Chapter 8 Managing Human Resources and Labor Relations

Chapter Overview The goal of human resource management (HRM) is to attract, develop, and maintain an effective workforce. Planning for human resources involves analyzing jobs, forecasting supply and demand for the number and types of workers necessary in the organization, and matching supply with demand for workers. Recruiting is the process of attracting qualified people to apply for open jobs. Human resource managers can recruit either internally or externally. Organizations use a variety of methods including applications, tests, and interviews to select employees from the pool of applicants. Once workers have been hired, performance appraisals, which typically incorporate either ranking or rating techniques, help managers decide who needs training and who should be promoted. Wages and salaries, incentives, and benefit packages may all be part of a companys compensation program, playing a critical role in attracting and retaining qualified personnel. In recruiting, hiring, compensating, and managing workers, managers must comply with a variety of federal laws. Equal employment opportunity legislation forbids discrimination based on factors that do not relate to legitimate job requirements. The concept of comparable worth holds that different jobs requiring equal levels of training and skill must pay the same. The Occupational Safety and Health Administration establishes guidelines for ensuring a safe working environment. Human resource managers must also deal with other contemporary legal issues including employment-at-will, AIDS, and sexual harassment. Key changes that affect the workplace today include workforce diversity, the management of knowledge workers, and the growing use of contingent employees. Many firms are striving to create workforces that reflect the increasing diversity of the population, but not all firms have been equally successful in, or eager to implement, diversity programs. Recruiting, retaining, and managing knowledge workers employees whose value is based on what they know rather than on their experience is a particular challenge for technology-related firms who depend on them. Hiring contingent workers temporary or part-time employees is a growing trend that offers managers more flexibility, but also creates a new set of management issues. A labor union is a group of employees working together to achieve shared jobrelated goals, such as higher pay, shorter working hours, more job security, or improved benefits. For unionized employees, the foundation of labormanagement relations is collective bargaining, the process by which union leaders and managers negotiate terms of employment for those workers represented by
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unions. Both labor and management have a range of tactics that they can use against each other if negotiations fail. Chapter Objectives 1. Define human resource management and explain how managers plan for human resources. 2. Identify the tasks in staffing a company and discuss ways in which organizations select, develop, and appraise employee performance. 3. Describe the main components of a compensation system. 4. Describe some of the key legal issues involved in hiring, compensating, and managing workers in todays workplace. 5. Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 6. Explain why workers organize and what labor unions do for their members. 7. Explain the collective bargaining process and its possible outcomes.

REFERENCE OUTLINE
Opening Case: From Hard Bargains to Hard Times I. The Foundations of Human Resource Management A. The Strategic Importance of HRM B. Human Resource Planning 1. Job Analysis 2. Forecasting HR Demand and Supply 3. Matching HR Supply and Demand Staffing the Organization A. Recruiting Human Resources 1. Internal Recruiting 2. External Recruiting B. Selecting Human Resources 1. Applications Forms 2. Tests 3. Interviews 4. Other Techniques Developing the Workforce A. Training B. Performance Appraisal Compensation and Benefits A. Wages and Salaries

II.

III.

IV.

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B. Incentive Programs 1. Individual Incentives 2. Companywide Incentives C. Benefits Programs 1. Retirement Plans 2. Containing the Costs of Benefits V. The Legal Context of HR Management A. Equal Employment Opportunity 1. Protected Classes in the Workplace 2. Enforcing Equal Employment Opportunity B. Legal Issues in Compensation C. Contemporary Legal Issues in HR Management 1. Employee Safety and Health 2. Emerging Areas of Discrimination Law a. AIDS in the Workplace b. Sexual Harassment c. Employment-at-Will New Challenges in the Changing Workplace A. Managing Workforce Diversity B. Managing Knowledge Workers 1. The Nature of Knowledge Work 2. Knowledge Worker Management and Labor Markets C. Contingent and Temporary Workers 1. Trends in Contingent and Temporary Employment 2. Managing Contingent and Temporary Workers Dealing with Organized Labor A. Unionism Today 1. Trends in Union Membership 2. Trends in Union-Management Relations 3. Trends in Bargaining Perspectives B. The Future of Unions Collective Bargaining A. Reaching Agreement on Contract Terms B. Contract Issues 1. Compensation 2. Benefits 3. Job Security 4. Other Union Issues 5. Management Rights C. When Bargaining Fails 1. Union Tactics 2. Management Tactics 3. Mediation and Arbitration

VI.

