MINNEAPOLIS, MN Human Resource Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

Human Resource Management

Human Resource Management

[Author removed at request of original publisher]



Human Resource Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

This book was produced using Pressbooks.com, and PDF rendering was done by PrinceXML.


Publisher Information viii

Author Bio ix

Acknowledgments x

Dedications xii

Preface xiii

Chapter 1: The Role of Human Resources

1.1 What Is Human Resources? 2 1.2 Skills Needed for HRM 11 1.3 Today’s HRM Challenges 15 1.4 Cases and Problems 26

Chapter 2: Developing and Implementing Strategic HRM Plans

2.1 Strategic Planning 29 2.2 Writing the HRM Plan 40 2.3 Tips in HRM Planning 48 2.4 Cases and Problems 52

Chapter 3: Diversity and Multiculturalism

3.1 Diversity and Multiculturalism 55 3.2 Diversity Plans 61 3.3 Multiculturalism and the Law 68 3.4 Cases and Problems 77

Chapter 4: Recruitment

4.1 The Recruitment Process 80 4.2 The Law and Recruitment 89 4.3 Recruitment Strategies 95 4.4 Cases and Problems 107

Chapter 5: Selection

5.1 The Selection Process 111 5.2 Criteria Development and Résumé Review 115

5.3 Interviewing 120 5.4 Testing and Selecting 128 5.5 Making the Offer 134 5.6 Cases and Problems 137

Chapter 6: Compensation and Benefits

6.1 Goals of a Compensation Plan 141 6.2 Developing a Compensation Package 144 6.3 Types of Pay Systems 148 6.4 Other Types of Compensation 165 6.5 Cases and Problems 177

Chapter 7: Retention and Motivation

7.1 The Costs of Turnover 181 7.2 Retention Plans 187 7.3 Implementing Retention Strategies 201 7.4 Cases and Problems 212

Chapter 8: Training and Development

8.1 Steps to Take in Training an Employee 217 8.2 Types of Training 223 8.3 Training Delivery Methods 230 8.4 Designing a Training Program 237 8.5 Cases and Problems 253

Chapter 9: Successful Employee Communication

9.1 Communication Strategies 257 9.2 Management Styles 269 9.3 Cases and Problems 277

Chapter 10: Managing Employee Performance

10.1 Handling Performance 280 10.2 Employee Rights 296 10.3 Cases and Problems 307

Chapter 11: Employee Assessment

11.1 Performance Evaluation Systems 312

11.2 Appraisal Methods 319 11.3 Completing and Conducting the Appraisal 332 11.4 Cases and Problems 341

Chapter 12: Working with Labor Unions

12.1 The Nature of Unions 347 12.2 Collective Bargaining 359 12.3 Administration of the Collective Bargaining Agreement 365 12.4 Cases and Problems 369

Chapter 13: Safety and Health at Work

13.1 Workplace Safety and Health Laws 373 13.2 Health Hazards at Work 382 13.3 Cases and Problems 400

Chapter 14: International HRM

14.1 Offshoring, Outsourcing 404 14.2 Staffing Internationally 418 14.3 International HRM Considerations 423 14.4 Cases and Problems 440

Please share your supplementary material! 443

Publisher Information

Human Resource Management is adapted from a work produced and distributed under a Creative Commons license (CC BY-NC-SA) in 2011 by a publisher who has requested that they and the original author not receive attribution. This adapted edition is produced by the University of Minnesota Libraries Publishing through the eLearning Support Initiative.

This adaptation has reformatted the original text, and replaced some images and figures to make the resulting whole more shareable. This adaptation has not significantly altered or updated the original 2011 text. This work is made available under the terms of a Creative Commons Attribution-NonCommercial-ShareAlike license.

Author Bio

Human Resource Management is adapted from a work produced by a publisher who has requested that they and the original author not receive attribution. This adapted edition is produced by the University of Minnesota Libraries Publishing through the eLearning Support Initiative.

Unnamed Author holds a master of business administration from City University of Seattle and a doctorate of business administration from Argosy University. Unnamed Author is a tenured professor at Shoreline Community College and teaches in the business department. She also teaches graduate and undergraduate management and HRM courses for The University of Phoenix–Western Washington Campus. Before becoming a professor, Unnamed Author worked for several small and large organizations in management and operations. She is also an entrepreneur who has performed consulting work for companies such as Microsoft.

