposed himself
to her, and sexually assaulted her. She contacted a company harassment hotline
but was never called back. She also alleged that she was denied a promotion
for complaining about the alleged assault. In 2011 a jwy awarded the employee
$95 million, a significant sum given that Aaron's profits had been $118 million
the previous year.45
To ensure a workplace free from sexual harassment, organization8 can follow
some important steps. First, the organization can develop a policy statement
that makes it very clear that sexual hru:assment will not be tolerated in the work-
place. Second, all employees, new arid old, can be trained to identify inappro-
priate workplace behavior. Tiurd, the organization can develop a mechanism
for reporting sexual harassment that encourages people to speak out. Fourth,
management can prepare to take prompt disciplinary acti.on against those who
conunit sexual harassment as v1rell as appropriate action to protect the victims of
sexual harassmenf.46

Few would disagree that having a diverse vrnrkforce :in terms of race and gen-
der is a desirable goal, if all individuals have the ne.cessary qualifications. In
fact, many organizalions today are con.cenited ·with developing and managing
 ...

~ 40 CMAIPTER 3 The Le9al Environment: Equ;d Employment Opportuni1y and Safety

diversHy. To eJimmaJe discrh:nmaHon in the . workplace, many organizalions

have affirmative action program3 to incrrnse minority representation. Affirma-
tive action was originaUy mnceived as a vi.ray of taking exfra effo~t to .atl:xad and
retain rr.Unority employees. This was normally done by extensively recruiting
:minorities on college campuses, advertisjng in minority-oriented publications,
and providing educational and training opportunities t:o n:rinorilies.47 Howeve1~
over !::he yearn, many o:rganization.s have resorted to quotalike hiri11g to ensure
that their workforce con1posiflio:n Inirrors that of the labor m_arket. Sometimes
U1ese organjzations ad voluntarily; in other cases, the quotas are imposed by the
courts or by the EEOC. Whatever the impetus for these hiring practices, many
white and/ or male individuals have fought against them, alleging what is called
reverse di5crim.inatirn:L
An example of ml imposed quota program is found at the fire department in Bir-
mingham, Alabama. Having a<lmitl:ed a history of discriminating against blacks,
the departm.ent rntered :into .a. mnse:nt decree with the EEOC to hold 50% o:f posi-
tions al aJl levels ill the fo:e department open for minorities even though mfoorihes
made u.p only 28% of the Ielevan!: labor market The result was that some v1rhi1:12
applicants were denied employ:rnent or prornolion in favor of black applicants
who scored lower on a sded:ion battery. TI.1e federal court found that foe city's use
of the :infieJdble hiring formula violated federal civil rights law and the constitu-
ti.onal guarantee of equal protecHori. 11"1.e appell.ate comt agreed, and the Supreme
Cornrt refused to hear ll112 ca.se, tJ1us maldng 1he decision final.
Ricci v. De.Stefano :represents another recent: case tl1at has been appealed to
the Supreme Court regaxding the potential for reverse discrimination based
on a situation in New I-faven, C01mecticut. In this case a professional consult-
io.g firm. developed a fin~fighter test specifically eliminating questions thafi had
adverse impact against :minority members (based on pilot study testing). How-
ever, ~when the test was giv'2n, no blacks made the promotion list, so the city
simply ignored the test and promoted no one. W1rite and Hispanic firefighters
who would .h ave been on the promotion list sued, stating that tl1e failure i:o use .·( ;
the test results. diso:im.inated against them because of their race. 'U1e d:i.shi.ct and
~

appellate courts ruled that because no blacks were promoted either (because
there were no promotions), there had been no discrimination.
TI1e €ntire issue of affinnative action should evoke considerable attention and
d ebate over the next few years. Although most individuals support the idea of
diversity, few argue for the ldnds of quotas fuat have to some extent resulted
from the present legaJ climate. In fact, one recent survey revealed that only 16%
of the respondents favored affixmative action with quotas, 46% favored it with-
ou t quotas, and 28% opposed all affirmative action program s. One study found
tl1at people favor affirmative action when it is operationalized as recruitment,
training, and attention to applicant qualifications but oppose it when it consists
of discrirri.inaiion, quotas, and preferential treabnent.43

OtlllfCOMIES OF 'ifHfE AMfERKi-\N5 WrlfM DtSAmUTIES ACT

11.le ADI\. was passed w ith the laudable goals of providing employrnent oppor-
tunities for the truly disabled who, in the absence of legislation, were unable
to find employment Certainly, snm.e individuals witl1 disabilities have fot.md
employment as a result of Hs passage. f-foweveJ.~ as often occurs with legislation,
tli.e impact is not necessarjly ~vvhal lNas intended. First, there has bee·n increased
 ...
CMAPTrER 3 The LeqDI Environment: Equal Employment Opportunity and Safety '1l 4- 1

Ii.ligation. The EEOC reports that m.o re than 2.00,000 complaints have been filed
since passage of the act .f\pproxin1al:ely 50(Yo 0£ the crn:nplaints filed have been
f0tmd to be without reasonable ca.use. For exmnple, in one case a company fired
an employee for stealing firmn other exnpJ.oyees and bringi_ng a loaded gun to
work. The fired employee sued for reinstate1nenJ lm der the ADA, claiming that
he wa~; the victim of a mentaI illness and thus should be considered disabled.49
A second prohl<~m is th;;1.1: th.e Rinds of cas(::s b eing filed a.re not what Congress
intended to protect Although the ad was passed because of the belief that dis-
cr.imi:nahon againf3t h1dividuals v•rith disabil.i.tie3 occurred in the failure to hire
them, 52.2% of the daim.s dieal 1Ni:l:h fi.1fogs; 23.9'Yo with failu:re to make reason-
able ao.:ommoda.tion, and 12.5% w~Jh harassx:ncnt. ()nJy 9.4% of the complaints
allege a faHure to hire or rehixe.so fa addition, although l:he act was passed to -
protect people vvith major disabiHties such as blin<lne~;s,. deafness, lost limbs, or
paralysis, these disabiliiier:: combined account for a -e'l:nall. minority of the d.isabil-
ities claimed. As we see in Table 35, tJ1e biggest disabHity category is "otl1er,"
meani11g that the plaintiff daims a disabiJil:y that is n ot one of the 35 types of
impainnent listed in the EEOC charg12 dato sy::ilen1. The second largest category
is "being :regarded as disabled" accounti.ng fc·r 12.8% of aH d1arges, followed
by "back impairment'' dahnco at 9.7%. Ar:; an ·exmnple,. recently a fired employee
sued Im. 11. asking for $5 xniHion in damages for violation of the Americans with
Disabilities Act 'I11e employee had be.en fixed for spending hou rs al: work visit·-
ing adult chat rooms on h:i ~J computer. He alleged iJ1at his addiction to sex and
the Internet stemmed frorn trauma experienced by seeh1g a friend killed in 1969
during an Axmy patrol in Vietn.arn_.s1
'Finally, the ad does not appeax l:o have had its ani.icipated impact. on the
employn1ent of Americans lf\T~Hl. disabi1itie:3. /\ccordjng to the .f\Jational Orga-
nization or1 Disability, 2:2 rnilhon of tb.e 51· milJion disabled .Americans are
.unemployed. 52
For these reasons, Congress has explored the possibility of amend~ng the act
to more n arrowly define the term disabihly.53 11J.e debate coniirmes regarding
the effectiveness of the ADA .

Em1p ~()ryee S:ari~erty

In March 2005, officials a l: the BP refiJ1.1ery in Texas City. Texas, were aware of l03·1
the fact that some repairs needed to be done on sorne of the equipment in an Identify the major
octane-boosting processing a.mH. On March 23, knowing that some of the key provisions of the Occu-
pational Safety and
alanns w ere not working, managers a1tl:horized a start-up of ihe unit. The start-
Health Act (1970) and
up resulted in the deadlie~:;t pei:roclwmicaJ accident in 15 years, killing 15 people the rights of employ-
an_d injuring an additional 170.5\\ ees that are guaran-
Employee safety has becmne a great concern in the global garment industry. teed by this act.
nu~ "Competing l:luuugh Su8tah1ahiWy" box describes the problem and how
Gap Inc. is attempting to solve it.
Like equal employwent opportunity, eJ[nployee safety is regulated by both
the federal and state governrnents. lfowever, ito folly maxi:n.1.ize the safety and
health of vvmkers, employers need. to go weU beyond th2 letter of the law and
embrace ii:s spirit. With lfo.s in mind, we fo·~;t speU out the specific protections
gl'1"'ra11t·,pp(l i·Jv
4.<-L. J fec
.~ ... -...- ,_
1
•"1··>l l"'''"l·s1·1·
_ , 5.'1,...(,a-c5. 1- 1·• 0··1 ·~ r,..-l "1 "~'r C-LJ....'-'<"I'"''~
€.'. L'I. . .;i, .•
1
..A ,_.._. ,,a,...;O'"',
<t11..._11...._i~ U1. ~.•.• __ 1
r. ; . .,,.l.PdS of caf.et.y
Ji,_ v
11A. ._, •
.{\. :-ll . _

awareness programs lhat ath::n1pt l:o reil11force the;.oe sh:mdatds.

 -"
.p
N

.•
Tf!ibi~ 3a5
Sample of Co mp laints Filed under the ADA

9;

'Not all complaints are listed.

SOURCE: EEOC, www.eeoc.gov/stats/ada-reccipts.html.
 Global apparel companies such
as Limited, Gap, and Inditex
source most of their manufac-
turing to Third-World countries
such as Bangladesh . Wo rkers
there ofren receive wages of
$37 per rnonth making the
iabor-intensive manufactu ring
. process cost effective. How·
ever, the third-party contractors
who 1'un these pla nts seemingly
. care little for the workers or
their safety.
In January 20'13 a fire at a
Bangladeshi factory killed 7
. workers. Two months previously
in Bangladesh. This approach
consists o-f:
·1. Engaging a Chief Fire Safety
Inspector to conduct fire
safety inspections with for-
mal remediation plans and
accountabi lity.
2. Launch ing a Worker Sup-
port Pro~jrarn, providing up
to $2 milliol'.J..to ensure that
factory workers at Gap lnc. 's
long-standing, h igh--volume
third-party apparel manufac-
turers Vlfho are displaced from
1.Nork because of fire safety
"Gap Inc. is
deeply committed to"'
Bangladesh. We share the
same goal with other stakehold-
ers to make tangible change as
quickly as possible," said Bobbi
Silten, Senior Vice President
of Global Respon_sibility. "We
believe the time has come to
take action, and hope others in
ou r industry will step forvvard
with similar plans that will signifi-
cantly improve fire safety in the
apparel factories in Bangladesh."
DISCUSSIO~fl QUlfi:SttHO~~

a fire at the Tazreen Fashions remed iation receive Ioayment

factory had killed 1 ·12 work-
ers. Advocates say that since
l\Jovember 2012 Bang ladesh has
suffered 18 nonfatal facto1y fires.
In its effort to stay ahead of
· the curve, in October 2012 Gap
Inc. anr1ounced that it was roll-
ing out a comprehensive build-
ing and fire safety action plan
':hat vvould cover its third-party
garment manufacturing facilities
.
fm work days missed .
3 . Providing vendors accel-
erated access of up to
US$20 million in capital for
safety improvements.
4. Co ntinuin~J to engage with
the Bangladesh government,
U.S. government and the
International Labor Organiza-
tion (ILO) to promote com-
prehensive change.
Do you think Gap is doing
enough to improve working
conditions in Bangladesh? Why
or why not?
SOURCES: "Gap Announces Comprehen-
sive Building and Fire Safety Action Plan for
Bangladesh Appa rel Facilities" Gap press
release, October 2, 2012; J. Manik and
J . Ya rdley, "Bangladesh Factory, Site of Fire
That Trapped and Ki lled 7, Made European
. Brands," New York Times, www. nytimes
.com/2013/01 /28/world/asia/bang ladesh-
factory-site-of-fatal-fire-made-western-
brands.html, Januaiy 27, 2013.

'HllE OCCUl?AT~ONA~ 'SAf!ElfY AND HEAILTM ACT (OSHA)

Although concern for worker safety would seem to be a universal societal
goal, the Occupational Saf~tty am.cl Hea.Hh Ad (OSHA)-the most comprehen- Occupational
sive legislation regarding worker safety--did not emerge h""l this country until Safety and IH0a!t6]
the early 1970s. At that time, there were roughly 15,000 work-related fatalities Ad: (OSHA)
every year. The law that authorizes
the federal govern·
OSHA authorized the federal government to establish and enforce occupa- ment to establish and
tional safe1y and health standards for all places of employment engaging in enforce occupational
interstate commerce. Tii.e xesponsibility for inspecting employers, applying safety and health stan-
the standards, and levying fines was assigned to the Deparhnent of Labor. The dards for all places of
Deparhnent of Health was assigned responsibility for conducting research to employment engaging
in interstate commerce.
determine lli.e criteria for specific operations or occupations and for training
employers to comply with the act. Much of. thfa research is conducted by the
Natioilal Institute for Occupational Safety and Health (NIOSH).

143
144 CHAPTIER 3
lf.aib~@ 3Lrrii
f~ights Granted to
IJ\forkers under iJK)
Occupational Safely
and Health Act
OSHA is responsible
for inspectin9
businesse::;, applying
safety and health
sfanclards, and
levying fines for
·of harm in the workplace (as defined by the standards 0£ a reasonably p1udent
vio lations. OSHA
regula tions pi-oh ibit
notifyi ng ernployers
of inspections in
advan ce .
Gan11~n·~~ fiJ\M1l:y
C~ii31nJJ$Q
The. pr01rision of rhe
Occupational Safety
'and Health Act that
states that an employer
has a n overall obliga-
tion to furnish employ-
ees with a place of
employment Free from
recog11i1:ed ha1:arcls.
The L(;9al Environment: Equ~,1 Employment Opportunity and Safety
Ernploye1Js h~w~ the righ t to
·1. ifocl' Jest an inspection.
?. H;Ne a representative r1r',""'·'~·1•. :;1·L;:ih:·
3.
4.
5.
1Emr})l~Qjf'el0 ~R9~ll1:5 RJ1il"M)1~rr OSHA
The i:na.ln provision of OSHA states tJ.1at each employi;::r has a
general duty l:oJurnish each employee a place of employment
f:F2e h'Om nx:ognized hazards that cause or are likely to cause
death o:r serious physical harm. This is referred to as the g~nercatl
<1Jndy daiuse. Some specific rights granted to workers under this
ad are listed in Table .3.6. The Depaitment of Labor recognizes
rrwny speciJic types of hazards, and employers are reguired to
.comply •Nith all the occupational safety and health standards
..published b~r . 1'-UOSH.
/-\ recent example is the development of OSI-IA standards for
occupahonaI exposure to blood-borne pathogens sud1 as the
Af[)S virus. TI1ese standards identify 24 affected industrial sec-
l:ors1 encornpassing 500 000 establishments and 5.6 million ·work-
1
i.::rs . .Axnong ol11er feahu:es 1 these standards require employers to
develop an exposme control plan (ECP). An ECP must include a
list of jobs 111rhose incumbents might be exposed to blood methods
1
for ]Jriple.1nenJing precautions :in these jobs, postexposure follow-up plans and 1
proG:'.diH'C3 fo·r r.::valuatiJ1g h1cidenls in which workers are accidentally inJected.
Although NIOSH pubhshes numerous standards, regulators cle.aTly cannot
antici.pai'c:' all possible hazards llrnt could occur in the workplace, Thus, tl1e gen-
fi'al dulT clause requires ern.ployers to be constantly alert for potential sou.rces
person) ;uld to corn:~ct them. For example managers at Alnoco s Joliet, illj11ois,
1
1
plant fli>.aJjz.ed thai over the years some employees had created undocmnented
shortcntr.; and built them into their process for handling flammable materials.
Thf:se change~> appeared to be labor saving but created a problem: workers did
not have u11iform procedures for dealing witl1 flanunable products. Tius became
an urgenJ issue because many of the experienced workers were readun.g relire-
n1ent ager and the plant was hi. danger of losing critical technical expertise. To
i3olve ll1ics problem, the plant adopted a training program that met au the stan-
dards ncoqnu:ed by OSHA That is, it conducted a needs analysis lughlighting
each task nF\ 1.r employees had to learn and then documented these processes in
1
wri.Hen guidelines. New employees were 5'iven hands-on h·ahung wi111 the new
procedur<2G and were then certified in writing by their supervisor. A computer
tracking systeJn v1ras m,5taUcd to rnonitor who was handling flammable m.ateri-
ab, and this systeni. hnmediately identified anyone who was not certified. TI1e
plant Jnel requfrern ..:;-nts for both ISO 9000 standards and OSHA regulations and
coni:lnu.e:o lo use the smne rnodel for safety lTaining in other areas of foe plant. 55
 Ii<'

CIHAU"TE~ 3 The Legal Environrnent: Equal Employment Opportunity and Safety 145

0Sf~~#7l, !lilll:sn:»ediown:s.
OSHA inspedions are cornducted by spedalJ.y tra:ined agents of the Departrnent
of Labor called compliance officers. These ~nspection.s usually follow a tight
"script." 1ypically, the compliance officer sh mvs up unarmo1mced. For obvious
reasons, OSHA's regulations prohibit advance notice of inspeclions. The officer,
after presenting credentiaJs, tells the employer the reasons for ll1e inspection and
describes, in a general way, the procedures necessary to conduct th.e investigation.
An OSHA inspeclion has four major co1nponents. First, the compliance offi-
cer reviews the einployer's records of deaOi.s, injuries, and illnesses. OSHA
requires this kind of record keeping from all firms 1Nii:h 11 or more full- or part-
tirne employee~>. Second, a~e office1~ b;vicaHy a.1_~cornpanied by a representative
of the employer (and pe:rhaps by a :representative of the employees), conducts
a "waJkarou:n,d" tour of Hie employer's pre1nises. (Jn this tom~ the officer notes
any conditionr3 that may violate specific published· standards or the less specific
·general dub; clause. The d1Jxd component of the :inspection, employee inter-
vie;Ns, jnay take place during the tour. At this time, any person who is aware
of a violation can bring it. to i:he attention of the officer. Fi11ally, in a dosing con-
ference the compliance officer discusses the findings vvith the employer, not-
ing any violations. The employer is given a reasonable time frame in which to
correct lhese violations, lf any vioJ,ation represents imnunent danger (that is,
could. cause serious h11·urv OT death before being efuninated tlu·ough tl1e nor-
-' '-'
mal enforcernenl: procedures), t.he officer 1nay, H1nn1gh the Deparhnent of Labor,
seek a restraining order fron.11 a U.S. dist.rid •:our!:. Such an order compels the
employex to correct the prnblem ii_--nrnediately.

Cotatnorns .r:m11rJJ fP>em~ ~tne:s

If a compliance officer believes that a violation has occm'l'ed, he or she issues a
citation to the employer that specifies the exact. practice or situation that violates
the act The employer is required to post this citation in a prominent place neru:
the location of H1e violation--'2ven if the employer intends to contest it. Nonseri-
ous violations may be assessed up to $7,000 for each incident, but this may be
adjusted downward if the employer has no prior histmy of violations or if the
employer has :tna<le a good-faith effort to comply wi1h the ad. Serious violations
of the act or willful, repeated violations may be fined up to $70,000 per incident.
l1ines for safely violations are never levied against the employees themselves.
111e assumption is that safety is primmily the responsibility of the employe1~ who
needs to wo:rk ·with employees to ensui"e that they use safe working procedures.
In addition to !fo~se civil penallties, crhnii"1a1 penalties may also be assessed for
·wiJJJuJ violations that kill an employee. Fines can go as high as $20,000, and the
employer or agents of tfo,~ employer can be imprisoned. Crhninal charges can
also be brought against anyone who falsifies records that are subject to OSHA
inspection or anyone who gives advance notice of an OSI-IA inspection without
permission from the Department of Labor.

The !Effect of OSHA

OSHA has been unquesti.on.ably successful in raising the level of awareness of
occupational safety. Table 3.7 presents recent data on occupational injuries and
illnesses. Yet legislation alone cannot solve all the problems of work site safety.56
 ..
146 CMAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety

if0111biijlli!l 3.1
Sorne of the Most
l~ecent Statistics
Provided by the Toti'\I recordable cases: Total f~tal'infLdies (ci 1(~ectors):
Bureau of Labor 2,986,500 in 201 ·1 4,693 in 2011
Statistics Regardin9 Cast:.os involving days away from work: Roadway inddents (all sectors):
Workplace Illnesses 908,300 in 201 ·1 1, 103 iil 2011
and Injuries Falls, slips, trips (all sectors):
Median clays away from work:
· 8 in 20l1 681 in 2Cll1.··.
Cases involving sprains, strains , tea1·s: Homicides (alLsectors):
3;'.f0,870 in201 l 468.in201 ·1 ·.
Cases involving injuries to the back:
'J 82,270 in 201 ·1
Cases involving falls, slips, trips:
,' 225)550 iq 2011

SOURCE:: www.bls.gov.

Many indush·ial acddents 8Sl2 a product of unsafe behaviors, noi: unsafe work-
ing conditions. Because the act does not directly regulate employee behavior,
little behavior change can be expected unless employees are convinced of the
standards' importance.57 Thjs has been recognized by labor leaders. For exait-U-
ple, Lynn Will.iams, president of the United Steelworkers of America, noted,
"We can't couni: on govermnent. \Ne can't count on employers. We must rely on
ourselves to bring about the safety 8.J."'1.d healtl1 of ow· workers."58
Because conformit1g to the statute alone does not necessarily guarantee safely,
many employers go beyond the letter of the law. In the next section we exam-
.ine various kinds of employer··j11itialed safety awareness· programs that comply
with OSHA requirements and, in sorn.e cases, exceed them.

SAFIETY AWAREN!ESS PROGRAMS

Safoty AwarGoe!l>to
fP'm91rnm!:l
Employer programs
that attempt to instill
svmbolic and substan-
tive changes i~ the
organization's empha-
sis on safety.
Safo\ty awareness prngri:am5 go beyond compliance with OSHA and attempt
to :instill symbolic and substantive d1anges in the organization's emphasis on
safety 'Tiu~se.programs typically focus either on specific jobs and job elements or
on specific types of injuries or disabilities. A safety awareness program has tlm~e
primary components: identifying and communicating hazards, reinforcing safe
practices, and promoting safety internationally.

Mentifyfi~g and Commuriikaicing k~b Hm:ardl:s

.Employees, supervisors, and other knowledgeable sources need to sit down and
..n~lb R-l!a;;rii/lm discuss potential problems related to safety. TI1e job hazard analysis t~d.mique
Allllaijysnis Tadmnqm~ · is one means of accompJishing this.59 With this technique, each job is broken
A breakdown of each down into basic elements, ai"1d each of these is rated for its potential for harm
job into basic ele-
ments, each 0f which
or injury. Jlf there is consensus that some job element has high hazard potentiat
is rated for its potential this element is. isolated and potential tedmological or behavioral chai'"'.lges are
for harm or injury. considered.

.
~
 CIHAPTIER 3 The Legal Environment: Equal Employment Opportunity and Safety 147

Anoiher means of isolating unsafe job elenl'enls is to study past accidents. 1he
iedTllrTLlf oJf op~rnti.onrns i\evie1N ffOJlU is an analysis methodology that helps man- Tedmko'if
agers determine which specific eiernent of a job Ied to a past acddent. 60 The first Ojp<era1il{}Jrn!S ~~~tl@1M
step in a TOR analysis is to establish the fads sm-rotmding the incident. To accom- (TOR)
Method of determin-
. plish this, all members of the work group involved in the accident give their initial
ing safety problems
impressions of what happened. ll1e grnup must then, through gxoup discussion, via an analysis of past
reach a consensus on the single, systematic failUJ-:e that most contributed to the accidents.
incident as well as two or three m ajor secondary factors that contributed to it.
An analysis of jobs at Burger King, for example, r<2vealed that certain jobs
required employees to walk across wet or slippery surfaces, which led to many
falls. Specific corrective action was taken based on analysis of vvhere people w ere
falling and whal: conditions led to these falls. Now Burger King provides m ats at
critical locations and has gene:raJJy upgraded its flo or m aintenance. The company
also makes slip-resistant shoes available to employ;ees in certain job categories.61
Cormnunicalion of an employee's risk should take advantage of several
media. Direct. verbal supervisory conl:ad is important for its saliency and imme-
diacy. Written memos axe it1i1porhmt because they help establish a "paper trail"
that can later document a history of concern regardiitg the job hazard. Posters,
es1)eciaUy those placed near the hazard, serve as a constant reminde1~ reinforc-
ing other messages.
In communicating :risl1;, H is ixnport.an t to recognize tvvo distinct audiences.
Sometimes relatively young o:r :inexperienced workers need special attention.
Research by the National Safety Cmmcil indicates that 40% of all accidents hap-
pen to individuals i~n tl1e 20-to-29 a ge group and tha t 48% of all accidents happen
to workers during tl1eir firnt year on the job .62 TI1e employer's primary concern
with respect to H1is grou p is to inform them. Howeve1~ the employer must not
overlook experienced workers. Here the key concern is to remind them. Research
indicates that long-term exposure to and familiarity with a specific threat lead
to complacency.63 Experienced employees need retraining to jar them from com-
placency about the real dangers associated with their work. This is especially
the case if the hazard in question poses a greater t.hJ:eat to older employees. For
example, falling off a ladder is a greater threat to older worl<:ers than to younger
ones. More than 20% of such falls lead to a fatality for workers in the 55-to-65 age
group, compared with just 10% for all other workers.MvVhile most of this d iscus-
sion has focused on workplaoe sai~ly, increasingly teclmology has enabled and
encouraged workers to work at home off the d ock. The "Competing through
Technology" box illush·ates some of the costs and benefits of this trend.

Re i~ffo irdnll~ 5afo PraiCtke:s

One common teclu1ique for reinforcing safe praciices is implementing a safety
incenti.ve program to reward workers for their support and commitment to
safety goals. Initially, p rograms are set up to focus on· :improving short-te1m
monthly or quarterly goals or to encourage saiety suggestions. 111ese short-
term goals are later expanded to include more wide-rangin g, long-term goals.
Prizes are typically distributed in highly p ublic forums (like annual meetings or
events). Tiu~se prizes u suaJJy consist of merchandise rather than cash b ecause
merchandise represents a lasting symbol of achievement. A good deal of
evidence suggests that such programs are effective in reducing injuries and
their cost. 65
 Globali1:atio11 and technol-
ogy continue to change when,
where, and hov11 people work.
A generation raised on mobile
deviu;s incr~~asingly uses t hen1
from their bedrooms late into
the night and early in the mom-
in9 . A poll conducted by Good
Techno logy revealed that half
of the respondents reporl:ed
reading and responding to
e-mai ls from bed. ;::., study
of British workers found that
20 percent of workers spend
betweE:)n 2 and 10 hours work-
ing from bed.
Smne workers do it to keep
ahead of e-mails so that they
don't have a huge inbox when
I. they awake, while others are
simply trying to maintain real-
time cornmunication'.> across
9lob;:il'l:irne zones.
One might be tempted to
believe that companies wou ld
love employees displaying such
commitment to work. However,
dravvbacks e)<ist. First, because
they work at night, emp loyees
rnay be tempted to take m ore
personal time at work 1:0 shop
online, check their Facebook
pages, or pla n their upcom-
ing vacations. Sec~r1d, it can
break the bond between sleep
and bed, resulting in insomnia .
Finally, it can begin to gener-
ate feelings of guilt fo r turning
devices off. Because of these
issues, a number of experts are
increasingly caHin9 for people
to declare thco bedroom a
''device-free zone."
On the other hand, given
these trends, bed manufacturers
have responded accordingly.
Luxury bed-maker _
E.S. Kluft now offers . · ·.
a giant 7-by-7-foot bed
that allows couples to spread
o ut papers and work from bed.
Reverie offers a split-adjustable
bed allowing one partner to
sleep horizontally while the
other has the bed propped up
in order to work.
Whi le working from the bed .
may be productive, employees "
need to be cautious and aware ·
of the potential costs to vvork-
ing "under the covers."
IOHSCUSSION QU~ST~ON
Should co m panies discourage
workers from working at home?
Why or why not?
SOURCE: S. Shellenberger, "More Work
Goes 'Undercover,"' Wall Street Journal,
November 14, 2012, pp. 01, DS.

VVhereas the safety awareness programs just described focus primarily on the
job, ol11E:r programs focus o:n specific injtffies or disabilities. Lower back disability
(LBD), for example, is a 1najor problern that afflicts many employees. LBD accounts
for appro;dmately 25% of aJJ workdays lost, cosfu1g firms nearly $30 billion a year. 66
Iiuman rcsot.u:ce managers can take many steps to prevent LBD and rehabmtate
those who are alxeady afflicted. Eye jnjuries are another target of safety awaxe-
ness programs. Tiw National Sociely to Prevent Blindness estimates that 1,000 eye
injw:ies occur eve1y day in occupational seU:ings.67 A 10-step program to reduce
eye injuxies is outlined in Table 3.8. Similar guidelines can be found for eve1ything
from d1emica1 burns to elecl:ro~ulion to injuries caused by boiler explosions. 65

rrnm«litflRH~ Safety h1tem.o;tijotrna~iy

Given the increasing focus on international management, organizations also
need to consider how to best ensure the safety of people regardless of the nation
:in which they operate. Cultural differences may make this more difficult than
ii: seems. For exmnple, a rec£nt shtdy examined the impact of one standardized
corporation.wide safety poli.cy on employees jn tlu·ee diffe1:ent cot.mhies: the
United States, France, and Argentina. The results of tlus study indicated that
the same pohcy was i.11.terpn;ted differently because of cultural differences. The
individualistic, control-oriented culture of fJ1e United States stressed the role of

148
 ~ .
CMAPTfER 3 The Legal Environment: Equal Employment Opportunity anci Safety ·1,~-'9'

lliain»R•fl 3"<~~
.i t , p9p91.1~t ?n. ey~h~zanJjob analysis. ,6, 10-Step P1·ogram
·.'.2. TE!s~ alhe.rtjployees' .v isionto·establish a baseline . for Reducing Eye-
. q . : Sel~ctprotectiveeyewoar desi9n0d fo r specific operations .. R81at·c=:d lnj urie~;
. .· .•.· 4 .. ffa;t~b!ish a ; 100% bt9bavioraJ compliance pro9rarn f('.)r e,y~wear;
·5. En sun~ that e yewear is. pro pr.orly fitted.
6. Tttiiti emp loyees · in · (:~nwr9cncy procedurf'.:s.
L C9ndUct o n g 6ih~J education ·prqgrarns regarding eye cc1re •
.•· 8, c:ontinunllv review accident prevention strategios.
9. Provide;,T1a11('190rnent sup pc:rt. . . . . . .. . .. . . . ·.
.· lO. Estciblishi)llrittf.fo p6lickis de!:i,i lin:J s;;inctions a nd .rewards for spedfic results, ·

SOURCE: From T VI/. Turrif, "r,ISPB Sus19ests HJ-Step Pro gram to 1°1·event Eye lnj u1y," Occupational Health and
Safety "10 Cl 991 ), pp. 6 :~-66. Copy ri ght@ Media Inc. Reprinted with FJer'.1;is si on .

l:op m anagement in ensuxing safety in a top-d own fashion. However, this pol-
icy failed to w ork.in Argentina, where the coUechvist cuJtme made employees
feel that safety w as everyone's joint concen1; therefore, programs needed to be
defined from the bottom up.m
At t11.e b eginning of ihis Bect:ion 'Ne discussed a horrific accident at BP' s Texas
City refinery. After examining the causes of the explosion, the U.S. Chemical
Safety an d Hazard Investigation Board asked BP to set up an jndependent panel
that 1Nould focus on overseeing radical changes in BP's safely procedures. Thi:>
panel was tasked with investiga iing the safely cullure at BP along 111rith the pro-
cedures for inspecting equipment and rep orting near-miss accidents. TI1e p an-
el's charter is not jusHo oversee the Te)rns City refinery, but also to look at th e
safety practices in refinerie~:; that HP harJ acqu iTed over the yeats. 70

v
\/
v
Hairas:s;ment and C~as:s; Arr:t~«.J11n ~~orrke r lai\.ft1sadtt at forever 21
This chaptei- ha s looked at the rjghts of employees and asked why companies
take advantage of thei r efl\iployees. As we saw earlier, the cheap-chic Forever 21
retailer is facin g a class-action lawsuit by e m ployees seeking damages for hou rs
worked off the cl ock durini~ meal breaks and after their shifts.
,~!though Forever 2 ·1 ha::; not responded to the allegations, it has been reported
that it has recently stopped its company p olicy of checking employee bags for
stolen merchandise .
These types o f class action lawsuits aga inst b ig companies are usually long and
tedious. It is a little bit like David takin9 on Goliath an d demands a lot of cou rage
from employees who take on their employers, but "if th ey win their lawsuit t hen
they ch ange e m p loyee riqhts for everyone in the compa ny.
In a simila r cl ass"'action lawsuit, Polo Ralph Lauren was accused of forcin~J
employees to e ndure off the clock bag checks without compensating them for
their time, denyi ng the111 bn,:-aks and lunch-times. Sounds familiar? The 6,700
'~m p loyees were awarded '.fl4 mi llion for vio lation o f California labor law and
the Fai r Labor St andarcb /-\ct {FLSJ\). Fedef·al and St ate laws clearly state that

--- -----
 ...
150 CHAPTER .3 The Legal Environment: Equal Employment Opportunity and Safety

employees need to be paid if they are under the employer's control or doing
something for the benefit of the employer. '
Although employment laws vary from state to state, a lot of states require
employers to post employment laws in a public place. The five employees of
Forever 21 represent youn g employees who are often vulnerable and who may
not know or understand their rights; many employees may feel their only optiqn
is to quit.

QUESTIONS
1. Do you think Forever 21 took advantage of its employees?
:l. When is a company policy the equivalent to unpaid la bour? .
3. Do teenagers/young people need to be more protected in the workplace?
4. Why should employees make employers respect the law?

Viewing employees as a source of competitive advan-
tage results in dealing with them in ways that are ethi-
cal and legal as well as providing a safe workplace.
An organization's legal envi.ronment--especially the
laws regarding equal employment opportunity and
safely-has a particularly strong effect on its I-IR.Iv1
function. HRM is concerned with the management of
people, and goverrunen t is concerned with protecting
individual~. One of HRM' s major chaJJenges, therefore,
is lo perform its function withln the legal constraints
imposed by the goverrunent. Given the multimillion-
d ollar settlements resulting from violations of EEO
laws (and the moral requirement to treat people fairly
regardless of their sex or race) as well as the penal-
lies for violating OSHA, HR and line managers need
a good understand1.1g of the legal requirements and
prohibitions in order to manage their busii1esses h1
ways that are sow1d, both financially and ethically.
Organizations that do so effectively will definitely
have a competitive advantage.

Equal employment opportunity
(EEO), 112
Americans with Disabilities Act
(ADA) of 1990, 119
Equal Employment Opportunity
Commission (EEOC), 121
Utilization analysis, 122
Goals and timetables, 122
Action steps, .123
Disparate h·eatment, 124
Bona fide occupational
qualification (BFOQ), 126
Disparate impact, 127
Fom-fifths rule, 128
Standaxd deviation rule, 128
Reasonable accommodation, 131
Occupational Safety and Health
Act (OSHA), 143
General duty clause, 144
Safety awareness prograins, 146
Job hazard analysis
techrique, 146
Technic of operations review
(TOR), 147

L Disparate impact theory was originally created by
the court in the Griggs case before finally being cod-·
ified by Congress 20 years later in the Civil Rights
Act of 1991. Given the system of law in the United
States, from what branch of government should
theories of discrimination develop?
2. Disparate impact analysis (the four-fifths rule, sta11--
dard deviation analysis) is used in employment
discrin'lination cases. 111e National Assessment of
Education Progress conducted by the U.S. Depart-
ment of Education found that among 21- to 25-year-
olds (a) 60% of whites, 40% of Hispanics, and 25% of
blacks could local:e infonnation in a news artkle or
almanac; (b) 25% of whites, 7% of Hispanics, and 3%
of blacks could decipher a bus schedule; and (c) 44%
of whites, 20% of Hispaiucs, ·and 8% of blacks could
correctly determine the change they were due from
the purchase of a two-item restaurant meal. Do these
 CHAIPTEIR :1 The Legal Environment: Equal Employment Opportunity and Safety
t~sl<s (locating information in a news article, decipher-
ing a bus schedule, and determining correct change)
have adverse impact? What are the implications?
3. Many co:m.pamies have dress codes that require men
to wear suits and women to wear dresses. Is this
cliscri.minatmy according to disparate treatment
iheory? Why?
4. Cognitive ability tests seem to be the most valid
selection d evices available for hiring employees, yet
they also have adverse impact against blacks and
Hispanics. Given the validity and adverse impact,
and considering that race nonning is illegal under
CR.A 1991, what would you say in response to a rec-
ommendation that such tests be used for hiring?
5. How rn.ighl f11e 'ADA's reasonable acconunodation·
requirement affect workers sudl. as law enforce-
ment officers and firefighters?
Take lhe foJJb1Ning self-assessment quiz. For each
stat:e.ment, circle T if the slatement is true or F if th,e
statement is false.
WM!);T [:il0 YOlli i(IMOW AIB\O ~lr $1EXlll#U.
MA!fMSSMIEll'W'lf?
1. A man cannot be the victim of sexual harassment.
T F
2. The harasser can only be the victim's manager or a
manager in another work area. T F
3. Sexual harassment chaxges can be filed only by the
per-son who directly experiences the harassment.
T p
Discrimination vs. Equality - Lessons Learnt at Home Depot
Home Depot is the largest home products firm in the
USA selling home repail' products and equipment for
the "do-it-yourselfer." Fow1ded 20 years ago, it now
boasts 100,000 employees and more than 900 ware-
house stores n ationwide. TI1e company's strategy for
growth has focused mostly on one task: build more
stores. In fact, an unwritten goal of Home Depot exec-
utiv.es was t:o position a store within 30 rnirmtes of
every customer in the United States. They have h'ied
hard to implement a sh·ategy of providing superi.or
service to its customers. The company has prided itself
on hiring people who are knowledgeable about home
repair and who can teach customers how to do home
repairs on tl1eir own. This sh·ategy, along with blan-
keting the cotmlry with stores, has led to th..e finn's
151
6. The reasonable woman standard recognizes that
women have different ideas than men of what con-
stitutes appropriate behavior. What are the :implica-
tions of this distinction? Do you think it is a good or
bad idea to make this distinction?
7. Employers' major complaint about the ADA is that
the costs of m aldng reasonable accommodations will
reduce their ability to compete with businesses (espe-
cially foreign ones) that do not face these requirements.
Is this a legiti.Inate concern? How should employers
and society weigh the costs and benefits of the ADA?
8. Many have suggested that OSHA penalties are too
weak and misdirected (aimed at employers rather
than employees) to have any significant impact on
employee safety. Do you think that OSHA-related
sanctions need to be strengthened, or are existing
penalties sufficient? Defend your answer.
4. The best way to discourage sexual harassment is to
have a policy that discourages employees from dat-
ing each other. T F
5. Sexual harassment is not a form of sex
discrimination. T F
6. After receiving a sexual harassment complaint, the
employer should let the situation cool off before
investigating the complaint. T F
7. Sexual harassment is illegal only if it results
in the victim being laid off or receiving lower
pay. T F
substantial advantage over competitors, including the
now-defunct Home Quarters (HQ) and still-standing
Lowe's.
Howeve1~ Home Depot h as mn into some legal
problems that could have implications for all its busi-
nesses. During the company's growth, a statistical
anomaly has emerged. About 70 percent of the mer-
chandise employees (those directly involved in selling
lumber, electrical supplies, hardware, and so forth)
are men, whereas about 70% of operations employees
(cashiers, accountants, back office staff, and so forth) are
women. Because of this difference, several years ago a
lawsuit was filed on behalf of 17,000 current and former
employees as well as up to 200,000 rejected applicants.
Horne Depot explained the disparity by noting that
 ...
152 CHAPTER 3 The Legal Environment: Equa l Employment Opportunity and Safety
most female job applicants had experience as cashiers,
so tl1ey were placed in cashier positions; most male
applicants expressed an interest in or aptitude for home
repair wox·k such as carpenl:ry or plumbing. As a result,
attorneys axgued lhat Home Depot 1Nas reinforcing
gender stereotyping by hiring in th.is manner.
More recently, five former Home Depot employees
sued the company, charging that it had discriminated
against African American workers at two stores in
Florida. TI1e five alleged that they were paid less than
white workers, passed over for promotion, and given
critical performance reviews based on race. "The com-
pany takes exception to the charges and believes tl1ey
are witl1out merit," said Home Depnt spokesman Jerry
Sfoelds. 'TI1ere have been several other racial discrimi -
nation suits in addition to this.
To avoid such lawsuits in the future, Home Depot
could resort to hiring and promoting by quota, ensur-
ing an equal distribution of employees across all job
categ01ies- sometll.ing that the company has wanted.
to avoid because it believes such action would under-
mine its competitive ad vantage. However, the com-
pany has taken steps to broaden and sh:engthe11 its
ovrn nondiscrimination policy by adding sexual ori-
entation to the written policy. In addition, company
president and CEO Bob Nardelli announced b1 tJ1.e fall
of 2001 that Home Depot would take special sieps to
protect benefits for its more than 500 employees who
serve in the Anny reserves and had been activated.
"We will make up any difference between iheir Home
Depot pay and their military pay if it's lowe1~" said
Nardelli. "VI/hen they come home [from duty], their
jobs and their orange aprons are waiting for t11em."
In settling the gender discrimination suit tl1e com-
pany agreed to pay $65 million to women who had
been steered to cashiers' jobs and had been denied
promotions. In addition, the company pr.omised
that eve1y applicant would get a "faiJ: shot." Home
Depot's solution to this h as been to leverage technol-
ogy to make better hiring decisions that ensure the
company is able to maximize diversity. Home Depot
instituted its Job Preference Program, an automated
hiring and promotion system, across its 900 stores at
a cost of $10 million. It has set up kiosks where poten-
tial applicants can log on to a comp11te1~ complete a.n
Segregation in Schools-Have Lessons been leamt?
Decades of progress on integration have been followed
by disturbing slippage in the US. Over fifty years ago
the United States Supreme Court declared racially
.
...
application, and undergo a set of prescree11.ing tests,
weeding out unqualified applicants. The system then
prints out test scores along with structured interview
questions and. examples of good and bad answers for
the managers interviewing fuose who make it tlm:iugfi.
the pr.escreening. In addition, the Home Depot sys-
tem is used for promotions. Employees are asked to
consbmtly update tl1eir skills and career aspixation3
so tl1ey can be considered for promotions at nearby .
stores.
The system has been an unarguable success. Math
agers love i.t because they are able to get high-quality
applicants without having to sift through mounds of
reswnes. In addition, l:he system seems to have accom1
pUshed its main plJ!pose. The n umber of female n1ru1;
agers h as increased 30% and the number of mino1itY
managers by 28% since the introduction of the system~
In fact, David Borgen, the co-counsel for the plai.ntiifs
in the original lawsuit, states: "No one can say it can't
be done anymore, because Home Depot is doing it big:.
ger and better than anyone I know." ~
O.RJESlQOINIS
1. JJ Home Depot was correct in that it was not discrjm-
inating, but simply filling positions consistent. vvith
those who applied for them (and ve1y few women
were applying for customer service positions), given
your reacting of this chapter, was the firm guilty of
discrimination? If so, under what theory?
2. How does this case illustrate the application of new
teclmology to solving issues tl1at have never been
tied to teclmology? Can you think of 0th.er ways
technology might be used to ad9ress diversily I
EEO I affirmative action issues? ··
SOURCES: "Home Depot Says TI1anks to America's Militaiy; Extends
Associates/Reservists' Benefits, Announces Military Discount,"
company press release, October 9, 2001; S. Jaffe, "New Tricks in
Home Depot's Toolbox?"; BusinessWeek Online, June 5, 2001, at
www.businessweek.com ; "HRC Lauds Home Depot for Adding
Sexual Orientation to Its Non-dii;crimination Policy," Human Rights
Campaign, May 14, 2001, at www.hrc.org; " Former Home Depot
Employees File Racial Discrimination Lawsuit," Diversity at Worl<,
June 2000, at www.diversilyatwork.com; "Michigan Officials File
Discrimination Suit against Home Depot," Diversity at Work,
February 2000, at www.diversityatworkcom; M. Boot, "For Plaintiffs'
Lawyers, There's No Place Like Home Depot," The Wall Sh-eet Journal, .
interactive edition, Febrnaiy 12, 1997. Accessed 6th May 2011.
segregated "separate but equal" sd1ools Lmconsti-·
Jutional. The case is widely regarded as one of the
court's most important decisions of the 20th centUry,
'li !
 ..
CMAPIE~~ 3 The Lega l Environment: Equal Employment Opportunity and Safety 153

. but'how mu('..h progress has really been made? There's in ll1e ranks of minority schoolchildren. While the
' no question that African Americans have made major number of white elementary school kids remained flat,
strides since- economically, socially, and education- at 15.3 million, between 1990 and 2000, the number of
, ally. But starting in the late 1980s, political bacldash black children climbed by 800,000, to4.6 million, while
brought racial progress to a halt. Since then, schools Hispanic kids jumped by 1.7 million, to 4.3 million. The
have slowly been re-segregating, and H1e achieve- result: Ivlinorities now comprise 40% of public school
ment gap between white and mli1ority schoolchildren kids, vs. 32% in 1990. And as the nonwhite populatioh
has been widening again. Can the United States ever has expanded, so have minority neighborhoods-and
achieve the great promise of integration? Some key schools.
questions follow. So minorities have lost ground? Yes, in some respects .
. What did the Court strike down in 1954? Through-- By age 17, black students are still more than three years
9vt the South and in Border States such as Delaware, behind the:iJ: white counterparts in reacting and math.
·black and white children were officially assigned to And whites are twice as likely to graduate from college.
· separate schools. In Top eka, Kansas, the lead city in . _}a.ken as a w hole, U.S. schools have been re-segregating
th,~ famous case, there were 18 elementary sd.10ols for 15 years or so, according to studies by the Harvard
for whites an.cl just 4 for blacks, forcing many Afri·· University Civil Rights Project. "We're celebrating
can American children to travel a long way to school. [Brown] at a time when schools in all regions are becom-
11te idea that black schools vvere "equal." to those for ing increasingly segregated," says project co-director
whites was a cruel fiction, conderruli.ng most black Gny Orfield.
children to a gTossly· inferior education. lflfh
~ at. ro Ie I1as th
· e po l"t"
1 1caI b ackl as h against
· ·mte-
Surely we've come a long way since then? Yes, gration p layed? The comts and politicians have
though change took a long time. Over 99% of Southern been pulling back from integration goals for quite a
black dlildren were still in segregated schools :in 1963. while. In 1974, the Supreme Court ruled that heavily
The 1960s civil rights movement eventually brougl1i: black Detroit didn't have to integrate its schools with
aggressive federal policies sudi. as busing and court the sunonnding white suburbs. Then, in the 1980s,
orders that forced extensive .i ntegration, especially in the growing backlash against busing and race-based
tlK~ South. By 1988, 4'1% of Southern black children were school assigrunent led politicians and the courts to all
attending schools where a majoriiy of siudenl:s were but give up on those remedies, too.
white, up from 2% in 1964. '1Ne cut school desegregation
So what are the goals now? The approach has
almost in half betvveen 1968 and 1990," says Jolm Logan,
shifted dramatically. Instead of trying to force inte-
diredor of the Lewis Mumford Center for Comparative
gration, the United States has moyed toward equal-
Urban and Regional Research at State University of New
izing education. In a growing number of states, the
York at Albany.
courts have been siding with lawsuits that seek
· What's the ·picture tod ay? There have been some equal o:r "adequate" fnnding for minority and low-
real gains. The share of blacks graduating from high income schools. The No Child Left Behind Act goes
school has nearly quadrupled since _Brown, to 88% even further. 'It says that all d1ildren will receive a
today, while the share of those ages 25 to 29 with a col- "highly qualified" teacher by 2006 and will achieve
lege degree has increased mor~ than sixfold, to 18%. proficiency in math and reading by 2014. It specifi-
· Another important trend is in housing, whid1 in turn cally requires schools to meet these goals for racial
helps determine the characteristics of sd1ool districts. subgroups. Paradoxically, it sounds like separate but
Residential integration is improving, albeit at a glacial equal again. Both the equal-funding suits and No
pace. TI1ere's still high housing segregation in major Child Left Behind aim to improve all schools, what-
metropolitan areas, but it has fallen four percentage ever their racial composition. Integration is no longer
points, to 65%, on an index developed by the Mum- the explicit goal.
ford Center. Some of the gains are happening in fast-
Ccin schools equalize without integrating? It's pos-
growing new suburbs where race lines aren't so fixed.
A few big cities have improved, too. In Dallas, for sible in some cases, but probably not for the United
States as a whole. The Education Trust, a nonprofit
example, black- white residential segregation fell from
group in Washington, D.C., has identified a mun-
78% in 1980 to 59% in 2000.
ber of nearly all-black, low-income schools that have .
Why haven't schools continued to desegregate, achieved exceptional test results. But such success
too? The inc1'eased racial mixing in housing hasn't requires outstanding leadership, good teachers, and a
. been nearly large enough to offset the sheer increase fervent commitment to high standards.
 ..
154 CHAPTIER 3 The Legal Environment: Equal Employment Oppqrtunity and Safety
'Ibese qualities are far nwre difficult to achieve in
large uxban schools with many poor kids-the kind
most black and Hispanic students attend. l11e average
minority student goes to a sch ool in whid1 two-thirds
of the students are low-income. By conh'asl:, whites
al:tend schools that are just 30% low-income.
So are black-white achievement gaps as much
about poverty as race? Yes, w hich is why dosh1g
them is dilficult with or without racial integration.
Studies show that middle-class students tend to ha ve
higher expectations, more engaged parents, and bel:-
ter teachers. Poor children, by contrast, often come
to school with far more personal problems. Yet poor
schools are n•ore likely l:o get inferior teachers, such as
those who didn't major in the subject they teach. Many
poor schools also lose as many as 20% of their teachers
each year, while most middle-class suburban schools
have more stable teaching staffs . "Research suggests
tha t when low-income students attend middle-class
schools, they do substantially bette1/' says Richard
Kahlenberg, senior fellow at the Century Foundalion,
a public policy think tank in New York City.
Is it possible t o achieve m ore economic integration?
There are a few shining examples, but they take
enormous political conunitment. One example that
education-system reformers love to highlight is Wah~
Counly, N.C., whose 110,000-studenl: school district
includes Raleigh. In 2000, it adopted a plan to ensuxe
that low-income students m ake up n o more than 4:0%
of any student body. It also capped t11ose achieving
under grade level at 25%. Moreove1~ it used magnet
schools offering specialized programs, such as one for
gifted children, lo help attract middle-income children
to low-income areas. Already, 91 % of the cmmty's
third- to eighth-graders work at grade level in math
and reading, up from 84% in 1999. More impressive,
75'Yo of low-income kids are reading at grade· ievel, u p
from just 56% in 1999, as are 78% of black children,
up from 61%. "The academic payoff has been preuy
incredible," says Walter .C Sherlin, a 28-year Wal<e
Cmmty schools veteran and interim director of the
nonprofit Wake Education Parh1ership.
Could this serve as a national model? For Hut to
happen in many cities, school distTicts would have to
mr.;rge with the surrounding suburbs. Wake Co1mty
did this, but that was back in the 1970s and part of a
long-term p lan to bring about racial integration. In the
metro Boston area, by conh'ast, students are Balkan-
ized into dozens of tiny districts, many of which are
economically homogeneous.
l11e res4lt: Some 70% of white students attend
'schools that are over 90% white and overwhelmingly
middle-class. Meanwhile, 97% of the schools that are
over 90% minority are .also high-poverty. Similar pat~
terns exist in most m ajor cities, but most affluent white
suburbs aren't lilcely to swallow a move like Wal<e
Comity's. How important is funding equality within
states? It's critical, especially if segregation by income
and race pe1·sists. Massachusetts, for instance, h as
nearly h'ipled state aid to schools since 1993, with over
90% of the 1noney goiJ1g to the poorest towns. That has
helped make Massachusetts a national leader in rais-
:L.1g academic achievement.
Nationally, though, tl1ere are still huge inequi ties in
sch ool spending, with the poorest districts receiving
less money than th:! richest-even though low-income
chjJdren are more expensive to educate. Fixing these
iJRhala.."1ces would be costly. Even in Massachusetts,;
a lower court judge r uled on April 26 that the sys-'
tem still shortchai1.ges students in the poorest towns.
Nationally, it would cost more than $50 billion a year
in exh"a funding to correct inequities enough to meet
the goals of No Child, figures Anthony P. Carnevale, a
vice president at Educational Testing Service. If, some-
how;-the UnitEd States could achieve more economic
in tegration, would racial integration still be necessary?
Proficiency on tests isn't the only aim. As the Su preme:
Court said last year, in a landmark decision on affuma-
iive achon in higher education, "Effective participa:
tion by members of all racial and etlmic groups in the:
civic life of our nation is essential if the .dream of one
nation, indivisible, is to be realized." It's hard to see
how students attending largely segregated schools, n o
Ii:l.atter how proficient, could be adequately prepared
for life in an increasingly diverse country. In this sense,'
integrati.ng America's educational system remains an
essential, fhough stm elusive, goal.
QJJllE'STIOll\.ll$
J. VVhil.e segregation of public schools has been
oul:lawed, the article notes that sd1ools are not'
necessarily "desegregating" (i.e., there are stiJJ pre-
dominantly minority and predominantly nonminor-
ity schools). If students are to work in increasingly
diverse workforces, is · the current system failing
them? Why or why not?
2. TI1e black- white gap continues to exist with regard
to reading, math, and graduation rates. What are
the implications of this on organizations' selecti.on .
systems (i.e., disparate impact)?
3. Given the lack of a "diverse" educational experi-
ence for a large percentage of black children, and
the gap between them and their white counterparts, .
what must organizations do to leverage diversity as .
a source of competitive adv~1tage?
SOURCE: From W. Symonds, "A Bittersweet Birthday," Business Weelc,
ivfa y 17, 2004, pp. 62-<i6. Used with pernlission of Bloomberg LP.
Copyright© 200<±. All rights reserved.
 ...
CHA IPTEIR '.) The Legal Environment : Equal Employment Opportun ity and Safety
Company Fails Fafr-Employrnent lest
Companies have to comply with federal as w ell as state
and local laws. One company tJ1at didn 't w as Profes-
sional N eu rological Services (PNS),.which w as cited by
the Chicago Commission on Human Relation s w hen
it discriminated against an employee because she is a
parent. Chicago is one of a few cities that prohibit this
type of discrimination.
The difficulties began with employee Dena Lock-
wood as soon as she was in terviewing fo r a sales
position with PNS. 111e interviewer noticed tha t
Lockv1rood made a reference to h er children, and he·· ·
asked h er if her resp onsibilities as a p aren t w ou ld
"prevent her from w orking 70 hours a w eek." Lock-
·Nood said n o, but the job offer she received suggests
:hat the interviewer had his doubts. According to
Lockwood's later complaint, female sales reps with -
·~mt children roufu1.ely were paid a $45,000 base sal-
ary plus a 10% commission . Lockwood was offered
$)25,000 plus the 10% commission. Lockwood negoti-
ated and eventually accepted $45,000 plus 5%, wil:h a
promise to in crease l:h e conunission rate to 10% w h en
she. reached sales of $300,000. She was also offered
five vacation days a year; when she objected, she w as
told not to worry.
Lockwood worked hard and eventually reach ed
her sales goal. Then the cornpany ra ised the require-
ment fo r the higher commission rate, and the si tua -
tion took a tu rn for th e w orse. Lockwood's daughter
woke up one morning w ith pink-eye, a h ighly con-
tagiou s ailment. Lockwoo d called in to resched u le
l. J- Ledvinka, Federal Regulation of Personnel and Human
Resource Management (Boston: Kent, 1982).
2. Ma rlin v. Willes, 49 FEP Cases 1641 (1989).
3. Wards Cove Packing Co. v. Ato11io, FEPC 1519 (1989).
4. Bakke v. Regents of the University of Californ ia, 17 FEPC 1000
(1978).
5. Patterson v. McLean Credit Union, 49 FEPC 1814 (198'7).
6. J. Friedman and G. Strickler, The Law of Employment Dis-
crimination: Cases and Malerials, 2nd ed. (};lineola, NY:
FoWldation Press, 1987).
7. "Labor Letter," The Wall Slrect Journal, A ugust 25, 1987,
p. 1.
8. J. Woo, "Ex-Workers H it Back wi th Age-Bias Suits," Tile
Wall Street Journal, December 8, 1992, p . BL
9. W. .Carley, "Salesman's Treatment Raises Bias Q uestions at
Sd1eting-Plough1" Tize Wall Street Journal, May 31, 1995, p. Al.
155
a meeting for that d ay, bu t her manager told her
not to bother; she was being fired. When Lockw ood
asked why, the m anager said "it just wasn 't w ork-
ing ou t. "
She went to the Chicago Human Relations Commis-
sion for h elp . The commission investigated and could
find no evidence of performance-related problems
th at w ould justify her dismissal. Instead, the commis-
sion found that Lockwood was a victim of "blatant"
discrimination against employees with children and
aw arded her $213,000 p lus attorney's fees-a hefty
fine for a com pany with fewer than 50 employees. PNS
stated that it would appeal .t he decision.
O.!JIEST!ON:S
1. Why do you think "p aren tal discrimination" w a.s
the grounds for Uris com p laint instead of a federally
protected class? Could you make a case for discrim-
ination on the basis of sex? Why or why n ot?
2. How could Professional N eurological Services have
avoided this p roblem?
3. frnagine that the comp any has called you :in to
help it h old down hum an resou rces costs, includ-
ing costs of lawsuits su ch as this one. What advice
w ould you give? How can th e company avoid dis-
crhnination and still build an efficient workforce?
SOURCES: Courtney Rubin, "Single Mother Wms $200,000 in Job Bias
Case," Inc., January 25, 2010, www.inc.com; and Ameet Sachdev, "She
Took a Day Off to Care for Sick Oilld, GotFii:ed," Clticaga Trib11ne,
JanUaD/ 24, 2010, NewsBank, h ttp:/./infoweb.newsbank.com.
10. www.eeoc.gov I press/ l -8-07.h tml.
11. www.eeoc.gov I €€oc/newsroom/ release/ 4-27-llb.cfm.
12. Special feature issue: "The New Civil Rights Act of 1991
and What It Means to Employers," Employment Law Update
6(December1991), pp. 1- 12.
13. "ADA: The Final Regulations (Title I): A Lawyer's Dream/
An Employer's Nightmare," Employment Law Update 16,
no. 9 (1991), p. 1.
14. "ADA Supervisor Trainin g Program:· A Must for Any
Sup ervisor Cond ucting a Legal Job Interview," Employ-
ment Law Update 7, no. 6 (1992), pp. 1-6.
15. www.hreonline.com/HRE/story.jsp?s toryld=533335303.
16. Equal Employment Opportunity Commission, " U nifo1111
Guid elines on Employee Selection Procedures," Federal
Register 43 (1978), pp. 38290-315.
17. Ledv inka, Federal Regulation.
156 CHAPTER 3 The Legal Environment: Equal Employment Opportunity and Safety
lB. R. Pear, "The Cabinet Searches for Consensus on Affir-
mative Action," The New York Times, October 27, 1985,
p. ES.
19. McDonnell Douglas v. Green, 411U.S.972 (1973).
20. www.eeoc.gov I eeoc/ newsroom/ release I 4-29-11.cfm.
21. UAW v. Johnson Controls,Jnc. (1991).
22. M. O'Brien, "Ugly People Need Not. Apply'!" HR Execuc
tive, September 16, 2010, p . 12.
23. Special feature issue: "The New Civil Rights Act of 1991,"
pp.1-6.
24. Wash ington v. Davis, 12 FEP H15 (1976).
25. Al/Jcrmarle Paper Compa ny v. Moody, 10 FEP 1181 (1975).
26. · R. Reilly and G. Chao, "Validity and Fairness of Some
Alternati.ve Employee Selection Procedures," Per-
somzel Psycholog1j 35 (1982), pp. 1-<i3; J. Hunter and
R. Hunter, "Validity and Utility of Alternative Pre-
dictors of Job Performance," Psychological Bullelin 96
(1984), pp. 72-98.
27. Griggs v. Duke Power Company, 401U.S.424 (1971).
28. B. Lindeman and P. Grossman, Employment Discrimination
Law (Washington, DC: BNA Books, 1996).
29. M. Jacobs, "Workers' Religious Beliefs May Get New
Attention," The Wall Street Jo urnal, August 22, 1995,
pp. Bl, BS.
30. EEOC:, "EEOC and Electrolux Reach Voluntruy Resolution
in Class Religious Accommodation Case," at ~,y.eeo c
.gov /press/9-24-03.
31. S. Sataline, "Who's Wrong When Rights Collide?" The Wall
Street Journal, March 6, 2007, p. Bl.
31. "Manager's Failure to Accommodate Creates Liability for
Store," Disabilily Compliance Bulletin, January 15, 2009.
33. Lindeman and Grossman, Employment Discrimination Law.
34. J. Reno and D. Th.omburgh, "ADA-Nol: a Disabling
Mandaf:e," Tlte Wall Streel: Journal, July 26, 1995, p . A12.
35. wvvw.eeoc.gov I eeoc/ newsroom/release/ 4-213-11.cfm.
36. Woo, "Ex-Workers Hit Back."
37. EEOC, "Target Corp. to Pay $775,000 for Racial Haxass-
ment: EEC 5€ttles Suit for Class of African American
Employees; Remedial Relief Included," at www.eeoc.gov I
press/l-26-07.html.
35. W. Johnston and A Packer, Workforce 2000 (Indianapolis,
IN: H udson Institute, 1987).
39. Bundy TJ. Jackson, 641 F.2d 934, 24 PEP 1155 (D.C. Cir.,
1981).
40. L. A. Graf and M. Hemmasi, "Risque Hwnor: How H
Really Affects the Workplace," HR Magazine, November
1995, pp. 64-69.
41 . B. Carton, "At Jenny Craig, Men Are Ones Who Claim
Se'c Discrimination," Tire Wall Stred Journal, November 29,
1995, p. Al; "Male-on-Male Harassment Suit Won," Hou s-
ton Chronicle, August 12, 1995, p. 21A.
12. EEOC, "Texas Car Dealership to Pay $1'10,000 to 5€Hle
Same-SeJc Harassment Suit by EEOC," at www.eeoc.gov I
press/10-28-02.
1ff EEOC, "Babies 'R' Us to Pay $205,0GO, Implement Train-
ing Due to Same-5€x Harassment of Male Employee," at
www.eeoC.1)0V /press/1-15-03.
44. Meritor Savings Bank v. Vinson (1986).
45. Source; Patrick, R Gune 10, 2011) Verdict: Jury awards
~;95 million in Fairview Heights sex harassment sujt.
wv•.rw.stl f:oda y.com I news I local I crime-and-courts I jury-
awardsmil. . .icle_6f46fa47-3a8b-5266-b094-b95910d5k46,
hhnl
46. R. Paetzold and A. O'Leary-Kelly, "The Implications
of U.S. Supreme Court and Circuit Court Decisions for
Hostile Environment Sexual Harassment Cases," in Sex-
ual Harassment: Perspectives, Frontiers, and Strategies, ed.
M. Stockdale (Beverly Hills, CA: Sage); R. B. McAfee and
D. L. Deadrick, "Teacl1 Employees to Just Say 'No'!" HR
Magazine, February 1996, pp . 586--39.
47. C. Murray, "The Legacy of the 60's," Comme11tmy, July
1992, pp. 23-30.
43. D. Kravitz and J. Platania, "Attitudes and Beliefs about
Affirmative Action:·Effects of Target and of Respondent
Sex and Ethn\city," Journal of Applied PSIJChology 78 (1993),
pp. 928-38.
49. J. Mathews, "Rash of Unintended Lawsuits Follows Pas-
- - ·sage of Disabijjties Act," Houston Chronicle, May 16, 1995,
p.15A.
50. C. Bell, "1Nhat Hie First ADA Cases Tell Us," SHRM Legal
Report (Winter 1995), pp. 4-7.
51. J. Fitzgerald, "Chatty IBMer Booted," New Yor/c Post,
February 18, 2007. ,
52. National Organization on Disability 2006 Annual Report
at vvwvv.nod.org.
53. K. Mills, "Disabilities Act: A Help, or a Needless Hassle,"
B!CS Eagle, August 23, 1995, p. A7.
54. C. Cummins and T. Herrick, "Investigators Fault BP for
More Lapses in Refinery Safety," The Wall Street Journal,
August 15, 2005, p. A.3.
55. V. F. Estrada, "Al"e Your Factmy Workers Know-It-All?''.
Personnel Jor.mzal, September 1995, pp. 128-34.
56. R. L Simison, "Safety Last," 17ie Wall Street Journal, March
rn, 1986, p. 1.
57. J. Roughton, "Managing a Safety Program through
Job Hazard Analysis," Professional Safeti; 37 (1992), pp.
28-3J..
58. M. A. Verespec, "OSHA Reform Fails Again," .llldustry
Weelc, November 2, 1992, p . 36. -·
59. R G. Hallock and D. A. Weaver~ "Controlling Losses and
E11llcmcing Management Systems with TOR Analysis,"
Professional Safety 35 (1990), pp. 24-26.
60. H. Herbstman, "Controlling Losses the Bmger King Way,"
Rislc Management 37 (1990), pp. 22-30.
61. L. Bryan,· "An Otmce of Prevention for Workplace
Accidents," Training and Development- fournal 44 (1990),
pp.101-2.
62. J. F. Mangan, "Hazard Communications: Safety in Knowl-
edge," Best'.> Review 92 (1991), pp. 84--88.
63. T. Markus, "How to Set Up a Safety Awareness Program,"
Supervisio11 51 (1990), pp. 14-16.
64. J. Agnew and A. J. Saruda, "Age and Fatal Work-Related
FaUs," Human Factors 35 (1994), pp. 731-36.
65. R. King, "Active Safety Programs, Education Can Help
Prevent Back Injuries," Occu patio1uil Health and Safety 60
(1991), pp. 49-52.
66. ]. R. Hollenbeck, D. R. Ilgen, and S. M. Crampton, "Lower ,
Back Disability in Occupational 5€ttings: A Review of the
Literature from a H uman Resource Management View,"
Personnel Psyc/10logi; 45 (1992), pp. 247-78.
1 ;•f
f,
 ..
CHAPTIEIR 3 The Legal Environment: Equal Employment O pportunity and Safety · 157
67. T. W. Turrill, "NSPU Suggests 10-Step Program fo Prevent
Eye Injury," Occupational Health and S1Jfely 60 (1991), pp.
62--66 .
.68. D. Hanson, "Chemical Plant Safety: 0'..31-IARule Addresses
Industry Concemt>," C/iemirnl and Engineering News 70
(1992), pp. 4-5; K. Broscheit and K Sawye1~ "Safety Exhibit
Teaches Customers and Employees about Electricity,"
Transmission and Distribution 43 (1992), pp. J.74-79; R.
Schuch, "Good Training Is Key to Avoiding Boiler Eiq)lo-
sions," National Under..vriter 95 (1992), pp. 21-22.
69. M. Janssens, J. M. Brett, and F. J. Smith, "Confirma-
tory Cross-Cultural Research: Testing the Viability of a
Corporation-wide Safety Policy," Academy of Management
Journal 38 (1995), pp. 364-82.
70. Cummins and Herrick, "Investigators Fault BP."
Afte r reading this cha pter; you should be able to:

llO 4 -'fi Analyze an organ ization's st1ucture and work-flow

process, id entifying the output, activities, and inputs in
t he production o f a produ ct or service . page 161

ILO 4-2'. Understand the impo1-ta nce of job analysis in strategic

human resource mana g ement. page 176

~.O 4-3 Choose the right job analysis technique fo r a variety

of human resource activit ies. page 180

!LO 4-4 Identify the t asks perform ed and the ski lls re quired
in a g iven j ob. page 'f 82

!LO 4-5 Understan d the differe nt approaches t o job design . p age 183

lO 4-6 Comprehen d the trade-offs among the va rious

approaches to designing jobs. page 190
'.:.Changes in OrganBzat~onal Structure
·and Workflow Promote G~~ Re\1iva ~
''Fritz, you have t o ch ange the organizati ona l
·structu re.,; That was one of the first messa g es
th at fo rmer AT&T CEO Eel Whitacre had fo r
Gene ra l M otors C EO Fritz Henderson 'Nhen Whit-
acre became the new chairman of the b oard in
the summer of 2009.This was just days afte r G M--
had gone ba nkru pt, and it was clear that m ajor
change s had to b e made if the company w as
ever g o ing to be competitive again in th e g lob al
automo b ile market. When it beca m e dea r th at
Hen d erson w as not up to this task, he was even-
tual ly replaced by Daniel Askerson , who w ent t o
work rest ructuring t he company and red esig ning
th e workflow.
In terms of orga n izational st1·uctui:-e, on e o f
GM 's m ajor p rob lems was that the huge com-
pany was org anized as many separate, divisio n--
ally ba sed b usiness units that acted almost as
if they were autonomous-if not cornpet ing-
organizat ions. Intram ura l feuds between divi-
sions ab out prici ng or marketing o r produ ction
were ven; common and 111ost executive bonuse s
we re based upon results achieved within t heir
own d ivisions, not organizationwide. One of
Askerso n's first step s was to redraw the o rgani-
zationa l cha rt to eliminate reduntlant fun ction s
and get everyon e focused on the success of GM
as a who le, rather than just their own un it s. Th is
meant d ismantling t he four regional divisio ns
th at mad e up GM at that time, North Am erica ,
South A merica, Europe, and International O p era-
tions, and elevati ng the functiona l specia lties
of purchasing, m a n ufacturin~J, and market ing ,
which w ere all placed under two global br;rnd s-
Chevrolet and Cadil lac. Two high-level execu-
tives were to oversee t hese global brand s and an
executive at each separate country wou ld only
control local sales and p ricing, but in all other
areas, report to the globa l brand leader.
In term s of workflow, relative t? the competi-
tion, GM was trying to p roduce too many differ-
ent and unique automobile platforms that each
required its own separat e parts and tooling sys-
tems . GM was trying to s1,.1pport 30 different plat-
forms in 2010, compared t o Ford, supporting five
platforms. This lack of si m p licity and standard-
ization prevented shifting work from one unit to
another and virtua lly w iped out any of the advan-
tages that might have been ga ined from large
economies of scale. At one t ime, a high degree
of product differentiation w ithin GM he lped the
company sell more cars, b ut t he inefficiencies
associated with all of t his in term s of work.fl ow
meant t hat high levels of sales were accomplished
at the expense of profit s. Indeed, Ford made
more than $300 more profit per car sol d relative
to GM, and Askerson set a goa l t o reduce the
number of p latforms at GM to 14, and reduce the
number of car and t ruck m odels from 86 to 49.
As a result of these changes in the organization's
struct ure and workflow, GM earned close to $5
billion of net income in 201 0, $8 million in 2011,
and a projected $ 10 m illion in 201 2. This was a
remarkable reversa l for a co mpany that many had
wri'Ltei1 off for dead in 2009 and that could only be
sustained with a controversial massive government
bailout. It w as also a m ajo r victory for the compa-
ny's workforce and the glob al economy because it
saved 208,000 jobs that might have been lost had
the organization not su rvived.
SOURCES: L. Cauley, "GM on the Brink," Fortune Magazine, February
4, 2013, pp. 117-122; S. Terlep, "GM's Chief Labors to Get Rebu ilt
Car Maker into Gear," The Wall Street Journal Online, June 11, 2012;
S. Terlep, "Target at Post-Bailou t GM: Earning $10 Billion a Yea r," The
Wall Street Journal Online, February 6, 2012.
159
 ..
160 CHAPTER 4 The Analysis and Design o-f Work

In Chapter 2 we discussed the processes of strategy formulation and strategy

implementation. SlTategy fornmlation is the process by which a company
decides how it will compete hi the marketplace; this is often the energizing and
guiding force for everylh.ing it does. Strategy implementation is the way the
strategic plan gets car:ded out in activities of organizational members. \Ale noted
five important components in the strategy implementation process, tl:u:ee pf
which axe d.irecily related to the human resource management function m1d oi,w
of which we will discuss :in this chapter: the task or job.
Many central aspects of stxategy formulation address how tl1e work gets done, in
tenns of individual job design as well as the design of organizational structmes that
link individual jobs to each other and the organization as a whole. TI1e way a firm
competes can have a profound hppacl: on the ways jobs are designed and how tl1ey
are linked via organizational sb:uchffe. ln tum, the fit benveen the company's struc-
ture and envfromnent can have a majorimpad on the firm's competitive success. '
For example, if a company decides to. compete on cost, and hence hi.re lmy-
cost offshore labor, the jobs have to be designed so that they ccu.1. be performed
by rnin.l.mally skilled people who will require little training. The organization
in this case needs to have a centralized siTudu.re so fhat low-level workers are
not forced inl:o maldng too many decisions and the workers should work ind~­
pendefrtly to prevent errors from cascadillg tlu·ough tl1e system. In conl..rnst, H ·'·'

the organization is going to compete by differentiating its product, and hen~e

hiring high-wage labor, it has to -design the jobs in a different way. As i:Ne saw
in om opening vignette, organizations that employ high-wage U.S. labor have
to leverage the higher sld11s of their workforce by broadening job descriptions
and creating flexible role responsibilities. The organizational struchire has to be
decentralized so that tl1ese high-skill workers, often working together closely in
interdependent teams, can make their own individual and team decisions.1
Throughout this chapte1~ we ptovide examples of 1he kinds of decisions that
need to be made with regard to how organi.zations should be strltctured and to
the jobs that exist with.in tl1ese organizations, so you can learn how these choices
affect a number of outcomes. This includes not just quantity and quality of pro-
duclion, but also outcomes like coordination; ilmovation; and worker attraction,
m otivation, and retention. Jn many cases, there are h·ade-offs associated with
tl1e d1oices, and the more you know about these h·ade-offs, the better decisions
you can make in terms of maldng your team or organization more competitive.
Thus, it should be dear from the outset of Hus chapter that there is no "one
best way" to design jobs and structure organizations. The organization needs
to create ·a fit between its enviromnent, competitive strategy, and phjlosoph3r
on the one hand, with its jobs and orgaiuzational design on the other. Failing to
d esign effective organizations and jobs has important implications for competi-:-
tiveness. Many years ago, some believed that the difference between U.S. autq
p roducers and their foreign competitors could be lTaced to,American workers;
however, when companies like Toyota arid Honda came into the United States
and demonstrated dearly that they could run profitable car companies wit11
American workers, the focu s slUfted to processes and organization. Clearly, as
our opening vignette showed, US. automakers like GM can be·competii.ive, but
changes in organizational sixu ch.H'e and the design of work have been necessary
to unleash that potential.
 ...
CHAPTER 4 The Analysis and Design of Work 161

Jlris chapter discusses the a-.1alysis ahd design of work and, in doing so, lays
out some considerations that go into making iniormed decisions about how to
create and link jobs. The chapter is divided into three sections, the firnt of which
deals with "big-pictuxe" issues related to work-flow ai1alysis and organizational
sll:ucture. 'The remaining two sections deal V\riJh more specific, lower-level issues
related to job analysis and job design.
The fields of job analysis and job design have extensive overlap, yet in fue
past: they have been treated differently. 2 Job analysis has focused on analyzing
existing jobs to gather information for other human resouxce management prac- ·
tices such as selec1ion, traL.ling, perfonnance appraisal, a11d compensation. Job
design, on the other hand, has focused on redesigning existing jobs · to make
them more effici.en.t or more m.otivating to jobholders. Tims job design has had
a more proactive orientation toward changing the job, whereas job analysis has
had a passive, illformation-gathe1ing orient?:fion.

\f~lorl(.mf~o~N Ana~ysis and

Organizartfilon Structure
Work-flow design is 1he process of analyzing 1he tasks necessary for the produc- R..Oi!ll~'il
tion of a product or service, prior to allocating and assigning these tasks to a Analyze an organiza-
particular job category rn: person. Only after we thoroughly understand work- tion's structure and
'Nork-flow process,
flow design can we rnake :in.form.ed decisions regardjng how to initially bundle identifying the output,
various tasks :into discrete jobs that can be executed by a single person. activit ies, and inputs
Organization stru.cfu.re refers to the relatively stable and formal network of in the production of a
verhcal and hQ]:izontal :ix1i:erconnections among jobs that constitute the organ.~­ product or service .
zalion. Only after we understand how one job relates to those above (supervi-
sors), below (subordinates), and at the same level in different functional areas
(marketing versus productj.on) can we make jnformed decisions about how to
redesign or improve jobs to benefit ihe entin~ organization.
Finally, work-flow design and organization structlJ.re have to be understood
in the context of how an organization has decided to. compete. Both work-flow
design and organization struch.ffe can be leveraged to gain competitive advan-
tage for the firm, but how one does this depends on the fixm's strategy and its
competitive environment.

WOIRK-FlO\N ANAlYS~S
All organizafions need to identify tl1e oufpLits of work, to specify the quality and
quantity standards for H1ose outputs, and to analyze tl1e processes and inputs
necessa1y for producing. outputs that meet the quality standards. This concep-
tion of the work-flow process is useful because it provides a means for the man-
ager to understand all the tasks required to produce a number of high-qualib;
products as well as the skills necessary to perform those tasks. TIUs work-flow
process is depicted in fig1m~ 4.1.

Ana~yzin91 Wor~c OllJJtprwts

Every work unit-whether a department, team, or individual-seeks to pro-
duce some output that others can use. An output is the product of a work unit
 162 CHAPTIER 4 . The Analysis and Design of Work

f~(!;i11!.1llr~ .<;t 1
Developing a Work.-
Unit Activity Analysis

Il

II .

and, within manufaduxing realms like those discussed in our opening storyr foj.s
· is often an identifiable object such as a jet engine blader a forkliftr or a football
jersey. I-Ioweve1~ an output can also be a senricer such ·as the services provided
by an aixline that transports you to some destinationr a housecleaning service
that maintains your houser or a babysitter who watches over your cfoldren.
·We often pictuxe an organization only in terms of the product that it produces,
and tl1en we focus on that product as the output. Merelyidentifying an output
or set of out1Juts is not sufficient. Once these outputs have been identified, ii: is
necessary to specify standards for the quantity or quality of t11ese outputs. For
example, a productivity improvement technique known as ProMES (productiv-
ity measmement and evaluation systexn) focuses attention on both identifying
work-unit outputs and specifying the levels of required perfmmance for different
levels of effectiveriess.3 VVith ProMES, the members of a work unit identify each
·of l11e p:roduds (outputs) of the work unit for the various customers. They th.en
evaluate the effectiveness of each level of products in the eyes of their customers.
A recent large-scale review of more than 80 studies of firms that have applied
the ProMES syste:m suggests that the use of this system for improving work flow
results in large :improvements in productivity that can last for many years.

An11aiyzin1!91 ~Noirk PnJlc~s;s;t12)s

Once lhe outputs of fl1e work mut have been identified, it is possible to exam:-
ine the work processes used to generate the output. The work processes are l:h~
 ...
CHAIPTIER 4 The Analysis and Design of Work 163

acl:ivities that 1ncmber!> of a •Nork unit engage in to produce a given output.

Every process consists of operafrng proceduses that specify how things should
be done at each stage of th2 development ot the product. These procedures
include all the tasks that must b1;:: performed in the production of the output.
The tasks are usually broken down into those performed by each person in
the work unit. Of course, in m.any situaii.ons where the work that needs to be
done is highly complex, no single individual is likely to have all the requil:ed
. skills. In these situations, the work m ay b e assigned to a team, and team-based
job design is becoming incn:~asingly popu lar in. contemporary organizations.
ill addition to providjng a ·wider sei of sl<:iUs, team members can back each
other up, share work when any mernber becomes overloaded, and catch each
other 's errors.
Teams are not a panaceil, however, and for teams to be effective, it is essen-
tial that the level of task interdependence (how much they have to cooperate)
matches the level of outcome interdependence (hmv much they share the reward
for task accomplishment). 4 That is, if 1Nork is organized around teams, team
bonuses rather than individual pay raises need to play a major role in terms of
defining rewards. Tean.1.s also have to b€ given the autonomy to make their own
decisions in order to maxhnize foe flexi.ble use of t11eir skill and time and thus
promote problem solving.5 In :a.ddiij_on, some members of teams may lean too
much on the other te<.un members and foH to develop their own skills or take
responsibility for their own tasks, and so even i11 teams it is critical to establish
individual accountability of behavior. 6
'.
' For example, Louis Vui.tton, the maker of top-of-the-line bags and purses,
used to design work processes centered on individuals. Jn tills old system, each
Vuitton worker did a highly specialized task (cutting leather and canvas,
stitching seams, aii:aching tl1e handle, and so on), and then, when each person
was finished, he or she would sequentially send the bag to the next p erson in
line. A typical line wou1.Jd be si:affed by 20 to 30 people. ·fu 2006, the company
switched to a team-based design wh,,.~re learns of. six to nine people all work
together simultaneously to assemble the bags. vVorkers are cross-b:ained i't1
multiple tasks and can. Hexibly chan ge roles and shift production from one bag
to another if any one bag becomes a "hit" and another becomes a '1 dud." The
length of time it took to produce the same bags dropped from eight days to one
day, and Vuitton cuslmners, who h ad often had to be placed on waiting lists for
their most popular products, lAJere able to get their hands on the product much
more quickly. 111.is speed to market is crHical given the emotional nature of this
purchase--after alt if one is ready to spend $700 on a tote bag,' it is best not to
have to delay that decision. 7
There is a great deal of value in studying workflow processes and this is best
illush·ated when priva te equity grot-1ps come in a.i.1.d buy a failing company at a
low price, revamp the worldlmN process, and then sell the company again at a
higher price. Private '-"quity gmups employ efficiency experts who tiy to wring
out every ounce of waste in production operations. \A/hen efficiency experts
first come into a company, they are looking for thxee different kinds of waste:
(1) movement ilrnt creates no ''ah1e, (2) ihe overburdening of specific people
or n1achines, and (3) inconsistent production that creates excessive invento-
ries. Typically .armed w ith stopwatches, clipboards, and flowcharts, efficiency
experts prowl tlle m<un.ufaduring floor for v..rasi:e that v.rould not be detected
by most managers. More often than not, Hus leads to a reduction in headcount
:/ ....
I
r 164 0-lAPllER /!. The Analy:;is and Desig n of \/\Jork
!I
I beca1we improved procedures dramatically sh:eamline operations. As Justin 1lm_
ienbrnnd, an executive al: Monomoy Capital Partners, notes, "You could have
I the best CEO in the world, but h1 a manufacturing company, profits are made
on the flo01·. " 6
Org<:uuzahons often work hard to minimize overstaffing via lemi. produc-
tion tedmiques. LeaJl production refers to processes developed in Japan, but
then ad.opted worldwide emphasizjng manufactu.ting goods witl1 a minimum
1

mnom.1.l: of !.i.me, materials, money-and most important- people. Lean produc-

Jion tries to leverage technology, along with small numbers of flexible, well-
lrained, and skiUed personnel in order to produce more custom-based products
at Ie~:;s cost. Thjs can be contrasted with more traditional "batch work" methods,
1Nhere lari~e groups of low-sldlled e1nployees churn out long runs of identical
rnass products that are stored in inventories for later sale. In lean production
sy3terns, then: are fewer employees to begin w ith, and the sldll leve.ls of those
en1ployees are so high that rJ1e opp ortunity to cuts costs by laying off employees i!.
is simply less viable.
Inrl~~ct a varadox of the most recent recession in 2008-2009 was how small
-'
m.any of the layoffs in llw manufacturing sect.or of tl1e economy 1;1rere given the
huge drop in production levels. For example, 14 months into the recession of
'.WOO, J.nanufacturers cut 9.5% of their employees jn response to a 2% cuf:j11 prn-
d.uction. In contrast 14 months into the most recent recession, th_e sa111oe 9.5%
1

of employees w ere laid off in :response to a 12% cut in production. lf the same
ra Jfo of job cui:s to production cuts from the year 2000 held in the year 2009, this
would have resulted in an astounding layoff rate of over 50% of maT1ufactusii1g
employees. i\1fany have attdbul:ed the lmNET "job cut" to a "production cut" ratio
experienced in the most recent recession to tl1e use of job redesign inihatives
i:hat emphasize lean produclion over mor€ h·aditional approaches. ·
For example, at Parker Hannifan Corporation's plastics manufacturing plaht
in South Carolina, lean production techniques have cut the number of people
required to run the plant to such a small number that permanently pulling one
highly trained person off the line
saves very little money, and yet ;,i:;,,
· ·_: l:
makes it impossible to sustain pro-
duction at all. In addition, lhc work
has been reslructw:ed to create
smaller production runs that result
L
'
:· ~'ii;
in reduced inventories, so that -.•j:::
when a downturn hits, it is noticed
iJH.
more quickly and can h2 responded ~t
to more gradually. In the past, by
1J1e time a recession was d etected,
jnventories had bulged to such a
level that more employees had to
be laid . off more quickly and for
longer time periods.9
1
In general, as the ' Competing
through Technology" box illus-
Th is job rnav look tedious or possibly even uninte res1inq. Considering trates, the traditional relationship
how to t:>ngage empl oyees in !;<xoiin9 the benefits of thc~ir work outside between productivity and employ-
of the lab is an important way to motivate them through the ir day. ment levels seems to be changing.
 Okun's Lavv, named a fter econo··
mist Arthur Okun, states that
thl~ re is a robust and steady
re lationship between p roduc-
tivity, on the one hand , and
unernployment rates on the
other hand. In gene ral, the
formula expressed in th is law
syggests t hat every 3% qain
in output shou ld reduce the
unemp loyment rate by 1'%.
Although the data fit this pat-
tem extrem ely well in the t ime
peri od between 1947 and 2005,
rnor<:i reo')ntly, this "law" does
not even meet the criteria for a
"rule ofthumb." For e><ample , if
one applied this law to t he five-
year span from 2008 to 2012,
then one vvoul cl have e)<pected
to see an unemployment
rate of arou nd 1% in t he U.S.
econorny--not nearly the 9%
that was actually in place.
Some have suggest ed that
the fundame ntal re lation sh ip
between growth and unem -
p loyment h as changed, due to
the increased use of ro bots in
the workplace. In fact, the U.S.
produced 25% rnore goods
and services in 2012 than it did
in 1999, but did so with al most
the same number of worke rs.
The difference can be traced
to the substitution of technol -
ogy for h urnan labor, especia lly
Ana~jfZBn19 Wm·k ~n ~Mots
The final stage :in work-How analysis is to identify the inputs used in the devel-
opment of the work unit's product. .As shmflm in Figure 4.1, these inputs can be
broken down into the raw materials, equipment; and human skills needed to
perforn:l the tasks. Raw materials consist of the materials that will be converted
into tl1e work unit's product.
in tht'l form of increasingly
sophisticated robots. ,l\lthough
the traditional idea was that
robots cou ld do on ly simple
jobs, and thus mere ly free
humans up to do more d ifficult
work, this is less and less true.
For example, in the wake of
the BF' oil spill disaster where
11 workers clied,,_;:--1 company
call ed Robot ic Dri ll ing Systems
designed a series o f robots that
did the work that was formerl y
done by deckhands and p ipe
handlers. T he 10-foot-tall robot
deckh and has a jointed arm
that can 6)\tend 10 feet and has
roughly a dozen interchange-
able, th ree-fingered hands that
all ow it to pick up anything from
a one-ton drill bit to an egg.
Robots can now d rive cars, fly
airplanes, trans late documents
and speech fro m one language
to another, search for legal prec-
edents, and even w rite sports
stories based solely on box
scores . Labor econo mist David
1-\utor has noted, "The era we 're
in is on e in w h ich the scope o f
tasks th at can be automated
is increasing ra pidly and in the
areas where vve used to think
those vvere our best ski lls-
things that req uire t hinking ."
Still others insist that rather
than b eing job destroyers,
robots will even-
tually become job
creato rs in the sense
that almost all nevv t echno lo-
gies spawn new jobs and busi-
ness o pportunities that could
never have been. imagined
in p rio r times. For example,
w ho would have thought t hat
developing apps for sma1i:-
phone s would be a v iable pro-
fession al job a mere decade
ago? Clearly, the productivity
gains attributable to techno-
log ica l advancements need to
be channeled back into edu-
cation and trainin~i prog rams
th at make human 1Norkers and
sophisticated robots va lu ab le
partne rs ra ther than d irect
competitors .
Di:SCUSSUOi\ll QIJIESTION
C an you think of other common
jobs th at exist today that would
have been inconceivable to
your pa rents ,or grandparents
w hen they were your a9e? Are
th ese new lines of work re la-
tively high paying jobs or low
paying jobs?
SOURCES: D. Lynch, "Did That Ro bot Take
My Job?" Businessweek, January 9, 20 12,
pp. 15-16; D. Wethe, "Transformers o n the
Oil Patch, " Businessweel<, September 3,
2012, pp. 48-50; S. Grobart, "What Mach ines
Can't Do, " Businessweel<, December 17,
2012, pp. 4-5.
·
165
 ...
166 CHAPTER 4 The Analysis and Design of Work

Organizations th at try to increase efficiency via lean production tech1Liques

often hy to mjnintlze the stockpile of inputs via "just-in-time" inventory control
procedures. Indeed, in some cases, inventories are being abandoned altogether,
and companies at the edge of the lean production process do not even manufac-
ture any p roducts until customers actually place an order for them. For exam-
ple, suxgical device maker Conmed used to forecast demand for their products
one to t'flvo months ahead, and when those forecasts turned out to be inaccu-
rate they would either lose sales or stockpile inventories. Today, because tl1e
length of time it takes to produce their devices has decreased from 6 weeks to
48 hours, they do not even manufacture any products that are not already sold.
The impact of this can be seen at Conmed's plant in Utica, New York, w here
a $93,000 inventory that used to take up 3,300 square feet on the factory floor
has been all but eliminated. ·nus allowed the compm1y to take back lost sales
from Chinese competitors wh0m, despite their lower labor costs, face the costs
of long lead times, inventory pileups, and quality problems an d transportation
costs. As David Johnson, Vice President for Global Operations at Conmed n otes,
"If m ore U.S. companies deploy these job design methods we can compete with
anybody and still provide secmity to ou r workforce." 10
However, there are also downsides to "just-in-lime" invent01y management
practices. Specifically, the efficiency gained from maintaining an inventory mea-
sured in days rather than irveeks creates a of lack of flexibility. An example of
this can be seen in the aftermath of the earthquake that shuck northern Japan
in 2011. Th_is region of Japan was home to a number of suppliers who had to
unexpectedly halt all production overnight on March 22. This dismpiion rip-
pled through lfo~ entire global economy that relied on "just-in-time" practices
when organizations as varied as Boeing, General Motors, John Deere, .HewleU-
Packard, and Dell had to halt their own production lines after running out of
:inputs. As one analyst noted, "If supply is disrupted in this situation, tl1ere's
nowhere to get inputs;"n
Equipnzent refers to the technology and machinet.y necessary to h'ansform
the raw materials into the product, but the final input in the work-flow pro-
cess is 1lui: human skills and efforts necessary to perform· the tasks. Obviously,
the human sldUs consist of the workers available to the company. Generally
speaking, in terms of human skills, work should be delegated to the lowest-cost ,
employee who can do t.h.e work welt and in some cases this principle gets vio-
lated when too much emphasis is placed on reducing headcount. For example,
between 2009 an<l 2011 the U.S. economy 1Niped out close to 1 million office and
administrative support p ositions, and at one level, this might seem a reasonable
place to cut costs. Howeve1~ does it really make financial sense to have a C-level
executive booking their own travel, typing up routine pape1work, loading toner
into the copier and screenmg 500 e-mails a day when 400 of those are basically
spam? For an executive making $1 million a year, an $80,000 assistant only needs
to ix1crease that person's productivity by 8% for the company to break even.12 To
compete successfuJly, organizations often have to scour the world for the best
raw 1naterials, i:he best equipment, and the peop le with the best skills, and tl1en
try to integrate aJJ of this seamlessly :in the work processes that merge all these
factors. A.s we have seen, IBM has been on the forefront of incorporating new
techn ological equipment in the processes, in order to eliminate office space and
reduce middle layers of management. Tilis company has also searched high and
wide for p eople with the best sets of sldlls as well. For example, symbolically,
IBM's 2006 Annual Invesf:OJS M eeting was held in Bangalore, India.

- - - - -- - - - -
 ....
CHAPTER 4 The Ana lysis and Design of Work 167

Jndia is central to IBM's future because it is a som·ce of high-skilled, low-

cost talent, especially in Lhe .area of software developm.ent. Howeve1~ this is
ju.st one part of the puzzk. Some of IBM operations require high-skill employ-
ees who have to work on-site 'With hardware issues in dose proximity to U.S.
customers, and hence mM also opened a nevv· center in Bould.er, Colorado.
IBM also needs the very nanuw skills of people with . Joctorates in the hard
.sciences, and thus it opened a research lab in Yorkto;Nn Heights, New York.
Some low-skill jobs that IBM needs •ue done by workers from China, Brazil,
or eastern Europe, depending on where the call originates and the language
spoken by the customer. The key to this strategy is not just going where one
can get cheap labor, but, iJt1stea.d, going where one can gei just the exact kind
of labor needed at: the best price. As noted by .P.obe:rt Moffat, IBM's senior vice
president, "Some people thu1k the world is centered in India and that's it. Glo-
balization is more than that. Our customers need the right skills, in the right
. l1t tune.
p1ace al' t h e ng . "l'l
'

Whereas work-flow design provides a longitw:linal overview of the dynamic

relationships by which inputs ar'8 conver ted into outputs, organization struc-
hue provides a cross-:sectionaJ. ove:nrie>H of !Jw. .static relationships between
individuals and m1its that crr::ate the oul:puts. OrgaJlization strud:J...u-e is typically
displayed via organ.izatio:naJ ch;;:1rts thai: convey both •rerticaJ. reporting relation-
ships and horizontal fonctiona.J. responsibilities.

DiniH!lf'lSi\Ons o· ~ SitnQcc'il:Q~aie
Two of the most critical dimensions of organiza1ion structure axe centralization
and departmentalization. Cenb:aHzaib1mn refers to the degree to which decision- Cen'itra!izatiltl'fil
making authority resides at the top of the organizational chart as opposed to Degree to which
being distributed tlu·oughout lower levels (b:1 which case authority is decentral- .r::Jecision-malcing
'authority resides at the
ized). DepairtmenfaHzati!{]1Jlll refers to the de&•Tee to which work units are grouped top of the o rga niza-
based on functional similarity or sirnilarity of work flow. tional chart.
For example, a school of business could be organized around h.mctional. siini-
Deparblilentaii~atior1
larity so that there would be a marketing department., a finan.ce d~parhnent,
Degree to which work
and an accounting deparlrnent, and faculty 'Nith:in these specialized depart- units are grouped
ments would each teach their area of expertise to all kinds of students. Alter- based o n functional
natively, one could organize the same school around v1.rork-flow similarity, so similarity or similarity of
that there would be an undergraduate unit, a graduate unit, and an executive work flow.
development unit. Each of these units wottld have its O\!lm marketing, finance,
Zind accounting professorn 1.vho taught only their own respective students and
not those of the other units.

· Strnct~ua~ Configlm:ru:Oor111s
Although there are an infinite number of ways to combine centralization and
departmentalization, two common configurations of organization structure tend
to emerge jn ·organizations. Tfo~ first !.ype, referred to as a functional structure,
is shown in Figure 4.2. A h:i.ncti.onal struchu:e, as the name implies, employs a
.functional deparh:nentalizalfon scheme w ith relatively high levels of centraliza-
tion. High levels of cenh·alizalion tend to go naturally with functional depart-
mentalization because individual units in 1he struch.rre~> are so specialized that
 ...
'] 6$ CHAPTER 4. The Analysis and Df:::sign of Work

members of the urtit rnay have a weak conceptualization of the overaU orgami-
zation mission. 'Iln1s, U1.ey tend to identify with their department and cannot
always be relied on to make decisions that are in the best interests of the organi-
zation as a whole. In D.ddihon, the opportuniry for finger pointihg and conflict
between subruuts that fw1.damenJ:aUy do not understand the work that oilier
subunits do creates the need for a centralized decision-making mecha:rrism to
manage potential dfoputes.JA
Alternatively, a second corrunon configuration is· a divisional structure, tlu-ee
examples of which are shown in Figures 4,.3, 4.4, and 4.5. Divisional structures
combine a divisional departmentalization scheme with relatively low levels of
cenlTalization. Units in these structuxes act almost like separate, S!2lf-sufficient,
semi-autonomous organizations. Tiw organization shown in Figuxe 1±.3 is
d ivisionally otganized around different products; the organization shown in
Figure 4A: is divisionally orgw1ized around geographic regions; and the orga-
nization shmvn in Figure 1.5 is divisionally organized around different dftents;
Regardless of hovr subuni~s are formed, many organizations try to keep the
size of each sti.bunit small enough that people witlun the subunit feel m:e they
can make a difference and feel connected to others. People within very large sub-
units experience reduced feelings of individual accountability and motivation,

fra4.?JY~ dlJ."2
The Fu nctional Struct ure

Marketing Engineering Man•~facturing Finance Personnel Legal affairs

department dep;:irtment dP.partm0nt department department , department

--·---·---·--------!
Supervisor Supeniisor Supervisor Supervisor
line 'I line 2 line 3 line 4

1
1-·rn--r1-+rrnT1 1-rrrrr-l--r1-r1·T-i 1r·rrTr~-rTTl11 n-rn-rt-,rrrT1
~/!;1:ti#~~fi'~~i:'.~:~,fi!~r!&:,i#!~l;;~&).f!oJ!!i~1~nr#r~~-~~!1w~:~t1:,\,:10ik!}ff:4~,~;~~!P}:~!,j/!f4~~~,,~~~~~~~
/\:;sernbly worlrnrs

SOURCE: Adapted from J , A. Wagne r and J. R. Hollenbeck, Organi«1tiona l Behavior: Securing Competitive Advantage, 3rd ed.
(New York: Prentice Hall, 1998).
 ...
CHAPTER 4 The Ana lysis and Design of Work 169

h1;;flgtu1n"~ ~3

Divisional Structure: Product Structure

Consumer electronics H ou sehold furn ishings Co rp orate oHice Corporate legal Corporate finan ce
division division "--" staff division division
1---·--·-·-·--·--·---·--·--1--- ·-·-··---·----T--------1

SOURCE: Ad apted from J. A. Wagne r and .J. ri. Ho ll e nbeck, Organizational Behavior: Securing Competitive Advantage, 3rd ed.
(i'lew York: Prentice Hall, 1990) .

which hinders organizational performance. Research suggests that these types

of problems start to manifest themselves once a group exceeds 150 people and
hence many organizations try to limit subunits to this specific size. For example,
W.L. Gore and Associates, the company that makes Gore-Tex and other innova-
tive rnateri.als, typically 1Nill brea.I<: up a dlivi5ion once its size exceeds this num-
be1~ split.ting it in two and opening a new physical office.15
Because of their work-flow focus, theix semi-autonomous natme, and their
proximity to a homogeneous consumer base, divisional sh·uctures tend to be .
more flexible and innovahve. They can detect and exploit opportunities in their
respective consumer base fas~:er than 1he more centralized functionally stTuc-
lured organizations. In fac!:, as the "Competing through Globalization," box
shows, when highly functional slructures that are really built for efficiency and

figure 4 .4
Divisional Structure: Geographic Structure

.---,
SOURCE: Adapted from J. A. Wag 11er and J. R. Holle11 beck, Organizational Behavior: Securing Competitive Advantage, 3rd ed.
(New York: Prentice Ha ll, 1~)913).
... .
 Low cost, high speed, and
fl exibility in prdduction o pera-
tions are three central weapons
in th e search for competitive
advantage, and th is is perfectly
illustrated in the " fast fashion"
industry Hist orica lly, retail-
ers launched new styles at the
beginning of each sea son and
it often took a full year for a
design concept to go from the
drawing board to the store
floor. Although last min ute
changes could be made, these
were typica lly costly and cu t
into n1argins at a rate that off-
set the value of the change.
Hovvever, chains such as H&M
and Zara are rewriting the rules
of the fashion industry and
increasingly introd ucing new
styles every month as part of
t he pu sh fo r "fast fashion." As
noted by Nate Herma n, the
Vice President of the American
Appa re l and Footwear Associa-
tion , "The America n consumer
vvants the widest variety pos-
sible, and they want it now,"
and companies that respond to
this demand can see margins
as high as 50% for thei r clothes
relative to margins of 40% for
companies that stay on the tra-
ditional one year cycle.
The only problem w ith this
practi ce, however, is that many
feel that It can only be accom-
plished via the exploitation of
workers in small, emerging,
Third-World labor markets.
It might not seem like such a
170
major request to shift an order
from 20,000 bl ue blouses
to ·10,000 blue blouses and
·10,000 red blou ses; however,
quick shifts in op erations like
this, \Nhen not accompanied
by changes in order delivery
dates, cause plant managers in
emerging economies to pump
up worker hours and take short-
cuts with maintena nce that cre-
ate major safety issues. In their
2010 Corporat e Responsibil ity
Report, f\.li ke stated: "Ask-
ing fac::tories to ma nufacture
too many styles and change
production runs in midstream
is one of th e highest contribu~
tors to facto1y overtime and
accidents."
These problems have surfaced
most clearly in Bangladesh, a
country th at has been at the
forefront of the fast fashion
iilclustry after surging wages in
China sent retailers looking for
cheaper and more accommo-
dating man ufacturers. Although
the Commerce ~/linister at
Bang ladesh has stated that "The
branding of Bangladesh as a
country whi ch doesn't look after
the interests or safety of work-
ers is not acceptable to us," the
recent incidents in that coun-
try speak fo r themselves. For
exarnple, in November 2012,
100 workers producing cloth ing
for Sears and Walmart died in
a garment factory fire, and this
was followed by an other dead ly
fire a mere two m onths later in
2013. In May 2013,
500 workers toiling
away at the Rana Plaza
garment factory died when the
five-story building housing t he
operations collapsed. In all, ·
over 1,000 garment wori<ers in
Bangladesh died belween 2006
and 2013, most of whom were
I
young women working 16-ho.ur
days for less than $40 a month .
There is more than enough
blame t o go around for these
deaths and many have pointed
to lax law enforcement by the
Bangladesh government that
depends heavily on its 4,500
garment factories as a revenue
source. Others have pointed to
the retailers whose demands
for low-cost, high-speed and
flexible production place too
much pressure on untra ined .
plant managers.to push \Nork-
ers and facilities to the limit.
Scott Nova, the director of the
Worker Rights Consortium,
notes that "Retailers need to
step back from this absurd
approach of changing styles
every 15 m inutes if factories are
going to be minimally safe."
IOB$CUSSION$ Ql!J!EST~O~S
'11 . Ho\IY does one balance the
potentia l for backlash against
Western firms that outsource
work to countri es that exploit
workers against the poten..:
tial .cost savings associated
with outsourcing to these
countries?
CONTINUED
 2. In underdevelop ed cou ntries
that have extremely high
rates of unemployment, how
does one ba lan ce the need
to provide workers better
working conditions aga inst
the potent ia l for losing all of
those jobs to worke rs in m o re
developed countries?
SO Uf~ CES: R. Dudl ey, 1-\ . Devan t h, and To ug h Opti on s," The
M. Town send, "The Hidden Cost of Fast Wall Street Jo urna l
F:ishi o n," l3~1sinessweek, Fe bru a ry 11, 201 3, Onlin e , May 13, 20 13.
p p. 15- 17 ; J. ,t;.,,. Ma nik and J. Ya rdley,
"Ba ng ladesh Finds G ross f\legl ige nce in
Facto ry Fir·e," The Ne w York Times
Online , Decembe r· 17, 20 12; K. Akte r·,
"The Bloodsh e d Be hin d Our Chea p
Clothes," C/IJN O nline, May 3, 201 3;
B. Wa lsh, "Outso urci ng a nd the Dha ka
Disaster," Time Magazine, May 13, 2013,
p. 1 O; I<. Chu, "Ap p a re l Re tailers Con fro nt

cost contaimnent try to compete via speed and fleyjbility, serious problems
can ensue. The perceived autonomy that goes along with this kind of struc::ture
also means that most employees prefer it and feel they are more fairly iTeated
U1an when they are subject to cenfTaJlzed dedsiori-m aking shuchlres.16 In some
extreme cases, small divisions may n ot even be supervised by a formal man-
ager, and the employees m ay self-manage. For example, Valve Corporation, a
videogam.e producer located h1 Bellevue, 1/Vashjngton , touts itself as a "boss-
free" company ~Nhere decisions regarding hiring, firing, and pay are m ade by
the employees themselves, who are organized into team s. The teams tend to
vote on most decisions, or in som.e cases, due to experience or expertise, one or
two people will emerge as leaders for specific projects. Typically this type of
leadership emergence occurs in a way that is supported by the team. A s one
employee notes, "It absolutely is less efficient up front, but once you h ave the
organization behind it, the buy-in and the execution happen quickly."17
A good example of the inteq>lay of alternative structures can. be seen in recent
developrnents :ln the c01nputer industry. Historically, the computer indushy
started with large and divisionally struchm:d companies like IBM, that over
time splintered off into increasingly smaller and f1mction ally specialized orga-
nizations. Technology companies focused in narrowly on hardware or software
or data storage or ff consulting services, but no one compar1y was interested
i-11 providing all of lhese services. TI1e thought was that specialization would
boost efficiency and technical innovation . Indeed, as one analyst noted, "today,

r-ngt\mr® 4.§
Divisional Structure: C lient Struct ure

r----·-·-·---1-- ·

SO URCE: Ada pted from J. A. Wag ne r and J. R. Ho llenbeck, Organiza tiona l Behavior: Securing Competitive Advantag e, 3 rd 6'd .
(New York: Prentice Hall, 19913).

171
 ....

'l 72 CHAIPTIER 4 The Analysis and Design of Work

a iypical corporate compulTT system might be assembled by Accentme PLC

wiH1 data storage systems f-:mJ1.n FM:C Corporntion and computers from. Hewleit-
Packard that usr:>. chips frmn Intel. Corporation to nm Oracle software."
I-fov11ever, Oracle recently amiounced that they were going to reverse t~1at
trend wiU1 th.eh' announcement to purchase Sun Microsystems foe., making
them both a software producer and a hardware manufacturer. Oracle now
plans on selling complete systems made of chips~ computers, storage devices,
and software---highlighting a competitive sh'ategy that is based on the idea that
corporate customers are ti.reel of assembling and integrating different teclmo-
logical components from multiple suppliers. In similar moves, Hewlett-Packard
rumounced just a few months after this that they were going· to purchase
Electronic Data Systems, thus entering the data storage industry and Apple
announced it ·was making a m ove to enter the semiconductor chip business 'by
buying chip maker P.A. Semi;· . ,
The temptation toward this type of "vertical :integration" can be strong
because one of the virtues of d ivisional structures is that they allow one to con-
trol all aspects of an entire business, makillg one's former supplier part of the
team., as opposed to an unpredictable element of the b usiness environm ent
Vertical integration also tends to generate large-scale operations that would not
n aturally evolve organically from smaller organizations, and with size comes
some de·g ree of power. Indeed, Oracle's CEO, Lany Ellison directly jnvoked the
old 1960s IBM model by stating, "we want to b e T. J. VVatson's IBM, which was
I.
the greatest company h 1 l11e history of enterprise in America because its. hru:d -
i ware and software ran most compani.es." 18 Time will tell whether this strategy is
effective, or like the old IBM, whether Oracle will learn that there are real li..-nits
associated with divisional structures as 1Nell.
Divisional structures are not very efficient because of the red1mdancy associ-
ated with each group canying its own functional specialists. Also, divisional
siruduxes can "self-cannibalize" if the gaj11s achieved in one unit come at the
expense of another unit For example, Kinko's stores are structured divisionally
w ith highly decentralized control. Each manager can set his or her ovvn price
and has autonomy to make hi s or her own decisions. But the drawback to this
iS lack of coordination h1 the sense that "every Kink.o's store considers ev~ry
other Kinko' s store a competitor; they vie against each other for work, they bid
against ead1 other competing on price."19 This was also the case, as we saw h1.
our openints vignette, where separate division s .of GM wound up competing
against each other for ll1e same car buyers.
Lack of coordination caused by decentralized and divisional structures can be
especially problematic with new and emerging orgru1izations tha.t do not have a
great deal of history or firmly established culture. Higher levels of centralization
and more functi.onal design of work make it easier in tllis context to keep every-
one on the same page while the business builds experience.20 Decentralized and
divisional struchues can also create problems if the stand-alone divisions start
making decisions that are overly iisky or out of line with the organizalion' s
larger goals. For example, m an y analysts felt that many of the problems associ-
ated wilh the near ban1<.ruptcy
.. of Citibanl-<: Jl1 2009 were caused by excessive risk
taking in several autonomous divisions lhat ·were no t being closely monitored
by any centralized authority. This wa.s especially the case with the division that
managed collateralized debt obligations (CDOs). Many conservative banking
 ..
CHAPTER 4 The Analysis and Design of Work 173

analysts warned that CD()s and other similar d erivatives spread risk and uncer-
tainty tlu-oughout the econor.ny more widi0.ly and did little to reduce risk tlu·ough
diversification. This belief 'iNas validated in the 2008 recession, when the housing
' market crashed ;.md thousands of people clcfaulted o:n. their mortgages. 21
Another example of this can be seen in the recent experiences at Procter and
Gamble (P&i:G), where each separate division was given control over its own
research and development budget. During tqugh economic times, each sepa-
rate mrit began to reduce expenditures on Rls;;:f) resulting h1 an effort to tighten
their budgets and meet shorl:··term profit goals. TI1e crunulative effect of all of
these short-term :independent decisions was that as a company~ P&G was under-
investing in R<~-cD, and a dearth of new and. innovative products wound up harm-
ing long-term competi1i veness. c::EO Bob McDonald stepped in and centralized
the R&D function so that the rnajority of :researchers 1Norked in a single unit
and reported to a single authmity, Joxge Mesguita;·The hope was to leverage the
research talent that was spread across the divisions and consolidate them into
a single unit focu sed on r.nore radical breakthroughs rather tlmn incremental
iimovations. 22
Alternatively, functional strucll1xes are very efficient, with httle redundancy
across units, and provide lit.J:le opportunity for self-caru.Libalization or for rogue
1.U1its running wi.ld. Also, although the higher level of oversight in centralized
· siTuctures tends to reduce the nmnber of erl'ors made by lower level workers,
when errors do occur in overly centralized systems, they tend to cascade tlu·ough
the system as a whole more quickly and Gill, therefore, be more debilitating .
.Moreove1~ these sl:ructuxes ten d to be inflexible and :LnsensiHve to subtle differ-
ences across prochicts, regions, or clients.
Functional stTucll.u-es are most appropriate h1 stable, predictable environ-
ments, where demand for resources can be well anticipated and coordination
regu:L·rem ents betw een jobs can be refined a:nd standardized over consistent
repelitions of activity. This type of structure also helps support organizations
that cornpete on cost, because efficiency is ceninl. to making this strategy work.
Divisional sh·uctures are rnost. appropriale hi. unstable, unpredictable environ-
ments, 1Nhere ii: \s difficult to an1icipate demands for resources, and coordination
requirements betvveen jobs are not cons~stent over tim.e. TI-us type of strUclure
also helps suppol't organizations that compete on differentiation or ilu1ova-
tion, because flexible responsiveness is central to maki11g this strategy work. Of
course, desit,TJ.un.g an organizational sb:ucture is not an eH11er-or phenomenon,
and some research suggests that "middle··of-the-road" options that combine
func tional and divisional elements are often best. For example, most organi-
zations lake a "mixed" approach to 11ow they structure the Human Resource
function witlun their organization. lypica.Uy, there is a submlit called a shared
sel"vice center that is highly cenin1.lized and handles all the major routine h'ans-
adional tasks such as p ayroll ~n1erc is aJso a center of excellence subunit that
houses specialized expertise in the area of h·aining or labor relations, which is
centralized but separate from the shared service c~nter. Finally, there is a third
decen tralized subunit that ads as business partner l:o other sub-unit leaders on
talent management or succession planning. Th:i.s tJ1xee-pronged structure has
elements that strive to achi~ve efficiency when it. coines t:o routine tasks, spe-
cialization when it comes to complex tasks, and flexibilih; when it comes to sup-
porting each separate business i.mif:.23 ·
 ..
17li:c CHAPTER 4 The /\nalysis and Design of Work

5\l:rnl['trurre aitrnd 1Jne NatMire of Jot!s

Finally~ moving from big-pichrre issues to lower-level specifics, the type of orga-
nfaation structure also lF\S jmplications for the design of jobs. Jobs in foncfional
structures need to be narrow and hlghly specialized. Workers in these struc-
tures (even middle managers) tend to have little decision-making authority o.r
responsibility for managing coordination between themselves and others. For
example, at Nucor Steel, production at its 30 minimill plants has doubled almost
every two years and p rnfit mru:gins have pushed beyond 10% largely because
of its flat, divisional structuxe. At Nuco1~ j_ndividual plant managers have wide
autono.my in how lo design work at their own mills. Nucor plants sometimes
compel:12 against each othe1~ but the CEO makes sure that the competition is
healthy and that best p ractices are dish·ibuted thrnughout the organization as
fast as p ossible, p:reventi_ng any long-term sustainable adva11.tage to any one
plant. Moreover~ the profit-sharing plan that makes up the largest part of peo-
p le's pay operates at the organizational level, which also promotes coUaborati.on
among m anagers v\Tho want to make sure that every plant is successful. Tims,
after takit1.g over a new mill for the .first time, one new plant manager got a call
or visit from every other manage1~ offering advice and assistance. As the new
manager noted, "It wasn't idle politeness. I took them up on it. My perfocmance
impacted their paycheck."2.4
Nucor employs just four levels of management and operates a headquarters
'
of just 66 people, compared to one of its competitors, U.S. Steel, which has over :~ '"1~~
20 levels and 1,200 people at its headquarters. Dus gives Nucor a long-tenn sus- .:.•..,_,_
j~:.
tainabk: competitive advantage, which it has held for close to 15 years. Sales ai: :!
Nucor grew from $4.5 billion in 2000 to over $13 billion in 2006. During the same .
p eriod, U.S. Steel's volume decreased by 6%. This has translated into success for
l,ill
lf"
~i:L,
.
both investors (roughly 400% return on jnvesbnent in the last five years) and. .

workers, whose wages average $100,000 a year, compared to $70,000 a year at

if·
U.S. Steel. As one indusb:y analyst notes, "In terms of a business inodel, Nucor ·'i.
r.·;
has won this p art of the world," and much of that victory can ,b e explained by
their sup erior stlucture and p rocess for managing work.25 ··
l~:-1··.·
'Ui.e choice of stmcture also has implications for people who would assume
the jobs created in functional versus divisional structures. For example, manag~
r".
\i,'!,
~!~
~

ers of divisional structures often need to be more experienced or lugh in cogni-

tive ability relative to managers of functional sbuctures.26 111e relatively smaller
scope and routine nature of jobs created in centralized and functional struc-
h u:es make them less sensitive to individual differences between workers. The
n ature of the structme also has implications for relationships, in the sense that
h1 cen1J:aJjzed and functional shuctures people tend to think of fairness in. terms
of rules and procedmes, whereas in decenb·afo:ed and divisional structures,
they tend to thfok of fairness in terms of outcomes and how they are b:eated.
interpersonally.27
Flatter sh·uctures also have implications for organizational culture in terms
of etlucs and accountability. For example, in a IUghly public scandal, Putnam
Investrnents was fined $110 million for engaging in "market timing," that 'is,
jmnping quickly in and out of funds in order to take advantage of momen-
tary market inefficiencies. 1lris is considered an unetlucal practice within the
industry because it increases fund expenses wluch, in tu111, harms long-term
 ...
CHAPTER 4 The Ana lysis and Design of Work 175

investors. Many long-tenn i.:nvestors left the organization, some of whom had
more than $800 m illion being managed by Puin arn.
Accordjng to Putnam insiders, the organization's tall and narrow organiza-
tional sh·ucture created a situafion in which too many people were managing
other people and telling them what they had to do to get promoted. Because the
only way lo earn m ore money at Putnam was to climb the corporate ladde1~ too
much pressure was put on managers and employees alike to boost short-ter~
result~.; i11 order to ath·act l:ht~ attention of those high above. The culture was
one where people ten ded l:o ask "vVhai: is the fine for this?" instead of "What
does tltis d o to help my clients?" V\lhen new CEO Ed Haldeman was brought
in to repair the damage, one of his first step s w as to remove hundreds of sales-
people, and then flatten the sh·ucl:u.re. The goal was l:o attrnct a different kind
o.f employee, who would be less interested in sh ort-term gains ru1d hierarchical
promotions h and ed out by oi11ers and more interes1:ed ht establishing personal
long-term relationships with customers and more collaborative relationships
'with colleagues. In Haldeman' s vvords, "To retain and attract the best people,
it's necessary to p rovide them. witl1. autonom y and independence to make their
own decisions."2!l
In our next section, we cover specific approaches for analyzing and design-
ing jobs. Although all of il1ese approaches are viable, each focuses on a single,
isolated job. These approaches do not necessarily consider how that single job
fits into th e overall work flow or structure of the organization. vW1ereas the Put-
nam Investments example shows how a finn m oved from a functional sh·ucture
· to a divisional slruchffe, the Evidence-Based rm. example shows how Eli Lilly
changed their structme in just the opposite direction, and this reinforces our
general principle that there is no "one best 1Nay" when it comes to organiza-
tional structure. Without this big-pichrre ap preciation, we might redesign a job
in a way that might be good for that one job but out of line wit11 the work flow,
structi.Jre, or strategy of 1llie organization. In an effectively shuctured organiza-
hon, peop le not on ly know how their job fits into the bigger picl1ue, they know
how everyone else fits as well.
Because paten ts for well-established dTugs run out after a set time period,
a compan y like Eli LiU.y can only survive by inventing new products before
the time b omb represented by their older d rugs goes off. Faced with the pros-
pect of losing the paten t on its $5 billion a year schizophrenia pill, Zyprexa,
this company restruchU'ed operations in a functional direction in order to cre-
ate ne1N p roducts more quickly and efficiently. For example, every person who
was responsible for converting molecules into medicine were taken out of the:iT
home departments and placed under one roof in the new Development Center
for Excellence.
This group of intensely focused specialists, who were all working together for
. the first time, came up with an innovative new method for launching and test-
ing drugs. This group took a formerly sequential two-stage process for deter-
minjng general effectiveness and then the optimal dosage, and converted it into
a single-stage p rocess where rnuHipie dose levels were tested all at once and
compared to each other. This process shaved 14 months off the process of devel-
oping a new cln1g for diabetes, and was th en generalized to other therapeutic
causes.29
 ...
17 6 CIHA IPTIER 4 The Analysis and D<~si~1n or V\11Jrk

Job A\na~~fsi~
,J4Jib AriwJJiy111!!'1. .Wob i:llna.~.y~;is refers to the process of getting detailed :information about jobs.iIt
The process of getting is impmtant for organizations to understand and match job requirements aJiJ.d
detailed information people to a.d.i.ieve high-quality performance. Tius is particularly true h1 todaJ's
about jobs.
compei:il:ive niarkelplace.

lfi~IE ~MIPORTANCIE OIF .»0!3 ANAlY5~5

lQ/i1.~2 Job anal.yr,:;is jc:; the build.fog block of everytlling that human resource m anagers
Understan d the impo1'- do. Almost every hurn.an resource management program requires some type of
tance of job analysis information that is gle;:uw:d fTom job analysis: selection , performance appraisal,
in strategic human
resource management.
trah1jng and developmieni, job evaluation, career planning, work redesign, and
human resource planning. "· ·
Work }[fied.esign, As prr.~viou3ly discussed, job analysis and job design are inter-
related. Often a firm will seek to redesign work to make it more efficient or effec-
tive. To redesign the work, detailed information about the existing job(s) must
be available .. fo addition, redesigrung a job will, in fact, be similar to analyzing a
job that does n ot yet eyjst

][-JfanrWiiP- I\":sifmriee JP'laruii.r,ng, In hmnan resource planning, managers analyze an_

organization's human resource needs b.1 a dynamic environment and develop
adivities tha!: enable a finn to adapt to ch ange. This p lan ning process requires
accm:ate h1formation about the levels of skill required in various jobs to ensure
that enough individuals are available in the organization to meet the humi11
resource n eeds of th.e sh·ategic plan. ·
Sdeci:for,~, Human resource selection identifies the most qualified applicants for
employment. To identify 'Which applicants are most qualified, it is first neces-
sm:y to deter.rnine the tasks that will be performed by the indiyidual hjx1,2d mi.d
to
the Jr,. nowledge, skills, and abilities the individual must have perform the job
effechvely. This information is gained through job analysis.
lh{l inin.g" Almost every employee hired by ~n organization will require
training. Some training program.s may b e more extensive than· others, but
all require the trainer to have identified the tasks performed in the job
to ensun~ that the training will prepare individuals to perform their j ob s
effec'l:iveiy.
.Pe1fornwnce Apprra.isaL Performance appraisal deals with getting information
about how well each employee is perfonn.ing in order to reward those who are
effeclive,. improve the performance of those who are ineffective, or provide a
w ritten justification for why the poor perfonner should be disciplined. Through
job analysis, the organizati_on can identify the behaviors and results that distin-
guish effective performance from ineffective performance.
CareA.~t·
.Planning. Career planning entails matching an individual's skills rul.d
aspirations with opportimities that are or may b ecome available in the organi-
zation. U15s matd1ing process requires that those in charge of career planning
know the skiU requfren1ents of the various jobs. This allows them to guide indi-
viduals ini:o jobs in vvh:ich they will succeed and be satisfied .
 ..
CHAPTEIR 4 The Analysis and Design of Work 177

Job Ev(.IJ} uaJ:fon. The process of job evaluation imrohres assessing the relative
· dollar value of each job to the organization to set up jnte.rnally equitable pay
struch1:r.es. lf pay structures are noi: equitable, exnp.!oyee~.> ·wjJJ_ be dissatisfied and
quit, or they will n ot see tbJ~ benefits of si:riving for promotions. To put dollar
values on jobs, it iB necessary to get iJ:ifonnation about different jobs to deter-
mine which jobs deserve higher pay ll1an otlwrs.

THE iMIPORlfAf\KE Of ~OIB ANA1Y5iS 10 Ufi\!lt MAMJ\1GIERS

Jch analysis is clearly imporh.mt to tl1e HR department's various activities, but
why it is important to line m.anagers m.ay not b e as dear. There are many rea-
sons. First, managers must have detailed jnformation about all the jobs in their
work group to understand the 1.Nork-flow process. Second, managers need to
understand the job requiren1ents to make intelligent hiring decisions. Very sel-
.dom do employeer:> get hired by the human resou rce deparhnent without a man-
ager's input. Third, a manag(::r is responsible for ensming that each individual
is performing satisfadorily (or better). This requires the manager to evaluate
how well each person is p erfonn.ing and to provide feedback to those whose
performm1oe needs improvement. Finally, it is also the manager's responsibil-
ity to ensure that the work is beiDg done safely; knowing 1Nhere potential haz-
ards might manifest tl1emselv1;:s and creating a d im.ate iNhere people feel free to
interrupt the production process iJ dangemus conditions exist.JO For example,
some were shocked whi~n Akoa' s new CEO Paul O'Neill' s opening remarks at
his fi.xst shareholders meeting were focused on pointing out the nearest emer-
gency exits in the building. Hovveve1~ O'Neill' s emph asis on safety and work
processes actually woD.nd up making hiu1 one of the .best CEOs in history. After
he took over at Alcoa, O'NdU changed reporting prncedm:es so that any time
an employee got hurt, the departm.eni: head in tfo,1t m1it had to develop a plan
detailing how work processes were going to be cho.llged to make sure the same
accident did nol: happen agah1< Executives 1.Nho failed to embrace this new stan-
dard routine were fired. As a n~~>ulJ of H1fa n ev\r policy, each deparb:nent head
had to become intimately familiar vvith work processes w hid1 ultimately led to
many conversations with lower level workers 111Jho had great ideas for not only
shoring up safei:y, but also sb.'eamlining work...flmv. Eveni:uaUy, even as safety
was jmproving, costs came dmvn, quality went up and productivity skyi·ock-
eted.31 Unfortunately, as the "Integrity in Action" b ox illustrates, not all' CEOs
see the connection between Gafety and efficiency.

, JOH ANAlYS ~S ~NIF O!RMATiOn\~

Matll.Br<e «:rf irrdormatimll
Two types of infonnation axe most useful in job analysis: job descriptions and job
specifications. A job desieir:i.p1l:ion is a list of the tasks, d ulies 1 and responsibilities Job Da!Scriptt!on
(TDRs) that a job en tails. TDRs are observable actions . For example, a clerical A list of the tasks,
job requires 111e jobholder to type. If you were to observe someone in that posi- duties, and responsi-
bilities (TDRs) that a
tion for a day, you would certainly see some typing. When a manager attempts job entails.
to evaluate job performance, it is m.ost ilnportant to have detailed information
about the work performed hl the job (that is, the TDRs). This malces it possible
to determine how well an individual is meeting each job requirement. Table 4.1
shows a sample job d esoription. On the one hand, job descriptions need to be
 Eve n pri or t o th e Upper Big
Bran ch m ine ex p losio n t hat
kil led 29 workers, Massey
Energy v11as not orious fo r put-
ting coa l miners at risk. In fact,
accordin g to a 201 ·1 i nvesti ~J a ­
tive report into th e d isast e r, no
Unit ed States coal company
. had a 1111orse fa tal ity reco rd t ha n
Masse y Energy, with o ve r 50
d e at hs in the f ive yea rs that led
up to t he fatal eve nts at Up per
Dig Branch.
Many industry insiders
attribute d t h is record to an
"orsian izational cult ure in
whi ch w rongdo ing b ecame
acceptab le, and whe re devia-
tion v11as the norm .If Un de r
th e leadersh ip of CEO Do nald
Blanke nsh ip, Massey pu shed
re lent lessly for higher pro-
du ctio n and lower co sts, an d
la rgely t urned a blin d eye t o
worker safety. For e xa mple,
government insp ecto rs rep eat-
ed ly sh ut down large stretches
of the mi ne, but as o ne w o rker
noted, " ma nagement never
fully addressed t he issu es, th ey
w ou ld foe it just good e no ug h to
fool th e inspecto rs and g et b ack
to lo ad ing co al--that w as just
th e M assey w ay."
Later that y e ar, w he n
Ma ssey was acquired by A lph a
f\latu ra l Resource s, t he n ew
CEO, l(evin Crutchfield , vo vve d
t o cha n ge t hat cu lture , statin g
that /f \f\/e're goi ng t o ru n this
right and le ad b y e)cample ."
One of Crutchfie ld 's fi rst moves
was t o initi ate and promote
the n ew /fR unning Rig ht Pro-
gram." The key co mponent o f
t his pro9ra m vvas "observa-
t ion ca rds " that 1t\1urkers were
encou raged t o an o n ymously
subm it to h ig he r le ve l manag-
e rs th at ident ified u ns afe prac-
t ices or con d it ions anywhere
in o r aroun d t h<'! rni ne s. The
"R.unn ing f< iq ht Pro gra m " is
ru n by 18 sta ffe rs !n ce ntral
head q uarte rs w ho process
ove r 15 ,000 c ard s a m onth,
and rev i e~N the:;e along with
Em p loyee Involvem en t Gmups
t hat work at the sit es .
T he message se nt by this
progra m is c1u i1:e a bit d ifferent
from what t he workers were
used t o und e ;· Blan kenship 's
leadership. In one infamous
mem o, the p revious CEO tol d
all emp loyee s in writ ing that
" if any of y o u have been asked
by your grou p p re sidents, your
supervisors, you r e ng ineers
o r anyone e lse t o d o anything
o t her t h an ru n co al, yo u need
t o ig nore th em and run coal.
T h is memo is
necessary o nly
because we seem
n o t to un derstand t hat coa l
p ays th e bi lls." M e m os li ke thi s
were o ne re ason that despite ·
residing in a reg ion m arked
by chro nica lly hi gh unempl o y :
m ent, and wh e re w orkers w ith
nothing b ut a h igh school
diploma co u ld e arn $70,000 a
year, the tu rn o ver ra t e amo ng·
coal miners at Massey .was
over 20% compared t o t h ei r ,
competitors wh o a ll had rates
in t he sin gle dig its . C rutchfi (:: ld
ha s vowed to get t he turn ove r
rate down to 5% in an effort t0
cut trai ni ng costs an d im p ro v e
pro duct ivity. In t he p rocess h e
st resses, " I can assure yo u , I
·wi ll not be send ing any mem qs
like t hat."
IDlnSCUSS!O N QUIESlnQ~\!l
In what w ays, o t he r than h ig her
t han averag e tu r (:l o ver, d o es
having an u nsa,/ ory ethi cal repu-
tation harm an o rganizatio n's
co m petitive advantag e?
SOURCES: P.M. Barrett, "Cleaning America's
Dirtiest Coal Com pany, " Businesswee/(,
August 29, 2011; J. Raby, "Ex-CEO Implicated
in Massey Coal Mine Disaster," USA Today
Online, February 28, 2013; H. Berkes, "Fonr1er
Massey CEO Accu se d of Conspiracy in Court
Hearing," NPR Online, February 28, 2013.

written bmadly because overly resi.T ictive descriptions make it easy for some-
one to claim that som.e irnportant task, perhaps unforeseen, "is not my job." On
the other hand, lack of specificity can also result in disagreement and conflict
betw een p eop le about the ess~~ntial elements of w h at the job entails.32 Thus, it
is critical to sb:ike an effed:iv,~ balance belween breadth and specificity when
consh'Uc!ing job descriptions.

178
 ..
CHAPTER 4,. The Analysis and Design of Work 179

1~ibn(E! 4.11
A Sample Job
Description

1. Essential Duty (40%): Maintenance of Equipment

Tasks: Keep a log of all n1aintenance pe1formed on ec1uipment. Replace parts
and fluids accor·ding ;to rrraintenance schedl.de. r~egularly check gauges and loads
for deviances that may indicate problems with eguipment. Perform nonroutine
maintenance <1s rec1uired. [\!lay involve limited supervision andtraining of opera"
tors perforrning maihtenance .

3. Essential Duty ('1 0%): Testing and-Approval

1~1sks: Ensure. that all required rnaintenance and repair has b::ieeri pe1fo rmed and
that it was performed according to manufacturer sp1:'cifications. Approve or reject
equipment as be ing n:;ady for US(3 on a j ob.

Nonessential Functions
Other duties as assigned.

A job spedfiiicaR:iirm is a list of H:i.e knowledge, skills, abilities, and other char- Job Sp~dfk1>r3:oQfi'l
. acteristics (KSAOs) that an individual must have to perform t.he job. Knowledge A list of the knowl-
refers to factual or procedural information that is necessmy for successfully edge, ski/ls, abilities,
and other character-
·performing a task. A skill is an individual's level of proficiency at performing istics (KSAOs) that an
a particular task. Abilit:y refers to a more general enduring capability that an individual must have to
individual possesses. Finally, other characteristics might be personality traits such perform a job.
as one's achievement motivation or persistence. Tims KSAOs are characteristics
about people that are not directly obsenrable; tJ1ey are observable only when
individuals are carrying out the TDRs of H1e job. If someone applied for the
clerical job discussed, you could not simply look at the individual to determine
whether he or she possessed typing skills. However, if you were to observe that
individual typing something, you could assess the level of typing skill. When a
manager is attempting to fill a position, it is important to have accuTate informa-
tion about the characteristics a successful jobholder must have. 1his requires
focusing on the KSAOs of each applicant.

Smnces of Job Anla~ysfis ~nfoirmatil«:bllll

In performing the job analysis, one question that often arises is, Who should be
responsible for providing tl1e job analysis information? Whatever job analysis
method you choose, the process of job analysis entails obtaining information
 ..
I! HO CHAPTER 4 The Analysis and Design of \/\fork

from people familiar wifri. the job. Vl./e refer to these people as subjed-:matter
experts because they possess deep knowledge of the job.
In general, it virill be useful to go to the job incumbent to get the most accurate
information about what is actually done on the job. This is especially the case
when it is difficultto monitor tli.e person who does the job. The ratings of mul-
tiple job incumbents that are doing the same job do not always agree, however,
especially if the job is complex and does not involve standardized equipment
or tight scripts for customer contact.33 Thus, you wiJJ also want to ask others
famili.m: with the job, such as supervisors, to look over the information gener-
ated by iJi.e job :incumbent. This serves as a check to determine whether what is
bejng done is congruent with what is supposed to be done in the job. One con-
clusion that can be drawn fTom this reseaxch is that incwnbents may provide the
most accurate estimates of the actual time spent performing job tasks. Howev:e1~
supervisors may be a more acemate source of infonnation about the importance
of job duties. hlcumbents also seem more accurate in terms of assessing safety-
related risk factors associated with vadous aspects of work, arid in general the
further one moves up the organizational hierarchy, the less accurate the rj.sk
assessmcnts.34 Although job incumbents m1d. supervisors are the most obvious
and frequently used sow:ces of job analysis information, other sources, sudi.,as
customers, can be helpful, pm.ticuJarly for service jobs. Finally, when it comes to
analyzing skill levels, external job analysts who have more experience rating a
wide range of jobs may be the best source.35 ·

JOB ANJUYS~S METHODS

ILO 4-J Th.ere are various methods for analyzing jobs and no "one best way." In this section,
1. Choose the right job we discuss two method.5 for analyzjng jobs: the position analysis questionnaire
I analysis technique for and the Occupational Information Network (O*NET). Although most managers
a variety of human
resource activities.
may not have time to use each of these techniques in the exact manner suggested,
the two provide some anchors for t.hinking about broad approaches, task-focused
approaches, and person-oriented approaches to conducting job ari.alysis.

Positiollll Analysns Questnom1aire {!PAQ)

l/lle lead this section off 1Arith the PAQ because this is one of the broadest and
most wen-researched instruments for analyzing jobs. Moreover; its emphasis 011 .
inputs, processes, relationships, and outputs is consistent with the -work-flow
analysis approach that w e used in leading off this chapter (Figure 4.1).
rfl1e PAQ is a standardized job analysis qu.eslionnaire containing 194 items.36
These items represent work behaviors, work conditions, and job characteristics
that can be generalized across a wide variety of jobs. They are organized into six
sections:
1. Information input- 11\!here and how a worker gets information needed to
perform the job.
2. Menial processes- 111e reasoning, decision making, planning, and informa-
tion processing activities that are involved in performing the job.
3. Work output- TI1e physical activities, tools, and devices used by tl1e worker
· to perform the job.
4. Relationships with other persons-Tii.e relationships with other people required
in perfonning the job.
 ...
CMAPTER 4 The Analysis and Design of Work 181

5. /ob context-The physical and social contexts where the work is performed.
6. Other characteristics-The activities, conditions, and characteristics other
r:han those previously described that are relevant to the job.
The job analyst is asked to determine whether each item applies to the job 1 ,
being analyzed. TI1e analyst then rates the item on six scales: extent of use,
amount of time, importance to the job, possibility of OCCUlTence, applicability,
and special code (special rating scales used with a particular item). These rat-
ings are submitted to the PAQ headquaxters, where a computer program gener-
ates a report regarding Ui.e job's scores on the job dimensions.
Research has ind icated that the PAQ measuxes 12 overall dimensions of jobs
(listed in Table 4.2) and that a given job's scores on these dimensions can be
ve1y useful. The significant database has linked scores on certain dimensions to
scores on subtests of the General Aptitude Test Batte.ry (GATB). Thus, knowing
. the dimension scores provides some guidance regarding the types of abilities
that are necessmy to perform the job. Obviously, this technique provides infor-
mation about the work performed in a format that allows for comparisons across
jobs, whether those jobs are similar or dissimilar. Another advantage of the PAQ
is that it covers the work context as well as inputs, outputs, and processes.
Knowledge of work context is important because in many cases, one can pre-
dict: absenteeism and tun1over from the nature of the SUJ."1.'0tmdings in which the "·
work takes place, an d some people are more resilient tfom others when it comes
to dealing with adverse envirnmnents. In addition, if one knows that the job
includes adverse working conditions, providing additional levels of peer sup- -~· ·
port and supervisor support might be required to help people cope.37 In con-
trnst,, work spaces that are designed in ways that people find pleasing can often
help overcome other aspects of a job that are generally seen as less desirable.38
In spite of its widespread use, the PAQ is not without problems. One problem j:
is that to fill out the test, an employee needs the reading level of a college gradu- I:,
ate; this disqualifies some job incumbents from the PAQ. In fact, it is recom- :

mended that only job analysts trained in how to use the PAQ should complete
·'
the questionnaire, rather than job incumbents or supervisors. Indeed, the ratings
of job incumbents tend to be lower in reliability relative to ratings from supervi-
~ '!
. sors or trained job analysts. 39 A second problem associated with the PAQ is that '
its general, standard ized format leads to rather abstract characterizations of jobs.
11lus it does not lend i tself well to describing the specific, concrete task activities ,.,
l!,
I·

Table 4.2
Overall Dimensions
l
of the Position
Analysis
Questionnaire

I.

!,.
,.
1

'
Ii:
.!I[
---------- --
 ....

132 CHAPTIEIR 4 The Analysis and Design of Work

that comprise the actual job, and it is not ideal for developing job descriptions or
redesigning jobs. Methods that do focus on this aspect of the work are n eeded if
this is the goal.

