Part One Introduction

1
Introduction to Human
Resource Management
Kwanbenz/Shutterstock
LearnIng ObjectIves

1-1 Explain what human resource management is Company’s

and how it relates to the management process. Strategic Goals

1-2 Briefly discuss and illustrate each of the im-

portant trends influencing human resource
management.
Employee Competencies

1-3 Briefly describe “distributed HR” and other im-

portant aspects of human management today.
and Behaviors Required
for Company to Achieve
These Strategic Goals

1-4 List at least four important human resource

manager competencies.

1-5 Outline the plan of this book.

tegic and Lega
Stra nvironment l
E

R e P l a ce
cru ment
Relatio e

itme
ns
e
F
Employ
or many people today Elance (www.elance.com)

nt and
HR Policies and Practices
symbolizes much of what’s new in human resource Required to Produce
Employee Competencies
management. Millions of freelancers from graphic de- and Behaviors

De rai
signers to translators, accountants, and lawyers reg-

ve
T
ion
l
t nin opme
ister on the site. Employers then use Elance to find, pen
sa g a nt
nd
Com
screen, hire, and pay the talent they need, in more
than 180 countries.1

Where are We nOW …

The purpose of this chapter is to explain what
human resource management is, and why
it’s important to all managers. We’ll see that
human resource management activities such as
hiring, training, appraising, compensating, and
developing employees are part of every man-
ager’s job. And we’ll see that human resource
management is also a separate function, usu-
ally with its own human resource or “HR” man-
ager. The main topics we’ll cover here include
what is human resource management, the
trends shaping human resource management,
human resource management today, the new
human resource manager, and the plan of this
book. The framework above (which introduces
each chapter) makes this point: That the firm’s
HR policies and practices should produce the
employee skills and behaviors the company
2 needs to achieve its strategic aims.
 Chapter1 • IntroduCtIontohumanresourCemanagement 3

What is Human Resource Management?

To understand what human resource management is, it’s useful to start with what
LeaRnIng ObjectIve 1-1
managers do. Elance is an organization. An organization consists of people (in
Explain what human resource
management is and how it
this case, people like Elance’s own in-house sales managers and Web designers) with
relates to the management formally assigned roles who work together to achieve the organization’s goals. A
process. manager is someone who is responsible for accomplishing the organization’s goals,
and who does so by managing the efforts of the organization’s people.
Most writers agree that managing involves performing five basic functions:
organization
planning, organizing, staffing, leading, and controlling. In total, these functions
A group consisting of people
represent the management process. Some of the specific activities involved in each
with formally assigned roles who
work together to achieve the
function include:
organization’s goals. ●● Planning. Establishing goals and standards; developing rules and procedures;
manager developing plans and forecasts
Someone who is responsible for ●● Organizing. Giving each subordinate a specific task; establishing departments;
accomplishing the organization’s delegating authority to subordinates; establishing channels of authority and
goals, and who does so by manag- communication; coordinating the work of subordinates
ing the efforts of the organization’s
●● Staffing. Determining what type of people should be hired; recruiting prospec-
people.
tive employees; selecting employees; setting performance standards; compen-
sating employees; evaluating performance; counseling employees; training and
developing employees
managing
●● Leading. Getting others to get the job done; maintaining morale; motivating
To perform five basic functions:
planning, organizing, staffing,
subordinates
leading, and controlling. ●● Controlling. Setting standards such as sales quotas, quality standards, or produc-
tion levels; checking to see how actual performance compares with these stan-
management process dards; taking corrective action as needed
The five basic functions of planning, In this book, we will focus on one of these functions—the staffing, personnel man-
organizing, staffing, leading, and
agement, or human resource management function. Human resource management
controlling.
(HRM) is the process of acquiring, training, appraising, and compensating employ-
ees, and of attending to their labor relations, health and safety, and fairness
human resource management concerns. The topics we’ll discuss should therefore provide you with the concepts
(HRM)
and techniques every manager needs to perform the “people” or personnel aspects of
The process of acquiring, training,
appraising, and compensating
management. These include:
employees, and of attending to their ●● Conducting job analyses (determining the nature of each employee’s job).
labor relations, health and safety, ●● Planning labor needs and recruiting job candidates.
and fairness concerns. ●● 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 employees, and developing managers.
●● Building employee relations and engagement.
And what a manager should know about:
●● Equal opportunity and affirmative action.
●● Employee health and safety.
●● Handling grievances and labor relations.

Why Is Human Resource Management Important to All Managers?

The concepts and techniques in this book are important to all managers for several
reasons.
4 part1 • IntroduCtIon

Avoid PeRsonnel MistAkes First, having a command of this knowledge will help
you avoid the personnel mistakes you don’t want to make while managing. For
example, you don’t want
●● To have your employees not doing their best.
●● To hire the wrong person for the job.
●● To experience high turnover.
●● To have your company in court due to your discriminatory actions.
●● To have your company cited for unsafe practices.
●● To let a lack of training undermine your department’s effectiveness.
●● To commit any unfair labor practices.
Carefully studying this book can help you avoid mistakes like these.

iMPRoving PRofits And PeRfoRMAnce More important, it can help ensure that you
get results—through people.2 Remember that you could do everything else right
as a manager—lay brilliant plans, draw clear organization charts, set up modern
assembly lines, and use sophisticated accounting controls—but still fail, for instance,
by hiring the wrong people or by not motivating subordinates. On the other hand,
many managers—from generals to presidents to supervisors—have been successful
even without adequate plans, organizations, or controls. They were successful
because they had the knack for hiring the right people for the right jobs and then
motivating, appraising, and developing them. Remember as you read this book
that getting results is the bottom line of managing and that, as a manager, you will
have to get these results through people. This fact hasn’t changed from the dawn of
management. As one company president summed it up:
For many years it has been said that capital is the bottleneck for a developing
industry. I don’t think this any longer holds true. I think it’s the workforce and
the company’s inability to recruit and maintain a good workforce that does
constitute the bottleneck for production. I don’t know of any major project
backed by good ideas, vigor, and enthusiasm that has been stopped by a short-
age of cash. I do know of industries whose growth has been partly stopped
or hampered because they can’t maintain an efficient and enthusiastic labor
force, and I think this will hold true even more in the future.3
Because of global competition, technological advances, and economic turmoil,
that statement has never been truer than it is today. Human resource manage-
ment methods like those in this book can help any line manager/supervisor (or HR
manager) boost his or her team’s and company’s levels of engagement, profits and
performance. Here are two examples we’ll meet in this book:
At one Ball Corp. packaging plant, managers trained supervisors to set and
communicate daily performance goals. Management tracked daily goal attain-
ment with team scorecards. Employees received special training to improve
their skills. Within 12 months production was up 84 million cans, customer
complaints dropped by 50%, and the plant’s return on investment rose by
$3,090,000.
A call center averaged 18.6 vacancies per year (about a 60% turnover rate).
The researchers estimated the cost of a call-center operator leaving at
about $21,500. They estimated total annual cost of agent turnover for the
call center at $400,853. Cutting that rate in half would save this firm about
$200,000 per year.

You MAY sPend soMe tiMe As An HR MAnAgeR Here is another reason to study
this book: you might spend time as a human resource manager. For example, about
a third of large U.S. businesses surveyed appointed non-HR managers to be their
top human resource executives. Thus, Pearson Corporation (which publishes this
book) promoted the head of one of its publishing divisions to chief human resource
 Chapter1 • IntroduCtIontohumanresourCemanagement 5

executive at its corporate headquarters. Why? Some think these people may be better
equipped to integrate the firm’s human resource activities (such as pay policies) with
the company’s strategic needs (such as by tying executives’ incentives to corporate
goals).4 Appointing non-HR people can also be good for the manager. For example,
one CEO served a three-year stint as chief human resource officer on the way to
becoming CEO. He said the experience he got was invaluable in learning how to
develop leaders and in understanding the human side of transforming a company.5
However most top human resource executives do have prior human resource
experience. About 80% of those in one survey worked their way up within HR.
About 17% had the HR Certification Institute’s Senior Professional in Human
Resources (SPHR) designation, and 13% were certified Professional in Human
Resources (PHR). The Society for Human Resource Management (SHRM) offers a
brochure describing alternative career paths within human resource management.6
Find it at www.shrm.org.

HR foR sMAll Businesses And here is one other reason to study this book: you
may well end up as your own human resource manager. More than half the people
working in the United States work for small firms. Small businesses as a group also
account for most of the 600,000 or so new businesses created every year. Statistically
speaking, therefore, most people graduating from college in the next few years either
will work for small businesses or will create new small businesses of their own.7 Small
firms generally don’t have the critical mass required for a full-time human resource
manager (let alone an HR department).8 The owner and his or her other managers
(and perhaps assistant) handle tasks such as signing employees on. Gaining a
command of the techniques in this book should help you to manage a small firm’s
human resources more effectively. We’ll address human resource management for
small businesses in later chapters.

