8 Managing Human Resources and Labor Relations

Introduction

A display shows a mannequin dressed in a business suit, holding a designer bag, with a second designer bag on a pedestal beside it. On the wall behind the mannequin are dozens of security cameras pointed at it, and the bags.
Exhibit 8.1 (Credit: Ludovic Bertron /flickr / Attribution 2.0 Generic (CC BY 2.0))

Learning Objectives

After reading this chapter, you should be able to answer these questions:

  1. What is the human resource management process, and how are human resource needs determined?
  2. How do firms recruit applicants?
  3. How do firms select qualified applicants?
  4. What types of training and development do organizations offer their employees?
  5. How are performance appraisals used to evaluate employee performance?
  6. What are the types of compensation and methods for paying workers?
  7. What is a labor union and how is it organized, what is collective bargaining, and what are some of the key negotiation issues?
  8. How are grievances between management and labor resolved, and what tactics are used to force a contract settlement?
  9. What are the key laws and federal agencies affecting human resource management and labor relations?
  10. What trends and issues are affecting human resource management and labor relations?

Exploring Business Careers

Andrea Herran, Human Resources Consultant

In college, Andrea Herran studied business administration and minored in psychology. Always interested in a business career, she initially took psychology simply because it was interesting. Little did she know how applicable that minor would become. As a human resources (HR) consultant, she often benefits from her psychology background. “Studying human behavior really gave me the background necessary to put myself in the position of others, to see things from their point of view, which has definitely been helpful in my career in human resources.”

Herran started out as an administrative assistant in the HR department of a hotel, and her career has run the gamut of human resources over the 25 years since she graduated from college. She has been an employment coordinator, focusing on employee recruitment and selection, and a personnel manager, where she learned the skills necessary to maintain and evaluate employees. As a training manager, she sharpened her talent for developing, coordinating, and even administering staff training. Eventually, she became the director of human resources for companies both in the United States and abroad. Indeed, beyond the United States, she has worked in Mexico, Argentina, and South Africa.

Andrea worked her way up in the corporate world, but entrepreneurship was more consistent with her desire for a fast-paced, changing environment, both in terms of what she does and who she works with, so she made the move to consulting. “Consulting allows me to draw upon all my human resources skills. I have opened five HR departments in my career, so I bring my full experience to bear on the challenges each company has.”

Today, Andrea’s passion is working with small businesses, entrepreneurs, managers, and owners as an advisor to “uncomplicate the people side of your business.” As the principal of Focus HR Consulting, she advises firms how to set up human resource programs and ensure legal compliance. She also provides leadership coaching and training and mentors employees. She has worked in several industries, including hospitality (hotels and restaurants), advertising, professional services, logistics, technology, and manufacturing.

When Andrea was hired by Aquion Water Treatment Products, she was tasked with updating the company’s HR policies and procedures. The company’s performance reviews were very task-oriented versus behavior-oriented. Instead of determining whether a task was completed, behavior-oriented reviews seek to evaluate not only whether the person completed the task but also how they did so, especially examining the interactions involved in the task. Is an employee punctual at returning consumer request calls? How do they relate to customers? As a manager, do they express thoughts clearly? “By evaluating specific behaviors, you create an environment with clearly set qualifications for advancement and opportunities for targeted employee development. Without this, the human aspect of human resources can be overlooked.”

Andrea has never looked back on her choice to become an entrepreneur, and she believes her varied employment history was a key to her success. “Anyone interested in this field should experience as many possibilities within human resources as possible. You leave school with the theory, but only through experience do you really get to see what the potential of such a career is.”

Sources: “About Us,” http://focushr.biz, accessed February 8, 2018; “Member Spotlight: Andrea Herran,” http://www.centerforguiltfreesuccess.com, accessed February 8, 2018; Insureon blog, “5 HR Pros Reveal the Secret to Hiring the Right Employees the First Time,” http://www.insureon.com, June 3, 2016.

This chapter looks at the role of human resources within an organization, from the general processes of developing and planning to the more specific tasks of employee evaluation and compensation.

Human resource management and labor relations involve acquisition, development, use, and maintenance of a human resource mix (people and positions) to achieve strategic organizational goals and objectives. Successful human resource management is based on a company’s ability to attract and hire the best employees, equip them with the knowledge and skills they need to excel, compensate them fairly, and motivate them to reach their full potential and perform at high levels. Today’s business environment presents numerous challenges to effectively managing employees:

  • Technology continues to advance, which places great importance on knowledge workers, especially when demand outstrips the supply of high-talent individuals.
  • Global business operations involve rapid data transfer and necessitate accelerated decision-making by executive and technical employees.
  • The workforce is increasingly more diversified and multicultural, which places increased emphasis on communication and cultural understanding.
  • Work, life, and family priorities are more difficult to balance as dual-worker families populate the labor force.
  • Employment and labor laws continue to greatly influence employee recruitment and hiring, compensation decisions, and employee retention and turnover in both union and nonunion organizations.

Each day, human resource experts and front-line supervisors deal with these challenges while sharing responsibility for attracting and retaining skilled, motivated employees. Whether faced with a large or small human resources problem, supervisors need some understanding of difficult employee-relations issues, especially if there are legal implications.

In this chapter, you will learn about the elements of the human resource management process, including human resource planning and job analysis and design, employee recruitment and selection, training and development of employees, performance planning and evaluation, and compensation of the workforce. The chapter also describes labor unions and their representation of millions of American workers in construction, manufacturing, transportation, and service-based industries.

8.1 Achieving High Performance through Human Resources Management

Learning Objectives

What is the human resource management process, and how are human resource needs determined?

Human resource (HR) management is the process of hiring, developing, motivating, and evaluating employees to achieve organizational goals. The goals and strategies of the firm’s business model form the basis for making human resource management decisions. HR practices and systems comprise the firm’s human resource decision support system that is intended to make employees a key element for gaining competitive advantage. To this end, the HR management process contains the following sequenced activities:

  • Job analysis and design
  • Human resource planning and forecasting
  • Employee recruitment
  • Employee selection
  • Training and development
  • Performance planning and evaluation
  • Compensation and benefits

The human resource management process shown in Exhibit 8.3 encourages the development of high-performance employees. The process is sequential because employees can’t be trained and paid until they are selected and placed in jobs, which follows recruitment, which is preceded by human resource planning and job analysis and design. Good HR practices used along this sequence foster performance improvement, knowledge and skill development, and loyal employees who desire to remain with the organization.

Photo of a group of people in an open rm with tables set up.
Exhibit 8.2 A job fair, career fair or career expo, are events in which employers, recruiters, and schools give information to potential employees and job seekers attend hoping to make a good impression to potential employers. They also interact with potential coworkers by speaking face-to-face, exchanging résumés, and asking questions in attempt to get a good feel on the work needed. Likewise, online job fairs are held, giving job seekers another way to get in contact with probable employers using the internet. How do you plan on using events like this in seeking your job? How can utilize the courses that you are taking to illustrate your skills that you can discuss at job fairs. (Credit: Taavi Burns/ flickr/ Attribution 2.0 Generic (CC BY 2.0))

HR Planning and Job Analysis and Design

Two important, and somewhat parallel, aspects of the human resource management process are determining employee needs of the firm and the jobs to be filled. When Alcon Labs gained approval from the Food and Drug Administration for sales of a new contact lens disinfectant solution in its Opti-Free product line, it had to determine if additional sales representatives were needed and whether new sales positions with different knowledge and skill requirements should be established.1 Human resource planning at Alcon means having the right number of people, with the right training, in the right jobs, to meet its sales goals for the new product. Once the need for sales representatives is determined, human resource specialists assess the skills of the firm’s existing employees to see whether new people must be hired or current people can be trained. See Exhibit 8.3 for a representation of the human resource management process.

 
 
The chart starts with a box labeled strategies, goals, and market position. This flows into a box labeled job analysis and design slash h r planning and forecasting. This flows into employee recruitment. This flows into employee selection. This flows into training and development. This flows into performance planning and evaluation. This flows into compensation and benefits. This flows into h r outcomes. This flows into retention slash turnover, which is the last box.
Exhibit 8.3 Human Resource Management Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Human resource planners must know what skills different jobs require. Information about a specific job typically begins with a job analysis, which is a study of the tasks required to do a job well. This information is used to specify the essential skills, knowledge, and abilities required for the job. When Hubert Joly started as the CEO at Best Buy, the retailer was facing serious financial pressures. The threat of online competition from Amazon was real. Joly was also facing a staffing issue with a lot of turnover. He and his team instituted a plan to keep and promote staff as a core competency that would differentiate Best Buy from online retailers.2 Also, a key HR responsibility is that jobs are examined to make any changes in job duty and task responsibilities. The tasks and responsibilities of a job are listed in a job description. The skills, knowledge, and abilities a person must have to fill a job are spelled out in a job specification. These two documents help human resource planners find the right people for specific jobs. A sample job description and specification is shown in Table 8.1.

HR Planning and Forecasting

Forecasting an organization’s human resource needs, known as an HR demand forecast, is an essential aspect of HR planning. This process involves two forecasts: (1) determining the number of people needed by some future time (in one year, for example) and (2) estimating the number of people currently employed by the organization who will be available to fill various jobs at some future time; this is an internal supply forecast.

Job Description and Specification
Position: College Recruiter Reports to: Vice President of Human Location: Corporate Offices Resources Classification: Salaried/Exempt
Job Summary:
Member of HR corporate team. Interacts with managers and department heads to determine hiring needs for college graduates. Visits 20 to 30 college and university campuses each year to conduct preliminary interviews of graduating students in all academic disciplines. Following initial interviews, works with corporate staffing specialists to determine persons who will be interviewed a second time. Makes recommendations to hiring managers concerning best-qualified applicants.
Job Duties and Responsibilities:
Estimated time spent and importance:
15% Working with managers and department heads, determines college recruiting needs.
10% Determines colleges and universities with degree programs appropriate to hiring needs to be visited.
15% Performs college relations activities with numerous colleges and universities.
25% Visits campuses to conduct interviews of graduating seniors.
15% Develops applicant files and performs initial applicant evaluations.
10% Assists staffing specialists and line managers in determining who to schedule for second interviews.
5% Prepares annual college recruiting report containing information and data about campuses, number interviewed, number hired, and related information.
5% Participates in tracking college graduates who are hired to aid in determining campuses that provide the most outstanding employees.
Job Specification (Qualifications):
Bachelor’s degree in human resource management or a related field. Minimum of two years of work experience in HR or department that annually hires college graduates. Ability to perform in a team environment, especially with line managers and department heads. Very effective oral and written communication skills. Reasonably proficient in Excel, Word, and Windows computer environment and familiar with PeopleSoft software.
Table 8.1

The Advancement Planning process at Best Buy involved reducing the turnover that occurs in most retail environments. The company has achieved a second-place ranking, behind only Costco, and its general managers’ tenure at a store averages five years. The performance of managers at Best Buy is reviewed to identify people who can fill vacancies and be promoted, a process known as succession planning.3 If Best Buy has a temporary shortage of sales professionals, at the holiday shopping season, for example, they can hire an experienced contractor or interim executive as a temporary or contingent worker, someone who wants to work but not on a permanent, continuous basis. Exhibit 8.4 summarizes the process of planning and forecasting an organization’s personnel needs.

 
The chart starts with corporate strategy and policy, and flows into human resource objective and policies. This flows into 2 separate boxes, one labeled human resource demand forecast, and the other labeled internal supply forecast. The chart says to make a comparison between these two forecasts. From this comparison, the process flows into a box labeled, differences. A note reads, if no difference, requirement equals supply. From differences, the process flows into two separate boxes, one labeled human resource surplus, and the other labeled human resource shortage. From human resource surplus, the process flows into a box labeled, take action. 1, reassign. 2 lay off. 3 terminate. 4, retire. From human resource shortage, the process flows into a box labeled, take action. 1, hire. 2, pay overtime. 3, subcontract. From the take action boxes, the process flows back up into the human resource objective and policies box.
Exhibit 8.4 Human Resource Planning Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Concept Check

  1. Define human resource management.
  2. Distinguish between job analysis, job description, and job specification.
  3. Describe the human resource management process.

