The field of human resources (HR) management encompasses all the tasks involved in attracting, developing, and supporting an organization’s staff, as well as maintaining a safe working environment that meets legal requirements and ethical expectations.
Managers in every organization face an ongoing array of staffing challenges, including aligning the workforce with organizational needs, fostering employee loyalty, adjusting workloads and monitoring for employee burnout, and helping employees balance their work and personal lives.
The concern over workloads is one of the factors behind the growing interest in work–life balance, the idea that employees, managers, and entrepreneurs need to balance the competing demands of their professional and personal lives. Many companies are trying to make it easier for employees to juggle multiple responsibilities with on-site day-care facilities, flexible work schedules, and other options designed to improve quality of work life (QWL).
Careful attention to each phase of this sequence helps ensure that a company will have the right human resources when it needs them.
Through the process of job analysis, employers try to identify the nature and demands of each position within the firm as well as the optimal employee profile to fill each position. Once job analysis has been completed, the HR staff develops a job description, a formal statement summarizing the tasks involved in the job and the conditions under which the employee will work. In most cases, the staff will also develop a job specification, which identifies the type of personnel a job requires, including the skills, education, experience, and personal attributes that candidates need to possess.
To forecast demand for the numbers and types of employees who will be needed at various times, HR managers weigh (1) forecasted sales revenues; (2) the expected turnover rate, the percentage of the workforce that leaves every year; (3) the current workforce’s skill level, relative to the company’s future needs; (4) impending strategic decisions; (5) changes in technology or other business factors that could affect the number and type of workers needed; and (6) the company’s current and projected financial status.
To ensure a steady supply of experienced employees for new opportunities and to maintain existing operations, successful companies focus heavily on employee retention.
In addition to overall workforce levels, every company has a number of employees and managers who are considered so critical to the company’s ongoing operations that HR managers work with top executives to identify potential replacements in the event of the loss of any of these people, a process known as succession planning.
If existing employees cannot be tapped for new positions, the HR team looks outside the company for people to join as either permanent employees or contingent employees who fulfill many of the responsibilities of regular employees but on a temporary basis. Roughly a third of the U.S. workers fall in this broad category of contractors and freelancers, and all signs are that this portion will continue to grow.
Flextime is a scheduling system that allows employees to choose their own hours, within certain limits. Telecommuting working from home or another location using electronic communications to stay in touch with colleagues, suppliers, and customers. Job sharing which lets two employees share a single full-time job and split the salary and benefits.
Although the concept is often framed in terms of ethnic background, a broader and more useful definition of diversity includes “all the characteristics and experiences that define each of us as individuals.”
Lumping people into generations is an imprecise science at best, but it helps to know the labels commonly applied to various age groups and to have some idea of their broad characteristics. (Note that these labels are not official, and there is no general agreement on when some generations start and end.)
Perceptions, roles, and treatment of men and women in the workplace has been a complex and at times contentious issue. The Equal Pay Act of 1963 mandated equal pay or comparable work, and the Civil Rights Act of 1964 made it illegal for employers to practice sexism, or discrimination on the basis of gender. The United States has made important strides toward gender equity since then, but significant issues remain. For example, the Equal Employment Opportunity Commission (EEOC) fields 25,000 to 30,000 complaints a year regarding gender discrimination.
Although women now hold half of all managerial positions, that ratio shrinks dramatically the higher you look in an organization. For example, among the 500 largest U.S. corporations, fewer than 5 percent have women as CEOs. A lack of opportunities to advance into the top ranks is often referred to as the glass ceiling, implying that one can see the top but can’t get there. The glass ceiling is an important issue for both women and minorities.
Beyond pay and promotional opportunities, many working women also have to deal with sexual harassment, defined as either an obvious request for sexual favors with an implicit reward or punishment related to work, or the more subtle creation of a sexist environment in which employees are made to feel uncomfortable by lewd jokes, remarks, or gestures. Even though male employees may also be targets of sexual harassment and both male and female employees may experience same-sex harassment, sexual harassment of female employees by male colleagues continues to make up the majority of reported cases. Most corporations now publish strict policies prohibiting harassment, both to protect their employees and to protect themselves from lawsuits.
To respond to the many challenges—and to capitalize on the business opportunities offered by both diverse marketplaces and diverse workforces—companies across the country are finding that embracing diversity in the richest sense is simply good business. In response, thousands of U.S. companies have established diversity initiatives, which can include such steps as contracting with more suppliers owned by women and minorities, targeting a more diverse customer base, and supporting the needs and interests of a diverse workforce.
The employment life cycle starts with recruiting, the process of attracting suitable candidates for an organization’s jobs. The recruiting function is often judged by a combination of criteria known as quality of hire, which measures how closely incoming employees meet the company’s needs.
Recruiters use a variety of resources, including internal searches, advertising, union hiring halls, college campuses and career offices, trade shows, headhunters (outside agencies that specialize in finding and placing employees), and social networking technologies. Exhibit 11.4 illustrates the general process that companies go through to hire new employees.
HR managers have the unpleasant responsibility of termination—permanently laying off employees because of cutbacks or firing employees for poor performance or other reasons. Layoffs are the termination of employees for economic or business reasons unrelated to employee performance. Rightsizing is a euphemism used to suggest that an organization is making changes in the workforce to match its business needs more precisely. Although rightsizing usually involves downsizing the workforce, companies sometimes add workers in some areas while eliminating jobs in others.
