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This document contains Chapters 1 to 2 CHAPTER 1 – CHAPTER EXERCISES Chapter Exercise 1.1 An Interview with an HRM Specialist Objective. The purpose of Exercise 1.1 is to give the student a personal feel for the role of an HRM manager or specialist in an organization. The problems that are cited by the people interviewed should reflect the trends discussed in Chapter 1. Description. Students should be given a few weeks to set up and conduct the interviews. Due to the nature of the exercise, the week in which you are going to cover Job Analysis (Chapter 4) is the most appropriate time to collect Form 1.1.1, and conduct the group discussions in the context of the job descriptions and job specifications for the personnel who are interviewed. These two products of job analysis are covered in Chapter 4. The exercise is easy to conduct at urban institutions and difficult in rural institutions unless the professor allows telephone or e-mail interviews. The Directory of the Society for Human Resource Management (SHRM) is an excellent source for telephone contacts. You can contact SHRM at If your school has an SHRM liaison, he or she should have the Directory. Class discussion should relate problems cited by the HRM people, directed toward the trends discussed in Chapter 1. This exercise can be combined with a written assignment that recommends specific HRM interventions for problems identified within the organizations represented. For example, staffing problems could be identified and attacked using better recruitment (Chapter 5) or more valid selection techniques (Chapters 6). Performance management problems could be tackled with more valid performance appraisal techniques tied to the strategic goals of the organization (Chapter 7) and perhaps pay for performance systems (Chapter 11). Health care costs could be researched and controlled through cost care management programs (Chapters 10 and 14). Labor realtions issues may also be particuarly timely (Chapter 13). Students should be given almost the full length of the course to submit a final set of recommendations for HRM interventions although different interventions could be presented in a working paper throughout the term. Procedure for Exercise 1.1 For Step 1, Part B of Exercise 1.1, groups of no more than 6 students should be assembled using a systematic method of assignment discussed in the Manual Introduction. Allow at least 15 minutes so that all group members can review all other student forms. As an alternative, students can be paired off for the review phase and then assembled in groups. We recommend that all group members review all of the other student's forms since this tends to facilitate discussion. Students should be given an additional 30 minutes to discuss the backgrounds of the HRM people who were interviewed, the major problems confronting these individuals, and activities (if any) being pursued by the organization to deal with the problems. We recommend that the instructor select spokespersons for Step 2. Each group should summarize the range of HRM specialists interviewed, the range of problems described, and the activities the organization is pursuing in response to the problems. The variance in backgrounds and responsibilities of HRM professionals should be apparent after discussion. As we discuss in Chapter 1, while there is an increase in the number of highly trained and educated HRM professionals with advanced degrees in the subject or related disciplines (e.g., MBAs, Masters or Ph. Ds in industrial psychology or HRM), many HRM specialists worked their way up through other positions within the company. For example, many women are advanced to HRM and personnel positions from clerical jobs. They then learn HRM techniques on the job or through special programs sponsored by HR associations such as the Society for Human Resource Management or the American Management Association. Some of the people who are interviewed by the students will probably have major policy and decision making responsibilities for HRM activities while others will have more clerical and implementation duties. In general, large companies have an HRM professional at the V P level while mid size organizations have an HRM manager. Many small companies have no designated HRM specialist and the president of the company or the small business owner performs all of the major HRM functions. Problems Identified in the Survey Using Form 1.1.1. Based on survey responses, service organizations in particular indicate considerable difficulties in hiring and retaining skilled personnel. Health care costs are often cited as a major problem in service and manufacturing, private and public sector. One estimate puts health care costs at 12% of U.S GNP while other countries pay an average of 7.5%. Other frequently cited problems are: reduced budgets and related downsizing efforts, compensation programs not linked to performance outcomes, chronic absenteeism, high turnover, meeting affirmative action goals, EEO lawsuits, employee discipline, and performance management problems. Public sector HRM professionals lament over greater demand for services, shrinking budgets, and hiring freezes. A significant number of HRM professionals have indicated a lack of support or resistance from line management. Many managers perceive HRM departments as reactive and often as obstacles to getting things done. The most effective HRM departments and programs are those that are developed and implemented in consort with line management. The most frequently cited difficulty between line management and HRM is staffing. Procedures, put in place to promote affirmative action or diversity and equal employment opportunity, are often viewed as obstacles to expeditious management staffing solutions. A survey found that the