VII.

VIII.

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LECTURE OUTLINE
I. The Foundations of Human Resource Management (Use PowerPoint 8.4.) Human resource management is the set of organizational activities directed at attracting, developing, and maintaining an effective workforce. A. The Strategic Importance of HRM The importance of HRM has grown dramatically in the last several years; this stems from increased legal complexities, the recognition that human resources are a valuable means for improving productivity, and the awareness today of the costs associated with poor human resource management. B. Human Resource Planning (Use PowerPoint 8.5, 8.6, 8.7, 8.8.) Human resource planning is the starting point for attracting qualified human resources. 1. Job analysis. Job analysis is a systematic analysis of jobs within an organization. The job analysis results in: (a) the job description, which lists the duties and responsibilities of a job, its working conditions, and the tools used to perform it; and (b) the job specification, which lists the skills, abilities, and other credentials and qualifications needed to perform the job effectively. 2. Forecasting HR Demand and Supply. Forecasting the supply of labor involves forecasting the internal supply the number and type of employees who will be in the firm at some future dateand the external supplythe number and type of people who will be available for hiring from the labor market at large. 3. Matching HR Supply and Demand. After comparing future demand and internal supply, managers can make plans to manage predicted shortfalls or overstaffing. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___

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II.

Staffing the Organization Staffing the organization is one of the most complex and important tasks of good HR management. A. Recruiting Human Resources (Use PowerPoint 8.9.) Recruiting is the process of attracting qualified persons to apply for the jobs that are open. 1. Internal Recruiting. Internal recruiting means considering present employees as candidates for openings. 2. External Recruiting. External recruiting involves attracting people outside of the organization to apply for jobs. B. Selecting Human Resources (Use PowerPoint 8.10.) The intent of the selection process is to gather from applicants information that will predict their job success and then to hire the candidates likely to be most successful. The organization can only gather information about factors that can be used to predict future performance; validation is the process of determining the predictive value of that information. 1. Application Forms. An application form is an efficient method of gathering information about the applicants previous work history, educational background, and other job-related demographic data; the application form should not contain questions about areas unrelated to the job such as gender, religion, or national origin. 2. Tests. Tests of ability, skill, aptitude, or knowledge that is relevant to a particular job are usually the best predictors of job success, although tests of general intelligence or personality are occasionally useful as well. 3. Interviews. In a structured interview, questions are written in advance and all interviewees follow the same question list with each candidate; in an unstructured interview, questions are asked at random.

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4. Other Techniques. Organizations often require applicants to take physical exams and drug tests. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ III. Developing the Workforce A. Training (Use PowerPoint 8.11.) After a company hires new employees, it must acquaint them with the firm and their new jobs. Orientation focuses on simple things, such as pay schedules and work hours. On-the-job training occurs while employees are at work. On-the-job training takes place at locations away from work, such as in simulated work environments or in classrooms. In addition, some management development also takes place through networking, which involves informal interactions among managers to discuss problems and issues, and mentoring, which is a relationship in which an experienced manager sponsors and teaches less experienced workers. B. Performance Appraisal This process begins when a manager defines performance standards for an employeethe manager then observes the employees performance and measures it against the standards. Formal appraisals measure an employees performance on job requirements and job-related goals. Most companies have a stepby-step process for dismissing or demoting employees. In addition, firms usually have a plan to decide which employees will remain employees when downsizing or making cutbacks. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ IV. Compensation and Benefits (Use PowerPoint 8.12.) Wages and salaries, incentives, and employee benefits are part of a firms compensation system.

