CH-1-2 The Changing and Strategic Nature of Human Resource Management – Human Resource Management: Essential Perspectives : Chapter Notes

This Document Contains Chapters 1 to 2 Chapter 1 The Changing and Strategic Nature of Human Resource Management Chapter Outline and Instructor Notes Suggested Content Coverage In all organizations there are many resources that affect organizational performance. One of the most crucial is human resources, the individuals with talents, capabilities, experience, professional expertise, and relationships. Human resources are the “glue” that holds all the other assets together and guides their use to achieve results. I. NATURE OF HUMAN RESOURCE MANAGEMENT Human Resource (HR) management is management systems to ensure that human talent is used effectively and efficiently to accomplish organizational goals. HR Activities - Figure 1.1 illustrates the context in which HR responsibilities are carried out and identifies seven interlinked HR activities which are listed below: 1. Strategic HR Management – is concerned with maintaining organizational competitiveness by achieving HR effectiveness through the use of HR measurement and HR technology. Through HR planning, managers anticipate the future supply and demand of employees. An additional strategic HR concern is employee retention. 2. Equal Employment Opportunity (EEO) - EEO laws and regulations require compliance that affects all other HR activities. The diversity of a multicultural and global workforce is creating more challenges. For instance, a company must have sufficient diversity to meet affirmative action requirements. 3. Staffing - emphasizes the need to provide an adequate supply of qualified individuals to fill the jobs in an organization. Job analysis serves as the foundation for ach¬ieving the goal of adequate staffing. Recruiting applicants and selection are required to procure a workforce. 4. Talent Management and Development - encompasses orientation of new employees, training, HR develop¬ment of all employees and managers to meet future challenges, career planning, and performance management which focuses on how employees perform their jobs. 5. Total Rewards - Compensation in the form of pay, in¬centives, and benefits rewards people for performing organizational work. Employers must develop and refine compensation systems and may use variable pay programs. 6. Risk Management and Worker Protection – For decades employers have had to meet legal requirements and be responsive to concerns for workplace health and safety. Also, workplace security has grown in importance along with disaster and recovery planning. 7. Employee and Labor Relations - must be handled effectively if both the employees and the organization are to prosper together. Important aspects to be considered are employee rights and privacy issues, development and communication of HR policies and procedures, and, in unionized firms, union/management relations. B. Managing HR in Organizations – In a sense, every manager is an HR Manager because they all engage in HR management and their effectiveness depends in part on the success of HR systems. However, since every manager can’t be expected to know the details about HR functions, systems, and regulations, many organizations have people in an HR department who specializes in these activities. 1. Smaller Organizations and HR Management – For many smaller organizations HR issues are significant. Three out of the top four issues identified by small businesses as the greatest concerns are HR-related issues: shortages of qualified workers, increasing costs of benefits, and compliance with government regulations. II. HR MANAGEMENT ROLES Three roles are typically identified for HR: (1) Administrative, (2) Operational and employee advocate, and (3) Strategic. Figure 1.2 indicates a significant transformation occurring in HR. The HR pyramid is being turned upside down so that significantly less HR time is spent on administrative and more time is spent on strategic HR. A. Administrative Role of HR – At this basic level, HR management is heavily oriented to processing and record keeping. Two major shifts driving the transformation of the administrative role are technology and outsourcing. 1. Technology Transforming HR – More HR functions are becoming available electronically or are being done on the Internet. Use of technology serves two main purposes in organizations. The first purpose is to improve the efficiency with which data on employees and HR activities are compiled. The second purpose of HR technology is more strategic and relates to HR planning. Having accessible data enables HR planning and managerial decision making to be based more on information rather than intuition and perceptions. 2. Outsourcing of HR – The HR areas most commonly outsourced are employee assistance (counseling), retirement planning, benefits administration, payroll services, and outplacement services. The primary reasons why HR functions are outsourced is to save money on HR staffing, to take advantage of vendor expertise/technology, and to be able to focus more on strategic HR issues. B. Operational and Employee Advocate Role for HR – Traditionally, HR has been viewed as the “employee advocate” in organizations. The operational role requires HR professionals to identify and implement needed programs and policies in the organization, in cooperation with operating managers. C. Strategic Role for HR – requires that HR professionals be proactive in addressing business realities and focus on future HR needs. Many business leaders increasingly see the need for HR to be more focused on the “success” of the organization. The role of HR as a strategic business partner is often described as “having a seat at the table,” and contributing to the strategic direction of the company. That phrase means HR is involved in devising strategy in addition to implementing strategy. III. HR MANAGEMENT COMPETENCIES AND CAREERS A. Ethics and HR Management – Closely linked to the strategic role of HR is the way HR management professionals influence the organizational ethics practices by executives, managers, and employees. Organizations with high ethical standards are more likely to meet strategic objectives and profit goals and more likely to attract and retain human resources. Differences in legal, political, and cultural values and practices in different countries often raise ethical issues for global employers. Ethical behavior is likely to occur when the following elements are included in ethics programs: •A written code of ethics and standards of conduct •Training on ethical behavior for all executives, managers, and employees •Means for employees to obtain advice on ethical situations they face, often provided by HR •Systems for confidential reporting of ethical misconduct or questionable behavior 1. HR Ethics and Sarbanes-Oxley – The Sarbanes-Oxley Act (SOX) was passed by Congress to make certain that publicly traded companies followed accounting controls that would reduce the likelihood of illegal and unethical behaviors. The biggest issues are linked to executive compensation and benefits. HR Competencies – Competencies needed by HR professionals include strategic contribution, business knowledge, HR delivery, HR technology, and personal credibility. HR Management as a Career Field – There are a variety of jobs within the HR career field. The HR generalist is a person who is responsible for performing a variety of HR activities. An HR specialist is a person who has in-depth knowledge and expertise in limited areas of HR. The broad range of issues facing HR professionals has made involvement in professional associations important. For HR generalists, the largest organization is the Society for Human Resource Management (SHRM). The most well-known certification programs for HR generalists are administered by the Human Resource Certification Institute (HRCI), which is affiliated with SHRM. One way of staying current on HR is to tap information available in current HR internet resources as listed in Appendix A. IV. CURRENT HR MANAGEMENT CHALLENGES A. Globalization of Business – has shifted from trade and investment to the integration of global operations, management, and strategic alliances, which has significantly affected HR management. Especially when international outsourcing occurs, HR management should be involved to ensure the appropriate consideration of various laws, cultural factors, and other issues. Another global challenge for international employers is the threat of terrorism. HR management must respond to such concerns as part of risk management efforts. B. Economic and Technological Changes – Economic and technological changes have altered occupational and employment patterns in the United States, as follows: 1. Occupational Shifts – A major change has been the shift in jobs from manufacturing and agriculture to service and telecommunications. The U.S. economy has become primarily a service economy, and that shift is expected to continue. Figure 1-3 lists occupations that are expected to experience the greatest growth in percentage and numbers for the period ending in 2014. 2. Workforce Availability and Quality – Many parts of the United States face significant shortages in qualified workers possessing the skills needed for the jobs. Contingent workers (temporary workers, independent contractors, leased employees, and part-timers) represent more than 20% of the workforce. The use of contingent workers increases workforce flexibility and is typically a cost-savings for the employer since they are typically paid less and/or receive fewer benefits than regular employees. 3. Technological Shifts and the Internet – Technological advances and the use of the Internet has driven changes in jobs and organizations of all sizes. Technology enables more people to work from home and at night and during weekends and always being “available.” C. Workforce Demographics and Diversity – The U.S. workforce is more diverse racially and ethnically, employs more women, and the average age of its members has increased. 1. Racial/Ethnic Diversity – Racial and ethnic minorities account for a growing percentage of the overall labor force, with the percentage of Hispanics equal to or greater than the percentage of African Americans. In addition, a growing number of individuals are characterizing themselves as multi-racial, suggesting a blurring of racial/ethnic identities. 2. Women in the Workforce – Women constitute about half of the U.S. workforce. Many are “primary” income earners or are part of dual-career marriages or domestic partner relationships. 3. Aging Workforce – The population of many economically-developed countries, including the U.S., is aging. In the next decade employers will be experiencing difficulty replacing workers as they retire, work part-time, or otherwise shift their employment. D. Organizational Cost Pressures and Restructuring – Managers are expected to operate in a “cost-less” mode: continually looking for ways to reduce financial, operations, equipment, and labor costs. V. NATURE OF STRATEGIC HR MANAGEMENT Strategic HR management refers to the use of employees to gain or keep a competitive advantage. Some recognized HR best practices that make a significant difference to business outcomes include: employment security, selective recruiting, high wages/incentives, information sharing/participation, training/cross-training, promotion from within, and measurement. A. Organizational Culture and HR Strategic Management – Organizational culture consists of the shared values and beliefs that give members of an organization meaning and provide them with rules for behavior. Alignment of organizational culture with HR strategy helps affect such aspects as merger success, productivity, and whether human capital can indeed be a core competency. B. Organizational Productivity – Productivity can be a competitive advantage because the costs to produce goods and services are lower and lower prices can be charged. Many strategic HR management efforts are designed to enhance organizational productivity, as Figure 1-4 indicates. C. Customer Service and Quality Linked to HR Strategies – In addition to productivity, organizational effectiveness is significantly affected by customer service and quality. In most organizations, service quality is greatly influenced by the individual employees who interact with customers. D. HR Effectiveness and Financial Performance – HR management has given significant attention to linking more effectively with financial executives in order to make certain that HR is a financial contributor to organizational effectiveness. The return on investment (ROI) of all resources and expenditures in organizations can be calculated, including the ROI of human expenditures. VI. HUMAN RESOURCE PLANNING Human resource (HR) planning is the process of analyzing and identifying the need for and availability of human resources so that the organization can meet its objectives. The focus of HR planning is to have the right number of human resources, with the right capabilities, at the right times, and in the right places. A. HR Planning Process – As shown in Figure 1.5, the process begins with the consideration of organizational objectives and strategies, and then assessing and forecasting HR needs and supply. Once the analysis is complete, management can develop HR strategies and plans to address imbalances in supply and demand, both short term and long term. B. Scanning the External Environment – Environmental scanning is the process of studying the environment of the organization to pinpoint opportunities and threats. All environmental factors – government influences, economic conditions, geographic and competition issues, and workforce changes – must be part of the scanning process. C. Assessing the Internal Workforce – Analyzing the jobs that will need to be done and the skills of people currently available to do them is the next part of HR planning. The needs of the organization must be compared against the available labor supply inside the organization. 