relationship between HR staff and line management is more adversarial in service organizations and the public sector than in manufacturing. Table 1.1.1 presents a summary of the survey results cited by HRM specialists as the major problems they are confronting. Table 1.1.1 Most Common Private Sector Problems More common problems in service organizations are marked by an asterisk (*). Ensuring compliance with regulatory agencies and laws (EEOC, ADA requirements, OSHA) Employee staffing and EEO* Training management and effectiveness Effective customer service* Job dissatisfaction/employee attitudes Preemployment screening Need for methods to improve performance* Lack of employee motivation* Negligent hiring Ineffective performance appraisals* Increasing levels of teamwork Recruitment and retention* Health care costs* Establishment of drug free workplace policy Pension plans Effective pay for performance systems* Insurance costs Most Common Public Sector Problems Cost cutting/staff reductions Workload increase/workforce freeze and reduction Excessive health care costs and sick leave Training program evaluation EEO compliance Affirmative action/diversity programs -- line management resistance Computer reporting programs Competitive salaries in technical areas Benefit administration Computer training Safety programs Insufficient funding Childcare Terminating ineffective employees Injury compensation costs Union demands Invalid performance appraisals Ineffective pay for performance Chapter Exercise 1.2 An Assessment of Customer Satisfaction and the Relationship to HRM Activities Objectives. The purpose of Exercise 1.2 is to relate HRM activities to customer satisfaction. The link between particular HRM practices (the domains introduced in Ch 1) and meeting or exceeding customer requirements will be discussed. Description. Part A requires each student to write critical incidents regarding customer service and satisfaction. Examples of both excellent and poor service are requested. Tables 1 and 2 present a summary of results using Exercise 1.2. The most frequently cited causes for excellent and poor service are presented from the perspectives of practicing HRM specialists and undergraduate or graduate students. These groups were given incidents as written and then asked to speculate on the most important "cause" of the good or bad incident. The rank ordering of the most frequently cited causal HRM activities are in parentheses in the "cause" column of each of the tables. Students and HRM specialists are able to assess the value of the product or service. The best employees at the point of contact often have little to do with customer satisfaction regarding a product but they tend to have an impact on service quality perceptions. Many critical incidents are written which focus on product quality, the assessment of which (as described) is largely independent of the point of contact with an employee. Many students related incidents involving poor products which customer representatives could do little or nothing about regardless of the employees' levels of motivation, ability or knowledge. As discussed in Chapter 1, however, the instructor should point out that product quality can been linked to HRM activities that may not be apparent to the student. SAS, the highly successful computer software company, credits its success to its staffing, recruitment and retention programs that help to attract and retain highly skilled employees. Good (or bad) market research and the ability to meet or exceed customer requirements should drive product or service specifications. The ability to attract, retain (or contract with) and motivate those people with the most to do with determining customer requirements is, of course, a major HRM responsibility. (This is a major point in Jeffrey Pfeffer's book on Competitive advantage) and a theme of this book. However, for services (e.g., universities, hotels, restaurants, airlines, dry cleaners), it is clear that the employee point of contact cannot be so easily separated from the service provided and that the employee point of contact can be a critical component of the service package. Many students related incidents in which they received such poor service from an employee that even though the actual delivered service (e.g., the food, cleaning, hotel, repair) was excellent, they would not return to the establishment. Recent research now ties customer satisfaction data (opinion surveys) with hiring practices and selection ratios. Lower selection ratio (ratio of # of openings to # of applicants (lower is better) is related to recruiting efforts and hiring practices are good or bad to the extent that they predict success on the job and trainability. Organizations that have lower selection ratios combined with relatively more valid hiring practices end up with fewer complaints regarding point of contact service. Specific HRM activities can thus be linked directly to the "business of the business" to the extent that point of contact affects repeat business and "word of mouth" marketing. One clear difference found between students and HRM specialists regarding the causes of poor customer service is the belief among students that poor employee attitudes and product or service knowledge can be corrected through training or better compensation. One common, underlying theory is that the company caused the bad attitude on the part of the employee, often by poor compensation. Students tend to believe that the company did something which created the employee's attitude or that the company failed to provide adequate training regarding the product or service. HRM specialists place relatively greater weight on personnel selection methods to improve the organization in this area. There may be a more "can't make a silk purse out of a sow's ear" orientation among