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A. Wages and Salaries Wages are paid for time worked; wages are an hourly rate. A salary is an amount paid per year for discharging the responsibilities of a job. Companies may set wages and salaries by looking at competitors rates. In addition, firms must decide how their wage and salary levels will compare for different jobs. B. Incentive Programs Incentive programs are special pay programs designed to motivate high performance. 1. Individual Incentives. A sales bonus, a typical incentive, may be awarded to employees upon their reaching a sales quota or performance goal. Merit salary systems link raises to performance levels in non-sales jobs. Pay-for-performance or variable pay goes to middle managers on the basis of companywide performance, business-unit performance, personal record, or all three factors. 2. Companywide Incentives. These programs apply to all employees in a firm. In profit-sharing plans, a firms profits earned above a certain level are distributed to employees. Gain-sharing plans distribute bonuses to employees when a firms costs are reduced through greater work efficiency. Pay-for-knowledge plans distribute pay to workers who learn new skills and become proficient at different jobs. C. Benefits Programs (Use PowerPoint 8.13, 8.14.) Benefits are compensation other than wages and salaries, including social security retirement benefits, workers compensation insurance, health and life insurance, and paid vacations and holidays. 1. Retirement Plans. Retirement plans are set up to pay pensions to workers when they retire. Contributions are made either totally by the company or by both the company and the employee. 2. Containing the Costs of Benefits. To contain the costs of benefits, employees can select from a variety of benefit alternatives in what is known as a cafeteria plan. In

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addition, increasing health care costs have encouraged companies to create networks of health care providers who agree to accept lower payments from member organizations. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ V. The Legal Context of HR Management A. Equal Employment Opportunity (Use PowerPoint 8.15.) Numerous federal and state laws, federal guidelines, presidential executive orders, and judicial decisions mandate equal employment opportunity, which is nondiscrimination in employment on the basis of race, color, creed, sex, or national origin. 1. Protected Classes in the Workplace. A protected class consists of all individuals who share one or more common characteristics as indicated by a given law; the most common criteria for defining protected classes include race, color, religion, gender, age, national origin, disability status, and status as a military veteran. 2. Enforcing Equal Employment Opportunity. The Equal Employment Opportunity Commission, or EEOC, has responsibility for enforcing Title VII, the Equal Pay Act, and the Americans with Disabilities Act. B. Legal Issues in Compensation Some legislation goes beyond equal employment opportunity and deals more substantively with other issues; one such area is legislation covering compensation. C. Contemporary Legal Issues in HR Management (Use PowerPoint 8.16.) 1. Employee Safety and Health. The Occupational Safety and Health Act holds that every employer has an obligation to furnish each employee with a place of employment that is free from hazards that cause or are likely to cause death or physical harm.

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2. Emerging Areas of Discrimination Law a. AIDS in the Workplace. Employers cannot legally require an AIDS or any other medical examination as a condition for making an offer of employment. Organizations must treat AIDS like any other disease covered by law; employers cannot discriminate against a person with AIDS, and they should try to educate coworkers about AIDS. b. Sexual Harassment. Sexual harassment is defined by the EEOC as unwelcome sexual advances in the work environment. With quid pro quo harassment, the harasser offers to exchange something of value for sexual favors. Lewd jokes, unwelcome comments, etc., constitute a hostile work environment. c. Employment-at-Will. The concept of employment-at-will holds that both employer and employee have the mutual right to terminate an employment relationship anytime for any reason and with or without advance notice to the other. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ VI. New Challenges in the Changing Workplace New challenges arise as the economic and social environments of business change. A. Managing Workforce Diversity (Use PowerPoint 8.17.) Workforce diversity is the range of workers attitudes, values, beliefs, and behaviors that differ by gender, race, age, ethnicity, physical ability, and other relevant characteristics; many U.S. organizations are now creating more diverse workforces, embracing more women, ethnic minorities, and foreign-born employees than ever before. B. Managing Knowledge Workers (Use PowerPoint 8.18.)

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Traditionally, employees added value to organizations because of what they did or because of their experience; today, however, many employees add value because of what they know. 1. The Nature of Knowledge Work. Knowledge workers tend to work in high-tech firms and are usually experts in some abstract knowledge base; these workers require extensive and highly specialized training, and not every organization is willing to make the human capital investments necessary to take advantage of these jobs. 2. Knowledge Worker Management and Labor Markets. Organizations that need knowledge workers must introduce regular market adjustments in order to pay them enough to keep them. C. Contingent and Temporary Workers (Use PowerPoint 8.19.) 1. Trends in Contingent and Temporary Employment. A contingent worker is a person who works for an organization on something other than a permanent or fulltime basis. About 10 percent of the U.S. workforce currently uses one of these alternative forms of employment relationships; experts suggest that this percentage is increasing at a consistent pace. 2. Managing Contingent and Temporary Workers. The keys to understanding how to use such workers involve careful planning primarily in the integration of these workers into the organization and understanding contingent workers advantages and disadvantages within the organization. In addition, managers must assess the real cost of using contingent workers. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ VII. Dealing with Organized Labor (Use PowerPoint 8.20.) A labor union is a group of individuals working together to achieve shared job-related goals, such as higher pay, shorter working hours, more job security, greater benefits, or better working conditions.

