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CHAPTER 2 FUNDAMENTALS OF HRM CHAPTER OVERVIEW This chapter opens with a “state-of-HRM” recap from a hypothetical VP of Human Resource Management. Current HR themes, including family-friendly benefits, use of computerized information networks, employee monitoring, team-based work, changing skill requirements, on-line interactive training, change management, diversity, government legislation, and work/life issues are mentioned. The importance of human resources to all organizations is stressed, and the fact that human resource management is an integral part of the broader practice of management is explained. The increasingly important role and professional status of HRM in organizations is presented, and an overview given of the four HRM functions -- staffing, training and development, motivation and maintenance. A discussion of external influences includes a brief history of management thought. Typical organizational structures and work roles for HRM departments representing each of the four functions are summarized, as well as trends toward more generalist positions and shared services. Final sections discuss the nature of HRM in an entrepreneurial enterprise, issues relevant to HRM in a global village, and HRM’s role in corporate ethics. Additional Features of This Chapter: Exhibits list major laws affecting HRM practice (Exhibit 2-2) and provide a sample HRM organizational chart, with salary information (Exhibit 2-5). There is an ethical issue discussion about purposely distorting information. At the end of the chapter there is a team exercise regarding making layoff decisions which requires students to discuss implications and reach a concensus of who to lay off. ADDITIONAL LECTURE OR ACTIVITY SUGGESTIONS Introductory “Bingo”: Each box in a Bingo grid format can represent a personal attribute or experience relevant to HR (e.g., “wants to work with people,” “is a business major,” “speaks a foreign language”). Students mingle with each other, putting an individual’s name in a box if the student matches the description. Each name can only be used once. The first student to get six names across, down, or diagonally is the “winner” of the Bingo game. This is a great ice-breaker. Box descriptions can be used as the basis for an introductory discussion; e.g., you can discuss the nature of HR work, the education required, the relevance of foreign languages, etc.   10

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This is an excellent time to talk about HR career paths and the relevance of different majors. The profession of HR has many career paths, and HR practitioners come from a variety of academic and work backgrounds. In most introductory HR classes you will have individuals from a variety of majors who often do not fully understand the similarities, differences, and ways that different academic areas complement each other. If your school has a chapter of the Society for Human Resource Management (SHRM) this is a good time to introduce students to the benefits of a professional association. If you do not have a chapter, perhaps there may be a local chapter which welcomes students at its meetings or which will provide a speaker who can give an overview of HR activities in the area. CHAPTER OUTLINE AND LECTURE SUGGESTIONS I.

Introduction A.


Management Essentials 1.

Management is the process of efficiently achieving the objectives of the organization with and through people. The primary functions are planning, organizing, leading, and controlling.


Management involves setting goals and allocating scarce resources to achieve them.

Why is HRM Important to an Organization? 1.

The role of human resource managers has changed. HRM jobs today require a new level of sophistication. a. Federal and state employment legislation has placed new requirements on employers. b. Jobs have become more technical and skilled. c. Traditional job boundaries have become blurred with the advent of such things as project teams and telecommuting. d. Global competition has increased demands for productivity.


The Strategic Nature a. HRM must be a strategic business partner and represent employees. b. HRM must be forward-thinking, support the business strategy, and assist the organization in maintaining competitive advantage. c. HRM must also be concerned with the total cost of its function and for determining value added to the organization.   11

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HRM Certification a. Colleges and universities offer HR programs. b. The Society for Human Resource Management and Human Resource Certification Institute offer professional certification.


HRM is the part of the organization concerned with the “people” dimension. a. HRM is both a staff, or support function that assists line employees, and a function of every manager’s job. b. HRM consists of four basic functions: staffing (getting people); training and development (preparing people); motivation (stimulating them); and maintenance (keeping them).

How External Influences Effect HRM 1.

2. 3. 4.


The strategic environment within which HR operates includes globalization, technology, work force diversity, changing skill requirements, continuous improvement, work process engineering, decentralized work sites, teams, employee involvement, and ethics. Governmental legislation effecting HRM practices (See Exhibit 2-2 for a listing of laws; these will be covered in chapter 3). Labor unions. Unions act on behalf of their members by negotiating contracts with management that spell out terms and conditions of employment and how they are to be administered. Management thought. Management principles, such as those from scientific management or based on the Hawthorne studies influence the practice of HRM. More recently, continuous improvement programs have had a significant influence on HRM activities.