HRM respondents with either a bad hiring practice or poor supervision as the major attributional domain. Training was seen by the HRM specialists as useful for providing greater employee knowledge of the product or service but not particularly helpful as an HRM activity for motivating employees. Despite a plethora of motivational programs for employees, HRM specialists considered better supervision relatively more important for attacking poor service problems. Many HRM specialists also related customer-based market research, work design activities, and information systems as major contributors to service quality as well (back to Pfeffer's book). Customer Satisfaction and Price Many students write incidents in which they mention satisfaction in the context of price and we know price enters into assessments of "customer value" (you expect a little more from the Ritz-Carlton than Motel 6 or the Lexus dealer as opposed to your Ford Focus salesperson). Given this, the instructor could mention the current trend and political debate on outsourcing, employee leasing, alternative employment schedules, etc. Underlying this trend is a theory that these approaches will ultimately affect the price of the product or service (e.g., Valujet's pricing was facilitated (they contend) by outsourcing maintenance (although they apparently conducted no definitive research which analyzed these costs). Many companies conduct studies estimating the cost savings of an outsourced part or service or the use of contracted, temporary or leased employees). Fewer companies conduct "quality" analysis in the context of the HR intervention. There can be little dispute that certain parts or products produced overseas can be delivered at a lower cost than if the part or the product was manufactured in the U.S. because of the cost of labor and the need to comply with U.S. labor laws and regulations. Nike lost $10 million on U.S. produced footwear in 1984; the last year of U.S. based production. Nike and its 15,500 employees would be in serious trouble if they produced in the U.S. while their competitors manufactured in Viet Nam, South Korea, Taiwan and Indonesia. Obviously, the quality of the product has not suffered when it is produced outside of the U.S. But the notion of "customer value" is a slippery construct. To the extent that customers include questions such as "is this made in America?" or "does this company do right by its employees?" in their decisions to purchase equation the realized cost savings to foreign production is reduced. To date, these types of questions have not been given much weight in the equation relative to bottom-line price and actual product quality. Due to the political rhetoric on this issue, however, the competitive advantage of domestic production could ultimately be enhanced. Review the history of Levi Strauss for an illustration of this difficult issue. The political fall-out of work outsourced or performed by contracted employees within the U.S. should be far less onerous (if burdensome at all). However, the key question here is the effect of the "theoretically" more cheaply produced product or service on quality as defined by the customers. The trend toward more outsourcing or contracting through temporary employment agencies often comes with the downsizing of the organization. The most successful downsizers conduct the process strategically to focus on specific business plans. Most importantly, downsizing efforts which consider only labor costs while ignoring the effects of the quality of products or services provided by outsourced or contracted companies may be doomed to failure. Please note that many downsizing/outsourcing programs do not meet their objectives and/or save as much money as projected. Table 1.2.1 Most Frequent Examples and Causes of Excellent Product/Service SOURCE: HRM Specialists Example/ Categories Causes Actual product or service quality - (1)*market research, customer knowledge Employee knowledge of product or service - (3) employee training Employee motivation to go beyond what is expected - (5) compensation, training, (4) personnel selection Departmental communication/ cooperation - (2) job design, work teams SOURCE: Students Actual product or service quality - (1) knowledge of customer requirements through market research Customer service related to - (2) employee training, employee attitudes - (3) compensation, supervision Knowledge of product or service - (4) training * Number of HRM activity in parentheses for causes represents rank ordering of the causes of customer satisfaction with product or service across all examples or categories. Table 1.2.2 Most Frequent Examples and Causes of Poor Product/Service SOURCE: HRM Specialists Examples/ Categories Causes Employee attitudes regarding customer problems - (3)* personnel selection (4) supervision (5) training Employee knowledge of product or service - (5) training (7) compensation Quality of product or service - (2) work design excluding employee contact - (1) market research Timeliness of product or service - (2) work design - (6) distribution SOURCE: Students Employee attitudes regarding - (2) training customer problems - (3) compensation - (5) selection Employee knowledge of product or service - (2) training Quality of product or service - (4) work design, excluding employee contact - (1) market research Timeliness of product or service delivery - (4) work design - (6) distribution * Number of HRM activity in parentheses represents rank ordering of the causes of customer dissatisfaction with product or service across all examples or categories. Table 1.2.3 Mean Self & Peer Assessments for Exercise 1-b 1. Not at all 2. To a small extent 3. To some extent 4. To a great extent To a very great extent

4.2 4.1 1. Help to establish a clear course of action needed to complete the work?