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Labor relations describe the process of dealing with employees who are represented by a union. Collective bargaining is the process by which union leaders and managers negotiate common terms and conditions of employment for the workers represented by unions. A. Unionism Today (Use PowerPoint 8.21, 8.22.) 1. Trends in Union Membership. Since the mid-1950s, U.S. labor unions have experienced increasing difficulties in attracting new members. Today, only 14 percent of the U.S. labor force is represented by a labor union. 2. Trends in Union-Management Relations. With the exceptions of the automobile and steel industries, unions are clearly in a weakened position and have taken much more conciliatory stances in their relations with management. 3. Trends in Bargaining Perspectives. Traditionally, unions have bargained for increased wages and increased benefits for workers. However, in recent years, unions have often bargained for job security; in addition, they have found themselves bargaining against wage cuts rather than bargaining for wage increases. B. The Future of Unions The future of unions depends on the future composition of the workforce. Some unions still hold considerable power. Whitecollar unionization is at an all-time high. Unions will most likely evolve to assume new roles and responsibilities, such as having a voice in management. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ VIII. Collective Bargaining (Use PowerPoint 8.23.) Collective bargaining is an ongoing process involving the drafting and administering of the terms of a labor contract. A. Reaching Agreement on Contract Terms

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By law, union leaders and management representatives must negotiate in good faith.

B. Contract Issues (Use PowerPoint 8.24.) Mandatory items are matters over which both parties must negotiate if either wants to; such items include wages, working hours, and benefits. Permissive items, however, may be negotiated if both parties agree; an example is a union demand for veto power over the promotion of managerial personnel. 1. Compensation. A cost-of-living adjustment (COLA) is one of the most common tools for securing wage increases. Wage reopener clauses provide for renegotiated wage rates at preset times during the duration of the contract. 2. Benefits. Typical employee benefit issues include the cost of insurance, retirement, paid holidays, and working conditions. 3. Job Security. In many cases, demands for job security include the promise that a company will not move to another location and that, if the workforce is reduced, seniority will be used to determine which workers lose their jobs. Job security is an increasingly important agenda item in many bargaining sessions. 4. Other Union Issues. Such issues include working hours, overtime policies, and rest-period arrangements. 5. Management Rights. Unions often try to limit management rights by specifying hiring, assignment, and other policies, though management wants to control hiring policies and work assignments. C. When Bargaining Fails (Use PowerPoint 8.25, 8.26.) 1. Union Tactics. A strike occurs when employees walk off the job and refuse to work. Economic strikes are triggered by stalemates over mandatory bargaining items; sympathy strikes occur when one union strikes in

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sympathy with action initiated by another and may violate the sympathetic unions contract. Wildcat strikes, not authorized by the union, deprive strikers of their status as employees and protection of national labor law. Additional union tactics include: picketing, in which workers march at the entrance to the firm with signs explaining their reasons for striking; boycotts, in which union members agree not to buy products of a targeted employer; and a work slowdown, in which workers perform their jobs at a much slower pace than normal. 2. Management Tactics. Lockouts occur when employers deny employees access to the workplace. Firms may also hire temporary or permanent replacement for strikers. 3. Mediation and Arbitration. In mediation, an unbiased, third-party offers advice and suggestions in settling a labor-management dispute; in arbitration, an unbiased, third-party offers a legally-binding decision in settling a dispute. Notes: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ___ Answers to Questions and Exercises Questions for Review 1. What are the advantages and disadvantages of internal and external recruiting? Under what circumstances is each more appropriate? Internal recruiting builds morale and motivation for other employees who see peers being promoted; in addition, with internal recruiting, there is no need to teach the culture and the nature of the business. In discussing disadvantages of internal recruiting, students will likely add that such recruiting may lead to fewer new ideas, may create other openings in the company that will need to be filled, and may create resentment among other employees who are not promoted. External recruiting, on the other hand, brings new ideas and expertise, increases workforce diversity, and may bring new information about the competition and the marketplace. Disadvantages of external recruiting plague many organizations also. For example, external recruiting may create training costs and temporary