8.2 Employee Recruitment

Learning Objectives

How do firms recruit applicants?

When a firm creates a new position or an existing one becomes vacant, the firm starts looking for people with qualifications that meet the requirements of the job. Two sources of job applicants are the internal and external labor markets. The internal labor market consists of employees currently employed by the firm; the external labor market is the pool of potential applicants outside the firm.

 
 
A photograph shows Bill Gates' LinkedIn profile page.
Exhibit 8.5 Online recruiting is among the top internet success stories of the past decade. LinkedIn, Monster, and CareerBuilder are hot spots for job hunters and recruiters seeking to establish a working relationship. What are the advantages and disadvantages of online recruiting compared to traditional forms of recruitment? (Credit: Bill Gates LinkedIn Profile screen capture, 3/23/2018)

Internal Labor Market

Internal recruitment can be greatly facilitated by using a human resource information system that contains an employee database with information about each employee’s previous work experience, skills, education and certifications, job and career preferences, performance, and attendance. Promotions and job transfers are the most common results of internal recruiting. BNSF Railway, Walmart, Boeing, Ritz-Carlton Hotels, and most other firms, large and small, promote from within and manage the upward mobility of their employees.

External Labor Market

The external labor market consists of prospects to fill positions that cannot be filled from within the organization. Recruitment is the process of attracting qualified people to form an applicant pool. Numerous methods are used to attract applicants, including print, radio, web, and television advertising. Hospitality and entertainment firms, such as Ritz-Carlton Hotels and Six Flags, frequently use job fairs to attract applicants. A job fair, or corporate open house, is usually a one- or two-day event at which applicants are briefed about job opportunities, given tours, and encouraged to apply for jobs. For firms needing accountants, engineers, sales managers, and others for professional and scientific positions, college recruiting is very common. These firms (Deloitte, Cisco Systems, Salesforce.com, and thousands of others) schedule job fairs and on-campus interviews with graduating seniors.

Online Recruiting and Job Search

The internet, social media, and specialized software have completely changed the employee recruitment process. Dozens of companies such as Monster.com, Indeed, StartWire, and Glassdoor enable applicants to search for job openings, post their résumés, and apply for jobs that companies have posted. Most companies provide links to their company website and to the career page on their site so applicants can learn about the company culture, listen to or read testimonials from employees about what it is like to work for the company, and search for additional openings that may interest them.

Large firms may receive thousands of online applications per month. To review and evaluate thousands of online résumés and job applications, firms depend on software to scan and track applicant materials using key words to match skills or other requirements for a particular job. Social media has also changed how companies search for applicants and verify applicant information.

Managing Change

Social Networking and Employee Recruitment

Referrals and professional networking are commonly used methods of identifying job prospects, particularity for managerial, professional, and technical positions. Several software applications and social networks facilitate employee referrals, reference checking, and hiring based on networks of personal relationships. ExecuNet and ExecRank are just two of the many career sites that allow members to search for contacts and network with other professionals in their fields.

LinkedIn is the most popular social network for professionals. It is a giant database of contacts with profiles that provide an overview of a person’s past and present professional experience, skills, professional referrals, and affiliations with business and professional associations. A member can search through an extended network of contacts based on his or her professional acquaintances. The basis for a search can be job, job title, company, geography, zip code, or membership in a professional organization. LinkedIn uses the concept that there are no more than six degrees of separation between two people, or one person can be linked to any other individual through no more than six other people. With more than 530 million members worldwide, LinkedIn’s extensive platform is an ideal network for both recruiters and those looking to make their next career move.

LinkedIn, like other social networks, is based on voluntary participation, and members consent to being networked. Nevertheless, important questions can be raised regarding privacy concerns and use of one’s social network.

Critical Thinking Questions
  1. Social networks can easily generate a name for an HR recruiting target, but how can the hiring firm convert the target into a candidate who is interested in the job?
  2. A social network like LinkedIn is an excellent tool that can be used to build a personal brand and find a new job. In what ways could a job seeker potentially harm their career opportunities on a social networking site?

Sources: “About ExecuNet,” https://www.execunet.com, accessed February 8, 2018; “LinkedIn Statistics,” https://expandedramblings.com, accessed February 8, 2018; “Social Recruiting Tips,” https://www.betterteam.com, January 24, 2018; Susan M. Heathfield, “Use LinkedIn for Recruiting Employees,” The Balance, https://www.thebalance.com, April 7, 2017.

Recruitment Branding

Recruitment branding involves presenting an accurate and positive image of the firm to those being recruited. Carbone Smolan Agency (CSA) is a New York–based image consulting firm that assists in developing a recruitment branding strategy.4 The materials developed by CSA comprise a realistic job preview, which informs job candidates about organizational realities of the job and the firm so they can more accurately evaluate jobs and firm expectations concerning work assignments, performance standards, promotional opportunities, company culture, and many other characteristics of the job.

Concept Check

  1. What are the two sources of job applicants?
  2. What are some methods firms use to recruit applicants?
  3. What is meant by recruitment branding?

8.3 Employee Selection

Learning Objectives

How do firms select qualified applicants?

After a firm has attracted enough job applicants, employment specialists begin the selection process. Selection is the process of determining which people in the applicant pool possess the qualifications necessary to be successful on the job. The steps in the employee selection process are shown in Exhibit 8.6. An applicant who can jump over each step, or hurdle, will very likely receive a job offer; thus, this is known as the successive hurdles approach to applicant screening. Alternatively, an applicant can be rejected at any step or hurdle. Selection steps or hurdles are described below:

  1. Initial screening. During initial screening, an applicant completes an application form and/or submits a résumé, and has a brief interview of 30 minutes or less. The job application includes information about educational background, previous work experience, and job duties performed.

  2. Employment testing. Following initial screening, the applicant may be asked to take one or more tests, such as the Wonderlic Personnel Tests. Wonderlic offers a suite of pre-employment tests for each phase of the hiring process. Used individually or together, the tests can assess cognitive ability (ability to learn, adapt, and solve problems), motivation potential (attitude, behavior performance, and productivity), and knowledge and skills (math, verbal, data entry, software proficiency).5

    HR Senior Vice President Martha LaCroix of the Yankee Candle Company uses personality assessments to make sure that prospective employees will fit the firm’s culture. LaCroix was helped by Predictive Index (PI) Worldwide in determining Yankee Candle’s best- and worst-performing store managers for developing a best practice behavioral profile of a top-performing store manager.6 The profile was used for personality testing and to develop interview questions that reveal how an applicant may behave in certain work situations.

     
    A diagram shows the steps of the employee selection process as a staircase.
    Exhibit 8.6 Steps of the Employee Selection Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

  3. Selection interview. The tool most widely used in making hiring decisions is the selection interview, an in-depth discussion of an applicant’s work experience, skills and abilities, education, and career interests. For managerial and professional positions, an applicant may be interviewed by several persons, including the line manager for the position to be filled. This interview is designed to determine a person’s communication skills and motivation. During the interview, the applicant may be presented with realistic job situations, such as dealing with a disgruntled customer, and asked to describe how they would handle the problem. Carolyn Murray of W.L. Gore & Associates (maker of Gore-Tex, among other products) listens for casual remarks that may reveal the reality behind applicant answers to her questions. Using a baseball analogy, Murray gives examples of how three job candidates struck out with her questions. See Table 8.2.7

    Striking Out at the Interview Game
    The Pitch (Question to Applicant) The Swing (Applicant’s Response) The Miss (Interviewer’s Reaction to Response)
    “Give me an example of a time when you had a conflict with a team member.” “Our leader asked me to handle all of the FedExing for our team. I did it, but I thought that FedExing was a waste of my time.” “At Gore, we work from a team concept. Her answer shows that she won’t exactly jump when one of her teammates needs help.”
    “Tell me how you solved a problem that was impeding your project.” “One of the engineers on my team wasn’t pulling their weight, and we were closing in on a deadline. So I took on some of their work.” “The candidate may have resolved the issue for this particular deadline, but they did nothing to prevent the problem from happening again.”
    “What’s the one thing that you would change about your current position?” “My job as a salesman has become boring. Now I want the responsibility of managing people.” “He’s probably not maximizing his current territory, and he is complaining. Will he find his next role ‘boring’ and complain about that role, too?”
    Table 8.2

  4. Background and reference check. If applicants pass the selection interview, most firms examine their background and check their references. In recent years, an increasing number of employers, such as American Airlines, Disney, and Microsoft, are carefully researching applicants’ backgrounds, particularly their legal history, reasons for leaving previous jobs, and even creditworthiness.

  5. Physical exams and drug testing. A firm may require an applicant to have a medical checkup to ensure they are physically able to perform job tasks. Drug testing is common in the transportation and health care industries. Southwest Airlines, BNSF Railway, Texas Health Resources, and the U.S. Postal Service use drug testing for reasons of workplace safety, productivity, and employee health.

  6. Decision to hire. If an applicant progresses satisfactorily through all the selection steps (or jumps all of the selection hurdles), a decision to hire the person is made; however, the job offer may be contingent on passing a physical exam and/or drug test. The decision to hire is nearly always made by the manager of the new employee.

An important aspect of employee recruitment and selection involves treating job applicants as valued customers; in fact, some applicants may be customers of the firm.

Customer Satisfaction and Quality

Puttin’ on the Ritz—For Potential Employees

Your meeting with a human resource representative is often your first exposure to the company you are applying to work for, and firms must provide good customer service to applicants if they expect to hire the most qualified employees.

Companies have several opportunities to create a positive impression of their organization during these key points in the employee selection process. These include a variety of communication channels, such as:

  • In-person greetings at a job fair or at the interview itself
  • Phone calls to a prospective employee from a human resource professional to set up the interview and any follow-up conversations between human resources and the applicant
  • E-mail correspondence to acknowledge receipt of an application and to thank applicants for submitting their job application
  • A thank-you note from the employer following the second interview

A firm that is recognized for treating prospective employees especially well is Ritz-Carlton Hotels, a subsidiary of Marriott International. When the Washington D.C. Ritz-Carlton was recruiting employees to staff a new hotel, the goal was to provide applicants with a personal demonstration of the famous Ritz-Carlton service-oriented culture.

As applicants arrived, they experienced the Ritz-Carlton “warm welcome” from several employees who greeted them, wished them luck, and escorted them past a violinist and piano player to the waiting room, where beverages and snacks were available. Applicants went through a standardized screening questionnaire, and those who passed went on to a professionally developed structured interview. Individuals were then personally escorted to the “fond farewell,” where they were thanked, given Ritz-Carlton chocolates, and escorted out of the hotel. The goal of Ritz-Carlton managers is to give applicants the same experience they would expect to receive as a customer staying in the hotel. Every applicant receives a personal, formal thank-you note for coming to the job fair, and those who are considered for positions but later rejected receive another note. Ritz-Carlton wants to make a good impression because an applicant could be a future Ritz-Carlton hotel guest, or the son or daughter of a guest.

Ritz-Carlton continues to show exemplary service during the employee orientation process. Every employee must go through seven days of training before ever working in a Ritz-Carlton. Two full days of the orientation are indoctrination in the Ritz-Carlton values and philosophy. The goal is to create a significant emotional experience for new employees during their first few days. This happens the moment new employees arrive for training at 6:00 a.m. and see senior leaders lined up outside the doors of the hotel, clapping and cheering as they greet them. The message is clear: You are important and we will treat you exactly as we want you to treat customers.

The leadership team is involved in facilitating the program, sending a powerful message about the importance of consensual commitment. “For these next few days, we will orient you to who we are—our heart, our soul, our goals, our vision, our dreams—so you can join us, and not just work for us.”