Unnamed Author has authored two books for McGraw-Hill and numerous supplemental materials. In her free time, she enjoys hiking, backpacking, scuba diving, and snowshoeing. She lives in Seattle, Washington, with her husband and her two rescue dogs.


I would like to thank each and every one of the reviewers for their contributions to this book. Their ideas, feedback, and suggestions make this book one of the most innovative HRM books on the market, and I thank them personally for their insight.

• Carol Decker, Tennessee Wesleyan College

• Melissa Gruys, Wright State University

• Lisa Stafford, Fairfield University

• Fred Kellinger, Penn State University–Beaver Campus

• Avan Jassawalla, SUNY Geneseo

• Cheryl Adkins, Longwood University

• James Tan, St. Cloud State University

• Niclas Erhardt, Maine Business School

• Valerie Wallingford, Bemidji State University

• Stanley Ross, Bridgewater State University

• Jack Walker, Texas Tech University

• Howard Stanger, Canisius College

• Tracy Porter, Cleveland State University

• Shirish Grover, College of Business, Ferris State University

• Josh Daspit, University of North Texas

• Robin Hoggins-Blake, Palm Beach State College

• Carlton R. Raines, Lehigh Carbon Community College

• Kees Rietsema, Embry-Riddle Aeronautical University

• Gemmy Allen, North Lake College

• Kim Lukaszewski, SUNY New Paltz

• Eddy Ng, Dalhousie University

• Adib Birkland, The City College of New York

• Allison Pratt, Saddleback College/Brandman University

• Christina Reis, University of New Haven, College of Business

I am grateful to Michael Boezi for bringing me on the FWK author team. His enthusiasm for the FWK model and his vision is inspiring. Jenn Yee’s ability to get me started in the right direction and Melissa Yu’s follow-through,

lightning-fast e-mail responses, amazingly good judgment, and quiet encouragement is ultimately what created the innovative finished product. I would also like to thank the talented people at FWK whom I don’t know, who quietly work in the background, such as the rendering people, technical people, and others, who I know put a great deal of effort into the final product and are a key component to FWK’s success. Also, thank you to Danielle Loparco for editing my first round of work.

I would like to thank my friends and family, who have supported me through this process. This list is long, but I hope they know who they are. I would like to specifically mention my husband, Alain, for understanding the late nights and long days, and also for being my best friend. My parents, Emanuele and JoAnn, for their constant encouragement and support of me professionally and personally not only today, but always. Lastly, thank you to the professors who adopt this book and support this new model of textbooks, which inevitably supports our students’ educational goals and success.

Acknowledgments xi


I would like to dedicate the book to the students who will be using it. I wish you future career success and hope you never stop learning.


Thank you for using Human Resource Management! Whether you are an instructor or student, by using this book you are part of the revolution. As instructors, the ability to customize this book by changing, adding, deleting, and moving text around, we are leveraging technology while making it beneficial (and cheaper!) for our students. If you are a student, I think you will appreciate the conversational style and features designed to make reading the book engaging.

Competing books are focused on the academic part of HRM, which is necessary in a university or college setting. However, the goal with this book is not only to provide the necessary academic background information but also to present the material with a practitioner’s focus on both large and small businesses. While the writing style is clear and focused, we don’t feel jargon and ten-dollar words are necessary to making a good textbook. Clear and concise language makes the book interesting and understandable (not to mention more fun to read) to the future HRM professional and manager alike.

It is highly likely that anyone in business will have to take on an HRM role at some point in their careers. For example, should you decide to start your own business, many of the topics discussed will apply to your business. This is the goal of this book; it is useful enough for the HRM professional, but the information presented is also applicable to managers, supervisors, and entrepreneurs. Besides these differences, other key differences include the following:

• This book utilizes a technology focus and shows how HRM activities can be leveraged using technology.

• We have also included a chapter on communication and information about motivational theories. Since communication is a key component of HRM, it makes sense to include it as a full chapter in this book. Human motivation is one of the cornerstones of HR, which is why we include information on this as well.

• Rather than dividing certain chapters, we have combined some chapters to provide the entire picture of related topics at once. For example, in Chapter 6 “Compensation and Benefits” we discuss both pay and benefits, instead of separating them into two chapters.

• The exercises and cases utilize critical thinking skills and teamwork to help the points come through.

• The Fortune 500 boxes focus on the concepts and how large companies apply these concepts. However, we still focus on small- and medium-sized businesses.

