Human resource

1–1
management
Chapter 1. Introduction
1–2 General information

 Course number: NLQT1103

 General Education courses
 Units: 3 credits
 - Theoretical hours: 25
 - Practical hours: 20
1–3

 - Course book:
 Dessler, G., (2015). Human Resource Management (15th Edition). Pearson, Boston.
 - Reference books:
 • Mathis, R. L; Jackson, J. H; Valentine, S. R; Meglich, P. A (2017). Human Resource Management
(15th Edition). Cengage Learning, USA.
 • Beardwell, J.; Thompson, A., (2012). Human Resource Management: A contemporary approach, (8th
Edition). Pearson, Boston
 • Mondy, R. W; Martocchio, J. J (2016). Human Resource Management, (14th Edition). Pearson,
NewYork.
 - Other required materials and information:
 a. NEU’s eBooks and documents at http://lic.neu.edu.vn:2048/menu: Emerald Insight, IG Publishing
eBook and ProQuest Central
 b. NEU’s eBooks and documents at http://aep.neu.edu.vn:2048/menu
1–4 Evaluation

 Attendance: 10% attendance and involvement in class activities

 Mid-term examination will account for 20%
 Work in groups of 4 to 6 student will account for 20%
 Assignment, submitted on Turnitin
 Evaluation will be based on both presentation and written report (approximately
30%, 70% accordingly)
 Final exam of 90 minutes will account for 50% . Students have permission to
take the final exam when they attend more than 80% of the total classes
and hand in both individual and group assignments on time
1–5
Any questions

HRM - NEU
1–6
The Manager’s Human Resource
Management Jobs
 Management process
 The five basic functions of planning, organizing, staffing, leading, and
controlling.
1–7
The Manager’s Human Resource
Management Jobs
 Human resource management (HRM)
 The policies and practices involved in carrying out the “people” or
human resource aspects of a management position, including
recruiting, screening, training, rewarding, and appraising.
1–8
Personnel Aspects Of A Manager’s Job

 Conducting job analyses (determining the nature of each employee’s

job)
 Planning labor needs and recruiting job candidates
 Selecting job candidates
 Orienting and training new employees
 Managing wages and salaries (compensating employees)
 Providing incentives and benefits
 Appraising performance
 Communicating (interviewing, counseling, disciplining)
 Training and developing managers
 Building employee commitment
1–9
Personnel Mistakes

 Hire the wrong person for the job

 Experience high turnover
 Have your people not doing their best
 Waste time with useless interviews
 Have your company in court because of discriminatory actions
 Have your company receive penalties for unsafe practices
 Have some employees think their salaries are unfair and inequitable
relative to others in the organization
 Allow a lack of training to undermine your department’s effectiveness
 Commit any unfair labor practices
1–10
Basic HR Concepts
Getting results
The bottom line of managing

HR creates value by

engaging
in activities that produce
the employee behaviors
the company needs to
achieve its strategic
goals.
1–11
Line and Staff Aspects of HRM

 Line manager
 A manager who is authorized to direct the work of subordinates and is
responsible for accomplishing the organization’s tasks.
 Staff manager
 A manager who assists and advises line managers.
1–12
Line Managers’ HRM Responsibilities

1. Placing the right person on the right job

2. Starting new employees in the organization (orientation)
3. Training employees for jobs new to them
4. Improving the job performance of each person
5. Gaining creative cooperation and developing smooth working relationships
6. Interpreting the firm’s policies and procedures
7. Controlling labor costs
8. Developing the abilities of each person
9. Creating and maintaining department morale
10. Protecting employees’ health and physical condition
1–13
Functions of the HR Manager

 A line function
 The HR manager directs the activities of the people in his or her own department
and in related service areas (like the plant cafeteria).
 A coordinative function
 HR managers also coordinate personnel activities, a duty often referred to as
functional control.
 Staff (assist and advise) functions
 Assisting and advising line managers is the heart of the HR manager’s job.
1–14
HR and Authority

 Authority
 The right to make decisions, direct others’ work, and give orders.
 Implied authority
 The authority exerted by an HR manager by virtue of others’ knowledge that he
or she has access to top management.
 Line authority
 The authority exerted by an HR manager by directing the activities of the people
in his or her own department and in service areas.
1–15
Employee Advocacy

 HR must take responsibility for:

 Clearly defining how management should be treating employees.
 Making sure employees have the mechanisms required to contest unfair
practices.
 Represent the interests of employees within the framework of its primary
obligation to senior management.
1–16
Examples of HR Job Duties