Horst Schultz, former president and COO of the Ritz-Carlton, first implemented the motto “We Are Ladies and Gentlemen Serving Ladies and Gentlemen” in the mid-1980s, and the motto is still at the heart of the company’s values today. In an address to employees, Schultz said, “You are not servants. We are not servants. Our profession is service. We are Ladies and Gentlemen, just as the guests are, who we respect as Ladies and Gentlemen. We are Ladies and Gentlemen and should be respected as such.”

Critical Thinking Questions
  1. What are the benefits of an employer treating a job applicant like a customer? Are there costs associated with treating applicants poorly?
  2. What is the Ritz-Carlton motto? How does it teach both applicants and employees about the company’s values?

Sources: “Gold Standards,” http://www.ritzcarlton.com, accessed February 8, 2018; “Lifetime Learning Opportunities,” http://www.marriott.com, accessed February 8, 2018; Justin Hoffman, “Secrets of the Ritz-Carlton’s ‘Legendary’ Customer Service,” https://www.psafinancial.com, May 8, 2014; Sandra J. Sucher and Stacy McManus, “The Ritz-Carlton Hotel Company,” Harvard Business School Case #601-163, March 2001; revised September 2005.

Concept Check

  1. Describe the employee selection process.
  2. What are some of the ways that prospective employees are tested?

8.4 Employee Training and Development

Learning Objectives

What types of training and development do organizations offer their employees?

To ensure that both new and experienced employees have the knowledge and skills to perform their jobs successfully, organizations invest in training and development activities. Training and development involves learning situations in which the employee acquires additional knowledge or skills to increase job performance. Training objectives specify performance improvements, reductions in errors, job knowledge to be gained, and/or other positive organizational results. The process of creating and implementing training and development activities is shown in Exhibit 8.8. Training is done either on the job or off the job.

 
A photograph shows a large indoor area filled with airplanes, and machines and computers.
Exhibit 8.7 Here is the final assembly process on a Boeing 787-10 for Singapore Airlines. This plant is one of Airbus’s largest and most technologically advanced manufacturing facilities. How is technology helping companies develop skilled workers both on and off the job? (Credit: airbus777/Flickr/ Attribution 2.0 Generic (CC BY 2.0))

On-the-Job Training

New-employee training is essential and usually begins with orientation, which entails getting the new employee ready to perform on the job. Formal orientation (often a half-day classroom program) provides information about the company history, company values and expectations, policies, and the customers the company serves, as well as an overview of products and services. More important, however, is the specific job orientation by the new employee’s supervisor concerning work rules, equipment, and performance expectations. This second briefing tends to be more informal and may last for several days or even weeks.

The chart starts with a box labeled training needs and assessment. This flows into training objective. This flows into design training program. This flows into conduct training program. This flows into training program evaluation. From here, the process flows back to each of the previous processes, with a note at the conduct training step that reads, feedback for training improvement.
Exhibit 8.8 Employee Training and Development Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Beyond employee orientation, job training takes place at the job site or workstation and is directly related to the job. This training involves specific job instruction, coaching (guidance given to new employees by experienced ones), special project assignments, or job rotation. Job rotation is the reassignment of workers to several different jobs over time. At Walmart, management trainees rotate through three or more merchandizing departments, customer service, credit, and even the human resource department during the first year or two on the job.

Two other forms of on-the-job training are apprenticeship and mentoring. An apprenticeship usually combines specific on-the-job instruction with classroom training. It may last as long as four years and can be found in the skilled trades of carpentry, plumbing, and electrical work. Mentoring involves a senior manager or other experienced employee providing job- and career-related information to a mentee. Inexpensive and providing instantaneous feedback, mentoring is becoming increasingly popular with many firms, including FedEx, Merrill Lynch, Dow Chemical, and Bank of America. Whereas mentoring is typically conducted through ongoing face-to-face interactions between mentor and mentee, technology now allows for a long-distance mentoring relationship. Dow Chemical uses e-mail and video conferencing to facilitate long-distance mentoring between persons who are working in different countries. For a mentee whose second language is English, writing e-mail messages in English helps the individual become fluent in English, which is a requirement of all Dow Chemical employees regardless of location and country of origin.8

Expanding Around the Globe

Employees on the (International) Move

Working abroad at one of the thousands of American or foreign multinational firms can be exciting and look good on your résumé. But is an international job assignment a step up the ladder to a more rewarding career path or a potential minefield of professional and family risks? The answer depends as much on an employee’s family situation as his or her ambition and how well the company supports and handles a transfer to an international location.

International job experience is increasingly seen as an essential leadership competency; therefore, many companies have developed robust rotational programs designed to give individuals critical global experience. According to the BGRS 2016 Global Mobility Trends Survey, providing high levels of service to relocating employees and their families is a fundamental expectation.

Brookfield Global Relocation Services (BGRS) is a talent mobility and relocation services firm that manages more than 60,000 relocations in 140 countries each year for its corporate and government clients. With 15 offices around the world, the company’s staff (which speaks 40 languages) can tap into their network of 1,900 trusted suppliers to help employees and families acclimate to their new work and home environments.

Increasing numbers of recent college graduates and experienced professionals are offered opportunities for overseas work assignments ranging from a few days to 24 months or longer. But acclimating to a new country and culture, as well as a new work environment, can be daunting and involves some unique challenges.

Challenges expatriates face aside from the demands of work include:

  • Choosing schools for children
  • Securing housing
  • Finding medical facilities
  • Opening bank accounts
  • Finding transportation and obtaining a driver’s license
  • Completing government forms
  • Locating food stores
  • Learning about community and entertainment offerings

With 189,000 worldwide staff and partners, KPMG International is one of the world’s largest professional services and accounting firms, with a presence in 152 countries. Through programs like the KPMG Global Opportunities (GO) program, the professionals at KPMG can explore job rotation assignments, transfer to a new location, or change to a new job function or group. The company’s Career Mobility Connection tool allows employees to evaluate opportunities based on their interests and to seek guidance from a transition advisor on potential career opportunities.

KPMG has developed several programs and standards to guide employees and establish consistency, whether they work in the United States or abroad. One of the most important is the KPMG Code of Conduct, which defines the values and standards by which KPMG conducts business and is intended to help guide actions and behaviors of its global workforce.

Every year, all KPMG employees and partners are required to affirm their agreement to comply with the Code of Conduct. In addition, all partners and employees are required to complete mandatory training that reinforces the principles of the Code and further builds understanding of the firm’s expectations.

Critical Thinking Questions
  1. How is KPMG’s Global Code of Conduct intended to influence and guide the personal values and behaviors of its employees and partners?
  2. Why must the Code of Conduct be affirmed by employees and partners every year? Why does KPMG include their partners in this program?
  3. What are the top four or five job qualifications an employee should have to be considered for an overseas assignment?

Sources: Corrine Purtill, “Expat Couples Do Best When They’ve Moved for the Woman’s Job,” Quartz at Work, December 6, 2017; https://work.qz.com/1134685/expat-couples-do-best-when-theyve-moved-for-the-womans-job/; Donald Murray, “The 7 Greatest Challenges of Moving Overseas and How to Resolve Them,” International Living, March 15, 2018, https://internationalliving.com/the-7-greatest-challenges-of-moving-overseas-and-how-to-resolve-them/; “KPMG’s Code of Conduct,” Accessed March 15, 2018, https://home.kpmg.com/us/en/home/about/kpmgs-code-of-conduct.html.

Off-the-Job Training

Even with the advantages of on-the-job training, many firms recognize that it is often necessary to train employees away from the workplace. With off-the-job training, employees learn the job away from the job. There are numerous popular methods of off-the-job training. It frequently takes place in a classroom, where cases, role-play exercises, films, videos, lectures, and computer demonstrations are used to develop workplace skills.

Web-based technology is increasingly being used along with more traditional off-the-job training methods. E-learning and e-training involve online computer presentation of information for learning new job tasks. Union Pacific Railroad has tens of thousands of its employees widely dispersed across much of the United States, so it delivers training materials online to save time and travel costs. Technical and safety training at Union Pacific are made available as programmed instruction, an online, self-paced, and highly structured training method that presents trainees with concepts and problems using a modular format. Software provided can make sure that employees receive, undergo, and complete, as well as sign off on, various training modules.9

Web-based training can also be done using a simulation, for example, a scaled-down version of a manufacturing process or even a mock cockpit of a jet airplane. American Airlines uses a training simulator for pilots to practice hazardous flight maneuvers or learn the controls of a new aircraft in a safe, controlled environment with no passengers. The simulator allows for more direct transfer of learning to the job.

Concept Check

  1. Describe several types of on-the-job training.
  2. What are the advantages of simulation training?
  3. How is technology impacting off-the-job training?

8.5 Performance Planning and Evaluation

Learning Objectives

How are performance appraisals used to evaluate employee performance?

Along with employee orientation and training, new employees learn about performance expectations through performance planning and evaluation. Managers provide employees with expectations about the job. These are communicated as job objectives, schedules, deadlines, and product and/or service quality requirements. As an employee performs job tasks, the supervisor periodically evaluates the employee’s efforts. A performance appraisal is a comparison of actual performance with expected performance to determine an employee’s contributions to the organization and to make decisions about training, compensation, promotion, and other job changes. The performance planning and appraisal process is shown in Exhibit 8.9 and described below.

  1. The manager establishes performance standards.
  2. The employee works to meet the standards and expectations.
  3. The employee’s supervisor evaluates the employee’s work in terms of quality and quantity of output and various characteristics such as job knowledge, initiative, relationships with others, and attendance and punctuality.
  4. Following the performance evaluation, reward (pay raise) and job change (promotion) decisions can be made. If work is unsatisfactory, the employee may be put on a performance improvement plan, which outlines the behaviors or performance that must be improved, the milestones and time periods to improve performance, and what will occur if performance is not improved.
  5. Rewards are positive feedback and provide reinforcement, or encouragement, for the employee to continue improving their performance.

It was once common practice for performance approvals to be conducted on an annual basis, but most companies have moved away from that standard. Instead, managers are encouraged to provide employees with continuous real-time feedback so that skill development and job performance can be improved more rapidly.

Information for performance appraisals can be assembled using rating scales, supervisor logs of employee job incidents, and reports of sales and production statistics. Regardless of the source, performance information should be accurate and a record of the employee’s job behavior and efforts. Table 8.3 illustrates a rating scale for one aspect of a college recruiter’s job. A rating of “9” is considered outstanding job behavior and performance; a rating of “1” is viewed as very poor to unacceptable.

The chart starts with a box labeled performance planning; setting standards and expectations. This flows into employee job task behavior. This flows into performance evaluation. This flows into rewards and job changes. From here, the process flows back to employee job task behavior, and is labeled performance feedback.
Exhibit 8.9 Performance Planning and Evaluation
Example of Behavior-Based Rating Scale for Performance Appraisal
Position: College Recruiter
Job Description: Visits campuses and conducts interviews of graduating seniors
Explanation of Rating Performance Rating Explanation of Rating
This recruiter plans and organizes spring-semester college-recruiting schedule to minimize travel expenses and maximize the number of colleges visited and students interviewed. 9
8 Even with tight travel schedules between campuses, this recruiter completes each campus report before arrival at next campus.
7 In making plans to visit a new campus, this recruiter might not have identified two or three faculty members for obtaining pre-visit information about degree programs.
6
This recruiter occasionally does not check with the college placement office to request student résumés two days before arrival. 5
4 Sometimes this recruiter’s notes are incomplete concerning a student’s response to interview questions.
3 This recruiter is often several minutes late in starting interviews.
This recruiter is frequently late in sending thank-you letters to students interviewed. 2
1 This recruiter is always late completing campus-recruiting reports.
Table 8.3

Concept Check

  1. What are the steps in the performance planning and appraisal process?
  2. What purposes do performance appraisals serve?
  3. Describe some sources of information for the performance appraisal.