• Practical application is the focus of this book. We want you to be able to read the book and apply the concepts. We feel this approach makes the material much more useful, instead of only academic.

• We use several YouTube videos in each chapter.

• The author introduces each chapter in a video format.

• How Would You Handle This? situations in the book utilize critical-thinking skills to think about ethical situations in HRM. Each situation also includes audio examples on how an HRM professional

or manager could handle the situation.

These features and pedagogical components make the book easy to read and understand while still maintaining an academic focus.


The organization of the book is intuitive. The book follows the process HR professionals or managers will go through as they ensure they have the right employees at the right time to make sure the company is productive and profitable.

• In Chapter 1 “The Role of Human Resources”, we discuss the role of human resources in business and why, in a constantly changing world, the HRM function is key to a successful business.

• In Chapter 2 “Developing and Implementing Strategic HRM Plans”, we discuss HR strategic plans and how those plans should be developed. Strategic planning is necessary to tie company objectives with HRM objectives, but it is also important to have a “people plan” and address the ever-changing work environment.

• In Chapter 3 “Diversity and Multiculturalism”, we discuss the diversity aspect of business and why multiculturalism is so important to ensuring a healthy organization.

• In Chapter 4 “Recruitment”, recruitment, the process for getting the most qualified individuals with diverse backgrounds, is the focus. We discuss some of the important laws to consider when hiring people and methods to recruit highly qualified individuals.

• In Chapter 5 “Selection”, we talk about the selection process. Once you have recruited people, you must organize the process that selects the best candidate. This can include interviewing, employment tests, and selecting the criteria by which candidate performance will be measured.

• In Chapter 6 “Compensation and Benefits”, we discuss how you compensate individuals through pay, benefits, vacation time, and other incentives.

• Chapter 7 “Retention and Motivation” discusses the talent management approach—that is, how you can retain the best employees through retention strategies and motivation techniques.

• The training and development aspect of HRM is likely one of the most important aspects of HRM. After you have gone through the time and effort to recruit, select, and compensate the employee, you will need to ensure career growth through continuing training, which is the focus of Chapter 8 “Training and Development”.

• Since communication is a key component to any and all aspects of HRM, we have a detailed discussion on communication and management style. While some of the information may be covered in other classes on topics in which people (such as HRM) are the focus, a review on communication is important. In Chapter 9 “Successful Employee Communication”, we also discuss management styles, since this is an important form of communication, and in fact, many people leave organizations because of their managers.

xiv Human Resource Management

• Chapter 10 “Managing Employee Performance” discusses some of the possible performance issues and how to handle those performance issues. We also discuss employee discipline and how to handle layoffs.

• Chapter 11 “Employee Assessment” focuses on how to assess performance of the employee. We address performance evaluation systems and methods.

• Most HRM professionals will work with unions, the focus of Chapter 12 “Working with Labor Unions”. The unionization process, how to negotiate union contracts, and history of labor unions are discussed.

• Employee safety and health are necessary to a productive workplace. Chapter 13 “Safety and Health at Work” addresses some of the health and safety issues, such as drug use, carpal tunnel, and other issues relating to keeping employees healthy at work.

• Finally, Chapter 14 “International HRM” looks at the differences between international HRM and domestic HRM. We discuss the recruitment, selection, and retention components of international HRM.


Each chapter contains several staple and innovative features as follows:

• Opening situation: The opening situation is used to show how the chapter topics have real-life applications for HR professionals and managers. The short openings are straightforward and show the practical application of the concepts.

• Learning objectives by section: Instead of a long list of learning objectives at the front of the chapter, we divide the learning objectives by section and offer exercises and key terms for every section in the book. This is a great way to “self-check” and make sure the key concepts are learned before moving to the next section.

• How Would You Handle This? situation: These situations are created to utilize critical-thinking skills that are necessary for strategic HRM. The situations are ethics-based in nature and also include audio that discusses the situation.

• Introduction video: Every chapter includes an introductory video by the author, discussing the importance of the chapter to HRM.

• YouTube videos: Since the book is technology focused, it makes sense to use the free technology available to cement many of the concepts. Each chapter has at least two YouTube videos, with some chapters including up to five or six.

• Figures: There are numerous figures in every chapter. I think you will find they are clear and focused but are not a series of endless graphs and charts of statistics that are interesting but of little value to learning the key strategic concepts in HRM.

• Case study: The case study at the end of every chapter is a good way to make sure students have learned the material. The case presents real-world situations and utilizes HRM knowledge and skills to

Preface xv

complete. The case studies are often tied to not only the current chapter but also past chapters to ensure continued application of past concepts.