 Recruiters
 Search for qualified job applicants.
 Equal employment opportunity (EEO) coordinators
 Investigate and resolve EEO grievances, examine organizational practices for
potential violations, and compile and submit EEO reports.
 Job analysts
 Collect and examine information about jobs to prepare job descriptions.
1–17
Examples of HR Job Duties (cont’d)

 Compensation managers
 Develop compensation plans and handle the employee benefits program.
 Training specialists
 Plan, organize, and direct training activities.
 Labor relations specialists
 Advise management on all aspects of union–management relations.
1–18 Cooperative Line and Staff HR
Management
1. The line manager’s responsibility is to specify the
qualifications employees need to fill specific
positions.
2. HR staff then develops sources of qualified
applicants and conduct initial screening
interviews
3. HR administers the appropriate tests and refers
the best applicants to the supervisor (line
manager), who interviews and selects the ones
he or she wants.
1–19
A Changing HR Environment

 Workforce Demographics and Diversity Trends

 Trends in How People Work
 Globalization Trends
 Economic Trends
 Technology trends
1–20 Today’s new human resource
management
 Brief history of personnel/human resource management
 Ancient armies and organized efforts always required attracting, selecting,
training, and motivating workers
 Welfare offices” and “welfare secretaries at late 1800
 Hiring offices,” training programs, and factory schools by 1900
 New union laws in the 1930s added “Helping the employer deal with unions”
 New equal employment laws in the 1960s
 Competitive edge through engaged employees and therefore personnel
management By the 1970s
 Distributed HR and the new human resource management

HRM - NEU
1–21 Trend shaping HR

 One big consequence of globalized competition, economic and

demographic trends, and the shift to high-tech and service jobs is the
growing emphasis by employers on getting the best from their “human
capital,” in other words, from their workers’ knowledge, education,
training, skills, and expertise.
 This requires, among other things, using human resource methods to improve
employee performance and engagement.
 Thanks to digital devices and social media, employers are shifting (distributing)
more HR tasks from central human resource departments to employees and line
managers.
 Gives many line managers more human resource management responsibilities.
 Many human resource managers can refocus their efforts from day-to-day
activities like interviewing candidates to broader efforts, such as formulating
strategies for boosting employee performance and engagement

HRM - NEU
1–22

 HR and Strategy
 HR and Performance
 HR and Performance and Sustainability
 HR and Employee Engagement

HRM - NEU
1–23 The new Human Resource Manager

 Leadership & Navigation

 Ethical Practice
 Business Acumen
 Relationship Management
 Consultation
 Critical Evaluation
 Global & Cultural Effectiveness
 Communication

HRM - NEU
Human Resource
Management
Strategy and Analysis
  The basic management planning process consists of
five steps: setting objectives, making basic planning
The Strategic forecasts, reviewing alternative courses of action,
evaluating which options are best, and then
Management choosing and implementing your plan

Process  A plan: course of action for getting from where you are
to the goal
 Policies and procedures: day-to-day guidance
  Strategic plan is the company’s overall plan for how
it will match its internal strengths and weaknesses
The Strategic with its external opportunities and threats in order to
maintain a competitive position.
Management  Strategic management is the process of identifying
and executing the organization’s strategic plan by
Process matching the company’s capabilities (strengths and
weaknesses) with the demands of its environment (its
competitors, customers, and suppliers, for instance)
The Strategic Management Process
Types of Strategies
Strategic Human Resource
Management
 Formulating and executing human resource policies
and practices that produce the employee
competencies and behaviors the company needs to
achieve its strategic aims.
Strategic Human Resource
Management Tools
 Improving Performance
Through HRIS

HR Metrics, Benchmarking
benchmarking,
and Data
Analytics

Strategy and Strategy-Based

Metrics
What Are HR Audits?