3.9 3.7 2. Speak effectively in the group?

3.6 3.5 3. Argue persuasively for a point of view?

3.8 3.6 4. Present your point of view concisely?

3.5 3.6 5. Write clearly and concisely?

4.4 4.3 6. Show sensitivity to other group members?

4.0 3.9 7. Stimulate and guide group members toward resolution of the assignment?

4.4 4.1 8. Listen carefully to other opinions and suggestions?

3.9 4.1 9. Analyze all pertinent information carefully before taking a position?

4.4 4.0 10. Display a willingness to state a position in a complex situation?
Exercise 1.2 Assessment Questions 1. Describe the experience you had in providing feedback on your designated discussant’s performance. To what extent did you feel comfortable in that role? Students tend to feel uncomfortable in providing feedback for a number of reasons. First, with the short observation period and assessment period, they may be uncertain about the validity of their ratings for this exercise. Second, many students will have had little or no experience in providing feedback to peers in a setting such as this (or in any setting for that matter). As we point out in the preface of the book, since providing performance feedback is considered a vital aspect of managerial performance, the experience gained through the assessment process should prove invaluable for the aspiring manager. Research in performance management shows that such experience improves the manner in which managers perform the vital feedback functions of their job. 2. How might that role be improved with better directions, better assessment devices, etc.? Research in performance appraisal also shows that the extent to which the rater feels uncomfortable in the process of giving performance feedback predicts the extent to which the rater makes relatively higher ratings and perhaps unjustified ratings (i.e., lenient ratings). As we will discuss in Chapter 7 of the book, lenient ratings are considered one of the most troublesome aspects of the performance appraisal process. Lenient ratings often render appraisal systems useless, severely hinder the effectiveness of pay for performance compensation systems and, of course, give the person being assessed the impression that his or her performance is highly effective. Rater training would improve the process. 3. How did you feel about receiving feedback on your group performance? To what extent did you find the feedback helpful? How might that process be improved? Students tend to feel more comfortable receiving feedback than providing it. Of course, the high ratings account to some extent for the ease in which feedback is given and received on this exercise. More negative feedback tends to foster more negative reactions to the feedback sessions. However, most students tend to view the feedback as helpful. Rate training would improve the process. 4. Did this exercise give you a better understanding of the relationship between HRM related activities and customer satisfaction? Explain your answer. One implication from this exercise should be that customer satisfaction in services is closely linked to the performance of the contact employees. In the services, many workers typically perform their major functions at the same time that the service is consumed by the customer and their performance therefore directly affects customer satisfaction. We also know that customer satisfaction is strongly related to repeat business. And loyalty to the service, but that, the customer is capable of distinguishing the performance of workers with whom he or she has contact with other aspects of the product or service quality. HRM activities such as selection, training, compensation and supervision are all critical activities related to the performance of these employees. Our survey work also clearly show that issues related to work design, information systems analysis, and customer based analysis are critically related to customer perceptions of product and service quality. HRM experts must maintain this customer driven focus as they monitor the effectiveness of the various HRM activities. Chapter Exercise 1.3 HR Issues at Valley National Bank Dave Ulrich Objective. The major learning objective for Exercise 1.3 is to relate HRM activities to the competitive strategies and advantages of the organization through a SWOT analysis. Effective HRM activities are well integrated with the strategic plan of the organization and can create several competitive advantages. This case describes a bank with potential for "technological" and "financial" competitive advantages but has several HRM characteristics that presently exhibit "organizational capability" disadvantages. Description. VNB has an opportunity for immediate competitive advantage due to financial and technological capabilities. However, organizational capability is such that the Bank could lose the potential advantages of the aforementioned capabilities due to HRM problems. The additional $2 billion in assets and the innovative information tools may not be properly utilized without swift interventions with regard to the Bank's HRM practices. Table 1.3.1 presents the chronological priority list of HRM issues requiring the accounting vice president's attention (this table corresponds to Form 1.3.1). In summary, the chronologically ordered priority list is as follows: 1. Determine the critical competencies required in the