• Team activities: The team activities will sometimes require students to work in small groups but may also involve the entire class. These activities are designed to promote communication, teamwork, and of course, the specific HRM concept, which are all valuable skills in HRM.

xvi Human Resource Management

Chapter 1: The Role of Human Resources

Human Resource Management Day to Day

You have just been hired to work in the human resource department of a small company. You heard about the job through a conference you attended, put on by the Society for Human Resource Management (SHRM). Previously, the owner of the company, Jennifer, had been doing everything related to human resource management (HRM). You can tell she is a bit critical about paying a good salary for something she was able to juggle all on her own. On your first day, you meet the ten employees and spend several hours with the company owner, hoping to get a handle on which human resource processes are already set up.

Shortly after the meeting begins, you see she has a completely different perspective of what HRM is, and you realize it will be your job to educate her on the value of a human resource manager. You look at it as a personal challenge—both to educate her and also to show her the value of this role in the organization.

First, you tell her that HRM is a strategic process having to do with the staffing, compensation, retention, training, and employment law and policies side of the business. In other words, your job as human resources (HR) manager will be not only to write policy and procedures and to hire people (the administrative role) but also to use strategic plans to ensure the right people are hired and trained for the right job at the right time. For example, you ask her if she knows what the revenue will be in six months, and Jennifer answers, “Of course. We expect it to increase by 20 percent.” You ask, “Have you thought about how many people you will need due to this increase?” Jennifer looks a bit sheepish and says, “No, I guess I haven’t gotten that far.” Then you ask her about the training programs the company offers, the software used to allow employees to access pay information online, and the compensation policies. She responds, “It looks like we have some work to do. I didn’t know that human resources involved all of that.” You smile at her and start discussing some of the specifics of the business, so you can get started right away writing the strategic human resource management plan.

1.1 What Is Human Resources?

Learning Objectives

1. Explain the role of HRM in organizations.

2. Define and discuss some of the major HRM activities.

Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities.

What Is HRM?

Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times” (Frasch, et. al., 2010).

It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.

Human Resource Recall

Have you ever had to work with a human resource department at your job? What was the interaction like? What was the department’s role in that specific organization?

The Role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.


You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:

1. Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations.

2. Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.

3. Recruitment. This involves finding people to fill the open positions.

4. Selection. In this stage, people will be interviewed and selected, and a proper compensation package will be negotiated. This step is followed by training, retention, and motivation.

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following:

• Discipline process policy

• Vacation time policy

• Dress code

• Ethics policy

• Internet usage policy

1.1 What Is Human Resources? 3

These topics are addressed further in Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and Motivation”, Chapter 8 “Training and Development”, and Chapter 9 “Successful Employee Communication”.

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:

• Pay

• Health benefits

• 401(k) (retirement plans)

• Stock purchase plans

• Vacation time

• Sick leave

• Bonuses

• Tuition reimbursement

Since this is not an exhaustive list, compensation is discussed further in Chapter 6 “Compensation and Benefits”.


Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons:

1. Issues around the job they are performing

2. Challenges with their manager

3. Poor fit with organizational culture

4. Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010). As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment” discuss some strategies to retain the best employees based on these four factors.

4 Human Resource Management

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following:

• Job skills training, such as how to run a particular computer program

• Training on communication

• Team-building activities

• Policy and legal training, such as sexual harassment training and ethics training

We address each of these types of training and more in detail in Chapter 8 “Training and Development”.

Dealing with Laws Affecting Employment

Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:

• Discrimination laws

• Health-care requirements

• Compensation requirements such as the minimum wage

• Worker safety laws

• Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection requirements and ensure the workplace is meeting both federal and union standards. Worker protection issues might include the following:

• Chemical hazards

1.1 What Is Human Resources? 5

• Heating and ventilation requirements

• Use of “no fragrance” zones

• Protection of private employee information

We take a closer look at these issues in Chapter 12 “Working with Labor Unions” and Chapter 13 “Safety and Health at Work”.

Figure 1.1

Caption: Knowing the law regarding worker protection is generally the job of human resources. In some industries it is extremely

important; in fact, it can mean life or death.

ReSurge International – Tom Davenport Operating On A Patient – CC BY-NC-ND 2.0.


Besides these major roles, good communication skills and excellent management skills are key to successful human resource management as well as general management. We discuss these issues in Chapter 9 “Successful Employee Communication”.