 An analysis by which an organization measures where it currently stands

and determines what it has to accomplish to improve its HR function
 Involves using a checklist to review the company’s human resource
functions (recruiting, testing, training, and so on), as well as ensuring that
the firm is adhering to regulations, laws, and company policies.
  1. Roles and headcount (including job descriptions, and employees categorized by
exempt/nonexempt and full- or part-time)
 2. Compliance with federal, state, and local employment-related legislation
 3. Recruitment and selection (including use of selection tools, background checks, and so
on)
 4. Compensation (policies, incentives, survey procedures, and so on)
 5. Employee relations (union agreements, performance management, disciplinary
procedures, employee recognition)
 6. Mandated benefits (Social Security, unemployment insurance, workers’ compensation,
and so on)

HR typical 

7. Group benefits (insurance, time off, flexible benefits, and so on)
8. Payroll (such as legal compliance)

areas  9. Documentation and record keeping. For example, do our files include résumés and
applications, offer letters, job descriptions, performance evaluations, benefit enrollment

audited
forms, payroll change notices, and documentation related to personnel actions such as
employee handbook acknowledgments?
 10. Training and development (new employee orientation, development, technical and

include 
safety, career planning, and so on)
11. Employee communications (employee handbook, newsletter, recognition programs)
 12. Termination and transition policies and practices
  A high-performance work system (HPWS) is a set of
High- human resource management policies and
practices that together produce superior employee
Performance performance.
 Firms with the high-performance HR practices
Work Systems performed significantly better than did those without
such practices.
Employee
engagement  Employee engagement refers to being

guide for psychologically involved in, connected to, and

committed to getting one’s jobs done. Engaged

Managers: employees “experience a high level of connectivity

with their work tasks,” and work hard to accomplish

Employee their task-related goals

 What Can Managers Do to Improve Employee
engagement Engagement?: providing supportive supervision
 How to Measure Employee Engagement?
and
Performance
Job Analysis and the Talent
Management Process
 The Talent Management Process
1. Decide what positions
to fill, through job analysis,
personnel planning, and
forecasting.
5. Decide to whom to
make an offer.
4. Use selection tools like
2. Build a pool of job 3. Obtain application
tests, interviews,
applicants, by recruiting forms and perhaps have
background checks, and
internal or external initial screening
physical exams to identify
candidates. interviews.
viable candidates.
6. Orient, train, and
develop employees so 8. Compensate
7. Appraise employees to
they have the employees to maintain
assess how they’re doing.
competencies to do their their motivation
jobs.
The basics of Job Analysis

 Job analysis is the procedure through which you determine the duties of
the company’s positions and the characteristics of the people to hire for
them
 Job analysis produces information for writing job descriptions (a list of what the
job entails) and job (or “person”) specifications (what kind of people to hire for
the job)
 Job descriptions: A list of a job’s duties, responsibilities, reporting
relationships, working conditions, and supervisory responsibilities
 Job specifications: A list of a job’s “human requirements,” that is, the
requisite education, skills, personality, and so on
 Work activities: Information about the job’s actual work
activities, such as cleaning, selling, teaching, or painting. This list
may also include how, why, and when the worker performs
each activity.
 Human behaviors: Information about human behaviors the job
requires, like sensing, communicating, lifting weights, or walking
long distances.
 Machines, tools, equipment, and work aids: Information
regarding tools used, materials processed, knowledge dealt
with or applied (such as finance or law), and services rendered Types of
information
(such as counseling or repairing).
 Performance standards: Information about the job’s
performance standards (in terms of quantity or quality levels for
each job duty, for instance). Job context. Information about
such matters as physical working conditions, collected
 Job context: Information about such matters as physical
working conditions, work schedule, incentives, and, for
instance, the number of people with whom the employee
would normally interact.
 Human requirements: Information such as knowledge or skills
(education, training, work experience) and required personal
attributes (aptitudes, personality, interests).
Uses of Job analysis Information
Conducting a Job Analysis

 Step 1: Decide How You Will Use the Information

 Step 2: Review Relevant Background Information About the Job, Such as
Organization Charts and Process Charts
 Step 3: Select Representative Positions
 Step 4: Actually Analyze the Job
 Step 5: Verify the Job Analysis Information with the Worker Performing the
Job and with His or Her Immediate Supervisor
 Step 6: Develop a Job Description and Job Specification
Collecting Job Analysis information

 Keeps in mind
 Make job analysis be a joint effort
 The questions and the process are both clear
 Use several job analysis methods
Collecting Job Analysis information

 The Interview
 Unstructured
 Structured
 Pros and cons
Collecting Job Analysis information

 Observation
 Participant Diary/Logs
Collecting Job Analysis information

 Quantitative Job Analysis Techniques

 Position analysis questionnaire
 Department of labor (dol) procedure
 Electronic Job Analysis Methods
Writing Job Descriptions