1. Jobs and Skills Audit – The following questions are addressed when conducting a job audit to evaluate internal strengths and weaknesses: •What jobs exist now? •How many individuals are performing each job? •What are the reporting relationships of jobs? •How essential is each job? •What jobs will be needed to implement the organizational strategies? •What are the characteristics of anticipated jobs? 2. Organizational Capabilities Inventory – As HR planners gain an understanding of their current and future jobs that will be necessary to carry out organizational plans, they can make a detailed audit of current employees and their capabilities. Planners can create and use knowledge, skills, and abilities (KSA) inventories to assist in future recruiting, selection, and HR development planning. D. Forecasting Organizational HR Supply and Demand – Forecasting uses information from the past and the present to identify expected future conditions. HR forecasting should be done over three planning periods: short-range (immediate), intermediate-range (1-3 years), and long-range (beyond 3 years). Demand can be forecasted by considering specific openings that are likely to occur as a result of employee movement (promotions, transfers, and terminations). Forecasting the availability of human resources considers both external and internal supplies. 1. External Supply –Extensive use of government estimates of labor force populations, trends in the industry, and many more complex and interrelated factors must be considered. Such information is often available from state or regional economic development offices. 2. Internal Supply – Estimating internal supply can be done by taking into consideration that employees may move from their current jobs into others through promotions, lateral moves, and terminations. Other internal factors to be considered are training and development programs, transfer and promotion policies, retirement policies, and data from replacement charts or succession planning efforts. E. Succession Planning – An important outcome of HR planning, succession planning is the process of identifying a longer-term plan for the orderly replacement of key employees. One common flaw is that it is too often limited to just key executives. F. Workforce Realignment – The ultimate purpose of a realignment plan is to enable managers to match the available supply of labor with the forecasted demand based on the strategies of the organization. 1. Managing a Human Resources Surplus - A surplus of workers can be managed a variety of ways but the actions are often difficult because workforce reductions ultimately are necessary. To provide employees with sufficient notice of such losses, a federal law was passed, the Worker Adjustment and Retraining Notification (WARN) Act. Common methods for handling a HR surplus include: downsizing, attrition/hiring freezes, voluntary separation programs, early retirement buyouts, and layoffs. Companies may provide outplacement assistance services. 2. Managing a Shortage of Employees - Before hiring to fill a shortage other options may include the following: use overtime, add contingent workers, bring back recent retirees, outsource work, reduce turnover. G. HR Planning in Mergers and Acquisitions – For mergers and acquisitions (M&As) to succeed, organizations have to ensure that different organizational cultures mesh. Cultural compatibility is the extent to which such factors as decision-making styles, levels of teamwork, information-sharing philosophies, the formality of the two organizations, etc. are similar. HR professionals should be involved before, during, and after M&As. VII. MEASURING EFFECTIVENESS USING HR METRICS It has been stressed that HR cannot be a strategic business contributor without focusing on measuring its programs, its services, and its contributions to organizational success. As such, the importance of developing metrics to measure HR effectiveness has grown. HR metrics are specific measures tied to HR performance indicators. Most HR activities can be measured and benchmarked. Some examples are shown in Figure 1-6. A. Measures of Strategic HR Effectiveness – For HR to fulfill its role as a strategic business partner, HR metrics that reflect organizational strategies and goods must be used. Some of the more prevalent measures compare full-time equivalents (FTEs) with organizational measures. An FTE is a measure equal to one person working full-time for a year. 1. Return on Investment – A widely-used financial measure, return on investment (ROI) is a calculation showing the value of expenditures for HR activities, and also shows how long it takes for activities to pay for themselves. 2. Economic Value Added – Economic value added (EVA) is the net operating profit of a firm after the cost of capital is deducted. Cost of capital is the minimum rate of return demanded by shareholders. 3. HR and the Balanced Scorecard – The balanced scorecard stresses measuring the strategic performance of organizations on four perspectives: financial, internal business processes, customer, and learning and growth. 4. HR Measurement and Benchmarking – Benchmarking compares specific measures of performance against data on those measures in other organizations. HR professionals interested in benchmarking compare their measurement data with those from outside sources, including individual companies, industry sources, and professional associations. 