Line and Staff Aspects of Human Resource Management

All managers have always been, in a sense, human resource managers, because they
all get involved in recruiting, interviewing, selecting, and training their employees.
Yet most firms also have a human resource department with its own top manager.
How do the duties of this human resource manager and department relate to the
human resource duties of sales and production and other managers? Answering this
authority requires a short definition of line versus staff authority. Authority is the right to
The right to make decisions, direct make decisions, to direct the work of others, and to give orders. Managers usually
others’ work, and give orders. distinguish between line authority and staff authority.
In organizations, line authority traditionally gives managers the right to issue
line authority
orders to other managers or employees. Line authority therefore creates a superior
Traditionally gives managers the
right to issue orders to other
(order giver)–subordinate (order receiver) relationship. When the vice president of
managers or employees.
sales tells her sales director to “get the sales presentation ready by Tuesday,” she is
exercising her line authority. Staff authority gives a manager the right to advise
staff authority other managers or employees. It creates an advisory relationship. When the human
Gives a manager the right to advise resource manager suggests that the plant manager use a particular selection test, he
other managers or employees or she is exercising staff authority.
On the organization chart, managers with line authority are line managers.
line manager Those with staff (advisory) authority are staff managers. In popular usage, people
A manager who is authorized to
tend to associate line managers with managing departments (like sales or production)
direct the work of subordinates and
is responsible for accomplishing the
that are crucial for the company’s survival. Staff managers generally run departments
organization’s tasks. that are advisory or supportive, like purchasing and human resource management.
Human resource managers are usually staff managers. They assist and advise line
staff manager managers in areas like recruiting, hiring, and compensation.
A manager who assists and advises
line managers. Line Managers’ Human Resource Management Responsibilities
However, line managers do have many human resource duties. This is because
the direct handling of people has always been part of every line manager’s duties,
from president down to first-line supervisors. One major company outlines its
6 part1 • IntroduCtIon

line supervisors’ responsibilities for effective human resource management under

these general headings:
1. Placing the right person in the right job
2. Starting new employees in the organization (orientation)
3. Training employees for jobs that are new to them
4. Improving the job performance of each person
5. Gaining creative cooperation and developing smooth working relationships
6. Interpreting the company’s policies and procedures
7. Controlling labor costs
8. Developing the abilities of each person
9. Creating and maintaining departmental morale
10. Protecting employees’ health and physical conditions
And we’ll see in this chapter that, if anything, digital tools like LinkedIn hiring and
cloud computing are actually expanding many line managers’ HR responsibilities.

The Human Resource Department

In small organizations, line managers may carry out all these personnel duties unas-
sisted. But as the organization grows, line managers usually need the assistance, spe-
cialized knowledge, and advice of a separate human resource staff. In larger firms,
the human resource department provides such specialized assistance. Figure  1-1
shows  human resource management jobs in one organization. Typical positions

figuRe 1-1 Human Resource department organization chart showing typical HR Job titles
Source: “Human Resource Development Organization Chart Showing Typical HR Job Titles,” www.co.pinellas.fl.us/persnl/pdf/
orgchart.pdf. Courtesy of Pinellas County Human Resources. Reprinted with permission.
 Chapter1 • IntroduCtIontohumanresourCemanagement 7

include compensation and benefits manager, employment and recruiting supervisor,

training specialist, and employee relations executive. Examples of job duties include:
●● Recruiters: Maintain contacts within the community and perhaps travel exten-
sively to search for qualified job applicants.
●● Equal employment opportunity (EEO) representatives or affirmative action
coordinators: Investigate and resolve EEO grievances, examine organizational
practices for potential violations, and compile and submit EEO reports.
●● Job analysts: Collect and examine detailed information about job duties to pre-
pare job descriptions.
●● Compensation managers: Develop compensation plans and handle the em-
ployee benefits program.
●● Training specialists: Plan, organize, and direct training activities.
●● Labor relations specialists: Advise management on all aspects of union–
management relations.

new APPRoAcHes to oRgAnizing HR However, what HR departments do and how

they do it are changing. Because of this, many employers are taking a new look at how
they organize their human resource functions.9 For example, one survey found that
44% of the large firms surveyed planned to change how they organize and deliver
HR services.10 Most plan to use technology to institute more “shared services”
(or “transactional”) arrangements.11 These establish centralized HR units whose
employees are shared by all the companies’ departments to assist the departments’
line managers in human resource matters. These shared services HR teams generally
offer their services through intranets or centralized call centers; they aim to provide
managers and employees with specialized support in day-to-day HR activities (such
as discipline problems). You may also find specialized corporate HR teams within
a company. These assist top management in top-level issues such as developing the
personnel aspects of the company’s long-term strategic plan. Embedded HR teams
have HR generalists (also known as “relationship managers” or “HR business
partners”) assigned to functional departments like sales and production. They
provide the selection and other assistance the departments need. Centers of expertise
are basically specialized HR consulting firms within the company. For example, one
center might provide specialized advice in areas such as organizational change to all
the company’s various units.

the trends Shaping Human Resource Management

Working cooperatively with line managers, human resource managers have long
LeaRnIng ObjectIve 1-2
helped employers hire and fire employees, administer benefits, and conduct apprais-
Briefly discuss and illustrate
als. However, trends are occurring in the environment of human resource manage-
each of the important trends
influencing human resource ment that are changing how employers get their human resource management
management. tasks done. These trends include workforce trends, trends in how people work,
technological trends, and globalization and economic trends.

Workforce Demographics and Diversity Trends

The composition of the workforce will continue to change over the next few years;
specifically, it will continue to become more diverse with more women, minority
group members, and older workers in the workforce.12 Table 1-1 offers a bird’s-eye
view. Between 1992 and 2022, the percent of the workforce that the U.S. Department
of Labor classifies as “white” will drop from 85% to 77.7%. At the same time, the per-
cent of the workforce that it classifies as “Asian” will rise from 4% to 6.2%, and those
of Hispanic origin will rise from 8.9% to 19.1%. The percentages of younger workers
will fall, while those over 55 years of age will leap from 11.8% of the workforce in
1992 to 25.6% in 2022.13 Many employers call “the aging workforce” a big problem.
The problem is that there aren’t enough younger workers to replace the projected
8 part1 • IntroduCtIon

Table 1-1 demographic groups as a Percent of the workforce, 1992–2022

Age, Race, and 1992 2002 2012 2022
Ethnicity
Age: 16–24 16.9% 15.4% 13.7% 11.3%
25–54 71.4 70.2 65.3 63.1
55+ 11.8 14.3 20.9 25.6
White 85.0 82.8 79.8 77.7
Black 11.1 11.4 11.9 12.4
Asian 4.0 4.6 5.3 6.2
Hispanic origin 8.9 12.4 15.7 19.1

Source: Based on U.S. Bureau of Labor Statistics Economic News Release December 19, 2013. www.bls
.gov/news.release/ecopro.t01.htm, accessed May 12, 2015.

number of baby boom–era older workers (born roughly 1946–1964) retiring.14 Many
employers are bringing retirees back (or just trying to keep them from leaving).
With overall projected workforce shortfalls (not enough younger workers to
replace retirees), many employers are hiring foreign workers for U.S. jobs. The H-1B
visa program lets U.S. employers recruit skilled foreign professionals to work in the
United States when they can’t find qualified American workers. U.S. employers bring
in about 181,000 foreign workers per year under these programs, although such pro-
grams face opposition.15
Other firms are shifting to nontraditional workers. Nontraditional workers are
those who hold multiple jobs, or who are “temporary” or part-time workers, or
those working in alternative arrangements (such as a mother–daughter team shar-
ing one clerical job). Others serve as “independent contractors” for specific projects.
Almost 10% of American workers—13 million people—fit this nontraditional
workforce category.
Some employers find millennials or “generation Y” employees (those born
roughly between 1982 and 2004) a challenge to deal with, and this isn’t just an
American phenomenon. For example, the New York Times recently reported that
because China’s one-child rule led many parents to pamper their children, China’s
senior army officers are having problems getting millennial-aged volunteers and con-
scripts to shape up.16
On the other hand, millennials also bring a vast array of skills. They’ve grown up
with social media and are expert at collaborating online. And, having grown up with
Apple and Google, they’re comfortable with innovation.