 There is no standard format for writing a job description. However, most

descriptions contain sections that cover
 1. Job identification
 2. Job summary
 3. Responsibilities and duties
 4. Authority of incumbent
 5. Standards of performance
 6. Working conditions
 7. Job specification
Standards of Performance and
Working Conditions
 Specifications for Trained versus Untrained Personnel
 Specifications Based on Judgment
 Job Specifications Based on Statistical Analysis
 The Job-Requirements Matrix
 main job duties
 task statements
 Importance
 time spent
 knowledge, skills, ability, and other human characteristics (KSAO)
Using competencies Models

 Lists of knowledge, skills, and experience someone needs to do the job

 The competency model or profile then becomes the guidepost for
recruiting, selecting, training, evaluating, and developing employees for
each job.
Personnel Planning
and Recruiting
Workforce Planning and Forecasting

 Workforce (or employment or personnel) planning is the process of

deciding what positions the firm will have to fill, and how to fill them.
 Strategy and Workforce Planning: employment plans are built on
forecasts—basic assumptions about the future
Workforce Planning and Forecasting

 Forecasting Personnel Needs (Labor Demand)

 Trend analysis :studying variations in the firm’s employment levels over the past
few years
 Ratio analysis: making forecasts based on the historical ratio between (1) some
causal factor (like sales volume) and (2) the number of employees required
(such as number of salespeople)
 The scatter plot: shows graphically how two variables—such as sales and your
firm’s staffing levels—are related
 Managerial judgment:
Workforce Planning
and Forecasting

 Forecasting the Supply of Inside

Candidates
 Personnel replacement charts
 Packaged software systems
Workforce Planning and Forecasting

 Matching Projected Labor Supply and Labor Demand

 Succession Planning
Recruiting Employees

 Internal Sources of candidates

 job posting: Publicizing an open job to employees (often by literally posting it on
bulletin boards) and listing its attributes, like qualifications, supervisor, working
schedule, and pay rate.
 Outside Sources of candidates
 Informal Recruiting and the Hidden Job Market
 Recruiting via the Internet
 Advertising
 Outside Sources of candidates (cont)
 Employment Agencies/Executive Recruiters
 Recruitment Process Outsourcers
 Temporary Workers and Alternative Staffing
 Offshoring and Outsourcing Jobs
 Referrals and Walk-Ins
 On-Demand Recruiting Services
 College Recruiting
 Telecommuters
 Military Personnel
Recruiting a More Diverse Workforce

 Recruiting Women
 Recruiting Single Parents
 Older Workers
 Recruiting Minorities
 The Disabled
How to recruit candidates

 Developing and Using application Forms

 Purpose of Application Forms
 Application Guidelines
 Using Application Forms to Predict Job Performance
 Mandatory Arbitration
Employee Testing
and Selection
 Why Employee Selection is Important
 The Basics of Testing and Selecting Employees
 Reliability: The consistency of scores obtained by the same person when retested
with the identical tests or with alternate forms of the same test.
 Validity: The accuracy with which a test, interview, and so on, measures what it
purports to measure or fulfills the function it was designed to fill.
 criterion validity: A type of validity based on showing that scores on the test (predictors)
are related to job performance (criterion)
 content validity: A test that is content valid is one that contains a fair sample of the tasks
and skills actually needed for the job in question
 construct validity: A test that is construct valid is one that demonstrates that a selection
procedure measures a construct and that construct is important for successful job
performance
How to Validate a Test

 Step 1: analyze the job

 Step 2: choose the tests
 Step 3: administer the test
 Step 4: relate your test scores and criteria
 Step 5: cross-validate and revalidate
Types of Tests

 Tests of Cognitive Abilities

 Intelligence tests
 Specific cognitive abilities
 Tests of Motor and Physical Abilities
 Achievement Tests
Work Samples and Simulations

 Work sampling
 Situational Judgment Tests
 Management Assessment Centers
 Situational Testing and Video-Based Situational Testing
 The Miniature Job Training and Evaluation Approach
 Realistic Job Previews
Background Investigations and Other
Selection Methods
 Check a Candidate’s Background
 Using Preemployment Information Services
 Making the Background Check More Valuable
 Other methods
Interviewing Candidates
Basic Types of Interviews