5. HR Audit – An HR audit is a formal research effort that evaluates the current state of HR management in an organization. It attempts to evaluate how well HR activities have been performed, so that managers can identify areas for improvement. CASE 1 - HR CONTRIBUTES AT SYSCO Many people in the United States are not familiar with SYSCO, but they see its results because SYSCO is the largest food services and distribution company with almost $24 billion in annual sales. SYSCO supplies food products to customers in restaurants, hotels, supermarkets, hospitals, and other companies. In a firm the size of SYSCO with more than 40,000 employees, HR management is making significant contributions to organizational success. As an indication of this success, SYSCO received the Optimas award for general HR Excellence from Workforce Magazine. Beginning several years ago, the need to re-vitalize HR activities was recognized by both executives and senior HR staff members. At the time, the SYSCO operating regions had administered many of their own HR practices. To bring change to HR corporate-wide, while preserving the entrepreneurial independence of the regions, a “market-driven” HR approach was developed. In this approach, corporate HR identified ways it could assist regional operations, and then developed programs and services that met regional needs. However, unlike in many other corporations where corporate HR programs would be “mandated” to operating units, SYSCO took a different approach. Key to market-driven HR is that managers in the regional operations must be convinced to “buy” the corporate HR services. For example, if a supervisory training program is developed by corporate HR, regional managers decide if they want to use the program for supervisory training in their regions. Another part of creating HR as market driven was the establishment by corporate HR of a Virtual Resource Center (VRC) to provide ser-vices to managers and employees. A key aspect of the VRC is use of HR technology to gather extensive data on HR activities and provide that data to operating managers. One source of data is workplace climate surveys of employees. Using the survey data, HR developed initiatives to increase safety, which reduced workers’ compensation claims by 30%, resulting in savings of $10 million per year. Another problem that SYSCO had was high turnover rates of night shift warehouse workers. Recruiting these workers has been a constant challenge for SYSCO and other distribution firms. By implementing a variety of programs and ser-vices, based on employee and managerial input from surveys, the retention rate for these ware-house employees has been increased by 20%, resulting in savings of $15 million per year. These savings are due to reduced time and money spent recruiting, selecting, and training new employees. Also, employees with more experience are more productive and more knowledgeable about SYSCO operations and products. Another area where HR has contributed is with truck and delivery drivers. Data gathered through the VRC has been used to revise base pay and incentive programs, increase driver retention rates, and improve driver safety records. Additionally, customer satisfaction rates in-creased and delivery expenses declined. All of these changes illustrate that HR efforts at SYSCO have been paying off for the company, managers, and employees. But as the value of HR efforts is recognized by more managers, HR’s role at SYSCO is likely to continue growing and changing.* Questions 1. How does the market-driven approach illustrate that HR has strategic, operational, and administrative roles at SYSCO? 2. Discuss what types of HR changes could have affected reductions in workers’ compensation expenses, employee turnover, and increases in customer satisfaction. _______________ * Based on Patrick J. Kiger, “HR Proves Its Value,” Workforce, March 2002, 28– 33. Suggested Answers to Case 1 Questions 1. How does the market-driven approach illustrate that HR has strategic, operational, and administrative roles at SYSCO? The administrative role is heavily oriented to processing and record keeping. When SYSCO’s HR staff enter data into the Virtual Resource Center (VRC) and when they use technology to calculate cost/benefit analyses they are performing the administrative role. The operational role emphasizes support for executives, managers, and employees when addressing and resolving HR problems and issues. When SYSCO’s corporate HR identified ways it could assist regional operations, and then developed programs and services that met regional needs they were performing the operational role. SYSCO’s HR was also performing the operational role when they worked with the operational managers of the warehouse workers and the truck and delivery drivers to reduce turnover in those operational areas. The strategic role focuses on the longer-term implications of HR issues and is closely linked to the strategic plans of the organization. When SYSCO’s corporate HR conduct workplace climate surveys of employees they are involved in scanning the internal environment to provide data to help upper level managers make strategic decisions. 2. Discuss what types of HR changes could have affected reductions in workers’ compensation expenses, employee turnover, and increases in customer satisfaction. The types of HR changes that could have affected reductions in workers’ compensation expenses, employee turnover, and increases in customer satisfaction include: Collection of better data to track workers’ compensation claims Improvement in safety training to reduce workers’ compensation claims Better recruitment and selection to match the job to the worker Better training and development efforts Better employee relations that makes the employee feel valued by the organization More competitive base pay and incentive programs More effective orientation programs for new employees CASE 2 – XEROX FOCUSES ON HR Xerox is a widely known firm worldwide, but it has been through numerous crises in the past decade. In fact, at one point several years ago, there were questions about Xerox surviving as a firm. But no longer. Under the leadership of Anne Mulcahy as CEO, Xerox has rebounded. Numerous strategic business and financial decisions had to be made, including reducing the workforce by 30,000. But Mulcahy also stressed that HR had to become a more strategic contributor. One of the actions taken was to consolidate a number of HR functions from different business units into a corporate HR Service Center. This center performs many administrative transactions, and has added Internet-based systems to make HR services more accessible to managers and employees. To track employees’ views on the company and HR, employee surveys on the company intranet have been used for several years. Areas at which lower scores were recorded have been addressed by HR staff and other managers. The survey results have led to another primary focus at Xerox: employee retention. With all of the reductions and organizational restructurings, keeping the remaining employees, especially high-potential ones, has been a continuing emphasis. Xerox has invested significant time and resources into training and development of its employees, an important retention factor. Greater use of e-learning, technology, and leadership development have paid off in reducing turnover and convincing employees that career opportunities exist at Xerox. Continuing competitive pressures are presenting new challenges for Xerox and its HR staff. The strategic importance of HR has been demonstrated in the past, and looks to be a part of the firm’s future.