Trends in How People Work

At the same time, work has shifted from manufacturing jobs to service jobs in North
America and Western Europe. Today over two-thirds of the U.S. workforce is employed
in producing and delivering services, not products. By 2020, service-providing indus-
tries are expected to account for 131 million out of 150 million (87%) of wage and
salary jobs overall. So in the next few years, almost all the new jobs added in the United
States will be in services, not in goods-producing industries.17

on-deMAnd woRkeRs Anyone who has registered on Uber already knows something
about on-demand workers.18 At last count, Uber was signing up almost 40,000 new
independent contractor drivers per month, a rate that was doubling every few months.
Today, in more and more companies like Uber, Elance, and Airbnb, employees
aren’t employees at all, but are freelancers and independent contractors who work
when they can on what they want to work on, when the company needs them.19 So,
for example, Airbnb can run in essence a vast lodging company with only a fraction
of the “regular” employees one like Hilton Worldwide would need (because the lodg-
ings are owned and managed by the homeowners themselves). Other sites tapping
 Chapter1 • IntroduCtIontohumanresourCemanagement 9

on-demand workers include Amazon’s Mechanical Turk, Elance-oDesk, TaskRabbit,

and Handybook (which lets users tap Handy’s thousands of freelance cleaners and
furniture assemblers when they need jobs done).20 The head of Elance-oDesk, which
places millions of short-term professionals via its site, says those on its site are viewed
as “mobile, independent bundles of skills.”21
The fact that employers increasingly rely on such Uber-like “extended work-
forces” has implications for HR. For example, companies that rely on freelancers, con-
sultants, and other such nontraditional employees will need to create personnel poli-
cies on matters like compensation for these “nonemployees,” and become more expert
as talent brokers in matching specific workers with specific tasks that need to be done.
On-demand models like Elance’s and Uber’s have detractors. Some people who
work for on-demand services say the sometimes menial jobs can make them feel some-
what disrespected. One critic says such work is unpredictable and insecure. An article
in the New York Times said this: “The larger worry about on-demand jobs is not about
benefits, but about a lack of agency—a future in which computers, rather than humans,
determine what you do, when and for how much.”22 Some Uber drivers recently sued
to become regular (rather than freelance independent contractor) employees.

HuMAn cAPitAl One big consequence of such demographic and workforce trends is
employers’ growing emphasis on their workers’ knowledge, education, training, skills,
and expertise—in other words on their “human capital.”
Service jobs like consultant and lawyer always emphasized education and knowl-
edge. And today’s proliferation of IT-related businesses like Google and Facebook of
course demands high levels of human capital. The big change is that even “traditional”
manufacturing jobs like assembler are increasingly high-tech. Similarly bank tellers,
retail clerks, bill collectors, mortgage processors, and package deliverers today need a
level of technological sophistication they wouldn’t have needed a few years ago. So in
our increasingly knowledge-based economy, “… the acquisition and development of
superior human capital appears essential to firms’ profitability and success.”23
For managers, the challenge here is that they have to manage such workers dif-
ferently. For example, empowering workers to make more decisions presumes you’ve
selected, trained, and rewarded them to make more decisions themselves. Employers
therefore need new human resource management practices to select, train, and
engage these employees.24 The accompanying HR as a Profit Center illustrates how
one employer took advantage of its human capital.

ImPrOvIng PerfOrmance: HR as a Profit Center

boosting customer service
A bank installed special software that made it easier for its customer service representatives to handle customers’
inquiries. However, the bank did not otherwise change the service reps’ jobs in any way. Here, the new software
system did help the service reps handle more calls. But otherwise, this bank saw no big performance gains.25
A second bank installed the same software. But, seeking to capitalize on how the new software freed
up customer reps’ time, this bank also had its human resource team upgrade the customer service repre-
sentatives’ jobs. This bank taught them how to sell more of the bank’s services, gave them more authority
to make decisions, and raised their wages. Here, the new computer system dramatically improved product
sales and profitability, thanks to the newly trained and empowered customer service reps. Value-added
human resource practices like these improve employee performance and company profitability.26 ■
Based on “Human Resources Wharton,” www.knowledge.wharton.upe.edu; Anthea Zacharatos et al., “High-
Performance Work Systems and Occupational Safety,” Journal of Applied Psychology, 90, no. 1, 2005, pp. 77–93.
See also Jennifer Schramm, “Effective HR Practices Drive Profit,” HR Magazine, November 2012, p. 88.

If your professor has assigned this, go to the Assignments section of mymanagementlab.com to

complete this discussion.
talk About it 1: Discuss three more specific examples of what you believe this second bank’s
HR department could have done to improve the reps’ performance.
10 part1 • IntroduCtIon

Globalization Trends
Globalization refers to companies extending their sales, ownership, and/or manu-
facturing to new markets abroad. Thus Toyota builds Camrys in Kentucky, while
Apple assembles iPhones in China. Free trade areas—agreements that reduce tariffs
and barriers among trading partners—further encourage international trade. The
North American Free Trade Agreement (NAFTA) and the European Union (EU)
are examples.
Globalization has boomed for the past 50 or so years. For example, the total sum
of U.S. imports and exports rose from $47 billion in 1960, to $562 billion in 1980, to
about $5.1 trillion recently.27 Evolving economic and political philosophies drove this
boom. Governments dropped cross-border taxes or tariffs, formed economic free trade
areas, and took other steps to encourage the free flow of trade among countries. The
fundamental economic rationale was that by doing so, all countries would gain, and
indeed, economies around the world did grow quickly until recently.
At the same time, globalization vastly increased international competition. More
globalization meant more competition, and more competition meant more pressure
to be “world class”—to lower costs, to make employees more productive, and to do
things better and less expensively.
As multinational companies jockey for position, many transfer operations
abroad, not just to seek cheaper labor but to tap into new markets. For example,
Toyota has thousands of sales employees based in America, while GE has over 10,000
employees in France. The search for greater efficiencies prompts some employers to
offshore (export jobs to lower-cost locations abroad, as when Dell offshored some
call-center jobs to India). Some employers offshore even highly skilled jobs such as
lawyer.28 Managing the “people” aspects of globalization is a big task for any com-
pany that expands abroad—and for its HR managers.29

Economic Trends
Although globalization supported a growing global economy, the past 10 or so
years were difficult economically. As you can see in Figure 1-2, gross national prod-
uct (GNP)—a measure of the United States of America’s total output—boomed
between 2001 and 2007. During this period, home prices (see Figure 1-3) leaped as
much as 20% per year. Unemployment remained docile at about 4.7%.30 Then,
around 2007–2008, all these measures fell off a cliff. GNP fell. Home prices dropped
by 10% or more (depending on city). Unemployment nationwide soon rose to more
than 10%.
Why did all this happen? It’s complicated. Many governments stripped away
rules and regulations. For example, in America and Europe, the rules that pre-
vented commercial banks from expanding into new businesses such as investment

figuRe 1-2 gross national 900

Product, 1940–2010 800
(Change from year ago, billions of dollars)

Source: Based on “Gross

700
National Product (GNP)” by
FRED Economic Data/St. Louis 600
Fed., from Federal Reserve Bank
500
of St. Louis.
400
300
200
100
0
–100
1940 1950 1960 1970 1980 1990 2000 2010
Shaded areas indicate US recessions.
2009 research.stlouisfed.org
 Chapter1 • IntroduCtIontohumanresourCemanagement 11

figuRe 1-3 case-shiller 200

Home Price indexes June 175
1988–June 2013
Source: Based on Case-Shiller 150
Home Price Indexes June 1988– 125
June 2013, S&P Dow Jones
Indices LLC. Accessed Septem- 100
ber 30, 2013.
75

50

25

1990 1995 2000 2005 2010

banking were relaxed. Giant, multinational “financial supermarkets” such as Citibank

emerged. With fewer regulations, more businesses and consumers were soon deeply
in debt. Homebuyers bought homes with little money down. Banks freely lent money
to developers to build more homes. For almost 20 years, U.S. consumers spent more
than they earned. The United States became a debtor nation. Its balance of pay-
ments (exports minus imports) went from a healthy positive $3.5 billion in 1960, to a
huge minus (imports exceeded exports) $497 billion deficit more recently.31 The only
way the country could keep buying more from abroad than it sold was by borrowing
money. So, much of the boom was built on debt.
Around 2007, all those years of accumulating debt ran their course. Banks and
other financial institutions found themselves owning trillions of dollars of worthless
loans. Governments stepped in to try to prevent their collapse. Lending dried up.
Many businesses and consumers stopped buying. The economy tanked.
Economic trends are pointing up today, and hopefully they will continue to do
so. For example, the unemployment rate had fallen from a high of more than 10% a
few years ago to around 5% in 2015, and economic activity was also picking up.
However, that doesn’t necessarily mean clear sailing for the economy. For one
thing, the “Great Recession” of 2007–2009 certainly grabbed everyone’s attention.
After seeing the economy tank the way it did, many companies became hesitant to
spend a lot expanding factories and equipment. The financial meltdown and writ-
ing off excessive debt left banks reluctant to make new loans, so prospective small
business owners find it hard to start new businesses. With their mortgages (often
still) underwater, their credit card and tuition loan debts still hanging over them, and
many still without good jobs, consumers are understandably wary about pulling out
all the stops when it comes to spending.32 The Federal Reserve Board, which sup-
ported economic expansion after the Great Recession, began reducing support in
2014 (because the economy was looking better, and because of the huge debts it had
run up supporting the recovery). At the same time, productivity increases are slow-
ing, which may further retard economic growth.33 And after what the world went
through in 2007–2009, it’s doubtful that the deregulation, leveraging, and globaliza-
tion that drove economic growth for the previous 50 years will continue unabated.