context of the goals for the department and the bank and the potential competitive advantages to be derived from the attainment of these goals. Most complicated HRM cases should begin with “Design” activities; 2. Assess the extent to which the current incumbents possess these critical competencies; 3. Develop training or selection programs where there are discrepancies between competencies required and competencies possessed by the incumbents; and concurrently, 4. Develop a compensation system commensurate with the competencies required for the positions and the goals of the accounting department and VNB. The first HRM area in need of action is to clearly define the requirements for the department and the various job positions in the context of the specific goals for the department and the potential competitive advantages to be exploited. One emphasis should be on a determination of the type and extent of knowledge required regarding the "information tool" and other sources in order to fulfill departmental goals in the context of the Bank's overall strategic plan. This step is essentially a rewriting of job descriptions and specifications in the context of current departmental goals and the new circumstances. The job specifications should stipulate the critical competencies employees must possess in order to meet these goals. After the critical competencies are determined, an assessment of incumbent knowledge should be made for purposes of determining the compatibility of skills required with incumbents' skills and, assuming there is a discrepancy, the training and/or personnel staffing requirements needed to eliminate the discrepancy. As the necessary training or personnel selection procedures are being developed for solutions to the discrepancies, a thorough study of the compensation system is now warranted. A process of linking the reward system with the strategic plan should be pursued culminating in a modified salary structure based on the new job descriptions. No action should be taken with the current staff until these compensatory steps are accomplished because the hiring and placement of personnel into the newly created positions can only be done effectively with knowledge of the compensation involved for each position to be filled by either internal or external personnel. There is strong indication, however, that immediate action may be required regarding several key personnel. Given the description of Bob Phillips' skills, it appears he would be more useful contributing to the strategic aspects of the departmental needs. A determination should be made on the extent to which Carla Goodman's past performance has been measured reliably, and whether her knowledge and skills are compatible with the new departmental needs. While it appears her technical skills may also be her strongest assets, Ms. Roberts should assess these skills relative to the negative allegations. A determination should then be made of the extent to which the negative qualities of Ms. Goodman and others can be alleviated with employee training, development, and performance appraisal feedback. Ms. Roberts should also make a determination of the extent to which her data on Ms. Goodman could have been gathered in some discriminatory fashion such that allegations of sex discrimination could be found warranted should she be dismissed. Of course, the lack of a formal performance appraisal system may not bode well for the Bank's defense in potential litigation. Similar analyses of personnel should also be followed for Mr. Williams and Ms. Lewis. After competency requirements are determined, a reward system should be established which creates internal equity among employees. Ms. Roberts should restructure the department with the appropriate assignments and determine any additional staffing needs. Employee reactions to the new assignment/salary schedule should be measured on an individual basis. For example, if Ms. Lewis prefers something more compelling, an attempt could be made to find something within the Bank that is compatible with the needs of the Bank and her individual needs. Table 1.3.1 HRM Issues in Need of Attention (In order) 1. Determine the critical competencies required for the achievement of the strategic goals and competitive advantages of the department and bank. Justification: Will not realize financial and technological competitive advantages without critical employee competencies. Action: Re do job descriptions/job specifications. Domain: Organizational design. 2. Assess incumbent knowledge, skills, and abilities in all critical competencies and determine any discrepancies. Justification: Valid and relevant performance appraisal data are needed to assess incumbent KASOCs. Action: Develop relevant performance appraisal system to measure critical competencies. Domain: Performance appraisal and management. 3. Develop training and/or selection programs where there are discrepancies between competencies required and competencies possessed by employees. Justification: Assuming there are discrepancies in competencies, they must be eliminated through training and selection. Action: Termination for only employees who possess no useful competencies or have no potential for learning them (decision makers should be very familiar with legal ramifications of such decisions). Then, training program development and assuming there is a need for external help, development of recruitment strategy and valid selection programs. Domains: Employee training and organizational development, and staffing. 