Hne Occupat"onal h-nf ollli11la1:fton Ne11:\Af'Ofi"~{ (O'~NIET)

The Dict:ionary of Occupational Titles (DOT) was b orn during the 1930s and served
as a vehicle for helping t11e nevv public employment system link the demand for
skills and the supply of ski!Js in the U.S. workforce. Although this system served
the country well for more t_han 60 years, it became clear to officials at the U.S.
Department of Labor that jobs in the new economy were so qualitatively diffe]:-
ent from jobs in the old economy~ that the DOT no longer served its pm-pose.
Technological chang~s in H1e nature of work, global competition, and a shift
from stable, fixed manufacturing jobs to a more flexible, dynamic, service-based
economy were quickly making· the system obsolete. 40
For all these reasons, the Department of Labor aband oned the DOT :in 1998
and developed an entirely new system for classifying jobs refened to as the
Occupational Information Network, or O*NET. Instead of relying on fixed job
titles and narrow task descliptions, the O''NET uses a common language that
general:i/::es across jobs to describe the abilities, work styles, work activities, and
work context required for vaiious occupations that are more broadly define;d
(e.g., instead of the 12,000 jobs in the DOT, the O*NET describes only l,OQO
occupations).41 .A-1though it was d eveloped to analyze jobs ill the U.S. economy,
research suggests that the ratings tend to be h'arIBportable across countries. That
is, if one h olds the job title constant (e.g., first-line supervisor, office clerk, com-
puter programm.er), the ratings of the job tend to be the same even if the job is
located in a different country. 12
The O''NET is being used by many employers and employment agencies.
For example, after closing its Seattle-based h eadquarters, Boeing used the
O*NE'I system to help find n ew jobs for the workers who were laid off because
of the impending move. 43 The State of Texas h as used the O*NET to identify
emerging occupations w ithin the state whose requisite knowledge, skills, and
abilities are underrepresented in the current occupational system. This infor-
m ation will be used to help h'ai.n Texas residents to be .prepared for the jobs of
the future. ·
Although these examples show its value for employers, the O*NET was also
designed to help job seekers. For example, the O:jNET seems particularly well
suited to describing the literacy requirements associated with alternative jobs.
Thus, individuals who want to improve then· ability to find employment can
obtain relatively accurate information about what jobs they are qualified for
given their current literacy lev el from the O*NET. They can also see how much
their literacy skills would have to improve if fuey wanted to apply for higher-
level jobs characterized by higher levels of complexity.44

DVNAMK ElEMENT5 Of .DO~ ANALYS ~ S

t04~4 Althou gh we tend to view jobs as static and stable, in fact, jobs tend to c.hange
Identify t he tasks per- and evolve over time. Those who occupy or manage the jobs often make minor,
formed and the skills cumulative adjustments to the job that hy to matd1 either changing conditions in
required in a given j ob.
the environment or personal preferences for how to conduct tl1e work.4.5 Indeed,
 ...
CHAPTER 4 The Analysis and Design of Work 133

although th.ere are numerous sources for error in the job analysis process,46 most
inaccurncy is likely to result from job descriptions simply bejng outdated. For
this reason, in addition to statically defining the job, the job analysis process
mus t also detect changes hl tile nature of jobs.
For example, in today's wodd of rapidly changing products and markets,
· .some people have begun to question whether tl1e concept of "the job" is sim-
. ply a social artifact that has outlived its usefulness. Indeed, many researchers
and practitioners are pointing to a iTend referred to as "dejobbing" in organi-
zations. This trend consists of viewing organizations as a field of work need-
ing to be done rather than a set of discrete jobs held by specific individuals.
For example, at Amazon .com, HR director Scott Pitasky notes, "Here, a person
might be in the same 'job,' but three months later be doing completely d iffer-
ent work."47 This means Amazon.com puts more emphasis on broad worker
specifications ("entrepreneurial and customer-focused") than on detailed job
descriptions ("C + + programm_ing") that may n ot be descriptive one year
down the road. ·
Also, jobs tend to change with changes in foe economy in fue sense that eco-
nomic downturns tend to be associated witl1 organ izational downsizing efforts.
Researd1 suggests that successful downsizing efforts almost always entail some
changes in the nature, and not just the number, of jobs.43 Indeed, this seems to be
the exact situation confronting many employers and employees coming out of
the most recent recession, where job descriptions are being stretd1ed to the break-
ing point. Failure to take into consideration the nature of the new jobs created
after downsizing events is critical because, without support from HR, survivors of
downsizing events tend to be less committed to the organization and have higher
rates of subsequent turnover when the economy returns to normaJ.49

Job Design
So far we have app roached the issue of managing work in a passive way, focus- L04°5
ing only on understanding what gets done, how it gets done,. and the skills Understand the differ-
required to get it done. Although tllis is necessary, it is a ve1y static view of jobs, ent approaches to job
design.
in that jobs must already exist and fuat they are already assumed to be struc-
l:ured in the one best way. However, a manager may often be faced with a situ-
ation in which the work unit does not yet exist, requliing jobs within the work
unit to be designed from scratch. Sometimes work loads within an existing work
mut are increased, or work group size is decreased while the same work load is
required. Finally, sometimes the work is not being performed in fue most effi-
cient manner. In these cases, a manager may decide to change the way that work
is done in order for the work mlit to perform more effectively and efficiently. Job Dasig111
Tius requires redesigning the existing jobs. The process of defin-
ing the way work will
Job design is the p rocess of defining h ow work will be performed and the tasks
be performed and
that will be required in a given job. Job redesign refers to changing the tasks or the tasks that will be
the way work is performed in an existing job. To effectively design jobs, one must required in a given job.
thoroughly understand the job as it exists (tlu·ough job analysis) and its place in
the larger work unit's w ork-flow process (work-flow analysis). Having a detailed Jolb Redesign
The process of chang-
knowledge of the tasks perfo1n1ed in the work unit and in the job, a manager ing the tasks or the
then has many altemative ways to design a job. rTilis can be done most effectively way work is performed
through understanding the trade-offs between certain design approaches. in an existing job .
..
 184 CHAPTER 4 The Ana lysis and D esign o f Work

Research has identified four basic approaches that have been used among the
various disciplines (such as psychology, management, engineering, and ergo-
nomics) that have dealt with job design issues.so All jobs can becharacteriz~d
in tenns of how they fare according to each approach; thus a manager needs to
understand the h·ade-offs of emphasizing one approach over another. In the fol-
lowing sections we discuss each of these approaches and examine the implica-
tions of each for the design of jobs. Table 4.3 displays how jobs are characterized
along each of these dimensions, and the Work Design Questionnaire (WDQ), a
specific :in strument that reliably measmes these and other job design charactei·-
istics, is available for u se by companies wishing to comprehensively assess the,i r
jobs on these dimensions.s1

MECHA!\HSlK AIPPROAC~
The mechanistic apprnad1 has roots }n classical industrial engineeri.t1.g. 'Ute
focus of the mechanistic approach is identifying the simplest way to structure
work that maxinrizes efficiency. This 'most often entails reducing the complex-'
ity of the work to provide more human resource efficiency-that is, making the
work so simple that anyone can be trained quickly and easily to perform it. This
approach focuses on designing jobs around the concepts of task specialization,
skm simplification, and repetition. TI1us, as we saw in our opening vignette, GM
w as tryin g to simplify the n ature of their work processes by hying to reduce
I. the number of unique car and h·uck platforms from 30 to 14, even though this
would still make their system relatively complex when compared to Ford, with
just 5 different platforms.
For exainple at Chili's Restaurants, cooks used to cut up vegetables, meats,
and ot11er ingredients as past of preparing a meal. In order to increase efficiency,
however, t:he organization decided to break this job into J:wo smaller parts: one
job, called "prep cooks" who come in the mon1ing and do all the cutting up, and
the second job, "line cooks" who take these prepared ingredient.s and u se them.
to assemble the final meal.52 ,

Tail!:ll~~ tn..3
Major Element s of
Various Approaches
to Job Design

SOURCE: Frorn Michael A. Carnpion and P<iu l IN. Th ayer, "Job Design: Approaches, O utcomes, and Trade-O ffs," :
Organizationa l Dynamics, W inter 1987 .~Vo l. '15 , No. 3. Reprin ted with perm ission from Elsevier.
 ..
CHAPTER 4 The Analysis and Design of Work 185

Scientific management was one of tl1e earliest: and best-known statements of the
. m2chanistic approach.53 According to this approach, productivity could be maxi-
mized by taking a scientific approach to the process of designing jobs. Scien-
tific management: first: sought to identi~; the one best way" to perform the job.
/1

Titis entailed performing time-and-motion studies to identify the most efficient

movements for workers to make. Once the best way to perform the work is iden:..
, tified, workers should be selected based on th:~ir ability to do the job, they should
beh·ained in the standard "one best way" to perform the job, and they should be
offered monetaiy incentives to motivate them to work. at their highest capacity.
The scientific ma11agernent approach was built upon in later years, resulting
in a mechanistic approach that calls for jobs to be designed so that they are very
simple and lack any significant meaningfulness. By designing jobs in this way,
the organization reduces its need for high-ability individuals and thus becomes
less dependent on individual workers. Individuals hre easily replaceable-that
is, a new employee can be h'ained to perform the job quickly and inexpensively.
Many jobs structmed this way are performed in developing countries where
low-skilled and inexpensive labor is abundant. As one might expect, this
includes a host of "low-tech" manufacluring and assembly jobs, but increas-
ingly this also involves "digital factory jobs." For example, ProQuest Historical
Newspaper provides a service where subscribet's can access the contents of any
article ever published by one of nine major U.S. newspapers simply by entering
an author name, keyword, or irnage. You might wonder how all of this histori-
cal, nondigital information and text is entered into this digital database, and the
answer would be fmmd in Madras, Spain. Here workers take this material and
enter the headline, author, major key v1.rords, and first paragrnph of the work
by hand into the database, and then run a program to attach a visual file to the
rest of the article. This menial work is conducted by 850 workers, who comprise
three 8-hour shifts that work 24 hours a day 7 days a week.5 4 It would be diffi-
cult, if not impossible to find workers in the United States willing to put up with
work this boring. ·
In some cases, jobs designed via med1anistic practices result in work that is
so simple that a child could do it, and this is exactly what can happen in some
undeveloped countries. This can lead to a bacldash against companies that ben-
efit from this unethical practice, and increasingly, organizations are taking the
lead in preventing these .kinds of practices. For example, -when it learned that
Uzbekistan cotton growers were using child labor to pick their crops, Walmart
used its power to force them to abandon this practice. Working with other large
U.S. retailers, Walmart took H1e lead to create the first system for tracking where
cotton came from cmd organized a boycott against Uzbekistan, which quickly
acquiesced to H1e c0117orate giant's pressure, freeii.tg the children to return to
schooJ.55 At the time, almost everyone else perceived that Walmart was a cor-
porate villain and bully, assaulting workers, the environment, and consumers.
Over the course of his tenure as !J:1e Walmart CEO, H. Lee Scott dramatically
reversed this perception, and now Walmart is routinely listed as one of the most
sustainable and corporately responsible organizations in the United States. 56

MOTIVATIONAL APPROACH
The motivational approach to job design has roots in organizational psychol-
ogy and management literature and, in many ways, emerged as a reaction to
mechanistic approaches to job design. It fo~uses on the job characteristics that
 ...
186 CHAPTER 4 The Analysis and Design of Work

affect psychological meaning and motivational potential, and it views attitudi-

nal variables (such as satisfaction, intrinsic mo.tivation, job involvement, and
beh avioral variables such as altendance and performance) as tl1~ most impor-
tant outcomes of job design. The prescriptions of the. motivational approach
focus on increasing the meaningfulness of jobs through. such interventions as
job enlargement, job enridunent, and the construction of jobs around socio-
technical systems. 57
A ni.odel of how job design affects employee reactions is the "Job Character-
istics Model. "58 Accorcling to this model, jobs can be described in terms of five
I characteristics. Skill varieti; is fue extent to which the job requires a variety of

skills to carry out the tasks. Task identity is the degree to which a ·job requires
completing a "whole" p iece of work from beginning to end. Autonomy is the
degree to which the job allows an individual to make decisions about the way
the work will be caffied out. Feedback is the extent to which a person receives
dear information about performance effectiveness from the work itself. Task
significance is the extent to which the job has an important impact on the lives of
other people. Although all five characteristics are important, the .belief that the
task is significant because perfomting it well leads to outcomes one values may
be tl1e most critical motivational aspect of work59 This can often be enhanced by
m aking it clear to the worker how his or her job affects other people, whether
they be customers, co-workers or society in general; 60
TI1ese five job characteristics determine the motivating potential of a job by
affecting the three critical psych ological states of "experienced meaningfulness/'
"responsibility," and "knowledge of results." According to tl1e model, when the
core job characteristics (and thus the critical psychological states) are high, indi-
viduals will have a high level of inte:mal work motivation. This is exped:ed to
result in higher quantity and quality of work as well as higher levels of job satis-
faction.61 Of the ttu'ee critical psychological states, research suggests that "expe-
rienced meaningfulness may be the most important when it comes to managing
. work-related stress."62 _
Job design interventions emphasizing the motivational apprpach l:end to
focus 011 increasing the meaningfulness of jobs. Much of the work on job enlarge-
ment (broadening the types of tasks performed), job enrichment (empowering
workers by adding more decision-making authority to jobs), and self-managiflg
w ork teams has its roots in il1e motivational approach to job design. In enriched
jobs, leadership is not the sole prerogative of one person, but rather is distrib:.
uted throughout the team, and research show s that this can enhance group
performance-especially in service jobs where there is a great deal o_f direct
interpersonal interaction behveen team members and clients.63 Not all workers
respond p ositively to eiuiched jobs like these because it requires some d egree of
flexibility and responsiveness to other people, but with the right workers, inter-
ventions such as these have been found to have dramatic effects on employee
motivation.<'4 Indeed, relatively elaborate theories have been developed that link
specific personality b:ait:s to specific job characteristics and thus, to some degree,
creating meaningful work requixes matclUng the right type of person to the right
type of task. 65
In some cases, even w ork that may not be that inte~esting can be made sig-
nificant by clarifying the link between what workers do and the outcomes 9f
their work, perhaps far down the chain. For example, in medicine, a stent is an
expandable wire f01m or perforated tube that is inserted into an artery to help

·- -- - - - --
 if'

CHAPTER 4 The Analysis and Design of Work 187

promote blood flow after a heart operation. lhe actual work that goes into stent
production is an assembly lirn~ p rocess where each worker does a very small
and, some might argue, boring task. To help increase the meaningfulness of this:
work, howeve1~ the company sponsors a parn; each year where line workers
get to meet people whose lives were saved by the stents that were produced on
•. that line. This is often a moving emotional experience for both parties and helps
the employees see the impact of tJ1eir work in a context where this would not
naturally happen. 66 Thus, although at some point it might be necessary to pay
workers in order to motivate them, it is even more important to show job iricwn-
bents why their jobs are important. Indeed, one of the secrets behirid effective
transformational leaders is their ability to help workers see the larger meaning
in what they are d oing on a day-to-day basis.67

DIOlOGKAl APPROAC~~
The biological approach to job design comes primarily from the sciences of
· biomechanics (i.e., the study of body movements), work physiology, and
occupational medicine, and it is usually referred to as ergonomics. Ergonomics !Ergonomics
· is concerned with examining the interface beh1veen individuals' physiological The interface between
characteristics and the physical work environment. The goal of this approach individuals' physi-
ological characteristics
i~ to minimize physical strain on lhe worker by shucturing the physical work
and the physical worf<
. enviromnent around the way the human body works. It therefore focuse_s on environment.
·outcomes such as physical fatigue, aches and pains, and health complaints.
Any job that creates a significant nwnber of injuries is a target for ergonomic
redesign, and as the "Competing through Sustai.nability" box illustrates, this
often dictates sweeping changes in V\TOrk rules, eguipment and culture.
1

TI1e biological approach has been applied in r~d~sig·ning equipment used in

jobs that are physically dernanding. Such redesign is often aimed at reducing the .
physical demands of certain jobs so tha~ anyone i:::an perfonn them. In addition,
many biological interventions focus on redesigning machines and technology,
such as adjusting the height of the computer keyboard to minimize occupational
illnesses (like carpal tunnel syndrome). The design of chairs and desks to fit pos-
ture requirements is very important in many office jobs and is another example
of the biological approach to job design. In addition to the direct effects of these
kinds of interventions on worker well-being, these types of programs also have
.·. a positive psychological effect on workers by emphasizing aJl organizational cli-
mate that values safety and health. 68
Often redesigning work to make it more worker-friendly also leads to
increased efficiencies. For example, at International T1uck and Engine Corpora-
tion, one of the most difficult aspects of tnlck product.ion was pinning the axles
·to the h·uck frame. Traditionally, the frame was lowered onto the axle and a crew
of six people, armed with oversized hammers and crowbars, forced the frame
·onto the axle. Because the workers could not see the bolts they had to tighten
w1der the frame, the bolts were often not fastened properly and many workers
1

i.t~ured themselves in the process. After a brainstorming session, the workers

. and engineers figured that it would be better to flip the frame upside down and
' attach the axles from above instead of below. The result was a job that could be
done twice as fast by half as many workers who were m'uch less likely to make
1

· mistakes or get injured.69

..
 Police officers, firemen and
Emergency Medica l Techn i-
cians (EMTs), also known as first
responders, are the first ones
to deal w it h horrible events,
including severe accidents,
bruta l assaults, aggression ,
and wounded and d eceased
persons. The image of t hese
first responders is that of tough
b lokes and courageous women
bearing the imprints of some-
times horrific experiences with-
out any complaining . Police
chief Silverii says: "Professiona lly,
there's that automat ic m ind set. I
have to secure the crime scene.
I have to look for evidence.
I have to look for witnesses.
i. But no matter how we ll you're
trained, you 're still hum an ."
However, when experienc-
ing critica l incidents, or being
exposed over a p eriod of time to
stress that he o r she was unable
to alleviate, fi rst responders can
develop signs of Posttraumatic
Stress Disorder (PTSD).
· PTSD is an anxiety d isorde r
that may develop after a per-
son is e)(posed to o ne or more
trau rnatic events, inclu ding
sexual assaul t , serious injury
or the th reat of death . Symp-
toms of PTSD are d istu rb ing
recurring flas hbacks, avo id-
ance or numbing of memories
of the event, and high levels
of anxiety, wh ich contin ues fo r
PERCEPTUAL-MOTOR APPIROACM
The perceptual- motor approach to job design has roots in .human-factors lit-
erature. vVhereas the biolofsical approach focuses on physical capabilities
and limitationB, th e percep tu.al-motor approach focuses on human mental
188
more th an a m ont h a~er the
traumatic event . Symptoms of
PTSD lead t o p eop le dropping
out ill for a !on g ti me especially
if no proper t reatment has
been offered. PTSD is consid-
ered as one of th e most impor-
tant threats t o the occupational
health of fi rst resp onders.
However, t he menta lity
amongst first responders is
still that emotions, hoi-rific
experiences and stress are not
displayed and t he image of
toughness is preserved. Show--
. ing emotions is a sign of v11eak-
ness amongst fi rst responders
and an indicat ion that one
is not up to t he t ask. With
the stigma su rrounding first
responders wh o seek th erapy,
or other forms o f p sychologi-
cal help, it seems real strength
comes in wh en first respond-
ers are becomi ng aware that
they can't get t hrough it alone .
When officers are shunned, and
demoted for showing signs of
stress, it forces th em to hide
their symptoms and expedites
their declin e in m ental health.
The more p ubl ic calls for first
responders t o know the signs
and get treat ment , the more
likely they are t o g et the help
they need.
Mandatory t herapy after cer-
tain traumatic events seems t o
be an important and helpful first
step. Removing
the stigma in the first
place is also important
as it encourages first respond-
ers with PTSD to seek the help
they need. In t he US and Europe
there is increasing understanding
amongst first responder orga- .
nizations of t he threat of PTSD
to the work force. However,
despite the g rowing awareness,
the stigma of the tough fast ·
responder is stil l headstrong. '
Also, in these times of econom ic
crisis forcing governments of
some countries to economize
o n police and fi re depa1tments'
attention to PTSD is easily ·
neglected. Paying attention to
PTSD will have its positive effects
on the wellbeing and effective
deployment of f irst responders,
D~SCUSSiON O.UIEST~OW•i$
1i. What other types of jobs
might be susceptible to long-
term problem s of PTSD?
:2. What might b e done in terms
of ergonomics to reduce
problems in t hese jobs?
SOURCES: "PTSS, een bemepsziekte tenzij",
www.pol itieacademie.ni/kennisenond erzoek/
kennis/kennisdossiers/pw/Pages/PTSS.aspx;
Manke, E., "Mandatory Counseling After
Trauma Helps Remove Police PTSD Stigma",
www.po liceptsd.com/mandatory-counseling-
after-trauma-he lps-remove-police-ptsd-
stigma/; UK, police stress research, www
.policepressure.co.uk/police-stress-research/.
Accessed 6th May 2014.
 ..
CHAPTER 4 The Analysis and Design of Work 189

capabilities and limitations. The goal is to design jobs :in a way that ensures they
. ' do not exceed people's mental capabilities and limitations. This approach gener-
.·ally l1"ies to improve reliability, safety, and u ser reactions by designing jobs to
·reduce the:ix information-processing requirements. In designing jobs, one looks
· at the least capable worker and then consh·ucls job requfrements that an indi-
vidual of U1at ability level could meet. Similar to the mechanistic approach, this
approach generally d ecreases t11e job's cognitive demands.
For example, although it may seem inconsequential, the praclice of turning a
· b'.uck left against traffic can be a dangerous act. Tii.e odds of an accident occur-
ring on any single left turn against traffic is ve1y small, of course, but for a com-
pany like UPS, that employs thousands or drivers covering millions of miles,
these odds add up over time. 11ms, UPS attached GPS devices to their trucks
~hat were programmed, within some linuts, to p lan routes that minimized those
.'.types of turns. In addition to reducing accidents. and injuries due to driver.
errors, the program also wound up saving $1.4 million in fuel costs. 70
Recent changes in technological capacities hold the promise of helping to
reduce job demands and errors, but in some cases, tl1ese developments have
actually m ade the problem 111rorse. The term "absence presence" has been coined
· to refer to the reduced attentive state that one might experience when simul-
taneously interacting with multiple media. For example, someone might be
talking on a cell p hone while driving a car, or surfing the net while attending
a business meeting, or checking e-mail while preparing a presentation. In all
tl1ese cases, the nev11 technology serves as a sou rce of dish'action from the pri- .
mary task, reducing performance and increasing the opportunities for errors. 71
It is important to stress that in th.is case, the source of disfracl:ion is mental, not
physical. Hence ergonomic interventions aimed at reducing physical barriers
are likely to be largely ineffective. For example, holding a stressful conversation
while driving in h eavy traffic is dangerous regardless of whether one is using
a "hands-free" device or n o t:. It is the mental strain, not the physical challenge,
that makes this a hazardous acti.vity.72 Research shows that on complex tasks,
even very short interruptions can break one's tTain of thought and derail perfor- ·-
rnance. Thus, e-mail servers thal: have a feature that signals the arrival of each
incoming message might best be turned off if the job incumbent cannot resist the
temptation this crea tes to interrupt ongoing activity.73
In addition to external di.sm.ptions, information processing euors are also
increased in any context that requires a "handoff" of information from one per-
son to another. Indeed, problems with handoffs have become a major concern
in the field of medicine. As Mike Leonard, physician leader for patient safety at
Kaiser Colorado Hospital, n otes, "In almost all serious avoidable episodes of
patient harm, communicalion failures play a central role." This would include
information that fails to get handed off from nurses, doctors, and medical tech-
rricians to one anoth er (e.g., the results of the most recent test that was handed to
the attending doctor does no t get handed to the attending nurse) or information
that fails to get handed off from ol1e work shift to another (e.g., a patient who
has already received medication from one shift gets it again from the next shift).
Problems between shifts are especially likely d u e to fatigue and burnout, which
may be present at the end of a shift for w orkers in sh·essfol jobs.74
Increasingly, hospit;).ls are borrmvin.g the "SEAR" method, originally devel-
oped in commercial and military aviation as a means to hand off an airplane
moving through different people's airspace, to standardize corrununication
protocols at the h andoff point in medical ~contexts . SBAR stands for situation,
 ...
~ 90 CHAPTER 4 The Analysis and Design of Wo rk

background, assessxnent, a.n.d recmrnnendation, which constitute the fou.r

components of eve1y successful handoff. 11wt is, jn a few seconds, the person
handing off the pahent needs l:o get conh·ol of the situation by demandi.ng the
listener's attention (situation} then relay enough information to establish the
context or the problem (background), then give an overall evaluation of the con-
dition (assessment), and finaJJy make a specific suggestion about the next best
course of aclion (recommendation). At one hospital that introduced this proce-
d ure, th.e rate of adverse events (i.e., unexpected medical problems that cause
harm) was reduced by more than half, from 90 to 40 for every 1;000 patients
treated. 75 ·
As work design increasingly relies on teams to accomplish organizational
. objectjves, siTtdying the best way to manage "hand-offs" and other aspects 'o f
:interdepen.dence be!ween jobs brc:comes more critical. Just as there are standard-
ized insu:w:nents for assessii.1.g. ~he i1ature of a job, there are also standardized
frameworks for assessing the nai1.ue of teams. The three most critical dunension.s
needed t.o describe teams include (a) skiU differentiation, the degree to which
members have specialized knowledge or functional capacities that make it mdre
or less difficult to subslih1te 1nembers, (b) authority differentiation, the degree
to which decision-making responsibility is vested in individual members, sub-
groups of the tea.Jn, or the coUective as a whole, and (c) temporal stability, the
degree to which team members are expected to work together for a long time.76
In many cases, team-based work design is a cenh·al component in terms of
strategy and competihve advantage. In fact, even industries ill'e apparel an.d
clothing-where U.S. manufacturing was written off for dead-are experiencing
a renaissance due to team-based work design. For example, Boathouse Sports,
a manufacturer of jerseys, uniforms, and jackets in Philadelphia, Pennsylvan.la,
relies on flexible manufachuing teams and finds its own unique competitive
advantage in adaptively responding to sman orders, and then delivering results
with the kind of speed that shnply cannot be matched by offshore producers,
Even though Boathouse prices are 10-15% higher, they can deliver on most small
orders in four weeks, compared to Chinese manufacturers who'Would take over
eight weeks . .Indeed, the high cost of shipping expenses due to the recent spike
:in oil prices is even cutting m.to 111e price differential. Tii.us, although some have
suggested that global competition is eliminating high-wage manufacturing jobs
where workers have a strong voice in how the workgets accomplished, in many
comers of the economy, high-priced ai.-id empowered workers are more tl1an
earning their own way.77

TIRADE-O~ fS AMONG [})ijflFfE~ENT APPROACHES

TO JOB DtSIGi\~
t04-~ A great deal of research has aimed at understanding the u·ade-offs and irnpli-
Comprehend the cations of tJ1ese different job d esign strategies. 78 Many authors have called
trade-offs among the for redesigning jobs accorrung to the motivational approach so tha.t the work
various approaches to
designing jobs.
becomes more psychologically meaningful. However, one study exarrrined how
the various approaches to job design are related to a variety of work outcomes.
For example, in this study, job incumbents expressed higher satisfaction with
jobs scoring high on the motivational approach. Also, jobs scoring high on the
biological. approach v1rere ones for which mcurnbents expressed lower physi-
cal requirements. Finally, the m otivational and mechanistic approaches were
 r
...
CHAPTER 4 The Analysis and Design of Work

negatively related to each other, suggesting that designing jobs to maximize effi-
ciency very likely results in a lower motivational component to those jobs.
Although the motivational and mechanistic approaches to job design do
work against one another some1Nhat, at the same time there is not a tight, one-
on-one correspondence bernreen the two. Thus, not all efficiency-producing
changes result in d issatisfying work, and :not all changes that promote satisfac-
tion create inevitable inefficiencies. By caxefuUy and sunultaneously attend-
ing to both efficiency and satisfadion aspects of job redesign, managers can
sometimes achieve the best of both worlds.79 for example, at the new Indiana
Heart Hospital in Indianapolis, much of the 11'\rorl( was digitized in order to
create a paperless organization. TI1ere are more than 600 computer terminals
placed throughout Ille facility, an.d the doctors and staff directly enter or access
information from these te:rxninals as needed. This has eliminated the need for
nurses' stations, ch art racks, medical records departments, file storage rooms,
and copiers and has cut down paperwork, :resulting in an increase in efficiency,
but also :increased job satisfaction by eliminating bureaucracy, allowing the staff
more immediate access to needed in.formation. 111.is has affected the bottom line
by reducing the length of time a patient stays in the hospital from an average of
five days at other h ospitals to three days at lndiru.<a Heart Hospital. This allows
the hospital to process more patients per bed relative to the competition, giving
them a direct source of competitive advantage, 30

QUIE51fDONS
1. The analysis of workfl ow design traditiona lly starts at the end of the process,
with the final product or service that is t o be rendered, One then works back
to determine the best process for this, and then determine the appropriate
inputs. If an employer is totally committed to a specifi c type of input, like high-
wage labor or e><isting equipment or easy access to certain raw materials, how
could the process of workflow design play out and how might the results be
different?
2. /\!though there are advantages and disadvantages to different structural con-
figurations, why m ight it b e more difficu lt to change one's structure in some
directions than others? Specifically, how are the HR challenges associated with
moving from centralized and functional structures to decentralized and divi-
sional ones different from the challenge of moving one's structu re in the alter-
native direction?
192 CHAPTER 4 The Analysis and Design of Work

3 . We have seen throughout this chapter that many ways of reducing the cost of
getting jobs done often come at some price to wo rkers who have to do those
jobs. What can be done to promote a more just, fair, humane and .susta inable
workforce in all corners of the world? Does the competitive nature of product
or labor markets mean that "nice guys always finish last"?

The analysis and design of work is one of the rnosi:
i1nportant components to developing and maintain -
ing a competitive advantage. Slrategy irnplementa--
tion. is virtually impossible without thorough attention
devoted to work-flow analysis, job analysis, and.
job design. Managers need l:o. understand the enfo·e
·work-flow process in foeir work mut to ensure that
iJl e p rocess maxi.mjzes dfici.en.cy and effectiveness.
To tmderstand this process, managers also must havr::
clear, detailed information about the jobs that e)dst in
the work unit, and. the way to gain this information is
tJ1rnugh job analysis. Equipped with an un.derstanding
of t11e work-flow process and the existing job, managers
cm1 redesign jobs to ensure that the work unit is able to
achieve its goals while individuals within the ml.it ben-
efit from the various work outcome dimensions such
o.S motivation, satisfaction, safety, health, and achieve-
m ent. TI1is is one key to competitive advanto.ge.

Centrnlization, 167 Job description , 177 Job redesign, 183

Depar lJ.nentaHzation, 167 Job specification, 179 Ergonomics, 187
Job analysis, J.76 Job design, 183

J. Assume you are the m anager of a fast-food restau-
rant. What are the outputs of ym..U' work unit? What
are the activities required to produce lhose outputs?
i;\f.oat are the :inputs?
2. Based on Question 1, consider the cashier's job. Wha i
are IJ1e oulputs, aclivilies, and inputs for that job?
3. Consider the "job" of coUege student. Perform a job
analysis on thfa job. What are the tasks required in
the job? What are the knowledge, skills, and abili-
Jies necessary to perform those tasks? What envi-·
roni7l.ental trends or shocks (like computers) might
change the job, and h ow would that change the sldJJ
requirements?
11. Discuss how the following trends are chang-
ing the skill requirements for managerial jobs in
the United States: (a) increasing use of computers,
(b) increasing international competition, (c) increas-
ing w o:rk-famjJy conflicts.
5. W11y is it important for a manager to be able to con-
duct a job analysis? What are the negative outcom.e;s
that would result from not. understanding the jobs J
of those reporting to the manager? ·
6. \A/hat are the h·ade-offs between 111e different
approaches to job design? Which approach do
you think should be weighted most heavily vvhen
designing jobs?
7. For the cashier job in Question 2, which approach
to job design was most influential in designing that
job? In the context of the total work-flow process
of the restaurant, how would you redesign 1he
job to more heaviJ.y emphasize each of 1fo~ other
approaches?
 ...
The chapter described hmv the Depa.rt.-nent of Labor's
Occupational Infonnation Nei:-work (O"l\TET) can help
employers. Tile system was also designed to help job
Sf~el~ers . To see if you think lhis new system meets the
goal of promoting "the effective education, training,
counseling, and employment needs of the American
Serving Up Speedl, Flexibility and innovaticm
When it comes to computer servers, the heavy1Neight
division includes tl1e lil<es of Hewlett-Packard, IBM,
and Dell. 1he servers sold by these giants axe mass mar-
keted as standardized products built to meet the pre·
dictabJ.e :needs of a la.rge customer base. Most of these
customers use these servers for large volwne data stDr·-
age and retrieval, and the Intel chips that serv<e at the
core of these madlines are very powerful I-IP, IBJ\1 a:nd
Dell tend to compete on price within this madcet, and
in orde1· lo keep prices compeii.live, au of their man.u-
factu.ring takes place .i.t1. low-wage countries in .Asia.
Many new web-based companies, however~ have
demands that differ from a traditional mass storage and
retrieval system. Web coxnpanies need to quickly fulfill
requests for small amounts of data, sud1 as an iu1a8e
on Google or Facebook, and they do not face tl1e same
demands for computing power foai: might cha.racterize
a large bank or credit ca.rd company. Santa Clam-based.
:3eaMicro was one of the first companies to x-ecogn).ze
this distinction, and they quickly moved into this mar-
ket 1Nitl1 new servers that were built, not in China, but
rather a half-mile doV1.m 1he road in. Santa Clara.
Indeed, although the narne, "Silicon Valley" is syn-
onymous with computers, jn fact, ·when it comes to
hardwaxe, very little manufacturing has tal<en place
V>rithin the valley since 1980s. The strategic decision by
SeaMicro to build its servers in California, as opposed
to Asia, was based on the way they designed the work
and lhe need to stay al: the cutti.i1g edge of liu-1.ovation
in. order to quickly respond to changes in t.edmologi-
cal developments. For example, the key to Sec.Micro' s
success is that they start. with smalle1· energy-efficient
cl1ips such as those that that might power a smaxt-
phone, and then surround these with custom-made
hardware and softwaxe that alJ.ows a large number of:
CHAPTER 4 The Ana lysis and Design of Work 193
workforce," visit O*NET's website at http:/ /oriline
.onetcenter.org/.
Look up the listing for yom cmrent job or dream
job. List the skills identified for that job. For each skill,
evaluate how well your own experiences and abiliti12s
enable you to match the job requirements.
these smaller engines to act like a much more power-
ful engine, while only using 25% as much energy as a
standard server.
This kind of successful innovation requn·es that
the cross-functional teams of hard1Na.re, software
.:md manufacturing engineers at SeaMicro constantly
experiment with the latest components, and tltls type
of exp erimentation requires rich, face-to-face com-
munication in real time that can only be supported by
having design and manufachuing side-by-side. Elimi-
nating the i1eed to ship m aterials speeds the transition
.from design to production, and alt.hough the cost of
high-skilled California labor might seem proltlbitive,
SeaMkro can offset this via a strong revenue stream.
The energy cost savings for its customers l}.Ie sud1 that
the systems essentially pay for themselves in just over
a year, allowing for a healthy gr9ss margin of over 60%
for each unit, which makes tl.tls small company highl y
compeiitive in their battle with much larger competi-
tors. As Jolm Turk, Vice President of Operations notes,
"It's not about us getting big, but rather it's how we
stay flexible. That is what the big guys don't have."
QIUl!aSlflO!l':U!S
1. In what way is small size a source of competifrire
advantage in this indusuy?
2. In what way is close proximity to customers a
somce of competitive advantage in this industry?
3. In ·what way is the use of small cross-functional
teams a source of competitive advantage in tltls
industry?
SOURCES: L. Wood, "SeaMicro Breaks New Grom1d with Atom
5e1~re1;" IHfonnationWeek, March l ,°2011, p. 23; C. Debmse, "The Top 10
Clean-tech Companies," Tlze Wall Street Journal, March 4, 2011, p . Bl; A
Vance, "Stars and Stripes and Servers Forever," Dloomberg Businessweelc,
pp. 33-35.
 ..
194 CHAPTER 4 The Analysis and Design of Work
'.S tretching the Job Descriplioru
11,~ economic data that was being rep01ted in 2010
rnade it quite dear tl1at the U.S. economy was com··
ing out of the recession. Profits, as well as producl:iv-
ity, were at near record. levels, mi.d yet there iNas sti.U
very little evidence as late as the Spring of 2011 tJ1;;it
exnployern were showing any sign of hiring new w ork-
ers. Although hiring always lags a recovery some-
what, the lag this time was inore extended than ever,
and some were concerned whether 1here would ever
be an upticl< in new jobs. This was reinforced in mes-
sages .from employers like Wendy Goldstej11, CEO of
Cosh.une Specialists, a small jewelxy manuJactt.1.re1~
who noted. that "TI1e jobs I cut aren't ·going to come
back just because business is better."
Employers were reluctant to engage in new hiring
for a whole host. of reasons. For one, many employ-
ers were suspicious of l11e recovery, and concerned
that increases in demand for products was going to be
short Jived. Rather than reflecting true growtl1 in max-
ket demand, many employers feared that Ibey were::
seeing just a one~time restocking of tl1eir custorners'
1. depleted inventories. Second, there was uncertainty
regarding how the nation's debates about health ca.re
wne going to play out for employers. Thus, it was dif-
ficult to calculate the cost of labor due to the high and
growing cost of insurance coverage that would have to
be offe1;ed to any new h_ire under some of the prop osed
federal plans. Finally, and most critically, h owevi:cr,
some employers during the recession just learned how
to get more w ork out of fewer employees and liked ii:
!:hat w ay. In fact, one ·2011 survey indicated that over
50% of workers reported that they had talcen on new
duties over the last year w ith no hike in pay.
fodeed, the most recent economic recovery was
witness to a great deal of "work redistribution" and
as one analyst noted, "job descriptions axe vvritten
in sand, and the wind is blowing." In some cases,
work was redislTibuted horizontally, as people w ho
survived !:he layoffs simply took on the jobs of those
that used to work alongside them. For example, at
D' Addario &: Co., a manufactuxer of guitar strings,
inspector jobs were elim.inated, and line workers were
!ndusivity Defines BrnunAbility's Products and Its Jobs
lfalph Braun built hi5 company out of his creativity in
meeting his own personal needs. Growing up in rural
Indiana, Brann ha.d difficulty climbing stairs, and doctors
. i
taught how to inspect their own work. In other c i,, ',
work was redish"ibuted vertically, as
executives I'.
managers had to pick up the work of junior staff , r
line w orkers that were let go. For example, marke ~. g
director Carol Firth found herself not only doing mor:e
copy production and copy editing, she even wound
up being responsible for the w ork of laid-off security
guards and was responsible for punching in the codes
to open the parking lot gates every mom.ing.
The gains in efficiency achieved by stretching job
descriptions m:e this, however, are offset by certain
costs ..For example, with respect to vertical redistribu-
tion, executives like Firth wony that "it was hard to
find time to plan meets with customers." Horizontal
planning often p l.aces people in roles that they were
not hired to fill and may not fit with their skills set. On e
can assign an effective but shy computer progranuner
i:o do sales work, but. one may wind up vdth a lousy
salesperson and ineffective progranuner. Moreove1~
Hi.ere axe mental costs associated with switching back
and fo r th from qualitatively different tasks that tire
workers out and can result in errors, accidents, and
rn5spl.aced priorities. Ultimately, there is a price to be
paid for this k,ind of job stretching, and at some point a
stretch can become a snap.
QIUl~SlUONS
l . In what way does stretching the job description like
that described here both strength~p and weaken job
incumbents? · i
2. In what way does stretching the job descriplion ~e
that described here both strengthen and weaken lli.e:
competitive position of companies that engage i,i.-1
Jl1.is practice?
3. In what way d oes stretching the job desc.dption
like this negatively affect society and tl1e larger
economy?
SOURCES; A. Kadet, "'Superjobs': Why You Work More, Enjoy It Less,"
Tlze Wall StTeet ]ournnl, May 8, 2011, pp. Bl and B7; T. Aeppel and C.
Dougherty, "Employer3 Hold Off on H iring.'' The Wall St1·cet foumal,
October 20, 2009, p. A3; S. E. Needleman, "Entrepreneurs Prefer lu
Keep Staffs Lean," T11e Wall Street Journal, Ma.rd1 2, 2010, p . B5.
diagnosed him wilh spinal muscular atrophy. At age 14,
Braun needed a wheelchair to get around. He was disap-
pointed but developed his mechanical aptitude, honed
 ...
CHAPTER 4 The Ana lysis and Design of Work 195

by years of helping his uncles :6x .m.otorcydes and race al Brau11Ability. On a typical day, Ralph Braun tours
cars, and used it to bwld him.self a battery-powered (])e facility in his wheelchair, observing the v..rork
scooter. 'With the scoote1~ Braun ·was able to navigate his and talking to production workers and staff. Garnett
way around a job at an automotive supply facl:ory, where says, "If anyone has an idea, that person is listened
co-workers would ask him to bwld somelfong similar to ." For example, an employee suggested that, rather
for their family rnembers and acquaintances. Lai:eJ~ for thai1 going through the process of safely disposing
better b:ansportalion to and from llle job, Braun figuxed of leftover paint, workers use it to paint the vehi.cle
out how lo convert a Dodge van with a lift so he could floors w1der the carpet, for a little additional protec-
enter the van on his scooter and clrive it from !here. tion o.f the vehicle. 1lle company readily adopted the
Again, people saw the van and asked for somefhing sil.11-- suggestion.
ilar. Eventually, Braun look aJJ his earnjngs from scooters Along 1Nith feeling resp ected, workers at Braun-
and van conversions cu<d started Save-t\-Step ManuJac· .A bility feel their work matters to society. In Garnett's
turing, later named BraunAbility~ which has become the words, because the company's vans make it possible
world's largest maker of wheelchai.r-accessible vans and to travel independently, employees "know that they're
wheelchair lifts. , changing the lives of people with disabilities w ith
The passion and p urposefulness of the compar1y' s ~very product that goes out the door."
founder are reflected in the structure of BraunAbiJjty' s
jobs and work Recrniling is inclusive, witl1 an espe- Q.IJJIEST!QINS
l. In what ways is work at BraunAbilit'y motivat-
cially great appreciation for lhe potential of disabled
worker s. Cindy Garnett, the company's director of
ing? VV11at other features of motivating workmight
Bra.1.mAbility be able to offer its employees?
human resources, notes that a :person virith a disability
2. What place would efficient job design have in a
has to go l:lu-ough lifo solving accessibility problems
company like BraunAbility? How could BraunAbil-
creatively, so that p erson is Wcdy to have become a
great innovator. vVherever possible, work schedules ity improve job efficiency in a way that is consistent
wi1li. the company's emphasis on indusiveness and
are tailored to employees' needs. Many employees
have flexible scheduJes, w orking their choice of eight flexibility?
hours between 7:00 A .M. and 6:00 P.M. Sorne employ- 3. Imagine that you work wi111 the HR director a1:
ees teleconunute full-time or part-time. Even produc- BrmmAb!J.ity, and she has asked you to suggest
tion workers, who must coordinai:e their tasks as van s some ways to reinforce employees' sense that their
move from one work station to tl1e next, have flexibil- jobs have an important positive impact on otl1ers.
ity l:o negotiate arrangements that work for them as a What would you suggest?
group. They told the company l11at they wanted just a SOURCES: "Collaboration, Inclusion Help Create Tirnt 'Small-Tovvn'
couple of short breaks during the day instead of a long Feeling," white paper, HR.BLR.com, January 18, 2010, http: I /hr.blr
lunch break, so they could leave earlier. BrnunAbili1y .com; "How I Did It: Ralph Braun of BraunAbllity," foe., December 1,
2009, www.inc.com; and "BraunAbility Launches EntervanXT to
went along with the idea. Accomrnodate Ne.=ds of Taller Wheelchair and Scooter Users,"
As you might expect from a company founded by Marketing Weekly Nws, October 10, 2009, Business tit Company
a creative man, innovation is valued over hierarchy Resource Center, http:/ I galenet.galegroup.com.

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 orm n11:.:r TRJV~r.c
\,J~~B11,,,,;~ ,j .• ;,,- \i;:;,.,:?

After reading this chapte1~ y o u ~; hould be able to:

llO 5 -'il Discuss how to align a company's strategic direction

with its human resource p lanning. pagr'i 20·1

~J) 5-2 Determine the labor dema nd for workers in variousjob categories . page 201

fLO 5 <3 Discuss the advanta9es and disadvantages of various ways of

e liminating a labor su rplus and avoiding a labor shortage. page 204

!LO !J;-4 Describe the vari ous recruitment policies that organizations
adopt to make job vacancies more altractive. page 220

!LO 5-!S List the various sou rces from which job applicants can
be drawn, their re lative advantages and disa dvantages,
and the methods for evaluating them . page 225

llO 5-ri;) Explain the recruiter's m le in the recruitment process, the limits
t he r8cruiter face s, and the opportunities avai lable. page 233

198
 ·Offshore outsourcing can be the transfer of pro-
;. duction to sites outside t he host country, but is
··more generally the relocation by a company of
a business process from one country to another.
The driver ·of such processes are the lower costs
argued by home country organizations, with a
sc~condary argu ment th at it releases resources in
the hom e economy that can be put to more pro-
ductive or higher value-added use within either
the organization or th e economy. In addition, out-
source offshoring m ay ach ieve gains in efficiency
and productivity, and can be seen as strategic in
nature . The cost savings can be enormous; any··
thing up to a 50-60% reduction in the costs of
services and th e result of this has led to appro>(i-
mately 230,000 jobs being outsourced annually
in th (?. US covering t he various aspects of soflwa re
development, financi al control, logistics manage-
ment, customer suppo11 and sales.
However, the benefits, for both the orga-
nization , and th e host and home economies,
from th is p rocess m ay not be as great as once
believed . Cost savin g s may be overstated; t he
companies who undertake may be seen as more
profit based organ izations than stakeholder orga-
nizations and they may be seen as exploiti ng the
poor, destroying t he culture and society of the
host economy. This may have a detri me ntal effect
on th eir brand and corporate image. So w hat of
these potential cost savings? Why might th ey be
less than anticipated? Continuous offshoring to
China and other emerging economies can lead
to labor shortages which drive up the p rice of
labo1-, causing organ izations to switch produc-
tion to even lower cost emerging economies if
they can. Monitoring the qualit y o f the activities
in ost econom ies raises transaction costs too.
Such swit ching costs between emerging markets
coupled \Nith rising transaction costs has led to
some home econom y companies returning jqbs
back to the home economy.
Offshore outsourcing also carries risks such
as supply chain delays, language and cultural
mismatches, the issues of ma naging activities at
.a distance, inadequate governance and perhaps
the loss of inte llectual capita l. Quality of prod-
ucts and services can be affected and this can
have a profound effect on customers who may
look for brand substitutes. As a result corporate
p rofits may be reduced, new contractors may be
ill-trained, under-skilled or lack experience. The
ove rseas contractor may change element s of the
product so that they too can make profits, and
some of these changes may be undetectable
and threaten the quality of th e product for the
home MNE.-
1\lonetheless moving p roduction to low cost
areas may not be the answer. Through the use ·
of be1ter technology, the productivity associated
with making the product or service in the home
economy can be improved by making home
production more competitive. Issues of risks in
overseas economies need to be considered too,
as does the issue of exchange rates. Many devel-
oped economies have seen their exchange rates
falling recently against those in emerging or tra n-
sitional economies, making imports more e)<pen-
sive and therefore compa nies have lost some of
their cost advantages from producing overseas.
Outsource offshoring may t herefore not provide
all the benefits once thought. Cost savings may
not be as high as expected as seen through import
prices, but bringing jobs back, through pol itical,
customer or union pressure, may have little impact
on quality if organizations do not undertake the
appropriate training in the home economy.
199
 '"
200 CHAPTER 5 Human Resource Planni ng and Recruitment

~ntroducti. on
Hum.an resource manageJ:s are at foe forefront of the worldwide war for corn-
petitive advantage. Organizati.ons need to find the b est set of workers for
rneeting their strategic objectives, attract those workers to their companies,
and then get them to stay long enough to obtain some r~hnn on their in.vest-
ment. As our opening vignette shows, for a long period of time, many organi-
zations decided tlt.at there was a strategic advantage to sending jobs overseas
versus keeping those jobs w ithin the United States. Lower hourly w ages,
flexible labor laws, and reduced levels of labor unions allowed companies to
manufacture products overseas al: reduced costs. Howev er, tl.mes c:hange, and
m ore recentl.i employers have shifted work back to the United States in ord~r
to take advantage of lower energy costs, lower shipping costs, and employees
whose sldll and education allov1~ them to leverage new teclmologies that boost
productivity. Thus, there are advantages and disadv antages associated with
different workforces, and organization s that survive and thrive find the best
m atch between the workers they need and the strategy they employ to com-
pete in the market.
The pmvose of this chapter is to examine factors that influence the supply
and demand for labor, and, in particulai~ focus on what human resouTces man-
agers can do in terms of planning and executing human resource pohcies that
give their firms competitive advantage in a dynamic environment.
Two of the major ways that societal trends and events affect employeirs
are throu gh (1) consumer markets, which affect the demand for goods and
services, and (2) labor markets, which affect the supply of people to produce
goods and services. ln some cases, as we saw in the opening story, the market
might be characterized by a labor shortage. In other cases, the market may
be characterized by a surplus of labor. Reconciling the difference between the
supply and demand for labor presents a challenge fo1' organizations, and how
they address this will affect their overall competitiveness. There are three keys
to effectively utilizjng labor markets to one's competitive advantage. First,
companies must have a clear idea of their current configuration of human
resources. In particular they need to know the strengths and weaknesses of
1

their present stock of employees. Second, orga~ations must know where

they are going in the future and be aware of how their present configw·ation of
human resources relates to the configuration that will be needed. Third, where
there are. discrepancies between the present configuration and the configura-
tion required for the future, organizations need programs that will address
these discrepancies.
This ch apter looks at tools and technologies that can help an organiza-
tion develop and implement effective strategies for leveraging labor mar-
ket "threats" into opportunities to gain competitive advantage. In the fi.r[)t
half of the chapter, we lay out the actual steps that go into developing and
implementing a humanresource plan. Through each section, we focus espe-
cially on recent trends and practices (like downsizing, employing temporary
workers, and outsourcing) that can have a major impact on the firm's bot-
tom line and overall rep utation. In the second half of the chapter, we famil-
iarize you with the process by which individuals find and choose jobs and
the role of per sonnel recruitment in reaching these individuals and shap ing
their choices.
 ...
CIHAPTE~ 5 Human Resource Planning and Recruit1mmt. 201

The Human mlieso~Uf[te l? ~a~'Hllmng Proces£

An overview of human resomce planning is depicted in Figure 5.1. The process n.o 5~1
consists of forecasting, goal setting and s trategic planning, and program imple- Discuss !)ow to align
mentation and evaluation. \Ille discuss each of these stages in the next sections a company's stra-
tegic direction with
of this chapter. · its human resource
planning.

The first step :in the plaimiing process is foiriec~sltrurng, as shovvn in tl1e top portion flfJlr111GSill'ii:Ofi'I~
of Figure 5.1. In personnel forecasting, th e JHR manager attempts to ascertain The attempts to
the supply of and demand for various types of human resources. The primary determine the supply
of and demand for
goal is to predict areas within the organization where there will be future labor various types of hum;;in
shortages or surpluses. . resources to predict
Forecasting, on both the supply and demand sides, can use either statistical areas within the organi-
met11ods or judgmental methods. Statistical metl1ods ru:e excellent for capturing zation where there will
historic trends in a company's demand for J.abm~ and under the right condi- be future labor short-
ages or surpluses.
tions they give predictions that are much more precise than those that could
be achieved through subjective judg1nen ts of a human forecaster. On the otl1er ·
hand, many important events that occur in the labor market have no historical
precedent; hence, statistical methods that work from historical trends are of little
use in such cases. With no historical precedent, one must rely on the pooled
subjective judgments of experts, ;;md t.h efr "best guesses" might be the only
source from w hich to make in...ferences about the fuhue. Typically, because of the
comp lementary streng!J.1s and weaknesses of the two methods, companies that
engage in h uman resoun x:; planning use a baJanced approach.

[)eteirmio~sn9 l ab(Qllf D~ITTrnarnd

lO !S-;2
'J'.YJJically, demand forecasts are developed around specific job categories or skill Determine the labor
areas relevant to the organization's cunen t and future state. Once the job catego- demand for workers in
ries or skills are identified, the planner needs to seek information that will help,,·' various job categories.

IFHgl'Ulr~ $.1
Overview of the
Human Resource
Planning Process

.
1-------------·-·---0-;
_.,·

. ;\.. .

':Jl'l; ;·
.fit~ : .

Human Resource Planning and Recruitment.
n.~l.:'ldiirn~ hlldkatQr
An objective measure
thiilt .ac-.umte/y predicts
futu re labor demand.
· changes in U1e n ear future caused by retirements, promotions, transfers, volun-
..
predict whetller the need for people with those skills or in that job category will
increase or decrease in the future. Organ.i.zaf:ions differ in the sophistication 1,1,.rith
which .such forecasts are derived.
At the most sophisticated level, an organization might have statistical mod-
els that predict labor demand for the next year given relatively objective sta-
tistics on leading indicators from the previous year. A lea.ding iindii.iealton: is an
objective measure that accw:ately predjds future labor demand; For example,
in the cattle indush"y, the price of corn. is closely related to the cost of beef.
I-Ieno2, sharp increases in corn prices at Tirn.e 1 affect the price, and therefore
the dem;:i.nd..for cattle at Time 2.-In turn, the demand for cattle affects the num-
ber of workers needed to staff slaughted10uses. Thus, when drought condi-
tions in 2012 caused a spike in corn prices, Hus predictably meant that Cargillr
a large beef processor,. would need fewer workers in 2013. Thus, Cargill shut
down a large plant in Plainview, Texas, well before the effects of the drought
were even seen at the plant Had the company not anlidpated this d rop in
demand, as many as 2,000 w orkers would have had to be p aid even though
they h ad nothing to do. 1 , 1
Similarly, the demand for nurses in a community can historically be predicted
very well by knowing the .average age of the co1nmunity members. Thus, if the
average age of American citizens is going up, w hich it is, then one can expect an
increase in. fue need for nmses. Studies based on these historical trends sugg~st
that by the year 2014, ow: economy will need 1.2 million mote nurses relative to
what is available today.2
Statistical planning models are useful when there is a long, stable history that
can be used to reliably detect relationships among variables. However, these
models almost always have to be complemented by subjective judgments of
/1
p eople who have expertise jn the area. There are simply too many once-in-
a-Jifetune" changes tl1at have to .be considered and that cannot be accm·ately
captured in statistical models. For example, based upon statistical history of the
relationship between output (as measured with the gross domestic product) and
unemployment, the Obama Administration preructed that unem.r>J.oyment :rates
i.11 2010 wo11ld come in at around 8%. However, to people's surprise, the actual
figure was closer to 9.5%, and the failure of this formerly accurate leading indi-
cator to predict actual employment levels was attributed to historically unprece-
dented events. Christina Romer, Chair of the White House Council of Economic
Advisors noted that "the fact that the recession was caused by a financial crisis
made it an unusual event, and firms may have reacted more forcefully tlw.n was
usual out of fear of the unknown. Also firms that couldn' t get credit may have
had to lay more people off than normally."3
.;l~\\
l0et~rmnn1nlllg labor SM~pi~y
Once a company has projected labor demand, it n eeds to get an indicator of the
firm's labor supply. Determining the internal labor supply calls for a detailed
analysis of how many people are currently in various job categories (or w ho
have specific ski.Us) "within the company. TI-Us analysis is then modified to reflect
'1.~
.
.
~,'-.
tary tun1over, and terminations.
As in tl1e case of labor demand, projections for labor supply can be derived
L
I ,i
~
either from historical statistical models or tlu·ough judgmental teclmiques. One ;~­
,,,ii
. !~
.. ~!I-,
 ...
CMAPTE»~ 5 Human Resource Planning and Recruitment 203

type of statistical procedrure lJ-1at can be employed for this purpose involves
transitional matrices. 'fi:<11irns1iJii([JlJlll,'2lli m;,ll:ir.kes shovv the proportion (or nllJ!lber) of 'fm1711z§U©li1l1'l! Mtarll:rrnn.
employees in different job categories at different times. Typically these matrices· Matrix showing the
show how people m.ove in one year fTom one state (outside the organization) or proportion (or number)
job catego:ry to another slate or job category. '·' of employees in differ-
ent job categ ories a t .
Table .5.1 shows a hypothehcaJ lransitional matrix for a hypothetical manu- different tim~s. ·
fachueJ~ focusing on seven job categories. 1-\Hhough these mahices look impos-
ing at first, you will see that l11ey an-:- easy !to read and use in determining the
internal labor supply. A malxix like the one in this table can be read in tvlro
ways. first, we can read the ro1Ns to answ1C~r the question "vVhere did people
in thi~3 job category in 2011 go by 2.014?" Por example, 70% of those in the cleri-
cal job category (row 7) in 2011 were stiU in this job category in 2014, and the
remaining 30% had left the organization . For the production assembler job cat-
egory (row 6), 80':Yo of those in this position :in 2011 were still there in 2014. Of
the rernaining 20%, half (:J.0%) ·w ere promoted to the production manager job
category, and tlw other half (10%) left the organization. Finally, 75% of those in
the production manager job category jn 2011 were still there in 201Ll, while 10%
were promoted to assistant plant manager and 15% le.ft the organization.
Reading th.ese kinds of rnah"ices acmss ro•Ns makes it dear that t11ere is a
career progression 1Nilfon_ this firm. from production assembler to production
manager to assistant plm1J manager. Although vve have not discussed rows 1
thrnugh 3, it might also be noted that there is a sirrrilar career progression from
sales apprentice to sales representafore lo sales manager. In this organization,
the clerical category is not part of any career progression. That is, this job cat-
egory does not feed any other job categories listed in Table 5.1.
A transition al matrix can also be read from top to bottom (in the columns)
to ansvver the question "it\n1ere did th<~ people in this job category in 2014
cm11e frmn (\A/here were they in 2011)'?" Again, starting with the clerical job
(colunm 7), 70% of the 2014 clerical positions were filled by people who were
also in this position in 2011, and the remaining 30% were external hires (they ..
were not part of the organization in 2011). In the production assembler job'
category (column 6), 80'% of those occupying this job in: 2014 occupied the
same job in 2011 , and the other 20% were external hires . TI1e most diversely
staffed job category seems to be that of production manager (column 5): 75%
of those in this position in 2014 held the same position in 2011; however, 10%

TaibD~ 5.1
A Hypothetical
Transitional Matrb<
for an Auto Parts
Manufacturer
··rz}iS<Jles"t~pres~htirrjve .·
(J)Sales ~pprnntic.~
.· ·(tJ), ·.Ass!s:ta·i1t.plantrn8iJaEJer
(5) Production rnam19er .1 0 .75 :I 5
··.• · .(9)"!fr(:5dutt!t,11 . ~issl;)inplf':r
Clerical
.oo
 ...
204 CHAPTER 5 H1J rnan l<esource Planning and n.ecruitrnent

w ere fonner production_assemblers who were promoted, 5% were form~r

assistant plant rnanagcrs who 111.Tere demoted, and 10% ~ere externaJ hixes
who were not with the company in 2011. .
Matrices such as these are extremely useful for charting historical h'ends in
the company's supply of labor. More important , if conditions remain som.e what
constant, tlley can also be used to plan for the future. For example, if we believe
that we are going to have a surplus of labor in U1e production assembler job
category in the nexi)lu:ee years we note that by simply initiating a freeze on
1

external hires, the r<ml<:s of tJ1is position will be depleted by 20% on thefr own.
Sjmilarly1 if we believe that we ·will have a labor shortage in the a:r,ea of sales rep-
resentat.ives1 the matrix informs us that we may want to (1) decrease the amount
of voluntary turnover in thJs position since 35% of those in this catego1y leave
1

every three years (2) speed the trnb1ing of those in the sales apprentice job
1

category so that they can be p:nnnoted more quickly than jn the past1 and/ ?r
(3) expand external recruitment of :individuals for this job category, s:ince the
usual 20</o of job incum.bents dra"wn from this source may not be sufficient to
meet future needs. ·
As with labor demand, historical precedents for labor supply may not always
be reliable indicators of future trends. For example it is typically the case that
1

when UJlemployment is high, applications for any open positions increase dra-
matically compared to what might be experienced when the unemployment
rate is low. Howeve1~ in 2010 many employers who were posting open posi-
1

tions found that !Jlere were very few people actually applying for jobs. This
I.
w as atb:ibut:ed to the fact that unemployment benefits had been extended to
unprecedented lengths (99 weeks) and because the collapse of the housing mar-
ket made it impossible for people to sell their homes, leaving them locked into·
fb,eir current Iocatio:n.4 Similarly, in the nuclear energy field, the near meltdo111~
of three nuclear pmm~r plants in Fukushima Japan, following the earll1quake
1

and tsunami that rod(ed that region in 2011 had an immediate effect on shJ:-
dents emolling in nude.at engineering progrnms across the world. Many sl~1-
dents stopped enro1ling in those programs or switched to othef -fields of study 1

suggesting that in the future, lhe supply of young people with this set of skills is
likely to be much lower than it is today.s

Determi111ing labor Surph.!ls or Shortage

.o
~ !l'<~ Once forecasts for labor demand and supply are known, the plaimer can com-
Discuss the advantages pare the figures to ascerta.hl whether there -will be a labor shortage or labor sux-
and &;advantages of plus for the respective job categories. When this is determined the organjzation
1
various ways of elimi-
nating a labor surplus
can deten:nine what it is going to do abou.t these potential problems_ For exam-
and avoiding a labor ple/ in terms of a labor shortage1 when the Affordable Care Act goes .ir1.to effect
shortagr~. in 2014, som.e 30 miUion people who currently have no access to heall.hcare vv-iH,
all of a sudden, be looldng for a doctor. TI1is might be a problem because the
U-5. already has over 15 000 fewer primary care physicians than it needs, and
1

some are projecting a labor shortage of over 100,000 doctors by 2025.GIn con-
trast, the Bureau of Labor Statistics estimates that during the decad.€ endJng in
2020, the U.S. econon1y will create roughly 70,000 lawyer positions, 1Nhile U.S.
law schools arc matriculating over 25,000 graduates a year. This tt·anslates jnto a
labor surplus of 175, 000 lavvyers w~Jl1 little of notlung to do.7 Clearly, the longer
one has to adjust to these kinds of surpluses and shortages, the easier the adjust-
ment, and thus forecasting iB a critical strategic human resource activit:-;r.
 ...
CHAPTER 5 Human Resource Planning and Recruitment 20!5

The second step in hmna:n resource planning is goal setting and strategic plan-
ning, as shown in the middle of Figure 5.1. TI1e purpose of setting specific quan-
titative goals is to focus attention on the problem and provide a benchmark for
determining lhe relative success of any programs aimed at redressing a pending
labor shortage or surplus. The goals should come directly from the analysis of
labor supply and demand and should indude a specific figm:e for what should
happen with the job catego:q or skill area and a specific timetable for when
results should be achieved.
The hypothetical rnanufacl1Jrer described h1. Table 5J., for instance, might set
a goal to reduce the number of individuals iu the production assembler job cat-
egory by 50% over the next J.:kree years. Similarly, the firm_ might set a goal to
increase the number of individuals in the sales representative job category by
25%, over the next tlu-ee years. ·
Once the~3e goals are establishedr the firm needs to choos~~ from the mariy dif-
ferent strategies available for redressing labor shortages ai.rd surpluses.Table 5.2
shows some of the options for a hmnan resource planner seeldng to reduce a
labor suq)lus. Table 5.3 shows some options available to the same planner intent
on avoiding a labor shortage.
This stage is critical because the mariy options available to the planner differ
widely in H1eir expense, speed, effectiveness, amount of hwnan suffering, and
revocability (hmAr easily the change can be undone). For example, if the organi-
zation can anticipate a labor surplus far enough in advance, it may be able to
freeze hiring and then just let natural attriJ.ion adjust the size of the labor force.
If successfol, an organization rnay be able to avoid layoffs altogetJle1~ so that no
one has to lose a job.

labSI!!! !!B.~
Options for
1. Down sizi ng Reducing an
··2. Ph::/ h~d1~1Z:Jioh s ,, Expected Labor
Surplus
3, Dcn1otions
11. Tr8hsfd1·~ :
5_ Wod< sharins1
6. ·Hli'fr\g frt:~0Z<'o! .
} _ Natural attrition Slow Low
· 8 . i:;;irlyrE?tiffii:rierrt ·:··· ·:... ···
9. l~etraining

TabR® !!D.~
Options for Avoiding
'I . Overtiff1r~ an Expected Labor
Shortage
2. T&mF)d~aryornhlqy~~;!!t ,
J_ Outsoun.:i1l!J
4. Rei;ra,inkd t.r21i·1sft1i·s ··· ·
5. Tumo11e1- reductions Slow Moderate
· ·• 6, r\l ew 1:ixtc<tha I:li ifo:·<
} _Technological innovation Slow Low
 ...
206 CHAPTER 5 . Human r~esource Planning and Reuuitrnent

Unfortunal:ely for ~m.any vlim kers, in the past decade the typical organiza-
li.onal response to a surplu.:s of labot has been downsizing, which is fast but
lµgh in h mnan suffering. n-v: h u rnan suffering .caused by downsizing has both
an inunediate and a long-term element. J.n. the short term, the lack of pay, ben-
efits, a.n,d meaningful work has negative implications for financial, physical,
and psychological aspects of individuals, caush1g bai-1kruptcies, illnesses, and
d epression. Then, even H one can survive these i1nmediate problems, in the
long term, an extended bout of unemployment (e.g., lasting over six months)
can stigmatize the individual, thus reducing future opporluni lies. Ln particular,
jn job categories where ski.Us are perishable and need to be constantly updated,
m any laid-off workers will take any work wHhin fJ1eir area--even unpaid vol-
ur1teer work--in order to prevent a gap in their employment history. 8 Indeed,
the term "adult intern" has b een coiJ.1ed to describe people who are wilU11g to
w ork for free while trying to break into a new career field. 9 TI1e typical organi-
zational response to a labor sh ortage has been either hiring temporary employ-
ees or outsourdng, responses that .a re fast and high in revocability. Given the
pervasiveness of these choices, we will devote special subsections of this chap-
ter to each of these options.

Diolllmsiz:nrii@
li)iQ>'WR115!~~rill@l 1.Ne define downsi:d.R1g as the plru.111ed ehmination of large numbers of person-
The planned elimina- nel designed to enhance organizational effectiveness. Although one tends to
tion of large numbers think of dm'lmsizing as something that a company turns to in times of recession
of personnel designed
to enhance organiza-
like we saw in 2008 and 2009, if fact, rnan.y organizations engaged in downsiz-
tional effeci:iveness. in g in the 2002-2007 time p eriod. Du.ring that period, in more than 80% of the
cases where downsizing took p lace, the organizations initiating t11e cutbacks
w ere making a profit at the fune.
Surveys indicate tlu·ee major reasons that organizations engage in dovvnsiz-
in g. First, many organizaiions are looking t o reduce costs, and because labor
costs represent a big part of a company's total costs, this is an atfractive place
to start. For example, in 2012., Yahoo cut 2,000 jobs, which amounted to 15% of
their workforce. The compan y expects to see an arumal savings of $375 million,
although this is partiaUy offset by an estimated $145 million onetime cost associ-
ated with paying employees severance pay.JO
Second, in some orga._-U.zations, the :introduction of n ew technologies or
robots reduces the need for a large number of etnployees. For example, at Gen-
eral Electric's new battery manufactw·ing pla11t in Schenectady New Yo:rk, the
eniire 200,000-squa.re-foot facility requires only 370 workers, only 200 of which
are achJ.ally on the shop floor. The plai.1t manager nms the entire operation,
in cluding lights, heat, inventory, pmchasing and maintenance from an iPad 111at
is linked to wireless sensors embedded in the batteries tl1emselves. As Prescott
Logan, -the general manager of tl1e plant, states, "It is not about low cost labor
b u t high technology. VVe are listenfog directly to what our batteries are telling
us and then thinking about ·ways to monetize that."n In fact, economywide, the
ratio of spending on capita] (plants, equiprnent, and machinery) increased by
over 300% between 1990 and 2010, indicatii.ig that employers across llie board
w ere subslihtting technology for h uman labor.12
A thixd reason for downsizing was that, for econmnic reasons, many firm.s
changed the location of whc~re they did business. Some of this shift was from
 ...
CIHAPTIER 5 Human Re.source Planning and Recn..frtment 207

one region of the United States to another--:in particular, many organizations

moved from th~ Northeast, the J\Aidwest, and California to the South and the
mo1mtain regions of the Vilest. In sorn.e cases, tedu10logy is employed to move
work that one nught tlunk v11as not that rn.obile. For example, the McDonald's
restaurant chain experim.ented with drive-up windows :in Michigan that were
staffed wil11 lower-wage V\Iorkers located in Fargo, North Dakota. What looked
lil<e a standard drive-up squawk box was actually a long-distance connection,
where Michigan orders v'.rere takei1 dm:"m by a worker in l\Tortl1 Dakota who
then relayed the order information back to the Michigan staff. 13
Although downsizing has an imm.ediate effect on costs, much of the evidence
suggests that it has negative effects on long-term. organizational effectiveness,
especially for some types of finns. for example, in firms that are high in research
and development. intensity~ downsizing has been linked to lower long-term orga""
nizational profits.14 Also, the negative effects of-dov-msizing seem to be exacer-
bated :in service industries characterized lby high levels of customer contact. For
example, in the five-year period between 2009 and 2013, Walmart added over
1150 new stores to its portfolio, but at the same tune, reduced headcount by over

20,000 people. TI1e average number of employees per store dropped from 343 to
301 and this resulted. :in a workforce that was spread too thinly across the large
stores. TI1is in turn resulted in longer checkout fo1es, less support to custom-
ers who needed help, and difficulty keeping the shelves stocked. One former
Walmart custome1~ Tim \Mute, noted., "You Nait 20, 25 :m.inutes for someone to
1

help you, and then, the person who comes was not trained in that area. And,
even though the long d1eckout lines were irritafu-.g, the No. 1 reason I" gave
up on 'Afalmarl: was its prolonged, horrible, maddening inability to keep items
il1sf:ock."1 5,16 In addition, when downsizing efforts are nof 'c omplemented by
changes ill the nature of work roles, then performance also tends to suffer.17 The
negative effect of downsizing on performance was especially high among firms
that engaged in high-involvement work practices, such as employing teams
and pay-for-perfo1mance ll.Kentives. Thus, the more a firm attempts to compete
through its human :resources, the more devastating the impact of layoffs is on'
productivity. rn
Still, m.any employers engage in this tactic and hence it is important to under-
stand what goes into an effective versus ineffective downsizing campaign. There
seem to be a number of reasons for the failure of most downsizing efforts to live.
up to expectations in terms of enhancing firm performance. First, although the
initial cost savings are a short-term plus, the long··term effects of an :improperly
managed dovrosizing effort can be negative. Downsizing not only leads to a loss
of talent, but in many cases it disrupts I.he social networks needed to promote
creativity and flexibility. 19 Second, many downsizing campaigns let go of people
who turn out to be irreplaceable assets. ln fact, one survey indicated that in 80%
of the cases, firms Vlrind up replacing some of the very people who were let go.
Indeed, the practice of hiring back formerly laid-off workers has become so rou-
tine that many organizations are increasingly using software formerly used for
h·acking job applicants to track their laid-off employees.20
A third reason downsizing efforts often fail is that employees who sur-
vive the purges often become narrow-minded, self-absorbed, and risk-averse.
Motivation levels drop off because any hope of future promotions-or even
a future-with the cmnpany dies out. Many employees also start looking for
alternative employment opporlunities. 21 Tile negative publicity associated with

- - - - -- -
 ..
206 CHAPTER 5 Human Resource Planning and Recruitment

a dov\111.Sizing campaign can also hurt the company's image in the labor ma.rket,
making it more djfficult to recruit employees later. Especially in an age of blogs
and text messaging, the once-private practice of laying off employees is becom-
ing it1creasingly transpa.rent, and any organizational mistake that gets made in
the process is likely to become highly publk.22 T11e key to avoiding this kind of
reputation damage is to ensure that the need for the layoff is well explained and
that procedures for implementing the layoff are fair. Although this may seem
like common sense, many employers execute layoffs in ways that make matters
worse .. For example, in Septtember 2006, Radio Shack human resource manag-
ers decided to infonn 400 people that they were laid off by e-mail.73 This makes
a dehumanizing event even more humiliating, and the negative publicity that
attended this decision hurt the company's future recruitment efforts. TI1..i.s also
increases the likelihood that disgruntled employees are likely to sue for loss of
wages. Angry ex-employees often bring suit based upon the Worker A~justment
and Retrnining Notification Act. 1his act requires that employers give workers
60 days warning regarding layoffs, as well as severance pay. Many employers
to
seem be unaware of this act, and because o{the recession, there was a spike in
lawsuits in 2009 based upon this act.24
The key to a successful downsizing effort is to avoid indiscriminant across-
the-board reductions, and instead perform. surgical strategic cuts .that not only
reduce ·costs, but also improve the firm's competitive position. For example,
Raven Industries, a Sioux Falls manufacturer of a wide variety of plastic prod-
ucts, had to cut its workforce, but went about the process in a mm.mer that
would help make the company "China proof." They went from having 10 dif-
ferent divisions to 4, eliminating manufacturing of cei;tain low-margin products
that could be produced cheaper in China (e.g:·, generic plastic covers for pickup
tmcks) and pouring more resources into more profitable custom-made cov-
ers for widely different agricultural machines. In the process, the organization
decreased in size ahnost by half (from 1;500 workers to 750), but revenue was off
by less than 20%. Two years after this strategic downsizing effort,t~1e company's
share price increased from $4.50 to over $30.25 ·

Early Ret~rnmiEm~ Program$ ~nd IBlMyoMts

Another popular means of reducing a labor surplus is to offer ru.1 early reti.xe-
ment program. As shoVim in. Figure 5.2, the average age of the U.S. wm.+...force
is :increasing. But although many baby boomers are approaching traditional
retirement age, early indications are that this group has no intention of retiring
any time soon. 26 Several forces fuel the drawing out of older workers' careers.
First, the unproved health of older people in general, in combination with the
decreased. physical labor in many jobs, has made working longer a viable option.
Second, this option is attractive for many workers because they fear Social Secu-
rity will be cut, and many have skimpy employer-sponsored pensions f:hai: may
not be able to cover their expenses. Thb:d, age discrimination legislation and
the outlawing of mandatory retirement ages have created constraints on orga-
nizations' ability to unilaterally deal with an aging workforce. Finally, many
employers are h1creasingly conce:med about losing the wealth of experience that
older workers bring to their companies.
Although an older workforce has some clear advantages for employers in
terms of experience and stability, it also poses problems. First, older workers are .

-------
 ..
CHAPTER 5 Human Resource Planning and Recruitment 209

lfl(9)Mfl"~ ~.2
40 I Aging of the
U.S. Population,
....
I;} 2000-2020
'·fl
!(il
"lJ
fll 30 -
\iii
\1il

20 --

sometimes more costly than younger workers because of theiT higher seniority,
higher medical costs, and higher pension contributions. For example, at Toyota's
plant in Georgetovm, Kentucky, veteran workers earn $26 an hour compared to
$16 an hour for new hires. In an eff01t to shift the workforce from high-paid to
low-paid workers, Toyota offered rei:irement incentives to 2,000 workers at the
plant. Each worker could get a lump sum paym.ent equal to two weeks of pay
for every year of service, up to a maximum of 25 years, plus· eight weeks addi-
tional pay. In relum for tal--Jng the buyout, workers would agree to retire on a
fixed schedule that prevents all Ille 1Norkers from retirix1g at once. 27 When the
value of the experience offsets these costs, then employers are fine; but if it does
not, it becomes d ifficult to pass these costs to consumers. .
Second, because older workers typically occupy the best-paid jobs, they ·
sometimes prevent the hiring or block 11112 advancement of younger workers.
TI1is is frustrating for the younger workers and leaves the organization in a per-
ilous position whenever the older workers decide to retire. Indeed, although a
weak economy hu rts the prospects of all workers, the impact is especially hard
on young people who have limited work experience and skills. In fact, simply
graduating into a bad economy can have lasting negative effects on workers. For
example, one study found that for each percentage point lise in the unemploy-
ment rate, those who graduated during a recession earn 7% less in their first
year on the job, and 3% less even 15 years later, relative to peers who just hap-
pened to graduate in better economic times.2s
In the face of such demographic pressures, many employers try to induce
vohmtary attrition among their older workers through early retirement incen-
tive programs. Although some research suggests that these programs do induce
attrition among lower-perfo:n:ni11g older workers, to a large extent, such pro-
grams' success is contingent. upon accurate forecasting. For example, in Japan,
many workers continue i:o work weU beyond the counhy' s official retirement
age of 60. Fortunately, Japan's private ernployers can force ernployees to retire at
60 if they wish, and workers often accepts lower ~flrages in order to stay on. Thus,
Komatsu, the wodd' s s<~cond large::d: constrnction equipment manufacture1~
 2'J 0 CHA!P'TER 5 Human r\esource Planning and Recruitme nt

rehires 9Ql/1o of its retirees at 40% of their past pay. In the Unifi{~d States, on the
other hand, people cannot be forced into retirement and have to be coaxed out
of the job with an incentive package.29 .
For example, General Mot.ors has offered a series of buyouts over the years in
order to t rim. its workforce ..lrl tfos most recent buyout plan at GM~ 22,000 of its
62,000 unionized workers were offered $20,000 plus a $25,000 vouch.el· l:owatd
the purchase of a GivJ. car if they wexe willin.g to retire. 111.is offer was much less
lucrative relahve t.o previous buyouts announced at the company, au.d for that
reason, many outsiders thought that this part of their plan was aJso mueahsl.1c h1
terms of generating its hoped for benefits.3° A similar.program at the Washingl'on
Post offered workers roughly a year and a haJf in salary, and tlus offer sic:emed
to be mo:re in line vvith 1Nhai: it generally takes to get people to leave voh.m.tarily.
Interestingly, while the Post ·was cutting the nmnber of employees, the New York
Times decided to reduce pay levels by roughly 3% and not layoff o:r buyout any
employees. Rather than seeing size as a liability, Executive Editor Bill Keller saw
it as a source of unique competiii.ve advantage for the Times (in fact, the large~t
newsromn jn tlv~ cotm!J:y), describing his current stock of employees as "the
e:ngine of our long tenn success."31
Pension plans often become extremely burdensome for compm1ies, and
hence, s01ne large employers have recently tried to back away from. theix obli-
gati.ons. I-<or example, in 2012., General Motors and Ford attempted to buy out
the pensions of 140,000 salarkd workers. Both companies were flush witl1 cash
after having recorded profit of $9 billion and $20 billion respectively in 2011, and
\, saw this as a one-time opporhmity to slash their pension liabHities will1 a mass
buyout. Because pension funds are jnvested in securities, their values rise and
faU u11expectedly, and hence removing these from the balance sheet is often a
ve1y desirable goal. All:hough the offers varied by the person's tenure and sal-
a1y, many employees were offered anyvvhere between $500,000 and $850,000 as
a one-time papnent tl1at would replace the montltly payment these same work-
ers would have received. This slufts the risk from the employer to the einploy-
ees who must now decide how long they thinl< they are going to live in order to
make their decision about accepting foe buyout. If an employee trunks he or she
is lli<ely to have a short life expectancy, it is best to take the buyout. H01Neve1~
if one thinl<:s they are going to live a long lin1e, they .may eventually oufave the
value of the one-1:DJ1.e pay1nent, and hence it is best to reject the buyout. At GM,
H10se w ho rejected the buyout are shifted to fill annuity program run by Pmden-
tial, and so at least fTom GM' s point of view, they were going to be free of these
obligations one way or anofher.J2

1Errrri1p~oyn~115Jl Tem~ornry lf\f~)lJrr.-cer:s;

Whereas downsizing has been a popular method for reducing a labor surplus,
hirjng temporary workers and outsouxcing has been the most widespread
rn.ea:ns of eliminating a labor shortage. The number of temporary employees
in !he United States s1Nelled from 4,.5 mjjJion in 1997 to 8.6 million today. IVIany
expect this number to gTow even larger with the passage of the Affordable Care
Act bc;;:cause employers can avoid the mandate to provide health care to anyonr:~
who wo:rks less than 30 hours a wcek.33 Temporary employment afforded firms
the flexibility needed to operate efficiently in the face of swings in the demand
for goods and services. ln fact, a smge jn temporary employment often preceded
 ...
CHAPTIEIR 5 Human Resource Planning and Recruitment 21 ·1

a jn rnp in pernwnent b.ir ing, and wa~; ofteri a leu.d.ing indicator that the economy
was expandirn;i;. Howevei:, that no longer seem.s to he the case. Hiring of tempo-
rary lNO·rke:rs 1'.;~se each n i.onth. from October of 2009 to Augu~:;t of 2010, but there
11>re!·e n o sig1.1S i:haJ the hiring of penna:nent ·vvorkers 1Nas expanding. Many ana-
lyst; p ointed to conceni::: r<:~gaxding the stabi.h ty of t:b.e econoxnic recovery as the
major reason \Nhy. Filoweveil~ others suggested that employers had simply come
l:o enjoy i:he id ea of matcJ.1jng qukk changes :in consumer demands for products
with (jl li<:I<: changes h1 the supply of labor. As one CEO notes, "You need the flex-
i·1Jlll1
.' ' !V· ff!
.
you:r
·
rna:npovve:r cor3t:S
'
SJ.nee
.
sa1es can
· r.rluci:ua.
' · f.e more. "34
··
tnJ adclition to fJexibHity, hiring temporary workers offers several. otl1.er
advan.tages:
"' 'J'he use of ternporary 'Norkers frees the firrn. from many administrative tasks
and fin ancial burden:3 associai:ed vvith be111g the '"f.:mployer of record. "
') :JxnaU crn.npanies HiaJ cannol: afford H1efr OVl.Tn testing programs often get
en1p loyee[3 1111ho have been tested by a ternpora1y agency
,, ~/J:n ny temporary agendes tcajn employees befon~ sending them to employ-
er:>; \N.hich reduces trainin.g costs and eases lhe transition for both the tempo-
1:;,iry worker and the company.
''' because the temporary •.vorker has htfk exp eriencf: Ln. the h.ost firm, she brings
an objective p ersp•2c\Jve to iJKc o:rganL"':ation's problerns and proct.'Cl.1ues that
J::; sor:nelinles valu.abJ,·e, Abo, since the l:EJ.npo:nu:y vi,rorke:r rnay have a great
dec.d. of experience in oHier finn~:;r she <:an. so1x1eti.m.es identify solutions to the
ho~.;t organiza tion's problems that were conJrnnted at a different .firm.

Fi.nally, allJi.ough. jJ rnay :3een1 ironic, rnany ernployers wind up trying to hi ri2
excellent l: emp o.rary 1Norkers for fuU-time jobs <J.fter so:m.e pe:dod of tllne. Note,
however, that there is u sually a foe that h as to be paid for pennax1ently "steal-
ing" •J temporary ernploy'2 1~ from. a temp agency. Still, some tem.p agencies ach.:t-
ally have "'lemp-to-FuJJ.-Ti.rne prog:rasnsp; thB..t :c1ctuaUy lTy to promote tlus goal
for ::;orne ·workers who vvant l:o be fuU-hrn.e employees. The client in tlus case is
encouraged to rnake a job offer to U1e ern.ployee 1Nithin a predetermined time ·
period, should the rnatch .seem. like a good one. According to the American Staff·
ing Ar:>sociation, 74%, of temporary workers ad:ually decide to become tempo--
rary ernployees b~~cauc.e i.l:'s a way to get a fu ll-time job.35
Ccrl:ain disadvan tage::> to enipl.oying temp orary workers need to be overcome
to d:foctively use thfa souxct~ of labor. For exa:mple 1 in the service sector of the
ccono.my, low levels of co1:r1n1itrnent to the orgardzati.on and its customers on the
par! of temporary employees, often spills over and reduces the level of customer
loyalty. 3<i Instead ofreplacing long-term employees with temporary employees,
1nan y orgm1.iz atiorrn try lo buffer their "core employees'' from wild swings in
de.n:lond by supplernenting: thcfr core staff 1Arith a small set o:f temporaiy work-
ers. For exarnpk\ in 2009, Boeing cul: 1,500 h~mporary wod<:ers from. one of its
divir;ions, but retained all of its p errmment ·workers. HR executive Jim Proubc
noted that, "'TI1e first Lnipcral:ive was to red uce all of the conlTact an:d contingent
labor that lNe possibly conld to shield mxr regular employees."37
In ad dition, there is oft·en tension be1ween a firm's temporary employees and
its full-time employees. Surveys indicate tha.i: 33% of 6.JJ.l-time employees per- ·
ceivk~ lh1e temporary help ar; a i:htr.:iat to ill.eir ovvn job secmi!y. This can lead to
lo1N levels of cooperation and, in some cases, outright so.botage if not managed
properly. 3n
 ...
212 CMAPTIER 5 Human Resource Planning and Recruitment

Tl11ere ;J.w~ s€veral keys ll:o managing this problem. First, the organization
n eeds to have bof:l:omed out in terms of any downsizing effort before it starts
b:i.inging h1 temporaries .. A clovvx1.sizJ.ng effort is almost like a death in the fo~mjJ.y
for employees who sw:vive_, and a decent time hl.terval needs to exist before new
l:em.porary vvorkers axe ~ntroduced into this context. Without Hus tim_e delay;.
th ere will be a perceived association between the downsizing effort (-vvhich was
a threat) and the nei:Ar temporm:y employees (who may be perceived by sorne as
outsiders who have been hired to replace old friends). Any upsw:ing h1 dem_a:nd
for labor after a dmvns:i.zing E:ffor t should probably fust be mel: by an expan_s~on
of overlime granted to core fuJl-thn12 employees. lf this demand persists over
lime, one can be more sure that the upswing is not temporary and that there wm
be no need for foture layoffs. The extended stretches of overtime will eventuaUy
tax the fuU-tim_e employees, •Nho will then be more receptive to the prospect of
hiring l:empo:rary employees f:o help lessen their load.
Second, if the orgm1ization is concerned about the reactions of full-lime work-
ers to the temporaries, it may 1ilrant to go out of its way to hire "nonl:hxeaten-
ing" temprn:aries. For example, aW1ough most temporary workers want theix
temporary assigrunenl:s to turn h1.to full-ti.me work (75% of those surveyed
expressed this hope), not aH do. Some prefer the f-reedom of temporary arrange-
ments. These workers are JJ.1e ideal t12i.nporaries for a firm with fearful fr1U- tiJne
·workers.a9
Of couxse, in aHe:rnpJjng to convince 6JU-time employees that they are valued
aind not aboul; to be replaced by ternporary vvorkers, the organization_must not
1. create Hle perception tl1at lemporary workers are second-class organizational cit-
izens. liH. staff can also prevent feehngs of a two-tiered society by ensuring that
the temporary age11cy provides benefits to th_e-temporaries that are at least mjJu-
m ally comparable to H1ose enjoyed by the full-time workers with whom they
i11teracl:. TI-Us not only reduces the benefit gap between the full-ti.me and part- -
tune workers but also helps atlTact the best part-time workers in tl1e first place.

011.ft:.J;(UJJ!fdllllga Offshorirril9ff ~ITTld ~mnnigr,·zitiottn

Whereas a. temporary e:mployee can be brought in to manage a single job, in
other cases a firm may be interested in getl:ing a much broader set of services
Oi.JJ~noMrdll1f1 performed by an outside o:rganjzation; tlus is called 011.dsouirdng. Outso-cm::h1g
/In organization's use is a logical choice when a finn slinply do(2s not have certain expertise and is not
of an outside organiza- willing to invest time and effort into developing it. For example, ironically, com-
tion for a broad set of
serv;ces .
paiues increasingly outsource 1nany of l11eir hmnan resource management tasks
to outside vendors who sped<.1lize in efficiently performing many of the more
routine adm.inistrative tasks associated with this function. Figure 5.3 shows a -
.forecast for growth rates in the hmnan resouxce outsourcing (I-:IRO) i.n.dwstry.
Cost savings h1 this axea are easily obtained because rather than purchase and
maintain Hleir OV\111 specialized hardware and softw~_re, as well as specialized
staff to support such systems, cm:npm1ies can iime-shaxe the facilities and exper-
tise of a firm that focuses on this l:edmology.
Thus, a :rnodernte-size cmnpany tlwt J.night otherwise need to have a 15- to
30-person HR staff can get by with just 5 to 7 people devoted lo I-IR because they
share services 1;1vith outside fi:n:ns like Accentuxe,40 thus benefiting from e:cono-
nues of scale. In addition to managing the size of the HR unit, the hope :iB also
tltat ll1is frees up HR managers to focus on more strategic issues. As Sam.uel
 ...
CHAPTER 5 Human Resource Planning and Recruitment 2131

NelsonHali puts the market for multiprocess HRO at $L475 billion by 2010 for the rFfi~MIT'® Sn:lt
midmarket, 1Nhich it defines i:l '."i cornpani<;?s vvith "l,C.)OQ-10,000 emplo~rees. NelsonHall U5. Multiprocess
d0fln(,~S multiprocess HRO as two or more ffli)jo r Hf{ t asks oi.1tsourced to a single HR Outsourcing
vendor, ~;o this rnarket is broadHr than the market for comprehensive HRO. Forecast

(21%)
'1.475
$'1,500 -- billion
(2 "1%)
·1.21

$1,200-·· (21%)
f/l
·1
!::

~ ('18%)
·~ $900 --
('16%)
700
600
$600 -

$300 --

$0---.

l\lot:e: Percentage = compoun d annual growth rat0.

SO Ul~CE : l\lebonl-l;:ill, "Multiple H R Outsourcin g in the U.:0.: Market Asse ss ment," .June 2006.

Borgese, VP of H R for Cafali.n.a Restam:ant Group, notes, "This allows us to keep

stra.l:egic tasks in-house vviH1 ladkal support form the outsourcing vern;lor. It's
ve1y difficult for a VP of HR to be a strategic player if he or she is managing the
HR mJrastmcture. "11
In other cases, outsourcing is aimed at simply reducing costs by hiring less
expensive labor lo do the 1Nork, and, more often than not, this means moving
the work outside the counhy. OHahl{))J\RJtlg is a special case of outsourcing where Offshorin!31
the jobs lhat inove actually leave one country and go to another. Tilis kind of job A special case of
migration has always taken place; however, rapid teclmological changes have ot11.sourcing where
thejobs that move
made the current trends in H1is area historically unprecedented. Offshoring is actually leave one
confroversial because dose to 800,000 white-collar jobs have moved from the country and go to
United States to India, eastern Europe, Southeast Asia, and China :in the last another.
10 yr2ars. Jn addifion to reslTicting job growth in the United States flus has also
affected wages, in the sense t.h.at while the average rate of salary growth dur-
ing an economic recovery is usually arrnmd 6--8%, because of offshoring, salary
growth in ~he most recent recove:ry was actually negative (-1%).
AHhough initially many jobs that were outsourced were lo1N scope and sim-
ple jobs, increasingly~ higher skilled vrnrk is being done overseas. For example,
DuPont moved legal services associated •Nith its $100 rnJ.lhon asbestos case
litigation to a team of la1/11Jrers 1Norkin.g in 1he Ph:ilippines. Some. of tlus work
reflects the sort of tedious copy:ing of docurn.ents (more ill.an 2 million pages)
that is associated w ith. a t·ypical offshoring project, but much of the work requires
 ...

214 CHAPTIEIR 5 Human l~esou rce Planninq and Recrui tment

actual legal judgments (e.g., delennining 1J1e relevance of the document to the
case or its need for confidentiality) that n.onnaUy would be performed by U.S.
lmvyers. Paralegal work by U.S. fix.ms can run up to $150 an h our versus $30
in the PhjJipp:ines, and lawyers' salaries in tJn_e Philippines are one-fifth of iJ.1eb:
counterparts' b.1 the United Stal:es.''2
hi.deed, the stereotype that "call center" staffu""1.g is the onJ.y type of work
being offshored is L.1.creasii-igly invalid, as couJ1lr.ies like China., India, and ili.ose
in easten1 Europe uy to dim.b the skiU ladder of available w ork. In fo.dia aJ.one,
iNhereas 35% of the wrnrk offohored there fri 2000 reflected caJl center vvork, by
2006 this was red.uced to 35%. ·nw grnvvth in Tlldia is now in higher-paying
contracts dealing -will1 b usiness process hnprovement, processing ·mortgages,
handJmg insurance dauJilS, oirersee:ing payrolls, and readj11g X-rays and oilier
n1.edical tests.43 Many of the siinple call center jobs that J.noved to India are either
moving deeper into tl1e ruraJ Xndlan vHlages 44 0:1.~ ironicaUy, moving bad< to the
United States. In.deed, can center jobs ar·e increasingly bemg performed by U.S.
workell.'s ·who are now operating out of their O\N.1.1 homes instead of massive caJJ.
centers like those run overseas. One recent survey indicated that 25% of call cen-
ter employees are based in ihei.r 011vn homes, and some have estimated tlrnt this
will grow by another 25% between 2006 and 2010.45
Although this may seem problematic for U.S. employers, in fact, if effectively
managed, firms that offshore certain aspects of work gam an undeniable compeii-
tive advantage over tl"1eix rivals. IgnoJ.i.ng this source of advantage is seJi-defea.ting,
1 ·
and ald.n to putting one's head i11. the sand. For example, Levi-Strauss tried for
'
I
yeaxs l:o compete against other 101N--cost jeans manufacturers who off-shored thefr
labo1~ Howevex~ after years of one plant shutdown after another, in 2003 the firm
finally gave up and dosed down aJl of its U.S. manufactmmg plants. 111e move,
I ·which many saw as inevitable, was long overdue and had it been made earHeJ.~ the
company might have been able to avoid losjng over $20 million.
When making the decision to offshore some product or service, organizations
I
should consider several critical factors, Iviany who failed to look before they
leaped onto the offshoring bandwagon have been disappointed by their results.
I Tirns, as \fire saw in our opening vign.ette, many employers w ho tried offshoring
and had bad experien.ces are moving jobs back to the U.S. Qualify control prob-
lems, security violati.ons, and poor customer service expeliences have in rnany
cases wiped out all the cost savings attributed to lower wages and more. For
example, problems with th€ developm.ent of Boe:iJ.1g's 787 Dreamlmer, a project
that is three years overdue and bilUons of dollars over budget, have been abh.ib-
uted to both the am.ount and type of work that was offshored. With respect to
the amount of outsourced vrnrk, the 787 had more foreign content (30%) than
any plane Boei.ng ever built (where the average is 5%), and many of 111.e compo-
nent parts manufactun~d by far-flung suppliers did not fit together very well. In
terms of the nature of H-1.e wodc, Boeing took on final assembly of the phu1e, but
this is tl1e acti.viiy that provided the least amoU1.1t of value a.dded. 46 Jim A\baugh,
the company's chief of aviation, adxrdtted that "We gave too m.uch ·work to
people that had never reaJJy done this before, and -then we didn't provkle th.re
oversight that was necessary. L-1. hindsight, we spent a lot m ore money ina.n ·we
ever would have spent if 1,ve tried to keep many of the key teclmologies closer to
Boeing. TI1e pendulum swung too far. "47
Indeed, these kinds of problems have led to a resurgence of outsourcing activ-
Hy that keeps ihe work within the boundaries of the United States. For exainple,
 CHAPTER 5 Hur11an l'\esou rce Planning and Recruitment 215

many rural areas of the Uni.i:ed States that have been vklirns of lost maJ1ufactur-
ing jobs have retooled ther:nseJves in a.n effort to atl:ract work that is cunently
11
being shipped overseas. The value proposition offered by these firms is that \Ne
cost less than cities on the Easi: or vVest Coast, and we're easier to deal with th<m
Tndia. 48 Ironically, smne of the growth in rural outsourcing has come from finns
11

in India opening u p U.S. facilities. For example, several of the large Indian. out-
sourcing firms such as Ta la, VVipro, and Infosys have opened u p shop i n rmal
Ohio u.~; ing Arnerican workers. Privacy J.aws prevent certain d ata from being
shipped overseas and hence being local allows these firms to do work with tfo~
U.S. government and health carr2 providers that they could not do otherwisr::.
Moreover, local vvorkers h;:ive a. more n uanced understanding of the la11guage
and culture that supports ·working on more cornplicated on-si.te business p rob-
lems versus simply writing batch code.49
There are seve1:al steps a company should take to ensure the success of out-
sourcing. First, when choosing an. outsourcing vendor, it is usually the bigger
and older the better. Small overseas upstarts often promise more than they can
deliver and take risks that one is not likely lo see i11 larger, m ore established
contractors.so Second, do not offshore any work that is proprietary or requires
tight security. One software developer that hired an Indian firm to debug its
programs later found l:hal the finn copied the sofhl\TCU'e and sold it under il:s
own brand name.s1 In general, th~ work that is outsourced needs to be modu-11

lar" in the sense that th.e vrnrk is self-contained and does not require the out--
sourcing firm to provide any information tJiat is best kept secret for competitive
reasons.52· Third, it is generally a good idea to start small and then monitor the
work very closely, especially in the beginrring. Typically, if problerns are going
to develop, they manifest themselves quickly to those who are paying d ose
aJenhon. 53
Fmally, rather than h·eahng offsourced work as just a cost-contai.J.unent strat-
egy, firrns are increasingly looking for "transformational offshoring," which pro-
motes growth and opens up avenues of new revenue. That is, the
increased sophistication of outsomcing fiTms mean s that they are
better able to partner with compmues on an equal basis in develop-
ing innovative and u1uque ways t.o do business. Tius development
11
has prompted one CEO to note Jhat I think we will end u p w ith
companies that deliver products faster, at lower cost, and are better
able to compete agai.J.1st anyone j_n the world."
If one catrnot take the work overseas, but still. wishes to tap
into less-expensive global talen t to fill a labor shortage, then one
might simply bri1:l.g foreign w orkers into the coun try. Imnugra-
tion has always been a vital part of the American economy, and
many foreign workers are happy to leave !heir home and pursue
their own An1erican d ream.5 4 Howeve1~ enh·ance of foreign work-
ers into the United States to fill jobs is fed erally regu lated; so there
are limits to what can be accomplished here. Employers wishing
to hi.re foreign workers need l:o help them secure 1Nork visas and
show that there are no qualified t\mericans who could do the same
work. 55 Indeed, protecting the jobs o.f local workers is often a key Employees at Pella Windows
sticking point when it comes to bringing i11 immigrant labor, and agreed t o a four-day workweek to
as the "Competing through Globalization" box illustrates, this is avoid m ass ive layoffs in th e midst
not just an American phenomenon. of a labo r surplus.
 StrMgrnJ~~a~~
-·
·ri:Q
..
iFRlll1d .a (n;t~;t<(J)fi]ll fl·~
Since~ t he Middle A~::ies, the
Tuscan city of Prato has been
considert:'.)d the heart of Ita ly's
hi~Jh-e nd fa:3hion industry. Prato
sti ll produces over 27% of
!i:;1ly's i:(:!Xl:ile output; however,
the nature of the industry has
chan~:yxl considerably ov,:;)r tirn«:'
and the ci!y would be largely
unn~cognizabk) to any fo rm1~r
resident who left the resiion
;25 year~; ago and then retu rned
i:ocby. Today, 25% of F'rnto's
rcsicleni:s are Chinese and 4,000
of the (y:i1TrK1nt-produci n<]
busines::;e~~ are Chinese-O\Mnecl,
and the wrenching changes
that the city has gone th rough
to accommodate this infl ux of
I. immigrant la bor is threatening
to tc;:1 r the city apart. Ind eed,
in a larger conte)<t, the experi-
ence in F'rat o is symbolic of ifo=,
cultura l conflict that can e nsue
when immigrants seeking n e\f!f
opportunities (and creat ing new
01:)1)01-i:unities for employers)
cl.ash with the existing labor
force.
It all began in '1990, vvhen
some Italian teKtile producers
began settin9 up sweatshops
in China in order to lower costs,
but then brought som<~ of that
cheap labor back to Ita ly to
reduce cycle t imes Jnd ship-
pin~] costs. Having established
a bea chhe<:1d in Prato, other
Chinese workers flooded to
the region on tourist visas with
no intention of ever leaving.
AHhough most com.pm.1j12s ~:hat go this route behave ethically, there hav£ been
nmne:rous recent cases vvliere headJ1unting fums have violated U.S. laws and
exploited foreign workers through a host of schemes that jndude (a) m.aking
:216
nn] Z1Wn ~tziNHZlil11 'frlvl~m
/-\m b itio us, l1afd'No rking, and
c1uick to learn new skil ls, th ese
(J1i n12se irn miqrants soon began
buying oui: ltr.1lian ov•rn e1·s vvho
were happy t n ':ielt off the ir
busin eSSG'.3 in thc-: fact:-: of r,:;ve1·
incree:1sin9 ·Jlnbal competition
in t he ga m 1e11t ind ustry. These
11e1N owners si:a1ted produc--
.in9 cloth es fosi:er a1yl ch eaper
t han 'their Italian counterparts,
but still benelitted greatly from
th e "Made in !1:a!y" label s that
had beco111e ;:i::;;,;ociated with
hiq h qua lity crafrsm;:;inship and
apparel.
Loca l citi:u~ ns of Prato
compla in th at ·;Jv:.: new C hirn:ise
b u:;inesses are benefitting from
their histmy, "•rhile at the same
i:irne destroying IL Mayor Rober!:
Cenni rnanifr~!3ts open resent-
ment and statl~s, "1 11 thi s t ime o f
crisis, o ur l oca~ bus ine ssc~s try to
survive fol lowing t he lavvs and
p aying taJ<es, but t hey see oth-
ers doing busi11ess without fol-
lo v11i ng the rulRs. 1Ne ris k having
an unba lanced tovl!ll where on
one side you ha11e peop le tired
and mad, and on th e other~ a
community that does whatever it
wants." Crackdowns on C h inese
b usinesses have::: increa sed d ra··
matically over the last few years,
and instances of worke r abuse
at Chin<:::se-run operations have
been high lighted in the local
p ress.
On the ol:h{~r ha nd, s1..,1ccess-
ful Chinese b1.1sines:> 01111110rs like
Marco Wan g claim,
"/A lot of Italians are
complai ning that we Ch inese
are t aking th eir jobs, bui: if the
Ch inese cou ld speak pub lically
t hey v11ould say t he Italians just
don 't ha ve t he will to corn-
pete. When Chi ll ese peopl e
see a business o p portunity,
t hey get togethe r and ta ke
adva nta g e of it very quickly."
A lthou gh it is diffi cult to p re-
d ict how thi s wi ll all t urn out in
the end , it is ironic to note that
in 2012, Italy became t he first
European country to accept
bailout m on ey from the gov-
ernment of Ch ina. In an effort
t o help lighten Italy's 2 trill ion
eu ro n ati on al debt the Chinese
bought ove r 400 billion euros
worth of Ita lian bonds, fu rther
ti'.~htening the inte rdepe nd ence
of these two drastical ly different
cultures.
D~S.C!US$ij0NJ QIU!~$UQl01
How does one balance the
rights and responsibilities of
labor market newcomers vE:r-
sus estab lished players wh en
t ra nsform ing from a historically
important but nonviable bu si-
ness model to a new and uncer-
tain b usiness model? ·
SOURCES: S. Smith, "The Ita lian Fa,;hion
Capital Being Led by t he Chinese," BBC f\Jews
On line, February 11, 2013; N·. Burleigh, "The
Italian Jobs," Businessweek, November 7, .
2011, pp. 90-94; S. Meichtry, "ltali;rn Police
Ra id Ch inese Businesse s," The V\f,,I/ Street
.Journal Online, June 22, 2011.
 ...
CHAP'flER 5 Human Resource Planning and Recru itment 217

the worker pay (~Xorbitant fee·:_:; foll thefr visa,. (b) faJsifljing reswnes, employ-
ment records, and educati<.tn reco:n:ls, (c) failing to provide a job aJier the for-
eign •No:rker sho1Ns u p, c:md (d) taJ<:ing an illegal cut of the 1ATorkers' pay when
they are wo:rking.56 Scrutiny of the behavior of hiring agendes and employers
who recruit foreig,'11 workel's becornes especiaHy high during recessions, i·Vh en
rnnny Americans are out of 1Nork. "fhis has certainly been the case recently, as the
munber of employer audits con.d ucted by 1he U.S. Inun_ig.ration and Customs
Enforcem.ent, a di.vision of Department of Hom.eland Security, doubled between
2.009 and 2010.57 The limits on b:ringi1lg foreign labor into the United States are
particularly prnblernahc for h.igl<.-h-:ch com.parties. The growth of JJ.1ese firms has
not been matched by a gro•N].i!l[~ nm:nber of students i:Nith the advanced skills
in m_athemahcs and the ~;cienc~3 that these fo~ms need. Thus, employers like
Mircrosoft and Orade hav~: agg-ressively lobbied q1e govenllnent to ease these
rmtrictions.~;u Thes1:- efforts pa.id off in 2013 ·when a ne-w inunigration bill was
approved by the Senate Judic.iary Con1111iHee. This new law prnvidecl access to a
green card to <lHY foreign 1111or1c€r ~t11].l:h a job )n lhe U.S. and an advanced degree
h1 math, science, cngineerix1.g or h:-chnology. A green card aUmNs a non-U.S. citi-
zen to hve and 'Work in the US on a perma_·nent basis. Although some feared
this would resuH i11 Arn.e1icans los:ing jobs to foreign 1Norkers, Senator Orin
Hatch, t he hill's major proponent, stated. "Look, these are companies looking to
conh·ibute to the .Arnerican. economy :in a way that benefits American workers
nnd AR11ed.cai1-l:rain.ed foreign. workers."59

P~~tetrnnll~~ !PSJ)f m11dl IHk1lllO!IS

Companies fadng a shortage of labor m.ay be n~luctant to hire new full-time or
pad-lime employees. UrnJ~~r some condi.tions, H1ese frnns may have the option
of tryll.lg to garner m o.ire ho1U"s oul: of the existing labor force. Despite having
to pay 11vorkeirs ti:me-and-a··half for overlime production, employers see this as
preferable to hiring nnd training neiN employees--especiaUy if they are afraid
that current dernand for p:roducte:; or servkes rn.ay n.ot extend to tl1e future. Also,
for a r:;hort fone at least, rna1.ny ~Norkcr:3 enjoy the added compensation. How-
ever, over extended pelfiod~J, ernployiees experience stress and frustration from
being ovexworked in this mmmer.
Jn the face of a labor surplus, organ_i_zalions can somethnes avoid layoffs if they
ccm get their e1nployees to t:oike pa.y cu.ts. For example, Hewlett-Packard cut salaries
between 3% and 20% an.d reduced tlleir conhibui:ions to 40l(k) plans in lhe face
of the lasl: recession, and nwny olher firms engaged in the smne sort of practices.60
All:er.nal:ively, one can avoid layoffs and hold the pay rate constant but reduce the
number of hours of all the 1Norker.s. For example, dur:i.ng the recent recession, Pella
\A/indows shifted .from a fiv8-day 1Nod01\1eek to a fom-day wmkweek, but kept
each and eve1y worker on the paymJl P.JH10ugh most of PeJJa' s employees would
prefer to work the fuJJ w-eek, m.ost. abo agreed that tl1i5 was a more humane way to
reduce the su:rplius of labor rdati.v1~ to laying off 20°/i) of 111e workforce altogether.
Moreovei~ Pella believed J:hat the n~cession 1Nas going co be short and that govern-
1 ' "1.n lJJJ• 'n.1.0HE/
1
1ne1h Od.l<-J•
'· ' ... , p...........
"" "'"\ dJn~ '""·...i-_<U.t:·
··· c..P . -··-·01 i-1n.~;;. J.l.
.~ .. .) r .• ' - " "'. 'l r • - f-v s '- t 1 T
1 c.1.1.rc•.0«1c'1fr_1. s uu,_awLl°UC :i..u-e V\ OUJ
ld even-
hiaJ.ly translate into jnc:reased saI~s of tJ1eix 11Vindows. By not laying off workers,
the company ~Notll d be abk to rmnp up mor1::; quickly and take advantage of a
forecasted spike :in demand slrcmtly dmvn the :ro;:i.d. GJ. Increashlgly, the government
is tryk1g lo promote exacHy this type of reduction-in-homs approach to reducing
 ...
2'1 B CMAPTIER ~51 Hunvm Resource Planning and Recruitment

a labor smplus wifl1 special programs aimed at preventing p ennanent layoffs. For
example, when business at the Bristol, Rhode Island, plastics manufac\:w:'er Sm.n t
Gobai_n slowed ii.""1 2102, none of the ·workers were laid off, but many had !:heh'
hours cut by 4D%. This would have resulted in a major cut in pay for tl1e ·workers,
except for a state government program_ tJ1at helped Saint Gobain pay 70% of th. e
lost wages in return for the company keeping tl1e workers on the payroll 11-1e state
would have ·wound up paying a, sirrUla:r am.ount h1 unemployment coxnpe..nsation,
b ut this program allowed the company to hold on to experienced employees for
when the economy turns around. 111ese ldnds of "work share" progra,.--n,s have
always been popular in Europe but are now starling to be seen in the U.S . 67. ,
\/\lhile these kinds of swings ix1. labor supply and demand are not historically
uncomm. on in. the manufacturing industry, one unique aspect of the recession of
2008-2.009 was t11e degree l:o which sirruJ0x methods were aimed at profossi01i.al
workers. A "'furlough. " is a short-term elimination of paid workdays applied
to salaried workers, as opposed to "hourly workers." For example, at Arizona
State University and the University of Maryland, professional workers 11\TETe fur-
loughed for between 9 to 15 days, saving the institutions roughly $25 million. 63
Furloughs are perceived as a good strategy to employ when the employer has
an imm.ediate need to conserve money and protect cash flow, but also believes
that need will be short ten::n and tlle employees involved have skills that make
lhem hard to replace in the long term.64
. Fuxloughs are conb:oversial because, unlike most h ourly workers who go
I· home after foe assembly 'fo_'l.e stops n ..m11ing, the work of m.ost white-collar prco-
fessionals simply piles up when they leave the office for extended periods ,of
tim.e. htd€ed, a~ Arizona State and Maiylm:id, most of the professional workers
came to work anyway, meaning tl1at tl1e furloughs were actually pay cuts, not
reductions in hours. Also furloughs are controversial because they hit higher-
paid employees hm_-der than lower-paid employees, and if these pay differences
were a result: of some type of pay-for-performance system, this means Hmt thrc.
best employees take the biggest hit. On the other hand, SOffiE_!, argue that tlus
aspecl: of furloughs is achJ.aUy desirable in fue sense that those at the bottom of
the pay grade are more likely to need the money to meet basic needs like food
and rent relative lo H10se at the top of the pay system.

PIROGRAM ~MP lEM IEll\ffAlrnOi\~ AND IEVAlUAJION

The programs developed in the sb:ategic-c..hoke stage of tlle prooess ·&"'€ put into
practice in the program-implementation st.age, shown at the bottom of Figure 5.1.
A cxit:icaJ aspecl: of program implementation is to make sure that some individual
is held accountable for achievh1.g the st.a.led goals and has the necessaiy authority
and resom_·ces to accomplish l:his goal. It is also important to have regular progress
reports on the implementation to be sme that all programs are in place by specified
times and that the early returns from these programs are in line \hrit11 projecl:ion.s.
The final step fr1. the planning process b to evaJuate the results.

l-foman resourne planning is an important function that should be applied to

an organization 's entire labor force. It is also important to plan for vario1J.s sub-
groups withh1 the labor force. For example, affirmative action plans forecastand
 ..
CIHIAIPTIE~ !S Human Resource Planning and Recruitment 2~ 9

monitor fhe proporlion of various protected group members, such as women

and mii.norities, that are in various job categories and career tracks. The pro-
portion of workers in these subgroups cain then be compared -with the propor-
tion thafc each subgroup represents Ji.n the relevant labor market. Thjs type of i
comparison is called a WlmJrkfo>Jrrt:::e M~lll:fi.zall:nml\ 1rie1ri\ie';\'lT. Th.is process can be used Wigrkiforn:iz-
to. determine 1Nhethell' ifo~rie is any subgroup whose proportion in the relevant llltm~.;;n1l;n.g,lli\ R~'WOGlW I
labor market is subshmliaHy dilferccnt from the proportion :in the job category. A comparison of the I
proportion of workers
If such an analysis indicates that smm·: group-for example, African in prot:eeted subgroups
Americans--xnakes up 35% of the relevant labor :rn.arket for a job category but
that this same group constitutes o:nl)i 5% of fbe .aclual incun1bents in that job
with the proportion
that each subgroup I
category in that organization, tl1e:ri. thif:> is evidence of unde1u1ilization. Under- represents in the rel-
utilizahon could come about because of problemB in selection or from problems evant labor market
in inl:ernal movemerttt, and this could be seen via the. trnnsitional matrices dis-
cussed earlier in this chapter.
These kinds of affirmative prngnuns are of1ben controversial because tl1ey are
seen as unfaiT by many nomninorities . 65 Indeedr even some Jninorities feel that
lhese kinds of programs w.tlaiTly stigmatize H1e most highly qualified minority
applicants because of perceptions that their hiring was based on sometl:ung other
than lheir skills and abilities.66 JHowever, when the evidence provided from a
workforce utilization review Jt1nakes iJ: dear l:ha~ a sped.fie xninority group has been
histodcally unden:epresented because of past d.iscr:in1i.11ation, and that increasing
the level of representation will benefit workforce diversity and competitiveness,
then ll1ese kinds of programs axe easier to justify to all involved.67 Organizations
need to realize, howeve1~ ll1at affirmative action plm1s need to be complemented
with communication p:rognuns that dearly spell out foe needs and benefits that
tl1ese programs bring to the organization and the larger society. 68

·Ttu~1 !Humnan Resom~rnce Rell:~A~.dtm~nt P~·@cess

. As tl1.e first: half of Rhls chapter shows, it is difficult to always anticipate exactly
how rna..ny (if any) new employees will have to be hired in a given year in a
given job categ01y. 111e role of human. resource recruitment is to build a supply
of potential new hires that the organization can d:raw on if the need arises. Thus,
lnm1.;i.n ll"£som·<ee rie11:rnnbneJtll~ is defined as any practice or activi1y canied on by Human R~i>Ol\Jlli'~ia
the organization with the primary purpose of identifying and attracting poten- R11u:ru!itmrrmt
tial employees. It tJms creates a buffer bet1Neen planning and actual selection of The practice or activ-
new employees, which is H1.e ~:opic of our next chapter. ity carried on by the
organization with
Th(2 goal of fhe recruiting is not simply io generate large numbers of appli- the primary purpose
cants. If the process generates a sea of m1qualili.ed appU.can.ts, the organization of identi~ring and
will incur gTeat expense in perso.nnrd selection, bul: fevv vacancies wUl actu<;illy attracting potential
be filled. Th.is problem of generating too many applicants is o.ften promulgated employees.
by the use of wide-reaching technologies like the Internet to reach people. For
example, when Trend l\/ficro was hying to fill. a management position, it posted
an advertisem.ent on several onlin.12 job boardsr which resulted in a flood of
nearly 1,000 resumes.69
The goal of personnel recndu:nent is not to finely discri:mjJ1ate among rea-
sonably qualified applicants either. Recruiting niew persormel and selecting new
personnel axe both complex processes. Orgru.1izations explicitly b:ying to do both
at the same time V>rill probably not do either wrdl. For example, research suggests
that recruiters provide less infon:nation aboun11e company v.rhen conducting
 ...

22Q CHAPTIEIR !5 Human [\e;,;ource Planning and f-\ecru itment

dual-puxpose inte1·vie ws (inte~'rie·ws focus-2d on both recn..titing and sd.<3cii'ri.g

1

applicants).70 lJ.so, apphcay11.ts ;:1ppareni.:ly fr:member less information about the

recnribng orgm1izati.on a.Her dual-purpose interviews. 71
fo general as shown in Figuxe 5.LC all cornpanies have to m.alce decisions in
l:lm~e areas of recmiti.ng: (1) pe:rrsonnel policies which affect the kinds of jobs the
1

company has to offer; (2.) recn.1ilment sou.roes used to solicit applicants, whi<'.h
affect the kinds of people ·who apply; and (3) the characteristics and behaviors
of ll1e r.ecruitcr. These, in ilJrn, influence both the nature of the vacancies and tlbi.e
nal:ore of 1.he people applying for jobs in a way that shapes job choice decisions.

ll,Q !5~4 Personnel policies is a generic tenn we use to refer to organizational decisions Hiai:
Describe the various affect the nature of the vacancies fox which people are recruited. If t11e resea.rch.
recrn itment policies . ·i rna_tces
on rec:rm.bnerc 1 ,,, .
on.e l.J1J.ng c1.e::u~
··1t· 1s
·r •.. r11
.~oat Cil.aradenstics or : i.e w;.caJ1.cy are
that organizations
more irn.portant H1ai-i. f{'C:ru.iters or recrniting sources ~vhen it comes to predid-
adopt to make job
v;icancies more ing job choke.
attractive.

~n-rternai~ versl!;!s ltJtf(rnl\\~ ~ ITT\~(ij'Rfti·~iITU91: JloR» '.Sea:vi!fit)f

One desirable foah.rre of a va.cwncy is J:hal: ii: provides ample oppori:urrity for
advancement and p:rnmohon. On.e organizational. policy that affects this is the
degree l:o whidl the co1npany "promotes from "\Ni.thin"--that is, n~c.ruits for
upper-level vacancies inter.n.aUy ralJ1er than externally. Indeed, a survey of MBA
students found that !J1is lNas their top con.si.derniion when evaluating 31. com-
pany.72 Promote-from-\llrithin poiides xnake it clear to applicants H1at there are
opporh.mities for a.dva_ncern'2nt vvithin the cornpany. TI_1ese opiJorhmities spring
not just from the first vacancy buJ fr01n the ·vacancy created. when a person in
the cmnpa.n.y fiUs that vacancy.
For example, Cisco Systerns u:3es a program called "Talent·Connectio:n" to
help identify internal candi.dates for jobs within the organization that have
tradHionaUy been staffed by outsiders. About half of Cisco's 65,000 employ-
ees have created profiles that are stored in the program and tliese can be easily
searched fo:r matches vvhen a new oper..ing becomes avaHable. Mark Harnberlin,

f~@IUJn"l:f:l 5,4.
Overview of
the Individual
Job Choice-
Organizational
Recruitment Process

' .
- - - - -- ----

·\
 ...
CHAPT!ER 5 Human Resource Planning and Recruitment 2211

Vice President for Global ::;t3fljng ail Cisc.fJ, notes t.hal: !-he program has "saved
the company millions of dollars in search firm fees and other recruiting costs
while at the same hme, <:-u1ployee safr:;Jaclion with career development has
risen by 20%."l\. similar prog-ran1 G.iJled "Inside First," developed at Booz Allen
Harrrilton, helped. increase internal staffing from 10% jn 2008 to 30% in 2012.
While these programs air;c:· v.ery popula_r with employees because they increase
job w2curit:y and prornolfon opporhu:Jities, the only d.ovvnside to this type of pro-
gram is pushback from cm>reni n1<:magers of ~rnployees who are recruited away.
Many of these ernployees ar.e top performers in lhe cux:rent units and some man-
agers often bristle al: the los::; of these ind_ividuaJs.'73
A good exa.i.-nple of: th12 pm111er of tapping internal souxces of recmits is pro-
vided by Echvards Lifesci~nces, a medical device maker that has grown an aver-
age of 7% a year for the lasl 10 yeHrn. Edwards Uiesciences' workforce planning
model begins 1/\Tith tfo~ identification of the '7!5 n1ost critical jobs in the company
and then identifies two or threE: individuals that vrnuld serve as potential excel-
lent replacemen!B o:r ::;ucc:>:3rm:ii::s for the person currently occupying that job.
IdentifyinQ; these inteniaJ Gixididates eadv aUows the furn to invest in them
- ~ J

slowly, but surely~ providing th~~n1 •Nith extra t:rainfog boH1 in technical areas and
genera1·o1eau.ers.tup
Cl l • s1u"Jo.1.s. ""'l
1ms • g:i.ves
' tne
l company a d_eep uenc1l " from w hid·1 to
lfl....

clrmi11 talent, and indeed rnon~ than '70% of its rnost critical jobs a:re staffed from
this bE'~nch. 71111.~c potenhaJ .for E:xtra 11-ain:ing and the hope of upward advance-
ment is a highly ni.ofivating (~le:ment. of the cu:ltu.re and helps keep attrition and
turnover to smne of thre lowest rah::s in. the industry.
In addition to employi:.ng prornote fron1 v\rithin and internal recruiting sources,
perceptions of job secu.xity ::i1Ki tong-l:enn cornmihnent to the organization ru:e
also pmmoted by "'due process pol.ides.'' JEmmpfoymrenh~.t-1ritiH polides state 1Emplo1>ml);lii1t·
lhat either party in the em.ployr.nent relationship can terminate that relation·- at-Wn~I ltl'o~n~n~i;,
ship at any time, regardle~.3s of cause. Cornpanies that do not have employment- Po/ides which state
at-will provisions typically have -extensive due process policies. Due process that either an employer
or an employee can
polidcs formally lay out the steps an employee (:an take to appeal a termination . terminate the employ-
decision. Organizational recruHin.g materials that emphasize due process, rights ment relationship at
of appeal, and grievance :mechanisms send a message that job security is high; any time, regardless of
employment-at-will policies suggest the opposite. Research indicates that job cause.
applicants find companies with due process policies more attractive than com-
panies V\.rith employment--al:-1viU policies.75 Dl!Jle IPro~f'il!m
l?olicire::o
Policies by which a
company formally
IE1<'twn011sk am1d ~rnrtrnlfllsk fli'.t:wm·1u1s lays out the steps an
Because pay is an important job characteristic for almost all applicants, compa- employee can talce to
nies that take a "lead-the-1n_arl\f2I:" approach to pay-tl1at is, a policy of paying appeal a termination
decision.
higher-than-cur:renl:-market •NageG--lmve a distinct advantage in recruiting. For
example, Matt f"\Toon, owner of :Noon Turf Ca.re, a fast growin g start-up with
50 employees i:1Hd '.f!tJ mj[lion in I'•2Venue, struggled to find any experienced tele-
marketing employees when he 1Nas paying $25,000 per year for the position.
·when he changed that fig1m-: lo $45,000 per year, he was able to hire foul" highly
qualified individuals who more than made up for the pay difference when it
came to generating additional revrcnue.76 Pa.y can also make up for a job's less
desirable features-for example, paying higher wages to employees who have to
work midnight sfofts. These kinds of ~>pedii.(~ shift differentials and otl1er forms
of more generic compensaJi:ng differentials 1Nill be discussed in more detail in
 ...
222 CMAPTIER 5 Human Resource Planning ;;1nd Recruitment

later chapters t11at focus m11. compen sation strategies. We merely note here that
"lead" policies n1ake aD.y gi.vien vacancy more attractive to applicants. Indeed,
as we see in the "Competing through Sustain ability" box, what appears to be
shor tages in labor supply for certain positions often can be 1.J:aced to a mismatch
between the pay associated ·wiiJ.1 the job and worlrJ.ng conditions.
There are limits to what can be d01:1e in terms of using pay to ath·act people to
certain jobs, however. For example, the U.S. Ann y, because of the recent w arn 'in
fraq and Afghanistan, struggled and faUed to meet its recruiting goals for new
soldiers, despite offering a $20,000 signing bonu s and a $400 a month raise in.base
pay for in.fan.try posi1ion s. As General :W.l.ichael Rochelle, head of Army recruit-
in g, notes, "Vve can't get sta.rted d.011\Tn a slippery slope where we are dependii1.g
on money to lure people in. Th e reality is that wh.He we have to remafa at least
competitive, ·we're never going to be able to p ay as much as the private sector. "
To offset tl'l\is d isadvantage in exh·insic financial rewards, the Army has to rely
on m ore intrinsic rewards related to pah·iotism. and personal growth oppmtuni-
ties ~hat peop le associate ·with m.iJitary service. For example, RocheUe suggests
th at "ifo::- ildea that being a soldier sh·engthens you for today and for tomorrow,
for whatever you go on to do in. Jj.fer that clearly resonates w ith them," a:nd tJ.1us
this serves as an alternative mean s of appealing to recrnits.77 The Alm,y' s Part-
nership for Youth Su ccess Prog:nnn uses this idea to match recruits wi.t11 private-
sector employers who are interested :in h.ixing former soldiers who have received
th e skills and experiences that the Army provid es.
The AJTmy also uses partnerships to help retain cuTrent soldiers, a.t1.d one of
these focuses on spouses. Beca use of llle short-term nature of militru.y deploy-
ments, spouses in the m.ilitar.y have often struggled to find stable employment,
and because marit.:aJ discord is a primary negative influence on reenHsim.ent,
helping the spouses of soldiers can in turn promote retention. The Anny part-
ners with finns like Home Depot, Sp rint, CVS, Sears, and Dell because th ese
employers have many branches in different parts of the country. 1hus, if tl1e
sold ier is forced to redeploy from one base to a.nothe1~ the private company 1nay
w ell have openings that v11ould allow lfo: spouse to simply transfer from one
branch to another. Partnerships like this help support soldiers bu t do not neces-
sarily result in direct competition on p ay ·with respect to private employers.78
Home Depot has this sa1ne type .of recn.tlting partnership with other organiza-
tions such. as the A,m_ericanAssociati.on of Retired Persons (AARP). The AARP signs
up jnterested members as part of a database and then works with Home Depot to
find suitable jobs for if:s members. Because many AARP members have outside
incorn.e fTom pensions or Social Security, competition on wages is not as signifi-
cant a facJ:or for this .segment of the labor force as it is for young~r workers who
axe raismg families. Moreove1~ Home Depot's 0V1r.n research makes it dear that i.he
h . rrnover and absenteeis1n rates are lower for older workers than for their younger
colleagues. As Home Depot's CEO notes, "1,A!hen you look at the l<nowledge and
cm:eer experience, and the passion.of ifo~ me1nbers of the A.ARP, this is a gold rn.in_e
of resouxces to draw upon, ari.d this helps us gain competitive adva.ntage." 79

ijma~e
.
Adwertnsnn(9J-
Organizations often adverti.se specific vacancies (discussed next in l:he section
''Recruihnen~ Sources"). Sometimes, however, organizations advertise just i:o
promote themselves as a good place to work in general. Image advertisjng is
particularly impo:rtant for com p anies in highly competitive labor markets that
 Some o f th e b enefits of p o lit i-
cal and econom ic integrati o n
in the European Un ion (EU) are
more o bviou s t han others and
t here for eve ryo n e to sei::J . Fm·
e)<amp le , fo r EU citize ns g o in<J
on ho liday in Eu rope, it no lon-
ger mean s w aiti ng at custom s
barriers to e nte r into a c o unt ry
and the 3 2 7 mill ion people
who come from count ries
using t he Euro no longer n eecl
to change m on ey from one
currency to another. \/Vith t he
barri ers down g oods and se r-
vices can move free ly fro m o ne
membe r country to another
and everyone win s b ecau S<::':
adm in istrative red ta pe is mi n i-
mized and t he whole pro cess
spee ds up . How e ve r, 1Nhen it
com e s t o the m ovem e nt or
p eople, and ·specificall y la b or,
then it is qu ite a different
matte r. Economic mi g ratio n
is noth ing nevv and th e reac-
t ion b y t h ose affe cte d b y it is
noth ing n ew eithe r. Hist ory is
littered w ith inst an ces of " c om -
in9 ove r h e re and t akin g o ur
jo bs " . The t ruth of t h e n1 atte r
is very diffe rent. ..
Th e re are not m any t im e s
w hen th e naturally Eurosce p ti c
British h ave ca u se to ch ee r
a p iece of European le g isla-
t ion but the acce ssion of t he
former Comm unist countries,
or t h e A8, h ad implicati o n s fo r
Britai n's househ o ld e rs. /\. lack
of plumbe rs a nd oth e r skill ed
w ork men had m e ant p e opl e
in Britain had b ee n payin g
high pri ces fo r t h ei r se rvi ces.
Howev er, now fre e to m o ve
across Eu rope, th o u sands o f
you ng wo rke rs trave lle d from
Easte rn Eu ro p e to th e UI( to
ta ke ad va nt ag e of these con-
diti o n s, rnaking t he ma rket
mo re cornpetit ive and driv ing
costs d own.
One of th e m ain wo rrie s
about th is 1Nas th at su ccessive
waves o f e co nom ic m ig rants
v1101..dd b rin g wage levels d own
t o t he b are min im u m fo r hom e
workers and re pat riate all
m i9 ran t e arni n g s back to th e
m othe r co unt ry. So vv idespre ad
was th is fea r in Europe that
in France t h e ' f\to ' campa ig n
aga inst t he 2005 Europea n
co nstitution , w h ich sought
to b r in ~J Europe even cl oser
together, saw an u nl ike ly al li-
ance b etvve e n the far rig ht and
t he fa r left u n iting t o save th e
Fre nch ele ct orat e fro m th e fea r
o f t he ' Po lish Plumber' . How
pivot al t h is was in the rej e ct ion
o f t he European co nst itutio n
is n ot cl e ar; hovvever w h at it
does tell u s is th at w h i lst free
movemen t of labor is seen as
a pl us in t h e economi c t e)(t-
books , w hen pl ayed o ut in
pract ice t h is represents a ch al-
len ge at a societal lev e l.
Even wit hout t he aband o n ed
European constitutio n, since
20 04 a co mmon sign o n Brit-
ish shop pi n g st reets has b een
'Po lskie Delisksy' : a Polish
delicat essen, t o serve t h e Ul<'s
b urgeon ing Po lish popul at io n.
In some pa rts of Brita in t here
has been an infl ux that has p ut
some sm all ru ral com m unities
u nder st rain. Lincolnshire is an
area in Britain t h at\•..
·:;,, ~
survives p re d o mi-
n antly o n fa rming and
th e need for p eople t o work in
th e f ields is con stant but the
loca l pop u lati o n is un able to
fil l t he g a p . T he rnis1 rant vvork-
ers from across_ East e rn Europe
m et this nee d b ut t h is also
cau sed so m e resentment. The
last t im e t hese p arts of Britain
h ad to d ea l w it h such a h igh
level of p opu lation change vvas
d uring t h e Second W o rl d War
wh e n United Stat es an d Cana-
dian se rvi ce m e n 1Nere st atiorn:id
t here prio r to the invasio n of
m ain land Europe. in all by 2009
British G o ve rn ment fi g u res
sho wed t h at j ust ov<.::r o ne mil-
lion n ew imm ig rants had come
fro m the AS cou ntries; around
78% of t hese vve re ag e d
s
b etween ·1 and 34.
Howeve r, d e sp it e t he fears,
a 2009 Local G overnrnent
A sso ciatio n rep o r t in the UI<
e choed what othe r aca d em ic
stud ies had foun d-th pt the
w aves of em igrati on t o the Ui(
by worke rs from t h e AB coun-
t ri es had n o rea l impact on
wage rat e s for British worke rs
and th at th ey w ere competi n g
aga inst other Easte rn Euro-
pea n im m igrants fo r jobs tha t
th e Brit ish d id not vvant to do.
Th e econom ic d o wntu rn and
th e weakenin g p o und m ay
h ave con v in ced man y Eastern
Euro p eans t o return home but
fo r many th e 2004 and 2007
enlargem ent o f t he EU h as
b een a p assp o rt t o a new life
an d fo r m an y e m ploy ers across
CONTINUED
223
Europe ii: has kept their busi·- 2" V\/hat arr.:: t he actual benefits
nesses thriving. of econo mi ~= migration in
the EU?
IDRSiC!lJS;:J;iO!Nl QUJIE:ST~(1.)R"'11lS .:;!\. f~eflect on youi· response
'11. Why has economic migration to the first two quest ions;
been perceived as a threat l:o hmN do you see the global
dornestic worker$? recession and crisis in l:he
Eurozone affecting economic
migration in
Europe?
SOU RC E: Polish immigr::i-
tio11 to th e UK: Wild claims
clon 't a.dd up. The Guard-
i'3n 29/04/10; Th e lmpilct of .
Recess ion on Migrant Labor. Local Govern-'
ment /.l.ssociation, January 2009. '

perceive themselves as ha.ving a bad. linage. Indeed, research evidence suggests

that ll1e impad: of compax11y image on appli.cant reactions ranks second only lo
the nature of the work Hsdf DO
For e5<ample, in. a d:iJ{erent context, 111 the '!Nake of the Jerry Sandusky se;( sc~n­
dal ai: Pennsylvania State University, 1he school found it inc.reasingJ.y cli.ffi.cuJt 1o
recruit ouJL-of-state students. As one accepted student from Chicago noti:dr "'D.l.e
reputation of Penn State has taken a hit lately." Reo:uiting out-of-state students
Ji.s critical i:o Pelli"".1 State because it receives just 6% of its revenues fron1 th.e slate
and non.residents pay up to $12,000 morrc; per year relative to Pennsyivaman.s.
'Du.ls, when out-of-sl:aJe studienl:s' iensoJlments fell from 36% to 24% this v\'a.s 21,
major hit to r12venue. In order l:o r:nalce up for this i-eputational damage, Penn
State wound up lowering acceptance standards and sent out more tfom ~tOOO
acceptances for nonresidents relalive lo the years prior to ihe scandal. 81
Even though it does not provide any fruonnation about any sp~~cific job,
jmage advertising is often effective because job applicants develop kleas about
ifo~ general reputation of th~ fir.rn. (i.e., Hs bnmd jmage) and then this spiUs ovr.::r
to influence their exped:ations about Hi.e nature of specific jobs or careers at lli.e
o:rga.nizahon.02 Research suggests that the la.:nguage associated wiiJi. the oJ:ga~m­
zation's brand ii.mag12 is often similar to personality trait descriptions Hlat one
mjght more conunonly use lo describe anotfo~r person (such as i.nn.ova.live or
competent or smcere). 03 These perceptions then influence the degree to which
the person feels attracted to JJ1e organizalion, especially if there appears to be
a good fit beiv,reen the trr:frlts of ·the applicant and the traits that descdbe the
organization.13 4 Applicants seem particularly sensitive to issues of diversity ari.d
inclusion ix1 these types of advertisements, and hence organizations that adver-
tise their image need to go out of theix way to ensure tl1at the actors jn t11eiJ:
adverhsements reflecl: the b:road nal.1.m:: of the labor market consi.ituenc:i.es tha~
they are trying to appeal to in terms of race, gender, and culture.85
111ere are an infinite number of wa.y for firms to hy to project their image, but
increasingly this is being a.ccom.phshed at the organization's own webs:i.te. ln
fact, one :recent study hi.ed. to determine if the media used (pictures versus video)
and t11e nature of the people porlTayed :U1 the media (homogenous or diverse)
had an impact on appJicant reactions to a firm's website. In this study, resecu:ch-
ers randomly assigned a large sample of upper-level college students who v1rei"e
seeidng jobs to one of fom different experimental websites tl1at included (a) text
and pktures of current employees who were homogenous, (b) text and pichrres
of cur.rent employees 1Nho 1Arere racially diverse, (c) videos of cmrent emp~oyees
who weire homogen.ous, or {d.) videos of cuJ:xenl.: employees who were racially
diverse. 111e students V1.rere th.e n asked to respond l:o a number of items that
dealt with tl1eir perceptions of the company's image.
224
 ...
CHAIPTIER 5 Human Resource Planning and Recruitment 225

Th~~ iiesults of this sv.udy proved that appli0:u1!:s v\Tl10 saw 1rideos rated the com-
pany higher in innovaliveness. siJ'k~, and dominance, and lower in tenns of cost cut-
ting and thriH. In addition, for applicants that were raciaJ minordies, lhe websites
tJial presented a diver."le sel~ of employees ab o resulted in higher rnti.ng of innova-
tiveness and style, and lower rating in terms of cosl: cutting and thrift Tirns, it seems
that the11e js n:~al value added in tenT11s of image projection by tl1.e added expense of
producing videos, especially those involving racially diverse emplo~eesJl6

The sources from ·wh.i.ch a colnpany recnxiJs potential employees are a critical iLO ~~!$
aspect ·of its overall recrui~rnent strategy. The type of person who is likely to List t he va rious
re:;pond to a. job adverhsed on fd1e Internet 1n ay be different from the type of sources from which
job applicants can
person who responds to an ad iJl IJne dassified secJ.jon of a local newspaper. In be d rawn, their rela-
this section we exa1n.i.ne t11e different sources from which recruits can be drawn, tive advantages and
highlighting the advantages 3.Jl-Pd disadvantages of each. d isadvantages, and the
methods for eva luating
them.
lrntenil.ai~ ~1errs1U1s !EK~eriill.ai~ :StiJlm·n~s.
1/lle discussed internal versus external soun:es of rr::cruits ea.dier in this chapter
and focused on the posilive effects that iJ1t.ern2J recn;iiting can have on recruits'
pl~rcep tions of job securily. Vi.Te ·win nmv discuss this issue again, but with a focus
on hovv using internal sources affr..::cls fthe kinds of people vvho are recruited.
ln genera.I, relyiJ.1[~ on in~erna ~ sources offers a cornpany several advantages.
First, it generates a sarnple of appbcants 1Nho are well knm.N:n to tl.1e fom. Sec-
ond, lhese applicants are relatively knov1rledgeable about H1e company's vacan-
cic:>, which rnirumizes JJ.1e possr!bility of inllated expectations about the job.
Third, it is generally cheaper and faste.r to fiH vacancies i..nl:en.1ally. Indeed, as
the "Evidence-Based HR" bmc shows, when .iJ com.e s to hi.ring CEOs, internal
applican ts outperfon:n otitsiders on several different criteria.

When it comes to deciding on recruiting an insider or ouisider .for the orga-

nization's top spot, the evidence is quite dear that outsiders often struggle to
adapt to their nev11 role. For example, 1Nhen it comes to tenure, CEOs hired from
outside the company average fom years prior to departing compared to five
years fo:r insiders. Jn addition, vvhen it comes f.o being forced out, 35% of out-
sider CEOs get ousted after less lhat"'l thxee years compared to 19% for insiders.
Finally, when H comes lo rehun on investment, companies with an internally
hired CEO outperformed than those with an. outsider by tl.1%.
This evidence helps explain •Nhy in 80% of the cases, firms wind up hiring an
internal can.didale for th.fa cri~icaJ position. Experts attri.buJe this difference to
inGiders' enhanced ·fantlliarity ·with key peTsonnel and a more nuanced under-
standU-11.g of the organization's culh.ise. As Per Ola Karlsson, Booz Hamilton's
managing diredor of Eurnpe.. no-i:es, "It takes a Rong time to really get to under-
stand hmv a company work3, and insiders havit:' a beUer ability l:o understand
how to effect change with.in ;-m orgmru.zation fl1an outsiders typically do."
SOURCE: L Kwow, "Chief E><ecutives Hired lnte rnallir O utlast, Outperfo rm Their Ri,.•als," The Wa ll Street Journal
On!irH?, May 30, 2012.

226 CHAPTEf~ '.)
Dnw£·c1t f\r,Olpttk<i11;i·it£;
Peor;IG who apply for
a job vacancy withoul:
prompting frorn the
•or:;i;mi;:atio11.
IR00fawriiiltt%
People w/10 an~
prompted to apply
for a job by someone
within th'> organizatioP.
...
Hurnan l~esouru~ Planning and Recrnitrnent
VVith all these advantagi::s, you might ask v1rhy any organizaiion wouJ1d ever
rc;Jnpioy e;-cternal :recruiting methods. There are several good reasons why orga-
n~?::ati~)i~;:; :crlip;ht decide to recruit externally. Fixst, for enhy-level posit.ions and
perhaps 12ven1. for some specialized upper-ievel positions, there may not be ru"'lJ'
inJer:rwJ recruits from which to draw. Second, bringing in outsiders may expose
the organization to new ideas or new ways of doing business. Using only inter-
nal ro2cn;itm.ent can result ill a. 1NorJr---lorce whose members all think alUce at'ld
\Nho H1en~for<:: may be poorly suited lo innovation. For example, for most of
jts lOO-year hislo:ry, retailer JCPeimey foUmved a pradice of stricl:ly promot-
i11g froro witl·•jJ1. Thjs led l:o a very strong culture that in many ways was stiH
dos(;Iy related to J:he one first established by JCPenney him.self in the late 1800s.
The: crnnpany' s linage was very conservative, and the behavior and attire of iche
crnployees was very formal. This culture made H difficult to attract and retaii11
youu.ger workers, however, andJhe accounting department estimated that turn-
over /\ias cosl.ing IJ1e company $4:00 million a. year. To stem the tide1 JCPenney
1
l.nought in an outsidell~ :i\1:ike Ullinan, as the new and his first steps in redirect~
1
ing ihie company were to loosen up the culture ai.-i.d hire more outsiders into key
Inanagcnient positions. 111fts was cenh'al to the CEO' s new competitive strategy,
in l:he sE~nse Hi.al:, in U1Jman' s own words, "fo retailing today, you have to realize
iJnere ;ts too much property ai-:ld too much merchandise--what there isn't enough
of JS tal.ent ll I had a dloke to honor the past and lose, or move forvvard an.d
1Nin, I pick ~vinning." 57
.FinaUy, recruiting from outside sources is a good way to sh·engthen one's
own company and weaken one's competi.torn at tl1e saIUe lime. This slTategy
so2rns to be particula:dy effective during bad economic tirnes where "counter
1
cyclical hiring" policies create once-i11-a-Jlfetime opportunities for acq,u..U:ing
;1~11ent.m 1 For example, duxjng the mosil: recent recession, many firms that were
!op perfox,mers-and I11ence able to weather the storm better than theb: lower~
perfon:nin~g competitors-viewed this as an excellent opportunity to poach t.he
highes·~-perfonning indivkluaJs within slTuggling companies.89 Thus, for many
organizaiions, limes of crisis and turbulence are actually the best time for fchem
i~o sh]n1:: by leveraging theix nuTent talent and success to bring in more talent
and achieve even greater success over t11e long term.90 In fact, having one s 1
1
employt:c::; "poached.' by another company Gill be so devastating that, as tlw
jnlegnl:y
/tlf •
m.
• A· chon
· rr 1Jox s11ows, compaiues. go to great 1engths· , perliaps even
jUeg;;il or 1u1eth1kaJ. lengtl1.s1 to prevent this from happening.
~:» ur1rern:ri: Aplfllikaii1ts afill!l:il n1efonra~s
Duxed <n. 1ppRii.caJJ.11.~a are people who apply for a vacancy without prompiing from
H1c organization. RdeJC.Q'.<!\hi' axe people who are prompted to apply by someo:ne
·wi~h5xi the orga:niza!ion. TI1.ese two sources of recruits share some charader:iislics
that make them. exoelle:nt sources from whkh l:o draw.
Firs!:, :nw:ny direct appLkants are to some extent ah"eady "sold" on the orga-
niz:ation. Most of them. have done some hmnework and concluded that there
is 1~nough fit between thernselves and the vacancy to warrant H1efr subn:rit~
ting ;:v1 <-1pphc:ahon. This process is caUed self-selection. A form of aided self-
selechon~ occurs with referrals. Many job seekers look to fdends, relatives, &"l.d
.,
.
In the constant war for talent
in Silicon Valley, poach in~J the
best pm~Jrnmmers away fron1
one's compf?tition is a common
strate~iy and "cold cal l in~( i'.;
the central tactic employed 1:0
mmcute that strategy. Cold call-
ing refers to the practice when~
recruiters from 0 1112 company
ca ll an employee of some oth,~ r
company 1Nho has t he skills i:hey
need, and try to get that person
to switch sides. Thus, rat.her
than search For new employees
among those tl~at do not have
jobs and are lookinsJ for wmk,
cold callers search the pool of
Feople who have jobs and ;;ire
not looking for work. Obvio1.1:3ly,
to move a person who is ba:;i-
cally happy and not lookin<_:Jfor
workcosts mon ey, and this can
IPad to bidding \Mars that clrilfe
up salaries and e mployers' costs.
One t empting way for ony'1-
nizations to avoid this outcorrn:-;
is to come to agreements
where they all refra in from try-
in9 to hire employees away
from each other. For e)(ample,
when an employee at Adobe
(whose CEO at t he time was
Bruce Chizen) received a cold
call from a recruite r at Apple,
an Adobe Human Resource'.;;
El<ecutive sent an e-mail to the;,
cold.caller stating that "Bruce
and Steve Jobs have an agree-
ment that we are not to solicit
ANY Apple employees and vice
VE·rsa." In another e-mai l, after
receivin~1 a telephone call from
Jobs regarding a cold call to
App le originatinS;J at Google,
CEO Eric Schmidt fired off an
(o--rnail to his Human Resource
staff that stated, " I believe we
ha\ie a policy of no recruiting
frorn Appl(:>-" Schm idt told his
HR un it to " g et this stopped
and let m e know why it is
happening."
,As tempting as this kind of
ag i-eement mighi; be, however,
this way d "competing" is
actually considE')recl "anti-
cornpetitive ," a nd the e-mails
described above were at the
cent.Ar of an anti-trust lavvsu it
f iled against /-\pple, Google,
J\dobe, Intel, Pi1c<1r, Intuit, and
Lucas·-·fil m that charges these
firms wi:h col luding to restrict the
free movement of labor and fix
wag(.:cs. Clearly, once all the cold
calls sto1::i, any employees' hope
of gettin(J i:l nevv and better job
or levernginq this opportunity to
91at a raise or better assignment
is squelched, and this hardly
::;eerns fair. Indeed, som e of the
e-ma ils e)(changed clearly sug-
g(-:ist that: the employers recog-
nized this type of collusion was
problematic. For e)(ample, Intel
CEO Paul O'Tellini wrote in an
intf-::n1al memo regard ing a pact
1Nith Google, "Let me clarify:
\Ne have nothing signed. We
have a handshake 'no recruit'
agreement. I wou ld not like this
broadly known."
In contrast, other e><ecu-
tives took the ethical high road
\/\lhen it came to responding
to these kinds of offers. For
example, Palm
Inc. CEO Ed Col-
ligan responded to
an offered agreement by Jobs
by stating that "your proposal
that we agree that neither
company will hire the other
company's employees, rega rd-
less of the individual's desires,
is not only wrong, it is likely
illegal. " In the end, Judge Lucy
Koh struck down the la1Nsuit
as fi led, suggesting it 1Nas too
broad in trying to cover over
100,000 workers. Hmll/ever, at
the same time, she welcomed
the lawyers for the plaintiffs to
refile a more focused compla int,
noting that "the fact that all
si)( identical bilateral agr-ee--
ments were reached in secrecy
among seven defendants in
a span of two years suggests
that these agreements r·esulted
from collusion, and not from
co incidence."
DISCUSSIO!i'A- QU~S1r!OIM
Why is having one's best
employees "poached" by a
competitor such a devastat-
ing event and what steps can
employers take to prevent the
loss of their top talent other than
engaging in secret collusions
that may violate anti-trust laws?
SOURCES; M. Wohsten, "Gentlemen's
Agreements," Lansing State Journal,
Jan uary 29, 2012, p. 13A; C. Albanesius,
"Judge Refuses to Toss Anti-Poaching Case
Against Apple and Google," PC Magazine
Online, April 20, 2012; S. Lynch, "Google and
Apple are Safe from Anti-Poaching Laws, But
Not for Long," Silicon Valley Business Journal
Online, April 5, 2013.
227
---------
22'.2 CHAiP'tt/EIR 5 Human Resource Planning and Recruitment

. '
acquafotances i:o help fin d employxnent, and evoking these social rn:"ll.ATOrks ·
can greatly aid the job search process for both the job seeker and the organiza-
tion. Curren!: employees (·who are knowledgeable of both the vacancy and the
person tl1ey are referring) do their homework and conclude that there is a fit
between the person and the vacancy; 1J1ey then sell the person on the job . These
kinds of "word-of-mouth" endorsements from credible souTces seem to have a
particularly sfrong effect early in the recruitment process w hen people axe still
unfocused :in their search process.91 Ironically, as more and more recruiting is
accomplished vi.a imperso~~al sources IiJ:r::e ths 1nternet, the ability to dra•N on
person al souxces of information on :recruits is becoming even more valuable. At
companies like Sprint, the percentage of new hires from this souxce has gone
from 8°/o to 34,% in the last three yearn alone.n
fo the war for talent, some employers who try to entice one new employee
from a compelitor will often try tp leverage that one person to try to entice even
more people away. The term "liftout" has been coined for this practice of trying
to recruit a whole team of people. For example, when Mike Mertz was :recruited
as lfo:~ new chief executive at Optimus, a computer servicing outfit, within hourn
of leavints his former employer, he in t11n1 recruited seven other former col-
leagues to join Oplirrms. Uftouts are seen as valuable because in recn ..1iiing ill
1Nhole intact group, as Mertz notes, ''You get the dynanucs of a functioning team
·without having to create th;;it yourself." 93 Indeed, the team chemistry and (001'-
dmat ion that often takes years to build is already in place after a hftout, and
this k ind of speed provides competitive.advantage. Of course, having a v1rhole
team Ufted out of youx orgax11ization is devastating, because customers are fre-
quently next to leave, foHowing the talent ratl1.er than standing pat, and hence
finn s have to work hard 1:0 make suxe that they can retain their critical teaJms.
It is ironk to note Hi.a t at a time when technology makes it easy for job appli~
cimts to send out x-esumes and easier yet for em ployers to search for resmnes,
most appHcants still find jobs via referral and word-of-mouth. Indeed, tech-
nology makes it so eas}r to apply for jobs, that many employers are ofl:en so
inundated with applicaiions H1at, as lfo:>: "Competing thTough 'Technology" box
Uluslrates, they are forced to u se crude technological screening measures in
order to stem tl1e tide. f aced 111rith this uncertainty, a recommendation from a
wdl-know1n and well-regarded current employee goes a long way in terms of
streamlining the decision-making process.94

Au:llv~rtnsemellllts RITT\ N®wspt!]IJJlre11:s a!lui l?eir§~dlicab;

Advertisements to recruit personnel are ubiquitous, even 1l1ough they typically
generate Iess desirable recruits than direct applications or refefl'als-and do so
at greater expense. However, because few emp loyers can fill all theix vacan~
des with direct applications an.d n~ferrals, some form of advertising is usually
needed. Moreove1~ an en1ployer can take many steps to increase the effective-
ness of Uus recruitment method. ·
The tvlro most important questions to ask :in designing a job advertisement are,
What do 'We need to say? and To whom do we need to say it? With respect to il:he
first question, m.any organizations fail to adequately communicate the spedJics of
the vacancy. kleaJJy. persons reading an ad should get enough information to eval-
uate 1he job and its requirements, allowing them to make a well-informed judg-
men.t regarding their qualifications. 1ld.s could mean running long advertisements,
which costs more. I-fowevel~ these additional costs should be evaluated agamst tl1e
··ltis a rarrc and 1NoncJ<c;rful ev•,=:nt
when an ernployc'r who !:,; r<:x:ruit-
in~j for a job openin9 ~](:'t::: ::1
number o: qualified application:;
:hat are "j1x;t ri 9ht. " In rnosl:
cases, and esp(::ci;:1 1l/ durinq
1.-~conornic downturns, 0n1ploy-·
er'.> an:> inundated with far toe
many 21pplicanl:s. F-0 1- e><ampl<::. in
2012, St<:irbucks attracled o·,rer?
million npp!ications for rou'.:Jhly
6,000 position::.;. Procter and
Gamble reo')ived owr 1 rni!l ion
npplicaiions for 2,000 op0nin<;is.
Te)GJ'.; F<oadhousc:: rc~staur;:1nl:
chain ruut:irwly receiv(~'=' 40(1
application:> within the fast :24
hours of k;tin9 a '.~ inglrc-, op(=;nin~+
F';:i1i of this prnbk")rfl is Git.bed
by nnvv technolo9y. For e)r_;:irn
pie, with today's technology,
people can often apply fo1 <l job
with one click of a rnousi.::. That
i'.;, people witl·~ accounts at soci<01I
netvvorking cites like Linkedin
can forward their profossioria l
irrforrnation to an employer
postin9 a job by simply hiLfr19
the "/~pply Now" link. When
c:orrfronted 'Nith the probk-)1T1 of
too 1T1any applications to scn:?Gn ,
most organizations lypically tum
to "applicant tracking system'.>"
that: e:d edsonica lly sift thmur;1h
th e haystack to find the needle.
The fonnulas that S:JO into thr.::se
pmqrc:nns ck~rn ons l:rate how
orqanizations try to rnatch
people to their jobs and or~}+·
nizations, and knowinq these
cosl:~1
of processing a huge n1.:unber of appli.cants v1rho <:u-e not reasonably qualified
or who vrould nol find the job ao::eptable mice llvq learn more about it.
In tenns of whorn to n:aclt will-1 t}ij.s rne:3sage, the: organization placing the
0dvertise.m ent has to decide 1Nhich rnecli.um it vviJJ. use. The classified secli.on
of local newvspapex-s i.s the rnost cornrnon :nl.ei:fouTl. H is a relatively inexpensive
kwrnul;:is can h(0!p you "be the
needle" 1111h(::n applying for a job.
The firs.t step in th is process is
tc rnake surr=" ihat your applica-
tio~ is structured in a way that
is ec-;sy for the rxogram to reacL
Sirnpie stream lined presenta-
tions that minimize the use of
~ir~iphic:; o r comp lex tab systems
aP2 best a~ this stage . You may
%'at-rt i:o avoid the terriotation
I
to siei cwe rl y creative and try to
stand out as different or unique
at thi:s stage of the proces:>.
Tho m'))'I: step is to study
the posi:e:d job description and
th? web >it<=: of the employ 2r to
1 1
mab;, :11_1rl", you cl<")Scribe your
characteri stics in ::1 way that the
soft1•van:: : p ro9r;:1n-1 will rr::,0 cognize.
The · 111ord~' in )'Our application
should rnin1ic thi;-~ words in th e
job descripi:ion and the vvords
that describe the organization's
cu lture on their vvebsite. If th<?.
job description says "account
n-1a na9er'' your application
needs to show specifically how
you "manaqed accounts" using
those precise words, as opposed
11
to saying thai: you 1.Norked
with clients_" If the company's
vvebsite says it values "innova--
tive thi nking, " then you need to
be an "innovative thinker," not
someone who is "creative."
The final stPp is to make
sure you describe your past
educational experiences and
work e)(periences in a 1Nay that
tri~1gers that algo-
rithm. Many programs
sea rch for the name:;; of presti-
gious universiti8s or tho:: names
of large employers such 21s For-
tune 500 cornpa ni<c1S. ()bviously,
·if you hav1= this experience, you
need to make sure i:his is dear.
However, if you works-cl frx a
small company that supplied a
I ..... ~ con-1par•v
l Ct.,.·qp. I _ . ~r o,· 1"1: ''1°"1
) .,, ~·i ·'·nn1'
l - ..... '-...' "''
- ·1
correspondence course frorn a
orestigious
I , .
schooi, thi ::; cou ld
be hel pful , as 'Nell. Clr::<'.irly,
one shou ld nevE?r 1Y1::ikc 3 false
claim because no on-::' c;1rer gets
hired.
via the soh:V1;ac0 croqr;:<m
l -
alone. In the end, the nroqrarn
c -·~
1Nill ideritify rnultipl:,; " n~:edkes' '
for face--to-fa ce inb'~rvie\1vs ~rnd
background check:=;, i'.lnd t hu~3 . if
you are not a need le, pretenc!--
ing yo u're a neccllc-~ won't !::i-?. ·
enough.
lD!SCUSS~0!\1 QUlC:SliK~~q
As w.e see here, alrnosi: any
emp1oyrnent screen can be
"gamed" by sophisticated job
applicants; hovvever, do you
believe that "gaming the sys-
tem" is a positive or a neqative
indicator when it comes to pre-
dicting employee success?
SOURCES: L Weber, "Your [\e3ume versu:;
Oblivion," The Wall Streer Journal On/in,~.
.Januar/ 24, 20·12; M. Richtel. "How Big Da;:il I:;
Playing Recruiter for Specialized Workers," The
New York Times Online, t'-pril 27, 2013; I.. Rya n,
"It's Not a Talent Short.age - Ifs a Glade Hole,"
'Bu;inesweek Online, Milrch 14, 20·1 3.
230 CIHAIPTER 5 Human Resource Planning and Recruitment

means of reaching many people vrithin a specified geographic area who are cm-
rently looking for work (or at least h-aterested enough to be read.mg the classifieds).
On the downside, this medium. does not allow an organization to target skill lev:..
els very well. Typically, classified ads are read by many people who are ei1h12r
over- or underqualified for the position. Moreover, people who are not looking for
work rarely read the classifieds, and thus this is not the right medium for lunng
people away from Hieix current employers. Specially targeted journals and peli-
odicals may be better thm1 general newspapers at readling a specific pa.ii of the
overall labor market. In addition, employers are increasingly using television- ·
p articularly cable television-as a reasonablypriced way of reaching people.