Companies can face two dramatically different challenges regarding retiring employees. For companies that are short-handed, the challenge is to persuade older employees to delay retirement. Conversely, companies with too many employees may induce employees to depart ahead of scheduled retirement by offering them early retirement, using financial incentives known as worker buyouts.
In the past, mandatory retirement policies forced people to quit working as soon as they turned a certain age. However, the Age Discrimination in Employment Act now outlaws mandatory retirement based on age alone, unless an employer can demonstrate that age is a valid qualification for “normal operation of the particular business.
How do employees (and their managers) know whether they are doing a good job? How can they improve their performance? What new skills should they learn? Managers attempt to answer these questions by conducting performance appraisals, or performance reviews, to objectively evaluate employees according to set criteria. The ultimate goal of performance appraisals is not to judge employees but rather to guide them in improving their performance.
In addition to formal, periodic performance evaluations, many companies evaluate some workers’ performance continuously, using electronic performance monitoring (EPM), sometimes called computer activity monitoring.
Many performance appraisals require the employee to be rated by several people (including more than one supervisor and perhaps several coworkers). This practice further promotes fairness by correcting for possible biases. The ultimate in multidimensional reviews is the 360-degree review, in which a person is given feedback from subordinates (if the employee has supervisory responsibility), peers, superiors, and possibly customers or outside business partners. The multiple viewpoints can uncover weaknesses that employees and even their direct managers might not be aware of, as well as contributions and achievements that might have been overlooked in normal reviews.
Training usually begins with orientation programs designed to ease the new hire’s transition into the company and to impart vital knowledge about the organization and its rules, procedures, and expectations. Effective orientation programs help employees become more productive in less time, help eliminate confusion and mistakes, and can significantly increase employee retention rates.
Training and other forms of employee development continue throughout the employee’s career in most cases. Many HR departments maintain a skills inventory, which identifies both the current skill levels of all the employees and the skills the company needs in order to succeed. (If your employer doesn’t maintain one for you, be sure to maintain your own skills inventory so you can stay on top of developments and expectations in your field.)
For many companies, payroll is the single biggest expense, and the cost of benefits, particularly health care, continues to climb. Consequently, compensation, the combination of direct payments such as wages or salary and indirect payments through employee benefits, is one of the HR manager’s most significant responsibilities.
Most employees receive the bulk of their compensation in the form of a salary, if they receive a fixed amount per year, or wages, if they are paid by the unit of time (hourly, daily, or weekly) or by the unit of output (often called “getting paid by the piece” or “piecework”).
For both salaried and wage-earning employees, one type of incentive compensation is a bonus, a payment in addition to the regular wage or salary. Paying performance-based bonuses has become an increasingly popular approach to compensation as more companies shift away from automatic annual pay increases.
In contrast to bonuses, commissions are a form of compensation that pays employees in sales positions based on the level of sales they make within a given time frame.
Employees may be rewarded for staying with a company and encouraged to work harder through profit sharing, a system in which employees receive a portion of the company’s profits.
Similar to profit sharing, gain sharing ties rewards to profits (or cost savings) achieved by meeting specific goals such as quality and productivity improvement.
A variation of gain sharing, pay for performance requires employees to accept a lower base pay but rewards them with bonuses, commissions, or stock options if they reach agreed-upon goals. To be successful, this method needs to be complemented with effective feedback systems that let employees know how they are performing throughout the year.
Another approach to compensation being explored by some companies is knowledge-based pay, also known as competency-based pay or skill-based pay, which is tied to employees’ knowledge and abilities rather than to their job per se. More than half of all large U.S. companies now use some variation on this incentive
Companies regularly provide employee benefits—elements of compensation other than wages, salaries, and incentives. These benefits may be offered as either a preset package—that is, the employee gets whatever insurance, paid holidays, pension plan, and other benefits the company sets up—or as flexible plans, sometimes known as cafeteria plans (so called because of the similarity to choosing items in a cafeteria). The benefits most commonly provided by employers are insurance, retirement benefits, employee stock-ownership plans, stock options, and family benefits.
Many employers offer retirement plans, which are designed to provide continuing income after an employee retires. Company-sponsored retirement plans can be categorized as either defined-benefit plans, in which companies specify how much they will pay employees upon retirement, or defined-contribution plans, in which companies specify how much they will put into the retirement fund (by matching employee contributions, for instance), without guaranteeing specific payout levels during retirement.
Defined-contribution plans are similar to savings plans; they provide a future benefit based on annual employer contributions, voluntary employee matching contributions, and accumulated investment earnings. Employers can choose from several types of defined-contribution plans, the most common being the 401(k) plan
Roughly 10 million U.S. employees are now enrolled in an employee stock-ownership plan (ESOP), in which a company places some or all of its stock in trust, with each eligible employee entitled to a certain portion. (Most ESOPs are in closely held corporations whose stock isn’t available for sale to the public.) Many companies report that ESOPs help boost employee productivity because workers perceive a direct correlation between their efforts and the value of the company stock price.
One method for tying employee compensation to company performance is the stock option plan. Stock options grant employees the right to purchase a set number of shares of the employer’s stock at a specific price, called the grant or exercise price, during a certain time period. Options typically vest over a number of years, meaning that employees can purchase a prorated portion of the shares every year until the vesting period is over (at which time they can purchase all the shares they are entitled to).
Employers offer a variety of other benefits in addition to those just discussed. Some of them are mandated by government regulation and some are offered voluntarily to attract and support employees. Here are some of the most common benefits
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