lABoR foRce tRends Complicating all this is the fact that the labor force in America
is growing more slowly than expected (which is not good, because if employers
can’t get enough workers, they can’t expand). To be precise, the Bureau of Labor
Statistics projects the labor force to grow at 0.5% per year 2012 to 2022, compared
with an annual growth rate of 0.7% during the 2002–2012 decade.34 Why the slower
labor force growth? Mostly because with baby boomers aging, the “labor force
participation rate” is declining—in other words, the percent of the population that
wants to work is declining. Add it all up, and the bottom line looks to be slower
economic growth ahead. The Bureau of Labor Statistics projects that gross domestic
product (GDP) will increase by 2.6% annually from 2012 to 2022, slower than the 3%
12 part1 • IntroduCtIon

or higher that more or less prevailed from the mid-1990s through the mid-2000s.35
One study of 35 large global companies’ senior human resource officers said “talent
management”—the acquisition, development and retention of talent to fill the
companies’ employment needs—ranked as their top concern.36

tHe unBAlAnced lABoR foRce There is other economic news. Although the
unemployment rate is dropping, it’s doing so in part because fewer people are looking
for jobs (remember the shrinking labor participation rate). Furthermore, demand for
workers is unbalanced; for example, an “average” unemployment rate of, say, 5%
masks the fact that the unemployment rate for, say, recent college graduates was
much higher, while that of software engineers was much lower.37 In fact, almost half
of employed U.S. college graduates are in jobs that generally require less than a four-
year college education.38 Why did this happen? In brief, because most of the jobs
that the economy added in the past few years don’t require college educations, and
the Bureau of Labor Statistics says that will probably continue. Occupations that do
not typically require postsecondary education employed nearly two-thirds of workers
a few years ago.39 And, “two-thirds of the 30 occupations with the largest projected
employment increases from 2012 to 2022 typically do not require postsecondary
education for entry.”40
The result is an unbalanced labor force: in some occupations (such as high-tech)
unemployment rates are low, while in others unemployment rates are still very high;
recruiters in many companies can’t find candidates, while in others there’s a wealth
of candidates41; and many people working today are in jobs “below” their expertise
(which may or may not help to explain why about 70% of employees report being
psychologically disengaged at work). In any case, slow growth and labor unbalances
mean more pressure on employers (and their human resource managers and line
managers) to get the best efforts from their employees.

Technology Trends
However, it may be technology that most characterizes the trends shaping human
resource management today.42 For example, the consulting firm Accenture estimates that
social media connections via tools like LinkedIn will soon produce as many as 80%
of new recruits—often letting line managers bypass the human resource manage-
ment unit.43
Five main types of digital technologies are driving this transfer of functional-
ity from HR professionals to automation. Employers increasingly use social media
tools such as Twitter, Facebook, and LinkedIn (rather than, say, as many employ-
ment agencies) to recruit new employees. Employers use new mobile applications, for
instance, to monitor employee location and to provide digital photos at the facility
clock-in location to identify workers. The feedback, fun, and objectives inherent in
gaming support many new training applications, and websites such as Knack, Gild,
and True Office enable employers to inject gaming features into training, perfor-
mance appraisal, and recruiting. Cloud computing and more intuitive user interfaces
enable employers to monitor and report on things like a team’s goal attainment
and to provide real-time evaluative feedback. Finally, data analytics basically means
using statistical techniques, algorithms, and problem-solving to identify relation-
ships among data for the purpose of solving particular problems (such as what are
the ideal candidate’s traits, or how can I tell in advance which of my best employees
is likely to quit?). When applied to human resource management, data analytics is
called talent analytics.
As one example, talent analytics is revolutionizing how employers look for job
candidates. For example, one employer reportedly operated for many years on the
assumption that what mattered was the school the candidate attended, the grades
they had, and their references. A retrospective talent analytics study showed that
these traits didn’t matter at all. What mattered were things like: their résumés were
grammatically correct, they didn’t quit school until obtaining some degree, they were
successful in prior jobs, and they were able to succeed with vague instructions.44
 Chapter1 • IntroduCtIontohumanresourCemanagement 13

Technological change is also affecting the nature of jobs.45 When someone thinks
of “tech jobs,” jobs at Apple and Google come to mind, but technology affects all
sorts of jobs. At Alcoa’s Davenport Works plant in Iowa, a computer at each work
station helps each employee control his or her machines or communicate data. One
former college student became a team leader in a plant with automated machines.
He and his team type commands into computerized machines that create precision
parts.46 As another example, about 17 million people now use information technol-
ogy to work from remote locations at least once per month. “Co-working sites” offer
freelance workers office space and access to Wi-Fi and office equipment.47

today’s new Human Resource Management

A Brief History of Personnel/Human Resource Management
LeaRnIng ObjectIve 1-3
Briefly describe “distributed HR”
“Personnel management” is not new.48 Ancient armies and organized efforts always
and other important aspects of required attracting, selecting, training, and motivating workers. But personnel tasks
human management today. like these were mostly just part of every manager’s job, something that lasted in most
countries until the late 1800s. At that time, labor problems began arising in many
of the post–industrial revolution’s new factories. Soon employers were setting up
“welfare offices” and “welfare secretaries” to manage activities like factory wash-
rooms, and “safety bureaus” to oversee plant safety. By 1900, employers set up the
first “hiring offices,” training programs, and factory schools. Personnel management
had begun.
In these early firms, personnel managers took over hiring and firing from super-
visors, ran the payroll departments, and administered benefits plans. As expertise in
testing emerged, personnel departments played a greater role in employee selection
and training.49 New union laws in the 1930s added “Helping the employer deal with
unions” to personnel’s tasks. New equal employment laws in the 1960s made employ-
ers more reliant on personnel management to avoid discrimination claims.50 By the
1970s globalization made gaining a competitive edge through engaged employees—
and therefore personnel management—increasingly important. Today economic and
demographic trends (recall the diminishing workforce participation rate and aging
population, for instance) make finding, hiring, and motivating employees more
challenging, while more high tech and service jobs means employers must excel at
managing employees’ knowledge, skills, and expertise (human capital) through aptly
renamed human resource management departments. Furthermore, as we’ve seen,
technological trends including mobile and social media are changing how employers
recruit, select, train, appraise, and motivate employees.51 In a sense, a new human
resource management is emerging. We’ll look at this next.

Distributed HR and the New Human Resource Management

Perhaps most importantly, more and more human resource management tasks are
now being redistributed from a central HR department to the company’s employees
and line managers, thanks to digital technologies like mobile phones and social
media.52 For example, employees at Washington-based LivingSocial use a digital tool
called Rypple to comment on each other’s work. LivingSocial then uses these com-
ments as an input to its formal employee appraisals. Similarly, hiring managers in
some companies bypass human resource management to find candidates directly via
LinkedIn. At Google, when someone applies for a job, his or her information goes
into a system that matches the recruit with current Google employees based on inter-
ests and experiences. In a process Google calls “crowdsourcing,” Google employees
then get a big say in who Google hires.
Some experts say that if current trends continue, many aspects of HR and talent
management will become “fully embedded in how work gets done throughout an
organization [distributed], thereby becoming an everyday part of doing business.”53
So, somewhat ironically, we seem to be shifting in some respects back toward the
time before the first personnel departments when line managers did more of the
 14 part1 • IntroduCtIon

personnel tasks. As an example, Hilton Worldwide is placing more HR activities in

the hands of employees, while redirecting the savings thus attained to building up the
more strategic aspects of what its human resource managers do.54 In the following
chapters, we’ll use Trends Shaping HR features like the accompanying one to present
more examples.