* Questions 1. Discuss the challenges faced by HR management when significant staff cutbacks occur and how they should be addressed. 2. Use of technology, employee retention, and HR development have been at the core of HR becoming more strategic at Xerox. Why have those areas been so key? _____________ * Adapted from Ed Santalone, “Processing a Turnaround,” Human Resource Executive, June 28, 2004, 16– 23. Suggested Answers to Case 2 Questions 1. Discuss the challenges faced by HR management when significant staff cutbacks occur and how they should be addressed. When companies cannibalize the human resources needed to grow and innovate, disruption follows for some time. Downsizing can hurt productivity by leaving “surviving” employees overburdened and demoralized. Survivors need information about why the actions had to be taken and what the future holds for them personally. The more employees are involved in the restructuring, the more likely the transition is to be smoother. HR professionals and managers, too, find downsizing stressful and may react negatively to having to be the bearers of bad news. The most common methods used when downsizing must occur include attrition and hiring freezes, early retirement buyouts, and layoffs. Voluntary separation programs appeal to employers because they can reduce payroll costs significantly over time. Using such programs is also viewed as a more humane way to reduce staff than terminating long-service, loyal employees. One drawback is that some employees the company wishes would stay, as well as those it wishes would leave, can take advantage of a buyout. Employers must also comply with WARN and other laws. It is often recommended that employers should provide outplacement services to give displaced employees support and assistance. 2. Use of technology, employee retention, and HR development have been at the core of HR becoming more strategic at Xerox. Why have those areas been so key? These areas have been key because they illustrate to employees that Xerox is committed to professional development and continuous learning for its employees. These efforts should also help Xerox employees perform at a higher level to continue its rebound. Focusing on employee retention and HR development helps Xerox reduce its turnover which is an expensive cost. Using the results of the employee surveys will also assure that Xerox is actually providing the types of programs that lead to employee retention. It is very important when downsizing has occurred that the organization emphasize keeping its high-potential employees and managers. Chapter 2 Organization/Individual Relations and Employee Retention Chapter Outline and Instructor Notes Suggested Content Coverage The long-term economic health of most organizations depends on the efforts of employees with both the appropriate capabilities and the motivation to do their jobs well. Organizations that are successful over time can usually demonstrate that relationships with their employees do matter. I. INDIVIDUAL/ORGANIZATIONAL RELATIONSHIPS Job satisfaction and commitment often help determine whether an employee will want to stay with the organization. The individual’s performance is a major part of whether the employer wants the employee to stay. A. The Psychological Contract - A psychological contract refers to the unwritten expectations that employees and employers have about the nature of their work relationships. This contract is individual in nature and subjective, and contains both tangible items (such as wages, benefits, employee productivity, and attendance) and intangible items (such as loyalty, fair treatment, and job security). In a psychological contract, employers provide competitive compensation and benefits, flexibility to balance work and home life, and career development opportunities. Employees contribute continuous skill improvement and increased productivity, reasonable time with the organization, and extra effort when needed. People’s expectations about psychological contracts differ between generations, as well as within generations. These generational differences are likely to continue to create challenges and conflicts in organizations. 1. Job Satisfaction – Job satisfaction is a positive emotional state resulting from evaluating one’s job experiences. Job dissatisfaction occurs when one’s expectations are not met. Dimensions of job satisfaction frequently mentioned include work, pay, promotion opportunities, supervisors, and coworkers. Job satisfaction appears to have declined in recent years. More demanding work, fewer traditional hierarchical relationships with management, shorter relationships, and less confidence in long-term rewards are cited as reasons. B. Loyalty and Organizational Commitment - As Figure 2.1 depicts, the interaction of the individual and the job determines levels of job satisfaction and organizational commitment. Organizational commitment is the degree to which employees believe in and accept organizational goals and desire to remain with the organization. A related idea is employee engagement, which is the extent to which an employee is willing and able to contribute. Focus should be placed on continuance commitment factors, which suggests that decisions to remain with or leave an organization ultimately are reflected in employee absenteeism and turnover statistics. II. INDIVIDUAL EMPLOYEE PERFORMANCE For an employer to want to keep an employee, that employee must be performing well. The HR unit in an organization exists in part to analyze and address the performance of individual employees. A. Individual Performance Factors – The three major factors that affect a given individual’s performance are: (1) ability to do the work, (2) effort expended, and (3) organizational support. The relationship of these factors has been expressed in the formula: Performance (P) = Ability (A) X Effort (E) X Support (S) Performance is diminished if any of the factors is reduced or absent. Individual motivation, one of the variables that affect effort, is often missing from the performance equation. B. Individual Motivation - Motivation is the