IEh~ctrorrnk R®crnitnil9
The growHtt of the :informatii.on.superhighway has opened up new vistas for
organizations frying to recruit talent. TI1ere are many ways to employ the
Internet, and increasingly organizations are refining their use of this medium.
Obviously, one of the easiest ways to get :into "e-cruiting" is to simply use the
organization's ovim web page to soJicit applications. By using their 0111m web
page, organizations can highly tune their recruitment message and focus in on
specific people. For example, the interactive nahrre of this medium allows indi-
viduals to fill out surveys thatd escribe what they are looldng for and what they
have to offer the organizalions. 111ese surveys can be" graded" immediately and
recruits can be given direct feedback about how well they are matched for the
organjzation. Indeed, customizing e-recmiting sites to maximize their targeted
p otential for helping people effectively match their own values with fhe o:rga-
ruzation's values, and their svJJls with il-1.e demands of the job is probably their
best feature.95 The value of steer:ing reouits to company websites is so high that
m any employers will pay to have their sites rise to the top of the list jn certain
search engines when certain terms are entered.
For example, Pricewaterhou.seCoopers (PwC) struck a deal with the career
networking sjte Linkedin so that if any student from one .of the 60 schools it
recruits does a search of accounting-related jobs, PwC pops up firnt and is listed
as "the featured job." PwC also gets space on the page to promote the organiza-
tion that :includes videos of cunent employees extolling the virtues of workin:g
at that company. 96 Other companies pay Unkedin roughly $8,000 a year for the
opporiunity to search among its 187 million profiles, and some, such as Adobe,
fill roughly half of their jobs via Linkedfo alone.9 7
Of course, smaller and less well-known organizations may not attract any
attention to their own websites, and thus for them this is not a good option.
A second way for organizations to use the web is to interact with the large,
w ell-known job sites such as Monster.com, HotJobs.com,' or CareerBuilder.com.
1111~se sites attract a vast array of applicants, who submit standardized resumes
that can be electronically searched using key terms. Applicants can also search
for compaalies in a similru: fashion. The biggest downside to these large sites,
h owever, is their sheer size and lack of differentiation.
TI1e ina·eased familiarity of web devotees w ith web logs or "biogs" has cre-
ated other opportunitie3 for recruiters to reach out and have public or semJ-
p ublic conversations wiHt recruits. Microsoft's senior recruiter for marketing,
H eather Hamilton, manages a blog that describes what it is like to work at a
m arketing career at Microsoft. Interested candidates can read what she posts,
 CIHAPTEIR 5 Human Resource Planning and Recri.iitment 231

and then ask questions or provide their own information. This allows many
other "passive" applica11ts to see the answers to previous questions or what
other people who are applying to the organization are like. In one week alone,
this blog was viewed by over 25,000 people, and as Hamilton notes, "the big
thing for me is reach.... As a recruiter, Xcould be on the phone all day every day
and not be able to reach that many people." 98
The growing use of iPods and iPads has also opened up a new and rich ave-
to
nue get information frm:n employer to applicant via podcasts'. A podcast is an
· audio or audio/visual prngrarn that can be placed on the web by an employer
and then downloaded for subsequent viewing. Podcasts are lilce e~mails in the
sense that they can be used to reach out lo a large number of people; however,
the rich nature of the rnedia--which employs col01~ s01md, and video--is much
more powerful than a s:L.1.1:ple text-only e-mail. ..,Podcasts really make the job
description comes alive," notes Dan Finnigan, ;;i general manager at HotJobs
· .com, and the ability to describe the organization's cuH1lre is so much more emo-
tionally charged with this media relative to mere words on a page. 99
Social neiwo:rking sites such as Facebook and IviySpace.corn are yet another
avenue for employers to reach out to younger workers in their ovvn environments.
Neither Facebook nor lVI:Jf3pace allow employeirs to create pages as members, but
it does allow them to pi..rrchase pages in order to create what is called a "spon-
sored group." Emst &-r. Young's sponsored group page has been joined by more
1l1mi. 5,000 Facebook users, who can access info:r.rnation about Em.st & Young and
chat with recmiters from th.e company in a blog-like manner.ioo Unlike more for-
mal media, the conversations held here are very informal and serve as an easy
first step for potential recruits to take in their relationship with the company. New
entrants to this market Eke the site BrnnchOut take this infonnal fonnat even fur-
thei~ ;md allow its members to rate otli.er ~Nork€rs in a. "Hot or Not" format. That
is; users are shown the pictures of tlNo of their Facebook friends and then asked to
choose which one they would rather work with. Scores accumulate over time and
founder Rick Marini suggests that "it provides a l'ealisfic, crowd sourced assess-
ment of a candidate that recruiters might find hard to come by on their own."101 ,, .··
As wilh any new and developing technology, all of these approaches pres-
ent some unique challenges. From an employer's perspective, the interactive,
dynamic, and unpredictable natu.Ye of blogs and social networking sites means
U1at sometimes people who have negative things to say about the organization
join in on the conversations, and tl1is can be difficult to control. The biggest lia-
bilit'I; from the applicant's perspective is the need to protect his or her identity,
because this medium has also been a haven for identity thieves, who post false
openings in the hope of getting some applicant to provi.de personal informa-
J.ion.102 In general, an applicani: interacting with these types of sites should never
provide Social Security numbers or set up banlc accomi.ts or submit to seeurity
checks until they have visited lfo~ employer and met them in person.

P'OJJb~k arrnd Prhmte Empijoym01nrfc Agend~s

The Social Security Ad of 1935 requires that everyone receiving unemployment
compensalion be registered with a local state employment office. These state
employment of.fices work witJ1 the U.S. Employment Service (USES) to hy to
ensme that w1employecl. individuals eventually get off state aid and back on
employer payrolls. 'lb accomplish this, agencies colJect: information from the
Lui.employed about their skills and experiences.
232 CHAPTEIR' 5 Human Resource Planning and Recruitment

Employers can register thefr job vacancies with their local state employment
office, and the agency will attempt to find someone suitable using its comput-
erized j_nven.tory of local unemployed :individuals. The agency makes refer-
rals to 1J1e organization at no charge, and these jndividuals can be interviewed
or tested by tl1e employer for potential vacancies. Because of certain legisla-
tive rnaia.dates, state unemployment offices often have specialized "desks" fpr
m:is1orities, handicapped individuals, and Vietnam-era veterans. Tims, this is an
excellent source for employern who feel they are currently underutilizing any ?f
these subgroups.
Public enlployment agencies se1ye primarily the blue-collar labor market; pii-
vate employinent agencies perform much the same service for the :white-collru:
labor market:. UnJjJ.ce public agencie~, however, private employment agencies
charge the organization for the referrals. Another difference between private
and pubUc employment agencie~ is that one doesn't have to be unemployed to
use a private employment agency.
One special type of private employment ·agency is the so-called ex:ecuti:Je
search firm (ESF). These agencies are often refened to as headhunfers because, .
milike the otl1er sources •Ne have exmnined, they operate almost exclusively
with people who are cun:ently employed. Dealing with executive seru:d1 firms
is sometimes a sensitive process because executives may not wa:ht to advertise
their availability for fear of their current employer's reaction. Due to the sensi-
tive natme of tlus process, the most successful ESFs tend to develop b:usting,
long-term relationshjps with high-skilled employees, and serving as the buffer
between Hle employer and the recruit becomes tlle core of their business modet 103
Along with. newspapers a..--id dassified advertisements,, ESFs may have suffered
the most dam.age in recent yeal's due to the combination of reduced employment
levels because of the recent recession on the one hand and inci-eased use of low
cost elecl.Tmuc search vehicles on the other.
Indeed, man.y organizations have shifted away from private employment
agencies hi the last few yeaxs and focused more on using their own internal
recruiters to staff openings. For example, Time Wainer filled thousands of senior
p ositions during the last seven years, but used an outside agency only once.
Instead, like roughly 25% of the Fortune 500 companies, Times Warner has ere:..
ated a head of executive recruitment to do the work formerly done by private
agencies. At Time Warne1~ tlus person oversees a 30-person team where each
p erson handles 10-15 placements at a time. This unit saved Time Warner over
$100 million in search furn fees and filled ead1 job in roughly 100 days, co;rn.:.
p ared to 170 days associated witl1 a private agencyJ04 Similarly, GE built an
internal recruiting staff of arnund 500 people, and in 2012, helped by Linkedin
and other social networking sites, filled most of GE's 25,000 openings.105 Th.ere
is a general belief witl1in these and other companies that inte1nal recruit.em have
a better feel for the organization's culture and thus, in addition to filling posi-
tions faster and d1eaper, those recruited are also a better fit for the cmnpany.
Many have questioned whet.her the ESFs have a viable business model, given
the recent changes in the economy and ht tedmology.106

Co~~egi~s am.:JJ tlh11n,~ewsP.tnes

Most colleges and universities have placement services that seek to help their
graduates obtain employmli;)ni:. Indeed, on-campus interviewing is the most
 ...
CMAIPTEIR 5 Human Resource Plann ing and Recruitment 233

irnpor!:anl source of recruits for entry-level professional and managerial vacan-

cies. Organizations tend to focus especially on colleges that have strong reputa-
tions in areas for 1Nhich H1ey have critical needs (chemical engineering, public
accounting, or the like).
Many employers have foun.d that to effieclively compete for the best students,
lhey need to do more than just sit,"ll prospective graduates up for interview slots.
One of the best ways to establish a sll:onger presence on a campus is with a col-
lege ·Jnterrn3hip program" These kinds of programs allow an organization to get
early access to potential apphcants and to assess their capacities directly. TI1ese
program s also aUow appHcants to gain firsthand experience with the employer~
so that both parties can make weH-mfo:rmed chokes about fit with relatively low
costs and comm.il:Inent.107
Another way of increasing one's presence on campus is to participate in uni-
versity job fairs. fo general, a job fair is a place where many employers gather
for a short tirn.e to rn.eet large numbers of potential job applicants. Although job
fairs can be held anywhere (such as at a hotel or convention center), campuses
are ideal locations because of H1e many ·well-educated, yet unemployed, indi-
viduals vvho live 1l1ere. Job fairs are a rather in.expensive means of generating
an on-carnpus presence and can. even provide one-on-one dialogue with poten-
tial recruits-dialogue tllat could no1: be adi..ieved through less interactive media
like newspaper ads.

Evallo.11zitnng the Qu.n<i31~Tit\v ffJ' a Sm~n·o1,;:

Because there are few rules about the quality of a given source for a given
vacancy, it is generally a good idea for employers to monitor the quality of all
their recruihnent sources. One means of accomplishing this is to develop and
comp are yield ratios for each source. Yield ratios express the percentage of appli-
cants who successfully move from one stage of the .recruitment and selection
process to the n ext. Comparing yield ratios for different sources helps determine
which is best or most efficient for the type of vacancy bemg investigated. Data
on cost per hire are also usefol in establishing the efficiency of a given source.1°B .··
Table 5.4 shows hypothetical yield :ratios and cost-per-hire data for five
recruitment sources. For the job vacancies generated by this company, the best
lwo sources of recruits are local universilies and employee referral programs.
1'.Tewspaper ads generate the largest numb er of recruits, but relatively few of
these are qualified for the position. Recruiting al: nationally :renowned universi-
ties generates high ly qualified applkants, burc relatively few of them ultimately
accept positions. Finally, execuhve search firnll5 generate a small list of highly
qualified, interested applicants, but this is an expensive source compared with
other alternatives.

The last part of the model presented. in Figure 5.4 that we will discuss is the R..0!5in6
recruiter..l'vforeover, many applicants approach the recruiter with some degree Explain the recruiter's
of skepticism. K:nowing that it is the recruiter's job to sell them on a vacancy, role in the recruitment
process, the limits th$
sorne applicants may discount what the recruiter says relative to what they have recruiter faces, and the
heard from other sources (like fdends, magazine articles, and professors). For opportunities available .
these and other reasons, :recruiters' characteristics and behaviors seem to have
less impact on applicants' job choices tllan we might expect.
;£],1.j1. CIHIAPTER 5 Human Resource Planning and l'\ecruitment

Hypothetical Yield f-i'.ati o'.; for Five ffocruitment Source:;

F'.!-~:ou111 c'.1s 9e11erated :?00 400 50 500 20

!nl:e1'.1ie-N ol"fe1·s acccpi:ecl 17'.) lOO
Yir:dd ratio (>"701
'..)/ /C 2S% 909b . 80% 100%
/\pplkan ts judned acG:~ pl:;,1 ble -100 95 '19
01:·0 1
YiF;ld 1·;:Jtio S7r.Yo I,.) 70 89(~{~ 12%
/-\cr.:ept ernploy1r1t:H1I: of:for:; 90 ' lS
:~
Yield ratio ?O'Yo 'Ii% 88f7b 50%
Curnulattve 90/200
yield ratio 4!:-5%
c:o.st $30,000
.1.;·j33: $6,000 ·-

1R.ecntita':3 JE-'mu:tiirm11JJ} lln!r:/I" Mosi: m:gauiza1ions must choose whe1:her 1J1elr

recruiters are specialists in. lu.:.u:nan resources o:r experts at particular jobs (supelr-
viso:rs or job lncuunbents). Some studies indicate that applicants find a job less
attractive and the recruiter less credible when he is a personnel spe6aJistJ 09
This does :n ot completely discount personnel specialists' role in recruiting, buhl:
doe(:> indica~e that such specialists need to take extra steps to ensure thal: apph-
cant.s perceive then1. as knowledgeable and credible.
Rciern.iter's 1h1dts. Two h'aHs stand out when applicants' reactions to recruiters
are examined. The first, which could be called "warmth/' reflec:_ts the degree to
which the recruiter seems t:o care about the applicant and is enthusiasiic aboi1t
her potential to contribute t.o the company. The second characteristic could be
called "irlfonnativeness." In general, applicants respond more positively to
recruiters who are perceived as warm and :informative. These characteristics
r:>eem more irnportant than such demographic c.haracterislics as age, sex, or race,
vvhich have complex a_n d inconsistent: effects on applicant responses.no
In addition, timjng seen1s to play a role as welt in the sense il1at recruiters
have a bigger impact early in the job search process, but then give way to job
;md organizational characteristics when it comes dovvn to the applicant's final
decision. u 1
l\ecntifr·. rrs l\ealism. Perhaps the most well-researched aspect of rr2cruiJing
deals with the level of reali.sm that the recruiter incorporates into his message.
Because the recru.i.ter's job is to attract candidates, there is some pressure to
exagg:eraJ(~ the positive foat:ur~s of the vacancy while downplaying the negative
feature3. /\pplica.nts are highly sensitive to negative information. On the 01J1er
hand, if l:h.e recruiter goes too :far in a positive direction, the candidate can be
misled and hued into tal<ing the job under false pretenses. This can lead to a
serious case of unmet expectations and a high tu1nover rate. In fact, 1111xealis-
:~
I

hc descripH.on0 of a job may even lead new job incumbents to believe that the
ernployer is deceitfnt n. 2
.
...
'i
 ...
CHAPTER 5 Human Resource Planning and Recruitment 235

l\/Ia:ny studies have looked at the cap acity of "realistic job previews" to cir-
cmnvent this p roblem and help mi11inuze early job t1.irnover. On the whole, the
research i11clicates that realish c job previews do lower expectations and can help
redu ce future turnover in the vvorkforce.113 Certainly, the idea that one can go
overboard in selling a vacancy to a recruit h as merit. Howeve1~ the belief that
:informing people about the negative characteristics of the job will totally "inoc-
ulate" them to such characteristics seem s unwarranted, based on the research
conducted to d al:e.114 Th11s we n~ tuxn to the conclusion that an organization's
decisions about personnel policies tl1at directly affect the job's attributes (pay,
security, advan cernent opporhmilies, and so on) will probably be more impor-
tant than recruiter h·aits and behaviors in affecting job choice. Still, helping
applicants better understand their own needs and qualifications and then link-
ing this to the tn1e nature of current open ings may be best in the long run for all
concerned, even if it does not result in an inunediate hire.m
Enhancing .Recndter J;npacf:. Although research suggests that recruiters do
not have m uch influence on job choice, this does not mean recruiters can-
not have an impact Organizations can take steps to increase the impact that
recruiters, have on those they :recruit. First, recruiters can provide timely feed-
back. Applicants react •rery negatively to d elays in feedback, often making
unwarranted attributions for !:he delays (such as, the organization is uninter-
ested in my application). l1 6 Second, recruiting can be done in teams rather
than by indiv iduals. As we have seen, applicants tend fo view line personnel
(job incumben ts and supervisors) as m ore credible than personnel specialists,
so these kinds of recruiters should be p a rt of any team. On the other hand, per-
sonnel specialists have knovlfledge tha t is not shared by line personnel (who
may perceive recruiting as a small part of th eir "real" jobs), so they should be
included as w ell.

v
\/
v
Securing ia ~ent
We opened t his chapter vvith a story of how more and more companies are sh ift-
ing away from outsourcing and offshoring, and instead relying on local talent to
compete in t o day's fast rnovin'.~l economy. Still there are advantages and d isad-
vantages with recru iting workers from different sources.

QUESTIONS
1.. Discuss the advantages and disadvantages of hiring local workers versus off-
shoring versus bringin(~ in immigra nt labor? How does the nature of the prod-
uct market affect vvhat you might do in the labor market?
2" Assume you are a vvell-w;tablished company facing a labor surplus in some
job category. Why might it be in your best interest to use some method other
than layoffs to reduce this surplus, and in \Nhat sense are your options here
a functio n of how well you did in terms of forecasting labor demand and
supply?
J. Discuss the advantages and disadvantages of promoting workers from within
your own fi rm versus going outside the firm to bring in external hires. How
does the nature of the business situatio n affect this decision?

\
...
Hvman :rccoun:.-e planning 1ns£0 labor supply ;.xnd
d'i'.:nJBnd fo.re-casi:s. f)I) <nP~l:idpa!:<e lahu.r. :ohorlages and. smc-
plus2r:;. H also <l"l.'lfaUs pmg.ra!.111s that C<'ln. b:e u:jliz£d ~ o
;.reduce a fabo:r smplus (such as downnizing and early
n::fo'Cmcnk pro57ams) and elim'iDn.te a labrn.' 0horrag:e
(lil<e bringing in tiempw:ary 111.rorh:1n m· e:Jci:nmdjng «:we1 1•
l:ime). V\lhen done we!.l, hn1.1unan 1'.teGOtoJ.¥-ce pfanrun.g; can
<;;ohance ::he sucr:ncffS o{ J}ie or3rnc1iz;a.~f,01n w'hHc JJ.1in].i!ll'.iz.-
in.g t111.e hum.an su.ffedng J."£sultl.ng from. po1J<.dy 0uti.d.--
pated fobor ~31uplu::in~ or s.hrnJagic.s. Hu1ma111 rcesource
recrui1:ing ii~> a buJ:Xier< .ri.divily H111G: a:'e<Ai.'<::s Rn applkant
pouI J:haJ !he rn13<J11.1.i wJion Gill Jlxaw fxom in the E:vcx1i:
Forcmafo1g, :Wl Ootsrn.1i1.-0.:ng, '.2.12
Leading indicator, 202: Offahodng, '.U3
'fransllional matrix, 203 Workforce 1diUza.tion review, 219
Do1N1.1~;J.;'.;Jng, 206 Hl.tman resource :recrnibnent, 219
J. [Jir;c1s:;s the effecl::> all;:iJ .an irnperniling ]abm· shortage
rnighi: have on 111·2 foHowill.g thr,ee St~hfo1i_ctions o{
hum.an resoumce managem.it:."'l.li:: aclection <md place-
m <.0·nt, lli'ajni_ng and can::er dev·~Ropn1ent, ::u.1d com-
p 0Ji1GDJion and hendilu. V\llhid1 ~.;1Jilbfu_m,cfoJn m~ghJ:: be
n•.ost heav ily impad:~:d? ill what W'i'!}"'S n-D.glit ther;e
g:rm.1.p::; devdop jnint mop'-'rii\L~ve progrnm.s to avicTrr
<~ J-Rhor: shori:age?
2. DiscH<.'13 t.hr.:: ccml:s w~d ]J2ne:fit3 asfiooated with stalis-
l:k(:!ll. v-.~rs1Js jud.g;n1'C..n.l;al fm.v.::t:<:M:~l:s for labor demand
and fobor supply. Under •Arhai: ieon.ditions :mig.'ht
ei~:he;~ of lhtc'\e tedmJi.ques be jJ)Jev,olbAe'i' Under wh8.t
(~nndH:ions lnJ\ght both be feGisibI1-c~, bu!: o:i1e m oJ!:'C
(lr::t;irnhlc th;.:m fthe ofbr;;:r?
3. Some companies have fktaH1;0<J. aff:irn:iati.ve action
pk111~3, coniplei:.e '1Nii:h go;::ifo ;,nd Qirnel:abfos, k~~,
v,;(H::ncn and i1rxinm·Jti1i:m, r:ind yet 11;.xv-f~ no foJrmaTt
hulnan .:rc:::ioux<:~e plan. foll.' the or.g•:iniza.lion as a whole.
Most empolnyerr;; have lo evafo<i11.te itrnnd1'(c..'f:is o{ resu.ll'Ji.l~s
· cadi we.(:k. H ylm wanl: yow: q{mm:i."'S ~() have '" g<;Gd.
di.a.nee of bci.n3 11ead. by pro:3JXC~hr"-~ en1p~oye1-sr you
-=
of o. labor shorta.ge that is to be filled with new hires.
Orsanfaati.onal recruitment programs affect applica-
tions through per.smmel policies (such as pmmo1te-f.rom-
within policies or due p :rocess provisiOJ[l,s) that affect the
a.itributes o{ the vacancies themselves. They can also
impad: foe nature of people who apply for pos.iti.ons by
-using dilfenO'nt recruitment sources (Jjlce recn.riting from
m1ivern.iJies vernus adverti.sing in newspapers) . Finally,
orgm1:i7.,,atio:ns can use recruiters to ffif.luence :individu-
als' perceptions of jobs (efoninating nlisconceplli:ms,
dm:ifying uncatainties) or perceptioos of t.he:uo,'3e1.ves
(manging 1hdx vaknces for various work ou.f:comEr:;).
Em ployment-at-will policies, '.?..21
Due process policies, 221
Direct applicants, 226
Referrals, 226
Why tnight this be the case? If you weife a hmrum
resource spedaJist interviewing with thfa company
for an open position, what would ll1i5 practice ilnply ~f.t\
.· !~
for f11e role of the human resource maITTager An that
company? -·
4. REX:rUiting people for jobs tll.at entaU intemaJ.fo:na.I
assignments is increasingly import.ant for .tnany
companies. V'Jhere mJght one go to look fo,: 1-i:i,d.ivii.cl-
uaJ.s in.terested. in these types of assignme.nii? How
mighi: :recruitin g practices aimed at these people
· differ from these one might apply to tl112 "a.ve;_·3 ge"
recruit?
5. Di'3cuss tlle rcl!ltive merits of inrernal versus e;ctier-
nal recruitment. What types of business strn.tegies
might. best be supported by recruiting externally,
<md what t-:;.rpes might call for mrer:t.lf.d. :recrv:Hmient?
Vifo<!!t factors nught lead a firm to dieddle to switch
from. m.l.~:!!Tial to external recruitment or vice versa.?
must invest l:i:oo.e and energy not only in its content,
but also in its look Review yow· resume and answer
y£s or no to each of the following questions.
 ...
CHAIPllEIR 5,
1. Does it avoid typos and grmnmatical errors!
7-. Does it avoid u sing p r2rsona1 pronouns (such as I
and me)?
3. Does it dearly identiljr v1.rhat you have done and
accomplished?
4. Does it highlight your accomplishments rather
than yom duties?
5. Does it exceed t1J\70 }Jages in lengt11?
6. Does it have correct contact information?
7. Does it have an employment objecti.ve tl1at is spe-
cific and focuses on the employer's needs as welJ
as your own?
Need Slave Labour? Cai~ Us
To say that North Korea, officially lmown as the Demo-
cratic People's Republic of Kon~a (DPRK), is an oddity
would be an understa tement. Nicknamed the "h1~rrnit
kingdom" because of its isolation - boil1 p olitically and
geographically - the term originates from the Joseon
Dynasty and the fact that it i.s located on a peninsula.
It is often u sed by Koreans them selves to describe pre-
modern Korea.
Years of cruel and incompetent ntle h as left J\Torth
Korea's economy jn ruin. Closed off from the rest of
the w odd and shrouded in m ysteq i the country is
1 Stories of exploitation abound. In one inst:inr'~ i_t
notoriously difficult to get inform ation on m1d its
sanctions-·hit economy is said J:o operate on a n umber
of different levels. Reliable news reports are spotty at
best, but a reported famine in the mid 1990s is beli eved
to have killed over 1 million people and is said to have
been caused by economic ntismanagement alongside
the loss of Soviet su pport The North Korean govern-
rnent' s cenb:ally-pla:nned systenl proved too inflexlble
to effectively d eal with the disaster.
The isolated and sometimes violent com1h:y
became even more of a pariah nation w hen it deto-
nated a nuclear w eapon for test in 2006 and 2009,
which is believed to have odginated at a test site called
Punggye-ri. Subject: to international sanctions, and
burdened w ith an anliqualed economy and alrnost no
indus triaJ base, the hard line regime Y•las in n eed of
some h ard cash. But what could North Korea export in
order to earn money? The answer was simple: her peo-
ple. 1ens of thousands of North Koreans slave away i11
far off and exotic lands around the worl d in a multi-
tude of industries.
How does the system vvork? Well first, the l'·for!l1
Korean government "enJists" workers for overseas
assignrnents. It then signs bilateral agreements with
foreign goven1ments, sorne of them of questionable
character themselves, in such places as Africa, Eastern
Human Resource Planning and f~ecru itrnent 237
8. Does it have at least one-inch margins?'
9. Does it use a maxin:nun of 1.wo typefaces or fonts?
10. Does it use bullet points to emphasize you.r skiJls
and accomplishments?
11. Does it avoid u se of underlining?
12. Is the p resentation consistent? (Exan1ple: If yon
use all caps for the: name of your most recent
workp lace1 do you do that for previou5 work-
places as well'?)
Tiie more "ye:s" answers you gave the more Jj}:dy
1
you_r resume 'Nill ath·act an employer's attenfion and
get you a job intervievv!
Europe, the Ivii.ddle East and SonI:heast Asia. Hi..m1lv~ds
are believed to be currently 1Nm-ki.ng in IVfongoli.a r'Llld
abou t :21,000 in Ru ssia. Usu ally the 'V:nTrker's scifory is
paid directly to the local Nortl1 Korean embassy Vlihat
happens to the hmds after that is anyone's r5Ue:c;s. And
exactly hmN mudl does one receive fo;' l:hi.[.; IJJr~ of
h·avel exciten1ent and advenh..me? A western m:ini.ng
1
company 1Nas approached by a North Kor·emi intenne-
dia.ry and told that it could be provi.ded ·with vrnri::.t0rs
for ~n .50 p er day.
was found that a group of almost 100 North f.(o:ff•w:i
women were iNOrkir1g in a rundown j\1l0ngoli:::cn. foc-
tory producing high end goods for such 1NeU know1:1_
J:JK brands as Edfribmgh 1'\'.poUm IVUU (F.11\TJ\tJ). In
another, thousands of Norin Koreans aT2 vvor.kin:; as
lmnher jacks in remote locali.ons in Sibr:;f':i;:i_ Y.t has ;.;E':en
reported that the 1Norkers get two days o:ff pe1: year
and are unckr <:onstant pn~ssure nnd thr2n•:s to rneet
production quotas.
Dming the political tu.nnoil. in Libya :1pproxi-
m.a tdy 200 North Korean '>·vorkers 1:heno (mostly do'>
tors)" n.u.rses an.d co:nstruction_ ·v1orlc::.ers) 1'Vere or<:,(-;rect
1
to stay put and not to return home, even thoui:~:h a
war 1,v-a.~3 waging arowi.d them . This was lx~cause
lhe need for the hard currency tha t !hey gsneno!l:ed
was great, but the fear that the workers >l\ro1JJd brtng
home ideas of revolution was even grea.t0r. I1: i~3
said thai: they had been dispatched to the cou1~try
i:n ordex- l:o eain the h ard ctuTency that Pyongy,,ur.g,
the capital of the Democrnhc People's Republic o(
KorG:i, requiref; to fund its ntlssile and JTuclea;r vv,~ap­
on::i programs.
Invariably the worker3 come vviLh minders and
ov1.::rse<.0rs, to make Stll'e that they stay in Une and are
productive. IVfost of the workers have faJniUes back
home w ho are in effect hostages, and the threat of
238 CHAIPTER 5 Hu man Resource Planning and Recruitrnen1:
retaliation against loved ones can be a great motivator.
So in addition to low wage competition fro1n Chfoa i.i:
would appear that companies and workers now havrc:
a n ew threat to worry about. N o wage compelition
from. North Korea.
Ql\.JESliONS
1. What are the possible downsides for a company
that chooses to use North Korean labor?
2.. What typ es of industries and govermnents do you
think would be most )jJcely to use North Korean
labor?
Short-Work Programs Buffer Workers and Firms
Although lfo:~ 1.;lobal economic recession of 2007-2008
hit aU countries hard, some nations were a.ble to
w8ather this storm better tlrnn ot11ers, at least V'ril:h
respect to layoffs and unemployment. For example, it<
Holland, even at the peak of the recession, the Dutd1
unemployment rnte was at just 3.7%, well below the
doubk:"dir;il munbers experienced in the Unibed
States. Much of the credit. for this can be traced to so-
called "short-work" programs established in the N eth-
e:d ands, where govenunent intervention and subsidies
help soften the blows associated with sharp swings in
labor demand and supply.
Short-Work programs w ere historically introduced
in Holland during the Nazi occup ation in. the 1940s
but they were often re-introduced after the Second
World War during times of dire need. In the m ost
recent recession, to qualify for a subsidy, an employer
had ·to show that their organization experienced a
30°1<, drop in revenue over a tvvo-month period, thus
qualifying as a "sharp swing." Rather than resorting
to layoffs, the company simply reduces !:he hours ead1
person works, and lhen the governmeni: pays work-
ers for a large p ercentage of the hours that were lost.
For example, at DAF Trucks, even though demand
for trucks dropped by over 50''l'o in 2009, the company
maintained over 80% of its full-time staff.
Although pay is off slightly relative to normal, most
e1nployees on short work talce home about 85% of what
they would normally make, and as one DAF vvorker
noted, "it sure beats being unern.ployed." The prac··
tice also helps the employe1~ who gets to retain highly
trained workers that might otherwise be lost forever.
Especially during short-term shocks, valued employees
might be unavailable fo.- re-hire once the demand for
labor rebounds, and hence a short-term shock results
in a long-term, irrevocable loss. Indeed, not only do
3. Do you Hunk that Norf11 Korea's exporting of labor
is a sustah1able proposition? Do you thi11l< that it
Y1rill help them to overcome their internal problems?
E)(plain.
SOURCES: "Let !:hem eat yellowcake" January H, 201.2, TI1e Economist;
'1\Torth Korea bans citizens working in Libya from returning home"
by JuJian Ryall, October 27, 2011, TI1e Telei:p:aph; "NorU1 Korea Rents
O ut Its Resources to Stave Off Reforf!l" by Choe Sang-Hun, October
7.5, 2011111€ New York Times; "Profit from its people: North Korea's
e;qJoli: shame" by Simon Osttovsky, October 1'1, 2011, TI1e Independent;
"Trafficking- in Persons Report 2011- North Korea" Issued by the United
States Embassy, Seoul, South Korea. CNl\I; "How does Korea get its
money" by Susanna.h Cullinane, April 10, 2013.
Hie companies get l:o re taiJ1 valued employees, in many
cases these ::;ame workers wind up u sing the tit-ne off
t:o upgrade l11eir skills. Finally, although there axe some
upfront costs for the government w h en they provide
the su bsidies (roughly 2 million eu.ros for the Dutch),
fu_\s is somewhat offset by the reduction in costs asso-
ciated with i.memployment compensation that are also
bom.e by the govenunent.
Short-work programs do have their criti.cs, how-
ever. Some of the criticism is strictly financial, in the
sense tl1at it results in a deficit spending model for
the gove1nment. For example, in Holland, the counl1:y
went from having a government suxplus of 1% GDP ··r
!:-'
l'""
to a deficit of 5% in a single year. Some of the criticism ·~
is more ideological, in the sense t11at the prograi11s
seem to have a comnu.mist feel to them. For exarnple,
Rick Van der Ploeg, an economics professor at Oxford
University, claims that "this is sharing poverty plain
and simple." Finally, some of the criticism hinges on
competitiv12 dynonlics, in the sense that if tl1e down-
1.1.un is not just a short-term cyclical drop, but ralJ:i.er
a long term strucl:u..ral change in the economy, this
practice "locks" people into obsolete jobs. Cleaxl.y, tli.e
debate about the costs and benefits of such programs
will go on in othe.r cotmtries, but in the meantime, illie
Dutch have a long-term conunitrnent to short-work
programs.
Q!JH2$T~ON:S
l. If you were an employee in a context where there rL
was a labor smvlus, would you prefer a short-work r
p rogram or would you prefer to just quit and find a
new job?
2. If you were an employe1~ how does a short-work
program help you out iI1 times of h·ouble, and why
:might you be tempted to be in lTouble all IJ:i.e time?
 ...
CHAPTER 5
3. From a larger societal point of view, should gov-
enunents support short-work programs with tax-
payer money or is this just a give-away p rogram
that promotes failing employers and unnecessary
employees?
For Personal Financial Advisors, A Smail Staffing Plan With a Big Impact
Robert J. Reed has been a financial plmmer since 1978
and received his Certified Financial Planner designa-
tion in 1981. In 1999, he hired Lucy Banquer~ a form er
legal secretary, to work as his assistant and the only
employee at his firm , Personal Financial A.dvisors
LLC in Covington, Louisiana. At that point, hmn an
resource p lanning wasn't on Reed's radar at all.
Bui: around 2005, Reed begmi. to act on a desire
lo have a more complete plan for his firm's grnwth.
Ile determined that h e wanted t11.e business to gr01N
from about $400,000 in annual revenues to becom e a
million-dollar firm by 2012. TI1at was a realistic go al,
but not one h e could achieve •Ni.th only the support of
Banquer. Although Ban--quer does an excellent job of
fieldine; client ph one calls and answering questions,
Reed needed to bring in :more financial experhse to
serve more clients.
Typically, a financial-planning .firm like Reed's
expands by hiring ar1 entry-level advisor to handle
routine tasks w hile learning on the job until he or she
can take on clients independently. But Reed didn't
simply take tl1e u sual path; he considered w hat role
he wanted for himself in hls firm as it grew. Reed real-
ized that the p art he excelled at and loved most was
managing 'the inveshnents, not the presen tations to cli-
ents, and th at he wanted the firm to grnw in a way that
would free more time for him to spend with his fam-
ily, not expand his hours to supervise others. As Reed
defined the scop e of his own. desired job, he clarified
what he wanted from his next employee: a Certified
Financial. Planner w ho had experience plus an inter-
est in all the plannmg and advising tasks except invest-
ment management.
Wilh that strategy in mind, Reed began the sear d1
for another planner to work with hixn. After about eight
months of recruiting, Reed met Lauren Gadkowski,
who was n uming her own advisory film in Boston but
preparing to relocate to Baton Rouge to be 'With her
future h usband, Lee Lindsay Reed wanted his new
financial planner to operate independentl~ so he agreed
t.o the idea of her office being in Baton Rouge, abou t a
45-rnfoute drive from his, and he let her determine how
oflen she would need to visit the Covington office.
- - - - - -- -
Human Resource Planning and Recn.li"i:ment 239
SOURCES: A Cohen, "A Dutd1 Formula Holds Down Joblessness,"
T1ie Wall Street Journal, December 28, 2009, p. AlO; J. Smith, "Making
Short-Work of 111.ingr;," The Ecoiwmist, August 4, 2010, p. 23; P. Jones,
"Short-Trme Work Plans Saved Jobs," Tile Wall Slreef: Journal, January 4,
2011, p. C3.
Reed stuck to his plan: Lauren Lindsay quickly
began working with Reed 's larger clients and :intro-
duced herseli as their main contact with the firm. After
sitting in on a Jew meetings to satisfy himself that he
had made a good hiring decision, Reed shifted his
efforts to managing the investments. About.10% of the
clients indicated they would prefer to maintain their
working relationship with Reed. Lindsay took over
the remain.mg 90% as well as the new clients she has
brought into the firm since joining it.
Reed's dedsion to focus on investment manage-
ment has paid off for Personal FinanciaJ Advisors,
giving the firm better-than-average performance on
its inveshnents even as revenues have climbed. And
with Lindsay on board to handle client contact, Reed
became able to follow the more traditional path to
further growth by hirmg an associate financial plan-
ne1~ David Hutchinson, in 2008: In contrast to Lh1dsay,
Hutchinson is still preparing to · become a Cerlifie~d
Financial Plaru.1er, but he has an educational back-
ground in financial planning and experience as an
i.nvestment broker. -
Ql!l IESlriONS
1. Is a company ever too small to need to engage in
human resource planning? 'Nby or why not? Dis-
cuss whether you think Robert Reed p la.imed his
hi.ring strategy at an appropriate time in the firm's
growth.
2. Using Table 5.3, review the options for avoiding a
labor shortage; and discuss how well the oplions
besides new hires could have worked as ways for
Reed to reach his goals for growth. As you do so,
consider qualities of a financial-planni1;g business
that might be relevant (for example, direct· client
contact and the need for confidentiality).
3. Suppose that when Reed was seeking to hire a certi-
fied financial planner, he asked you for advice on
where to recruit this person. Which sources would
you suggest, and why?
SOURCES: Angie Herbers, "Letting Go," Investment Advisor, June 2009,
pp. 96-97; and Personal Financial Advisors, "Who We Axe," corporate
website, wvvw.mypfa.corn, accessed June 1, 2011.
 if•
240 CHAPTER 5 Hurnan Resou rce Planning and Recruitment
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tJ:. M. Whitehouse, "Some Firms Strnggle to Hixe Despite
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 ...
CHAIP'TER: 5
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--- --- --- ---
Human Resource Planning and Recru itment 24 '11
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Week, February 2, 2009, pp. 80--81.
242 CHAPTER 5 H urnan Re source Plann ing and Recruitment
90. J. Collins, "How Great Companies 1uxn Crisis into
Opportunity," Fortu ne, Febmary 2, 2009, pp . 4'9.
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100. E. White, "Ernst & Young R.eaches Out to Recruits on
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...
h.1 ',(!':,,., /ID
' i- ~I~..:...
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f,.\;,

- - - - - - · - - · - - - - - · - -·-····· -----· · - - - - - - - - - - - - - - - - - · - - - - - - ·
Afler readin9 this clvipl:or; y(Ju dlou/d b0 able to:

LO 1;J:] Establish the basic scienti fic properties of personnel selection methods,
including reliabil ity, val id ity, and generalizabil ity. pagf} 246

ll~I(,) 0J-~~ D iscuss how the particular characteristics of a job, organization,

01· applicant affect J:he util it y of any test. page 256

~-0 ~)-3 Describe the <Jovemrn ent 's role in personnel selection decisions,
particu larly in the ;:11·eas of constitutional law, federal laws ,
12xecutive orders, and judicial precede nt:. page 259

ilJ) 6-4* Li st the comrnon methods used in selectins:1human resources. page 263

~-0 6-5 Describe the degree t o which each of the common methods used
in selecting human re'.;ou rces meets the demands of reliabili1y,
validity, generalizability, utility, and legality. page 263
 Modern Dutch society is an a9eing society. Over
the past two decades, the average age of the .
labor.force has gone up by as much as five yea rs .
· It is especially th e Native-Dutch population which
is ageing. Populations from other ethnic back-
grounds are 9enerally much youn~Jer, and tlwy
will become increasingly important to the avail-
able workforu: and for Dutch cornpanies in gen-
. eral. However~ there are sis1ns that the position of
non-native job seekers is under pressure.
In October 20'13, t he European Commission
against Racism and Intolerance wrote in its offi-
cial ECRI Report that the i\!ethorlands should put
more effort into its activities against racism. \/\Jith
respect to the labor market, the Cornrn ission
stressed that mic;:irants from Eastern Europe 1ti1ere
9enerally greeted with suspicion and that th(:;
presence of Muslims was peru::ived and depicted
as a threat to Dutch society. This development
has major consequences for the ernployability
of these groups: In t he l\letherlands, almost a
quarter of the non-Western job seekers are tryin9
to find jobs through staffin~;I agencies. Hov.vever,
according to the !\letherlands Institute for Social
Research (f\JISR), alm ost half of the non·-European
job seekers have 50% less chance of being
offered a particular job in comparison with native
job seekers with completely identical C\/s. Ethnic
discrimination particularly applies to non-Western
job seekers. Males are mori-) o~en confronted
with discrimination than females. This is extremely
wonying, especially because unemployment rates
among non-\fl/estem youngsters i~:; high.
Out of the Non-native rni~Jrants, in 2013, almost
13% were unemployed. For t he Native-Dutch,
this was appro)(imately four· percent In addition,
tho group of f\lon-native wo1-kers more often
had temporary labor c ..mtracts {27%) cornpared
with Na•:iv(~·-Dutch 1111orkers P ()%). Moreover,
unemployment rates were rising more strongly
arnongsi: migrant groups than amongst f\lative-
Dutch groups. The differences cannot be attrib-
uted to predictors including education and work
e><perience. Accord in g to the NISR, ethnic discrim-
ination seems to be an important predictor.
To illustrate the above points: in one research
stu dy, the f\llSR sent actors from different eth-
nic backgrounds to staff planning agencies and
instructed them to present similar C\/s, including
an age of 22 or 23. All actors had an excellent
command ohhe Dutch language. The study
included ten male and ten female actors from
different ethnic backgrounds: Native Dutr:h,
Su rinan1- Dutch, Turkish-Dutch and Moroccan··
Dutch. Results showed that Non-Western females
had a 33% chance of being offered a job, while
as little as 23% of the Non-Western males had a
chance of being offered a position.
Ste reotyping is certainly not limited to the
f\letherlands: in many other Western European
cou ntries, many more examples 9f long-standing
eth nic prejudices can be found.'bespite Europe's
open boundaries, these ethnic prejudices make
it difficult to integrate the efforts of people
from different European nationalities, present-
ing another barrier to competitive advantage
over and above the limits attributable to shrink-
ing populations. In conclusion, getting past
stereotypes and prejudices is becoming more
important in order to attract,· select and hire the
best talents - regardless of their demographic
backgrounds .
SOURCES: SCP: uitzendbureaus discrimineren allochtonen. www. nrc.
nl/nieuws/2012/12117 /scp-uitzendbureaus-discrimineren-allochtonen/;
Dreek eens uit die etnische bubbel en word succesvol op de
arbeidsmarkt. vvww.nrc.nl/carriere/2013/12/1 O/breek-eens-uit-die-
etnische-bubbel-en-word-succesvol-op-de-arbeidsmarkt/; /\ndriessen, I,
Pernee H., and Wittcbrood, K. (2014). Ervaren discriminatie in
l'foderlc:nd. The Hague: i'letherlancls Institute for Social Rer.Harr:h.
245
246 CHAPTER 6 Selection and Placement

Any organizalion that intends to compete thxough people must take Hie utmost.
care with how it chooses organizational members. These decisions have a criti,.
cal irn.pact on the organization's ability to compete, as well as each and everjr
job ap plicant's life. Organizations have to strive to make sure that the decisio~
they make wiU1 respect to who gets accepted or rejected for jobs promote th~
best interests of the com.pany and are fair to all parties involved. Inaccurate a_n~
biased stereotypes like those alluded to in om opening vignette threaten the vi~­
bility of organizations, especially in an increash1gly diverse world. Jack Weldt
the legendary former CEO at General Electric says it best: ·
\A/hat could possibly be more importai.1.t than who gets hired? Business is a game, and
as with all games, the team that puts t11e best people on the field and gets' them play-
ing together wins. It's that simple.I
This is as true at the levd of individual fo.J.11s, as it is with respect to compe-
tihon between nations. 1he Uni ted States has always been a magnet for talent
from other nations, and this counh·y grew economically powerful tlu·ou gh the
contributions of many different people who emigrated here from other cow1-
lTies. Some have suggested the United States is losing its edge in this regard,
howeve1~ and that "this is America's most serious long-term threat."2 That is,
social and economi.c in.equality, racial and ethnic bias, growing political intol-
erance, and a failing educational system are conh·ibuling to a state of reverse
migTalion, where highly trained professionals w h o carn.e to this country are now
leaving the United States in larger percentages than those corning in. hlnovation
and economic growth are fueled by people, and the firms or counh·ies that bring
in the best people will be the ones that compete most successfully.
111e pmpose of this chapter is to familiarize you with ways to m.inimize errors
in employee selection and placement and, in doing so, improve your company's
competitive position. The chapter first focuses on five standards that should be
met by any selection method. TI1e chapter then evaluates several..corrunon selec-
1
tion methods according to those standards.

Se~ection Method Standards

!LO 6~'ll Persormel selection is the process by which companies decide who will or will
Establish the basic not be allowed into organizations . Several generic standards sh ould be met in
scientific properties any selection process. We focus on five: (1) reliability, (2) validity, (3) generaliz-
of personnel selection
ability, (4) utility, and (5) legality. The first four build off each other in f11e sense
methods, includ ing
reliability, validity, that the preceding standard is often necessary but not sufficient for the one that
and generalizability. follows. Tius is less the case with legal standards. However, a thorough under-
standir1g of the first four standards helps u s understand the rationale underly-
in g many legal standards.

RIEUAB!R.JfY
Much of the work in p ersonnel selection involves measuring characteristics
of people to determine who will be accepted for job openings. For example,
we might be jnterested in applicants' physical characteristics (like stren gth or
Mr
Ii
 ...
CHAPTER 6 Selection and Placement :2A]}7

endurance), their coguiti.ve abilities (sud1 as spatial memory or verbal reason-

ing), or aspects of their personality (like their decisiveness or integrity). Many
people have inaccurate stereotypes about how these kinds of characteristics may
be related. to factors such as race, sex, age, or eth11ic background, and therefore,
we need to get past these stereotypes and measure the acluaJ attTibutes directly.
1Nhatever the specific focus, in. H1e end we need to quantify people on these
dimensions (assign m.unbers to them) so we can order them from hi.gh to low on
U1e characteristic of interest. Once people are ordered in this way, we can decide
whom to hire and whom to rejecfc.
One key standard for any measuring device is its reliability. We define
relfab:ii.lily as the degree to which a measure is free from random error. If a Rellabu~!fy
measure of some supposedly stable characteristic such as intelligence is reli- The consistency of a
able, then the score a person receives based on that measure will be consis- performance measure;
the degree to which a
tent over time and in different contexts. performance measure
is free from random
error.
Estimartifflg t~e llte~nabillOil:y uJlf M1t2a~mn?)u1rH~lfilf(
Most measurement in personnel selection deals 1;1rith complex characteristics
like intelligence, integrity, and leadership ability. Howeve1~ to appreciate some
of the complexities in measuring people, we wm consider something concrete in
discussing these concepts: the measurement of height For example, if we were
measuring an applicant's height, we rnight start by using a 12-inch ruler. Let's
say the first person we nleasltte hn-ns out to be 6 feet 1 and 4h6 inches tall. It
would not be surprising to find out that someone else measuring the same per-
son a second time, perhaps an hour later, fom1d this applicant's height to be 6
feet and 12h6 inches. The same applicant, measured a thlrd time, maybe the next
day, might be m easw·ed at 6feet 1 and 8/ 16 inches tall
As this exam.pie makes dear, even though the person's height is a stable char-
acteristic, we get slightly different results each Hme he is assessed. Tius means
that each time the person is assessed, we must be making slight errors. If a mea- __
surement device were perfectly reliable, Ulere would be no errors of measure.: -
ment.. If v11e used a measuF2 of height that was not as reliable as a ruler-for
example, guessing someone's height after seeing her walk across the room-we
might see an even greater amotmt of unreliability in the measure. Tims reliability
refers to the measuring :instrument (a ruler versus a visual guess) rather than to
the characteristic itself.
We can estimate reliabilin; in several different ways, however; and because
most of these rely on computing a correlation coefficient, we will briefly describe
and illustrate this statistic. The correlation coefficient is a measure of the degree to
which two sets of numbers are related. The correlation coefficient expresses the
strength of the relalionship in numerical form. A perfect positive relationship (as
one set of numbers goes up, so does the other) equals + 1.0; a perfect negative
relationship (as one goes up, the other goes down) equals -1.0. When there is no
relationship between the sets of numbers, the correlation equals .00. Although
· the ach1al calculation of this statistic goes beyond the scope of this book, it will
be useful for us to conceptually examine the nature of the correlation coefficient
and 1Nhat this means in personnel selection contexts.
When assessing the reliabHity of a m.easure, for example, we might be inter-
ested in knowing how scores on the measuI"e at one time relate to scores on the
same measure at another time. Obviously, if the characteristic we are measuring
 ...
24~ CHAPTER 6 Selecti on and Placement

is supposedly stable (like iA-iJeUigence o:r integrity) and the time lapse is short,
this relationship should be strong. If it were weak, then the measme would be
inconsisteni:-hence unreliable. 111is is called assessing test- retest reliabilihj.
Plotting tl1e two sets of numbers on a two-dimensional graph often helps
us to appreciate the mearung of various levels of the conelation coefficient.
Figme 6.1, for example, examines the relationship between student scholastic
aptirude in one's jmlior and senior years in lugh school, where aptitude for col-
lege is 1neasured ill tJ.1xee ways: (1) via the scores on the Scholastic Aptitude
Test (SAT), (2) via ratings from a high school counselor on a 1-to-100 scale, arid
(3) via tossing dice. In th.is plot, each nmrtber on the graphs represents a person
whose scholastic apti.tude is assessed twice (in tl1e junior and senior years), so in
Figure 6.la, 11 represents a person who scored 1580 on the SAT in the junior year
and 1500 h1 tli.e senior year; 2020 represents a p erson who scored 480 in the junior
year and 620 in the senior year.
Figure 6.la shows a very strong relalionship between SAT scores across the
two years. This relationship is nol~ perfect in that the scores changed slightly
from one year to the next, but not a great deal. Indeed, if there w ere a perfect LO
correlation, the plot would show a straight line at a 45-degree angle. Tuntlng to
Figure 6.lb, we see that tl1e relationship between the high school counselors'
ratings across the two yeats, while still po13itive, is not as strong. That is, the
cmmsdors' :ratings of individual students' aptitudes for college are less consis-
tent over the two yeaxs than their test scores. 1his might be attributable to the
fact the counselor's rating during the junior year was based on a smaller nmn-
ber of observations relative to f11e rafu1gs made during senior year. Finally,
Figure 6.lc shows a wo:rsl:-case scenario, where the students' aptitudes are
assessed by tossing two six-sided dice. As you would expect, the random nature
of the dice :means tl1at there is virtually no relationship between scores taken in
one year and scores taken the next. Altllough no o:i;ie would seriously consider

IFR@11.mr~ (ffi. 1l iill

Measurements of a
StL1dent's Aptitude

700 -

L.fr"---+-- -+- ---l----+----+-----

400 700 1000 1300 1600
Jlll!llflln!Glli'·1f4i!"'1R' SAT $i;;:orn

·- - - - - - -~
 CHAPTEIR 6 Selection and Placement 249

---+-----1------1-----1----~----

20 40 60 80 100

12

11

'IO
Cl)
y
Q 9
'1•
0
m 8
m
~~ 7
""ff!
>~ 6
.~
f,l
·~
,-
;)
fll
111
4
3

2 3 4 5 6 l 8 9 10 11 12
JamioR'\,,Y~1'1llf 'iio%s o·~ [)k{F,:·

tossing dice to be a measure of aptitude, it is wmth noting that research shows

that the coffelation of overall ratings of job applicants' suitability for jobs based on
unshuctured interviews is very dose to .00. Tims, one cannot assume a measure is
reliable 1ATithout actually checking this directly. Novices in measurement are often
surprised at exactly how umeliable many human judgments turn out to be.
 ..
250 CHAPTER 6 Selection and Place m ent

Th ere are many steps one can tal<e to increase the reliability of the intervie;w
p rocess, such as provi.ding raters with standardized training and common for-
m ats for translating observed behaviors into scores on dimensions, but in lieu o.f
these measures, most p eople tend to be pretty UlU'eliable raters of other people,
especiaUy people they an~ m eeting for the first time.3

Staindawds fm· RelialbmitJf

Regardless of what characteristic we are measuring, we want highly reliable
measures. Thus, in. lhe previous example, when it comes to measuring students'
aptitudes for college, the SAT is more reliable than counselor ratings, whic:h
in .tum are more .reliable than tossing dice. But in an absolute sense, how high
is lugh enough-.50, .70, .90? This is a difficult question to answer specifically
because the required reliability ·depends in pa.rt on the nature of the decision
being made about the people being measured. .
Forexample, let's assume some college admissions officer was consideruig
several students depicted in Figures 6.la. and 6.lb. Turning first to Figure 6.lb,
assume tlw admissions officer was deciding b,etween Student 1 (1 1) and StU~
den t 20 (2020): For this decision, the .50 reliability of the ratings is high enough
because t11e difference b etiNeen. the two students is so large that one wou~d
m~ke tlle same decision for admission regardless of the year in whid1 the rating .'L
w as talcen. That is, Student 1 (with scores of 100 and 80. in the junior and senior
yeai~ respectively ) is always ad mitted and Student 20 (with scores of 12 and 42
for jmuor and sexuor yeaxs, resp ectively) is always rejected. Thus, although the
ratings in this case are not all that reliable in an absolute sense, their reliability is
high enou gh for this decision.
On tl1e other hand, let's assume the same college admissions officer was
deciding between Student 1 (1 1) and Student 2 (2 2) . Looking at Figure 6.la, it is
clear that even with the highly reliable SAT scores, the difference between these
students is so small that one would make a different admission d~cision depend-
ing on what year one obtained the score. Student 1 would b e selected over Stu-
dent 2 if tl1e junior-year score was u sed, but Student 2 would be chosen over
Student 1 if the senior-yeax score was u sed. Thus, even though the reliability of
the SAT exam is high in an absolute sense, it is not high enough for this decision.
Under these conditions, the admissions officer needs to find some other basis for
m aking the decision regarding these two students (like high school GPA or rank
in graduating class).
Althou gh these two scenarios clearly show that no specific value of reli-
al;>ilil:y is always acceptable, they also demonstrate why, all else being equaJ,
the more reliable a measure is, the better. For example, turning again to
Figures 6.la and 6.lb, consider Student 9 (99) and Student 14 (1414). One would
not be able to m ake a d ecision between these two students based on scholastic
aptitude scores if assessed. via counselor ratings, because the unreliability in the
rati.11gs is so large that scores across tl1e two years conflict. On tl1e other hanq,
one would be able to base the d ecision on scholastic aptitude scores if assessed
via the SAT, because the reliability of the SAT scores is so high that scores across
the two years point to the same conclusion. Moreove1~ if there are differen ces
between scores the first time someone takes a test and the secon d time, research
evidence suggests that the second score is usually more p redictive of future
outcomes.4
 if'

CHAIPTER 6 Selection and Placement 251

VAUDHV
We define validity as the extent to which performance on the m easure is related Validi"il.y
lo performance on the job. A measure m ust be reliable if it is to have any validity. The extent to which
On the other hand, we can reliably measure many characteristics (like height) a performance mea-
sure assesses all the
that may have no relationship to whether someone can perform a job. For this relevant-and only the
reason, reliability is a necessary but insufficient condition for validity. relevant-aspects of
job performance.

Criterion-Related Va ~ id.ar~ff(i)lf\1 . Crit~rn«:11n-iit~latP.dl

One way of establishing the validity of a selection method is to sh ow that there Validity
is an empirical association behveen scores on the selection measure and scores A method of establish-
for job performance. If there is a substantial correlation between test scores and ing the validity of a
job-performance scores, crnfrie1·fon-irefat.ied vaHdilty has been esfablished.s For personnel selection
method by showing a
example, Figure 6.2 shows t11e relationship between 2011 scores on the Scholas- substantial correlation
tic Aptih1de Test (SAT) and 2012 freslunan grnde point average (GPA). In this between test scores
example, th.ere is roughly a .50 correlation between the SAT and GPA. This .50 and job-performance
is referred to as a 7Jalidity coefficient. Note that 1Ne have used the correlation coef- scores.
ficient to assess both reliability and validity, which may seem somewhat confus-
ing. The key distinction is that the correlation reflects a reliability estimate when Priedk~i¥S'
we are attempting to assess the same characteristic twice (such as SAT scores Validation
in the junior and senior years) 1 but the correlation coefficient reflects a validity A criterion-related
validity study that
coefficient when we are attempting to relate one characteristic (SAT) to perfor- seeks to establish an
. mance on some task (GPA). empirical relationship
Criterion-related validity studies come in tvvo varieties. Predictive validation between applicants'
seeks to establish an empfrkal relationship between test scores taken prior to test scores and their
being hired and eventual performance on the job. Because of the time and effort eventual performance
on the job.
required to conduct a predkti.ve validati_on study1 many employers are tempted

-·~ng {l}.Jff'"ll ilJi "~

Relationship
between 2011 SAT
Scores and 2012
Freshman GPA

1.0 -

0.0 .....__ _- l - - - - l - ---+------+-- - - 1 - - - -

400 500 600 700 800
 ...

252 CHAPTER 6 Selection and Placement

Coni::11,.ffrnfillt ~o use a different design. C«Jllfil~m'Jceitall: vaHd<nti.oJ111. assesses the validity of a test by
'V.mi!cl131tiollll administering it to peopie afread y on the job and then correlating test scores with
A criterion-related existing m easures of each person's performance. The logic behh1d this strateg-;j
validity study in which
is that if fhe best perfomi.ers cuxren.Hy on the job perform better on the test than
a test is administered
to all the people cur- those who are currently sb_.u ggling on the job, foe test has validity. (Figw:e 6.3
rently in a job and then compaxes fhe two types of vaJidalion study.)
incumbents' scores are Despite the extra effort a_nd H.me needed for predictive validation, it is supe-
correlated with existing rior to concurrent validation for a nmnber of reasons, First, job applicants
measures of their per-
formance on the job.
{because they ate seeking vrnrk) are typically m ore inotivated to perform well
on the tests than are cu:n:ent employees (who alteady have jobs). Second, current
employees have learn_e d ina_ny things on the job that job applicants have not
yet learned. Therefore, the correlation between test scores and j ob performance
for cunent employees may n ot be d1e same as the correlation between test
scores and job performance for less knowledgeable job applicants. 111frd, cur-
rent employees tend to be homogeneous- that is, similar to each other on many

ffigll.!lll"(f.ll 6.3
Graphic Depiction
of Concurrent and
Predictive Validation ---1
Designs I
I_

,---o-
__ J
 ...
CHAPTER 6 Selection and Placement 253

characteristics. Thus, on xnm:ry of tl~e dwsaderisiics needed for s1:i.ccess on the

job, most current <~mployees 1Nill s11o•N resl:rktion in range. This resiJ.icted range
makes it hard to detect a relationship behflreen test scores artd job-perfonnance
$Cores because few of the current employees >Nill be very loiN on the characteris-
tic you are trying to validate. For example, if emotional stability is required for
a nursing caree1~ it is quite likely Hrnt most nurses •Nho have amassed five or six
years' experience will score high on this chaxacteristk. Yet to validate a test, you
need both high test scorers (~V>rho should subsequently perform well on the job)
and low test scorers (who should perfonn poorly on the job). Thus, although
concurrent siudies can sometirnes help one anticipate the results of predictive
studies, they do not serw-: as substitutes.
Obviously, we would liJ:e our measun:s to b e high in validity; but as with the
reliabilily standard, we must also ask, how fogh is high enough? When trying
to detenn:ine how 1nuch validity is enough, one typically has to turn to tests
of statishcal significance . .A test of statistical significance answers the question,
"Assuming that there is no true relationship between the predictor and the crite-
rion, what are the odds of seeing a relationshi p th.is s1Tong by chance alone?" If
these odds are very low, then one might infer thatthe results from the test were
in fact predicting futJ..ffe job performance.
Table 6.1 shows how big a correfation bi:::tween a selection measure and a mea-
sure of job performance :needs to be to adrieve statistical significance at a level of
.05 (that is, there is only a 5 out of 100 chance that one could get a conelation this
big by chance alone). Although it is generally true 111.at bigger correlations are
bette1~ the size of the saniple on which the correlation is based plays a large role
as well. Because many of the selection methods we examine in the second half
of this chapter generate correlations in the .20s and ,30s, we often need samples
of 80 to 90 people. A validation study wii11 a small sample (such as 20 people)
is almost doomed to faih:uce from D.11.e start. Fortunately, as vou can see from the
"Competing through Tedwology" box, advances in the ability to process "big
data" via cloud-based analytics is greatly expanding the ability to find valid pre-
dictors of future job performance.
Cont®fillt Vaiidati©irn
A test-validation strat-
Con~elllil: Vaiid.antiou~ egy performed by
When sample sizes are smaU, an alternative test validation slTategy, content vali- demonstrating that
dation, GU\ be u sed. Conteint vaHdalbi.on is performed by demonsh'ating that th e items, questions,
f\le questions or problems posed by the test are a representative sample of the or problems posed by
kinds of situations or problems that occur on the job. A test that is content valid a test are a represen-
tative sample of the
expose~ the job applicant to situations that axe likely to ocnU" on the job, and
kinds of situations or
then tests whether the appli.cani: currenl:ly has sufficient knowledge, skill, or problems that occur on
ability to handle such sill.iations. the job.

'1fabme 6.1!
Required Level
of Correlation to
Reach Statistical
Significance as a
Function of Sample
Size

' .

- - - - - -- -- -- - - - - - --
In the old days, when it came
to staffing its call centers, Xero;<
Corporation always looked
for applicants who had done
the job before. This seemed
like a reasonab.le approach to
take until one day, when they
actually assessed the empirical
relationship between experi-
ence, on the orie ha nd , and
performance and turnover on
the other hand, they learned
that experience did not matter
at all. Instead, what really sepa-
rated winners and losers in this
occupation was their personal-
ity. People who were creative
tended to perform well and
stay on the job for a lo ng time,
vvhereas those who were inquis-
itive tended to struggle Vlfith
the job and leave well before
the company ever recouped its
$5,000 investment in training .
)(erox now leaves all hiring
for its nearly 500,000 call center
jobs to a computer software
algorithm that tirelessly looks
f?r links between responses to
personality items and a highly
specific set of job outcomes.
The program was developed
by Evolv Incorporated, and
rather than relying on inter-
vir.:?wer judgments that might be
subject to personal biases, the
Evolv program puts appl icants
through a battery of tests and
personal ity items, then tracks
their outcomes at the company
over time. The algorithm is con-
stant ly adjusting itself with the
<:Kcurnulation of ever more data,
all in an effort t o develop a sta-
tistical model that describes the
ideal call center employee.
Evolv is just one p layer in an
expanding industry that seeks
to use "big data" to help com-
panies find a nd ret ain the best
employees. Globally, spending
on this sort o f talent manage-
ment software rose 15% in just
one year to an estimated value
of $3.8 billion, and the competi-
tion for this business is intense.
For example, in 2011 alone,
IBM purchased Kenex.a Corpo-
ration for $1.3 billion, Oracle
acquired Taleo for $1.9 billion,
and SAP bought SuccessFactors
for $3.4 billion.
Organizations that rely on
"big data" solutions tend
to generate hiring decisions
that perform well when it
comes to traditional standards
like criterion-related validity
because the algorithm only
retains items that demonstrably
discriminate applicants in terms
of future outcomes. Still, some
items that demon- ,
strate validity can also .,
create problems in terms
of adverse impact by age, race
or gender, and so items that fail
to show no demographic differ-
ences are weighted much more
heavily in the algorithm relative
to those that might favor one
group or another. In the end, by
relyi ng on sheer brute force of
large numbers of items, la rge
numbers of applicants, and
long time periods to assess out-
comes, programs such as these
can help employers achieve the
goals of both predictive validity
and legal defendability.
Pnscuss·norM alUlria~1no~Es
II. What types of jobs are best.
suited to "big data" hiring
solutions like those discussed
here?
~. What types of job categories .
are likely to always involve
some degree"of human
judgment?
SOURCES: J. Walker, "Meet tl1e i'Jc;iw
Bo5s: Big Data," The Wall Street Journal
Online, September 20, 2012; G. AndGrs,
"The Rare Find," Bloomberg Businessweek,
October 17, 2011, pp. 106-112; 0 . Cormier-
Smith, "AkzoNobel Selects Oracle Talent
Management Cloud Services for Its Recruiting
Needs, " The Wall Street Journal Online,
/.\pdl 10, 2013.

Many of the .new sjmuJations that organizations are using· are essentially
computer--based· role-playing games, where applicants play the role of the
job incumbent, confronting the exact types of people and problems real-Hve
job incumbents would face. The simulations . axe just like traditional role-
playing games (e.g., "1he Sims"), and the applicant's reactions and behaviors
are scored to see how well t11ey match with what one woo.Id expect from the
ideal employee.6 Because the content of these tests so closely parallels the co'n-
tent of the job, one can safely make inferences from o:ne to the other. Although
254
 CHAIPTER 6 Selection and Plac·ement 255

· criterion-related validity is established by empirical means, content validity is

achieved primarily through a process of expert judgment.
.· TI1e ability to use content validation in small sample settings makes it gener-
ally more app licable than criterion-related validation. However, content valida-
tion has two limitations. }:7irstr one assumption behind content validation is that.
the person w ho is to be h..u:ed. must have the knowledge, skills, or abilities at the
lline she is hired. Second, because sl.1bjective judgment plays such a large role
in content validation, it is critical to minimize ihe amount of inference involved
on the part of judges. Tirns the judges' ratings need to be made with respect to
relatively concrete and observable behaviors.

GENERAUZABIUlrif
Gcnc:ir<lHzabiHty is defined as the degree to which the validity of a selection G~liil®ll'i!il~izab!li"fy
method established in one context extends to other contexts. Tims, the SAT may TI1e degree to which
be a valid predictor of someone's perfonnance (e.g., as a measure of someone's the validity of a selec-
tion method estab-
GPA in an undergraduate program), bu l:, does this same test predict perfor- lished in one context
mance in graduate programs? If the test does not predict success in this other extends to other
situation, then it does not "generalize" to this 01l1er context. Thus, rather than contexts.
rely on the SAT ~or all types of programs, separate tests like the GMAT, LSAT,
MCAT, and GRE may be neieded for particular types of graduate schools.
There are two prim.ary "contexts" over which we might like to generalize: dif-
fei;ent situations tjobs or organizations) and different samples of people. Just as
reliability is n ecessary but not. sufficient for validity, validity is necessary but not
, sufficient for generalizability.
It was once believed, for example, that validity coefficients were situationally
specific-that is, the level of correlation bet ween test and performance varied
as one •Nent from one organization. to another, even though the jobs studied
seemed to be idenlical. Subsequent research has indicated that this is largely
false. Rather, tests tend to show similar levels of correlation even across jobs that
are only somewhat similar (at least for tests of intelligence and cognitive ability)/'
Correlations with these kinds of tests change as one goes across widely differ-
ent kinds of jobs, however. Specifically, the more complex tl1e job, the higher
the validity of many tests. H was also believed tl1at tests showed differential
subgroup validity, which meant that the validirf coefficient for any test-job per-
formance pair was different for people of different races or genders. This belief
was also refuted by subsequent research, and, in general, one finds very similar
levels of correlations across different groups of people.7
Because the evidence suggests tl1at test validity often extends across situa-
tions and subgroups, validity generalizaf:ion stands as an alternative for validating
selection methods for companies that caimot employ criterion-related or content
validation. Validity genera.lization is a three-step process. First, the company
provides evid ence from previous criterion-related validity studies conducted in
other situations that shows that a specific test (such as a test of emotional stabil-
ity) is a valid predictor for a specific job (like nurse at a large hospital). Second,
the company provides evidence from job analysis to document that the job it is
trying to fill (nurse at a small hospital) is similar in all major respects to the job
validated elsewhere (nurse at a large hospital). Finally, if the company can show
~ ·
that it uses a test that is the san1e as or similar to that used in the validated set-
ting, then one can "generalize" the validity from the first context (large hospital)
to the new context (small hospital).
 ..
256 CMAPTIER 6 Select ion and Placement

un1tJ1rv
fl-.0 ~-2 UftilHy fa U1e degree to whid1 the information provided by selection mei11ods
Discuss how the par- enhances the bottom-line effectiveness of H1e organization. In general the more
1
ticular characteristics reliable, valid, and gern:-ralizable the se]eclion m ethod is, t:µe more utility it will
of a job, organization,
or applicant affect the
have. On the· other hand, in.any characteristics of particular selection contexts
utility of any test. enh ance or detract from the usefulness of given selection methods, even when
reliability, validity, and generaJizability are held constant.
IJJJtilifC)f Figmes 6.4a and 6.4b, for example, show two different scenarios where tJ.-:i.e
The degree to which correlation between a measure of extroversion and .the amount of sales reve-
the information pro-
1.1ided by selection
nue generated by a sample of sales representatives is the same for two differ-
methods enhances the ent comparcues: Company A and Cmnpany JB. Although the conelation between
effectiveness of select- the measuxe of extroversion and sales is lhe same, Company B derives much
ing personnel in real more utility or praclical benefit from the measure. That is, as indicated by the
organizations. arrows proceedmg ou~ of IJi.e boxes (which i.i.1dicate the p eople selected), the
average sales revenue of the tluee people selected by Company B (Figure 6.4b)
is $850,000 compared to $780,000 from the three people selected by Company A
(Figure 6.4a).
TI1e major difference between these two companies is that Company B gen-
erated twice as many applicants as Company A. Titls means that the selection
ratio (the percentage of people selected relative to the total number of people
tested) is quite low for Company. B (3 / 20) relative to Company A (3/10). Thus,
the people selected by Company B have higher amounts of extroversion than
those selected by Company A; therefore Company B takes better advantage
1

of the relationship between. extroversion and sales. Thus, the utility of any test

fF~@)IUllf~ . (\i).4J.zi Company A

Utility of Selecting
011 Extroversion
Scores when
Selection Ratio
Is High $900,000 -- $900,000
~
,..., ·l;'
IQ
~
@
:;i!
$800,000 -- - $800,000 '
~

"'
>
""
ill::
<'il
$700,000 - $700,000
~
~
l\fll

$600,000 - $600,000

$500,000 $500,000

400 500 600 700 800

 ..
CHAPTER 6 Selection and Placement 257

fggMm Ctii.4Rl
Utility of Selecting
on Extroversion
Scores when
Selection Ratio
- $900,000 - -
,..,, $900,000 Is Low
- f"I
..-
0 $850,000
~
l\I $800,000 - $800,000
~
I:
!!,!
>
Ill
~ $700,000 '''1!7
$700,000
l\!
m
Ill

$600,000 - - $600,000

$500,000 - $500,000
1-----1----1-----j---------j---~

400 500 600 700 800

generally increases as the selection ratio gets lowe1~ so long as the additional
costs of recruiting and testing are not excessive.
Selection ratios tend to get low when the economy is in a recession, and there
are more people looking for work than there are jobs, the utility of valid selection
teclu1iques is especially high. This is a reason why countercyclical hiring, can be
especially effective in terms of establishing long-tenn competitive advantage.
Many other factors relate to the utility of a test For example, the value of
the product or service produced by the job incumbent plays a role: the more ., "
valuable the product or senrice the more value there is in selecting the top per-
1

formers. For example in a high-tech company, there is tremendous value associ-

1

ated with a great team of software engineers wi1li. a proven record of working
productively together to create innovative products. If a company tried to hire
total strangers w ith out this kind of track record and build a team from scratch,
it might take years to see any value from a set of individual hires. Thus, many
organizations in this industry are willing to pay top dollar to hn:e entire intact
teams. The term " acqui-hire" is used in this indushy to describe this practice,
and in some cases, large companies are willing to pay up to $5 million to bring
an independent team into their fold. Ashley Vandy, an HR director at Facebook,
notes, "We are always look)ng for talent, and t11ese deals are one way to bring
great teams to Facebook."U
Indeed, the utility of hiring the b est talent is highlighted by recent evidence,
shown in the "Evidenced-Based HR" box, where one can see that performance
in jobs is not normally distributed, but instead takes the shape of a power law.
Thus the value of isolating and then hiring the best workers and leaving the rest
1

for the competition is even greater than what was once believed.
 ...
258 CHAPTER 6 Selection and Placement

Most individual differences take on the form. of a normal distribution, in the

sense that most people are in the middle, followed by a smaller group of people
who are a little bit above or below .the mean, foJJ.owed by an even smaller group
of outliers far above and below the mean. Tius idea of the normal distTibution
has traditionally been extended to people's beliefs about job performance as
well, even though there has not been a great deal of evidence collected to test
tlus belief. However, a study examirung over 600,000 entertainers, politicians,
amateur athletes, professional athletes and scientists has challenged this idea,
and instead suggests that job performance follows a power law distribution.
Figure 6.5 shows how a distribution that follows a power law differs dramati-
cally from a normal dislTibution, in the sense that there are actually ve1y few
high performers and a large group of potentially poor performers.
TI1e implications of these new findings for utility analysis are important
because they ilnply that fhe dJfference between the dollar value of a "lughly pro-
ductive worker" (e.g., someone who is one standard deviation above the mean,
perhaps selected based upon a validated test) and an "average worker" (e.g., at
the mean, perhaps selected at random) is much greater than one would expect
if the distribution was normal. Based upon data in the samples studied, the dif-
. ference between an average and a highly productive worker if the dish·ibution .
is normal is $11,327, but the difference between these two workers if distributed
. as a power law is $39 ,645. Obviousiy, in large companies, this difference in value
per worker would add up quickly, thus illustrating the critical financial implica-
tions of selecting the best and brightest.
IF~gMrn 6.5
Comparing a
Normal Distribution
to a Power Law

SOURCE: E. O'Boyle and H. Agu inis, "The Best and the Rest: Revisiting the Norm of Normality of Individual Perfor-
mance," Personnel Psycholog}t, 65 (2012), pp. 79-119.

llEGAl!Jnf
TI1e final standard that an.y selection method should adl1ere to is legality. AH
selection methods should conform to existing laws and existing legal prece-
dents. Employers who are taken to court for illegal discrimination experience
high costs associated with litigation, settle1nents, and awards, and also suffer

~------
 ..
CHAPTER 6 Selection and Placement 259

potential damage to theh" social reputations as good employers, making recruit- ILO r\SJ~~
ment more difficult. Moreove1~ although the tlU'eat of litigation is ever present, Describe the govern-
· this is especially a problem durin.g econonric recessions, when it is difficult to ment's role in person-
nel selection decisions,
find a job. Indeed, the number of discrimilll.ation cases filed with the EEOC set a particularly in the areas
record of over 100,000 in 2011 aione.9 For ex:am.ple, a recent class-action charge of of constitutional law,
racial discrimination accuses the advertising industry of discriminating against federal laws, executive
African Americans. The suit seeks to secure damages of over $200 million from orders, and judicial
four of lhe largest firms in the United States (Interpublic, Omnicon, Publicis, precedent
and WPP) .10
A different case against Wahnart sought damages of over $1 billion, and
charged that the retailer discrim.inated against women via a set of subjective and
decentralized interview processes that were rile with gender stereotypes that
limited their advancement oppodunties. 11 A.IH1ough this case was eventually
. decided in Walmarl:'s favor for a technical reason (the 1 million women plaintiffs
··failed to establish that they were common vkli.m.s of a common policy), the rep-
utational damage caused by aJl the tes1imony seriously wounded the company.
Supreme Court Justice Ruth Ginsberg noted, "The plaintiffs' evidence, including
class members' tales of their OV'm. experiences suggests gender bias." This kind
of reputational damage can only h urt an iemployell' in the labor m arket, even if
the employer prevails in court 12 in addition, the negative reputational effects
· associated with being perceived as an employer who discriminates unfairly can
even hru:t the company in the product market For example, if Walmart is per-
ceived as treating 1.flTomen unfali:ly, this n:Ught be a tum-off for female customers
some of whom may shop elsewhere.
This is exactly what was experienced by G1ick-fil-A. Even though the firm
had never been charged with any form of employment discrimination, when the
president of the company made disparaging comments regarding gay marriage
in 2012, th.ere was an imm.e diate negative backlash against "hate chicken" that
harmed sales. Even worse, ii threatened the company 's expansion plans and
strategy to move into northern and urban areas. The Mayor of Boston went so
far as to send a letter to the company urging tl1em to back down from plans tQ..c,
locate in Boston, and he was quoted in the Boston Herald saying that "he would
make it very difficult" for the restaurant to come to town. Chicago Mayor Ralun. ·
Emanual chimed in and stated that "Chick-fil-A's values are not Chicago's val-
ues" and protest movements in New York and San Francisco were organized to
oppose expansion into those areas. A.11 of lhis despite the fact that no one ever
presented any evidence or even charged the company with actual discrimina-
tion against gay customers or job applicants.13
111e increased purchasing power of various minority groups highlights
the need to make sure that perceived discriminatory policies do not interfere
with bottom-line business results. Our opening vignette made reference to the
"minority majority" in terms of birth rates and death rates, but similar sta-
tistics can be leveraged with respect to purchasing power. By 2015, Hispan-
ics will spend $1.5 trillion on U.S. goods and senrices, a full 50% more than
they did in 2010. African Arnerican spending will expand by 25% in the same
time period to $1.2 trillion in spending. Finally, spending by Asians will rise to
$700 billion a year, a ~to /ii increase. M any organizations are aggressively court-
0

ing all of these new customers and they reflect this in both their marketing and
hiring practices.14
 ...
260 CIHAPTER 6 Selection and Placement

tFedlen·a~ tegfis~iar~uorrn
Three primary federal laws form the basis for a majority of the Stti.ts filed by
job applicants. Ffrsi, the Civil Rights Act of 1991 . (discussed in Chapter 3), an
extension of the Civil Rights Act of 1961-1, protects jndividuals from discrjrn.ina-
fion based on race, col01~ sex, religion, and national origin with respect to hiring
as well as compensation and working condili.ons. 111e 1991 act differs from t11e
196'1 act .in tlU"ee important areas.
First, it defines employers' explicit obligation to establish the business neces-
sity of any neutral-appearing selection method that has had adverse impact on
groups specified by the law. Tius is typically done by showing that the test has
significant criterion-related or content validity. If the employer cm.mot show
such a difference, which the research suggests will be difficult, then tl1e process
may be ruled illegal. H should also be noted that "customer preference" is not a
legally defensible means of justifying a process that has adverse impact.
Second, the 1991 act allows the individual filing the complaint to have a jury
decide whether he or she may recover punitive damages (in addition to lost
w ages and benefits) for emoti.onal injuries caused ·by the discrimination. 111fa
can generate large financial settlements as well as poor public relations tJ.1at can
hinder 111e organizati.on' s abmty to compete.
Finally, the 1991 ad expli.citly prohibits the granting of preferential h·eatment
to minority groups. Prefe:r.ential treatment is often afu·active because many of
the most valid methods for screening people, especially cognitive ability tests
and work sample tests, often a.re high in. adverse impact. 15 111us, there is some-
what of a trade-off in terms of selecting the highest scorers on validated tests on
the one hand and creating diversify in the workforce on the other hand.1 6
One potential way to "have your cake and eat it too" is to simply rank the
scores of different races or gender groups within their own groups, and then
taking perhaps the top 10% of scorers from each group, instead· of the top 10%
that would be obtained if one ignored race or gender. Many feel that this prac-
tice is justified because it levels the playing field in a context where bias works
against African Americans. Hmvever, the 1991 act specifically oµtlaws this prac-
tice (sometimes refelTed to as race norming). 'I11e reason for this is that adjusting
scores in this way has been found to have a number of negative effects, not only
on the attitudes of white males who clajm it causes reverse discrimination,17 but
on the proposed beneficiaries of such preferential treahnent. A recent Supreme
Court case jnvolving the University of Te)cas (UT) illustrates how difficult it can
be to achieve diversity goals while still upholding m erit-based selechon and
avoiding perceptions of reverse discrimination. Specifically, in order to increase
the percentage of African American and Hispanic students in the UT system, the
school made it a policy to accept the top 10% of the graduating class of every
high school. Because many high schools :in Texas tend to be segregated by race
and ethnicity, this policy ·worked somewhat like race norming in ensul'ing that
members of every group found their way into college; so far, so good.rn To push
the d iversity gains even furtl1er though, the admissions officers at UT noted.
that many African American students in affluent suburban schools often were
rejected fo:r admission, even though they had higher test scores than AJricm.1
American students from urban schools. When the school tried to reach out and
accept lJ1ose studen.ts, howeve1~ this policy was challenged and then struck
down by the Supreme Court. The court reacted negatively to this policy becaus~
it meant that a white sludent at an affluent school who had the same test score:as

----- -
 ...
CHAPTER 6 Selection and Placement 261

an African Ameri.can. at the sa1ne affluent scn ooi. v1roukl be rejected whereas the
African American student would be accepted. The court decided that this was a
clea~· case of reverse discrimination basecl solely on race.1 9 Indeed, although the
U.S. does not allow for these kinds of quotas for the inclusion of various groups,
· as the "Competing through Globalization" box illusfrates, the same is not hue of
Europe, where "Pink Quotas" have become comrnonplace.
Rather than employing race nonning, employers ccm partially achieve both
goals of xnaximizing p redicted future performance and diversity in several
ways. First, aggressive recruiting of members of protected groups allows an
employer to generate a larger pool of protected group members, and; by being
highly selective within this larger group, the scores of admitted applicants will
more closely ma tch those of all the otller groups.2° Second, as we see later in this
chapter, different selection methods have different degrees of adverse impact,
and mullistage selection batteries that use different methods at different stages
can also help.21 The key is to u se meH1ods that have lmAT adverse impact early in
the process and only employ the methods that h ave high adverse impact later.
Third, by directly showing the degree to which p ast unfair practices and uncon-
scious bias has resulted in adverse impact in the past, the nonbeneficiaries of
· affirmative action p rograms are much ni.ore likely to view them as acceptable as
a form of short-term remedy. 22
Finally, one common approach that does not seem to work is to abandon the
kinds of compliance-driven, evidenced-based workforce utilization reviews that
we discussed in our last chapter, in favor of softer, "inclusion" initiatives that
expres~3 lhe generic value of diversity but faH to docmnent goals and timeta-
bles statistically. Some orgaruzations treat diversity more like a marketing cam-
paign than an HR initiative, and it is not uncommon to see companies that won
awards for their "inclusion programs" such as Texaco and Bank of America, also
later convicted of illegal discrimination. Some observers have noted that there is
an almost complete overlap of the lists of the lop 50 companies for inclusion and
the top 50 companies for advertising expenditures, and the need to complement
style with substance cm.mot be overlooked in this critical area.23 The simple huth
is that best predictors of whether a firm becomes truly diverse and avoids litiga-
tion is w hether (a) there is a specific p erson (e.g., a diversiiy compliance officer)
whose sole job is to monitor hiring statistics, (b) this person has the power to
change hiring practices, and (c) this person is held sh·ictly accountable in their
own performance appraisal for achievh1.g quantifiable results.24
Although most litigation that involves the Civil Rights Act seeks to redress
bias associated with race and gender, it should also be stressed that the act also
protects against bias based on religion. In p articular, in the post-9 /11 world,
evidence is accruing that indicates increased bias against job applicants who are
Muslim. 25 Still, perhaps because the United States sfresses the values of free-
dom of religion and freedom of speech, the level of litigation associated with
religious·-based charges is very small in number compared to what one sees for
gender and race.
The Age Discrimination in Employment Act of 1967 is also widely used in
personnel selecfion. Court interpretations of tl1is act also mirror those of the
Civil Rights Act, in the sense that if any neutral-appearing practke happens
to have adverse impact on those over 40, the burden of proof shifts to the
employer, who must show business necessity to avoid a guilty verdict.26 The
act does not protect younger workers (thus there is never a case for "reverse
 Althou9h women constitute promote voluntary comp liance, severa l U.S. boards,·
1TJuqhly half of Italy's popula- t he Italian program esta bli shes speaks for many when
lion, i:IH:?Y comprise only 6% of a mandat e. As Joyce Big io, a she notes, " I don't support
corpoi-ate board mem b ers in recently added member to the the European plan to force
li:;:ilian con11)anies. This is one of board at Fiat, notes, "I have fem ale q uotas on boards. I
i\11:: lowest levels in Europe and ahNays b een convinced of t he wou ldn't w ant to be part of a
c;:111 [y~ traced to larger societal need fo r affirmative action . It board beca use I am filling a
isswas. For e)(ample, la bor force is the o nly way to break into quota." Many Italian women
pa1-1:icipation rates for Italian u :=:rtain areas 21 nd correct an share t his feeling, but at t he
worrn:o-n sta nd at 46%, w hich imbalance." same time, see t he need for
i'.3 the lowest rate in any m ajor Ironica lly, b ecause t his ne\N chang e. Elisabetta Magistretti,
European country. This lm111 demand for labor often runs w~o sits on three different Italian
1-ate can be attributed to rigid up against a sh ort supply of corporate boards, captures this
labor laws th at make it difficu it European candidates, ma ny sentiment when she states, "It's
fnr women to work part time, 'c ompan ies trying t o com e into been d isap pointing for me as a
and t hus rnany wom en leave complian ce with these lavvs wom an to need a pitchfork to _
the labor market aft er having wi nd up bring ing in Ame ri can join a b oard, but without th is new I
children, and never return. This 1Nomen to fill board positions. .lavv compan ies wou ld have never I
attrition, then "trickles up," Women al ready occupy cl ose t hought about us. Now it is up t o i
creating a situation vvhere few to 20% of t he corporate b o ard women to demonstrate they're
vvomEm have acquired t he skill:; p ositions in the U.S., and th us well-prepared for the job_"
and G)<perience necessa ry to constitute an experienced
hold corporate boa rd positions_ pool of candidates from w h ich
In <J n "Jffort to help reverse to choose. In addition, m any
1. How d o es greater represen-
this trE:~nd, the Italian govern- Europea n companies com pete
tati on of women on corpo-
llH;:)ni: passed a new law that in U-5. p ro d uct m arket s, and
rate boards promote both
requires all Italian listed and thus, in addition to experi ence,
societa l goals __and compe-
state·-01A111ecl compan ies to A merican women bri ng an
tiveness goalS at the same
ensure that 33% of their board intuitive understandi ng of U. S.
time?
seats are held by women by co nsumers th at is not shared by
2. What long-term steps can be
2014. This sort: o f law, o ft en m any European women.
taken by countries and com-
r0 ferred to as a "Pink Q uota," is Recruiting American women
panies to eliminate the need
incrc~ as i ng Iy common in Europe, for European boards is often I
but the rate set by th e Ital ian difficult, however. Part of t his is
for quotas over time? .
I
qovemr'.·1e11tl:I is much mm~ at~:ributabledto the t ime com - SOURCES; J. s. Lublin, "Pink Quotas Alter =·,,,_!

acgg ress1ve ·· 1an rat.es set 111 rmtment an overseas trave 1 Eu rope's Boards" Th~ Wall Street Journal -
Fi-;mce (7-0% by 201 4) and the required by such positions, but Onlin e, Sept e mbekr 11, 20 12; G. Za mp<mo, .='-~.-
United Kingdom (25% by 2015). t he very e)(istence of the quota "Italy to Pus11 'Pin Ouotas,"' The Wa ll Sireet :
Also, unlike statut.es -, n Sweden t "t If . I d I. ~
I
Journal Online, June 5, 2012; D. Brady,
sys em I Se IS a SO a e:n ment . "Hard Choices," Bloomberg Businessweek, '
and the Netherlands that Helena M orrissey, a veteran of October 1, 2012, p. es.
f!1::•. 1:.'f'!/':fi.-:i;,,,1.,·•11f'''":!1:,,,.,,,,,,,,.,,,.,,,,1, r!ti'//11!.''1Jni',""""'·"-''~lir.."'<."'l.'-~..;~r:'11"!i'f.'1'."7'-'l"·""·1.~ 11.~•t:!!!rlr:: r1:!!:"'·~·~1i-".''.1ii'fr,l!i"!r7'!':'.!.r;,.~.-.,r:fl1r.'."'r:>t'"!.'C'.'.':;$~7'/."'.~ '"·"'._,,·"'·~~·"'"6..,.,,"""-,.,:=f:""~""'"~~..,,,~.~"M~~"""~""~~~~-~~~~~..,..~7=..'"""':!.-'":;;:~.';::!:~~~-~'-~~~';!:!.~~~..2§

discriw.ination" here), a..nd like the most recent civil 1ights act, it aUows for jury
td.ab and pu.n itive damages_ This act outlaws almost all "ma11datory retir-e-
ment" programs (company policies that dictate that eve1yone who reaches a
set age must retire).
 ..
CHAPTER 6 Selection and Placement 263

Finally, the Americans witl1 Disabilities Act (ADA) of 1991 protects individu-
als with physical and m ental disabilities (or 1Nith a history of the same), and
requires that employers m.ake "reasonable accommodation" to disabled individ-
uals whose handicaps n1ay prevent IJ1em from. performing essential functions
of the job as currently designed. "Reasonable accommodation" could include
reshucturing jobs, modifying work schedules, making fa.::ilities accessible, pro-
viding readers, or modifying equipment. The A.DA does not require an organi-
zation to hire someone lf\Those disability prevents him or her from performing
either critical or routine aspects of the job nor does it :require accorrunodations
IJ1at would cause "undue hardship." 'f.echnological advancements in the area of
acconunodations, along iNith the general shifi: in jobs from those that are physi-
cally demanding to those that are more mentally challenging, is increasirig the
percentage of jobs that disabled workers can hold.27

Execnlrtnve Orders
As noted in Chapter 3, the executive branch of the government also regulates
hiring decisions through the use of execufore orders. Executive Order 11246 par-
allels l:he protections provided by the Civil Rights .Act of 1964 but goes beyond
the 1964 act in two important ways. Fil'st, not only do the executive orders pro-
hibit discrimination, they acn1aUy inand.ate that employers take affirmative
action to hire qualified minority applicants.w Executive orders also allow the
government to suspend aU business with a conlractor while an investigation is
being conducted (rather than waiting for an acl1rnl finding), which puts a great
deal of pressure on employers to comply with these orders. Executive orders are
monitored by the Office of Federal Contract Compliance Programs (OFCCP),
which issues guidelines (like the Affo·mai.ive Action Program Guidelines pub-
lished by the Bureau of Nation.al Affairs in 1983) to help -companies comply.

.Types of Se~ec·tmon M~~rthod$

The first half of this chapter laid out the five standards by which we can judge l06-4
selection measures. In the second half of this chapte1~ we examine the common List the common meth-
selection methods used i:n various organizalions and discuss their advantages ods used in selecting
and disadvantages in terms of these standards. human resources.

INTIEmrnEWS
A selection interview has been defined as "a dialogue initiated by one or more 1.0 61-!5
persons to gather informalion and evaluate the qualifications of an applicant for Describe the degree to
employment." The selecti.on i:nJerview is the most widespread selection method which each of the com-
employed in organiza1ions, and. there have been literally hundreds of studies mon methods used
in selecting human
exam.:ining their effectiveness.29
resources meets the
Unfortu11ately, the long history of researd1 on the employment interview sug- demands of reliability,
gests that, without proper care, it can be 1mxeliable, low in validity, and biased validity, generalizability,
again st a number of different groups. Moreove1~ interviews are relatively costly utility, and legality.
because they require at least one person to int-erview anoH-1.e r person, and these
persons have to be brought to tl1:e sarn.e geographic location~ Finally, in terms
of legality, the subjectivity embodied in the process, as ·well as the opportunity
264 CHAPTER 6 Selection and Placement

for unconscious bias effects, of-ten m akes applicants upset, parfjcularly if they
fail to gel: a job after being asked apparently irrelevant questions. In 111e end,
subjective selection methods lilce the interview must pe validated by h·aditional
criterion-related or content-validation procedures if they show any deg1:ee of
adverse impact.
Fortunately, more recen~ research has pointed to a number of concrete steps
that one can em.ploy to increase the utility of the personnel selection interview.
First, I-lR staff should keep the interview stmctured, standardized, and focused
on accomplishing a smaJJ number of goals. 111at is, they should plan to come out
of each interview with quantitative ratings on a small number of dimensions
that are observable (like inte1personal style or abilify to express oneself) m1d
avoid ralings of abilities that may be better measured by tests (lilce intelligence).
In additi.on to coming out of the interview with quantitative ratings, i.nterviev•r-
5ii1i:M<i!1J:H<Olill.lliij ers should also have a strucl:u:red note-taking system that will aid recall ·vvhen it
Olfllil:<l;llf'\fn®wiq comes to justifying the ratings.30
An interview procedure Second, ask questions dealing with sped.fie situations that ru:e likely to arise on
where applicants are the job, and use tl1ese to detenni11e ·what the person is likely to do in that situa-
confronted with spe-
tion. These types of si\Jtuta~imil.<ll.A in~eR\vR~iN items have been shown to have quite
cific issues, questions,
or problems that are high predictive validity.31 Situational ju.dgrnent items come in two variefies, as
lilcely to arise on the shown in Table 6.2. Some items are "experience-based" and require the applicant
job. to reveal an actual eJqJerience he or she had in the past when con.fronjj11g the

Tiil!bm!l;l 6"2
Examples of
Experience-Based
and Future-Oriented
Situational Interview
Items
"What was the 'biggest diffeJ'ence ()f opinion
you ever had with a co-w.orker? How did you ,'
resolve that situation?''

t.rncigine ,thcit,y()u an·,,~ fc,9~wod~erdi9agree

11

aboutthe besti{Vay to hf!cidle an absenteeism ,

problem with anotherrnerriber of your tearn.
How would you resolve that situation?" ,
 ...
CHAPTER 6 Selection and Placement 265

situation. Other items are "future-oriented"

and ask what the person :is W.<ely to do when
confronting a certain hypothetical situation
in !he future. Research suggests that these
types of items can. both show validity but
that experience-based items often outperform.
future-oriented items. Experience-based iterns
also appear to reduce some forms of impres··
sion man.agement sud1 a:; ingratiation better
tl1a.n furuxe-oriented itern.s. 32
Situa1ional interviews <:an be pa:riicularly
effective when assessing sensitive issues deal-
ing with the honesty and integrity of candi-
dates. Clearly, sirnply asking people cfuecl:ly
whether they have integrity 1/l!m not produce
mudi. in the way of usefol u1Jfon11.aiion. HmN··
eve1~ questions that pose ethical dilemmas
and ask respondents to discuss how they When more than one person is able to interview a
dealt with such situa1ions h1 the past are often ca ndidate for a position, t here is significant advantage in
removing any errors or biases that a single individual might
revealing in tem1s of how different people
make in choosing the correct person for the job. in today's
.deal 1Nith cmrunon dilem_.mas_ For example, tech nolog ical world, it is becoming easier foi- mu ltiple
by stating "'1Ve have aU observed som.eone people to givf::~ their input in an interview by vvatching a
slretching the rules at 1Nork, so give me i:'!NO video tape or listening via conference call if they cannot be
exarnples of sitnatfons jn whid1 you faced then=! in person.
this dilemma and how you dealt with it," the
intenriewer forces the applicant lo reveal how he or she deals with ethical dilem-
mas as an observer. Since the person is an observer and not tlle perpetrator in th.is
case, he or she will be ks3 defensive in terno13 of revealing how he or she deals
with ethical issues.33
H is also j_mportant to use multiple interviewers who are h·ained to avoid _
many of the subjective errors that can result when one human being is asked to' ·
rate ano1l1er. For example, at Google, there were definite concerns with demo-
graphic similarity bias in interviews, because their own analysis of local data
wa~> suggesting that managers were hiring people who seemed just like them_
To eliminate this problem, Google now compiles elaborate files for each candi-
date, and then has all intervievvs conducted by groups rather than individuals.
Laszlo Bock, vice president for Google's Pieople Operahons, notes that "we do
everything to minimize the authority and power of 1he lone manager in making
hiring decisions that are going to affect the entire company." 34 Many companies
find that a good way to get "multiple eyes" on an applicant is to conduct digi-
tally taped interviews, and then send the di.gitalized files (rather than the appli-
cants) around from place to place.
111is is seen by some as a cost-effective means of allowing numerous rat-
ers to evaluate the candidate under standard conditions. The use of video-
based interviews began on college campuses, where tedmology resources were
widr~ly available. However, over time, private start-up companies began selling
those same services to the general public.35 Of course, many employers find
that the luck of true jnternction. that can take place in videos limits their value
somewhat and, hence, the use of face-to-face interactive technology like Skype
is also on the rise.36
 ....

266 CHAPTER 6 Selection and Placement

Regardless of the medimn, anyone who will be conducting an employment

interview needs to be trained, and a relatively small amount of money spent
on training up front (in the $3,000 to $30,000 range) can save major expenses
later in the process if it prevents a lawsuit or a poor hiring decision that h.arm,s
the organization.37 Ute goal of most h·aining prngrams is to limit the subjec..,
tivily of IJ:le process and reseaxch suggests that it is best to ask interviewers to
be "witnesses" of facts that can later be integrated via objective formulas, ~s
opposed to being "judges" allowed to idiosyncratically weigh how various fact.s
should be combined to form. ffo:~ final recommendation. 38 In addition to being a
1Nilness, t11e interviewer sometimes has to be the prosecuting attorney, becaus'e
jn some cases tl1e interviewees may be motivated to try to present an overly
positive, if not outright false, picture of their qualifications. People seem J:o be
particularly prone to present false information when the competition for jobs
is high, ai.1d data on resume .fraud indicated a. spike in detected fraud. during
the recent recession of 2007. Part of this spike was attributable to the behavior
of applicants, but part of it was also due to the ease with which employers can
access basic infonnation on applicants from sources like Google. 39 The data from
a 2006 survey of executive recruiters bears this out and reveals that it is common
practice for employers to search the web for infonnation on applicants. In fact,
35% of those respondents stated that they eliminated candidates based upon
whaHhey learned from web searches-up from 25% the year before.40 Given the
increasing role of social media h1. everyday life for most new entrants into U1e
labor pool, the ability to go beyond the formal interview when obtaining jnfor~
mation about applicants is o:nJ.y going to hi.crease jn the years ahead. 41

REFEIR!ENCES0 ~ijOGRAPHKAl DATA., AIMD A~PUCATIOi\i BLANKS

Just as few employers would thfr1k of hiring someone without an interview,
nearly all employers also use some method for getting background information
on applicants before an :interview. This information can be soli~ited from the
people who know the candidate tluough reference checks. ,,.. ·
. The evidence on tli.e reliability and validity of reference checks suggests that
these are, at best, weak predictors of future success on the job. TI1e main reason
for Hris low validity is that the evaluations supplied in most reference letters are
so positive l11at it is hard to differentiate applicants. Tilis problem with reference
letters has two causes. First, the applicant usually gets to choose who wdtes the
letter and can thus choose only those writers who think the highest of her abili-
ties. Second, because letter writers can never be sure who will read the letters,
they may justifiably fear that supplying damaging information about someone
could come back to haunt them. Thus, :i.t :is cleru:ly not in the past employers'
interest to reveal too much information beyond job title and years of service.
In general, the validity of reference checks jncreases when the employer goes
beyond the list provided by the applicant:, and employers who rely heavily on
this sou.roe tend to seek a large number of references (10 to 12) and contact those
people directly by phone fox a more ni.teractive and, possibly, open and anony-
mous exd1ange of information. 42 Another problem with reference checks is that
applicants do not always tell the truth when it comes to listing their references.
In fact, 30% of the companies that check references find false or misleading refer-
ences on applications. Mkhael Erwin, a career advisor at Career Builder, notes,
"For some reason, people think companies aren't going to check their references
 ....
CHAPTER 6 · Selection and Placement 267

and therefore they think they can get away with all sorts of fabrications. In real-
ily, 80% of companies do in fact check references prior to offering someone an
interview or prior to making an offer.'B
The evidence on the utility of biographical information collected dfrectly
from job applicants is much more positive, especially for certain outcomes like
hlrnover.44 1he low cost of obtaining such information significantly enhances
its utility, especially ·when the information is used in conjunction with a well-
designed, follow-up inte:rviei:N tl1at complements, rather than duplicates, the
biographical information bank.
One of the most impo:rtar1t elements of biographical infonnation deals with
educational b.ackgxou:nd. In some cases, employers are looking for specialized
educational backgrounds reflected in functional degrees such as business or
nmsing or engineering, but in 0th.er cases, employers are just looking for critical
thinking and problem solvin.g skills that might be associated with any college
deg:ree.45 This focus is atlTibuted to th:~ "naiure of the economy, which increas-
ingly demands people with high levels of education. Indeed, it is ironic that
despite relatively high levels of employment, many employers find it impos-
sible to find people with thr~ sldlls tl1J:y :need.46 TI1e term "education gap" has
been coined to captme lfo~ difference bel\1:-veen the average years of education
required in a job listing in a given area, and tl1e average years of education in
that same area. For the nation as a whole, the "education gap" runs at about 5%~
but in some cities like Las Vegas the nmnber exceeds 10%. ATeas that have larger
education gaps experience much higher rates of unemployment and are usually
the last. to show signs of job recovery during an economic expansion. 47
Again, as with the interview, the biggest concern with the use of biograph-
ical data is that applicants who supply tl1e information may be motivated to
misrepresent themselves. Resume fraud is on the rise and one survey indicated
that roughly 45% of job applications that were audited contained some amount
of inaccurate material. One recent and highly public example of this occurred
at Yahoo, when it was learned 1110.t thell' recently hired CEO, Scott Thompson,
had apparently lied about his obtaining a computer science degree from Ston:e:
hill College. In fact, an investigation revealed that 111ompson not only lied on
his resume, but even ·worse, he hied to cover it up by blaming someone else.
Specifically, Thompson blamed the misinformation on an executive search firm,
suggesting they made the error. However, U1e headhunting firm was able to pro-
duce an e-mail exchange that proved just the opposite. In the end, Yahoo had
to force Thompson's resignation, whid1 wa5 particularly problematic because
this was the company's fourth different CEO in five years, thus pointing to the
firm's larger inability to effectively hire for leadership positions.4B
In order to prevent embarrassiug episodes like this, many employers hire
outside companies to do background checks on employees. Background checks
can help on this score, but many firms that provide background d1ecks are unre-
liable themselves. In addHion, background d'lecks offer no guarantee, because
of the increased sophistication of those in the dishonesty business. Some univer-
sities and state prison systems have even been hacked into by companies that
try to insert or delete tllle:i.r clients' names from databases.49
Although it is not a panacea, to some extent forcing applicants to elaborate on
their responses to biodata quesiions can. sometimes be helpfuJ.50 A good elabora-
tion forces applicants to support their answers with evidence that includes names
of other people involved, dates, locations, and objective evidence that would
 ..
2f.t8 CHAPTER 6 .Selection and Placement

support a thorough cross-checking. Thus, rather than just asking someone if they
have ever led a sales team, an elaborated item. would force the applicant to name all
members of the.team, where and when the team was together, and what sales they
accomplished, citing specific products, figuTes, and customers. TI1e evidence sug-
gests that forced elaboration reduces the traditional measures of faking behavior.51
Althoughthe u se of background checks is increasingly common in the Uid.ted
States, they are rarely used in Europe~ There are several reasons for these dif-
ferences between Europe and the United States. First, in terms of values and
culture, in Europe, the appli.cant' s right to privacy trumps the organization's
right: to know. As noted by Andrew Boling, partner at Baker and McKenzie, a
Chicago-based HR outsouxcing firm, "outside the United States, individual pri-
vacy rights enjoy ihe sa.rne prntections that we give to our First Amendment-in
Europe what's private, stays private." 52 Thus, a U.S. firm that seeks an employ-
ee's consent to do a background check is likely to be denied in Europe, and per-
forming the check without consent would be illegal 'i n many countries.
Second, relative to the United States, one sees far fewer incidences of work-
place violence in Europe, :and the rates of theft and.fraud are also much lower.
Similarly, unlike Americans, Europeans tend to carry less debt, and hence back-
ground checks for credit problems rarely hun up applicants whose financial sit-
uations are so dire that one might be afraid of trusting them around money. At
the height of the U.S. financial crisis, for example, over 40% of people who were
screened on credit card balances would have been rejected as viable hires given
most standards adopted by companies that do backgrnund checks. The percent-
age of similarly situated bad risks in Europe is simply mud1 lower.53
Thixd, although the greater deference to individual privacy would seem to
put the employer at a disadvantage, on the other side of the equation, the legal
concept of negligent hiring is also largely unheard of in Emope. This reduces
tl1eneed for employers to show copious am01mts of due diligence jn order to
protect themselves legally. As in any cow1try, individual emph?yees in Europe
may :run afoul of the law or commit egregious acts; howeve1~ this is an issue
between the offender and the law, and one's employing orgai,uzation is rarely
held legally' responsible for their actions.
Finally, if 011;e takes away the legal mol-ivation to perform due diligence and
avoid negligent hiring suits, the decision to do a background check lies solely
on its perceived value in screening out future problems. However, much of
the information collected by firms doing bad<ground checks is inaccurate, and
the objective evidence regarding the effectiveness of these firms in preventing
future problems is weak. For example, most fraud is committed by long-term
employees who know t.he firm well, not repeat offenders who move from place
to place. Thus, only 7% of convicted fraud perpetrators had any criminal record
whatsoever prior to the offense they were convicted for, and hence they would
not be caught in any screen. Moreover, u1 roughly half the cases where a fraud
conviction was upheld by a U.S. court, the companies that were harmed did
pe1form tl background check. Thus, for a whole host of reasons, the use of bad~­
gr01.md checks is likely to stay a uniquely Amelican tradition. 54

IPHYSKAt AIBn.nv TIEST5

Although automation and other advances in technology have elim.in.ated or
modified many physically demanding occupational tasks, many jobs still
require certain physical
.
abilities
... or p sychomotor abilities. In these cases, tests of
 ...
CHAPTER 6 Selection and Placement 269 ·

physical abilities may be relevant not only to predicting performance but to pre-
dicting occupational injuxies and disabilities as well. 55 TI1ere are seven classes of
l:esls in this area: ones that evaluate (1) muscular tension, (2) muscular power,
(3) muscular endurance,('!) can_iiovascular endurance, (5) flexibility, (6) balance,
and (7) coordinalion.56
'D1~ eritedon-related validities for these kinds of tests for certain jobs like fire-
fighting are quite strong.s7 Unfortunately, these tests, particularly tl1e strength
tests, are likely to have an adverse impact on some applicants with disabilities
and many female applicants. For example, roughly two-thirds of all males score
higher than the highest-scoring female on muscular tension tests.SB
Because of this there axe two key questions to ask :in deciding whether to
use these kinds of tests. First, is the physical ability essential to performing the
· job and is it. mentioned prominendy enough in the job description? Neither the
Civil Rights Act nor the ADA requires employers to hin: individuals who can-
not perform essential job functions, and both accept a written job description as
evidence of the essential functions of the job. Second, is there a probability that
failure to adequately perform the job 1111ottld result in. some risk to the safety or
health of t11e applicant, co-wo:rkers, or clients? The "direct threat" clause of the
ADA makes it clear that adverse iinpact against those with disabilities is war,-
ranted under such conditions.

Cognitiv~ aibii.Hfy fcesfo differentiate ii.1dividuals based on their mental rather Cog~!11:iw~
than physical capacities. Cogrdtive ability has many different facets, although Abiioty lf<!l!s~:$
we will focus only on three dominant ones. Vierbal compirehension refers to Tests that include three
a person's capacity to understand and use written and · spoken: language. dimensions: verbal
comprehension, quan-
Qua:ntifaH.v~ abillity concerns the speed and accuracy •Ni.th vvhich one can solve
titative ability and rea-
arithmetic prnblems of all kinds. Rea5mililg abilHy, a broader concept, refers to soning ability
a person's capacity to invent solutions to many diverse problems. .· .
Some jobs require only one or tvrn of t11ese facets of cognitive ability. Under Veirb9ll
these conditions, maintaining tl1e separation among the facets is appropriate. For Compirr<!~l!'il:illSD<Oli1

example, H1e verbal requixements associated vvii:h many jobs in the U.S. economy Refers to a person's
capacity to understand
has increased over the years, but this has occurred at a tirne when we have actu- and use written and
ally witnessed decreases n1 scon~s on standardized tests measuring these skfils.59 spoken language.
For example, a survey of more than 400 large finns suggested that as many as
30% of the applicants for enhy-level positions have such poor reading and writ- Qu.illntitative Abi~oty
ing scores t11at it would be impossible to put them on the job without remedial Concerns the speed
training. 60 If this is the only cognitive ability t1iat is related to the job, then this and accuracy with
which one can solve
would be the only one that should be used to :make decisions. However; many
arithmetic problems
jobs that are high in complexity require most, if not all, of the facets, and hence of all kinds.
one general test is often as good as n1any tests of separate facets. Highly reliable
commercial tests measuxing these kinds of abUities are widely available, and ~ea$ml\iing Abi!n~v
they are generally valid predictors of job performance in many different kinds Refers to a person's
of contexts, including widely different countries. 61 The validity of these kinds capacity to invent solu-
tions to many diverse
of tests is related to the cornplexilyof the job, however, in that one sees higher
prob/ems.
criterion-related validation for complex jobs than for simple jobs. The predictive
. validity for these tests is also higher in jobs that are dynamic and changing over
time and thus require adaptability on the part. of the job incUi~bent.62 Tims, jobs
in rapidly changing industries like the technology sector often require high lev-
els of cognitive ability to adapt to ever-changing conditions.63.
 ...

7'10 CHAPTER 6 Selection and Placement

One of the major d rawbacks to these tests is that they typically have adverse
impact on some minority groups. Indeed1 the size of the differences is so large
that some have advocated abandoning these types of tests for making deci-
sions regarding who will be accepted for certain schools or jobs.64 The notion
of race no:rming alluded to earlier, was born of the desire to use these high-
1

utility tests in a manner that avoided adverse impact. Although race norming ·
was made illegal by the recent amendments to the Civil Rights Act, some have
advocated tl1e use of bandh1.g to both achieve the benefits of testing and mini-
mize its ad.verne impact TI1e concept. of banding suggests that similar groups of
people whose scores differ by only a small amount all be treated as having the
same score. Then, within any band, preferential h·eatment is given to :minori-
ties. Most observers feel preferential treatment of minorities is acceptable when
scores are tied1 and banding sill.1.ply broadens the definition of what constitutes
a tied score.
For example, in many classes a score of 90 to 100% may constitute a 4.0 for the
com·se. This means thal: even though someone scoring 99 outperfom1ed some-
one with a score of 91 each gets the same grade (a 4.0). Banding uses the same
1

logic for all kinds of tests. TI1us, jf one was going to use the grade in the class
a.s a selection standard, this would mean that the person with the 91 is equal to
the person with the 99 (i.e., they both score a 4.0), and if their scores are tied1
preference should be given to the rnili.o.rity. Like race norming banding is very
1

controversial, especially if U1e bands are set too wide.65

As with all the selection measures we have seen so far, one is always con-
oemed that applicants may be tempted to cheat or tell lies in order to score well
on whatever :instrument is used t.o make selection decisions and that is also the
. rnse here. Cheating on tests is hardly a new phenomenon1 however. ·w hat is
new is the degree to which the u se of computelized testing and social network-
ing has changed the nature and scope of ch eatin g. The term "question harvest-
ing" has been coined to capture the process wh ereby test takers use advanced
technology to download questions or capture images of questigns with digital
cameras or other devices while taking a test and then transffiit the content of
1

the test wirelessly to people outside the testing facility who then post the ques-
tions fo1: future test takers. Clearly, security precautions are needed to ensure
test security/ and the nature of these precautions will change with eveiry new
d1ange in tedmology.66

While ability tests attempt to categorize individuals relative to what they can
do, personality measures tend to categorize individuals by what they are like.
Research suggests th.at th.ere are five major dimensions of personality, known
as "the Big Five": (1) extroversion (2) adjustment, (3) agreeableness, (4) consci-
1

entiousness, and (5) openness to experience. Table 6.3 lists each of these with a.
corresponding list of adjectives that fit each djmension.
Although it is possible to find reliable, commercially available ineasures
of ea.di. of these traits, the evidence for their validity and generalizability is
mixed at besl:.67 For example, conscientiousness1 whidi. captures the concepts
of self-regulation and self-motivation, is one of the few factors that displays
any validity across a number of ·different job categories; and many real-world
managers rate this as one of the most irnportant: characteristics they look for in
 ...
CH.APTER 6 Selection and Placement 271

Tarain~ tli>3
·1. Extroversion Socia ~I ~, g~ega ~'()us, a ssert_i~~, ta lk~tiv~, . e~p~~ssi~e The Five Major
. t '. ~/.~~L0$tment ·>·Ef rn¢iW9h·~l l.~::~t?l?.l~);J.h:6tid~farr;:$sed/J>~t0re-;t ¢qr\t~rttrjf;: ·· Dimensions
3. Asireeableness Courteous, t1·usting, good-natured, tolerant, of Personality
Inventories

5. Openness to experience Curious, imag inative, artistically sensitive,

bmad-minded, p layful
·· . !;., ·. .. ··

employees. Indeed, employers often consider this factor so important that, as the
"Competing through Sustainability" box sh ows, they will not hire people who
have been unemployed for a long time because they be1ieve this reflects lack of
conscientiousness.
Instead of showing s1Tong direct and positive correlations with future per-
formance across all jobs, the validity coefficients associated with personality
, measures tend to be job specific. For example, exh'overts tend to excel in jobs
likes sales or p olitics because these jobs demand gregariousness and assertive-
ness, two of lli.e central featmes shared by all exh·overts. In conh'ast, introverts
are better at studying and ·working in isolalion, and hence they are best at jobs
like accountant or research scientist because these jobs demand patience and
vigilance. Both extroverts and intToverts, however, can become effective lead-
ers, although they achieve effectiveness in d ifferent: ways. ExtToverts tend to.be
top-down, autocratic and charismatic leaders who motivate followers by getting
them emotionally engaged. In contrast, effective inh·overted leaders tend to be
more bottom-up, participative leaders who listen to empowered employees and
then engineer reward structuxes so that people are working toward their own
self-interests. 6a
Despite their generic lack of validity the use of personality' h·aits in selec;::
tion contexts h as lisen over 1he years, and a recent study indicates that 35% of
U.S. organizations employ these kinds of tests when selecting personnel.69 Part
of this is ath·ibutable to the wider use of team-based structures that put more
emphasis on collaboration at 1Nork. In contexts where task interdependence
between individuals is stressed, personality conflicts become more salient and
d isruptive relative to situations where individuals are working alone. 70 Team
contexts require that people create and maintain roles and relationships, and
several h·aits like agreeableness and conscientiousness seem to promote effec-
tive role taking.71 On the other hand, people who are high in disagreeableness
and low in conscienliousness are more prone to engage in coWlterproductive
behavior in group contexts.72 One important element of staffing in team-based
structures, howeve1~ relates to how the selection of one team member influences
the requirements associated with other team members. 73 In some cases, organi-
zations might try to select people who have ve1y similar values and personal-
ity traits in order to create a strong team culture. When there is a strong team
culhue, everyone shares the same views and traits, promoting harmony and
cohesiveness.74.
In other cases, people putting together a team go out of their way to make
sure that the people on the team have different values and personalities. The
hope here is that a diversiry of opinion promotes internal debate and creativity.75
 In autumn of 2012 statistics asso-
ci ated with the European e con-
omy were definitely sh owing
signs of improvement Employers
had stepped up hiring, layoffs
had slowed and t he unemploy··
ment rate began to drop. One
stat istic t hat stubbornly refu sed
to move , however, was the long-
term unemployment rate. Unem-
pl oyment rates differ drastically
amongst the 27 countries, with
a staggering 26.7 and 27.8'X:i
of unemployment in Spa in and
Cireece, respectively, with youth
unemployment at an intolerable
57.4 and 59.2%. Moreover,
at the e nd of 20 11 those
un1.')111ployed for more tha n a
year in the EU totalled alm ost
·10 rnillion--including 3 million
\A.rho had been unemployed for
12 to ·17 months, 1.6 million for
'18 to 23 months, 3.2 m illion for
.24 to 4T months and 1.9 m illion
fm more than 48 mont hs.This
latter figure is impo1tant because
research suggests that long-
term bouts of unemployment
can sometimes make people
unemployable. This creates an
entire subclass of citizens t hat
can never be hired, harming the
competitive interests of both
employers and t he larger society
in which they are embedded .
There are three reasons why
long-term unemployment can
scar potential job applicants for
years. First, over time, the nature
of work changes and people who
have been outside the workforce
If one does take this approach to staffing a team, it is critical that one also takes
steps to make sure that tl1ere are not strong "fault lines" within the group that
create strong, and opposin g subgroups. Diversity can be built into a team, and
may 110 longer have t he skills
needed for current jobs. Fm
example, technological devel-
opments are in t he ICT industry
more tlJle than exception. \/\fhen
workers drop out of t his industry
for a long t ime, the re is an imme-
diate threat that their skills are
getting outdated and obsolete.
Second, even wh en the skills
requ ired for a job have not
changed, som e employers seem
to believe that long-term unem-
ployment implies a lack of skills.
That is, instead of testing fo r
skills, employers just make the
assumption that anyone out of
work for an extended period' of
time must lack skills. For exam-
p!t-), some recru ite rs state openly
that when trying to fi ll job posi-
tions, they are not looking at
the unemployment p ool. People
who are ta lented enough and
have already found positions are
the tale nts for recruitment.
Finally, som e empl oyers
seem to believe that rega rdless
of one's ski ll level, long-term
unemployment reflects a lack of
conscie ntiousness and ambition
on the part of a job applicant.
In particular, if someone applies
for a job o nly after their unem-
ployment ben efits expire, some
employers believe that the per-
son is lazy and would actu;;:i lly
prefer t o not w ork if t hey could
get away with it Thus, rather
than trying to directly assess con-
scientiousness with a personality
inventon; or from references from
past employers
(who become increas-'
ing ly difficult to contact
over extended time periods),
applicants are rejected based
upon a presum ption of gu ilt In
rea lity, many individuals who
have e)(perienced long-terrn
unemployment want not hing
more than t o get b ack to mean-
ingful employment, but they face
a form of discrimination that is
not covered by any type of law.
These three reasons have
urged some European govern-
ments to provide re imburse-
ments to employers for t he
provision of intern sh ips and train-
ing courses to long-term unEim-
ployed . However, t he effec1s o n
turn inq-
round
.
the unemoloved
I J
rates are not known yet.
DISCUSSION QllJl~Sl'fiQ.IMS
'il. How might a systematic
and comprehensive system
of testing and reference ·.:---.
checking help 'eliminate
some sources of long-term
unemployment?
2. On t he other hand, in vvhat
sense does t he solution to
this problem go beyond hir-
ing practices of employers?
SOURCES: www.theguard ian.com/ ·
cornrnentisfree/2014/j an/16/why-the-
european-econorny-is-worse; Long term
employment 2012. European Commission.
www.eu-employment-observatory. net/
resources/reviews/eeoreview-ltu-2012.pdf;
http://careers.theguardian. com/unemployed-
jobhunting-tips-workplace; www:thegua rdian
.com/politics/2009/jan/13/labour-
unemploymentdata. ·
 ...
CIHAPTIER 6 Selection and Placement 273

subgrouping p roblems avoided 'INith judicious selection. For example, imagine

· a four-person group comprised of h"ro m en and hA!Q women, two marketing
experts and two engineers, and h/\ro people from the United States and two peo-
ple from France. One way th.is dive:rsit'y could configure itself is such th at the
two males were also both engineers and b oth from the United States, and the
two women were bolJJ marketing exp erts from France. In this configuration,
the group has a strong fault line b~cause all duee dimensions of diversity con-
verge, and it is easy to predict how this group might break apart into two sub-
groups. In conh·ast, the same level of diversity could be configured in a group
where one of the men vvas an engix1ee:r, bu t one of the women was an engineer
also. Similarly, one of the marketing experts was a man and one was woman.
Finally, one of the men was frmn Fnun.ce and one ·was :from the United States.
In this second con figurabi.on, there is no strong fau lt line, and it is harder to see
how the group is likely to fall apari:.76
1
'I11e concept o f emoli_onal intelligence' is also important ir1 team contexts
/1

and h as been u sed to describe people who a.re especially effective in fluid and
socially intensive con texts. Emoti.onal intelligence is traditionally conceived of
having five aspects: (1) self-awareness (kn owledge of one's strengths and weak-
nesses), (2) self-regulahon (tl1ce ability l:o keep dismphve emotions in check),
(3) self-motivation (hovv to moiivate oneself and persevere in the face of
obstacles), (4) empathy (th.e ability to sense and read emotions in others), and
(5) social skills (the ability to manage the emotions o:f other people). Danial
Gole1n an, one of the primary proponents of this consh"uct, noted that "in the
new 1Norkplace, wiil1 ii:s emphasis on flexib m ty, teams and a sh·ong customer
orientation, this crucial sei: of emoiional com petencies is becoming increasingly
essential for excellence in every job in every part of th:-~ ·world."77 Relative to
stand ard measures of ability and personality, there has not b een a great deal of
scientific research on emotional intelligence, and critics have raised both theo-
retical and empU:ical questions about H1e constTuct. Theoretically, some h ave
argued that the consi.Tuct is overly b road a:n.d coni-uses aspects o:f perceptio~c
ability, and temperament that axe best conceptualized as separate processes.78
Empirically, tile d ata seem to suggest that if one holds scores on the variables
captured by the five-factor model of p erson ality and scores on tests of cogni-
tive ability constant, there is very little, if any, added predictive power attrib ut- •
able to emotional fotelligence. 79 For 1example, the facet of emo1ional intelligence
that d eals w ith self-regulation and keeping i..rnpulses in control is really just an
aspect of emotional stabihly, a constmct. th at has been aroLmd for ages. Indeed,
stan d ardized treabnents for '~anger managem ent" that were developed for peo-
ple w h o are low in em otional stability are also appropriate for people low in
emotional intelligenoe. 80 Moreove1~ the stan dard literature on emotional stabil-
ity has specific markers for 1Nhen this trait goes from subclinical to clinical levels
of psychopathic behavim~ whiid1 is not the case for measures o.f emotional intel-
ligence. Although, you might not think that anyone with psychopathic tend en-
cies w ould find en hy into modem organizations, the rate of this characteristic in
work organizations mfrrorn that of the general population (1%) except when it
comes to CEOs, where some have estimated the rate to be even higher. 81
In addition to the de'lrelopment of team-based stiuctures, the use of personal-
ity measures as screening devices has also increased because of the increased
use of multinational structures an.d the i_n crease :in the number of job s that
require that people work in foreign locales. The n umber of people that are asked
to w ork outside their own counhy h.as..increased steadily over time, and m ore
 ...
214 CHAPTER 6 Selection and Placement

often than not, the decision of whom t.o :3end where is based primarily on tech-
nical sldJ.h However, in one large study of expahia.tes working in Hong Kong,
Japan, and Korea, high levels of emohonal stability and openness to experience
were two of the strongest predictors of adjustment and performance, and these
tended to J:mmp technical expertise when it came to predicting who VifOuld suc-
ceed and fail. In this study, the cost of an adjustment failure (i.e., someone who
has to come home prior to finishing his or her assigmnent) was estimated at
over $150,000 per person, and hence the stakes are high in this context. 132
Regardless of the natuxe of the context the validity for almost all of U1e Big Five
factors in terms of predicling job performance also seems to be higher when tl1e
scores are not obtained from the applicant but are instead taken from other peo-
ple. 83 The lower validity assodated with self-reports of personality can be traced
to tlu·ee factors. First, peopl.e sometimes lack insight into what their own person-
alities are actually like (or how they are perceived by others), so their scores are
inaccuxate or unreliable. Second, people's personalities sometimes·van; across
different contexts. Thus., son1eone :may be very conscientious when it comes to
social activities such as p lanning a family wedding or a fraternity party, but less
conscientious when it comes to doing a paid job. Thus, contextualized 1.neasures
that add the term at work" to standard personality items often perform better
/1

/1
as predictors thar1 standard noncont.extualized measuxes. On average, cohtex-
tualizing" measures on personaHty tests jn this manner can boost their average
validity coefficient: from around .lOto 25.84 Third, with some traits like ability,
vali.dily coefficients axe higher vrhen one uses a curvilinear prediction instead of
just a straight linear predicHon. That is, with a trait like emotional stability, the
best job performers often score in fue niiddle range, and for a lot of jobs, both
being too nervous and being too calm can be problematic.85 11us kind of cur-
vilinear finding is rarely found with ability measui-es, in the sense tl1at people
who are "overqualified" on ability typically perform at the highest levels with
evidence of a drop-off at extreme levels.86
flnaUy, one factor H1at also limits H1e vali.dity of personahty items is that,
unlilce cognitive ability scores, applicants fo1d it easier to fake traits by pro-
viding socially desirable responses to questions. Research suggests that when
people fill out these inve1iJories when applying for a job, their scores on consci-
entiousness and emotional stability are much higher relative to when they are
just fillin.g out the same questiormai.J:es anonymously for research purposes.87
In addition, if people fail a personaliry test and tl1en take the same test again in
the future, their scores seem to drastically increase.BB Several steps can be u sed
to try to reduce faking. For example, if employers simply warn applicants that
they are going to cross-d1eck the applicants' self-ratings with other people, this
seems to reduce folcing. 89 Also, the degn::e to which people can fake various per-
sonality traits is enhanced with questiormaires, an~ one sees much less faking of
h·aits when interviewers are assessing the charncteristics. 90 All of this reinforces
the idea that it is better to obtajn tlus information from people other tl1an the job
applicant, and that it is better to use this information to reject low scorers but not
necessarily hire all higher scores on the basis of self-reports alone.91

wom< SAMrPllE:S
Work-sample tests attempt lo simulate iJ1e job in a prehiring context to observe
how file applicant performs in the simulated job. The degree of fidelity in
work samples can vary gr..eal:ly. ln some cases, applicants respond to a set of
 ...
CHAPTER 6 Selection and Placement '27 5

standardized h ypothetical case studies and role play hovv they would react
to certain situa.-tion s.92 Often these standmdized role plays employ interactive
video technology to create "vh't-ual job audiiions. "93 Indeed, simulations involv-
ing video-based role-plays seem to be more engaging and display higher levels
of predictive validity relative to p aper-and-pencil approaches.9 4 In other cases,
the job applicants are brought to the employers' location and actually perform
the job for a short time period as part of a "job hyout." 95 Finally, although n ot
generally considered a test, th.e p ractice whereby employers hixe someone on
a temporary basis and then, after a rather long trial (six months to a year), hire
that person pennanently is jn essence an extended w ork-sample test. 96 T11ese
extended job lTials give employers a :rich base of experience to base their hiring
decisions on, and as one H_R mmi.ager :noted of 'Nork samples, "It's foolish of
any of u s to th ink our interviev1.r skills are so great that we can predict how well
someone is going to work in terms of dyna:rnics of a real job with a real tearn.9 7
fo smne cases, employers 11vill sponsor cmnpetitions w here contestants (who
al: this point are not even considered job applicants) vie for attention by going
head-to-head in solving certain job-related problems. TI1ese sorts of competi-
lions have been common in some industries like arcJUtecture and fashion design,
but their use is sp reading across many other business contexts. These compe-
titions l:end to be cost effective in generating a lot of interest, and some have
alt:racted as many as 1,000 contestants who bring their talents to bear on specific
prob]ems faced by the employing orgardzation.98 Competitions are particularly
v•1ell-sLLited for assessing and "discovering" young people who may not have
extended track records or portfolios to evaluate.
As pmt of its own fight. in the wa:r for talent, Google spon sors an event called
"Google Code Jam ," which ai:b:ads more than 10,000 contestants a year from
all over the world. 11-Us one-day competition requires contestants work to solve
s61ne very difficult programming problems under relatively high levels of time
pressure. f 'or example, finalists have to develop software that would p erform
tmique and d ifficult searches employing a minimmn number of "dicks" or_,'·
develop a complex interactive war game from scratch in w1der two hours. The
winner of the contest receives $7,000 and a guaranteed job at Google's presti-
gious Research and Developrnent Centei.~ but, in fact, Google usually w inds up
hiring more than h alf of the 50 finalists each year (but that is not guaranteed).
The finalists in this contest represent the b est of the best in terms of the world's
top programmers, and as Robert Hughes, director of the Code Jam, notes,
"Wherever the best talent is, Google w ants them."99
With all these advantages of work-sample tests come tlU"ee drawbacks. First,
by their very nature the tests are job-specific, so generalizability is low. Second,
partly because a new test h.as to be developed for each job and partly because of
their nonstandardized formats, these testB are relatively expensive to develop.
It is much more cost-effective to purchase a commercially available cognitive
ability test that can be u sed. for a number of different job categories within the
company than to develop a test for each job. For this reason, some have rated
the utility of cognitive ability tests higher thcu1 work-sample tests, despite the
latter's higher criterion-related validity-. Finally, at least w ith respect to work-
sa:mple tests d eveloped as contests and competi1ions, these events tend to attract
more male applicants t:han fernale applicants. In fact, for evening occupations
where roughly 50% of the job incumbents are 1Nomen, only 15% of the people
who shovv up for competitions for such. jobs are fem.ale, suggesting this is a prac-
tice that could easily lead to adverse impact if n ot carefully monitored.100
2.16 CHAPTER 6 Selection and Placement

In the area of managerial seleclion, ·w ork-sample tests are typically the cor-
As!'<&~l!>man\1: Ciant~ir nerstone in assess1nent centers. Generically, the term assessment centeir is used
A process in which to describe a wide variety of specific selection programs that employ m.uJti.ple
multiple raters evaluate selection m.el:hods to rate either applicants or job incumbents on their manage-
employees' perfor-
rial potential. Someone attending an assessment center would typically expe-
mance on a number of
exercises. rience work-sample tests such as an in-basket test and several tests of more
general abilities and personahty. Because assessment centers employ multiple
selection methods, their critelion-related validity tends to be quite high. Assess-
ment centers seem to tap a number of different characteristics, but "problem-
solving ability" stands oui: as probably the most important skill tapped via this
Ihethod.101 The idiosyncratic and unique nature of the different exercises, how-
eve1~ has led some to suggest that the exercises thems elves should be scored for
winners and losers without mc;Lking any reference to higher order chasactedstics
like skills, abilities, or lTaitsJ02 Research indicates that one of the best combina-
tions of seleclion methods includes work-sample tests with a highly shuctured
interview and a measure of general cognitive ability. The validity coefficient
expected from such a combined battery often exceeds .60. 103

Many problems that confront society also exist within organizali.ons, which has
kd to l:lNo new kinds of tests: honesty tests and drug-u se tests. Many companies
formerly employed polygraph tests, or lie detectors, to evaluate job applicants,
but this changed with the passage of the Polygraph Act in 1988. This ad ban.•ed .
t10.1e use of polygraphs in employment screenmg for most organizations. How-
eve1~ ii: did not eliminate the problem of theft by _employees. As a result, the
paper-and-pencil honesty testing industry was born.
Paper-and-pencil honesty tests come in a number of different forms. Some
directly emphasize questions dealing with past theft admissions or associations
with people vvho stole from employers. Other items are less dir~st and tap more
basic traits such as social conformity, conscientiousness, or emotional stabillty.104
A large-scale independent review of validity studies suggests they can predict
both theft and other d isruptive behaviors. However, the reported correlations
tend to be much higher when the research studies were conducted by test pub-
lishers \!\rho market the tests relative to outside, objective parties with a less
obvious conflict of interest. 111.us, it is always a good idea for organizations to
check the predictive accuracy of tl1ese kinds of tests for themselves and not rely
solely on the results reported by test publishers.ios
As is the case with ineasttres of personality, some people are concerned that
people confronting an honesty test can fake their way to a passing score. The
evidence suggests that people instructed to fake their way to a high score (indi-
cating honesty) can do so. However, it is not clear that tllls affects the validity of
the predictions made u sing such tests. 111at is, it seems that despite this built-in
bias, scores on the test stiJl predict furore theft. Thus, the effect of the faldng bias •jrr:
:,, ;,~,. 1,.
is not: large enough to detract from the test's vali.dity.106 · : \ •·-.

As with theft, there is a growing p erception of the problems caused by drug

'

·.:. j
J
-'

use among employees. This is particularly the case in any job that exposes tl1e job
incumbent or the public to potential injmies. Thus, as the "Integrity in Action"
box shows, in jobs where safety is paramount, the considerali.on of any factors
', ~
other than task proficiency and sobriety-especially political factors- is not: j1ist
bad business, it may also ... be rn1.ethical. TI.ie major conh·oversies surrounding
h~ October 201 1 a series of
reports by the European Parlia·-
ment's internal auditor found
significant breaches of the rules
in re latioi1 to hiring people.
These breaches concerned about
7,000 unelected officials who
worked for the European Union
assembly. Despite the auditor
warning of the risk of conili cts of
interest, EU staff were allowed tc
authorize their own e)(penses and
pay allowances to everyone they
wanted to hire. Family members
and close relatives were hired
and in the period 2007-20'!0,
some of these hired personnel
were paid double and ~i iv(:;n
allowances to which they are not
entit led.
With the perspective th at t ax-
payers' money is involved here,
it is remarkable that officials were
fa iling in looking for t he best
value when awa rding contracts
in hiring personnel. How0}ver,
reports had been kept secret
from the Members of the assen1-
bly which led t o a continuation
of the undesirable state of affa irs.
fou rteen senior members of t he
European Parliament had seen
the reports, but were required
to sign a confidentiali1y clause
hindering t hem from disclos-
ing t he problems. In 201 ·1 some
m embers of the European Parlia-
ment made the reports public,
despite the efforts of the parlia-
m ent's secretary-general to block
·the release by argu ing that pub-
lic exposure of the audits would
disrupt decision-making .
It seemed that members of
the assembly considered the
l~uropean Union as a job and
money machine for near rel a-
tives and fami ly. As the auditor
addressed in his reports, more
t ransparency and control were
desirab le, bringing the ques-
tion of how to avoid undesirable
state of affairs in the future . This
case tells us that selection is riot
always considered as an impor-
tant procedure leading to a more
competent: organization. The way
some members of the assembly
w ere using selection procedures
vvas veni much related to the cul-
tu ral aspect of the organization;
even;one acted the same.
After these events some
members of parliament pleaded
for more openness and a stron-
ger role for the internal auditor.
Openness helps the outside
world scrutinize how ta><payers'
money is spent. David Liding-
ton , the m inister for Europe,
sai d: "Clearly, reports such as
these are worryi ng and further
empha sise the
need for increased
transparency across
all EU institutional budgets ." A
European Parliament spokes-
inan said: "The very aim of these
reports is to improve the parlia-
ment's management by identify-
ing risks and weaknesses. The
auditor makes recommendations
to t he management, which are
then carried out ::md followed up
again by the auditor, <J'.3 the inter-
nal auditor points out himself."
DISCUSSiOl\J QU~:STIOi\Jl
As th is box shows, political insti-
tution s such as thE-) r::uropean
Parliament are often caught in a
bin d w here they are not abl'e to
place restrictions on the people
individual members c21r1 hi re,
but at the same tim e are held
resp onsible for any hiring m is··
takes individual members make.
How can t he European Parlia-
ment meet both of these chal-
lenges when it comes to making
successfu l hiring decisions?
SO URCES: German reporter r::ornes out on
top in EU bribery case, Elit:;a Vucheva, EUob-
server, 6.1.2009. EU anti-fraud office denies
responsibility in journa list lrc:alc case, Elitsa
Vuch eva, EUobserver, 30.11.2007 . German
journalist gets court backing in EU lea/c case,
Elitsa Vucheva, EUobserver, 28.11 .2007. l:U
fraud and 'irregularities' hit £'1.6 billion, The
Telegraph, Bruno Wate rfield, 30 Sep 2011.

drug tests involve not their reliability and validity but whether they represent
an invasion of privacy, an mueasonable sea.Tch and seizure, or a violation of due
process. Urinalysis and blood tests are invasive procedures, and accusing some-
one of drug use is a serious matter. Employers considermg the use of drug tests
would be well adv1sed to make sure that their <lmg-testing programs confo1m to
some general :n:tles. :First, these tests should be administered systematically to all
applicants for the same job. Second, testing seems more defensible for jobs that
involve safety hazards as:::.ociated with failure to perform.107 Test results should
be reported back to the ;j_pplicant, who should be aUowed an avenue of appeal
' . 277
278 CHAPTER 6 Selection and Placement

(and perhaps retesting). T.ests should be conducted in an environment llrnt is as

ml.intrusive as possible, and results from those tests should be held in strict con-
fidence. Finally, when testing current employees, the program should be part of
a wider organizational progrmn that provides rehabilitation cow1selingJ0 8

v
v
V In the vignette that opened this chapte r we saw how the demograph ic composition
of the f\lethe rlands is changing, and some of the implicatrons this has for personnel
selection in the future. The cli:xisions that orga nizati ons make rega rding who is going
to be part of the team and who is goi ng to be turned away, are some of the most
important decisions that the Firrn wi ll make in terrns of ga ini ng a com petitive advan-
tage. These decisions have to be based upon procedu res that have been empirically
validated and not left to idiosyncratic judgments of untrained individuals who may be
subject to stereotyped b iases. Firms that routinely re cruit and select the "best of the
best," regardless of the occupation, leave their com p etitors with labor pool leftovers
that will constantly limit their abi lity to compete. This chapter has sum marized hun-
dreds of years of research and demonst rated a large an d va ried set of tactics that firms
can use to make the right hi ring decisions when it comes to the selection process.
QU!EST~ONS
1. Based o n this chapter, what are the best m ethods of obtaining informatio n
a bout job applicants?
2.. What are the best characteri stics to look for in applicants, and how does this
depend on the nature of the job ?
3. If yo u could use only iwo of the methods described in this chapter and cou ld
assess only two of th e chara cteristics discussed , which would you choose,
a nd why?

In this chapter we examined the five critical standards
with which all personnel selection methods should
conform: reliability, validity, generalizability, utility,
and legality. We also looked at :nine different selec-
lio.n methods cun"ently used in organizations zmd
evaluated each with respect to tl1ese five standards.
1able 6.4 summarizes these selection metl10ds and can
be used as a guide in deciding whid1 test to use for a
specific purpose. Although we discussed each type of
test :individually, it is important to note in closing that
there is no need to use only one type of test for any
one job. Indeed, managerial assessment centers use
many different forms of tests over a two- or thsee-day
period to leanl as much as possible about candida.tes
for important executive positions. As a result, highly
accurate predictions are often made, and the validity
associated with the judicious use of muliiple tests is
higher than for tests used in isolation.

Reliability, 247 Content validation, 253 Verbal comprehension, 269

Validity, 251 Generalizability, 255 Qu;mtitative ability, 269
Critelion-related validity, 251 Utility, 256 Reasoning ability, 269
Predictive validation, 251 Situational intervi.ew, 26 1± .Assessment center, 276
Concurrent validation, 252 Cognitive ability tests, 269
 T~ib~e '6.4
A. Summary of Personnel Selection rl/lethods

lntervievvs Lovv vvhen Lovv if unstructured L0\:\1 Lo\ V,. especially

1
Lo\N because of subjecti\-'ity
unstructured and and nonbehavioral because of expense and potential intei'"'vi2~1112r bias;
when assessing a!so lack o-f validity makes
1

nonobseivabte traits jcb-1·ei2tedness !ovv

Reference Lovv, especially Low because of lack of Low Lotff: althot.Igh _not Thos.2 \Ntftin_g letters rnay be
checks vvhen obtained range in 2\Iaiuations expensive tQ c-bt3in concerned ~vrth charges ot
from letters
Biographical High test-retest, High criterion -;·elated Usually job-specific, High; inexpensive fv!ay have .adverse i1npact; thus
information especially for verifi- validity; lcvv in content but have been sue- way to collect vast often develop sep.arate scoring
able information validity cessfully developed amounts of potentially keys based on se~< or race .,
for many job types relevant data
Physical High Moderate criterion- Lmy; p~rtain onlytq ·. . ~od~ratef.Or ~orne Ofteri hayeadverse impact
ability tests related vaHdity; high physkaJ)yd€mand- . : physical j9J::is.; l'ri?Y on woiJ1?nanclpeoplywit.h
cont?nfvaHdity for ing jol::Js ·.·. •C"< pr~•/ent exp~6siyE: dlsaE;>Hities;need to establish
.. sorTie Jobs · · ·· iqjude:S and cfosabiJity job-relatedness . .
Cognitive High Moderate criterion- High; predictive for High; !ow cost and Often have adverse impact
ability tests related validity; rnost jobs, although wide application on race, especially for ,L\frican
content validation best for complex across diverse jobs in Amencans, though decreasing
inappropriate jobs
persona l.ify ·• High L.()"Vto rnocierate

l!~{;ili,:tfd'
· IQC3,pprpppa.~e
Work-sample High High criterion and job-specific, High because of low
tests content validi:tf' but have been suc- adverse impact and high
cessfully developed job-relatedness
for
Honesty .