Trends shaping hr: DIGITAL AND SOCIAL MEDIA

Digital and social media tools and the new human resource management.
Digital and social media tools are changing how people look for jobs, and how com-
panies recruit, retain, pay, and train employees. In doing so, they’ve transformed
the practice of human resource management, and created, in a sense, a new human
resource management. Here are some examples.
Career sites now make the inner workings of employers more transparent than
they’ve ever been.55 Sites such as Glassdoor, CareerBliss, CareerLeak, and JobBite
let their members share insights into hundreds of thousands of employers, includ-
ing specific company-by-company commentaries, salary reports, and CEO approval
ratings. According to one report, 48% of job seekers surveyed said they’ve used
Glassdoor during their job search, including checking before apply-
ing for employment at a company.56 Among other things, such trans-
parency prompted sensible human resource (and other) managers to
redouble their efforts to ensure that their internal processes (such as
promotion decisions, pay allocations, and performance appraisals)
are fair, and that their recruitment processes are civil—for instance,
by responding to rejected job candidates and providing them with
some closure.
Recruitment is one of the most familiar ways that digital and
social media revolutionized human resource management. For exam-
ple, as we’ll see in Chapter 5, managers use LinkedIn to find passive
employment candidates (those not actively looking for jobs), and to
check out active candidates. Another site, Gild, lets managers find
skilled software engineers by searching the Web for open source code,
and then evaluating the code’s programmers in part by scanning tech-
nology forums to assess the programmers’ reputations.
Talent analytics algorithms help managers improve employee
retention. They do this, for example by identifying the factors (such
photosIndia.com/gettyImages

as experience, career advancement, performance reviews, compensa-

tion, and even a surge in activity on social media sites) that flag high-
potential employees who are more likely to leave.
To improve training, talent analytics tools synthesize information
from learning management systems (such as training courses taken)
and customer management systems (such as each salesperson’s sales
performance) to identify which training courses have the biggest
impact, and why.
Like many employers, Rather than just matching mentors and protégés informally, new, eHarmony-
Hilton Worldwide is type tools let managers match them also based on personality.
“distributing HR”—placing And with about 70% of all openings now available online, new analytical tools
more HR activities in the scrutinize online job ads and identify hiring trends by industry and occupation, and
hands of employees. real-time competitive pay and benefits information. ■

A Quick Summary
We can summarize important trends to this point as follows:
●● 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.
 Chapter1 • IntroduCtIontohumanresourCemanagement 15

figuRe 1-4 what trends

Trends:
Mean for Human Resource
Economic
Management global
workforce
technological

Distributed
Employers HR
focus on
“Human
Capital”

HR focus on Line managers

HR more responsible
employee
manager for HR tasks
performance,
more time to
engagement,
focus on
and HR
strategy

●● 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.
●● This gives many line managers more human resource management
responsibilities.
●● And this means that 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.
Figure 1-4 illustrates this.
We’ll look next at human resource management’s roles in strategy, performance, and
employee engagement next.

HR and Strategy
strategic human resource
management
First, today’s human resource managers are focusing more on longer term, strategic
Formulating and executing human “big picture” issues. We’ll see in Chapter 3 (Strategy) that strategic human resource
resource policies and practices that management means formulating and executing human resource policies and prac-
produce the employee competencies tices that produce the employee competencies and behaviors the company needs
and behaviors the company needs to to achieve its strategic aims. We illustrate this throughout this book with Strategic
achieve its strategic aims. Context features such as the accompanying one.

ImPrOvIng PerfOrmance: The Strategic Context

building L.L.bean
Strategic human resource management means formulating and executing human resource policies and
practices that produce the employee competencies and behaviors the company needs to achieve its stra-
tegic aims.
L.L.Bean illustrates how companies do this. The heart of L.L.Bean’s strategy has always been offer-
ing great outdoor equipment with outstanding service and expert advice. As its company history said,
“L.L.Bean, Inc., quickly established itself as a trusted source for reliable outdoor equipment and expert
advice. The small company grew. Customers spread the word of L.L.Bean’s quality and service.”57
16 part1 • IntroduCtIon

To provide such service, L.L.Bean needs special people as employees, ones whose love of the outdoors
helps them deal knowledgably and supportively with the company’s customers. To paraphrase its Website,
L.L.Bean is looking for a special type of employee, one (like its customers) who loves the outdoors, and the
company therefore treats its employees just as well as it famously treat its customers.58
L.L.Bean’s HR policies and practices attract and develop just such employees. For one thing, the com-
pany knows just who to recruit for. It wants sociable, friendly, experienced, outdoors-oriented applicants
and employees.59 To attract and cultivate these sorts of employee competencies and behaviors, the com-
pany uses multiple interviews to screen out applicants who might not fit in. And L.L.Bean offers an out-
doors-oriented work environment and competitive pay and benefits. It was a Fortune “100 Best Companies
to Work For” employer in 2015.
To help encourage great employee service, L.L.Bean also provides a supportive environment. For ex-
ample, when its Web sales recently for the first time exceeded phone sales, L.L.Bean closed four local
call centers, but arranged for the 220 employees to work from their homes. And instead of sending jobs
abroad, the company keeps its jobs close to the town where Leon Leonwood Bean started his company
almost 100 years ago.60 L.L.Bean’s managers built the firm’s strategy and success around courteous, expert
service. They know that having the right employees is the key to its success, and that it takes the right blend
of human resource practices to attract and nurture such employees. ■
Source: Based on “Our Story”, L.L.Bean, pp. 1-19, from www.llbean.com/customerService/aboutLLBean/images/
110408_About-LLB.pdf; www.llbean.com/; Michael Arndt, “L.L.Bean Follows Its Shoppers to the Web,” Busi-
ness Week, March 1, 2010. http://www.llbean.com/llb/shop/515428.

If your professor has assigned this, go to the Assignments section of mymanagementlab.com to

complete these discussion questions.
talk About it 2: What would you say are (1) L.L.Bean’s strategic aims, (2) its required employee
behaviors and skills to achieve these aims, and (3) HR policies and practices it needs to produce these
necessary employee behaviors and skills?

As in the Strategic Context feature, today’s employers want their HR managers to

put in place practices that will produce the employee behaviors that help the com-
pany achieve its strategic aims. We use a model opening each chapter to illustrate this
idea, but in brief the model follows this three-step sequence: Set the firm’s strategic
aims → Pinpoint the employee behaviors and skills we need to achieve these strategic
aims → Decide what HR policies and practices will enable us to produce these neces-
sary employee behaviors and skills.

HR and Performance
Employers also expect their human resource manager/“people experts” to spearhead
employee performance-improvement efforts. Here they can apply three levers. The
first is the HR department lever. The HR manager ensures that the human resource
management function is delivering services efficiently. For example, this might
include outsourcing certain activities such as benefits management, and using tech-
nology to deliver its services more cost-effectively.
The second is the employee costs lever. For example, the human resource manager
takes a prominent role in advising top management about the company’s staffing levels,
and in setting and controlling the firm’s compensation, incentives, and benefits policies.
The third is the strategic results lever. Here the HR manager puts in place the pol-
icies and practices that produce the employee competencies and skills the company
needs to achieve its strategic goals. That’s what was done at L.L.Bean, for instance.
HR And PeRfoRMAnce MeAsuReMent Improving performance requires measuring
what you are doing. For example, when IBM’s former chief HR officer needed
$100 million to reorganize its HR operations several years ago, he told top management,
“I’m going to deliver talent to you that’s skilled and on time and ready to be deployed.
I will be able to measure the skills, tell you what skills we have, what [skills] we don’t
have [and] then show you how to fill the gaps or enhance our training.”61
Human resource managers use performance measures (or “metrics”) to validate
claims like these. For example, median HR expenses as a percentage of companies’
total operating costs average just under 1%.62 We’ll address this in Chapter 3.
 Chapter1 • IntroduCtIontohumanresourCemanagement 17

HR And evidence-BAsed MAnAgeMent Basing decisions on such evidence is the

heart of evidence-based human resource management. This is the use of data, facts,
analytics, scientific rigor, critical evaluation, and critically evaluated research/case
studies to support human resource management proposals, decisions, practices,
and conclusions.63 Put simply, evidence-based human resource management means
using the best-available evidence in making decisions about the human resource
management practices you are focusing on.64 The evidence may come from
actual measurements (such as, how did the trainees like this program?). It may come
from existing data (such as, what happened to company profits after we installed
this training program?). Or, it may come from published research studies (such as,
what does the research literature conclude about the best way to ensure that trainees
remember what they learn?).
Sometimes, companies translate their findings into what management gurus call
high-performance work systems, “sets of human resource management practices that
together produce superior employee performance.”65 For example, at GE’s assembly
plant in Durham, North Carolina, highly trained self-directed teams produce high-
precision aircraft parts. We’ll also discuss how they do this in Chapter 3.
HR And Adding vAlue The bottom line is that today’s employers want their human
resource managers to add value by boosting profits and performance. Professors Dave
Ulrich and Wayne Brockbank describe this as the “HR Value Proposition.”66 They
say human resource programs (such as benefits plans) are just a means to an end.
The HR manager’s ultimate aim must be to add value. Adding value means helping
the firm and its employees improve in a measurable way as a result of the human
resource manager’s actions. We’ll see in this book how human resource practices do
this. For example, we’ll use, in each chapter, HR as a Profit Center features like the
one on page 9 to illustrate this.

HR and Performance and Sustainability

In a world where sea levels are rising, glaciers are crumbling, and people increas-
ingly view financial inequity as offensive, more and more people say that businesses
can’t just measure “performance” in terms of maximizing profits. They argue that
companies’ efforts should be “sustainable,” by which they mean judged not just on
profits, but on their environmental and social performance as well.67 As one example,
PepsiCo has a goal to deliver “Performance with Purpose”—in other words, to
deliver financial performance while also achieving human sustainability, environ-
mental sustainability, and talent sustainability. PepsiCo wants to achieve business
and financial success while leaving a positive imprint on society (click www.pepsico.
com, then click What We Believe, and then Performance with Purpose). In one sur-
vey, about 80% of large surveyed companies report their sustainability performance.68
We’ll see that sustainability trends have important consequences for human resource
management.