 Structured Versus Unstructured Interviews

 unstructured (or nondirective) interview An unstructured conversational-style
interview in which the interviewer pursues points of interest as they come up in
response to questions
 structured (or directive) interview An interview following a set sequence of
questions.
 Interview Content (What Types of Questions to Ask)
 situational interview A series of job-related questions that focus on how the
candidate would behave in a given situation
 behavioral interview A series of job-related questions that focus on how the
candidate reacted to actual situations in the past.
 job-related interview A series of job-related questions that focus on relevant past
job-related behaviors.
 stress interview An interview in which the applicant is made uncomfortable by a
series of often rude questions. This technique helps identify hypersensitive
applicants and those with low or high stress tolerance.
How Should We Conduct the Interview

 unstructured sequential interview An interview in which each interviewer

forms an independent opinion after asking different questions.
 structured sequential interview An interview in which the applicant is
interviewed sequentially by several persons; each rates the applicant on a
standard form.
 panel interview An interview in which a group of interviewers questions the
applicant.
 mass interview A panel interviews several candidates simultaneously.
How Should We Conduct the Interview

 phone interviews
 computer-based job interviews
 web-based video interviews
Avoiding errors that can undermine an
interview’s usefulness
 structure the interview
 know what to focus on
 avoid the following common interview errors
 First Impressions (Snap Judgments)
 Not Clarifying What the Job Requires
 Candidate-Order (Contrast) Error and Pressure to Hire
 Nonverbal Behavior and Impression Management
 Effect of Personal Characteristics: Attractiveness, Gender, Race
 Diversity Counts: Applicant Disability and the Employment Interview
How to Design and Conduct an
effective Interview
 Designing a Structured Situational Interview
 step 1. Analyze the job
 step 2. Rate the job’s main duties
 step 3. Create interview questions
 step 4. Create benchmark answers
 step 5. Appoint the interview panel and conduct interviews
 How to conduct an effective Interview
 step 1: First, know the job
 step 2: structure the interview
 step 3: get organized
 step 4: establish rapport
 step 5: ask questions
 step 6: Take brief, unobtrusive notes during the interview
 step 7: Close the interview.
 step 8: Review the interview
Training and Developing
Employees
 employee orientation: A procedure for providing new employees with
basic background information about the firm.
 The Orientation Process
 The employee handbook
 Orientation technology
Overview of the Training Process

 Training: The process of teaching new or current employees the basic skills they
need to perform their jobs.
 negligent training: A situation where an employer fails to train adequately, and the
employee subsequently harms a third party.
 Aligning Strategy and Training
 The ADDIE Five-Step Training Process
 Analyze the training need.
 Design the overall training program.
 Develop the course (actually assembling/creating the training materials).
 Implement training, by actually training the targeted employee group using methods
such as on-the-job or online training.
 Evaluate the course’s effectiveness.
Conducting the Training Needs
Analysis
 strategic training needs analysis
 current training needs analysis
 new employees (what the job entails and to break it down into subtasks, task
analysis)
 current employees (improve the performance, performance analysis)
 task analysis: A detailed study of a job to identify the specific skills required
 competency model: A graphic model that consolidates, usually in one diagram,
a precise overview of the competencies (the knowledge, skills, and behaviors)
someone would need to do a job well.
Conducting the Training Needs
Analysis
 performance analysis: Verifying that there is a performance deficiency and
determining whether that deficiency should be corrected through training
or through some other means (such as transferring the employee).
 can’t do/won’t do
Designing the Training Program

 Planning the overall training program including training objectives, delivery

methods, and program evaluation
 setting learning objectives
 what the trainee should be able to do after successfully completing the training
program.
 creating a motivational learning environment
 make the learning meaningful
 make skills transfer obvious and easy
 reinforce the learning
 ensure transfer of learning to the job
Developing the Program

 Program development means actually assembling the program’s training

content and materials.
 Implement means actually provide the training, using one or more of the
instructional methods
Implementing the Training Program

 On-the-job training (OJT): training a person to learn a job while working on it.
 Apprenticeship training: A structured process by which people become skilled
workers through a combination of classroom instruction and on-the-job training.
 Informal Learning: performing their jobs while interacting every day with their
colleagues
 Job instruction training (jiT) Listing each job’s basic tasks, along with key points,
in order to provide step-by-step training for employees.
 Lectures
 Programmed learning: A systematic method for teaching job skills, involving
presenting questions or facts, allowing the person to respond, and giving the
learner immediate feedback on the accuracy of his or her answers.
Implementing the Training Program

 Behavior modeling: A training technique in which trainees are first shown

good management techniques in a film, are asked to play roles in a
simulated situation, and are then given feedback and praise by their
supervisor.
 Audiovisual-Based Training
 Vestibule Training
 Electronic performance support systems (epSS): Sets of computerized tools
and displays that automate training, documentation, and phone support;
integrate this automation into applications; and provide support that’s
faster, cheaper, and more effective than traditional methods
 Videoconferencing
Implementing the Training Program