Drug tests High Expensive, but may May be challenged on

yield high payoffs for invasion-of-privacy grounds
health-related costs
N
'-..!
--0
280 CHAPTER 6 Se lect ion and Placement
l. We examined nine d ifferent lypes of selection
methods in this chapter. Assu.m.e that you were just
rejected for a job based on one of these methods.
Obviously, you might be disappointed and angn;
regm:dless of what m ethod was used to make .ilus
decision, but can you thinl< of two or three methods
that rnight leave you most. clistressed? In general,
<nhy might the acceptability of the test to applicants
be r.m impoltant standard to add to the five we dis-
cussed in this chapter?
2. Videotaping applicants in interviews is becomjng
an increasingly popular means of getting multiple
assessments of that in clividual from different per-
spectives. Can you think of some reasons ~Nhy video-
taping interviews might also be useful in evaluating
the i11lerviewer? Whal: w ould you look for in an iJ1ter-
vi.ev1r<:r i( you were evaluating one on videotape?
Reviews of research about personality have identified
five common aspects of personaJity, 1ieferred to as the
Dig Five personality traits. Find oul: whid1 are your most
pronurn~nt traits. Read ead1 of the following statements,
maxking "Yes" if it descdbes you and "No" if it does not.
l. ln conversations I tend to do most of the talking.
2. Often people look to m e to make decisions.
3. I am a very active person.
1
1. I usually seem to be in a hurry.
5. I am dominant, forceful, and assertive.
6. I have a very active imagination.
7. I have an active fantasy life.
8. H ow J feel about things is import;mt to me . .
9. I find it easy to feel myself what others are feeling.
10. I tJtink it's interesting to leam and develop new
hobbies.
lL My first reaction is to trust people.
12. I believe that most persons are basically well
intentioned.
13. I'm not crafty or shy.
14. I'd rather not talk about mysdf and my accom.p-
lishments.
Selection: Staffing Dutch Corps Commando Trnops
On May 29 2009 Captain Maxco Krnon was lmighted
to the Military Williams Order 4th Class--H1e highest
decoration for bravery in the Netherlands. TNs decora-
tion was awarded for his actions as a platoon leader in
3. Distinguish. betvveen concuxrent and predictive
vali.dation designs, discussing why the latter is pre-
ferred over ll1e former. Examine ead1 of the nine
selection methods discussed in this d1apter and
d etermine whid1 of these would have their valid-
ily most and least affected by tl1e type of validation
d esign employed. .
t Sorn.e have speculated that in addition to increas-
1
ing tJ1e validity of decisions, employing rigorous
selection. methods has symbolic value for organi-
zati.ons. What message is sent to applicants about
the organization tluough hiring practices, and how
:m ight this message be reinforced by recruitment
p rogrnms that. occur before selection and b:aining
p rograms tJ.iaf: occur after selection?
J.5. I'cl rather praise others than be praised myself.
16. I come into sihrnlions being fully prepared.
17. I pride myself on my sound judgment.
18. I have a lot of self-discipline.
19. I try to do jobs carefully so they don't have to be
done again.
20. I like to keep eve:rything in place so I know where
it is.
21. I enjoy performing under pressun;. ·
22. I am seldom sad or depressed.
:23. I'm an even-tempered person.
2A. I am levelheaded in emergencies.
25. I feel I am capable of coping with most of my
problems.
The statements are grouped into categories. State-
ments 1- 5 descdbe extroversion, 6-10 openness to
experience, 11- 15 agreeableness, 16-20 conscientious-
ness, and 21- 25 emotional stability. TI1e more times
you wrote "Yes" for the statements in a category, the
more liJ<;ely you are to have the associated traJt.
the Afghan province of Uruzgan in 2006. His primary
task was the reconnaissance and the protection of the
area for bu.:ilcling the Task Force Uruzgan. During a
~ nine-day palTol Kroon and his platoon encountered a

group of Taliban fighters, 1Nhich resulted in a heavy
. gm1fight During this gunfight Kroon asked for air sup-
port and itook responsibility for guiding tJ.1e t\meri.c;m
fighters to H1e enemy. During several d ays and night s
of fighiing he succeeded in countering Hie Taliban
attacks without sustaining any Dutch casualties. After
the battle Kroon and his men looked for TaJJban casu:-
alties and ensured the wounded had proper medical
care and the deceased were treated with respect
Captain Kroon and his platoon belonged ~o a J.1
army unit named the Dutch Corps Commando Troops
which was established in the Second \Nodd i/\Tax. The
·.DuJch Corps C ommando Troops continued to figh1
after the Second World War on varioHs bat'defields in
Korea, Indonesia, Surinam, New Guinea, Somalia and
.lately in Afghanistan. They are the special forces of H1e
Dutch Force which are d eployed in critical w ar condi-
tions . The Dutch Corps Commando Troops is one of.
the most selective organizatim.1s in :11e world. Xndeed,
the process of being chosen for this elite unit is so rig-
orous that it takes hundreds of app)jcants to staff just. a
few positions. At ilie end of this selection process, l:he
seleclf~d receive their personal gi:·een beret and becmne
a member of a b:i:otherhood fo:r :lifo. TI1eir m.oti:o is
"Now or never". D u tch Com.mandof3 aw:- on dnty
24 hours a day. They work autonomously in teams far
beyond the enemy lines. As one might expect, the job
requirements associated with these positions are ori-
ented J:o physical abilities and war-fighting sl:<:ills. [:n
Secularism ~s Considered Sacred in Frano~
Although m any think of France as possessing a very
free-spi.rited and liberal culture, this counb:y takes .its
religion--or more accw·ately, il:s lack of religion-- very
seriously. h1 May 2011, over 50 Muslim. women were
arrested for doing no m ore than wearing facial veils
in public. This was in accord with a new law put into
effect that month that banned veils, extend:ing previ-
ous legislation 1hat banned bod y covering burquas,
and any other "ostentatious religious symbols." ho the
United States, the combined c1.tlturnl values of free"
dom of religion and freedom of speech would m ake
such fl. law unthinkable, but for the Prend1, the value
of secularism, that is the belief that religion should :nol:
enter h1to any pubHc m state foncti.on, is considered
sacrosanct.
Indeed, official Prench policy holds that all citizens
of France are considered equal, and Hms, the govern -
ment does not even collect data that would SU£port
the kind of affirmative action policies that exist: in
-.- -
CHAPTER 6 Selection and Placement 26 'il
addition, an· m embers must have sl<ills in "explosive
ordnance disposal" (defusing bombs), "dose quar-
ters battle" (h and-to-hand fighting), " aedaJ. infiltra-
tion" (parachuting), survival, evasion, resistance, and
escape. Further to these 'elementary skills', during his
tenure, every Commando specializes in a specific role,
for example: medics, snipers, demoli1ion specialists
and communication specialists.
I-:Iowever, the requirements of the Commando go
beyond the physical and technical and they axe heavily
influenced by recruits' mental ability, personality traits,
a..•d above aJ1, integrity. For example, with respect l:o
cognitive ability, the Dutch Commandos work closely
wi.lh intelligence forces and its members have to be
able to process and retain huge amounts of informa-
tion (e.g. building layouts, details about suspects,
local customs, and language). In addition, personality
characteristics like decisiveness, emoj:ional stability,
confidence, and extraversion are critical because these
i11dividuals are typically immersed in stressful con-
texts engaged in collaborative tasks. Finally, and per-
haps most importantly, due to the secretive na1m:-e of
their work, each person has to be totally tn.J.sfworthy.
SOURCES: Ridder na strijd in vallei tegen Talibaan, NRC HaHddslllad,
11 febntari 2009; Leiderschap onder extreme omstandigheden,
F.A. Ebbelaar, Carre, 2009, nr. 1, pp. 24-25. Eerste MilitaiJ:e Willems-
Orde h1 50 jaar, Ministerie van Defensie, 10 februari 2009; Kapitein
Kroon tof ridder geslagen, NU.nl, 29 mei 2009; Iedere.leider moet eerst
leren dienen, de Volkskmnt, 12 fob 2009.
the United States on the grounds that is unnecessary.
Howeve1~ labor market data belies this rosy view, at
least when it comes to getting good jobs. As one young
Muslim student notes, there are good jobs i il France,
but they are reserved for certain people, and usuaUy
it's white Frend1 people." This statement is backed up
by labor market data that reveals that the m1employ-
ment rate for Muslims in France is thTee time higher
than the rate for the country as a whole. Part of this can
be traced to religious-neutral employment practices
in France, where job security provisions supported by
t11.e goverru-nent and unions protect the jobs of those
already employed, often at the expense of Muslims
who are inl.migrants and relative newcomers to the
countn;.
However, tl1ere is abo direct evidence from sci-
entific studies that. shows that active di.scrin1i:na-
tion in hiring decisions is a major contributor to the
problem. For example, as part of a scientific research
 ..
2~t:2 C!HAPTIEIR 6 Selection and Placement
st1J.dy, Claire Adida and her colleagues sent out fake
job applica1ions in response to employment adver-
1.iGements posted in France where each apphcant was
i.d rn.tical h1 their experience and qualifications-with
one exception_Half the employers were randomly sen i:
an application from someone with a Muslim. sounding
name, Khadjia Diouf, an d haJI were sent an applicahon
from someone wil:h a Chxistian name, Auxelie l\llenaxct
Despite having exactly the same qualifications, "Aur02-
li.e" was asked to interview for the position at a rate
(2B 0!t.) that was four times higher than Khadjia (7%),
which is direct ixrefutable evidence of religious bias.
Ironically, despite this bias, the currenl: trend within
the Muslim communily is for young people to chang'-2
their nan:ie::i in a directi.on that celebrates, n1J:her than
hides their religion. Th at is, fust 15eneration Muslim
in unigrants into France routinely gave theis children
Chri.shan :n ames :in order to help speed the integni.hon
process. HoV.rever, partially in response to the obvi-
ous segregation by religion that exist_s in many French
cities, an increasing number of young Musfu-i1.s axe
adopting names that reflect their religious group iden·
1ity as opposed to theix French identitY-
Kina)(is Chooses Sales Reps with Personality
Kina.xis is a software company headquadered ii.1 Ottawa,
Ontm:io, tl1at sells to clients around the world. Its spe--
cialty is software for supply chain managernent~U the
processes and relationships through whid1 companies
obtain supplies as needed and get lheir products to cus-
tomers on tiJ.ne and at minimal cost TI1is is a sophisti-
cated iype of product, tailored to a company's specific
needs. Therefore, K:inaxi_s depends on salespeople w ho
understand how businesses work; who listen cmefully to
identify needs, and who provide excellent customer s-er-
vice to maintain long-term business relalionships.
Rec(mtly, Bob Dolan, vice president fm: sales al:
Ki.nmds, needed to hiD2 a sales team to senre clients h•
North America. The company had just one salesperson
serving 111.e continent, and Dolan wanted to add fotU'
rnore. He received about 100 resumes and wanted to
select from these. He started by reviewing the resumes
against job reqwsements and selected 20 candidates
for a first round of interviews. The interview process
helped Dolan cut the list of candidates in haH, so he
needed another way to nannw his options_
Dolan decided his next step 1i1rould be personality
l:esting. He lilied a firm called Opus Productivity Solu -
tions l:o ad.ntinister a test called PDP ProSom to the
remaining 10 candidates. In addition, Dolan himself
Qa))IESTnQli\~S
1. To what extent is the belief that people an~ not
biased by factors like religion, race, gender and eth-
nicity nothmg more than "wishful thinldng" arid
what are some of the methods inveshgators can use
to estabJj_sh the existence of bias?
2' Rather than trying to blend ill and integrate into the
wider French corrununity, many young Muslims in
Fronce, .unlike their pru:ents, are embrncjng names
that clearly reflect their religion. What does Uris say
about the magnitude of bias documented there and
how young MusJjms are reacting to it?
3. How axe the cultures of the U.S. and France differ-
ent in a way that makes different kinds of bias more
or less lilcely to be seen in employment decisions?
Can you tl.1ix1k of other countries where bias may
take a different form?
SOURCF,S: M . De La l:laume, "Enforcing Veil B<in, the Frenc.h Have
Stopped 46 Viol<1tors," Tiw New York Times, May 11, 2011, p. Ill; C. L.
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took the test and had his current sales rep do the same.
TI1e existing salesperson was doing an excellent job,
so the resu.lts of his test could help Dolan and Opus
pinpoh1t the chm:acterishcs of someoile likely l:o suc-
ceed in sales at Kinaxis. Based on analysis of aU tl1e
results, Opus created a benchmark of traits associated
w ith success in the job.
Representatives from Opus also discussed the test
results wil:h each candidate, giving each one a chance i:o
disagrne with the scores. No one did_ Dolan observed
that all the candidates scored high in assertiveness and
exlToversion-not surprising for people in sales. Jn
addition, hvo of l11em scored above the bendunark i..>
conformity and below the benclunark in dornirrn.nce.
Those results suggested to Dolan that these candidates
mi.ght be so eager to please that they would be quick
to give in to whatever customers requested- a pattern
t11.at could become costly for the company. Dolon elim-
inated those two carniidates.
That meant Dolan still had eight candidates to fiH
four positions. He a.sked each one to give him the
names of major accounts he or she had signed up in
the previous two years. Four candidates wen;) able to
come up 11\rith three m four large clients. TI1ose were
the candidates Dolan hired.
 ...
Since then, Dolan. says hi'3 experience with per-
sonality testing has only reinforced his belief that this
selection method helps Kinaxis identify tl1e best can-
didates. For example, one sales rep had scored low on
"pace," indicating that the individual mighl: lack l.11e
patience needed for the slow cycles required to dose
a sale of a complex sofl:ware system.. Dolan hoped the
issue could be overcome if he provided enough coach-
ing, but in fact, the sales rep sometimes behaved :irnpa--
ticntly, annoying prospects. After tlu-ee yearn of trying
to help him grow into the job, Dohm laid hin1 off
The company's commitment to careful selection
is expressed on its website: The Kt.1.wds recnritni.ent
process enables us to explore the potential of [a p art-
nership between our company and each employee] by
determining if there is solid alignment between yous
career aspiraf:ions, youx values, and your professional
skills and the Kincuds vision, cultrn:e, and passion."
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CHAPTER 6 Selection and Placement 283
O.l!Ji!E$1fl01Nl$
1. What selection metl10ds did Bob Dolan use for hir-
ing salespeople? Did he go about using these meth-
ods in the best order? What, if anything, would you
change about the order of tl1e methods used? ·
2.. Vllhat were tile advantages to IGnaxis of using per-
sonality tests to help select sales representatives?
What were t.he disadvantages?
3. Given the inf01malion gathered from the selection
meth.ods, what process did Dolan use to make his
selection decision? VVhat improvements can you
recommend to this process for decisions to hire
sales reps in the future?
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 ...
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Psychology 79 (1994), pp. 643-58.
107. M. E. Paronto, D. M. Truxillo, T. N. Baue1~ and M. C. Leo,
"Drug Testing, Drug Treatment, and Marijuai1a Use: A
Fairness Perspective," Joumal of Applied Psyc!wlogij 87
(2002), pp. 1159--{:)6.
108. K. R. Murphy, G. C. Thornton, and D. H. Reynolds, "Col-
lege Students' Attitudes toward Drug Testing Programs,"
Personr.zel Psychology 43 (1990), pp. 615-31 .
Afte r reading t:his chapte1~ you sh ould be able to:

fLO 7-1 D iscuss how training, informa l lea rning, and knowledge
management can contribute to continuous learning
and companies' busi ness strategy. page 289

IUO 1-'/l E)cplain the ro le of th e manager in identifying t raining

needs and supporting trai ning on the job. page 291

lO 7--3 Conduct a needs assessment. page 293

tLO 1-4 Evaluate employees' read in ess for training. page 299

lQ '].!'.); Discuss the strengths and weaknesses of presentation,

hands-on, and group train in g methods . page 307

lO 7-f; E)cpla in the potential advantages of .e-learning for training. page 315

ILO 7-7 · Design a training sessio n to ma)<imize learning . page 321

ILO 1-~ Choose appropriate evaluation d esign and training outcomes based
on the t raining objectives and eva luation purpose. page 322

LO 1-? Design a cross-cultural prepa ration program . page 325

lO 7°'Wl Devel op a program for effectively managing diversity. page 329

 learr11ing Oppou~tun ~ties fo1r Emphl}fees Are No
Accident at Fa~·mea·s h1stuance Group of Compan~es
.Farmers Insurance Group of Companies is tho
third-l argest insu rer of auto and homeowners insur-
ance in the United States and also provides other
insura nce and financial products. Farmers has
60,000 employees and exclusive and independent
agents in every one of the 50 states. It p rocesses
millions of insurance quotes, new policies, renew-
als, and bills each yea r. In the insurance industry,
legal requirements and t he introduction of new
products, processes and services make t raining and
development critical for business success. At Farm-
~ ers Insurance, learning professionals are rewarded
based on the degree to which training prog rams
change the behavior o f employees and help the
business meet its o bjectives. Learning is delivered
based on the desired end result. !\lo vvon der that
Farmers has been ranked in the Top 'IO of Tra ining
magazine's Top ·125 for the last four years and wi ll
be inducted into the Hall of Fame!
Farmers uses a blended k~arning appmach to
deliver effective learning t o its multigenerational
employees and agents who are located across
the U.S. Farmers b elieves t hat rather th an allow-
ing learners to chose the type of training method
that they bel ieve best fits their style, a blended
learning approach is more effective. ,6...s a result, its
training progra ms integrate face-to-face instruc-
tion1 print, online, video 1audio, virtual simu lations,
and coaching. Technology is used for d el ivering
knowledge and instrud:or-led training is used
for skill development. In the past five years t he
amount of learn ing delivered through instructor-
led classroom b ased tra inin9 has dropped from 90
to 50%. The other 50% is on line or informal learn-
ing. For example, Farmers is using various tra in-
ing methods to help its employees cope with the~
changes made in claims processing, 1·atings, billing
and product systems in support of Farmers busi-
ness strategy, which emphasizes customer expe-
rience, distribution, and product management
e)(cellence. For example, field managers were
required to complete on line training and webinars
designed to provide the new knowledge th ey
needed. Then the managers received instructor-
led t raini ng, videos, and coaching guides. Farmers
also revised its training program for new agents as
a result of an increased failure rate of new agen-
cies. The revised program includes more coaching,
performance support aids, and multimedi a meth-
ods . It also insures that new agents learn knowl-
edge and skills when they are relevant to their
jobs rather than forcin g them to learn everything
at once and having th em frustrated wit h being
unable to recall the info rmation when they need it
later. As a result of the program revision, conve1t·-
ing new agents to full-tim e status improved by
12%, sales resu lts exceeded sales goals by 11%,
and agency success rates i nc~,eased 10%.
Recognizing that new technologies are poten-
t ially useful for training de livery and instru ction,
Farmers has started to use virtual classrooms,
mobile learning, social networks, electron ic tab-
lets such as i~pads, and learning simulations.
While taking courses at t he University of Farmers,
learners can use electronic tablets to t ake notes,
access websites and articles, and view vid eos.
The video capabi lities of the tablets allow instruc-
tors to use them to record the learners' practicing
ski lls and then provide feedback and coaching.
Also, t he instructors can create learni ng materi-
als such as iBooks with embedded videos. To
encourage learn ing outside of a formal classroom
environment, Farmers developed iFa rmers apps
for customers, sales agents 1 and em1::>loyees. The
CONTINUED
287
iFa rrnE~rs customer app helps customers learn
;:ibout different insurance products. An iC!aims
ap p gives customers a cc~ss to input and rnana9-
ing thei r insurance claims. The iAgent app p ro --
vicles busin,..)ss-focused learning for sales agents.
Farrners has also been e)(perimenting with socia l
networking for employees to collaborate, cre-
ate and share knovvledge, and to provide per-
formance support. Some training prog ra ms are
using the social network for collaborative eJ<er-
• cises. Fanners' " .Agen cv Insider" prograrn allows
,( .
learners to specify whether th ey want to use
'ii(lfitter, Facebook, e-m ail , or an RSS feed.
SOURCES: Based on www.farmers.com, we bsite for Farm ers lnsuran c;e;
M. Weinste in, " Farmers' Compre hensive. Trai ning Policy," Training ,
(January/February 20 13), pp ..42-44; L. Freife ld , "Farmers' Premier
Position," Trainin g (January/February 20·11), pp. 26-3'1; J. Salopek, '. '
"Thriving through Chan ge, Cultivating Growth," T + 0 (October 201b),
pp. 53-54.

1
As the chapter opener shmvs, lxain:ing contributes to Farmers Insurnnce s focus
on its employees and customers. Training helps Farmers' employees develop
skills they need to succeed in their cunent jobs and develop for futw:e posi-
lions. From Farmers' perspective 1xaining is strategic because it leads to con-
1

sistent service that ath·acts a11d retains customers, high-quality employeesr and
positive revenues. l:;armers recognizes that there is stiff competition for con.sum.-
ers' insurance business- success requires smart, motivated employees 1Nho can
delight customers.
'Why is the emphasis on slrntegic traL.1.ing important? Companies m:e in busi-
ness to make money, and every business function is under pressure to show how
it contributes to business success or face spending cuts and even outsourcing. To
conhibute to a company's sucoess training activities should help the company
1

achieve its business strategy. (Consider hmN Farmers' h·aini:ng conh·ibuted to

development of employees selling skills.)
TI1ere is both a direct and an indirect link between training and business strat-
egy and goals. Training can help employees develop skills needed to perform
!:heir jobs, which directly affects the business. Giving employees opportu:n:iiies
to learn and develop creates a positive iNOrk envfromnent, whl;~h supports the
business strategy by attracting talented employees as well as motivating and
retaining current employees. ·
Why do Farmers fosurai"lce and many other companies believe that an jllvest-
ment in training can help them gain a compeiihve advantage? Training cm1 ·

"' Increase employees' knowledge of foreign competitors and cultures, which is

critical for su ccess in foreign markets. ·
'1> Help ensure that employees have the basic skills to work with new technol-

ogy, such as robots and computer-assisted manufach1ring processes.

<t> Help employees understand how to work effectively in teams to contribute to

product and service quality.

'il Ensure that the company's culture emphasizes innovation, creativity, and

learning.
~ Ensure employment secmity by providiALg new ways for employees to con-:-
tribute to the company when their jobs change, their interests change, or theh:
skills become obsolete.
"' Prepare employees to accept and work more effectively with each other, par~
ticularly with m.inorHies and women.1

288 '
.
~
 ..
CHAPTEIR 7 Training 289

In this chapte1~ we emphasize the conditions through which trahung prac-

tices can help companies gain competitive advantage and how managers can
contTibute to effective training and other learning intiatives. TI1e chapter begillB
by discussing a systematic and effective approach to training design. N ext we
review training methods and training evaluation. The chapter concludes wit.h
a discussion of h·aining issues in.dueling cross-cultural prepaxation, managing
diversity, and socializing ern.pioyees.

As we discussed in Chapter J, intangible assets including human capital, cus- ILO 7p1
tomer capital, social capital, and intellectual capital help companies gain com- Discuss how t raining ,
· petitive advantage. Recognizing that formal training, informal learning, and info rm al learnin g, and
knowledge manage-
knowledge managern.ent are in1port.a.nt for the development. o f· intangible assets, ment can contribute
many companies now consider training one part of a larger emphasis on con- to contin uous learn ing
tinuous learning. Figure 7.1 shows that fonnal training and development, infor- and companies' b usi-
mal lean1ing, and knowledge management are ll1e key features of a continuous ness strategy.
leatning philosophy that focuses on performance and supports the business
strategy. CmalixnwMB R~<'lrrnrur•g :refers to a leaming system that requires employ- Coli'il-:talill1U1/Ql1U15
ees to understand the entire lAJork system and they are expected to acquire new learning
skills, apply them on th.e job, and share w1l.a~ they have learned with other A learning system that
, em.ploy.ees.'.2 req uires employees
to unde rstand the
Tn:ailt11.ing; refers to a plam1ed effori: by a company to facilitate learning of entire worl< process
job-related competencies, knowledge, sk.ills, and behaviors by employees. TI1e and expects th em to
goal of training is for employees t.o master the knowledge, skills, and behav- acquire new sl<ills,
iors emphasized in traU.11.ag and apply them to their day-to-clay activities. Tra- apply them on the
ditionally, companies have relied on formal training tlu-ough a course, program, job, and share what
they have learned with
or event to teach employees Hie knov\rledge, skills, and behaviors they need to other employees.
successfully perform their jobs. li~OR'.flifil.rllR trcanning refers to h'aining and develop- ,.,c. . . .
menl: programs, couxses, and events that are developed and organized by the Tramm9
company. Typically e1nployees are required to attend or complete these pro- A r_l~nned effo rt t~
f · ·
· w 1uc
gram.s, · l1 can me
· 1u d e 1ace-to-
,;: ace trauung programs (suel1 as mshuctor-
. le d factl1tate the leammq
of job-related kn owi~
courses) as well as online programs. U.S. companies make substantial invest- edge, skills, a nd behav-
ments in fo1mal lrai.J.Th."'l.g. One eslimate is that U.S. organizations spend over ior by employees.
$171 billion on formal employee training and development.3 We will discuss Fornrmi Training
development in Chapter 9, "Employee Development." Train ing and develop-
Despite companies' significant investments in form;:i.1 training and develop- ment p rograms and
ment activities, informal learning is also :important for facilitating knowledge courses that are devel-
and skill acquisition.4 fofo1rm«11! lemrniing refers to learning that is learner initi- oped and organized by
the company.
ated, involves action an.d doing, is motivated by an intent to develop, and does
not occur in a formal leanu.ng setting.s fofonnal learning occurs without an lnformlll! l<tl!airlf1lnli1£J
instructor, and its breadth, depth, and timing are coni.ToUed by the employee. Leaming that is learner
It occw:s on an. as-needed basis and may involve an employee learning alone or initiated, involves
l 1 f f j - d d
t 1roug 1 ace-to- -ace or tee moiogy-ai e social interactions.
Informal 1earning action and doing, is
motivate d by an intent
can occur llu·ough many different ways, indud:ing casual unplanned interac- to de velop, and does
lions with peers, e-mail, informal mentorh1g, or compa.i.-iy-developed or pub- not occur in a formal
licly available· social netv>10rking •Nebsites such as Twiiter or Facebook. The learn ing set.ting.
 ..
290 CHAPTER 1 Trainin9

f fitijMrn 7!" 11
Key Features of
Continuou:.> Learning

application of sod.al media from a marketing stni.tegy to a learning sixategy and

the availability of Web 2.0 technologies such as social networks, microblogs,
and wilds allow employees easy access to social learning through collaboration
and sharing with one or bNo or more people.G One estimate is that informal
learning may account for up to 75% of learning within organizations!
Both formai trnining and informal learning contribute to the development of
intangible assets but especially hmnan capital. Human capital includes knowl-
edge (know what), advanced skills (know how), system understanding and cre-
aHvity (know why), as well as motivation to deliver high-quality product.sand
services (care why). 7 One reason why informal leru.1.u.ng may be especially impor-
tant is tl1at it may lead to the effective development of tacit knowledge, whi.ch can
~nr::i~klht ri<now!ed9~ be conb:asted wi.tl1 eJ...plicit ki.1owledge.s Explidt .knowledge refers to knowledge
Knowledge that is well that is well documented, easily arliculated, and easily transferred" fJ:om pernon
documented and eas- to person. Examples of explicit k11owledge include processes, checldists, flow-
ily transferred to other
persons.
charts, formulas, and definitions. Explicit knowledge tends to be the primary
focus of formal training. Tacit knowRedge refers to personal knowledge based on
lf.adt fu1iomriaidlEiJO individual experiences that mal<e it difficult to codify. It is best acquired through
/(now/edge based informal learning. The characteristics of the formal training envirnnment may
on personal experi- limit the exkent to which tacit knowledge can be acquired, such as the relatively
ence that is difficult to
codify. short duration of classroom or online h·aining and limited opportunities for prac-
tice. Thus, informal leaming is cent1'al to tl1e development of tacit knowledge.
R(R111Q>W~4Mtl!9J~ Well-designed formal training programs can help employees acquire explicit
l\1Jk1R11a9emalillt knowledge. But to acquire tacit knowledge employees need to interact vvii.h
Process of enhancing peers, colleagues, and experts and have lea;rning experiences that axe not usu-
company performance
ally found h1 fonnal training. Informal learning does not replace fonn.al !.:rai.ni.ng.
by using tools, pro-
cesses, systems, and Formal training is still needed to p:repaxe employees for their jobs and help them
cultures to improve the progress to future positions. lnfonnal learning complements b:am\ng by helping
creation, sharing, and employees gam tacit knowledge lb.at formal training cm.mot p rovide.
use of knowledge. KmtoW\rliedg~ n.11aJ1J\ag;~meKl1.~ refers to the process of enli.ancing cornpany pt:rfor-
mance by desig1ung and implementing tools, processes, systems, struci.i.u·es, and
cultures to in:i.prove the creation, sharing, and use of knowledge.9 Knowledge
management: contdbutes to informal learning. For example, Cerner Corpora-
tion, a global technology company in Ka11sas City, Missouri, developed uCern., a
 ...
CHAPTER 7 Trnining 291

knowledge-sharing sy0tern for e:rnployees and clients to share their knowledge

about soluiions, projects, and professional iJ'"l.l:erests. 10
It is important for all aspects of continuous learning, including training,
knowledge :management, and informal leai1.u.n.g, to contribute to and support
the busTI:ess strategy. Continuous learnmg needs to address performance issues
that lead to :improved business results_ To do so requires that the emphasis on
continuous learning aligns with the business strategy, has visible support from
senior managers and involves leaders as instrucl:ors and teachers, creates a cul-
hJre or work enviromnent that encourages learning, provides a wide range of
learning opportunities including h·aining, informal learning, knowledge man-
agement, and employee developirnent, uses trnditional methods and innovative
teclmologies to design and deliver learning, and measures the effectiveness and
overall business impact of leaming. 11
Consider how Jiffy Lube en1braces a continuous learning philosophy that
supports the b usiness strategy.12 Jiffy Lube's sh·ategic goals focus on develop-
ing growth opporti.mihes for franchisees and providing a world-class customer
experience. Jiffy Lube's customer value proposition is that every driver deserves
to be free from the anxiety of keeping his or her vehicle in excellent shape. This
requires that service ted111icia.ns are knowledgable about and able to provide
high quality and necessary services to drivers. At Jiffy Lube this means that ser-
vice technicians need to be trained and certified. Training is provided through
Jiffy Lube University (JUJ). In 2011, 125,000 certifications were earned and
employees participated in more than 1.3 miUion learning hours. JLU evaluates
· the success of learnb1g efforts many ways including learner feedback, franchisee
surveys, the n umber of training courses completed, earned certifications, and
customer service scores fTorn mystery shoppers.
Jiffy Lube recognizes the value of continuous learrung and informal learning.
Recently, every employee, i:ndudin.g the company president, was required to
complete courses at JLU plus spend at least one day at a Jiffy Lube service cen-
ter. The courses included orientation and safety and training for the Courtesy
Technician, Upper Bay Technician, Customer Service Advisor, and Team Le~d
positions and products. Jiffy-Lube also has established partnerships with col-
leges to allow service center employees to transfer credits from courses earned
through JLU to eru:n an undergrad certificate in Management Foundations.
Lemners and managers can access on.line a roadmap which shows how training
is helping them advance their careers. Also, recognizing that its service center
employees typically arie 18- to 25-year-olds who are actively involved in social
media, Jiffy-Lube provides video cam.eras so that store employees can capture
best practices and ideas. These videos have focused on customer service, team
building, operational exceUence, and safety. Jiffy-Lube trainers edit the videos
and make them available to a.11 employees on YouTube_
lrnnlibDfiH$;! D®SR\S)fin
ifl'r«JM::®St!
A systematic approach
lnlla:u:it!nn~rci'li\fE 11:$.p;f.hla(!L'~~'iatf~ lt'.l\f'i\~"ti'1l\"f.\:'.'llm
Kl:JJ1\!;';;•~1~ ~ 1u m~1 rn .;;&~ 1~ m.1 ~ \!,. ~. rn.!f :ri,;, r:r .. \v} rn 1H11HP:1 ~J for d eveloping training
programs.
Training Ac·tmvmttraes
A l<:ey characteristic of trairung activities 1J1at coniTibute to competitiveness is l07~i
Explain the role of the
that they are designed according to the instructional design process.13 Train.mg
manager in identify-
design proc11:?ss refers to a systematic approach for developing training programs. ing training needs and
Instruc1ional System Design (ISO) and the ADDIE model (analysis, design, devel- supporting t raining on
opment, implementation, evaluation) a:re two specific types of training design the job. .
 ...
2'92 CHAPTEH::i'. 7' Train ing

processes you may know. Figure 7.2 presents the six stages of this process, which
emphasizes that effective training practices involve more than just choosing the
most popular or colorful training method. .i

~:::P.'&jjll.fif'I~ 7J ,2 Needs assessment

The Tr;;iining Process
·".Otgar\izatiohal•analysis
• Person analysis
"Tasl' .analysis

Creating a learning environment

.. ldeqtHicationof learning ··feedback
objilctives and training
· tcomes
~ · Meahipgful

"·~'\- material

Ensurlng
.
transfer of trainlng •·.

Selecting training methods

---~

· ~ Preser1taHonal .methods ·.·.·

• Har)ds•o,n methods

Evaluating training programs

:...
 ....
CHAPTER 7 Training 293

The first stage is to assess needs to del;e:rroine if training is needed. The· sec-
ond stage involves ensuring employees have the xeadiness for h·ainin.g, and they
have the xnotivation and bask skills i:o master training content. Stage 3 addresses
whether tJi.e training session (or the learning enviromnent) has the factors neces-
sary for learning to occu:r. Stage 11 i.s to ens1rre that b:afriees apply the content of
training to .J:heir jobs. 1his requires support from managers and peers for the use
of trnining content on the job as well as getting the employee to understand how
to take personal responsibJlity for skill improvement. Stage 5 involves choosing
a training method . As we shall see in this chapt-tT, a variety of training methods
are available ranging from traditional on.-the·-job trnining to newer technologies
such as social m edia. 1he key is to choose a training method that will provide
the appropriate learning envirnrn·:x1ent to ad.1.ieve the h'aining objectives. Stage 6
is evaluation-that is, deten:n:ining 1Nhethet h"aining achieved the desired learn-
ing outcomes and/ or financial objectives.
The training design process should be systematic yet flexible enough to
adapt to business needs. Different steps may be completed simultaneously.
Also feedback from each stage in the training progress can be useful for the
other stages. For exampk~, if trnnsfer of training is difficult, then the learning
envirnmnent should overemphasize practice and feedback. Keep in mind that
designing training unsystematically w ill reduce the benefits that can be realized.
For example, choosing a training method before determining training needs or
ensuring employees' readiness for txainlng increases the risk that the method
chosen will not be the m ost effective one for meeting training needs. Alsq, train-
ing may not even be necessary and may result u1 a ·waste of time and money!
Employees may have i:he k.nmA.rledge, skills, or b ehavior they need but simply
not be molivated to use them. Next we will discuss important aspects of the
training design process.

INllEfEl!JlS ASSESSMENT
The first step in 1he instructional design process, needs assessment:, refers to the'' .. ' lO 7~3
process used to detenni:ne if training is necessary. Figure 7.3 shows the causes Conduct a needs
and outcomes resulting from needs assessmen t. As we see, many different "pres- assessment.
sure points" suggest that training is necessaxy. These pressure points include Needs A.s:o.~Sf>M{!!!flt
performance problems, new technology, internal or exte1nal customer requests The process used to
for h·ain.ing, job redesign, nev11 legislalion, changes in customer preferences, new determine if training is
products, or employees' lack of basic skills as well as support for the company's necessary.
business strategy (e.g., grm,vtl1, global business expm1Sion). Note that these pres-
sure points do n ot guarantee fJ1.at training is !he correct solution. Consider, for
example, a delivery truck driver whose job is to deliver anesthetic gases to medi-
cal facilities. TI1e driver mistakenly hooks u p the supply line of a mild anesthetic
to the supply line of a hospital's oxygen system, contaminating the hospital's
oxygen supply. Why did !:he driver make this mistake, ">Nhich is clearly a perfor-
mance prnblem? Tii.e driver 1nay have done this because of a lack of knowled ge
about the appropriate liJ1e hookup for the .anesthetic, ai-iger over a requested
salary increase that his rnanagerrecently denied, or mislabeled valves for con-
necting the gas supply. On..ly the lack of k.novlfledge ca.:n be addressed by b:aining.
111e other p ressuTe points require addressing issues related to the consequence
of good performance (pay system) or the design of the work environment.

----~----
294 CHAPTER ·7
ffl~l\1.lff~ 7l .3l
The l\leeds Assessment Process
/~easons or "pressure po ints"
" Legislation
'"'Lack of basic skills
" Poor performance
" l\lew technology
" Customer requests
'"New products
"' Higher performance
standards
"' f\lew jobs
" Business growth o r
contraction
"' Global business
expansion
Organfi;i:ationa~
Alfllai~ysi~
A process for deter-
mining the business
appropriateness of
training.
IP'~rr.<Qln Ana!yti;n%
A process for determin-
ing whether employees
need training, who
needs training, and
whether employees are
ready for training.
lf.ais;k Analysis
The 1xocess of iden-
tifying the tasks,
knowledge, s/ci/ls, and
behaviors that need
to be emphasized in
training.
Training
\J\ihat is the contr-mt? Outcomes
"' What trainees need
to learn
" Who receives training
" Type of training
In what " Frequency 9f training
do they --~..... " Buy-versus-build
need training decision
training? ,. Training versus other
HR options such as
selection or job
redesign
" How training should be
\fVho needs training? · evaluated
Needs assessment. typically :involves organizational analysis, person analy-
sis, and task analysis.1 4 Organizational analysis considers the context h1 which
training will occur. That is, ox:gaunizationzil aJI11.alysis involves determining the
business appropriateness of training, given the company's business strategy, its
resomces available for training, and support by managers and peers for training
activities.
Person analysis helps identify who needs training. Perso:n arnnlysis involves
(1) de-termining whether performance deficiencies result from a lack of knowl-
edge, skill, or ability (a training issue) or from a motivational or work-design
p roblem; (2) identifying who needs training; and (3) determining employees'
readiness for h·ainh1g. Tmsk mnalysfo includes identifying the important tasks
and lmowledge, sldll, ai"1d behaviors that need to be emphasiz;eCI in training for
employees to complete theix tasks.
In practice, organizational analysis, person analysis, and task analysis are
usually not conducted in any specific order. However, because organizational
analysis is concerned with identifying whether training fits with the compa-
ny's strategic objectives and whether the company wants to devote time and
money to training, it is usu.ally conducted first. Person analysis and task analy-
sis are often con.ducted at the same time because it is often difficult to determine
w hether performance deficiencies are a trnining problem without understand-
ing the tasks and the work envirorunent.
What outcomes result from a needs assessment? As shown in Figure 7.3, needs
assessment shows who needs training and what h·ainees need to learn, includ-
ing the tasks in which they need to be trained plus knowledge, skill, behavio1~
or other job requiren\'ents. Needs assessment helps determine whether the com-
pany will purchase training from a vendor or consultant or develop training
using internal resources.
B~i:1/\T Pantex helps maintain the safety, secuxity and reliability of the nation's
nuclear weapons stockpile.1 5 Tii.e compru.1.y offers technical trairung and man~
agement development courses, and every employee has an individual develop-
ment plan. The mission of the teclmical training department is to provide quality
tr aining that is necessary~ precise, timely, and behavior or ability changing.
 CMAPTER 7 Training 295

Recently, the techrucal lra.irung program was revie·wed to help improve its effi-
ciency and effectiveness. The review found that training requires a huge time
commitment by employees to be away from their jobs and 20% of the courses
accounted for 3% of the h·afrung houxs. As a result, the technical tr·aining depart-
ment reexamined its comse offerings by considerirtg if the h·aining was still
necessary, if the tra:inii""1g objectives were still relevant, ~J the course provided
redundant information, and if the target audience for the course had changed.
This Jed the technical trojn.ing depaitrnenl: l:o consolidate or remove more than
700 courses. Also, many courses were redesigned, redud11g the time to comple-
tion by more than half. Many classroom. sessions were replaced with computer-
based training or informal meetings between employees and thefr manager.

Three factors need to be considered before choosing trai.11.ing as the solution to

any pressure point: the company's strategic direction, the training resources
available, and support of ][Jlanag(~rs and peers for training activities.

Suppm·t of MzilTllagers -rnrnd fPiBe!f5

Various studies have found that peer and nianager support for h'aining is criti-
cal. The key factors to success are a positive attitude among peers and managers
about participation in training acli.vities; rnanagers' and peers' willingness to
tdl trainees how they C3Jll more effectively use knowledge, skills, or behaviors
learned in trnirring on the job; and the availability of opportunities for the train-
ees to use training content in their jobs.1 6 If peers' and managers' attitudes and
, behaviors are not supportive, employees are not lil<ely to apply h·aining content
to their jobs.

Com[p(-my Strnttegy
hi Chapter 2 1Ne discussed the impodanc.e of busii"1ess slTategy for a company
to gain a competitive acbnmtage and earUer in this chapter we discussed how
Jiffy Lube relies on learning to support the company's mission and strategy. As
figure 7.1 highlights, training should help compaxtles achieve the business
strategy. 1able 7.1 shows possible strategic initiatives and their implications for
training practices.
His important to identify the prevailing busiJ.1ess strategy and goals to ensure
that the company allocates enough of its budget to traLning, that employees
receive training on relevant topics, and that E:mployees get the right amount
of trni:ning.1 7 EMC s products helps companies store, protect, and organjze
employee, customer, and produd info:rmation.rn In five years, EMC grew from
offering 200 to 300 products to more thax1 Ll,000 products based on a business
strategy that included acquhing 40 companies whose products complemented
EMC's product line. The acquisition strategy meant that a necessary strategic
training initiative for EMC was i:o develop and expand its professional certifi-
cation program (Proven Professionals) ·n1e certifi.cati.on program is critical for
the company's technical employees and Hs customers to understand the value
of its products and hmN to install and support them . The program includes
10 f:echnologi•.:is with certification available.r and within ead1 certification area,
employee~; and customers can attain 3§SOciale, specialist, .ai1.d expert levels.
 ....

296 CHAPTER 7l Training

1f&:illb~® 1011
Examples of Strategic Initiatives and Their Implications for Tra ining Practices

Improve Custome r Service " Ensure that emp loyees have product and service knowledge
" Ensure that emp loyees have skills needed to interact with
custom ers
"' Ensure that employees und er.stand their roles and
deci sio n-making authority

.: }~i~~~~~~J~~i~~~,,~*K"~!l~~lir

Enhance Innovation and Creati vity

:~!!:,~ !J!lf~~~fl~Tuv
1
,
"' Capture insight and inform ation from kno wledgea ble
'J~~i~·
em ployees
" Lo g ica lly organize and .store information
"' Provide methods to make information availab le
(e.g., re source guides, websites)
" Dedicate physical space t o encourage.te amwork,
coll abo rati,()11, creativity, and knowledge sharing

SOURCE: Based on S. Tannenbaum, "A Strategic View of Organiz:ational Training and Learni ng ," in Creating, Implementing and Managing
Effective Training and Develop ment, ed. K. Krniger (San Francisco: Jossey-Bass, 2002), pp. 10-52.

The "Lntegrity in Action" box highlights what business lead~:rs might reason-
ably expect from their training and development or learn.mg function.

lrnining Re501U11rce5>
It is necessary to identify whether the company has U1e budget, time, and exper-
tise for training. For exarn.ple, jf the company is installing comp uter-based man-
ufactming equipment in one of its plants, it has three possible strategies to have
computer- literate employees. First, the company can use teclmical experts on
staff to train all affected employees. Second, the company may decide that it is
more ·cost-effective to identify computer-literate employees by using tests an.d
w ork samples and replace or reassign employees who lack the necessary skills.
'Third, if it lacks time or expertise, the company may decide to, purchase training
from an outside consultant or organization.
Table 7.2 provides examples of questions to ask vendors and consu.hants to
help evaluate whether they can meet the company's lTaining needs.

Person analysis helps the m.anager identliy whether training is appropriate and
which employees need training. In certain situa.tions, such as the introduction o{ \'

a new" technology or serv:4:'e, aU employees may need training. Howeve1~ when ff

' t:.i•._
 Ernst 8, Young Chief learni119 them understand more broadly Hamilt on recog-
Officer Mike Hamilton recently vvh<:1t changes need to occur, in nizes that technol-
retirecl from his position as addition to learning, to get the ogy is in the midst
Chief Learni ng 8{ Development desired o utcomes. Focusing of changing how learning is
Officer for t ho Americas. He ·on b usiness leaders first help:o. delivered and supported. He
believes that o m;, of thc0 cha I-- to enhance their views of the believes that that this makes it i,;
lenge s for any professional val ue of t he traini ng function even more important that learn- ,
working in learning, t raining, or and incn=ase the attention they ing and development profes- I
development is to understand pay to learning professionals sionals constantly consider how • I
~:;;,:t~1~~ ;~d~i~J~~A7t;:~;nti~•~~'.Jusi- ;:iftl~~p~~;ayn~J~1~iJhd~~s~~s~:~~~at ~hu~~ct~:~~~~l~~l~1e:~~~yees ,:·-~_.
tr<:11nmg, an c eve opmem can
help business leaders solve
1 1 · on s co eagues ave person-
ally learned a lot from him such
1 Pl:SCUSS~ON QllJIES"f!OfMS
;!__
~

their problems. The first step, as don't always take no for an 41. What does strategic training I
he emphasizes, is to under- an s11\1er, learn by being open to and development mean to
l
0

stand what is important to the revisiting your ideas vvhen chal- you?
business leade r, rather than leng ed by others, demonstrate 2. How did Mike Hamilton help I
emphasize programs and tools passion for what you believe insure that tra in ing vvas stra- -
that come fro m the training in, and emphasize getting the tegic at Ernst 3, Young? What I
function. Hami lt on err1phasizes "right things" done. Hamilton did he do that vvas most I
that sometimes the best thin~..i. is also known for making learn- important f or making learn- -.:·;.
is to help busi ness leaders ing available to employees at all ing strategic? Explain. i
understand that a program i'.1 levels of the company. Learning I
unlikely to help them reach
busin<..::ss objectives. Instead,
and development is fun and
challenging rather than some-
SOURCE: Based on L. Frei fe ld, "Legacy
of a CLO," Training, January/February 2013,
i~-.':·
'
the focus sh o uld be on helping thing that has to be completed. pp. 52, 54, 56.
~~_., ,., ,. ,. ! ''W'-' .·''"<'"• lm'"'°'"''"'~l-~1':-l"':•''''''"•'-~ •f"''" .-, ~,_.1,r;'<!>"!"llr..'i'" '"'~'t"lf"ll"•l"''l''"'"'l""""""'rmPl"'-~""!"''''"-~">i·~~--,"·""~.!!':.\~.!r:.'~t'=!._. , _.,.,.J.":l"'-~~..!~..,~·.,,i-":ll'>'">!""'~rJ;>:"""!'"$,-:.~~·-,.,~~~'""'~''=$~.,,t~~~~"'=i:-..;.-">:.~:""1:T--;!'!.~-,;.-:;:,:"::-:c!'- , ': :.·" ,;i"-~"'>i-~'t::.."'~=-""!.=.~-~~-::::f!":!.~~'":S~

managers, customers, or employees iden tify a problem (usually as a result of a

perfomlance deficiency), it is often unclear whether training is the solution.
A major pressure point for training iG poor or substandard perfonnance-that
is, a gap between employees' cmTent performance and tl1eir expected perfor-
mance. Poor p erformance is indicated by customer complaints, low performance
ratings, or on-the-job accidents or unsafe behavior. Another potential indicator
of the need for training :i.s if: Hw job changes so cmrent performance levels need
hnprovement ur employees nmst complete new tasks.
From a manager's p erspecl.ive1 to determine if b:aining is needed, for an y per-
fon nance problem you need to analyze d 1aracte1istics of the perfonne1~ input, out-
put, consequences, andfeedbadc. How might tl1is be done? You should ask several
queslions to determine if !mining is the likely solution to a performance problem.19
Assess whether
1. The performance problem. is L.'"Ilportant and has the potential to cost the com-
p any a significant amount of mon.ey fro.in lost produd:ivity or customers.
2. Employees do not krnJ'N how to perform. effectively. Perhaps they received liitle
or no previous iraining: or the training was :i.11 E'ffecti.v~ (person characteristics).
297
 ...
293 CHAPTER 1 Training

Questions to
A::;lc Vendors ::md
Consultants
What an:~ the ~.u~lific~~i~n ~ and experiences of your staff?
· ; . ~e:~~~~;i:Jiq~:~w~rt!s0~:t(~}'~~~;'9 . ..
Can

How long w ill it take to develop t he training program?

· ·.•: i:H.Q\IJ/~,J·cl}· V:f.i lky,~;~1'f:~:gi:0,i t~~ ·99.ir,1>(\';: ;<; . '?'?:· •·. "}····•· ·
What instructional design methods do ·

SOURCES: Adapted from R. Zemke and J. Annstrong, "Ev<iluating Multimedia Developers," Training Magazine,
November 1996, pp. 33-38; B. Ch<ipm<in, "How to Create the Ideal RFP," Training, January 2004, pp. 40-43;
M. Weinstein, "What Vendors Wished You Kne w," Training, February 2010, pp. 122-125.

3. Employees emu-lot demonstrate the correct knowledge or behavior. Perhaps

they were trained but 11:hey hlfrequently or never used the training conteil1t
(kno"1rledge, skills, etc) on the job (input problem).
4. Performance expectations are dear (input) and there are no obstacles to per-
fmmance such as faulty tools or equipment (output).
5. There axe positive consequences for good performance, whereas poor per-
formance is not rewarded. Fo:rexample, if employees are dissatisfied vvith
their compensation, th.ell" peers or a union may encourage them to slow
down their pace of work (consequences).
6. Employees receive timely, relevant, accurate, constructive, and specific feed-
back about their performance (feedback). .... "
7. Other solutions such as job redesign ot transferring employees to other jobs
are too expensive or unrealistic.
If employees lack the knowledge and skill perform and the other factors to
are satisfactory, training is likely the effective solution. If employees have the
knowledge and skill to perform, but input, output, consequences, or feedback
are inadequate, training may not be the best solution. For example, if poor per-
formance results from faulty equipment, training cannot solve this problem, but
repairing the equipment will! If poor performance results from lack of feedback,
then employees may not need training, but therr managers may need training
on how to give performance feedback.

TASK A~JAlY5tS
A task analysis, defined on page 294, identifies the conditions in which tasks
are perfonned. TI1e conditionB include identifying equipment and the environ-
ment the employee works in, time constraints (deadlines), safety considerations,
or performance standards. Task analysis results in a description of work activi-
ties, :including tasks performed by the employee and the knowledge, skills, and
abilities required to successfully complete the tasks. A job is a specific position
 ....
CHAPTER 7 Training 299

requiring the completion of specific tasks. A f'ask is a statement of an employee's

vvork acl:ivity in a specific job. The four steps in a task analysis include identify-
ing the job(s) to be ax1.alyzed, devielopi.ng a list of tasks performed on the job,
validating or c01l..firmlng the tasks, and. identif-ying the knowledge, skills, abili-
ties, and other factors (e.g., equipment, working conditions) needed to success-
.fully perform each task. 20
Each of the four steps of a task analysis om be seen :in this example from a
utility cmnpany. Trainers were given the job of developing a training system in
six months.21 The purpose of the program was to identify tasks and knowledge,
skills, abilihes, and other considerations lfo:it 1Nould serve as the basis for train-
ing program objective~; and lesson plans.
The first phase of the project involved identifying potential tasks for each
job in the ulility' s elecl:irical maintenance area. Procedures, equipment lists, and
info:rn1ation provided by subject matter experts (SMEs) were u sed to generate
!:he tasks. SMEs indud(2d managers, it"l.siJ·uctors, and senfor teduucians. The
tasks were incorporated into a questionnaire administered to all tecluucians in
t11e elecfrical maintenance department The questionnaire included 550 tasks.
Technicians were asked to rate each task on importance, difficulty, and fi:e-
quency of performance. I11e rating scale for frequency included zero. A zero rat-
ing indicated that the ted.mkian rating the task had never performed the task.
Technic.i.ans w.ho rated a ta~3k zero were asked not to evaluate the task's diffi.-
culty and imporl:anoe.
Customized soflwaxe was used to analyze the ratings collected via t.he ques·-
tionnaire. The primary requirement used to determine whether a task required
lTaining was its ini.portarice rating. A !:ask rated "ve:ry important" was identified
as one requiring hai.ning regardless of its frequency or difficulty. If a task was
rated moderately i1npodant but difficult, it also was designated for training.
Tasks rated unimportant, not difficult, and done infrequently were not desig-
nated for h·aining.
TI.1e list of tasks designated for ITaining was reviewed by the SMEs to dete:i:-
mine if it accurately described job tasks. The result was a list of 487 tasks. f;or
each of tile 1±87 tasks, t1No Sl\/l:Es idenlified the necessary knowledge, sldlls,
abilities, and other factors required for performance. This :included information
on working conditionc-;, cues that :initiate the task's start and end, performance
standards, safety considerahons, and necessary tools and equipment. All data
were reviewed. by plant technicians and members of the training department.
i\1Iore than 14:,000 knowledge, skill, ability, and other considerations were clus-
tered into common areas. An identification code was assigned to each group
that linked groups to task <md knowledge, skill, ability, and other factors. These
groups were then combh-1ed into dusters that represented qualificalion areas.
11rnt is, the task clusters related to lh-tlced tasks that the employees must be cer-
tified in to perform the job. The clusters were used to identify training lesson TrniITTun~
plans and course objectives; h:ainers also reviewed the dusters to identify pre- Employee charaei:eris-
Ucs that pro'lide llhHT1
requisite skills.
with the des ire, energy,
and focuc: necessa1y to
learn from training.

The second step in the training desii;'n process is to evaluate whether iLO 7.. ,t~
employees are ready for training. Rte.md:hM~§s fm ~ifahTtiirQg refers to employee Evaluate employ:::e:;'
re8diness for training .
characteristics that provide employees witl1 the desire, energy, arld focus
 ..
300 CHAPTER 1 Trai ning

Mroitiva1tion t 101 necessary to lean1 from trninu1g. The desire, energy, and focus is referred to as
lie.airn m otivati.mi to h~alt'll11.22 Various research studies have shown that motivation
The desire of the to learn. fa related to knowledge gain, behavior change, or skill acquisition in
trainee to learn the
training programs.23 Table 7.3 presents factors that influence motivation
content of a training
program. to learn and U1e actions th.at stTength them. Motivation to lea1n influences
m astery of all types of twining content, including knowledge, behavior, and
skills: Managers need to ensure that employees' motivation to learn is as high
as possible. They can do tlus by ensuring employees' qelf-efficacy; understand-
ing the benefits of training; being aware of training needs, career interests, ai.1.d
goals; understanding work envi:romnent characteristics; and ensuring employ-
ees' bask skill levels.
The "Competing tlu:ough Sustainability" box shows efforts to develop the
skills of the "hidden workforce" and in return get motivated fu.i_d cmmn.itted
employees.

( IRJEAT~ij\~G A ILEARNmlrG IENVmONMIEU\ff

Learning pennanently changes behavior. For employees to acquire knowledge
and skills in the h·aining program. and apply this information in their jobs, the
l:rnining program mus~: include specific learrung principles. Educational and
indu strial psychologists and insb.·uctional design specialists have identified sev-
eral conditions under which employees learn best. 24 Tabl~ 7.4 shows the events
that should take place for learning to occur in the training program and their
Amplicalfons for instruction.
Consider how several companies are creating a positive lean1ing environ-
m ent using a variety of training methods. 25 Yapi ve Kredi Bank, headquadered
in Istanbul, Turkey, developed a program to help managers improve theix skills
in motivating and coaching their employees. TI1e program included classroom
sessions in which trainers reviewed conunon case studies of conunon situa-
tions· in coaching and p rovided online readings and videos. Benior managers
reviewed. coaching and development teclmiques and program participants
w ere given coaching assigmnents with their peers to complete. B & W Pantex
first-line mai.'lgers' course focuses on soft sldlls aswell as HR policies, disci-
pline, and supervision using instructor-led training with video presentations
and role-plays. TI1e course includes real-life scenarios based on actual situa-
tions that have occurred in its facilities. The program also includes on-the-job
trainjng h'"'l which brained and qualified subject matter experts teach tasks and
procedures. Brown-Forman, one of the largest companies in the global wine
and spirits industry (its brands include Jack Daniels Tennessee Whiskey, South-
ern Comfort, Findlandia Vodka, and Herradura Tequillas) created a two-and-
a-half-day training program focu sed on helping the company's marketing
professionals build tl1e brand. The company's chief marketing officer visits the
class to explain the importance of its content and why the course was devel-
oped. In th.e course, participants work in teams to develop a brand campaign
for a sample brand. This includes making presentations and completing exer-
cises. Representatives from Brown-Fonnan's creative agencies attend the pro-
gram and part of the program involves interacting with consumers to identify
ll1eil: drinking patterns and preferences. At the end of the program, participant
tea.J.11.3 present th.eh' final project to a pand of senior marketing exe<:utives who
serve as judges.

f.;1.
-.I'
 ...
CHAPTER 7 Tra ining 301

~i~b n e 1 .3!
Factors That Infl uence Motivation to Learn

Employee beliefth at th ey can Show employees training success.of their peers.

successfully learn content of the
. training; progra111.
Communicate thatpljrpose oftraining is t o
improve ri ot identify area of incompetence.
Commun icate purpose and activities
invofvecl in training.
Emphasize that learning is unde r their
personal contml.

Aw aren ess of
tf'ai ning need s
l(nowlecli;1e of ski I! st ren gths
and weaknesses.
Communicate why they were asked to attend
training p rogram.
Share performance appraisal infom1ation.
Encourage trainees to com plete self-eval uation
of all strengths and weaknesses.
Allow em p loyees to participate in choice of
to attend.

Ba:;ic skill s Cognitive ability, readin g , Ensure trainees have prerec1 uisite skills needed
and writing skills. for understanding and learn ing t raining content.
Provide remedial trainin g .
Use video or other visual t raining method s.
Modify training progra m t o m eet tr~li n ees ' basic
skill level s.

Conscienti ousness Tei1dl'mcy to be reli ablr2, Commun icate need foi- learning.
hardworking, self-di scip lin ed,

SOURCES : Based on J . Co lquitt, J. LePine, and R. Noe, "Toward an Integrative Theory of Training Motivation: A Meta-Analytic Path A nalysis of
20 Years of Research," Journal of Applied Psychology 85 (2000), pp. 678-707; and R Noe and J. Colquitt, "Planning for Impact Train ing:
Principles of Trainin g Effectiveness," in I(. Kraiger (ed.). Creating, Imp lementing, and Managing Effective Train ing and Development
(San Francisco : Jossey-Bass, 2002), pp. 53-79.
 flftreelf11~ QJJ5~n,~9, Avaijiab~e mlld Nl!Jlit !Re<e({Jl~nmzeHrJ T.a~e111r11:
trtJl Crrearte iCtl Busnne;s:s
In 2002, chef .Jamie Oliver
invested over f1 mill ion to
crc~ate the Fifteen Fo undation,
a d1<Jrity and a sma ll chain of
re:3t21urants that train s way,,
'1varcl youths in the hospita lity
,. industry, After the la unch of
'\.
th e London Fifteen restau-
1·!1
I.I (., 1-2111i in 2002, the con cept
I was n::plicated in Am stercla rn
in ~~ 004 and in C orn wa ll and
Me!bour1w in 2006 a s an
c ;c tc,n'.>ion of the not-fo1--profi t
r<::'.:.!:ciurant initiative vvhere
youn9 people on the ro p(~ s
can k;:irn th<:' ropes of a corn-
nicr;::ial kitchen, gr•:iduatin9
l U rnunths I ater as profos··
si<")nal chefs .
Two Dutchm e n, Sarri el T<::lus
::ind Coen Alewijnse, are tho
founcfors of Fifteen in Amster-
d ;irn. In 2003 they read an
,:inide about Jamie Oliver and
the FiftcE~n concept and real-
ized that this was an opportu -
r·1i t y to start up a bus iness in
·!inc w; ii:h a social ly responsible
enti-c:prPneursh ip pe rspec-
tive. /\fter some intense talks
wi th .farnie Oliver and his st aff,
hheen f.\rnsterdam o pened
rts doors in 2004 . Th e open-
inc;J w;:is est ablished by Jarnie
Oliv,2r putting his signature on
one of the walls. Th e young··
::Jters who are hired by Fifteen
/\m'..>terdarn are gen 2ral1y peo-
1 Cornwall is soaring and the
, .. pie who d idn't co mp let e their
'><'~condary education and have
21 srnall chance to get access
lo i:he labor market; this offers
them<:~ unique op p rn-1:unity.
30%
/\s in many big towns unem-
ployment rates in Amsterdam
are high in relation to other
urban areas especially in times
of economic crises, and that
makes it hard fo r this specific
9roup to g et a j ob especially
vvith out any certificates or
d iplomas. After a strict selec-
tion proce ss th e youngster s
who have th e chance to
fo llovv the prog ram are super-
vised intensive ly, but there
are some occasio nal drop
outs. In Amsterdam about
42 youn9sters who passed
the intense p rogram are
working in the hospitality
industry now.
Cornwa II is not exactly the
place whe re we expect an
establishment li ke Fifteen. It's
more often seen as a holiday
destinat io n with its extensive
beaches and rugged coast-
line . However, after a 10 week
invasion of English families in
the summer pe riod, it turns
quiet in September. The for-
tunes of Cornwall's full -ti me
youth ca n be very different at
this time, and th e kind of idyl-
lic, remote landscape where
you might pay h andsomely
for a holi day let is often the
hardest p lace in which to
grow up. Un employment in
unemployme nt rates amongst
youngsters are only increas-
ing . Without the consider-
able spending of tourists the
Cornish economy would likely
collapse . Fifteen Corn-
wall was established in 2006.
The Cornwal l Foundation of "'\
''l'
Prom ise (CFP), a charity set up
specifically to run the training
programme at Fifteen Corn- ]
wall, also owns the restaurant. cl
Th e restaurant is in its seventh
year, and has seen 31 of 79
apprentices graduate and find
work in the industry. Aside
from a possible futu re of long-
term u nemployment, many
of the Fifteen trainees are on
suspended prison sentences ,
while one or two of the annua l
intake of 20 16-to-24-year-
olds will have served time in
prison. Seve ral have a history
of drink and/or drug abuse,
or getting into fights . As in
London and Amsterdam, the
selection o f candidates is aim-
ing at tho se most in need of
the opportunity. Poten tia l can-
didates shoul d have a sincere
interest in , and a talent for,
food and cooking. The pro-
gram scouts the whole county
for appre ntices, contacting
schoo ls and y oung offender
institutions, and even asking
grandmothers. 'We choose
those who want to jump out,
away from the kids down-
town , who want to leave that
behind,' says David Meneer,
the charity's C EO.
The Fo undation's 2007
socia l aud it proudly reported
th at of 106 young people
enrolled with Fifteen since
March 2002, 54 (53%)
completed the '18-month
apprenticeship . A t ota l of
40 graduates (75%) were
cheffing or workin g in the
fr>od industry, and of those
cooking , six out of ten were
earning up to £20 1<, a quar-
ter were earnin g :£20K-£30K
and 7% were salaried above
£301<. This number is increas-
ing. In 20·10 more t h an 150
you ngsters were t ra ined and
educated, and are now work-
ing in the hospital ity indu stry;
there have been a f urther 38
gra duat es since 2010 and
t he progr.amme is still going
strong in 2014 and into 20'1 5.
Seven groups have now suc-
cessfully completed the chef
app re nticeship at Fifteen
Cornwell since the program's
inception in 2006. Besides
the ch arity purpose, the ques-
t ion can be raised about the
profita bi lity of this foundation .
Every drop o f profit is going
ba ck to the found ation to start
up new projects and estab lish-
m ents. Althou gh not much is
kn own about the exact figu re s
concerni ng profitability and
turnover, the
initiatives are
still in prog-
ress an d run-
ning their 18th month
progra ms. So it might be
stated that running a b usiness
with a main purpose of help-
ing yo ungsters o ut in creating
a fu ture is profitable as well.
SOURCES: Jamie Oliver's Fifteen Cornwall:
turning the tide, Rose Prince, The Telegraph,
10 Aug 2009. Fifteen goes green: Petra
l<~oon, Sociaal Ondernemen. Nu!; www
.jamieoliver.com/the-fifteen-apprentice-
programme/news. Accessed 6th May 2014.

1huwJer of braining refers to on-the-job use of knowledge, skills, and behaviors Trnm;,f,g:u- o·~ Trr.nilfllnrl\!ii)
learned in training. As Figure 7.4 shows, transfer of b:aining is influenced by The use of knowledge,
manager support:, peer support, opportunity to use learned capabilities, tech- sl<ills, and behaviors
learned in training on
nology support, and self-management skills. As we discussed earlier, learning is the job.
influenced by the learning environment (sud1 as meaningfulness of the m aterial
a:nd opportunities for practice and feedback) a.rid employees' readiness for train-
ing (for example, fueir self-efficacy and bask skill level). If no learning occurs in
the training program, ttansfier is u_nJikely.

Mallllaigew Support
Manager m..tppm:l refers to the degree to which trninees' managers (1) empha- ManaQ®U' $ 1\Jlppoirt
size the :importance of attending training programs and (2) su·ess the application Degree to which train-
of training content to the job. Table 75 shows what managers should do to sup- ees' managers empha-
size the importance of
port training. attending training pro-
At Ingersoll Rand, to ensure that top m anagers understand and support grams and stress the
the role that training and development can play in the company, a "ladder of application of training
engagement." model was created.26 Top managers are engaged in h·aining and content to the job.
development in many different ways, including providing input into learning
program development, serving as trainers or co-trainers, visiting courses as an
executive speaker, or serving as advisory council members for Ingersoll Rand's
corporate university.
llie greater the level of manager support:, the more likely that trnnsfer of
h·aining will occur.27 The basic level of support that a manager sh ould provide is
acceptance, that is; allowing trainees to attend h·aining. The highest level of sup-
port is to participate in training as an instructor (teaching in the program ). Man-
agers who serve as instructors are more likely to provide lower-level support
functions such as reinforcing use of newly learned capabilities, discussing prog-
ress with trainees, and providing opportunities to practice. Managers can also

303
304 CHAPTEH 7 Tra ininq

Conditions for Learning and Their lmpo1ta11ce

Employees need to understaii,dthe purpc)s8-.0r;/6pjectives of the

training pm grarn to help then:i undei-stan?vvhytl1ey need training
;mcl whatth.e are e)( ectedto accom 5lish. · ··

Opportunities for pr.x tice fo1inees need to d emonstrate what is le::-Jrned (knowledge, skill,
behavior) to become more comfortable using it an d t o commit it to
1T1erT1ory. Let trainr~c:;s choose their rac.iice strategy.

Obsen1(0, e><periE:nce , and

1~~,~~1l~~0\
Adults learn best by doing. Gain new perspectives and insights by
inter·act with training co ntent, working with others. Can learn by obser\tihg .tlje actions of models
other le<:irners, and the in~;trucl:or or sharing e)'periences with each other in communiti es of practice .or
through social networking. lnte i'2!d and 'rnanipu l ~·fo content through
i-eading or usirn;:1 toc;ls that allow for bWi lding•idees and solving
such as workshetits andohlih¢ interactions.

Comm it tr;;1 in ing con t(~n t Facilitate recall of traini ng content after training, Examples include
i:o rnern ory usin g co ncept maps showing relationships arnong ideas; using
multiple types of review(whti1}g, drawing, mle:-pJ~ys);tea ching key
words , m pr'ovidin g a visual image. U.mitinstruction manageable to
units that ck>n 't exceed meiilory limits; review and pi'actice over
multiple ·

SO URCES: Based on R. M. (iag ne, "Learnin g Processes and Instru ction," Training Research Journal 1 (1995/1996), pp. 17-28; M. Knowles , The
Adult Leam e1; 4th ed . (Houston: Gulf, .1990); A. Band urn , Socia l Fo undations of Thoug ht and Action (Englewood Cl iffs, NJ: Prentice Hall, 1986);
E. A Locke and G. D. Latham , A Theory of Goa l Sel.ting and Task Performan ce (Englewood Cliffs, NJ : Prentice Hall, 1990); B. Mager, Preparing
Instructional Objectives, 2nd ed. (Be lmo nt, CA: Lake, 1984); B.J. Smith and B. L Dela haye, How to Be an Effective Tra iner, 2nd ed. (New York:
John Wiley and Sons, 1987); I( A. ..Srnith-Jentsch, F. G. Jent.sch, S. C. P;;iyne, and E. Salas, "Can Pretra ining Experience Expla in Individual Differc
ences in Lenrning?" Journr.i l of Applied Psych ology 81 (1996). pp. 1 ·10-16; and H. Nuriddin, "Bu ilding the Right Intera ction," T + 0, March 20·11,
pp. 32-35.

,Q.,,iction fP'~"3lffl1
Document summariz-
ing what the trainee
and manager will do
to ensure that training
transfers to the job.
facibJate i.ra.nsfer Huough use of action plans. An 41\dfo:n plan is a wrilte.n. -docu-
ment that includes the steps that the lrnjnee and manager wm take to ensure
tha t trni_ning transfers to the job. The action plan includes (1) a goal identifying
what train1ng content will be used and how it will be used (project, problem);
(2.) strntegies for reaching the goal, including resolffces needed; (3) strategies for
getl:ing feedback (such as meetings w ith the manager); and (4) expected outcome
(whaJ: wiU be different?). The action plan includes. a schedule of specific dates
 ...
CHAPTER 7 Training 305

Opportunity to fng11.na·® 71 "4

use learned Technological Work Environment
capability "..._,~ suppo;·t Characteristics
"" Influencing Transfer
of Training

/"''
Self-management Manager
skills support

Peer support

and times when the manager and trainee agree to meet to discuss the progress
being made in using leaxned capabilities on the job.
At a minimum, special sessions should be scheduled with managers to
explain the purpose of the training and set expectations that they will encourage
attendance at the training session, provide practice opportunH.ies, reinforce use
of training, mi.d follow u p with employees to determine the progress in using
newly acquired capabilities.

Peer :Support
Transfer of training can also be enhanced by creating a support network among
thetrninees. 28 A s11.1.ppoir~ nefi.wm%:: is a group of two or more trainees who agree Support Networi<
to meet and discuss their progress in using learned capabilities on the job. This Trainees who meet to
could jnvolve face-to-face m_eetings or commw:dcations via e-mail, Twitter, or discuss their progress
in using learned capa-
other social netvvorking tools. Trainees can share successful experiences in using bilities on the job.
training content on the job; fhey cai.1 also discuss how they obtained resources
needed to u se h"aining content 01· how they coped with a work environment that
interfered with use of lrnining content
Websites or newsletters might be u sed to show how trainees are dealing with
trnnsfer of h·aining issues. Available to all trainees, the newsletter oi· website
mighl: feature interviews with lrnh'"lees w ho w ere successful jn using new skills

11'.mbne 1 nS>
Under:;t.:1nd __t_h? contentofthe_trai ning. How Managers Can
-·.Knqw J19vy.•trai11ir1 g ,rel$t~s,tq; 1~fi.A t ypiJ.• r'ie~d ~mr:ziJqy~E)s.Jo <;i6, Support Training
In perforrnance appraisals, e va luate err1pl oyees on how t hey apply tra ining
to thei1·

Ex1Jl~in to : r~pl7y;es :'hy th~y hav; _.bi:;en _.aske_dto at~e_nd t~~in i 1;g ­
· Giv(;yernplbye es ·f0'§d~);3pk•1;elai:¢d• tdski l. !$•-qtb·(;}havior·they ; \~f~ 't1ylf1"~/~0;dl:iy~lpipl ( <+
If possible , be a tra ine1·.

SOURCES; Based on R. Elates, "Manage rs as Transfer Agents," in E. Ho lton Ill and T. Baldwin (eds.), Im pro ving
Learning 1i·ansfer in Organizations (Sa n Fra ncisco: Jossey-Bass, 2003), pp. 243-70; and A. Rossett, "That Was a
Great Class, but ... " Train ing and Developmen t, July 1997, p. 21 .
306 CHAPTER 7 Training

or provide tips for using new sk:ills. Managers m ay also provide h'ainees with
a mentor-a more experienced employee who p reviously attended the same
training program. The mentot~ \!\.rho may be a pee1~ can provide advice and sup-
port related to transfer of tr3lin.mg issues (such as how to fu1d opportunities to
use the learned capabilities).

OppontlJJlITTity t<O Usie learned Capabmtnes

0?pOlrtl\ll!llaty O pporhmity to use learned capabilities foppoirru:nHy to perfom"I.) refers to the
·~Q IPerrform extent to which the trainee is provided with or actively seeks experience >Ni.th
Train ee is provided newly learned Imowledge, skill, and behaviors from the training progran1.29
with or actively seeks Opportunity 1:0 perform is influenced by both the work envirnnment and trainee
experience using newly
learned knowledge,
rn.ohvation, One way trainees can use learned capabilihes is through assigned
sl<i/ls, or behavio1: v11ork experiences (problerns or tasks) that. require theix u se. TI1e trainees' manager
usually plays a key role in delen1tin.in g worl<: assigrunents. Oppo1iunity to per-
form is also influenced by the degree to whid.1 tra:ll1ees take personal responsj.bjJj.ty
to actively seek out assigrunen ls that allow- them to use newly acquired capabili-
ties. Trainees given many opportunities to use h·aining content on the job are more
likely to maintain learned capabilities than lrninees given few opportunities. 30

Tedu nok~gi<c.ai~ S11J1JJ1p1ort IEIP'S5 a11uJl Krr11ow~edge Management Systems

ll:;is-droirnk JElcdrrnrnk pieirformnta.ncc suppo:irlt sysrcema (JEPS:S) are computer applications
Perfoirmarn::® that can provide, as requested, skills training, information access, and expert
Support Sysitamli advice.31 EPSSs may be used to enl1ance transfer of trairUng by g iving trainees
(IEIP':S$) an electronic information source that they can refer to as needed as they attempt
Computer applica- to apply learned capabilities on the job.
Uons that can provide
(as requested) skills At Reuters, the news and fo.1ancial information company, employees who
training, information deal with orders for financial systems information and data needed a wa.y to
access, and expert: get their questions answered on an as-needed basis because they did not have
;;dvice. the time to attend training sessions. 32 Typical questions included how to register
financial traders to access Reuters' information and systems and how to coordi-
nate installation of Reuters' technology on the trading floor. Reuters purchased
an EPSS that provides employees with help tabs on their computer screens as
they perform tasks. Tii.e help tabs provide answers to questions about the steps
employees need to complete different processes (su ch as user registration).
As we discussed earlier jn tl1e chapter, many companies are using knowledge
management systems to improve the creation, sharing, and use of knowledge.
At MWH Global, an engineering and environmental consulting company, a
s9ftware program was used to analyze the data that employees provided about
which colleagues they most frequently interacted with and w ho!Il they tun.led
to for experti.se. 33 The program plotted a web of h1terconnecting nodes and lines
representing people and relationships. l11e web p rovides a corporate rn.ap of
CommMnitn®"' how work gets done, lists the weU-connected technkal experts, and helps iden-
Qf rrnctk6.l tify informal corn1ections between people that are missing on a traditional orga-
Groups of employees nizational chart.
who work together; Knowledge management systems often include communiti.es of practice. :~: .
~-

learn from each other; Commu.nilties of pmctk~ are groups of ernployees who work togethe1~ lean1 from
and develop iJ com-
each other, an d develop a c01nrnon understanding of how to get work accomplished.
mon understanding
of how to get work Chicago-based Grant Thornton LLP, part of the Global Six accounting orga-
accomplished. nizations, developed and deeloyed a knowledge management system kno-vvn
 ..
CHAPTER 7 Training 307

as "K-Source."31 K-Source 1Nas designed '1:0 help meet key business goals of
growing sales, improvin.g customer service, supporting company values, and
increasing efficiency of intern.al services. K-Source includes an online commu-
nity of practice for every line of service offered by the company, indushy group,
and geographic area. Employees are encouraged to contribute to K-Source by a
knowledge manager who solicits theiJ: participation as wen as by including it
as part of thell: performance evaluation goals. Using K-Source employees can
create personal profiles, set up personalized news feeds from financial websites,
access courses, e-books and v1ebcasts, and participate in online discussions.
1

Seif-Management Skms
Training programs should prepare employees to self-manage their use of new
skills and behaviors on lli.e job.35 Specifically, within the training program, h"ain-
ees should set goals for using skills or behaviors on tl1e job, identify conditions
under which they might foil to use them, identify the positive and negative con-
sequences of using them, a.11.d monitor their use of them. Also, trainees need to
understand that: it is natural to encounter difJiculty 1.-. hyh1g to use skills on the
job; relapses into old behavior and skill patterns do not indicate tl1at trainees
should give up . Finally, because peers and supervisors on the job may be unable
f:o reward trninees using new behaviors or to provide feedback automatically,
trainees need to create their own reward system and ask peers and managers
for feedback.
As you should have realized by now, learning and· h·ansfer of training are
closely related. If training does not facilitate learning there is noihing to transfer
t:o the job. Similarly, if employees do leam, transfer of h·airu.ng Vtrill not occur if the
work environment does not support. or actively discournges applying what was
lear11ed. Consider how Verizon, the telecommunication company, facilitates both
learning and transfer l:luough its :i.nshuctor-led virtual classrooms which bring
training to nu:my of its geographically dispersed employees.36 Recognizing the
importance of keeping learn.em actively involved with each other and the h"ain-
ing content, Verizon has ilnplemented a number of new learning strategies. TI1e
training which supports its business customer service billing process combines
leader-led discussions with interactive assignments that participants complete in
groups in virtual breakout rooms. V1Jebinars include on.line polling to keep learn-
ers engaged. Its information teclmology classes include labs and simulated tech-
nical equipment for practice and :instruction. For retail training, Verizon' s V:iJ.tual
Trainer (VT) brings the h·ainer to the retail si:ore vixtually with initial training
provided by vr. vr is then supported by a document completed by the learner
and used as a job aid to reinforce f.rairning, a discussion guide used by managers
to discuss examples, ideas, content, and activities, and a scenario and coaching
form that gives the learn.er ihe opportunity to apply skills after training.

SIElECTING TRA~Nik\l!G MIEl!HlODS

A number of different methods can. help em.ployees acqujre new knowledge, l07-5
skills, and behaviors. figure 7.5 provides an overview of the use of h·aining Discuss the strengths
methods across all size compan.i.es. The instructor-led classroom still remains and wea knesses o'f
presentation, hands-
the most frequently u sed h"awng method. Howeve1~ it is important to note that on, and group training
the use of online learning, mobile learning, and social networking for h·a:ining methods.
continues to increase and expectations are .tbat this trend with continue.
 ....

308 CMAPTIEIR 1 Train ing

ffi91unr~ 1.5
Overview of Use of
Training Methods Mobile (cell phones,
iPods, tablets, PDAs)

SOUl<CE: D;ita from "2012 Training Industry Report," Training, l\lovember/

December 20·12. p. :<'0-33.

One estimate is that nearly 40% of executives plan to use tablets such as the
iPad into thefr new training and development i.ni.tiatives. 37 TI1ese devices are
expected to be used for learning and performance support but also for coaching
and mentoring employees, mobile gaming, and microblogging (e.g., Twitter).
Regardless of the training method, for training to be effective it needs to be
based on the training design model shovvn :in Table 7.1.. Needs assessment, a
p ositive learning envirnrunent, and transfer of training. are critical for training
program effectiveness.

Prese1J1tation Method~
IP'rnr.ientatnoPH Presentation melhod5 refer to methods jn which trainees ~re passive recipients
M~timdls of information. Presentation methods ipclude 1Taditional classroom insb.uc-
Training methods in tion, distance learning, and audiovisual training. They can include the use of
111.rhich tra inees are p ersonal computers, smartphones, and tablet computers such as iPads. These
passive recipients of
information.
methods ideal for presenting new facts, information, different philosophies, and
alternative problem-solving solutions or processes.
ff.nsfrucbn"-led Classroom Instruction. Classroom instruction typically involves
having the tra:iner lecture a grnup. fu many cases the lecture :is supplemented with
question-and-answer periods, discussion, or case studies, Classroom inshuction
remains a popular training method despite new technologies such as interactive
video and computer-assisted inslTuction. Traditional classroom instruction is one
of the least expensive, least lime-consuming ways to present information on a spe-
cific topic to many trajnees. Tiv2'. more active participation, job-related examples,
and exercises th.at U1e instructor can build :into traditional classroom instruction,
i11e more Jikely trainees vviU lean1 a1ld use the information presented on the job.
 ...

CHAPTER 7 Training 309

Dis tan ce k::arning is us1;:d by geographically dispersed companies · to pro-

. vide in formati on. about nc1,v p roducts, poli.cies,. or procedures as ·well as skills
training ar1d exp er t lectutcs i:o field 1ocations.3 c Distance learning features nrvo-
way co1rum.mications bet-ween people.39 First, 11: can include teleconferencing.
Tdecm:nforieirndn g refers to sy.nckrorious exchange of audio, video, and/ or text Tiel~con~f.llrnndng
between two or m ore individuals 01· group s a t i.•No or mon.:: locations. Trainees Synchronous exchange
·a tte~ f l<l ~·a'i:u
l..l · nrr
JL ["J 1-;1·0"""·"'1°·F·
J , . 5).. ~,.,._ .L.U .··1··'-
"1. iT"''P1·'·
.J. t,:) ...r"'{'U.li•1
~~ . .'r':l. .~ -~ ~- 1'-'" (...{ -· .. ~-·,.,...,
.. ··' . ,_1._":l •'"1
_\ ..~.l
.
1 Arh'ch !-h"''' l~an comm 1 1
L . 'C) _ . L · 111·cate of audio, video, or text
between individuals or
with trainers (who arc at another Jocahon) and oiher trainees using the telephone groups a t two or more
or personal computer. Secon.d, distance learni ng can indud(C~ a vidual class- locations.
room. A thin1 type of distance learning also includes individualized, personal.-
computer-based training.~o Employees p articip a.i:(:! in training anywhere they
have access to a personal co1_nputer. This can also include wr~bcasHng, which Wabcast.!ng
involves face-to-face insl.Tuction provided online through live broadcasts. Classroom instruction
Course m aterial, including video, can be distributed usi11g the company's provided online via live
broadcasts.
intrnnel:. Trainers and trainees interact using e-maj}, bulletin boards, and con-
ferencing systems. Both types of distm1ce learning can also allow h'ainees to
respond to questions posed during H1e ITaining program using a keypad.
Distance learnin g usually indudes a link so that trainees viewing the presen-
tation can call in questions and conunents t.o the trainer. Also, satellite networks
allow companies to link up wi.lli. industry-specific and educational comses for
which employees receive college credit and job cerliii.cation. IBM, Digital Equip-
ment, and Eastman Kodak are among the ma_ny firms that subscribe to the National
Tedmological University~ whi.ch broadcasts courses tlu'01.1ghout the United States
that technical ernployees n eed to obtain advanced degrees in engineering.41
An advantage of distance k~arning is tl1at t he company can save on travel
costs. Jt also allows enrployees in gE'ograph.icaHy dispersed sites to receive train-
ing from experts vvho would not othenvise be available to visit each location.
The major disadvantage of distance learning is i11e potential for lack of interac·-
Lion between the trainer and the audience. _A high degree of interaction between
lrninees and Lhe trainer is a posjtive learning feaiiire that is missing from dis- ·
tance learning prograrns thal: xnerely use technology to broadcast a lecture to
geographically d ispersed en.lployees. All that is done in this case is repurpos-
ing a trnditi.onal lechll'e (with its limitations for learning and transfer of train-
ing) for a new !:raining techn.ology! TI_1 at's why establishing a communications
link between em p loyees and il1e trainer is :important. Also, on-site instructors
or fad.litators shou ld be available to answer ques1ions and rn.oderate question-
and-answer sessions. The "Competli1g through Globalization" box shows how
Nissan is using a v irtual classrnmn as part of h·aining to meet its business strat-
egy for global growth.
Audiovisual Tr(l!.iniug. Audiovisual training includes overheads, slides, and
video: It has been used for improving corru1i.unkations skills, interviewing skills,
and customer-service skills and for jJluslraiing how procedures (such as weld-
ing) should be followed. Video is,. :ho•,Areve~~ rarely used alone. Learners may not
be required to a Ucnd a das~3. They can w ork independently, using materials in
workbooks, DVDs, or on the InteJ:net. PowerPoirit or other presentational soft-
W;:ire and video or audio clip::. can also be u sed to show learning points, real-life
experiences, and exarnples. AudjovisuaJ. f.Tain.ing can easily be made available
on desktoo comin rters, smart:Phones,
.ii. .J:.
and tabk:t cornDu.ters. These devices allow ~

users to access the nrn.terial::> at any lime or p lace. 111ey also allow instruction to
include video clips, pod casts, dl.Drt5 and cl.iagramf;, learning points, and lech.tres.
 Nissan has more than '150,000
people working around t he
vvodcl including automobile
production locations in 20
countries and product marke ts
in more than 160 cou ntries. To
insure that the company could
meet its globa l plans for s1rowth
and e)(pansion, f\lis sa n identi·
fied 60 high potential employ-
e<::s who needed to develop
the skills and competencies
that would prepare them to bE-;
successful in the ne><I: stage of
their careers. The high potential
employees worked in different
functional areas, levels, and
locations including Latin
America, Europe, Africa, the
Middle East, Asia and Au stralia.
Face-to-face interaction
between the high potential
employees in a classroom
setting 1A1ould be inval uable
because it v11ou ld help th ese
employees networkand work
together on group projects.
/\ho, classroom instruction
\/vould insure that the employees
answered by the
or facilitator. However,
from sites around the world was
too expensive _
To meet this challe nge l\iissan
created an e-learning program
which included a virtual class--
room. This allowed the high
potential em ployeE~s to learn a
consistent c-;c-i.: of lear.:ksrship skills
and compete ncies t hat were
based on f\!issan's core busi-
ness principles. Nissan wanted
to combine the strengths of a
das:~room experience including
relationship building, immedi-
ate feedback , and the ability
to practice ski lls with those of
an on line learning environment
(easily accessible resources at
any t ime or place). As a result,
the first step in the prog1-am
was that pro gram pa 1ticipani:s
assessed their own compe-
tencies. Their boss and peers
completed a si1-nila r assessment.
Next, th e participants attended
a vi1tua l feedback session where
the assessment resu lts were
e)(plained. Courses designed
to improve th ei1· current skills or
develop new skills were offered
in a virtual cla ssroom. The
courses included a virtual learn-
ing lab for ski ll practice . Course
content in the virtual classroom
was delivered by a live instruc-
tor. Learners could connect to
the cou rse on line . They could
ask questions, role pl ay, interact
using virtual white boards and
polling tools, and work in small
groups. To help
th e participants build
working re lationships they could
vi ew photos of each other and
the virtual class size was limited
to 20 learners.
The first 20 learners were
from ·10 different countries! Yet,
the participants reported that
they felt they were interacting
in a real classroom. They liked
th e abili1y to interact i1J real
time, wo rk with sma ll groups of
other learners, and learn about
oth er participants' roles . Evalu- ·
ation results suggested that the
program was successful : Boss
and peer assessments after the
program indicated that partici-
pants improved thei r leadership
behavior. ·
1. Would on-line learning
methods also be useful fm
developing high potential
employees' skills and com-
petencies even if they were
not located across the world?
Explain.
2. Is online learning a useful
training too l for supporting
other types of strategic in i-
tiatives shown in Table 7. 'l?
Why?
SOURCE: Based on A. Lang, "l>.ccelerate the
Leadership Engine," Chief Learning Officer,
April2013, pp.42-47.

nus helps facilitate learni11g though appeahng to a variety of the users' senses
and both cmnmunicating and demonsh'ating knowledge, sl.--".jJ.ls, and behaviors.
For example, a restam:ant called Flippin' Pizza provides h'aining via an iPad
· app.42 Trainees can use the app to Jink to a series of short videos each wi.l:h a les-
son in cooldng or customer service.
0
 ..
CHAPTER 7 Trairiing 311

SAC a tedmology coJT~pany, is utilizing th e iPad because

it can h elp facilitate p cn:>onalized learning fo:r salespeople
arou nd Hw 1Nork L A nP MJ salesperson in China ·will ne12d
a d ifferent set of skilb and apps t han a s;,:i.lesperson w h o is
cxpr:de:nced S(:•Uing SAP solutions in Canada. 'Watson Phar-
maceuticals has developed an. app for its corp ora te tmJversHy,
aUovvin g pharmaceutical !'(~preseniahves ko access videos and
produd knmvledge from. their iPh011e:;.'n
The n s(:-; of aud io visv al lTah1ing has (:l num.ber of advan..
tages. Fi.rst, use:rs h ave conlTol. over tJi.e p resentation. 11:i.ey
can rev:i.evv, slow dmNn, or speed up the lesson, whkh permits Mobile technology is usefuL not only for
flexibility in customizing the ses:3ion dep ending on traii.1.ees' entertainment, but can also be used for
expertiBc. Second, l:rainees Gtn be exposed to equipment, employees who travel and need t o be
in touch with the office. iPods, !Pads,
problems, ~md evenis that cannot be easily d en1onsfx.ated in
and Personal Digital Assistants also give
a classroom. Another a d va:ntage is that learners get a consis-
employees the ability to listen to and
tent presentation. participate in training programs at their
M.ost problems 6:om these Jnethods resull: from having too own leisure.
1nuch content for the tcainee i:o Iea:rn, overuse of hmnor or
rn.usi.c, and dram.a that djsb~acts frmn H1e key learning points.4'!

~Zlm1is~oirn M i;y~hJQJidl:s
Hamw1B-mll nu~thods are training methods that r<r~quire the tl.'ajnee to be activ ely M<i111ul1£J.·rQlU11 M<e'ith@rdh
involved in learning. I-Ian.ds-on rnethod.s include on-the-job training, simula- Training methods that
tions, business gam es and cas,e shidies, behavior J.11odeliI1g, interactive v ideo, actively involve the
trainee in learning.
and w eb-b ased training. These m ethods are ideal for developjng specific skills,
un derstanding h ow sldJJs and behaviors cm b e transferred to the job, experien c-
ing all aspects of completing a task, and d ealing w ith interpersonal issues that
arise on the job.

O rtn-Qhie-j l\Jlh bratTIJllnJTI\g; (Off} reforn to nev1r or inexperienced employees learning On-tha-J!olbi
through observing peers or xnanagers p erform ing the job and trying to imitate Trnilfllnlil~(OJT)
their beh avior. OJT can be useful for trainin g :newly hired employees, upgrnd - Peers or managers
in g experienced employees' skills when new technology is inh·ocluced, cross- training new or inex-
perien ced employ-
training employees within a department or 11\iork mlit, and orienting transferred ees who learn the
or p romo ted employees ~:o their new jobs. job by observation,
OJT takes various for ms, indudi.ng apprenticeships and internships. (Both . understanding, and
are discussed later in this si~dion.) OJT is an a l:h"active training method because, imitation.
compared to other meth ods, it n eed s less inveshnent in time or money for rna te-
riab, !J~ainer 's salary,"or i11sb:uctional design. Managen:3 or peers who are job
kno1Nledge experts are u sed as instructors. OJT must be structured to be effec-
tive. 'fable 7.6 shows the ptinciples of structured OJT.
App~:£:n~kie:"lhip is a l.A.rork-sli,1dy training m eth od •Nith both on-the-job train- Apprnrnfi:k<1M;lhli~
ing and d assromn b:a:i:ni ng.4 5 To qualify as a :registered apprenticeship program. A worl<-study training
1mder state or federal guidelines, at least 1411, h ours of classroom instruction and method with both on-
the-job and classroom
2,000 h ours, or one yem~ of on-the-job experience are required.46 Appren tice-
training.
ships can be spon sored by individual comp a:nies or by grou ps of companies
cooperating ·with a union . TI.1e ni.ajority of ap prenticeship programs are in the
.
sblled trades, su ch as p h nnbing, carpentr,y, elecb:ical work, and bricklaying.
 ...
31 i CHAPTER 7 Train inq

Principles of On-the-Job Tra inins1

. , · th~;t~1sk and

2 .· ·•$ G %~1.;8!;~i~iti~~l::·1~:~~:'~t;:';1~~~,~t !~ oi:1·:

1

·:;;;iyi qf:J>8: r1y,tbing,

1
7. ;EE~!~ti~l~!~~i::::::;::::e.
unli.1 ·,.eic;qt1·9teJepw~1Jqti'{?,rf i.s, 1;,ichi§\,(ed, · .
] . E>q:rl;}ln·t!\dk(:l)l·pointsor:behaviors. (V\/i;iteout 13 . PraisE;1·the•t1·ainee.s fortheJY.!5tit;:cess<inlearn\na
~e~~. . .. . .. . . . .. . ~

th&/l<lcW 'h19i1;t$ifor tbe):raine(Js, if po:-;sible.)

4. Shovvtl:witrciinees .how·t<:J.·do it•<1~J<:1in .
5. Hav\~ .thr1.traiitE1c;s cb.oneor n-1t.:)re sinc1le oan.s of
·1·!'(":.•l, i'.:1;;s-.' lc~- "{,. ·JY".t.:l·'.IJr.·1-~·1(, ·1 ..~·e. ·. t:l"''"l"r' . 11· 1...·0·1·1-''<~· t ,.:;;!~~1
1

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I:""_.:.... J t ..
_,I
..0 d·1·1r-·
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. . . ...

(optiona l): · ·

SOURC ES: B;:is<?d on W. J. Rothwel l and 1-1 . C. l(azanas, "Planned O.JT lo Productive OJT," /i·ai11in9 and Development Journal, October I 9'i0,
pp. 53-55; I'. .J. Decker and B. R. f\l athan, Dehavior Modeling Trainin g (~·le''' York: Praeger Scientific, 1985).

The hours and. 1111eeks tha t n1ust be devoted to completing specific skiU lUUts
are dearly defined. OJT involves assistfag a certified tradesperson (a journey-
m an) at the work site. The on-the-job trajxung portion of the apprenticeship fol-
lows the guidelines for effoc::ive on-the-job trnining.47
A major advantage of app renticeship programs is that learners can earn pay
while they learn. TI1is is important because programs can last several years.
Learners' wages usually increase automatically as their skills improve. AJ.so,
apprenticeships are usually eff"'~ctive leanU.ng experiences because they involve
learning vvhy ~md hmN a task i.s p erform.eel i_n classroom insb:uction prov:i.ded by
local trade schools, h.igh schools, or comxnun_i_ty colleges. Apprenticeships also
usually result in foll-tim.e employment for trah1ees when the program is c01~­
p leted. from the company's persp12cti.ve, apprenticeship progrnms meet specific
bush1ess needs an.d help l o attxact talented employees. ·
At its xnanufacturing fadJjty jn Toledo, Ohio, Libbey Glass has apprentici::;-
ship programs h1 mold n1aking, machine repali~ rnillwrighting, and mainte-
n ance repaix.413 Each apprentice requires tli.e support of a journeyman for each
work assignment. The program also requires apprentices to be evaluated eveiy
1,000 houss to meet Departrnent of Labor standards. The reviews are conducted
by a com111.1.ittee including representatives of management and deparhne:nt joux-
neymen. The committee also develops tests and 0Uv2r evaluation materials. Tile
cormnittee members cannot perform their normal duties during the time they axe
reviewing apprentices so !:heir workload has to be spread among other employ-
ees or rescheckLled for some other fone. TI1e benefits of the program include the
d eveloprnent of employees who are more receptive to change in the work envi-
romnent, the abihl:y to perfor:m work at Libbey instead of having outsousce to
jobs to conlract labm~ an.d an edge for Libbey in atl.rncting talented employees
1111ho like the idea l11at after completing an apprenticeship they are eligible for
promotions to other posihons in the company, jncluding management po2ihons.
----------------------------------------------------·---
...
CHAPTER l Training 3113

/\Jso, the <)ppn::ntio,~f;hip progrnrn helps Libbey tailor haining and work expe.ri-
enccu i:o Jncr~i: sp·~cific ""'"'"°:~ds in mainbena11 ..~e repait~ \Nhich is necessary to create
Dnd .repair prududkm JJ1<.tt•ld 1>quip1ne:nt ~used in making glass products.
One di ~3 ;1.dv<1nl ;1r;:;r.c: of ;:1pprenhr::e~:;hip progrmns is that there is no guarantee
thaJ !obs wiU b e ;wai l :~tik ·: '.Arhcn t he proi:i;r.am. is con1pleted. Anol11er disadva11_··
t<:if;e 'A s lbat cmployelt's •Tli<r)l not hire Op]~renHces because !:hey b elieve appren-
hi.'.es ;1rc .nm.To1Nly i:rnini:d in one occupation or iNiJh one company, and prograrn
y,r;1du.n.te; niay hnvre: only Gnnpany-·spedfic skills and may be unable to acquire
~ •,v.,
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. ti'i:u ti". on ~ntrB>:rnsJ!lip
or i;; oari: of an ;:1cadernir: pn:>'J;nnn. 5tudenJs axe placed in paid p ositions where
~ .•. !_, ·- ·"- --
On-the-job teaming
they c;i.n iy1i.n cxpe•·ii:'fl!:c:< related. to their axea of studT For exam.ple, Ford, sponsored by an 0du-
cationa f institution, or
\/Vh:\;·lpoo!, and HolJs-Ro;u:'.; u;;:c interns jy_1 hu.n 1an resow'.ces and. engineerhi.g
part of an academic
posih()ns. If they perforrn wcU many compani1:::s offer inten1s full-time positions program.
after ;Jv~:-:y Cf)JTlJ?lctri-: -~Ilt.:-:':i~·t· siJJ<d..fte~3-

Shurr,J/p1florr:-o.. :3i,niif<ili11l.c.\fi~,,rKi\ i::; 'l trafrrlxig rnethod tha.t represents a real-life situ- Sim!l..qk\~i!Q\1!1
aUon1 with oTD.iJ1·r::es ' d<:<'i:3inns 1·"":T!Jhing in outcmnes H1al: 1niJ:ror ··what would A training method that
hnpp*::n if H'v~ U:a.1.111:~~; v,rerr~ on lhr:: job. SimuJations, which allo>Al h'ainees to see represents a real-life
situation, allowing
tlv~ irnp;K~ dc1 :i'.3ion:~'
in <:<:rl 2rlJJidsJr risk~frec '2nvironment, are used to
of !Jiei:r trainees to see the
h>wh produd :icn 'lild :C:·.k.iUs a0 ""1r:::JJ ;:i_s nurn.agexnent and. interpersonal outcom es of their deci-
skiJl:o. SiniuinUon::: ar.c: u;3;,;d for l::rainins pilots, cable installers, and caJl center sions in an artificial
crnployees. environment.
At !Jnitcd P;:ircci :3f·xvicc (UP~;), t,edm.ol.ogy hac-; n1ade the clrivers' job more
cn;;npiect!'' Tiv~y havr': ~1) handle tho;:~ hTick :'3<tfoly, be proficient on tJ1e DIAD
(handhekl .con1oul:cr),
1 .
u•td12n:;t~nid h01N f:o sta.·.1,r safe duxing a ..D . ackM~e
u
d.eliv- ~

{::ry 1\:s a n~:;11lt, UPS rlP'i(:lop·•~d the JJ1tegrad training center in. Maryland. Inte-·
gn.vJ inclt ;d<~~" a p ackage Gir ::;i.nndator designed l:o teach new hires how to load
and unload package:; frorn :shchres, ~he floor, and the rear door- meeting com-
pany tini.e :::Land anb :::uch ;H:hvitJ.r,::::3 °vhilc 11tiJ1irniz.h1g stress and strajn that
c;Ju:-;c injurif•;::. 'J 'hc (Jyiv·er has ::o step off and on the truck at least 120
ti1n(:s on his no: h(?f 1·ou;2, which. c .m. str;:ijn anJdes if done incorreclly. Trainees
dchvrc;r JXJ.ckar;;;:s ·•Ni.th tirai•v:r and traj:n(:'C3 ~3(-?rYi:ng a.s custmn.ers in a simulated
f( " jAr:>
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[\11Drt.;;;rs. to cornputer ckpidim10 of 1TUJ0t1ans that are being used as imagi- l\>r;r~tnr:~
nary C(rnch":::::;, co--worl.<f'crs, arid c ustomers in. sim.ulations .so Typically, trainees Computer depictions
sec the avatar who appear;:; tb.roughout fhe trainin.g course. For example, a sales of humans that can
be used as imaginary
tralnin•,._,..!; cour;>c at (J)1N Corporation, .r.
a tcc.hnolo'-::v 0 .1 J..
nroducts and service com-
coaches, co-wo11<ers,
pany, guides trai11eeG through rnock intei..--vie1Ns •NH:h customers. TI1e avatar intro- and customers in
ch1ce:; the custom<cor siluaiion, ;:u1d l:hrc"> trainee hears the customer spealdng in a simulations.
sin1u.!at:cd p hone convr:r::;abnn. 'fhe trainee has lo deteJtTllJ11e \Nith help frmn the
YirtMa~ Reai!i-:ty
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/\ ·w;.-iy 10 «.-'nhancc .';iniuJ;ihion~> i;:> thTon.gh virtual reahly. Vhtilui.R rie<J1.ftity is a
technology that pro-
cmnpul:·:c:;"-b~1;:;e: d h:chnr):Jogy tha 1: provid<e'S tnlinees 1Nith a thxee-d:i.rnensionaJ vides trainees wit.h
kc;1n1ing (::Yp1.,:riencli'.:. Usfng sped ~1J.i:;::cd e1.:pxipuH:::nt or vjewing the virtual model a three-dimensional
on the cor:nrmter so_·r,.~cn, lrainecs ni.ove throngh 1J.1.e sirnulated environment and learning experience.
interad: ·wiJh its 0J.rnponc-or11:~;.'.'1· TcdmoJ.ogy is u se•J to sthnulate multiple senses Trainees operate in
a simulated environ-
of lb(-" train(~c. 5 ?. C1cviccs rekrv inJorrnation from the erwironment to the senses. ment that responds
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.1 .. - .,.) ._ ,_ ._.\. 1 to their behaviors and
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 ...
'.-:114 CIHAPTfER 1 Training

al so com.municate info:rma.ifon about the ITainee' s movements to a computer.

nu~se deviices allow the 'xainee to exp erience the perception oJ actually being ll~
a particular envi..-:·onment ,
For example, employees at Sili.con Image learn about making silicon chip s
by exp loring a virtual world in Second Life that represents a corporate campus'
and by interacting Vlrith avataxs.53 Employees C.oTl visit the compan y's depart-:
men.ts w h ile watching .videos ~m.d slide shows explaining w h at work is done
within each unit. British Petmlem n used Second Life to train new gas station
employees in the safety features of gasoline storage tanJc<.S and piping systems. 5(\
BP build s three-d:L.-nensional replicas of H1e tau1' and pipe system s at a gas sta~
tion. Trnh1ees are able to see th e undergroru1d storage tanks an d p iping systen1s
and observe how safety devices control gasoline flow, which they could neve:1.'.
do in real l ife.
i-\.s you. can see from tJ1e examp le, sjm.ulations can be effective for sev12raJ
reasons.55 First, lJ:ainees c;:ixi. u se them on theit d esktop, eliminating the need
to travel to a cenlral trairll.ing location . Second, simulations are mean..i11.gf11J., get
tramees iJJvohred in lean1jng, and are emobonally engaging (tl1ey can be fun!).
'Dus h elps increase em.p loyees' w iUingn.ess to practice, retain, and i1nJ.Jrove
theix skills. Third, srno.ulaJors p rovide a ('Onsistent message of what ne.e ds to
be learned; b·aimees can wod<: a t their Ov\m pace; an d, compared to face~tro~face
jnstmction, shnulators can incorporate n1ore situ ations or problem s that a trainee
migh t encounter. I~ou:rth, simulation s c:u.1 saJely p ut employees in situations that
would be dmi.gerous u1 tfo:: real ~Nodd. Fifth, simulation s have been fouud to
result in p osihve outcomes such as training beh1g completed in a shorter time
comp ared to tradition al h·ainjng courses, and providing a positive rehu 11 on
hwestment. Disadvantages of sjmulations includ e their cost and need for con-
stant u p d ating. Tlus is becau se simulators must have identical elements fom1d in
the w ork en viroJtm1enl:. 111.e simulator n eeds to respond exactly a s the equipment
(or customer) wottld under the conditioned response given by the trainee.56

JJusfocss GfJT.mcs a.11uJ. Case Shui.ies. Situations lhat trainees study and d iscuss
(case studies) and bu siness games in 1Nhich h·ain ees m u st gather information.,
analyze it, and make decisions are used primarily for management skill devel-
opmen t. 111ere are many sources of case studies including Harvard Bu siness.
School an d the Darden Bus1n ess School at University of Virginia.
Games stim.ulate learning because participants are actively in volved and
they mllnic t11e competitive n atu re of business. The types of d ecision s that par-:
ticipan ls make in games indude all aspects of m anagem ent practice, jnd1,.,11d-;
ing labor relations (such as agreement in conlTact negotiations), m arkeling (the
price to charge for. a new p roduct), and finance (financing the pw:chase of new.
techn ology). A realistic gmne or case may stimulate m ore leam .ing than pre-
" t at"1on m.e.·tl10d. s (roucJ1. as c..a0sroo1n
0en 1" . fJ.' uc ti'. on) b ecause .ll
ms ." 1s
. m ore m.eanmg
• -
ful. ConAgra Foods ne111.r vice p residents participate in a game on the last of:
eight days of leadership tra:i.ning .57 Teams run a simulated business based on
ConAgra, rotating through mks including sales •md marketing, research an d '
development, and finance. 'TI1e teams compete for business and market share
while developing theiT tt.::am1No:rk and other in t e1versonal skills. A t the end of
the game, ConAgra execul.ives d etermine the wiJl..t ung tectms based on fin.andoJ'
measures as weU as team 1Nork skills. Sun Ivlicrosystems uses garnes i:o teach.
new employees fue company structure, strntegy, and history an d to portray 11:he
comp any as innovative wjth,;:;trong values. 11le game is set on a pl&"1et, knov'm
 ...
CHAPTER 7 Training 315

as "Solar.is/' v"rhidi. has <ll 5oci.ety based on Sun's core values. The game includes
groups of lo~->t colo.nists who battle on tl11.e planet after 1Nar1dering through space.
The colonists make it thr2u~ goal l:o creale an information net:vvork (Sun is the
compan y H1at fo1Jtnd(x!_ the nf;lwork). Enernies threaten the planet and the play-
ers' task is to save it
Cases may be especially appropriate for developing higher-order intellechrnl
skills su ch as analysis, synthesis, and evalu.ati.on. TI1ese skills are often required
by managers, physida.-ns, and other professional employees. Cases also h elp
lrninees develop the willingness to l:al<.:e risk s given Ull.cerl:ain outcomes, based
on their analysis of the s:Huation. To use cases effectively, the learning environ-
rnent nmst let tra :inees prepare and discuss their case analyses. Also, face-to-face
or eleclTonic co1ru.nm1ication mnong ll:ainees m_ust be arranged. Because h·ainee
involvement is criiical for the effecti"iieness of the case method, learners must
be wHling and able to ;)J'l.al yze the case and thrc:~n communicate and defend their
positions.
Belrn.vior JWoJding. Research suggests thafc behavior modeEng is one of t11.e
most effective tedrniques for teaching interpersonal skills.SR Each h·aining ses-
sion, whi ch ty}'.licaUy lasts four h ours, fo cuses on one interpersonal skill, such
as coaching or corrununicahng ideas. Each session presents ll1e rationale behind
key behaviors, a DVD of a mo<ld performing key behaviors, pracli.ce opporh.lni-
ties using role-p laying, evaluation of a model's performance in. the videotape,
and a planning session devoted to 1.mderst.aJ.KHng hmv the key behaviors can
1. be used on the job . In the practice sessions, trainees get feedback regarding h ow
closely their behavior matches i:he key behaviors demonstrated by the model.
The role-playing and rnodeled performan ce are based on actual incidents in the
employment setting in •AThich the trainee needs to demonstrate success.
E-JLeai-rting. lE-t oe<1.rJt11.Jlng, computer-based training (CBT), online learning, and web- lO 7-f;:,
bascd f'raining refer to instrudion and delivery of lrnining by computer tlu·ough Explain the potential
the Internet or the web. 59 Io enl1ance l.earnmg an of these training methods can advantages of e--leaming
for training.
include and integrate ixito instruciion text, interaction u s:ing sim.ulations and
games, video, col.laborahon using blogs, 1NJ.k.i.s, ax1d social netvwrks, and hY}Jer- !E-l.11l.t'lrnfirr1rg
links to additional resources. fo some n;pes of CBT iTairring content is provided Instruction and delivery
standalone using sof l1Na1·e or DVDs with no connection to the Internet. Tra:in- of training by com-
ees can s till interact -vvith the h'a.ill.i11g content, answer queshons, and choose puters through the
Internet or company
responses regarding how they vvould behave in certain situations, but they can- intra net.
not collaborate with o ther learners. For exarnple, Wipro 1echnologies developed
a tool they call a Unified Learning J(it (ULK), a portable laptop programmable
con1puter that enables ne'Vl.r employees to experiment in engineering subjects.60
One ULI< can teach m ore th.an 10 different technical subjects related to hardware
and software engineering.
Online learning, e-learning, and web-based training all include delive1y of
i:nslTuclion. using the Internet or web. TI1e training program can be accessed using
a pass'll'.rord tlrrough tl1e public InJemel or th e company's private intranet. TI1ere
·are m any potential featuures that can be included in onJfae learning to help train-
ees learn and lTansfer iJ:aining to lheir jobs. For example, onfu-.e progrnms !hat
use video may make it an :interactive experience for trainees. TI1at is, trainees
watch the video and hav1~ the opportu_,_1iti; to use the keyboard or touch the screen
to answer questions, provide responses to h ow they vvould act in certain sitUa-
tions, or identifl; the steps they wouJd take to solve a problem. Interactive video
is especially vaJuable for helping traiJ1ees learn tedmical or interpersonal skills.

--------
 ...

;:~anofi·-/\venii.G U.::J. V\131.~l behind its COHlpetltion iJl prnduct krlO'Wledgi;:: IN:i.!lJin
r-f· it:'.
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{!Jr.C>l2 could •x m1pl.de in foe· field or ·whil.e traveUrig. AB a result, the company devel-
o .'.ix:d a self-naced
1
e-leaminp.: sd.ution-·-a virlJ1aJ G3Jnpus called Diabetes Un.iver-· .J . ..
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Effective e-learning is grounded on a thormigh needs assessment and ":mn-

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T'witho'l~ an.d sh.axed mcd..ia s•;r...:11_ as YouTube. N(ainy c0111panies are considering
using tablets such as the i··pad for b~aining because of their ease of use, colorful
ca:·,.y-to-r.ead display, ab.Uily to connect to J:hP ·wE::b, access to social meclia a~nd 1

avai.J.a.b iJJty of powerful apps. Apps rder to appHcations designed specificaily for
smartphonec-; ;:md ta.blet compuh~rs. Apps ar·c:: primarily bdng W3ed to supple-
nienl training, manage the path or sequf:r1cc of training, and help employees
nlain.i:Dl_n training record~.;.63 The "Competing through Tedmology box high- 1
'

lights h o1N social rnedia a.n.d apps are bdng used for training.
Blended f..,er11niin~;:.
~
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reiated to l:edmol-
ogy {P.g., insufficient b axl.d~Nidth, l ac::k of high-speed vveb conneclions) because 1

of l.rainec preference for fac~c-to-face con tact 1Nii:h instructors <tnd oili.er learn-
er:.\ r.1nd because of employcv:3' h1abil.Hy to find unacheduJed rime du.ring 'i:hefr
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ral'Ern~<tl»:l'd v~an~ttllllfJl
Delivering contrml
in:;truction with a com··
bination o f /cchnology-
based and h~c::~··to-Facc
nwtho1L.
h~g lo a hybrid, or blended ., learning approach. 113h::J1J dle<d\ kar1aRug refers to con1-
and b in..ing ted1..n.ology rri.eChods 1 :::uch a.s e-learning or social 1ned:ia, with face-to-.foce
i..rtDirnci:ion,, for d1~livery o f .l.eai~ning <'Ontent ;:1nd :Lnstruchcn. Elor exarnpk,. :rcvi.::;i:i:
f:'·~J)'i_,\;.- !t~la.,;:_'FJ.1.e-rs Insu.railce is ~. ·~_::>fiXXf~ t~le1i.d_(~K:-~c 1(2'8\'FJirnq;~ TJJr211clc-cl lr:::·;11TL1r~g ap_~Ji'roaclr~c~:t ·
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 Many co mpan ies at{: '.-•L.~ rtinq to
use ::;oci al m edia and ;oipp<> ior
in'.;truct ion, suppori o f lT<:iininq,
or t o f)n<::oura9e know!ed:y"
:>ha1·in9 ../.\dva ntas:ie Sa les 8<
M<:1rketin ~~J (ASM) a s<::1le'..'· a nd
rnarke tin(J a~Jeitcy bas(~ d in
Irvine , Californi a, added s o1j ;JI
netvvorking to its sales t rainin9
proqrarn (/\cce l~H atod C>ire(=!r
Excellence in Sales.- - AC['.:-;)
which te aches individuals to
becorne busin<:~::; : ; devd oprrK~nt
marv19 e r'.;. Th e f ivc-rn o nth
ing p roqrarn involvPs pariici-·
. pants rneetin~:J face-to-lace fo1
a 1:1~1•.J-d<~y l:raii1inq s1c1ssion •md
then returnin ~~ to tlwir honv::·
:~ak:J s rn~J rkcts . TfK: mrnai n inq
t i1T1<': in t he pro9rarn i'.~ spent
worki n~J in th e field vvith rr;cnto 1 ·'.,~
an d (:ompletinq ci11-l ine l:i«'<iDi n~~i
rnod ul12c? . Duri n~J t he p ro~1r21n1 ,
ernployeE~~~ have accE:' S'.3 tn th e
/.\C!:S workpla o ,-: cornrnunil:v
online for interaction with '.:;eni o 1·
..Jci ...:.. . l'vc
''"I'·"-' .1""·ld <"f'-c; - -:'I, 11-..1c-'1-'
f·· ......
~ ._, ·-1•-' c-'1·'·
mid ot her salesperson:> i1;1the
pro(Jrarn. /\dd ing tl1(~ srn::i<:1I
n<"tvvorkin9 p lai.iorn1 to t ht:< tra in-
ing pro9ra1n h<?s 011courn'.~Y-:d
employees to sh are knowleclqE:'.
For t:% :tmple, one learner- ~n ti)<:>
pror;irarn contacted all of tlv"!
ACE5 mentors t o identify l:x::'st
praclice '.; on a specific topic. H E~
compil ed thi s informatio n into a
docurncml: vvhi ch he sharc-d 1Nith
th'" e nti re lea rner cornrnunily.
cxainple, lixn.e savings and n,~duced costs can be gai.ned by having employees
f : . ,.~,_
co"·1
. .i.11. o t rl·~
_. .t .x-' , ,_ t-.c
1. _..__ on
. _.l1·1~c
. _ . ,_:. ..IC',,--.,;-,..,-
·~.r.iui. J . _d_
face-l:o-face at a training ~~efiSioJ:) i:o discus~:; hmv the lrno-•vkdge c;;m be applied to
the ·wor kpfo.ce u sing G:\'.:let:, gaxnes, sirn.uJahons, or classroom discussion.
Verizo n uses 3ocial network-
in g too ls to t rain employees
to supp o rt n13w products and
dr:Nio:-::; _ f),~;v ie<') Blog, De1.rice
r:.orum , ~:in d Learninq Communi-
tie s help insure that employees
are reddy t o supporl: customers
v.1 tv:~n nev·.t products and devices
a n? int rodu ced t o the market ,
ens1ages Verizon's rnultigenera-
tional workforce, and facilitates
peer- k,-pe;~r learning . Device
f3! o:] m;,1kes available infonna-
k:arn-· tion •'>ncl up ciatE!S on vvin::'!less
d e v ices (::;u ch as DRO ID), FAO.s
(frequ o 11tl\' «:; ked questions),
how-tcH1id·:=:~ os, and trouble-
shooti ng tips. D0vice Forums
()tlabl e reta il employees to
learn fro m p e,::'\rs, and product
rnamrfo cl: u n~ rs. Employees can
;1sk e;:Kh o t her questions, share
i ~;sue s, po~3t tips, rnake sug ..
9csti o11s, a nd access product
eJ<p!:?r1:'.~ . Lea rning communi-
ties an~ acce ssed through the
.•. 1 ·1t·-)r "- r
~ ... -l Device 810 9. They include
vide o bkYJS, message boards,
iin!c t o online trai n ing modules,
and p m cluct: dernonstrations.
!n add ition t o these tools,
employees have access to My
1\ letvlfo rk for collaborating with
ti ..... . D
"'·1i:>i1· t·no
1·· '-'
~ P.
,, ' AJ!<=-dne
~ I'"'
1
-J t
_, :::1 anc·-l1
docu ment sharing, and creating
workin g groups. Some instruc-
tors al so use it for posti ng
supplen1ent <:)I content for
learner-:;' w ;,::.,_
i:oc1 •... . . ·i"r r•r-tr rrn a~qu1···1
·rJ r .l:
~
0
J•. i_
- 'JI. .. · 111r
J lcnO'\-led'"'"e
·~ ,. . .1 1_.
.11•..
Watson Phar-
maceuticals h;,1s
developed an app for its
corporate university, al!ovving
pharmaceutical representatives
. to access videos ;:;nd product
knmvledgf:: from thei1- iPhones.
A.n app for the U.S. rnilitary
combat medical teams provides.
details on specific medical
procedures such as controlling
bleeding . The Arw01ican Oph-
thalmological Societ_y (/\OS)
is usin~i apps in its continuous
medical education co urse s to
supplem e nt traininq. Courses
are provided online but learning
tip'.:; and techniqu e '.3 are pro-
vided as mobik~ apps.
D~SCUSS ! QN QU!l;(~~lfiO!N1
Hovv do you think ·i:hat social
media and apps can be most
effectively used in training? For
example, as a method for deliv-
ering training content? Help-
ing insure transfer of training?
Knowledg e sharin9? Explain why.
SOURCE: Based on Ci Dutton. "l11ere's an
App for ll1at!" Training; S e pt~mbe r/Octobe r
2011, pp. 36-37; .J. MeistM, E. i<aganer, and
of
R Von Feldt, "2011: The Ye<1r tho Media
Tab let as a Leaming Ti:..lDI," T + D, Apri l 2011,
pp. 28--31; T. Bingham, M. Connor, and
M. Weinstein , "Netting Know-How," Training,
September/October 2010, pp. 21.\-29; J. Roy,
"Transforming Informal Leam ing into a Com-
petitive Advanta3<.!," T + 0, October 2010,
pp. 23-25; P. Galaga11, "Unformal, the J\levv
f\lor-mal?", T + D, SeptembAr 20 10, pp. 29-31;
1\11. \Ne instein, ''Verizon Co n n1~cts to Success,"
Train ing, ..January/February 201 'i, pp. ~0-42.
_ a11d ·th.er1 ffiPC''·
5 :.r . _ .._c ~ .
31'7

'.:J'l 6 CHAPTER 7
~~•:m111illil\9
li\/ilarnOll~f.'1mtFmfi:
'.Sy!!!il:tll'm (ILM$)
Tech nology platform
Lhat automates the
adm inistration, de vel-
opmenl, and de livery
o{ a company's training
program.
Grn~Q[pl- or lf~~lilfl . .
liJRJlnM~ng Mlfl'thioicfo
Training techniques .
that help trainees share
ideas and e;(periences,
build group identity.
understand the dynam-
ics of inte r/Jersonal
relationships, and g et
t o /mow their own
strengths and weak-
nesses and those of
their co-workers.
f21qpilfl'1iir.1ifiltn~~
IP'rrogir.:Jlm\S
fraining programs in
which trainees ga in
/m ovvledge and theory,
earticipate in behav-
ioral simulations, ana-
lyze the activity, and
connect the theory and
activity with on-the-job
situations
..
Trainin9
'/Learning Marwgemeni' System. A le'1lmin,g mm.1.agemenf( sysf(em (LMS~ refers
to a technology platform that can be used to autonrnl:e the admini stration, devel-
opment, ;.:md ddivery of all of ;:i, com.pany' s trafrti11g programs. An LMS can pro-
vide emp loyees, managers! and trainers with the ability to m.anage, dehvel~ ;md
trad< learning activities.M LMSs a.re becoming more popular for several reasons.
An Ll\!IS can help compani.es reduce travel and ot11ei· costs related to tra:i.njng,
reduce li m.e for prograrn co•npletim1r j_ncrease employees' accessibili.ty to train-
ing across the bush1.e3s, and provide adminisl:rative capabiJj.f:ies to h"ack pro-
grarn completion and course emollments. An LMS allows companies to fTack
all of the learning activity :in ll1e business. Vanguard, foe financial services finn,
u ses an LMS 1.b.at aliows its employees, known as crew members, to get learning
recomrn_endations frmn Vanr:,1.Jard's University based on their career interests,
developrnent goals, and relevant conteni: for their current jobs. 65 It also makes
it easier for crew rnembers to find and access videos, audio clips, j_ntc::ractive
Flash dem.onstrati.ons, and articles and ern:oll in classes. TI1e LMS categorizes
informal learning sources such as podcasts, articles, and videoclips with formal
leamjng soluhons jJJduding on.line and classroom-based cow·ses. Jnformal and
formal learning soluhons as well as outside courses offered by vendors can also
be fow1d using a keyvrnrd S(:arch.
GrnMp·· ott" lfe.amrH3uiMin~g MeHmdls
G ir<01up- fi: te<1\JD111-b.uftldilng mie\l:]wds are training metl1ods designed to improve
1cllJl'
l:ea.m or group effectiveness. Training is directed at improving .t he trainees' skills
as well as team effecliveness. ·Jn group-building methods, lTajnees share id12as
and experiences, build group identity, understa_ndthe dynamics of interpersonal
relationships, and get l:o know 1:h eir own strengths and weaknesses and those of
their co-workec:;. Group technjques focus on helping teams increase their skiJJs
for effective teamwork . .AH involve examination of feelings, perceptions, arid
beliefs about the functioning of the team_; discussion; and development of p lans
l:o apply what was learned in. tTainjng to the team's performance in the work set-
ting. Group-building methods fall into tlu·ee categories: experiential programs,
team h"aining, <md ac tion learning.
E.xperieu.i'ial Progrmns. lExprt:rden'IJ:iaR pmg1r.otms involve ganung conceptual
knowledge and themy; taking part tn a behavioral simulation or activity; analyz-
ing the activity; and connecting the theory and activity with on-tl1.e-job or real-life.
situations.66 -
For exp~riential train_i.ng programs to be successful, several guidelines should
be follow ed. TI1e program need s to tie in to a specific business problem. TI1e
trainees need to be moved outside their personal comfort zones but within limits
so as n ot to reduce fxainee 1n.otivation or ability to understand the purpose of
the p rogram. Multiple learning modes should be used, inclucling audio, vism1l,
and kinesHi.elic. V\Then prepa ring activities for an experiential training program,
h·ainers should ask trainees for input on the program goals. Clear expectations
about the p urpose, expected ou tcomes, and trainees' role in the program are
important. Fh!ally, training programs that h1clude experiential learning should
be linked to changes j_n, employee atl.il11des, behaviors, and other busjness results.
Quantum Corporation 1-Uxed an actors' group to lead a team through a series
of improvisational activities designed to get foe team members to share personal.
 '"
CHAPTER 1 Training 319

st.ories.67 The team consisted of very talented employees who were not used to
1Noddng w ith each other. Many of the l:earr.1 members v1rere geographically dis-
persed, ·which jncreased H1e difficulties in worldng together. TI1e team, which con-
sisted of members from m.surfoeti.:ng, ien5rin eering, graphic design, and information
technology ·was w orking on overhau]ing the company's on.line capabilities. Using .
mus:i.c, props, lighting, ;:;md cosl:um.es, ihe actors interpreted ·foe stories told by
team members. 111.e actors por~:rayr-2d tea1n n1.emloers who, for example, expressed
isolation and f111s1J:ation. Other times, team members would play the parts. The
sessions aJ1o1Ned each team. n1ember to ask questions of the actors or each other.
The team came avvay frmn the activity 11\r:ith. more empa!J:i.y and understanding for
ead1 olfo'.:"r. Developmenl: of the personal relationships created positive interper-
sonal bonds that h elpi::d tJ1,-z team rn.ieel: deadlines and complete projects.
Adven:dm·e liearnn.iinng, a type of e:xperientia~ prograi-n, develops teamwork Aci'lf~lill"f.:Mri'~
and leadership skills using structured outdoor activities.68 Adventure learning IL"l!wimnrni~
appears to he best swJed for developing skills related ~o group effectiveness, Learning focused on
such as self-mNarenesG, probkm so1ving, conflicl: management, and risk taJ:rJng. the development of
teamwork and leader-
Adventure learning may involve stTenuous.- challenging physical activities such ship ski/ls by using
as dogsledding or mol.mtain d.imbi:ng. H cB:n also u se structured individual and structured outdoor
group outdoor achvihes sud.l as dimbing ·walls, going thxough rope courses, activities.
making trust: falls, dimbjng ladders, and l.rnveli.ng from one tower to another
using a device attached to a 0NiTe that connects ~he tvvo towers.
To improve their leadership sb.Us an.d leannNork, la:wyers at Weil, Gotshal, &
Manges in New York worked with New -:lork City firefighters to lea1n how to
I. hook up a fire hose, set the 1Nate:r pressuxe, and extinguish fires. 69 At the fire
academy fouir-person tearms rushed into bucning buildings, rescued passen-
gers in simulated subway accidents or other em ergency drills. The FDNY pro-
g.ra:i.n, Firefighter for a Day Team Challenge, was created to help teams develop
decision-making and p robleim. solving skills.
Adventure learniI1t~ can also include demanding activities that require coor-
dination and place less of a physical strain on team members. For example,
Cooldn' Up Chan ge is one of many team-building courses offered around the
United States by chefo, caterers, hotels, and cooking schools.7o These courses
have been used by companies such as Honda and :rvlicrosoft. The underlying
idea is ll1at cooking dasses help strengthen com1nunications and network-
ing skills by requiring tem11 members to work togellwr to create a full-course
meal (a culinary feast!). Each team has to d ecide who does what kitchen tasks
(e.g., cooking, cutru1.g, d eaning) and prepares the main course, salads, or des-
sert. Often team members are requLred t.o switch assignments in midpreparation
to see how the team reacts lo change.
For adventure lemTling programs to succeed, JJ1e exercises should be related
to the types of skills that participants a.re exp ected to develop. Also, after the
exercises, a skilh~d fad]jJator sho1,dd lead a cliscussion about what happened in
the exercise, what was learned, huw the c<ercise relates to the job situation, and
how to set goals and apply 1Nhai: ·was learned on the job.71
Does adventure learning work? Participants often report that they gained a
greater understanding of them.selves ;xnd the 'Nays they interact witl1 their co-
vvorkers. One key to the success of an adven.h.tr-e learning progrrun may be the
insistence that w h ole work groups participate together so that group dynamics
that inhibit effectiveness can emerge and b(-: discussed.
 ...
J,21[)) CHAPU:R 7 Tt-ainin9

Tl1.e physically demandilci.g: nall1re of adventure Ieaniing and ~:he req<._i.iirement

iC:w~n-1frnnn~lfll9J
/<,)am members .under-
stand and prad:ice
ea ch of.lier's skills.
!Jw.t IT.ain.121,~s often have to tou<:h each 0iher jn the exercises :;:nay increas':! ith.e
(~ompany' s risk for negUgence claims due to personal injury, in1:·2nti.on.aJ ~ nfili.c­
tion of ernohonal distress, and invasion of p rivacy_Also, the Am.edca.ns with Dis -
abilities Ad: (discussed ill Chapter 3) raises questions about reqttiJ.i ng e.•n.pJ.oyec:s
-vvith disabilities to parhcipate h i. physically dem.anding train.i.n.g experi·ences.
'Rier:r.:m 'JI.}·ainiµr.g. Team lxainfag coordinates the performance of ixi.d:\v~d1.kl~3 1Nho
work together to achieve a conHno.n goal.. Such 1x<:!.ining is an j~wprn:;m-r•: i.ssu.e
when :information. must be shared and i:nd.Jviduals affect the overall performance
of i:he group. For example, in the 111fotary as vveU as 1l1e private sector (l:hi11J<:
of n.udear power planl:s m: cornme.rdal airhnes), much vmrk is perforn1ed by
cn~W[:3, grnL1ps, or teams. Success depends on coordination of inciividual achvi-
ties to make decisions, team pcrfonnru.1ce, a11d readiness lo deal ·wi.th pob:nli.ally
dangerous ~iituations (lil<:e an ove:rheali-ng nu.diear reactor).
Team. training strategies include cross-h:aining and coordination traj_ning.n
In tC:ii.'l()lB:'.i\-ll:ir.<itiini'in-Rg team n1embers 1J.nderstand and practice each other's s]<ll.ls
r30 that n1embers are prepared !:o step in. and take an.other n1.ember's place.
Ci(l)l(])Jr.d:TI.ll11.<nRilQH PJl'P.aRlllliJtllg h:ains th<::: teAtn in. how i:o sh.are inJonnation and deci-
'"-J·o·n ·'-'"' "o
,_,. l ,-·""'v;mizir->
.11.F.H...U u .. _ .._ 1-P' -" n. J~'JP";fr-ruo
.•.,UJ.Jl ·' - !:. •
._f_._ <.:
•• '\. .. -~'--· ('oor0lm-
']. •'l('P a·'-'
~u J .. .. . . ie lrc oJJ.~
.· .~ l:ra;'lJ-ng
. JU. -LJ~ P"'IJec'
:J 1 ...... o _\ "'llv
J1.r.A !-11noir-
.I .·-t ·-..t .. .

Cq<Q>rr,l!nin@l1(Ql\llITTI i:ant for couu11e:rdal aviation and surgical teams, who monitor diJforenJ: aspects
Trni1111ttliil\91 of equiprnent and the envi.rom:nent bui: mnst rJhare infonnation to ma.ke thr.~ most
Tt ain:; the team in how effective d ecisions regarding patient ca:r.<::: o~c aircraft safety Dnd p ier:fonna.nce .
to share Information Tu21um R~<M:it~T!.' ftll.·21in.uJ.1tg refern to h aining the l:eam m anager or faciJitato1c Tbjs may
and decisions. involve training the manager how to resolve conflict witl-U_n the team. or help the ·•r·• '

lle.!'lm t1}"1de?r team. coordinate activities or oiher team sldJ.h

'ffi'miilfll01fl1~1 Un.itedA5rlines (UAL) had its supervisors "lead" ramp employees in aitt'2nding
Tt·aining the team man- Pit Instrudio:n 1~-c TrahU.ng (Pit Crew U), which focuses on the preparati.on, prac-
ager or faci litatot: t.i.ce, :md tea:m1No-d;:;: of NASCAR pit crews. United used the b:ainin.g i:o develop
s tandardized methods to safoly and efficiently iuiJoad, load, and send off jJs al.r-
planes.73 Pit Instruction .Sr: Training, located. outside of Charlotte, North Carolina,
has a quarter-mile race lxack and a pi.I: road with places for six cars. 11-i.e school
offers programs to train n ew racing pit crews, b ut most of its business comes
from companies interested in havmg their teams \Nork as safely, effi.cieniJy, and
dfeclively as NASC.AR pit crews. 111.e trnining was part of a mulhrrulUon-doUar
uwesl.meni: thal: includes u pdating equ1.p1nent and providing luggage scanners.
111.e purpose of the trafoing is to .reiJ:lforce tl1e need for ramp teams to be orderly
and couurnm:icate, to help stand ardize tasks of ramp team members, to help
shorten U1e lime an airplane fa serviced at the gate, and to improve mora1e_
TI1e keys for safety~ speed, and efficiency for NASCAR pit crews iis H1arl each
member knows whaf: tasks l:o do (d1ange fixes, use air gun, add gasoline, dea1l Hp
spills) and, when the crew has finished servicing the race car, mov0s ni::"w r.::qui.p-
ment jnto position anticipating the next pit stop. The training involved the ramp
workers acruaJly worYJng as pit crews. They learn how to handle jac.il:s, d1Dnge
tires, and fiU fuel tanks on race cars_ They are videotaped and ti.med jusl: lil<:e :re.al
pit crews. 111.ey receive f1eedback from professional p it cre1N m ernbers "V11ho \Alork on
NASCAR teams and trainers. Also, the h:atning reqwses them to deal with cixcum.-
stances lfo~y might encounter on tile job. For one pit stop, lug nul:s had been spdn-
Ided iinlentionally in the axe;,:i vvhere the car slops to see if the United empl0yees
would noti.ce H1em and dean then.1 up. On thefr jobs ramp employees axe respon-
sible for removing debris f-ro:m the l arma(' so it doesn't get sucked i_nto jet engjn12s
 ...
CHAPTER 7 Training 321

or harm equipment For anoiJ-1.er pit stop, teams had to work with fewer members,
as sornetimes occurs when ram.p crews .an:: understaffed due to absences.
Action JLe1.uning. In acRiimil X~<llll.'illiing; teams or work groups get an actual busi- Action l!E.larni1191
ness problem, work on solving it and commit to an action plan, and are account- Teams work on an
able for carrying out the plan. 74 J'.ypically, action learning involves between actual business prob-
lem, commit to an
6 and 30 employees; iJ may also include customers and vendors. TI1ere are action p lan, and are
several variaHons on the composition of the group. In one variation the group accountable for carry-
includes a sh1gle customer for the problem being dealt with. Sometimes the ing out the plan .
groups include noss-fom.ctional team members (members from different com-
pany departm.ents) 1Nho all have a stake in the problem. Or the group may
involve employees frmn mllihple .fu11cl:ions \Mho all focus on their o-Y.m func-
tional problems, each conh·ibu.ting to helping solve th~ problems identified.
For example, .ATC, a public f.Tan.sportation services management company in
Illili.ois, used action lemnh-i.g to help boost profit.abiHty by reducing operating
costs. 7S. Employees were divided into Action V\Torkout Tea.Ins to identify ways of
reducing cosi:s and to brainstorm effective soluiions. Tl!.e process assumed that
employees closest to where the work gets done have th.e best ideas about how to
solve problems. Teams of five to seven employees met once a week for a couple
of hours for 45 to 60 days. For example, a tea.II1 vvorking on pm.ts inventory
might have had a parts clerk, a couple of people frorn maintenance, a supervi-
sor, and m1 operations employee. These tearns :3tud5ed problems and issues such
as overtime, preventive maintenance, absenteeism, parts inventory, and ineffi-
dent safety inspection prncedmes. 111.e teams brainstormed ideas, prioritized
then1 according to their highest poi:e1itial, developed action plans, installed
them, tested them, and m.easured the outcomes. TI1e solutions that the teams
generated resulted in m.ore than $1.8 million in savings for the company.
Action learning is often part of quality improvement processes such as Six
Sigma training and Kaizen. Kaizen, the Japanese word for improvement, is one
of the underlying principles of lean manufacturing and total quality manage-
ment (we discussed lean flunking in Chapter 1). Kaiizefill refers to practices pmtic- Kai;i;t<m
ipated h1 by employees from all levels of the company that focus on continuous Practices participated
improvement of business p:rocesses.76 Just Born, the company that makes Mike in by employees from
all levels of the com-
and Ikes and Peeps, uses the V1To1N . . . Now hnprovement Process, a customized
pany th at focus on con-
Kaizen process to improve business processes and results.77 The Wow ... Now tin uous improvement
Improvement Process :includes training employees how to identify improve- of business processes.
ment opportunities, collect data, make improvements, measure results, and
based on the results refine practices. As the 'Wow .. . Now Improvement Process
illustrates, Kaizen involves considering a continuous cycle of activities includ-
ing planning, doing, checking, and acting (PDCA). Statistical process controls
such as cause-and-effect diagrams and scattergrams are used by employees to
idenfify causes of problems and potential solutions.

Advice fom~ Choosong a ir~~aining Method

Given the large number of lraining methods available to you, this task may l07·7
seem difficult. One way to choose a training method is to compare methods. Design a training
The firs!: step in choosing a melhod is to ideni:W.; t11e type of learning outcome session to maximize
learning.
that you want training to influence. These outcomes include verbal information,
intellectual skills, cognitive strategies, attih.ides, motor skills, or some combina-
lion. Training methods may influence one or several leanung outcomes.
' .
 ...
322 CHAPTER 1 Training

Also, you should take into account that, there is considerable overlap
between learning outcomes across tJ1e trnining methods. Group-building meth-
ods are unique because they focus on individual as well as team learning (e.g.,
improv:ing group processes). If you are interested in improving the effective-
ness of groups or tem.ns, you should choose one of the group-builrung methods
(e.g., aclion learning, team !:raining, adventure learning). Second, comparing the
presentation methods to lhe hands-on mefl1ods mustrates that most hands-on
methods provicle a better learning environment and transfer of training than
do the presentation methods. The p resentation methods are also less effective
than the hands-on methods. E-learning or blended learning can be an. effec-
tive train.ing method for geographically dispersed trainees. E-learrung and
other teclmology-driven training methods have higher development costs, but
ti:avel ai.1d housing cost savings will likely offset development costs over time.
To take advantage of the positive features of both face-to-face and tedmology-
based instruction, you should consider a blended learning approad 1. A final but
important consideration is the !:raining budget If you have a limited budget foi:
developing ne'l.N lTain.ing methods, use s1Tuctured on-the-job training-a :rela.:.
tively inexp ensive yet effeclive hands-on method . If you have a larger budget,
you might want to consider hands-on rnefuods that facilitate transfer of tTain-
ing, such as simulators.

\. ll0.1~$
Choose appropriate
evaluation design and
training out comes
based on the training
objectives and evalua-
t ion purpose.
Tir.aiilil)ill'ftg out«:omes
A way to evaluate the
effectiven ess of a train-
ing program based on
cognitive, skill-based,
affective, and results
outcomes.
. coinpm1y effectiveness (such as sales).
Training evaluation can provide useful jnforrnation including the program's
strengths ai"':'ld 1Neaknesses, identifying which learners benefited most and least
from participating, dei:ermming the program's financial benefits and costs, and
allowing the comparison. of the benefits and costs of different programs.
Ex.aminin.g the outcomes of a program helps in evaluating its effectiveness.
TI1ese outcomes should be related to t.he program objectives, which help train-:
ees understand Ille puxpose of the program. TirililAng 0111lcomes can be catego-
rized as cognitive outcomes, skill-based outcomes, affective outcomes, results,
and return on inveshnent. 713 Table 7.7 shows the types of outcomes used in eval-
uating fra111ing programs and 1r.1hat is measi.u-ed au.cl how it is measured.
Which b_.aining outcomes measure is best? The answer depends on U1e fram-
ing objectives. For example, if the instructional objectives identified business-
relaled outcomes such as increased customer service or product quality, then
results outcomes should be included in the evaluation. Both reaction an.d cogni-
tive outcomes are usually collected before the trainees leave the training site.
As a result, these measures do not help determine the extent to which tramees
actually use the training content in their jobs (transfer of training). Skill-based,
affective, and results outcomes m.easured foJlowing training can be used to
detenrun.e fJ:ansfer of training-that is, the extent to which training has changed
behavior, skills, or attitudes or directly j_nfluenced objective measures related to

Kelly Services iB a good example of a company tl1at has investigated the ben12fits
of training based on evaluation data. Kelly Services, a company in the tempo-
rary staffin g industry, revised its training programs to try and reduce the tim.e it
 ...
CHAPTER 7 Training 323

takes new employees to become produchvs and to reduce their turnover. Kelly
Services created a new ernployee orientation p rogTar:n and developed 13 ·new ·
sales couJrses. Kelly uses :multiple approaches to evaluate its training programs.
It uses anecdotal and quantitative data to demonsb:ate a causal relationship
bebNeen learn.i.ng and outcomes such as course completion rates, course enroll-
ments, crn5t p er trainee, and trainee reactions. For the news sales courses, sales
wen-; 84°/., higher for ernployees >Nho had com pleted at least one of the courses
nnnparecl to employees who did not participate in H1e program. Evaluation of
the n ew employee orientation program show ed that turnover decreased 13%
and produ.ci:ivity Y.ras 2'7% higher for employeet3 vlfl10 participated in the pro-
grarn compared to those v.rho did not.
SOURCE: Based on P. Harri s, "Learning at Your Service," T + B, October 2010, pp. S7-5C.

Eva~a.,ija1J:nm11 Desig011s
As shown in Table 7.8, a number of different evaluation designs can be applied
lo training p rograms. Table 7.8 compaxes each evaluation design on the basis
of iArh o is i_nvolved (h·ainees and/or a comparison group that does not receive
trafrring), when outcorne m.easures are collected (pretrnining, posttraini1.Lg), the
costs, the time needed to conduct the evaluation, and the strength of the design
for ruling out alternative explanations for the results (e.g., are improvements
due to fadors other than the training?) . ln general, designs that use preh·aining
/. and p osl:tra.i.nfr1g measures of outcomes and include a comparison group reduce
the risk that factors other than !J~aining itself are responsible for the evaluation

1f~fblw (~ .., "1

Outcomes Used in Eva luating Tra ini ng Prog rams

" Pencil-and~paper tests , . ii Safety rul~s

"' Wo rk sample . '" Elect rica l p rincip les
"' Steps in appraisa l
inte1view

Affective outcornes '' Motivation ·"' Interviews

"' Re2Ktion t o program " Focus groups · " Satisfaction with
training
'" Attitudes " Attitude surveys " Beliefs 1·egarding
other cu ltures

l~etum on in ve::;l:rnent " E:c:onorriic value of "' Identification and ,. Dollars

traini ng comparison of costs
and benefits of the
1:xogrnm
324 CHAPTER 1 Trai ning

"W;aiiblfie 1 .$
Comparison of Evaluation Designs

Posttesl: only Train ee; No

Pretes t/pdsi:t~st. . 'kaihi:i<~$-· ·)<e.:s.;
Posttest only with Trainees and f'-lo "(eG
compar·ison g1·oup ,comparison
P1'et~st/FJQtttestw.ith ·n:2111·1ees dr1d Yes
-corn1)a!-ison gfoup con1parison
Time series Trnin r::es rvlediurn fv1ediurn Medium

results. 111is b11ilds confidence to use foe resuJts i:o make d ecisimi.s. The iTade-
off is that evaluations using these designs are mme costly and tini.e-consuming
to conduct than evaluations not using pretrain:ing or posttraining measuxes or
comparison groups.
For example, if a manager is interested in determining h ow much employees'
communications sldlls have changed as a result of a behavior-modeling train-
jJ1g program, a pretest/posU:est comparison group design is n ecessary. Trahi-
ees shot.Lld be rando:m.ly assigned to training and no-training conditions. These
evaluation design features give Jl-1e manager a high degree of confidence that
any communication skill change is the result of participating in the training prn-
gram-79 This type of evaluation design is also necessary if the manager wants to
compare i:he effectiveness of lwo training programs.
Consider the evaluation design that Mayo Clinic used to compare two meth-
ods for h·aining new managers.so 111.e Mayo Clinic, located in RochesteJ.~ Min-
nesota, is one of lhe world's leading centers of m edical education and research.
Recently, Mayo has undergone considerable growtJ.1, adding a new hospital and
clinic in H1e Phoeni'< area. As a result, employees who were not frilly prepared
were moved into management positions'. This resulted in :iJ.1creased employee
dissatisfacti.on and employee turnover rates. After a needs assessment indicated
that. employees were leaving because of d issatisfaction with management, Mayo
decided to :initiate a new IJ."aining program designed to help the new manag-
ers improve their skills. Th.ere was some debate whether the train:ing would be
best admmistered one-on-one with a coach or in a classroom. Because oJ the
higher cost of using coaching instead of classroom h"aining, Mayo decided to
conduct an evaluation using a posltest comparison group design. Before train-
ing all managers, Mayo held three training sessions. No m ore thm1 75 managers
were :included in each session. Within each session mari.agers were divided into
~ .·•
three groups: a group that received four clays of classroom training, a group
that received one-on-one training from a coach, and a grnup that received no
training (a comparison group). Mayo collected reaction (did 11lie trainees UJ(e
the program?), learning, lransfe1~ and results outcomes. The evaluation found
no statistically significanJ differences in tl1e effects of the coaching compared
to dassromn h·ainmg. As a resul t, Mayo decided to rely on classroom courses
for new managers and consider coaching only for managers with critical and .
immediate job issues.
 ...
CHAPTER 7 Training 325

Many cmnpanies ar<e interested in_ deter:rninjng the financial benefits of

learning, including training courses and programs and development activities
(development activities are discussed in the next chapter). One way to do this is
by determin_ing return on investment (ROI). Rehllir111. oltl\ i:nvieshnentt: (ROI) refers Rietl1rn on
to the estimated dollar retur_n front each dollar invested in learning. Keep in imrestm®nt. (!RO!}
mind that ROI is not a subst:i.tut.e for out.comes that also provide an indication Refers to the estimated
dollar return from
of tli.e success or usefulness of learning sud1. as irainees' :reactions, knowledge each d o llar invested in
acquisition, or behavior change. Abo,. ROI )_s best suited for outcomes that can /ea rn ing .
be quantified such as quality, accidents, or turnover, otl1erwise you will have
to make a ·well-considered educated guess about tl1e value of the outcome
(e.g., how do you value increased leadership skills?).

Determitrning tit-Ge fflrfta1nidai~ Bem~frlts o~ learnna-n 91

To make an ROI analysis folloiN these steps:Bl
1. Identify outcomes (e.g., quality, accidents).
2. Place a value on the out.comes.
3. Determine the change in perfonnance after eliminatii1g other potential
influences on training fl!.Sults.
1:. Obtain an a:i.mual axnotmt of benefits (operational results) from training by
con1paring results after training to results before h·ai:ning (in dollars).
5. Determine the tTahung costs (din~ct costs + indirect costs + development
costs+ overhead costs + compensation fo:r trainees).
6. Calculate tl1e total savings by subtracting lhe training costs from benefits
(operational resuHs).
7. Calculate the ROI by dividing benefits (operational results) by costs. The
ROI gives an estimate of t11e dollar return expected fTom each dollar invested
in traitting.
Recall our discussion above on the evaluation of the ne-vv manager train-
ing program at Mayo CHnic. 82 To determine Mayo's return on investment, the
human resource deparhnent calculated that one-third of the 84 employees
retained (29 employees) would have left Mayo as a result of dissatisfaction.
The department believed their retention was due to the impact of the training.
1l1e department calculated that il1e cost of a single employee lu1nover was 75%
of average total compensation, or $42,000 per employee at Mayo. Multiplying
$42,000 by 29 employees retained equals a savings of $609,000. However, the
cost of the tra:h"1irtg program needs to be considered. If tl1e annual cost of the
training program ($125,000) was subtracted from the savings, the new savings
were $4:84,000. These numbers ·w ere based on estimates but even if the net sav-
ings figure were cut in half, the ROI is still over 100%. Being able to quantify the
benefits delivered by the program has given the human resource department
greater credibility at Mayo.

Spec~a~ 1f~"ainmng ~ssues

To meet the competihv;:: challenges of ~-ustainability, globalization, and tech- !LO 1-9
nology discussed in Chapter 1, companies must successfully deal with several Design a cross-cultural
special h'aining issues. 11'1e special training issues include preparing employees p reparat ion progra m.
to work in different cultures abroad, managing workforce diversity, and social-
izing and orienting new employees. ...
.
326 CHAPTER 7
fcnpai.:rrfiaii:~
Employee sent by his
or her company to
manage operations in
a d ifferen t country.
C:rc0!'.>:>-CM i ~:l\JlrnQ
IP'r!F.!p!Jlrn~k~l!i\
The process of educat-
ing emp loyees (and
their fam ilies) who are
given an .assignment in
a fo reign country.
To sncceed overseas expatriates (employees on foreign assigrunents) need to be
Training
cm;ss~ourn.TUlfV\l P~!ErARAT~ON
As we mentioned in Chapter 1, companies today are challenged to expm-id glob-
ally. Because of the increase in global operations, employees often work out-
side thefr, co1mlxy of origin or work with employees from other countTies. An
iexpf;lh·fah: works in a. corni.try other than his or her country of origin. The most
frequenHy selected locahons for expatriate assignments include the lJnited
States, Chin.a, United JKingdorn, Singapore, Germany, and Japan.33 Many U.S.
con1.pa11ies me ush1g international rotational assigmnents as a tra_i:rdng tool.
Guardian. lndustries, a glass manufacturer in IV1i.chigan, h as expats in 18 differ-
ent counlsi•~s.M Guardian's expat retention rate is dose to 90% which is likely
du.e to ho•N iJ tre<JJs the expafa during and after their assigmnents. Guardian
values e)\pat cxpic:riencc by looking at tJ.1ese employees first when consider--
ing 1Nhorn to fil.l open positions. VVfoJ.e on theix assigrunents, Guardian stays in
contact vvii:h. the expats. Expal: assigmnents can be of varying lengths depend-
ing on businesr3 needs. One former expat spent 13 years in Saudia Arabia arnJ.
Thailand rn.ov.i.ng from department head to plant manager. The e:xpa.t and his
fan1jJy asked to return to th.e U-5. but the company had no plant manager open-
ings. The expat ·was willing to take a lower-level position to learn things he
didn't yei: know about the business. When a plant manager position became
available it was offered to him. 1/Ve discuss international human resource man-
agement i.n detail in Chapter 15. Here the focus xs on m1derstandh1g hovv to
prepare employees for expatriate assigmnents.
Cil">l\1!JiG~•c]d1t11J.1R'.lill y,:1 rr·1.:;:pru.'illtion educates employees (expatriates) and theh" fmTui-
lies 1Nho are i:o be sent to a foreig11 country. To successfully conduct business 1n
the global rni.arkeivlace, employees must understa..-id tJ.1e business practices and
the niltural :no:rm:3 of different countries.
S°h~ !!X) HR] Cim:s;s; - (M~tma~ Pireparntiolill
1
l. Cmnpetent in their axeas of expertise.
2. Able to conurnm.icate verbally and nonverbally in the host country.
3. Flexib11?, tolerant of ambiguity~ and sensitive to culhlral differences.
11. Mohvated to succeed, able to enjoy the challenge of working in other cm.m.-
h.ies, and willing to learn about the host cormtry' s culhlre, language, and
custo:ms.
5. Supported by their families.tis
One reason why U.S. expahiates' often fail is that companies place more ernpha-
sis on d'~veloping employees' technical skills than 011. preparing them i:o work in
other cultures. Reseaxd1 suggests that foe cmnfort of an expatriate' s spouse ;:md
fainily it>the n1ost impor tant determinant of whether the employee will complete
the assigru.nent 3" Studies hove also found that personality characteristics an~
related to expatriates' desire to tenninate the assignment and perfonnance in the
assi.gnnJ_ent. 37 Expatriates ·who were extroverted (outgoing), agreeable (coopera-
live an.d tolenmt), and conscientious (dependable, achievement oriented) ·were
n1ore likely to wanl: to stay on tlle assignment and perform well. 111is sugg1ests
IJ.1at c1·osG--cultwcaJ. tram.ing niay be effective only when expahfates' person;:ihhes
pred.isporx: ll1.e:m. to be ·successful in assigrunents in otl1er culttues.
 ...
CHAPTER 7 Training 327

Th,::- k·:~y to a succe:ssfnl foreign. assignm4~J.1t i1:> r• cmnhirli.1'!:i('n of training and

car<':er xnanagernen~ for fhe employee and farn.ily.

ff"1re«!J·~~zirfmrr0· ~»~·na :s~

l:kforc departure, ernployees need to :receive language h•:.imn.g and an orienta-
hon to ~he rncw cou:ntry' s cultuxe and customs. H is cri~jG1 I l:hat the family be
included i11 orientation programs.en Expatriates and thei.r i-c1Jii_ili-es need informa-
tion about hous:i.ngr schoo]s, .ri\:'creahon., shopping/ ::J.nd ).•c;'l.lcth case faciJiiies iri.
lhe an::a.o. 'Nher~: they will live. focpaisiatet> also rm.is-t 1:!.iscuss 111ri.th i:.lwir managers
' hoiN ihe foreign assigm11ent fits into th-eir c1reer pla,ns 21nd vvhat types of posi-
tions they can expect upon rehU'n.
Cromi-culturaI training methods include presenta!:ionzil tcdmiques, such
as lectures !:hat expatTiates an.d their fa:mihr.::~s ai:bend on. th<"': custorns and cul-
iun: of i:he h()st crn.mtry, limnersion experiences, or a.d ual experiences in the
hmnc country ~in .culturaUy diverse c01nnl.m1.ii:i.F.:s. 89 Exp~,;J.~(·?nri.a1. '?X'2rcises, such
an rniniculture c~xp12riem~ 2:':J.,. a .U01N expatriates i:o spend !:imc with a fan:uJy in
!he lJnih~d States fxom the 12tJ:mk group of th2 hos! ci:yun~:ry For 2xa.rnple, an
Ind!;Jn ixain(:':f took 20 n11.anagers from Adv;:.mced rvncro [\'VlCl:CD Oi'l a tv10-1Neek
i nm1crsi.on !rip duri.ng ·vvhich the f;J'OU]Y IJ:avded f:o j\[,Z:,i\; r'ldhj, Bangalore, and
11 1 ~e- p
....~1 >Af;i:1~ ·1..•i J8 90 T·.J.ll. _· .11..
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1
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gran:1 requinxl six months of pla:.-m:L.".l.g, inducEng providin::; th<:. execufrves with
l.' .p>..{.-(J.. .,, ..,.1·-' ·~ · 1· nr1 •)·n {·i)od·' lJ O~eni·'al
a ·t. 1)- "" '!··t Ji: v"'eru,··Pv i'" ~l1"''-': ;11·~ 0 1·ac_t'· n· .,
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busiKH~ss rn-eetin.gs. for exmnple, fr1di.ans pJ:efer a relati"'''"'Y ind:isect way into
busin,~s~; discussions, so the nw.nagers weT0 advised to (hscu~3~3 cuuent events
and other subjects before ta]king business.
He.search sugg<t:sts H1al: tbe degree of difference beti.0r~cn H1(~ UnHed S1:ates and
the·host cou.nlxy (cuJtu:ral novelty), the amount of int('.':ra(:Jion v1i.th h ost co1...mh7
citizens and host nationafo (jni:eraction), <Uld !:h.e fmn.ilia.rify v;ith new job tasks
and ·work envirorn.nenJ (job novelty") all inJluence fo12 "rigo,~'' of fri.e cross-cultural
training method u sed.91 Hands-on a:n.d group-bu:ild:ing methods are most effec-
liv<'; (and n.10~:it need ed) in amig,nments ·with a hjgh level. of cvJh.l•:al a:nd job nov-
dJ.y th<'.'!l require a good deal of interpersonal in[et·achon ·wJ.!:h hosl: nationals.