Staffing Function Activities 1. 2. 3. 4.

Employment planning ensures that staffing will contribute to the organization’s mission and strategy. Job analysis is used to determine the specific skills, knowledge and abilities needed to be successful in a particular job and to define the essential functions of the job. Recruitment is the process of attracting a pool of qualified applicants that is representative of all groups in the labor market. Selection refers to the process of assessing who will be successful on the job and the communication of information to assist job candidates in their decision to accept an offer.   12

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Goals of the Training and Development Function 1. 2.


The Motivation Function 1. 2.


Motivation is a multifaceted process that involves understanding complex human behavior to influence employees so that they will exert high energy levels. Managing motivation includes job design, setting performance standards, establishing effective compensation and benefits programs, and understanding motivational theories (See Exhibit 24).

How Important is the Maintenance Function? 1. 2.


Orientation and socialization help employees to adapt and become 100-percent performers. Employee training, employee development, organization development and career development ensure that employees and organizations are fully productive.

Employees are more likely to be productive, committed and loyal if you provide a safe and healthy work environment and care for their well-being. Effective communications programs provide for 2-way communication to ensure that employees are well informed and that their voices are heard.

Translating HRM Functions Into Practice 1.

Employment - Employment specialists coordinate the staffing function and help line management by advertising vacancies, doing initial screening, interviewing, making job offers, and doing paperwork related to hiring. 2. Training and Development - Training and Development specialists help employees to maximize their potential, serve as internal change agents to the organization, and provide counseling and career development. 3. Compensation and Benefits - Compensation and Benefits staff establish objective and equitable pay systems and design costeffective benefits packages that help attract and retain high-quality enployees. Benefits administrators also help employees to effectively utilize their benefits, such as by providing information on retirement planning. 4. Employee Relations - Employee Relations involves communications, fair application of policies and procedures, data documentation and coordination of activities and services that enhance employee   13

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commitment and loyalty. Employee relations should not be confused with labor relations, which refers to HRM in a unionized environment.


What is the Purpose and Elements of HRM Communications? 1. Keep employees informed of what is happening and knowledgeable of policies and procedures. 2. Convey that the organization values employees. 3. Build trust and openness, and reinforce company goals. 4. Elements that are present in successful communications programs include: a. Top management commitment and effective information that flows downward, upward, and laterally. b. Effective upward communication to ensure that top management receives the information it needs. c. Determining what to communicate using the “what-if, so-what” approach. d. Allowing for feedback should include built-in methods to obtain feedback from employees regarding the effectiveness of communications. e. Information sources can come from HRM as well as supervisors trained by HRM, handbooks and manuals.


Does HRM Really Matter? 1. 2. 3.


Conclusion: The Changing Nature of HRM 1. 2. 3.


Research has shown that a fully functioning HR department does make a difference. Organizations that spend money to have quality HR programs perform better than those who don’t. Practices that are part of superior HR services include rewarding productive work, creating a flexible work-friendly environment, properly recruiting and retaining quality workers, and effective communications.

There is a movement away from centralization of functional areas toward more self-contained business units which may have their own HR generalist, who has responsibilities in all HR areas. A closely aligned trend is for the use of shared services, which means that specialized HR services, like compensation and benefits, are handled by staff in a centralized location. In some organizations, HRM is outsourced to firms such as staffing agencies, training consultants and financial managers.

HRM in an Entrepreneurial Enterprise   14

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General managers may perform HRM functions, HRM activities may be outsourced, or a single generalist may handle all the HRM functions.


Benefits of an entrepreneurial business environment include freedom from many government regulations, an absence of bureaucracy, and an opportunity to share in the success of the business.

HRM in a Global Village A.

HRM functions are more complex when employees are located around the world. Consideration must be given to such things as foreign language training, relocation and orientation processes, etc.


HRM also involves considering the needs of employees’ families when they are sent overseas.

HR and Corporate Ethics A.

HRM’s role is to ensure that ethics exist in an organization and are adhered to.


The Sarbanes-Oxley Act passed in 2002, establishes procedures for public companies regarding how they handle and report their financial status. 1. Establishes penalties for noncompliance. 2. Provides protection for employees who report executive wrongdoing. 3. Requires that companies have mechanisms in place where complaints can be received and investigated. DEMONSTRATING COMPREHENSION: Questions for Review


Contrast management, personnel, and human resources management. Management is the process of efficiently achieving the objectives of the organization with and through people. Personnel and human resources management are sub–disciplines of management. While both terms are often used interchangeably, personnel has a "softer" connotation as a representative of the people, while human resources management represents the people but also has a strategic focus to support the business strategy of the company.