 Computer-Based Training (CBT)

 Simulated Learning and Gaming
 Lifelong and Literacy Training Techniques
 …
Implementing Management
Development Programs
 Any attempt to improve current or future management performance by
imparting knowledge, changing attitudes, or increasing skills.
 Strategy’s Role in Management Development
 Succession Planning
 Managerial On-the-Job Training and Rotation
 Off-the-Job Management Training and Development Techniques
 case study method
 management game
 role-playing
 in-house development center
 executive coach
Evaluating the Training Effort

 Designing the Study

 controlled experimentation: Formal methods for testing the effectiveness of a
training program, preferably with before-and-after tests and a control group.
 Training Effects to Measure
 Reaction
 Learning
 Behavior
 Results
Performance Management
and Appraisal
Basics of Performance Appraisal

 The Performance Appraisal Process

 (1) setting work standards; (2) assessing the employee’s actual performance
relative to those standards (this often involves some rating form); and (3)
providing feedback to the employee with the aim of helping him or her to
eliminate performance deficiencies or to continue to perform above par
 Why Appraise Performance?
 Defining the Employee’s Goals and Performance Standards
 Who Should Do the Appraising?
 Peer appraisals
 Rating committees
 Self-ratings
 Appraisal by subordinates
 360-degree feedback
Techniques for Appraising Performance

 Graphic rating scale

 Alternation ranking method
 Paired comparison method
 Forced distribution method
 Critical incident method
 Narrative Forms
 Behaviorally Anchored Rating Scales
 Mixed Standard Scales
 Management by Objectives
 Computerized and Web-Based Performance Appraisal
 Electronic Performance Monitoring
 Conversation Days
Dealing with rater error Appraisal
Problems
 Potential Rating Problems
 Unclear standards
 Halo effect
 Central tendency
 Leniency or strictness
 Recency effects
 BIAS: The tendency to allow individual differences such as age, race, and
sex to affect the appraisal ratings employees receive.
The Need for Fairness

 Why
 How
Managing the Appraisal interview

 Appraisal interview: An interview in which the supervisor and subordinate

review the appraisal and make plans to remedy deficiencies and reinforce
strengths
 Satisfactory—Promotable
 Satisfactory—Not promotable
 Unsatisfactory but correctable
 Unsatisfactory and uncorrectable
How to Conduct the Appraisal
Interview
 Talk in terms of objective work data
 Don’t get personal
 Encourage the person to talk
 Get agreement
How to Handle a Defensive
Subordinate
 Recognize that defensive behavior is normal
 Never attack a person’s defenses
 Postpone action
 Recognize your limitations
How to Criticize a Subordinate

 It’s necessary
 Giving feedback periodically
 Should be objective and free of personal bias
 Praise over criticism

 Get agreement on a plan

Performance Management

 What Is Performance Management?

 The continuous process of identifying, measuring, and developing the
performance of individuals and teams and aligning their performance with the
organization’s goal
 Direction sharing
 Goal alignment
 Ongoing performance monitoring
 Ongoing feedback
 Coaching and developmental support
 Recognition and rewards
 Total Quality Management and Performance Appraisal
Establishing Strategic Pay
Plans
Basic Factors in Determining Pay Rates

 employee compensation: All forms of pay or rewards going to employees

and arising from their employment.
 direct financial payments: Pay in the form of wages, salaries, incentives,
commissions, and bonuses.
 indirect financial payments: Pay in the form of financial benefits such as
insurance.
 Aligning Total Rewards with Strategy
 Equity and Its Impact on Pay Rates
 External equity
 Internal equity
 Individual equity
 Procedural equity
 Legal Considerations in Compensation
 Union Influences on Compensation Decisions
 Pay Policies
Job Evaluation Methods

 Market-based approaches vs and job evaluation methods.

 job evaluation: A systematic comparison done in order to determine the worth of
one job relative to another.
 market-competitive pay plan: Pay plan where pay rates are equitable both
internally (based on each job’s relative value) and externally (in other words
when compared with what other employers are paying).
 compensable factor: A fundamental, compensable element of a job, such
as skills, effort, responsibility, and working conditions.
 Preparing for the Job Evaluation
 Identifying the need
 getting employees to cooperate
 choose a job evaluation committee
 Identifies 10 or 15 key benchmark jobs.: A job that is used to anchor the
employer’s pay scale and around which other jobs are arranged in order of
relative worth.
 Select compensable factors
 Evaluating the worth of each job.
Job Evaluation Methods: Ranking