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may

6 Human Resource Management

affect the organization. Outside forces, or external factors, are those things the company has no direct control over; however, they may be things that could positively or negatively impact human resources. External factors might include the following:

1. Globalization and offshoring

2. Changes to employment law

3. Health-care costs

4. Employee expectations

5. Diversity of the workforce

6. Changing demographics of the workforce

7. A more highly educated workforce

8. Layoffs and downsizing

9. Technology used, such as HR databases

10. Increased use of social networking to distribute information to employees

For example, the recent trend in flexible work schedules (allowing employees to set their own schedules) and telecommuting (allowing employees to work from home or a remote location for a specified period of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues, so they can develop policies that meet not only the needs of the company but also the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with this bill has huge implications for HR. For example, a company with more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care insurance to their employees (Cappelli, 2010). Because health-care insurance will be mandatory, cost concerns as well as using health benefits as a recruitment strategy are big external challenges. Any manager operating without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also mean breaking the law, which has a concerning set of implications as well.

Figure 1.2

1.1 What Is Human Resources? 7

An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make

strategic decisions based on changes in the external environment. To develop this understanding, reading various publications is


One way managers can be aware of the outside forces is to attend conferences and read various articles on the web. For example, the website of the Society for Human Resource Management, SHRM Online1, not only has job postings in the field but discusses many contemporary human resource issues that may help the manager make better decisions when it comes to people management. In Section 1.3 “Today’s HRM Challenges”, we go into more depth about some recent external issues that are affecting human resource management roles. In Section 1.1.2 “The Role of HRM”, we discuss some of the skills needed to be successful in HRM.

Figure 1.3

8 Human Resource Management

Most professionals agree that there are seven main tasks HRM professionals perform. All these need to be considered in relation to

external and outside forces.

Key Takeaways

• Capital includes all resources a company uses to generate revenue. Human resources or the people working in the organization are the most important resource.

• Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees.

• There are seven main responsibilities of HRM managers: staffing, setting policies, compensation and benefits, retention, training, employment laws, and worker protection. In this book, each of these major areas will be included in a chapter or two.

• In addition to being concerned with the seven internal aspects, HRM managers must keep up to date with changes in the external environment that may impact their employees. The trends toward flexible schedules and telecommuting are examples of external aspects.

• To effectively understand how the external forces might affect human resources, it is important for the HR manager to read the HR literature, attend conferences, and utilize other ways to stay up to date with new laws, trends, and policies.

1.1 What Is Human Resources? 9


1. State arguments for and against the following statement: there are other things more valuable in an organization besides the people who work there.

2. Of the seven tasks an HR manager does, which do you think is the most challenging? Why?

1Society for Human Resource Management, accessed August 18, 2011, http://www.shrm.org/Pages/default.aspx.


Cappelli, P., “HR Implications of Healthcare Reform,” Human Resource Executive Online, March 29, 2010, accessed August 18, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509.

Frasch, K. B., David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Human Resource Executive Online, June 30, 2009, accessed September 24, 2010, http://www.hreonline.com/HRE/ story.jsp?storyId=227738167.

Rivenbark, L., “The 7 Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10, 2010, http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406.

10 Human Resource Management

1.2 Skills Needed for HRM

Learning Objectives

1. Explain the professional and personal skills needed to be successful in HRM.

2. Be able to define human resource management and the certifications that can be achieved in this profession.

One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource department.

The first skill needed is organization. The need for this skill makes sense, given that you are managing people’s pay, benefits, and careers. Having organized files on your computer and good time-management skills are crucial for success in any job, but especially if you take on a role in human resources.

Like most jobs, being able to multitask—that is, work on more than one task at a time—is important in managing human resources. A typical person managing human resources may have to deal with an employee issue one minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task or one part of the business, human resources focuses on all areas of the business, where multitasking is a must.

As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most important skills for achieving success at any job. Being able to manage a variety of personalities, deal with conflict, and coach others are all in the realm of people management. The ability to communicate goes along with people skills. The ability to communicate good news (hiring a new employee), bad news (layoffs), and everything in between, such as changes to policy, makes for an excellent manager and human resource management (HRM) professional.

Keys to a successful career in HRM or management include understanding specific job areas, such as managing the employee database, understanding employment laws, and knowing how to write and develop a strategic plan that aligns with the business. All these skills will be discussed in this book.