Explain the purpose of HRM in an organization. Human resource management is the people component of management. As a staff function, HR helps line managers with staffing (getting people); training and   15

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development (preparing people); motivation (stimulating them to put forth their greatest effort); and maintenance (keeping good employees).


What activities are involved in the staffing function of HRM? Staffing includes strategic human resource planning to determine what the human resource needs are to fulfill the organization’s mission; job analysis, to specify the essential knowledges, skills and abilities needed by employees; recruitment, to attract qualified individuals; and selection, to choose successful employees from an applicant pool.


Explain the goals of the training and development function of HRM. Training and Development ensures that employees can continue to meet the demands placed upon them by the organization. Included are orientation and socialization, to help new employees adapt; specific training in job-related skills; employee development, to prepare employees for the future; organization development, to facilitate changes which entire organizations are experiencing, and career development, to help individuals grow and meet their own needs while they are supporting the organization.

5. Describe the primary goals of the motivation function of HRM. A primary goal of motivation is to provide an enviroment that influences employees to exert high energy levels for those behaviors which are important to the strategic goals of the organization. Human resource specialists can help motivate employees by providing assistance in the areas of job design, setting performance standards, and establishing effective compensation and benefits programs. Additionally, HR specialists can train managers in motivational techniques and help line managers diagnose motivational problems. 6. In what ways can HRM meet its goal of the maintenance function? HRM must ensure that the working environment is safe and provide employees services, such as employee assistance programs, to deal with personal situations. They must also ensure open and effective lines of communication. 7.

What role does HRM play in the strategic direction of an organization? HRM has responsibility for the “people” component of an organization. If HRM is successful in this area, the organization may gain a competitive edge through its employees.


How does HRM affect all managers? HRM looks to managers to be an integral part of conveying information to and from employees. The decentralization of management functions puts   16

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responsibility on individual managers to be more knowledgeable about company HR policies and practices, and employee rights.


“Motivation is the primary responsibility of line managers. HRM’s role in motivating organizational employees is limited to providing programs that equip line managers with means of motivating their employees.” Do you agree or disagree with the statement? Explain your position. Agree. It is the responsibility of line managers to know what motivates each of their employees. HRM is too far removed to be able to do this. Disagree. HRM is responsible for job design, properly defining job requirements, matching applicants to those requirements, and training new employees, as well as assisting line managers with motivational techniques.


You have been offered two positions in HRM. One is a generalist position in a smaller business, and one is a recruiting position in a large corporation. Which one of the two jobs do you believe will give you more opportunities to be involved in a variety of HRM activities? Defend your answer. Generalist position in a smaller business. Many HRM functions must be performed in all businesses regardless of their size. In a smaller business, HRM personnel must wear many hats and become knowledgeable about all aspects of HRM. Recruiting position in a large corporation. Taking this position will provide the opportunity for further career development. Large corporations usually offer more training and development programs. Additionally, a large corporation is subject to all the HR laws and may well practice HRM on a global scale.


“Globalization has led us to the realization that workers are interchangeable between countries so long as language issues are resolved.” Do you agree or disagree with this statement? Explain your position. Agree. Money is what motivates workers no matter what country they are in. Workers will adapt to any environment if the pay is right. Disagree. In terms of motivation, skill expectations, salary and benefit expectations, how managers will treat them, what they want to do with spare time, how vacations should be allocated, there is wide variation from country to country. Although we all have common physical needs, and an interpreter can   17

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provide help with language barriers, the issues are much greater, especially if the goal is an empowered work force. If the workers are recognized as beings with potential for extraordinary contribution, then the differences must be recognized and nurtured.


“Employers only need to provide employees with enough information so they can effectively and efficiently get their jobs done. Beyond that, employees don’t have a need to know.” Do you agree or disagree with the statement? Defend your answer. Agree. Information that is speculative or incendiary should be kept from employees. An example might be preliminary discussions that top management is having about the future of the business, or discussions about proposed personnel policy changes that may or may not be implemented. Disagree. If information affects the lives of the workers, they have a right to be informed. In an open, trusting environment workers will respect privacy issues and understand that some news is for information only purposes.