 Obtain job information

 Select and group jobs
 Select compensable factors
 Rank jobs
 Combine ratings
 Compare current pay with what others are paying based on salary survey
 Assign a new pay scale.
Job Evaluation Methods: Job
Classification
 Classes: Grouping jobs based on a set of rules for each group or class, such
as amount of independent judgment, skill, physical effort, and so forth,
required. Classes usually contain similar jobs.
 Grades: A job classification system like the class system, although grades
often contain dissimilar jobs, such as secretaries, mechanics, and
firefighters. Grade descriptions are written based on compensable factors
listed in classification systems.
 Grade definition: Written descriptions of the level of, say, responsibility and
knowledge required by jobs in each grade. Similar jobs can then be
combined Into grades or classes
Job Evaluation Methods: Point Method

 point method: The job evaluation method in which a number of

compensable factors are identified and then the degree to which each of
these factors is present on the job is determined
How to create a Market-competitive
Pay Plan
 1. Choose Benchmark Jobs
 2. Select Compensable Factors
 3. Assign Weights to Compensable Factors
 4. Convert Percentages to Points for Each Factor
 5. Define Each Factor’s Degrees
 6. Determine for Each Factor Its Factor Degrees’ Points
 7. Review Job Descriptions and Job Specifications
 8. Evaluate the Jobs
 Based on the degree to which each compensable factor is present in each job
determined and number of points we previously assigned to each degree
 9. Draw the Current (Internal) Wage Curve
 market-competitive pay: system A pay system in which the employer’s actual
pay rates are competitive with those in the relevant labor market.
 wage curve: Shows the relationship between the value of the job and the
average wage paid for this job.
 10. Conduct a Market Analysis: Salary Surveys
 salary survey: A survey aimed at determining prevailing wage rates. A good
salary survey provides specific wage rates for specific jobs. Formal written
questionnaire surveys are the most comprehensive, but telephone surveys and
newspaper ads are also sources of information.
 11. Draw the Market (External) Wage Curve
 12. Compare and Adjust Current and Market Wage Rates for Jobs
 13. Develop Pay Grades
 pay (or wage) grade: A pay grade is composed of jobs of approximately equal
difficulty
 Determining the number of pay grades
 14. Establish Rate Ranges
 pay (or rate) ranges: A series of steps or levels within a pay grade, usually based
upon years of service
 compa ratio: Equals an employee’s pay rate divided by the pay range midpoint
for his or her pay grade.
 15. Address Remaining Jobs
 16. Correct Out-of-Line Rates
Pricing Managerial and Professional
jobs
 What Determines Executive Pay?
 job complexity
 employer’s ability to pay
 executive’s human capital
 Classify executive and management positions into grades, each with a
salary range
 Rank the executive and management positions in relation to each other,
then group into classes those of similar value.
 Compensating Executives
 Base pay: includes the person’s fixed salary as well as, often, guaranteed
bonuses
 Short-term incentives: are usually cash or stock bonuses for achieving short-
term goals,
 Long-term incentives: aim to encourage the executive to take actions that
drive up the value of the company’s stock and include things like stock
options.
 Finally, executive benefits and perks: include things such as supplemental
executive retirement pension plans.
Compensating Professional Employees

 “professional” under the law

 person’s main duty must “be the performance of work requiring advanced
knowledge,” and “the advanced knowledge must be customarily acquired by a
prolonged course of specialized intellectual instruction.
 not easily compared or measured
Pay for Performance and
Financial
Incentives
Money’s Role In Motivation