A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far in advance and look at trends that could affect the environment in which the business is operating. Too often, managers focus on their own area and not enough on the business as a whole. The strategic HR professional is able to not only work within his or her area but also understand how HR fits into the bigger picture of the business.

Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that examines the moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics

standards within the organization. Many HR managers are required to work with highly confidential information, such as salary information, so a sense of ethics when managing this information is essential. We discuss ethics from the organizational perspective in Section 1.1.2 “The Role of HRM”.

Dilbert and the Evil HR Director

” href=”http://www.youtube.com/watch?v=sCKOpJQI6Iw” class=”replaced-iframe”>(click to see video)

Ethics is perhaps one of the most important aspects to being a great HR professional. This humorous video shows how unethical behavior can undermine motivation at work.

Human Resource Recall

Think of your current skills. Are there personal or professional skills you would like to work on?

Finally, while we can list a few skills that are important, understanding the particular business, knowing the business strategy, and being able to think critically about how HR can align itself with the strategy are ways to ensure HR departments are critical parts of the business. HR is a specialized area, much like accounting or finance. However, many individuals are placed in HR roles without having the specific knowledge to do the job. Oftentimes people with excellent skills are promoted to management and then expected (if the company is small) to perform recruiting, hiring, and compensation tasks. This is the reason we will refer to management and HR management interchangeably throughout the chapters. In addition, these skills are important for HRM professionals and managers alike.

Having said that, for those of you wanting a career in HRM, there are three exams you can take to show your mastery of HRM material:

1. Professional in Human Resources (PHR). To take this exam, an HR professional must have at least two years’ experience. The exam is four hours long and consists of 225 multiple-choice questions in a variety of areas. Twelve percent of the test focuses on strategic management, 26 percent on workforce planning, 17 percent on human resource development, 16 percent on rewards, 22 percent on employee and labor relations, and 7 percent on risk management. The application process for taking the exam is given on the Human Resource Certification Institute website at http://www.hrci.org.

2. Senior Professional in Human Resources (SPHR). This exam is designed for HR professionals who focus on designing and planning, rather than actual implementation. It is recommended that the person taking this exam has six to eight years of experience and oversees and manages an HR department. In this test, the greater focus is on the strategic aspect of HRM.

3. Global Professional in Human Resources (GPHR). This exam is for HR professionals who perform many of their tasks on a global level and whose companies often work across borders. This exam is three hours long, with 165 multiple-choice questions. A person with two years of professional experience can take the certification test. However, because the test has the international aspect, someone who designs HR-related programs and processes to achieve business goals would be best

12 Human Resource Management

suited to earn this certification.

The benefits of achieving certifications are great. In addition to demonstrating the abilities of the HR professional, certification allows the professional to be more marketable in a very competitive field.

Figure 1.4

Caption: Perhaps one of the most important skills in any kind of management is the ability to communicate.

Baltic Development Forum – Kristovskis-meeting-41.jpg – CC BY 2.0.

Most companies need a human resource department or a manager with HR skills. The industries and job titles are so varied that it is possible only to list general job titles in human resources:

1. Recruiter

2. Compensation analyst

3. Human resources assistant

4. Employee relations manager

5. Benefits manager

6. Work-life coordinator

7. Training and development manager

8. Human resources manager

9. Vice president for human resources

1.2 Skills Needed for HRM 13

This is not an exhaustive list, but it can be a starting point for research on this career path.

People Skills in HR

” href=”http://www.youtube.com/watch?v=L1Jfo0Iym94″ class=”replaced-iframe”>(click to see video)

This chapter makes the point that communication and people skills, or “soft skills,” are necessary to be successful in any job. This video addresses the importance of these skills.

Key Takeaways

• There are a number of skills crucial to human resource management. First, being able to organize and multitask is necessary. In this job, files must be managed, and an HR manager is constantly working in different areas of the business.

• Communication skills are necessary in HRM as well. The ability to present good and bad news, work with a variety of personalities, and coach employees is important in HRM.

• Specific job skills, such as computer skills, knowledge of employment law, writing and developing strategic plans, and general critical-thinking skills are important in any type of management, but especially in human resource management.

• A sense of fairness and strong ethics will make for the best HR manager. Because HR works with a variety of departments to manage conflict and negotiate union contracts and salary, the HR professional needs ethics skills and the ability to maintain confidentiality.

• Since one of the major responsibilities of an HR department is to align the HR strategic plan with the business strategic plan, critical and creative thinking, as well as writing, are skills that will benefit the HR manager as well.