8.6 Employee Compensation and Benefits

Learning Objectives

What are the types of compensation and methods for paying workers?

Compensation, which includes both pay and benefits, is closely connected to performance appraisals. Employees who perform better tend to get bigger pay raises. Several factors affect an employee’s pay:

  1. Pay structure and internal influences. Wages, salaries, and benefits are based on skills, experience, and the level of the job. The most important high-level positions, such as president, chief information officer, and chief financial officer, are compensated at the highest rates. Likewise, different jobs of equal importance to the firm are compensated at similar rates. As the level of management responsibility increases, so does pay. For instance, if a drill-press operator and a lathe operator are considered of equal importance, they may both be paid $21 per hour.
  2. Pay level and external influences. In deciding how much to pay workers, the firm must also be concerned with the salaries paid by competitors. If competitors are paying higher wages, a firm may lose its best employees. HR professionals regularly evaluate salaries by geography, job position, and competitor and market wages. Wage and salary surveys conducted by the U.S. Chamber of Commerce and the U.S. Department of Labor can also be useful. There are also several websites such as Glassdoor that post salaries for jobs by company.

An employer can decide to pay at, above, or below the going rate. Most firms try to offer competitive wages and salaries within a geographic area or an industry. If a company pays below-market wages, it may not be able to hire skilled people. The level of a firm’s compensation is determined by the firm’s financial condition (or profitability), efficiency, and employee productivity, as well as the going rates paid by competitors. For example, MillerCoors Brewing Co. is considered a high-paying firm ($29–$33 per hour for production employees).10

Types of Compensation or Pay

There are two basic types of compensation: direct and indirect. Direct pay is the wage or salary received by the employee; indirect pay consists of various employee benefits and services. Employees are usually paid directly on the basis of the amount of time they work, the amount they produce, the type of work performed, or some combination of skill, time, and output. An hourly rate of pay or a monthly salary is considered base pay, or an amount of pay received by the employee regardless of output level. In many jobs, such as sales and manufacturing, an employee can earn additional pay as a result of a commission or an incentive pay arrangement. The accelerated commission schedule for a salesperson shown below indicates that as sales increase, the incentive becomes increasingly more attractive and rewarding; therefore, pay can function as a powerful motivator. In this example, a salesperson receives a base monthly salary of $1,000, then earns 3 percent on the first $50,000 of product sold, 4 percent on the next $30,000, and 5 percent on any sales beyond $80,000.

 
Base pay $1,000 per month
3% of 50,000 1,500
4% of 30,000 1,200
5% of 20,000 1,000
$4,700

Two other incentive pay arrangements are bonuses and profit-sharing. Employees may be paid bonuses for reaching certain monthly or annual performance goals or achieving a specific cost-saving objective. In this instance, employees are rewarded based on achieving certain goals.

In a profit-sharing plan, employees may receive some portion of the firm’s profit. Employee profit shares are usually based on annual company financial performance and therefore are paid once a year. With either a bonus or a profit share, an important incentive pay consideration is whether the bonus or profit share is the same for all employees or whether it is differentiated by level in the organization, base pay, or some other criterion. Choice Homes, a large-scale builder of starter homes, pays an annual incentive share that is the same for everyone; the president receives the same profit share or bonus as the lowest-paid employee.

Indirect pay includes pensions, health insurance, vacation time, and many others. Some forms of indirect pay are required by law: unemployment compensation, worker’s compensation, and Social Security, which are all paid in part by employers. Unemployment compensation provides former employees with money for a certain period while they are unemployed. To be eligible, the employee must have worked a minimum number of weeks, be without a job, and be willing to accept a suitable position offered by the state Unemployment Compensation Commission. Some state laws permit payments to strikers. Worker’s compensation pays employees for lost work time caused by work-related injuries and may also cover rehabilitation after a serious injury. Social Security is mainly a government pension plan, but it also provides disability and survivor benefits and benefits for people undergoing kidney dialysis and transplants. Medicare (health care for seniors) and Medicaid (health care for the poor) are also part of Social Security.

Many employers also offer benefits not required by law. Among these are paid time off (vacations, holidays, sick days, even pay for jury duty), health insurance (including dental and vision), supplemental benefits (disability, life, pet insurance, legal benefits), 401K contributions, pensions and retirement savings accounts, and stock purchase options.

Some firms with numerous benefits allow employees to mix and match benefit items or select items based on individual needs. A younger employee with a family may desire to purchase medical, disability, and life insurance, whereas an older employee may want to put more benefit dollars into a retirement savings plan. Pay and benefits are obviously important elements of human resource management and are frequently studied as aspects of employee job satisfaction. Pay can be perceived as very satisfactory, or it can be a point of job dissatisfaction. In a study of job satisfaction conducted by SAP, direct compensation was the most important element of job satisfaction by employees from various companies.11 As the cost of health insurance and other benefits has risen sharply over the past few years, benefits have become increasingly important to workers.

Catching the Entrepreneurial Spirit

Starbucks Perks More Than Coffee

At Starbucks, CEO Howard Schultz understood that the single most important aspect of creating an enduring brand is its people. Schultz wanted to set Starbucks apart from other coffee shops and service businesses, and he did this by offering health benefits and stock ownership for people who work part-time. It had never been done before, and it came with a cost.

In addition to employee benefits, funding to build the brand was funneled into operations to create an experience that would enable the brand to endure and be sold profitably for many years to come. So instead of expensive marketing and advertising campaigns, the company focused on experiential marketing.

Scott Bedbury, the president of marketing of Starbucks at the time, explains, “The stores were once four white walls. There was no comfortable furniture or fireplaces or music. So we set out to create an experience in the stores and a level of brand equity that most traditionally marketed brands couldn’t touch. That meant constant creative development of products, and the look and feel in the stores. It wasn’t cheap. The first year, we spent $100 million building out stores, which is a significant marketing budget for anyone.”

But the defining moment for the brand was the stock option and employee benefit plan. This laid the foundation for the company’s internal brand, and was Schultz’s mission from the very beginning, explains Bedbury: “When Howard took over the company, he was not a rich man and he didn’t own a house or even a car. Howard grew up poor in Brooklyn and was influenced strongly by his dad, who never got health benefits from any of his employers. This fueled Howard’s drive to create a company that put employees first. He is passionate that when it comes to customers versus employees, employees will always come first.”

But it wasn’t easy, and it took a lot of courage to present this idea to investors. Bedbury said, “When Howard tried to raise $2.8 million to buy the company from the three founders, he made 220 presentations and he got shut down in all but 12 of them. He was seen as an idealist who was going to put an unnecessary burden on the bottom line by offering benefits to part-time employees who viewed this as a temporary job. But Howard convinced them that turnover would drop, which it did. Store manager attrition was 15 percent, part-time hourly employees was 65 percent, compared to McDonalds and Taco Bell, which were about 200–300 percent a year. That’s turning over your work force every four months, and when you do that, your service suffers and there are all kinds of problems. I don’t know why more people don’t do it. If you give up some equity to employees, they’ll reward you for that.”

Critical Thinking Questions
  1. How can a company like Starbucks sustain its strong employee culture while continuing to grow rapidly?
  2. Can a firm give its employees too much in terms of benefits and services? Explain.

Sources: Blog, MarketSmarter, http://www.marketsmarter.com/blog, accessed March 12, 2018; Carmine Gallo, “How Starbucks CEO Howard Schultz Inspired Us to Dream Bigger,” Forbes, https://www.forbes.com, December 2, 2016; Tanza Loudenback, “The Story Behind the Rise of Starbucks’ Howard Shultz, Who Just Gave a Raise to Every US Employee of His $82 Billion Coffee Company,” Business Insider, http://www.businessinsider.com, July 11, 2016; Monique Reece, Real-Time Marketing for Business Growth (Upper Saddle River, NJ: FT Press/Pearson, 2010).

Concept Check

  1. How does a firm establish a pay scale for its employees?
  2. What is the difference between direct and indirect pay?
  3. Why are health insurance and benefits so important to employees?

8.7 The Labor Relations Process

Learning Objectives

What is a labor union and how is it organized, what is collective bargaining, and what are some of the key negotiation issues?

Tens of thousands of American firms are unionized, and millions of U.S. workers belong to unions. Historically, the mining, manufacturing, construction, and transportation industries have been significantly unionized, but in recent years, service-based firms, including health care organizations, have been unionized.

A labor union, such as the International Brotherhood of Teamsters, is an organization that represents workers in dealing with management over disputes involving wages, hours, and working conditions. The labor relations process that produces a union-management relationship consists of three phases: union organizing, negotiating a labor agreement, and administering the agreement. In phase one, a group of employees within a firm may form a union on their own, or an established union (United Auto Workers, for example) may target an employer and organize many of the firm’s workers into a local labor union. The second phase constitutes collective bargaining, which is the process of negotiating a labor agreement that provides for compensation and working arrangements mutually acceptable to the union and to management. Finally, the third phase of the labor relations process involves the daily administering of the labor agreement. This is done primarily through handling worker grievances and other workforce management problems that require interaction between managers and labor union officials.

The Modern Labor Movement

The basic structure of the modern labor movement consists of three parts: local unions, national and international unions, and union federations. There are approximately 60,000 local unions, 75 national and international unions, and two federations. Union membership has been declining over the past three decades and is now half what it once was. The number of employed union members has declined by 2.9 million since 1983, the first year union statistics were reported. In 1983, union membership was 20.1 percent of workers, with 17.7 million union workers. In 2017, membership declined to 10.7 percent of workers, with 14.8 million members.12

A local union is a branch or unit of a national union that represents workers at a specific plant or over a specific geographic area. Local 276 of the United Auto Workers represents assembly employees at the General Motors plant in Arlington, Texas. A local union (in conformance with its national union rules) determines the number of local union officers, procedures for electing officers, the schedule of local meetings, financial arrangements with the national organization, and the local’s role in negotiating labor agreements.

The three main functions of the local union are collective bargaining, worker relations and membership services, and community and political activities. Collective bargaining takes place every three or four years. Local union officers and shop stewards in the plant oversee labor relations on a day-to-day basis. A shop steward is an elected union official who represents union members to management when workers have complaints. For most union members, his or her primary contact with the union is through union officials at the local level.

A national union can range in size from a few thousand members (Screen Actors Guild) to more than a million members (Teamsters). A national union may have a few to as many as several hundred local unions. The number of national unions has steadily declined since the early twentieth century. Much of this decline has resulted from union mergers. In 1999, for example, the United Papermakers International Union (UPICU) and the Oil, Chemical and Atomic Workers Union (OCAW) agreed to merge under the new name of PACE, or Paper, Allied-Industrial, Chemical and Energy International Union. PACE has about 245,000 members.

For 50 years, one union federation (the American Federation of Labor-Congress of Industrial Organization, or AFL-CIO) dominated the American labor movement. A federation is a collection of unions banded together to further organizing, public relations, political, and other mutually-agreed-upon purposes of the member unions. In the summer of 2005, several unions (Teamsters, Service Employees International Union, Laborers’ International Union, United Farm Workers, Carpenters and Joiners, Unite Here, and the United Food and Commercial Workers Union) split from the AFL-CIO and formed a new federation named the Change to Win Coalition.13 The new federation and its member unions represent more than 5.5 million union members. Change to Win Coalition member unions left the AFL-CIO over leadership disagreements and ineffective organizing strategies of the AFL-CIO; one of its primary goals is to strengthen union-organizing drives and reverse the decline in union membership.14

Union Organizing

A nonunion employer becomes unionized through an organizing campaign. The campaign is started either from within, by unhappy employees, or from outside, by a union that has picked the employer for an organizing drive. Once workers and the union have made contact, a union organizer tries to convince all the workers to sign authorization cards. These cards prove the worker’s interest in having the union represent them. In most cases, employers resist this card-signing campaign by speaking out against unions in letters, posters, and employee assemblies. However, it is illegal for employers to interfere directly with the card-signing campaign or to coerce employees into not joining the union.