CASE APPLICATION 2-A: KINDERGARTEN FUN CASE SUMMARY Eze Castle Software is a 6 year old company of 90+ employees that develops software for securities trading. When the company first started, attention was paid to every detail. As the business grew, nobody seemed to be minding the whole store and employees didn’t know much about what coworkers were doing. A company official decided to divide up some of the chores, including overseeing a company-wide cookies and milk break every afternoon. Employees began to socialize and gain a better understanding of what was happening in the organization. The result – employee morale increased, costs decreased, and productivity went up. 1.

What is your reaction to this “employee plan” implemented by Eze? Do you believe it is too simplistic? Defend your position. The plan works. A number of HR studies indicate that one of the things employees consider important is having a sense of “being in on things”. Obviously, as the company grew, employees were losing that feeling. Whether a plan is simple or complex does not determine it’s worth. What is more important is does it accomplish it’s goal? In this case it appears to have been very successful.


Do you believe such employee programs as described in this case can succeed at other companies? Why or why not?   18

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In order to be successful the right conditions need to exist. First, there must be top management support and active participation. If it is perceived that management thinks it is a waste of time, employees will stay away. Second, the size of the company would have an impact on the success of a program like this. If the company is too large, the group will become unmanagable and employees will not have an opportunity for meaningful conversation with one another.


Do you believe special human resources management conditions have to exist for such a system to work? Explain. How do these conditions related to motivation? The work environment has a significant impact on how well an employee does his or her job. The latest technology must be present to permit maximum work efficiency. The proper tools must be readily available. There also needs to be a level of respect between management and the employees. This can be made evident by involving employees in decisions that affect them, listening to employees, and implementing their suggestions where appropriate. These conditions are all part of the environment that fosters an employee’s willingness to do the job. It’s motivation at work! CASE APPLICATION 2-B: TEAM FUN!

CASE SUMMARY Kenny and Norton have bitten the bullet and hired a Director of Human Resources. Tony, the HR Director, has implemented a number of new ideas intended to improve the HR function and to keep open lines of communication for and with employees. 1.

Which of the functional HR processes can be identified in Tony’s area? The following functions can be found in Tony’s area: Staffing – hiring and all associated paperwork Training and development Motivation – stimulating people to do their best Maintenance – involves communication programs and coordination of activities and services aimed at keeping people


Identify the environmental influences important to TEAM FUN!. Environmental influences include governmental legislation, globalization, technology, workforce diversity, labor unions, and the trend toward decentralized work sites.


How do its HR functional areas line up with the overall HR process?


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The four functional processes outlined in question 1 correlate with the four functional areas of employment, training and development, compensation and benefits, and employee relations.


Which motivation theorists has Tony applied to TEAM FUN!? Tony’s initiation of activites such as the picnic and the web bulletin board are aimed at increasing employees’ affiliation with the company. Maslov believes that belonging is a need that organizations must recognize and accommodate. McClelland believes that there will be higher work performance when one’s job provides responsibility, feedback and moderate challenge. Exhibit 2-4 lists the key elements of classic motivation theories.


Does Tony need to do anything else to set up a strategic HR function? Tony must be sure that as he develops HR policies and practices, he aligns them with the strategic goals of the business. The HRM department needs to be a full partner in maintaining a competitive advantage. WORKING WITH A TEAM: Making a Layoff Decision

OVERVIEW Using information about five employees, students, working in small groups, must decide which two employees will be permanently laid off. Each group should then present its recommendations to the entire class. SUGGESTIONS/VARIATIONS This is an excellent opportunity to demonstrate to the students how HRM decisions often have to take into consideration more than one aspect of HR. You might refer students to exhibit 2-2 and ask them to list the legislation they think needs to be considered in making a decision. TEACHING TIPS FOR ON-LINE HRM EXPERIENCE: WRITING PERSONNEL POLICIES Writing clearly understood personnel policies is not easy! Pick a topic about which numerous companies should have a written policy. Provide students with several and ask them to critique the samples for language, clarity, etc. Extract sentences from sample policies and ask students to eliminate any words they think are not necessary.   20

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Use the same process and ask students to substitute more easily understood words where possible. Give students a list of policies that need to be in an employee handbook and ask them to prepare a table of contents based on how they think the handbook should be organized. Ask students what questions they think employees would frequently ask. Discuss what factors should be considered when deciding how to distribute a policy manual.


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