• Many people find themselves in the role of HR manager, so we will use the term HR manager throughout this book. However, many other types of managers also perform the tasks of recruiting, selecting, and compensating, making this book and the skills listed in this section applicable to all majors.

• Certification exams can be taken to make you more marketable in the field of HRM. These certifications are offered by the HR Certification Institute (HRCI).


1. What are your perceptions of what an HR manager does on a day-to-day basis? Research this job title and describe your findings. Is this the type of job you expected?

14 Human Resource Management

1.3 Today’s HRM Challenges

If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well.

Consider the expenses that involve the people part of any business:

1. Health-care benefits

2. Training costs

3. Hiring process costs

4. And many more…

These costs cut into the bottom line of any business. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. Containment of costs, therefore, is a balancing act. An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. We will discuss ways to alleviate this concern throughout this book.

For example, there are three ways to cut costs associated with health care:

1. Shift more of the cost of health care to employees

2. Reduce the benefits offered to cut costs

3. Change or better negotiate the plan to reduce health-care costs

Health care costs companies approximately $4,003 per year for a single employee and $9,764 for families. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families1, respectively. One possible strategy for containment for health-care plans is to implement a cafeteria plan. Cafeteria plans started becoming popular in the 1980s and have become standard in many organizations (Allen, 2010). This type of plan gives all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. For example, a mother of two may choose to spend her flexible benefits on health care for her children, while a single, childless female may opt for more vacation days. In other words, these plans offer flexibility, while saving money, too. Cost containment strategies around benefits will be discussed in Chapter 6 “Compensation and Benefits”.

Another way to contain costs is by offering training. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy women who worked there, and it was found

that a manager at one of the stores subjected the victims to inappropriate touching and comments. This lawsuit cost the organization $2 million2. Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. In Chapter 8 “Training and Development”, we will further discuss how to organize, set up, and measure the success of a training program.

The hiring process and the cost of turnover in an organization can be very expensive. Turnover refers to the number of employees who leave a company in a particular period of time. By creating a recruiting and selection process with cost containment in mind, HR can contribute directly to cost-containment strategies company wide. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as $9,777 for a position that pays $60,000 (Del Monte, 2010). By hiring smart the first time, HR managers can contain costs for their organization. This will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”. Reducing turnover includes employee motivational strategies. This will be addressed in Chapter 7 “Retention and Motivation”.

In a survey reported on by the Sales and Marketing Management newsletter3, 85 percent of managers say that ineffective communication is the cause of lost revenue. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. An understanding of communication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. In HRM, we can help ensure our people have the tools to communicate better, and contain costs and save dollars in doing so. Some of these tools for better communication will be addressed in Chapter 9 “Successful Employee Communication”.

One cost-containment strategy for US businesses has been offshoring. Offshoring refers to the movement of jobs overseas to contain costs. It is estimated that 3.3 million US jobs will be moved overseas by 2015 (Agrawal & Farrell, 2003). According to the US Census Bureau, most of these jobs are Information Technology (IT) jobs as well as manufacturing jobs. This issue is unique to HR, as the responsibility for developing training for new workers and laying off domestic workers will often fall under the realm of HRM. Offshoring will be discussed in Chapter 14 “International HRM”, and training for new workers will be discussed in Chapter 8 “Training and Development”.

Figure 1.5

16 Human Resource Management

Caption: One of the biggest contemporary challenges in HRM is figuring out the balance between what benefits to offer versus the

impact those benefits have on employee motivation.

winnifredxoxo – balance scale – CC BY 2.0.

Of course, cost containment isn’t only up to HRM and managers, but as organizations look at various ways to contain costs, human resources can certainly provide solutions.


Technology has greatly impacted human resources and will continue to do so as new technology is developed. Through use of technology, many companies have virtual workforces that perform tasks from nearly all corners of the world. When employees are not located just down the hall, management of these human resources creates some unique challenges. For example, technology creates an even greater need to have multicultural or diversity understanding. Since many people will work with individuals from across the globe, cultural sensitivity and understanding is the only way to ensure the use of technology results in increased productivity rather than decreased productivity due to miscommunications. Chapter 3 “Diversity and Multiculturalism” and Chapter 14 “International HRM” will discuss some specific diversity issues surrounding a global workforce.