Once the union gets signed authorization cards from at least 30 percent of the employees, it can ask National Labor Relations Board (NLRB) for a union certification election. This election, by secret ballot, determines whether the workers want to be represented by the union. The NLRB posts an election notice and defines the bargaining unit—employees who are eligible to vote and who will be represented by the particular union if it is certified. Supervisors and managers cannot vote. The union and the employer then engage in a pre-election campaign conducted through speeches, memos, and meetings. Both try to convince workers to vote in their favor. Table 8.4 lists benefits usually emphasized by the union during a campaign and common arguments employers make to convince employees a union is unnecessary.

The election itself is conducted by the NLRB. If a majority vote for the union, the NLRB certifies the union as the exclusive bargaining agent for all employees who had been designated as eligible voters. The employer then has to bargain with the union over wages, hours, and other terms of employment. The complete organizing process is summarized in Exhibit 8.10.

In some situations, after one year, if the union and employer don’t reach an agreement, the workers petition for a decertification election, which is similar to the certification election but allows workers to vote out the union. Decertification elections are also held when workers become dissatisfied with a union that has represented them for a longer time. In recent years, the number of decertification elections has increased to several hundred per year.

Benefits Stressed by Unions in Organizing Campaigns and Common Arguments Against Unions
Almost Always Stressed Often Stressed Seldom Stressed
Grievance procedures More influence in decision-making Higher-quality products
Job security Better working conditions Technical training
Improved benefits Lobbying opportunities More job satisfaction
Higher pay Increased production
Employer Arguments Against Unionization:

  • An employee can always come directly to management with a problem; a third party (the union) isn’t necessary.
  • As a union member, you will pay monthly union dues of $15 to $40.
  • Merit-based decisions (promotions) are better than seniority-based decisions.
  • Pay and benefits are very similar to the leading firms in the industry.
  • We meet all health and safety standards of the Federal Occupational Safety and Health Administration.
  • Performance and productivity are more important than union representation in determining pay raises.
Table 8.4
The steps are numbered 1 through 7. 1, union contact with employees. 2, authorization card campaign. 3, petition for certification election. 4, N L R B determination of bargaining unit. 5, employer and union pre election campaigns. 6, election. 7 a, certification of union and start of collective bargaining. 7 b, rejection of union.
Exhibit 8.10 Union Organizing Process and Election (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Negotiating Union Contracts through Collective Bargaining

A labor agreement, or union contract, is created through collective bargaining. Typically, both management and union negotiation teams are made up of a few people. One person on each side is the chief spokesperson. Bargaining begins with union and management negotiators setting a list of contract issues that will be discussed. Much of the bargaining over specific details takes place through face-to-face meetings and the exchange of written proposals. Demands, proposals, and counterproposals are exchanged during several rounds of bargaining. The resulting contract must be approved by top management and ratified by the union members. Once both sides approve, the contract is a legally binding agreement that typically covers such issues as union security, management rights, wages, benefits, and job security. The collective bargaining process is shown in Exhibit 8.11. We will now explore some of the bargaining issues.

The chart starts with two separate boxes, one labeled employer bargaining preparation, and the other label reads union bargaining preparation. These both flow into a box labeled exchange of initial demands and proposals. This flows into bargaining agenda. This flows into bargaining compromise, concession, and tentative agreement. This branches in two directions. In one direction, it branches to top management approval. This is the end of this branch. In the other direction, it flows into vote of union members. This then flows into 2 directions. In one direction, it branches to ratification, which is the end of this branch. In the other direction, it flows into rejection and strike, which then flows into resumption of bargaining. This is the end of the flow chart.
Exhibit 8.11 The Process of Negotiating Labor Agreements (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Union Security

A union wants all employees to be union members. This can be accomplished by negotiating a union security clause. The most common union security arrangement is the union shop, whereby nonunion workers can be hired by the firm, but then they must join the union, normally within 30 to 60 days. An agency shop does not require employees to join the union, but to remain employees, workers must pay the union a fee (known as the agency fee) to cover the union’s expenses in representing them. The union must fairly represent all workers, including those in the bargaining unit who do not become members.

Under the Taft-Hartley Act of 1947, a state can make any and all forms of union security illegal by enacting a right-to-work law. In the 28 states that have these laws, employees can work at a unionized company without having to join the union. This arrangement is commonly known as an open shop. Workers don’t have to join the union or pay dues or fees to the union.

Management Rights

When a company becomes unionized, management loses some of its decision-making abilities. But management still has certain rights that can be negotiated in collective bargaining. One way to resist union involvement in management matters is to put a management rights clause in the labor agreement. Most union contracts have one. A typical clause gives the employer all rights to manage the business except as specified in the contract. For instance, if the contract does not specify the criteria for promotions, with a management rights clause, managers will have the right to use any criteria they wish. Another way to preserve management rights is to list areas that are not subject to collective bargaining. This list might secure management’s right to schedule work hours; hire and fire workers; set production standards; determine the number of supervisors in each department; and promote, demote, and transfer workers.

Wage and Benefits

Much bargaining effort focuses on wage adjustments and changes in benefits. Once agreed to, they remain in effect for the length of the contract. For example, in 2015, the United Auto Workers negotiated a four-year contract containing modest hourly wage increases with U.S. car manufacturers; pay hikes were about 3 percent for first and third years and 4 percent in year four.15 Hourly rates of pay can also increase under some agreements when the cost of living increases above a certain level each year, say 4 percent. No cost-of-living adjustment is made when annual living cost increases are under 4 percent, which has been the case for the early years of the twenty-first century.

In addition to requests for wage increases, unions usually want better benefits. In some industries, such as steel and auto manufacturing, benefits are 40 percent of the total cost of compensation. Benefits may include higher wages for overtime work, holiday work, and less desirable shifts; insurance programs (life, health and hospitalization, dental care); payment for certain nonwork time (rest periods, vacations, holiday, sick time); pensions; and income-maintenance plans. Supplementary unemployment benefits (income-maintenance) found in the auto industry are provided by the employer and are in addition to state unemployment compensation given to laid-off workers. The unemployment compensation from the state and supplementary unemployment pay from the employer together maintain as much as 80 percent of an employee’s normal pay.

Job Security and Seniority

Wage adjustments, cost-of-living increases, supplementary unemployment pay, and certain other benefits give employees under union contracts some financial security. But most financial security is directly related to job security—the assurance, to some degree, that workers will keep their jobs. Of course, job security depends primarily on the continued success and financial well-being of the company. For example, thousands of airline employees lost their jobs after the 9/11 terrorist attack in 2001; these were employees with the least seniority.

Seniority, the length of an employee’s continuous service with a firm, is discussed in about 90 percent of all labor contracts. Seniority is a factor in job security; usually, unions want the workers with the most seniority to have the most job security.

Concept Check

  1. Discuss the modern labor movement.
  2. What are the various topics that may be covered during collective bargaining?
  3. Explain the differences among a union shop, agency shop, and an open shop.

8.8 Managing Grievances and Conflicts

Learning Objectives

How are grievances between management and labor resolved, and what tactics are used to force a contract settlement?

In a unionized work environment, employees follow a step-by-step process for handling grievances or disputes between management and labor. Conflicts over contracts, however, are far more challenging to resolve and may result in the union or employer imposing economic pressure, as described in this section.

Grievance Handling and Arbitration

The union’s main way of policing the contract is the grievance procedure. A grievance is a formal complaint by an employee or the union that management has violated some part of the contract. Under a typical contract, the employee starts by presenting the grievance to the supervisor, either in person or in writing. The typical grievance procedure is illustrated in Exhibit 8.13. An example grievance is a situation in which an employee is disciplined with a one-day suspension (and loss of pay) for being late for work several times in one month.

A photograph shows the inside of the stadium during a Dallas Cowboys football game.
Exhibit 8.12 Ezekiel Elliott is a star running back for the Dallas Cowboys who was suspended by NFL commissioner Roger Goodell for six games in the 2017 season. The controversial NFL running back, with the support of the NFL Players Association (NFLPA), appealed the decision several times and was able to delay the suspension, but eventually lost a highly publicized case in federal court. U.S. District Judge Katherine Polk Failla ruled that the NFL’s decision to suspend Elliott did not violate the labor agreement. What options did Elliott and the NFLPA have after losing this court case? (Credit: grantlairdjr/ flickr/ Attribution 2.0 Generic (CC BY 2.0))

If the problem isn’t solved, the grievance is put in writing. The employee, one or more union officials, the supervisor, and perhaps the plant manager then discuss the grievance. If the matter still can’t be resolved, another meeting takes place with higher-level representatives of both parties present. If top management and the local union president can’t resolve the grievance, it goes to arbitration.

Arbitration is the process of settling a labor-management dispute by having a third party—a single arbitrator or a panel—make a decision. The decision is final and binding on the union and employer. The arbitrator reviews the grievance at a hearing and then makes the decision, which is presented in a document called the award. In the one-day suspension mentioned above, the arbitrator might rule that the discipline was improperly made because the employee’s attendance record for the month was not accurately maintained by the firm.

The diagram starts with an employee with a grievance. Step 1 is an oral presentation between the first line supervisor, and the union steward. Step 2 is grievance in writing. On one side is the plant manager, personnel manager, and first line supervisor. On the opposite side is the grievance committee, business agent, and Chief steward. Step 3 is a higher level grievance meeting. On one side is the president, vice president of labor relations, and the plant manager. On the opposite side is the international representative, local president, business agent, and chief steward. Step 4 is arbitration.
Exhibit 8.13 Typical Grievance Procedure (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Tactics for Pressuring a Contract Settlement

Virtually all labor agreements specify peaceful resolution of conflicts, usually through arbitration. However, when a contract expires and a new agreement has not been reached, the union is free to strike or engage in other efforts to exert economic pressure on the employer. A strike occurs when employees refuse to work. The United Auto Workers union used a selective strike strategy, a strategy of conducting a strike at a critical plant that supplies parts to other plants, against General Motors. The union conducted its strike at a stamping and parts facility in Flint, Michigan, that supplied critical parts to other plants. The 54-day strike caused the company to stop production at many of its assembly plants because parts were not available from the Flint plant. General Motors lost approximately $2.2 billion during that dispute. Likewise, the employer can put pressure on the union through a lockout or by hiring strike replacements if the union has called a strike. For example, in 2018 aluminum producer Alcoa locked out more than 1,000 union workers from its smelter facility in Quebec, Canada, after union members went on strike.16 Table 8.5 provides a summary of union and employer pressure strategies for forcing a contract settlement.

Strategies of Unions and Employers
Union Strategies Employer Strategies
Strike: Employees refuse to work. Lockout: Employer refuses to let employees enter plant to work.
Boycott: Employees try to keep customers and others from doing business with employer. Strike replacements: Employer uses nonunion employees to do jobs of striking union employees.
Picketing: Employees march near entrance of firm to publicize their view of dispute and discourage customers. Mutual-aid pact: Employer receives money from other companies in industry to cover some of income lost because of strikes.
Corporate campaign: Union disrupts stockholder meetings or buys company stock to have more influence over management. Shift production: Employer moves production to nonunion plant or out of country.
Table 8.5

Concept Check

  1. Describe the grievance procedure.
  2. In what ways do arbitrators act like judges?
  3. What are some tactics for pressuring for a contract settlement?

8.9 Legal Environment of Human Resources and Labor Relations

Learning Objectives

What are the key laws and federal agencies affecting human resource management and labor relations?

Federal laws help ensure that job applicants and employees are treated fairly and not discriminated against. Hiring, training, and job placement must be unbiased. Promotion and compensation decisions must be based on performance. These laws help all Americans who have talent, training, and the desire to get ahead. The key laws that currently impact human resource management and labor relations are listed in Table 8.6.