O ~~ -'.S~·l!:~~ !Phr.-11Sf~
On--sit'..:-~
training involves continued o:rienl:atlon to the host country and its cus-
torns and cultures tl11·ough :formal programs or through a. 1nrc~r1!o~'ing relation-
ship. Uxr>atriates and their fmnilies may be paired 1A1ith an ernployee from the
ho'.; t cotm.try who helps them understand ~he nf•w, unJr,i_niihar work environ-
11K'ni and con1rnunity. 92 Co:rapanies are a.Jso using th<> 11t1cb to help employees
on expa.tri.ale assignments get aJ1swers to question~1.~'3 Exp;:1triates can use a
website ':o g-.~t answers to queslions sud1 as, How do J. condur:i: a 1neeli.i1.g here?
or 1/Vhat religious philosophy migh!: have influenced today'::; n(o:goliation behav-
ior? KnmNledge managernent softvvare aJJlow~_:; ernpl.oye·e.~'~ to contribute, orga-
ni.?:-2, and accf::ss knowledge specific to iJ1eir expa.triate a:>s.ig-rm1enJ.
A majm reason that employees refose expan·iat·c assi_rp11nents is that they
c:an'i: afford to lose th.eir spouse.rs inco:rne or an~ cono~rn'::'.'d thD!: !:heir spouse's
career could be deraik~d by being out of the •llfod:.Jorc.\:: for :::i f::~,M years.9'1 Some

- - - - -- --- --------
 ...

"traifo11; " ;3pous~2s d12cid'2 to us(~ the time to puxsue educational activities that
could conl:ribuie to their long-tem1 can~er goals. But it is difficult to fo1d these
opportw1ities in. an i.mfmniliar place. GlaxoSmitltl<Jine's International Service
Ccnte1~ which handles all of il:s relocations from or to the United States, offers
a buddy sys1:en1 for spouse~; l:o connect with others who have lived in the area
for the pasl: several years.95 ~:;enernl Motors offers career continuation se:rvices
which reirnbu_1·5e sp~1JSE:S $2,500 each year during fhe expahi.ate assignment for
maintaining profossim'i.al licenses or certifications. TI1e World Bank manages an
Internet site dedka.ied for exp.a.bi.ates where spouses can post resum.es an.d ask
for job leads.

~e· Ii"
lfl\.ar~11naf(~((J)~~ ~j.)R]36re
1R~p~1il: rdorll:n~,ITT iR.ll.'?pa&1rii.<11~jm~,pn::pares "'.~xpaJrial:es for retu.n1 to ihe parent company and colu1try
The preparation of from. the fon::ign. assigrm.112n~:. Expatriates and their families are likely to exper~-
expatriates for return 12nc-e hj.gl1 leveb of sh·e~,;s and amdei:y when tJ.1ey rehnn because of th12 changes
to the pa re nt company
H1a t havr,~ occmT,:::d sincr.~ H1eix deparhJ.re. Employees should be encouxaged to
and country from a
fore ign assignment self-manage 1:hf~ repatriahon process.96 Before they go on t11e assignment they
need to consider \~7hat skills they want to develop and the types of jobs that
might br.~ available :in ihrc: company for an employee "'.rith those skills. Because
the company d1anger:> and coUeagw:=;s, peen5, and managers may leave while the
expatriate is on assit:,"nmenJ, they need to mainta~1. contact with key company
I
I an.cl industry co:ntacls. Oi:he~.wi.se, on retun1 the employees' reentry shock will
I be heightened when 1.hcy have l:o deal ·with nev1.r colleagues, a new job, and a
1· company cultme t]1at rnay have changed. 1lli.s includes providjng expabiates
with company newsielters <Jnd commwuty newspapers and ensuring lfo:1t they
receive personal. 0nd work-related mail from the United States while they are on
foreign assignment. His also not uncorrunon for employees and their families to
have to readjust to a lower stand ard of living in the United States than they had
in the foreign courn1:ry, where iltey may have enjoyed maid service, a limousine,
private schools, m1d dubs. Salary and other compensation arrangements should
be worked oul well before em.ployees return from overseas assigmnents.
Aside from H~e:ntry shock, many expalxiates decide to leave the company
because !lie assignrnents they are given upon returning to the United States
Iwve less responsibility, chaUenge, and stal11s thm1 their foreign assig:mnents. 97
As noted earlier, career planning discussions need to be held before the employ-
ees leavr2 the UniJed States to (~nsuJ·e Hiat they understand the positions they
will be eligible for upon repah"ialion.
Royal Dutch ShelJ, a jojnt Dutch and United Kingdom oil and gas company,
has one of the world's largest expalTiate workforces. To avoid expatriates who
feel undervalued a.nd leave the company, Royal Dutch gets involved with expa-
h"iates an.d their carieer. H.esou.:rce planners track workers abroad, helping to iden-
tify their nf:xt ;J.Ssip;nr.oenl:. Most expatriates know their next assignment tllxee to
six months before th.e move, and aU begin the next assignment with a dear job
description. Expal:ri.al:es 1/!rho have the potential to reach top-level management
positions a.re placed in. the hon.le office every third assigmnent to increase tlleir
visibility to cornpany executives. ExpalTiates are also assigned technical. men- ._;. .-

tors who evah1atc thcjr sldUs and help them irn.prove their skills through trair1.-
1
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0

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 '"
CHAIP'TER 7 Tr.:iinin g 329

.
MAN,NGm~G \f\1VOIRIKfOiROC: IORVrERSnY .AND ~IM(llJIS~O~~
Diversity can be consickred any di:m.ension thal: differentiates a person fTorn 1SJ: 7~'1lfll
. . '·}· ice
anot " , 98 1:1 _01 . • c·"<axnp ·- .(P ,_ '·'·'· '"' • -~
.., ,_ .\v'-rv:.on d..rve1 - _.-·.·s.
.. hf ""> ni,"'__ ans - enl - 11.:tcii.:1
- - ~'..1., .,. o:t:1.k;.u1.ce~
6
l 'J:Cp - ·a·· " .c: .,•..• c1
' i..~ Devdop a program for
effc~cti \re l r manag in g
vari.ety including age, ethnicity, educati.on, sr;:;xual orienJahon, vvork style, race,
diversity.
gendet~ and rnore. bndu:sn11:~n refers i:o creating an environment in •Nh.ich exnploy-
e'(··.S·· "11·,·•o ::J ""'
..:-. '·d."-~- C 0
.,J(... (Jf l)C
1'.) ~;: A1<' ..80"'"'l-l\.-
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~~-"' . .·i..Ctil
00 •..,..,d- . ro·•n·,-,-,>b--·""Pl
-'L .:. ~J __ -c·.~- !·-r -r::u.,. f1·o·~r1 ofl1o-o
- .IL -~.11.udJ!.;1.:· C . . ~. - J. !'.. , - • ...._,•_1) ,SO
-.. . . .• ~~,d~1~n<:111i1
they rnn perfm:rn their bes!: wodc_9? r::efers .,,J creating an
Di;r~~irsHy :trc-"liinftng; refr-.>rs to learning efforts that an:' designed to change erwironme nt in which
.2mployees share a
employee atl:.iJudes nbout diversity and or I develop skills J:leeded to work with ::;t?.nsf~ of belonging,.
a diw~rse workforcP.. HoiNeve1~ b:ain:i.ng alon~ is j_nsuffici<ent to capitalize on the mutual respect, and
strengrns '' o f· a o.verse ·1· 11vorl.-.1orce.
i\..-C lGO M L ru1\agnng · \Ulr1.rtersnr:y
..n· "'l ,;1urn(!l' m<e.itiL~.sw.
• n ' n mvo. • 1v.es commiirnent fro m
creating an environment that aUows all employees to con!xibute t-o organiw- others.
lfonal goals and experience personal gi:owth. This environmenl: includes access f0ifhq~rr~".!in1y tlf'an~Hlilt~
lo job:~ as wc::ll as fair and positive b:eatm.enl: of all employeE's. 'Dw cornpany Refers to learn-
mus l develop er:nployees '/\rho are corn.fortable •Norking 1NHh people frorn a 'Nid.€ ing effo rts that are
variety of ethnic, racial, an(l. religious backgrounds. Managh1g diversity may des ig ned to change
require changing the company cull1ue. It includes the company's sl:<:mdard:.> a.nd employee attitudes
~bou:- cliversit_y and or/
non.n s ;:ibout ho-w em.pkY;r€es are treated, competitiveness, I.esults orienta.hon,
devr'1fop ski/ls nee ded
innovation,. and :risk taking. 'I11e value placed on diversity is grou:ndied. in the to wo r/( wii:h a dive rse
. ·' J') <'l.Tlf
C()l"'l t J Cl •. -llll .. t•·e
:c -· vv0rkfr:i 1c1::,.1 •
Diversity m.ay enhance performance when organizations have an envirornnen1:
thai promotes lcarnfog fro1n diversity. There is no evidence to support the direct fi\!~m~agofiilg iDn~r<"lrniil;y

relationship between divr,-crsity and business.101 Rather, a cmnpany 1Nill s~e th~ ri:n!fil(~ illH:tlM::>fi-Ollil
succ<:~ss of Hs d iversity efforts only H it makes a long-term co:rn.m.ihnent to man-
Th e process of creatin9
an emrironment i:hat
. aging diversit)r. Successful di.versi!y requixes ihat it be viev·red as an opportunity allovvs all emp loyees to
for cniployecs to (l) lean1 frorn each other huw to better ;1ccomplish their ·work, contribui:c~ to organiza-
(2) lw prmrjded with a supporljve ;md cooperahve orga.nizahona1 .r:ultux-e, and tional goals and e:<peri-
(3) be taught leadership and process skills that can faciJ.itate effective team ence personal g ro wth.
functioning. Diversity is a ;:eality in labor and customer market~> a.11.d is a social
•2xpectation and value. IVfonagers should focus on building an organizational
environrnenl, on hurnan resou.rce practi.ces, and on managerial and tearn sl<iUs
that ;:JU capitalize on diversily. As you will see in tb.e discussion that foUows, man-
aging diversi.ty reg_uires difficult cultural change, not just slogans on U1e ·wall!
Consider Sodexo' s diversity efforf:.107. Sodexo is the leading food and faciliHes
tn<1nage:rnent company in the Un.Hed States, Canada, and Ivtexko,. daHy serving
LO million r:ustorners. V\Til:h 8mployees h1 80 countries repres(~nting 128 na.hon-
alitie~:'. connecting with customers on a daily basis, a policy of h1dusion is nol
an option or a choke-it is a business necessity. Sodexo is focused on gender
repre~;eni:alion, generational opporttmjties in the workplace, people with dis-
abiJii:ie::;, and ethnic minority representa1ion. As a result, diversity and inclusion
arc core elements of the business strategy. Sodexo believes l:hal: diversity and
indw;ion is a ftmdamental business objective focused on employees (e.g ., ·work
culture, recruih11ent, talent develop1nent, work life effeciiveness), custoni.er~;,
clients, and shareb.olders (e.g., supplier diversity, cross-market diversity coun-
cil, diversity consulting), and cornro.1JJ1i lies (e.g .., Sodexo foundation, Conu11u-
, ...., _ T)
1.Ht/ JI. · " · - '"')
8ltH~l.J .. . FOl.• r>c..XClJllJ_Y
. - ]p'·r ..,
001ne. o.~£ •J~
Lle .. 0 b'JeC 1·- D<•-
:J.>T,_0 i7· ' ·-~·:,
,,_,1.Cll.I --" c- l. ,.
Lthrj1.~'~·· ·· .. r"I;
d.:>l.i\lk .. .
.1Hg .. l
a_1J(l
living th(O; busi.ness case frff div,,~:rsity and indusion; increas1_ng <.rNareness of
how diversity rela tes to business challenges; creating and fosi:erh1g a diverse
 ...
330 CHAPTEIR l Tr~Jin inq

work e1wixom:n"2nt by developing management practices that chive hiring, pro-

mo Lion, and retention of talent; engaging in relationship management and cus-
l:orncr service to atb·act an.d :rel:mn diverse clients and customers; and partnering
;vith wrnrwn <lnd xnlnority businesses to deliver food and facility management
:31~nrio2:;. T:)ivl'"~r sity and inclusion are core competencies at Sodexo. Diversity and
.
tnc.u ·1 ~"vJn
• an~ part orr emp,.oyces
l '•
i.Tairu.ng
• •
an d. managers annu a l perf·orm.ance
I

review; new employee orientation emphasizes Sodexo's values and expecta-

tions regarding diversity and indusion.
Sod<e:xo ~'K~ parates Equal Employrnent Opportunity (EEO) and legal compli-
ance IT;1in:ing from di~ersit-f training. At Sodexo, diversity training is part of
U.1.-e rn3na.gh1g d.ivernity strategy. Eve1y three years, employees are required to
b:i.ke EEO a.nd Rff:i.rmative achon refresher cou rses. Top management is also
invoJ.ved in and committed. to managing diversity. The senior executives pro-
g1nun ;(;y· ll1dr.~::; ongoing classroom train.in.g that is reinforced with cornrnt.uuty
involv '2n1c·11l, sponsoring employee grnups, and mentoring diverse employees.
Executive:; a.re Rngaged. in learning tli.e business case for diversity and are per'"
sonaHy he~d accmmtablie for the company's diversity agenda. Every manager
t:ake:c; an •:-ighJ-houi: introductory class (Spirit of Diversity). Sodexo's diversity
tra.in.i.ng iiwo.lvi::s learning Rabs focused on skill building and diversity aware-
1.1e'1:-:i . Exmnpks of these lean1jng labs include Generations in the Workplace,
Dis:JbiJjJy Awareness 'frafrung, Cross-Cultural Communications, and J_mprov-
i:ng; 1'i?anl fc:Hecl.iveness through Inclusion. TI1e company's learning and. devel-
oprn(::nJ i1,;a1:n develops customized learning solutions for different functions
~1.nd <Nork ti;:ams. For example, a course related to selling to a diverse cli.ent base
W<Jts devdopcd and offered to the sales force, and a cross-cultural c01nmunica-
tio nr.> prograrn 1Nas p rovided for recruiters.
In addition to cHv~::rsity training activities, Sodexo has six employee netvvork
[:;roups---:,uch as llw African Am.erican Leadership Forum, People Respect-
j_ng IndivJich.v:.iJity~ Diversity, and Equality, Honoring Our Nation's fjnest with
Opportunity di1d Respect (HONOR), and the Intergenerational Network Group.
These n~;:>Arork groups provide forums for employees' professional develop-
nn. t::ni: a;1d sha.ring ji-1put and ideas to support tl1e coni.panys' diversity efforts.
Sock:;,o':: 'Cha.:rnpions of Diversity" program rewards and recognizes employ-
c'~~; who ;1d,rance diversity and inclusion.
'fo cniphasize the importance of diversity for the company, at Sodexo ·each
j[nana~;rc:r has a diversity scorecard that evaluates their success in recruihnent,
reh:~nhon, promolio:n, and development of all employees. The scorecard includes
bot~1 guan.li.tatlve goals as well as evaluation of behaviors such as participating
in trnin:tng, lTJ.entoring, and domg community outreach. A proportion of their
p<iy bon•.13<::3 is detennined by success in t.hese areas.
'.:Jodcxi) has found thai: its diversity training and efforts to manage diversity
<.ire h avj11g a positive impact on business results. Its mentoring program has led
to increased produclivity, engagement, and retention of women and people of
color. There vras an esfonated :rehlln on investment of $19 for every dollar spent ·
on the program. Sodexo also h as been awarded several new business contracts
and n,~·ti ;Jined dients because of its involvement in managing diversi1y. Sod exo
hns a..bo been :recognized for its diversity and inclusion efforts, which helps
attract talented employees by signaling that the company cares about the well-
beh1g of aU of its employees. Sodexo has been ranlced number 2 on the 2012
Di.verr:;Hyin.c Top 50 Companies for Diversi·iy list. Titis marks the thb:d con,secu-
b.ve year that Sodexo has peen ra..nJ-:ed ntm1ber 2. Sodexo is also recognj.zed as
<J. top cmnpany for execut:i.vr:~ women and ranked among the top 10 cmnpanies
 CHAPTER 7 Tra ining 331

Key Components of Effective Managing Diversity Pmgrams

·fop l\/lanageme nt Suppori:

~ Make the bu siness case +or diversity.
" Include diversily as pa r1 of the business strategy and corporate goals.
~ Participate in divers ity proc;:11·a111s, and .encouraqe ali manage rs to attend.
"' Ensure that the composition ofthe executive management team mirrors t he
Hecrui.trnen:t and Hiring .
·Ask soarchfirrns .to identii}' wider arrnys of
llt

·" Enhance th e interv.iewir:iq, s0Jecti6i\

~ E><pand colk~g<:l r(!cruiirn~mt µt historica lly minority collE!ges:
identifyin9 and Developin9 Talent
,, r:o1T11 a p;:ir1:n 10~rs hi p
with in l:errd1 ip p r·og r«:irns that target minority students for m anagement caree rs.
" Establish a me ntoring process.
<> Ref ine the company's global succession pl anning system to improve identification of ta lent.

" Improve the se lection and deve lopme nt of managers and leaders to help ensu re that they are capab le
of rnaJ<irnizin9 team performance.
" 1: nsu1"2 that all employees, es1::ieci all y women and minorities, have access to management deve lopment
a nd leadership programs.
i:i.mi:iloye<~ SqpporJ . >
(:!.· form re~;QLtrce ,~Jroups. qr fm1ploy~.e networkg roups,including• ef:0,p,lp:ye.~ .
usEi thern •to .hel.R the,0ornpany d0vel.9p b~1siness goals and, un.rj(;lr~~,§;hg;_f
vvith (1::.!.g., Asian ' Paci ficemploye$s,wo rD~n, gays, ·lesbians, tran99e~d~Fs;;
Hi::1par1ics). ·. ·. · · . · · · · · · , ,, ·· ·

~ O '!k)b rate cultu ral ltadltions, festivities, and holidays. • . .. .· . .···.. ·. ·.·. / > ..... .. ·.· ·.· ·•· .· . . .•.
,, Maki:~ work/ Iifo hafahte initi~tives (suth asflextiine, telecoifimuting;·· ~ldercar.¢).a§iiJ~b!e.tb; a!l•~mptoyee-s:'
En ~;uring Fair Treatment ·
" Conduct e><ten sive di ve1·s ity trainin g .
" lmpk!rTHc:nt an alternative cli:;pute reso lution pmcess.
" · Include wom en <:md m inorities on all human resources committees throug hout the
!•k1ld ing M<:ma911rs Accountabfo · ·. .. .
"' !...ink rr1anagers' 0::1rnpensation to their success in meeting di\1ersi~y '"''"'·~· .U<

iw:IU'$ion.JrYthe1v,iqt\<p1 <3ce, .
" Use Eimploye<;i ;o1ttittide or· en9agerne 11t surveys to
· oppi:lrt\mities for development, woddlife b alance, and ,,....,,,,.r,'"""'h",n"'
or lrnplemeiTl 86D~d~gree fer~dback for all rrn;rn agnrs and SL.!pervisons;
Improving Relati onships with External Stake h okk~rs
0
Increase marketi r i~J to diverse com munities.
"' Provide custome r se rvice in d iffe r-en!: langu ages.
0 Broaden the company's base o-f suppli ers an d vendors to include businesses owned by minorities and
women .
~ Provide schol arships and educational and neighborhood grants to diver-se communities and their
members.

SOURCES: Based on J(. Bezrvkova, I<. Jehn, and C. Spell, "Reviewing Diversity Training: Where Have We Been and Where Should We Go?"
·.:,,;.'
·! ··' Academy of Managemen t Learning /Jc Education 11 (20 12), pp. 207-227; R Ana nd and M. Winters, "A Retrospective View of Corporate Diversity
..........., .. I' Training from 1964 to th e P1·esent," Academy of Management Learning 8, Educa tion 7 (2008), pp. 356-72; C. Chavez and J. Weisinger, "Beyond
Diveroity Training : A Soci al Infusion for Cultura l Inclusion." Human l?esource Managemet;it 47 (2008), pp . 331- 50; V. Smith, "'Texaco O utlines
Compmhensive Initiatives." Human Reso urce Executive, February 1997, p . 13; Ve rizo n's diversit-; program avail able at t he comp any website,
www.verizon .co1n.

for Latinos, blacks, global diversity, and people with disabilities. Most effective
programs to manage diversity, such as Sode:i.co' s diversity program, include the
key components shown in Table 7.9.
332 CHAPTER 7 Training

As should be apparent frorn this discussion, successful diversity programs

involve more than just an effective training program. They require an ongo-
jng process of culture change IJ1at includes top management support as well
as diversity policies and practices in the areas of recru:ibnent and hiring, train-
ing and development:, and aclminish·ative structmes, such as conducting diver-
sity surveys and evaluating managers' progress on diversity goals.103 11.1ey also
fo cus on enh<mcing diversity and inclusion witl1 suppliers, vendors, and in the
communities where the company conducts business.

Onlboarding and Socia~izatmon

Onboardling Onbomrdhllg, or socialization, refers to the process of helping new hires adjust
Refers to the process to social. and performance aspects of their new jobs.104 This is important to help
of helping new hires employees adjust to their jobs by establishing relationships to increase satisfac-
adjust to social and
1ion, clarifying goals and expectations to improve performance, and provid-
performance aspects
of their new jobs. ing feedback, coaching, and follow-up activities to reduce turnover. There i:s
wide variation :in the types of onboarding programs across companies. How-
ever, effective onboardjng involves the fom steps shm"111 :in Figure 7.6. Effective
onboarding does include understanding mUJ.--idane tasks such as completing tax
fo1ms and knowing how to complete time sheets or travel reimhuxsement forms.
But it goes beyond compliance to include enhancing new lilies' self-ccmfidence,
their feeling socially comfortable and accepted by their peers and manager,
understanding their role and job expectations, responsibilities, and performance
requirements, and helpjng them "fit" into and understand the comp~my culture.
Effective onboa:rding is related to many important outcomes for the e1nployee
and the company includin.g higher job satisfaction, organiza,tional comn1itment,
lower turnove1~ higher performance, reduced stress and career effective11ess.1os
Table 7.10 shows the characteristics of effective orientation programs. Effective
onboarding programs actively involve the new employee. Several companies

!Figul!'e 1.lffi
The Four Steps in.
Onboarding

SOURC E: Bu sed on T f3auer, "Onboarding New Employees: Maximizing Success" (Al exandria, VA: SJ-m M Founda-
tion, 2010); G. Chao, A. O'Leary-Kelly, S. Wolf, H. l<lein, and P. Gardner, "Organizational Socialization: Its Content
an d Consequences, " Journal of Applied f>sycho lo_gy 79 (1994), pp. 730-743.
 ...
CHAPTER 7 Training 333

offer onboardin g programs that indude the d1m·acterislics shown in Table 7.10.
Ne•N hires at Sierra Nevada Corporation , a compa_ny in th.e defense and aero-
space·indushy, are contacted by tlw: company's talent acquisition and training
teams before mientation.106 The program includes a review of the company's
history, cultuxe, vision, and values. l\Tew hires' first day on the job includes a
meet-and-greet lunch date with theU: manager. Employees continue onboard-
ing for 90 days, which includes e-learning, mentoring, on-the-job trnining, and
a performance review. Booz Allen's onboarding programs involve face-to-face
and online activities to enhance the effectiveness of theiT process. Booz Allen,
a strategy and technology consulting company, revised theil" onboarding pro-
gram to reduce the time it took for new employees to become productive, sup-
.port 1h eir decision to join tl1e company, and develop knowledge regarding the
company cultuxe and core values.107 T'ne new program, which spans 12 months,
.includes learning activities and events organized into three phases. The first
. ... phase, known as "Engage," is designed to motivate and prepare new hires for
· their. first year. Engage spans two to three weeks. It includes learning activities
that actively in volve tl1e new hires indud:ii.1.g working in cross-functional teams
with members from different offices an.d levels. New hires can use thell' laptops
to explore onlme resources for career plaitning and development. TeamB of three
new hires each begin to compete :in a simulai:ed year··long client project:. TI1.ey
have access to an experienced employee who can provide insights and examples
of how they h ave worked with clients during their career. Also, senior company
leaders deliver welcome messages and lead discussions on ho~v to succeed at
the comp<my. The second phase of the onboarding program, "Equip," begins the
new hires' second week and continues tlu·ough theiT first sbc months. "Equip"
provides employees with the skills, behaviors, and tools t11ey need for success
at the compan y. It includes 30, 60, and 90 day meetings with their manager, a
series of e-newsletters, and a detailed onboarding tool kit designed to reinforce
and build on what they lea1.1.1ed in the first phase of the prog--ram. The third and
fina l phase, "Excel," emphasizes professional development, rela1ionship build-
ing, and acceptance of H1e company's values. "Excel" :involves the seven-month
period through the end of the new hires' first year of employment. The employ-
ees' first ammal performance review occurs at the end of "Excel." In addition to
the three phases, new hires have access to and are encouraged to use the compa-
ny's social med ia and knowledge m anagement tool, 1G1own as the Onboarcling
Conununity, to discover and share infonnation via biogs and take part in online

Table 1.10
Employoes are enco uraged to questions Characteristics
:Prot:J1arn .includ0s inforitratio0-o.11 ·botf1;tec}1n)taland social; aspeqtsof.theJqp'7 · of Effective
ThQ employee manager has some onboarding 1-esponsibility Onboarding
Debasin9 or e rnbatrassing new ·employees is avoided Programs
l::rnployePs learn about th"'" company cu lture, history, langua~ie, products, services,
and cu:.;t:omers
Foll owcup ()f e rnp l oyet~ pro9ressoccurs at different points up.to oneyear.a:fter .·
joining :th(!) cornpahy ·· ·
Prograrn involves participation, active involvement, and formal and informal
interaction between new hires and current employees
R<~locatkn1 assistanc~ fs prc)v icJed>(such as house huntinfj o!' ir\formation sessions
on the comn1unity for employees and their significant others)
 ..
334 CHAPTER 1 Training

activities and resomces that support the onboarding program. As a result of the
program, h.u-nove.r for new employees who have been with the company sjx
months or less has been reduced by 4%. Also, new employees' time to produc-
tivity has been reduced, saving the company m.illions of dollars in lost revenue.
IBM's onboarding program, Succeeding @IBM, takes into account that many
new employees don't spend much of their time in the office--they work at home,
on the road, and members of their work group are likely located around the
world.1os But new employees still need to quicJ:-Jy learn to perform their jobs,
feel comfortable, and develop a network of friends. The onboarding program
includes both face-to-face jnteractions and teclmology-based features that help
employees prepcu:e for their job as well as plan for their careers. It helps employ-
ees learn how their job relates to other IBM business units and locations and is
customized to address !:he needs of employees in different types of jobs such as
consultants, college graduates, and managers. Following a classroom experience
on the fixst day new employees work: online to complete four different phases of
onboardi.ng. Discovery IBM covers IBM's values, history, and businesses. Share
and Connect encourages new e:mployees to collaborate with each other and expe-
rienced employees for support, caxeer guidance, and technical expertise. Grow
My Career provides a roadmap for employees to use to identify different learn-
ing and career paths within IBM. Find Support cormects new employees with
mentors, career coaches, websites, and other resources. New employees can alSo
use IBM's instant messaging a11d have access to an online employee directory
I
1· that includes job descriptions, resumes, sblls and languages spoken, and photos.

v
v
"\/The chapter opener hi g hlights the d iffe rent training metho ds that Farmers Insur-
anc e Group uses to su p port its b usiness objectives . .
QUIEST~OINS

'L What are the advantages an d d isadvantages of the blended learning

approach use d at Farmers?
2. How wou ld you determine if Farmers' tra iriing is strategic?

Technological .iJ.movalions, new product markel.13, and ~
diverse workforce have increased the need for compa-
nies to reexamine how their t:raixu.ng practices contrib-
uteto learning. Jn this chapter we discussed a sy::;i:ematic
approach to Lnrining, including needs assessment,
design of the learning environment, consideration of
employee readiness for h"ain.ing, and transfer-of-training
issues. We reviewed numerous training metl1ods and
sh·essed that the key to succes5ful training was to
d1oose a method that would best ac,c omplish the objec-
l:ives of training. We alBo emphasized how trainil:lg
can contribute to effectiveness through establishing a
link -vVith the company's strategic direction and dem-
onstrating through cost-benefit analysis how IJ:aining
conh·ibutes ·~:o profitability. Managing clivernity and
cross-cultural preparation are two training issues that
are relevant given company needs to capitahze on. a
djverse workforce and global marb~ts. ·
 CHAPTER 7 Training 335

Continuous learning, 289 Electronic performance Group- or team-building

Training, 289 support systems (EPSS), 306 · methods, 318
formal training, 289 Corrununities of practice, 306 Experien1::ial programs, 318
Informal learning, 289 Presentation methods, 308 Advenhll"e learning, 319
Explicit Knowledge, 290 Teleconferencing, 309 · Cross-training, 320
Tacit Knowledge, 290 Webcasting, 309 Coordination training, 320
Knowledge management, 290 H ands-on methods, 311 Team leader LTainmg, 320
Training design process, 291 Action lcamjng, 321
On-the-job training (Off), 311
Needs assessment, 293 Kaizen, 321
Apprenticeship, 311
Organizational analysis, 294 Training outcomes, 322
Intemshlp, 313
Person analysis, 294 Retm:n on iJ.1veshnent, 325
Simulation, 313 ExpaiTiate, 326
Task analysis, 294
Readiness for training, 299 Avatar, 313 Cmss-cnl.h ll'al preparation, 326
:Motivationtolearn,300 Vutual reality, 313 RepalTiati.on, 328
E ~lear.ning, 31.5 Inclusion, 329
Transfer of train.illg, 303
:Manager support, 303 Repmvosing, 316 Diversity training, 329
Action plan, 304 Social medfa, 316 Managing diversity ;;l.lld
Support nelworlc, 305 Blended learning, 316 :inclusion, 329
Opportunity to perfmm, 306 Learning management Onboarding, 332
system. (LMS), 318

1. l\Joelron, a retail elech·onics store, recently invested
a large amotmt of money to train sales staff to
improve customer service. TI1e 5kills emphasized
in the program include how to greet customers,
determine their needs, and demonstrate prod--
uct convenience. The company wants to ·know
whether the prograrn is effeclive. Wh at outcomes
should it collect? What type of evalu ation design
should it use?
2. "Melinda," bellowed Tonm, 'Tve got a problem
and you've got to solve it. I can't get p eople in this
plant to work together as a teani. AB if I don't have
enough trouble with the competition and delin-
quent accounts, now I have to put up with run-
ning a zoo. It's your responsibility to see that -U1e
staff gets along with each other. l want a human
relations training proposal on my desk by Mon-
day." How would you determine the need for
human relations training'? How would you deter-
mine whether you actually had a training prob-
lem? What else could be responsible?
3, Assume you are general manager of a smaJl sea--
food company. Most training is unstructured and
occurs on the job. Currently, senior fish cleaners
are respon5ib le for teaching new employees how
to perform the job. Yollr company has been prof-
itable, but recently wholesale fish dealers that
buy yow· produd have been coJnplaining ab0ut
the poor qualiiy of your fresh fish. For exam.pl.e,
some fillets have not had all the scaks removed
and abdomen parts remam attached to the fillets.
You have decided to change ihe on-the-job o:ain-
ing received by the fo\h cleaners. How will you
m odify the training to improve the quality of the
product delivered to the wholesalers?
4. A training needs analysis indicates that m.anagers'
productivity is inhibited because they are reJuc-
tant to delegate tasks to their subordi..<ates. Sup-
pose you had to decide beti:Neen using adventure
lemning and a lecture using a virtual classroom
for your trainmg program. \Nhat are the strengths
and weaknesses of each tcclmique? lNhid1 would
you choose? V\fl1y? ·w hat factors would influ ence
your dedsion?
5. TO improve product quality, a cornpany is intTo-
ducing a computer-assisted manufacturing pro-
cess into one of its assembly plants. The new
tedmology is likely to substanlia11y modify jobs.
 ...

336 CHAPTER 7 Trainin<::J

Employees w ill <.1J.so be requiJ.(;d tu l.ear.n si:a Usti-
cal process control lecl.rniques. The new h"di.nol-
ogy and push for qu.alily will n~quire ernployees
to attend numerous training sessions. Nfore th;:m
50'/;, of th e employcer:> 'Nho will be af.fod£d by
the ne1N leduwlog:y coxnplctcd their formal edu··
cation more than HJ years ago. Only about 5% of
the company's eihployee~:: have u sed lfo~ tuition
reimbursement benefit. How should managen1enl:
maximize ei:nployees' readiJw~;s for traixti.ng7
6. /\ training com·~cie 1Nas offered for n:iainl:enance
employees in which trainees were supposed
to learn how to repair and operate a new, com.-
plex electronics system. On l:he job, maintenance
employees were typically told about a symptorn
experienced by the machine operator an.cl ·w ere
<1~>ke d to locate !:he trouble. Dusing training, the
trainer would p0sc various pn Jblc.o.1s for llw mai.n-
l:enance employees to solve. He lNould poii.1!: oui:
a component on an el.ectrica1 diagram and asl<:,
"\/\That would happen iJ l:his co:mponent ·was
faulty"?" Trai11.ees ~would then ;:race the circuitry on
a blueprint lo uncover !:he symptoms that ·would
appeax as a result of the problem. You an~ n=~ceiv,-­
ing complajnts about poor troubleshooting from
1
ma:intenance supervisors of employees wh.0' have
completed the program. TI1e trainees are highly
motivated and have the necessary prereqLtisites.
What is the problem with the training comse?
iNhat recommendations do you have for fb(ing
this course?
7. What factors contribute to the effectiveness of
e-learning trairung programs?
8. Choose a job you are familiai· V'rith. Design a
new employee onboarding program for that job.
Explain how your program contributes to effective
socialization.
9. \II.Thy might employees prefer blended learning l:o
h'aining using only iPads?
10. \lln1at learnmg condition do you thiJ.1.k is most nec-
essary for learning to occur? \Much is least criti-
cal? Why?
11. \l\lhat can companies do to encourage inform.al
lean1.ing?
12. List and discuss the steps in cn;s:>-o.JJ.t11xal
preparation.

In the chapter we discussed tl1e need for leaxners to 5 = Strongly Agree

be motivated so that trai:njJ.1(j will be effec!J.ve. What i~; 4: = Somewhat Agree
your molivation to learn? Find (Jut by answering 01e 3 =Neutral
foUowiJ1g questions. Read each s!:atem.cni: osid h""ldkale 2 = Somewhat Disagree
how much you agree wilh it, u:,>i.ng the following scale: 1 = Strongly Disagree
1. I hy to learn as mud1 as r. can frnm the courses I take. 5 4 3 2
.,
; __
I believe I tend to learn mor12 frnm my col.uses IJw.n
other students do. 5 4 3 2
3. 'Nhen I'ln involved in courses and can't underst.:md
something, I get so frustrated l stop ttying to learn. ,-
,) 4 3 2

,·Grnwth thrnugh Acqu isi"rdon Brevving !nternational Talent

SAIHVliUer is the second largest b rewer in tfo: world, to excel its employees through out the world must
employing over 70,000 p eople and selling over be equally competent. SABMiller contracted with
200 brands of beer in 7.5 countries throughout t.hr:: Accenture to roll out its Supply Chain Academy
world . I-Jowever, in orde r for this global busines~s which is considered one of the most sophisticated ·
 ..
programs of its kind worldwide. The ben efit:> of
this program include its implementation flexib il-
ity which ensures that a p roduct of equal standard
and content can be rolled. out differently depen.ding
on regional demands and constraints. AH reports
suggest that Accentwre's program has been widely
accepted by SABMiller employees in subsidiaries
throughout the world and the company is begin··
ning to see significant improvements in supply
chain performance.
McDonald's: Expansion by Leaming
In. 2008, the British government axmo1mced that tfo::
American fast food firm McDonald's w as eli gible to
confer diplomas to its British employees. McDomi.kl' s
has about one thousa..1.d establislunents in the UK T.lw
busii>ess world reacted .very enH11isiaslically becauBe
working w ithin a McDonald's restaurant could tJlen
lead to the comprehension of running ;;i. business.
Despite the cxitical remarks from higher 1~ducationaJ
inslih.ttes, the then Prime Ministe1~ Gordon Brown,
· reacted positively saying that combii1ing practical
skills and theoretical knowledge is no degradation of
standards.
McDonald's was established when Ray Kroc,
a sales agent for milk shakes equipment, met the
McDonald brothers in California. Ray Kroc entered
into a contract with the McDonald brothers to open
restaurants using the McDonald nam.e all over the
world . On April 15 1955 the first reslaw·ant was
opened in Des Plaines (Illinois, USA). McDonald's
has since grown into one of the largest fas t food
firms in the world and now has establishments in
119 countries and territories around the world and
serves 58 million customers each day. It employs
more than 1.5 m illion people and has over 31,000 res-
taurants worldwide.
Interestingly, most of the McDonald's restau-
rants are owned and operated by franchisees or by
joint ventures. Only 15% of all the resta1ffants are
owned and operated by the McDonald's Corpora-
tion itself. McDonald's does not make direct sales
of food or materials t:o franchisees, instead organiz-
ing the supply of food and materials to restam:ani:s
tlu-ough approved third party logistics operators.
CHAPTER 7 Train ing 337
Q.IUl~SunO!i"tJS
L Huw cat< a company such as SABJVliller ensure
equivalence in standards for training interventions
that are implemented in vaiied and diverse regions?
2. How can organisations help support employees in
~id.opting new technologies?
SOURCES: Brewing Up Stronger Talent: Implementing Accenture's
Supply Chain Academy at SAB!vliller. www.accenture.com/
Si teCoU ectionDocuments /PDF I Accenture-11-2254-SAIJ..Miller-Cre-
US-Cropped.pdf. Accessed 6th May 2014.
AH fraJ.1d1jsern and general managers are trairn=.:d by
Il/kDonald' s Hamburger University in Oal<: Brooks in
Illinois. 11.1.e H a..mbu.rger University 1~.ra:s established jn_
1961 for people who want to lead a McDona.ld's 12st.ab-
li.shm.ent. At this University tJ1e students are taught in
genen1l management to run a restaurant successfully.
l\1fore than 80,000 students have graduated from this
University. The Hamburger University is situated on
an 80 acres (32 ha) campus with 19 full-time resident
instructors. The facility comprises 13 teaching rooms,
a 300-seat auditorium, 12 interactive education team
rooms, and 3 kitchen labs. Hambmger University
tra.i1 slators are able to provide simultaneous inter-
pretation, and the faculty has the ability to teach in
28 different languages. Restaurant employees receive
approxim ately 32 hours of training in their first month
with M:cDonald's and more than 5,000 students attend
Hambmger University each year. In 2010 McDonald's
additionally opened a Hambmger University location
in Shanghai, Cl1ina.
The jobs in a McDonald's restaurant are very spe-
cific and. standardized to guarantee a smooth and
efficient work process. Each food item has its own
machine. The machines are an essential part of the
produ ction process and work autornahcall.y. The pro-
duction process comprises several steps and each
step is extensively described with a work process.
Every McDonald's facility works by the same inter-
national standards. TI1e machinery is in some way
highly evolved and has been made exactly right for
its particular job through trial and error so that the
actual speed and ease of each task is maximised. The
area is J.aicl out for maximum efficiency and minimum
33'6 CHAPlER 7 Traini n~J
movement by 1J1e worker. .For r-:J(<W.1ple the b1m c~,
toaster grill and trays are posii:ioncd vnc on rup Df lh2
other and there an~ signs everywhere ·with wo-rds <JJ.vJ
pictures for instruction. The standmdized rN0rk pro""
cess and the efficient lay ou t rnakes a Md)on.akl's re;--
taurant more a factory than a kitchen. New· worken:
are following training on the job 1:0 :Ul?Whcr l:he work
p rocesses.
After performing well, workern vvho arc conskl.-
ered 'talents' are offered to step into nvuw.gemcn t
training. McDonald's offers e:-kan:ting pri:lgrmn:o in
management which :make~3 jJ possible for s>:w:l.en!:;~
to get access to an adv anced dip lot.n<A . fks ide::; th€
training and education progrm.n::; MdJonald's abn
offers scholarships to employees wh") also ar~ s1_,, _
dents studying at university. ln l:h<~ UK McDonaJd's
promised to offer 10,000 appreniiceships per annuxn
from 2012 onwards. TI1,e cmnp"lny is "1im:ing ;:i_t m;·:
in seven of Hs workforce to be i.nvohrcd in prep;:n: ·
ing for an on-the-job q ualifica tion tl.1rou.3h ux:id•·-
ing, some classroom learning and onlJsJ.c study. Xi:
will include developing young 1wopk'::; math .zmd
English ability, teamwork and iJnrolvo:ncnJ i_u co1n·-
munil:y projects, as well as 1:r;,1ining peopk hov11 <u
cook burgers. The apprenhcl';;Ghips wovld inclvd•c::
working in the kitchens and at counter;3, "·1ri!:i11g
reports and studying hygiene 0.11.d nutrHfon, omd
might last a year.
How Nick's Pizza Delivers Trainin9 Resu~ts
At firnt glance, Nick's Pizza 8r. Pub souncb as ordinary
as a company can be: a p izza rccsh11~trant 1Nith two loca--
tions, each in one of Chicago's norllnve:::t suburbs. BvJ
when you take a look at the comp m1y's performance
measures, something spedaJ. seerns to br.~ going c:n. ht
an industry where 200% employee hJJ11ovrr~r and oper-
ating profits around 6 1/2%, axe normaJ., Nick's has
to replace only 20% of its employees each .r:ar and
enjoys operating profits of l<l% or lnme. These n:su.Hs
are amazing, especially for a busuv::~;s i.n which !.I out of
10 employees are hlgh school students.
l/llhat makes the difference? H couJd be the cuJtttT~.:
at Nick's. Rather than hiring expert managers <md lay-·
iJ1.g down a lot of ml.es, .N ick's is choo~l}' about ·who
Davi.d Fairhurst, the senior vice-p:n2sident ~uvi d1.ief
prnpk officer for McDonald's in thr~ UK, sa_i_cl he had
no problem with t.he tenn McJob provided i:ha< H did
nol: mean lmv-paid, low-dignity employment wi£h no
opportunities. "'There is still the perception there but
l:he gap [from reality] is not as big as it w a5 and people
understand a bit more about what the realit-y is about
J~or many yow1g people we are a stepping stone on to
other things." 11i.e founder of the McDonald's concept
R<1y Krnc emphasized the importance of <lev€loping
talent and investing m oney in education arnJ !To.ining
S.'.> a source of success. When offering 1lie po00iJJility to
k:;:i_-rn and to develop, employees ar€ not crdy b12:con1.-
ing inore skiJJul and competent, but b2comjng rnor-::,
kJyal and productive.
QliJIE$UOINl:S
1. VVhat is the contribution of learning to the :wcc2s;3
of McDonald's? Substantiate yotff ans·wer.
/~ .
Is tJJ.e.re a difference betvvee11 a con,1pap_y· Sl-1.J_)_port-·
ing learning and a company supporlii.<g traLuing?
Explain.
3. How can e-learn.ing be useful for the actual •Nork i_n
a McDonald's restaurant? Explain.
SOURCES: McDonald's serve~ up 'Diplomas·, Hannah Goff, DIJC
)'.Jews, 2!J january 2005. McDonald's to put 10,000 appreri.l:ices on :fa:;t-
fccd trnck to success, TI1e Guarclian, James Meikle, 7 Janu;wy 7-IJ09.
WVl•·w.mcdonalds.com.
gets hired for eve1y position and then provides them
with enough training to operate skiUfuJly and exer-
cise so1md judgment. The whole training program
emphasizes ways to develop trustworthy, dedicated
employees.
Traiillng at Nick's begins with a lwo-day orienta-
l:ion program. Trai11ees learn the company's p urpose,
valu es, and culture, and they participate iJ1 rnle-
playi.ng activities to practice those lessons. Then it's
on to skills training, begll:uUng with a course caJJed
simp ly 101. During that four-hour hands-on J.esson
in the btchen, all the new employees--regardJ.ess of
w hat fheh· future job will be- learn to make a pizw.
From. there, the lrainees divide into work g:rnups for
 ...
.
the ll(~Xt
level of training. In 201, these groups of train-
c1~s embark on longer-term training to be certified in
performing a particular job. For example, an employee
might train in pizza making for a few weeks 1mlil he or
she earns a certificalion as a pizza r:naker.
Class 201 ends the mandatory training, but Nick's
provides incentives for further learning. An employee
can participate in additional 201 courses to learn more
jobs and earn a pay increase. An employee who earns
two rnore certifications (say, one in salad making and
one in sandwich preparation) enjoys a wage increase
of 75 cents an hour-and the prestige of exchanging
the uniform's tan hat for a red hat. Some employees
earn nine certifications, after which their pay rises
another $2 an h oux, and they get to wear a black hat
with their uniform.
Yet another level of h·aining prepares employees
to be LTainers t11ernselves. This level--301-prepares
employees to earn a top skill rafit1.g in theix areas of
certification. Besides these task-miented skills, the
empioyees receive training in commrnlication and
le<Klership and study a book called Mastery: T71e Keys to
Success and Long-Tenn Fulfillment by George Leonard..
Employees who cornplel:e these requirement5 receiv<::
a Leadership 301 Passport, which includes a chEck-
list of behaviors they are expected to 1nodel for the
employees they lead. Dming the weeks that follow,
they watch for situations in which tl1ey or ot11.ers ru:e
exhibiting each behavior, jotting down descriptiorrn of
what they witnessed. VI/hen H1e listed behaviors have
au been observed and noted, the participants take
a course i.n txait1.i11g, and they finally are ready l:o be
n.mned trainers themselves.
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2. U. Sessa and M. London, Continuous Leaming in 01ganiza-
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.3. M. Green and E. McGill, "The 2011 State of the Industry,"
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pp. 29-31.
CHAPTER ..l Training 339
Along with these formal training program.s, Nick's
provides furtl1er on-the-job leal"ning through coach-
ing by managers and lTainers. The goal is to provide
feedback in the moment, not waiting for perfo1mance
appraisal meetings. For example, at tfa~ end of each
sh.Ht, trainers will ask h·ainees to identify one thing
they did well that day and one thing they would
liJ(e to improve. In addition, managers are taught to
observe employees' behavior on tl1e job and ask 111ern-
selves whether what they see would make them want
to hire the employee. If yes, the manager is expected to
give i.J.runediate positive feedback If no, the manager
is expected to coach the employee on how to do better.
Q.U f,;$!HQU\tS
1. To lhe extent that you can provide details from
t.he information given and a visit to the Nick's
Pizza website (ww1111.nickspizzapub.corn), prepare
a needs assessment for b:aining kitchen staff at
hTick's. Remember to include organization, person,
and task analyses.
2. How does the work environment support l:ra:iJ.1.ing
at Nick's? In what additional ways, besides those
described, could the work environment support
tTai.njng 'i'
3. Do you think an outside contrnctor could provide
training for Nick's as effectively as its current meth-
ods do? VVhy or why not? Pue there some types or
topics of training for which a contrnctor might be
appropriate? If so, which ones?
•SOURCES: Nick's Pi.zza & Pub corporate website, www.nickspizzapub
.com, accessed March 15, 2012; and based on ]30 Budingham, "Lessons
from a Blue-Collar Millionaire," Inc., February 2010, www.inc.com.
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 340 CHAPTER 1 Training
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 ...
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K. Jehn, J. Leonard, D . Levine, and D. TI1omas, "TI1e
Effects of Diversity on Business Performance: Report of
the Di.versity Research Network," Human Resource f\1a11-
agemenl '12 (2003), pp. 3--21; F. Hansen, "Diversity's Busi-
ness Case Just Doesn't Add Up," Workforce, June 2003,
pp . 29-32; M . J. Wesson and C. I. Gogus, "Shal<ing Hands
vvith the Computer: .An Examination of Two Methods of
Newcomer Socialization," Journal of Applied Psyclw/.ogiJ 90
(2005), pp. 1013--26; H . J. Klein and N. A., Weaver, "Th.e
Effectiveness of an Organizational-Level Orientation
Training Program in the Socialization of New Hires," Per-
smmel Psychology 53 (2000), pp. 47-66.
102. R. A>a.nd and M . Winters, "A Retrospective View of
Corporate Diversity Training from 1964 to the Present,"
Academy of Management Learning & Education, 7 (2008),
pp. 356-72; Dolezalek, "The Path to Inclusion." Also, s2e
www.sodexousa.com. "Sodexo 2011 Diversity and Inclu-
sion Annual Report," available at WV\'W.sodexousa.com
website for Sodexo USA, accessed Ap1il 28, 2013.
103. C. T. Schreiber, K. F. Price, and A. Morrison, "Workforce
Diversity and the Glass Ceiling: Practices, Bmri.ers, Pos-
sibilities," Hunum Resource Planning 16 (1994), pp. 51-69;
K. Beztvkova, K. Jelm, and C. Spell, "Reviewing Diversity
Training: Where Have We Been and Where Should We
Go?" Academy of lvinnngement Leaming and Educahon 11
(2012), pp. 207-227.
104. T. Bauer, "Onboarding New Employees: Maximizing
Success" (Alexandria, VA: SH.RM Foundation, 2010) .
105. H. Klein and N. Weaver~ "The Effechveness of
Organizational-level Orientation Program in the SociaF
ization of New Hires," Personnel Psyclwlogy 23 (2000),
pp. 47-66; C. Wanberg, J. Kammeyer-Mueller, "Predic~
tors and 01.ltcomes of Proactivity in the Socialization Pro-
cess," Journal of Applied Psychology 85 (2000), pp. 373-385;
T. Bauer, T. Bodne1~ B. Erdoga.n, D. Truxillo, a.nd J. T1.lc!.cer,
"Newcomer Adjustment during Organizational Socializa-
tion: A Meta-analytic Review of Antecedents, Outcomes,
a11d Methods," Journal of Applied PsyclwlogiJ 92 (2007),
pp. 707-721; D. Allen, "Do Organizational Socialization
Tactics Influence Newcomer Embeddedness and Turn-
over?" Joumal of Management 32 (2006), pp, 237-256.
106. "Trainli1g Top 125," Training, January /Febmary 2011,
P· 91.
107. D. Mill.iken, "Poised for Discovery," T + D, August 2011,
pp. 70-71.
108. T. Stamer, "Big Blue Welcomes You," Human .Resource
Executive, September 16, 2010, pp. 30-33.
Afi:er re;JCJin9 ti ris chapter; v ou shcuicl /y~ ab fr,! to.

the 1najor cb i e 1Tn i11a11is of efhctive

!den1:if ;,
;)crfornvmce nHrlaC;i<') F'il'c'l lt. pa:']e 348

lckmtify the'! for,,? crit:eri a ior effective performance

r-r1;Jt1aqs! l-:,-::;11·!: ~3y.=;tc n·1: _~. f)a:Je 352

l)isr:us:; lour :i1;1xo;ir :hes to pe1+onna11ce management, the ~ipecifo.:

1l1r0
~cchnique'> U~'E!d in 0'K h a pproach, and the way these app roaches cnrnp;_1re
Nith the cril:e1·ia fo r r:dfective pe1-forrnance management syste ms. page JSi
1

Choo:;e l:!v; most approach to performance

r,; :(c:; i::ti 11(0
1·nea'.;1:rerne1Ti: fo;· d 9iwm c;ituation. page 376

Discuss t l·1(CJ advant ci 9 es and disadvantages of the different

sources. of perforn1;111ee information. page 377

C l100:,e the mo:;i ·Afoci:ive so•.ffn0(~.;) for pe1-fonnance

information lor any ·;ii:: i 0 iio11. pa9e 377

l)islinr;Jlfr_;li l.ypc:; or ,-:yiinq '-"il"Ors, ;:;ind e)cplain how l:o

m ini1ni<:c each i1'1 a p 1 ': r fu 1-rn anu~ <".·\1altF1i:io1L page 386

IL.cf) ;~_,~(' Conduct i.111 Hffrn:Uw; pet hn;~;mu~ foeclb<:Kk session . page 3B8

RJ) ~~-'W !dc'!ntify the c01u~+'. of a pe rlonnance problem page 391

 l'V1o sl: co1 npani Es have a u ni cp.1(~ '.;et of core 'Jal- Many companies are taki 11 9 on thr~ c ha ll e nsJe
ues th;1t tfv=~y l·)c:liev ' ; cordTi l.-.ui:(J to b usinesc; of redesi~Jning their performance rna riacicrnent
sL1ccc;:;s thmu9h d i:;t inqui'.J1in:J t hern frorn corn· ::;yste rns t o ensure that t hey are evaluatin~1 not
··)r:"1·1""n··c; I1.,,.,,J'r· , .. ct1 P.... ;•..J h····-.1
. , :: 1..-1·rcoci- ·..~ I {. 1·1 d , ..I r'C''"'
\..,, ir Cl _:J . .,. 1"·1
:· I. --· J ·-· .:·-·.11·1 cJ
v . . ,_. r.. ) 1· rv·i I
only 1.vhat employec~s 9et accomplished b1 Ii: also
the (-_.\ ye~:~. of c:ust(>rn~:)iS~ cfic·r1. tsr c, 1·n tJl<-JVf~ .f::·> , a :·1r:i how they 9et it accornplishec!. V;;m l_;:u1:3r~hot
the ~;cncr;_d puLlic. h>r e::c:;1ri-1ple, Hei neken l\~\i, Banki 1:'.)rs, the largest in depencl(~nt D1Jl:ch pri vate
·XI I'! o] the ''Vodd \ lX•'cWil l<J '.Jidni:';, 'Mith [)5 ,(li)() ban k, for r::xamplo, stirnu latGs bo:h ::;;
1::m p loyc•f>'' '.rn d nior(~ t l1<J ; 1 250 b;·::mch 01x)1«Jr:ins:1 · l n1rc,_,~v-
<"""11.J··
.... fj - .!''''.,. ..) to _,,._.I.r(C''."(
-··ir'O\/l.dP
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1
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:n 1T1cH·e thD !l 'i 4(".J L) i ·t:~V\t~.~~ric: '. ~. ir·1 / (J - r~lus c :·.)utTtr i 1::~ ~~- , ban k's e<X'E! V<~l ue s. ('we <:.'ffC /:;,1111hi
has <J cii '.;f:in ~:i,ui:;hcd :~c~t of co 11-o. Vi.iiu(::::;. The:;i=: i:icxl, li·1dr:q::i<:?nd.;: mt and Professiunn!').
lliJll vc:s in1:l 11,k: 'L~ n j oyrrn?1i-i 1 (!xinqin9 enj oymr:~nt back is tht::n used by thr:~ emplo·(°'C :,· . ;'. 1 :]<;:·;
to Iii ·,::{ ·: ~ c, ,~;p c ct' (rt !sp <,;cl: !11cl ivicf1_~a I:~;, ~,oc iet~,. a d iscussion \Nith coilea sJLk!S and ;3 i r•:; ;Fcy \'
<:lniJ ·!: l 1 ~·:· r~:1l;:1f!(.'.)i:) <-1 i )<.· J · (~)~-l s:-:; j r,)11 fc•r r:p.~~1 !-· d·le r)p,r-fr)r!ni::Jnce rev i<:;·lN. St. \ t:)~.;c~c11 .J .'(_.~;· ;
il:jt). --,-hc)'t rctJrr:::: ~~,:-~~1 rt vvh;-:-1t !·-ie in r:.·_~k.cn in tc~. r-1 c}~ tc~
ckNe lopment pl an is dra\Affl up ''" 1d : ". , ; >'i ; •:f
sta n( ~ fn i·· ,; ~t; . a C(J IT)C>rd i~<:~: ci i:i7~:~:;n, ::, f)usin~~~:;s f">arJ· .. q ets ~1re forn1u lated .
11E!I ;uic\ <111 r:rnp lnye:: l-k9ineken irnpmw:d it> F\:_·rloirnar\c,: ~·
Siiv lic::; have '.>h own that conir;a11ie~;'
r
for.alio 1-i rne nt process further in .2(.l'l:?. by f11(JI''." ;•:>:p ii-::i"i:ly
crn hiti:inq fin;J11ci;.1 l tar~JFi'.' oftun '''H>rh; <:i~JO'linst inte9ratin9 p er{orrnance with it~; cor•cc ·.r,1iu.·-: ; :mi!
p rod uc in ~ J :-;u'.:;tainable r3nJ1111th. Orn'.' :;tudy fo1.1nd related behaviours. Before, a siqnific<:inl. of
tivri the hiJhe::i fi1v1nci;:i! r•'iJFnc; 1w.on-:: <:H:hi Gved i:he appr01 isal was influe nced '. ;okdy by i:\i;~ cmn··
at companies w hose (:[()'._; had clv1llenqirn~1 ) u Its ('
p any r.2s '
. wnat v11as I
accornp 11s1v:or-. · ' I'
.;, I ·;nn!lV:) .. .
fin;ll v:i;cd ~;oals iJnd cornrnun icai ncJ d vhion of tfvc! ind ividua l acc:ount:1bilitv. Hoi.·\I t he:;c ! c:•ui: •: 1Mr:cn.;
co1 npany beyond m;:1kin9 profri:s , ~; uch ;l:'. cre;ri ;-)('('•lllli•lic
,.. - ·· · ~. 1-
1
.... , \~P«
... :;if1e·d ~,u .J not. '°
\ :.. )•'tJl1'
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··'j'('I ... , ,l."'l
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1~·-- ['i' · 11<
i 1.l J

iri<J an innovativr; product, providi ng r;Jl"='<l l:f:~r incorporated, but in fact dec:oupkJ(l :n·1ri ih'.'::·
cu~;to111er S(·' rvicc, or irn provin9 1he qua lity of life_ \ vhat' objectivi..-1s. Furl:h('JrTnon:·, a 3-r;ioini: i·;i;:i n q
Despite~ tlw imprntdnce of 11;:.i l ue'.; it is ch allongin~~J sca le didn't a!lovv sufficient pedo rm anc:' ,jill·erGr1
to deli11c; then1 i11 beli:-1viou 1-::il i:e 1Tn~; so ih ey can tic:rtion . In 20 12 a new pe1forrnance n1a1,;:1'.}'":me11i
l~l(·' 'J -~(.;.,.) ' ll"··-· <·1;:
l'.''""'"'l 0
- ~ 1·1cl1-n(-
1
~ l11cl'"C
1
,, · -· ... .... ..A r-).°'.. "''
;c~11 cl f"' 1i ...
\. ()·f-., ,-,0rrrn1·-·
t,· ~- ..
- ,-· .. ' "'-•
structure was implemented for ;:111 s'c::nio r- •Tv1naq-·
1T1ar1c•a n1<lnd•Jenv·;n1 sy:3t(~rn. /'1 iso, the n::sults of •3'rs. \/Vith this structure, Heinekc'n has o-(';a::ed
;. a Society for Hunvm h~e~;mu-c<::) IVL:mag ernent ~;u1-:.. a de,ar disti ncti o n bebNeen the short-·:t<::rrn \/dli -
v1~y on pcrfo 1rn a nce rna 11 aq0rn ent hi !~Jh l i~Jh ts the ;;.1ble pay aqreement for bonus calcuk1ti•:w1 ;:111 d
c:nniu
'
lu;rit11
-
of w1l11cY; fo r Joerfc:irrna n c(~: rn;:m aoe-
,} an Annua l Pe1-fmmance J.\gre0rn ent (AF1i\) '•Nhi ch
rn ent '.:;lli'.tuy results sl10 1~11': d thai over 85'}~, of Hf< 1-evvards an em ployee based on hov,r t hr·:::• CJ •:hievc
. I'·' . . " .. . c..1i •'
l-·' l..()c:rv;·c;1.nr·1 ~• "'<-11·
c..~ ...;. '" ·- r•
0
... 1·1··. ·,.,.. 1nn1·n 1·11·1:rl 1
l · ("~~1 .1I +~. I."(-· ·1··1 ~-·Jr•·1.-
~(. :'.Jo
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ern ploy(:c behaviours u11ck~r lvin 9 vc.1l urc~ '.~ t h<Ji'l it i'.:; In the /'•J'!\, an employee\ ind ivich!i1I
t<:;i r1·11::~· 1 .: :'~)r::? jc;L) ~Jr~rf"c>1-1F"li-, l1 \": ~·· . !J~.~ · ;: it c~~;r- - 1 L)o (J(Jric·. live:; ('wlvri:') are defined by usinq fiw'

COl·IT li·.JUCD
(::.irai.r.'lc:,v.
..,, .i··
bJdcr:;hi1), i:0chn!ccd masten,1,
.
pcod("
, I ."<: ('whar 1r.1<:1:0 accomplished). Th is way, Heineken is
'.1.i!tu.r(-; ;:ind ~;ustain;.ibil! i.y) . h .1r!:hermore, a n(~wly ablE:: to incl ude its core values and re lated behav-
dev<::·lc.•pr:>d Ler:ider::;hip Com pck mcy rnockcl i'.; intn:i- io1 i1·s into its performance management system
duccc:1, r:ons istin9 o: si;( behavio urs {drive s to '~'ii\ and so encourage ::;usta inable performance and
iocu:;c:; e)d:crnally, thinks glo bally, fostt:.irs col k1 bor;:i- g rov"th of both its employees and organization .
iinn, 'crl'TJ<]C':; ,'!,,, in:opires olJv::rs, and dr:Ne!ops per:>- Th i'.; systsm '~Ji l l bf) extended to lower leve ls ·within
p le:: ond te~•m~;) on which nFma<l?rs are rated 1.ninq the or9a11izai:ion in .'.2013-2015.
;:1 iil/(0--poini: scc..ile. Th i'.; sy~~tr:~m provides beh;wiourril
SO U r~C E S: 13ased on I(. Tyler, "Evaluating Values," HR Magazine, April
;md·1or:,; ('hovl/' things an:? clone) to '.>upporl: pr~ rfor- 20 ·1·1, p p. 57--02; W'Nw.va 11lanschot.nl; www.annualreport.hei neken
1n.Ji1C'~ eva luation in t he five objective cal:e9oriec; .corn; www.en~1spain.corn/sir:e_rned ia/file s/SP69/Heineken.pd f.

Comp;:u1:les faal: seek competitive advantage through employees must be able

to ma.n.age the behavior ax1d results of aH employees. Traditionally, the formal
perfor nla:nce appra_isal sysl:eni ·was viewed as the pri..mary xnean s fo:r m.anag-
ing employee perfonnanoe. Performance appraisal was an administrative duty
perfonn<::d by manager:-:> a11d 'Nf.l.'3 p1:imarily the responsibiHiy of the human
rcsowx r.:: f1,;nclion. Ivfanagr.::rs now· vievv perfonnance appraisal as an annual
"i!11")--J-hPV
J. ~-<.,.,...
. . '- •\..,, l11..';Cl,-br f'Ql'P't)
·· '-,J ~}_ J!.J\ 1~'- '·j - ... •c.. fo;·r;,
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0 J"l. "0
t
!l Catalog al). . ''U1..1°'\.:.,; Jle2'a-
. ~ _. L.-:

ti.vr.:: information they have collected on an employee over the previous year.
Uecausi:; they may d islike confrontation and feel that they don't know how Jo
give effechv;,: eval.uations, son102 xnanagers spend as little time as possible givJ.11g
1.::lnployees feedback. T\Tol sttrprisingly. most managers and employees dislH<e
11
pcdon:nance appraisal:;. "Tirn.c-consuming," frustrating," "dread," "burden,"
11
and p<.1j11" - are son-i.e of th<:: words that co1.ne to <Crnployees' minds when giving
or rei.:eiving perform.a,nce reviewsJ Sorn.e of the reasons include the lack of con-
r;;i.s~ency of: use of pe:rformmi.ce appraisals across the company; inability to dif-
ferentiate ~m1ong d ilferent perfonnance levels; and the inability of the app raisal
sys tern to provid e useful data for development, to help employees build their
skills and cornpel:encies, or to build a h igh-performance culture.2
Some have argued that aU perform ;:ince appraisal systems are flawed to the
point that they are rnanipu1ahve, abusive, autocrahc, and counterproductive .
It is in1porl:ant to realize that the criticisms voiced about ani1ual performance
nppraisals sho1Arn in TabI12 8.1 are n ot the result of evaluating employee perfor-
m ance. Rather, they result f-J:om hovv the performance management system is
developed and used. If done correctly, performance appraisal can provide sev-
eral valuable benefits to b oth employees and ll1e company. An important part o.f
a.pp;';:iising perfon:nance is lo establish employee goals, which should be tied to
i:he cornpany' s sh·aJ.;:~gic goals. /\s the ch.apter opener illustrates, both what gets
accorn1:ihshed and hovr il: gets accomplished should be evaluated. The perfor-
n:vtnce appraisa.l process tells top p erformers that they are valued by the com~
pany. Kl requires managers to at least annually cormnunicate to employees their
perforni<i.nce strengths and defo::i12ndes. A good appraisal process ensures l11at
all en:tployees doisig sirnifor jobs are ev<'J.ualed according to the same standards.
The w~e of technology, r:;1Kh arc; lhe web, can reduce the ad minish-ative burden of
perfonn;:ince appraisal and improve 111e accuracy of performance reviews. Al.so,

3l~. (~

- -- - ---~-
 ..
CHAPTER 3 Perfo rmance M anagement 347

TarGi E ~ !$.1
to ha r:ipen l"n ore once 01· tw ice a yeai-. We Examples of
trad itional annual review was a crutch for rnanagers to do just that and no more." Problems w ith
-Rebecca director of human 1·esou 1'ces at Zappos Trad itional Annual
· Performan ce
Reviews

" t\lo 011e could convince rne th at t here was any value to it. You've g ot t o be
to e)<.p lain the process to c.1 10-year-o ld. You want to ta lk to me once a year abo ut
,what I did for t he whole yea r? Wh at if I told my kids t hat I was going to give th em a
once-a-year discussion on t heir behavior? Sometirnes we do stupid things. "
---Dan Wa lker, for me r chief ta lent officer at Apple Inc.
' ''.. ' . rn~ii1stream m an<:~qernent is ernbedtled in, and re !ie<; on, a cu lture o f domiha- .•
· ·. tio11 . .. tho perfo rrna n ~re rev ievy is th'e biggest hammer rnanagert1enr has." ' ·
·· · .< Sbi'ntifi!IJ\; .c.:i:i 1b~·1±; · aq1il'.furuMCS(ijt :f\i,tdiof'i:h1iPe:rfbr:r11~nte Rfi?&iei::i! · ·. ••·· ··•' · ·. • ·.
"Even su rprise good revie ws a 1·e ba d b ecause if employees do n't know th ey 're
doing well, yo u are not reinforcing t hat behavior, or you run the risk. of losing a real
good r~rnployee_''---Cindy (i erathy, HR manager at Belimo A ircontro !s Inc.

SO URCE : From A. FQ)c, "Curi ng W hat A ils Per formance Reviews," /-IR Magazine, Janu ary 2009, p p . 52-56; S.
Cu lbert, Get Rid of the Performance Review (Mew York : Busine5s Plus, 201 O); and R. Pyrilli s, "Th e Reviews Are In,"
Wo rkforce Management, May 201 1, pp. 20-25.

a properly conducted appraisal can help the compan y identify tl1e strongest and
weakest employees. H can help legally justify many HRl\ 1 decisions such as pro-
motions, salary increases, discipline, and layoffs.
We believe that perfmnrnnce appraisal j,s only one part of the broader process
of perfor:mance management. We define pedorn:i.alil.iee management as the pro- Parrformarrt~s
cess through which managers ensure tJ1at employees' activities and outputs are · M.airrull~®meol·~
congruent with the organization's goals. Performance m anagement is central to The m eans through ·
gaining competitive advantage. which managers ensure
that employees' activi-
Om performance management system has three parts: d efining perfonnance, ties and outputs are
measuring performance, and feeding back performance iri.fonnation. First, a per- congruent with the
formance management system specifies whic.h aspects of performance aJ:e rele- organization's goals.
vant to the organization, p lima.rily th.rough job <malysis (discussed in Ch apter 4).
Second, it measures tl1ose aspects of perfom1ance through piedoir.rnance ap praisal, Perlorrmalillll:e.?
which is only one method for managing employee performance. nu.rd, it p rovides Apprai!r.al
feedback to employees tlu·ough pen.frnnuaance foedhad <sessions so they can adjust The process through
their. performance to tl1e organizalion' s goals. Performance feedback is also ful- which an organization
gets info rmation on
filled tlu-ough tying rewards to p erfo1mance via the compensation system (such as how we ll an emp loyee
tlu-ough merit incxeases or bonuses), a topic to be covered in Chapters 11and12. is doing his or her job.
hl this chapte1~ we examine a variety of approaches to performance manage-
ment. Fh"st we provide a brief summary of current performance m anagement Perform~nt!;e
practices. Next, w e present a rnodel of performance that helps u s exam ine the feiedb!ildK
system's pmposes. 111ei1 we discuss specific approaches to performance m anage- The p rocess o f pro-
n1ent and the strengths and weaknesses of each. We also look at various sources viding employees
information rega rding
of performance information. The errors resulting from subjective assessm ents of their performance
perfonnance axe presented, as well as the means for reducing tl1ose enors. Then effectiveness.
we discuss some effecti.ve components to performan ce ·feedback. Finally, we
address components of a legally defensible performance management system.
 ..
:Ji!!B CHAIPTEIR B Pe1formance Management

Ihe PD''tacth::e f:urf Pe~rfow,rnnan~ce ~Vianagemen~:

Several recent surveys of hun\an resource professionals suggest ihat most
companies' performance ma11agemenJ practices requfre annual paper-dxi.ven
reviews thak include both behaviors and busjness goals.3 V\n1ile 1nany compa-
nies use performanoe manageuient to manage employee performance and make
pay decisions, less ll1ai1 25''l'o of the compa_njes u.se performance management
to help rnanage talent through iden1ifying training needs and develo1)ing lead-
ership talent. Sixty-si,'"C percent of companies used the same performance man-
agement system across all levels of the organjzation. Unfortunately, more than
60% of employees say reviews don't help their future perfonrnmce. Eight in
ten companies conduct perfonnance appraisals and of those 72% report bejng
only somewhat satisfied, not very satisfied, or extremely dissatisfied with. the
appraisal process. Forty-five percent of employees feel that their manager con-
sistently communicates to fhem about 1J1eir performance tlwoughout the yeax
and in between formally scheduJed perforrnance l"eviews. Only 28% of compa-
nies have autornated their performance m.anage1nent system.

rinO ~-'Ii As you rna;v have alreadv fo?,w·~rl. out fron:o the chapter introduction and )'OU.r
... J '-- -

identify the major ovvn

. . c~ . ~· ~ · ..~ ~ cv:~
,_xeeneuc._"', m.any , ·, ._:m.p 1O/E..€0
(.:). .1 .~ ~
,1n,,, ..... 5._,_s d"o1'1
,na.1-:'\~ .J• _, ,..... ,o ~:;. ::-. ·::--,') i ·•• 1 ~ .~
ulf,O i:J..,,n_,_a.( pc::uo.i_
'. -,
101.L_c.,_ - !r"O .._., 1·( ..... __

determinants of effec- mm1ce review. Although performance m;:;.riagement does include the once or
tive performance
management.
twice a year formal appr«isal or evaluation meeting, effechve performance
. c.: .. •-. . - ..·,.~ Fi,-,,.,«, P ...·1( 1
'"1aa""ffiPill
m .cu ·11Jroce""
CJI(. x··- •. 1':JO,. -·ip'· ., .._.., ""-pni·
.l. , ,.·tq_~J11;.V.:: ... r.~ ... -.(1 r,._1_1_·.::..c· •',_J.tJ1
('<'1V"' .d1"' pPr.cnrt11·1•v·--,
. ._:-~..l-. c.. ... l..1 ... c .... ~-"C- ·t-na-'
. J_~-
0
agem£Hf process. As sho•-',rn in !:he proces~3 rnodd, providing feedback mld 111e
formal performance evaluation axe irnporta.nt but they are no!: the only 1m.por-
tant partr:; of ;m effective pcrform.ance nianagement process that contributes to
the con1pany's co1.npetitive advantage:i Also, visible CEO and senior rn.anage-
ment support for the systern are necessary. This ensures Hrnt the system. is con-
sistently used across the cornpany, appraisals are completed on thne, a:nd giving
and receiving perform.anc~ feedback is an accepted part of the company culture.
The first two steps of the performance mr.u-1agement process involve identify-
ing what the company is trying to accomplish (goals or objectives), a set of key
performance dimensions that represent clitical factors or chivers that influence
the goals or objectives, and then develop performance measures for the key per-
fonn.ance dimensions. 5 The first step in the performance management process
starts wil:h understanding and identifying important performance outcom.es
or resuHs. Typically, these outcomes or results benefit customers, tl1e employ-
ees' peers or t,2am, and the organization itself. 'I11e company's and department
or team's strategy, mission, and values play an important part h1. determining
tl1ese outcomes. Chapter 2 pointed out that m.ost companies pursue sorne type
of strategy to reach revenuE'., profit, and market share goals. Divisions, depart-
ments, teams, and employees rnust ahgn th~~ir goals and behaviors, a.nd choose
to engage 111 activities that help achieve the organization's sl1·ategy and goals.
TI1e S!~cond step of the process involves u.nderstanding the process (or how) to
achieve !:he goals established in the fissi step. Thjs includes identifying measur-
able goals, behaviors, and activities th.at wiU hdp the employee achieve the per-
fonnance results. The goals, behaviors, and activities should be rneasurable so
JJ1at the manager a.1.-id emplo.yee can ddenrune if they have been achieved. 111e
 ...
CHA PTIEIR8 Perform ance Man agement 349

Fig m'W! $, 11
Mod el of t he Effect ivt.:) rJerfo1-rnance fl/l anagernent Pmcess

/
.·
,,/'
/
i
/
I
(

St(~ p 4

Eva! uat<O! perfo rman ce

SOUHCE: 13asecl o n E. ['u l<iko'.; , R. lv1 ucclle1·-H,m so 11, R. O'Leary, "ncJ M . fvle yrowitz, Building a High-Perform ance Culture : A Fresh Look at .
l'erformance Manageme nt l/l.lexand ri;i , \fl\: SHRM Fo1.m d a tion , 20'12); H. .l\guinis, "/\ n Exp an d ed View of Perfo rmance Manag eme nt ," in
J. W. Smith and M. London (eds.). l'wformance iviana9 emenl: (San h ancisco: Jo sse y-Bass, 2009), p p . 1-43; and J . Russell and L. Russell,
'"fo lk Me through It: The Nel<t l_evel of Pe rformance Mu nagement," T + D, A pril 2010, pp. 42--48.

goals, activities, an d b ehaviors sh ould be p art of the employee's job d escription.

Step three in the p rocess, mganizaho:nal sup port, inv olves p roviding employ-
ee~:; with training, rv<'.:ce ;sary n:'som·ces aJ1d tools and frequ ent feedback com- 1

munication between il1ie e;,111ployee and m anager focu sing on accomplishments

as •NeH as issues an d chaUenges in..fluendn g performance. For effective perfor-
man ce managemen t 1m:magcrs and em ployees have to value feedback and regu-
larly exchange it. t~/fan3ge:rs need to 1nake t ime to provide feedback as well as
..-..,,11-1 1·n ·l..,P.-.o~r11
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tha t i~•r when the n:wn<:1r;r:::r an c\ en rployee discu~3s and compare the targeted p er-
formance goal and suppor b.ng behaviors 1Nith: the actual results. 'Ibi s typically
involves the an nual or b L:mnual formal perforrnance review. As we w ill see later
jn the chap ter there are rnany V•ra.ys to help 1.nake this formaJ review m ore of
a perfor:rna.:nce con 1r(:Ts; 11:ion de~;i.gned 1:0 id entify and discu ss opportunities to
iniprove and less o f a one-wriy e;1alu ation by tl1e manager. One 'way to make
!he formal evalu ation m ore effective is for m anagers to engage in frequent p er-
fon:nance COHVersah()flG >N[JJ1 ~2Inplo_yees rather than 1Nait for the formal annual
review (step 3) . The fo1aI 5teps of the performan ce management cycle :involve
the employee a.nd u1anag ?r kh::~ri.tifying :;rhat: the '2mployee (with h elp from the
1
 ...
350 CM.APTER 6 Pe1formance Management

manager) can do to capitalize on performance strengths and address weak-

nesses (step 5) and providjng consequences for achieving (or failing to achieve)
performance outcomes (step 6). TI-Us includes identifying tr·aining needsr adjust-
ing the type or frequency of feedback the managers provides to the employeer
clarifying, adjusting, or moclifying performance outcomes, and discussions of
behaviors or activities that need improvement or relate to new priorities based
on d1anges or r\ew areas of emphasis :Ui. orgmuzational or department goals.
Achieving perfonna:nce results may relate to compensation (salary increases,
cash bonuses)r recognition, promotion, development opportunities, and cori-
tinued e1nployment l11is depends on fli.e purposes the company decides on
for the performance management system (see our discussion in the section
"Pmposes of Perfonnance Management"). Finally, it is important to realize that
what en1ployees accomplish (or fail to accomplish) and their consequences help
shape changes in the organizational business sh·ategy and performance goals
and the ongoi.rig performance management process. Evaluating the effective-
ness of the performance management system is necessary to determine needed
changes. Ihis could in.dude gathering corrunents about the managers' and
employees' concerns about the system, analyzing rating data to determ.ll1e if
they are being affected by rating errors, reviewing objectives for their qual-
ity, and st1xlying the relalionship between employees meeting objectives and
depaxtment and orgaruzational results.
For exmnple, lillton Worldwide decided to develop a new perfonnance
management system from scrat ch to create a consistent process for helping its
employees linprove. 6 The new system is business-focused and easy to ad.minis-
ter a.nd use. The goal of the system is encouraging performan.ce conversations
between managers and employees outside of formal review meetings. 111.e sys:..
tern focuses on what gets done and how it gets done by assessing behaviors and
competencies. Managers set objectives at the beginillng of the year and check
iJ.1 with employees at the middle of the year to discuss how tl1.ey are perform··
ing. Managers enter comments on employees' perfo1mance directly hi.to the
online performance management system. Managers and employees can enl:er
more comments about performance behveen the mid'-year- and end-of-year
review. Tlus encourages continuous feedbacl<: betvveen managers and employ-
ees outside of the formal midyear and end of year review meetings. A recent
survey showed that employee satisfaction with the new performance managel:
ment process increased by 37% compared to the prior system. The "Integrity i.J.i.
Action" box shows how cornpany leaders' behavior can help create a culture
that encourages performance feedback and recognition.

Purposes of Perion"rnnance Management

l08~2 The purposes of performance management systems are ~f three kinds: slTategic,
D·iscuss the three adm.llusb:alive, and developmental.
general purposes
o-f performance
management.
SlRATIEGK IP!Lm.IPOSIE
First and foremost, a performance management system should link employee
activities 1Nith the organization's goals. One of the primary ways sh·ategies are
Ustenan~~m11d Reco~~1111iizRr111g :a\ ~i1D1tD1~B .~1V~J1~ ~(re·:tf P1~ri~»rfun;;M11rr.~
Marnagiemetrnf( Prfa<Clt~ro'0s W\ttl~1id1~;~fl"2)a-R b31 (ou-rrnl\)arn~y t®ade~"S
This chapter ernphasizes th"'' role l:o b e able Lo be in ;c:1 f'Osition to I 0 n ominations in
t hat m anagers p lay in reinforcing understand the nature:: of their one month , they <_:y~i:
good em p loyee performance, work : : nd rnake sure people
1 'l 0 dollars and a pin. Winnin 1:i
list en ing to their concerns and know m e. '' Pr.1rticipating in their at least one in ever~1 catr:!sJ01·v
co ach ing t hem in order to rnain- daily wo rk enables her to really possible every quari:E~r rnake~.
tain and impro ve t his p (?1-for- qet in t o uch, ansvver their ques- them an " all-star w innt !r" . Fu ;-:.. 0

mano~. It is o ften difficult to get
managers to give employees
recog nition or listen to i:hern
because some d on't 1·eco911i;::i:-:
the va lue o f d o ing so or are
umvill ing to d evote the neces·-
sary t ime a nd energy needed.
Often , manag ers can be encou1·-
aged to give employees feed-
back and list en t o the ir concerns
if t hey see t hat company leaders
model t hese b ehavior:>.
Ina Kerkd ijk, 9erK~ral man
ager of seven nursing homes,
with 550 e mployees, doec> noi
just t ake the time to visit he1
E-xnployees, but also puts on her
un iform every month . "I decided
to mal<e sure I wo uld be easily
accessible fo r the people work·
tion:;, seek their feedback and
collec t employees' suggest ions
on how to improve the m'.'._:Jani-
zation: ult enables me to rna/(e
beuer decisions. "
C:ipita ! One, a global finan-
cial services and insurano;)
company, is 1·ankecl number
one o n th e 20·13 list of b(0St
111mrkp lae<'O''.o in the U!(. !t has <:1
number o f f,)1Tn<'tl ernployee
pm9 r·;_HY1'.? airnecl at cn::;ating ~l
cultu r<:i of reco::;m itio n and grati-
tuck:. /\s part of one of these
prograrns , Cap ital One encour-
ag,0::; i<;:!alrnr•rork using lapel pins.
Based on help and teamwork,
empl oyee:-;s can nmninate each
other. They are awarded a
iapel pin ;md a fake dollar for
thermo re, Capital Om/'.; rrn,:r;.:iq-
ing director persona lly thank:;
employees vvhen they h~ivc
gone the extra mile and the:'. :
are rewarded in a depci rtmerrta!
celebration. Initiatives like «his
make sure emp!cY\i8Gc> gr:::i: thr•
praise they cle·3enlc and lf!"'::d.
\Nhat other thinqs c;.i n CC'mi>my
leaders do t o o·:~·ak" ;:, ·~uitu; c:
that encou:·ac:e:~ fccdl:iaci;
recognition ancl iein fon:>~:.; ::h ·~~
importance of 1x;rk,,;-rnan(h
management?
SOURCES: lntermecliar, CEO op clc "'·''''rb!o·"r:
maak er geen showije van , JO Januery ·~~01 ::·'.;
2013 Europe best V·torkphc~:::; profils::: <lt 1 ,\1 ~r·fV/
.greatplacetowork.ch; vv\ri_.111.pino:afte1·;;.cc·r·"~­
1
..

ing in this o rgan isation. I >Nan! each a11\r;:;rd. \/\/he n they receive Accessed 6th l•.1lay 20·11.1_

imp lem en ted is through defining the results, behaviors, and, to some extent,
em ployee characteristics ll1at are necessary for carryh--ig out those strategies, and
then developing 1neasu.rement and feedb ack systems that will ma)d1nize the
extent l:o w hich employees exhibit the characteristics, engage in the behaviors,
an d produce the results.
Pi~rformance m anagement i.s critical for companies to execute their talent
man agem en t stra tegy, that i.s, to identify ernployEes' stTength s and weaknesses,
lin k em p loyees to apprnpri.ate training a.rid d.P.velopmen t achv:i.ty, and reward
good p erformance with pay and other i_noc:n i::iv,~~3. .. ·

O rganizations use perfonnance rnanagerneni-inforrnation (performance apprni~'lals,

in particular) in many acJrnj_nir~ixative ded si.ons: salary acLministration (pay raises),

35'1
35? Cl--~APTE~\ D
l'er forrna11crJ n1<:magernent is
'" '( r-~ cutin9 ;;1 Vi le11I: rnanaqernent system
;md invo lves one-on-one con tact with
m <:111<1qnrs l:u ('~nsure that pro pe r l:r-ain in9
''HK1 c:kve loprnent are taking place .
l O U-3
.lchrrl.i fy Lhe l'iw~ criteria
for d fe clive perlor-
;n;:i rice 1T lo 1V1 CJP. ITl8 11'1
sy:;t12n1:. .
....
l'e d orrnance Manage ment
pron1ohonsr rc:~lenti.on-icrnunati.o:n, layoffs ;ind. rcc;g;l..:i!:io,.i. 1
of incli.vidu aJ perfounance.7 De0pite lhe in1por tance of these
decisions, however, n.1 any n1anagers, ·who a.re the souro:; of
the is1Jorrnahon, see the perfonr1a.nce appraisal prnc2ss nnly
as a nE:cessr.:uy evil th2y ni.ust go through to fulfil l l:hei;· iob
requn"'2D.l cnl~->- Thr.=:y fe-e! tmcorn.fortable evalua"ling oth?rs and
fr;;ecling those evaluahon s bad' to t he ernployees. 111.us, they
tend to ral:e everyone high or at least rate them the saJJ'.1.e, 111al:-
ing Hie perforn1.ance appraisal information relahvely useless.
For example, one rnanager stated, "There is really no getting
axoun d ihe fad that 'Nhenever I evaluate one of rny people,
l stop and Jl1in.k about !:he irnpact-the ranti.fi.calfons of rny
critical for decision;:; on my relaiion.ship vvith the guy a:nd his folure
here . ... Call it being pohbcally ini.nd ed, or usi_ng m;:1nager:ial
discretion, or fiI1e- tuning lh-: guy's ratings, but in the end, J've
got to live vvilJ-1 him, and I'm not going to rate <i guy 1v.d:houl
thinking about the fallout."8
;}·\ l..1 'l .i.1.. ·cl. (-·1 1.11JO.)e 1 ·· c·"f" " f · ·1 P._ L1cllagc1L.1
0 perOUlldlC i · ::i- ··01 · Pl j· ..i<- o l.0 devs]
-·- e.op · eI1.p
- .,.I -.tuJ'
~ -i·;rc•,="" · ·'~ -r,;]·
\ .10
are dJechve at thei.-r jobs. iNhen employees are not performing as lNeU as l: hey
sho uld, performan ce management seeks to irnprove their perfonn;,n1ce Th(~
feedback given during a perform.ance evaJuahon proce0s ofl:en pinpoiri::i the>
employee':.> weaknesses. Ideally; however, the performa11ce m.aJ1agernen{: sy::ii:ern
idr.-'1111·fi 0 ~ Jl
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the causes of the3e deficiencies-for example, a skill deficiency, a moi::ivahona.1
problem, or some obstacle holding the employee back
1VIanagiers are often mKoinfortable coilfTonting employees with theLr perfor-
rnance vveaknesses. Such coniTontations, although necessaD; to the effectiveness of
ihc ·work group, often strain everyday ·working relabonships. Giving h.i3h r;:iti_n gs
to all ernployees enables a mcu.1ager to minimize such conflict5, but then the devd-
opmental purpose of t11e performance management system is not fuUy acb)evecL9
. An important step in perfonnance management is to develop the ineasures.
by 1Nhich performance will be evaluated. We next di3CU5S the issues i11vol ved in
developing and using different rneasures of performance.
Jn Chapter 4 we discussed how, through job analysis, one can analyze a JOb to '
delermiw~ exactly w hat con sti tutes effechve performance. Once th e co:mpany
bas determined, through job analysis and design, what kind of performance .i.t ,
expeds froin its (':m.ployees, it needs l:o develop ways to measure that perfor-
1nance. Th.i s section presen ts the criteria underlying job performance Jn'2asurE:s.
Lai:(T sections . discuss approaches f:o performance meastu-ement, sources of
jnfon.r1.ati.on, and errors.
All:h ough people differ about criteria to use to evaluate performance n1;:u1age-
inent sys l:erns, 'Ne believe tl1al five c>f:and out: strategic congruence, validity, :reli ·
<-\bihty 2Ko=.:ptabiJity~ and specifkity
 CHAIPTiER a Performance Management 3!~3

Sl;,·;;;if:q_)ie <-«.J1ll'n~)ft.'1tn~~1tt11:'.r<' is !he exJenl: lo vd.-iich a perforn18.nce managen1ent sys- $11rnt'P.!gk

h'.lP diciJs job perform:Jno~ l:hat is congruent ·;,vith the mgani.zation's strategy, Coll1l9n1ianc~

goal:·.:, and <:ultu.F~. If;;. cornpany ernphasiz1.~:.o (:usto1x1er service, then its perfor- The e)(tent to which
the performance man-
mano~ .managc,~ment sy;;l:en:l. should assess hov" ·w1dl its e1nployees axe senjng
agement system elicits
!h·z; i::ornp::lny'[; customers. Strategic congrncnce emphasizes the need for the per- job pe1formance that
fonrn:rnce 1nanagexne:nt ::;ysi:eo1 to guide ernployees in coniTibuting to the orga- is consiste nt with the
nizaii.on' s suox~ss. Thfa requires sysleffis He)dhle enough l:o adapt to changes in organization's strat(~ gy,
:Jw con1pany's stral:egi.c posl.1..U'C. The "Cornpefo1g th.rough Globalization" box goals, and cu lturr~.
;;how:; lJ1(~ ilnportant rol12 of pedorrnance 1.nandgern;,:;nJ in developing a global
b1.1:>i1 l!'SS.
l\t1;u1y -con11.)anie~; such as I-:1e1A1Jeit-Packard, F1~deral Express, and Coca-Cola.
Jwvc ir;l-roduced xneasures of crif:icaJ soo::ess factors (CSFs) into thefr perfor-
rn nnC(~ rnn.nagenient syste:ms.1° CSFs ar<P focl:or:-:; in '"· cornpany's business strat-
egy UH-:11 give it a cocnpelitive edge. Companies meB.si.n:i~ ernployee behavior that
rclal{~S to aUa.in1nent of CSFs, which increases the ixnporl:ance of these behaviors
for crnployees. Employees can be held accountable and re1-varded for behaviors
ifo1t diredly i'Clale to l:he co:rnpany aUaini1ng tl1e CSI1s.
Sprint, the O verland, Kansas-based cmnp;:my that provides ·w freless services,
h:;r; iJii·ee piHm:s for its strategy.U The si::ratesic piJfars indude improving the
r:• ;;;h)1-rv:r cxperiew~e, 3i:r·e•:11)theni.ng th.e bra..nd, and generating cash and increase
p•ofjt:;. 'Co ~.>upport the strategy, t.he pe.rfo:rrKianf:(: •xi;:mage1nent system. involves
1•1au<" ;;1°:r:3 <·1'.;rw~;sing eniployiC:eG on a 1x:i2.s--·i.:::ij]. ba~::>is us:ing thxee to five criteria,
(:ndi of vvJ1kh :b linked l:o ;;1. strategic obj<.:~cfr,re. Sprint provides performance man-
;if/~·.<nt?ni to()Js that a.How ln1ddng of :mel:ri<::s s-uch .o1s \Nb.at percent of einployees
re(~~:1ive coach.i.ng as part of their ongoing appraisal.. Also, in Sprh1t' s call centers
an d i"'.': tail stores where most ernployees 1i110:rl;.,. ernploy€es can go online and see
their .individual performax1.ce objectives and their progress toward achievin.g
HK~•.TL '.3prin l:'s xnanagers set performance objectives based on changing internal
o-:;.-nJ_:-rany as ,,,.,,cJJ as 1na.rkel: conditi.ons. To rooi:iva.te crnployees to achieve objec-
bvc:o (and the bonuses determined. by reaching the objectives), achievement of
objectives is based on lwo 6-n:wnth period:3. 1b.s gives the company fae flex-·
i b ililJr l:o adjus t. performance objechves at least two tim<2s during the year, which
i;; important when financial fo.recasts chm1ge or new products are infroduced,
~;uch as being the fo:st company to :ini:roduoe a national !JG wireless network.
nl-,,_, c,_J_11.,,' ·"'·Hc,·1g'-'
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l.\ .U . . \._ Cl'"'tor-ne1·
0.
.,.• .A.I.lo)ralty,
. I

e1nployei~ ~3a ljsfaction, and other nonfinanciaJ. perfonnance areas that affect
profitability. To effecl:J.vely use non.fo.1anciaJ perforn1<:1J102 measu.xes managers
m:rxl l:o: 12

·~ l)evielop <:1 model of how nonfinancial performance measures link to the

company's strategic goals. Identify th2 performance w:eas that are critical to
;;LH:CCSS.
·~ U;.;ing already existing databases, identify data that exists on key performance
n wa~;1u:es (e.g., custom.er satisfaction, einpJ.oyee satisfaction surveys) . If data
arc nol available, identify a perfonnance area tha l: affects the company's strat-
egy and perfo:n:nance. Develop measures for those p:::'rfonnance areas.
~ TJ::;c stati~~tic;:)l .r.:m.d q1.~ahhrti.v~2 :meiJ1.ods fo1,· testing the relai::i.onship between
Ute perfon11ance
..
m.easures and financizd outcornes. Regression 0
and correla-·
hon analysis as well a.s focus groups and inl enr1e1M!3 can be used. For example,
A Mb-R o~: Metrrks ~$ Need~d tQ So.appQrt
ILitM:a~ m~d Compalltt~f f'ertfQ~'mBIITTi(ere

WD-40 Company's products
are found under th<~ sink, in the
garage, and in toolbmces of
consumers around the wo rl d.
\/lfD-40 Company produces
lu bricants, heavy-duty hand
cl eaniars, toilet bowl clean-
er'.:i, bathroom cleaners, and
carpet sta in and room odor
eli minators. In 2012 the com-
pany cre<:rtecl a new businc~ss
unit, WD-40 BIKE, focused on
cyclinq-specific maintenance
p roducts such as chain lubri·-
cants and fra me pmtectani:.
It's most well-known rxoduct is
the versatile lubricant \IVD-40
that can be used to help loosen
rustv nuts and bolts and even
·'
as a stain and gum remover!
Do you know what \/VD-40
stands Tor? VVD-40 means \Nater
Di:;;,placemsnt, ·40th attempt.
That's the name from the lab
book used by the chemist who
developed WD-40 in '1953.
The chem ist was altemptin9
to create a solution to prevent
corrosion (which involvf~S dis-
F..1 l acin~~J water). The chemist's
persistence paid off when he
perfected th e formula on his
40th try.
WD-40 is a global consumer
products company, headquar-
tered in San Diego, California,
with operations in the Americas,
Europe, and Asia Pacific The
majority of W D-40's revenue
comes from outside the United
States. One of the company's
strategic in itiatives is to ma><i·-
mize the WD-40 brand in the
global marketplace. As a result,
WD-40 wanted to ensure that
the metrics used to eva luate
employees' performance sup-
ported developing the brand in
the company's global markets.
Until 2008, 80% of bonus pay-
outs for employees in countries
in l\lorth America , Europe, and
Asia were determined by over--
all financial performance and
20% by financial performance
within the employee's country.
The results of an employee
survey in 2008 showed that
employees wanted more of
their bonus to be li nked to per-
formance measures under their
control, that is, country-specific
per-formance. In response, HR
at WD-40 created the Double
Vision Program, which p laces
a greater focus on country-
specific pe1formance while
still rewarding global business
results . f\let invoiced sales and
operating cash flow based on
earnings before interest, ta><es,
depreciation, and amoritization
are the two performa nce met-
ri cs used in the program . Eighty
p ercent of the bonus is now
based on loca l performance,
accord ing to the achiev~men:t
of sales and profit targets estab-
lished by the CEO and board
for the entire company~1 Of the
80%, 50% is determined by
meeting sales targets and 30%
by meeting profit goals, and
20% is determi ned by global,
corporate earnings results. The
HR team collaborates with the
finance departmentto distrib-
ute quarterly earn ings and sales
repo1is to every employee. This
helps employees understand
how they are performing on
the numbers an d gives them
time to try and posi tively influ-
ence the numbers before th(~
year-end bonuses are deter-
mined. Also, employees have
a clear vision of hovv their
activities influence both the
company's country-specific per-
formance and overall corporate
performance.
iD~S.CUS$iON Ql.Jlfl,;ST!!OIN
One of the criteria used to
evaluate a performance man-
agement system is strateg ic
congruence. How would you
evaluate WD-40s Double Vision
program according to this crite-
ria? Explain your evaluation.
SOURCE: Based on E. Krell , "All for Incen-
tives, Incentives for All," /-IR Magazine, Janu--
· aiy 2011, pp. 35-38 and www.wd40.com
website for WD-40 Company.

st udies show that employees' involvement, satisfaction, and enthusiasm for

work are significantly related to business performance including customer
satisfaction, productivity, and profitability.1 3
"' Revisit the model to ensure that the nonfinancial performance measures are
appropriate and determine whether new measures should be added. This is
354
 ...
CHAPTIEIR 3 · P~rformance Management 355

hnportanJ to 1.:tndersiand th£' drivers or finili1cial performance and to ensure

that the model is appropriate as the business strategy and economic condi-
tions changie.
'" Act on conclusions that tJ1e model demonstrates. For example, Sears found
!:hat employee attitudes about the supervision they received and the work
environment had a significant impact on customer satisfaction and share-
holder results. As a result, Sea:rs invested in managerial training to help man-
agers do a better job of holdmg employ€es accountable for their jobs while
giving them autonomy to perform their rol.es.H
r,)Audit whether the actions taken and the investments made produced the
desired result.
J\/lost companies' appraisal systems remain constant over a long time and
tJwough a variety of strategic emphases. 1-Iov1.reve1~ w hen a company's strategy
d1anges, its employees' behavior needs to change too.1 5 The fact that appraisal
systems often do not change may account for lNhy many managers see perfor-
mance appraisal systems as havil1g little impact on a fil'm's effectiveness.

VAUOrifY
Vallid:Hy is the extent to which a performance measme assesses all the relevant------c111d Vil'l~fidlfity
only the relevani:-aspecis of perlonnance. This is often refened to as "content valid- The extent to which a
ity." For a performance measure to be valid, it must not be deficient or contaminated. performance measure
assesses all the
As you can see in Figure 8.2, one of the cirdes represents ''b:ue" job performance-- relevant-and only
all the asped:s of performance relevant to success in the job. On the other hand, the relevant- aspects
cmnpanies must use some measure of perfonnance, sud1 as a supervisory rating of of job performance.
performance on a set of dlxnensions or measures of the objective results on the job.
Validity is concerned with maximizing the overlap between actual job perfo11nance
and t11e measure of job performance (the green portion ix1 the figure).
A performance measu.re is deficient if it does not measure all aspects of per-
formance (the cranberry portion in the figure). An example is a system at a large
u.niversity that assesses faculty members based more on research than teaching,
thereby relatively ignoring a relevant aspect. of performa11ce.
A contaminated rn.easure evalual:es :irrelevant aspects of performance or
aspect:s that are not job related (the gold portion in the figure). The performance
measure should seek to rn.inii--:nize contamination, but its complete elimination
is seldom possible. An example of a contanunated measure is the use of achtal
sales figures for evaluating salespersons across ve1y different regional territories.
Often sales are highly dependent upon the territory (number of potential custom-
ers, number of competitors, economic conditions) rather than the actual perfor-
rnance of the salesperson.. A salesperson 1Nho •Norks harder and better than others
might not have the highest sales totals because foe territory simply does not have
as much sales potential as others. Thus, these figures alone would be a measure
11Mt is strongly affected by things beyond the control of the individual employee.

Rali<JJbility
IR!EUAIBIUTY The consistency of a
Rdi.<iibiiHty refers to the consistency of a performance measure. One important performance measure;
the degree to which a
type of reliability is inf:errater reliability the consistency among the individuals performance measure
who evaluate J.he employee's pe.rfm:ma.nce. A perfonna11ce measure has interra- is free from random
ter reliability if two individuals give tl!r.~ ~iam.t.: (or dose to the same) evaluations
 ...
356 CHAPTER 8 Pe1for111ance Management

lr~gMrnm ~.l\.Z
Contam ination
and Deficiency of
a Job Performance .Dob. Act1.11<11i, <0r "t1nllia,"
Measure p1,:aiforni1~1i11co job
mlf;l!;JISl!Jllfif.t perlonrlfllance

Contamination Validity Deficiency

of a person's job perfo:nnanoe. Evidence seems to indicate.that most subjective

supervisory measures of job perfonnance exhibit low reliability.16 With some
measures, the extent to w.hich a.JJ the items rated are internally consistent is
important (internal consistency reliability). .
1n addition, t11e measw:e should be reliable over thne (test- retest reliabilily).
A measure that results in drastically different ratings depending on when the
measures are taken lacks test-retest reliability. For example, if salespeople are
evaluated based on th.eix r.i.ctual. sales volume during a given month, it would be
important to consider their consistency of monthly sales across time. ·what if an
evaluator in a department slore ~~xani.jn_ed saJ.es only during May'? Employees
in the lawn and garden d.epar!ment would h.ave high sales volumes, but those
jn tl!e men's clothing department would have somewhat low sales volumes.
Clothing sales :ir1 May arE' h:adilionally lower than other months. One needs to
measm:e performance consistently across lime.

ACCIEl?lffti.murt
AictJ::'<!ptalbiiinty AccieptabiRity refers to whether 111e people who use a performance measure
Th e extent: to which a accept it. Maii.-iy elaborate performance measures are extremely valid and reli-
performance measure able, but t.i-iey consun1e so nmch of managers' time that they refuse to u se it.
is deemed to be satis-
fa ctory o r adequate by
Alternatively, those being evaluated by a measure may not accept it.
th ose who use it. Accepi:ability is affected by lfo:: extent to which employees believe the perfor-
manoe management system is fair. As Table 8.2 shows, there are tlu-ee categodes
of p1.2rceived fairness: procedural, jnterpersonal., and outcome fain1ess. TI1e table
also shows specifically how the performance management system's develop-
ment., use, and outcomes affect perceptions of fairness. In developing and u sing
a performance management system, managers should take the steps shown in
the colum1i labeled "Implications" in Table 8.2 to enBm:e that the system is per-
ceived as fair. Research suggests that perfor.m.ance management systems that are .
srgdfndv1 perceived as unfair are likely to be legally challenged, be u sed inconectly, and .
Th e extent to wh ich a decrease employee motivation to improve.17
performance measure
gives deta iled guid-
ance to employees SrPIEOfKflfY
about what is expected
of them and how Spedfidtty is the extent to which a performance measure tells employees what
they can mee t these is expected of them and how they can meet these expectations. Specificity is
expectations. relevant to botl1 tl1.e strategic aJJ.d developrnental purposes of performance
 ...
CHAPTER 8 Performance Management 357

Categories of
Perceived Fairness
and Implications
for Performance
Management
Proccc:)du ra l Develop111 ent " Give managers and employees
Systems
fairness opportu nity to participate in
development of system.
"' Ensure co nsistent standards when
eva luating different employees.
" Minimi ze ratinq errors and biases.

:f~~~~;~~,~~f;;:
lnteq)e1·sonal
fainiess

Outcom<} Outco 1T1 f's " Communicate expectations

foirne'..is rega rding pe1formance
eva luations and standards.
,,. Con1n1l1nicate expectations
regard ing r·ewards.

SOUllCE: Adapted from S. W. Gillil;md and .J. C. Langdon, "Cr.,,;1ting Performance Management Systems Th at Pro-
mote Pe rceptions of FairrK, ss ," in Performance Appraisal: State of the Art in Practice, ed. J. W. Smither. Copyright©
1990 by Jossey-Bass, Inc. This mater ial is used by permission of John Wiley ,'J< Sons, Inc.

management. If a m easure does not specify what an employee must do to help

the company achieve its strategic goals, it does not achieve its strategic purpose.
Additionally, if th e measure fails to point out employees' performance prob-
lems, it is almost impossible for the employees to coned their performance.

Approaches to ['fgeasur~ng Pe~~f(1u~mance

An important part of effective performance man agement is establishing how ILO 6-4
we evaluate performance. In this section we explore different ways to .evalu- Discuss the four
ate performance: the comparative approach, the attribute approach, the results approaches to perfor-
mance management,
approach, and the quality approach. \/Ve also evaluate these approaches against
the specific techniques
the criteda of strategic congruence, validi"!:y, reliability, acceptability, and spec- used in each approach,
ificity. As you will see, all of these approaches have sh'engths and weaknesses. and the way these
As a result, many companies' performance evaluations use a combination of approaches compa re
approaches. To effectively conlribute tiJ organ.izational business strategy and with the criteria for
effective performance
goals, effective performance evaluation systems should measure both what management systems.
gets accomplished (objectives) and how it gets accomplished (behaviors).
Figure 8.3 shows an example of a performance management system that eval-
. uaies behavior and results. 11lie results (project development) are linked to the
goals of the business. 1111~ performance sta ndards include behaviors that the
employee must cle:m onsi:rate i:o reach the results. The system provides feed-
bad:;: to the employee and holds both the employee and manager accountable
for changing behavior.
 --;

'W
01
co

F]gura ~J,3
Example of a P2rforrnar-ice ~1 !anagement System That Includes Behavior and Rssu !t3

Ai.aas:-foc .~.::-=don ~,;

···ts~t~~foPn~-=nt

Specific :rnowledge, \iVhat arnpfoyee and

~
;/
skills, and behaviors manager wil! d o to ;:,
:.:.
to be developed th at address davEloF'n12nt K'.·
'!
·1 = Otr-tstanding wiH help ernp!oyse needs.
?.::;~ HJghly _ eJfectJ·re achiEv e key result,;.
~- _~·: _ACc9p~· ab1~ . .
4 '" Unsatlsf<\dory ·

Prohac.t De,1-alooment Develop preHminary Preliminary project By end of yczar, 3 lnc;easa knowledge Read articles,
i\lanage the project material for matarials ar.a approvals wera at of project management resaarch, and meat
dev::lopment of approYal within four devsloped on time. 75%, 5% les5 than softN3r.?. i 1ith soft~r1~r~ vendors .
1 1

project scope, cost w·e eks aftar r-ec.ai,1ing standard.

estimate studies, and project scope. Eight>;
schedules for percent of ne'rt
appro•.ial. projects racaive
approval. Initial cost
1·
estimates are wrthin
5% of final estimates.

.,; • -- - J"..t':F~ ....:.c - f:i~ ,;c- ft>,;:l , J:' ~;;1,, - J~.·~w~#r~:~

 CH/\IPTEIR 8 Performance Management 359

The con:i.parat~ve approach. to perfo:rmance rneasuren1eni: u~quires the rater to

comp;n:c~ an individual's performance vvitb ilwt of others. 1lris approach usu-
<JHy us1.,;~; c-;ome overall assessrn.ent of an individual's perfon:na:nce or w orth and
sr;ek; to develop some ranking of the individual::: ·withfo a work group. At least
lhP''.C ~cchniques fall under the comparativ£ approach: r211Jd~ng, fo:rced dislribu-
l:ion, ;;ind paired cmnparison.

iq''""°_,fi,, ;,,,q
~'\it}1 !t~?1\ 11 Uh -:J.1
Simple ranking _1 ·~~quires managers to nml<. employees within tlwir depaitments
frmn highest performer to poorest performer (or best to worst). Alternation rank-
ing, on the olli.er hand, consists of a manager lookin.g at a ,lis!: of eni.ployees,
cl~;ciding who is the best ernployee, and crossing !hat person's name off the list
Prorn lhe H-~xna.injng narnes, the manager decide::> who the \Norst employee is
and c1.·usr3es dial: name off the hst--and so forl:b.
i\<.1.nking ha~> receiv ed specific a.Ue:nti.on i.n the o:mrl:s, l\s discussed jn
Ch;1pt1,;~r 3, in fl·K: Alberma.rlc v. "f\.11oody case the valid8.tion of the selecHon system
····
'N• -.1·.:>
r·· ·· ,., )· :~1-·1·+,c"tJ
\.. enc,_: _,,_ ,.,_ , l.-10 .. ng
·<='.·i. . ~ .l....
F e.ll' ., f.u.1.u;.L
_z1 1~•-iY'<:.£ g_,_, ,.._~,.,
.._,, -- ·i(· n·--c• ~-~·- r\ _._
-,,;, \.1.lt 1-·1:0."lrll]"~P ····o·~{
f")._f }J,,:
~'-·'- ·~ - -J. c. ·,n. 1;;·1-1
__, __l_.,, "n "e The
_.!..<0cq.<-,.. .

coi 1_d aduaHy slated, "There i~; no vrny of knovvi:ng precisely 'What criteria of job
perfornri.;1.r;ce that superv1so:rs vv-ere considering,. wh.e:thc:r -e:::i.d• s11pervisor was
considf.:ring the san1e c:rite:da--or whet.hei~ i.ndeedr ar;.y of ,;:]y2 supervisors actu-
I· aUy ;:1pph!0~d a focused and stable body of criteria of any ki:nd. ''18

r.~ r,-'!1
!l''J ··-r,·-,,,~,~
l":~_\J1 "11'"1·"'1.'fl"nR\'ll'il''"'fill
,,iu I.' 1;,,,1,,, u,, ;11cul.
Th~,~ lfnced dfotribulion rnethod also uses a ranking fon:nat, hut employees are
l • •
m 1H:;f'.ci ' tr:- c.J'm.uque
:n groups . rfl....lJ.s " '
:requl.t'es J.l • percent-
, 1e rnan<:1g-er to put c'2dam
:1 f;C's o~ crnploy«x:s into predetermined categori.ie.'3. I'vfo~:>t i:oxnn!_Qrily~ employees

arc grouped into three, foux, or five categories usually of vnsg-'.1<11 size indicating
th<:' be:oJI: vvorkers, the lNorst 1Norkers, and one or m.ore caJegor.i'2s in betvveen.
ln.\~ Dtsurancc
'"" '
cornpany .1"~.nw:ncan
I\ • In.ernahorn:t1
t . l G'
.,rour:: {__h_,_
\ TC') . using
,_,,, JS . a f orcec11
dis:.r.ibution system in Hrhich AJG employees axe ranl<ed on o scale of 1 to 4.19
TJrfrng lhis sy:~ten1 only 10% of employees receive t.h~: top :ranking of "1," 20%
of ic~rnp l oy"'X:s n-:ceive a rank:h1g of "2," 50°/o of employc':es :receive a ranldng of
"3," and 20% receive the lowest r anking of "1.1." ErnpJoyet:'.S "l·Vith higher ran.k-
much more year-end incenlive pay such as bon.u.ses thari. those wiich
ing::~ receivit~
Jry1,ve;' umkings (employees ranked in the top 10% 'vViH get rn1J.cJ1 great.er bonuses
compared l:o lllieir peer~J). 'TI1.e CEO advocated the im.plernentahon of the forced
.JblrU.rnHon sy[~tem to ensure that ihe co:mpany is paying the best people for
1

!.hi:~ir performance and to better differf'.nti.ate poor fro.rn. high performers.

Tlv' cornpany had prev,ously used ranking systems but found that over half of
-crnployees 111,1er1:: evaluated as high perfon11ers. Also, the CEO wants to send a
mes:mge of accoun tability to the American tax.payers vvho h~-:lp ed bail out the
co~n1:i;J_ny.

t\t1Yoct'1tes of Lh~se sysl:~ms Sc.y that they ax·1~ llte heBI: 1A1ay to identify high-
p ol'<:)nU.al ernployees who should be given i.ndning, pror.1otionL\ and financial
f'!.~l"Ja1.·d::i and i:o identify the poorest perfon:ners 'who should. b(c) helped or asked
io k::ave. 'fop-level managers at many companies hav'c o°br3rc;rved that despite
 ..
360 CHAIP'TER 3 Perforrnanc:P. Manaqerneni

corporate perfor-1J1ance an d ret u rn l:o shareholders beh""'lg flat or decreasii.-i.g, com-

pensation costs have conlinued. to spir.oJ. upward and performance ratings con-
tinue to be high. 'fhey qu-estion how 111.ere can be such a disconnect betvveen
corporate perfon111<.tll(C ;:J1.nd (?In p loyees' evaluations and compensation. Forced
d-1.s h:ibution systernB pn:rvidic: rJ )Tnechanism to h elp align company performance
a.nd eJnployec perfor n1;;nK«') and compensation. Employees in the botton1 10%
cause perfor1na.nce ::;la.ridards to be lowered, influence good employees to leave,
and keep good employees from joining the company.
/\ forced distrib1.ition ;::ysi:ern h elps managers tailor development activities
to e1.nploy1.:;es based on l:h~ir perfon1lance. For example, as shown in Table 8.3,
poor perforrner:3 arr2 given specific feedback about what they n eed to improve
in t11eix job a.nd a timetable is set for tl1eir improvement. Ii they do not improve
t11eir perfonnance, 'ffo~y are d ismissed. Top performers are encouraged. to partic-
jpate in. develop1.1ient ar.hv iJ:i.r.:'s such as job exper.iences, mentoring, and comple-
tion of leadership p rogranx3 •111hich "'Nill help prepare them for top management
positions. The u~;e of a forcEd dis!J:ibuli.on systern is seen as a way for com.panies
to increase perfon.n ance, n1otiv ate en1ployees, a_nd open the door for new talent
to join the company to replace poor perfonners. 20 Advocates say ll1ese systems
force n1ana.gers to maJqoi: h ard decisions about employee perfonnance ba.sied on
job-related criteria, rather Hwn to be lenient :in evaluating employees. Critics,
on the other hand, say the 3ysl:<·?n1s iJ1 pra.ctke «:1Ie axbitra1y, may be illegciJ., and

Tfiilllbi~r,m $3
Perforn1ance and
D evelopment
B ~1sed on Forced
Distribution and A Above average ., Accelerate developmerit through
l~<inking excP. 1) tion al challenging job assignm ents
Al perforrTJ(or " Provide mentor from leadership team
" ffo cognize and reward cont1-ibutions
"' Praise employees for strengths
" ConsidN leadership potential
" Nominate for leadership

B ,l.\v~~ri';~1<,i 111E>ets
expt:Ktatiohs·
st~J.aclyjJ<:!rfo 1:rner

C Below exp(Ktatior1s . upon

poo1· perfom1ance specific skills, behavior, and/or results
nee d to be improved with timetable
for accornpl ishm ent
" iVlove to job that better matches skills
" Ask to leave the

SOURCES: Dci~;ed on IJ. f\)(8irod, 11. :-l<indfidd-Jones, and 1:. Michaels, "A Mew Game Plan for C Players," /-IBR,
Ja11ua1y 2002, pp. 80-·138; A. W;:ii/c<>r, "Is 1°erformance Management as Simple as ABC?" T + 0, Februa1y 2007,
p p . 54-57; T. De Lon9 and V. Vij"1)1<.>raghav;-,n, " Let's Hear It for D Players/' l-IBR, June 2003, pp. 96--102.
 ..
CHAPTER 8 Performance Management 361

ca.u st: poor u 1o ra1e.21 Fo:r example, one workgroup might have 20% poor per-
forn1.cr:'; wh ih~ ;;inother rnight have only high performers, but the process man.-
da!f'f'> !hat 10'/"o o.f ernpfoyees be elimmated from both group2. Also, in mm1y
forced di~:;tribu tion syst-r::ms an lm.intend ed consequence is the bottom category
t·cncb to corn~i t :t of minoriher3 •Nomen, and people over 40 years of age, causing
1

cb:_;o·ixn.ination lawsuits (we discuss legal issues affecbng performance manage-

1n-cn l hi tcr i11 ihP chapte•). FinaUy, it is cLiJ.fo:::ult to ranJ<. employees into cHstirn::-
ii11(> Cd IP~~orics wlwn criteria are subjective or when it is diJficult to differentiate
eni ployc;~s on lhe crileriia (such as team.work oI' comm1u1.kations skiHs).
Research sin r1.llafo1g different featur es of a forced system. and other factors
tha t in fl uence companv performance (e.g., voluntary turnover rate, validity of
::;ck;chon n:wt hods) sugger,-;Js ilv1t forced disJribubon rati11g systems can improve
llw potentiaI perforrnanoe o.f a company's \Arorkforce.22 Corn.panies that have
clear goals and rnanag1:::rnen.t criteria, train evaluators, use the ranki.n.gs along
w ith o ther l IR metrie~, and re1Nard good performance :n'1ay find them usefol.
The n wjority o f improvement appc<:lrs to occur during the fixst several years
the• ~;;rs l en1 i.r~ used, :roai.nJy because of the large number o:f poorly performing
en1ploye{~s who are i.dr.~ntiJied and fired. Keep in mind that despite the poten-
li<~ l advantages of forced choice systems for improving a company's workforce
p E'r.fonn mice, the potential negative side effects on 1norale, teainwork, recruit-
oing, ~ind shareholcler perceptions should be considered before adopting such
:1 :3ysii <::rn. M <my oo:rnpaxues have emphasized the linJ<:age between employees'
p<c'•+orrnancc and their develop1nent p lan ·without using a forced distribution or
r<Jnking syslPm . Forced n1xiJci.ng is ethical as Jong as the system. is dearly com-
u 111Jd<:a h;c1, i:he systen.1 is par t of a posiiive dimension of the organiza1ion cuJ.ture
(i.n nov;1tion, con tinuous improvement), and the employees have the chance to
appeal decisions.

IPi.1in'1e1dl (({)ln1rnp.airns;1Cm
The paired cmnparison method requires managers to compare every employee
with 0very other employee iin. the work group, giving an employee a score of 1
every Uxne he or she is considered the higher performer. Once all the paLrs have
been compared, l:he manager computes the :m.unber of limes each employee
received the favorable decision (i.e., counts up l11e points), m1d t11is becomes the
encJ.p l.oy,~e's p erformance score.
The paired comparison method tends to be time-consuming for ma:n:agers
and wiU become more so as organizations become flatter with an increased span
of co•1tioL For exam.ple, a manager with lO employees must make 45 (10 >< %)
co inpa:ri.smx;, Hmvever, if d1e group increases to 15 employees, 105 corn.parison.s
xr1u ~3t be made.

IE~fai~itDzifong ·n:lhJ1e Comrpr.JJrratim~ Appro<01ir.~

Th<-' cornparative approach to perfon.nance measurement is an effective tool in
d ifferen tiatin g employee performance; it virtually eliminates problems of leni-
ency, cenlTal tr:ndency and strictness. TI1is is especiaUy valuable if the results
1

of the rrv~aEmxes are to be used in making ad m.inisl::rativ1c2 decisions such as pay

ra i~>cs and promotions. In addition, s11ch systerns are relatively easy 1:0 develop
and jn rn(x; I: cases easy l:o use; thus, they are often accepted by use:rs .

·~
 ...
362 CHAPTER 3 Performance Management

O:ne problem with these teduuques, how ever, is theiJ: conu no:n faj_J.m·e to be
foiked to the strategic goals of the organization. Although raters can evaluate
the extent to ·which indi viduals' performances support the strategy, this J.i.t-i.k is
seldom made explicit. In addition, because of the subjective nature of the rat-
ings, their actual validity and reliability depend on the raters themselves. Some :1
.·~
firms use multiple evaluators to reduce the biases of any individual, but most
do noL At. best, we could conclude that their reliability and validity axe modest.
TI1ese techniques lack specificity for feedback purposes. Based onJ.y on il1eir
relative ranldngs, .individuals are completely unaware of what they must do dif-
ferently to improve thejx ranking. This puts a heavy burden on the m anager to
provide specific feedback beyond that of the rating instrument itself. Finally,
..
rnany ·employees and managers are less likely to accept evaluations b ased on -~

comparative approaches. Evaluations depend on how employees' performance

relates to other employees in a group, team, or deparlm.ent (nonnative standard)
rather foan on absolute standards of excellent, good, fair, and poor performance.

TIHH'= ATil!UBUTIE APl?~OACH

TI1e attribute approach to performance management focuses on H1e extent to
which individuaJ.s have certain ath·ibutes (characteristics or trails) believed
desirable for tl1e company's success. The teclmiques that use this approach
defis1e a set of traits- such as initiative, leadership, and competitiveness-and
evaluate individuals on !:hem. ·

Grnp~k Ratirng 5ca~ie$

The most common form that the aUribute approach to performance manage-
ment takes is the graphic rating scale. Table 8.4 shows a graphic rating scale used
in a manufacturing company. As you can see, a list of trqits is evaluated by a
I:·"'':;! five-point (or some other number of points) rating scale. The manager consid-
' i

ers one employee at a lime, circling the number that signifies how much of that
trait the individual has. Graphic rating scales can provide a number of different
points (a discrete scale) or a continuum along which the rater simply p laces a
check mark (a continuous scale).
The legal d efensibility of graphic rating scales was questioned in the Brito v.
Zia (1973) case. In t:his case, Spanish-speaking employees had been tenrun.ated
as a result of theit performance appraisals. These appraisals consisted of super-
visors' rating sub-ordinates on a number of undefined dimensions such as
'I~. . .
·;:·.
volume of work, quantity of work, job ki.1.owledge, dependability, cind. coopera-
tion. lfo~ court cdticized the subjective appraisals and stated that the company
should have presented empirical data demonsh·ating that the appraisal w as sig-
nificantly related to actual work behavior.

Mimed~Sf!:arn:ilzm:J! Sc£U~~s
Iviixed-sf:andard scales w ere developed to get aro~d some of the problems with
graphic rating scales. To create a mi'<ed-standard scale, we define il1e relevant
·per~formance dimensions and then develop statements representing good, aver-
age, and poor performance along each dimension. TI1ese statements axe then
rn.ixed with tJ1.e stateJ.nents from other djmensions on the. actual rating instru-
ment. An example of a mi.x:ed-standard scale is presented in Table 8.5.

·•'
 ...
CHAPTER 8 Performance Management 363

1l"aifbift 1~ iSln/)1'
· b<ample of a Graphic l~atin<:_1 ')cak

The foilowin9 arnas of perforn1ance are siq11i[icant to rno•;t positions. Indicate your assessment of
performance on each dirr1c11sion by cirdi11'.:1 Uw <:ippmpriate mting .

1: 4 3 2
l<nowledge ,)

r,)
CcJrd1:nur1icatio11 4
.Jud~.:irnent
r~
,) f..!. _,
')
2
M2frrag1.~dal c;kill 5 4
Ouality performance. 5 1:~ 3 2
r-
:.frJ<llTIW()t'k ,) 4
lnl.etpcr'.;orial skill:> IC
,.) {~

lhiti21tiV<o 5 4
Cnc<:.rtivity 1:
.J j! 3 ')
,__

Prqb i(l 111 'so lvi 1'19 I~

~_ ,J 4

As v1re see in the table . the rater is ;:1sked to complete the rnting instn1ment by
indicating w hether the en1ployee's perforrnancc is above (+ ), at (0), or below
( -·) ll1e statem ent. A special scoring key is then used to score the employee's
performance for each dimension. Thus . for exarnple, an employee performing
above all t:hxee statements receiv·e.s a 7. If the (:Tnployee is below the good state-
ment, at the average slaf:ement, and above the poor statement, a score of 4 is
assessed ..An employee be:frHN an thxec statements is given a rating of 1. This
scoring is applied to an the dimensiions h_;. dE:~<ecrnli.ne an overall performance
score .
.Note that rnixed-standard seal.es 1.AH~re originally d.eveloped as trait-oriented
scales. However, this sarne technique has been applied to instrum.ents usin.g
behavioral ratheT than trait-oriented statem.ents as a rn.<,: ans of reducing rating
errors in performance appraisal.23

tva~ffJlatRllllg 1t!he AUr~b~1 t«0 t.\1Pl!JJff'O«:~d~

Attribute-based performance methods are the most popular methods in organi-
zations. 'Titey are quite easy to develop and are generalizable across a varie~ty of
jobs, strategies, and organizations. In addHion ff m.uch attention is devoted to
1

idenl:ify:ing those attribute:-:: relevant to job pcrforrna;io:: and carefoJJy defining

them on the raling isistn.i:rnent, they CDTl. b:; ;i :_o, n::habl.c- a11Jl. valid as more elabo..,
rate measurement tech:rtique;;_
I-Iowever, these ledmiqur,~s faU shod on scv2ral of 1.l.1e cri.teria for effective
performance n1anagen:ierd:. Then:' is usually hJJJ.r:: c:0ng:n1enc•:-: between the tech-
niques and th e company's sb~ategy. The;;e rn-::U.iod.J are used because of the ease
in developing them and b(~can:w the :3r.1:rnc: 1:ne•:hod (U~{i ol: traits, cornparisons)
is generalizable across <:my organiz.;1h0r 1 ;';1/l :~1Tuf.egy. Jxi. addition, tl1ese
 , · ·~

.. .;
.)

.364 CHAPTER 8 Perform ance Management

1f~bH~ ITTl":S
An E)(ample o f a Three traitsbeinsi Lev,el s of pe rformance in state ments
M ixed-Sl:andard Initiative (Jf'.lTV) High (H)
Scale ...Jntelli9ence(ll\ITG) M("~Jium (M)
.•. Jfol;,1tions vJith others

this employee h~1s a tendei1cy to gei· irrto Unneu:.:ssary

conflicts with other

.
~··

Initiative + + -f-· 7
. : ltJtriJU9~iioi () 6
F~r,, latio;ic;wil:h othcm; 0

..

--- · ~- -~--------------
 ....

CHAPTER 3 Performance Management 365

I;
metJ1od:s usuaHy have 'vague perfonnancc 0tn.ndards that ctre open to dif-
VETji
(tClCH. · ....r~
... , · ·•·t n1~eI'j..·:rre1 .a L.!
11.. - ~., -~~---
uOH~> uy ~ ).r. i·~:cn · -~ "· J..:l!k1
ChJc:JE'h•. !J.H::r.>-.. 1. . "' Ott"'n
r·ater·"
.. . . . , ,' . . . ..°..,,C'o. -~'nc
: ,., »--1~.i.'.C.r'l.-:ro·11'·
r ·"''--~]1·_.l,), ·~~ i:-,r-.
"-',;; .•c«.L.··-~
"' .

provide ex:l~einely diH.~rent .ratings and ranki.ngs. Th•2 result is that both the
validity and reUabili ty of these m ethods are usually Imv.
Virtually none of 111.ese teclmjques provides any specific guidance on how an
employee can f:mppor t the comp;my's goals or correct performance deficiencies.
fo addilfon, vvhen raters gi.v(:: feedback, thes~ techniques tend to elicit defensive-
ness from employee!3. For exaxnpi.e, hov1 ·would you feel if you were told that
...
an a nve-poml: l you were rate d
. sca.e, ... a ""'" . matunty,
/,.. .ul . ? Cerl ~ ainl . y you m1g1.· . lt
feel son11:~what defensiv''" and 1..1.nvviUing to accept that judgrnent, as well as any
additional feedback. Also, being told you were rated a "2" in maturity doesn't
tell you how lo iinprov10' your rahng.

THE BfEHAV~O~P~t Af[D fROA«]-~

The behavioral approach to perfon11a:JOce management attempts to define. the

behaviors an employee must exhibit to be effective in the job. The various tech-
niques definl\~ thof;>e behavior~3 a:nd then require rn<mage:rs to assess the extent
to wrdch -t~mpfoyce:3 exhi.hit them. 'tNe discuss five techniques that rely on the
behavioral approach.

~ieri]~wnrni"a~~~f i\m:~wrn!\n R;a·~AITT~~ '.5icc:q~ e·~

A bdumiorally rmciwred mf:ing scule (BARS) is designed to specifically define per-
forrnance dirnensions by developing behavioral anchorn associated with differ-
ent levels of perfonnance.24 An exmnple of a BARS is presented in Figure 8.4. As
you can see, the perforrnance dimension has a number of exm:n ples of behaviors
ll1"'l
. A. ,dl'(''}·f·"
0 .. ~- .]·.... il . .<I.
n-JPCl·i:l·C
.\.:.. ,: J l ~~ ,. J!. . lf-'V
: •. >.:_. ]__ ,) 0;:
0 0 ~ 0 '"
-~ }J!.;,::, _1l lC0l" ..fv'""'lCP.
.tr. J.(..U '.:. Ccil•Y"'~
'\..· J 'b ,,-l.,
~ -- _ 3
t~-- ( ·1;.,.,.l
~. .'l!J... C'J''<''i
-,: h ' -- Q ]l
. ...•

1;) develop a BA.RS, iNe fir~;J: gather a larg(~ n u.mber of critical incidents that
l '''"'.
c[Jl."P<'
... 1f,..1H _,Jf.c, ·t·
..... €.\,d. i i...\1 l..!L
lV!'.. 3.L · .. pffp f\w- "iJ p.... I10f1Ha,JC~
....... CJ. 0 . ....l. i:h.,
..c - . .., ·p tJ1 : 1.
_, ,_JOO Tl...1e.,e"' ill.Cl
' "d€11 . t S 8J.C
.., ,
,Jl.) JL~ .'C..~·1 t·1. ·J·1·} JV
'l·1c.,i·"1·"'
\~.C P. . _ )"'I.tor•:n·,
l ..
t(... (.l·,
JI.~,· -- \...- di'''"'
1,.'cP1 0 '"' " 1·on«
--•--"- ll ~.'LJi.l.l:J .. . """'Ct1 .•U~.'-•
· '-~ l OJ.~
1"1af·_ '"-''"PP1·'·" ag1·ee clearly
.~..,"" "1.,.,PS fJl_c;
'L.!.l.:..., 1 LJ\-. .. -... • . . l.::J _ .

represent a particular level of performm1ce axe used as behavioral examples (or

anchors) to guide the ralf.Cr. 'The mm.1ager's task is to consid<:'r an employee's
performance along each dfrnension and deterrn.:lne where on the dim ension the
-- f ,VO-'P'-
e1np.c.1 "- "'p_rionncLl..
0 ,<"' ,c ·• • ·r CP
..... i.1.1...., 1 ' · · jJ'.1.Pc. JlL
.C.: •-~ t.sm.g Pl..1av· , · l mH..:1lO.,_
. 1rn.a. · , l .. rs c..o•1n gm _.,, 'dp<>
_,,, . 1"'1..~.,,
.1u0 raong ,_.
becmnes the em.ployee's score for that dimension.
D _I . v·
u.eilld , IOI<'L. l ..iHCfl.OIS
" I .. H.• l~ q,-c, , ·Jv j·::i }· ,., -:'nd "J' c-· .:1 .. ' '·· O- -•~ 1.,.,· . -
... l c ac . an.oc,f:/''-·> d ,_" ' CJ:oanvan.>•\::,eo. , 11.ey can mcrea"'e
. , , "'
interrater rehabdity by provicbng a. precise and coniplete defiriihon of the per-
formance clhnension . ..t-\ disadvantage is that they can bias infonnation recall--
. th211: is, l:)(~havior that dosdy app roxilnates th!? anchor is xnoxe easily recalled
than other behavior.25 Research has DJ.so· d em.,on;,:;iTatr.-::d that manag-e:rs and their
subordinater:; do n o t n'lake rnuch of a distinction bel'vlrt:P.n B/\..RS and trait scales.26

~·
l1f..:l' ,\~-~n-,,n~ ·- ~ ~f 0 1i"ll''".'.ll
l(j\ i " .1.,, 11 u n 11 0µ,11·~~"'"ioe!l·"nfi1i".' ...»r."'·•H~:v·
J!., .:o ·- 11 ,u~.ij 1, 11 1... 11 11 :c 1.. •.0, H.c. 0

A behavioral observation sc1.:dc (BOS) is a variation o( a BAR5. Like a BARS, a BOS

is dev'-::loped .from crii:kal incid<::n!:3.27 Ho 1Ne·,nc~r, a BOS differs frorn a BARS in
two basic ways. First, rather than discardin.g a large number of the behaviors
 ....

366 CHAPTER :1} Pe1:ronmmce l\/lanagerneni

tfijq:Jll,!Jn"~ lfl6"'4J.
1aslc-BAHS Rating
Dimension: Patrol
Officer

';. •\.;. .
~uc

SOURCE: P.d<ipted frorn f~. Harvey, ''.Jo lJ /\;ic1lysi,;," in l-l"!ndb ool< of Industrial,'!, Organ iza tional Psycho logy, 2nd ed.,
ed . M . Dunnette and L l-lou9h (Pal o /1.ito, <.: /\:Consulting f-'sychologists Press, 1991 ), p. 138.
 '"
CHAPTER 8 Performa nce Management 367

l:hai: exemplify effective or ineffective perfonnance, a BOS uses many of them to

rnore specifically define all the behaviors H1at al'e necessmy for effective perfor-
mance (ox that would be considered ineffeclive performance). Instead of u sing,
say, 4 behaviors to define 4: levels of perfonnance on a particular dimension, a
BOS n'lay use 15 behaviors. An example of a BOS is presented in Table 8.6.
A second difference is that rnthe:r than assessing which behavior best reflects
an individual's percform;-.:m.cc, a BOS requll'es managers to rate the frequency
with whld1 the employee has exhibited each behavior during the rating period.
These ratings are Hien averaged to compute an overall p erformance rating.
TI1e major drawback of a BOS is that it may require more information than
most managers can process or remember. A BOS can have 80 or more behaviors,
and the manager musl: remember how frequently an employee exhibited each
CQmpaa:11H11des
of these behaviors over a 6- or 12-mont-h rating peliod. This is taxing enough for
Sets of skills, l<nowl-
one employee, but managers often must rate 10 or more employees. e dge, abilities, and
A direct comparison of BOS, BARS, and graphic rating scales found that both p e rsonal characteristics
managers and employees prefer BOS for differentiating good from p oor per- th at enable employees
formers, maintaining objectivity, providing feedback, suggesting training needs, to successfully perform
and being easy to u se among m anagers and subordinates.2B the ir jobs,

Comp@'il:e111cy
modl~h
Cmi!lpetency Modeb lde ntif)1 and provide
Compie&icndes are sets of skills, knowledge, abilities, and personalcharacteris- descriptions of com-
tic::; that enable employees to successfully perform their jobs.29 A com petency pete ncies that are
common for an occu-
modieR identifies and provides desciipiions of com p etencies that are conunon pations, organization,
for an entire occupation, organization, job family, or a specific job. Compe- job family, or spe cific
tency models can be used for performance managem ent. However, one of the job.

lf'abfie ~.6
Overco rning Resista nce to Chan ge
An Examp le of
CJ) Dqi:;d'. lb6~t the d•¢i'.cti!S:cif thr:f ·. ·
·n.·;;;
All'nqst· f\ley~r ....••. ·.·•· · : ..
a Behavioral
Observatio n Scale
(2) E)(plains why t he chci ng e is rie cessary.
(BOS) fo r Evaluating
Al niost f\leV(~r 'I 2
.Jo b Performance

(4) Listen s to t he employee 's conce rn s,

Al m ost Never 1 2

~r:~~::~. (;~:l~~~rcM~6+9rxb~1 ~·;rnvti· ··

1

.·(s):

(f)) IF necessa1·y, specifies th e d ate for a fo llow-up m eetin g to

respon d to t he emp loyee 's concerns-
Al111ost l\Jevor ·1 2 3 4 5 Almost Always

Below /.\dequat e /\dequ at e Fu ll Excell ent Superior

6--'IO 1'l--'l 5 16-20 21-2 5 26-30

Scores are set bir rmmagement.

SOURCE: From Gary Latha m and Ken Wexley, Increasing Productivity Through Performance Appraisal (Prentice
Hall Series in Human Reso urces), 2nd Edition © 1994_Reproduced by permissi on of Pearson Education, Inc,, Upper
Sad dle River, f\lew Jersey.

.
...
 ..
368 CHAPTER 8 °erfonnance M anas3ernent

strengtilS oJ competency :~noclels is that they are useful for a varie~y of I-:m. prac-
tices inducting recri.1itiJi.g, selection, training, and development. Competency
models can be used to help identify the best em.ployees to fill open pocitions,
ar1d as the foundation for development plans that allow ihe employee and ma_n.-
ager to target specific strent,•fhs and development areas.
Table 8.7 shows the competency model tllat Luxottica Retail, known for pre-
mium , luxury, and sports eyewear sold tlu:ough ·LensCrafters, Sunglass Hut.
c:m d Pearle Vision, developed for its associates ill field and store positi.ons.3° 'Ihe
competency :model inclwJes leadership and managedal, functional, and foun-
dational co.mpetenci.es. The goal was to define and identify competencies that
manageis could use for hiring, performance management, and training. AJ.so,
competenci€s would help associates identify and develop ihe skills they need to
apply for d ifferent jobs. To effectively use competency models for perfonrnance
(,;valuation th<0y must be up-to..:date, d1ive business performance, be job·-related
(valid), be nd.~~vant (or customized) for all of fue·company's business unite;, and
provid 12 sufficient dela_U to ma}.::e an a.cc1.U'ate assessment of employees' perfor-
.rnance. P.J LuxoUic<J. Reta~l developing competencies started with meeting with
busin.es~:i leadec3 l:o understand their current and future bush1ess strategies.
Business drivers were identified and guestiormaires, focus groups, and m(:-~et-­
ings wil:h managers and associates were used to identify important compelen--
des and exaxnples of behaviors related to eadl. Competencies across bush1ess
.units and brands axe reviev1red every four or five years or whenever a ;najo:r
chm1ge in jobs or business strategy occu:rn to ensuxe they are relevant t\lso,
the wieighUng given to each set of competencies in the performance evaJ.uahon
is reviewed lo ens1m:; that they are app:rop.fiate (e.g., what V1reights should b·e

L.wwttica Retai l's L1,:1adership and !VlanagHria!

Competency Model Leader'.;h ip
Coach and develop othe;-s
Motivate others
tearn1Nork

Criti ca l th inking
Foster open comrnun ications
Build n,~ la tl o!'lsh i ps and inte1·pe1·sonal sk ills
D(::!vc;dop and nianage oneself
Adc.1ptabil ity i.in d flexibi lity
Custon-i,e:r focus
A ct w ith inte91"ily
Diversity and 1.m ilticultu rallsrn
Drive and cornrnitment

SOURCE: From C. Spi cer, "Build ing a Com pet ency Model," Hf~ Magazine, April 2009, pp. 34~36. Reprinted with
p~nni ssion of Soci ety for Human Resource Managem ont.

.
- - - - - - - ------~ ___!__
 ...
CH.f.WTEIR 8 Performan ce Management 36'9

given to the functional 3kiUs) . Depending on their rch::va.no:: for a specific job,
vari.ous cmnbinai:ions of H1e~;e competencies m:e used fo1,· 0:vakmting associates'
perfonna.nces. Associates are rated on a J--·5 sc;.~J"'; for eadi <:ompetency w ith 5
.r:ne;:ining for exc<ee(b expedations. HR, tra.111ing and develop1nent, and opera-
tions te:an1.s worked together to define the -~. evels of each competency, that is,
whal does it mean and what does the competeniey Jook like 1Nhen an employee
is ral:ed "meets expectations" versus 'rbelovv expecJ:ahons"'? This was necessary
to ensure that managers are using a shnilar frrune of reference ·when they evalu-
ate associates usi.n g the co:mpetendes .

1Ewa~lUla-~nm11 rorW t~u~ Bd°lla~#ttf0ln·;a1~ .1~rf»rn·a.aid11

The behavioral approach can be very effecti've . H can Link ilie corn.pany' s strat-
egy to the specific behavior necessary for i:mplernen1ing that strategy. It provides
specific guidance and feedback for employees a.boul: thrc: performance expected
of them. Most of the tedu1jques rely on in-·depth job analysis, so the behaviors
that are identified and measm:ed axe valid . Be.causr.~ thos.i:~ -:who will use the sys-
tem develop the measiJ1Ses, t he acceptability is also often high . Finally, with a
substanhal i.i.1vestment in training raters, l:hie tlf-xhxu.ques me :reasonably reliable.
The major weaknesses have to do with lfo~ organizationaJ context of tl1e
~3ystenL Although. th e bi.:~havioral approach can be dosely tied to a company's
strategy; the behaviors and measrn.:es rnu:.:il be ·constantly Ino:nitored and revised
1. to ensure !hat they are still hn.l.<:12cl to the strategic focns. This approach also
an;mmes that there is "one betJt way'" to do the job and that the behaviors that
constitute th.is best ·way can be identified . One sl:udy found l:hat managers seek
to con1Tol behaviors when H"iey percei.ve a dear re1ationship between behaviors
and results. V•fl"ien this link is n ot clear, they k:nd to rely on m.anag.ing results. 31
The behavioral approach :rnight be besi: sui ted to less mmplex jobs (where the
best way to achieve resuhs is somewhat dear) and least suited to complex jobs
(where there are rnultiple ~1>1ays, or behaviors, to achiev£ success) .

The results approach focuses on managing the objective, measurable results of

a job or v1ork group. 'TI1is approach assumes that subjectivity can be eliminated
1

from the measurement p rocess and that results are the dos'2st :indicator of one's
conlTibution to organizational effectiveness.32 V\Te ex01nj11e two performance
rnanagemeni: systems that use results: the balanced scon:card and the produc-
tivity measl.uement and evaluation system.

Ihe !Us~ «Jf Oh]ecfo1es

· The use of objectives is popular frt both priva te and public orga:nizations.33 In a
results-based system, the lop managernent tearn fi.rr::.t defines the company's stra-
tegic: goals for the conling year. These goals are passed on to the next layer of man-
agement, and these managers define the goals th'2y rnust adu.eve fOJ: the company
to reach its goals. This goal-seli:ing process cascades down the organization so·that
all managers sei: goa1s that help the con1pany achieve its goals.34111ese goals are
used as the standm:ds by which. an t1divi.du1.1l' s perforxnanoe is evaluated.3.5
 ..