HR and Employee Engagement

employment engagement Employee engagement refers to being psychologically involved in, connected to,
The extent to which an organiza- and committed to getting one’s jobs done. Engaged employees “experience a high
tion’s employees are psychologi- level of connectivity with their work tasks,” and therefore work hard to accomplish
cally involved in, connected to, and their task-related goals.69
committed to getting their jobs Employee engagement is important because it drives performance. For example
done.
(as we will discuss in Chapter 3), based on one Gallup survey, business units with
the highest levels of employee engagement have an 83% chance of performing
above the company median; those with the lowest employee engagement have only
a 17% chance.70 A survey by consultants Watson Wyatt Worldwide concluded that
companies with highly engaged employees have 26% higher revenue per employee.71
The problem for employers is that, depending on the study, only about 21–30% of
today’s employees nationally are engaged.72 In one survey, about 30% were engaged,
50% were not engaged, and 20% were actively disengaged (anti-management).73
18 part1 • IntroduCtIon

We will see in this book that managers improve employee engagement by taking
concrete steps to do so. For example, a few years ago, Kia Motors (UK) turned its
performance around, in part by boosting employee engagement.74 As we will discuss
more fully in Chapter 3, it did this with new HR programs. These included new lead-
ership development programs, new employee recognition programs, improved internal
communications programs, a new employee development program, and by modifying
its compensation and other policies. We use special Employee Engagement Guide
for Managers sections in most chapters to show how managers use human resource
activities such as recruiting and selection to improve employee engagement.

the new Human Resource Manager

It’s more complicated being a human resource manager today.75 Tasks like formu-
LeaRnIng ObjectIve 1-4
lating strategic plans and making data-based decisions require new competencies
List at least four important
and skills. HR managers can’t just be good at traditional personnel tasks like hiring
human resource manager
competencies. and training. Instead, they must “speak the CFO’s language” by defending human
resource plans in measurable terms (such as return on investment).76 To create
strategic plans, the human resource manager must understand strategic planning,
marketing, production, and finance.77 As companies merge and expand abroad, they
must be able to formulate and implement large-scale organizational changes, drive
employee engagement, and redesign organizational structures and work processes.
None of this is easy.
When asked, “Why do you want to be an HR manager?” many people basically
say, “Because I’m a people person.” Being sociable is certainly important, but it takes
much more. What does it take to be a human resource manager today? Recently, the
Society for Human Resource Management (SHRM) introduced a new “competency
model” (called the SHRM Body of Competency and Knowledge™); it itemizes the
competencies, skills, and knowledge and expertise human resource managers need.
Here are the behaviors or competencies (with definitions) SHRM says today’s HR
manager should be able to exhibit:
●● Leadership & Navigation The ability to direct and contribute to initiatives and
processes within the organization.
●● Ethical Practice The ability to integrate core values, integrity, and accountabil-
ity throughout all organizational and business practices.
●● Business Acumen The ability to understand and apply information with which
to contribute to the Organization’s strategic plan.
●● Relationship Management The ability to manage interactions to provide ser-
vice and to support the organization.
●● Consultation The ability to provide guidance to organizational stakeholders.
●● Critical Evaluation The ability to interpret information with which to make
business decisions and recommendations.
●● Global & Cultural Effectiveness The ability to value and consider the perspec-
tives and backgrounds of all parties.
●● Communication The ability to effectively exchange information with
stakeholders.
SHRM also says human resource managers must have command of the basic knowl-
edge in the functional areas of HR, such as employee relations. The basic knowledge
of principles, practices, and functions they need here should cover:
●● Functional Area #1: Talent Acquisition & Retention
●● Functional Area #2: Employee Engagement
●● Functional Area #3: Learning & Development
●● Functional Area #4: Total Rewards
●● Functional Area #5: Structure of the HR Function
●● Functional Area #6: Organizational Effectiveness & Development
●● Functional Area #7: Workforce Management
 Chapter1 • IntroduCtIontohumanresourCemanagement 19

HR managers can’t just

be good at traditional
personnel tasks like
hiring and training, but
must“speaktheCFo’s
language” by defending
human resource plans in
measurable terms.

Dmitriy Shironosov/Alamy

●● Functional Area #8: Employee Relations

●● Functional Area #9: Technology & Data
●● Functional Area #10: HR in the Global Context
●● Functional Area #11: Diversity & Inclusion
●● Functional Area #12: Risk Management
●● Functional Area #13: Corporate Social Responsibility
●● Functional Area #14: U.S. Employment Law & Regulations
●● Functional Area #15: Business & HR Strategy

HR and the Manager’s Skills

The aim of this book is to help every manager develop the skills he or she needs to
carry out the human resource management–related aspects of his or her job, such as
recruiting, selecting, training, appraising, and incentivizing employees, and provid-
ing them with a safe and fulfilling work environment.78 Special HR Tools for Line
Managers and Small Businesses features provide small business owners/managers
in particular with techniques to better manage their small businesses. Know Your
Employment Law features highlight the practical information all managers need
to make better HR-related decisions that work. Employee Engagement Guide for
Managers features show how managers improve employee engagement.

HR and Ethics
Regrettably, news reports today are filled with stories of otherwise competent man-
agers who have run amok. For example, prosecutors filed criminal charges against
several Iowa meatpacking plant human resource managers who allegedly violated
employment law by hiring children younger than 16.79 Behaviors like these risk torpedo-
ethics ing even otherwise competent managers and employers. Ethics means the standards
The principles of conduct governing someone uses to decide what his or her conduct should be. We will see that many seri-
an individual or a group; specifically, ous workplace ethical issues—workplace safety and employee privacy, for instance—
the standards you use to decide are human resource management related.80
what your conduct should be.
HR Manager Certification
Many human resource managers use certification to demonstrate their mastery of
contemporary human resource management knowledge and competencies. Managers
have, at this writing, at least two testing processes to achieve certification.
20 part1 • IntroduCtIon

The oldest is administered by the HR Certification Institute (HRCI), an inde-

pendent certifying organization for human resource professionals (see www.hrci.org).
Through testing, HRCI awards several credentials, including Professional in Human
Resources (PHR), and Senior Professional in Human Resources (SPHR). Managers
can review HRCI’s Knowledge Base and take an online HRCI practice quiz by going
to www.hrci.org and clicking on Exam Preparation and then on Sample Questions.81
Starting in 2015, SHRM began offering its own competency and knowledge-
based testing and certifications, for SHRM Certified Professionals, and SHRM
Senior Certified Professionals, based on its own certification exams.82 The exam
is built around the SHRM Body of Competency and Knowledge™ model which
includes functional knowledge and skills as well as competencies.
We’ve summarized separately the SHRM and the HRCI knowledge bases in
Appendices A and B of this book, pp. 612–629). One covers SHRM’s functional
knowledge areas (such as employee relations). The other covers HRCI’s seven main
knowledge areas (such as Strategic Business Management, and Workforce Planning
and Employment. It includes about 91 specific HRCI “Knowledge of ” subject
areas within these seven main topic areas with which those taking the test should be
familiar.
You’ll find throughout this book special Knowledge Base icons starting in
Chapter 2 to denote coverage of SHRM and/or HRCI knowledge topics.

HR and the Manager’s Human Resource Philosophy

Technical expertise is important, but at the end of the day, people’s actions are always
based in part on the basic assumptions they make, and this is especially true in regard
to human resource management. The basic assumptions you make about people—
Can they be trusted? Do they dislike work? Why do they act as they do? How should
they be treated?—together comprise your philosophy of human resource manage-
ment. And every personnel decision you make—the people you hire, the training you
provide, your leadership style, and the like—reflects (for better or worse) this basic
philosophy.
How do you go about developing such a philosophy? To some extent, it’s preor-
dained. There’s no doubt that you will bring to your job an initial philosophy based
on your experiences, education, values, assumptions, and background. But your
philosophy doesn’t have to be set in stone. It should evolve as you accumulate knowl-
edge and experiences. For example, after a worker uprising in China at the Hon Hai-
owned Foxconn plant that assembles Apple iPhones, the personnel philosophy at
the plant softened in response to the workers’ (and Apple’s) discontent.83 In any case, no
manager should manage others without first understanding the personnel philoso-
phy that is driving his or her actions.
One of the things molding your own philosophy is that of your organization’s
top management. While it may or may not be stated, it is usually communicated by
the managers’ actions and permeates every level and department in the organization.
For example, here is part of the personnel philosophy of the founder of the Polaroid
Corp., stated many years ago:
To give everyone working for the company a personal opportunity within the
company for full exercise of his talents—to express his opinions, to share in
the progress of the company as far as his capacity permits, and to earn enough
money so that the need for earning more will not always be the first thing on
his mind. The opportunity, in short, to make his work here a fully rewarding
and important part of his or her life.84
Current “best companies to work for” lists include many organizations with simi-
lar philosophies. For example, the CEO of software giant SAS has said,
We’ve worked hard to create a corporate culture that is based on trust between
our employees and the company . . . a culture that rewards innovation, encourages
employees to try new things and yet doesn’t penalize them for taking chances, and
a culture that cares about employees’ personal and professional growth.85
 Chapter1 • IntroduCtIontohumanresourCemanagement 21

Similarly, when Google founders Larry Page and Sergey Brin began building
Google, they set out to make it a great place to work. Google doesn’t just offer
abundant benefits and stock options.86 Google’s team of social scientists run
experiments, for instance, to determine successful middle managers’ skills.87 The
aim is to keep “Googlers” happy (and Google successful and growing). We’ll
look closer at how managers maintain positive employee relations in Chapters 3
and 13.