Several laws govern wages, pensions, and unemployment compensation. For instance, the Fair Labor Standards Act sets the federal minimum wage, which is periodically raised by Congress. Many minimum-wage jobs are found in service firms, such as fast-food chains and retail stores. The Pension Reform Act protects the retirement income of employees and retirees. Federal tax laws also affect compensation, including employee profit-sharing and stock purchase plans. When John F. Kennedy signed the Equal Pay Act into law in 1963, the goal was to stop the practice of paying women lower wages for the same job based on their gender. At the time, women with full-time jobs earned between 59 and 64 cents for every dollar their male counterparts earned in the same jobs. Although this law has been in place for several decades, progress has been slow. On April 17, 2012, President Barack Obama proclaimed National Equal Pay Day, noting that women who work full time earn only 77 cents for every dollar their male counterparts make. In 2016, the wage gap changed slightly, with women making 80.5 percent of what men earn.17

Laws Impacting Human Resource Management
Law Purpose Agency of Enforcement
Social Security Act (1935) Provides for retirement income and old-age health care Social Security Administration
Wagner Act (1935) Gives workers the right to unionize and prohibits employer unfair labor practices National Labor Relations Board
Fair Labor Standards Act (1938) Sets minimum wage, restricts child labor, sets overtime pay Wage and Hour Division, Department of Labor
Taft-Hartley Act (1947) Obligates the union to bargain in good faith and prohibits union unfair labor practices Federal Mediation and Conciliation Service
Equal Pay Act (1963) Eliminates pay differentials based on gender Equal Employment Opportunity Commission
Civil Rights Act (1964), Title VII Prohibits employment discrimination based on race, color, religion, gender, or national origin Equal Employment Opportunity Commission
Age Discrimination Act (1967) Prohibits age discrimination against those over 40 years of age Equal Employment Opportunity Commission
Occupational Safety and Health Act (1970) Protects worker health and safety, provides for hazard-free workplace Occupational Safety and Health Administration
Vietnam Veterans’ Readjustment Act (1974) Requires affirmative employment of Vietnam War veterans Veterans Employment Service, Department of Labor
Employee Retirement Income Security Act (1974)—also called Pension Reform Act Establishes minimum requirements for private pension plans Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation
Pregnancy Discrimination Act (1978) Treats pregnancy as a disability, prevents employment discrimination based on pregnancy Equal Employment Opportunity Commission
Immigration Reform and Control Act (1986) Verifies employment eligibility, prevents employment of illegal aliens Employment Verification Systems, Immigration and Naturalization Service
Americans with Disabilities Act (1990) Prohibits employment discrimination based on mental or physical disabilities Department of Labor
Family and Medical Leave Act (1993) Requires employers to provide unpaid leave for childbirth, adoption, or illness Equal Employment Opportunity Commission
Table 8.6

Employers must also be aware of changes to laws concerning employee safety, health, and privacy. The Occupational Safety and Health Act (OSH Act) requires employers to provide a workplace free of health and safety hazards. For instance, manufacturers must require their employees working on loading docks to wear steel-toed shoes so their feet won’t be injured if materials are dropped. Drug and AIDS testing are also governed by federal laws.

Another employee law that continues to affect the workplace is the Americans with Disabilities Act. To be considered disabled, a person must have a physical or mental impairment that greatly limits one or more major life activities. More than 40 million Americans, 12.6 percent of the population, were disabled in 2015, according to the U.S. Census Bureau.18 Employers may not discriminate against disabled persons. They must make “reasonable accommodations” so that qualified employees can perform the job, unless doing so would cause “undue hardship” for the business. Altering work schedules, modifying equipment so a wheelchair-bound person can use it, and making buildings accessible by ramps and elevators are considered reasonable. Two companies often praised for their efforts to hire the disabled are McDonald’s and DuPont.

The Family and Medical Leave Act went into effect in 1993. The law guarantees continuation of paid health benefits, plus a return to the same or equivalent job, and applies to employers with 50 or more employees. It requires these employers to provide unpaid leave of up to 12 weeks during any 12-month period to workers who have been employed for at least a year and worked at least 1,250 hours during the past year. The reasons for the leave include the birth or adoption of a child; the serious illness of a child, spouse, or parent; or a serious illness that prevents the worker from doing the job.

According to the Bureau of Labor Statistics, only 11 percent of all private industry workers have access to paid family leave. Low-wage earners fare even worse. Only 5 percent of low-wage earners get any paid maternity leave, and nearly half will not take time off because they cannot afford to go without income. The United States continues to be one of only four countries in the world (along with Liberia, Suriname, and Papua New Guinea) that do not guarantee paid parental leave.19

The Wagner and Taft-Hartley Acts govern the relationship between an employer and union. Employees have the right to unionize and bargain collectively with the company. The employer must deal with the union fairly, bargain in good faith, and not discriminate against an employee who belongs to the union. The union must also represent all employees covered by a labor agreement fairly and deal with the employer in good faith.

Several federal agencies oversee employment, safety, compensation, and related areas. The Occupational Safety and Health Administration (OSHA) sets workplace safety and health standards, provides safety training, and inspects places of work (assembly plants, construction sites, and warehouse facilities, for example) to determine employer compliance with safety regulations.

 
A painting depicts three eras of coal mining. The first appears to be 100 plus years ago, and children are in the mine alongside men. In the era are men with headlamps and pitchforks. In what appears to be the most recent era there are men standing in a mine that appears to be more sturdily built.
Exhibit 8.14 For some occupations, danger is part of the job description. Tallies of work-related casualties routinely identify miners, loggers, pilots, commercial fishermen, and steel workers as holding the most deadly jobs. Job fatalities are often linked to the use of heavy or outdated equipment. However, many work-related deaths also happen in common highway accidents or as homicides. Pictured here are miners at the Coal Miner’s Memorial and Pennsylvania Welcome Center. What laws and agencies are designated to improve occupational safety? (Credit: Mike Steele/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

The Wage and Hour division of the Department of Labor enforces the federal minimum-wage law and overtime provisions of the Fair Labor Standards Act. Employers covered by this law must pay certain employees a premium rate of pay (or time and one-half) for all hours worked beyond 40 in one week.

The Equal Employment Opportunity Commission (EEOC) was created by the 1964 Civil Rights Act. It is one of the most influential agencies responsible for enforcing employment laws. The EEOC has three basic functions: processing discrimination complaints, issuing written regulations, and gathering and disseminating information. An employment discrimination complaint can be filed by an individual or a group of employees who work for a company. The group may comprise a protected class, such as women, African Americans, or Hispanic Americans. The protected group may pursue a class-action complaint that may eventually become a lawsuit. As a measure to prevent employment discrimination, many employers set up affirmative action programs to expand job opportunities for women and minorities

Even with affirmative action and other company efforts to follow the law, each year the EEOC receives tens of thousands of complaints from current or former employees. The monetary benefits that the EEOC wins for employees has grown substantially during the past 10 years. Large monetary settlements often occur when the EEOC files a class-action suit against an employer. For example, the Ford Motor Company settled sexual and racial harassment claims by more than 30 women for more than $10 million at two Chicago-area manufacturing plants in 2017.20 Also, Sears, Motorola, and AT&T have had to make large back-pay awards and to offer special training to minority employees after the court found they had been discriminated against.

The NLRB was established to enforce the Wagner Act. Its five members are appointed by the president; the agency’s main office is in Washington, DC, and regional and field offices are scattered throughout the United States. NLRB field agents investigate charges of employer and union wrongdoing (or unfair labor practices) and supervise elections held to decide union representation. Judges conduct hearings to determine whether employers and unions have violated the law.

The Federal Mediation and Conciliation Service helps unions and employers negotiate labor agreements. Agency specialists, who serve as impartial third parties between the union and company, use two processes: conciliation and mediation, both of which require expert communication and persuasion. In conciliation, the specialist assists management and the union with focusing on the issues in dispute and acts as a go-between or communication channel through which the union and employer send messages to and share information with each other. The specialist takes a stronger role in mediation by suggesting compromises to the disputing organizations.

Concept Check

  1. Discuss the laws that govern wages, pensions, and employee compensation.
  2. Describe the Americans with Disabilities Act.
  3. How do the Wagner and Taft-Hartley Acts impact labor-management relations?

8.10 Trends in Human Resource Management and Labor Relations

Learning Objectives

What trends and issues are affecting human resource management and labor relations?

Some of today’s most important trends in human resource management are using employee diversity as a competitive advantage, improving efficiency through outsourcing and technology, and hiring employees who fit the organizational culture. Although overall labor union enrollment continues to decline, a possible surge in membership in service unions is anticipated.

Employee Diversity and Competitive Advantage

American society and its workforce are becoming increasingly more diverse in terms of racial and ethnic status, age, educational background, work experience, and gender. A company with a demographic employee profile that looks like its customers may be in a position to gain a competitive advantage, which is a set of unique features of a company and its product or service that are perceived by the target market as superior to those of the competition. Competitive advantage is the factor that causes customers to patronize a firm and not the competition. Many things can be a source of competitive advantage: for Southwest Airlines it is route structure and high asset utilization; for Ritz-Carlton hotels it is very high-quality guest services; for Toyota it is manufacturing efficiency and product durability; and for Starbucks it is location, service, and outstanding coffee products. For these firms, a competitive advantage is also created by their HR practices. Many firms are successful because of employee diversity, which can produce more effective problem-solving, a stronger reputation for hiring women and minorities, greater employee diversity, quicker adaptation to change, and more robust product solutions because a diverse team can generate more options for improvement.21

In order for an organization to use employee diversity for competitive advantage, top management must be fully committed to hiring and developing women and minority individuals. An organization that highly values employee diversity is the United States Postal Service (USPS). In 1992 the Postal Service launched a diversity development program to serve as the organization’s “social conscience and to increase employees’ awareness of and appreciation for ethnic and cultural diversity both in the postal workplace and among customers.” Twenty-five years later, 39 percent of postal service employees are minority persons: 21 percent African-American, 8 percent Hispanic, and more than 8.0 percent other minorities. In addition, women make up 40 percent of the organization’s workforce.22

Outsourcing HR and Technology

The role of the HR professional has changed noticeably over the past 20 years. One significant change has been the use of technology in handling relatively routine HR tasks, such as payroll processing, initial screening of applicants, and benefits enrollments. Large firms such as Nokia and Lockheed Martin purchase specialized software (SAP and Oracle/PeopleSoft) to perform the information-processing aspects of many HR tasks. Other firms, such as Jacobs Engineering Group (a large professional services firm), outsource—or contract out—these tasks to HR service providers such as Aon Hewitt and Workforce Solutions.

HR outsourcing is done when another firm can perform a task better and more efficiently, thus saving costs. Sometimes HR activities are outsourced because HR requirements are extraordinary and too overwhelming to execute in-house in a timely fashion. Frequently, HR activities are outsourced simply because a provider has greater expertise. For example, media conglomerate CBS Corp. recently announced that it hired Fidelity Investments to manage its 401(k) plan, which has more than $4 billion in assets.23

Organizational Culture and Hiring for Fit

Regardless of general business and economic conditions, many firms are expanding operations and hiring additional employees. For many growing firms, corporate culture can be a key aspect of developing employees into a competitive advantage for the firm. Corporate culture refers to the core values and beliefs that support the mission and business model of the firm and guide employee behavior. Companies such as JetBlue, Ritz-Carlton, and Cypress frequently hire for fit with their corporate cultures. This necessitates recruitment and selection of employees who exhibit the values of the firm. Ritz-Carlton and Cypress use carefully crafted applicant questionnaires to screen for values and behaviors that support the corporate culture. JetBlue uses behavioral-based interview questions derived from its corporate values of safety, integrity, caring, fun, and passion. Southwest Airlines has non-HR employees (flight attendants, gate agents, and pilots) and even frequent flyer passengers interview applicants to screen for cultural fit as well as strong customer-service orientation.