.Re:n.IJt:3-hx::cd sy:;lGns h;:i.ve three con:unon. components.36 111ey re•11J.in:' set-

ting eft'f<xti.vc i;o;;b. Thi.= ;,n',J.'.lt dfed:ive goals are Sl\1.Al\.T goals. That js,. l:fY:'' gca.b
axe spo:ific (df~:,rdv Gl:ah:d, define Hl.e result to be achieved), xneasixra.b.h· (cJJ.J.J·-
pared. i:o .1:~ ;:r;:~mdar~il aH::1h1;;;blr:: (difficult but achievable), relevant {hn1': !:o ~:rr;a·
n.izational r:,:u<:x:c~\S fociorc.; or goals), and timely (measured in deadlin.r2, dluP cldl:e:.',.
cycles, oF :xJr,cdu.k:J). [)jJf"~rent types of m.eas~uements can be u1:ied for goab
or objecfr11\~S indlid.ing hmcliness (e.g., responds to requests within 12 hours),
quality· (rcpmt provick~d dea_r information V•rith no revisions necessaxy), quan ..
tity (jncn:.::ned sales 25'~~), or financial metrics (e.g., reduced ptm:hasing costs
10%>). (An r.~xarnpk o( obkctives used in a firnmcial service finn is presented in
Table 3.3.) The go:dr:' are ~not usually set unilaterally by mrulagemen{ hut with
the J.nanagers' <ui.d r.3u.botdinates' participation. And the manager gives objediv12
feed.back f1)uoushout Hv~ raiJi.ng period to monitor progress to1Nmd. th1~ gonl.s.
Reseatch on obj12cl:ives has revealed t\Aro impmtant findings regardin.g their
effechve2nc;:;~;, 37 OJ[ 70 ::JbJdics exmn.ined, 63 showed productivity gains, iNhil.e
only 2 showed producli•rjJy losses, suggesting that objectives u suaJJ.y ):\"!!(~re.as~
productivi. iy. A.b;:\ p!.'D(h~1:bvity gains tend to be highest when there fr; :m.bshm"
lial con11n.i.t:i.nen.i to Hv: i}bj1-xi:ives progxan1 from. top 1nanagei:ne:nt: an f;:1vr,~rag12
i11crease of 56'X:, 1N.b.en. cmnm.itrnenl: was hJgh, 33% when conunitn1enl: w<~;~; rvod-
erale, and 6% 1Nh'<''n co:mm..iJment was low.
C1eady, ur;c:; of ;:;_n objcd:h.H23 system can have a very positive effect on m.it m:ga-
nization.' rs -t.:)crformmicrc-;. Cone.id.12ring~ the •process tlu-ough whkh uftoaRs <:1F:' 54:-:i:
(invol-lr(~m.enl: o{ ~~taff in setting objedives), it is also ill<ely that use o{ ;Jn objec-
tives sysh:::rin. eff,~~d:f..vdy hnks fr1d.ivi.dual ernployee performance 1Nith rb.'<'. fixxn'G
c '~;z;oals. Evalti.ahon of obiectives,
strateojc ~
based on results or business·-bar:1ed .Ln•::k··
rics, ff'IUtove:3 the subji::!!cl.:ivi ~ y from the evaluation process-employci;;;;:' , jth<:::r
mecl: the objedivc:> or they do no!:. For -example, Long Island Je1Ari$h :M:,,:<lio1l
Center impJ.£mented a com.puler--based performance management sy:stern Hiat
breaks the nw:ses job dcscr~ption into measurable goals in mder to k'E""V inJ12<>
1

tion r.aie~:; for th.e unii: low and patient-satisfaction scores high.31.l ::'i

!azi~attlll\:eiQl '.S«:(Q1fj't.;o:f.;awii:B
Some com.panies use Hw balanced scorecard to measuTe ·performance (•.Ne dJ.s-
cussed the u:;;e of ll<i~ balanced scorecard in Chapter 1). The balanced scorecard
includes fous pernv~:ctives of performance including financial, custmT1e1~ ini2;·-
nal or operation:::,"and. fo~ar.ni~g and growth (see Table 1.9 iJ.'"1 Chapter 1). The
fi11ancial pe.rspi2chve focuses on creatil1g sustainable growth in shard10ld.er

'\f~lbRte ~UEl
An Example of an
Objectives Measure
of Job Performance
Loa n portfolio ln<:-re asc" 1::iortfolio 90 Increased portfolio
rnanaq(~n1e11i value by ·j 0'% over value by 9% over
the n e;S '12 months the past 12 rnon ths
Sales Generate foe . ·· Gener~tedfoe
·inl.':oni•~ . of$30;00dh
''·• •· •·.rhhbllle of $45,000
over the ·11oxtl2 ·
rT1onth~; :
~~di;tj~:e"past 12 ·
 '"
CHA PTEIR 8 Performance Management 371
.
value, the customer p erspective defines value for customers (e.g., service, qu al-
ity), the internal or operations perspective focuses on p rocesses that influ ence
custom er satisfaction, and H1e lear ning and growth persp ective focuses on the
company's capacity to innovate and continuously improve. Each of these p er-
spectives are used to translate the businef;s sixategy into organizational, man age-
rial, and employee objeclives. Em p loyee perforniance is hnl<:ed with the business
strategy th rough comm unicating mild educating employees on the elem ents
of the balanced scorecmd., translating strategic objectives into measures for
d epartments and employees, and linking rew ard s to perfon nance measm·es.39
Employees need to know the corporate objectives, how they tran slate ir1to objec-
tives for each business u ni t, and develop theix own and team objectives that are
consistent w itl1 the business unil: and company objective;>. Effective balanced
scorecards allow employees Jo understand the business sh·ategy by looking
only at the scorecard and the :31rategy map (Jlle cause·-and-effect relation ships
among the measures). For example, for the cusi:om er perspechve of the balanced
scorecard an airlin e might have on-time p erformance as a critical success fac-
tor.40 Gate agents, ground, maintenance, and scheduling represent groups of
employees who im p act on-ti.me performance. Gate agents h ave four roles that
can influence boarding speed including ch eck-in thneli:ness, effectively d ealing
with connections, flight documentation , and the boarding process. Gate agen ts'
performance in these fouT roles should be ev alu ated becau se they impact key
perform an ce indicators irelated to on-time perfon nance including cost savings,
custom er satisfaction, customer losses, and op era tional costs.

1Prrnch.s d h1ity MeasnJJremeITTifc mild EvalmJJtim11 Sysiten1111 (IPrnMES)

n le main goal of ProMES is to motivate employees to improve team or com-
pany-·level productivity:'n It is a m eans of m easuring and fee d ing back p roduc-
tivity information to em p loyees.
Team m embers ll:y to map l11e rela tionship betvveen specific outcomes and
prod uctivily and the relationships between effect an d performance, p erfor-
mance and outcom es, an d outcomes relationship to satisfaction of employee
needs. ProMES consists of four steps. First, people in. an organization identify
the p roducts, or the set of activities or objectives, the organization expects to
accomplish. The organization' s productivity depends on how well it produces
these prod ucts. At a repaiJ.' shop, for example, a product might be something like
"quality of repair." Second, the staff defines indicators of the products. Indica-
tors are measures of h ow v11ell the products are being generated by the organiza-
tion. Quality of rep air could be indicated by (1) return rate (p ercentage of item s
returped that did n ot fw.1ction im mediately after repair) and (2) percentage of
quality-control inspections passed. 'mrd, the staff establishes th e con tingencies
betvveen fl1e amo w.1t of the indicators ;md the level of evaluation associated with
tha t amoun t. Fou rth, a feedback system is d eveloped tl1at provides employees
and w ork g roups with :information about their sp ecific level of perform ance on
each of the indicators. An. overall productivity score can be computed by sum-
ming the effectiveness scores across the various indicators.
Research thus far strongly suggests this technique is effective in iI1creasing p ro-
d ucti.vity. (Figure 8.5 illusf::rates the productivity gain.sin the repair shop desclibed
previously.) The research also suggests -the system is c.m effeclive feedback m ech a-
nism. However, users found it fone-consumin g to develop the initial system.
 ...
372 CMAIPTEIR B Per formance Management

(i00 - -
Increases in (..J G
Productivity for a
l~epair Shop Usi ng
Prof\!1ES Measures 500l
400 - .
(!()
'Jl
'11
JI:::!
~-~

.2: 300 --
1j
(;ll
it:
M.11
B
200 · -

·100 --

0 - ---+-l---- 1- -1--+ --1--1-1 -- --1--+----1- +-- 1- 1---+----+--1-4- f-+-+--f-4

·1 2 3 4 5 {) 7 g 9 10 1'1 12 '13'14 151 6 '17'18 '19 202'12223
Month

SO URCE: P. Pritchard , S. Jone s, P. Roth, I\. Stuebing , and S. Eke berg , "The Evaluation of an Integrated Approach
to Measuring Organizational Productivity," Personnel Psychology, 42, (1 989), p p. 69--115 . Used by pe rmission.

Evah..m1Non of the Results Apprnach

The results approach minimizes subjectivity, relying o n objective, quantifiable
in d icators of p erform ance. ~DTus, it is usually highly acceptable to b oth man ag-
e:i.·s an d employees. Another advantage is th at it links an individual's results
w ith th e organiz ation's slTa tegies and goal s.
However, there are a num ber of chaUenges in using ·objective p erformance
m easures. Objective measuxem en ts can be both contarn.inated and deficien t-
con taminated because they are affected by things that are n ot under the
emp loyee's conh'Ol and d eficient because not all the important aspects of job
p erformance are amenable to objective ni.easu rement. For example, consider
how an economic recession can :influence sales goals or, for a teache1~ p arental
support for studying can influ ence student's achievem ent test scores. Another
disadvantage is that individ uals may focus only on asp ects of their perfor-
m ance that are m.easured, neglecting those that are not. For example, if tl:i.e large
.~··"'
m ajori ty of employees' goals relate to productivity, it is unlikely they ·wiJJ b e
coi1cerned witl1 customer service. One study fotmd that objective performance
goals led to higher performan ce but that they also led to helping co-workers
less.12 It is important to id en tify if goals should be set at the i11dividual, team, or
d ep arhnent level. Setting emp loyees' objectives may not be appropriate if work
is team-based. Individual objec tives may undermine behaviors related to team
success such as sharing infonn ation an d collab oration. A final disadvantage is
tha t, although results measures provide objective feedback, t11e feedback :may
 ...
CHAPTER 8 Performance Management 373

not help em p loyees learn how they need to change their behavior to increase
their perforn 1ance. H baseball players are in a hi tting slump, simply telling L1Lem
that their batting aver.age is .190 may not m.oti.vate them to raise it. Feedback
focusing on the exact behavior thal: needs to be changed (ill.<~e taking one's eye
off th e ball or dropping one's shoulder) ·would be more helpful. 43
John Deerie takes specific actions to Jvoid these problems. 44 At the start of each
fiscal year, irnmagers a:nd enrployE:1.c:s rn.eet to discuss objectives for the yem:. A
midyear revievv is then <:'.ond11d:ed to check on the employees' progress in meet-
ing t:he goals. The year··end review ni.~eting focuses on evaluating goal accom-
plishment. G oal achi1::'w:m.ent at Hie end of the ye.ar is Jinl(ed to pay increases
and other rewards. AH {:ompany objectives are supported by division objectives
that are available for employees to viev1.r online. Employees also have available
a learning and activities '~ourseware catalog they can use to help develop skills
need ed to ad ueve theic performance objectives.

Thus far we have examined tl1e traditional approaches to measuring and

evaluating employee performance. Fundamental characteristics of
the quality
approach indud<~ a customer orientation, a prevention approach to errors, and
continous hnproveinent lrnproving customer satisfaction is the primaty goal of
the quality approach. C:ustorners can be internal or external to the organization.
\. A performance manag~~1-r1ent system designed with a strong quality orientation
ca:n be expected to
<flEmphasize an assessrnent of both. person and systen1 factors in the measm·e-
ment systern.
'8 Emphasize that managers and employees work togef11er to solve perfor-
mance p roblems.
"' Involve both ii-:iternal and external customers in setting standards and mea-
suring p erformance.
® Use mullip le sources to evaluate person and system factors.45
Based on this chapter's earher discussion of the characteristics of an effective
performance management system, it should be apparent to you that these char-
acteristics are not just uDique to the quality approach but ate charactefistics of
an effective appraisal system!
Advocates of the quality approach believe that most U.S. companies' perfor-
mance management systen1S are incompatible with the quality philosophy for a
nmnber of reasons:
1. Most existing systems measure performance in terms of quantity, not quality..
'2. Employees are held ao:ountable for good or bad results to which they con-
tribute b ut do not completely conh'ol. .
3. Companies do not share the financial rewards of successes with employees
accordin g to how much they have contributed to them.
4. Rewards are not connected to business results_46
Sales, p rofit margins, and behavioral ratings are often collected by manag-
ers to evaluate employees' performance. These are person-based outcomes. An
assumption of using these types of ou tcomes is that the employee completely
controls them.. I-ImNever, ac(o:rdixi.g to the quality approach, these types of
 ...
37 4 CMAPTEfR 8 Performance Management

outcomes should not be used to evaluate employees' performance because they

do not have complete contTol over H1em (i.e., they are contaminated). For exam-
ple, for salespersons, perfonnan.ce evaluations (and salary increases) are often
based on attainm.en1: of a sales quota. Salespersons' abilities and motivation
are assumed to be directly responsible for their performance. However, qual-
ity approach advocates argu.e that better determinants of whether a salesper-
son reaches tl1e quota m:e "systems factors" (such as competitors' product price
changes) and economic conditions (which are not under the salesperson's con-
trol).47 Holding employe€s a.ccountable for outcomes affected by systems factors
is believed to result in dysfrmdional b~havior, such· as falsifying sales reports,
budgets, expense accounts, and other performance measures, as well as lower-
ing employees' motivation for confinuous :improvement.
Quality advocates suggest that the major focus of perfo1mance evaluations
should be to provide employees with feedback about areas in which they can
improve. Two types of feedback are necessary: (1) subjective feedback from·
managers, peers, and customers about the personal qualities of the employee
and (2) objective feedback based on tl1e work process itself using statistical qual-
ity control methods.
At Just Born, the company that makes Peeps and 1\1.ike and Ike candy, tl1e
performance management process is designed with a slTong quality orienta-
tion.w TI1e perfonnance management system is designed to facilitate employee
improvement (a fmward-looking approach) rather than focus entirely on what
the employee has accomplished d1uh1g the past year. Also, managers and
I· employees are encouraged to work together to solve performance problems.
The performance management system is part of the company's broader
people development system (PDS) which is designed· to ensure that learning
and devdopment align with business strategy and drive business results while
ensuring employees have fue skills to succeed in thell: current and future jobs.
TI1e PDS includes the performance management process, learrung and career
development processes, and succession plam1ing process. Information from
ead1 of these systems is shared to ensure that employees axe developing the
skills tlu-ough training <md on-the-job experiences needed for the1r cmrent jobs
as well as preparing for their future career interests. Just Born's perform.aI1ce
management system starts wil:h a planning meeting between the employee
and their manager. At this meeting the employee's role and strategic goals of
the deparhnent are discussed. The manager and employee agree on up to four
personal objectives 1l1at will help the depashnent meet its objectives and the
employee achieve the specific deliverables described in the job description. Two
coinpetencies that the employee needs to deliver or improve on are identified.
The immager and employee ·work together to develop a learning plan to help
the employee gain the competencies. During the year~ the employee and man.-
ager meet to discuss the progress in meeting H1e deliverables and improving the
,,.... competencies. Pay decisions made at H1e end of each fiscal year ru:e based on the
achievement of perfonnance objectives and learning goals.
Just Born also uses the ~Now . . . Now improvement process, a customized
Kaizen process to improve business processes and results. The Wow ... Now
improvemen t process includes teaching employees how to identify improve-
ment opportunities, collect data, make improvements, measure results, and,
based on the results, refine practices. Kaizen, the Japanese word for improve-
ment, is one of the underlying p1inciples of lean manufactming and total
 ...
CHAPTER 8 Performance Management 375

quality managemenl: {we discussed lean manufacturing in Chapter 1). Kaizie:n Kai;;:~n
refers to prachces participated ill. by employEes fTom all levels of the company Employee practices
that focu:3 on conlinuous improven1ent of business processes. 49 As the Wow ... that emphasize contin-
uous improvement of
l'fow improvement process illustxates, Kaizen involves considering a continu- business processes.
ous cycle of activities in.duding plam1ing, doing, checking, and acting (PDCA).
Statistical process control techniques are used by employees to identify causes
of problem3 and potential solutions. 111ey in.dude process-flow analysis, cause-
and.-effcct diagrams, control di.arts, histograms, and scatl:ergrams.
Statistical process con!Tol techniques are 1rery important in the quality
approach. These techniques provide employees with an objective tool to identify
causes of problems and poteniial solutions. TI1ese techniques include process-
flow analysis, cause-and-effed diagrams, Pareto charts, control charts, histo-
grams, and scattergrams. Process-flow analysis identifies each action and decision
necessary to complete work, such as waiting on a customer or assembling a
television set. Process··flow analysis is usefol for identifying redundancy in pro-
cesses that increase mmlufacturing or service time. fo cause-and-effect diagrams,
events or causes that result in undesirable outcomes are identified. Employees
try to identify aU possible causes of a problem. Th.e feasibility of the causes is
not evaluated, and as a result, cause-and-effecf: diagrams produce a large list of
possible carn:~e~>. A Parelo chart highlights the most important cause of a problem.
ln a Pareto chart, causes are listed in decreasing order of importance, where
I importance is usually defined as the frequency with which that cause resulted in
a problem. 111e assLunphon of Pare1to anaJysis is 1fo1t the majority of problems
are lhe result of a small number of causes. Figure 8.6 shows a Pareto chart listing
I the reasons managers give for noi: selecting current employees for a job vacancy
!
Control charts involve collecting data at multiple points in time. By collecting
data at different fimes, employees can idenoiy what factors contribute to an out-
come and when they tend to ocnIT. Figure 8.7 shows the percentage of employ-
ees hired internally for a company for each quarter betvveen 1993 and 1995.

70 Fngll.llw® $.t-Oi
Pareto Chart
60 --

50 -

40 ~
1%

30 -

20--
J
.... ~
10- fi
!~~-
0 ~
··--Trans er _____"f~[~r-----;\11 anagement ac
time tirning di,:; cret ion deve lopment
toolon9 plan.

SOURCE: From Clara Carte r, HR Magazine. Copyright 1992. Repri nted with permission of Society for Human
Resource Management.
 ...
316 CHAPTER 0 Perform ance Management

Control Chart 100'% ..

?O -
80 --
70 --
60 --
50 -
40 --
30 -
20 --
10 --
- --<---1-------j--- t -- - - - ' i - ---1- ---+---+"-----t-
Otr ·1 O.tr 2 Otr 3 Otr 4 Otr 1 Otr 2 Otr 3 Otr 4 Otr 1 Otr 2

SOURCE: From Clara Carter, HR Magazine. Copyright 1992. Reprinted with permission of Society for Human
Resource Management.

Internal hiring increased dramatically during the third quarter of 1994,. The use
of control charts helps employees understand the number of internal candidates
who can be expected to be hired each year. Also, the contTol chart shows that
the amount of internal hixing conducted duxin g the thixd quarter of 1994 ·was
much larger than normal. Hisf:ogra ms display distributions of large sets of data.
Data are gmuped jnto a sm.aUET n umber of categodes or classes. I-Iistograms anc;
useful for understanding the amount of v ariance between an outcome m<d the
expected value or average outcome.
Scattergrams show tlv~ relationship between tvvo variables, events, or different
p ieces of data. Scattergrams help employees determine whether the relationship
between two variables or events is positive, negative, or zero. ! ~fl

Eva ~uatnow-n of the Qua~ ity Al!Jlpn:Paich

!LO 8-5 The quality approach relies. primarily on a combination of the athibute and
Choose the most results approach es l:o performance measurement. However, traditirn1.::u per-
effective approach formance appraisaJ systems focus more on :individual employee performance,
to performance mea-
surement fo r a g iven
while the quality approad1 adopts a systems-oriented focus.so Many companies
situation. rnay be unwilling to completely abandon their traditional performance manage-
ment system because it serves as the basis for personnel seleciion vaJid.ation,
identification. of training needs, or compensation decisions. Also, the qu.alil:y
approach advocates evaluation of personal traits (such as cooperation), whid1
are dHfi.cult to relate to job perfonnance unless t11e company has been slJ:uchued
into work teams.
ln surrunary, organizations can take five approaches to m easuring perfor-
mance: comparative, a11Tibute, behavioral, results, and quality. Table 8.9 sum-
marizes tli.e various approaches to meastffing p erformance based on the criteria
we set forth earlier and illustrates tJ1at each approach has sb:engths and weak-
nesses. As a result, effective p erformm1ce evaluations involve a combination of
approaches :including ass@ssment of objectives and behaviors.
 ...

CMAIP'TER 8 Performance Ma naqe rnerrt 3Tl

E11aluation of A p proaches te> F'e rfo rmance M easu rement

( . 0111 pa r::rtivr:; l'nur, unk•/; Cm be hi9h Depends on rater, Moderate ; easy Very low
1'f ;.:1nil~Jer take '.; if ral: in 9s .J 1e b ut usual ly no to d eve lop and
l:i rr1 e l o 1;· k1h::· clo ne cc:m:Aull;' measure of use b ut re si sta nt
l11 :k agree rn e nt used to no rmative
stan dard
/\!ti ihutt· ' U::;uzdly low ; Usuall y low; Usually low;can be High; easy to
ree:1u 1rr;:)$ can be fin e imp mve cl by . develop a11d use
1Tian;::i9('.)f' l u if dev e loped sp e cifi c d efinitions
rri;-~ ke lin k carffful ly o f c1ttributes
Hr ~ h: 1 vior;1 I C c:m h e qu itn Usua lly hic3h ; Usua lly high Mod e1·a te; Ve ry hi<Jh
hi<Jh m inimizes d ifficult t o
conta 1r1i nal:i o n develo p, but
a nd def ic ic-mcy accept ed we ll
for use
Very hiqh Usually hiqh; Hi9h; main High ; us ually . High 1e:y1i-c!ing
Ci1 1'1 b (~ b o th pro blem .canbe. devel o pE!d wi t h re sult ;:.;( b ut lc)\N
conl:E1111inat c'"d te st--rot est- - input from t hose rega rd ing behav-
and d efi cient clepends o n tirr1in 9 to be eval uated iors nE:cic~ ss ciry to
of rne rJsure a chi i::vr::~ t h!3rT1
() 11 .ilit v l.\~ry hi qh Hiqh, but c2rn High Hi•Jh ; usually Hig l1 rery;rrJing
be both developed w it h resu lt:o; , b1.1t low
con tan·1 in CJ tecl input from th ose 1·e~:prd inc;1 b e hav-
an d d eficient to b e evaluated io r:. necess.:i 1y t o
achi ew~ t hem

V.{h ;.1J:cvcr ap proach to pei·forn iance n1anagem.enl: is used, it is necessary to decide fl.O :8~('>
"'il.100. ~ to JJ:;;e as the soLtrcc of the pr:::J·fori11a.nce 1neas1rres. Each. source has specific Discu:;s the a d va n ta~_1es
<> ITPJ•<rl'i-ic
,.J ··· ·•· ·"-o .. . \.) i:Pl("l
.. A 'lP(Y• lr 1·1·'"> ::.>:··' ; V\Tr-
' - 11 - ~·'-·"· 'i... 1-
1
. ·c' d1°ru
L • . .. L . - ~- c <:; J.~..:j.vp 'l)i'i 1nri1-·y, u"'O"''Cr>s·
__._) - ,,,:,),_, !l.,., , . · - ·--·· :i::, . man-lge1·s
'"- ~ l_.ILLc ' p '- e 1·"
o, 0 and d ir;a clvanta ges of
t ha d iffe rent '.iOIJrce:;
subord in ntcs, :;(·:U, a.nd c 1x:;l0u 1.ers. To iJl O "?.ClSe the effect of performance m.anage-
of p i:"] rf<.:inJ1anr:.:::;
1"1'""" ' ·I :-;;<;l-f'
__ _, ._ )V.. ~'·r: i r>;
· ' , _.---l- 'l . ~. - ..;,h
... . ~( j ,-,
Jc... ·ni
.• ···- ;1r
- - · J •c
•1 j'n;1ii·1;:mfr
~ '.:... ·-__- .,; ____,, _,_. ,c; J..11:. J . i~):J · -- -O r.and
__, hn0 ' 'f'l''lff'JO'Pl"''
- ·- .J,.J'. !· .. , __ - ,.) "·elf-ar.:spr.:"'lil"'lll:
·-··· ~ -L...I nf _.i.)L) _ .,_ i...... ..• • • ·-
inform::1ci1);1.
jX~»(on•• ano. : . This hdp:_; fa.:Hiia te a co:n vcrsatio:n about perfo1nwnce during the
apprai:>; :l rn ceting and on a .rnore frequent b asis. The "Com.peting through Sus-
ta irwbllity" box iUustra1cs the iinportance of using n1ultiple sources of p erfor-
rn mi•,>'. i11fo nn<'J ion J:o \,:n::;m·(:· Uwt the nt:eds of aH stakeholders ar e being m et.

lLO ;Di-?'
Cho ose the most effec-
·1f\/f;=ip
. 1 .. ·,( ap•·s
<. .. . ~(, ()'·-• ). '" """ i'~l1 !\:°. .
KA .t.,'\... . -·11o"'·i·
.L ,) . f-
. l pc1.1e"-r~lv
·- _,_ ._! ,.. I.. .) ·1-·1"' cl ~ 011'"Cf'
0
~_J 1':;.
1
1) infonnati' on • _It
- .'!. - - oC.'I. .irJe-·f·or1T1
l "''1ce-
... J. .LU
th1'2 source(:;) for per-
is u:su;J.Hy ~~;;1 fo to assu.x:ne !:h;:1t su pervisors ha:iri;~ extensiv i::· k nowledge of the jd) form ance inform atio n
·t'<"(n1;
. -- l - '-"- ··1·0'--l..
-11r.•11!·"· "' "lri
:'- .. . .~) i:.u
1
.. _,,,d_ "1•
. _·,..,,_ t·J·1"'"· rx;· 1.l
L'-1.•.-/ l r.:.
1 '" ''l a'Tf'C
.. t: J.l -'-"~-
'l'"' -""- _ T' i"'·' -F· "DT
1 .r'..A.~-~
"'o-·tr1n1·...,,
."'! l . . _ . _ '-} to Ob"" €1""1e tl1e.-1r
1i• ''-" .:i. 1) • , • • • •• fo r ;my sicu<;t io n ..
 T~we lli~a1~th fol!Jl!llvtfartnorn famh11~tC$ rt»erriorITTrniQJRll(£ 'ffrrorn1
ffliff~irent Pers~e(thfe.s; it(IJ) ~1r11:s;1U1rre ij'IJ: ~.~10iets ~ts MrossaoITTJ m101 Goals

Performance management can
help create and reinforce the
skills, motivation, values, and
culture that help organizations
achieve economic, social, and
environmental benefits. Also,
perfo rmanc(;-; managernent
can help insure the long-term
benrAits for the or~1<:miza-
l:ion's stakeholders includ ing
~"mp loyee s, customers, and
the cornmunity. Th e H ealth
1=:oundatio11 in the United l<ing -
dom is a non -profit organiza-·
t io n with ;J mission to insurE;
that groups and individuals
;:ire not cut off from access to
health care. It provick~s fund-
I· ing for programs to improve
health syst,~ms in the UI< and
helps UK inhabitants make
informed decisions about
healthcare and advocate for
their health.
lt fo cu~~es on tvvo needs
it has defined as priorities:
patient safety and perso n··
centered care. For each need,
the organization establishes
yearly objectives the agency
sho uld attain to fulfil its rnis-
achievements and providi ng
reflection upon this is an impor-
tant aspect of work. Therefore,
at the Health Foundation, each
erriploye<=' collaborates with hi e>
or he r supenrisor to define the
employee's pe rforrn ance objec-
tives. f3ecause the organ ization
has already w;tablish ed and
published yearly organization-
level o bjectives, the supen1isor
has a sense of vvhat his 01- her
group needs to accomplish to
';upport th ose objectives. Th is
information enab les the man-
a9er to support the e mployee
in identifying ~~pals that will
contribute to achievin'.;J the
group's effort In p1-actice,
meeting these ideals can be
challenging.
Some accomplishments are
difficult to measure, a nd some
appear un related to the Health
Foundati on'o; O"erall goals and
mission rel ated to promoting
health. Ho1Never, the Health
Foundation aims to engage
a ll staff w ith a challeng in ~1 and
e)(citing learning culture and
encourage openn ess, discus-
diversity is important and peo-
ple are val ued, respected and
know that they matter. The
Health Foundation addresses
this by gathering perfor-
mance information from an
employee's peers, customers,
and subordinates. They can
indicate whether, for example,
they feel that the employee
has treated them with respect.
Likewise, measurements of
an employee group's morale
gauge whether the group's
manager is leading effectively.
ID~S.ClUJSSiON QU ESTROINJS
'i. What source(s) for pe1-for-
mance information do you
think it is best to use to
determine 'Nhether employ-
ees are working toward the
organization's long-term
goals and mission, and ulti-
mately its future?
2. What performance outcomes
(attrib utes, behaviors, com-
petencies, objective results)
would you assess?
SOURCES: www.health.org.uk/about-us/ ~
.'· .'
••··.·_,,. .f'.j
work-for-us/benefits-of-worl<ing-fo r-u s/;
'I

sion . The Health Foundation sion and feedback so t he www.gov.uk/government/uploads/system/

cherishes the idea of continu- Foundation can develop and uploads/attachment_data/file/270368/34658_
Cm_8777_Vol_1_accessible.pdf; www.health.
ous learn in g and devc~loprnen t. continuou sly improve. Also org.uk/blog/my-promise-to-learn/. Accessed
Keep ing track of individual's this cu ltu re advocates that 6th May 2014 .

.,,. ....

employees- in other words, tJ1al: they have the ability to rate their employees. In
addition, because supervisors have something to gain from the employees, high
performance and something to lose from..low perfo1mance, they are motivated
to make accurate ratings.5 1 Finally, feedback from supervisors is str·ongly related

37H
 CHAPTER 8 Performance Management · 379

to performance and to exnployee perceptions of the accw~acy of the appraisal if

managers attempt to observe employee behavior or discuss performance issues
in the feedback session.52
Burljngl:on Northern Santa Fe Corporation of Fort Vl/orth, Texas, improved
its performance management process by h.olding leaders accountable in setting
am111al goals, creating individual development plans, providing feedback and
coaching to employees, and self-evaJ.uation. 53 .An. onlme performance manage~
ment system supporls the p rocess. The c01npany's executive team creates the
overall company objecltives, ¥.rhidl cascade dovm to ead1 department and indi-
vidual employees who can nmN see how H1ey contribute to the company's suc-
o::ss. Tiv~ online system allows m.anagers and employees to see how they and
the departxnent arc progressing on the objectives. RequiTed to be engaged in the
perfor:rnance n1anagenr1ent process, 1.n.oJ:-iagers are 1.nore focused on the necessary
~mnmunicahons, coaching, and giving feedback, £md they me more inclined
to seek out training to be sure that they have thP- necessary cornmurtications,
feedback, and coaching skills. Managers' effectiveness is monitored by periodic
ernployee sunreys that ask questi.om; a.bout whether t11e manager discusses per-
formance, ·whether the dialogue vliHh the manager is two-way, and whether the
ernployee receives ongoing feedback.
Problen1s with usjng Gupervisors as the source of performance information
cf:ln occur i11 p mticular siJu.ations. In some jobs, fo:r example, t11e supervisor
does not have an adequate opportunjly to observe the employee per.forming
his job duties. For example, in outside sales jobs,. the supervisor does not have
lhe opportu11it.y to see Hw salesperson at 1.1>10rk most of the time. 111.is usually
requfres ffo:it the manager occasionally spend a day accompanying the sales-
person on sales calls. Howeve1~ on tl1ose occasions the employee will be on best
behavio1~ so there is no asstn:ance that perfon:nance that day accurately reflects
performance when tli.e manager is not arou.nd.
Also, some supenrisors may be so hi.ased agajnst a particular employee that
to use the supervbor as the sole som:ce of ]nformation would result in less-than-
accurate measmes for fhat individual. Favoritism is a fact of organizational life,
but it is one that n.1uGt be minimized as much as possible in performance man-
agement.51 Thus, the pcrfon:nance evaluation system should seek to :minilnize
the opporhuuties for favorilisna to affect ratings. One way to do tlus is not to
rely on only a supervisor's evaluation of an employee's performance.

Another source of perforrnance informati6n is 1l1e employee's co-workers. Peers

are an exceUent source of infonnahon h1 a job such as law enforcement, where
the supervisor does not always observe the employee. Peers have expert knowl-
edge of job requirernents, and they often hav~ the rnost opportuni.ty to observe
the employee in day-to-day activities. Also, peers are often in the best position
lo praise and recognize each other's performance on a dajly basis. International
Fib.1ess Holdings, a Ca.nada"·based healt11 care group, uses peer-to-peer feed-
back to recognize employecE» day-to-day behaviors that often go unnoticed such
as helping out with a challenging task, yet exemplify the company's core val-
ues.55 A pencil-and-paper version of the peer-to-peer feedback system requiring
employees to vvrite thank-you notes generated little excitement. So the company
created a Facebook-like application 1Nhich employees rnn use to recognize peers
 ...
380 CMAPTE!R 8 PerformanG:~ Management

publicly by posting messages to a "team •Nall" a.swell as privately using e-mail.

Each employee receives 300 points each year that they can allocate as they like
to acknowledge their peers' behaviors. T11e points can be traded for awards such
as paid time-off, gas cards, or gift cerl::ificates. Peers also bring a different per-
spective to the evaluation process, ·which can be valuable ]n gaining an ove:ra.U
picl11re of the individual's perfonnance. ln faci:, peers have been fow1d to pro-
vide extremely vaJid assessments of performance iri. several different settings.56
One disadvantage of using peer ratin.gs is the potential for friendship to bias
ratings.s7 Little empirical evklence suggests that this is often a problem, how-
ever. Another d isadvantage is that when the evaluations are made for admin-
istrative dedsio:nsr peers o.ften fo.1d the sii:ua.tion of being boH1 tat.er and ratee
uncom.fortable. When these ratings are used onJy for developmental purposes,
howeve1~ peers read favorably.5n

Subordinates a.re an especially valuable source of perfor:rnance frlforrnal:ion

when managers are <::valuatecL Subordinates often have the best opportunity
i!Jlpwar<l tFe{!!dlbaick to evaluate how vveJJ a manager tn~ats 1~rnployees. Upwali.'d. fr~iedlback. n:.fers to
Manage rial perfor- appraisals that involve collecting subordinates; evaluations of 1nanager's behav-
mance appraisal that ior or sidJls. Dell Inc., the 1exas-based cmnputer O)mpany, recently took steps t.o .
involves subordinates'
evaluations of the
focus :not only on financial goals but also on makmg the company a great place
manage r~; behavior or to work to altrad and keep lalente<l crnpfoyees. 59 To help develop what DeJl
ski/ls. calls a 1ATi:nning cuJl:ure,'' Del.1 add·ed a pc:oplc n1aJ1agem.~:nt con1poni::nt to h~3
11

results-oriented perf01n1a:nc12 management syslem. Ilfianag12rs are no'w rated by

ll1eir employees on semiannual ''Tell D€H" surveys. l\1anagr::>r~ who receive less
than 50% favorable scores on five qu<estions receiw~ less fa.vorabl.e compensa- ;: :~

:~I
tion, bonusr and prornotion opportus~ities and axe required l:o take additional
training. Table 8.10 shows the five queshons. Managers are expected to work
continuously to improve their scores. Their goaJ is to .receive at least 7.5% favor- · : ~ii

r11 t~
able ratiJ:1.gs from employees on H1e five questions. One sl.udy found that manag-
ers vie1.Ared receiving upward feedback more positively when receiving feedback
fr.om subordinates •Nho were identifi.e(t but subordinates preferred to provide . I

anonymous feedback When subordinates we:re identified, they .inflated !heir

ratings of the manager.60
One problem with subordinate evaluations is that. they give subordinates
power over their managers, thus putting th£~ manager in a difficult sil:ualion.61
This can lead to managers' emphasizir1g employee satisfaction over productiv-
ity. Howeve1~ this happens only when administrative decisions are made from

., ....
Example of Upward ~ Even.if)vvereoff~red aco.mparablepositibn with simi larpay arid b~nefits at
Feedback Survey · another company; I would stay at DE\1!. · .·· ' . ·1 ·11 ~
: 'fIT·. I.
. Jt:
Questions from "Tell 1receive origoiri~ffoedback thathelps !Tle to impmve my pe1forrnanc£,
·· a; ··
. ~I

Dell" Surveys .,,, . My ma11a9E!i/supervisor suppoitsmy efforts to bala11ce i:-riy work and personal iife_
· ,., My rnanagerl~lif?ervisor is effective cit managing 1::ie!'.:lple: ·.
· ·l.cc;i11.be Sl:Jtcessful at.Delland still retain .my indiyiciuality;

SOURCE: Based on A. Pomeroy, "Agent of Chan9e, " HR Maga7.in e, M~y 2005, pp. 52-56 .

.
 ...
CHAPTER 8 Performance Management 381
.
these evaluations. A~J 'wi(h pe(~J:' evaltw.tions, it is n good idea to use suboi·dinate
evaluations only for ck:Vdopmental purposes. To assure subordinates that they
need not fear retribot:ion. frorn. their rrlan.agers, it is necessary to use anonymous
evaluations and aJ .k~a~31: G1rc'tc: subordinates for each :mm1ager.

SB.IF
Although seH-ralings are not often used as tl112 sole source of performance
information, they can stiU be valuable.62 Obviously, :individuals have extensive
opportunities l:o observ(:' their m11m behavior, and they usually have access to
information regarding their results on the job. The YMCA of Greater Rochester,
i\le·w York, ad ded employee s~lf-evalnahon ;::i.s part of its performance review
process to address c0x1ccrns !ha~: employees had little input :into the appraisal
process. It d idn't help f<:1c:Hitate conv{,;rsati.on betlNeen employees and managers,
and both pvr lies dreaded formal appraisal rneehngs.63 In the revamped process,
self-evaluation allows ernployees to give examples of good performance and to
request l:rauTu1g. ' '
i:o :1mp1'{We tn.ecr
l •
1.veaK. "
nies::;es . T.! r
.uemre ·. ey are fi"1nal"ize d , perf or-
Jh
rnano~ ral:i.ng1> are ba~;cd on n discussion be tween the rnanager and employee.
5df-cvaluations hav(~ k:ssened the fear a:nd arndety associated with the old
appraisal process. Employees feel they have a voice and the opportunity to
influenc~ the apprabaI p·Ioo~ss_ Ma.nagers axe relieved because the burden for
I
I evaluation i~-> no longer cornpletely l:heix responsibility. Now, employees provide
them_iMith fo(~dback and insight into !11-eir performance which help determi.ne
\· ~'7
...
pcuodna_nn:.
]I ~ '.'. .~· -
.,_.
i ddI\J·"·
CJ"! ....

One problern with S'21.(-raJ:ings, h.01.N..::ver, is a tendency toward inflated assess-

nwnts. Research has fo1.md that self-ratings for personal h-aits as well. as overall
perfonnance :ratings tend to be lenient compared to ratings from other smffces. 64
I Thj~:; stems from two soa.u-:ce~3. ff l:hc rahngs are going to be used for ad.min-
. ·~" '-"v,
lSd:<lU. ·r" »c-" •. c.· ij'I.
C C!CCJ..>10,l._, 1, . .11<.,(-'_ .(--d)
.-,. T JoJ~ .....), . h···- L,
·- · "'''"") 'c: ,_ l.1.e- p..1npl oyeeS
.ul. J,.J ~ • ·tereS t S t 0 ll111a
I lil , -LI ··te
their ralings. 1\nd then::: i.s ample 12vidence in the social psychology literature
th.at jndivi<luals ;:1.ttribute their poor performance to external causes, such as
a co-worker 1Nho they l:hJnk h~1s not provided them with timely infmmation.
Although self-ratinw; are k~:>s inflated when supervisors provide frequent per-
formance feedback, ii: i~> .not advisable to w3e them for administrative purposes.65
The best use of self·raJings i:3 r:w a prelude to the performance feedback session
to get employees thinking about their performance and to focus discussion on
areas of disagreement.

(JJSlfOM!E~:S

As discussed in Chapter l, <3ervice industries an~ expected to account for a major

portion of job growth:1r, /\s a result, many companies are :involving customers in
their evaluation systems . One '"triter has defined services this way: "Services is
sm:nething which can be b1.)ught and sold but 1Nhich you cannot drop on your
foot." 67 Because of the unJque :nal:ure of seniices-the product is often produced
and consumed on the spof---superv:i.sors, peers, and subordinates often do not
have the opporh.u1Hy to observe ernpJoyee behavior. Instead, the customer is
often the onJy person present to observe the employee's performance and thus
is live best source of perforrnance information .
 ,~r1
..
!'
,':·.•') '

382 CHAPTER 3 Performance Management

. }f.1,
Many compaxtles in service industries have moved toward customer evalua-
tions of employee performance. Man:iott Corporation provides a customer satis-
faclion card in every room and mails surveys to a random sample of customers
after their stay in a Marriott hotel. '\!Vhirlpool's Consmner Services Division
conducts on-site (using the service technicians' hand.held computers), ma;J, and
telephone surveys of custorners after factory service tecluucians have serviced
their appliances. These suxveys allow the company to evaluate an individual
technida.n's customer-service behaviors while in the customer's home.
Using customer evaJualions of employee performance is appropriate in.1 two
siluations. 60 Tii.e first is 111.1hen an employee's job requires direct service to the
customer or linl<ing the customer to other services within the company. Second,
customer evaluations are appropriate when the company is interested in gather-
ing information to determ.lne what products and services the customer wants.
That is, customer evaluations serve a strategic goal by integrating markeling
strategies with hum.an resource activities and policies. Customer evaluations
coU.eded for !his purpose are useful for both evaluating the employee and help-
1ng to determine whether d1anges in other HRM activities (such as training or
the compensation system) axi:: n eeded to improve customer service.
The weakness of custorner surveys is tl1eir expense, particularly if printing,
3610l-D~girl!ltl!) postage, telephone, and labor are involved. On-site surveys completed using
Apprn!sai~ hand.held computers help elirninate these expenses.
I A performance In conclusion, the be3t source of performance information often depends on ;,,,!i
appraisal process ·~~., 1,
the particular job. One should choose the source or souxces that provide fue best 'J,.·.
.; ''i:~
for managers that
\·! opportunity to observe employee behavior and results. Often, eliciting perfor-
includes evaluations
mance information fron.1 a variety of sources results in a performance m.anage-
~
'
!
from a wide range of
persons who interact ment process that is accm·ate and effechve. In fact; one recent popular trend in .,. .

with the manager. The orgm1izations is called 360~&·~gF~re apprai::;al3.69 This technique con.Gists of hav-
process includes self- ing multiple raters (boss, peers, subordinates, customers) provide input into a
evaluations as well as
manager's evaluation. 111e 1najor advantage of t11e teduuque is that it provides
evf.l/uations from the
manager's boss, sub- a means for mini.mi.zing bi.as in an otherwise subjective evaluation tedrnique; It
ordinates, peers, and has been used primarily for sb:ategic and developmental pmposes and is dis-
customers. cussed in greale» detail in Chapter 9.70

Launched in 1994, the 1VITN Group is a multinational telecommunications

group, operating in 21 crnJJ.1h'ies in Africa, Asia and the Middle East. .As of
30 April 2011, MTN recorded 149 million subscribers and subsequently passed
150 million subscribers acrnss its operations. MTN's substantial investment jn :1~
its network, customer service inihatives and its people training and develop- Jill,
''
,.• ment was recognised when it took the :number one spots in the Ask Afrika
Orange J.ndex survey in tlle T£lecommunication Provider and Internet Service ..•'j':il
Provider categories. Ask Afrika Orange is a South African customer satis- ''i
faction index thaJ: is researdwd and compiled annually by market research
specialisi: Ask Afrika. 111.is high level of customer satisfaction at MTN is sup-
ported by a variety of evidence-based interventions. For example, proactive
and on-going customer satisfaction is measured by an independent company.

; ~ii~}'. ·.'
1 ,:
 ...
CHAPTER 8 Perform ance M anagement 383

The independent assessor nses cornpu.ter assisted telephonic interviewing to

gathel' informa!ion rer;m:ding cus torner service. This data is th en combined
1~Hh 1500 nmdornJ.y })icked subscribers 111rho are interviewed every three
months. This ni.ull:i-p[·onged .approach Jo as::;essir1g the real level of customer
satisfaction has consistently prodtKed results suggesting that customer satis-
faction is more than 85°/.).
SOURCES: www.p rng .o rg .za/do cs/2002/ appe nd ice s/021 ·105 mln .pp t; W'.'Ml.b izcomm u nity.co m/Articl e/1 96/545/
65201.html. Accessed 6th May 201 4.

Use of TechnohlQlf h11

Perforrnance ~V!lanageme1r1rt
Technology is influencing p erformance management systems in tluee ways. As
we have seen in the chapter mai1y companies are moving to web-based online
paperless performance management systems. These systems h elp companies
ensure that performance goals acros~3 all levels of the organization are aligned,
provide managers m1.d ~~mpioyee s :Nith g:n::ater a.ccess to performance informa-
tion and tools for 11.mderstanding and using the data, and improve the efficiency
of th.e performru"lice ni.ana gemeni: proces~i. Consider the use of online perfor-
mance management at Sereno, a biotechnology company:. and Amcor Sunclipse,
a nationwide distribution co1tnp<.u:1y headquartered ir1 Califonlia.71 Sereno uses
an onlii1.e perfonnarn::e management system that allows all managers to see the
performance of any employee that they are responsible for as w ell as the total
distribution of :ralings. Senior 1Tlanagers can see how everj manager rated their
people and analyze tJw relationship between department productivity and the
total average performance of employees in the d epartment. If there is a lack of
relationship it suggests that employeE;s are being overrated. At Amcor Sunclipse,
annual appraisals were con sistently late, there •Nas no consistency in appraisals,
they had little connechon to company objechves, and weren't u seful in assign-
ing employees to training programs or filling open positions. The new online
process allows e-mail nolification to employees ;md their manager to complete
performance evaluations and Inakes it easier to ·weight the rela1ive value of dil-
ferent performance goals. F'or example, all remployees are measured on safety
behaviors but safely is a more criii cal part of some jobs (such as manufacturing
jobs) than others. The on.line system can be set up to automatically weight per-
fonnance areas (safety, reduce waste, etc.) based on how important they are to
the job. For example, for a manufachuing supervisor improving safety might
count for 40% of their overall performance rating compared to 5% for an office
worker. -
Second, social medja tools such as Facebook and Twitter are increasingly
being used to deliver timely feedback. As emphasized in the effective perfor-
mance management :model (see Figure 8.1) performance feedback is a crihcal
part of the performano:' rnanagernent process that should not be limited to quar-
terly, midyem~ or annual formal perfonnance evalua tions. Also sometimes peers
and coworkers can give more ti:rn ely and s ccurate feedba ck and recognition
than busy managers. The "Co1npehng thrnugh Technology" box shows how
social media tools are being used for perforrHm1ce feedback.
 Soda~ M<el[~na loo~s ~ie~p Ma~e ~~}eriiorman1Ge
Mr.3l~11,~~JefilM:1n11·it ~ [Jla a~y E~enir~
M~iny 0mploy<::!es an:c no lon-
qer vvaii:iiHJ for a fonm1I per-
forma nce appr;:1isal to receive;;
f(c>(::clback or fwlp i:hr:)rn under·-·
:;tand how to improve. E:mploy-
!'!es are incrnasingly relyinq on
soci;~I nHxJi<:l for perfo rmance
feedbcick whethE.~r or not the
organiz;Jtion is 1_1sin9 Facebook,
-f1Nittcr, or tvlySpau::: ,,; ~; p ~1rt o+
the perfonTl<ince mana'._:Jernenf~
process . This is especially t ru e
for GF:n(=;ration Y (.;m p loy(:~es
who have grown up electron i-·
ca lly conn<,: cted to each other
1
thmus:1h social 1w;,di<:1 tools that
(:)1·1able personal and p rofe'.>-·
~; ional conncctio11s . [\e9ardles;;,
hii_::J h pedoDT1er:3 of all ages
acms'~ 91.0nerations are likely to
:,e0:k and 11dluc fr~0dbac k.
F~c-:co9nii:in9 the potc".'ntial U'.3(::
of soc ici l rned ia for pe1-forrnance
rnanagernent and capitalizinsJ
on the employees' nel'.')ds for
feedback frorn pi::ers as \Nell
a<:> their managers, forwarcl -
thinkinq companies are devel-
opin9 websites or pu rchasing
softwa re to help rnake perfor-
mance nv.inagernent more of
an ongoinq dynamic process.
Social media tools p rovide the
opportunity for employees i:o
get reco~Jnition from peers who
may be in the be st position to
observe and quickly recognize
, good perfomvmcc. Use of
soci;i l rned ia as a pe1-form ance
rnanag cm<o:nt tool is likely to be
more pr·evalent in cornpanies
that have a cu lture c mphasizinsJ
open cornrnunications r;:ither
3t14
-- -··-
than i:hose t h at believe they
need rnanaqer~~ to tightly co11-
trol and mo nitor pei-fom1ance.
For exarnple, /\cce11ture has
developed a f acebook-Lype
proqram ca lled Pe rforTnan ce
~1Jultip li er th at allo1Ns employees
to updat<'.:' their perfonnanci~
and post wee kly p erformance
s,1oals. Leo Pharma Inc. has a
Facebook-! ike 'Nall that s<::rve '~
as a virtual bui letin board when:';
employees can recogni:::r2 each
other for beha viors that sup-
po1-1: the company's core values.
Sa lesforce work .corn's perfor-
rnance mana9ernent platForm
,-,,isembles a Fa o2hook paG1e .
r:mployees and managers
can send each other colorful
"badges" to fiXO~Jnize good
perforn1ancc0 . The badges
include slog ans such as "you
rock" or "kicking butt. " Also
employees can receive feed-
back and coachi ng from peers.
Employees can post short ques-
tions about their pe rformance
su ch as "\f\/hat did you think
about my speech? " or "How
can I hand le angry custom -
ers better?" T he questions ar(-'!
e-mailed to manage rs, peers,
and anyone else from vvhom
the employee wants to receive
feedback . The responses are
gathered t ogether so they are
anonymous and sent back to
the employee, providing a
quick and time ly performance
review. \!\forksimple is a socia l
performance platform based
on actual work anrl socia l goals
- -
that happen throu~ihoui. ·
the wmkda y. \f\Iorksirnplc h1=!lps
employees develop currccc.r1t and
future 9oals, tie them i11to team ~ .' !
<:Hld company goals, and .:>l-1;:ir·2 '·'. :.~'rJj'
them with pe<-=::rs and ma1v1 · y~crs ,',l 1
to getfeedback and k<:0ep them
I
up-to-date on changes in th ic:
goals. Some con1pani(~" ;:ir.-:> also '·II
.' i
postin9 performance n:·,1i(::'N
forms on \/\f ikis to irn1)rove the
accuracy an d \h:i lidity oF '•o'\r;)lua --
l:ions by allovving all t:nri:i<::: :~ who
have observed an (0nipioyee's
performance, indudin9 nvm-
agers, peers, anc.J
to pmvid(:J input ini:o
cess and valuable feeclb;y::k tn
I
emproyees.
!O~SC!UIS$~0N QJ.1.JliESTK11 ~·~:;
1l" Consider the perfornHncs
management proce:::;s shovvn
in Figure 8.1. On which
step(s) in the process do you
think socia l med ia tools can
have the greatest po:.>itive
influence?
2" What are the potential d is-
advantag es of usins1 :;ocial
media tools in perfomvinu2
management?
SOURCES: A. Grown, "Crossing the ('J011-
e rationa l Divide," Financial Post, April 1'1,
2011, from www.financialpost.com; P. Gala-
gan, "Dude How'd I Do?" T + D, July 2009,
pp. 26-28; and J. McGregor, "Perfo.rmance
Review Takes a Page from Facebook," Busi-
nessWeelc, March 12, 2009, p . 5ll. ; http://
work.com, accessed April'-?, 20H; "i''<'rfor-
mance r~eviews Rernade/' Fon'une_. C)ctober
2?, 2012, p. (,0; h ttp://9elworksimplro.com;
D. Ziel inski , 0
G ivins_1 Pra ise, " HH f\,12!f;izin0,
October 2012, pp. 77-78.
 ..
CHAPTER 8 Performance Management 385

Third, companies axe relying on electTonic h·acking and monitoring systems

and softvvare to ensure that employees are working when and how they should
be and to block access to visi!jng certain websites (such as il1ose containing por-
nographic images). These systems include hand and fingerprint recognition sys-
tems, global positioning systems (GPS), and systems that can track employees
using ceU phones and hanclhekl computers.
For example, at the New York law furn. Akin 8t Smith LLC, paralegals, recep-
l:io1uBts, and clerks dock in by placing their finger on a sensor kept at a secre-
tary's desk The managing partners believe the system improves productivity
and keeps everyone honest, holding them to their lunch tirnes.72
Economic Advantages Corporation, a mortgage service company with offices
in Vennont and New York, installed an attendance tracking system. The new
system :irnplies that iJ1e company's salaried workers, client services represen-
tative::>, gel: p<:\id by the horn:..Automated VVaste Disposal, based in Danbmy,
Conn(;cticut, was com:erncd with the amount of overliJne hours of garbage col-
lectors and sales staff The operations manager ixlstalled a global positioning
systern (GPS) in garbage trucks and sak-:s vehicles. The trncking technology has
reduced the need for overtime hours to complete work, eliminating employees
getting "lost" during the day and visiting friends or local restaurants dmi.i.•g
1Nork hours.'73
JVI.eijei~ a retail supercenter offering groceries and 40 other departments
(in.duding furniture, automotive, fashion., and health and beauty), is one of sev-
eral :rei:a:ilers using software designed to ix:n.prove the efficiency of cashiers.741111~
I· store's cmnpuler times how long it takes to complete each customer transac-
hon, taking into account the kinds of merchandise being purchased as well as
whether customers are paying with cash, cri-::cUt, gift cards, or store credit. Each
we~'k the cashiers receive scores. If ihe cashier falls below the baseline score too
m.an.y times, they may be carefully monitored by their manage1~ moved to a
lovver-paying job, or even lose thefr job!
11-ae rationale behind the system is l:o maxi.mize efficiency to improve cus-
tomer service. Meijer suggests that the system has helped managers identify
slmiv cashiers and work with them to improve their efficiency. It also allows the
company to establish standards for identifying which newly hired cashiers in
the 90-day probationary period should be ti:ansferred or fired. Howeve1~ inter-
views with cashiers suggest that it has increased their sh·ess and decreased other
customer service behaviors not related to efficiency, such as making eye contact
with customers, or msh.ing older or physically challenged customers who might
need help unloading and payjng for their merchandise. Some customers like the
quicker checkout times, but ol11ers feel that the cashiers are not as friendly with
them because they are rushed at checkout
Despite the potential increased productivity and efficiency benefits that can
result from these systems, they still present privacy concerns. Critics argue that
these system tlu·eal:en to reduce the workplace to an electronic sweatshop in
which employees are treated as robots that are monitored to maximize produc-
tivil:y fot every second they are at work. Also, electronic monitoring systems
such as GPS threaten eniployees' rights ~m<l digriity to work without being
monitored.
Some argue t11at electronic trad<-ing systems are needlessly surveilling and
tracking employees when there is no reason to believe that anything is wrong.

- -- -- --
386 CHAPTER 8 Performance Management

Good managers know what th~ir employrces are doing, and electronic systems
should not be a substitute for good management. Critics also argue that such
systems result: in less productivity and motivation, demoralize employees, and
create unnecessary stress. A mentality is created that employees have to always
be at their desks to be productive. Advocates, on the other hand, counter that
these systems ensure that time is not abused, they improve scheduling, and they
help managers idenf:W; lazy workers. To avoid the potential nega1ive effects of
electronic monitoring, managers must cormrnmicate why employees are being
monitored. Monitorjng can also be used as a way for more experienced employ-
ees to coad.1 less experienced employees.

REIDUCi~H.i RATER ERRORS, ?OUTKS, AND mlCREASING

RIEUAIEUIUTY ANf!J VAUIDWfY Of RAT~NG$
l0$-8 Res~arch consistently reveals tJ1at humans have tremendous limitations h.1 pro-
Distinguish types of cessing information. Because we are so lilnited, we often use "heuxistics," or sjm-
rating errors, and plifying mec.hanisms, to make judgments, Virhether about investments or about
explain how to mini-
people.75 These hemistics, whidl appear often in subjective measures of perfor-
mize each in a perfor-
mance evaluation. mance, can lead to rater effors. Performance evaluations may also be purposefully : ·:i;1~-;1~. '·"
d istorted rco achieve personal or company goals (appraisal poliHcs). Table 8.H ·,, \
.;;.1
. ,,

shows tl_1e different t-ypes of rating errors. Sim.ilru.· to me error is based on stereo- •;t 1

types the rater has about how individuals V\rith certain characteristics are expected
ApprnHl\iai fP'd~tfia::r.. to perfonn. 76 Leniency;. strictness, and central tendency are lmo10111 as d.ish'ibu-
A situation in which fional en:ors because the rater tends to use only one pa.rt of the rating scale.
evaluators p1.irpose-
ful/y distort ratings to Appr~D.aal politics refer to evaluators pu1poseful.ly distorting a rating to
achieve personal or achieve personal or cornpany goals. Research suggests that several factors pro-
company goals. mote appraisal politics. These factors are inherent in tl1e appraisal system artd

l~Me ~.'il'll
Typical Rater Errors
are similar to us in race, gender, back-
ground , interest, beliefs, etc., receive higher ratings than
those who are not .
. Co1"\tFast

Lenien cy Rate1· gives high ratings to all employees regard less of their
pe1forma nee.

Central t?~ndency Rate1· gives rniddle or average rat ings to all employees
despite their performance .

.~-,·:a.t~~: ~~=2;J!~~~~~.~:t~ ;~~~~irr+~~rn~=.;$;.;~;\1~~ ,:r~~,,

1
1 1

er0p oyee, · · > • •. ·• · .

Horns f~ater gives employee low ratings on all aspects of perfo1·-
rrwnce because of an overall negative impression of the
] .

employee.
 ..
CHAPTER 8 Performa nce M anagem ent 387

the company cultuxe. Appraisal politics are most likely to occm w hen raters are
accountable to the employee being rated, there are competing rating goals, and a
direct link exists between performance appraisal and highly desirable rewards.
Also, appraisal polihcs are Ukely to occuur if top executives tolerate distortion
or are complacent tm11Tard it, and if d.istmtion strategies are part of "company
folklore,., and are passed down frmn senior employees to n ew employees. For
example, employees at King Phannaceutical resisted development of a central-
ized perfo1mance systemJ"l Kjx1g Pharmaceuhcal is bu_ilt from smaller acquired
com1)anies, each with a unique culture. Each department within the company
had developed its O\Am 1Nay of figuring out how to evaluate performance and
link ii: to pay.
There are ll1xee approache~> to reducing rating errors.75 They include rater error
h·aining, frame-of-reference i.TaJ11.ing, and cali.bration meefu1gs . .Rater error train-
ing attempts to make rnanagern aware of ra ting errors and helps them· develop
strategies for minimizing those errors. 79 These programs consist of h aving the
participants view videotaped vignettes designed to elicit rating errors such as
"contrast." They ll1ei11nake their ratings and discuss how the error influenced
the rating. Finally, they get tips to avoid committing those errors. This approach
has been shown to be effeclive for :reducing errors, but there is evid ence that
reducing rating errors can also reduce accuracy.no
Rater accuracy training, also called fra.me-of-reference training, attempts to
emphasize the multidirn.ensional nahir.e of perfonmmce and to get raters to
understand and use the same idea of high, rnedium, and low performance when
maldng evaluations. This involves providin g e;<amples of performance for each
dimension and then discussing the actual Ol' "correct" level. of perfonnance that
the example represenls.31 Accuracy lTaining seem s to increase accuracy, pro-
vided that in addition the raters are held accom1table for ratings, job-related
rating scales are used, and raters keep records of the behavior they observe.82
An important way to hdp ens ure that performance is evaluated consis-
tently across managers and to reduce the influence of rating en-ors and politics
on appraisals is to hold calibration meetings.33 CaHll.n:a1lim1 meetings provide Cainlbrn1ti@lll
a way to discuss employees' performance 11vi.th the goal of ensuring that s:L.-ni- Mei&tnn!llJ$
lar standards are applied to their evalua!ions. These meeting include manag- Meetings attended
by manag ers in which
ers responsible for conducting performance appraisals a nd their managers and
em ployee p erformance
are facilitated by an internal HR representative or an external consultant. In the ratings are discussed
meetings, each employee's performance ra.tlng and the manager's reasons for and evidence sup-
the ratings are discussed. Managers h ave the opportunity to discuss the defi- p orting the ratings is
nition of each performance rating and ask questions. The calibration meetings provided. The purpose
o f the meetings is to
help managers identify if their ratings are too positive or negative or tend to
reduce the influence o f
be based on employees' most recent performance. Managers are more likely to rating errors and poli-
provide accurate evaluations that are 1Nell-clocumented when they know they tics o n p erformance
:may have to justify faem in a calibration meeting. Calibration m eetings can also appraisals.
help eliminate p olitics by discussing how perforrnance ratings relate to business
results. Also, in addition to rater training an d calibration meetings, to minimize
appraisal politics, managers should keep in mind the characteristics of a fair
appraisal system, shown .earher in Table 8.2. Thus, managers sh ould also:
'l> Build top management support fo:(' the ap praisal system and actively discour-
age distortion.
0 Give raters some latilude to customize p erformance objectives and criteria for
their ratees.
 ....
383 CHAPTER 8 Performance Management

"' Recognize employee accomplishmenJs that an: not self-promoted.

® Provide employees with access to :information regarding which behaviors are

desh'ed and acceptable at work

@ Encourage empioyees to actively seek and use feedback to improve
perfotmance.
~ Make sure constraints such as budget do not drive U1e process.
"' Make sure appraisal processes axe consistent across the company.
"' Foster a climate of openness to encourage employees to be honest about
weaknesses. 81

l08-'9' Once tJu~ expected per.formance has be€11 defined and employees' performances
Condllct an effective have been measured, H is n.iecessaxy to feed that performance :information. back
pe1forrnance feedback to t11e employees so Ibey Gill correct any deficiencies. 111e performance feed-
. session.
back process is complex. and p.rovok<:'.s m:i,"<lety for both the manager and the
employee.
Fe~N of us feel comfortable sitting in ju.dgrnent of others. The tl1ou.ght of con~
fro.niing ot11ers wW.1 what w e perceive to be their deficiencies causes most of us
to shake ill our shoes. If giving negaHve feedback is painful, receiving it cm.l be
excruciating- -tlms th.e importance of the performance feedback p:rocress.

THE MAtMAGIERa5 !ROU: mAN Eff/ECllnfF.

fl~RFO.IRMANCE f!EIEO~AG( P~OCESS
H employees are not made aware of how- their performance is :not meeting
expectations, their performance will almost certainly not improve. In fact, it
may get worse. Effective managers provide specific performance feedback to
employees in a way that elicits positive behavioral responses. Because of the
importance of performance feedback for an effective performance management
system man.y companies are training managers on how lo provide feedback.
For example, Lubrizol Co1pomtion, a chemical manufacturer based in Wickliffe,
Ohio, requires that managers emoll hi a two-day training course designed to
help them provide meaningful feedback. 35 The company's goal is to become rec-
ognized as the best developer of people. The training course focuses on how
man.agers give feedback, who they need help from, and how they can hold
them5elves accountable. To provide effective perfonn.ance feedback managers
should consider the following recommendations.86
JFee;JUJ,4dc Should Be Gh1e:ii1 Frequently,, N1J1t Once a Yca1~ TI1ere are two rea-
sons for this. First, :managers have a responsibility to correct performance defi~
ciencies immediately on becowng aware of them. If performance is subpar in
January, waiting until December to appraise the performance could mean an.
11-month productivity loss. 5£cond, a major determmarit of the effectiveness of
a feedback session is the degree to which the subordinate is :not surprised by
the evaluation..An easy rule to follow is that employees should receive such fre~
quent performance feedback that they al:ready know ahnost exactly what their
formal evaluation will be.
 ...
CHAPTER 13 Perlorrnance Management 389

Survey:3 r'C~mH:·' fror.n ;;(:~w~1·;:ii con1p;;ffij.e:; suggest that man.y ernployees, <ei3pe-
• ·1 1
G<UJ ' .
tnOSC ·
111 '\:n<c~H{ol'DliXr!1
'' ' . ' , ' ·,•
.i! •\CUipiO)'CCS
1
'°•· ·l9'~(-J)
001.l.l ;}H(:;J' _ 0 , , W8J'.).f' ID.OFC> .f.Tequen.t a.n.c,l
rnndid perfon:oanc::: fi1.::r:: dbnck from m~1\I1<;gers beyond ·what is provided once or
bvice D. year chiri:ng ny::ir fo;:nv:l pedon-:riancc rcviewP /\;-:; ;J P~m.tl t, Ernst'~" Young
LLC cn~aied m.1 oDhn'c'. ''~.: :e·.:dh:tck ZonP ., Hiat prompt:J employef::S twice a. year to
request foedbnck bul: alsn aHow~:> them to n::quc:st or subrnil: feedback at any tiJ:ne.

Cret11.A.e ihc lC.i.ghi: Cmt£1-:.1'>'t /~Jr the Di.sieus:sfrm . .f\/[anagers should choose a neu-
tra ·1. iJOcahon
. r
.lor I
b.1e ,. " I . 'TI ' ,.,.. ,. b tl 1 . .
1c 1:~cv.i·_KKk' ~;css1on. ... le n1<.:Lnager s ornce u:1ay no.: e · ·1e x~sr
place for a c0rn-Jtn1chv .fr'o~db<J.d<: ses::aon bi~cause the en:iployee_ :may assod.al:e
1::

t· 11e o ff"
.1cc •l\Ti. IJ1.
, u_np )l''.E\~~;:1.PJ {:cnve·c:;;~tJ.OIB.
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.,1yq~ anag€rs snou_,r_(Jlescn."b el·1i.e 1:nee11.n.g 1 1 •

a~; an opp ortiin~ l~)' l:o d i';cuE;:' thr:~ rok ,Jf ;hp e;.npl.oyee, i~h€ role of the 1n.cu.1ageJi',
and. the reL:\hrn1:3hip bi:l•.vc£:n thr.:::rn. J\li.anag·t:IS should aJso ad:nmvledge that
they wou!.d hh~ llif:n;r.::ding to br~ an open dialogue.
';\ 1 -~-if- , :r.:-:1 .. -· ,.,. ,, ·1 ~-,..,. -1· n F-7' , -.:'r,. r-ri.;.c . .,. ...• "P,3f""r.~ •c;;lf7' .£:,_,,_,_. -~i 11"' ~-~;:; ·f'-,,,,,...f.': .i:~1"" 11 r. r..c.•,<-.;o"ll.·~
f.i'.!9,;( Ji:./if(:. fi:.J1,fri·-~·/i /, 1(}l:fn:.:r.._. /t.(,• .1 :.:0..1.~.~ .•,,.. sU Li; .. :;• (.:): .· 1.h:,...q JL .,·:.:fl}ru1:· i,,1..!.J , p.C((! VJl.;;jd.Jii,:.. J!,.,11..tf!. ,J~_...::;osti Ft,.
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..l·.<.t

ing· en-,ul.ove1·'::> counJ

~ J l
j.(-;\J:: ;~ ~'2U·-ass~ssni~:n\: b::fore the feedback session .
can be
very prod1J(:\iv~:. n rcqt\lB''.S cmp!.oye~s to thiJ1k about their performa11ce over
! . . . 1 " n' . j
. .L t ,• . 1
tf1:-:-; 1?(.~B"t I..a.~JllfS i?Cl'.t(Ji((, ;JJ.1,.({ -r..t i1::rv~:Ot1J'~.\E/:: f3 ttl.e:rrt fO dlJ.Il,._( CJ.~)()lX. rJ1.81I' \.Vea. (..11.CSS<:?S.
'' ,

Although ~.;(_~H-ral:in~;::; q;;cd for ad:r:riinisi::rativ'2 ckcisions a.re often i-t1Jlated, tlwre
is evjd.2ncc fhat thE'y nvry i~;~':u.aJl.y J:.e )o'r·r,2x i:har1. supervisors ratings v,rhen d0nr2 1

fo~r (Je1Pc1-){Jf.1i ~c:n.La1 fY~J}~'}"') 10:.>t~s. 1\r1·oth.e~~· Tec:1.so·:r1 ~?. r.:1elf-asse~:;srn.e11t caTl l~e fn:o·d.11c··
Live i:.; that it (an n1ak<:: ~~he :3'~':3si.on go :mo•·,;c; .s:cnoothly by focu:-:;i·ng discuss:lon 'Jn
m"eas 1NJ1ere di:3;;1grco.nPn1: 1,: xists, nc;suJting in ') more efficient session. Fi_nnUy.
····· 1'.A' .I ,_.. 'C..J' 1r.rl·1·,
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pate fully in the r~.c>~db;lck ;s1;:~3sion .

f-',.,.~, 1. ·l•fn "Tr..:. J,.Ji'P.tL

.L 1:f fi .l°.(;11J.il °'~b
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one of thl·e(? approaches in nerfo,1.·mance feedback sessions. hi. th£ "tell-and·-seH"

... ~- .I!.

approach, managers tell the employees hotrV th::y have rai:ed them aI1d then jus-
tif~r these ratings. Jn Ut1r,:: ''tdJ--and-bst:en" approach, managers tell employees hO'w
they have rated thern and then k~i lhP en1ployecs explain their side of the story.
ln the "p:robk111··r:>oiving'r 01pproach, rn. ana.ger::; <:ind. 8mployees vvork togel:her i:o
solve performann: problems in an a:1nosphere of respect and encourage1nenL
In spite of thie re~:;earch d.crnonstratin.g the superiority of the problem-solving
approach, ni.osJ: tn.a11agi-~rs stUJ :rely on the reU-ax1.d-seU approach.
\/\!hen en1ployct,~:; participate in the ~:,::ed.ba.ck session, th:~y are consistently
s;rfo1fied vvith the prcc(:::::s. (I<.e·caJJ OlH' discussion of fairness earher in this chap-
ter.) Parl:kipation indurk:3 ali_o'wh1g ernployees to voice their opinions of the
eval.uahon, as ~rVeU a~: di~1cu ss p~rforni.ance goals. One si1Jd.y found that, otl1f.~r
than :mtisfaction wjth. 011t:/::; :Tupcrvism~ partidpation ·was the single most impor-
l:m1t predictor o{ sahsfacdon 1Nifi1 the feedb-H::k ::;es.3 ion.8n

~·
390 CMAPTIER S Performan ce Management

Focus on Sofi!Jing Problerns. A common mistake that managers mal<e in pro-

viding perfonrnmce .feedback is to try to use the session as a chance to punish
p oorly pecfon:ning employees by telling them how utterly lousy their perfor-
m ance is. This only reduces the employees' self-esteem and increases defensive-
ness, neither of which w ill improve performance.
To improve poor performance, a manager m.ust attempt to solve the problemB
causing it TI1is entails vvorking wifll. the employee to determine the achlal cause
and then agreeing on hovv to solve it. For example, a salesperson's failure to
m.eet a sales goal may be tl1e result of lack of a proper sales pitch, lack of product
knowledge, or stolen sales by another salesperson. Each of these causes requires
a different solution. l!Vithout a problem-solving approach, however, the correct
solution m ight never be identified.
Focus I'eeaRrack on BeluJJ.vfor i()lf Rcsuli-s1 Not on the Person. One of the most
important things to do when giving negative feedback is to avoid questioning
the employee's worth as a person. This is best accomplished by focusing the
discussion on the employee's behaviors or results, not on the employee. Saying
"You're screvving up! You're just not motivated!" will bring about more defen-
siveness and ill feelings tha.n stating "You did not meet the deadline that you
agreed to because you spent too rn.uch time on anotl1er project."
Nlinimize Cdficism. Obviously~ if an individual's performance is below stru.1-
dard, some crihcism must take place. However, an effective manager should
resist the temptation to reel off a litany of offenses. Having been conf-ronted with
the p erformance problem, an employee often agrees that a change is in order.
However,. if the manager continues to come up with more and more examples of
low p erformance, the employee may get defensive.
A.gn1-e t-a Specific Gof.ds a.mi. Set a Date to Review Progress. The importance
of goal setting cannot b e overemphasized. It is one of the most effective moti-
vators of perfonna11ce.89 Research has demonsfrated that it results in increased
satisfaction, motivation to 'improve, and performance improvement.90 Besides
setting goals, the manager m ust also set a specific follow-up date to revie•N the
emp loyee's performance toward the goal. Tius provides an added incentive for
the employee to l:ake the goal seriously and work toward adueving it.

Like most businesses, Google h ad files of data about managers-results of per-

formance reviews, surveys measuring employee attitudes, and nominations for
management awards. Google used its expertise in analyzing large amounts of
data to find what is most relevant to use its database on managers to identify a
profile of the kind of manager whose team is most successful. The company's
people analytics group (which brings together p sychologists, MBAs, and data
milun g ex.perts) analyzed 10,000 observations about manag~rs in terms of more
than lOO variables, looking for patterns. The initial finding was a surprise to
som e at a. con1pany tlml: h ad once operated without managers: teams lNith good
managers outperform teams with bad managers. But what makes a good man-
ager? Under the leadership of Google's I-IR vice president, the company dis-
tilled its findings into a list of the behaviors that get results:

.
 Cl·Ul,P'TEIR 8 Pe1formance Management 391

1. Be a good coad1.
2. Empower your team, and don't micromanage.
J. Expre~;s interest in !:eam members' success and personal 1Nell-bei11g.
4. Don't bi: a sissy: Be productiv e and results-oriented.
5. Be a good communicator, and listen to your team.
6. Help your employ1~es with career development
7. 1-Jave a clear vision and sh·ategy for the team.
3. I-Iave key tech1ucal skills so you can help advise the team.
By building performance measures including the eight behaviors, Google
vvas able to e valuate its managers' pe:rfonnance and identify th ose w ho needed
to improve in particular areas. It developed trait-ring programs in the eight types
of desired beh avior. Before and after providing performance ap praisals, tr·ain-
i.ng, and coaching, Google condu cted surveys t:o gauge manag·2rs' p erfonnance .
It rneasured a significant improvement in manager quality for 75% of its lowest-
perforrning rnanagers.
SOURCE: f\. 81y anl:, " Google's Quest to Build a Better Boss," The f\lew York Tim es, M arch ·12, 20 11, www.nytimes.
corn; Cla ra Byrne, "People /\ria ly ti cs: How Go og le Does H R by the Numbers," \/en tureBeat, Se ptember 20, 20·11 .
htip://venturebe;cit.com ; I'. Gabg "1 n, "Mea sure for Measure," T + D, M ay 20 ·1·1. pp . 28-30.

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As we emphasizt=:d in the previous discussion, employees need performance lO 8 -10

feedback to irn.prove their current job performance. As vve discuss in Chapter 9, Identify the cause of a
"Eni.ployee Developm.ent," performance feedback is also needed for employ- pe1fo rm ance proble m.
(':c:; to develop their knowledge and skills for the future. Jn add ition to tmder-
;;tanding ho w to effecl:ively give employees perfon nance fe edback, managers
need to be able to diagnose the causes of perform an ce problems and take actions
to improve and maintain employee performance. For example, giving perfor-
rnan.ce feedb<ick to marginal employees may not be suff.i.cien t for improvi11g
their performance.

l\rlany different reasons can cause an employee 's p oor perform ance. For exam-
p le, poor performance can b e d ue to lack of employee abili ty. misunderstand-
ing of perfonnance expectations, lack of feedback, or the need for h·aining an
employee vlfl10 does not have the l<:nowledge an d skills n eeded to meet the
performance .standards. VIJhen diagnosing the causes of poor ' performance it
is i.rnportant to consider 1NheH1er the poor performan ce is d etrimental to the
b1 :is ine~>s . That is, is poor performance cril:ical to completing ~he job and does
il affed bu::;in es:3 results? Hit is detrimental, then the nexl: ste1) is to conduct a
performance analysis to determine the cause of poor performa~~ce . The different
factors that should be considered in analyzing poor performance are shown in .
 Figu re a.a. For exampk, ik an ernployee understands the expected level of per-
forman.co:::, haC:; bf~en given siJJhdent feedback, understands the consequences,
but lacks the hnovvJ.cdge 8Jo,d. sYf.ill.s needed to meet the performance standard,
this suggests that the nianager rnay want lo consider training the employee to
improve perforx:n<HK~c, J1nov~ng H1e employee to a different job that better fits
i:hal: person's ~:;k.iiJs, or discharging the employee and making sure that selec-
hon :methods to find a nr.~·w employee measure the level of knowledge and skills
nr::eded to perform the job.

fFngiflqn·0 ~)t;\
hictors to Con'.>ider
in Analyzin~J Poor
i·'c 1+omlC111c'~'

Dor,)s the employee h<JV'" tl; c:· i'':'•..i'~!;sary rc ki!ls 2nd knowledge needed?
Do e:; the ~.: rnploye-~ knol/'' \•vh v ·ti10 dGsire d pE:rfon-nance lte'rel is important?
Ls the ernployec rncrri:ally, phy:;kally. and e rnotionally able to perform at the
I t::~xpectcd lrcvnl':'

f)o,porfon11ail().+s10111d;.irds; 8.id.'.;t?
Dcll:isth!'.·1 •(:;rnplqyee·.know th"' desirli:d: ley~! ·olH.':!X}:J•iiic:t$d/P'erf(~ftnil:tk:·e?
·Ocfr!ii the ornpkJy(i~~ be.lievo sh~o or hEH.:an 1"&~tl'f':1;fi~; -r;1~tf:b:tltt*fM~~'.;5f:~ i-idcii;d.'f

An:; co nsr;;q1.11::11c% (n:o•.rvari::b, incentives) al igt1ed with ·goot!peHbrrnanGe?

An:~ the ·conseque nC\:~!:, of FH;;rfrm11an<,:e valuable to the errjp.iq)i~·~f.
11 rn"l.11l'"t·').
_. f'l-"·'!'fol'
J...,_, f"f'.> , ,.., , .'{'"\};"1'1Cf->
..1 ,...., . <"Pn<:l"CJI
.,_, _,I '· '~'I ..l'-'i"l\
\_, , .. -- ··' r•1\r">(\
,, ('·'' ::;,,l " -'' 1'1'I -Gr
"' 1..• 1'I•">')•0>J\/
l <;.;...I- C\ . ~ , '
,.•

Do work qroup or team 111xn1'.:; 1•;• ncoura9e employees notto ,meet,

p0r·fo1rn<"nce sta 1·1dard~:?

SOURCES: IJnsed 'Jn(;_ i\ummlN, " !n ';eArch of 1.he Holy Performance Grail," Training and Development, April
1996, pp. 26-11; C. Rei11 lv11t, '"How t.o 1..c>ilp r'\IGr Barrie rs to Perfo rmance," Training and Development, January
;woo, pp. 20--24; F. Wilmouth, C. Pri'.:irnore, i'lnd M. Bray, "HPT Models: An Overview of the Major Models in the
1-ield," Perfornv111ce lmprovement4·1 (201);~), pp. ·14-21.
 '"
CHAPTER 8 Performance Management 393

After cond ucting i:he performance an.alysis, managers should meet with the
crnployee to discus:; Uhr.-c ~~·e:mJl:s, agn::e to l h(c> next steps that the xnanager and
.r
,. ·--:_ .C"0 . r 1 - "1·
.-,1:.11,"").l0.1i,T.:l1P•
t"J• '.,..
c._ Ht \ :·l] ~.1, ... ~ .•·. ~ 11 - ... ,;-}\
.. .a-"c 1.0 Ln.p1ovc pe11orn:ianue
- ..,£ ·-~
~,_. g.,. t.auun , p..01ncn.ng lE\::iOtu-..i::.::i,
..,. -, .. 'p ) . """'(";,.\f,".'

p.;iving .m orE: feedback), discuss the consequences of fai.li.ng to improve perfor-

i1l<ince, and ~-:::t a time h.•:v2 for i.rn.provemenl:. This type of discussion is xnost
bcndicial if ii OC(l.ffS rnon:: frequently than the quarterly or yearly performance
rcvi·cw, so p{~:rfonx1<u.1.ce issues can be qui.d.dy dealt v1rHh before they have
;v:h1~,:rse consequence::; for the cotnpany (and the employee). Eelnw we di:scuss
the •1ction::: that f:>houkl be considered for different types of employees.

'frlble U.12 c>hows actions for the m anager to take 1Ni.th four different types of
ernployec~> - /\ r-; the table highlights, managers need to take into acc01.mt employ-
ees' abilil:y, nnohvaho:n, or bofJi_ in considering ways to ilnprnve performa.nce.
To de termine an employee"s leve!t of ability, a manager should consider if h.e
or sh~c has Hie knowledge, skills, and abilities needed l:o perform. effectively.
Lack of abiUty may be ;m ~ssue if an employee is new or ~h~ job has recently
changed. 'llJ de tern:tiJl4~ ernployees' level o f motivation, rn.anagers need to con_-·
:3:id•-::i.- if ~mployees arc doing a. job they l-vant to do and if they feel H1cy are being
appro1niatdy paid or xe·waxded ..A sudden negative cl101112;e in an enmlove.e's
- . • ,• !'..~ }. ·'

perforrnan·~~~'; n1ay ind)cate personal problem::".

Ways to Manage
Employees'
Performance
Solid p;;}rfotTO~)rs - M isd in~ cted effort
"' Pewroird qood performance >!> Co8ching

~' lckontify developm ent '' Frequent performance

oppoi-tunities feedback
,, f"r-ovicle hon est, direct ,, Goal setting _
f()(:o,dback '~ Training or te rr1porary
assignment for skill
d§"velopi11ent
" r~est(U ctured job assi gnment
MCYf.!W\TIOf\l Undi"n1Ull2nrs Dc~adwr.:ii:id
" ()iv(; hone'.;t, d imct "' Withholding pay increases
foedbock '' Demotioi1
'' Provide couns~31in g " Outplacement
'' U'.>E; tecim buildin9 and p, Fi1·ing
conflict r·esolution '" Specific, clirectfoedback
" Link reward ~' to on performance
pi.":rforrnancc:: outcomes probkm1s
" ( )ffo-?r lrainin9 for need ed
knowlecl9e o rskill s
"' f\/lni1a9e siTe% levels

' SOUIKF.:: lfasecl o n M. London, .fi!b r=eedb;icfr (M ahw<ih, \\l.J : l..awn~nce Erl baum -~ssociateo; , 'I '197). pp. 96-97.
Us'C'.cl by pc)rmisc:inn.
 394 CHAPTERS Per formar1u~ Managern(:;nt

Eni.pk1yees with high BbiJity and motivation include likely good and out-
st<iJ1<bng pedorm€·rs (solid performers). Table 8.12 emphasizes that managers
should not i.gnort: employees witl1 high ability and high m otivation. Managers
should prnvicle development opportunities to keep them satisfied and effective.
501ne ii\divi.duals who axe outstandjng or good perfonners may be candid.ates
for k::<:J.dership positions within the company. As a result they will need chal-
lcngi~tig d~velopment experiences and exposure to different aspects of the busi-
ne:>:-1. Thc312 employees would be considered "A players" (see Table 8.3). iA/e
(fo,crn5:3 development experiences in Chapter 9. Other employees may not desire
po~:ri.l:ion~; with m;xnagerial responsibility. These employees need development
opport-unili'c'S to help keep tli.em engaged in their work and to avoid obsoles-
C(~llCC. TheJe em.ployees would be considered B players in Table 8.3. Finally,
there ~>.re different reasons vvhy employees are considered poor performers
(C players shown in Table 8.3). Poor performance resulting from lack of ability
but not n1ohvation (misdirected effort) may be improved by skill devdopment
acfrviti.es :.:n1d1 as training or tempora1y assigrunents. Managers with employees
vvho have the ability but Jack m.otivation (underuf:ilizers) need to consider actions
that focus on Lnterpersonal problems or incentives. These aclions include mak-
ing ::;ure that incentives or rewards that the employee values are linked to perfor-
1n <.1.nce a:nd nJ.aking counseling available to help employees deal with p ersonal
problems or career or job dissatisfaction. Chronic poor performance by employ-
(:'·e s with low ability and moi:ivation (deadwood) indicates tl1at outplacement or
firing rnay be the best soluhon.
I·
D~~\fe~oping
and mmph:;menting a System
That foHows lega~ GuideUnes
We now discuss the legal issues and consh·aints affecting performance m.anage-
Dl<~nt. Because perfonnance measm:es play a central role in such adm.liustrn-
tive decisions as prornoiJ.ons, pay raises, and discipline, employees who sue an
orga:nization over these decisions ultimately attack the measurement systems on
which thJ:' decisions were made. Two types of cases have dominated: discrimi-
nation a:nd unjust dismissal.
In discrimination suits, the plaintiff often alleges that the performance mea-
surement system unjustly discriminated against the plairitiff because of age, race,
or gender. l:V1any performance measures are subjective, and we have seen that
bxlividual biases can affect them, especially when those doing the measuring
harbor racial or gender stereotypes. For example, in 2002; Ford Motors settled
J:wo cfasG action J.awsuitB for $10.5 rnillion. 91 Ford said it needed a forced ranking ·t:.' i':

j~
system because its culture discouraged candor in performance evaluations. Ford
.Motors Perfonmmce Management System hwolved grading 1,800 middle man-
agers as A, B, or C. Managers who received a C for one year received no bonus; !
t'wo years at the C level meant possible demotion and termination. Ten percent
of the rnanagcrs \"!ere to be graded as C But some employees claimed the system
had a negahve ixnpact on olde1~ white workers because they received a larger
proportion of C grades. Eventually, Ford elfrninated the forced ranking system.
1n Brito v. Zia., the Supreme Court essentially equated performance measures
with Geleci:ion i:ests.n It ruled that the Uniform Guidelines on Employee Selec-
f:ion Procedures apply to evaluati11g the adequacy of a performance appraisal
 CHAPTER 8 Performan ce M anagement 395

instnmi.enL This rulis1g pr.esenLs a chalf_c;;nge io those involved in dev eloping

perfornl.ance measures, becr.:iw:.:e a subsiantia1 body of ;·.esea.rch on race discritni-
nalion jn performance rahng has clernorish·ated that both white m1d black rat-
ers give lugher ratings to rnembers of their ovvn racial group, even after rater
trnining.93 There h3 also evidence thot tlv:: discrirninatory biases in performance
rating are vvorse 1Nhen one group rnakes up ;;1. smaJJ percentage of the w ork-
group. When the vast majority of the group i:s nial.rc-;-' females receive lower rat-
ings; when the rrtinor.ily i::.; rnale, males recdve low.1~ r ratings. 9q
In the SE~cond type of r::.uit, <i.n. 1J1njust d1;3rnjs:sa:~ ~3uH, the plaintiff claims that the
dismissal "\Nas for reasons other than those the en1.ployer dah:ns. For example,
an employee who works for a defr~:n3,f~ <~crnt:a(~trJr might bl.ow the whjstle on the
company. for defraudL.'1.g the governrnenL H the comJXlff)' fires the employee,
claiming poor performance, the employee l.:nay argue 1:hat the firing was, in fact,
. because of blowing the wh:i.stle on tJi.~ employe:r---in oiJv~r 1Nords, that the dis-
rn:issal ·was unjust. Th(.::- courl: ca::,e \NiJl likely focus on the perform.m1ce measure-
ment system used as the basis for d.ahning the employee's perform ance was
poor. Unjust dism.issal <Jlso can result frmn ten11inati.:ng for poor p erformance
an ernployee who has a hisl:ory of favorabk ;·(~~rie"'NS a:n.d raises. This may occur
especaUy when a new evaluahon sysh:sn i~; i_ntrodw::ecl that resuJts in n1ore
experienced older en1ployees receivu_1g ux1sahsfaci:ory xeviews . Rev,rarding
poor performers or giving poor performers positive eva1uahons because of an
unwillingness i:o confront a perforn1ance issn<:: undcn::nin.es the credibility of any
1. performance managernent system.. This makes i.t difficult to defend termination
decisions based on a perfor:r.nance appraisal system.
Because of the potential costs of discrirninahon and w:i.just dismissal suits,
an organization needs to detennine exactly ·what the couris consider a legally
d.eforn;ible perfonnance rnanagerneni: systern. Based on revie-ws. of such court
d Pcisio1·1"
~~ ._ u, 1.11re occ.er
.U t11e'
1 .. fo"lol•Ti'1a
l _ l::J c+1;:1 1·ric·•·r.
11 _J, ~--·'"J._"'<ir
·~·
1:.....,.1..
. _i:.
0 0
,.) ..... o{1 <:1 ''V"''('i"m ·'l·l1a'·l •/111.ll
1:::- ~. OJl)·-·-·· . ,'v '·
1"1· 11s'ca11d
L. .¥-

legal scruliny.95
1. Tile system should be developed by conducting a valid job analysis that
ascertains the irnportant aspects of job perform ance. The requirements for
job success sh ould be dearly conunu:nicated to employees.
2. The system should be based on either behaviors results; evaluations of or
ambiguous trait~:> should be avoided. Al.so, performance discussions should
focus on work behavior ;md results <;)Jher tJn11. qu-r::'sljoning potenti.al imder-
lying reasons for behavim and resulb.:. such as a physical or mental disability.
3. Raters should be trained in how to use the systern rather than simply given
the materials and left to j_nterpret how to conduct the apprnisaL
4. There should be some fon:n of review by u pper-level mm1agers of alI the
performance ratings, and there shoukl be a sys tem for employees to appeal
,.....
whai: 1fo~y consider to be an imfair evab:1al::ion .
I ., ;: : 5. The organization should provid~ sonv2 fomt of perforrnance counseling or
corrective guidance to help poor perfonners hnprnve l:hei.r performance
before being dirm1issed. Bo;h shori:-· ;cnid 1.0n g-tenn performance goals
-'"\
'
should be l11duded.
6. Multip le raters should be'. used, padkuJady if an f:Inploy£e 's perforrnan.ce is
wili.kely to be seen by only on. 2 rahng source such as rnana geT or customer.
1

At a minimum, employees should lY': asked 10 r.:omsnent on their appraisals.

TI1ere should be a dialoguE~ betvveen i:h<:' n:ianager and the emplo yee.
7. Perforrnance evaluations need to})(> doct JJJie:nied.
 ..
396 CHAPTER 8 Perfom1a110~ Management

v
\./
· T I1e sto1·y i Ilat opener:J t Iw. ; c1apt
.,J I <:;1· cl'1scussecl 11ow
l .
companies re'd es1gn
. LILle1r
. 1·q er-
Formance fvlana(Jernent '.3).f'.;terns in order to c:>valuate what employees accomplish
an d how they clo this.

O.QJ iE'.Str~CMi\!lS
'L bcplain why peer ex co-wo1·ker evaluations might be necessa1y to evaluate
vcilues.
2.. Do you t hink evaluations of values and their related behavior should receive
equal, rnorc, or less 111Jr2ight t han evaluation of objectives in ernploys:es' pei--
forn1;:;inc(! evaluation? \/Vhy?
::t Proqr(:ssivc; and la rge r companies have often formulated their u:irp<,1rate val ··
ues. If a corn pa ny has no written corporate values, what can you do and what
qucsl:ions can you <:isk to qain insight into what the company stands for?

Measuri.ng and managing p-crforniarn:'' i3 a chalkng.-
ing enl:e1.pri.sc and one of: th1,~ I<1cys to g:runin.g competi..
th11~ adva.n.tage. PerfoDJ1ance JJWD<'f!/:Cm en~: systerns
serve strategic adn1i11ish·8tiw2, ;n~.d deveiopmen..
1 hon, once performance has been measuxed, a. m<ljor
t;:iJ purposes-their i.tnpori:aJJ.CE' r·:rnm:10-fc be 0"'ir:'.Tl2Sfi.--
mal:ed. A pedorm;:mce :measu.n0n1<:".filt c;y:>tein GhouJl.d
!Je (~valu.ated. againfit {he crj.t,c·~j~1. nf fJtTatcgic co11g11-1-
cnce1 validity1 reliability1 accepte1bihty~ and specific-
ily M.eas ured against these cri.tei.·ia 1 the compax·aiJve,
al:tribute behaviornt rer:;ul!s m1d quality approaches
1 1
Effoctive managers need to be aware of the issues
tnvolved in determill.ing the best method or co.mbina-
tie>n of mctJ.1ods for their patticular situations. Ii-.1 .adcH~
'~.:cnn.J?OnenJ of a rn.au.ager 's job is to feecl ti_
1a;:: !?"r:xfor-
l.tH:II·cCe in.formation back to employees in a •1vay th<\k
rssuli:s in improved P':!rformance raHl.E:r i:h.an dcf12n-
siveness and dEc.reased motivation. Managers should
take action based on the causes for poor perfon:nance:
ahiJj_ty; Inohvation or both. Wianagers must b.:: :sm:(:-'
1

hav~:e
different s1:rengths and'v11eaknr::sse~> - Thus dedd ·- 1 foat their fY2rfon:nan ce maJ_Hgement system can. m"Cet
ing which approach and whkh source of perfo:rmm.K€ legal scrutiny, esped.ally if it is used to d.iscir::.J..uy:: or
infornwJ:io:n are be[:i: ':k:pcncb on !:he job in question. fiD? poor perfonnern.

Performance management, 34'7 Reli.abiUty, 355 Kaizen,375

Pei.formance appraisat '.-347 Accep!:<'bilily, 356 Upward feedback 380 1

Performance feedback, J11'7 5pecm_ci.ty; 356 360-degree appra\sal 332 1

Sh'ategk congruence 353 1 Competenct€S 367 1 Appraisal politics, 386

Validity, 355 Competency x:nodiel, 367 Ca.Ubration meetings, 387

L 1/\lhat are t.::xample:5 of adrninistJ:aUve decisions. thai: perfonnance management system for faculty m.em-
might be .o:J.ade in .nlanagi.n[s the perforn1anc2 oft: bers .fulfill its strategic purpos£ of eliciting th2 types
profossors? DeveJopmenial d~xi::;fonc.'! of behaviors and results required by Hus strateg;T?
2. V\n.1a.t 1vo1d.d you. con.sicler th.of:~ strat~mr of 'V01JK
1 ·:t What do you Utinl<: is the most import.ant step
Hniversity (e.g., research u.nd.ergrnduatc tf:'add.n[; ,
1 shown in the mudel of llw effective pe:donnance
15radrnx!:e teadli.ngr a comh:iJ1D.tkmF Ho1N rn.i.ght ihe n1::i11<~{r,emenl: process? Justify your m~swer.
 ..
L V!/h aJ sou.recs of pcrf0r:manci2 infor:mation 'Noul.d
1 9~ (~an electroill.r.: m.o.nito.rin.g of pe:rforn1.cln.ce ever be
yon use ::o <:-uaJuaJ:e facuHy n1ernbers' p 1:: d onua1Ke'?
5. ~/lfhal: <lXC the ad vantages and disadvantages of a
p e r forrnan <=rr-· n1anager ncni: ;3yshc:1n that evaluates
val ues'?
6. Thin k o( th e !;151: tin1<': you ha.d a confiid : with
a nolher r~~r:mn, either at ·w ork or at sd1.00L Usin.g
the guidelines fot> perfonnarwe feedback. ho;,.11
would you p rovide effE:ctive perfonnance f<e~edback
i.o Iba.I: person ?
7. Exph1i_n w )1a f. fr:d1T10ss has ':o do ·with perfo:n.nancf2
manag(~rncni.
n. 1/\/hy rni.ght a :i1oanag·r::r inteniionally di stort
appraisal w ::adJs'? vVhal vvould you recommend to
mininnize this problen1'?
Bo1J1T do you like gel:ling feedback? 'fo .\ef,;t youx aiti·
I u d e:< i;o w;1rd .!feedback, take Hw folfowing o:pJ.i>:;. Ee2"~;
c ad1 Gl:atemenJ, m1d 1Nrile A. next to er::\ch. st<J. lcmcn t
y o n il[~fef 1Nith. If you djsagree vvH:h the s ta t<:'m1'n '
wrHe D.
l. l Iifo~ being told how vveU K axn ·d oing en 21
projed :.
·--· ·~- fr:rfi1 though I 1n<1y 11!.inJc. I have done" ;:i good
jobi, ·i {eel a lot ::-ri.OX·P .co•1JiclenJ 11t.rh.K~n~ 2.f.)IYH~OP.1:~
ek3e t<fJ]s IDf~ SO~
3. Even ·w'hen I tl1ink K G)1.ild have done some-
l'J)ing heHer, I fe€l good when other peop)r,;
this1k •Nell of 1ne for what I have done.
--·- 't It i::; important for me i:o lmmv '.Nh a!: pi:~op!oe~
Htink of rny work. · oHi.ern. For stGtem.ents 5-12, the greater l.be number of
5. i lhink :rn y instrudor would think 'Nor:s<e; of ll:He
if J a::> ked hirn or her for feedback
--·-·--- 0. J 1.rvou.kl be nenrous about asking my ii.1struc-
r::or hW·'' she (ff h e evaluates my b1:havior i11
da:>s.
..._. 7. H if:; n ol a good idea to ask Kny foH01v stu-
dentr; for foedback,: they 1night think 1r am
incompe~ent.
--- f\. lt is (~·n:1J:Nl(l'i:lS~SiJW;
1..,... !:o ;~sk other students fur:
their hnpression of hmN I am doing in d ass.
~:
Ll<Y•<lr:i HenJth cnre Corpora!:i.on has an a:u!onaated
gon\·;:it li17;J•men! ;::ysiern H10i: about half of if!:~> !'iS/!00
en1ploy-.:~es par tkipate in . .Ai: Baxter the prnccss :3!:;;ists
with the comp a n y's top sfra1·egi(: goals krl.fr\i•/n ;::i,:3 thr2
CIHAIPTE!R'. 3 Performance Management 39'Av
acceptable to employees? Explain.
10. J\ delivery driver contaminated a hospital's oxy-
gen supply by refilling the hospital's main oxygen
supply lixw with trichloroethane,. a mild <ines-
~heti.c. Following detection of the contarrtim1tion,
;o;ll patients were switched to m,)Tgen tanks and no
patients were injured. How wonld you diagnose
the cause of this performance problem? Explain.
11. How can the use of social media such .as Facebook
and Twitte1~-like applications benefit the pedor-
mance rnzmagement process?
9. 1H would bother me to ask the i.nstructoi· for
fic~12dhacJ<:.
JO. Ji: i.s not a good idea i:o ask th'2 instrud:or for
lr2edb;:ick because he or she rnig.ht U11."'lk I am
i.ncompetent.
-·- -- U. H is einbax.rnssing to ash: '.J;c instructm· .for
feedback.
12. It is better to try to fism·r.:: out huw I am. doing
f\n 11\V ov1r:n., rafJ1.f.:r 1ttan. to a.sk. o\JN::r stu.d.{~n.ts
for fe~2cJba1~k~
Fox· stal:crnents 1- 11, ad.d fae total :nm1nb12r of As: - - ·--·-
Fm stntem.ents '5-12, add t.he total rnnnb•::r of As: ___
For :3tatemenf:ro 1-'1, the greater the number of As, the
g<'ea!:er ym;.x preference for and h'U.5l: in feedback from
As, the greater the risk you believe there is in askb1g
for feedback
Mi:rw inighi: this i11.foiuw.tion be useh.Lt i.:n. under··
:3l:anding how you :react to fer::db;Kk in sd100] m on Hw
job?
'3DLH<.CES: n~ssd \Jn D. B. l'edm~ R. D. Rensvold, and S. ~IL Adam~ .
"/\.n Inveoti.gation of Factors Expected to Affect Pe1:::dback SeBking: A
Loni~itudfo;tl Fieid Study," Pei-emwcl P.syclwlogy 45 (1992.), pp. 779-<305;
5. J. Asford, "Fe<'Xiback Seekint~ in Individual Ad:;plntion: A Resource
Perspective," i\rr•£icmy oflvfrnmge1111?11f Jmmia/ 29 (1986), pp. %5--07,
four Bs (BeGf: Team, Best Pru:t:ner, Best. fovesb:nents,
r,.tcs.-' "-.1nzer1
"0·.. ) . ,..r,_He execut:nre
. team creates goa;s.
i
uni.::ler
e:ach cat"~gory. TI:w top 150 executives then develop
their g0•d.s which are d istributed to er.nployees. 'D1e
 ...
398 CHAPTER 3 Perfo rrnanv'" l\llana~1 ernenl:
goalr:J are collected h1 a pe:rfonnancc Tn<uwr:;em<:n i
::;ystem. A website provides guidance on hO'w to wriie
goals, and achieve1nent: re suJ.t::; a.re ::;hared ·wilh 1:.h c
co1npany' 3 perfonnance revie·w ;,1n.d co;np<~n.sa.l:i.<.~''
systems. A manager of e-proetff<'c.t.nenJ of sFpplj_(,01·~,
;:i.1: Baxter who ~·epmts i:o ~he VF of _puJ·ch;.1SD.l8 :;;1 yc;,
"The biggest value is lhc digitiwhon ;md 01,;1::>h~ ':n:
fashion of performance hLfor11i.ation. .FUstoL\c;;iJly
we'd p u t this infonn<J.tion ini:o ti.ling cabinets 2nd
pull it oul: once or f:'Vlrice a year. l1\T}1;) I: th.is 1noce.ss i c",
really, is <J tool that provides nw •-11ith an opportuni!~·:;
to better un.derst<md Baxter'~; eY_!Ycct;:i,ti.on:3 of n w <11.•d.
n.:1.y tea.m."
Oi\Jl £5TRO~W5i
L I-fow does th.is type of goal.-sdhng proc(;::;c; coni:rih ·
ute lo effective performance n1a.nagemenU
Finkmcial d i.5l:ress plagued 5cripps Heal.th, a pri.• 1 a tc
I nonprofit comm.unity health sy ~; lern loc;:~l:e d i:n S;:l_::-;
I· Dk'go, Californ ia. The co.mpany ·wa~:; J.osing money,. ·;Jic
dlicf cx0cufrve officer resigned, tw:.n over arn.ong nnr.sc_;
w;.n; h:i.gh, and employ1?.e rnorak was poor. Un der i.lvc·
leadership of a new CEO, <). _n?~w 0b:al:r2g;i.c plv_i1 M,ra:o
developed tho.I: included st1.ci.l.mJiujng busiJ.wss opera
lfons, increflsing the efficienci:~s of operations, a.1•d
iJTJ.provin.g employEe sr.Jl:i.sfactinu m.1.d perfon.1 «,1r;cc. 1
Irnpl.ern.enl:ahon. oJ the si:ra~:cg'ic j_)(8I1 w::i.:; su.o:.c;ssfql_
J\ iv2v1 pcr.for1n.cu1ce .r.nanagi:~xxH::n. t· :::.ysh:~r.n iJ.1.:?il
focus<:::d on leadership devel.opxncnf:, 1nd.r.ic3, J.Tcogni-
h0n of employees and busin.eGs unit iJerforman.ce, ;cu HJ
·u:;ing compensation to n:iotivi.lle e1npJoy<~es wgs ~· kEy
contri.butor to 111.e succe3sful tun1nrnund of ~)cripps
I-Jeall:h. Scripps Health perfonxwncc manogcmen:
system plays an imporla.nt rok in helping ~.3cripps
Fknlth motivate and engage emp loyees, vvhich leads
to delighiing cuslom.ers thrnugh pnwidi.ng excdkn ~
patient care and service.
.. Patient admission:3 and don;i tion::- <W<:: h.igh and
ernployee hm.1over dropped l:>d.ow indw3f;-y stan·
dards. Today, Scripp:> HrnJ.ll1 sy~;te rn indud.es five
aGute-cm.-c:: hospitals, more H1an 23 priJnm·y and spe
cialty care outpal:ienJ d iD_ics, hc_;nc he;1.J.th mn2 2cr -
vices, and more tlir.m 2,600 affiUa i:ed phy:;kians and
13,000 einployees. Scripps Blso prnvides hi::<1l.lh educ;;i--
U.on and vvellness events and prngnirm; :31Kh ::is ex-<-'• ·
cise dasc;.e5, heart hcal.!:h 51en1jn.ar::>, (XW('J-ltlng d ::i::::::G;,
and fund raisi.i"1g events acros::; S3n Diego Ccn.m Jy
~L gaxte1· uses a website to provide guidance on how
!:o write goals- \!Vhat are the characteristics of effec-
tive go;oils m1d objectives tl1at should be emphasized
on th.e w-ebsite?
:',_ Wlial: are the potentiaJ. disadvantages of relying
e:nlirely on goab or objectives for performance
r:r.rn.r1agen1.ent? VVhat recorrunendations would you
give, if any, to Baxter to increase the effectiveness of
th.is syste1n.?
:;OURCE: K. Tykr, "Performance.Art," HR Mn.grzzine, Au8Ust 2005,
pp. 5G---63; M. Hayes, "Goals O riented," 11lfor11111tion Week, Maxch 10,
:2.IJD3, from lnfomwlion Week website at www.inforrnationweek.com;
L'. Silverstone, "Paperless Perfo1mance Reviews," HR Professional,
f:'dxuary 2005, w·v•w.hrpao.org/HRPAO/KnowledgeCenlre/
Hl{Frnfoss i.onal/ newsduster /Paperless+ Performance+ Reviews.ht:m,
rdr ir~ved: February 19, 2005; and M _Totty, "TI1e Dreaded Perfonna.nce
Fcc•ri~w," Tlw lA!nll S!Jeel Journal, November 27, 2006, p. R7.
Sine: 20(1!) Scripps has been named one of Hl€ 100 Best
Corr1pa11ic~s to \!\Tork For by Forf.wie magazinr::.
Ferfon11anc-2 managements is pmt of Scripps'
.:u1nual planning, b usiness strategy, financial and
operati.ons processes through coJJ.aboration between
HR, (inance, strategic planning, and operati.ons
d>:'p2.rlJ11ents. 'Dus helps ensm·e thal: the p erformance
n1anag~::n1en!: process helps Scripps mee t its strategic
bn2-iDcss goals and employees engage i.J.1. behaviors
\:bat 2upport 1J1e achievement of these goals. The per-
fonnBnce apprnisaJ evaluates employees on annual
ubjecl.ives and behaviors related to Lhe Scripps core
values (respect, g_uality, and efficiency). TI1.e perfor-
mance m.anagement process is aligned for all employ-
c(~S i.n the orgaru.zati.on including b oard and senior
~x<-xu tiv.0:: m.anagement ao.•d staff employees. ·Also,
Scripps Health performance management process
encou-:-ages
. manage.rs and employees to work together
iJ1 evaluating performance, setting measurable goals,
i.ndeni.ifying areas for p.erformance improvement, and
r{c;cogriiz!,ng excellent performance.
I-lR i:ntrnduced an automated, online perform.ance
evaluation that simplified the performance man-
agement process. Managers can more easily track
c1nployee performance strengths and weaknesses and
~:nsun~ performance appraisals are valid by linking
thcn1 to the job description. The online system makes
i• ensier for managers to set personal, employee, and
dE:porlment goals that are linked to functional and
org8_ni.z.ahonal. goals (a process known as "cascading"
 ...
goal setting). i\Jso, t l1e onUne performance manage-
rnent system h elps manager.•3 review and !:rack their
own, their employeeco', and the department's progress
in re<>cl.1ing performance goals.
One of the m osl: important uses for performance
man<.ige menl: sysie ms is to help motivate and reward
employees for effective p e.donnance. Scripps Health
user; its perfoi:-nl<nKe managexnent system to help
deter.tnine pay in.creases and reward bonuses. Employ-
ei::::; nm re(:eive annu a l pay increases up to 5% based
on their perfonn ance appraisah Scripps also has a
gainsharing progrmn caJJ.ed "Success Shares" which
hc.l1x; mol:ivate and reward teai.nwork. Gain shar-
ing programs such as Success 5hares are designed to
reward oulslanding pl:l lient can' an.cl employee con -
IJ·.ibutions toward financial perfonnance based on the
overall p erformance of their department or business
unit Ernploy(~es only receive rr21Nm·ds if departrnent or
busines~; unit gc-als and objecfr1re2. are met or excEeded.
H.e 1Nards are <~akulated using .f orrnulas w hkh include
a cornb:inahon of patient f;:1tisfr.1chon St:ores and finan-
cial. objective:>. For exarnple, one year Scripps p aid oui
$'7.1', million to rnore.i:han 9 ,300 employees. On average
;hese ernployees received $900 w i l:h a inaxim.iml pay-
oul: oJ .fiv-c dayr:\' pay.
For succes~;fv:J. perfonna:iKe JT1.anagement, employ··
ec~; need lo n:'ceive effective axi.d tixnely performance
fcedbadc fron t ihcir rnanagers. Employees need to
Performance Management al Meadow Hills Veterinary Center
Brian c::onrad, the p ractice rnanager of J\!feadow I-lills
Velr:;ri..nary Center, m akes <'l clairn that sound s a lot like
statem ents you often hear in :inanagement ;md HR
circles: "'UH-~ staff is rny n1.unber one asset in this hos-
pit:aL" Sometimes s l:ate1nents like that are puffery, b ut
in Conrad's case, he puts Lhe claim i.:nt.o action in the
way he h andles performance management at his t:v>ro
Washington Stale facilihes.
Because the o rgani zation is small, appraisal inter-
vie~Ns axe handled al: the highest level: each employee
being evaluated meets with Conrad and the owners
of the practice. Conn1d wants them to be full par-
ticipants in the p rocess, noi: nervous subjects under a
rnkroscope, so h e ITi.es io put them at ease by giving
employees a few months lo look over evaluation forms
ahead of 1.iJne, so they can. SP!'~ wh.at measures wiJ.J be
evaluated. He also keeps the Ineetings regular and pre-
dictable by scheduHng a rneeling wW.1 each employee
twice a year.
CHA PTER :B Performance Management 399
receive feedback on a day-to-day basis as well as dur-
ing the fonna.1 anm10J p erformance review. In addi-
tion, managers need to undemtand how to set goals
t11at lin.k employee perfonnance to department and
business goals. To facilitate effecJjve performance
management, Scripps managers receive extensive per-
formance management education and training. Also,
managers' perfonnance evaluation i.ndudes leader-
ship comperencies indudiri.g character, :relationships,
serve, change, a_nd results which help hold them
accounl:abl.e for evcluaiing and developing employees.
am~ ~Ti Oh\!:S
1. The chapter discusses five criteria for effective per-
fonnance appraisaJ.s: slTategic congruence, validity,
reliability, acceptabillty, and specificit y. Evah~ ate
the Scripps Health appraisal system on each crite-
rion, that is, deci.de whether the appraisal system
meets !l1e criterion, faUs shm:t of the c:citerion, or
exceeds the cdteri.on. Provide eviclc:~nc<e of each.
2. \/Vhal: are the strengths and \•'TE'<>l.mEsses of o:riJine
appraisal systenJs s t:tcl1 ~s tlle o:nf:'. U3(~d by ScriJ?:ps
Health? \/\That chang<:::3 vvould you ._.,~cmnmend for
the system J:o i.i.T.prnve its '/'.reaknesses·i'
SOURCES: Based on S. J. ~Neils, "Prescription for '1 Tu;:narouncV'
HR Jvlngnzi11e, Jur1e 20{)9, pp. 88-9'1; website for Sc:ipps Hen!t11 at
wwvv.scr.ipps.org .
Conxad also tries to dial down the ten5ion by sepa~
rating compensation discu ssions frorn. performance
evaluation s. In h.is experience, employees don't Esten
weU to feedback ii they're b u sy calculating wh~ther
1J1e r evievv wiU qualiJy them for a raise. Instead, C~on··
rad meets twice a year with the owners to go over the
budget and a.U the employees' conl.1.ibutions. Raises
and bonu ses are determin.ed in those meetings and
awarded to employees in meeli11gs separate from the
appraisal in.ten.riews. 111.is keeps the appraisals focused
on what is getting in the i.vay of top performance and
hO\f\l employees can improve.
Conrad also !Ties to keep appraisal interviews posi-
tive by not wailing for appraisal time to address per-
fonnance problems. His understanding of his position
is that he is responsible for addressing perforrna:nce
prnblerns as they arise. When a sillJation can't be
re~30J.ved by a. few word s from a supervisor, Cmrad
invites the employee and his or her supervisor to join
------- --
 hiJn. for Jonch fflhlay from l]y,~ M/<,?r1:;pti• ~C - cfl_lfi"'c (hey
discuss Hie issue and lookfm.· .:1. :;oh1l:i•m.
Conrad doesn't IimH co1rnmmio1li1).\l and. fecdl:m.ck
l:o problem:.>. He l:rie3 to h1nw crnpJoyr::r::::; i:1J l.d. thcix
work sihw.l.ion5 betl:er by looki.ng for infonJt1aJ oppor-
tuni ties fot two-way cmnu:m.nic;1tion. H he nee.d s ;:o
r un an €rr<:1nd or ;_iU£nd a comJni.injty fcV(:~nt, .he iJlviJcz.
one of the rc:rnploye£:.> l:o ;i1~co1np;m y hitn ;omd UJ'f:r; th;i .;:
ti.me to ask about the.is Gu\:er g rn1b w.1d ho:N they f<C-:d
<lbout: 01.cii: ·work Ofl:cu , h~: 11.1.icov(' l.'~1 o:r>por11 u1.iJics
for employees to devd.op and 1.wc 11nl <Af'Pf'd skilb. ~1.,
one case, a pm:H:ilne adxnini ~;i~;·;1!i•;'2 en1.p! oy~:e ind1-
c<i l:ed. she w;:1~:; intr:en~sted in fulJ--;j;n<' '""-Ork Over hmdi.,
Conrad and l:hc empl0yc-~:~ 11v.1pF ~"; nnf: pos:3ibk G1.F::r:r
Dal:hs, ;:ind ~1he decided !o i~c~· in-;u;-_~ '; '::d. i.n ti.·,s<Jtm(:nt ok
the animafo. Shr:: contirni(>.d._ rn ar·piy h"'.r 01 dn1:i:•1ish·at;ivr:c
sldib by coordinai in1; surge; ks ;x;vI dcnf:i.shy, ;.i;1d ;;he
enr oU0d i:n <::on!:i1min5-<~d1wciho-n cbs~;cs r;o she could
<:1 ssjsf: jn lbe treal.nwnl: ;:,ircci..
T hfa approach lo ped:mcn_;:mr:c i.:"<HH1iJf;'"n1i::n>: is p <1r:
of a J.arger objective <.Ii Meadov•r fWb . Cnuxad say::; h0
p n Fnised crnployef:3, "'Nq i(-~ n;:n •.nor1h <:T wiJ.l k;w .c.'
llw prai:tice fi?eting und1ntkng'<'='(!, c:om:cdc :rt a lade
of diredionc or h ave prnfr' .:<;;.i.ona l gxowth hi_ni:k-r€d. "
{((::i-.cpini:; th;1l: promJ r;e r2~1uixe:- ~l nm1bin;:1.hon o( cm.-<>
I· fuJ hiring, ongoing tr;i,iJ1jrn_~, <~11 d·J·1r,:nc::;!: rcvi<':>M of an~;
J.ni.sl:ah~s thai: ;Jfe ma:dc. \Mhcn u;1ploy <cc s d on't per--
fo nn up In (~;(_pcdali0113 . o-1.n:na15c::r:' <.'v alua.k: ·•i\rhelhcr
cl1a.ngc::-; aF~ n eed ed in l:rain.i.11g or h.iri.ng, Conrad
I. A. Bradley, "Taking Ute Jlqnn<.lhf:y (Ji_il of Pe·formance
H.evie~Ns,". T + D, Ju.D.e 20J.O, p. JD; .1i. PydJH~:, //The I~ev.i~v115
Are fo/' Wor/cforcr; Mmm:;n;1w.l', Mny WIJ , pp. 7.0-25.
2. l<•L L;:iff, "Perforn:ianc'" M.<1nag-::;1.nH1!: Gi.ve.> :''< 5haky Fr::i:-·
fon.11.~1.nce/' T + .D ~38pk::n1b r::r 7.:007, .F· JC.; l\. Fo)c, ''(.:vx.ir1.g
1 Indusf.Tial mzd Organizatio11al Psychology 1J (20JJ), FF· \'i<)-fr}.
V\Thaf: / \.il0 Pcrforn1aJ.1:Cf Rciric·vv.s," J{r~ lvTr~gozi11P., Jan1.iary
'.2009, pp. 52-56.
3. /\. Free<lm;:nl, · "Ualarn:ine; 'Va l.1.K s, f.~i:: s1.i.lts jJ.1 fZevie'J\rs,"
.Hu.man Resourcr. Excr:11 Li;·1c, Angur:J 7-006, p p . 6'.i'.--63;
G_ Ruiz, "Perform.once j\1[anngcrwc.1.1> TJnderperforms,"
Wor/(force l11I1m11gc1wmt, Deff:mlwr 2006, pp. 47-<i?; A fimc,
''(\u:in.g °V'H1at t-\il::; Perfo i.'~:oa nc0 n.~·~.rJ.~-:r,r;:;," {-IJ?. h!J.agaziae,
Janu;:i.ry :wo9; /\. Ura.dky; ''Td~ing U 1<0 Pnn11illiJy oul: of
Perf:o.nnance F.eviei-vs," 'f + D, Jn;1<e WlH, p . 1 U; E. Pufa-
- l~o ~;, Perfonrumcc f\11mage me11. I (rJxford, EnGl.'-11.1<J: WiJey-
Blackvvell, 2009).
'1. E. Pu.la.ko:;, Pr:ijomumci: .1Hmia;5w1f.11i (0;<.fcn:d, Engl.;:_ind:
Wiky-Bk1ekweH, 2009); H . A.gulni:;, '' 1\n EJ'pauckd Vie-v1r
of P~rfonn<1nce Mm1agernf~nJ/ i.n J. 1N. .') ;:nifo and \Vt Lon-
don (eds.), Pmfim111mc;; Ji.!J.m1w,;emrnl (~)Mi Pran ci.,;;co: Jo:;sev--
Uas(;, 2009), riJ- l~J3; J- Rus~dl ;md L R11:oseH, "1alk 11.iir::
Through H: The f\foJCI: Level <J( .F edornmncc )'Amrng?Jneni:,''
T + /J, l\pdl 2010, pp. 47.-4!3; J. J):.1hling ;ind A O'MaJley,
r.c:;,peds that em.ployees will l<E~ep tJ-1,d_r par fc o:: th0 hax-
g01i.n b y showmg a w illingness to try nev·.r opporl:uni-·
ti.P.s and paxtidpate in problem solving . H employees
aren' t willing to buy :into this culture, Corn:ad won't
keep them on board . But apparently not :tnany ·want
to leave. 1Nhile the rate of employee tu..ui.ovE:r for
lhe 'reterinary industry is about 30%, tw:nov'2J.' of
M'E'adow Hi.Us has fallen from 25% several. ycm·.'3 ago
!o just 10% soon after Conrad made hi0 pn:mnise h:l'
,2m ployees.
rQt~llESlfftOIN$
E<.i.sed on the information given, discuss ho-~N w!'2JJ.
U:i.e performance management at Meadow I--IiJb Vd--
eiixiaxy Cen ter meets its strategic, aclmin:iBl:rafive,
and development.al purposes.
2. 'IV11at :m.eth.od.s for measurit1g employrec J?c;rfor-
mance do you t.hj.nl" would be most beneficAaJ for
l\!Ieadow Hills? W11y?
·:~ EvaluaJ:e Brian Conrnd' s approach lo appr<U.sal
ini:erviews. VITdte a paragraph or bNo su.mrnari'z:ing
'l"rhat Com·ad is doing well and how h12 n dgh·; fur-
ther improve the effort.
SOUf.Ci:lS: "Four Ways !o Add Value to Employei: Eval uaiion:;,''
Fc£-o-i11nn; Gcc110mics, Janua;:-y 2010, Business &r Compan7 .Rec011;.u~
( 'enter, hl~ p://5~leneLgalegrnup.com; "Help Me lo I-kip Yo1,_,"
Vderi1w ry Ew11omics, August 2003, Business lit Company B.-2so11rcs
Cente1~ http:/ I galenet.gulegroup.com; and Blian Comad, "t/fol<e the
From.is£: Keep Yott< Team/' Vcterinmy Economics, May 2000, Du.aine~s &
( :o.mpany Resource C<'.nter, http:/ I galenet.galeg:roup .com.
"Supportive Feedback Environments Can i'vicri.d. T:'-·~nk011
Performance Management Systems," Inrblstrial 1m1.i 01 g11-
11izoJio11al Psychology 4 (2011), pp. 201-3; E Pub.h::s and
R. O 'Lea.ry, "V\Thy ls Performance i'v:fa,:i.ng<cm.o.r. i: l}ro);r::n.7"
5. J. Harbou1~ "Tii.e Tiu·rc2 'Os' of S11cc<0s3htl P.:.crformanG2
Measurement: Design, Data, and Displa:i~" Pc:for;;1rmr:c
Improvcmmt 50 (fobruary 2011), pp. 5-U-
ij_ A. M cilva.iJ.1e, "There's Gol: to Be a B<::tter V1fay/' [{1<;wm
R.es01;,rce Executive, July I August 2012, pp. lrt-17.
'7. J. Cleveland, K Mmphy, and R. Williams, "i\th.1.li:ip k Usc:.s
of Performance Appraisal.: Prevalence and C o.1.-r~:h1i:2s,"
Journal of Applied Psyc!wlogy 74 (1989), pp. 130-35.
B. C. Longenecker, "Behind the Mask: The PoU;JG; o{
Employee .1\ppraisal," Academy of ll/f.Jm11gw1.er;t Exo:ui'fr;P. .I.
(1987), p. 183.
9. M. Beet~ "Nol.e on Performance Appraisal," in Readings in
Humm1 Resource l\!Jmmgement, ed. M . Br::er and D. ~3pro:dor.
(New York: Free Press, 1985).
.l.O. C. G. Ikmks and K E. :May, "Perfonriance i";Jm10-e;c:u:icnt
The Real Glue .i11 Ori)il11jzations," in Evohiing Pmr:liccs in
H.111111<11 Resourr:e l\tlanogement, ed. A. K<aut and A. KoD_l'an
(S;;::n Francisco: Jossey-Bass, J.999), pp. 118-45.
 ...
LL E. Krell, "All for Incenti>.'•2S, b:icen ti'""S .k.11.' AJl," UR Mag.1-
zi11e, January 2011, pp. 35--.JfJ.
·12. CD. Ittner and D . F. L;u..:::k'l':f, "Co.mi.n g Up Short o P 'i'.ion-
financial Perform::mce \\l!ea:Jul.'2mo1t/' Hrm111rrf l311sin~ss
Rwi.ew, December 2003, pp. fla-95.
JJ. J. K. Harl£r~ F Schnudl., ilnd T. L Hayes, " Bnsine:-;s--Unit
Level Relationships belween Employc~· 3atisfr1di0n.,
Employee Engagement, and Bnsiness Outcm:nG;: A. Ukt.;i ..
Analysis," f 01mwl of Applfr:d Psyclwlogy 3'7 (200:;'), pp
268-79.
H . A . J. Rucci, S. P. Kirn, and RT. Qui..1.n, "The Ernployce-
Cuslomer-Profit Chain at Sears/' Hania rd Business Review,
January-Febrnary 1995, pp. 82·--'Y7.
.l5. R Schuler and S. Jackson, "Linking Competiti.ve Stni tegics
with Human Resource P.rnctl.ces," .Academy of Mam1gement
Exccuti71e 1 (1987), pp. 207-19.
16. L. King, J. Hunter, and F. Schmidt, "B alo in a M1.tltid.invc;n-
Bion.al Forced-Choice Performan ce Evaluation Scale," f1Jur-
11al of AJ1FlierJ Psychology 65 (1980), pp. 507-16.
1'.7. El. R. Nalban, A. M. Mohrman, ilnd J. JVliJJmon, " fJ1terp<'r-
s0nal Rcdf!~:ionD as a Context for the Ef.fc-Ct3 of i\pp:i:·c:ti;..:a1
Inlerv.\ews on P<~rforman.cP and Satisfaction: /\ Longit,.1.
d in a l Study," .Academy of l\1.Imzagemrnt Jounwl :yr i,1.991),
pp. 3'52-69; !v1. S. Taylm~ K. D. Tracy, l\IJ:. rf. F.war d , J. V .
Harrison. ;:md S. J. CacmH, "DuePrncsns i.n Pcrfor uta,lG'
Appraisal: /\ Quasi-experiment in Frocedun1J Jrn•\-kc/"
,~dmiizisl ra live Sdence Quarterly 40 (1995), pp. tJ ?5--.'3/3.:
I. M. I/Verner and t11I. C. UoJino, "EJ(plaining U.S. Co1fftl
0f Appeals Decisions fovohrU.1g Performancrc l\ppr.9'baL
An~nrncy, fairness, :md Val.idalion," .Perso1111el Psvclwiogy
50 (1997), pp. 1-24.
18. J\/l;a1111~rlc Paper Compam; v..Moody, 10 FEP l UH (l<J'.7S)
J'l_ S. Ng and J. Lublin, "AJC Pay Pfon: Ranlr.. and fak, " The
lr\Tall Slreel Jo1mial, Febn.vu:y ll, 201.0, p. RS.
20. S Bates, "Forced Ranking," HR f\!fagazine, June /.:IJ03, pp.
63-68; A .Meisler, "Deadman's Curve," Work/'ora; Mmwge ..
merit, July 2003, pp. 44--19; M. Lo1Ne1.~j', "forcing the fssiw,"
Hwnan .Resource Exerntirle (Odober 16, 2003), pp ~ 20-29.
21. Ibid.
22. S. Scullen., P. Bergey; ::md. L. .Mm.an-Smith, "Forced Choke
Distribution Systems and the I1nprmrement of 1/\forl-.Jorce
Potential: A Baseline SimufaVi.on," Personnel Psycliology 58
(2005), pp. 1-32.
23. F Blanz and E. Ghiselli, "The Mix<~d Standard Scale: A
New Rating System," Personnel Psijclwlogy 25 (19?3),
pp. 185--99; K. Murphy and J. Constans, "Dehavi.or;:;l
Anchors as a Source o{ Bias in Rating," Journai of Applied
Psycltology 72 (1987), pp. 573-77.
24. P. Smith and L. Kendall, "Reb:anslation of Expectations:
An Approach lo the Construction of Unambiguous
Anchors for Ralinr; Scales," Joumo.1 of Applied Psychology 4~:
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 [;r.pki1in hm,v srnp loyr.~c) ck~vcloprmani: contribu1:1:;s to sl:r;:rt0 9ies rei ;xl:l?cl
r:o emplo yf2e r·(0teni:ion_ d eve lopinq intell ecl:u<i l capital, and b u::;i ne:ss
q rm11r•:h. p a9e ';70/J

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a11d construct approp1·iate d eveloprnerri: p l;-1ns fo r t hem. page 438

401!.
Philips is a 9lobal provider of hf~alth~ca re, con-
sumer lifestyle and liqht in:J solutions, ·,11frth almost
115 ,000 mnployees and c:l pres('~nce in rn(m: than
100 countries. Founcbcl in i iJ?1. in the (\leth0Hc
lands, the co1npany '.>t;:nt{;d rri<1kinq carbon-.-fi iament
larnp~;, but som1 intmduced its fir•;t innoval:ions: the
medical ic-ray t ube (in 'I '?'in), c lr:KiTic
Corn pact Di:1k .Jnd DVD ('19133/'l 991, «vith Sony), as
·,Alf~ ll .,,,. ·•·!1e <::,,,. . -,,,1::.,,·1 c·-..,fr."t"
, .. (",.;1 •. ) 1. ..,, .,_, __, 11·1·'l'•"1·
.....ft , _~~ 1 •. .1. __ , -~r.::1
Today, Ph ilips still ha~; one of th(: vvor!d 's la rq-
est patent portfolios (ovi;r '130,000). LearninsJ
and cleveloprnent is cxitic;::d For Phil ips in orcl(':\r to
remain ahead of the co111rY~tition and maintain
il5 i11novcition l<:?ack:rsh ip position in th<:> heaith-
(--,r"'
AA ,.., , lt'fo"·i,fl'" '-l'1-l
j,_.. .,:i~J -..: _-. !_, 1 i... l1'nl,
:..1 1f.•·i!'l~)
ernploye(~s t o str<:~nqt:l)<:cn
1.:hei1 professional <;md
h=,adership skill<> ancl d•'"rdop their carer.0r poten··
tial, Philips wa nts to :;tay at the forefro nt of devel-
opment~; in ib industriG::;.
[ m ployee d evclopn1ocnt is important but can
be challenqinq for S1.Jverc1I i-ic)dS011s l:oo. OnE~ chal-
lenge is the pa ce of ch<:infJ<': in !:he rn<:wkets Philips
is operating in. Technologies and business mode ls
are replaced at high speed, resultin9 in si9nificant
chal lenqes for HF1_ Furtherrnore, Philips deve l-
Of'.:led its vision of "Or •"-~ Philio•,;",
f
strivino,
-
for a trulv
g lobal work cult ure, erv1blinq (;.employees t o sh are
solutions effecti\1ely throus_1hout the company
and work efficiently. Philip:; developed a global
learning procwuri called the Phi lips LearninsJ Cur-·
ricula. Vice-Pre5ident !.r:;11nirn;i f.'1. Development,
Jef IJau1NGls stated: " The value of d1c-,.1 /earninq
pro9rarn for Philips is
ing one 1111ay o f lf'.mrking .;incl one mind-set for all
Philips employees. The ick'!a/ end resu lt would be
when an e mployee joins Philips in anv .busir1css,
no matter tlie country, he/'.;ho has access to an
identical lea rning offering." The cha llon9i:;) hr:::re
was that Philip;c;' globa! ieamin9 op1:~rntion was not
centr;:~l ize d . Processes, systems and adm inistrative
tools deviated across the globe and operations
werE) therefore difficult to manage and had ied to
cost esccil;;1tion due to overlaps.
Philips has taken ::;everal steps to overcome
these chalk0nges and ensure that its develop- .
shcl\/(0t' ('I ?39), ment effo1ts support ernployGi3s' career interests,
enhance skills, and grow top leadership t.cilent
_.~_J I(?0•1'-··1)
•• _J •'· ~·· ~"~· Yearly, all employees are invited to complete a
development plan that helps them articulate career
ambitions, identify learnin<J gaps and 9ain neces-
sary n:~sources and support:. Phil ips uses the 70~20-
10 approach. This means the:1t most of ernploye\:!
cieve lo pment occurs through on-thG-job !earning,
.-, cic·
"l"'itl'"
·-· Jni UJ l10!p'
-71- ~ P,I 1r1r·
- .• >::}
:.,i, wh ile 20% comes from coach in1;i and 10% from
formal training. Philips launched over 130 global
courses and reduced overlap (and costs) by 30'%
through a streamlined learning offerin~J Cor·e
Leaming Curricula focuses on the area~; of personal
effectiveness, people management and business
acumen . In 2013, 32,500 employees enrolled, as
well as 19 ,000 in Functional Core Curricula pro-
grams, including Marketing, Finane<~, IT, Sales and
HR. Building a global learning organization, ~'h!lips
p rovidE:;s a personalized University Portal, unlimit-
J
edly accessible through all rnedii'.1, enab ! in~~ c:il!
employees to track t heir development F•mcess. The
Talent p ipeline curriculu m aims at hi9h-potentials
on track to fl.rture leadership roles, offering chal-
lenging action learn ing projects related to real
business opportunities. The Leadership /\cademy,
launched in 2013, focuses on the dHfr1r-ent ne"x·Js
vr:11y much a part of creat-· of executives at·all levels in the organization. Both
programs were developed vvith the top global busi-
ness schools. In 2013, Philios I
soent
I
€47
·
.3 million
on train ing, in line with 2o·i 2 levels.
SOURCES: S. Chakravarthy, Realizing the Vision of one Philips, ·
Chief Leaming Officer, February 2008; "/\nnual Re1~ort 20·13",
"Careers" and "About Philips" at www.ph ilips.corn
405
 ...
406 CfHAIPTIER 9 Employe(~ Development

As JJ1e ESPN example illuslrates, employee development is a key contrihu-

tor to a company's competitive advantage by helping employees un.derntand
IJ.1eir strengths, weaknesses, and interests and by showing them how nev1r jobs
and expanded job responsibilities are available to them to meet their personal
growth needs. TI1is helps retain valuable managers who might otherwise leave
to join client s or competitors. It is also important to empha-
size that development is important for all employees not just
1

managers. Employee development is a necessaiy component

of a cmnpany' s efforts to compete in the new economy, to
meet the chaUenges of global competition aii.d social change1
and lo incorporate teclmological advances and changes in
V\70rk design. Employee development is key to ensuring that
employees have the competencies necessary to serve custom-
ers and create new products and customer solutions. Regard-
less of the bush1ess strategy development is :important for
1

retaining talented employees. Also because companies (and

their employees) must constantly learn and change to meet customer needs
and compete in new markets, H1e emphasis placed on both training and devel-
opment has increased. As ·we noted in Chapter 1, employee commitment and
retention. are directly related to how employees are treated by their managers.
This chapter begins by discussing the relationship between development,
!. training, and careers. Choosing an approach is one part of development plan-
n ing. Second, before einployees choose development activities the employee
1

and the co1npany must ha.ve an idea of the employee'.s development needs and
H1e purpose of development Identifying the needs and purpose of develop-
m.ent is part of its plarnu:ng. The second section of the chapter describes the
steps of the development pla11ning process. Employee and company responsi-
bilities at each step of the process are emphasized. Third we look at develop-
1

ment.approaches, including formal education, assessment, job experiences, and

in terpersonal relationships. 111.e chapter emphasizes the types of skills, knowl-
edge, and behaviors that are strengthened by each development method. The
chapter concludes with a d iscussion of special issues in employee development.,
including succession plaiming and using development to help women and
ILO 9-11 minorities move into upper-level management positions (referred to as "melt-
1
Explain how employee ing the glass ceiHn.g' ).

development con-
tributes to strategies
related to employee
retention, developing The Reh:rtmornshMp c?u11H0Hn~~ De\te~opanentw
intellectual capital , and
business growth.
Training" and Career·s
OEVElOPM!ENT ANO T~AU\!ING
..• !Devraif(J)pme~i!:
The acquisition of JDevdopmellJl.ft refers to formal education, job experiences1 relationships, and
!<now/edge: sl<il/s, and assessment of personality and abilities that help employees prepare for tli.e
· behaviors that improve future. The ESPN example iUush"ates that although developmeni: can occur
an employee's ability
J11rnugh participation in planned programs, it often results from performing dif-
to meet changes in
job requirements and
ferent types of work. Because it is futuxe~oriented 1 it involves learning that is
1
in client and customer not necessadly related to tJ1e employee s current job.1 Table 9.1 shows the dif-
demands. ferences bef:-1A1een training and development. Traditionally h·aining focuses on
1

..
 ...
CHAPTER 9 Employee Development 407

Comparison
betv11een Training
Foc1E: Current Future ·
and Development
U ~:. (; of '.rVork (::;iq:><2rknc:::,,,:, I.ow High
G oai. Preparation for current job
Pcit·tidpat icn Required

helping employee;/ pr.:rformance in their current jobs. Development prepares

lhcrn for o ther position::> i_n the company and increases theiT ability to move
:into jok that n ;ay not yet exist.2 Development also h elps employees p repare
for drnn[!/!~:i in their <.:un·ent jobs lJ1al: may result from new technology, work
d esii;n:3, nc\N cu:3ton1er~3r o r ne1N product markets. Development is especially
critical for talenJ n1anaE/<~n1entr particularly for senior managers and employ-
c~':; with Jeadership potenJial (recaH our discussion of attracting and retaining
L:ik.'n t in Chapter 1). Cmnpanies report that the most :important talent manage-
nie,nl ch<1Hen gel3 they hice include developing existing talent and attracting and
rdaining exJs ting Ieadership tal.ent.3 Chapter 7 emphasized the str·ateg:i.c role of
h'diniog. As !ruining conLi.!Tues to become 1nore stxategic (that is, related to busi-
n (;~;::; 1;oab), lbe disitincUon between training and development will blur. Both
trai.ning and. d eveloprnenl: v11iU be .required and will focus on current and future
l·1 01·•co)"'
--· ., .'i . (.JJ
'-' ,.,_.L,, ~- ~-f.A ., ...,t.fi. \ I_._,.
-''(Y1 __n.. ·.~-,..( . . '..r
1vJ·1T. ,1 ·1v>1-'·
_ .'C..~- ~ 1. ·J"
,. ~,)4

I·
'fodny'.s caJJ::crs are knovvn as protean careers.4 A protean calll.'ee:r is based on IP'rot<e;;i111 Cawe~w
self--dircc tion 1NiJh the goal of psychological success in one's work. Employees A career that is based
take rnajor re :>po:nsibihly for managing their careers. For example, an en gineer on self-direction with
· '···J,.,_, fr· · manage1nent a t
"t" · t o 'wor1<: rn the goal of psycho--
.d.. L .•_ 'i.o
Lhl/ u-lc,-ci"'
., ...... r ,_d ,.. _ r1 .Ju.) Ja f..1cci!.._ ....
<".11- ·r·~. om. .l1 Pr
....... posL10n
logical success in
the United VVay Agen cy for a year. 1lte purpose of this assignment could be to one's worlc
devctop her rn m.1a.gerial. skiHs as vvell as help her personally evaluate if she likes
n1;1nagerial >Nork n:iore than engin.eering.
Th(-: protean career has several imp lications for employee devefopmen t.
Th e goal of th e ne1N e:n.,eer ir; psy.-chofogk.aiJ s11.1\iecest'l: the feeling of pride and IP$y«:h@!(()9fiica~
accnmplishrnent that comes from achieving life goals that are not limited to '.Sl!lllC<Clfl!$5
<Khili':'Ver:nenJs at work (such as raising a family and having good p hysical The feeling of pride
health). Psychological Sl.Ko2ss is self-determined rather than solely determined and accomplishment
that comes from
throu gh signals the employee receives from the company (like salary :increase achieving life goals.
and promotion). For 1.c:xample, a 55-yea:r-old management consultant used to
wor!-: in M an hattan in l"-Je1Ar York. Ciiy5 After inore thm1 10 years in the b usi-
nes;:, she decided to become a stay-at-h ome mom. As she focused on raising
h-:.~r !::No ch ildren she also worked for n onprofits creating a preschool program
for economically disachrantaged children. After she moved with h er husband
an d farnil y io Japan for four years due to h is job transfer she became interested
in food. \/Vh.en the farndy returned to the U.S. she realized that she had a pas-
sion for far1.ning. She studied on.lirn~ and visited local farms to learn about how
to rnake goal: dwese. Ibday, she own s and operates a working farm :in New
York about a one-hour drive from Nevv York City. The farm produces goat
cheese, grows vegelahles, and hosts classes for children and adults. The farm
.
...
 ..
408 CMAPTER 9' Employee Developmeni:

demands mean. she has to put in long hours, sometimes 14-hour days. She
plans to work as long as sh£ is physically able to and hopes to make t11e busi-
ness self-sustainable. She also doesn't believe the farm is her last career m.ove.
She hopes someday that sh.e will apply what she has lean1ed to projects in
Africa and India.
Employees need to develop new skills rather than rely on a static knowledge
base. Tilis has resulted from companies' need to be more responsive to custom-
ers' service and product demands. As we emphasized in Chapter 7, "Train-
ing," leaJTling is continuous, often informal, and involves creating and sharb.1.g
knowledge.
The emphasis on continuous learning has altered the direction and frequency
of movement within careers (career pattern).6 Traditional career pattem:S con-
sisted of a series of steps arranged in a linear hierarchy, with higher steps related
to increased authority, responsibility, and compensation. Expert career patterns
involve a lifelong conunibnent to a field or specialization (such as law, medi-
cine, or management). These types of career patterns will not disappear. Rather,
career patterns involving movement across specializations or disciplines (a spi-
ral caxeer. pattern) will becom.e mrnre prevalent TI1ese new caxeer paU:e:rns mean
that developing employees (as well as employees taking control of their own
careers) will require providing tJ1em with the opportunity to (a) determine their
interests, skill strengths, and weaknesses and (b) based on this information, seek
appropriate development experiences 1.hat will likely involve job experiences
and relationships as well as formal. courses.
I· The most appropriate view of today's careers are that they are ''bmmdary-
less and often change." 7 It may include movement across several employers
Gob hopping) or even different occupations. Statisti.cs indicate that the average
e:mployment tenure at any given company for all Am.erican workers is only five
years.B One study fou.nd t11at 60% of employees of all ages rate time and flexibil-
ity as very important reasons for staying witl1 a company.9
"Boundaryless" means tl1at careers may involve identifying more with a job
or profession than witl1 the present employer. A career can also be considered
boundaryless in the sense that career plans or goals are hlfluenced by personal
or family demands and values. One way that employees cope wilJ.1. changes
in their personal lives as well as in employment relationships is to rearrange
and shift theix roles and responsibilities. Employees can change tli.dx careers
throughout their Hle based on awareness of strengths and weaknesses, per-
ceived need to balance wod<. and life, and the need to find stimulating and excit-
ing work. 10 Career success may not be tied to promotions but to achievh1g goals
that are personally meaningful to the employee rather than those set by parents,
peers, or the company. As we discuss later in the thapter~ careers are best mim-
aged through partnerships beJween employees and their company that create
a positive relationship through which employees are committed to ihe organi-
zation but can take personal control for managing their own careers to benefit
!DiGv~iopment themselves ,and the company. .
pim1nan9 system As this discussion shows, to :retain and motivate employees compatlies need
A system to retain and to provide a system to identiJy m1d meet employees' development n12eds. Thjs is
motivate employees by
especially :important to retain good performers and employees who have poten-
identifying and meet-
ing their development
tial for managerial positions, TI1fa system is often known as a dievefopmie:nt
needs (a lso called career pfaJ1milillg or 1c.1ll.rieieir m21111ag~m-teli.ll.'i: syskm" We discuss these systemB in the fol-
management systems). lowing sedion.
 ..
CHAPTER 9 Employee Development 409

lto0'9'~2
f;Qie\f1f!~O~J~~ir~ce~rnt Plia1nnmng Sy:sten1s Discuss the step s in the
(=ompanies ' devdopKrnC:Jl1~ phmning syste1ns vary in the level of sophistication develop ment planning
p ro cess .
m1.d the en1phasfr; they ph1ce on chffcrent con1ponents of the process. Steps and
;·1?sponr:;ihilibies in thf: development plaxming system are shov.m in Figure 9.1.

SeU-.A:ssiessRTrn(en~
Selfassess1uent riefors i:o the use of information by employees to determine their
career interests, values, aplitudes, and behavioral tendencies. It often involves
psyd101ogical tesis such ;1~:> the l\llyers-Briggs 1.'ype Indicator (described later
in the chap ler), the Sh·ong-C~nnpbeU foterest h1vent011r1 and the Self-DiJ:ected
~)earch. Thr.'; 5trong-Ca;.rplx:H helps em.pioyees iden.iify their occupational and
job :inl:eres:rs.: H11~~ -5!~U-Dir::;ctc-xl Search ide:n tifies employees' preferences for
vvorking in diffen:;nt l:ypes of envirconrnents (hke sales, counseling, landscaping,
and so on). 'fosts n1.ay afao help eni.ployee'.s identify the relative values they place
on work .and leisure achvitie:>.
Through the assessrnent, a dev eloprnent need can be identified. This need ~09<3
can result frorn gaps behveen cmTent skills and / or interests and the type of EJ(pla in the em p loyee s'
work or posft.Hon the en1ploy.ee virants. For example, Verizon Wireless provides a nd company's respon-
sib ilitie s in planning
k)D online tool that aHovvs -en1cployees to assess their current skills and abili-
d evelop ment.
ties in order to bend-io1.arl.c ihemsdves against job openings throughout the
r:ornpany. The .c:1s~;esr:anen:1 aHov1rs e:rnpfoyiees 1:0 identify capabilities they are
Jacking and provide~ thcrn with ;3pecifi.c info:nnal:ion about what they can do
to develop :skill::» U1J·ough lrainfr1g, job experience, o:r enrolling in an academic
program.. 11

[{ez1l!Rt}f CilM0d(
Reality checlc refers to the :information employees receive about how the
coxnpany (~valuates ;:heir skins and knov1rledge and where they fit into the

rr~~ nrr~ rurn"1r:1 ~" ·11

Steps ancl F<esponsib ilitiec> in ihe Ca reer Management Pro cess

ii::mff)~<O>)Jl!}1'!! kkmtify opportunitkls Identify what needs identify goal Identify steps and
fi"lff%1P911ill\\~IJJ.i~!t:';I' and nec~ds to improve. arra realistic to mid method to timetable to reach
develop. determine goal goal.
progress.

C~1lmpm~)f Provide .a~;s.<~ssment Communicate Ensure that goal is Identify reso urces
rr~i»r@ITTl1'i~~i~ii1:Jf informaUon to identify peiiormance SMART (specific, employee needs
s!:re'ilgths, lfl.1eakm,1sses , evaluation, wh ere measurable, to reach goa l,
ini:ernst~:, and vahw";· •?mployera fits in attainable, relevant, including additional
long-range plans and timely); assesment, courses,
of the company, commit to help work e)cperiences, and
chan9es in ind ustry, employee reach relationships.
prof~~ssion, <Jnd the goal.
workpbce.
 ...
4·10 CHAPTIEIR 9 Employee Development

company's plans (potential prom.otion opp ortunities, lateral moves). Usu-

ally this infonnai.ion is p:rov:ided by Hl.e ernployee' s ma..nager as part . of
performance appraisal. Some compzmies also use the 360-degree feedback
assessment which ilwohres exnployees completing a self-evaluation of their
behaviors or competencies as w en as n1anagers, peers, direct reports, and
even customers provide small.er evaluation s. (360-degree feedback is dis-
cussed later in the c,:hapter.) It is not uncommon i:n well-developed systems
for the manager to hold sep arate perform ance appraisals and development
d iscussions.
For example, as part of Caterpillar's performance inanagement process,
career development is discussed between the employee and his or her man-
ager.12 To facilitate this discussion, employees complete a data sheet that serves
as an internal resume. TI-i.e d ata sheet includes infonnati.on about the employ-
ee's. skilJs, education, academic degrees, languages spoken, and previous posi-
tions. Managers are ex-_pected to indicate an employee's :readiness for a n ew job,
whether ihe job will be a promotion or lateral move, and what education ,or
training the employee needs to be ready for the move. Managers discuss w?-111
employees w here they w ant to go next and v;hai: illiey have to do to p1·epare
tl1emselves for t11e next p osition. Managers also identify where they think the
el'nployee has the best opportunities in different functional areas and provide an
I overall. rating of potential and promotability.

\.
I Goal SettiAHg
Goal self:ing refers to il1e process of employees d eveloping short- and long-term
development objectives. These goals usually relate to desired positions (such as
becoming sales manager within three years), level of skill application (use one's
b udgeting skills to improve tl1e unit's cash flow problems), work setting (move
to corporate marketing within two years), or skill acquisition (learn how to use
the com p any's human resource information system). These goals are usually
d iscussed with tl1e manager and written into a development plan. A develop-
men t plan for a product m anager is show n h1 Figw:e 9.2. Development plans
usually include descriptions of strengths and weaknesses, career goals, and
development adivities for reaching the career goal. An effective development
plan focu.ses on development needs that a.n:: most relevant to th e organization's
slrntegic objectives.
Consider Just Born's Career Development Process (CDP) used by high-
perfonni.ng employees to identify th eir career path -..11rithin the company and :ready
themselves for their next position.13 The d evelopment plan :involves identifying
both short- and long-term career goals. Employees commit to two gocils to help
1hem progress in their career. Just Born provides a competency dictionary on the
company's inlxanet ibat can be used for identifying development ileeds. Th.e CDP
gives both employees and their managers the opportunity to discuSs futuxe career
plans and becomes a reality check by rais:ing expectations and increasing perfor-
mance standards. Employees initiate the care.er development program by first
defining future job interests, identifying w ork experiences that help prepare for the
future job, and establishing ll1e lo:ng-tenn career goal. 111e CDP is discussed with
the employee's manager. 'Tiv2 rn.anage1' can support the CDP or suggest changes. If
employees' future job interests are outside theix current department, the interests
are communicated to the managei' of that department.
 CHAPTER 9. · Emp loyee Development 411

IFR\glMlff<'! %.~
Development Plan

. :........ . :
, . ., .

Nm1ne;

C:o~r1p1i'f.(l nc)es . .
PiGa.'ie ithuttity ycnJr throe' gi0ateststrengths and areas for
Strtmgths . . · ·· ·
"' Str·21tegic thlhldtiSrand ·
.,. Hesu!ts orientatkin
.,,. Spil'lt for winr1in£f(bui1dihg

~\foxt J,\!>signm:1;11'l'ts
ldonti(y poUaritial n<·mt assignment·~ (iw;:luding tirnir19) that
qoub.
;; Ma11ag<o1r or director lt-:;vel ir1plM1ninfJ, development; product,
to be 1=a11 20'14. .

Tr;.)!ining and ~)evak)pment fl!<&e9r.