desire within a person causing that person to act. Motivation is a goal-directed drive. The words need, desire, and drive are all similar to motive, from which the word motivation is derived. Performance, reaction to compensation, turnover, and other HR concerns are affected by and influence motivation. Motivation is complex and individualized. Answering the question often asked by managers, “How do I motivate my employees?” requires managerial diagnoses of employees’ efforts, abilities, and expectations. III. RETENTION OF HUMAN RESOURCES Retention must be viewed as a strategic business issue, and each organization must determine the causes for its own specific retention situation. Unfortunately, some myths have arisen about what it takes to retain employees: 1) money is the main reason people leave, 2) hiring has nothing to do with retention, 3) if you train people, you are only training them for another employer, 4) do not be concerned about retention during a merger, and 5) if solid performers want to leave, the company cannot hold them. Some factors that limit individuals’ willingness to leave the jobs are links between themselves and others; compatibility or fit with the job/organization/community; and potential sacrifice, or what they would have to give up if they left the job. While some loss of employees is unavoidable, there are factors related to those individual decisions that an employer can control. These “drivers” of retention are shown in Figure 2.2. A. Characteristics of the Employer and Retention – Organizations experience less turnover when they have positive, distinctive cultures; effective management; and recognizable job security. 1. Culture and Values - Organizational culture is a pattern of shared values and beliefs of a workforce. Those items provide organizational members with meaning and rules for behavior. 2. Management and Retention - Other organizational components that affect employee retention are related to the management of the organization. One factor affecting how employees view their organizations is the visionary quality of organizational leadership. 3. Job Security - is another concern because the past decade has produced many downsizings, layoffs, mergers, acquisitions, and organizational restructuring, which have affected employee loyalty and retention. Organizations where job continuity and security are high tend to have higher retention rates. IV. JOBS AND RETENTION Job design refers to organizing tasks, duties, and responsibilities into a productive unit of work. Job design is currently receiving greater attention because it can influence performance in certain jobs, as well as reduce cost to the business through reduced turnover and absenteeism. It can also affect job satisfaction, as well as physical and mental health. A. Approaches to Job Design/Redesign - Job simplification may be appropriate for jobs of entry-level employees, however, making jobs too simple may result in boring jobs and cause high turnover. Several different approaches to job design have been used. 1. Job Enlargement and Job Enrichment – Job enlargement involves broadening the scope of the job by expanding the number of different tasks to be performed. Job enrichment is increasing the depth of a job by adding responsibility for planning, organizing, controlling, or evaluating the job. 2. Job Rotation – Job rotation is the process of shifting a person from job to job. The advantage of job rotation is that it develops an employee’s capabilities for doing several different jobs. B. Person/Job Fit - The person/job fit is a simple but important concept of matching characteristics of people with characteristics of jobs. Figure 2-3 shows some characteristics of people and jobs that might need to be matched. If a person does not fit a job, they are more likely to look for other employment, so retention is affected by the selection process. Often high turnover rates in the first few months of employment are linked to inadequate selection screening efforts. Physical and environmental factors also affect retention of employees. Workers expect to have modern equipment, technology, and good working conditions. Additionally, workers want a safe work environment. C. Using Teams in Jobs – Typically, a job is thought of as something done by one person; however, jobs designed for teams may make jobs more meaningful, and allow the organization to take advantage of increased productivity and commitment. Some firms have gone as far as dropping such teams as workers and employees, replacing them with team-mates, crew members, associates and other titles that emphasize teamwork. With more firms operating globally, the use of global teams has increased significantly. The virtual team is an organizational team composed of individuals who are separated geographically but linked by communications technology. Teams are more likely to be successful if they are allowed to function with sufficient authority to make decisions about their activities and operations. V. WORK SCHEDULES AND RETENTION Employers are using different work schedule alternatives and telework to respond to the stress caused by the pressures of home and work demands and to aid employee retention. •Shift Work and the Compressed Workweek - Shift work is a commonly used work schedule design and many employers provide some form of additional pay, called a shift differential, for working the evening or night shift. One type of shift work is the compressed workweek which is a schedule in which a full week’s work is accomplished in fewer than five 8-hour days. •Flexible Scheduling - Flexible work schedules allow organizations to make better use of workers by matching work demands to work hours. One time of flexible scheduling is flextime which is scheduling arrangement where employees work a set number of hours a day but vary starting and ending times. •Time Flexibility - Various work scheduling alternatives can be used to improve time flexibility. This is especially desirable as workload pressures increase due to downsizing, more employees have a need for elder care, and dual-income couples in the “sandwich generation” are caring for children and aged parents. •Work/Life Balancing – Programs commonly used to balance the demands of work with the responsibilities of life, including family and personal responsibilities, are: different work arrangements, leave for children’s school functions, compressed workweek, job sharing, on-site child/adult care, telecommuting, employee assistance plans, on-site health services, wellness programs, and fitness facilities. •Job Sharing - Job sharing is another alternative scheduling design in which