 financial incentives: Financial rewards paid to workers whose production

exceeds some predetermined standard.
 Productivity: The ratio of outputs (goods and services) divided by the inputs
(resources such as labor and capital)
 fair day’s work: Output standards devised based on careful, scientific
analysis.
 scientific management: movement Management approach based on
improving work methods through observation and analysis
 variable pay: Any plan that ties pay to productivity or profitability, usually as
one-time lump payments
Individual employee Incentive and
Recognition
Programs
 Piecework: A system of pay based on the number of items processed by
each individual worker in a unit of time, such as items per hour or items per
day.
 merit pay (merit raise): Any salary increase awarded to an employee
based on his or her individual performance
 Incentives for Professional Employees
 Nonfinancial and Recognition-Based Awards
 Job Design
Team and Organization-Wide Incentive
Plans
 Team (or group) incentive plan: A plan in which a production standard is
set for a specific work group, and its members are paid incentives if the
group exceeds the production standard
 Organization-wide incentive plan: Incentive plan in which all or most
employees can participate
 Evidence-Based HR: Inequities That Undercut Team Incentives
 Profit-sharing plan: A plan whereby employees share in the company’s
profits
 Scanlon plan: An incentive plan developed in 1937 by Joseph Scanlon and
designed to encourage cooperation, involvement, and sharing of benefits
 Gainsharing plan: An incentive plan that engages employees in a
common effort to achieve productivity objectives and share the gains
 Earnings-at-risk pay plan: Plan that puts some portion of employees’ normal
pay at risk if they don’t meet their goals, in return for possibly obtaining a
much larger bonus if they exceed their goals
 Employee stock ownership plan (esop): A corporation contributes shares of
its own stock to a trust in which additional contributions are made annually.
The trust distributes the stock to employees on retirement or separation from
service
Benefits and Services
 Benefits: Indirect financial and nonfinancial payments employees receive
for continuing their employment with the company.
Pay For Time Not Worked

 Supplemental pay benefits: Benefits for time not worked such as unemployment
insurance, vacation and holiday pay, and sick pay.
 Unemployment insurance (or compensation): Provides benefits if a person is
unable to work through some fault other than his or her own
 Vacations and Holidays
 Sick leave: Provides pay to an employee when he or she is out of work because
of illness.
 Leaves and the Family and Medical Leave Act
 Supplemental unemployment benefits: Provide for a “guaranteed annual
income” in certain industries where employers must shut down to change
machinery or due to reduced work. These benefits are paid by the company
and supplement unemployment benefits.
Insurance Benefits

 Workers’ compensation: Provides income and medical benefits to work-

related accident victims or their dependents regardless of fault.
 Hospitalization, Health, and Disability Insurance
Retirement Benefits

 Social Security: Federal program that provides three types of benefits:

retirement income at the age of 62 and thereafter, survivor’s or death benefits
payable to the employee’s dependents regardless of age at time of death,
and disability benefits payable to disabled employees and their dependents.
These benefits are payable only if the employee is insured under the Social
Security Act.
 Pension plans: Plans that provide a fixed sum when employees reach a
predetermined retirement age or when they can no longer work due to
disability
 Defined benefit pension plan: A plan that contains a formula for determining
retirement benefits
 Defined contribution pension plan: A plan in which the employer’s contribution
to employees’ retirement savings funds is specified.
 Portability: Instituting policies that enable employees to easily take their
accumulated pension funds when they leave an employer
 Savings and thrift plan: Plan in which employees contribute a portion of
their earnings to a fund; the employer usually matches this contribution in
whole or in part
 Deferred profit-sharing plan: A plan in which a certain amount of profits is
credited to each employee’s account, payable at retirement, termination,
or death.
 Employee stock ownership plan (eSop): A qualified, tax-deductible stock
bonus plan in which employers contribute stock to a trust for eventual use
by employees.
 Cash balance plans: Plans under which the employer contributes a
percentage of employees’ current pay to employees’ pension plans every
year, and employees earn interest on this amount.
 Employee retirement income: Security Act of 1975 (eriSA) Signed into law
by President Ford to require that pension rights be vested and protected by
a government agency, the PBGC
 Pension Benefits guarantee: Corporation (pBgC) Established under ERISA to
ensure that pensions meet vesting obligations; also insures pensions should
a plan terminate without sufficient funds to meet its vested obligations.
 Early retirement window: A type of offering by which employees are
encouraged to retire early, the incentive being liberal pension benefits plus
perhaps a cash payment.
Personal Services and Family-Friendly
Benefits
 Employee assistance program (eAp): A formal employer program for
providing employees with counseling and/or treatment programs for
problems such as alcoholism, gambling, or stress.
 Family-friendly (or work–life) benefits: Benefits such as child-care and fitness
facilities that make it easier for employees to balance their work and family
responsibilities
Flexible Benefits Programs

 Flexible benefits plan/cafeteria benefits plan: Individualized plans allowed

by employers to accommodate employee preferences for benefits
 Flextime: A work schedule in which employees’ workdays are built around a
core of midday hours, and employees determine, within limits, what other
hours they will work.
 Compressed workweek: Schedule in which employee works fewer but
longer days each week
 Job sharing: Allows two or more people to share a single full-time job
 Work sharing: Refers to a temporary reduction in work hours by a group of
employees during economic downturns as a way to prevent layoffs.