In addition to cultural fit, firms are increasingly hiring for technical knowledge and skills fit to the job. Tech companies such as IBM, Amazon, and Microsoft receive thousands of résumés and job applications each year and continue to look for the best and the brightest when it comes to technical knowledge and skills. For example, IBM is now focusing on a skills-based approach rather than a candidate’s education level and number of academic degrees. Amazon is all about the customer and looks for employees who continue to be “relentlessly curious.” Microsoft continues to raise the talent bar by embracing job applicants who have demonstrated leadership, achieved concrete results, and can prove that they love to learn.24

More Service Workers Joining Labor Unions

Organized labor has faced tumultuous times during the last several decades due to declining union membership, loss of factory jobs, dwindling political clout, and the shifting of jobs outside the United States. With union membership now down to a little more than 10 percent of the U.S. workforce, some wonder if labor unions, who organize as a united front against poor working conditions, still have a place in the country. Mary Kay Henry, international president of Service Employees International Union (SEIU), is optimistic that unions are capable of resurgence by organizing the growing number of service workers into labor unions. The SEIU is the fastest-growing union in the nation, having jumped to 2 million members from 1.1 million a decade ago.25

Henry’s goal is to focus on recruiting the country’s millions of low-wage service workers, positions that are primarily filled by the working poor. These workers are disproportionately women, immigrants, and members of minority groups, which have all been traditionally more open to unionization. If these workers are successfully recruited into the SEIU, Henry believes that their wages and benefits would increase in much the same way unions brought factory workers into the middle class in the 1930s.

The SEIU believes that the service industry provides a target of opportunity, with the largest expected employment growth through 2026 in low-paid local services:

 
Job Projected Growth26
Home health aides 47%
Personal care aides 39%
Food preparation 17%
Janitorial 10%

Many believe that the future of labor lies primarily in the success of recruitment efforts and in enrolling the massive numbers of employees who are in fast-growing, low-wage service jobs. For example, the SEIU was successful recently in unionizing hundreds of workers who provide services to people with disabilities in California, with an eye toward raising standards for their work and increasing hourly wages and benefits. Reversing labor’s decline will be challenging, but the SEIU looks positively toward the future.27

CONCEPT CHECK

  1. How can employee diversity give a company a competitive advantage?
  2. Explain the concept of hiring for fit.
  3. Why does the service industry provide an opportunity for labor union growth?

Key Terms

affirmative action programs
Programs established by organizations to expand job opportunities for women and minorities.
agency shop
Workers don’t have to join a union but must pay union dues.
apprenticeship
A form of on-the-job training that combines specific job instruction with classroom instruction.
arbitration
Settling labor-management disputes through a third party. The decision is final and binding.
collective bargaining
Negotiating a labor agreement.
competitive advantage
A set of unique features of an organization that are perceived by customers and potential customers as significant and superior to the competition.
conciliation
Negotiation process in which a specialist in labor-management negotiations acts as a go-between for management and the unions and helps focus on the problems.
contingent worker
Person who prefers temporary employment, either part-time or full-time.
Equal Employment Opportunity Commission (EEOC)
Processes discrimination complaints, issues regulations regarding discrimination, and disseminates information.
federation
A collection of unions banded together to achieve common goals.
grievance
A formal complaint by a union worker that management has violated the contract.
human resource (HR) management
The process of hiring, developing, motivating, and evaluating employees to achieve organizational goals.
human resource planning
Creating a strategy for meeting current and future human resource needs.
incentive pay
Additional pay for attaining a specific goal.
job analysis
A study of the tasks required to do a particular job well.
job description
The tasks and responsibilities of a job.
job fair
An event, typically one or two days, held at a convention center to bring together job seekers and firms that are searching for employees.
job rotation
Reassignment of workers to several different jobs over time so that they can learn the basics of each job.
job specification
A list of the skills, knowledge, and abilities a person must have to fill a job.
labor union
An organization that represents workers in dealing with management.
local union
Branch of a national union that represents workers in a specific plant or geographic area.
management rights clause
Clause in a labor agreement that gives management the right to manage the business except as specified in the contract.
mediation
Negotiation process in which a specialist facilitates labor-management contract discussions and suggests compromises.
mentoring
A form of on-the-job training in which a senior manager or other experienced employee provides job- and career-related information to a mentee.
Occupational Safety and Health Administration (OSHA)
Sets workplace safety and health standards and assures compliance.
open shop
Workers do not have to join the union or pay union dues.
orientation
Presentation to get the new employee ready to perform his or her job.
performance appraisal
A comparison of actual performance with expected performance to assess an employee’s contributions to the organization.
programmed instruction
A form of computer-assisted off-the-job training.
protected classes
The specific groups who have legal protection against employment discrimination; include women, African-Americans, Native Americans, and others.
recruitment
The attempt to find and attract qualified applicants in the external labor market.
recruitment branding
Presenting an accurate and positive image of the firm to those being recruited.
right-to-work law
State laws that an employee does not have to join a union.
selection
The process of determining which persons in the applicant pool possess the qualifications necessary to be successful on the job.
selection interview
An in-depth discussion of an applicant’s work experience, skills and abilities, education, and career interests.
selective strike strategy
Strike at a critical plant that typically stops operations system-wide.
shop steward
An elected union official that represents union members to management when workers have complaints.
simulation
A scaled-down version or mock-up of equipment, processes, or a work environment.
succession planning
Examination of current employees to identify people who can fill vacancies and be promoted.
training and development
Activities that provide learning situations in which an employee acquires additional knowledge or skills to increase job performance.
unemployment compensation
Government payment to unemployed former workers.
union shop
Nonunion workers can be hired but must join the union later.
worker’s compensation
Pay for lost work time due to employment-related injuries.

Summary of Learning Outcomes

8.1 Achieving High Performance through Human Resources Management

  1. What is the human resource management process, and how are human resource needs determined?

The human resource management process consists of a sequence of activities that begins with the job analysis and HR planning; progresses to employee recruitment and selection; then focuses on employee training, performance appraisal, and compensation; and ends when the employee leaves the organization.

Creating a strategy for meeting human resource needs is called human resource planning, which begins with the job analysis. Job analysis is a process of studying a job to determine its tasks and duties for setting pay, determining employee job performance, specifying hiring requirements, and designing training programs. Information from the job analysis is used to prepare a job description, which lists the tasks and responsibilities of the job. A job specification describes the skills, knowledge, and abilities a person needs to fill the job described in the job description. By examining the human resource demand forecast and the internal supply forecast, human resource professionals can determine if the company faces a personnel surplus or shortage.

8.2 Employee Recruitment

  1. How do firms recruit applicants?

When a job vacancy occurs, most firms begin by trying to fill the job from within the ranks of their own employees, known as the internal labor market. If a suitable internal candidate is not available, the firm turns to the external labor market. Firms use local media to recruit nontechnical, unskilled, and nonsupervisory workers. To locate highly trained recruits, employers use college recruiters, executive search firms, job fairs, and company websites to promote job openings. During the job search process, firms present an accurate and positive image of the company to those being recruited, called recruitment branding.

8.3 Employee Selection

  1. How do firms select qualified applicants?

The selection process helps identify the candidates in the applicant pool who possess the best qualifications for the open position. Typically, an applicant submits an application or résumé and then receives a short, structured interview. If an applicant makes it past the initial screening, he or she may be asked to take an aptitude, personality, or skills test. The next step is the selection interview, which is an in-depth discussion of the applicant’s work experience, skills and abilities, education, and career interests. If the applicant passes the selection interview, most firms conduct background checks and talk with their references. Physical exams and drug testing may also be part of the selection process.

8.4 Employee Training and Development

  1. What types of training and development do organizations offer their employees?

Training and development programs are designed to increase employees’ knowledge, skills, and abilities in order to foster job performance improvements. Formal training (usually classroom in nature and off-the-job) takes place shortly after being hired. Development programs prepare employees to assume positions of increasing authority and responsibility. Job rotation, executive education programs, mentoring, and special-project assignments are examples of employee development programs.

8.5 Performance Planning and Evaluation

  1. How are performance appraisals used to evaluate employee performance?

A performance appraisal compares an employee’s actual performance with the expected performance. Performance appraisals serve several purposes, but they are typically used to determine an employee’s compensation, training needs, and advancement opportunities.

8.6 Employee Compensation and Benefits

  1. What are the types of compensation and methods for paying workers?

Direct pay is the hourly wage or monthly salary paid to an employee. In addition to the base wage or salary, direct pay may include bonuses and profit shares. Indirect pay consists of various benefits and services. Some benefits are required by law and include unemployment compensation, worker’s compensation, and Social Security. Many employers also offer benefits not required by law. These include paid vacations and holidays, pensions, health and other insurance, employee wellness programs, and college tuition reimbursement.

8.7 The Labor Relations Process

  1. What is a labor union and how is it organized, what is collective bargaining, and what are some of the key negotiation issues?

A labor union is an organization that represents workers in dealing with management over disputes involving wages, hours, and working conditions. A company is unionized through an organizing drive that begins either inside, with a small group of existing employees, or outside, with an established union that targets the employer. When the union gets signed authorization cards from 30 percent of the firm’s employees, the NLRB conducts a union certification election. A majority vote is needed to certify the union as the exclusive bargaining agent. The union and the employer then begin collective bargaining and have one year in which to reach an agreement.

Collective bargaining is the process of negotiating, administering, and interpreting labor agreements. Both union and management negotiators prepare a bargaining proposal. The two sides meet and exchange demands and ideas. Bargaining consists of compromises and concessions that lead to a tentative agreement. Top management then approves or disapproves the agreement for the management team. Union members vote to either approve or reject the contract. The key issues included in a union contract are wage increases, fringe benefits, and job security.

8.8 Managing Grievances and Conflicts

  1. How are grievances between management and labor resolved, and what tactics are used to force a contract settlement?

In most labor agreements, the grievance procedure consists of three or four steps. In the initial step, the employee files a grievance; this is an oral and/or written presentation to the supervisor and may involve a union steward as representative of the grievant. Steps two and three involve meetings of the employee, one or more union officials, the appropriate supervisor, and one or more management officials. If the grievance is not resolved at step three, either party (union or management) can request that an arbitrator, or neutral third party, hear and decide the grievance. The arbitrator reviews the grievance at a hearing and then makes the decision, which is presented in a document called the award.

When a union contract expires and a new agreement has not been reached, the union may impose economic pressure on the firm. These tactics may take the form of strikes, boycotts, picketing, or corporate campaigns. Similarly, employers may implement lockouts, hire replacements, or move production to another facility to place pressure on a union to accept a new contract.

8.9 Legal Environment of Human Resources and Labor Relations

  1. What are the key laws and federal agencies affecting human resource management and labor relations?

A number of federal laws (listed in Table 8.6) affect human resource management. Federal law prohibits discrimination based on age, race, gender, color, national origin, religion, or disability. The Americans with Disabilities Act bans discrimination against disabled workers and requires employers to change the work environment to accommodate the disabled. The Family and Medical Leave Act requires employers, with certain exceptions, to provide employees up to 12 weeks of unpaid leave a year. The leave can be for the birth or adoption of a child or due to serious illness of the worker or a family member.

Federal agencies that deal with human resource administration are the EEOC, OSHA, the Office of Federal Contract Compliance Programs (OFCCP), and the Wage and Hour Division of the Department of Labor. The EEOC and OFCCP are primary agencies for the enforcement of employment discrimination laws, OSHA enforces safety regulations, and the Wage and Hour Division enforces the minimum wage and related laws. Many companies employ affirmative action and safety officers to ensure compliance with antidiscrimination and workplace safety laws. The Wagner and Taft-Hartley Acts govern the union-management relationship, in part through the functions performed by the National Labor Relations Board. The law gives workers the right to form and join labor unions and obligates the employer to deal with the union fairly.