two employees perform the work of one full-time job. Such arrangements are beneficial for employees who are either unwilling or unable to work full-time. It also allows each person to substitute for the other during illness, vacation, or when other circumstances occur. The key to successful job sharing is that both “job sharers” work effectively together and each is competent in meeting the job requirements. •Telework – Technological developments have created the possibility for employees to work anywhere and anytime. Some employees telecommute, which means they work via electronic communications equipment. HR must develop policies regarding teleworkers and must train supervisors and managers on how to “lead” employees who may not be physically present much of the time. A. Career Opportunities and Retention – Organizational efforts to aid career development can significantly affect employee retention. Opportunities for personal growth, which allow for skill development and promotion, lead the list of reasons why individuals took their current jobs and why they stay, particularly for technical professionals and those under age 35. Tuition aid programs, mentoring, and formal career planning efforts can increase retention. B. Rewards and Retention – The tangible rewards that people receive for working comes in the form of pay, incentives, and benefits. While retention is a complex issue, one key to retention is having competitive compensation practices. 1. Competitive Pay and Benefits – Employees expect pay and benefits to be close to what other employers are providing and what they believe to be consistent with their capabilities, experience, and performance. This is often defined as within 10% of the “market” rate. Also, a number of employers have used a wide range of benefits to attract and retain employees. 2. Performance and Compensation – Many individuals expect their rewards to be differentiated from those of others based on performance. This perception may prompt the individual to look for jobs where compensation recognizes performance differences. 3. Recognition – Employees may be recognized with tangible items, such as plaques or certificates, or intangible and psychological recognition, which includes feedback from managers and supervisors that acknowledges extra effort and performance. C. Employee Relationships and Retention – Employees expect reasonable policies and fairness in treatment. If individuals feel that policies are unreasonably restrictive or are applied inconsistently, then they may be more likely to look at jobs offered by other employers. VI. MANAGING RETENTION - Figure 2.4 shows the keys to managing retention. A. Retention Measurement and Assessment – Management decisions require data and analyses rather than subjective or emotional factors, in order to enhance retention. Absence and turnover measurements should be analyzed, in addition to employee surveys and exit interviews. 1. Exit Interviews – An exit interview is one in which individuals are asked to give their reasons for leaving the organization. Departing employees may be reluctant to divulge their real reasons for leaving. A skilled HR interviewer may be able to gain useful information from departing employees that the employee may not want to share with the supervisor. 2. Employee Surveys – can be used to diagnose specific problem areas, identify employee needs or preferences, and reveal areas in which HR activities are well received or are viewed negatively. B. Retention Management Interventions – The analysis of data mined from turnover and absenteeism records, surveys of employees, and exit interviews is an attempt to get at the cause of retention problems. Analysis should recognize that turnover and absenteeism are symptoms of other factors that may be causing problems. Some of the first areas to consider include work, pay/benefits, supervision, and management systems. C. Retention Evaluation and Follow-Up – Once appropriate management actions have been implemented, it is important to evaluate and follow-up on those actions. Regular review of turnover data can identify when turnover increases or decreases among different employee groups. Tracking of intervention results and adjustment of intervention efforts should also be a part of evaluation. VII. EMPLOYEE ABSENTEEISM - Absenteeism is any failure to report for work as scheduled or to stay at work when scheduled. A. Types of Absenteeism – Many employers have sick leave policies that allow employees a certain number of paid days each year for involuntary absences. Involuntary absences, such as illness, death in the family, and other personal reasons for absences are unavoidable and understandable. However, much absenteeism is avoidable or voluntary. B. Controlling Absenteeism – Organizational policies on absenteeism should be stated clearly in an employee handbook and stressed by supervisors and managers. The disciplinary approach is the most widely used means for controlling absenteeism, with most employers using policies and punitive practices. Figure 2-5 shows actions that employers may use to control employee absenteeism. VIII. EMPLOYEE TURNOVER Turnover is the process in which employees leave an organization and have to be replaced. Many organizations have found that turnover is a costly problem. Many service industries frequently have very high turnover rates and costs. A. Types of Employee Turnover – Turnover can be classified in a number of ways including:
•Involuntary Turnover Terminations for poor performance or work rule violations •Voluntary Turnover Employee leaves by choice
•Functional Turnover Lower-performing or disruptive employees leave; positive for the organization •Dysfunctional Turnover Key individuals and high performers leave at critical times
•Uncontrollable Turnover Occurs for reasons outside the control of the employer •Controllable Turnover Employees leave for reasons that could be influenced by the employer