Watch It!
How does a company actually go about putting its human resource philosophy into action? If your
professor has assigned this, go to to the Assignments section of mymanagementlab.com to complete
the video exercise titled Human Resource Management (Patagonia).

the Plan of this book

The Basic Themes and Features
LeaRnIng ObjectIve 1-5
In this book, we’ll use four themes and features to highlight particularly important
Outline the plan of this book.
issues, and to provide continuity from chapter to chapter.

Practical Tools For Every Manager

First, human resource management is the responsibility of every manager—not just
those in human resources. Throughout every page in this book, you’ll therefore find
an emphasis on practical material that you as a manager will need to perform your
day-to-day management responsibilities, even if you never spend one day as an HR
manager.
Second, managers use human resource management techniques to improve per-
formance, productivity, and profitability. To highlight this, you will find special boxed
features titled:
Improving Performance: HR Tools for Line Managers and Small Businesses.
These features highlight actual tools and practices any manager can use to im-
prove performance at work.
Improving Performance: HR as a Profit Center. We’ve seen that employ-
ers need human resource management practices that add value. To illustrate
this throughout the book, most chapters contains an illustrative Improving
Performance: HR as a Profit Center feature. These show actual examples of how
human resource management practices add measurable value—by reducing costs
or boosting revenues.
Improving Performance: HR Practices Around the Globe. These features high-
light how actual companies around the globe use effective HR practices to im-
prove their teams’ and companies’ performance.
Improving Performance Through HRIS. These features highlight how managers
use human resource technology to improve performance.
Diversity Counts. These features provide insights and guidelines for managing a
diverse workforce.
Third, the book emphasizes how digital and high-tech trends are shaping human
resource management. You’ll therefore find Trends features such as Trends Shaping
HR: Digital and Social Media in most chapters.
Fourth, particularly with today’s “distributed HR”, every line and staff man-
ager should understand how the employer’s human resource management policies
and practices produce the employee skills and performance the company needs
to achieve its strategic aims. Special chapter-opener scenarios and Improving
Performance: The Strategic Context features illustrate this in most chapters. And
use the Hotel Paris continuing case starting in Chapter 3 to apply that idea.
22 part1 • IntroduCtIon

chapter contents Overview

Following is a brief overview of the chapters and their content.

Part 1: Introduction
Chapter 1: Introduction to Human Resource Management. The manager’s hu-
man resource management jobs; crucial global and competitive trends; how
managers use technology and modern HR measurement systems to create high-
performance work systems.
Chapter 2: Equal Opportunity and the Law. What you should know about equal
opportunity laws; how these laws affect activities such as interviewing, selecting
employees, and evaluating performance; Know Your Employment Law features
highlight important laws in each chapter.
Chapter 3: Human Resource Management Strategy and Analysis. What is strate-
gic planning; strategic human resource management; building high-performance
HR practices; tools for evidence-based HR; employee engagement at Kia Motors.

Part 2: Recruitment, Placement, and Talent Management

Chapter 4: Job Analysis and the Talent Management Process. How to analyze a
job; how to determine the human resource requirements of the job, as well as its
specific duties; and what is talent management.
Chapter 5: Personnel Planning and Recruiting. Human resource planning; deter-
mining what sorts of people need to be hired; recruiting them.
Chapter 6: Employee Testing and Selection. Techniques you can use to ensure
that you’re hiring the right people.
Chapter 7: Interviewing Candidates. How to interview candidates effectively.

Part 3: Training and Development

Chapter 8: Training and Developing Employees. Providing the training and
development to ensure that your employees have the knowledge and skills needed
to accomplish their tasks.
Chapter 9: Performance Management and Appraisal. Techniques you can use for
appraising employee performance.
Chapter 10: Managing Careers and Retention. Causes of and solutions for em-
ployee turnover, and how to help employees manage their careers.

Part 4: Compensation
Chapter 11: Establishing Strategic Pay Plans. How to develop equitable pay
plans for your employees.
Chapter 12: Pay for Performance and Financial Incentives. Pay-for-performance
plans such as financial incentives, merit pay, and incentives that help tie perfor-
mance to pay.
Chapter 13: Benefits and Services. Providing benefits that make it clear the
firm views its employees as long-term investments and is concerned with their
welfare.

Part 5: Enrichment Topics in Human Resource Management

Chapter 14: Building Positive Employee Relations. Developing employee rela-
tions programs and employee involvement strategies; ensuring ethical and fair
treatment through discipline and grievance processes
 Chapter1 • IntroduCtIontohumanresourCemanagement 23

Chapter 15: Labor Relations and Collective Bargaining. How to deal with unions,
including the union organizing campaign; negotiating and agreeing upon a collec-
tive bargaining agreement between unions and management; and managing the
agreement via the grievance process.
Chapter 16: Safety, Health, and Risk Management. How to make the workplace
safe, including the causes of accidents; laws governing your responsibilities for
employee safety and health; risk management methods.
Chapter 17: Managing Global Human Resources. Special topics in managing the
HR side of multinational operations.
Chapter 18: Managing Human Resources in Small and Entrepreneurial Firms.
Special topics for managing human resources in smaller firms.

the topics are Interrelated

In practice, do not think of each of this book’s topics as being unrelated to the oth-
ers. Each topic interacts with and affects the others, and all should align with the
employer’s strategic plan. For example, hiring people who don’t have the potential
to learn the job will doom their performance, regardless of how much training they
get. Similarly, we will see throughout this book that each human resource manage-
ment function, from job analysis to recruiting, selecting, training, and rewarding
employees, should aim to produce the employee behaviors and competencies that the
company needs to achieve its strategic goals.

chapter Review

MyManagementLab® Go to mymanagementlab.com to complete the problems marked with this icon.

chapter Section Summaries
1-1. All managers should be able to answer, What is “knowledge work” and therefore on building
human resource management, and why is it impor- “human capital,” the knowledge, education,
tant? Doing so helps managers avoid problems training, skills, and expertise of a firm’s em-
like hiring the wrong person for the job. And ployees. Workforce and demographic changes
more important, it can help ensure that managers mean that the workforce is becoming older and
get results through people. Line managers’ hu- more diverse.
man resource duties include placing the right per- 1-3. New digital technologies such as mobile and so-
son on the job, and orienting and training new cial media will make human resource management
employees. today more distributed. Traditionally, personnel/
1-2. The trends shaping human resource management HR managers focused on administrative issues
are influencing what human resource man- such as running the payroll department. Today,
agers do and how they do it. Globalization employers expect their human resource manage-
means more competition, and more competi- ment teams to focus more on big-picture issues,
tion means more pressure to lower costs and to including instituting human resource policies
make employees more productive and quality and practices that support the companies’ stra-
conscious. Technology is requiring more em- tegic objectives, and to foster high performance
ployees to be technologically well informed and through engaged employees.
pressuring employers to improve their human 1-4. To do so, the human resource managers need new
resource processes by applying new distributive competencies. They should be able to apply evi-
technological tools. There is more emphasis on dence-based human resource management, which
 24 part1 • IntroduCtIon

means the use of data, facts, analytics, scientific the responsibility of every manager, that the
rigor, critical evaluation, and critically evaluated workforce is increasingly diverse, that employers
research/case studies to support human resource and their human resource managers face the
Chapter 1

management proposals, decisions, practices, and need to manage in challenging economic times,
conclusions. and that human resource managers must be
1-5. In understanding the overall plan of this able to defend their plans and contributions in
book, keep several important themes in measurable terms—to use evidence-based man-
mind: that human resource management is agement—to show they’ve added value.

Discussion Questions
1-1. Explain what HR management is and how it 1-3. Illustrate the HR management responsibilities of
relates to the management process. line and staff managers.
1-2. Give examples of how HR management concepts 1-4. Compare the authority of line and staff
and techniques can be of use to all managers. managers. Give examples of each.