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efficiency loss, may decrease morale among current employees, and may create friction regarding salary differences if the outsider is more highly paid. 2. Why is the formal training of workers so important to most employers? Why dont employers simply let people learn about their jobs as they perform them? Employers need to ensure that workers are performing their jobs correctly and efficiently in order to prevent costly errors. Also, in order to be socially responsible to employees, suppliers, shareholders, and customers, firms must train their workers in the latest technology, the most efficient production processes, and the nature of the industry. 3. What different forms of compensation do firms typically use to attract and keep productive workers? Individual incentives may include bonuses, merit pay, or pay-forperformance. Companywide incentives include profit-sharing plans, gainsharing plans, and pay-for-knowledge plans. Mandatory benefits include Social Security and workers compensation insurance, while optional benefits include health and life insurance, stock purchase plans, retirement programs, and family-friendly benefits such as flextime, subsidized cafeterias, subsidized or free childcare, sick days, vacations, employee recognition awards, etc. 4. Why do workers in some companies unionize whereas workers in others do not? Compensation, working conditions, and the demographics of the workforce influence whether or not workers opt to unionize. Questions for Analysis 5. What are your views on drug testing in the workplace? What would you do if your employer asked you to submit to a drug test? Answers will vary, but should include discussion of the impact of drug abuse on the workplace and issues of employee privacy. 6. Workers at Ford, GM, and Chrysler are represented by the United Auto Workers (UAW). However, the UAW has been unsuccessful in its attempts to unionize U.S. workers employed at Toyota, Nissan, and Honda plants in the United States. Why do you think this is so?

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These workers, with company headquarters in Japan, may feel they have satisfactory wages, adequate benefits, satisfactory working conditions, and reasonable job security. 7. What training do you think you are most likely to need when you finish school and start your career? Students answers will vary widely. 8. How much will benefit consideration affect your choice of an employer after graduation? Answers will vary. Application Exercises 9. Interview an HR manager at a local company. Focus on a position for which the firm is currently recruiting applicants and identify the steps in the selection process. Answers will vary based on the company and the position. 10. Interview the managers of two local companies, one unionized and one non-unionized. Compare the wage and salary levels, benefits, and working conditions of employees at the two firms. Answers will vary. Answers to Exercising Your Ethics 1. What are the ethical issues in this situation? The key ethical issue is dishonesty your manager is encouraging you to deliberately mislead employees and to actively interfere with organizing activities. Furthermore, terminating a key organizer is blatant intimidation. All of these efforts are clearly at odds with social responsibility to employees. An underlying ethical issue is the threat of moving jobs abroad, which presents a conflict among social responsibility to employees, and social responsibility to customers and investors. 2. What are the basic arguments for and against extreme measures to fight unionization efforts? Basic arguments for extreme measures to fight unionization include the need to limit spending on human resources. Basic arguments against extreme measures include the questionable ethics of this approach, and the

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negative impact on morale, which could negatively impact efficiency and effectiveness. 3. What do you think most managers would do in this situation? What would you do? Answers will vary. Answers to Building Your Business Skills 1. Based on everything you learned, are you sympathetic to the union movement? Answers will vary. 2. Are the union members you spoke with satisfied or dissatisfied with their unions efforts to achieve better working conditions, higher wages, and improved benefits? Students answers will vary. 3. What is the unions role when layoffs occur? Answers will vary. 4. Based on what you learned, do you think the union movement will stumble or thrive in the years ahead? Answers will vary. Classroom Activities 1. Ask students to work in groups of four for this activity. Assign any two jobs to the groups, asking them to write a job analysis and job description for each job. For example, the instructor may assign any of the following jobs: assembly-line supervisor, human resource manager, purchasing clerk, forklift driver, short order cook, etc. Some students may or may not be familiar with the jobs you have assigned, but each group can rely on the input from all of its members in order to complete the activity. After each group has completed its job analyses and job descriptions, open the class up for discussion to allow each group to determine what may have been missed or omitted in their work. 2. Instructors may want to plan this activity in advance. Divide the class into 3-member groups. Each group is responsible for presenting an interactive

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training session to the rest of the class. The training session can involve any activity, such as how to perform a card trick, how to roll out a pie crust, how to perform a craft, etc. The purpose of the activity is to illustrate the importance of hands-on activity in a training session, as well as the importance of proper communication. After the activity is complete, ask students in the audience to critique the communication effectiveness of the presenting group.

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