Even though some turnover is inevitable, employers today must address turnover that is controllable. Organizations are better able to retain employees if they deal with the concerns of employees that are leading to turnover. Tactics for adapting to ongoing turnover include simplifying jobs, outsourcing, and cross training. IX. HR METRICS: MEASURING ABSENTEEISM AND TURNOVER A. Measuring Absenteeism – One formula of measuring absenteeism, suggested by the U.S. Department of Labor is as follows: Other useful measures of absenteeism might include: incidence rate (number of absences per 100 employees each day), inactivity rate (percentage of time lost to absenteeism), and severity rate (average time lost per absent employee during a specified period of time) B. Measuring Turnover – The following formula from the U.S. Department of Labor is widely used; in it, the term separations mean departures from the organization. Turnover data can be gathered and analyzed in a number of different ways, including by: job and job level; department, unit, and location; reason for leaving; length of service; demographic characteristics; education and training; knowledge, skills, and abilities; and performance ratings/levels. 1. Determining Turnover Costs – can be relatively simple or very complex. Figure 2-6 shows a simplified costing model. More detailed and sophisticated turnover costing models consider a number of factors. Some of the most common areas considered include the following: Separation costs: includes HR staff and supervisor time and salaries to prevent separations, exit interview time, unemployment expenses, legal fees for separations challenged, accrued vacation, continued benefits, etc. Replacement costs: includes recruiting and advertising expenses, search fees, relocation and moving costs, supervisor and managerial time and salaries, employment testing costs, reference checking fees, pre-employment medical expenses, etc. Training costs: includes paid orientation time, training staff time and salaries, costs of training materials, supervisors’ and managers’ time and salaries, coworkers “coaching” time and salaries, etc. Hidden costs: includes costs not obvious but that affect lost productivity, decreased customer service, other employee turnover, missed deadlines, etc. CASE - ALEGENT HEALTH Alegent Health, based in Omaha, Nebraska, is a non-profit health-care system composed of seven hospitals with about 2,000 beds and more than 200 clinic and outpatient locations, 1,200 physicians, and more than 7,500 other employees who work throughout the organization. Several years ago, Alegent recognized that HR issues needed “acute care treatment.” Turnover rates of 24%, coupled with more than 500 unfilled positions, were costing the firm more than $15 million annually. Four years later, the turnover rates had declined to 12% and open positions had dropped to fewer than 100. Because of their improvements, Alegent’s HR practices, and especially its retention successes, won several local and national awards. Alegent was named one of the “Best Places to Work in Omaha.” The award was based on surveys of employees that asked about credibility, respect and fairness, pride, and camaraderie. Alegent also received a Workforce Management Optimas Award in the financial impact category for its success at recruiting and retaining key staff. Winning these awards indicates that Alegent is clearly being effective with its HR activities. Specifically regarding retention efforts, Alegent created an Employee Retention Task Force whose focus was to decrease turnover and increase employee satisfaction. The task force identified several strategies to be used. One program illustrates how Alegent approached retention of nurses. The Nursing Residence Program has caught national attention. Each resident (or new nurse) is paired with an experienced nurse or “preceptor” based on interests, personality, and so on. Also, a mentor outside the nursing department adds support and encouragement to individuals. Nursing staff meet monthly for training. In addition, they can visit various other departments (pediatrics, cardiology, etc.) in which they may have career interests. Nurses interested in management can shadow the department director to see how the department is managed. Returning nurses who have been out of the field five or more years are enrolled, retrained, and paired with recently finished residents. Alegent Health is the exception to the turnover levels in nursing. Compared with the U.S. health-care industry rate of 20%, Alegent’s turnover rate of 7.6% is exceptionally low. Another key to aiding nursing recruitment and retention is an extensive training and development program. Many different short courses and classes are provided to Alegent employees at no cost. As part of this program, Alegent pays up to $20,000 for employees selected for a career advancement program to obtain nursing degrees.* Questions 1. Discuss how Alegent’s practices match with the recommended retention practices covered in the chapter. 2. Why was Alegent’s broad-based approach to nursing retention important? _____________ * Based on Christa Hines and Amy Protexter, Alegent Health Press Releases dated June 25, 2002, October 21, 2003, June 9, 2003, December 18, 2003, and February 25, 2004; and Eilene Zimmerman, “Strong Medicine,” Workforce Management, March 2004, 40-42. Suggested Answers to Case Questions 1. Discuss how Alegent’s practices match with the recommended retention practices covered in the chapter. There are several drivers of retention: characteristics of the employer, job design, career opportunities, rewards, and employee relationships. Regarding the characteristics of the employer, Alegent has clearly focused on creating an organizational culture of shared values and beliefs that provide members organizational meaning and rules of behavior. Their culture tends to value people and eliminates barriers for employees to pursue their individual capabilities. This type of culture tends to result in lower turnover. Alegent also seems to be concerned about the job/person match since they allow nurses to visit various departments in which they may have career interests. One of the strong areas of Alegent’s practices is the commitment to training/development and mentoring. These practices along with the focus on career development are two other areas related to career opportunities that are discussed in the text as recommended activities to lower turnover. A final area that Alegent excels in is employee relationships. By using an employee task force to identify retention strategies, employees feel involved in their work. 2. Why was Alegent’s broad based approach to nursing retention important? A broad based approach to nursing retention is important because of the severity of the turnover costs and because retention is connected to so many other areas of HR: recruiting, selecting, orientation, training, compensation, career planning, health/safety, etc. To focus on only one element of retention, such as training, but to neglect the other areas will not work. If you don’t have good selection, orientation, compensation, etc. then training will not be enough to have a significant effect on turnover. Instructor Manual for Management of Human Resources: The Essentials Robert L. Mathis, John Jackson, Sean Valentine 9780324592412, 9781305115248