8.10 Trends in Human Resource Management and Labor Relations

  1. What trends and issues are affecting human resource management and labor relations?

Human resource managers recognize that diverse workforces create an environment that nurtures creative decision-making, effective problem-solving, more agility in adapting to change, and a strong competitive advantage. Therefore, firms are becoming committed to recruiting and hiring a diverse workforce. To maximize efficiency, many firms are outsourcing HR functions and using technology to reduce costs and improve efficiency. Firms are also striving to hire employees who possess qualities that match those of the corporate culture. Although labor unions have faced declining membership in the last several decades, enrollment of service workers into labor unions may increase as low-wage earners seek improved working conditions, pay, and health benefits.

Preparing for Tomorrow’s Workplace Skills

  1. Would an overseas job assignment be good for your career development? If you think so, what country would you prefer to live and work in for two or three years, and what type of job would you like to have in that country? (Resources)
  2. The benefits package of many employers includes numerous items such as health insurance, life insurance, 401(k) plan, paid vacations, tuition reimbursement, employee price discounts on products of the firm, and paid sick leave. At your age, what are the three or four most important benefits? Why? Twenty years from now, what do you think will be your three or four most important benefits? Why? (Resources)
  3. Assume you have been asked to speak at a local meeting of human resource and labor relations professionals. The topic is whether union membership will increase or decline in the next 50 years. Take either the increase or the decline position and outline your presentation. (Information)
  4. Go to the government documents section in your college or university library, and inspect publications of the Department of Labor (DOL), including Employment and Earnings, Compensation and Working Conditions, Monthly Labor Review, Occupational Outlook Handbook, and Career Guide to Industries. Alternatively, go to the DOL Bureau of Labor Statistics website at http://stats.bls.gov. Access the most recent DOL publications and locate the following information. (Information)
    • Number of persons in the American workforce
    • Unemployment rate for last year
    • Demographic characteristics of the American workforce: race, ethnic status, age, marital status, and gender
    • Occupations where there are projected shortages for the next five or 10 years
    • Union membership by major industry category: manufacturing, banking and finance, health care, business and personal services, sports and entertainment, and any other area of interest to you
  5. Assume you are a director of labor relations for a firm faced with a union certification election in 30 days. Draft a letter to be sent to your employees in which you urge them to vote “no union”; be persuasive in presenting your arguments against the union. (Information)
  6. Using the internet, research articles featuring a recent strike or a labor contract settlement. Report to your class the specifics of the strike or settlement. (Technology, Resources)
  7. Team Activity: Select two teams of five. One team will take the position that employees are simply a business expense to be managed. The second team will argue that employees are an asset to be developed to enable the firm to gain a competitive advantage. The remainder of the class will judge which team provided the stronger argument. (Interpersonal)
  8. Have you or a family member ever been a union member? If so, name the union and describe it in terms of membership size, membership characteristics, strike history, recent bargaining issues, and employers under union contracts. (Information)
  9. Team Activity: Divide the class into two groups. One group will take the position that workers should be required to join unions and pay dues. The other group will take the position that workers should not be required to join unions. Hold a debate in which a spokesperson from each group is given 10 minutes to present the group’s arguments. (Interpersonal)

Ethics Activity

Tracking employee information through global positioning systems (GPS)—in particular, on company vehicles driven by employees—is becoming commonplace. Location information is transmitted to a server via the cell phone network (and sometimes via satellite phone service) and is then available to the company through the web or mobile apps.

As the cost of GPS drops and the number of mobile workers rises—by some accounts, to as much as 75 percent of the workforce by 2020—companies are depending on GPS to monitor the movement of personnel and products to improve customer service and help with time management. “I wanted to see how much time was spent on each job,” says one small business owner with a fleet of seven service vehicles. “We’ve had a few problems in the past—people weren’t where they said they’d be. With GPS, we can defend ourselves to the customers. We know how fast the drivers drove, what route they took, and how long they spent on each job.” Late in 2017, four wastewater plant mechanics employed by the city of Modesto, California, were fired after GPS showed they used “work hours to socialize at the lift stations with [each other], go home, shop, sleep and drive around in the City utility vehicle.”

Companies are not only tracking vehicles, but many now track employees through their mobile phones. Understandably, many employees don’t like the idea of Big Brother following their every move; most states allow employers to track their employees’ location even in off hours. Many employees take their company vehicles home after their shifts, but even employees with company-owned phones may be tracked after hours, too.

Surveys show that many GPS-tracked employees have serious concerns about after-hours tracking, micromanagement, and privacy (https://www.tsheets.com/gps-survey). In 2015, a woman in California sued her employer, claiming that she was tracked 24 hours a day through her company-issued iPhone. And when she uninstalled the tracking app, she was fired.

Using a web search tool, locate articles about this topic, and then write responses to the following questions. Be sure to support your arguments and cite your sources.

Ethical Dilemma: Do GPS devices constitute an invasion of employee privacy? Are there guidelines companies can develop for appropriate GPS use?

Sources: Kevin Valine, “Modesto Disciplines Sewer Workers for Goofing Off,” The Modesto Bee, http://www.modbee.com, January 1, 2018; Kaveh Waddell, “Why Bosses Can Track Their Employees 24/7,” The Atlantic, https://www.theatlantic.com, January 6, 2017; Andrew Burger, “IDC: Mobile Workers Will Make Up Nearly 75 Percent of U.S. Workforce,” http://www.telecompetitor.com, June 23, 2015; David Kravets, “Worker Fired for Disabling GPS App That Tracked Her 24 Hours a Day,” Ars Technica, https://arstechnica.com, May 11, 2015.

Working the Net

  1. Go to the blog page of the College Recruiter website at https://www.collegerecruiter.com/blog, and read the relevant articles to learn how to prepare a résumé that will get results. Develop a list of rules for creating effective résumés. What tips were the most useful to you?
  2. Working as a contingent employee can help you explore your career options. Visit the Manpower website at http://www.manpower.com, and use the Job Search feature to look for several types of jobs that interest you. Choose your current city and one where you would like to live, either in the United States or abroad. What are the advantages of being a temporary worker? What other services does Manpower offer job seekers?
  3. As a corporate recruiter, you must know how to screen prospective employees. The Integrity Center website at http://www.integctr.com offers a brief tutorial on pre-employment screening, a glossary of key words and phrases, and related information. Prepare a short report that tells your assistant how to go about this process.
  4. You’ve been asked to give a speech about the current status of affirmative action and equal employment to your company’s managers. Starting with the website of the American Association for Access Equity and Diversity (https://www.aaaed.org) and its links to related sites, research the topic and prepare an outline for your talk. Include current legislation and recent court cases.
  5. Web-based training is popular at many companies as a way to bring a wider variety of courses to more people at lower costs. The Web-Based Training Information Center site at http://www.webbasedtraining.com provides a good introduction. Learn about the basics of online training at its Primer page. Then link to the Resources section, try a demo, and explore other areas that interest you. Prepare a brief report on your findings, including the pros and cons of using the web for training, to present to your class.
  6. What are the key issues facing labor unions today? Visit the AFL-CIO website, http://www.aflcio.org, and Labornet, http://www.labornet.org. Select three current topics and summarize the key points for the class.
  7. Not everyone believes that unions are good for workers. The National Right to Work Legal Defense Foundation offers free legal aid to employees whose “human and civil rights have been violated by compulsory unionism abuses.” Read the materials on its site (http://www.nrtw.org), and prepare a short report on its position regarding the disadvantages of labor unions.
  8. Although we tend to think of labor unions as representing manufacturing employees, many office and service-industry employees, teachers, and professionals belong to unions. Visit the websites of two of the following nonmanufacturing unions and discuss how they help their members: the Office and Professional Employees International Union (http://www.opeiu.org), the American Federation of State, County, and Municipal Employees (http://www.afscme.org), the National Education Association (http://www.nea.org), the Actor’s Equity Association (http://www.actorsequity.org), and the American Federation of Musicians (http://www.afm.org). What are the differences, if any, between these unions and those in other industries?

Critical Thinking Case

Discrimination in the Workplace Continues

Although we live in enlightened times, a recent Gallup Poll found that 15 percent of American workers still experienced some form of workplace discrimination. The study was conducted to mark the anniversary of the Civil Rights Act of 1964 and the creation of the EEOC.

The poll found that the two most frequently cited types of discrimination are sexual discrimination (31 percent) and discrimination based on race or ethnicity (36 percent). Also mentioned were age, disability, sexual orientation, and religion. The work areas found to be most susceptible to discrimination are promotion and pay. Being selected for a job and treatment in the workplace were also cited. Wage discrimination and sexual harassment are two big battles women continue to fight. Both topics were in the headlines in 2017; one took center stage and the other was brushed under the covers (at least for now).

Thanks to Harvey Weinstein, the topic of sexual harassment was in the spotlight, setting off a tsunami as women around the world reacted with their #MeToo stories. As the movement progressed from Hollywood, to media companies, to Capitol Hill, and finally into corporate America, the topic had a platform. From the boardroom to the factory floor, women who had been sexually harassed shared their stories.

As companies rushed to put zero-tolerance policies into place and issue new training requirements, lawsuits and class-action cases were settled more quickly, some very publicly. In August 2017, the EEOC reached a $10 million settlement with Ford motor company for sexual and racial harassment at two Chicago plants.

In contrast, little was reported on the reversal of the new regulation designed to combat the wage gap between men and women. The revised EEO-1 would have gone into effect March 31, 2018, and required companies with 100 or more employees and federal contractors with 50 or more employees to report W-2 wage information and total hours worked for all employees. The EEO-1 form already requires employers to report data on race/ethnicity and gender.

The Office of Management and Budget (OMB) initiated a review and immediate stay to the U.S. EEOC “in accordance with its authority under the Paperwork Reduction Act (PRA),” reversing the regulation that had been revised on September 29, 2016.

Pay equity advocates who had supported expanded pay-data reporting were critical of the suspension. “We see through the Trump administration’s call to halt the equal pay rule that requires employers to collect and submit pay data by gender, race, and ethnicity to the government,” said Fatima Goss Graves, president and CEO of the National Women’s Law Center in Washington, D.C. “Make no mistake—it’s an all-out attack on equal pay. [It] sends a clear message to employers: if you want to ignore pay inequities and sweep them under the rug, this administration has your back.”

How important is equal pay? According to the analyses of the 2014–2016 Annual Social and Economic supplement published by the Institute for Women’s Policy Research, the United States economy would have produced additional income of $512.6 billion if women received equal pay; this represents 2.8 percent of 2016 gross domestic product (GDP).

In addition, poverty rates would drop from 10.8 percent to 4.4 percent, and the number of children with working mothers living in poverty would be nearly cut in half, dropping from 5.6 million to 3.1 million.

Critical Thinking Questions
  1. Why is workplace diversity so important in today’s business environment?
  2. What are the major sources of workplace discrimination? Cite specific examples from the case.
  3. What steps are companies taking to ensure that employees are not discriminated against?

Sources: Susan Chira and Catrin Einhorn, “How Tough Is It to Change a Culture of Harassment? Ask Women at Ford,” The New York Times, https://www.nytimes.com, December 19, 2017; “Statement of Acting Chair Victoria A. Lipnic about OMB Decision on EEO-1 Pay Data Collection,” https://www.eeoc.gov, August 29, 2017; Stephen Miller, “White House Suspends Pay-Data Reporting on Revised EEO-1 Form,” https://www.shrm.org, August 31, 2017; Heidi Hartmann, Jeff Hayes, and Jennifer Clark, “How Equal Pay for Working Women Would Reduce Poverty and Grow the American Economy,” http://www.iwpr.org, January 13, 2014; “Gallup Poll on Employment Discrimination Shows Progress, Problems, 40 Years after Founding of EEOC” (press release), https://www.eeoc.gov, December 8, 2005.

Hot Links Address Book

Let’s Test Your Knowledge

License

Icon for the Creative Commons Attribution 4.0 International License

Introduction to Business Administration Copyright © 2022 by LOUIS: The Louisiana Library Network is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

Share This Book