Technology also creates a workforce that expects to be mobile. Because of the ability to work from home or anywhere else, many employees may request and even demand a flexible schedule to meet their own family and personal needs. Productivity can be a concern for all managers in the area of flextime, and another challenge is the fairness to other workers when one person is offered a flexible schedule. Chapter 6 “Compensation and Benefits” and Chapter 7 “Retention and Motivation” will discuss flextime as a way to reward employees. Many companies,

1.3 Today’s HRM Challenges 17

however, are going a step further and creating virtual organizations, which don’t have a physical location (cost containment) and allow all employees to work from home or the location of their choice. As you can imagine, this creates concerns over productivity and communication within the organization.

The use of smartphones and social networking has impacted human resources, as many companies now disseminate information to employees via these methods. Of course, technology changes constantly, so the methods used today will likely be different one year or even six months from now.

The large variety of databases available to perform HR tasks is mind boggling. For example, databases are used to track employee data, compensation, and training. There are also databases available to track the recruiting and hiring processes. We will discuss more about technology in HR in Chapter 4 “Recruitment” through Chapter 8 “Training and Development”.

Of course, the major challenge with technology is its constantly changing nature, which can impact all practices in HRM.

How Would You Handle This?

Too Many Friends

You are the HR manager for a small company, consisting of twenty-three people plus the two owners, Steve and Corey. Every time you go into Steve’s office, you see he is on Facebook. Because he is Facebook friends with several people in the organization, you have also heard he constantly updates his status and uploads pictures during work time. Then, at meetings, Steve will ask employees if they saw the pictures he recently uploaded from his vacation, weekend, or backpacking trip. One employee, Sam, comes to you with a concern about this. “I am just trying to do my job, but I feel if I don’t look at his photos, he may not think I am a good employee,” she says. How would you handle this?

Cyberloafing, a term used to describe lost productivity as a result of an employee using a work computer for personal reasons, is another concern created by technology. One study performed by Nucleus Research found that the average worker uses Facebook for fifteen minutes per day, which results in an average loss of 1.5 percent of productivity4. Some workers, in fact, use Facebook over two hours per day during working hours. Restricting or blocking access to the Internet, however, can result in angry employees and impact motivation at work. Motivational factors will be discussed in Chapter 7 “Retention and Motivation”.

Technology can create additional stress for workers. Increased job demands, constant change, constant e-mailing and texting, and the physical aspects of sitting in front of a computer can be not only stressful but also physically harmful to employees. Chapter 13 “Safety and Health at Work” will deal with some of these stress issues, as well as safety issues such as carpal tunnel, which can occur as a result of technology in the workplace. More on health and safety will be covered in Chapter 10 “Managing Employee Performance”.

18 Human Resource Management

The Economy

Tough economic times in a country usually results in tough times for business, too. High unemployment and layoffs are clearly HRM and managerial issues. If a human resource manager works for a unionized company, union contracts are the guiding source when having to downsize owing to a tough economy. We will discuss union contracts in greater detail in Chapter 12 “Working with Labor Unions”. Besides union restrictions, legal restrictions on who is let go and the process followed to let someone go should be on the forefront of any manager’s mind when he or she is required to lay off people because of a poor economy. Dealing with performance issues and measuring performance can be considerations when it is necessary to lay off employees. These issues will be discussed in Chapter 10 “Managing Employee Performance” and Chapter 11 “Employee Assessment”.

Likewise, in a growth economy, the HR manager may experience a different kind of stress. Massive hiring to meet demand might occur if the economy is doing well. For example, McDonald’s restaurants had to fill six hundred positions throughout Las Vegas and held hiring day events in 20105. Imagine the process of hiring this many people in a short period of time The same recruiting and selection processes used under normal circumstances will be helpful in mass hiring situations. Recruiting and selection will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”.

The Changing and Diverse Workforce

Human resources should be aware that the workforce is constantly changing. For example, in the 2010 census, the national population was 308,745,538, with 99,531,000 in 2010 working full time, down from 2008 when 106,648,000 were working full time6. For full-time workers, the average weekly salary was higher the more educated the worker. See Figure 1.6 for details.

Figure 1.6

The average weekly earnings for workers in the United States increase with more education.

1.3 Today’s HRM Challenges 19

Source: Data from US Bureau of Labor Statistics, “Usual Weekly Earnings of Wage and Salary Workers,” Table 5, Economic News

Release, July 20, 2010, accessed August 19, 2011, http://www.bls.gov/opub/ted/2010/ted_20100726_data.htm.


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