Individual and group activities

1-5. Working individually or in groups, develop out- had to do something about the company’s top-
lines showing how trends like workforce diversity, management compensation plan, which many
technological innovation, globalization, and felt contributed to the allegations by some that
changes in the nature of work have affected the some former company officers had used the com-
college or university you are attending now. Pres- pany as a sort of private ATM.
ent in class. Siegel came to Tyco after a very impressive
1-6. Working individually or in groups, contact the career. For example, she had been head of execu-
HR manager of a local bank. Ask the HR man- tive compensation at Allied Signal, and was a
ager how he or she is working as a strategic part- graduate of the Harvard Business School. But, as
ner to manage human resources, given the bank’s strong as her background was, she obviously had
strategic goals and objectives. Back in class, dis- her work cut out for her when she took the senior
cuss the responses of the different HR managers. vice president of HR position at Tyco.
1-7. Working individually or in groups, interview an Working individually or in groups, conduct an
HR manager. Based on that interview, write a Internet search and/or library research to answer
short presentation regarding HR’s role today in the following questions: What human resource
building competitive organizations. management–related steps did Siegel take to help
1-8. Working individually or in groups, bring several get Tyco back on the right track? Do you think
business publications such as Bloomberg Busi- she took the appropriate steps? Why or why not?
nessweek and the Wall Street Journal to class, or What, if anything, do you suggest she do now?
access them in class via the Web. Based on their 1-11. Appendices A and B at the end of this book
contents, compile a list titled “What HR Manag- WLE
(pages 612–629) list the knowledge some-
ers and Departments Do Today.” one studying for the HRCI (Appendix A)
KNO

DG

1-9. Based on your personal experiences, list 10 exam- or SHRM (Appendix B) certification exam
E

BASE
ples showing how you used (or could have used) needs to have in each area of human resource
human resource management techniques at work management (such as in Strategic Management,
or school. and Workforce Planning). In groups of several
1-10. Laurie Siegel, former senior vice president of hu- students, do four things: (1) review Appendix A
man resources for Tyco International, took over and/or B; (2) identify the material in this chapter
her job just after numerous charges forced the that relates to the Appendix A and/or B required
company’s previous board of directors and top knowledge lists; (3) write four multiple-choice
executives to leave the firm. Hired by new CEO exam questions on this material that you believe
Edward Breen, Siegel had to tackle numerous would be suitable for inclusion in the HRCI exam
difficult problems starting the moment she as- and/or the SHRM exam; and, (4) if time permits,
sumed office. For example, she had to help hire a have someone from your team post your team’s
new management team. She had to do something questions in front of the class, so that students in
about what the outside world viewed as a culture all teams can answer the exam questions created
of questionable ethics at her company. And she by the other teams.
 Chapter1 • IntroduCtIontohumanresourCemanagement 25

experiential exercise

Chapter 1
HR and “The Profit” leads to inadequate supervision of some ongoing
Purpose: The purpose of this exercise is to provide orders and to lower profit margins. Questions also
practice in identifying and applying the basic concepts arise at Grafton about, for instance, the effective-
of human resource management by illustrating how ness of the training that some managers (including
managers use these techniques in their day-to-day jobs. the owner’s son) have received.
●● Watch several of these shows (or reruns of the
Required Understanding: Be thoroughly familiar with shows), and then meet with your team and answer
the material in this chapter, and with at least one or two the following questions:
episodes of CNBC’s The Profit with Marcus Lemonis 1-12. What specific HR functions (recruiting, inter-
www.tv.com/shows/the-profit/watch/. (Access a library viewing, training, and so on) can you identify
of past episodes at URLs such as www.cnbc.com/live-tv/ Mr. Lemonis addressing on this show? Make
the-profit) sure to give specific examples based on the
How to Set Up the Exercise/Instructions: show.
●● Divide the class into teams of several students.
1-13. What specific HR functions can you iden-
●● Read this: As you may know by watching billion-
tify as being problematical in this company?
aire Marcus Lemonis as he works with actual small Again, please give specific answers.
businesses in which he’s taken an ownership share, 1-14. In terms of HR functions (such as recruit-
human resource management often plays an impor- ing, selection, interviewing, compensating,
tant role in what he and the business owners and appraising, and so on) what exactly would
managers need to do to be successful. For example, you recommend doing to improve this com-
at Grafton Furniture, a lack of clarity about who pany’s performance?
does what (a lack of up-to-date job descriptions) 1-15. Present your team’s conclusions to the class.

application case
Jack Nelson’s Problem After touring the 22 branches and finding similar problems in many
of them, Nelson wondered what the home office should do or what ac-
As a new member of the board of directors for a local bank, Jack Nel- tion he should take. The banking firm generally was regarded as being
son was being introduced to all the employees in the home office. a well-run institution that had grown from 27 to 191 employees during
When he was introduced to Ruth Johnson, he was curious about her the past 8 years. The more he thought about the matter, the more puz-
work and asked her what the machine she was using did. Johnson zled Nelson became. He couldn’t quite put his finger on the problem,
replied that she really did not know what the machine was called or and he didn’t know whether to report his findings to the president.
what it did. She explained that she had only been working there for 2
months. However, she did know precisely how to operate the machine. Questions
According to her supervisor, she was an excellent employee. 1-16. What do you think is causing some of the problems in the
At one of the branch offices, the supervisor in charge spoke to bank’s home office and branches?
Nelson confidentially, telling him that “something was wrong,” but 1-17. Do you think setting up an HR unit in the main office would
she didn’t know what. For one thing, she explained, employee turn- help?
over was too high, and no sooner had one employee been put on the 1-18. What specific functions should an HR unit carry out? What HR
job than another one resigned. With customers to see and loans to be functions would then be carried out by supervisors and other
made, she continued, she had little time to work with the new employ- line managers? What role should the Internet play in the new
ees as they came and went. HR organization?
All branch supervisors hired their own employees without com-
Source: From Supervision in Action: The Art of Managing Others, 4th edition,
munication with the home office or other branches. When an opening Pearson Education, Inc., Upper Saddle River, New Jersey.
developed, the supervisor tried to find a suitable employee to replace
the worker who had quit.

continuing case
Carter Cleaning Company are not just the job of a central HR group but rather a job in which every
manager must engage. Perhaps nowhere is this more apparent than in
Introduction the typical small service business. Here the owner/manager usually has
A main theme of this book is that human resource management no HR staff to rely on. However, the success of his or her enterprise (not
activities like recruiting, selecting, training, and rewarding employees to mention his or her family’s peace of mind) often depends largely on
 26 part1 • IntroduCtIon

the effectiveness through which workers are recruited, hired, trained, of his stores to include the dry cleaning and pressing of clothes. He
evaluated, and rewarded. Therefore, to help illustrate and emphasize embarked, in other words, on a strategy of “related diversification”
the front-line manager’s HR role, throughout this book we will use a by adding new services that were related to and consistent with his
chapter 1

continuing case based on an actual small business in the southeastern existing coin laundry activities. He added these for several reasons. He
United States. Each chapter’s segment of the case will illustrate how wanted to better utilize the unused space in the rather large stores he
the case’s main player—owner/manager Jennifer Carter—confronts currently had under lease. Furthermore, he was, as he put it, “tired of
and solves personnel problems each day at work by applying the con- sending out the dry cleaning and pressing work that came in from our
cepts and techniques of that particular chapter. Here is background coin laundry clients to a dry cleaner 5 miles away, who then took most
information that you will need to answer questions that arise in sub- of what should have been our profits.” To reflect the new, expanded
sequent chapters. (We also present a second, unrelated “application line of services, he renamed each of his two stores Carter Cleaning
case” case incident in each chapter.) Centers and was sufficiently satisfied with their performance to open
four more of the same type of stores over the next 5 years. Each store
Carter Cleaning Centers had its own on-site manager and, on average, about seven employees
and annual revenues of about $500,000. It was this six-store chain that
Jennifer Carter graduated from State University in June 2008 and, after
Jennifer joined after graduating.
considering several job offers, decided to do what she always planned
Her understanding with her father was that she would serve as a
to do—go into business with her father, Jack Carter.
troubleshooter/consultant to the elder Carter with the aim of both learn-
Jack Carter opened his first laundromat in 1998 and his second
ing the business and bringing to it modern management concepts and
in 2001. The main attraction of these coin laundry businesses for him
techniques for solving the business’s problems and facilitating its growth.
was that they were capital- rather than labor-intensive. Thus, once the
investment in machinery was made, the stores could be run with just Questions
one unskilled attendant and none of the labor problems one normally
1-19. Make a list of five specific HR problems you think Carter
expects from being in the retail service business.
Cleaning will have to grapple with.
The attractiveness of operating with virtually no skilled labor not-
1-20. What would you do first if you were Jennifer?
withstanding, Jack had decided by 2004 to expand the services in each

MyManagementLab
Go to mymanagementlab.com for Auto-graded writing questions as well as the following
Assisted-graded writing questions:
1-21. From a practical point of view, why is it important for all managers and fu-
ture managers to have a good command of human resource management
concepts and techniques?
1-22. Think of some companies that you are familiar with or that you’ve read about
where you think the human resource managers have been successful in “add-
ing value.” What do the HR managers do to lead you to your conclusion?
1-23. MyManagementLab Only—comprehensive writing assignment for this
chapter.

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Human Resources Management.

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