List both trc:iiningand devdopmentactivitif:tS that Vvill either
or JXl'lvidc~bven:il(development.
,, Ma5t<,r's ckig1ee cku;~;eswi li allovv me to prac.tk€ ans! irnprpge my :'JV •
1
. ~~~i:,~~~;6~. ;h~··~~~~;~'.~~.7~~~0~<l0;i;~~;~~~~~i;~::~H~~:~~2:1·~~~~·:~

t\(tnmn P~amnnwn9
During thjs p hase, employees complete an action plan. An action plan is a Actiollll plan
written strategy that employees u se to detenrune how they will achieve their Written s tra tegy that
short:- and long-term career goals . Action plans may involve any one or combi- employees use to
de termine how they
nation of development approaches discussed later the chapter (such as enroll-
will achieve their sho rt-
ing in tourses and seminars, getting addih onal assessrnent, obtaining new job and long-term career
exp eriences, or finding a mentor or coach). 14 The development approach used goals.
depends on the needs and di~veloprnental goal.
 ...
412 CHAPTER 9 Employee Development

Examp~es o·f Caireerr MaITilai9emen1ii: affllf.~ De~10~Qpmerut '.Systems

Effective career develop1nent systems indude several hnportant feah..ues (see
Table 9.2). Several companies' development systems include one or more of tfo:se
features. Sprint's individual d evelopment plan is based on five core competen-
cies: acl: with integrity, focus on the custorn.e1~ deliver results, build relationBhips,
an d develop leadership.15 These competencies a.re used by each business unit
to establish its sh'ategy as weU as by each n1anager and employee in creating
development plans. 1he competencies axe the foundationB for development con-
versations between managers and employees. /-\_mong the resources available Jo
su pport the developmetd: plan is a development activities guide, which includes
audiotapes, books, and specific comses designed to improve each of the com-
p etencies, as well as a website where employees can learn about 1he process.
At Automatic Data Processing (ADP) xnanage:rs are trained to promote devel-
opment and they are held accountable in part of the:Lr perfom1ance evaluation
for the n umber of employees they have coached and prepared fo:r promotion.1 6
Managers receive training on how to hold effective development discussions.
Employees can attend information sessions where they can learn about career
options within ADP from other employees holding many different positions.
ADP also provides a web-based tool foll' its sales associates, which fuey can use
to access sales and sales leadership can::er descriptions and opporhtnities across
the company's markets, products, and international locations. General Mills' s
development plan follows the process shovm in Figme 9.2. Ead1. employee com-
pletes a development plan that asks employees to consider four areas:
@ Professional goals and motivation: Whal prnfessiona1 goals do I have? VVhat
excites ,me to grnw profession.ally'!'
® Talents or strengths: What are my talents and si::rei1gths?
0 Developnient opporlu.nities: Wh.ai development needs are important to improve?
<r. Development objectives an.d action steps: What wiU be my objective for this plan?
What steps can I take to m.eet the objectives'!' ·

Design Factors . L Syste.rri ii'pqs,i tibhed as a response to.a business needor sQpr.:iorts'the bt,Jsines~. ;;
of Effective ~trategy. . .< . .. . . _ .< .. _. _· . _ · · ·: >' . · · · ··.· ·
Development > ' 22 Etnplqye~~taf"ld· rnanagers participate ih developrn.eht •qftl)~ ,system. _ _
Systems >,,. $: Erp@l9y~~s ar;eencouraged tq ta ke an~dive rok'1 ·in ;c~r77r .rnanr.19etn~nt and

.~~~i}if~il{t~t~f1r~~~&d~i~~~~~2~r~.\~~tJii~~,~~"~~·(~itjJ\';8~~ . .
· i~·ir111ti~~1;,~~{!;~~~~~~~~~;;;t~?~~~~;~;;~G·~;~,'~"
petf'.Jrrn~rjte rnanf,lgement, training ;'andrecruiting systems: ·. .•. ' '•
: ,9; A laige;·tjivers§•talentpool is created ; .· .. . .-. . _•.. · . _ ...... ·
.

-·. ·• JO.> p~yE!l(Jp0entplans and :tale!ltevaluation inforrnatiqn. are. a~1a.ilal;)le and

.actes;:;ibl¢·to f11l' martagers. .· · · · · ·

SOUHCE: Based on 13. Baumann, J . Duncan , S. E. Fornier, and Z. Leibowitz, "Amcco Primes the Talent Pump," Personnel
Journal, February 1996, pp. 79-84; D. Hall, C..amer.; In and O ut of Org;miza!ions {Thous;md Oaks, Cf.\; Sage, 2002).
 ...
CHAPTER 9 Employee Development 413.

Every year manag;.::rs and em.ployees are

expected to have a development dis-
cussion and create an inch,ridual d12velop1nent plan.. Speakers, online tools, and
workshops to help en1ployces complete the development plan and prepare for a
development discuss ion 1Ni.th Lheu: manager increase the visibility and empha-
size the h11portance of ihe development planning process. Evaluation data
showed that more 1:hm.1 80'?:, of employees report having an effective and moti-
vating develop1n0nl: p lan. /\lso, annual. survey results show 1l1at General Ivlills
ranks 20% to 30'lio high er on continued. irnprovement and impact of learning and
growth compared to <.:ompa:n.ies it is bench.marked against.
The "Competing through Technology" box shows how the Intercontinental
Hotel Group is using sodaJ media and the web for development and career
management.

Approa(dhes t~1 ~:nr~J)hlye~:! De\lelopment

Four approaches are used to develop 't.!mployees: formal education, assess-
ment, job experiences, and interpersonal relaii.onships.1 7 Many companies use
a combination of these approaches. Figi.u:e 9.3 shows the frequency of use of
different employee d evelopment p ractices. Larger companies are more likely
to u se leadership b:aining and development planning more .frequently than
smaller coni.panies. For exarnple, Brooks Rehabilitation, a nonprofit, operates a
127-bed rehabiJ.itation hospital in Jacksonville, Fl01ida, as well as more than two
dozen outpatient rehabilitation clinics, a skilled nursing facility, a research cen-
te1~ and a physician practice. 113 Brook=; needed to develop managers who were
able to share knowled.ge, embrace change, ~md make decisions that can help
reduce costs. The leadersh:~p development program starts with assessment, goal
selfing, and classes focused on teaching basic concepts. Next, based on their

100 tFigllJJD"tS 9.3

'"10!
(\>
lll
T 84 Freguency of
::1> Use of Employee
•II
ru Development
v
:e....
«I
Practices

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v
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v
di)
0..
Ill
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~)
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20
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SOURCE: Based on E. Esen <incl .J. Col lison . Employee Development (1'.\lexa ndria, VA: SHRM Research, 2005) .

.
...
Caireer Management aunHdJ teadeirs;Mp ID18~ffe~op!llll~fflr~ ~s Sie1111ed
24171 aft h1ltercontfinientai~ H«lte~ Gft"IQl!lUJP1
lnterContinental Hotel Group
(IHG), an Atlanta-based com-
pany, operates by a sim ple
strategy: "Great hotels guests
love." IHG operates brands such
as lnterContinental, Crowne
Plaza, Hotel Indigo, Hol iday Inn ,
Holiday Inn Express, Staybridg e
Suites, and Candlewood Suites.
These brands include 4,400
hotels with 652,000 rooms, in
over one hundred countries
around the world. Th e company
believes that how its em ployees
feel about its brands and how
they deliver the guest experi-·
ence is what distinguishes it
from the competition. "Winning
Ways," IHG's core va lues, help
guide and motivate employees
to improve their personal and
professional lives, take ovvner-
ship, vvork together, and engage
in responsible behavior. IHG
rna kes four promises to employ-·
ees: Room to Have a Great Start,
R~om to Be Involved, Room to
Grow, and Room for You. The
"Room to Grow" promise means
that employees are given sup-
port for development opportun i-
ties and to pursue a rewardi ng
career. "Room to Grow" ensures
that empl oyees know what suc-
cess means for their jobs, they
receive regula r, high-qual ity
feedba ck, they have opportun i--
ties to develop in their current
Elnd future roles, and they are
aware of career opprntunities
within IHG around the world.
In step with its Room to Grow
promise IHG's website has tools
414
that can help employees man-
age their careers. Through the
\Nebsite employees can get
career advice and create a skills
and interest profil(:1 which they
can use to sr:?arch for a job. Al so,
employees can evaluate their
skills and receive a list of roles
and jobs that best match t heir
skill set along with current job
openings. To develop man ag-
ers' leadership skills IHG created
a vi1tual lee:1dership develop-
ment com munity, the Lead-
ers' Lounge, for employees in
general manager positions in its
hotels as well as for employees
holding corpmate director or
higher-level positions. The Lead-
ers' Lounge features short and
concise information on leader-
sh ip provided in articles, tips,
videos, down loadable too ls,
and best practices with in IHG .
Employees vvho access the site
can use socia l net1Norks to post
tips and react to the leadership
content. Th ere are several dedi-·
cated areas v11ithin the l_eaders'
Lounge includirn~1 the "Lead-
ership Gym," vvh ich features
assessment tools designed to
help employees identify t heir
leadersh ip strengths and weak-
nesses, and "Problem Solver"
which asks employees for input
011 leadersh ip issues. Also,
included is <.l section for users
to access e-learning opportuni-
ties on business topics includ ing
finance, customer service, and
coaching skill s (''Th(=: /\cademy").
Use of "The Academy " also
allowed IHG to move
several modules of its Senior
Leadership Program online,
generating cost savings result-
ing from reducing trave l costs
related to global managers hav-
ing to travel to the training site.
There is compelling evidence
that the Leaders' Lounge has
been effective for developing
managers. The Lounge costs
5% of the costs for a typical
three-day on-site leadersh ip
workshop. More than 70%
of Lounge members use it in
any one month, averaging six
times per year. More than 3,000
leadership tools have been
downloaded and shared vvith
leadership teams around the
world. Loun ge members across
the gl obe have taken content
from the Loung e and used it to
build loc11l learning workshops
and training sessions.
D~SCU5SiON QJJIEST~Oi\!S
'il. Which design features of
effective deve lopment sys-
tems are included in IHC3's
online leadership and ca reer
ma nagement system?
2. What other design features
might they consi der includ-
ing in their system? Exp lain
you r recommendation.
SO URCE: Based on www.ihgplc.corn
website for lnterContin e ntal Hotels Group;
P. Harris, "Where People Power Makes the
Difference," T + D, October 2010, pp. 32-34;
"Best Practices and Outstanding Initiatives:
lnterContin0ntal Hote ls Group Leaders'
Lounge ," Training, January/February 2011 ,
pp . 96-97.
 CHAPTER 9 Employee Development 415

assessments, participants work on "change projects" which focus on a process

or function they want to change. They work with their O\!\ffi manager or a senior
manager to determit-ie h01N they wm purnue that cha_,_1.ge. TI1ey create an action
plan for canying out the change, then meet in groups to share their ideas. They
provide feedback for eac:h oilvc~r's ideas, w lti.ch not only irrlproves the plans and
commmucations skills but also helps il1em learn to give and receive feedback.
TI1e change projects have resulted in financial benefits for Brooks. One partici-
pant designed a system for viewing payroll information online w hich saved the
company $50,000. Other benefits of the development program have included
higher retention of staff and improved quality of services.
Keep in mind that although much development activity is targeted at man-
agers, all levels of employees may be involved in development. For example,
most employees typically receive performance appraisal feedb ack (a develop-
ment activity related. l:o a :3sessment) at least once per yea r. As we discussed
in Chapter 8, as part of the appraisaJ process they are asked to complete indi-
vidual development plans outlinistg (1) hovv they plan to change their weak-
nesses and (2) their future plans (including positions or locations d esil:ed and
education or experience needed). J\Text v11e explore each type of d evelopment
approach.

FORMAL IEDUCATmM
formal education pirogr mnf.il include off-site and on-site programs designed LO 9~~
specifically for the company's employees, short courses offered by consultants D iscuss current t rends
or universities, executive I\/[BA pxograms, a.id university programs in which in using fo rmal educa-
t ion fo r d evelopment.
participants actually hve at the university while taking classes. These programs
may involve lectures by bush1.e ss experts, business gaines and simulations, Fonna! Edlucafcion
adventure learning, and meetings with customers. Programs
Many companies such as McDonald's and General Electric rely primarily on Employee development
in-house development programs offered by h"aining and development centers p rograms, including .
or corporate universiii.es, rather than sending employees to programs offered by sho1t courses offered by
consultants or universi-
universities. 19 Companies rely on in-l1ouse programs because th ey can be tied ties, executive. MBA
directly to business needs, can be easily evaluated using company metrics, and programs, and univer-
can get senior-level management invobred. sity programs.
The thousands of resta1U"ai1t managers and owner-operators who attend
McDonald's Hamburger University each year in Oak Brook, Illinois, get class-
room trai11ing and participate i.n simulations on hovv to run a business that
delivers consistent service, quality, and cleanliness. TI1ey also receive coaching
and peer support foce-to --face m-1d onli11e. The company's hlghest-perfonning
executives pmi:icipate in a 11..~.ne-month leadership institute at Hamburger U,
where they tackle major issues facing the company.
General Electric (GE) has one of the oldest and most widely known manage-
ment development centers in the world. GE invests approximately $1 billion
each year for trailung and education programs for its employees. 20 Over the
past 17 years, the ln9 rnost senior f.'xecutivoes in the company spent at least
12 months in lTai11ing and profes;;:iona l developm ent. GE d evelops manag-
ers at the John F. Wekh Leadership Center at Crotonville, New York.21 The
facility has residence bujJding:3 where participan ts stay while attending pro-
grams as well as classroorns for courses, programs, and seminars. Each year
 ...
416 CHAPTER 9 Employee Development

GE employees chosen by· their managers based on their p erformm11.ce ;md

p otential attend management development programs. The programs ii.1dude
p rofessional skills development and specialized courses i_n areas such as risk
analysis and loan slrucluxing. All of the programs emphasize theory and prac-
ti.cal application. Course J.iJ.ne is spen t discussiJi.g business issues facing GE.
The programs are taught by in-house instructors, mtiversity faculty m embers,
and even CEO Jeff InunelL Examples of ma.nagement development programs
available at GE are shown in Table 9.3" As you can see, GE uses a combina-
tion of coursework and job experiences to develop entry-level an.cl l:op levels
of management. Other progrm.11s such as the Business M anager Course and
the Executive Development Course involv-e action learning. As discussed in
Chapter 7, action. learning involves assigning a real problem that GE is fac-
ing to program participants .who must present their recommendations to Jeff
I:mmeH. Besides programs an d courses for management development GE also
holds seminars to ·better tmderstand customer expectations and leadership
conferences designed specificaU.y fm: African Americans, women, or Hispanic
managers to discuss leading and learning.
A number of institutions offering executive education in the United States
and abroad include Harvard, the V\n1axton School of Business, the University
of Mich_i.gan, INSEAD, IMDr a:nd the Center for Creative Leadership. At the
University of Virginia, the Darden School of Business offers an execu.tive
MI:l'A prograin in wltich sh1dents attend classes on cam.pus once a month on \'._, ~ ~':, \•

'Timrsday through Saturday. TI1e on-campus time provides opporJ:unHies for +' ·'~ii
students to collaborate on presentations, siJ.nuJations, and case stud}es. The

lf,pil!)Rie 9 "?>
Examples of Leadershi p Development Programs at General Electric
. '~ ·

En try- level Forn1 al catJr"ses to develop c:ornrne rc:ial skill s Bachelor's degree; m inimum
Co mrnen:ir.il and techniques. Challe ngin g assignments 3. 0 G P/\; prio r inte rnship or
Leadership Pmgrarn in kE~Y s;c1les and marketing roles w ithin a co-op experience, wi llin gness to
business. re lo cate ; demon si:r-ated interest in
sales career and resu lts oriented.
E:><perif;)nced · 1\eceive at lea sf six weeks of t raining to develop MBA; S:--S yea rs marketing or
Commerc ial marketihg and sales' capabilities, strengthen sales experience; demonstrate d
l_eadership Prograrr1 · leadership skills, foster ECU.::i:cul ture ..Three achievernent·an.d leadership
(ECl.P): Sal1')$ and t'liglrtcrnonth busihess rotations within a GE in sales or marketing
IV! a rketi ng busi1wiss; the·totations aremarketing .focused . cornmUnications, and analytical
and sa les focused. Every four months, review · skills; w illing ness to relocate;
s<:-:lf-assessrnents and manager evalucitions to G)<pertise aligned with a GE
identify accomplishments, development needs business.
and career interests, 'frai n in~J includes classroom
and online tra ining and in-residenc10 symposiums
at the John F. Welch Learning Centec

SOURCE: Based o n "Experienced Program: E><perien ced Commercial LeadP.rs hip Prog ra m (EC LP), United States," from www.ge.com/careers/
culture/university-students/ei<perienced-corn mercia l-leaded1ip-progr.'.'lm/united-stai:es; and "Ent ry- level Prog ram: Commercial Leade rsh ip
Program (CLP), United States," from www.ge.com/caree r:;/culture/ university-stud ent.s/cornm ercial-leade rship-program/united-states, accessed
Apri l 17, 2013 .

;~.~~

\(~\l

·~
 ...
CHAPTER 9 Employee Development 417

school also brings executive MBA students to campus four times for leadership
residencies. During each weeklong Iesidency, the students use workshops,
coaching, and reflection to get better at handling t11e:ix everyday management
challenges. Between the times on campus, the students continue their educa-
tion with independent study, onl:ine classes, ai1.d tools for. virtual meetings and .
online exams.22
Another trend in executive education is for employers and the education
provider l:o create programs with content and exper~ences designed specifi-
cally for the audience. Hasbro worked with Dartmouth's Tuck School of Busi-
ness to create the Hasbro Global Leadership Program. This annual weeklong
program covers areas where the toy company's managers needed greater
strength: global strategy, emerging markets, personal leadership, ethics, and
brand building.23 Duke Corporate Education conducts custom programs for
ArcelorMittal, which 1Nas formed by the merger of two steel companies. 24
One of the challenges the company faces is how to get its managers to under-
stand the global challenges facing the steel industry. As a result, the program
involves middle managers visiting steel plants in both mature and emerging
nrn rke ts to gain an understanding of the technology and management pro-
cesses of a more established steel plant compared w ith a growing steel plant.
The managers are asked to develop proposals for improving the growing
plant, such as how to identify envir01m1ental problems and expanding health
and safety features.
Managers who attend the Center for Creative Leadership development pro-
gram take psychological tests; receive feedback from managers, peers, and
direct reports; participate in group-building activities (like adventure learning,
discussed in Chapter 7); receive counseling; and set improvement goals and
write development plans.25
Enrollment in executive education programs or MBA programs may be lim-
ited to managers or employees identified to have management potential. As
a result, many companies also p rovide tuition reimbursement as a benefit for
all employees to encourage them to develop. Tuition reimbursement refers to Tulil:l<Olil
the practice of reimbursing employees' costs for college and university courses !RG!mbur1cemiant
and degree programs. Companies that have evaluated tuition reimbursement The practice of rei.m -
programs h ave found that the programs increase employee retention rates, bursing employees'
costs for college and
readiness for promotion, and improve job performance-26 Verizon Wireless university courses and
invests $26 :million annually in tuition assistance program participated in by degree programs.
18% of its employees.27 Employees can receive tuition assistance for attend-
ing a university or college or for 1he costs of the company's on-site program
conducted at call centers and corporate offices. The on..:site program classes,
taught by university facully, help employees earn degrees by attending classes
where they work and when they have free time in theiT work schedules. They
are eligible for tuition reimbursement from the day they are hired and have
to make no commil1nent to stay employed with the company. Their expenses
are limited to $8,000 per year for full-time employees and $4,000 for part-time
employees. This exceeds the $5,250 annual reimbursement limit that most com-
panies use based on the tax-free maximmn established by the IRS. To be eli-
gible for reimbursement coursework has to relate to the employees' current job
or career path within Verizon Wireless. Evaluation of the program has shown
that it has resulted in increased morale and helped to attract new and retain
current employees.
 ...
416 CHAPTER 9 Employee Development

MassMutual Financial Group restructured and became a flatter and leaner com-
pany. This limited career opportunities for its employees. Engagement suJ·vey
. results showed a decrease in employees who felt they had the opportusuty to
achieve their career goals. An online web portal, The Career Resou..rce Center
was ci·eated to give employees access to self-assessments to help identify ll1eir
strengths, mterests, and values and to deterrrline the match between their cm--
rent position and their career goals. A competency development guide •Nas
introduced as a way to help employees find leaiTring and development resources
to strengthen tl1eir competencies. Also, the portal includes a tool that enables
employees to compare and contrast jobs across t;he company. One year after its
implementation 66% of employees had used the Career Resource Center, its use
has increased each month, and there has been an. increase in employees' p;;u·Jici-
pation in learning and development courses.
SOURCE: Based on Bersin Awards WhatWorks' 2013 Winners, "MassMutual Fin ancial Group," Human Resource
Executive, March 2103;.p. 52.

n.o 9-5 ASSESSMIENT

Relate how assessment
of personality type, Assessment involves collecting information and proviiling feed.back io ernployees
work behaviors, and about their behavior, con1munication style, or skills. 28 The employees, their peen,
job performance can managers, and customers may provide information. Assessments are used for sev-
be used for employee eral reasons. First., assessment is most frequently used to identify employees 11vitl1
development.
managerial potential and to measure CWTent managers' strengths and weaknesses.
A$sessmant Assessment is also used to identify managers with the potential to move into
Collecting information higher-level executive positions, and it can be used with work tea.ms to identify the
and providing feed- strengths and wealmesses of individual team members and the decision processes
back to employees or communication styles that inhibit the team's productivity. Assessments can help
about their behavior,
communication style,
employees understand theit tendencies, needs, L!..ie type of work environment they
or skills. prefe1~ and the type of work they might prefer to do. 291lris infonnalion, along with
tli.e performance evaluations they receive from the company, can help empfoy-
ee.s decide what type of development goals might be most a.pprnpJ.iate for them
(e.g., leadership position, increase scope of theit current position).
Companies vary in the methods and the sources of information they use in
developmental assessment. Many companies use employee performaJt1ce evalu-
ations. Companies with sophisticated development systems use psydl.ological
tests to measure employees' skills, interests, personality types, and communica-
tion styles. Self, peer, and managers' ratings of employees' interpersonal styles
and behaviors may also be collected. Popular assessment tools include person-
ality tests, assessment center performance appraisal, and 360-degree feedback.

Persorfllai ity Tests and ~nventoiries

Tests are used to detennine if employees have the personality characteristics
necessary to be successful in specific managerial jobs or jobs involvj_ng :interna-
tional assignments. Personality tests typically meastue five major dimensions:
extroversion, adjustment, agreeableness, conscientiousness, and inguisil:ive:ness
(see Table 6.3 in Chapter 6).
 CHAPTER 9 Employee Development 419

The Myers~Briggs Type Knventoiry (MJBTU® refers to an assessment that is Myers-Briggs Typa
based on Carl Jung's personality lype theory. Tiris theory emphasizes that we Inventory (MBTl)afi
have a fundamental personality type that shapes and influences how we under- A personality assess-
ment too/ used for
stand the world, process information, and socialize. The assessment determines
team building and
which one of 16 personality types fits best. The 16 unique personality types leadership develop-
are based on preferences for introversion (I) or extraversion (E), sensing (S) or ment that identifies
intuition (N), thinking (T) or feeling (F), and judging 0) or perceiving (P). The employees' prefer-
assessment tool identifies individuals' preferences for energy (introversion ver- ences for energy, infor-
mation gathering, .
sus extroversion), information gathering (sensing versus intuition), decision
decision making, and
makmg (thinking versus feeling), and lifestyle (judging versus perceiving). 30 lifestyle.
Each personality type has implications for work habits and interpe~sonal rela-
tionships. For example, individuals who are inh·overted, sensing, thinking,
and judging (known as IST.Js) tend to be serious, quiet, practical, orderly, and
logical. These persons can organize tasks, be decisive, and follow through on
plans and goals. ISTJs have several weaknesses because they do not tend to
use the opposite preferences: extroversion, intuition, feeling, and perceiving.
These weaknesses include problems dealing with unexpected opportunities,
appearing too task-oriented or impersonal to colleagues, and making overly
quick decisions. Visit the website www.cpp.com for more information on the
personality types.
The DiSC measmes personality and behavioral style ·including dominance
(direct, sb:ong-willed, forceful), influence (sociable, talkative), steadiness (gentle
accommodating) and conscientiousness (private, analytical).31 See Ww-w.cliscprofile
.com for more information on DiSC.
For example, CareSource, a Medicaid-managed care provider in Dayton, Ohio,
has a defined process for identifying and developing employees who have the
potential to be strong leaders and effective managers.32 Assessment of fit with
the organizational values and culture which emphasize serving the underserved,
begins with the recruiting process. The company uses multiple assessment tools
to evaluate managers' competencies (recall om· discussion of competencies in
Chapter 8, "Performance Management"). These assessments include the Myers-
Briggs Type Indicator (discussed below), the Gallup's Strength Finder to iden-
tify managers' strengll15 and develop plans for using their strengths with their
employee team, and the Leadership Practices Inventory, which provides manag-
ers with an idea of their leadership sldlls as evaluated by peers, their boss, and
their own self-assessment, and is used to build a personal leadership develop-
ment plan. Also h"Tice a year, using the performance management system, they
are evaluated on competencies and behavior that CareSource believes are char-
acteristics of an effective leader and manager: a service orientation, organiza-
lional awareness, teamwork, conununications, and organizational leadership.
Based on the assessment results, managers with high leadership potential are
encouraged to participate in a variety of development activities.

Assessment Center
At · an assessment center multiple raters or evaluators (assessors) evaluate AsSiessment Centsr
employees' performance on a number of exercises.33 An assessment center is A process in which
multiple ra ters evaluate
usually an off-site location such as a conference center. From 6 to 12 employees employees' perfor-
usually participate at one time. Assessment centers are primarily u sed to iden- mance on a number of
tify if employees have the personality characteristics, a9ministrative skills, and exercises.
 ...
420 CHAPTER 9' Ernployee Development

interpersonal skills need:ed for managerial jobs_ They are also increasingly being
used to dd:ermine if employees have the necessary skills to work in 'l:eaxns.
The types of exercises used Jn assessment centers include leaderless group
t0aded"'1SS Ga·ol.lp discussions, iill:erviews, in-baskets, and role-plays.3·! ln a kade:rles:5 group
il)ij:;.:;:ussnQn disc11wsion, a team of five to seven employees is assigned a problem and nmst
Process in ,which a work together to solve it '''-'ithin a certain t:im.e p eriod. The problem may involve
team of five to seven buying and selling supplies, nominating a subordinate for an award, or assern-
employees solves an
assigned problem
bling a product In U1.e inhc:nrkwr employees answer questions about thejs work
l;ogctlv;,r within a cer- and personal e;q'.Jeriences, skill sh·engll1s and iNeavJtesses, and career plat.IS. An
tain l:il'ne period. J\n~b.\llakcft: is a sj11u:i.J.aJion of the. administrative tasks of the manager's job. 'Ihe
exercise jndudes a variety of documents that may appear in the in-basket on a
Tirr]·Renrnew
Employees are ques-
inanager's desk. The participants read the materials and decide how to respond
tioned about their wor/c to thenl. Responses might in.dude delegating tasks, scheduling meetingsr writ-
And personal experi- ing replies, or con1pletely igno:d.n g the memo! Roli£mpfays r·efer to the parlici-
e nces, shills, and career pant ta.king the part oo: rolo.~ of a nwnager or other employee. For example, an
plans. assessment center participant m.ay be asked t.o take the role of a xrianager who
Ali1 -13 ar.ke~: has l:o L~ive a negative performance review to a subordh1ate. TI1e participant js
/.\ simulation of the told about the subordinate's performance and is asked to prepare for and ach1-
administrative tasks of aUy hold a 45-·m..inute m.ceting with the subordinate to discuss the performance
a manager's job. problem::;. The role of the subordinate is played by a manager or other mer.nber
Ufo~e-Fi' 1 iay3
of th.e aHsessment center design team or company. The assessment center m1ght
/-\ participant taking also it1.clude interest and apiii.1_1de tests to evaluate an employee's vocabulary,
1:he part or role of general mental ability, and reasoning skills. Personality tests may be used to
a manager or other d e lern:1inc if employees ca11. get along with others, their tolerance for ambiguity,
employee . and other 1Taits related to success as a manager.
Assessment center exercises are designed to measure employees' adminis-
trntive a.nd interpersonal skills. Skills typically measured include leadership,
oral and written communication, judgment, organizational ability, and stress
tolerance. Table 9.4 shows m.1 example of the skills measured by the assessment
center. An vve see, each exercise gives participating employees the opportu-
nity to demonsh·ate several different skills. For example, the exercise requiring
scheduling to meet production demands evaluates employees' adrn.in:ish·ative
and problem-solving a:bilily. TI1e leaderless group discussion measures interper-
sonal skills such as sensilivity toward others, stress tolerance, and oral corrunu-
nkation skills.
Managers are usually used as assessors. Th.e managers are h·ained to look
for employee behaviors t11at are related to the sblls that will be assessed. Typi-
cally, each assessor observes and records one or two employees' behaviors in
each exercise. The assessors review their notes and rate each employee's level
of skills (for example, 5 = high level of leadership skills, 1 = low level of lead-
ership skills). After all employees have completed the exercises, the assessors
discus:3 their obsenrations of each employee. They compare L.'i.eir ratings and h·y
to agTee on each employee's rating for each of the skills .
.As we mentioned in Chapter 6, research suggests that assessment center
ratings a.re related to performance, salary level, and career advancem.ent. 35
Assessment centers may abo be useful for development because employees
who parlicipal:e in the process receive feedback regarding their ati.itudes, skill
strengths, and weaknesses. 36 For example, Steelcase, the o.ffice funutu.re man-
ufacturer based in Grand Rapids, Michigan, uses assessment. centers for first.-
.,,·.'.
level managers. 3 '7 The assessni.ent center exercbes h1clude in-basket, interview
 '"
CHAPTER 9 Employee Development 421

Ei<amples of Skill s Measured by /\ssessment Center Exercises

Sl( IU-5
v
Lea dership \/
/ \. )( .I\

(Dornin<.ince, coachinq, influenn;,

resourceful ness)
Pmblern solvins.J ."
;\ x v
I\
v
,'\

(.Juclgrnent)
v
lnierpc)rson al /\

(Sensitivity, conflict m'.;olution,

cooperation, oral ccirnrnunicatlon)
Adrninis1i-ative
\/
/\
\/
I\ )(
(Oi·~1ani zi11g , planninq, writtc11
cornrnunications)
P1m;onal .)( x
(Stmss. tolert:incE:, conriclence)

)( indicate:; skill measured by cx1orcis2.

simulation, and a timed scheduling exercise requirit1g participants to fill posi-

tions created by absences. T>v1a:nagers are also required to confront an employee
on a performance is~me, getting tl1e employee to commit to improve. Because
t11e exercises relate closely to ·what managers are required to do at work, feed-
back given to m anagers based on thefr performance in the assessment center can
target specific skills or competencies that they need to be successful managers.

PeR'fcmnam::e Apprab;<IJl~s ainrd 36CHlegree feedback Systems.

As we mention ed in Chapter 8, pll!::r.fo:irmance appraisal is the process of mea- i?erlormam:~
suring employees' performance. Performance appraisal information can be use- Appiraiis!lll.
ful for employee development i mder certain conditions.38 The appraisal system The process through
must tell employees specifically about ~heir performance problems and how which an organization
gets information on
they can irnprove their perfonnance. This includes providing a dear under- how well an employee
standing of the difference~> beiween current performance and expected per- is doing his or her job.
formance, identifying causes of the perfonn.ance discrepancy, and developing
action· plans to improve perfonncmce. Ma.n.a.gers must be trained in frequent
performance feedback M;.;1nagers also need to monitor employees' progress in
carrying out action plans.
Recall our discussion i_n Chapter 8 of how Just Born uses perfonnance
appraisals for evaluation and development.39 The appraisal starts with a plan-
rling meeting between employee and manager. TI1e strategic initiatives of the
department are discussed along 'With the employee's role. TI1e employee an_d
mzmager agree on fo ur personal objectives that wiU help tl1e department reach
its goals ar::; well as J.cey pe:donnance outcomes related to the employee's job
 ..
l!..22 CHAPTER 9 Employee Deve lopment

Upw~rrd rF•l'Htiidlb~dk
A performance
app ,.aisal p rocess
For managers that
i11cludes subordinates'
evaluations.
~6'.llo,oin@wli:l(i}
ff-\\fq~r,:ii"11d( S3f;,\bl'm111
A pedormance
apprC1isa l system
(or mana9ers that
iticlucfes el!a /uations
from '1 wide range of
persons who interact
with the rn an:Jger: The
process includes :;e/f..
e valuations as well as
evaluations from the
miJnager's boss, sub-
ordinates, peers, and
custorners.
descri.ptlon. Cornpetencies the employee needs to reach the personal objecti.ves
are iclentifiecL The maJ.1.ager and employee jointly develop a plan for ir.nprov-
in g or lean:1ing the competencies. Durh1.g the year, the manager and ernployee
m.onHor ll1e progn::ss h::r'\~1ard reaching the performance and personal objectives
;.)nd ach..i.evernent of the leosnjng plan. Pay decisions made at t.he end of each
year are-based on 111.e achievement of both performance and leaxni:n.g objeclives ..
A reo~nt trend in performance appraisals for management development is
the 11 :%: of upward frei~dback and 360-degree feedback Upward foedb<nck refers
l:o apipraisaJ that involves coUect:ing subordinates' evaluations of managers'
behavior~• or :3kiJJs. Tb.e 360-·degree feedback process is a special case of upward
fe edbad\. In J.(~OJ-dcgreie: J!\':edbads systiemn;, employees' behaviors or skills are
evaluated not onJy by subordinates but by peers, customers, their bosses, and
IJH~n:Jsdves. The :raters coJ.n.plete a questionnaire asking them to rate the person
on a imsnber of different di.nJ.ensions. Table 9.5 provides an example of the types
of skills reJ.att::d to managerneni: success that are :rated in a 360-degree feedback
quesJfo;•na:iJ:e. TypicaUyr ra ters are asked to assess tli.e manager's strength in a
particular Heni. or 'Nhether development is needed. Raters may also be asked to
identify hcnN frequenHy l:hey observe a competency or skill (e.g., always, some-
1·1·1-vt"''' ~n
.. _ ..-.. c.__/' , ,J'G & '\ ....., "'('"f"')
,,,·,l. t·'i')fl.l . .:: v .:. . "-

Skills l~elated to Mana geri al S uco~ :>s

Can think strategically, engag e in flexible prob lem solvin9,

and wo rk effectivr::ly with higher management.
Dc·i 119 whal:ew:!" it takes Has pe tsevercii1ce ahdfocus ;lh the fate .Sf ·ob.s tacles.
Fk:in9 ' ' quick study Ouickly masters new technical and busihess knowled.:=ie.
13uildin:::i andrnending r<::dal:ion.ship'; l(n ows how t6 ·bUild!andrnainta!n1;vqrkh1g telationships with
co-1.vorkers-ai·id;external parties, ...
Lr;:adin9 subordin;Jtes Dele~]ates to subord inates effectively, broad ens their oppor-
tu 11ities,and acts with fai 1·ness tovvFSdth~m.
C()rT1pnssion and se nsitivi ty Sh ows genuine interest in othe'rs 'ant:li'sE:!9sithrity to subordi ~
r1 a1:l';r.' needs. · ·· ·
Straiqhtforwardn<'):;s an d corriposure Is honorable and steadfast.
Setting -a developrnenta lclirnat:o Provides a challengingdim~teto· ei'\c(}urage subordinates'
development. · · ·
Confrontin~J prob lem subordinate:; A cts deci sively and fairly when dealing with prob lern
subord inates.
Tearn' o dentation /Acco1nplisb~s tasks·througl} 111:a:na,gir1ghthers.
Bak1nce between personal life and wo1l Balances work priorities w ith personal life so t hat neither is
neglected. .. ..·.·
Decis i vene~;s Prders.quick· ~odf!PP!"(?0Jr1JC\}E,l.i ~sti.9Q~:;i~.,?f<:~yv .C\ndprecise
on es in manymanagemen(situatlons, ..· . .. . .
Has an accurate picture of strengths and weaknes.ses and is
willing to improve.
Hiring talented staff Hire.s talented pe01~!e for the team.
l'°uttinr:=i peop le at C'ilse Di splays warmth and a good sense of hum o1·.
. Actin9 with flexibility Can behave in ways that al'~ 6freh seen as opposites .

SO URCE: Adapted with permissio11 fro m C. U. lVlcC.1uley, M. M. l.. 01nb;1rclo, ilnd C. J. Usher, "Diagnosing Management Development l\l •~e cl s: An
l11sl.n.1rnenl: Based on How Managers Develop," ..Journal of Management 1S Cl '?89), pp. 389-403 .

....
 ...
CHAPTER 9 · Employee Development 423

The res ults of a 360-clegn~e feedbadc system show hm,v the manager was rated
on each item. The results also show how self-evaluations differ from evaluations
from the other raters. Typically managers revievv their results, seek clarification
from the ralers, and sei: specific development goals based on the strengths and
wealmesscs idenhfied.10 Table 9.6 shows U1e type of activities involved in using
360-degree feedback for development:n
T11e benefits of 360-degree feedback include collecting multiple perspectives
of xnanagf~rs ' performance, allowing employees to compare their own personal
evaluations with the views of others, and fonnalizing cornmuni.cations about
beh aviors and sblls ratings between emp loyees and thefr ii-i.ternal and external
custmners. Several sh..1dies have shown that performance improves and behav-
ior changes as a resuJt of participating in upward feedback and 360-degree
f(!edback systerns.42 The most change occurs in individuals who receive lower
ratings from others than they gave themselves (overraters).
Potential limitations of 360-degree feedback include the time demands placed
on the raters to complete the evaluations, managers seeking to identify and pun-
ish rat(:rs who provided negative information, the need to have a facilitator help
int erpret results, and companies' failure to provide ways that managers can act
on the feedback they receive (development planning, meeting •Nith raters, tak-
ing cnmses).
In effective 360-d egree feedback systems, reliable or consistent ratings are
p rovided, raters' confidentiality is maintained, the behaviors or skills assessed
are job··related (valid), the system is easy to use, and managers receive and act
on the feedback.43
'Technology allows 360-degree questionnaires to be delivered to the raters via
their personal computers. This increases the number of completed question-
naires returned, makes ii: easier to process the information, and speeds feedback
reports to managers.,
Regardless of the assessment method used, the information must be shared
·w ith the employee for development to occur. Along with assessment informa-
tion, the employee needs suggestions for correctirig skill weaknesses and using
skills already learned. These suggestions might be to participate in training
courses or d evelop sl<ills through new job experiences. Based on the assess-
ment inforrnatfon and available development opportunities, employees should
d(->.velop action plans to guide their self-im.provement efforts.

'lf'abQe ~.6
·1, Und erstand strengths and weaknesses. Activities in Using
Fieview 1·ati11<~JS fo r strengths and weaknesses. 360-Degree
Identify skills or behaviors whe re self and others' (manager, peer, customer) Feedback for
1·iJti119s agr·ee and disagree. Development
.£1 . ldent;i'fy a developrnerrt g,oal,~ . .
Cho o s e~ a skill or behavlorto de.velo1J. ·
Set a clear, spt8cifii:: goal with >? .spedfied outcome.
3. fd1.>:ntif y a process for r<?cognizing ·goal accomplishment.
4, Ide ntify strategies fofrea~:h]'p'gth~ developmerrtgbal. . .·. ·.· . ·. . . .. .
Establishstrntegies st1Ch .<1$regdlrig ,'job experiences, COLirses. and 1'elationships.
[ sta b lish strategies fo1- rece:ivi'hg'fee dback on progres'3. . ·
Cst~1bli !i h . stn'1t(~gicils forreinforcing t he ·new. skill or behavior,
 ...
424. CHAIP'TER 9 Employee Developmenl

At AHiedBasi:on Security Systems, its 360-deg:ree feedback report maps onto

the coni.pany's core values and what it calls its Leadership Non-:-Negotiables. 44
The process is lPstkred l:o ;m onJine talent tool kit which .gives managers leadership
icips based on their 360-d.egree feedback. Capital One has developed an effec-
tive 360-deg:ree feedback :3ystem.15 Capitol One, a consumer credit company, has
included a number of foaJur~s in its 360-degree. feedback system to miniruze
.t he chance '!fo~J the ra.Hngs wm be used as ways to get back at an employee or
tur.ned jnto popuJ.arHy i:ontests. 1lv:: 360-degree assessments are based on U1e
compm1y' s competency n.itodel, so raters are asked for specific feedback on a
competency area. Rather th<JJl a lengthy form that places a large burden on rat-
ers to assess many different competencies, Capital One's assessment asks t11e
raters to concen!::rate on three or four strengtl1S or development opportunities.
It also seeks coni.xnents rather H1an limiting raters to merely circling numbers
corresponding to how m.uch of ead\ competency the employee has demon-
strated. These comment3 often provide specific information about what aspect
of a competency needs lo be developed or identifies work situations in which a
competency needs to be .urn.proved. 111is comment system helps tailor develop-
ment ad:i.vities to fit competency development. To increase the chances that the
assessment will result in chauge, the feedback from the 360-degree assessment
is linked l:o developmc~n.t plans, and the company offers coaching and training
to help employees strengthen their competencies. Employees are encow:a.ged to
share feed.back with their co-workers. This creates a work environment based on
honest and open feedback H1_at helps employees·personally grow.

.DOU] IEX!PrEmlE~Ot'.5
l09-6 Most employee dew~lopm0nt occurs lhrough job €Xpe:dences:46 relaiionships,
E1cplain how job experi- problems, demands, tasks, m other featu.res that employees face in their jobs.
ences can be used for
ski ll development.
A rnajor assumption of using job expe:riences for employee development is
that development is most likely to occur when there is a mismatch between the
.fl'°'~ 1Expl'ilri«u11<ee5 employee's skill.s a11d past experiences and the skills required for the job. To suc-
The relationships, ceed in their jobs, employees must stretch their skills--that is, they axe forced to
problems, demands, learn new skHJ.s, apply l:heh" sldlls and knowledge .in a new way, and master new
tasks, and other fea-
exped.ences.47 New job .assignments help take advantage of employees' existing
tures tha t employees '·;-j

face in their jobs.

skills, experiences, and contacts, while helping them develop new ones.48 Job
''\fl'11
experiences are used for d<?.:vdoprn.ent in companies of all sizes but their type an.d ::L
availability vmy. 4? Lm:ge compmuer3 such as HCA Inc. with 195,000 employees
in the health care business have the ability to provide high potential employees
with many different kinds of developmental experiences. For example, an admin-
istrator can begin worl<l11g in a-position :in a smaller heath care facility, ai.-id then
move to a larger fad.lily b.id.ud:i.ng a hospital or heath care business. Smaller com-
panies nughJ not hav~ th"'~ same type or nmnber of development experiences at
work, but can encom:age employees to get relevant experiences outside of work
For example, the CEO Qt Fitn.ey Bowes learned a lot about conflict mai.1agement
through his role as vice president of his homeowners association. Regardless of
the size of 1li.e company, for job experiences to be an effective development activ-
ity they should loi;; taUored to employees' development needs and goals.
Most of what we know about development through job experiences comes
from a series of si:u.Jje;; conducted by the Center for Creative Leadership.so
Executives we:i.\>: a:>ked to identify key career events that made a difference in
 ...
CHAPTER 9 Employee Development 425

their 1nanagerial styles and the lessons they learned from 1hese experiences. The
key events included those involving the job assignment (sud1 as fixing a faiI-
i.n g operation), those involvmg interpersonal relations.hips (getting along with
suiJe1;~risors), and the specific type of 1Tansilion required (situati.ons h1 w hi.ch the
executive did :n ot have the necessary backgroun d). TI1e job demands and ·what
ernp.i.oyees cm. l12m~n :fro:cn thiem are sh.ov11n h-1 Table 9.7.
On.e conc(~tn in the ur~e of demanding job experiences for ernployee develop-
ment is whe ther they are vie'.l\Ted ~s positive or negative str~ssors. Job expe-
ri<::nces thn l: are seen as positive sl::rc:3sors ch.aUenge employees to stim.ulal:e
. ' ·- ,. J'oJ·) C'-'-<·
' ..IC<.llJlLUg.. 1 ·1·1[J 0 r1g·~ ... · 1r~""·\-"('J
..'L -l"°'•? .." c v /":. . ''"".Il'"'v"·t·1·
•::'.<:)« ..'""
Cl,, 1/ ,_ "'J.'IP"'"O"''" .I. e.:.:<.. •:. h-"to-}1
.:>L c,:,,;, .l.~ c-·n•1"t
0
• Cr . l •cc'
-="rPJ,, l }1•.:.
..' ;> O"r. ~Ld.r·-·1
J..-

f!Jl ::; t.r.ess for employees exposed to them. Receni: research findings suggest tl1al:
all of the job dexrnmds, 1Nith the exception of obstacles, an: related to learn-
i.ng.s1 Managers reported that obstacles and job dem<)nds related to creating
change W(c~re more likdy to h~ad to negalive stress than the other job demands.
This rmggests that coJnpanies should carefully vir.eigh the potential negative

.Job Demands and the Lt~~;sons J.:mployees Lea rn from Them

Makin9 transi tion~; Unfamiliar responf;ibi/ities: The manager must handl e responsibilitie s t hat are
ne1N1 very d iffNent, or much broader than previous o nes.Proving yourself: The
111anagerhas .added pressure to . ~howothersshefan . h a nc:Jl: .the job.

• . [$~Jl~!~!~J~~~~~~1;;~,~~~~~iI~::~: r
1 9

·: ···
by··n fqrmE)rint~Ui"t)be;nt o_rti.lk1; 0\f(C>f ·probJerfl ernploy~~S···(~~\Juctio r1.·:tfetf7 ......· ·y : ;,. )[\!

~:~rgz~*~!\~?£,~is~Pe~~:~:e:'16~i ~:t~~'l'':,7~~'.~"~fG~,,. :·~;~ ,.

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HavinsJ hi9h level of High stakes: Clea r d eadlines, pressure fro111 senior managers, high visibility,
f(':S!Xll"J!> ibi Iil:y and responsibility for key decisions make success o r failu re in this job
clea rly evident.Managing business diversity: The scop e of the job is large
with responsi bilities for multiple function s, groups, prod ucts, custom ers, or
markets.Job overload: The sheer siz<::? o-f t l1 (':! job requ ires a large invest ment
o f time and energy. Handlin g external pressure: External factors that affed; the

.
business (e. g., negotiating with unions m government agencies; vvot-ki ng in a
frxeign ~u.lture; ~ ~ping with se rious commL.1nitypr<:>blerns) rnust be dealt wit~ .

1 ::.'..s~,
, · :St
'
. -~
~.._,;:
·~~;~~~,;:~~i1\~t~i¥~01,,h,rfa!~;r,:~:1f'~~it~:~ J~J:;,·~~~~~tf,~~~~~,~~~~~~;g:.,ihPeif~'·· ·
"~";~1~ '
I •,/~
~
:if'
.t{
Facinq ob:;tacles Adverse bus iness conditions: The business unit or product line face s financial
problems or difficult economic conditions. Lack of top management support:
Se 11io1· man aDem ent is re lu ctant to pmvide direction , suppo i-t, or resources
for cune11t work or new projects. Lack of persona l support: The manager is
())(el uded frorn key networks and gets little support and encouragement from
ot hers.Difficult boss: The manag('"r's op in ions or manage ment style differs from
those of th e boss, oi- th e boss has m;;1jor sho 1·tcomin9s.

SOU RCE : C. D. McCm1ley, L. J. E<is1:m'1n, and .J. Ohlo tt, " I.inking fl/l<1nagement Selection <i nd Development through Stretch As~ignments," Human
((eso urce Mi1nagem ent fliJ. (19'15), Pl)· 93-·1 1!) . Copyrigh t IQJ 1995 11\filey Periodicals, Inc., ii Wiley Company.
' . •'"$!

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'f,;.·;. •.:j -
i· • ::,1•!,!,IS"J. :;
. ,. ... ;J.-. ,.~ .
 ...
426 CHAPTER 9 Employee Develo1Jrnent

consequences bcfor'2 piacing c,:nc.p loyees is1 development assignments involving

obstacles or creatulg chaJ•f.'::::.
Although the researd1 GJ1 d'?vel.opn1.ent through job experiences has focused
on executives and ma.na iy~r::; , li ne ("1n.ployees can also leain from job expelienoes.
As we noted earliet~ for a !MOJ-k tearn t:o be successful, its members now need the
kinds of skills that only nFn1a5ers Y\.rere once thought to need (such as deal- ;;.~

ing directly wi.H1 custo m~::rsr analyzing dafa to determine product quality, and
resolving confl:kl; a_ni.ong t.cm:n 1nexn bers). Besides the development that occurs
when a tean1 is fonned, cn.1plo11e<:::::: can f-urthEr develop their skills by switching
work roles within the le;;un.
Figm:e 9A: shuws th€ var jou s way2 that job experiences can be used for
employee developrnent These indude 12nlaxgi11g the current job, job rotation,
l-ransfers, pronmtions, duiNf\"\Ar;:nd m.ove::>; arid temporary assigrunents. For com-
panies viritJ1global01w:r<rVin• ls (rn.nHinaHonals), it is not uncommon for employee
development to invo1vi~' ini:crna hon al assigmnents that require frequent travel
or relocation. ·

n:n~argirnig Hu~ (~~rn-eri!J'!i: J1nJ ~11

Job IEITliarglllml6.'nt Job eJtd.iJ\:rgiemieli1~ refer::: lo a d di n g cha.Uenges or new responsibilities to employ-
Adding challenges or ees' current jobs. This could :i.riduck' special project assignments, switching roles
new responsibilities
wHhin. a work te<.un, m: r·c:.:;•2;;cxchix1.g :n.-e'w 1Nays to serve clients and customers. For
to an employee's
current job. example, an engirif~cri:ng eniployc1~ Jn.ay join a task force developing new career
p ailm for tedm.icaJ eu1p.l oy,2c~;_ Through th5s project work, the engineer may lead
certain aspects of career p;J(h d e velopment (such as reviewing the company's
career developn1en t procec.;:_;)_./\:3 ;:;, rf.:suH, the engineer not only lean1S about the

lflgure 9.4
How Job
Experiences Are
Used for Employee
Development
 ...
CHAPTER 9 Employee Development 427

company's career development system, but uses leadership and organizational

skills to help the task frn'ce reach its goals. Some cornp.an:ies are enlarging jobs by
givjng two managers 1J_1e sa.rn.e responsibililies and job htle and a11owing them to
divide the work (lwo-in-a-·box).52 111.is hel.ps managers learn from a more expe-
rienced employee; helps companies fill jobs that require muJtiple skills; and; for
positions requiring extensive travel, ensures that one employee is always on site
to deal with work-related issues. For exaxnple, at Cisco System.s, the head of the
Cisco routing group, vvho ·was tcained as an engineer but nmi\l works in business
development, shared a job with an engin.Eer. Each enlployee was exposed to the
other's skills, which has helped both perform their jobs better.

Job Rotation
Job rotation gives employees a series of job assigrnnents in various functional Job Rotation
areas of the cmnpany or movement among jobs in a single f-tmcti.onal area or The process of system-
department. Cianbro Corporahon, a consh·uction company, u ses a rotational atically moving a single
individual from one
program for new hires that exposes them. to estirnating, engineering, and field job to another over the
experience.53 The Financial Department provides a program that includes rota- course of time. The job
tions through field asr:;ign:m.ents, business 1u1jJ assignments, and a corporate assignments may be
rotation. At the senior level, top talent are rota ted to provide them with the in various functional
exposure and experiences they need to suco.".ed in senior management positions areas of the company
or movement may
in the company.
be between jobs in a
Job rotation helps e:mployees gain an overaU appreciation of the company's single functional area
goals, increases their understand ing of different corn.pzmy ftmctions, develops or department.
a network of contacts, and improves problem-solving and d ecision-making
skills.54 For example, Sanofi-Aventis Pharmaceuiicals encourages high perfom1-
ing sales professionals to take on a temporary project or assignment with the
Commercial Training Department to detenn:ine if they are interested in a training
specialist role.55 TI1e length of the p roject assign.m ents vary from a few days to
several weeks depending on the needs of the employee and training unit. Sales
professionals who accept a full-1ime trai_ning posilions rotate to another role in
the corporate office in hNo to thxee years (such as Marketing), go back to the
field in a different sales mut, or accepi: a promoti.on to the district sales manager
·position. Job rotation has aJso been shown to be related to skill acquisition, sal-
ary growth, and promotion rates. But there are severalpotential problems with
job rotation for both the employee and the work unit. The rotation may create
a short-term perspective on problems and solulions in rotating employees and
their peers. Employees' satisfaction and mol:ivation rnay be adversely affected
because they find it difficulJ to develop functional. specialties ai.1.d they don't
spend enough.tim<~ in one position to receive a challenging assignment. Produc-
tivity losses and workload increases may b'~ experienced by b oth the depart-
ment gaining a rotating employee and the department losing the employee due
to training dem.ancls mid loss of a resource .

lransfo!l"s, Prnmoti«:ms, am~ !DIOlwnw.;:mo1 Mmre:> Trnn!i>for

Upward, lateral, and downward mobility is available :for development purposes The movement of an
employee to a differ-
in most companies. 56 Jn a rcir"11nsfr:r, ai.1 en1p!oyc~e is asFJig11i::d a job in a different
ent job assignment in
area of the company. Transfer~> do not necessarily j11crease job responsibilities a different area of the
OJ_" compensation. They are likely lateral m oves (a move to a job with similar company.

' .

--- - ----------~-

··.
 ...
428 CHAPTER 9 Employee Development

Promotioau; responsibilities). i1:1'n.·ornoitform are advan.cements into positions with greater chal-
Advancement into lenges, more responsibilily, and more authority th.an in the previous job. Promo-
positions with greater tions usuaJJy :include pay increases.
challenge, more Transfers may involve relocation witrun the United States or to another coun-
responsibility, and
more authority than try. This can be stressful not only because ll1e employee's work role changes,
the employee:~ previ- but if the employee is in a two-career fmnily, the spouse must find new employ-
ous job. ment. Also, the family has to join a new community. Transfers disrupt employ-
ees' daily lives, interpersonal relationships, and work habits.57 People have to
find new h ou sing, shopping, health care, and leisure facilities, and they may be
many m.iJes from tl1e emotional support of friends and family. They also have to
learn a new set of work norm.s and procedures; ihey must develop interpersonal
relationships with their new managers and peers; and they are expected to be
as productive in their new jobs as they were in their old jobs even though they
may know little about the products, services, processes, or employees for whom
they are responsible.
Because transfers can p:rovolke anxiety, many companies have difficulty get-
ting employees to accept: them. Research has identified the employee character-
istics associated ·with a 1;villingness to accept transfers:SB high career ambitions, a
belief that one's fotille with the company is promising, and a belief that accept- .
ing a transfer is necessary for success in the company. Employees who are not
married and not active in the community are generally most willing to accept
transfers. Among married employees, the spouse's willingness to move is tl1e
most important influence on whether an employee will accept a transfer.
Downward Move A downward move occurs when an employee is given less responsibility and
A job change involv- authority.59 This may involve a move to another position at the same level (lat-
ing a reduction in eral demotion), a. temporary cross-functional move, or a demotion because of
an employee's level
of responsibility and
poor performance. Temporaiy cross-functional moves to lower-level positions,
authority. which give employees experience working in different functional areas, are most
frequently used for employee development. For example, engineers who want
to move into management often take lower-level positions (like shift supervisor)
to develop their management skills.
Because of the psychological and tangible rewards of promotions (such as
:increased feelings of self-worth, salary, and status in the company), employees
are more willing to accept promotioll5 ·than lateral or downward moves. Pro-
motions are more readily available when a company is profitable and growing.
When a company is restructuring or experiencing stable or declining profits'-
especially if numerous employees are mterested in promotions and the company
tends to rely on the extern.al labor market to staff higher-level positions-
promotion opportunities may be limited.Go
Unfortunately, many employees have difficulty associating transfers and
downward moves with development TI1ey see them as punishments raifo~r than
as opportunities to develop sldlls that will help them aclUeve long-term success
with the company. Many employees decide to leave a company rather than accept
a h·ansfer. Companies need to successfully manage transfers not only because
of the costs of replacing employees but because of the costs directly associated
With them. For example, GTE spends apprmdmately $60 million a year on home
purchases and other relocation costs such. as temporary housing and relocation
allowances. 61 One challenge companies face is learning how .to use transfers and.
downward moves as development opportunities-'-Convincing employees that
accepting these opportunities will result in long-term benefits for them.
 CHAPTER 9 Employee Development 429

To ensure that employees accept transfers, promotions, and downward

moves as development opportunities, companies can provide
"" Information about the conte1i.t, challenges, and potential benefits of the new
job and location.
c,. hwolvement in the hw.1sfer decision by sending the employees to preview

the new location and giving them information about the community.
~ Clear performance objectives and early feedback about their job performance.
"' A host at the new location to help them adjust to the new community and
workplace.
"' Information about how the job opportunity will affect their income, taxes,
mortgage payments, and other expenses.
" Reimbursement and assistance in selli.ng and purchasing or renting a place to
live. ·
0 Ai1 orientation program for the new location and job.
'1! Information on how the new job experiences will support the .employee's

career plans.
0 Assistance for dependent family members, including identifying schools and
child care and elder care options.
t;l Help for the spouse ·in identifying and marketing skills and finding ·
employment.67.

Temporcuy Assigmnrents Prn.ied$, \foh.mteer Work, and Sabbaticals

0

Temporary assignments refer to job tryouts sudt as employees taking on TemporaPJ

a position l:o help them determine if tl1ey are interested in Y1.rorking in a new assignments
role, employee exchanges, sabbaticals, and voluntary assignments. All te1!1-po- Job tryouts such as
rary assignments have a predetermined encling date after which the.employ- employees taking on a
position to help them
ees return to their permanent position. For example, Sanofi Pharmaceuticals determine if they are
encourages high performing sales professionals to take on a temporary project interested in working in
or assignment with the Commercial Training department to determine if they a new role.
are interested in a b:a:iJ.ung specialist role. 63 The length of the project assignments
vary from a few days to several weeks depending on the needs of the employee
and h"aining unit. Sales professionals who accept a full-time 1Taining position
rotate to another role in the corporate office in two to tlu·ee years (such as Mar-
keting), go back to the field in a different sales unit, or accept promotion to a
dish'ict sales manager position.
Employee exchange is another type of temporary assignment. Procter &
Gamble (P&G) and Google have swapped employees. 64 Employees from the
lwo companies participate in each other's ll:aining progrnms and attend meet-
ings where business plans are discussed. Both companies hope to benefit from
the employee swap. Procter & Gamble is trying to increase its tmderstancling of
how to market laundry detergent, toilet paper, and sk.in cream products to a new
generation of consumers 1Nho spend more time onhne than watching television.
Google w ants to gain more ad revenue by persuading companies to shift from
showcasing their brands on television to video··sharing sites such as YouTube.
Also, some large companies are sending employees on temporary assignments
at smaller technology and media start-·up companies to learn how they get
things done quickly and with fewer resource.s. 65 For example, an associate brand
manager at PepsiCo's Ne'"r York headqua.rters spent a week at Airbnb, a travel
 ...
4:·:IO CHAPTER 9 Employee Developrnen t

renJrJ.l bu5iTM25S located. l.11 '.:;:;ip Pnmci.sca. The manager noted that the companies
h ad sirnilar casual oJUr.1J•:;.1·a~i.v~ work (~nv:irnrunents. But Airbnb relied rnore on
a:n instind 8JJproach i:o rna1·b~1:iJ1g rather i:ha_n analyzing data or usj11g market-
ing agencies . .t\jrbnb rnad<:'2tin1; (;l:aff also benefited from the exchange. They
learned aboul: ho1N Fr.~vsK~n bu~ lt large data sets of market reseasch.
5.Blbbatka~ Temporary a:3si.gn11.~r.~ni:2 can include a sabbatkat A sabbatical refers lo a
A leave of absence leave of absence from th(• cornpa_ny for pernonal reflection, renewal, and skiJ.l
from the company d evelopn:ienL Employe'2s oP_ .1 Jbbabc;1J_ often receive .full pay and benefits. Sab-
for personal re flec-
baticals k'I eni.ployees get fl.'l•ray frorn the day-to-day sh·esses of the.ix jobs and
tion, renewal, and skill
develoement. acquir-2 new ski.Us and pe1-·speclives. Sabbaticals also allow employees more
ti.me for personal p1.usuits such as ·w dtixig a book or spending more ti.me wiH1
young chjldren.. s~1bbati-::;:1b an-:: coirtmon iJ.1 a variety of industries rang.U1g from
consulhng firn1s to Ovc.; f;~:s l·food indnstry.66 They l-y1Jically range f-:rom four to
lO weeks. Sabb;xtii:aJs c;;u1 bwolvc travel, finishing a d egree or other learning
opporhui.ihes, donahng bJnc I:<) charity, worki11g on research or new product
d eveloprnent, or 1.vorkiJ 1f; on ;:1 "green" cause. Recreational Equip men!: (REI)
employe e~> ·w.itb J.5 yc;:u·,~ ~Jr· scrvi.c€ earn their fo·st paid sabbatical which includes
four consecutive weeks of h _n 1c off in addition to the:iJ: vacation hours earned.6 7
At every followh1g fiv€ ye0:1r2 of service em1)loyees earn another sabba.ficaJ. with
one additional ·w eek added ea.ch time.
Volunteer a;Jsigru:n"~nt:.~ c~in also be used for development. Volunteer assign-
ments rnay give en.lpJoycc; 9pporl.1mities to manage change, teach, have a high
level of responsibilily, and be exposed to other job demands shown earlier jn
I· Table 9.'7- Fm General. 1\!!ill::>, vol.usiteer assigrnnents and involvement with com-
munity project~; is one of the ways the compa11y Jives its corporate values. 6ll
Employees work_ in ;:i, w ide variety of chariti.es, witli. duties ranging from serving
meals lo HK: honi.dess, painting child care center rooms, or serving as corporate
boa;.' d :rnem.bers. Besides providing valuable services to community orgaxti.za-
tions, General j\fhlb behevE's vohm.teer assignments h elp employees jmprove
t:earn relalionsh.ips and develop leadership and strategic thinking skms.

!NTEIRIPIE ~ SO!\!Afl ~ lE tf\H ON Sm!Ps

ll.09-1 Employees can also develop sl<ills and increase their knowledge about the com-
Develop success ful p an y and its custor.ners by interacting with a more experienced orgasuzalion
mentoring programs.
member. lv'.ientoring and coaching are two types of interpersonal relati.onships
that are used to develop employees.

Men11trnrfiq11~
Men1l:on- A nu~n.l:oJr
is ;~n e;,pericn(ec!, p roductive senior employee who helps develop a
An experienced, less experienced eni.ployer:- (the protege). Because of the lack of potential men-
productive senior tors and recogruzing that ernployees can benefit from relationships wHh peers
employee who heles i
and colleagues some con1panie;i have inlliated and supported group aJ.1d peer
develo p a less experi- '·~
..i\
enced employee. mentoring. ;, tl
: ·.

Most cnentoring rdalionshj.p:3 dev€lop informally as a result of in.terests or val-

u es shared by th£ rncntor and protege. Research suggests that employee5 with
certain p ersona.Hty characteristics (like ernolionaJ. stability, the ability to adapt :iF
:;l fi'
their behavior based on the situation, and high needs for power and adueve-
ment) are :rnost Jikely to ::;eek a Jnentor and be an attractive protege for a mentor.69
Mentoring relahonship:3 c~1n D.lso d evelop as p art of a formal mentoring prograrn,
 ..
'C.H,iXIPTER 9 Employee Development 431

th.at is, a planned. compaJ1y dfrnt i:o ln-:int. lo1y:Jli~:1· c"JCC€.3:sfrd. senfor employees
with less experienced en1ploycc:. 'fab'k '))·: ::\H·,,,\r:: r:x •xmpk~s of how companies
are u ing fonnal n1ento··i·-rv .l.J. i.J Dros~r-,-r:ris _-~· ·'·· - i\1fr·
- '· ···r1~0;·!1w
· ·· ··-· ·1.? i·:rncr,1n1 :' hnve
c - - :r· . . ·-·- .::r 1nany linpor-
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tant our1Joses indw:fo10:

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Developing Su.cce:ss1'11! fi. fouiori.n'7; l-"rog;·t.c;us. On1:~ ma.im· adva.ntage of formal-

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mal mentorjng progrmns i~3 that meni:oc; DJ<1y ncf: be ;;ib!e to provide com1seling
.,,i.d co"cl1u
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h'USt needed for both pmties to be C(lfi oin;: \ •1l...+~ wiih ! I v~\; i.'dd6onship.72 Toshiba
.... A.JI .) « ...·
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'-1. •.. _, -·- ·- ·}.:-'- ...

Both managers and HR bus:i.n'2~3S ..p;,1(ln r:-~r~~ t r) !,,:> ;·\w hnv: i:o he1D new employees ~

meet their colleagues and :s.how ;Jie••1 :1n_r1.1nri 'd1r. w<Jrk'.~ll.;:icc.73

Examples of Mentorin g Pmq ram,;

sec Soft Com puter--1:ve 1y new hire i<; cl ~.:", iq1 ·H :d ,c:: i/l•.rnio r. Tlw n1e11tor creates a persona lized learning
passpoi'l including thG 11 evv cnnployce\ phut1:1 ,:;rid iclcnti fir0c: !he competency areas the new hire needs to
develop. After i clc~nti~1inq t lw ccm1pdency t h "'~ 1nrcnlc1;· i'.; IT!Sponsible for, the mentor follows up with the
employee. When the employee\ pe:sondl le;1rninq 1v1s:.; port i:; c:omplete they are eligible for advancement .
~i~ro,s;ott--The ri1entorin9 pmgrair1 i11d1.1d<c;::; Cil l•~;~r c!t~vc-;loprnent mentor'iilg and: p~~t:'.~ ' 'Ji!H'r:!9
-. deyylc)pmoiTt 1'nentorin9 fC'Jcwms on camf'~1· r.uKI pmfo:,:;icq1.:0Jclevelopn1ent through s,~1·ygi _ _·-· -·· ·-·
c;r6$~·-gf:(:'.ll,1p rnei:itorin9. Peer rnento1·ir19 i'> le'.'..:; :,tr1.1·~:i:i 11r:~d :md focuses on tr9r\sfor qf,;yY9.th$t~:j;l,t
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The Sacnwne111:0 Mui·lidi:i;~l Utility Distrlc1. (S i1/IUD)-..-l11cl1.1cfos a one-year mentoring program in its Building
Leadership Talent pm~1 rarn. The progran1 rnatc.l1 (•c; :xo i'-'."y~·; v.,-ith mentors who are outside their business
unit. SMUD provides an orientation and half-<li;y :;w;c; i<)i'\ ior !.he n1entors that includes skill building, role-
playing, a process model for effective rn e nto1i11q, tem plr:ites for documenting goals and progress toward
meeting the goals, skill fXdclice, ~ind 'Neh bi:1'.;ed t1 ;1ir 1!n ~:1 ·

•· ~~d~~~~~r,:c~~~;~~.:~~;: ~:~1~~~~~ ~~~1 1~~n~~:~:;~:~~·~ ~~ .~·:·:.~::~. :'?{~~~r~:~ ·:~: ~1·~~-t~~14:;~i~1i~¥¥

1 1 1 1 1 1 1 1

_~~Pt~p~~0Jn Sqcle;(o of their identity 9rourfi. I hey 1!xlude nei:woilc gmupsbas${:l:9fr.

: 1'~¢.9./,W%Gal ~fr~:fo1:t=:r\te, milit2rr}' sc:rvice , :.lllc:I i n • c~ rcyv:cr<:itinns. The SpiritofM·efjtbri0$
· l!~;fp111J"fiJ,C~livi~ionalpairi11~r; in which _nm11.1 l1/ hii .:~d :1 11d !ro11t·lim; rn anagr::rs come t6g$t~~
~iof\pldf~V01brJh11;lnt opportunities and in cn:a·c'" ~ Jw <.fr~ pth ancldi1.1ernity ofS:Odei<S'~ifia, _.
Agilent: Techl'1ologies---The f\le)(f l..]ene r ; ,i1 c.;·! t.... ).~,,.!,o: r:J 11p Frcgr<:i1T1 acce lerates development for top talent
by matching senior executives with hi9h !Y.d:;0·11ii.:ii
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:d¢y~l".frJ rel a1:i<)i1shfps.. " ' .

SOURCES : Based on www.socleltousa.com, websit<" for '.-.:o (fol«), l1v: .; "FJc0'..'1: 1° r~ctice,·; anc! Outstanding Initiatives," Training, January/February
201 1, pp. 94-98; "Trainini::i Top ·12'.i"," 'fr;o1ini11g, .Jarn.1;11:11r:,,1J<t<'·; y ;!(,i'f l pp . ').-!-S':'J: f( . Ernelo, "Conversatirn:is with Mentoring Leaders," T + 0,
June 2011, pp. 32~37.
 ...

'Jhblc 9 .9 p:rr23(~.nl:;:; the 1..iw.ra.cter:l5tics of a successful fonna.I ine.11i;ori_u~ prn-

gra.n:1.. Iv'i-snJo.rs sh.ouJd be :d:iosen based on in.terpersonal and ted1JJi0:1l skills.
't!1"~Y <~Lo n,;,~rc;d lo be lrai.ned..7tt for rnenJors, proteg€s, and the company to get the
.i :nosl; out of mcn1tor)ng,. tools and suppor ~: are :n.eeded. 75 For exaxnplre, a•: thr~ UnJ-
ver:sil.y of [\k~w Mexico 1doc5pit::>}J (UNI'vtH) a "MentorshJ.p Progr<:u-n Parl.:n1.2ring
Guide" prmri.d.1.2s in{o:r.maJion on rJJe mentor an.cl protege roles, monthJ.y meeting
sh·u.cJ.1.in.:, a~n.d kk:zts for d12veAoprn.ent activities a.nd how to build rela1ionships.
Yuni\! Ur<n1dspmvidcs go~;J sheets d5scu.ssion guides, ·websites, books, a'.nd seH- 1

gu.idcd ''"·.J.<,'ai1·ning; nio.du]f::~ .

/".. i_c.~c:y ;o suco~ssfal r:nentming programs is foal: the mentor and protegr2 are
weU-•)J;:lidrA::d ;1nd cm1 j.nlYrad with each o!J1er face-to-face or virtu..a.Uy using
v:i.dco-corrfr.::rcncinG . /\•ncrican Fidelity .Assurance Company (AF.A,_) o:eat,ed a
spedaii?:cd nl.<':ntoi·ing J:;,;·og1«JJJl for develop ing l.eaders.76 Cun:ent le3.ders serve
•Y> llnPnlor:: bnt ;1 !:::0- !:''D :_;cr•i':' ;:is proteg'-':s. l[n. the progran1 participants are p·aired
1 . '"0t6,,e J?lJal" ·md obJ'ective~ Paviw-~ aU""'nHon
l,.~~--pc1
1
--~' •·l. t-•
I(,.\._") ...,., _ 0-1 ""'"'·'"'l'
w 'l......t...• l~ -"· JPj>l-
·-·
. . . . . -• ' · - · · -•·· n"·.-01 ·1 1..,, "~'-
J.J.1t.. ~11. -.\ 1
.,,.,1' · ~l:_"-J
_ O
L,... C. ;,) . '"(J -
CJ ·'~·- .. .· .

to nK~1lJo;·-pro1J~sc p;:i_i_ring;:; has paid off: 88% of proteges indicated thaJ tlw:ir
n1cnlor:1 play{~d n. kr:ey xOk.' in r-sac.hjng H1eir goals and 88% plan to ooni:in.ue thr~
1
•'
n:K:nhJ1·ing rc.l;J.ti.onshi.p. (\! UNJ\;1H quarterly "Speed Neiworking ' sessions are
;Jn j;n_porl:;Jnt part of fdH': 1:0.t.=:nJoring prngnun. TI1ese sessions provide the oppor-
I h u-iily for ''P lo 15 n1enirn·;3 ~.o :rneet a.nd interact with 15 proteges. TI1ese sessions
provide lhc pi.· oti2g~ wiJh r.:'xposure to the guidance and lips of multiple lead-
f.'.:_rr; an.cl l:he oppmtunil:y tc, network. IvUcrosoft provides an on.line portnl that
pnivirk::" ;);:;s:~0t)J102'. in nial:ch.i.ng rnentors and p:rol:eges and a social n1c::hNor.l<ing
ftu1chon •hnt helps (~mp.1.oyE:e::: connect with each oth er.
vv;,"b~b<:Jf:l(?d 1.-w=JJd11}ng systems axe also available to help match mentors and pro-
_._,._ (~!''f!11\Ta'' .- }. 0 D and. __pro·te"g6s' V·TOJl··l( J1'2°""l
1......
·,:;c.,.:t :;,, ,_ .),,-. .. ·-· .1·'
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1

Characterist ics of Succe'.;sful FoiTrn l l\tknt ori11q Pro9ra1Yb

.1. . 'Ment dtahd prot(!196 p;.J t·Udpabon ir; voluntary. Relatiorfohip'<::a.n . beended'~t,~t')Y tl/ne ,without foar.of
p unisl1rner1t . . .· . . . . . ..· · · ·. . .. <.·. : . .·
~ ... lhr.~,i:nentor+-p rotef:j(~ nrntd 1ing procesn .d o eg not liiTJit th e.al:iilityoh nfotrnr.iL,r el,a\iqi.n1;hlpsto ·develop.
· fore><~1mple, a rne1itor pool can be estab lished to altovv proteges to choose fro r)'i;a varietyofcp.1a.lifi0d
1:nentors.
.
·· · . .
·
;;i, Me11tt::Jrs are·chosi::m on lhc )J<:H>is ofthr.~ ir pi~M record in deyeloplng empk>yees, w i(liQghess to serve as
a 111entor, and ~~vickm ce of positiw coachin9;·cornrn unication, and li st~,m in g ' sl<il ls. / . .··.· •
4.· ; Mentor'"·pt()t;~t:J~! matchinn i~~ based on ho1rfth'~" mentor's skills car\ helr:> ,rneett[ie prg~$g e;s needs,
5. 'Thi~ pLirpqse o-f tho 1xo~ir;,im ;~, ckiady ·undNstood. Projects.;;ind activit ies that-the inenior and prot6ge
"'!'"' ,,;"P".c t,;tl
,:~ -~ : >;;l"~.l- ~
. ..
"·1 C()Hi f·.)-· i<!>",
~ k..f . l.L _,
. ., ·:t"(" •"\J"'C;(j ,~rl
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· . · ·
6. T he ler:1gth of the rm'.> ~.Jrar<• is spodfied. Mentor and protege 8.re encouraged to pursue the rekrtionshi p
br::~yond t he formal period. ·
'7, /\ mi n!rnurn kc:vel of corrt,.i.r..:!: l)r.c:Lwr:>,.:;n th <:~ .n-:rnTtor and p1·ote g 0 is specifi ed. Ment ors and prot {::gec> rn=
.ied
to det13r!'nln~) whtm ~lir,)y wW nl'i~,,,,1 , how ohr~n, ;:ind how t hey will commun icate oixtside the n-v=:etinct.
8. Pnyl:?;qer; ol'e encm;1·;~9·~:d J:c1 cont01.:t one :::mu i:hr:;r to discuss proble m s and share successes.
9. ~rhe n1(:~ ntor pro!Jr!)t-r1 l~;; e\rr:~luatF~ct . lnteP/ir:~'J11r.! v1ritb rnerrto t·s· ~1 ri d p(oteges.·. g fye .i mr,1.ediatE~ fE"!edback
roga rdin9 specific <11·c·<.1s of ·~k;:m ti :'ihwti on. S1 1i'v.:"Y'3 9;:\'ther morci d et ai led informati?n re9ard in9 locmefrts
t-cN.'.(:!i ved frorn !-)~1rl:i ci[;;;;rtjnq in th"" pro~:lf'<.;)lfl. · ·
·10. ErnployeG ck~,1~:e lopn1~'nt i;' ;(~\•\ri.1rdtcx:l, \r,Jl1 ich '.3i'.:.;ric11'.:o to rnanager•3 that mentoring and other ckiw:lop-
rn~mt activi·t:i e~; arr.: 1~.1ori:l1 th.-;!ir tirn c:; ;md "''.fh•'<.
 ...
CHA!PTIEfR 9 Employee Development 433

developrnent plans, and schcd1de mentor and proteg(:" :rneeth1gs. 77 For example, at
SAK'., a company specializing in h~chnology soluhon..s, a "\iveb-based tool is used to
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.Bem~fits of NlenJ:oring Rda:tionships. Holli. r.nentors and proteges can benefit

frmn a mentoring relationship. Research su 3gests foal: mentors provide career
and p sycho·-social support to their pmteges. C2ureierc m..11.ppmrt·~ includes coaching, C"ir·~~a· s~~r,:Ji1}21Glrr-ll:
protection, sp onsorship, and providD.1g chaJJenging assigmnenl:s, exposure, and Cor.ching, p rotec-
visibility. Ps-..rdwsl()ldan :51\.ilftJlllJll(]\r1i; in.dud.es serving. . . as a friend a.nd a role model, tion, sponsorship, and
,Y Jr .L
p rovid ing challe ng ing
providing posiiive regard and acceptan ce, and creating an out.let for t11e pro- assignments, e)(posure,
tesre
0 to talk ab out amdeties and fears. Addihonal henefils for the lm~ote 0ee iI1dude and visibility.
higher rai:es of promotion, higher salaries, and greate~· organizational influence.78
Mentoring relaiionships provi(k~ opp ortn:nii:ies for inenl:ors to develop their Ps.)rdnosoda!
.ir1teq)ersonal skills and ii-icrease lJi.eir feel1....:1gs o{ se:lf-'esteem and worth to the SMpp1J>rt
Serving as a frie nd and
organization. J?or individuals in i:echn.ical fields such as en1911eering or health role model, provid-
services, the p rotege i:n.ay help thern gain Jmov.rledge aboui: frnpo:rtant new sci- ing positi1re regard
enlihc developments in iJ.wfr field (and ~:herefor12 prevent lhen1 from becom- and acceptance, and
i.n3 technically obsoletie). 1a.mara 1hm u:ner stm11nadz(~S sorne of the benefits creating an out/et fo r a
she gained from mentoring relationships: "I found ni.entors in hvo of my ear- protege to ta lk ab out
amtieties and fea rs.
lier companies, both n:1.a.le and fernr:lle m anagers ·who 'taugh.t me tl1e ropes' in
an informal sense by giving me inside in.fo:rr.:na.tion about th e company, certain
executives-and even sud1 practical things as how i:o conduct business lTavel
and handle an expense account." 79 On.e m.en i:or auanged for her l:o travel from
the remote manu.factu_ring plant 1Nhere she ·w or.ked to the corporate office and
sel: up meetings to meet key employees she would h.ave to vwrk wi1h. Her men-
tors have abo included co-1Norkers, p een-:, and even s1Jbordinates who have
taught her com.puter soHware skills. As a result of h~r posit.i.ve experiences as a
p:roJ:ege Trw.nmer now rnenirn:s oU-aers employees.
Mentoring can .also occur between mentors and p:roteges from different orga-
nizalions and can allovv smaH business ow n ers access ~o eJCpe:rienced mentors
they might not otherwise meet. 80 V\TebsitE:s such as lVficJroJ\,fontor are available
to help small business ovvners find on.lin e m entors. For example, Sturdy McKee
wanted to exp and his physical therapy practice but needed help tmderstand-
ing financial stal:ement::; so he could pla.n the growth of his business and seek
ouh;ide funding. Using Mi.croMento1~ he completed a pen3onal profile, listed his
goaJs, and then searched potential mentor profiles. Sturdy and his mentor had
weekly phone conversalions discussing the basics of balance ~:;heets and finan-
d .aJ. vocabulary. As a result of his positive experience, Sturdy has mentored other
entrepreneurs seeking help on how to sl:art a physkaJ. therapy practice.
lO sq;;
Coad~ia1g Describe how to tra in
A ic~J1.\ll.d11 is a peer or manager who works with <:r.n employee to motivate him., managers to coach
employees .

.I
help him develop sl.dlls, and provide reinforcement and feedback. 1llere are
tlu-ee roles that a coach can play.BI Paxt of coaching may be one-on-one with an Coad~
employee (such as giving feedback) . .As1.other role is to help employees learn A peer or manager who
for thernselves. This irnrohres helping IJ1em fo.1.d experts 1/>Tho can assist them wor!cs with an (~ mployee
to m otivate he1; help
with their con.oeirns and beachit-ig tll.em h m.v to obtain feedback from others. her deve lop skills, and
Third, coachin g may involve providing resouxces such as mentors, courses, or prolfide re inforce m em~
job experiences that t.he ierrnployee n1ay not be able to gain access to without and feedbaclc

. . ·, ..•. ,>Jl
· .· .,: ~:.B~~a
 ...
434 CHAPllER 9 Er:nployee D0veioprnent

the coach's h€Ip. Becton Dick.inson uses peer coaching as paxt of its k:ader-
ship developn1~nt prngrarn.s.32 The topics discussed include job challeng 2s a.s a.1

developmwJ method, a:r.nhiguity as a change agent, and how to inJluen.ce oth-

ers. Evaluatirn11. of •he peer coac.h.ing has found that coaches gain conhd.eno::.: i1~
tl1eir abilities and participants learn about the topics discussed. VVhen. ConA.gra
Foods selected la•r.ryer Colleen Batcheler to be its general cotmsel, the compa:n.y' s
human resource deparm1ent offered her executive coaching to help prepa.-re for
this high-level role. Batcheler met several tllnes with the coaching tearn, using
the assessm.enJ:s and homework they gave her to cfraw up goals for what she
wanted to achieve. For accountability, she met with ConAgra's cki.efexecuJive
and with her ::itaff to rev:ie1N her goals with them. One of Batcheler's gm1J.s v.ras to
spend more i:ixw:~ learning about the strengths of each person on the legal {(~mn.
so she could. apply team nwmbers' muque qualities in a way th.at would get the
best resullr3 for the team overaJJ. Lean1.ing to look for personal qualities 1.va:3 dif-
ficult af: fi.r:3t, but sho:: pracliced. the behavim: until it became second nature ../\s a
result, she is a rnme effective leader~ and her team members are more conu:oitted.
and prod.udive.fl3 Research :3uggests that coaching helps managers irnprove by
idenlifyjJ:1g areas for ir:nprnve.i.nenl: and setting goalB. 84 Getting results frmn a
coach.i11g relationship can take at least six months of weekly or montl1ly meet-
jngs. To bf2 effective, <:.1 coach generaU.y conducts an assessment, asks qu~:sf.on.5
that chaUenge the exnpfoyec to think deeply about his or her goals and motives,
helps th:: e.1npl.oyee crcah:: an action plan, and follows up regularly to heip Jfo~
employee stay on trade. Ernployees contTibute to the success of coaching when
I· they persevere in pradid11g Hie behaviors identified in the action pla.n. 85
The "Competing through Sustainability" box shows how mentorj_ng :md
other dev<:-~lop'xnent aclivities can contribute to a company's abihty to cope with. '
·1,,
.·•:, ~\
:)H
constant chm.1e;rr::-. ~·. ' l
· : ;;· ~
·I
:i:,
!, ·
!

!LO 9-9 A major development bsue facing companies today is how to get women and
Discuss what compa- minorities into upper-lev1.~l management positions-how to break the gfass
nies are doing for melt- redH.ng. Sunreys show lJ1at ill Fortune 500 compru:ries women represent less than
ing the glass ceiling.
3% of CEOs and approximately 14% of executive officers. 86 Two-lhirds of compa-
G~asr. Cai~hlg
nies lack specific programs targeted at the needs of women leaders. Twenty-tlu.·ee
A barrier to advance- percent of cmnpanies offer some activities or programs targeted to the needs of
ment to higher-level vvomen. Thr2se adivitier> include flexible scheduling, diversity recruiting, and
jobs in the company coaching and mentoring. One of the dilemmas is t11at companies may be .i:eluc- i
·' '1
that adversely affects i:ant to tn~at 11\ronnen any differently than men from a leadership developn1enl:
~
·1

women and minorities. . I

perspective clespit.c ackno11vledging that women lack executive sponsors or men- '
'
'.!

The barrier may be

··due to lack of access tors, have jnsufficient ex1Jer\ence, and need better work/life balance. Th12 glass
'·'
to training programs, ceili..•.g is a barrier to advmKement t.o the higher levels of the organization. Tius
development experi- bmTier 1.nay be d.ue l:o stereorypes or compa;.iy systems that adversely affect th12
ences, or relationships development of ·women or n1Jnorities.137 Th.e glass ceiling is likely caused by lack
(e.g., mentoring).
of accesr; to 1J:a:ining programs, appropriate developmental job experiences, a:nd .'If
developme.ntaJ relaHon:ships (such as mentoring).33 Women and minodti.es often it
have trouble finding :mentors because of their lack of access to t11e "old boy net-
work," managers' preference to interact v1ith other managers of simiJ.m· stai1Js
 f\lewYork--Presbyterian Hospital
(NYP), based in New York City,
is the larqest not-for-profit, non-
sectcirian hospital, in the United
Stat12s with 2,409 beds. f\IYP's
mission includes a "comrnit-
rnrn1t to providing high quality
and compassionate patil~nt care,
mrtstandin9 clinical education to
physicians, biomedical <.;cientists,
and other healthcam profe:>-
sionals, innovative healthcare
re~,;earch an d scientifi c discov-
E?ly, r0sponsible and proactive
cornrnunity service, unmatch(xl
service to patients, families, and
vi•;itors; and a safe work environ-
ment. cornpetitiv8 cornpens21--
tion , and th e opportunity for
career advancement to its staff."
I· f\levvYork-Prr'"sbyterian Hospital
(NYP) has recei ved many awards
includin9 bt3inq named to the US
f\f ev1rs and \f\for/d f?.eprnt "Honor
l~oll of America's Best Hospitals"
in 20·11--12 and havin~1 more
doctors narn(oid to the "t>,merica's
Top Doctors" list than any other
hospital in the nation.
To be successful at its mis-
sion f\IYP recognized the
importance of developing its
front-l ine managers. They aff:
re'.;ponsible for supervisin9
l\IYP staff ~ind influence pro-
ducl:ivity, turnover, employee
en gagement. and perhaps most to measure their
importantly, patient satisfaction. progress in devel-
NYP's "Build Tomorrow's Leac!- oping their skills and
e1-ship" is an 18-month prograrn identify areas that still ne.:::d
· to help managers dev<'llop im provement. The managers
problem-solving, collaboration, meet with their directors several
communications, and decision~ times to review and follov,,· up
m aking skills. The program on thei r pi-ogress. In addition to
includes three phases. Phase developing the managers' skills,
·1 includes deve lopment p lan- NYP's e1<pectecl out comes from
ninq <Jnd leadership workshops. the program include building
Manag1:::rs US('? 360--feedback collaboration across depart--
an d periormance appraisal rnents, hospit<:ils, and functions,
in-formation to cre<ite de\/elop- building common rn;;1nageme11t
ment plan~;. These plans h<-:}lp an d leack,rship practices, and
focus managers' lr0arni119 in im pro,1i1llJ f\IYP's ability to rec-
cla ssroom vvodc;hops 1Nh ich 09 nize and adapt to changes
require~; t h1an1 tu imforidi 1ally and challen(jes in hiealthcare,
an d in team'.-" ana lyze probkms hospi-u:1I practice~~. and patient
and make decisions usin~J rc~ai­ preferenc~~s .
istic case studies and business
situations. In Phase 2 rnana~J­ PR$Cl\JISS~Oi1\~ Ol\,m'.:lilf'~(:lll\1$
ers work on proj ect teams to 1. \/\/hat d(":v(-;lopm<-;ni:
apply the skills, knowledge, approad1€s are used in i'WP's
and abilities learned in the "Bui ld Tornorrow'~> Leade1°·
wo rkshops to important hospi-- ship" program? Hov11 do
tal projects. Phase 3 involves they encoura9e managers'
managers working 1Nith top development?
cli nical and administrative man- 2. What other developrneni:
agers to address irnpo1iant approach might also be use-
strategic issues. Throughout -ful t o add to this program?
the program managers work Why would it be useful?
close ly with a senior leader who
serves as a mentor. At the end SOURCE: Based on E_ Smith , "Building
Tomorrow's Leaders," Chief Learn ing Officer,
of the program they receive August 2012, pp. 3!3-39; www.nyp _org,
an other 360-degree assessment website for f\lewYork-Presbyterian Hospital.

rather than with line ernployees, and intenhonal exclusion by managers who
have negative stereotypes about women's and rninor:i_ties' abilities, motivation,
and job preferences. 89 IZesearch has fmmd no gender differences h1_ access to job
experiences involving transitions or crealli1 g change.90 I-foweve1~ male maJ_1ag-
0.:rs receive significantly more assignments :involvirtg high levels of responsibil-
hr (1
..L.1 _. -h. "'"'
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t--d'k. .~ ul.c.l ab~: I 0 . .1 i al.l_o.ua_, ao ... 11.y <~n , n'.H11,1a 0 e_.__a __ . e ,re __. .. -.u .::O, '-~rna e 1nm1at:,.:-•.0
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reporl experiencing n1ore challenge due to iack of personal ~3uppor1: (a type of job

435

- - - - - - - ·--- - - --- -- --
 ...

d~:inand (:onsidie:Jred to an obsl:acle :t:hat has been found lo rdai:c to haKn1fuJ.

~; ~:fc~m} ilwn :rn<Jle n:ianagec>. Career ·'.:'ncrn. u'agcrne:nt
. from peers and :sen:irn: man..
agers doe::: help won1exi adv;xn.ce to the higher rnanagement levels.91 l\.fonager::;
rnaking dcvelopm.e.n tal <:1ssig:nnv:'.:nts need to can~fuHy consider 1Nhethe:r gendET
bimJes or sl:ereoiypes anc: inflm.'!icing
: tlie rypes of assigmnents given l:o wmnen
versus n.1en. A.Hhough 1n<f.'.ntorj11g relation.sl·dps a.re necessary, the "foJcgrity in
Action"' box highlights t.he downside of male leaders mentoring female proteges.
Consider Safe•Nay's efforts to melt ille glass ceiJing. 92 Safeway has 11 775 gro-
cery stores in the United States and Canada. 'Io meet the challenges of specialty
grocers and big-box, low·.~price omnpelitors such as VvaJmaxt and Target, and
rccognh:ing that 70(i'o of Hn custmners were V101.Iten, Safeway took steps lo help
devel.op -i:.vonaen. for advance:o:1erit into rnanagem.ent. A women1s jJ1itiati.ver O i.am.-
pioning Chi.'.mge for V\Tomcn: An Integrated Strategy1 includes programs that focus
on k~aden;bip devdopment, nH.m toring, and wm'.k./Hfe balance. SaJeway l::;vpkally
p:rmnotcs from >Ari.thin and has focused on the retail level as a source for poten-
t\al nimwgcrn tiu:ough the company's RetaH Leadership Development (RLD) pro-
gnnn. l\Tinet.y percent of S;;l\fe1Nay'!3 l,800 store 1JJanagers moved np through the
company's mm1.age:m(~nt ranks thxough the prograin, and ail but 1 of the com_-
1)<-my' s 10 Jj_vision presidents began their cm:'2e:cs working in one of the stores.
'lb help women and minorities achieve t.op--level rrn-mage1nent positions, the
RLD w.t1s used to ]x:.crcase lfo2' number of women and mlnmilies who complete
the prog;n.:ll.m. Those who cornplde the progrmv, are assigrn::d to a store or an a.ssis-
hmt xnrn1.1ager positi.on that can lead to corporate-level leadership positions. To
help support wornen's r.~fforts to gain lmdership positions, Safeway ensures !:hat
won1A~n 'vbo work paxt-tin1e and use flexible schedules .have shnUas opportu-
ni.He:3 for coad1Jng, ;:_idvano2n1enl:, and development as employees who axe on
l:raditiom11 work ~JcheduJ.es. 11'1e company a.lso realized that frequent relocations
did not work for some em.pioyees, especially women. As a result, rejecting a relo-
cation to a different locaiion is no longer considered a. career-busting dt'·cision.
Safeway also provides a women's leadership network for women i_n~erested
in a<lvandng into rnanagement The network s])onsors events such as presenta-
tions at d.iJferent cmnpany locations that highlight the success of Safeway women
and provide lea:rntng opportunities. Executives who attend these presentations
rn.eet.with worn.en who ha.ve been iden.ti£ied a:;; candidates for rnanagernent posi-
tions and are targeted frn: dt:velopment oppodunities in stores. These di<-;;cussions
focus on the women's career interests, and the execuiives suggest job opportu-
nittes .and encuural~e them to apply for positions that can help tl1em advance
lo th(~ next management level.. Safeway's rnentoring progrnm emphasizes that a.
:m.anager 's first protege should be a woman because of the lackof female men-
tors. Safev,Tay's ·work/life balance program, which includes flextime, aUmvs -all
1No1nen, :regardless of their family status,. to have a healthy balance between wofk
and .l.ifo, Safeivay realizes that it~:i managers are responsible for helping women
n~ach n~anagcment positions. As a result, aU managers attend a Ma.11aging Diver-
':'i'v urork.:: 1 "Jt'~· !V.d'"..I!
l\,f<>n··'D't"''"' J.tA.11eu'~ succe<i-;; 1 01-u'1"' • 1
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g:oals. Managers who read.1 their targets can increase their pay bonus by 10%. .
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Safeway's women's in.itiati.ve has been successful. Since 2000, th.e :nrn:nber of
foo:iale store m.oJ.lagen has .i.ncreased by 42(Yo . 111.e number of women "Who have
qualified for a..nd compl0terd the El:O program. ina:eased 31 % over the past five
years . .A n::s12;m'ch report p repared by I . ehman Brothers showed that the progTam
increased the company's EkiJes m•.d earnings. Enhancing its reputation as an
 Mentorinq w ith cornnanv Pei:r.=:;eus· .:md his wife's n1ar- · often interact:ed
~- ' ~
leaders can help \/\!omen q;:iin riag1~ o f ov,:;r 30 years a model with lower-rank~n~i
visibility for thei r work and for rnaking a marriage work officers to get a
the a cce~;s t o socia l ivc:l'•'.!Ork::; di=!:;pit::-> the sep<:1rati on and sense of vvhat wa!_; hapoeninci
, I ·-
11"·-d•-"ll·I·", of lc, ric,." 1"1'" .-, ,,,:.rs'"''"~
need ed to brea k \:hrouqh th o. I c 1, t r· .. , '.-
.... .J . _I' -., , ,,:.:1 l.I . 1 ,, . ~ .... Cl •. • O ri the C!round inst,s·ad of rel v-
-- J

glass ce ilins!- However, cro ss - d(:)F.'! o yments . ing o n report~; t hat +ilt(:: red up
gr2nder mento 1·in9 rela1:ion:-;h ips Uroadwtc)![ fi rst met Pc:trac:;us t he chain of cornrn;--md.
. (relationsh ips in which \f\IOflK'n i.11rl1<~ n :;he was in ~Jraduate
· are mentored b y a male k:nck!r) sch ool <:I t Harvard and h13 gave f.~US CUSSiON Q.UIESTHON:S
l that cross th e line from ;:J :;t.r-ictly ;=i tal k th c-}1-e about counter'- The reality in the workplac1~ is
1' bw;ine:>s i:o a personal rra lr.rikm - i11surgency strategy. She was that men still hold the major-
l ship C<-ln darn~)qf.:~ the carec'<:'or~; :.;o inspired by his ideas that ity of leadership positions in
i· <rn d reputations of both th (:! she decick'! d to write a doctoral o rg aniza tions. \l\/o rm;n need
mentor and prol:f')gE!. fktircd cl i s~31:i rtati o n on his lead ership these male mentors to orovide I

,L\rrny Ger1eral David Pe l:r2.ew; '.>t yle. \/\/hen Petra e us took corn - the visibility, assignrmmts, and
resi9ned os C l/-\ di n::cl o:- ,::rficr rnan d of the ;Jrrned forces in coach ing neu:ssarv to help
an FBI inve:.;l:i ~f::rU011 s u ~J 'J '~:;ted /.\f9hi:1 nistan in .'.20'10 she asked, them dENE<lop th•:o skills nec(:~'.;;­
th at he had ;m extramarita l a nd h(7) agreed, t o let her come sary for top mana9ernent posi-
affair with hi s prot<§qii, F'au la observe him and his command ti on s. However, many senior
f~.ro advvell, and she may h.::ive team. Broadwell used these male~ leaders avoid rnentoring
had i11aprxoprLTl:e 21e<:>)s': to observati ons in writinq hi s \Nom en for fear that they will
ci <:lssifi1xl rn ili1:<:1ry information . bioq raphy, A ll In: The Educa- be accused of having an affa ir
The mentori119 n,~ l atio 11 shir1 tion of Cir~ne ra l David Petraeus. o r sexual harassment. \!Vhat
lx~c;=1rr1e a lo,.1 c := iffoir ;:yft(,r hr::., A.It.hough Broadwe ll was r-ecommenclations v110u!d you
took over as C l/.:\ d irector and .20 years younger than have for how to encou rag<:i top
endl::d in surnm c r 20 ·1?. Petraeus, t hey had many simi- company le adc~rs to rn entor
PErtrae us was ar~iuab ly thi=: larities and shared common vvomen a nd keep th e n-::!ation-
rn ost important mil itary offi ·· interests _ She had traveled to sh ip professi on al (rather than
o~ r o f hi'..; gerv2ration. HF, was 60 countries, served in intel- romanti c)?
! · appla uded for cleve lo p in~~1 ;:i liqe nce, sp eci al orJerations and
j countf~rinsurq t':~ncy strategy with an F.8 .1. counterterrorisrn
SOURCES: Based on J. Goudreau, "The
David Petraeus.-Paula 8roadweli Affair: The
l which he use d to help t 1.1n1 task force, had a degree from Danger of Male Mentors?" frorn v1vvw.forbec,
.j aroun d the 1Nar in Iraq . His ci1·-- an Ivy-league uniVt)rsity, was .co m, accessed April 15, 2013; F. Kaplan,
"Why Did General Petrae•JS Ri sk Everything
! cl e of advisers ir1cluded a rnix intereste d in fitne ss, and was for an Affair?" November, 10, 2012, from
t·
;' of individuals from the A rrny marri ed with children. It wa s not www.s late.com; .J . Roth, "'Nill the Petraeus
Affair Hurt Cross-Gender Mf,ntorinsi
as well as civilian analysts. Hi'.; unusual for Petraeus to men-
Relationships?" November 20, 1.012, W'IVW
advi:;ers were en c o ur~1~10d ·::o 1'. or young o fficers. Petraeu :;; .womensagenda.com; K. Prio;; "Don't Le t the
provido him with criti cal ihrilk- 1..va!> known for his personn el Petraeus Affa ir Ke0p Men Imm Mentoring
Women ," www.theatlanti•:.com; <j_ Shan e
in ~J and 'N<?. re fref! to off'c;r ph ilosophy "pick f'~ood peop le,
and S. Stolberg, "A l'lrillim1t C;:ireer with "
·,. opinions that differed frorn hi~'· p ick th ern younq before other

'ii ! ~~~:~:~~;~:,~~~:~~i·~~:~~:.~ ;J
Meteoric Rise and /l..b rupt f-all, " Nov0mber
p ickers 9et !nto the competi- 10, 2012, wwvv.nytirnes.co m.
t ion, hG!p them gmw, keep in
'i''"H wll ·"'"l'"'Jnr"i· C"''('"eiic-"llCP. " l..J e
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437
438 CMAPTIE!lit 9' Employee Development

Recommendations Make <:.u1·e senior manag e ment supports and is involved in the prograrrl.
for l\l]elting the Glass lvbke a business case fo r chang e.
Ceiling Make tlw chcrn'.:Je public .
Gcithe r data on problems ca using t he glass ceiling·usingtask.forces, focus grou ps,
.and ·questionnain::s.
Create , 1vvareness of how ge nder attitudes affe ct t he work enviro nment.
Force <:1Ccountability thfO L! fJh i-eviews of promotion rates and assignment decisions.
Promote devc,:loprnent for al i e rnpl oyees.

SOU RC/:: 13'1sed on D. McCri'icken , "\!Vinning the Ta len t \/l/ar for Women," H;irvard Business Review, f\lovember-
December 2000, pp. 159-67 .

if::1 np loyer of choice for ~Norr1E:n and m inorities, Safeway received IJi.e Catalyst
Award, which is p resented an:n.ually to outstcu.rding compan ies that promote the
career advancement of worn.en and minorities. Table 9.10 provides recornmen-
dal:ions for melting H1e glass ceibng and helpi11g retain talen ted worn.en.

S UCOESS~ON f?lAU\U~~N G
lO r.fn1((] Su.ccessi.on plarnung refers to t11E~ process of identifying and lJ·acking high-
Use the 9-bmc grid potential employees. §ur:!Cq~ssilon pfa.Jt11Jt1\iing helps organizations j_n several d iffer-
for iclentilying where en t ways.93 It requires senior Inanagement l o sysfemalically review leadership
e mployees fit in a
succession plan and
talent in the company It ensures that top-level managerial talent is avail.able. It
construct appropriate p rovides a set of developrnen.t experiences faat managers must complete to be
development plans considered for top management positions; thi s avoids premature promotion of
for them. managers who are not rea.dy for upper management ranks . Succession planning
systems also help atlTad an d retain managerial employees by providing them
5l\nccier:;sHolill
f.~~<inrninn;si
V'.rith development opportunif:ies that they can complete if up p er m anagern.ent
The identification· is a career goal for the1n. Hig.h-po~enH.aR empfoy£es are th ose th e com pany
and traclcing of high- believes are capable of being success:ful h l. higher-level managerial positions
/Joten l.ial employees such as general manager of a. strategic business unit, hmctional director (such as
capable of filling director of marketing), or chief executive officer (CE0).94 High-potential employ-
highe1cfevel managerial
ee::.; typically complete an individual development program that involves educa-
positions.
tion, executive mentorin.g and coaching, and rotation throu gh job assigmnents .
Mi[~lhi-l?o11:en!:i l3l~ .Job assignments are based on tl1e successful career patllS of the managers whom
!Empioyia~:; the high-potential employees are being prepared to rep lace. High-potential
Employees the com .. emploY'ees may also receive special assignm ents, such as m aking presenta tions
pany believes are an d serving on corrun.iJtees and task forces.
capable of being suc-
in high-level
cessfiJ/
Tabk 9.11 shows the process used to devdop a succession pl;:m.. The firsi:
management positions. step is to klen.tify 1/\That p ositions are included in the succession plan, such as all
managem.ent positions or onJ.y certain levels of management. The second step
is to identify which employees are part of the succession p lai.tJ:ung system . For
example, in some companj12s only high-poten tial employees are h1cluded hr tlw
succession plan. 1lu.rd, the company needs to identify how positions will be
evaluated. For example, w ill tJ.1e emphasis be on competencies needed for each
position or on the experi.encc's an individual needs to have before moving ixi.to
lb e posilion'? Fourth, the compa11y should identify how em ployee potential w iU
be measured. Th.al: is, •N jlJ employees' performance in their current jobs as well
J:
'.

as ratings of potential be used? 'Nm employees' position interests and can~er

j.
.
'
 ...
CHAIP'TEIR 9 Employee Development 439

'f?1RJlR0 9. 'll 11
'I. Identify what.positions are inducled~n thQ pion, The Process of
2.. idei-1ti:ftthe.ei111:)lbyr=:es who are induded in the plan, · . .· , Developing a
J, [)evelop standard:; to evciluate r-fositions.(e.g.ccornp~tentie~, d~sired . . . Succession Pian
. experiences, desired know l ed~Je ; developmental va lue): .·· ···. ·• ..•. > ) < .•.
4. Determine how employee potential wil! be me;;i.sured (e'.g" currerrtp<:;rforrnc:ince
· and potentiaLperformance). · · ·· ·
5. Develop the succession ;:)lannino review. · · ·· · •. . . > ··
· 6. Linkthe succ.e ssionplannin9 system with other human res?t:.1rce ,syst$ryis, · .·
including.tr~inil1g and·devc~k)ptT1e nt, compensation, peiforrnancemanagernent,
and staffing systems. ·
7. Det<.:.:rrnine V\lhat ·ferxlback is providr::d to ernployees~
n. Measure the effective111.'!S$ (!f thH sur;ce:ssion plan.

SOURCES: Based on W. Rothwell, " Tl1 e Future of Succession Pl;innin g," T + D, September 2010, pp . 5"1-54;
O. Dowell, "Succession Plann ing, " in Implementing Organizariona/ /ntArventions, ed.;). Hedge and E. Pulaskos
(San francisco: Jossey-Bas5, 2002), pp. 7G-109; R. Barnett: i'l11d S. Davis, "Creating Greater Success in Succession
Planning," Advances in Developin!J Human Resources 10 (Z008), pp. 721-39.

goals be considered'? fii:Hh, !:he succession planning :review process needs to be

developed. Typically, succession planning reviews first involve employees' man-
;;igers and human resources. A talent review could also include au overall assess-
ment of leadership iale:nJ: in the company, an identification of high-potential
ern.ployees, an d a discussion of plans to keep key managers from leaving the
cmnpany. Many companies use !he 9-bo:x grid for conducting the succession
planning reviev•r. The 9-foi'\Jlx gr.'il\"l! is .a il1.r,sr2-by-three mahix used by groups of 9"bon girnd
man.agers and executive::'· ;:o cornpare emp J.oyees within. one department, ft.u1c- . A three-by-three
hon, division, or the eni:irt.:: company.95 The 9-box grid is used for analysis and matri;( used by groups
of managers and
discussion of talent, to help fornn.tlate effective development plans and activi- executives to compare
hes, and to idenLify talented employees who can be groomed for top-level empfoyec:s within one
management positions .in the com.pany. As shown in Figure 9.5 one axis of the department, function,
matri)( is based on an asses::nnent of job performance. 'The otl1er axis is typi- division, or the entire
cally labeled "potential" or "prornotability." Typically, managers' assessment of company.
performance (based on th.e company's performance management system) and
pob,~nHal influences employees' development plans. For e)cample, as shown in
Figure 9.5, "Stars" should be developed for leadership positions in the company.
Contrast the development plans of "Stars" with employees in the other areas of
l11e g-rid. The development plans for "Poor Employees" e1nphasize performance
improvement in their cu.rrenl position rather than getting them challenging new
' " L·
·~ir!t job experiences. H. they do not improve :m their nn'.ten~: position they are likely
!'.'· .
to be fixed. "Technical/Subject Expe:i.ts'' an-~ outstanding performers but have
.
J.-t~
:.~~~·s1i~~
low potential for leadership positions. Their development plans likely empha-
·.·;;~ . size keeping f11eir l<nowledge, fJkiJ.ls, and •: ompetencies current and getting them
''."~ experiences to continue to 1nolivate them. and facilitate ·creativi.b; and innovation.
"Potential May Be Mispi.a.ced" e1.nploy12es m ay have just taken a new position
and haven' t had the l:lmc !:o demonstrate high performance or these employ-
ees' knowledge, skil.Js,, or competencies might not match their job requirements.
Their development plans mighJ emphasize moving them to a position that best
matches their skill set or H they have just moved to the job, insuring tl1at they
get the h:aining and develop:nnent opporh.mjties and resources necessary to
help them attain high performance levels. "Core Employees" axe solid but not

· ,;;
440 CHAIPTER 9. Employee Dev0lopmeni:

fFAigJll.illP!:!l 'Sl.5
E:cample of
•J 9-Box Grid A ·r
Technibal/·subject
> E;{IXH't

5
Core
Employee
'.:
I''

, r1
.·
·'; J
:.1l.

outstanding perfornv2rs '!\'ho have moderate potential. Developrn.ent plans for

these employees wiJl i.ndudrc: a ndx of trainjng and development desig1wd to
help insure their solid performance conti.Jl.1.ues. Also, their development plans
likely indude some development ex:-periences !:hat can help grow their skills and
detennine theiur interest and ability to perform in positions requiring djfforent
skills and/or more responsibility.
SixH1, succession planning is dependent on other human resource systems,
including mmpensalion, training and development, and staffing. Incentives
and bonuses may be linked to completion of development opportunities. Activi-
ties such as training courses, job experiences, mentors, and 360-degree .foedback
should be part of high-potential employees' development plans. Companies
need to rn.al<:e decisions such as will Hi.eyfill an open management position inter-
nally with a less-expe.r.ieno::d employee who will improve in the role over lime,
or wiU IJ~.ey hire a n1.anager from outside the company who can i:tnmediately
deliver results. Seventh, employees need to be provided with feedback on fotuxe
moves, expected ca.reer patli.s, and development goals and experiences. FinaD.y,
the succession pl;)1lni.ng process needs to be evaluated. Tius :includes .i.dentify-
ing and measuring appropriate :n~sults outcomes (such as reduced fuue to fill
manager positions, j.r1cr.eased use of h-1.te:mal promotions) as weJl as coUectlng
measures of satisfacl:ion vvith the process (reaction outcomes) from employees
and managers. Also, n10difiG1ti.ons that will be 1nade to the succession planning
process need to be idenbfied, discussed, cixi.d :iJnplemented.
To prepare for !:he exp€.::ded shortage of health care managers, G1Jnderson
Luthenm Health Systcr.n. in La Crosse, 'lNisconsin, developed a succession plan.-
rung process to identify and develop high-potential candidates jn one of four
leadership leveb: phyr;;ician ~xecutiv€s, physician adm:inish·ative leadership,
adminJr:;l:rative cxec1J.ti.v·.;;::;, and admi11.ish·alive leaders at the dil'ecl:or k v el. 96

.. :, ~,!1.·:11,'
' ~~ .f
 ...
CHAPTER 9 Employee Development 441

Selection of candidate~;; was lx1sed on demonstrating a high level of competency

in nine areas jncluding operations, finance, strntegic th.inking, building partner-
ships and teams, si:aff development, change management, performance man-
agement, and leadership dev~~iopment Candidates also needed to demonstrate
an interest and wiUing11ess for prornotion, to participate in a leadership assess-
ment. process to dete:nnir1e skill gaps and development needs, to .receive devel-
opment: feedback and ooad.1ing to. get a realistic view of current performance
and. develop skills and co1npei:encies for fuh.u:e posit.ions, to accept assignments
that provided devdop1nent oppo1tunil:ies" and to invest tl1e time and effolt
·required to learn nev\T skills <.ind review thefr progress with their vice president
or manager and a revicev\r group headed by the vice president of Operations and
Human Resources. Heh::nriorn 1. interviews,. 360-degree assessment, the Myers-
Briggs Type Jndical:m~ <:n1d assess1nents of values and leadership skills are used
to identify individuals' strli::ngths and developrnen t needs or gaps. Based on
the assessment, individu.aA development plans are discussed and agreed upon
with the revievv group. Development plans are based on both the candidate's
and orga:nizahonaJ need:3. The d(~11eJopmenl: plans in.dude activities such as
coaching, conlinuing edw:::ation, mentoring, project assignments, corrunittee
appointment~>, job enlarg;e:cneni:, job :rota.hon, or cross-functional assignments.
For example, projects have i:ndu.ded work in developing an electronic medical
record and assignments. f'Tcv1.r :~oh experiences isi.dude moving an admiriistrative
director fron1 the rehabilitahon area into the human resources operation role for
IJ.m.:~e years before :1noving in.to a larger role overseeing all hospital operations.
Th,ese activities allow cand:i.dal:es to lea:rn. while the leadership team can evaluate
how tli.ey perfon:n when 3ive:n increased responsibLUty and stretch assignments.
Gunderson measures the iinpact of development activities and tJ.1e success of
the 5uccession planning proc1~ss tlu:ough performance and feedback from peers
and colleagues. D1e revie1N group studies annual progress. Sixty high-potential
employees in all levels of leadership have been identified and their career pat.hs
discussed. Four high-potential directors have been promoted ir1to chief roles
and six high-potential managers into dir·edo:r :roles. J\Tjne high-potential manag-
ers and directors now have expanded roles. ·
One of the U.nportant issues in succession planning is deciding whether to
tell employees if they are on or off the list of potential candidates for higher-
levd manager posil:ions.97 'U1ere axe several advantages an.d disadvantages that
companies need to consider. One advantage to making a succession planning
list public or telling employees ·who are on the list is that they fil'e more likely to
sl:ay with ill<~ company because they understand they likely V\rtU have new career
opporl:un.Hies. Anoiher is that high-potenlial employees who ate not interested
in other positions om con1..nnrnicate their intentions. This helps the company
avoid investing costly development resourcet; in them and allows the company
to have a more accuraie id.ea of its high-potential managelial talent. TI1e disad-
vantages of identifying highvotentiaJ employees are tl1ose not on the list may
become discouraged and leave the con.1pany or changes in business Sh'ategy or
the employees' perfonna:nce could tal<e them off the list. Also, employees might
not believe they have had a fair dum1:e to compete for leadership positions if
they already know that a ]jr:;fc of potential Gmdidates has been established. One
way to avokl lhese problerrn'> is :o let employ~es knmv they are on the list but
not discuss a specific posti:ion ille~y 1Nill likdy reach. A.nother is to frequently
review the lisl: of candidates and dlf::ady cmnmnnicate plm1.s and expectations.
Managers at M:i.dmaxk Corporalion, a medical equipment manufachn·er based in
442 CHAPTIEIR 9 Employe('? Development

Versailles, Ottio, iden li}~r ::>V(:cr.:. ::;::;0 1·~3

r::vBry si/ rnonl:hs as part of the cornpany's
per.fon:nan.ce .
rev1e1N . 2.::~
prcce r.m n., p:t·outKe
'. l l'_isl: o:f can.ctJ1 'd
;;i p ol:i:::nha .. 8.t'2S. oOl1lt2 <. "

employees are also labeJed a;J J. dgh poi:<c>r1iiaJ. an d oi:hers are identified as havu1g
high potenhal for l.ea(fornhip pos~hons . Einpi.oyer2s 1.1\rith high poten tial for leader-
sbjp posihons are coi1;3jc]cre d for d 1a llu1g:inf!~ development assignrn.eni:s invoJ_v..
ing overseas relocation. U 3ing iJ:1tc~nrir.:;w~~ th(:: cornpany determines jf employees
on the succession list are interested and qualified for leadership positions.

v
v
V ln the story t hat opened thi:1 chapte r, k:o;Jrni119 ~incl deve lopment at Phili ps was
discussed.
Ql\JIES'HONS
'11. Philips invites ali en·ipl(J'/e·:< ; tc 1:1>1T1p lei:e 1 1m Individu al Development Plan
(IDP)_ \/\/hat should b e included in o;·de;- fm it to be effective? ·
2. T he Talent pipeli ne (:1J1Ti o.du1Ti i'.:, aiinrx! at h igh-pote nti als. How could Phil ips
identi fy em ployees wit h t hr:s potential fo1· i:op leadershi p positions?
3. Why does most deve lopment at i:1 hi lip'.3 occtH t hrough experi ence on the job
(70%) rather than by aitenclin9 cou:·s(:s?

This d1apter emphasized the various developnv:nl
methods that companies use: formal educ;;!l:.ion, ;x30,2sc.;-
ment, job experiences, and .i.nteq:H':rsonal. rdationsb_ip :3.
J\Aosl: companies use one or more of these appw::;ic.h c::;
to develop employees. Fom1al education invol.v'.02
enrolling employees in courses or semiJ1axs offcr<=:d.
by l11e company or educational. i.nsti.lutions. As::0s~>­
Jnent involves measuring the employee's pe.tformanc(::,
behavi01~ skills, or personality characterislics. Job €Xj)<~­
rienccs include job enlargement, rol:a.l.i.ng to a new jdJ,
promotions, or transfers. A more experiencec1 0<~11i.or 1
r::m p ioy0':' (:J :r0sr1Jor) can help employees beUer under-
;:;bJ.T1.d _ th.r~ {:o:rr~-r:i-n:n.·y 8J.1.d.
gain. exrlosure mi.d_ visil..,jJit~y to
ksy p:>.r:::G!l 3 :i11 th ~ org;:ih1.zati.on. Part of a n:J.anager's
job r(.csporisltliliJy rnay be to coach employees. Regard-
lc::.; of th.:: d'c>"·dopmen!: approaches used, employees
;:,;llould !w>re :J. d<:veJopmen!: plan to identify (1) the type
of devdopm.c;1I 1i.eed<::d, (7-) developm.ent goals, (3) tl1e
b:si ::ippi·oach tor development, and (4) whether devel-
opm(:ni: :.::;oaJrJ Ivwe been reached. For development
p1ans to be dfcctive, both the employee and U1e com-
pr.1ny )vive •.".:::>ponsibilitks that need. to be completed.

Development, 406 J11 l:<o1.1rir::w, 420 Do'w11.ward move, 428

Protean caree1~ 407 fo.-basket, 4:20 Temporary assignment, 429
Psychological success, 407 Role-J_Jlays, J20 1 Sabbatical, 430
Development plruming syste1n, 408 Pedo nrw 11ce appraisaI, 4'.n Mentor, L130
Action p lan, 411 Up~Nard f<~1cdb0ck, i2'.Z 1 Career support, 433
Forrnal educaljon provam.s, 1JJ.5 360-degr::oF foedb;1(:k PsychosociaJ support, 433
Tuition reimbursement, 417 sy~>iem:::, 1J'.2'/ Coo.ch, 4:33
Assessment, 418 Job exp~rie nc.es, ".l~A (;Jass ceili.ng, 434
Myers-Briggs Type Job 12:ill2rw::ment 1:2.6 '.':iuccession plarn1j11g, 4:33
Inventory (MBTI)ill>, 419 Job rot::iH(:n , 12 / . 1
High-potential e1nployees, 438
Assessment center, 419 rr~-.a11sfer,. /~: 2 7 9-box grid, 439
Leaderless group discussion, 42.0 Proin oi:i.ons .- J:?.0 1

.I
"'
•,;
 ..
1. How could assessm.ent be used to create a produc-
tive work tea.Jn?
2. Li.st 811d explain the d1arncteristics of effective
360-deg;ree feedback systems. · axe they beneficial?
3. \/Vhy do companies develop fonnal mentoring pro-
gTams? M1al: are the potential benefits for the men-
tor? For the prn teg(~? ·
4. Your boss is interested h1 hfring a consultant l:o
help identify potential 111anagen1 arnonf5 cm-rent
employees of a fast-food restaurant. The manager's
job is to hdp '"'ait on customers and prepare food
during busy tim.es, oversee all aspects of restam·ant
operahons (iJ1cluding scheduling; rn.aintenance,
on-the-job training, and food purchase), and help
rnotivate employees to provide high--quaHty ser-
vice. The m.anager is also responsible for resolving
disputes tl1at mjght occur between employees. The
position involves working under stress and rnord:i:-
n(.l.ti.ng several activities at om~ iimP.. She ::i.sks you to
outl:ini:: the type of assessment progrrun you b elieve
1vmlld do the best job of identifying employEes who
vvill be successful manager::;. V\That will yon tell her?
j. !:;. I\ifony employees are unwilling to relocate because
they like their ci.u:renl: communily, and spouses and
chi.ldren prefer not to move. Yet employees need
to develop new skills, strengtl1en skill weaJr. nesses,
and be exposed to new aspects of foe business to
ptep;u:e for m<.magemenl: positions. How could m.1.
Go to 1'\fwvv.keirsey.com. Complete the Keirsey Tem-
perament Sorter. What did you learn about yous-
. self? How could the instrurnent you completed be
Adu111ea's leadership Prngrnms as Drivers fo r Establishing Corporate Identity
Achmea Holdilig NV is one of the loxgest and oldest
financial service providers in the Neth.erlai;ds. Start-
ing life as a guarantee inslitution, named Achlum in.
1811, this small institution grevir by a. :numb er of m.erg-
ers with other financial service proviclem, including
banJ(s, insurance finns, pension funds and health
CHAPTER 9 Employee Development 443
employee's current job be changed to develop man-
ageinent skills?
6. What are some examples of sabbaticals and why
7. \A!hat is coad1ing? Is there one type of coad1ing?
Explajn.
8. \!\Thy are many managers reluctant to coach their
employees?
9. Why should comp anies be interested in h elping
employees plan their development? What benefits
can companies gain? What axe tl1e risks?
10. Whst are the manager's roles in a development
system? i/Vbich role do you trunk is most: diffi-
cult for H1e typical manager? ·w hich is the easiest
role? List the reasons why managers might resist
involvement in career management.
11. Draw the 9-box grid. How is it u..sefu.1 for succes-
sion planni ng?
J.2. Nalionwide Financial, a 5,000-employee life insur-
ance company based in Coh.unbus, Ohio, found
JJ1.at its m;magement development program con-
tainHl four types of managers. One type, unk novvn
kaders, have the right skills but their taJ.ents
are unknown to top managers in the company.
.Anotl1er group, arrogant leaders, believe they have
all the skills they need. What types of develop-
m.ent p rogrmn would you recommend for these
m2-.n.agers?
useful for employee development? What might be
some disadvantages of using this insb.ument?
insurers, into Achmea Holding l'JV. A.lthough basied
in the l\Tethe:dands, Ad1mea has a strong foothold in
Europe and employs about 21,000 people.
Th.e mission statement "Adunea ontzorgt", freely
interpreted as "Adunea takes care of y01.u· worries",
is ;m important driver for the corporate identity of
 ...
Ach inea. Th"" ciJrp~}rnte identi.ty enco1.np'1sse:3 frnn
pm:ts. I lw fixs>: pm.;I s hmd s fo.r being a comm.unHy of
conci=~rned people •.vhc:;:e !:he c1wl:onwr feds ar;su rcd.
Second, Adunea v\Ti)flJs to b .'>. and to sl:a.y the mosl:
i:ru~ik:d insu.rer. 1'h ird, Achm.ea wa.nl:s to be identified
'Jvith its owl:ouwr:3 l:u tnake innovation and realisal.fon
p oc>sib k~. To <Khicve these thi~ec hnporla11I: ident iJy
par!2 /\.d 11:nPn j_uf:;·odu( 1:s a.3 a fomth. pal'l the foU0•1·r-
ing cure compeiVi lcic~;: cr<1H:s1na.nship, jn1.provern en f;
m:1d thr.>. <>bili.ty il. o bind. Lead <::rship is an ini.po>>
i:1~tn.t
con.(l.ib_o n lo ac-corP.f>lish. iJ:ds ·cor_po:rate id.e:nJ:i.)~V­
J-] cnc12,. /\chxnca. ·d_ c~relo p1 r;:«:.J a l~nrlerT;hitr J110clr~l 1/vbich
coJ.npd~1es th ree dim.<'~nsio115: GYIJTSE: 5ceking, bi~nd­
ing people and tald.nr5 G)f e of operntions. Leade.rc;hjp
progra.n1s are develop~d for managers as weH as fo r
profers::1i.ona b iJ.l C(mo2rl: vi1i.t h other paxties sud1 as
.Nyenroc:k Bu~'ine~-;r; \JniversiJdt (NL) and As.bridge:
Uus:in'~~,;r; Schoo l (UK).
Jn. l:h~~ l.e<1 d!':rnhip prog:rmns it's n.ot jusi: the a<::qn i-
si.lion of koowkdw: that'::-; iJ.1iportm.1l bul: abo
00.r.l.al (.~ evtJ.0_1?rn~::::n ~: . ·p~:~ .r 13cip.si.n.· ~.'f.~ te]J their tJcrSGit-aJ
Gtori1~st re<J-:-~ j_ vr2 fe {~ (~t}oie~< b_'fHll 1.:hrf:;j1· c·oU.eD.gu._esr .oTe
s1J.f.!€ i."'i d ::;r.::d_ by cor.np:1 1i.ry· -~-1D.ETt h::-:iC3 a:n.d. :rn'.'ofessionaJ.
IKEA js !:he world's largest :h!n1H::ux-r2 ret<ljJ.er ;md
3elb n:ady-to-ar:mcx11.bk fu n:1i.t1.m::. Thie company 1NC).2
fou nded .in 1943 by Ingvnr Kan:trad in Sweden and
is knmr.rn for its alJenUon to cosf[ control, operati m.1<iJ
Inanagcmr.~nt foo.rn and product innovation ·w hJrJi\
has enabl.1-::d Hw cen1.pmry to 101.ver :U:s prices by 11,vo
oft· t:hrcc p ercent o ver ~he last i:en yearn. lKEA i~> ::J so
known fo r.: iJs global. exp2.J1~>ion and h<is localion s aH
over the world.
.lKEA stores axe often d1~.'..ti.p::ncd in a "on..2-w;;iy" by--
out, l02:ading customers fllong " the long nai:ural. v1rny" 1 J-Wj\1 has ;:in hnportant ,iob in the design of a v.e1y
• 'N.hich cncourn gcc~ foe o.1s.torncr to see the store in its
entirety:. Tbfo phHo:3op hy i :J dJHcrenl: in coi:nparison J:o
;:i, i.radiUonal. rd:a il s l.ni:·-e, wher'=~ con s111ncrs an: ;:iJJ.ow~:d
cna.cJ112~ ~}1vj lkJ111:~ lo patlicir~ aJe JJ.1 sLm:u.la.ti.oKl.S~
T.h.e
~xu'ti-ci..pan t~; ~;;1i.n more
compreh ension about their
p ersona1il:y. l~::aden;hi.p
sldJls, personal piifalls and
their 01wrati.on01 3ixengths. Resilience, perseverance,
autonorny and the capability to b i11d people are out-
.comes for th'~ people who have followed sud.1 a lead-
'2rship progxmn.
GR.Er~s1rno11'~!1ii
L 1.Nimi: d12vciop rncnt activiti(:s are used in Chis pro-
gram? ~/Vhy 2.re l:hey ir:nporlani:'!
2. VV11.at shouJd h·2 the outc01nes of Achxnea.' s 1ead-
'2rsbjp prn5nu;:1s m1d hovr d.o these conhibute to
establ.id-t.i_n5 A.d.•.uv2a's corporate id.enhty?
3. VV.hy o.re professionals an imp ortant t0sget group
for thc-c ile:-1.d'!2mhi.p prngrams? Vifhat should be the
JI
I
011tcGm.12s of lhei.r participation? Substantiate your
j .
:3{)UH.CES: tnt'2'''k>v 'A'i.ih /\.dtrne.i'J hokli.ng on March ;;s :2.0'.l.:2..
PreErnt;itio;1 /\.d1m•ca Iead,;r.:hip for th<': bom:d of cfo:ect.ors, 1'1fo.rd129 - .'.·..i
~010 . ;1\T'lN-;. r.ad:n'iJ.ell.DL 3D rr1agazh1.~, no. l ?..012, /\d11n12a publicatjoo.
1
J
_...."!...]
ills.i.ght: EJtro,pc-:J .J:\fr-'!t.vsli:::r.i:er, J2.n.uary 2012.
"."c.f
j
lo go dixa:i:Iy to b':l.e section w here the goods and sET-
vi.ce:' 3s~; displayed. In newer IKEA stores, more glass
is used, m.aking us~ of n otw:aJ light, which reduces
energy cost.s, ~1.nprnves ~.vorker moraJ.e an d gives a bet-
ter 1.n.r.pr<::s3ion of tine product.
Anotber h:npmtan.t factor in IT<:E.A' s s u ccess is Hs
FfRivt AJ.br~rt Ivfortens, Execuliv'~~ Director Human
Resmm::2s IKEA, f;'; m phasize:J the importance of hm.nan
resou.rcr:::·s a_·nd. fb.e fnx1ciion. of ~eaclership i:n tl.11.e expm1. .
s\on of IKE/\ aJJ. over tl>e w orkL According to him
sh'udured 1vay o.f h1nova.tive w orkir.g. Strategic HRI\1
mem1s the support r:md the con.firmati.on of an organi-
:::::1.J:i.onal c<:;JJuxc in which co-w o r kers aren't af1:aid to
· ._:_.;(:;
:1 ·
,.: ··
 ..
have voio: and in lNhidi )~•·: hJIC'.r<in :hk;1J <Jiffen~nc·:::s
m:e min:i.miz.ed.
In lKEA.n1anage:rr; r;ho1.0 ld b<~ k;),d"~.rn., •NH:h B. !::txon.g
focus on the realiza tion of ~ibjccl:ive:s and the percep-
tion that this co.n only be achi<::vr"'l '""rith Hi/; :inp1.1~ and.
ideas of the co--·worh:~1.·c;_ They ho.v~; i:o be ITanDpur--
ent abont 1Nhat i.::; going GH , ... rii:hin l:he coni.pan.> Thi:::
transpm:ency j11vi.i:er.; '.~roi:.kr:·~r:> tu th.ijJ_k abonl: the cmn·-
pa.ny and to conw up "NiH1 new i<]Eas in in:i.pr•wix~ s
operations and in d'<:vd.opi.:nG t irw fHDo:b~_cf::::; a_;:rd ~;e;:·­
vices. 1.b Ill(~asu.rc th_is .i:n.~.rc?1lvc:i)}·t::nJ rJf cu-11vf.n<k£2rs l-IR
organ.izes Zt 1,vorlcers' f3ati.~; f~;1.i: .:tiur~ s ~n~~.rc-.:y- or1cr.~
11/\To years. HR helps D.li'1TiageDY:~n1 ·wiJi.1 i:liFc de'if::l.-
opment of their Jeader::ihip s~yk~ a.~~cordi nr; fo iKE/\
standards.
.tl\_ti. ad.ditiorR;~11 hl1.j_J(.1oft<3.: n;1: j;3,Jtv.: j n_ tbc:; ·1Norl(iv~d.d.~2
1 Knmprad and IKEA". Harvard Business Schoel Publishing, Doston,
strategy of IKEA is tlle capnbiliiJr \o fo: ·wiH1in a di.v er-
sity of national c1.i1tures v,rjlJ;o1 d: d.cnyin.;~: jJ:3 ff!Nn
norms 31ld values. Th1cn~ i.'.c' ,_,,J dishrn::ti.on bet w•.::eL
ITu;'1.les and_fe1nales °''"l"u·:.n ~lpplyin_g io·r jo1}S 1:tt1~J. rtf: TI<JI!\
The 100 full-f:i.rne and SO parHiu:1e employees of the
Little 'fokyo Service Cenler (l:fSC:) virod' i:o prov ide <1
range of social services t;.;urge\ing Asian'.,; ::;.nd P>1cific
Islanders h1 Los AngeJ.e:,; Coanty. The organizati.on's
focw; js on the needs .of peo-p le in Dnanda! difficulty,
with physical disabili.h<::~i, or strug;glin.g with .l.an-
guag.e o:r cultural barrier:3. 5'".i:vk:ri~S indude t.::onn.-
seling, transporl:ation, i:n:m::;l;;1_Lion ;>,rid consnrneY 1
education. Emergency ca1:~:. j ;_; provkkd in ~K:vera l
different: Asian languages plu~> Eng1i:3h 0nd Span:i.:>h.
LTSC also has sponsot-.e d Hie con;:1i:ru<:tion or renova-·
lion of corrununity dev'"~loprncn.1: proj€~ciG including
aparfn1ents and comm 11n.ity fo-ciHJ:i('G ::melt HG child
care centers.
CfSC's 1~xecuti.ve dirr,:>dor, Gil l 1i/\1i3J;-rnabe.
he "really lovep," his w·1:rrk, '",nd no v.ronder, given
the organization's impor tF1nce io H-ie con.11nnnil:y.
CHAPTER 9 Employee Development 445
family Vie :i. s impmtant whidl means th<\t people are
sent home when they are off duty. In some na.lional
cuJtures 1'\Th.ere workplace presence ;:.2presents loyalty,
such as in Japan, this is a difficult :issue.
Q.\1ft!E:SlfiO~R$
L Vi.J11.at 1'-Jnd of developmental ac!ivHies should Ikea
consider for. its .leadership developmi::nl:al prn-
grnmrn.e? Substantiate your answer.
2. Vl/1mt xnruiagerfol skills and c.mnpel:e:ncies should
m1 Ikea maJ1ager have to nm thr~ i,t.(T::A business
c"'l.r(::r·y successfully?
;:;oURO~S: Armitste~.d, Louise (Ociol}<T 1, :?.010). "lk-c<i" . Tiu! Dnily
7.l:iegrnp!z (London); "Il'illA". lKfA Janu<>.r; 21, 2011. Rro:u!ers (January
IJ, 2008) lKEA mulls joint venture with 11csrtia f.1-nTiiture ma}~"r; "Jngvar
lvl.A, 02163. 1996; Global Players: 1-igva.r Kamprad, Founder =d Chief
/'i.dvisor; IKEA; "FAQ". IIG3A.cm:n. February 11, 2.00G; "IKEA: Flat-pack
accountint~ • 171c Ecorw ;nfr;t. May 11, 2006. RetriE:-·vf'2d June J.0,,2009.;
11
Nicole W.eidema. Intei.view Albert M:rrtens, hr-top.man H<ea Groep;
'I-fet is h.ier geen speeltuin'. Intero1ediaiJ'. Peb.nJBS}' 1? :;.'.GD9.
Consequently, the thought of taking a sabbatical
would no t have occurred to him. But several years
ago, Vvatanabe provided a professional reference to
a colleague who had applied to the Durfee Founda-
tion for a gnn1t to fon d a sr.ibbaticaJ.. A st<~ff mem-
ber at the foundation suggested that vVatanabe, too,
might benefit from a s;ibbatical. Hi.s initial response
iNas that he didn't need one. After all, he wasn't
burn..ing out. But the s taff member explHi:ned that a
sabbalical could help LTSC's people learn to oper-
ate nrnre independently. V\lhen Watanabe mentioned
111.is to the board of directors, they encouraged h.J.m
to apply.
vVith that backing, vVatanabe t0ok a thxee··month
f; ;iys sabbatical from LTSC. TI1e fixst iwo m.onths iNere
a
devoted to travel: tour of Israel and Egypt, a vaca-
tion in Tahiti, and a road lTip with his brother-in-law.
44.6 CHAPTEH 9 r::rnployee Deveiopme11i:
After that, 1Nal:anabe stayed put long enough Jo write
an autobiography.
Watanabe found that stepping away for a fe-w
months freshened his perspective on LTSC. Wh.en he
returned, he applied hfa vision aJ1d renevved energy to
restructure the agency forough a merger of it5 comJ:nu-
nity services center and its community development.
corporation, and he acceleratedvrogress on a comJnu-
nHy organizing project He abG h1unch<~d 1nore vigor-
ous advocacy to build a comrnunity gym.na.simn n1.
the Little Tokyo neighborhood of Los Angeles, dxa•N--
ing posiJjve attention frmn pohhci.ans and ftmdiJ1g
sources.
VVhile Watanabe felt persomilly restored d u ri_ng
h is time away, he believes the agency benefitr;.:d, too.
hl particular, he discovered that his absence provided
developmental oppmtunities for others ai: LT.SC. 11112
agency's deputy director served as inlerirn. execuhve
director while Watanabe was away, and two employ--
ees t·eporting i:o ll1e d eputy direci:or shouldered r:he
deputy's responsibiWies. One o{ them has sinc(-: br::en
prornotecl. Building on these experiences, the ::iecond
tier of management at 1-:TSC ha:; tafom more direct con-
trol of the agency's day-to-day activities, freeing Vllai:o.-
nabe to concentrate on broc:1dcr strategy. Their c.;realer
preparation also amounts l:o a kind of successJon
J. D. Day, Developing Leadr:rsilip Tiilcnl: (AkJwndda, VA: SHRM
Foundation, 2007); M. London, Mrmaging the Training Enler-
prise (San Francisco: Jossey-Dass, 1959); C .McCauley ;md
S. Heslelt, "Individual Development in 1he Worlcplao2,"
in Handbook of Indusf:rial, Work, rmd Orgnnizatio11a/ Psychol-
ogy, Vol. l, ed. N. Anderson, D. Ones, H. Si11angil, ;md
C. Viswesverar1 (London: Sage Publications, 2001), pp. 313--35.
?.. .R. W. Pace, P. C. Smith, and G. E. Milfa, Hwnan Resow-re
Development (Englewood· Cliffa, NJ: Prentice I-foll, 1991);
\IV. Fil:zgeralcl, "Training versus Development," Training
and Development Jor~mal, May 1992, pp. 81-811; R. A . !'Toe,
S. L. Wilk, E. J. Mullen, and J. E. 1Nanek, "Employee Devel-
opment: Issues in Construct Definition and Investiga-
tion of Antecedents," in Improving 1h1i11i11g Effectiveness in
Work Organizations, ed. ]. K Ford (Mahwah, NJ: Lawrence
Erlbaum, 1997), pp. 15.3-89.
3. Towers Perrin HR Services, 'foleTZl Ma11agement: Tlie S!cale
of !he Ari: (Chicago, IL: Towers Perrin, 2005). Av<illable al
www.towersperrin.com. "/.\.ction Items: 42 Trends Affecting
Benefits, Compensation, Training, Staffing, and 'Iechnol-
ogy," HR Magazine, January 2013, pp. 33-J5; "Challcnge0
Pacing HR over tl1e Next Ten Years," accessed from. w 1Nw
.shnn.org, March 24, 2013.
1.t D . T. Hall, "Protean Careers of the 21st Cenl:ury," Ac1Jdem1/ of
Management Executive 11 (1 9%), pp. 8--J6; D. Hall, Careers In.
and Oza of Orga11iwlio11s. (Thousand Oaks, CA: Sage, 2002).
J. Greenhaus, G. Callahan, and V. Godshalk, Career Mmm:_<;t!-
menf, 4th ed. (Thou:3and Oaki, CJ\: ::>age, 2010)
planning. According to LTSC's board chai.x1na11, "If Bill
•Nere to leave tomorrow, the organiZation would be in
vexy good hands." ·
Q9JJE$lf~ON$
1. Based on tl1e information given, how well chd Little
Tokyo Service Center follow the development plan-
ning process described in Figure 9.1 Which ele-
ments of that system, if any, were missing?
'.7-. lmagim: that LTSC has called you iil as a consul-
tant before Watanabe is to start his sabbahcRL The
agency has asked you to help obtain H1e maximum
developmental benefit from the sabbatical axrange-
ment. How would you recorrunend that Watanabe,
the board of directors, and the second tier of man-
agement proceed?
3. Keeping in mind that an agency like LTSC would
have hmding and just a few senior managers, sug-
gest two addiJional development achvit.iizs tlwt are
JjJ<:ely to b~ most beneficial to tl1e organization, and
explain why you chose them.
SOURCES: Deborah S. Linnell and Tun Wolfred, Creative Dismptioil:
Sabbnticnls for Capacity Building and Leadership Development in the
Nonprofil Sector (CompassPoint Nonprofit Services, 2009), p. fl; ilnd
Little Tokyo Service Center, "About LTSC," corporate website, WW1"
.llsc.oq~, accessed April 7, 2012.
5. K Essick, "The Good Life-Second Acts," The Wall Street
Journal, May 6, 2011, p. R7.
6. K. R Brousseau, M. J. Driver, K Eneroth, and R. Larsson,
"Career Pandemonium: Realigning Organizati.ons and
Individuals," Academy of Management Executive 11 (1996),
pp. 52-66.
'7. M. B. Arthur, "The Boundaryless Career: A Nei,v Perspec-
tive of Organizational Inquiry," Journal of 01ganization
Behavior 15 (1994), pp. 295-309; P.H. Mirvis and D. T. Hall,
"Psyd1ological Success and the 13oundaryless Cs.reei.~"
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Capital, and Knowledge Management: Implications for 'i~.1li1
Organizational Performance," Journal of Orgo.nizalional
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Tiu; Wail Street Journal, November 29, 2005, p. B6; E. Kaplan-
Ldserson, "TI1e 01m1ging Worl:.Jorce," TD, Februm:y 2005,
pp. 10-lL
10. L Mruniero and S. Sullivan, "Kaleidoscope Careers: An
f\Jtr:r:rvi6ve Explanation for the 'Opt-Out' Revolulion,"
 ...
.i\.c11de111y of 11/lanagemrml E:·::u;uf.iv e l') (200!i), pp. J 0(1··7.J;
~). Si.dlivan <ind L. Maini<;ro, "l:km:.l.im;id:..ln r>: 1.dr.-;1~ foJ.
Post.e ring Farnily-Frien d l)j ·vv~)rkp l ri.<:!-~B . '' O: :':~n;r;';taf'i< .1 11nl
Dy111mricr. 3<i (:?.00'7), pp. ·+~~- c~ .
ll.. U. Yovov ich, "Golden Oppnri.1.1J1jJ jc<' f-i1t1i!'m F 1::''•J11n:c
C:r.:ecutivc, August 7.()IJg, pp. :JO-J4.
rL ~;, 1'1eedl8UH\O, "J\lev•r Ca.r1~~).~ '. ·);:-i \n 1~ f·:·n:lp J~r~'':':·l, 7"/:r:: l'\!nli
11
Street Journal, April 21, 20013, p. fl~1
·1.3. M. Sallie-Dostinmu, "fk·rn l:o 1C rnw," Tr>, .i';i.<>.y 7006,
pp . .'H-37.
14. D. T. Jaffe and CD. ScoU:, "C;.irw2r Dcv'd o pn:i.-t:nl:f)r T.~:> 1po1-"
erme nt in a Changing 1/'Jo r/·( 1Vodd," in N r:m [)irn:lior::' in
Career Plmmi;1g a11d tile l·Vmkjilncr:, cd . }. J\·l. : ~ i1n.n:;wrcw
· {Palo All:o, C.A.: ConsuHin1~; P:~~~n.:hoi.ogj ~3~:; Prr;;:~;:.! ·~- ~·;:~Fl) ,
pp. '.13- 60; L. Su.m.uvo>rs, ' '/\ LoGi.:<11 Appro;.\cl; ;,, f)F_,,,J_
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0 1
:n
1
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0 11
livc, July I August 20J'..1.,. pp. 30 ·-'.Y..
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w·vvv11.brooksh.ealt:h.or0 1 f'.< :t.:re c~s::::cl l\.i'.l(l i··ch ::~9 , ?J!J ~~.;
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la!," U.5. News t_:.· Worlrlnqmri. hi·~p :/ /.hc:o:il::h.wmEw:c
.corn, acc~~s sed M.m:ch 2'.I, 'WJ2; 1<·:rr i /\nnr.l.:r0ng 1r'f::kh,
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care," T + D, December 20U., pp. GU-70.
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pp. 46-51; Heth Kow iH, "Why M':DonaJd's Win:; i.n /lny
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ting Venue," Finan.cial Th11e1; 131.winc:;s Ed11rn!io11, J\/i;.>.J·c.b 20,
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22. University of Virginia Dard<~D School of Dusinr.::.o~ , "M.Bt\
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CHAPTER 9 Employee Development 447
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r\.-·. q rp T1 tL:.1r~..
1
11• .4""~~
!\.../ p"\ .
IC

A fter reading this chapter, you sho uld be able to:

ILl(J'l 'll!G-'g Distinguish between involuntary and voluntary turn over,

a nd d iscuss how each of these forms of turnover can be
leveraged for competitive advantage . page 453

llQ 'il«:S-22 List t he major elements t hat contribute to pe rceptio ns of

.iustice and how to apply these in organizational contexts
involving discipl ine and dismissal. page 456

ILO '~@-::); Specify the rela tionship between job satisfaction and various
forms of job vvith drawal, and identify the major sources
•;!
of job satisfaction in work contexts. page 468

ILO 'RQ-4 Design a survey feedback interventioh program, and use this to
·lfi
l~
... : .~i
promote retention of key orga nizational personnel. page 479

'"p ,,

450
 fi/IChurnin91flfl
Data from Eurostat indicates that Europeans are
less like ly t o ch ange jobs than American s. Within
the technology sector the av'<:,rage European vol"
untary turnover rate in 20'l 3 v11as 7. 9°/.J, compared
to 10.4% in Arn erica. It i '~ irnportmt t o keep in
mind that significant differ<:m ce~; Hxist betvveen
the various European countries. Germanic Europe
repoti:s low turnover rates: on average, only 7%
of Austrian, Swiss and German employees !eave
th eir employers. The An9 lo 1·es1ion sh ovvs th e
his1hest turnover rate in Europe with 13%.
[)ifferent points of vi ew exist regarding the
optin1al level of employee t urnover. O n a national
k:~vel , higher volunta1y t urnover rates are a source
of competiti ve ad vantage. /\n incmasin g num ber
of people willin g ly leavinq jobs indicates a recov ..
erinq labor ma rket and new opportun ities for
unemployed workers. Unlike forced layoffs th at
reduce the overall size of the economy, people
who turn o ver voluntarily often have li ned up
better jobs, and thus create a new job opening
for someone else after they leave. Th is kind of
''churning" does not affect the size of the econ-
omy and resu lts in a better person-job fit: workers
move across jobs that enable thern to l,:ie more
productive, often resultin9 in increased wages.
Ho weve r, hig her employee turnover is a
double-ed ~=ied swo rd ~ \l\!'hile churning may be
benefici al to the overall labor market as well as
t o individuals, it is not to orqanizations. Th ey
face substantial costs when replacing employ-·
ees: recru itment , advertising, tra ining new hires,
costs of temporary workers and intan gible costs
invo lvin9 lost p roductivity and stress on re main-
inq staff. i\ccord ing to Hay Group these costs
rn119e betvveen 50% and 150% of th~'" employee's
)
I
annual salary. Now do the math: for an organiza-
tion vvith 10,000 employees, assuming an aver-
age sa lary of €35,000 and a churn rate of 8%,
th ese costs are approximately €28 million .
Attraction and retention of valued employees
is critical. for organizations. Companies that man-
age to keep their employees satisfied record
low voluntary turnover rates, as employees feel
lim ited incentives to switch jobs. They often are
motivated, well p aid and feel a strong sense of
commitment. Low churn rates, however, can be
the result of more negative factors too. Driven by
unce rtai nty during times of recession, workers are
reluctant to leave thei r jobs, reducing the number ·
of job openin gs even further and the dficiency
with which the labo r force operates.
Although turnover rates for many European
economies are not w hat they used to be, ana ..
lysts predict an increase in the near future. Many
employees will be lookin g to change jobs in the
nexi: corning years. They suffered through years
of increased workload s without increased pay
and are looking to im prove their situation as the
economy heats up. Employers that failed to meet
the needs of thei r em ployees will lose their most
val ued people, whereas good employers will be
able to keep and attract high-performers. This
way, churning streamlines the economy and cre-
ates efficiency by eli minating weak competitors
and strengthening the m ost competitive firms.
SOURCES: Tanovaa, C. & Holtom, B. (2008). Using job ernbecldeclness
factors to explain voluntary turnover in four European coLintries,
IJHl~M . J\lo. 9, pp. 1553-1 568; www.radford.com/home/insights/
articles/2014/emea_tech_europe_leads_in_workforce_stabi lily.
asp; www.ldenbaum.de/Portaldata/3/Resources/documents/pclf/
cliskussionsbeitraege_personalmanagement/Kienbaum_Benchmarks_
for_lnternational_HR .pdf; www.haygroup.com/clownloads/nl/
are_you_missing_something .pdf. Accessed 6th May 2014.
451
452 Cfr-~ArPTER 'l IO Employee Separation and Retent ion

~ 1411'~'
fl Ill 13
riffl\ d'l r\! Ill G"f- ~ n ftY?l
··~ '·• '·'M~ 14}3 \j\/Jj ·~ ~- 111"M# t1 i1i
Every execufrve recogruiz:es the n eed for satisfied, loyal customers. If th e firm is
p ublicly held, H is also safe to assume that every executive appreciate~.; 1J11e need
to hav~~ satisfied, Joyal .iJ:iv~s!:ors. Customers an d jnvestors p rovide the financial
resources that a.How the organization to sm'Vive. Howeve1~ not every executive
u11.derstands the need to generate sat.isfadion and loyalty among employees.
Yet, as we saw ix1 the opening vignette, whereas voluntaxy tuxnover is aclUally
good for the overall econo:r ny, it is often very costly for some jndividual employ-
ers. This may even be 111e deciding factor w h en it comes to who wins and who
loses .in l:he con1petiHve market because retenli.on rates asnong employees are
relat~xJ to re i:-enlion rah'::::: mn ong cust01ners.1 hi fact, research has established a
direct lJn k belween employee retention rates m1d sales growth and companies
that arc cited as one of !:he "100 Best Companies to Work For" routinely outper-
forrn their compelil:ion on many other financial indicators of performm1ce. 111is
is especially H1e case in the r1e:rvice indusb.·y where the direct contact between
custor.rv~rs and e1nployees enhances the relationship between employee satisfac-
Hon ;:ind custorner satisfaction .
For e~G·rr.ople, Cosico Wl.iolesale is v\fell-known throughout the retail u1.dus-
try for treating iis employees bette:r than r.nost of its competitors. Costco pays
:ib hotffly wo.rkETs over $'.20 an how: compared to !l1e industry average of $12
an hom·. Costco also p•:iJv:i. d es i:omp<my-sponsored health insurance to all
1employecs, as •.l\reU as luihon reirnbu:rsement progran.1s that allow employees
·wh o s~ar t out at the lowe~>I: ievel of the shop floor to clilnb the corporate lad-
der. The result of this is that voluntary hu·nover withh!. the organization. is very
low for Ille retail industry. The tun1over rate among employees is less than 5%
in a cut-thxoat indus!J:y where the average isdoser to 30%. nus feeds directly
into Costco '~; business model and strategic plan where, due to their ernphasis
on lovv prices, 80% of their profit comes from membership fees . Despite the
fod that lheir me:rnbership fees are 20% higher than Walmart, over 90% of cus-
tom ers renew ead1 year, providing a stable and predictable source of income.
CEO Craig JeJj11ek notes, ''Y.le know it's a lot more profitable ii."'1 the long term
to nu1urniz:e employee turnover and maximize employee prod udivity, coITu-n.it-
m ent an d loyalty. H you treat consmners with respect and h eat empl.oyf::es with
respect, good things are going to happen to you. "2 ·

In add ition to holding onto key personnel, another hallmark of successful

finns is t.h~:i:ir ability and willingness to disn'.liss employees who are engaging in
counl:erp roduclive behavior. Indeed, it is somewhat ironic th at one of the keys
to retaining productive employees is ensux:h-i.g that these people an:: not being
made rni:3crable by supervisors or co-·workers who are engaging in unproduc-
tive, di~~ruptive, or dangerous behavior. Unfortunately, su rveys indicate that
xnany rn.m1agers- indeed as many as 70~/o--strnggle to give frank and honest
foedbad< to poorly perforn.1jng ~mbordin.ates, and then w j11.d up experien cing
and tok~rating- poor perfon.nance for v~~i.JT long periods.3 His precisely for this
~'.eason that. many organizations have resorted to forced distribution rating sys-
tems like those we discuss(:'d earlier :in Chapter 8, which require some percent-
age of em ployees to be given "unsatisfactory" ratings. Howeve1~ in the absence
of hone:sl:, accurab2, and d i.agnosh c feedback, even these systems do little to spur
iu:1.prow..:n.•cnl:. Fo.r cxampk:, at Iv1i,.::rosoft, ernp loyees felt that son1e m.anagers
·who \1\H~P2 poor at giving negative feedback just used the distribution system
 ...
CMAPTER 10 Emplbyee Separation and Retention 453 ·

a5 a crutch. As one M\krnsoft \i\TOrker li.oted, n ianagern would just say, "I really
vvan ted to give to you <J. 11:, but 1 had IJ:i.e cmve so I had to give you a 3." 4 Feed-
back like that does not give the employee any sense of justic~ancl does noth-
infS to promote focused hnp1~ovemenl:.
"Thus, to compete efox:f~lvely, organ izations must take steps to ensuxe that
good perfonners are Iillohvated to stay w iil1 th e organization, whereas chroni-
cally low performers <lH:~ aHovred, encou raged, 01~ if necessary, forced to leave.
Retaining top perfon:ners is not always easy, however. Competing organiza-
tions are constantly Kooking lo steal top performers, and "poaching talent" is
becoming an increa5ingly conunon ·Vll ay for orgauizations to build themselves
up, whilf; at lfo::"! sarne fon·~, tearing their competitors doY.rn. 5 It is also not nearly
as easy to fire e:rnployees as xnany people think TI1e increased willingness. of
people to sue their employet~ combined ·with an unprecedented level of violence
in the workplace, has r.nade dischm:s>in.g employees who lack talent legally com-
plicated. and personaHy da:ngerous.6 Ilor example, in 2010, a truck driver for a
beer distributor in Hartford, Connecticut, ·was dismissed, a11d then came back
and fatally shot seven O.)-V\TOrkers and hjs supervisors. This is not an isolated
incident and reques ts for ni.si.s coun sehng center services for laid-off workers
actu ally d oubled in ~he pr::riod beh1V een 2008 and 2:010.7
The p urpose of this chapter (the last TI:1 Part 3 of this book) is to focus on
ernployee sep aration and retention. The m alerial presented in Part 3' s previous
tv\TO chapters ("Perfonnance Management" and "Employee Development") can
b e used to help establish ·who ar.e the ouITent effective ·performers as well as
who is likely to respond well to futm e developmental opp01i:unities. This chap-
ter complei:e f.l Part 3 by discussing what f:an be done to retain high-performing
employees who w;:ixran t furlJ1er development 9.S well as managing the separa-
tion process for lm~r·perfor:ming employees who have not responded well to
developrnen.tal opportunitiE's. hii'l.'O~Mn·i:ary
Since nmch of what nes:!ds to be done l:o retain employees involves compensa- Turnovt!)'r
tion and benefits, Hus chapter also serves as a bridge to Part 4, which addresses Turnover initiated by
the organization (often
these issues in more d etait The chapter is divided into hvo sections. The first
among people who
examines i nvo]Till.lrrrl\:2l_ry Ji: 1uurm.ov~ir, that is, tun1over initiated by the organiza- would prefer to stay).
tion (often m:nong; people who wou.ld prefer to stay). The second deals with
vohun.&i.li.1'"J . truurnmre:ir, t.hai: is, turnover initiated by employees (often whom Vo!Mnti:lry TMrnov1&r
th e company would prefer to keep). Although both types of turnover reflect Turnover initiated
employee separation, !hey are dearly ruiferent phenomena that need to be by employees (often
whom the company
examined separately.
would prefer to keep).

Manag ~ng hm1!1o~unta ry "Turnover

Despite a company's best efforts in thie area of personnel selection, training, LO 10~1
and design of compensai.fon :system s, some employees will occasionally fail to Distinguish between
m eet perfonnance :requirements or ·wi ll violate company policies while on the involuntary·and volun-
tary turnover, and dis-
job. For eJCample, in 2012, Secret Se:rvice members responsible for protecting the
cuss how each of these
President of the Unibed Statlf..:s on h is upcoming trip to Colombia -were caught forms of turnover can
bringing back prostitul:<-~s to their hol~l rooms. Secret SeDJi.ce work ruies forbid be leveraged for com-
bringlng any foreig1:i naf.io:naJ, let alone p rostitutes, to a security zone prior to a petitive advantage.
Presidential visit:, mod hence il1ese einployees had to be terrninated.B Similarly,
when ahport security p ersonnd at r-.Tewark Airport were found sleeping on the
 ..
454 CHAPTER 10 Employee Separation and Retent ion

job, lher<'~ vvas no other option that w oi.tld. protect public safety other than forc-
h1g these in(Uviduals to find n ew· work )n a. different i.:ndustry. 9 v-n1en event~Jike
this happen organizations :n eed to invoke a discipline program that could ulli-
rnately lead to the individual's discharge. For a number of reasons, discharging
employees can be a very difficult !:ask 111at n eeds to be handled with the ufm.os t
care and aHcnlfon to detail
First, legal aspects to this decision can have important repercussions for tlle orga-
nization. Historically~ in the absence of a specilied contract, either the en1ployer or
tile employee conkl sever the employment relationship at any thne, TI1e seve1ing
o f J·:us l . couJd
l . ..re1ahons_11p
., . . ·. lJE': f:or ,; goo d cause, no cause, or even "b. a d cause.
ff fl fl fl

!E mplioymenii:-~l· Over liu11::r thjs policy has been referred to as 1li.e iemployment~at-willl dodrine.
wm Doctirin0. 111is employmenl:-at-wiJJ doctrine has eroded significantly over time, however.
The doctrine that, in Today ('.mplo\r(~Es who ;:u·.:' fired sometilnes sue their employers for wrongful dis-
the absence o f a spe- d1ar(;e. ;3orne judg{:cS h ff' T(-; b1.::en willing to con.sider employees who meet certain
cific contract, either an
employe1· or employee
criteria regardin1-r, longevity, promotions, raises, and favorable past performance
could sever the r(~vievv~:J <1G haviJ1g an im.phcd contract to dismissal only for good cause--even in
e mployment relation- Hi.e fd.o::: d direcl: lanc;uage in the cornpany hai.J.clbook that states a..n employm.ent-
ship at any time. al:-wi1! rd.ationsbivJO .•.
A ·w.rongf1.1.l d isd1m:ge sujt typically attempts to establish that the discharge
eitl1er (1) violated an imph1.:-2d contract or covenant (that isr the employer acted .
lmfairly) or (2) violated public policy (that is, the employee was terminated
because h e or sh{~ refused lo do someU1ing iJ.legalr unethical, o:r w.1safe). Wrong-
ful chscharge :-:·nits can also be filed as a civil :rights infringement. if the person
chscharged .is a member of a protected grnup. The number of such "protected
groups" is large, however, and includes, racial minorities, women, older work-
ers (over 40 years of age), homosexuals, disabled workers (including ll1e obese),
1Nh:istJ.e-blowers, people who have filed workers compensation claims, and if one
counts reverse discrin:unai.ion claims-Caucasians. Indeed~ as noted by Lisa Cas-
silly, a defense attorney for the firm Alston and Bird, "It's difficult to find some-
one who doesn't have some capacity to claim protected status." 11 This means that
in ahn ost any jnstance when someone is fired for poor performance, the alterna-
tive possibility that this person was a victim of discri.Irllnation can be raised.
Not st..u:p1·i.singlyr lhis has led to an increase in litigation. For example, in a
recent case at General Elec6:ic, an employee w as awarded m ore than $11 1nillion
:in a vHongfol d1:scharge suit.1 2 The vividness of these highly publicized cases
often cfrstort:> the perceptions of how infTequently plaintiffs actually lNin such
cases, however. For example, Figure 10.1 shows the base rate probabilities for
various outcomes in such cases. As you can see, a plaintiff rarely ach5eves a vic-
tory in ihi:s kLnd of case should it survive appeal (odds are roughly one-tenth
of 1 percent). However, the hi gh legal cost associated with winning the ca.se is
often enough to m ake some employers reluctant to fire workers. When 1l1is hap-
penr>, the employer's shorH:erm emphasis on staying out of court has come into
conflict vvitli. the long-term need to develop a competitive w orkforce.
For exarn.ple, one reaction to this dilemma is enduring long slxetches of poor
perforrnan1.:e in order to create the extensive "paper trail" that would suppor t a
negative achon. iNhil.e HR professionals often point the finger of blame at super-
v isors ·who have not done a dHigent job documenting past performance prob-
lems, s1.:1pervisor~.; often !:u:m. ar01md and accu::;e HR of being "nervous ]\Tellies"
who never seer.n satisfied 'with the amount of evidence provided b y supervi-
sors. J\,forcover, keeping poor perfonners in their roles does not directly affect
 ..-
CHAPTEIR10 Employee Separation and Retention 455

Out of 'I0,000 Stage Curnulathm Cost for a rflil!!IJ.lr~ 1@. -n

r::mployrnent Suits of Lawsuit Company to Defond <:i Single Probable Outcomes
Lawsuit of Wrongful
Fil.ING Discharge Suits

Settle (most settlements rt·. - ) ,)

7\000 · .p 1 h;0J.O
<Xe fo r nuisance value) ~
.SUMIVIARY ----~-=----~~.-..-~~~·"""~~~
.... ... . ... JUDGMENT ·.·· >1;:,
C:iet res olved by - - - - -. , .'\ .

---'~:::~~ .:i~i--
2,400

·--.'rl-... . . . . .,.,rr......
~ .,..,,,...,.,._.~----~·

----- -----~ ~ - ..
. -fo'~---·
END OF TRIAi.
Trials are won by ·$:2!;/Gi.O'O(Jf :
pla intiffs .. .., . . ; , .. ,
.,..~.~~~l.,-.,....,,...-,........,...,.-.~~~~~~A..,...,........,..,.,,.,,,.,,,.,_ _ _,.._........,......,.,..,..,., ., ·-· .-·'. : ··.'~ "'~~j;i;·'~<'.·; ,';.'·..:·1::··' , / .;/ ·'
~ APPEAL
-·-·- ---··--···----- /i.•.:1(·- - - - -----·--- - - - - - --
t f1 laintiH victories survive

· ·- · - - - - - - - -'~1~'~---··---------- ap~~-~---------'•'fF.1.~ -~~W!/!i'i'Jfli.WJ~ ,~ l ! /! f!iZ!\l,\i'lt'f! J J !,~'fJ /J;,. ..

"'Out of 22 t rial l0:;5es typically appr:aled by companies.

')OUHC[S• M . Orey, "Fear of Fi ri ng," Business\l\leek, ,'l.,pril 23 , 2007, p. 60; Cornell Law School; Hofstra Labor 8c
f.mp/oyment Caw Journal; B\.,Y reporting.

HR professionals every day, like it d oes supervisors, V'rho have to watch help-
lessly as the morale of the rest of the worHorce erodes. Indeed, there is noth-
ing mon~ corrosive to team-based slr uctmes ihan wide variability in effort and
oerfonnance
.. behveen different members. As one member of a research team
in a phan n aceul:ical fin:n noted with respect to the .idea of "carrying" a poor
perfonncr for fear of litigation, "As a female and. also of a m.i.n_ority race, Xam
a pp alled and [3addened by this scenario as I must bear the weight of this con-
s ianl underperformier."13
/\nother questionable reaction is to initiate punitive actions short of termina-
tion, iJ1 an effort to get the employee to quit on his or her own. TI-us reaction is
oftetl a result of frustrated supervisors, who, unable to fire someone because of
H R, resort to punishing the employee in oilier ways. This might include giv-
in g the p erson a low-level work assignment, a downsized office, or some other
fmm of undesirable treatment. The problen1 vvith this approach, however, is
thi:\1: it J.night be construed as "retaliation," and the employer could be sued for
this, even iJ the origjnal discr.inunation suit is dismfosed. In fact, some attor-
n ey:; advis<:: any clients who cu:e expecting a poor performance appraisal or
r;orne other adverse job event to file a discrimination suit as part of a preemptive
attack i:ba!: sets up the groundwork for a subsequent "retaliation" lawsuit.
Finally, a third unsustaii1able reaction is to pay off the employee wiil1
thousands of dollars in excess severance pay in return. for \Naivh1g their right to
sue for w rongful dismissal. That is, even i£ the employer feels the case is unwar-
ra nted, in order to avoid litigation itseJf, the employer may of.fer the terminated
 ...
4...56 CMAPTER 10 Employee Separation ;~nd He!:ent ion

ernployee $20,000 or 1nm·r:; to 1Naive thefr right to sue. The problem with this
strategy is that it se~:s the 12xp ecta.tion drnt all poor performers are entitled to com-
pensation on lheir 1Nay out the d oor, and this eventually increases the aro.ount of
p otential fuhll'e li!:igati.on by rewarding frivolous charges. A more effective and
sustainable strategy for em.ployers would be to develop a reputation that you
will .defend the fin:n s right to terminate low performers, rather than invite bul-
1

lying by an overly aggressive attorney or employee. As defense attorney Mark

Dichter notes, "I ccu1 design H R policies that can virtually eliminate yo~ li5k of
facing employment daim_s b ut you'U have a pretty lousy workforce. At the end
1

of the day1 you have to nm your btl.siness. 11 11

The costs associated ·with let.Jing poor performers stay on within the organi-
zation cm.mot be chscorn:1i:ed. Organizations that introduce forced distribution
rating systems where lmN performers are systematically identified and, where
n ecessa:i.y elhn:inated from p ayTOUs often experience quick improvement gains
in the rfu'lge of 4D%. Over l:hne, :research shows that the gains achieved by such
progrmns get smaller and sma.Ue1~ but the .initial jump illustrates how many orga-
nizations drift into a sihmhon where toleratil1g low performance has become :a n
unsustainable business p r;;i dke.15 Given the critical financial and personal risks
associated with employee d.ismissal it is ea.sy to see why the development o;fa
1

standard ized systematic approach to ?iscipline and discharge is critical to :all

1

organ.izahons. 11lese dedsions sh.ould not be left solely to the discretion of h1di-
1
vidual managers or supervisors. In the next section we explore aspects of an
effective discipline and d ischarge policy.

l O 11©-2 As we n.oted earlier in Chapter 8, ou1tiel!JJme faimess refers to the judgment

List the major elements that people make ·with resp ect to the ou.tc01nes received relative to the outcomes
that contribute to per- received by other people vviH1 whom they identify (referent others). Clearly, a sit-
ceptions of justice and
how to apply these in
u ation 1Nhere one person js losing his or her job while others are not is condudve
organizational contexts to perceptions of outcome u_n.f airness on ll1e part of the d ischarged employee.
involving discipline and Tile degree to which this potentially unfair act translates into the type of anger
dismissal. and :resenllnent that might spawn retaliation in the form of violence or litigation,
howeve1~ depends on perceptions of procedural and interactional justice.
Ouii:~omlll! 1Fairm.1ss
The judgment that Whereas outcome justice focuses on the ends, procedural and interactional jus-
people make with tice focus on n1.eans. If :rnethods and procedures used to arrive at and implement
respect to the out- decisions that impact the employee negatively are seen as fair, the reaction is W<ely '·'r'i
comes received rela- to be much x:no:re positive fhan if this is not the case. Proicedurru just.ice focuses
tive to the outcomes
received by other
specifically- on !he meUwds used fo defennine the outcomes received. Table 10.1 details
people vvil:h whom they six key principles that dete:r.onin"~ whelJi.er people perceive procedures as being
identify. fair. Even given all. the :negafrve ramifications of being dis1nissed from one's job,
,}·'.Jl·I·
the person being dismi.ssed may accept the decision with mmimum anger if the ill
IP'rn1:~durnl Jus11:ke
procedures used to arrive aJ the decision are consistent, unbiased, accurate, cor··
.A concept of justice
focusing on the meth- rectable representative, and ethical \Nhen i:he procedures for the decisions are
1
I
ods used to determine perceived in this fash:(on, U:i·1~ individual does not feel unfairly singled out, aii:-1.d ]. .
the outcomes received. this helps maintain his or her faith i"n th~ system as a whole, even if he or sheiiB
unhappy 1Nith the Gpecific rkcision that was triggered by the system.16 ....·,1:. ,
Lack of bias ;:i_nd i-nfo:r:m.a tional accuxacy are tl1e most critical features of the ·.J
·~
six, and the potentiaJ for subjective judgments to be biased means that employ-
ers often have to go beyond .simple supervisor evaluations in most cases.17 In. an ' '

'
'··'·'
··-!
~ ~' :
 ...
CHAPTER 10 Employee Separation and Retention 457

('I) Consistency. The procedures are applied consistently across ti111e and other Six Determinants of
persons. Procedural Justice
(2). Bi<'.1s supprnssi<;rn. The proceclur3s.are.,appl ied l:;iy
ii')te re:~t U1 the outcome and ·no prior prejudices
(3) Information 21c<:tff•Ky. Th e iJrocedure is based on information that is perceived
to be true.
(4) CorrHctability. The procc~ch:.n·ehas built-in safeguards that alfow one
rnistHkefj C)i' bad decisions
(S) ltepresentativene:;s. The !Jroccclure is informed by the conce rn s of all groups or
stakeholders (co-workers, customers, owne rs) affected by the decision, in clud ing
the individual beinq clisrn issecl.
(6) Ethk:3lity. Thti procecluri':" is consistent with prevai ling moral
pertain to issues like inv;,,islon ofprivacy ordec~p~lorL

effort to ensure that :h'-'::y have an airtight case many employers have turned to
private investigators to collect: objective evidence where necessary. For example,
when a Florida hospital suspected a worker vvho claimed she was out with the
flu for tluee days was actually totally healthy, they .hired a private investigator
to look into the case. In fact, the woman had gone to Universal Studio theme
parks those days m1.d the investigation 1.mcovered photos of her from three dif-
ferent roller coaster rides (which routine~y photograph riders and then try to sen
the pictures to them), as 1Nell as a video where she volunteered as part of an ani-
mal act---all lime-stmnped and dated. Needless lo say, this led to a termination
that the worker was not interested in d1aUenging.rn Although this may be an
ext-renie example, in general, the goal of an effective procedural justice process
is that the person who is terrn.inated knows exactly v11hy this \l\ras the case, arld
he or she may even be able to use the informahon to improve their chances at
staying gainiully employed at theix next job.19
Whereas procedural justice deals 11>.rilJ-1. hmv a decision was made, interadional ~wrt~rnctio81\a~
justice refers to the interpersonal nat-ure of how the outcomes were implemented. For JM:stke
example, in many docun.i.ented cases, after giving employees tli.e news of their A concept of justice
referring to the inter-
terrnination, employers inunediately have secmity guards whlsk them out of
personal nature of how
the building with their various personal items haphazardly thrown together in the outcomes were
cardboard boxes. This ships the person of their dignity, as well as their job, and implemented.
employees who wil11ess this happen to a co-vvorker shov1r a drastically lower
level of organizational commitment from that day forwm·d. 20Table10.2 lists the
four key determinants of interaclional ju.stice. When the decision is explained
well and implemented in a fashion rJwJ is socially set1sitive, considerate, and
empathetic, tlus helps dehrne some of: the resenhnent that might come about
from a decision to discharge an employee. As one human research director
noted, 1J1e key :is to ensuxe tha~ the affected in.dividual "vvalks out witli. their dig-
nity and self-respect intact." 21 Going through these steps is especially important
if the individual who js being managed is aJready high in hosiility, and hence a

1~bu~ 'lllfJ).;,e
(1) Explanation. Emphasize aspects of 1::irocedural fairness that justify the decision. Four Determinants
(4) Soei.ai senriithrity. Tre<it the person with dignity andr espect. ·· · · of lnteractional
(3) Conskkmtion. Listen to the person 's concerns. Justice
(4) Empathy. Identify with the person's feeling;;.

45g CHAPTIEF<; 10
/'\U ~r~~r{Jt)mt~Jir,1~ f~)n~,Fn .rrc~~
1:~ r·~ ~"°'"~fttk»ii1l (;i\J)iR)
/\ 1nethod o( r·e :;o/vin9
dispul:e:; that doc:; not:
rely on the le9a l sy; ..
i:ern. (){ton proceeds
;·hrc>ugli r:he frwr s1:<19es
o{ op!?n door policy,
peer revi0111r, rr)ediation,
;,1nd arbitration.
/-\11 r::;<arnple of
::i !''roqrc:;:-;ive
[ Ji'.:;cir,\lin-r: 1=- ro9r;=:irn
1
1
...
Fmployce Separation and Retention
thxeat to respond in violent fashion. 22 Clearly, there at."2 ofo~n
h1di.vidual. differences in how strongly people read to p er-
ceived iniustice and whe1her or not these rule5 have been
violated, ,even in the exact same situation. Some people see
unfairness in every sihiation and react slrongly1 vvhereas
others a·re more trusting, and this has to be recognized when
explain ing procedures to different types of people. 73
PROGRIE551VIE D~5CIP'UNE AND
AlTIERIMAlilVlE rnsPUTE RESOlUTION
Except hi H1e most exlTeme cases employees sh011id gener-
1
ally not be terminated for a first offense. Rather, ten:nina-
Hon sh ou ld come about at the end of a systemati.c discipline
prog·-J·;:im _ Effective discipline programs h ave two cenlTal
com.ponents: docmnentation (which include.s spedfic pub-·
lication of work rules and job descriptions that should be
in piaKX' pd or to adrrill1istering discipline) and progresGive
punitive
..
measures. Thus, as shown in Table 10.3, .punih ve
rneasu r1.2 s should be taken in steps of increasing magnitude,
;~nd only after h;Jving been dearly documented. Tius may start with ;m unoffi-
ci.:i1 'Narnn.t1g for the first offense, followed by a written reprimand for additional
0Hen::0ec~- /\1: some poin.t, l ater offenses may lead to a temporaiy suspension.
Before .a company suspends an employee, it may even want to issue a "last
d• nncc n otification," indicating that the next offense will result in tern0.inaHon.
Stich procedures n1a.y seem exasperatingly slow, and they m ay fail to meet one's
ei·ioh ona i ne12d for quick and satisfyn1g retribution. In the end, howevei~ when
problem '~Tnployee.s are d isch arged, the chance tl1at they can prove they were
dir:>charw~d for poor cause has been minimized.
Al var .ious points in th e discipline process, the individual or the organiza-
hon rni3-J1t v1ran!: to bring in outside parties to help resolve d iscrepancies or con-
CHr.::l::;. /\r~ <:1 last resort, the jndividual :might invoke the legal system to resolve
H1.::':~1e l.JiJXof3 of conflicts, b ut ijl order to avoid this, more and more companies
,':~ re turn)J)I,_; l:o ~l!:em.mfo.r~ J.ispu~ie riesO!luHon (AD:R) techniques that show
p ronii.ne i.n resol.vi_ng disputes in a timely, conslTuctive, cost-effective manner_
/\hcq l.aJive di~-;pute resolution can take on rnany different forms, but li1 general,
F:lr5t off-t:_~n~.1c Unofficial ve rbal warning
ScKc•nd offense OHiciai w1+tteh warr\{hfJ?' .
Third olfensc Second official warn ing, with threat Document Hied
of tempor~1·ysus1)e~si~~
l~;Jrnpota ry sUspe.nsion artd '~la st- filed
chonce notificatkiri" · · · ·
Tennination (with right to go to Document filed
arbitration)
 ...
CHAPTER 10 Employee Separation and Retention 459

.ADR proceeds tlu:ough the four stages shown :in Table 10A. Each stage reflects a
somewhat broader jnvolvement of different people, and t.he hope is that the con-
flict will be resolved at earlier steps. However, the last step may include binding
arbitration, where an agreed upon neulTal pru:ty resolves 111e conflict unilaterally
if necessary. The key 1Hord in tlus context is "neutral," and if there is one com-
mon complaint about ADR systems it is that, more often than not, arbitrators
wishing to do more business lean in favor of the organizations that are paying
111eir salaries, and noi: the workers. As Damon Silvers, the general counsel for
the AFL-CIO noted, "1h~re is a mountain of evidence faaf: these kinds of things
are captive of the industry," and this makes some workers reluctant to abide by
their rulings.21 This reluctance sometimes leads to lawsuits being filed anyway;
hence, on the flip side, some employers find that ADR, rat.her than sb:eamlining
the process, just adds another layer to the problem.25
Whereas ADR is effective in dealing with problems related. to performance
and interpersonal differences in the workplace, ma..ny of the problems that lead
an organization to want to terminate an h1dividual's employment relate to drug
or alcohol abuse. In these cases, the organization's discipline and dismissal
program should also incorporate an employee assistance progrnm. Due to the
increased prevalence of EAPs in organizations, we describe them in detail here.

!EMPLOYEE ASSISIA~KrE AND WEILli\U:ss PROGRAMS

An employee a.ssiafrruT1.iee JP!l'ogram OEAP) is a referral service that supervisors 01; Emp~i:iiyee
employees can use to seek professional b:eatment for various problems. EAPs Assni>ta111c:e
vary widely, but most share some basic elements. First, tli.e programs are usually Programs (lEAPs)

~ ···'II{~
' ' .!~
identified in official documents published by the employer (such as employee
handbooks). Supervisors (and union representatives, where relevant) are trained
to use the referral service for employees whom they suspect of having health-
Employer programs
that attempt to amelio-
rate problems encoun-

: ?: .: ~~~· ·
tered by workers who
related problems. Employees are also trained to use the system to make self- are drug dependent,
~:'" ~: i1~,~~ .. '
ji::; referrals when necessary. alcoholic, or psycho-
TI1e key to the effectiveness of an EAP is striking the right balance between logically troubled.

<l<1~1·ti
collecting information that can be used to promote employee health on the one

lf'ab~e110.4
Stage ·1 : Open-dQor policy Stages in Alternative
The two people in conflict (e.g., supervisor and subordinate) attempt to arrive at a Dispute Resolution
settlement together. If none can be reached , they proceed to
', \:.'··~t
. ;•J'.:;;Jii
' ·,) ,~J ~~]~;~~F~t~:~,~w::'ats~:~~!:s~.~~.,~~~~i~;~{~~~~~~~j~t~~t;:
·an-ive i:lta sehl~'.') rf\ei1t: !f.1i0ne can b€r reathed;theyi .J:)roce~dto ·. · ·· · ' ·
·'
Stage 3: Mediation
IC\ neutral third party from outside the organizat ion hears the case and, via a
non binding pmcess, tries to helrJ the disputants a1·rive at:a settlement. If none can
be reached , the parties proce<-od to

11~1~~~i~~~~~~~~\~lsi~~~~~~:tJ~tt~l~~~Ui~~:~f~~r~~ ye~
··. ."':·.'" " :.'.!;'._'······ .'':
1

~ xlj.
:>.: ~1
460 CMAPTE~ 1!()) Employee Sc~parntion <:Jnd R2tention

hand and iJie employrc:2' s dgliJ to privacy on the other. In particular, :in an age
of digil:ahzation, orgmili:;ations can do a great deal to help employees provide
more detailed a.nd. acc.'1.lri:i.te information to their health care providers. For exam-
ple, J.nos1: people v,rho go to tl1eir physician fill out a form on their past history
over and over agam; in rnany cases, because they do not feel well or feel ro.shed,
they wind up preparing ;,naocu.rate and mu:eliable histories. 1his can lead to
treahnent errors and cornplications that are bad for the patient and dxive up
t11e health care costs th.at companies have to pay. To help solve U-tis problem,
Wahnart prnvid12~> c:rnployecs with a digital tool that allows them to enter their
health data once, very slowly ~md carefully, and then keeps this in digitalized
form so that it Gm. bt:: accessed by health care providers whenever it is needed.
nµs reduces errors ;)nd cosl:s, but it also places a great deal of personal :informa-
tion that needs to he prol:ed;f:<l in the hands of the employer.26
Whereas EA.P3 die~l wilh en:i.ployees who have developed problems at work
because of hca.Hh~rdated i t3S1.K' 3, employee wellness programs take a proactive
and preemphve focus on trying to prevent health-related problems in the first
place. Some of these pro15-rarn s take a very positive approach and are not very
confToven:;jaJ. for exmnple, ::iccmmting firm Grant Thornton spent roughly
$200,000 jn 2:008 to help rnore than 200 of thefr employees train for and run in
m a.rai:hons. Mosit: of these crnployees reported that they would not have talcen.
fuis step towm:d a rnore acti.ve lifestyle without this kind of support.27
Some orgm1ization.s even reach beyond the employee and offer incentives to
tl1e worker's spouse and famjly. After all, if the organization is actually insur-
ing everyone in the fru:nily, there are savings to be made by placing the focus
on the whole .famiJy. Fm example, Aetna offers a $1,2.00 reward for employees
who can get th.eir spouse and children to sign up fot its corporate wellness pro-
gram. These kinds of financial incentives typically pay for themselves because
research suggests that for large employers, every $1 spent on wellness results
:in a saviJ_1.gs of $3.27 when it comes to costs.:m Indeed, adding a social element
to wellness programs often increases participation rates and effectiveness, and
so some employers sponso.r h::am-based competitions that pit various sub-units
against each other in ml effort lo spike interest and motivation. It is one thing
to let yourself down and not meet yom exercise goals, but it is a different thirig
altogether when yow.' failure results in the failure of your team. For example,
when em.ployees in city govenunent in Charlotte, Virginia, were~ asked to par-
lid.pate in a sJ.;c.·1Nerek chaUen:gr,~ where the only reward was bragging rights
within the mp1niza!J.on., participation :rates doubled and the employees logged
dose to 9,.000 how-s of exETcise.?.9 Sin:Ulm· competitions have been successfully
staged behAreen various rm1.all businesses, who as a group tend to shllggle when
it comes ({) offr.:.ring wellness programs.JO
Not an employees wi11 necessarily respond to positive incentives like this,
howeve1~ and hence :mme companies take a more punitive approach to weH-
ness. ScoU:' s rvhrack' Gro Company is at the forefront of firms that are tal-J.ng
extreme [?teps to ciuta:il ri~3ing health care costs. Scott's has a "no-tobacco policy"
that bars an crnploy£2s from smoking or chewing tobacco (which was common
in the conrpaLny). In addition ho this, employees being considered for employ-
t.11. . • u. Do vou dr1'1~ - alcol1ol "'"1d 110'·I)/1- mu~1...7
1
"P " ::-1·e :::J CPJes'-<on"'
1
m...'l)~--.d. --- . ;:i.dcod
~.- -'.t the>
•-'L •JJI .... ..:u, ... ·fn]
. ., . n.·1ATu·)<J"
· · ··---~~J ......J.~. J .. . ll\. .
UJ. 1
1
• Ui~

Do yo-u suffer frmn high chol~~s!:erol or high blood pressure? Are you depressed
or b1.u'ned-ouf( How si:ressfoJ are your relutionships w ith your spouse or clill-
<lren? VV1_1aJ were the cmJses of death for youl' parents? All of this seems highly
 ...
CHAPTIEK-t 'l 0 Employee Separation and Retention 461

intrusive and an invasion of privacy on lhe part of the employer; howeve1~ the
company only took this step when it became dear tl!at its 'Workforce was in such
bad physical shape that the costs it was ]ncu:rring for health care expenses were
d os·cr'ov-ing
I\~ .J.. ·i·r<' ab~l1"tv '1·r, "'on•pr->l·p
-~··-Cl 1L .) .'U A
'\.... efft=>cl::iv
. IL_. - .... ·-- .........\v31.
,_ .t~
0
) ..

.Altl10ugh perhaps on t':le edge of ho1N far it is wi.Hin.g to go to reduce tJ1ese

costs, Miracle Gro is certainly not a.lone in term:::. of its -concerns about such costs.
For example, Michelin Tire Company not only •:ollects hea..H:h-xelated data fr·om
employees, b ut jn addition to this, p1.mishes ern.pl.oyees who fail to mc:'et health
goals. Michelin employees vvho have high blood pres~_:;uxe or whof;e waistlines
exceed a certain limit (40" for men and 35" for v1romen) are forced to pay an exh·a
$1,000 for health care coverage. TI.us might seem pretty strict for a company
whose mascot is tl1.e "Bpare-hred" Michelin, Man, but sin1.ilar penalties have
been levied by CVS Caremark., Honeyw·ell, and General Electric. PJJ of these
companies have found that peoplr~ react more f,trongly to Htreats of losses than
promises of gains. Reward p:rngrnms al: these COffPpan.ies foat offered incentives
to get healthier sjmply did not seem to wo:rk; h.owever, punfohment-based pro-
grams definitely get people's attenti.on. 111.ese con:ipanies have also fmmd that
roughly 80% of heall:h caxe costs are gene:rn.ted by just 200/o of i:he workers, and
a staggering 1% of workers generate 33'% of the costs. 1argeting these specific
individuals has proven to be an efficient v.ra.y to gel: costs under control, but
there are legal linrits to how far employers Gm go with these sorts of penalties. 32
Most employers that nm. the numbers com£ to shnilm· conclusions that a
small percentage of 1Norkers drive a big percf:ntage of costs, arid it is not dif-
ficult to predict which workers are in this group . Indeed, the very .factors that
Miracle Gro screens for reflect this list of vali.d. pn:>cHctors. Thus, although this
may seem invasive from the employees' perspeclive because a lot of the trouble-
1:'.0me behavior occurs outside of work, much of this becorne5 .iob-related TNhen
the costs are born by the employer. Indeed, <J recent survey of 135 e~'.(ecutives at
.Fortune 500 firms indicated that more than 60(10 of thern belk~ved that employ-
ees who exl1ibit unhealthy behaviors such as smokh1.g or failing to n.1;mage obe-
sity should be required to pay a greater share of health insurance premiums.33
lnd.eed, employees who srnoke are often further subgrouped and ostracized by
policies that make tl1em smoke outside company facilihes. AB one srn.oker who.
works for a publisher note:d1 "Ifs a little bit humiliating when you realµ:e that
you look like a herd o.f dw.nb animals corralled outside i11e huildfag."34 ·
In the meantime, individual employers have to make thei.T ov1ll1 decisions
regarding how to ba.l;mce privacy concerns v11ith co::~t concerns and how much
pressure to place on employees whose lifestyles put thern at risk. 'TI1ey also
have to decide how intrusive they are going i:o be into ·2rnp1.oyees' lives, know-
ing that some will lie and falsify records in order to avoid more costly premi-
ums or losing their jobs. For example, at the Whirlpool plant: in Benton Harbor,
Michigan, 40 workers who were caught on videotape smoking in the parkL."1g
lot had to be fired because they cl.aimed tlley >Nere no:nsJtnokers on 1.heh' benefits
enrollment form. 3~;
Although financial costs are often foe driving force behind these programs,
one should not lose sight of the fad ill<J.t l:he quality of life enjoyed by employees
both on and off tl1e job is also affected. For C%-11nple, wh.iJ,? some employ0es 1Nere
suing Miracle Groover its progrmn, anoth~:cr employee:->, Jue Pellegrini, was cel-
ebrating the fact that lhe very same program 3ff\io~d his hf.2. /\!though physically
fit, Pellegrin.i's health assess:ment indica ted a bigh l(:vd of cholesterol, and the
 ..
462 CHAPTER 10 Employee Separation and Retent ion

company forced him to see a physician. n1at trip to the doctor revealed. a 95%
blockage in a heart valve that would have probably killed him within five days.
Obviously, PeUegrini has a different perception of Miracle Gro's policies than
most employees, noting that ¥Then it came to his own lHe, "It was that close."36

Ol\JJlf PtACIEMENl (OllJJNS EllJNG

The permanent natu..re of an e1nployee termination not only leaves the person
angry, ii: also leads to confusion as to how to react and in a quandary regarding
what happens next. If the person feels there is nothing to lose and nowhere else
to tum, the potential for violence or liti.gation is higher than most organizations
Qr.~1cpieic~m<!llnil: are willing to tolerate. Therefore, many organizations provide outpfa.cern1ent
C<1.MJJfi11!li1<ulnni!9J counseH!l11.g;, which hies to help dismjssed employees manage the transition
Counseling to help from one job to another. Then~ is a great deal of vaiiability in the services offered
displaced employees via outplacement prog-ra:ms, lypicaUy :includjng caTeer counseling, job search
manage t:he transi-
tion from one job to
supp ort, resume criti.ques, job interviewing training, and provision of network-
anothei: ing opporhu.1.ities. 111e n u1pber of companies offering outplacement support
has increased dramatically in recent years. 111.is was most cleasly evident in. the
recession of 2008, when lJle percentage of employers offering this service was
55% compared with just 39'/'o cl.ming the 2001 recession.37 ·
Many have criticized the effectiveness of outplacement programs and charged
that the companies that offer Hi.e service care more about avoiding litigation
and bad p ublic relations than getting former employees new jobs. Many pro-
grams tal<:e a "one-s:ize-fits-aJJ" approach with standardized training programs
not tailored to IJ1e specific needs of clients and industries, as well as boilerplate
resurne services thai: wind up sending out almost identical documents for dif-
ferent workern. Indeed, i:he evidence suggests that 40% of workers offered such
services never show up, ;md another 30% quit after one or two sessions.38
At the very least, though, outplacemen.t counseling <::an help people realize
that losing a job is not the end of the world and that other opportunities exist.
Indeed , for many people, losing a job can be a critical learning experience that
plants the seed for future success. For example, when John Morgridge was fired
from his job as branch manager at Honeywell, it made him realize that his own
assertiveniess and need for il1dependence were never going to cut it in a large,
bureau cralic :inslihrlion like Honeywell. Morgridge tookhis skills and went on
to b uild cornputer network m aker Cisco Systems, which is now worth more
than $1 billion. 39 This is a success story for Morgridge, but tl1e fact tllat a major
corporation like Honey-well let his talent go certainly reflects a lost opportunity
for the cmnpany. Retaini11g people who can make such contributions is a key to
gajnin.g and maintaining competitive advantage. 111e second half of this chapter
is devoted to issues related to retention.

~~ai~1ag~ng \loh~mlftary Turnover

In the first sect.ion of this chapter, our focus was on how to help employees who
were not contributing to iJ.1:e orgaxiizaHon's goal in a marmer that protected. the
firm's ability i:o compete, and on h ow to support former employees' transition
h1to al.lernative employment. Jn tJl..i.s second section, we focus on the other side
of the separation equahon---preventing employees who are highly valued by the
 ...
CHAP'TER '10 Employee Sepdration ancl Hete.ntion ,. :?.()~~~

organization fr·onl leaving (and perhaps even joining the competition). At the
organizational level, ll;.n10ver results in lowered ·w ork unit perfon11ance, whjd.l,
in hffn, harmc,; lfo:~ firm's financial p erformance.40 This causal chain is espedaUy
strong when the organization is losing its top performers. Research suggests
lhat some of the organizai:ion' S top performers are up to 300% J.TlOre p roductive
than average employees, Rnd retaii"ling these vrnrkers is especially clifficult.M
Moreover, in organizalions !:hat rely on long-term customer contacts, the loss of
1vorkexf; VI.rho are cenh·al l:o custo:tner networks can be especially disruptive.'12
In general, at least when. it comes to complex jobs, there seexns to be a ctu·vi--
J.inear relationship behAJeen past performance and folure tur.nover, hl the sens<e
that l:he worst and best performers tend to leave more frequently than those
a l: the average. Low performers often see the "writing on tile wall" and quit
be.fore l:h<-:y are fired, especially if l11ere is evid ence that thefr relatively poor per-
forrnance is actually getting worse over time. 43 Jn conh·ast, the best p erforrners
oflen have rn.a ny other employmentopportunii.ies and are subjected to rep~ated
poaching attempts that eventuaUy take their toll Lmless the orgartizaiion can
keep coming up with pay rnises. 44 h1 other cases, rather than offering higlv2T
wages, some employers try to gain loyalty from their employees by offering
lavish benefits. For exarnple, Google is renowned for its outrageous €mployee
be:nefitt>, which include 11 free gourmet cafeterias, five fully staffed on-site doc-
tors' oHiccs, on-site car vvashes and oil d1anges, free on-site washers and dryers,,
11nJirniled sick days, aU-expense-paid ski trips, free shuU:les with VViFi for com -
:u1utcr:3, lap pool, climbh1g wall, and volleyball courts.
Google's ernployees respond to all of this by working incredibly long hours
~md by putting all headhmlter calls into theix autorejed bin. Most employee~:.;
<.rre coxnrnitted to the orgcu1ization's general well-being not for annual raises but
b~x~nv:3e they are heavily vested in stock options that will ni.ake them aJl mi1Jfo:n-
aires if the company can maintain its cw:rent trajectory. Teamwork is dem<J.nded
and salaries, v11hile not high for the indushy, tend to be mufonn in order to pro-
mote collaboration and teamwork while disco1U'aging "lone wolves." Ind.ividu-
als are given autonomy to nm their own experirnental p rojects (up to 20% of
their time can be devoted to these), but collective decisions on most large-scale
group projects are arrived at via open and spirited public debates that tend
to unfold very quickly.'15 Indeed, the evidence seems to suggest that younger
employees like those at Google, sorneti..mes referred to as millennials, prefer
benefits to cash , and generally want i:o work in an envirorunent that is fun, col··
laborative and provides a great deaJ of inunediate feedback and opporhmities
for development. This generation of employees has a lot to offer employets,
j11duding the fact l11at they are technically skilled, racially diverse, socially inter--
connected and collaborative. Howeve1~ the annual rate of voluntary turnovier
arnong millennials tends to be higher than that associated with other genera--
hons, and this has led some to conclude that they are impatient and entitled.
Still, as one experienced manager n otes, "If they don't feel like U1.ey're mahng D.
contribution to a company quickly, they don't stay, but ii you provide thern V·.ril11.
the right envi.ronment, ll1ey'll 1Nork forever- around the clock."46
I:n. this section of the chapter, w e examine 111e job withdrawal process !:hoJ
characterizes voluntary employee turnover, and we illustrate the central roi,;:;
that job satisfaction plays in this process. Replacing workers is an expensive
undertaking, and recent estir_nates for 2008 place this cost at roughly $50,000 for
professional or managerial w orkers and $25,000 for clerical or maJ.mfachu'.lng
 ...
464 CHAPTEH: 'A0 Employee Separation and i;:etention

employees.ll7 Replacemli:-;nt costs reflect just a tip of th.e iceberg, howeve1~ when
iJ.: comes to the costs of job dissatisfaction and tum.over. There is also a demon-
stn.:i.bIe relationship betii1re.en employee satisfaction and customer satisfaction at
th e individual level,'18 and turnover rates and customer satisfaction at t.he orga-
:nizatio:naI levd.19 fodeed, H1e whole employee satisfaction-firm performance
relaiionship can becmne part of a virtuous cycle, where firms witli. more highly
satisfied r~mployecr.> perfonn better and hi.crease their profits, which in tw:n they
use to shore up en:iployee pay and benefits-further adding to th.eh' competi-
tive advantage.Go We will d iscuss what aspects of job satisfaction seem most
critical to r~tention and hov\r t.o measure these facets and we show hqw survey-
feedback interventions, designed around tllese measures, can be used to strate-
gicaUy rnm1age the voluJ11tar.y ruxnover process.

Job withdraw.;11 is a se~ of behaviors that dissatisfied individuals enact to avoid

the work situation. The righ t s.i.de of Figtlte 10.2 shows.a model grouping the
overaU set of behavior~; jn J:o three categories: behavior change, physical job
w ithdrawal, and psyd1ologkal job withdrawal ·
We pn::'.:sent the various fonll..'.> of 1Nithdrawal ill a progression, as if individu~
als try IJi.e next category onJy jJ tli.e preceding is either unsuccessful or impos-
l?nogrns!;\non <W·W
WlthdlirmM!il1!
sible to irnplentent. Tilis th eo:ry of p1rogr~ssiil\Jllll of 'lilrH:bdrawal has a long history
and n1a11.y aclher(c:nJs. 51 For example, someone who is dissatisfied with the job \~·1
' 'ii! !
l
11
1

Theo1y 1.hat dissatisfied
individuals en'3c1: a set
of behaviors in succes-
sion to iJvoid their work
situation.
oir orgm1iza.ti.on might not be able to just jrunp to axi.other job .tight away but :
w ill insi:md either disenga.f;e tempora:dly (through absenteeism or tardiness)
.:;· ji).
or psyc.hofogi.cal.ly (~hrnugh lower job involvement and organizational com- Jn
:;/ii<:
mihnent) until the right opportunity comes along.sz For example, as we saw
in the vignel:fce Hlal: opened th ,\s chapter, the chmn rate associated with normal
m ovement in and out of jobs seemed to be down in recent years due to the bad
economy, but an signs axe now pointing to a surge in volnntary turnover as the
economy improves. Others have suggested that there is no tight progression in
that any one of tlle categories can compensate for another, and people choose l11e
categmy that is m.ost likely lo red:ress the specific somce of dissatisfaction.53 Slill
other theories mah1tain lli.al II.um.over is set up by a general level of persistent
dissatisfaction that then is 1.Tiggered abruptly by soni.e single disruptive event
at w ork H1ai: either pushes the em.p loyee away (such as a dispute with a super-
visor or co··vvorker) or pulls the employee away (an alternative employment

fij9Mrn 10,2
An Overall Model of the J ob Dis'.;aiisfaction-.J ob \Afithdrawr..il Process

Cau::;f)S of Job
diss9tisfaction
" Pf;')rsonal
disposition
·• Tasks and roles
'll Supervisors and

'1'-
co-workers
Pay and benefits ·d
·; : ,~
 ...
CHAPTER ~ 0 Employee Separation and Retention 465

opnortunitv).!i'' Th_is n1od1.~J focuses on ~'the :;n·;xv,;- t.h8"1: brc2aks the camel's back"
b;1tshares ;AfHh all the other !lieories an emphasis on job dissatisfaction as the
necessary but insufficient cause of b.illYlOV'-~c H.egard1ef3G of ·what specific the-
ory one endorses, there is a general con.sensus that withdxawal behaviors are
dearly related to one aJt1othe1~ and they ;:;re all at least partially caused by job
dissatisfaclion.55

Biehitmnor Gllmll~Je
0 ne irug• l1t expect. t ·11at an emp1oyee s rn:st
I <• •• ,. £
response to CJJssa.nsrnc ti' on wou_ld b,e
to try to change the conditions that generate the dissatisfaction. This can lead
to supervisor- subordinate conirontation, perhaps even conflict, as dissatisfied
\Norkers try to bring about changes in policy or upper-kvel personnel. Although
at first l:his type of conftkt can feel di..reai:-cning to the rnanage1~ on closer in.spec-
tion, this is really an opportunity for the manager to leaxn.::i.bout and perhaps
solve an irnporl:a:nl: problern. 1Nhen properly chm.mded by a secure and sup-
portive leadei~ "voicing opporhmities" for lovver-level employees can often
i·esult :in substantial organizaljonal improvern·~nts an.d prevent tm:nover among
highly engaged employee~3.5G
Less constructively~ enlployees can frt:i.hal:e change through ""'J'misHie~lbfowing '\J\Phir.t~®-bk1wii1T111iiJ
(rnaking grievances ptitblic by going to the media).57 V\Th_i.stle-blowers are often Making grievances
dissatisfied individuals \Arho cannot bring about internal change and, out of a public by going to the
media or government.
sense of con:unihnenJ or frustration, take their concerns to exte1nal conslitu-
encies. For example, Russell Tice was au_employee of the U.S. National Secu-
rity Agency (NSA) whose job 1Nas to r~leclTonkally emresdrop (i.e., spy) on om
nation's enemies. He Virw:; devoted to his job and noted that "the mentali1y at
NSA was •Ne need to gei: these guys an.d we're going to do ·whatever it takes to
get Hi.em." Howeve1~ when his job ·was ch;:u1.ged in the wake of 9I11 to focus
on 1:alls being macle by U.S. dtiz.ens, he W<:lr3 ·concerned that ·without the proper
1Narrants, this type of surveillance of his feHmv Americans was illegal. No one
at NSA would take Ticer s concerns seriously, and so he took his concerns to tl1e
J\Iew Yorlc Timer;, whid.1 ew;ntuaUy pubbshed an article that accused the Bush
administration of conducting widespread illegal wiretapping. The White House
first denied the allegal:ions, but when the evidence became too overwhelming to
dispute, ll1e adminisfrahon adrniUed tliat the program 1Nas inappropriate and
hence ended its e)dstence. Ticic; eventually had his secmity clearnnce revoked,
but he noted iliac it was worth it. "\/Ve need to clean up the intelligence commu-
nity. We've had abuses and IJ1ey need to be addressed." 53 Unforlunately, as the
"Integri1y in Aclion" box shows, this specific issue came up again in 2013 in the
case of Edward Snowden.
Although this type of whistle-blowing activity has always tal<en place, the
advent of v11ebsites like Wildleaks has provided a more obvious and convenient
outlet for this activity. Wfr..ileaks is m.ost famous for coUec6ng and publislung
informat ion provided by gove:r:n1nen1: and miHl:ary souxces, but it has also tlu-eat-
ened private companies such as Bank of .A.:merica.59 TI1is type of whlstleblowing is
also on the :rise because of a provision of the 2010 Dodd-Franks regulatory over-
haul that encourages this behavior by offering 30% of penaliies collected by the
government l:o individuals who help tmearth illegal actions, in an effort to com-
pensate them for the risks lhey take. 60 Ih~cause many of these settlements involve
rn1tlti-million-d0Uar seU:.lements, this speLi.fic incentive can be vexy powerful. For
 In his own rnind, t.dwcffcl
Snowden Wi:lS cloin(J the ri~1h1
thinq. Concern(?d that the
f\!ational Security /-\gency wa'.;
increasingly spyin9 on US citi-
D:ms by collectin9 information
on over ·10 rnillion i:elephonr:;
calls, he \l\len1 public wi\:h !:h is
infonw_ition in June of ;2(!"! 3. He
felt he was doin9 his civic duty
in trying to inspire a nationdl
debate on the ''sE'!O.H"ii:y--
privacy" i:ra<.fo-off that s(o~erned
to b~-, t.01king place in thf~ United
States at that tim e. He ahci
kn0vv the severity of his •Ktion~>,
notin9 that, "I und<?rst and i
will be m ade to :_;uffer for rny
acl:ions, but I \fl.rill be sati~:;fied
if the federation of s<?cre i: law,
unequal pat'don and irresistible
e)C(:~cutive pow(~rs that rule the
world that I love are revealed
1M<:<s e\f(:)I. tapped illegally. How-
ever, by making t he program
public, Snovvden tipped off
potentia l te rrorists to heretofore
unknown dangers, and thus
aided and abetted them in t he
goal of '1Voiding detection.
in the (::>yP-s of his employer,
Boo;;: Allen, Edward Snovvden
1.A.1as 011t~: of the \l\rorst hiring
cleci~; ions they ever made: Booz
Al k:!n i ~; one of many large con-
ir;:1ci:o;-s t hat have been hired
by t l l8 U.S. 9 overnment to help
pmce ~;::; intelligence informa-
tion that has e;<pandecl rapidly
since the 9/1 ·j attacks. The
\Nashi n9to11 -based firm has
25,000 emp loyees and gets
99% oF it s revenue from the
U.S. government, and hence
i:hi:; is ci re lationshi p the com-·
pany can hard ly risk damaging . ·
under a specific
contract he will-·
in g ly signed; and
the trust of the lar9er so ciety in
whi ch he resides to pmtect its
citizen s from rogue companies
or branches of governrnent. ,,,
p:
Thus, does the soci etal \falue ]
of t he privacy deb;:ite Snmvden l•
triggered offset the potential
damage the leak caused fo 1-
Booz Allen ancl the !l()tion's I· ],
fight against terrorism? This is' I
a difficult question t o answer. I ·~I~
The other difficult ciuestion to
an swer is what i'.> the n:!spon-
,.:;- I
sibility for HP pr-ofa~ssionals to ! ,[:[
I ·~Jt
identify future whistlcb iowers
given their potentia l controver-
sial societal value? t' :.•,f,;!'j;l1~.:·,
i Wll
I I

for even an instant."
In the eyes of many p eople
Imagine th at HR profession-
Booz Allen qu ickly denounced
Snovvden's actions and vowed
als were able to <:tccurr.itely ll1j,w,
pred ict vvho would become a ~ (

within th e U.S. 9ov(::rnrrn::n1:,

Edward Snowden was a traitor.
In t ho (')ffort to thwart global ter-
ro1·ism, the pros;ram al: th(') heart
of this controversy rnerely cap-
tured data on who was talking
to whom, and not the content
of any of those conversatio ns.
The program vvas simply t ryin9
to lay out the social nei:ir,.rork of
global terrorists, p a1t o f which
resides 1Nithin the country's bor-
ders. The data co uld be used
to secure a legal vvarrant for
to investigate how he came to
fy~ hired and whethe r or not
whistleblowe r. VVoulcl firms bG '.I!~
~ ·;'.:it
I
motivated to screen out such ~ ,
then:-) was any way t hat their
individua ls frorn being hired, I•.
and if so, would this be an ethi- I· Jj~
H uma n Resource profession-
als coul d have predicted his
cal practice frorn the v iew of the 1.· r '
actions.
111 the eyes of ethicists,
larg(~r soci ety? 1
1! I
l dl
wh2th1::>r o r not Edw ard
~)no\Nd en is a whistl eblower
or traitor will be for history to
~~~~;;;/ ~·;,~~:e~: ~~~r~~ :-~~;~~
The Wall Street Journa l Online, June 10,
Leak," I:r
2013; M. Mukasey, "Le;Jking Secrets to
d12cide . For ethicists, an indi- Terrorists," The Wall Street .Journal Online,
vidual like Snowden has to June 9, 2013; J. Bussey, "/\Wake-Up Cil ll for
manage two separate trusts: Bo oz Al len and Us," The Wall Street Journal
the tru st of his employer, who
Online, June 10, 2013; D . I:. Wittkower,
"Are You a Whistleblower or 2 Sn itch?" The ' '·:i'l·:'
~ ; '

tappin g a phorn~, but n o phonH pays hirn to do specific work Wall Street .Journal Online, June 17, 20'13.

'., ,.
.
· o.,,

exmnple, Floyd Lzm.disr a. former member of Lance Armstrong's cychng team,

bI1ew iJ.1.e whistle on an illegal doping sdi.eme that Arm.strong had denircd fm mm1y .,,.
::;
years. Hecans 1.:' Arntslmng's tearri. was funded by the U.S. Postal Servrice u:nder a '.
.. ''
contract that prnhibi~ed the llse of banned substances, the government sought
$100 niillion iJJ_ retrihuifo:n f-rom. the tea1n, 30% of which could go to La11.chs.61. ,_,
466 ...
;i
..•:,.,
:; .:~
 ...
(:rrllAPTIER HJJ Em p loyee Separat ion and Retent ion 467

IP~vs;nG~~ Jlf~ib ~Mtl~Ol\:~flm~fr.J,~

If: the job conditions c;:mnot b(~ changed/ a dissatisfied worker may be able to
solve the proble:rn by I(~aving the job. This could take the form of an :internal
transfer iJ the dissatis{;:v:tion is job-·sp~~cific (the result of an mtlair supervisor or
tlnplieasant V•Torking cow.:htions). On the other hand, if the source of the dissatis-
foclfon r-elat<~s to orgarti.zaii.onwide policies (lack of job secu.rity or below-market
pay levc15), organiJ::;aho:nal t.u:rnmrer is W<::ely..As vie indicated earher, there is a
neg;:1.tivc relationship benNEY::n ttirn.over rai:es and organizational perforrrn.mce,
''11 ( ·l1 .l· J·, ·iJl •-'
" r ve .. .,.·
./ •"n<·'· !\.• .'·-ep
l v "·o .. -. _~_r.:t_c
"'O::> ·w·o1;;<"""l''' · "'·c ,:>_.pec1· ''}Jn t-.1· ol-. perr..,,.,.,..,er 0
C.I.. 1;cw•1»•'<>l·l
t:,'·CA~.;:..~. <:~ .. ..
_} . . :...~- ,_..,,.o.t) __ .\.-1:.. 1.)"-... - __ {A. J 1Lb'"'° .. . .l...t.!.lAR':. 0
0

in skilled jobs. G7.

Asiother v11ay of physically removing oneself from the dissatisfying work
short of quitting altogel11er is to be absent One recenf: smvey indicated that,
on average, companie:3 spend J.5% of theix payroll costs to ni.ake up for absent
or tardy iNOd<ers.63 Part o{ the reason that absenteeism is costly is that, like a
· ,"' it
vntb, ·,. o !:l.en ·· 0p1cau fr·'
,,. . , .. i..,,, ..... Ofl'.•. on.e~ Yvo.L, · ··1.-101.
,-· '-· • .,•. o 1-1
•.1) a1 .1.ei., -· ev
- ·p... n ....
if no one · L ".:; 1ea.
· llu,,-rl ..
J ,)1~'·'·

with any communicable health disorder. The evidence su ggests that there are
r:>l:rong soc:ic1. ' . 1 non.113 . . as.r;ocia • teuCl 1"nJ: • ·1
:1 a b sen.teeJ.sn1., , anc.:J t 11at J.1. snowb a 11.. s m. II fl •

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large impact i::;f social istf.h1.:.~nces on absentedm.:n can be tTacecl to the fact that
•,p 1· j-1(.''-1 · .I d· ·"(:!.:~,o. ; -· ••· .. C t.c~ l10V\T
:J. ~ •p
t.ue1 _ JL. ·,._:
no.I· ra g1:._a. ·-'.-•3. o f .,<;;;'1.an cll ..LJ.L,dA p1a.cl·1·i1" r1· · 11.
..,.. e ~..\.ii.en ·., conte., .. ane.1
'When people report in sick, a:nd this creates a great deal of interpretive latitude
..fryr.. _1'_1·,c·1..iv1"cl1
~.J v .. • . ..·1t.'·l l "'(Wl«~"...,,; 1'o 6'-f..
ir11 ___ , __ \.l.· np"· ;"1'0"Il(] G
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11,.11,; • ••. • . 11. ...... . . "\ .J >1ar'·ou"
... X
.•. li..JJ.(.-\ .. -.::> t ·111"J-<;;
.ft..£J ....... _ e-1 .
1
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treat the ism.1.e,, somP con1pa:i.iies ll.k£ V\Taln1a.rt have centrnl:lzed thrc:i Dror.es~3 by . .{

·which . - ·- an... . Pf
... ·ff('JiovPP . .... .._,._ ... _,) '· a
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... !I. .. ....
.L -A r.t .. 1. .• ,_ , oA: kc-~1
• 1 .. ~ TnTn-
_c J. J .•, ..

agers. Vlfalm;:ul: en1ploy<;~es s1.:>cl<ing a day off need to call a J. .• gi)() nu.rnbe;· and
,J:lH.
. . ")'\ll.L
. ;t(~·-"~ .:>,. ,..<'lJJC.i'l.l(
. :~ -· 1-");',-.
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tne ' request 6'"·'

IPs~fK:hoijo1]ka~ "l.Jntfi~r1:~1r:rij~m1!
1/\fhen dissal:isfied employees are mi.able lo change their situation or remove
themselve~> p hysically from their jobs, they m.ay psychologically disengage
themselves from their jobs. Although lhey axe physically on the job, t:heir :m.inds
rnay be soniewhere else. ·
1his psychological disengagement can take several forms. First, if the primmy
di s~m.fr3facl:ion has to do Virith the job itself, the employee rnay display a very low
level of job .involvement. }Joh iJn1volv~iume1n& irJ the degree to which people identify Jolb !ttilV<Olihfl\llnll~/11t
themselves with their jobs. People w ho axe uninv olved vvith lheir jobs consider The degree to which
their work an muJ.npor!:ant aspect: of H1eiT lives. A second fonn of psychological people identify them-
selves with their jobs,
disengagement, 1Nhid1 can oco.:1.r whr.~n the dissahsfaction is v..ri111 the einployer as a
whole, is a lmv level of organizational comJTiibnent. Orcgm;ni:r;a'n::i«:m.211 cm.nnrnitmenft Or9m1r1!£?.1fi:D©i1lm~
. ,_) ·'·
'l"' l •;>
L. ;!.ocr.·po
~"- C.c.(:)! .. '·()• '/1i'··1·c.
I.. '!.--~ . .l ~~ <.. 1..
1
·1n E"IlplO'ff"·' W.. ..!l r.. -.IL l · cw Hr1"·tl1 i-l1P
J, \. . .\;; 'd 11·tt·.j:l._ ~ 01"0""''11.
·-[Jt.U.. -~ '"'ati'• 0'1 ?.nd ls un"Jl-
0
.J. , . ,'I,-.;. · oe..Q i.'V • ,, ·'- vJ1. . :..-!. • J_ V' _ CtQlmmnt m@111t
ing to put forth iefforl: on its behalf Individuals 1Nho feel !hey have been unjustly The degree to which
!Teated by lheir employer often respond by redrn.ing . their level of commjhnent an employee identi fies
with the organiza-
and are oft~n looking for the fixsi: good cl.1;:mc12 to q1xi.t. tJ.1eh· jobs. tion and is willing to
"f. . J\.11p·y·
__, .-J.·1·:1•r .,, ·1c~,-, ""P."" ..J().J'.1ci
J. . ~.·_} . 'rn P"''·re1·ved P 'lJ. •J·~i· I'·.-.:.a·t...,...0nl i)v
f.l .. 1- ' \..r ).1,,.i.Jj_ · " \1, .- l -...A._ .._ .. .i {~;riu,g
.<..t ,/J
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p ut fo rth e{fo1t on its
the f:~mployer via theft, fraud, or sabotage. Ind.eiecl, aHhough theft by ernployees behal f.
is a constant concern a:rnong aJl employers,. fostory reveals that durLng econorn:i.c
recessim1D, cases of fraud a:nd malfeasance of.ten :rise as fast as the stock Inarket
falls. Part of tb.e probk:rn, of course, is that when people are struggling to make
en(b meei: they are also subject to g.i:eat.er Je.vds of ternptation. 111.is might be
 if•

468 CHAPTEIR 11 CD

:·.\II espe6aUy the ca::>!:~ H thE} beh~ve that Hv.::y are about to be laid off, and hen.ere
: ,1
axe anin:y and ne:rceiv<C a~l .a-cl of 1J1eft. as a. iust, retalia.tory behavior ail-ned at the·
., ,I o.rgn.nb:al.ion.. The oi:her pa.rt of the proble;~1, h owever, is that du.ring hard. limes,
ii organiz;atio:ns becon1e more vigjJanl: of bo!:t.o:rn hne concen\s and, Jn tJ.112 h.l.m.t to
v~duce costs, often trip ovier irr~gularities that. might not have been noticed dur-
ing m.orr<e flush periods ..As security consulJan.i: Brian Mid1 notes, "it i.s ofte:n ha.rd
1 II l:o kU ·w hich is the dxkken or th.e egg rr1 these cases, but the evidencs H1<J.t re~es­
siuns cause .a spike in documented employee tl1efl: is iJ.Tefutable." 66
Ii For i:=:/Zample, in the case of the m.ost recen.i: :recession, on£ 2009 SU...l"11-ey revealed
I that roughl.y 20°/o ofr managers polled 1Nf;re able to docu:rnent a11 increase in theft
! of bol:h finandaJ. a.nd p.h ysicafi assel:s frmn 2006 to 2008. A separat.s study by
PricewaterhmweCooper Jonnd tJ.lai com.pani.es lost an average of $2.il niiUion to
fraud in 2007, 1.JLp from $1.7 l.niUion in 2005. lronicaUy, the evidence 6:om fraud
cases suggests H1a~: .~ri: ns oftei;1 1:hJ2 rnost <::dnca!:ed and lTusted employees that do
the n:10:3t dm.n.age. For exmn ple, the average orgaJ.lizational tenure of r::mployees
convkied of kraud. is ronghJy eight years, and rn.ost have graduate deg-rees. '11.us
is a group of mnaxl: eniployees vvho have earned ll:ust and worked their way in.to
the besi: position l:o knffw <Sx1xl1y ho·w to get away with various fraud sd1emes.67

~
I '
~ ILO 10<-t As we : m w in. Figm:e 10.2, the h-:y dxiving fo:rce behj_nd all the diffen0nt forms of:
Spec i~1the relationship iob w.lthdixav.;.al fa ~~)h ~N~ 4 isfod.]0Jt~, •vhi.ch 1Ne iNiU define as.a pleasurable feeling
between job satisfac- ul<:H.•..i "P·''".
jJ, ·1 ,.,,
__..,1.n__ .f
,,_ ,. JCK"O.Hll '"l
1.J"l.e" p P.."Jt.C..t-
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'. " · OiL
.,tldt ;:> JO.J
1 £.:llr- n
. J· Jfr...w.u - 11QWS .tOf
0 'Vr cu_ c '-1~ 0 f· u lf"lJ
L.b.. J .ment
tion and various forms
of job withdrawal,
nf cx1l.e":3 iu11porft:ant job vah~12s . t' This definition :reflects three important aspedG
6

and identify the major ·Of job satisfaction, First, joio sntisfocti.on is a fo.nctlon of values, defined as "what
sou rces of job satisfac- a person consd.ou.slv , or 1.Inconsciouslv J desires to obtain." Second, this defini--
tion in work cont<~xts. lion emphaai:u~s tlw.t d jJ(erenJ en iployees h.21.ve diffen;nt views of whi ch values
are important, and this :ir, nilJ.c;:iJ in determining the natm:e aud degree of l:h.eir
.»ob s~tisfoctiol!l
job sat:i.sfa.ction. One person may value high pay above all else; another may
A pleasurable feel ing
ihat results from the value the opporlu:nity to travel; another rney value staying witJun a specific geo-
perception that one's grnphk region. Thi:: third i1n.p orta.nt aspect of job satisfaction is percepb.on. An
job fulfills or allows for individo;~rs percep!ions rnay noi: be a completely accurate reflection oJ reality,
the fulfillment of ones and difflf-~rent peopk n1ay vi~v11 the same siilJ.ation differently.
importanl:Job values. .un. pa:rticnlar, people's pen :eptions ::i.re often strongly in fluenced by their
frame o{ reference. A fr01u1m~ Qf :rrefor~n112e is a standard. point that s<erves as a
1F1·~m<n> <P>ff
Rlilfornnca!
comparison for otJ.i.er points and thus provides meanhi.g. For example, a nurse
A standard point that
serves as a comparison might cornpare h.er salary to th e salaries of other nm·ses and her overaU. satisfac-
for oth(~r points and tion wiJl1 pay depends on l:his comparison as much as the absolute value of pay
thus provides meaning . itself. A fern.ale nurse in 20U n:lad.e, on average, a little over $50,000 ayer.ix in
salary. This ir.J f.l. health.y ::>;1Jmy, and she might. be satisfied. ·w ith this salary UJ.1i.i1
she learns that, on average, a male mu:se do(ng the same work mad~:: slightly
over $60,000 a yeaJt·. 09 1hese b x1dr:J of fra:m.e-of-reference effects are powerfoJ, and.
rn.ar1.1J1 co.moarries
1
trJv !l:o r~duce the :irnpacf[ i
of these kinds of social con1n;u·:i.sons ~

by tnaki.:ng pay levels secret. l-Joweve.o.~ as work tx~comes more colfa.borai::i.ve and
• • ' .1 • • • d 1 f
teaicn-onern:ec~, IJ'1cre is u1.creas.mg: em.m10. ..or tnmsparency aooui: pay~ a•ll.f'<even
1 ~

tean1 m ember input into pay dcdsio:ns. Balandng temn members' need-t.o-knuw
V\Th•'-1l pnvac)
• ~v co.n_('(•;'i ~ a
.~ ....lJ, ~
' .. .:. L a.":, .<1
:· Tvv-0'1 cl.e· x1xce
-~~ d. ,_ "'.1t,a
<-1J n1.i1 •c- ·1.e i.Ji"u,•.:, .,Ck.<
· con:t; "'"h (' ·") •.Lerun
1Ie.-:;L.
members. 1Nho disagree about their rela.U.ve worth is increasingly a struggle in.
mmily bush1esr3 contexts.70
 ...
CMAPTiER 10 Employee Separation and Retention 469 , ·.

Of. 1~.£H
,. du .,,,
lr.: , ., .,. j·,.,.,,i.L
,:c Sd
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0<-hilS. aCuOH •
lS ·tl1£ person
' 1
S
c1u-rent level of salisfachon .and ch.angies ill the direction of job satisfaction pre-
dict t1Jrnov err_· over and above the absolute level of h.unover itself. TI1at is, tv-10
people could report a k:::vel of "nmdernle" satisfaction wHh their jobs, but if one
person ~Nas Jf0rnne1dy high, and the ol:h.er pernon was formerly low, the person
with d1c negative hend has a much high.er probability of leaving relative to the
person with the positive 1rencL71 In addition, as the "Evidence-Based HR" box
shows, anolher sal.ien~ co1nparison gi:oup is the overall level of satisfaction for
one's woirkgroup.

AJJhough ~m einploy~::e's O"WH level of job satisfaction in an important predic-

tor of turnover, ther.::: an:~ illso social aspects to this decision tl1at are important,
espedaUy as tllis pfays. out over time. For exmn.ple, a recent study that involved
over .5,000 e:rnployees :cJt<Crosr3 over 150 busfri.ess establishments documented how
the job satisfaction lev.els of those •who s1nTolJllld an employee can affect the rela-
tionship behveen H1a[ emp]oyee's job satisfaction and subsequent turnover.
Specificall;~. if an -e1npl.oye12 is . expedencing declining job satisfaction, but
everyone else in. his f.ll';am is experien d11g 61 consistent positive change in job
sahsfadion: that person's llk!'o:Hlmod of turnover is rnud1 lower than one might
e:x:ped bas~d only on i:h.e person's own n egative job satisfaction lTajectory. ill
conixast, if ;m. emp]oye('~'::; job satisfad:ion is increasing, but the rest of his team
i.s expe:dendnf; a consistent negaiive change frll. job satisfaction; that person's
picobability o f staying on the job is l01Ner than one rr.tight expect. In both cases,
an 1;~mpi,oy1~e'':3 "beinr; out of step" 1Nilh his 01· her work context changes the pre-
did:ikm. for that .ernployee. T.h is r.esearch suggests anotller :reason why employers
need to h ave accun1l.e Jkn.mvledge of H1e job satisfaction levels associated with
different u nits of the:i.r or.g;anizaJ:ion.
SOURCE: D. Li11, T R. Mil:chell, T \('.(_LecJ, 0 . C. Hol tom, and T. R. Hinken, "V\~ 1en Employees Are Out of Step with
Co-Workers: How J ob .S<itisfoction Trajec.iory and Dispersion Influence Individual- and Unit-Level Voluntary Tum-
. over," f\rndemy o f Management .Jo11n~i'li, 55 (2012), pp. 1360-1300.

Iv1.any aspeci:s of people and organizahons can cause dissatisfaction among

eun.ployees. Mana.gen; and HR profession.ah need to be aware of these because
they are the levers vvhich can raise job satisfac1ion and reduce employee with-
d rawal. This is an issue that is parl:icularly salient in the nffrenf: economy where
pressures to raise produc!ivity have pushed many workers to the limit.

Ulr1~:sa1fo Wm·~dli1lg CIOlriudn·ttirnll~

Eaxlieir in this chaptex we discussed the employer-'s role in helping employees
sl:ay healtl1y via empfoyee assistance programs for specific problems like drug
addi.dion and alcoJ-n.oli dependency, .as •NeH as general wellness initiatives to p:ro-
mol:e health an d n:::duce hE:alth care-related expenditures. Obviously, if employ-
ers care this 11rrL1ch about: fhc Iisk employees are exposed to off the job, there needs
to be an even more important emphasis on risk exposure that occurs on the job.
 ...
470! CIHIAPTEIR 1 (h Empl oyee Separation an d Hetention

Of course, each emplo3~ee has a right to safe working conditions, and previ-
ously in th:is book (see Cha.pier 3) we reviewed the Occupational Safo1y ~n.d
Health Act of 1970 (OSHA), which speJJs out those rights .in a very detailed fash-
ion. Vile also discussed in that chapter how to develop safety awaxe:n.ess p:ro-
grnms that identify and corrununicate job hazards, as well as how to reinforce
safe iNork praclices ifo~:I: would allow one to pass an OSHA inspection. Although
our emphasis in that chapter on. safety lNas primarily directed at legal compli-
ance, v1re need to revis~l: the topic i.:n thi.s c.ha.pte1~ because OSI-IA is not the only
audience that is hkely to evaluate 11i.e safety of jobs. The perception and reac-
tion of Ui.e orga.nizati.on'G ovm employees to working conditions has implica-
tions for satisfaction, retention, and con:i.pelitive advantage that go well beyond
merely m eeting the legal requirements. That is, if applicants or job incumbents
conclude ll1at H1eu: health or lives are at risk because of the job, attracting and
reta.ixring workers will he is:npossible.
Altl1ough broad statisiics suggest that on-iJ:ie-job injury rates have plum-
meted over lime, many atl:ribute th.is to feaxs runong employees that if tl1ey
report an injury, IJ1ey i.night be fixed 1 especially if there is an y chance that the
worker may have perform.ed 1vhat could be conshued by anyone as an Uil5afe
act. This Jrjnd of 'blam.e-the-worker" a.ttitude results in w hat many consider to
be a severe 11underreporting" problem when it comes to w orkplace h1juries. For
example, Jeff Reppe:t~ a r.etixed employee at AK Steel; spoke for many when he
noted, "At a steel nillt you don't turn tl1e small or medium injmies h1 or else
you'll get time off without pay:" 72 ·

Not. all jobs pose safety risks, but the nahu:e oft.he work in a whole host of
jobs makes managing safety-related perceptions critical. Tilis includes jobs such
as fishing boat operntoes, limber cutters, airline pilot/ flight attendants, shuc-
tuxal metal workers, garbage collectors, and ta;d drivers/ chauffeurs, which all
have been identified as jobs ·where people are most likely to be involved in fatal
accidents. h1 fact, jn l:hese job categories alone, close to 1,000 people die arum-
ally. Other jobs that rate low in tenns of fatal accidents rate higher b.1 nonfa-
tal accidents, and this i11dudes many jobs in eating establishments, hospitals,
nurs:ing homes, convenience sto:res, and the long-haul trucking :ind.usi.Ty. Still
other jobs pose risks in tenns of contracting occupational diseases due to expo-
sw:e to chemicals. FinaJJy, some jobs create health risks ·simply because of the
long hours and high stress that axe associated w ith them .73 This was highlighted
recently by several cases in the aviation industry where air traffic controllern
who were worJ:J.ng at night were found to be sleeping on the job because of
extended hours. For example, in one case, a lone controller was working on
less f11an tv-ro hours' sleep in the p revious 24 hours, and this was a contributing
factor in the crash of: Com.Air Flight 191 in Lexington, Kenlucky. 74 In geneniJ,
working at night: runB counter to tli.e basic physiology of the human body and
d isrupts one's natural circadian rhythm, which in tum. causes a whole host of
p h ysical problems. Tims, working at night has to be considered a safet-y is.s ue jn
any job that states this as a task requirement in the job description.75
Many employers link fhiancial bonuses to attaining specific safety-related
goals, and this helps keep employees focused on doing the job the right way
every day. 76 These p:rogrmns more than pay for themselves over time. Reseaxch
suggests that it is not unusual for a rri.idsize company that reduces accidents
by 10% to see a $50,000 redudion in prem.imns. Assuming that the fo:m has a
profit 1118.rgin of 5%, thi.3 Is essentially the equjvalent of blinging in another
 ...
CMAIP'TER: 1Q Employee Separation and Retenti on 471

::a milhon in sale~>. Baned on these nu1nbers, Jim Hai:herley, a vice president at
T_.jberty TV'lulual Group, noi:(:'.J ;J1;:il: ''the -::ompani.es that have better profit-and-
loss c~taf:em12nts are th~ onef_; th2.I: take everything more seriously, including
safety. \f\faen they look at safety a~> a business issue, they win." 77

!Pf;l)1rs~irna~ IQlnsu»F\» s;ntimn:s

Becaus~~ dissatisfaction is an ernotion that 1J.ltimately resides within the person,
it is n ot S\.H'prising that Jnany ·who have studied these outcomes have focused
on individ ual differences. f'or example, in Chapter 6, we described t11e Five Fac-
tor Model of Personality~ and several of i1112se irnits have been linked to higher
turnover intentions and actu al turnover. .In generzJ, turnover is more likely to be
an issue for employees '>Nho are low in emohonal stability, ·low in conscientious-
ness, and low in agreeablcncss.n
l\fog<1liive .affoieti.v:R&y is a tcr:rn used to describe a disposihonal dimension tl1at !\legativ'1,;)
refled:s vervasive indiv~dnaJi. diffi:"]·ence~> in sahsfachon witJt any and all aspects Affectivi?i:)r
-'
of J.ifr~. Individuals •1vho ;;(£''!.'~ b_igh in negati1re affecl:ivity report higher levels of A d ispositional d imen-
aversive mood stales, i.ndll.d:~ng ange:1_:. contempt, disgust, guilt, feai~ and n er- sion that reflects
pervasive individ ual
von::m.ess acrosfJ all con~exts (1~1ork and nonwork). F'eople who are high in nega- differences in satisfac-
tive aJfechvi t:y tend to focus extensively on the n egative aspects of themselves tion with any and all
and others. They also l:end to persic;t in. their :negative attitud es even in the face aspects of life :
of organizational interven tions, such ::1s i:ncreas~d p ay levels, that generally
increase the levels of sahsfoction of other pieop.le. 79 All of tlus implies that some
individuals l:end to bring l01N sat:isfacti6n 1Nith them to ·work. Thus these people
c·l1- "..."''"·''..;~<> 0.. d fP.v<>··.-~1"'"'" 01·opn tli.e 01·ga1uz" ati
. 011. 01· the
. ""V l')(' l( -ATl1a
0

_rn -:~)
. . I''" l.".,_;VPlv
•\.:...li.u.U. . ·- J J,:-tu.llil.1..... .U.~: 1_(.'.J'r,:t.l 1.A. ......, ,_;,_, o·
1:. ..-. 0 11. .._. _ 1. . . .( 1--· 0

manager l:akes.
The €Vidence on. the hnJ.<.age bcttllfeen thesE kinds of h·aits and job satisfac-
tion suggests the i11nporhmce of perso1meI selection as a way of raising over-
all levels of employee sahsfochon. If job salisfaction remains relatively stable
across time and jobs because of charncterisHcs like negative affectivily, this
suggests that fxansient changes in job satisfaction will be difficult to sustain in
these i.ndivi.duals, 1Nho 1Nill typically revert to their d ispositional" or adapta- /1

tion level over time. 1liusl smne employers actually try to screen for this when
selecting job candidates- for example, at Zappos, the online retailer of sh oes
and apparel, CEO Tony I-Jsei notes that "VVe do our best to hire positive people
and put them where their posHivf? thinldng is reinforced."80 foterviews should
assess the degree to which any job applicant has a history of chronic clissatis-
fac6.on with employment. The logic is, if an applicant states that he was dis-
satisfied with his past six jobs, what makes Hsei think that person w on't be
dissatisfied with this one:::'?

lf<.Jl~;ks .ainiirol Rronie:s

As a predictor of job d issatisfaction, nothing surpasses tile nature of the task
itself. Many aspects of a task have been liti1(1,~d to dissatisfaction. Several el.a bo-
rate theories relating task rJ1araderisbcs to worker reactions have been .formu-
lated and exten sively tested. Vile d:i.scussed ~3everal of these in Chapter 4. In this
section 1Ne focus on three prhna:ry aspects of tasks that affect job satisfaction: the
complexity of the task, the amount of flexj_biliiy in where and when the work is
done, and, finally, the value l:he ernpioy€e puts on the task.Bl
4.72 CMA?TIER 10 Employee Sroiparal:ion ;.md Reh:-ntion

VVi!:h a :fe1N excepnions, H11fl~n,: !is a st:rong posilive r·elationship betw€€1l task com-
plexity a.10.d job satasfactiion. Ihai: is, the boredom_ generated by simple; 11£P€iit.iv-e jobs
f:Jhat do not rnenJally chall.'2nge the worker leads to frustration and dissati.sfa.cl:Ron.0z
JLnd.eed, as iUustral:·t:d in H11(· "'Crn.111pe!jng tluough Globalization" box, H1is frustra-
tion can often gel: completely out of hand as workers' demands for better jobs and
worldng conditions push. up against some employers' desire to hold do"'m costs.
One of the majm !nterventiot1s aimed al reducing job dissatisfactio:n by
increasing job com.plcxity is job em·idu:nent As the term suggests, this u1ter-
ven.tio:n ~s direcle_d at _jobs ihaJ ar.e "impoverished" or boring because of thefr
repeti.tivr.:: nauu-e or fo1Ar scope. Many job enriclunei1t programs are based on
the job charw::lbe:idsti.cs th~:oqr dis.cussed earher in Chapter 4. For exru:nple, m.any
job enrkhinent. program_f:; provide increa.sed opportmrilies for workers to have
]nput into hnporrcanJ org;Jn~zational decisions fuat iri.volve their work, .and iJ1js
has been roul:ine]y foand to .r educe role conflict and ambiguity. For example, at
Crouse Hospil:al in upstati~ New York, tuxnover was reduced from 49% to 18%
after initialing a program Hi.at promoted formaJ, small-group discussion about
how to improve pai:Ient c;:ix~~ nl: every level of the organization. Jn addition to
~Ji.e reduction hit tuJ1:n.1ov~~t~ .cost savings and increased customer service led to an
$11 milli.on :nei: gain 1that co:n1paxed very favorably to the $15 .miJJio:n net loss the
hospitax r~~corded prior rto the progrrurn.c.'3
fa somte cases, job ienridunent programs may have to be complernented with
lTaining programs to enstisce people have Jli.e skills to expand their jobs. For
exampler aJ University of Chicago Hospital, many teduucal employees struggled
w Hh i-r~terperso:nal tasks associated with customers, resulting in conflict ·with cli-
ents and stress at work Tr<'Jrung programs in customer service, critical thinking,
and situa!:ional judg1nent were provided, and the tecluudans were ead11 ienco1u-
aged to d10:-velop their own "Ideal Patient Encmmler" associated for their specific
job. Con1plaints frrn.i1 paH-enJs dropped precipitously, and the reduction u1 con-
Hid kd to kss stress for the i:iechnidm1s, as 'Well as a 33% reduction in turnover
in tl1ose job categories. 1N:Hli. this type o:f training, participants decide cm dlefr
most mo.port.an~ work values. They then leam how to pinpoint goals, idenfil'y
roadblocks to successful goaJ accomplishment, and seek the collaboration rnf co-
workers iu achieving these goals. In general, skills training gives job incumbents
the ability to beHer predid, understand, and control events occurring on the job,
wluch in turn Lo.creases their ability to make their own decisions.84
Job ~<0ta1tiicm AnoH1er task-based h1terve:ntion is ]ob 1rofaHoirn.. This is a process of syst~mati­
The process of system- caUy movjng a sjngle h1dividua1 from one job to anotl1er over the coru:se of time.
atically moving a single Although employees may nol: feel capable of putting up with tl1e dissaJj.sf-ying
individual from one
asped:s of a paxtkuhu: job indefinitely, they often feel ihey can do so temporar-
}ob to another over the
cow;;e of time. The job ily. Job rotation can do n1ore !]nan simply spread out tl1e dissatisfying aspects
assignments may be of a pa:rticular job. It. can jnc.rease worl< complexify for employees and provide
in \farious functional valuable cmss-trahling in jobs so i:hat employees eventually tm.detstand many
areas of the company different ,Jobs. This makes for a n10re flexible workforce and :increases 1!'10rkerr3'
or molfement may
be bel.ween Jobs in a
appreciati.on of the other ~asks illaJ hav~ l:o be accomplished for the organization
single functional area l:o com.plei;e Hs ntission.
or department JBecan.~se of the degre-c to whkh non1/\rork roles oft.en spill over and affod work
roles, an.d vice versa, a -l:hird 01:il:ic.a.l aspect of work that affects satisfo.dJ.on an.d
retenti.on is the degree J;o 11vh.ich. sd1eduling is flexible. To help employees mm:J.-
age thdx multiple roles, companies have tm11ed to a number of family-frAtendly
pohdes to boih rec:ruH n~tN tale:ni: and hold onto the talent they alxeady have.
 IRnrot !P>11,a-1ts s~:Not~igibtt iVm ~~QQn·fkfiR'Th~1 Ct:D!rrAdntA(Q)~ns

The Han Hoi riot started as chang es are cha ll enging the be in place, but this
! a minor fracas b e·tween two business model that underlies tim e, the workers are
I yo un~J workers, but soon esca- all of Chinese manufacturing. taking out their frustra-
li lated into a p itched battle that Sp ecifically, the ri ot put tion s on their em ployer rather
ll involved over 2,000 employees a spotlight on the tension tha ri themselves. The th ou g ht ~
j and 5,000 p ara military forces. between Chinese factories that of this for an employer rnanag- I
1. The two workers, vvho everyone base t hei r business model on ing over 1 million restive work- I
1 agrees started the riot, 11\fere
,--.. '
l from different regions and had
jus~ got off a stressful 12·-hour
low-cost strategies that create
lrnN-scope jobs and unpleasant
working conditions, and a new
ers is sobering and Han Hoi
spokesman Lou is Woo summed
up the experience by noting
§

I
j
1
I . shilt at the factory that makes g(~ n e rati o n of Chinese vvorkers t hat "we cannot argue that ~

I ~~:~,~,~~~:~~j:;~:~'. ~nd 1
;,~~e~:~dl~~'~;il~:; ~~~%~~. ~~:i;~l~~;:~;.sj~i~~ :~ ~~~:;~g I
I
i

I
frustrations boiled over when
a small argument turned into
a shoving and pushing matc:h.
o ne worker who vvas involved
in the riot spoke for many when
she stated that "some people
and requi res a lot of hard work,
so we may have to change that
rather t han hoping t he workers
•
-·~:
,
Witnesses cl aim that security are just not satisfied that Fo)(- w ill change." ~
1l
l.·

>ti:[: vvorkers at t he plant ov12.·r· conn pays us so little and asks I,

I reacted to t he incident, and u"'- t o work long hour<; " fv1ore lORSCUSSOOIM O.ll~IESil'BO!i\~$ i

~:!
!
!
began brutally beatinq the i1Mo
young people.
b;oadly, the Chinese-l~abor Bui-
letin , wh ich tracks strikes and
'L In what ways are t he factors
that cause job clissatisfac-
II
! At that p oint, hundrecb of labor p rot ests, reported 30 such tion universal across cultures, i
( work1::rs rush ed the security pe1-- incidents in 2012 , up dramati- and what does this imply for •
1:1:1 l sonnel and retmned the favor. cally from the 'I 0 reported just countries that seek competi- j
'. •:\·~f1 I Soon, more and more securi'i>; one year earlier. tive advantage by eJ<ploiting ·I
~ ! personnel were called to the Foxconn had already been workers? I
l. scene, followed b y mo~·e
and ::1t tt-i; cehnter of co11trove1·sy in
r 2. What does this say about I
! 1
more restive wor<ers. /-\major 2_0 0· 7, w en so many worcers 1 global compani es like Apple I
·i revolt was under way and when began committing suicide at that outsource work to such i!
:_~
I:
I
it wa s over, 40 p eople were hos- the p lant t hat security had to countries? ~
i
pitalized and the facility had to install nets to the sides of b uild- SOU RCES: D. Barboza and K. Bradsher; ~
be shut down for days after fires • s in order to catch workers
ing. " Foxconn Factory in China Is Closed after I•
and looting left many stretches attempting to jump to their Worker Riot," The New York Times, l
• of the campus t hat housed deaths. Foxcon n reacted to September 23, 2012; P. Mazur and T. Orlink, ~
I I I "Hon Hai Riot Undermine s Squeeze on •

' }~~~::;, ~ . .I! ~~:

'
~~:~·~~~a1;~~1::sc~l1~~:ed. !:~=~i:~~~;~:;1:i~;1~:~~\~g
,b 1" -,~- ' b -
;~~~~:7 ~n~~~a~;~~~~~1;;~~~1s;_reet
"t\le~ La.bar Attitude's Fed iilto
I
•"'.~~ I I -1
tions starteo t o
I
e raisec aoout
r • '
ing conditions, ut clec.1riy the
P. Mazu r, 1.
,
.
I the changing nature of the Chi:. chang es d id not go far e nough. ~:~~=~~~~"2:~~:,;.'.t s1.reet Journal Online, Ii
. . .:.•!....
';·
·l·:
.':'.:
:,i "_

i
, ::_

1
I nese workforce and how thes0 The same frustrations seem to
· •,7~ 1~~~"·"~'"'""'"·"N""""""~'"~''"'"'""'""'" ·'" -'''-"""'·''""'''N>""'"''·'""'"'""°''"''-*·"<'7"'"'"•';~='"'·=""°'·'""'"""~'~"""""='=·"~"'~~·"-""~"''°"""'"'"-'"'~~"''"'"'~-,,"-·==-._,,«$-."""'~·°""'"'~~,,_"'~...,..;-,~-.,,,_<""""'"-='-J
These policies may in.dude provisions for child care, elder care, flexible work
schedules, job sharing, telecor.mnuiing, and extended 1matemal and paterna1
leaves.BS Although these prognuns create some headaches for managers in terms
of scheduling vmrk and reporling req:uirements, they have a number of demon-
strable benefits. FU:st, the provision of fihese sorts of: brenefits is a recruitment

· ~·
473

•<frii
 ..
47 4 CHAPTIE~ nIQ Employeo Separation and F\'.c;0ntion
.
aid ~ hai hdpr> empk:>yrcJ~s aHxad pot<-;J.1tial job applkants. 86 Second, once hired/
flexible ·work ;:nT<:11lgements result in reduced absenteeism. Thitd, over the long
l:errn, H1ese pJtog1·aTns resvll: in higher levels of employee co1mnihnent to the
organizahon.u7 In ten.n5 of dovvnside, in addition to scheduling headaches, some
are con.cerned i:hat foce· ·t.o-face imteraclion is nitical for innovation, and as the
"Competing thrcough Sustc.inabihty" box :iJlustrates, one recent hlgh-profi1e case
where a HexbJ_ne program v,_,as eliminated cou_ld be h·aced to exactly this issue.
By far, the most important aspect of work in terms of generating satisfaction
b the degre~:- to which jJ is nJ.eanjngfolly n~lated to core values of the worker. The
!Fn.,010o;ndaiij J:erm prrnmdi:!.1 jlJ\11«.rfcJlv<~IJ::iimrr is oft.en used explicitly to captme the degree to which
!iffilotiw1r:tfiolii1 people ;,)fe n:~.otivated to help other people. ·when people believe that theix work
The clegme to which has an hnportant impact on other people, tl1ey are much more willing to work
people are ener-
gized to do their jobs
longer hours. 8fl This prosocial moti.valion could be directed at
co-workers and
becau~e ii: helps other
has been found to relate to helping behavior.s9 This form of motivation can also
people . be triggered by recognizi.ng that one's 1Nork has a positive impact on those who
benefH from. one·s se:rvicf.:,.. mi.ch ;Js custmners or dients. 90 In contrast, when one's
social needs are th.1A.rarted, 01ey oflen react negatively and in self-defeating ways
that drive people fu:rthf~X ;:nATay from them.91
For exa1nple, Genenk:ch is"'- small San Francisco-:-based biotech pharmaceu-
tical cornpany IJ1at c01Tipel:€s diiectly with the largest and most well-funded
pha:nnaceulical giants in the industry including Merck, Lilly, and Johnson /Jr.
Johnson. from the oul0el:, Genentech knew that the ultimate success of its ven-
ture depended on aUracting and retaining the best minds within the field of
bioscience, despite having less capital relative to tl1e competition.
,_,
"-'en.en ' ...1·ocused .l.·1 s nlJ.ssmn
1:ed1 · - on d eve1.opmg · ''b'1g 1·aeas, " parhcu.-
- and testing ·
larly as this relates to life and death issues (e.g., drugs to fight cancer) in the field
of health care. H then searched out scientists who had passionate feelings about
work in this area, and surrou.nded thern with a supportive co1vorate culture that
'<1iras more UJ<:e working in a small, dose-knit research university than a large
pharrnao2uhcal company..Researchers 1Nere given the autonomy to pursue their
ov1.rn ideas .iJ.1. a context where every success was celebrated (often in a sopho-
moric fashion), and every failuxe was treated as a learning experience rather than
a career·ending catastrophe. Tiw strategy was a "swing for the fences" approach
emphasizing hitting a few home runs, rather than hying to incrementaUy tinker
with existing products. As CEO Art Levinsi:;m notes, "At the end of Hi.e day, we
want to make drugs that reaUy matter-that's the transcendent issue/' and this
is captured in the cmporate motto: "In Bu siness for Life."
'fojs si:ralegy 1Nas dearly a risky bet., since in this jndushy, up to $800 million
may be ~:lpent to invent a ne1N chug, only to have 90% of these drugs fail to reach
the ni.arket, but so far H1is bet has paid off. The company has attracted many
of the top graduati11g doctoral students, as well as many scientists who have left
their large1.~ more conserva.live and hierarchical competitors. As one L.n.dustry
analyst noted, "From the day the company was fmmded, Genentech' s culture
0l"'S
J'..O. b"er.""1 J!..tV
;,.,,_
.\..,_'l co1inna'1
_ . '-A~--~'-'t ' t1'1r
0 -=-rJv"11·~·
.. . ~- o:. "'ae . "92
.... :.vo_ . . ~.u~J

5n~p0rn1nsrn·:s .\3lifMJ1 (((Jl-won·r:.:~11s

The lwo primary sets of P'-'X}ple in an organization who affect job satisfaction are
co-workers and supervisors. A person may be satisfied with her supervisor and
co--workers for one of tiNO rr;::a.sons. First, she may have many of the same values,
When Marissa Mayer was
selected to be the next CEO of
Yahoo in 2012, she bernme the
20th female CEO at a Fortune
500 company. Since she and
her husband were expecting
their first child when the news
was announced, this made her
the only pregnant CEO at a
Fortune 500 company. Certain
e)<pectations come with bein9
the only mother-to-be vvithin
the CEO ranks, but when Mayer
announced that she was ending
Yahoo's long-time policy allow-
ing fle>ctime at work, this was
not one of them. Indeed, imme-
diately after her announcement,
another long-time provider of
flexible work arrangements,
Best Buy, followed her lead and
ended their program. Thfr:; left
many wondering whether or not
the time for fle)(time has come
and gone.
In its defense, most research
into the effects of fle)(time sug-
gests that it has benefits and
many companies are standing
by their policies. For example,
Medtronics operations in Santa
Rosa, California, designated
15% o-f its workforce as "home-
office employees." Most of
those workers telecommute
from 'San Francisco, which is
roughly one hour away by
car. Medtronics swears by its
program, noting that it saves
ovei· $1 million a year in office
space and boosts its ability
to attract top level talent in
San Francisco who are willing to
commute one day a week, but
not willing to move or commute
every day.
However, managing flextime
employees ca n be challenging
for some managers because
it forces them to manage- out-
comes and resu lts, and not
just employee face-time. Jody
Thompson, the original archi-
tect of the Best Buy f lextime
program, notes, "Demanding
face-time from employees is
typically a sign that supervisors
ar~ unable to lead effectively.
They don't know how to man··
age performance, so they man-
age people's time." Mayer was
quick to note t hat her decree
was not mea nt to be a sweep-
ing condemnation against flex-
time in general, but rather, she
was just sayin g that it was not
right for Yahoo at this specific
time.
Specifically, there were
two issues that led to ~/layer's
somewhat controversial-policy
cha nge. First, internal evidence
from VPN logs showed that
Yahoo's work-at-home staff did
not seem to be working very
hard when measured in terms
of hours actually
logged. The percep-
tion that some of the
employees were abusing the
privilege was widespread and
created conflict with employ-
ees who were not abusing
the privilege. Second, Mayer
believed that Yahoo needed to
come up with creative solutions
to compete with Google and
Facebook, who had siphoned
off users and advertisers from
Yahoo over the years. Mayer
stressed that "people are more
productive when they are alone,
but they are more collaborative
and innovative when they're
together.'' Thus, the decision
was a strategic choice regard-
ing how to best compete in that
industry-no more, no less.
DRSCUSSION QUESTllOif\11
Discuss how the nature of a
company's workers and the
nature of the work itself might
influence when flextime is a
good policy and when it is a
poor strategy. Why might a
"one-size-fits al I policy" for fle)(-
time be unrealistic?
SOURCE: A Efrati and J . Le1zing, 1"
"Google's Mayer Takes Over as Yahoo Chief,"
The Wall Street Journal Online, July 17, 2012;
E. Fraunheim, "Reflecting on Flexing," Work-
force Management, June 2013, pp. 23-37;
R. Bell, "Turning Their Backs on Telecommut-
ing," Workforce Management, April 2013, p. 46.

attitudes, and philosophies that the co-workers and supervisors have. Neverthe-
less, if an employee values her autonomy and Wees to make her own decisions
at work, then she is likely to react negatively to a supervisor who is constantly
micro-managing and looking over her shoulder. Overly dose supervision is a
common souxce of dissatis.faction for ma:n.y employees, and worse yet, it also

475
 ..
;;·.; 476 · CHAPTIEIR 10 Employee Separation and Hetention

xed1l102n llAe perfor.mar11.cir:;"o{ nwnagers ·whose time 1night be better spent paying
attention to thefr ovv:n work. Still, monitoring employee activity is one formal
responsibility of supervisors, an.d when conducted in the proper dosage and in
the proper spirit, can actually be seen as a sign of support. Recent developments
iJ1 technology, as the "Competing tlu"ough Technology" box shows, have dra-
maiicaUy increased the alo:Uity of supervisors to monitor employees.
Second, as just mentioned, people may be satisfied with their supervisor and
co-workers because tl-1.ey provide support that helps them achieve their own
goals. Social support mem1.s the degree to which the person is surrounded by
other people who are sympathetic and caiing. Considerable researdi. indicates
that social support is a sh·ong predictor of job satisfaction and lower eni.ployee
turnover.93 In contras!:, abusive supervision is a major cause of tun1ove1~ .and
some organizations find that they can reduce turnover in some units by 25% to
33% in a single yeax simply by removing a specific supervisor who lacks inter-
...uerson.al skilJs.94
Supervisors are nofc aJways the only potential soul'ce of abuse, however, and
in many cases, abuse by co-vv-rn:kers can have an even more profound negative
influence on one's job saili.sfaction. fior example, one 2012 sunrey indicated that
35% of respondents reported being bullied by co-workers on the job. Workplace
bullying is defined as repeated h.ealth-harntlng mistreatment by o:n.e rn: more
perpeh"ators at work that takes the form of verbal abuse and offensive conduct
that is Hu:eatening, hmniliating or h1timidating to the point where it prevents
work from getting done. Unlike abusive bosses, who often let up once a specific
task is accomplished, bullying by co-"'lvorkers tends to be a constant, unrelentfug
process. Although it is corn_mon for high schools to adopt non-bullyjng rules,
this has not been tl1e case among empfoyE:rs, even though bullies rarely stop
being bullies simply because tl1ey graduated from high school.95
Because a supportive envi:ronrnent reduces dissatisfaction, many organiza-
tions foster team building both on and off 1:he job (such as via softball or bowling .
leagues). The idea is tJi.at group cohesiveness and support for individual group
members will be increased tluough exposure and joint efforts. Although man- .
agemeni: certajnly cannot ensure that each sh·essed employee develops friends,
it can make it easier for employees to interact- a necessary condition for devel-
oping friendship and rapport. fo fad, results of smveys indicate that endorsing
the item "Most of my closest friendships a.re with people at work" is one of the
most powerful tools for predicting turnover.96

Pay ~md Belllefit:');

We should not discount the influence of the job incumbent, the job itself, and the
sunouncling people in term'3 of :influencing job satisfaction, but for most people,
work is theix p:dmm:y source of income and financial security. Pay is also seen as
an indicator of status withiin the organization as !Nell as in society at large. Thus, ·
for many individuals, the standing of their pay relaiive to those within their
organization, m the stancUng of their pay relative to others doing simila.r work
for oth12r employers, becomes even more important than the level of pay itself.97
Thus, for some people, pay is a refled:i.on of self-worth, so pay satisfadion takes
on criijcal significance when H comes to retention.98 Indeed, the role of pay ru1d
benefits is so large that we devote tl-H: en.tire next part of this book to these topics.
Within this chapter we focus primardly on satisfaction with two aspects of pay
,\,I
,'l ~~-t.: i
When Marissa Mayer vvas
selected t o be the next CEO of
Yahoo in 2012, she became the
20th female CEO at a Fortune
500 company. Since she and
her husband were expecting
their first child when the news
was announced, this made her
the only pregnant CEO at a
Fortune 500 com pany. Certai n
eJ<pectations come with beinf:J
the on ly mother-to-be \Nithin
the CEO ranks, but wh(~n Mayer
announced that she was ending
Yahoo's long-timt~ policy allow-
ing fle)(time at \111ork, t his was
not one of them. Indeed, imme-
d iately after her announcement,
another long-time provider of
flexible work arrangements,
Best Buy, followed her lead and
ended their program. This left
many wondering whether or not
the time for fl extime has come
and gone.
In its defense, most research
into the effects of flextime sug-
gests that it has benefits and
many compan ies are standing
by their policies. For example,
Medtronics operations in Santa
Rosa, California, designated
15% of its workforce as "home-
office employees." Most of
those workers telecommute
frorn 'San Francisco, which is
roughly o ne hou r away by
car. Medtronics swears by its
attitudes, and philosophies th.at the co-workers and supervisors have. Neverthe-
less, if an employee values her autonomy and likes to make her own decisions
at work, then she is likely to read: negatively to a supervisor who is constantly
micro-managing and looking over her shoulder. Overly dose supervision is a
comm.on source of dissatisfaction for many employees, and worse yet, it also
program, noting that it saves
ovei- $1 million a year in office
space and boosts its ability
to attract top level talent in
San Francisco who are willing to
commute one clay a week, but
not willing to move or commute
every day.
However, managing flextime
employees ca n be challenging
for som e managers because
it forces them to manage out-
comes and results, and not
just employee face-time . Jody
Thompson, the original archi-
tect of the Best Buy flext ime
program, notes, "Demanding
face-time from employees is
typically a sign t hat supervisors
are unab le to lead effectively.
They don't kn ow how to man-
age performance, so they man-
age people's time." Mayer was
q uick to note that her decree
was not meant to be a sweep-
ing condemnation against flex-
time in g eneral, but rather, she
was just saying that it was not
right for Yahoo at this specific
t ime.
Specifically, there were
two issues that led to Mayer's
somewhat controversial-policy
change. First, internal evidence
from VPN logs showed that
Yahoo's w ork-at-home staff did
not seem to be working very
hard when measured in terms
·-·-----·- - - - - - - - - - - -
of hours actually
logged. The percep-
tion that some of the
employees were abusing the
privilege was widespread and
created conflict with employ-
ees who were not abusing
th e privilege. Second, Mayer
believed that Yahoo needed to t}
come up with creative solutions ~
to compete with Goog le and ~
Facebook, who had siphoned ·~ ·
off users and advertisers from ·
Yahoo over the years. Mayer *
stressed that "people are more ~
productive when they are alone, i
but they are more collaborative !!
and innovative when they're '.i
together." Thus, the decision i
was a strategic choice regard- ,,
ing how to best compete in that i
indust ry-no more, no less, l
'ii
DISCUSSION QUESTDOINJ ~·>
~
Discuss how the nature of a
com p any's workers and the
nature of the work itself might
~
i
influence when flextime is a
good policy and when it is a '
poor strategy. Why might a ~
"one-size-fits all policy" for fie)<- ~
time b e unrealistic? i "fl:·
SOURCE: A Efrati and J. Letzing, 1"
"Google's Mayer Takes Over as Yahoo Chief,''
The Wall Street Journal Online, July 17, 2012;
i
4
i
E. Fraunheim, "Reflecting on Flexing," Work-
force Management, June 2013, pp. 23-37; i
I
R. Bell, "Turning Their Backs on Telecommut-
~
_'fi,
ing," Workforce Management, April 2013, p. 46.
475
 ....
476 · CH.A.PTIER 10 Employee Separation and Hetention

reduces H-1.e pe:rfor.mancre ·oif :rnarw.gers ·wh.Q3e time mi.ght be better spent paying
attenlcion to their ovv11 ·work. Still, monitoring employee activity is one formal
responsibiJi1y of supervisors, and when conducted in the proper dosage and in
the proper spirit, can adually be seen as a sign of support. Recent developments
i11 technology, as the "Competing thxou.gh Technology" box shows, have dra-
matica:Uy increased the ab:iJity of supervisors to monitor employees.
Second, as just mentioned, people may be satisfied with their supervisor and ,
co-workers because tlv~y provide support 11tat helps them achieve their own
goals. Social support means the degree to v1rhich the person is surrounded by
0U1er people who are sympathetic and caring. Considerable research indicates
that social support is a sb.'ong predictor of job satisfaction and lower eni.ployee ·
turnover.93 In contras!:, abusive supervision is a major cause of tur:nove1~ and
some organizations find that they can reduce turnover in some units by 25% to
33% in a single year sirnply by removing a specific supervisor who lacks inter-
...uersonal skills.94
Supervisors arl'e nofc a}ways the only potential source o.f abuse, however, and
in many cases, abuse by co-vvuirkers can have an even more profound negative
influence on one's job saiisfoction. For E'xample, one 2012 survey indicated that
35% of respondents reported being bulUed by co-workers on the job. Workplace
bullyi.Ji1g is defined as 1-epcated health-har.nl.ing mistreatment by one or more
perpevxators al: work that takes the form of verbal abuse and offensive conduct
that is Hu:eatening, lmmiliating or h1timidating to the point where it prevents
work from getting done. Unlike abusive bosses, who often let up once a specific
task is accomplished, bullyjng by co-workers tends to be a constant, unrelentiilg
process. Although it is co:mmon for high schools to adopt non-bullying rules,
this has not been the case among empfoyers, even though bullies rarely stop
being bullies simply because f11€y graduated from high school.95
Because a supporlive en1.ri:ronJ.n.ent reduces dissatisfaction, many organiza-
tions foster team building borh on and. off the job (such as via softball or bowling .
leagues). Tile idea is that group cohesiveness and support for individual group
members will be increased th.rough exposure and joint efforts. Altli.ough man- .
agement certainly cannot ensure that each sh·essed employee develops friends,
it can make it easier for employees io interact-a necessary condition for devel-
opjng hi.endship and rapport. Jin fad, :results of surveys indicate that endorsing
the item "Most of my closest friendships are with people at work" is one of the
most powerful tools for predicting turnover.96

Pay ami !Beirnefnt:£

We should not discount. the :i.n1luence of the job incumbent, the job itself, and the
surrounding people in terms of i11fluencing job satisfaction, but for most people,
work is the:ix primary source of income and financial security. Pay is also seen as
an indicator of status within the organization
. as !Nell as in society at large. Thus,
for many individuals, the standing of their pay relative to U1ose within tl1teir
organization, or the stancHn.g of their pay relative to others doing similar wrnrk
for othrer employersr becomes even more important than the level of pay itself.97
Thus, for some people, pa.y is a reflection of self-worth, so pay satisfadion takes
on crifo.:al significance when it comes to retenlion.98 Indeed, the role of pay and
benefits is so large l:hat we devote the entire next part of this book to these topics.
With.in this chapter we focus primarily on satisfaction with two aspects of pay
In today's offices and factories,
technology such as computc')rs,
smartphones, e-mail, instant
messaging, Skype, and tele--
conferendng have opened up
many ne w channels of com-
munication for people who are
not actually at the same physi--
cal location. However, none of
these new technolog ies seem to
re ally replace the need for face-
to-face communication, and
thus, organizations still spend
over $225 million on business
travel each ye ar. This is a costly
investment and does not even
figure in the human costs asso-
ciated with wasted ti me or the
environmental costs associated
with carbon dioxide emissions.
A new technology is being
developed at several different
compan ies, however, that is
looking to change this by creat-
ing the perception of true physi-
cal presence via a "tel(-')presencEi
robot." One of the entrants in
th is new industry is the /\va 500
which grew out of the Roornba,
a d isk-shaped, autonomous
vacuum cleaner t hat used to
mindlessly scoot a round the~
room it was cleaning . Today, on
top of that b ase, the company
iRobot, along with its partner
Cisco Systems, has added a
pedestal, a monitor, a video
camera with microphone and
automated navigational systems
(pay levels and benefits) and how these are assessed within the organization.
Methods for addressing these issues aire discussed in Prut 4 of this book.
One of the main dimensions of satisfaction with pay deals with pay levels
relative to m arket wages. Indeed, when it comes to retention, employees being
that allow workers to walk and
talk face-to-face regard less of
t heir actual physical location.
One c;:;in a lso "sit still" and by
moving the camera and monitor
from side to side, have a face-
to-face conversation with others
situated arou nd a t able.
Ava uses GPS and other
technologies to navigate around
an office or plant, and thus the
device does not require the
person to "drive it" -one sim-
ply tells it where to go. While it
goes, it can be in either "Private
Mode" v11here most of its sensors
are tu1T1(·3C1 off to save energy,
or "Public Mode" where all the
sensors are turned on and one
can talk to whomever one hap-
pens to run into on the way. This
creates the type of serendipitous
and accidenta l interaction pat- ·
terns that often tum out to be
central to the creative process.
The technology is useful for
touring plants and making sales
calls, but it is especially valuable
for managers who are trying to
lead far-flung operations and
create teamwork among highly
specialized workers who live in
differe nt locations.
The technology is not with-
out its limits, in the sense that
st;:'lirWc)ys present an insur-
mountable barrier, forcing some
users to maintain different
robots in different locat ions.
This. allows them
to just switch from
one robot to another
when changing locations. Also,
some people are somewhat
uncomfortable talking to a
telepresence robot initially, but
they adjust to th is pretty rapidly,
especially if they routinely meet
face-to-face with the user on
other occasions. CEO of iRobot,
Colin Angle, notes that "my
challenge is to create an e)(peri-
ence that a professional would
find as a legitimate alternative
to travel," and if he achieves
t his goal, the next time your
boss is looking over your shoul-
der, he o r she may be doing it
from 2,000 miles away.
DISCUSSION QU!:STIONS
1. Why would the use oftele-
presence robots increase
the job satisfaction and per-
formance of some workers,
but reduce job satisfaction
and performance for other
workers?
2. What types of people and
what types of t asks would
be best suite d for the use of
telepresence robots?
SOURCES: C. Mathews, "Talking Heads, "
Dme Magazine, June 24, 2013, p. '12;
M. Endler, "iRobot, Cisco Create Telepres-
em:e Robot, " Information Week Online, June
11, 2013; T. Chea, "Telepresence Robots' Let
Employees 'Beam' into Work," Bloomberg
Businessweek, December 23, 2012.
477
 ·-
478 CMAPTER 10 Employee Separation and Retent ion

recruited away from one organization by another are often lured with pro1nises
of higher pay levels. In fact, exit surveys of high-performing employees w11.o
have left their organjzation indicate "better pay" as the reason in over 70% of Hie
cases compared to only 33% who indicate "better opportunity." Ironically~ when
the managers of those same workers a-re polled, 68% cite ''better oppodunity"
versus 45% who indicate it was "better pay," suggesting quite a difference of
opiniqn-99 Satisfac1ion w ith benefits is another important dimension of overall
pay satisfaction. Because many individuals have a difficult time ascertaining the
tru~ dollar value of their benefits package, howeve1~ this climension may not :JI!
always be as salient to people as pay itself. To derive competitive advantage : ·; w~I
from benefits' expenditures, it is critical not only to make them highly saliEint to !\~ ~
employees, hmNever, but also link tl1em to the organization's strategic direction. ·jj~ :
MIEASURiNG AND MOl\fflfOmNG JOB SAnSFACTION
Most attempts to measure job satisfaction rely on workers' self-reports. 111.ere is
a vast amount of data on the reliability and validity of many existing scales as
well as a weaHh of data from companies that have used these scales, allowing
for comparisons across firms. Established scales are .excellent places to begin if
employers wish to assess the satisfaction levels of their employees. An employer
w ould be foolish to "reinvent the wheel" by generating its own versions of mea-
suxes of lhese broad constructs. Of course, in some cases, organizations want to
measure thejx employees' satisfaction Vvith aspects of their work that are specific
to that organization (such as satisfaction with one particular health plan versus
another). In these situations the organization may need to create its own scales,
but this will. be the excepiion rather than tJ1e mle.
One standardized, ~111idely used measure of job satisfaction is the Job Descrip-
tive Index (JDI). The JDI emphasizes various facets of satisfaction: pay, the work
itself, supervision, co-workers, and promotions. Table 10.5 presents several
items from the JDI scale. Other scales eYJst for those who want to get even more
specific about different facets of satisfaction. For example, although the JDI we
just examined assesses satisfaction with pay, it does not break pay up into dif-
ferent dimensions. 100 The Pay Satisfaction Questionnaire (PSQ) focuses on these

1faib•e 1 @.!51
Sample Items from lnstrudions: Think of your present work. What is it like most of the time? In the blank
a Standardized Job beside each word given belovv, 'Nl'ite
Satisfaction Scale _y_ for "Yes" if it clescr·i bes your· work
(the JDI) ___lL_ for '' l\lo" if it does NOT describe your work
_?__ if you cannot decide
•Wdrk'ttis~.lf , · Priy
'• '')1J: fr~6i1tine· ..• ~2-'"--
·. ' Z~~ 'Satis{ying
--.1-.'.. Good . , , s~'~;~~,if~~ty .·
Supervision Co-workers
___.L._ Impolite __]__ Intelligent
___ :?___.Pra ises '.:'.IOOd \Nork __ ]__ Respons ible
-·--L~- . Doesn't supervise HJOUfJh Boring

SOURCE: W. I<. Salzar, D. C. Smith, D . E. Kravitz, S. E. Lovell, I<. B, Paul, B. A. Reilly, and C. E. Reilly, User's ManL1al
for the Job Descripti1 1e Index (.JOI) (Bowling Green, OH: Bowling Green State University, 1990).
 ..
CHAPTER 10 Employee Separation and Retention 479

. more specific d imensions (pay levels, benefits, pay sh11ch.u-e, and pay raises);
thus this measure gives a. more detailed view of exactly what aspects of pay are
most or least satisfying.101
Clearly there is no end to the num~ber of satisfaction facets that we might
want to measure, but the key jn operational contexts, where the main concern
is retention, is making sure that scores on whatever measures taken truly relate
to voluntary turnover among valued people. For example, satisfaction with
co··workers might be Io-w, but if this aspect of satisfaction is not too central to
employees, it may not translate into voluntary turnover. Similarly;. in an organi-
zation that bases raises on performance, low perfo1mers might report being dis-
satisfied with raises, but this may not reflect any operational problem. Indeed,
the whole sh·ategic purpose of rnany pay-for-performance plans is to CI"eate this
type of dissatisfaction among low performers to motivate them to higher levels
of performance.

Regardless of what 1:neasures are used or hmv many facets of satisfaction are a.o 10.. 4
assessed, a systematic, ongoing program of employee surney research should be a Design a survey feed-
prominent part of any human resource si.rategy for a number of reasons. First, back intervention
program, and use this
it allows the company to monitor frends over time and thtL5 prevent problems to promote retention
in the area of voltmtary turnover before they happen. For example, Figure 10.3 of key organizational
shows the average profile for different facets of satisfaction for a hypothet- personnel.
ical company in 2009, 2011, and 2013. As the figixre makes clear, the level of

lFi~urre 10.l
Average Profile for Different Facc:}ts of Satisfaction over Time

Very-
satisfied

Satisfied -

Neutral -

Dissatisfied ·
2009
2011
2013

Very
dissatisfied
.,___..._____, __. - - · + - - - - + - -·- - - l - - - - - - + - - - - 1 - - - - J
Work Promotion Supervisor Co-workers Pay Benefits Pay Pay
itself opportunities .level structure raises
 ..
48()1 CHA PTER 1IO Employee Separation and Retention

satisfaction with promotion opporl:unities in tlus company has eroded over ii.me,
w h ereas the. satisfaction v11ith co-workers has improved. If there was a sh"png
relationship between satisfaction with promotion opportunities .:md voluntruy
hunove:r among high performers, this.would constitute a threat that the organi-
zation might need to address via some of the teclmiques iliscussed in oux pre-
vious chapter, "Employee Development." For example, Sun Healthcare Group ·
found exactly this kind of trend :in its survey of nurses, aides, and other caxegiv-
ers. TI1e company responded to this feedback by creating the Career Patlnvays
Initiative that allowed tl1e employees to develop new skills and grow profes-
sionally. The program provided time off and financial support-some of which
was obtained from seeking a federal grnnt-to workers who Wanted to go back
to school and obtain higher degxees. Many former nurses aides becam.e fu.Uy
certified nursing assistants, many nuxsing assistants became licensed practical
nurses (LPNs) and registered nurnes (Rl\fs), and many LPNs and RNs became
nurse practitioners and physician assistants. TI1e organization not only wound
up having a higher skilled staff, in adrution, turnover was reduced by 20% after
the initiation of the program .io2
A second reason for engaging in an ongoing program of employee satisfac-
ti.on surveys is that it provides a means of empirically assessing the impact of
d1anges in policy (such as introduction of a new performance appraisal system)
or personnel (e.g., inlToduction of a new CEO) on worker attitudes. Figw:e 10.4
shows the average profile for different satisfaction facets for a hypothetical orga-
nization one year before and one year after a merger. An examination of the
profile makes it'dear that since the merger, satisfaction with supervision and

IFfigvur~ 'ii 0.4

Average Profile for Different Facets of Satisfaction befo re and after a Major Event

Very - -
satisfied

Satisfied -

Premerger
Neutral

Dissatisfied -
. li

Very -
dissatisfied
•~--t-~~~~~~~---+-,~~~~4~~~ ---1-~~~-i-~~~-+-~~~-+-~

Work Promotion Supervisor Co-workers Pay Benefits Pay Pay . >r.'I

. ;'~

itself :L
opportunities level structure raises

,.f. t
.; ·

.'.: ~~1 '

.... >'!!
 ..
C.IHAPTEiR 110 Employee Separation and Retention 481

pay structure have gon/e clown dramatically~ and this has not been offset by any
increase in satisfaction along other dilnensions. Again, this might point to the
need for training programs for supervisorn (hke those discussed in Chapter 7)
or changes in the pay system (like those discussed in Chapter 11). This was the
exact pattern of results that was found 1by HCL Technologies, an India-based
technology services provider. More spedficaUy, the company learned from its
survey that its variable pay-for-perfonmmce program was neating too many
wild swings h1 the workers' paychecks, and many were leaving to take jobs witl1
more stable month-to-month paychecks. The company responded by reducing
the variable component in pay from 30% to just 10%. The result was an increase
in customer satisfaclion, a 140% growth in revenue, and a 50% reduction in
turnover. 103
Third, when these surveys incorporate sta:ndardi.zed scales like the JDI, they
often allow Ill<~ compa1ny to compare HseH w.iJh others in the same industry
along these dimensions. For example, Figure 10.5 shows the average profile for
different satisfaction facel:s fo:r a hypotJ1eticaJ. oxgmuzati.on and compares this to
the industry average. Again., if we detect rn.ajor differences between one orga-
ni.zation and Hie industry as .a whole (on overall pay levels, for example), tlus
might allow the company to react and d1arnge its policies before l.:heX"e is a mass
exodus of people moving to the competition.
According to Figure 10.5, the satisfocti.on with pay levels is low relative to the
industry, but l.his is offset by higher-than-indusb:y-ave:rage satisfaction with ben-
efits and the work itself. As we showed ill Chapter 6 (°Selection and Placement"),
the organization might 1AT.ain~ to use this :infonnation to systematically screen

fijgruiire 'JI@.!$
Average Profile for Different Facets of Satisfaction versus the Industry Average

Very --
satisfied

Satisfied -

Neutral

Dissatisfied -
Industry
Average
Very
d issatisfied
·-1--··---1--~·~---1-------1------J-----+-----1--------j
i/\Jork Promotion Supenri'1or (:o-\NQTkers Pay Benefits Pay
itself opportunities level structure
 ...
482 CHAPTER 10 Employee Separation and Retention

people. That is, tl1e fit behNeen the person and lhe organization virould be best if
the company selected applicants who :reported being most interested in the natme
of the work itself and benefits, and rejected those applicants whose sole concern
was w ith pay levels.
VVithln the organiza1.ion, a systematic survey program also aJlows the com-
pany to check for iliffen~nces between u.ruts and hence benchmark "best prac-
tices" tl1at might lbe generalized across units. For example, Figure 10.6 shows the
average profile for fivedilierent regional divisions of a hypothetical company.
111e figure shows that satisfaction with pay raises is much higher in one of the
regions relative to the olhers. If the overall amount of money allocated to raises
w as equal thxough the entixe company, this implies that the maru1er in which
raises are allocated or communicated h1 the JVIidwest region might be smnetlring
that the other regions should look into.
Although findi;ngs such as tl1ese are leading more companies to do such sur-
veys, conducting an organizational opinion survey is not something that should
be taken lightly. EspedaJly in J11e begixming, surveys such as this often raise
expectations. If people fojJ to see any timely actions taken on matters identified
as p roblems in the survey~ satisfacHon is likely to be even lower than it would be
mthe absence of a survey.
Finally, although the focus in this section has been on surveys of current
employees, any strategic retention policy also has to consider surveying people
who are about to become ex-~mployees. Exit interviews with departing ·workers

R-;;fi~M!f<e 11@.16
Average Profile for Different Facets of Satisfaction for Different r\egional Divisions

Very -
satisfied

Satisfied

f\leutral -

Dissatisfied --

Very - -
dissatisfied

Work Promotion Supervisor Co-vvorkers Pay Benefits Pay Pay

itself opportunities level structure raises

' 1
'
 ...
CHAPTER 10 Employee Separation and Retention 483

can be a valuable tool for m1covering systematic concerns that are driving reten-
tion problems. If properly conducted, an exit interview can reveal the reasons
why people are leaving. For example, n::sults from recent exit interviews among
employees show that there are t1No .distinct groups of people who are leaving
their jobs-one set of workers who cannot get enough hours an.d a second set of
workers who are working too many hours. This may seem ironic and counterin-
tuitive, but in some ways it actually makes sense given the way work is increas-
ingly stmcturecl armmd two distinct classes of workers-hourly and salaried.
That is, because they are being paid by the hour, it makes sense for employ-
ers to limit the amount of lime hourly ·workers spend on the job. They want to
avoid paying any overtime hm.u:s (valued a t time and a half), but beyond that,
they may even h·y to bmit the n mnber of hours below 30 in order to avoid hav-
ing to pay for mandated health <'are.104 Thus, many hourly workers cannot get
enough work.IDs Jn contrast, salaried employees represent a fixed rather than
variable cost, and hence 1l1ere is pressure to malce these individuals work very
long hours, including nights and weekends . Many of these workers wind up not
taking vacation d ays that a.re provided to them or work while on vacation.106
Obviously, ii: w ou ld benefit everyone in the workforce to help smooth out some
of l:his over- and w1der -demand for labo1~ but this shows the pervasive power of
rules regarding pay and pay s1.ruchlfe---the topic of the next section of this book

v
'\/
v
Managing C~nnnn~n g
In the chapter opener we read how Eu ropean churn rates (the rate at which peo-
ple are quitting jobs to accept others) remain low due to employees' reaction to
the economic recession . Driven by uncerta inty, people are unwilli.ng to leave th eir
job. First signs of economic recovery announce increasing churn rates. Although
hea lthy churn rates are good for the economy as a whole, for organizations, the
key factor influencing competitiveness is vvho is leaving and who is staying. Orga-
nizations need to have policies that m ake it easy and advantageous for low per-
formers to leave (involuntary turnover), but make it difficult and unappealing for
high pe1forrners to leave (voluntary turnover) . Managing the "flow" of employees
is a critic8l source of co mpetitive advanta~Je and becomes even more im p ortant
as soon as the economy heats up.

QUESTIONS
1. In what ways would an increase in churn rates make it easier for firms to man-
age involu ntary turnover? And what m ight Firms do to take advantage of
changing chu rn rates?
~ . In what ways would an increase in chu rn rates make it more difficult for firms
to manage voluntary turnover? An d what might firms do to avoid being hurt
by chan gin g churn rates?
3. Strategies to develop a loya l and engag ed workforce are (part of) the solu-
tion to high turnover rates. W hat role can employee altitude surveys play in
this? What are challenges associated with getting accurate and reliable infor-
mation from employee surveys, and how can a survey process "backfire" in
terms of ha rming, rather than helpin g, a f irm's efforts?
 if'

484 CHAIPTIER 1 0 Employee Separation and Retention

'TI1is chapter examined issues related to employee
separation and retention. Involuntary turnover reflects
a separation initiated by the orga11ization, often when
the individual would prefer·to stay a membex· of the
rnrganizal:io.n. Voluntary tum.over reflects a separa"
ti.on jnitiated by Ille individual, often when the o.rga-
.nization would pre.fer that the person stay a member.
that does not invite retaliation, and voluntary turn-
over among high performers is kept to a mu•.i.rnurn..
Retaliatory reactions t.o organizational discipline and.
dismissal decisfons Ca!l be minimized by iJ.D.plernent-
ing these decisions in a manner that promot~s feelings
of proceduxal and interactive justice. Voluntary tu.n.1.-
over can be m.inb.nized by measuring and. monitorin.g

~'
Organizations can gain competitive advantage by employee levels of salisfaction with critical facets of
srrategically managing the separation process so that job and organization, and the..• addressing any prob-
involuntary turnover is implemented :in a fashion lems identi_fiie:d by such SUJ.""Veys. '

Xnvohmtary tun10ver, 453 Employee assistance Frame of reference, 468

Voluntary tuxn.over, 453
Employment-at-will doctrine, 45tl
Outcome fairness, 456
Procedural justice, 456
Interactional justice, 457
Alternative dispute
resolution (ADR), 458
...,.
programs (EAPs), 459 Negative affectivity, 471 '~ ,
Outplacement: COW1Seling, 462 Job rotation, 472 ·
Progression of withdrawal, 464 Prosod.al motivafion, 474
Whistle-blowing, 4,65
Job involvement, 467
Org<J1nizational. commitment, 467
Job satisfaction, 468

L The discipline and discharge procedures described
in this chapter are systematic but rather slow. In
your opinion, should some offenses lead to imme-
diate dismissal? If so, how would you justify this to
a court if you were sued for wrongful discharge?
· 2. Organizational turnover is generally considered a
negative outcome, and many organ.izaµ.ons spend
a great deal of time and money trying to reduce it.
1/\n1al silualions would indicate that an increase in
turnover might be just what an organization needs?
Given the diliicully of terminating employees, what
organizational policies might promote the l'etention
of high-performing workers but voluntary turn-·
over among low performers?
3. Tlu:ee popular :interventions for enhancing worker
satisfaclion are job enridunent, job rotation, and
role analysis. W1wt are the critical differences
between these interventions, and under what con-
ditions might one be preferable to the others?
4. Jf off-the-job stress and dissatisfaction begin to cre-
ate on-the-job problems, what are the rights and
responsibilities of the human resource manager in
helping the employee to overcome these problems?
Are intrusions into such areas an invasion of pri-
vacy, a benevolent and altruistic employer practice,
or simply a prudent financial step talcen l:o pro~£d
the finn' s investment?
5. Discuss the advantages of using published, stan-
dardized measures i.n employee attitude surveys.
Do employers ever need f:o develop tfo~ir own mea-
sures for such surveys? Where would one turn to
lea:i::n how to do IJ'lis?

The chaxacteristics of your job jnfluence your overall The following plU'ases describe duferent job chru:-
satisfo.clion with the job. One way to be satisfied at acteristi.cs. Read each phrase, then drde a number to I

work i5 to find a job with the characteristics that you

find desfrable. TI1e following assessment is a look at
indicate how much of the job characteristic you wouJd
like. Use the follovring scale: 1 = ver; little; 2 = 1.i!:tle; .J
j
what kind of job :is likely to satisfy you. ~ 3 = a moderate amount; 4 = much; 5 = very mudl. I

'
'"I·I,
' ·~
 ...
1. The opportunity to perform a number
of different activities each day
2. Contributing something si9nificant
t:o the cornp any
3. The freedom to determine hovv to
do my job
4. The ability t o see projecis or jobs .
through to completion, rath<-')r than
performi119 on ly one piece of t he job
~). Seei n~;:i the results of my work, so I can
g(~t an idea of how well I am doinr~ the
job
6. /-\ feelinq that the quality of my work is
important to others in the company
7. The need to use a variety of
comple)( skil ls
H. 1~esponsibility t o act <md n1ake deci-
si ons in dep enck~ntly of managers or
supervisors
9. Time and resources to do an entire
p iece o f work from b eginning to end
10. Gettinq feedback about my perfor-
mance from the work itself
Add the scores for U1e p <1irs of iten1s that measure each
job charact:eriBtic. A higher scme for a chaxade1;shc
means tha t characteristic is in me i1np01tant i:o you.
Safety lapses Sink Deep Water Horizon
When it came to accidents ·and safety violations, Brit-
ish Pelmleum (BP) had a history. In 2005, a blast at
il:s refinery in 'fe')(aG City, lexas, killed 15 people and
seriously injured anoH1er mo. A t its Gulf of M exico
opernl:ions, British Petroleum had warnings. ln fact,
lhere wiere 10 reported major incidenl5 in the gulf in
2007 alone. Vice President of Gulf of Mexico Produc-
tion, Richard Morrison, noted at tJ1e end o.f that ye<u~
"Vile are experiencing an unprecedented frequency of
s'::ri.ous incidents in our operations. We are extremely
fortunale that one or more of our co-workers has not
been seriously injmed or k5Hed.''
The good fortune ended abruptly on April 20, 2010,
when the Deep VVater Horizon rig, a floating oil •NeJl
larger than two football fields, exploded due to an
m1dctecl.ed natural gas leak The explosion b l led 11
people and injured another 17, and .sent the giant rig
l:o an underwater burial under a mjJ.e of seaV1.rater. In
add ition to this human cost, the accident was an envi-
ronmental disaster. It took months to cap the vvell over
•Nhich the DE:ep Water Hmizon was perched, and iJ.1
the meantime, over 200 m ilUon gollons of oH spe'v\T!C~d
CMAPT~H 10 Employee Separation and Retention 435
Skill Variehj: The deg1:ee to which a job requites you to
I234 5 use a variety of sl:...ills. ·
Item 1: -l- Iten1 7: =
123 4 5 to
Task Identity: TI1e degree which a job requires com-
pletion of a whole and identifiable piece of work.
123 4 5
Item 4: + Item 9: =
Task Significance: TI1e .degr~e to which a job has an
·1 2 3 4 5 impact on the lives or work of others.
Hem 2: _ _ +Item 6: _ _ = _ _
Autonomy: The degree to which a job provides free-
12 3 4 5 dom, emp owerment, and discretion in scheduling the
•Nork and determining processes and procedm:es for
·1 ~~ 3 4 !:> compieting the work
Hem 3: + Item 8:
·1 2 3 4 5
Feedback: TI1e degree to whid1 carrying out job-related
tasks and activities provides you with direcl: and dear
l 234 5
information about your effectiveness.
Hem 5 +Item 10:
l 2 3 tJ. 5 SOURCE: Adaptc-<l from R. Daft and R. Noe, Orgrmizlllio:utl Be/11ivior
(!'Jew York: Harcourt, 2001).
·1 2 3 4 5
into the Gulf, threatening the d elicate ecosystem of
flora, fauna, and beaches in that region. The cosl: of
the accident to the financial standing of BP was also
monumental. BP put aside $41 billion to pay for the
spill, but by the summer of 2011 that fund was already
tapped out.
Investigations into the disaster revealed a large num-
ber of human en-ors and problems in the area of strate-
gic human resource mru1agement on the part of BP, its
parb.1ers, and government regulators il1.a.t contributed
to the disaster.. First, on the BP side, cost-cutting efforts
at the company led to massive layoffs of workers,
which in tum resulted in a shortage of people with the
skills to conduct self-inspections. TI10se individuals
were then provided financial incentives and bonuses
that, ·when push came to shove, placed eHkiency goals
ahead of safety goals. This was exacerbated by coordi-
nation failures between BP and its partners who actu-
ally owned the rig and drilling equipment. Indeed, in
the fixst week of the disaster, BP CEO Tony Hayward
was quick to point the finger at Transocean, noJmg, "It
is not our rig, not our equipment, not our systems."
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M~0adi n91 for the Exit Flight AUendant Becomes Mero

H had happened a hund red times before. This time iJ c)dts from lhei.T own jobs. One of his fans, a former
bappr~ned in JFK Airport ir1 New York on a plane thal: flight attendant from New York, spoke for many when
h a.d just fonded . A passenger ldt her seat l:oo 0oon, nnd. she stated, "Enough is enough-good for him ."
opened up il1e storage compartu:1ent above her seat TI.1e reaction of Slater and his fan base spesl<s vol-
The flight attendant, Steven Slatei~ IJ1en did what he un1es to both the difficult nature of the speciii.c job of ··m
'i li.-
always dJd. He calmly asked her to return to her seal: fHght attendant, as well as the larger -collective mood . /"
until the airplan e came to a ccmpl.d e stop. The passen- of the WOJ.'kforce. With respect to the mght atl:en- ·'
g£r i.gnored hi:rn, and H-1.en Sla.ler did what he al.ways dant' s job, tl1is is ai.< arduous task characterized by low
dkl.. He calmly went to help her get s<~ated again.. pay, long hours, and demanding customers, some of
l11e passenger verball.y attacked Slater and wound whom are cryjng babies, dr.unl<s, or phobic to heights,
up hitting him over t.he head with the oversized bag crowds, or enclosed conditions. Within this charged
1Ju1.l; she was wrestling out of ihe overhead bin. After context, they must enact strict safety and secmit"y proc i'.f
·l:S
th.is, Slater di d something that no one else rner did. He ceduxes that have to be followed without exception or ·.<_.

returned to the intercom and let loose v.ri1l1 mi. obsoen- face disciplinary ch arges. In addition to the stressful
jJy laced inveclive cl-ireded a l: the woman. He 111.en n ahi.re of tli.e work, Slater hii.""Uself was struggling with
rnade a dramalic depaxture by pulling the br.igger on work- famHy conflict, as he juggled his highly unpre-
the emergency inflatable exil: d 1u.te, sliding off )nto d ictable work sd1edule with the demands of simu.lta-
r1Ctirem~nt--bul: only afrer grabbin.g two beers from neously trying to care for his dying mother.
the beverage cart for the trip. Turning l:o the larger workforce, Steven Slater's
Perhaps the only thing more remarkable 1fom Slat- frush·ation mirrored the mood of many workers who
er's outrageous escape was the pubJic's reaction to ii:. were fed up ¥Tith their current jobs and looking £01' ihe
_,._,.,l
Despite the unsafe and , in facl:, iUe3al natuxe of Slater's first opporl:u.•_i_iy
1. to quit. Large-scale surveys docu- ~l ~C

"
ad, he ilnmedia tely becw.-rw: a folk hero. 1Nithin l:lN O rnented tllet "feeling of loyalty to one's employer" , r..., ~
days of Jfo:~ event, over 180,000 people had joined Facc- hit an all-lime low i n 2009, and jn 2010, 1J:ie number
hook p ages d.evo i:ed to him w heIP. they all shared fan · of employees who voluntarily left their jobs suxpassed
.! :
tasirc:s about how they too 'NOu)d li ke io m.ake dranlatic the number of people involuntarily l.ai.d off for the fix?I: 'l.'.' l'!
 ...
CHAPTER 1 O!
hmc :·sinn~ 200U. This ~Jpells ful;un~ trnublrr.: for many
{~rn·p Ju31(~r~;, a~r~~J «J:_:. o_n.r.~ Ii_1~. execuJive n.otect ,.,.V\1e 1 P2.
uy ;nr;.to cal:ch people 1.:;vr5i. before rl1.ey sl:arn: looking
fu1c: a new job, w hich 'Nill becmne even m.ore in:lpor-
l;inl :1:3 the econom y .ixnproves and more opporti11nities
:1t co;n pelilors opens up." For ;:n;my en1ployers, hov-T-
c.r!::r, rhi:; all may be loo liJHe, l:oo late, and they may b~
!)~rtotd is :1 St Loui:-J' company whose narne explaj11s
"vh;1 1· it doc;;. The n;,une cmnbiner> i11.(:0 '"lord d1Jta wHh
HK: <NoHl lioiei, and ii: u:Y'r> its computers to safely
:_;tor1:: back1Jp:> of its cHent companies' data. H's a fast-
i·~rowing; businens, and for fonnder David lh·mNn, one
(~xi.pod:<int •.31aJkn1,/~ J:·w5 been making sure ernployecs
·1.(_:~.-n.<Y~"' Hi~~ C(ttU]??aJl Y a:p:preciate~3 tl1e1n etren as eve:r~von.r2
in '.3cnm1bling to kecp·up with the demands of exparK1--
in .F F'l ~:;rn aJl L1usj.;.1esr:;.
1 1\li~h<1bo;il thn~e do;~cn p12ople to ihin1::: abouJ,
lhu,.vn fir;;\ trkd a. methodi.coJ approach: He created ;:in
· c :inp!oye!>of..tlv:-~-nwn th program in ·which the in.cky
rccipircnl 1No11kl receive a. l:hanl<:-you e-mruJ message, a
:1;2;) p;ifi: card, and recognition for aJl employees to see
nn ibe compa.1r/ 3 intranet Brown saw this program. as
on(-~ Iv~ could re<l<lily find the tim.e to i__mpkment, and
Jv: hoped !he n-:·ward and recognition would ins pire
1~=~v12 fr~ .of _jol} iJ1vol~T12.':r~1A~n1 an.cl o:rga.J1ization;.;1l
co.rr~~- ~.10.itrn.eli. t .
One cidvan;age of a s1naH company is that you
,:~'' ' 9uiddy see people's reactions to your efforts.
UnJortun::1 td .) '~ whaJ Bro~~m sC<w on people 's faces
;rw.J he;~nJ in ;J1eir con •rETsation s was that reci.pi·-
'.:'1d :J of !he exnpioyee-of-the-monl:h rewards -were nol:
<c:J<;-i•:tl.y "'~x:citi::cL The progr;;<i.n 'Was just too formulaic
and ixnpe.tT:ionaL U Dato~:-el was to keep employees
engaged, it needed a different vvay to show that their
c.fforh; tn.at~:<~re{J_
So Bro-wn Jried a di.ff'?n2nl approach, even though
i~ H'quilr~~ rnme effort. He cornn1itted his eight man -
0gr;'.J':l to nofidnr; and reporting employee accom-
ph:;.h1n2n1·s . 'lb i:o:ipl<':nH:nt l:h.ic?, he s e ts aside part of
n::g nhr m.<1n.agernent n·i,2eti_np;s-pm:t of each daily
pli:on.r:: mcdi r~·g and lS 1niR1u i:es of each weekl)r
i11-·pcr''· On nH~etini5-·to di::;cuss ern ployee accor:npli.sh-
rnen~.2- '\/Vh.encver a n:iaimger notes tl1at an e rnployee
h•:is done ~3mne!:h!.ng extraordinary, Brown asks for
Emr:)loyee Sep aration and Retention 487
1.mabfo to H~captm·e the loyalty of aU of lhese "Steven
Sbi:er. wan11-~;bes.'"
:30lJfl.CE5: D- Lrnnard, "Mad as Hell," Bloomberg B11si11cssweek,
Anpi.st 16, 2010, pp. !5-6; A. Newman anci R Rivera, "Fed up Flight
Attendant hfal<es Sliding Ex.it," The New York Times, Augus t 9, 2010,
pp. Bl-P?.; and J. Poniewozik, "Steven Slater, Road Warrior: Jef3J.ue
Mints "·Folk Hero," Time, Aiigust 10, 2010, p. 34.
on2 of th2 managers besides the person's direct
sup•~rvi.sor to thank the employee in pe.rson. Brown
ha:::- also rnade a p ersonal con:unitmenl: to write tllank-
vou noteL>. In fact, with e-mail the norm at h is tech-
;10Iogy company, h~ makes some of the notes stand
out by writing them by h and and i:na:iJ.ing them to the
enlj?lo·~~rees at l101ne .
On,2 en1ployee vvho tbj1-lks the extrn effort matt.ers
is eng1J.1ee,_·-St~phanie Lewis. One day LeV\ris returned·
horn e ~-o find a note from Brown, observing that he had
heard during man.agement m.eelings tha t Lewis had
done :2xoc:ptionaUy vvell in v1orking with a custom.er.
Brovvn thanked h er for the effort. Lewis's reaclion: "It
i:m1d~ m.e feel important l:o get something so per.3onal
and 1.ui_i.que" from her company's b usy leader.
Jusl as communicati.1.g "thanJo:: you" has helped
with rn.oi:ivahon, going the extra mile to communi-
cate h:;\s helped Datotel's managers stay connected
with one another and the company's mission. AB the
company g-rew and jobs became more specialized,
Brown recognized that he would h ave to bring people
together formally to shm·e information about w hat
was happening. H e began to call meetings m1ce a
q1.tarter, an.d so Hi.at the enviromnent will be posihve,
he -esli:ibUshes a tl1eme h e Lhinks w ill get employees
thin_king and generate some ftm. Vvhen the theme was
"Rumble in the Jungle/' the company leaders dressed
as boxers, and ·when 1l1e theme was "Top Gun/' t.hey
dressed as aviatorn and met in an ai.rplane hangar.
TI1e effort to aJJow for fun is intervvoven wit.h the
conlpany's core values: passion, i.ntegrily, fun, team.-
Vlrork, " superi.or business value," and "improving the
cornJnm 1ity in vvhich we w ork" These aim to tmite the
enipJ.oyecs in a commilment. to customer service that
gives the company an edge in the indus l:ry. 111e val-
<.1e; axe also rn.eai1t to be an advantage for recruiting
and retaini.ng the best p eople. On Datotel's website,
--- ----- - - - - -
 ..
488 CIHlA/P'TER 1 (» Employee Separation <)nd lfotention
lh1~ careers page lists 10 reasons for wanting to ·w ork
at the cmnpany, and H-1.e top reason js the core values:
"Our Core Values represent ev•2rythiug that. we stand
fm~ and we take pride in them."
QIJ.JllE'.SiTHOfflir.S
1. Based on the informal-ion given, which sm:wc€a of
job satisfaction has Datotd addressed? What ol:he:r
.sources rnight the company adclress, and how?
2. Suggest several measm·es Datotd could use to eval~
ual:e the success of its employee retention efforts.
Be sure these are practical for a compru:ly of a fovv
dozen employees.
3. In a company a.s small as Datotel, losing even one
exnp1oy£e can presenl: re.a] diJficul.tic::s. Suppo3e
l. J. D. Shaw, M. K. Duffy, J. l.. Johnson, and D. E. Lodchm·•,
"Tur.novel.~ Social Capital Losse3, iUld Performance," llc11r.l-
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3. K. Sulkowkz, "Straight Talk at I\.ccv.tew l)mc," Bus im:s~­
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11,. Ivt Conlin and J. Greene, "How to Ivfake a j\/,[i_croser{
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one of Da.totel's managers begins to have perfor~
mance problems and seems unw;llin.g or unable to
improve. Suggest how you, as an HR consultant,
could help David Brown resolve this problem in a
way that is fair to everyone involved and that keeps
the compa..<y moving forward.
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Appreciation," foe., September 2009, www.inc.com; Jeremy N\l\li.k,
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 ;.·
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>.:1
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