4. (Same time as Step #3) develop a compensation system commensurate with the competencies required for the positions and the goals of the department and VNB. Justification: Present system creates major competitive disadvantage; key personnel underpaid, others overpaid. Action: Develop pay survey and pay for-performance system based on new job descriptions and specifications -- emphasize competitive advantages. Domain: Rewards and benefits system. Mr. Sterrett's recommendations: Mr. Phillips should be terminated. Ms. Goodman status quo. Mr. Phillips may have technological competencies that are valuable and difficult to replace. His problems are more related to managerial capabilities. If Bob can perform the "essential functions" of the job required, health problems should not (and cannot) be considered (pursuant to the Americans with Disabilities Act). Ms. Goodman should be assessed based on the steps presented above. No evidence is presented which indicates sex discrimination, although an internal inquiry should be made immediately. Exercise 1.3 SWOT Analyses Strengths The bank is in the unique position of acquiring a large influx of capital. The company’s technical capabilities in the form of valuable software and technically competent employees are also valued assets and potential sources of uniqueness. Weaknesses There are serious “organizational capability” issues that are clear weaknesses; personnel problems abound in this organization. Some employees need to be reassigned. Others possibly need to be terminated. Jobs need to be redesigned. Assessments made for all employees as to their knowledge, skills, abilities and other characteristics. The tie back to the mission statement is missing in Ms. Roberts’s assessment of what to do with her department. There is little experience of any of the current personnel in handling $12 billion company activities. There also seems to be wage inequity in proportion to the current job assignments and the effort of employees. Opportunities With the acquisition of the bank, VNB is in a capital position to hire good people, train employees retained and to expand the core business. The ability for Ms. Roberts to quickly train the company’s employees on the software is aided by the number of technically competent employees. This training will help in all VNB employees to take responsibility for the profitability of the company. There is also the potential for redesigning the department into teams. This would lead to greater pay equity if an effective compensation plan were implemented. Threats The fundamental threat is the disarray of the HR function. Wage inequity could cause turnover. There is an additional threat of Bob Phillips suing if he were discharged claiming an ADA violation. Ms. Roberts is in danger of losing Ms. Lewis to either another department or a competitor. Exercise 1.3 Assessment Questions 1. Do you agree or disagree with the recommendation of Mr. Sterrett? Explain your position. Is it lawful to cut employee pay as Mr. Sterrett’s recommends? Answers will vary but should contain information regarding the revised job specifications as well as analysis regarding current employee KASOCs. Bob probably has important technical skills. You need more information regarding the potential harassment lawsuit regarding Carla. 2. What other information would be helpful in preparation for recommending action to be taken? More detail on the increased assets and the technological advantage of the bank will of course be critical in determining the specific competencies necessary to take advantage of these potential capabilities. 3. What steps would you take to determine the legality of your actions? All decision makers should be very familiar with all laws and regulations related to personnel actions. Title VII of the Civil Rights Act and the Americans with Disabilities Act are two laws that may be particularly relevant to possible decisions. A training program for decision-makers who are not familiar with such laws should be implemented prior to personnel decisions. 4. What is "unique" about VNB and how could the uniqueness give the bank a competitive advantage? The $2 billion in new assets and the technological software are the "unique" capabilities that can translate into competitive advantages. Of course, another "unique" characteristic of the bank is the horrendous condition of the HRM function in accounting. The steps presented in Table 1.3.1 are necessary in order to take advantages of the financial and technological capabilities and ultimately create an "organizational capability." 5. Among the major activities of HRM (see Figure 1-3), what domain usually drives other HR domains when significant organizational change is necessary? Organizational design isssue are almost always what should be addressed first (see page 10). In organizational design the make-up of jobs, including tasks and other requirements, can be changed, as well as how those jobs interact. Staffing can follow the design changes. CHAPTER 2-Chapter Exercise Exercise 2.1 - International HR Strategies: The Derivation of Policy Brenda E. Richey Objective This exercise introduces the student to the complex compensation issues that face the multinational firm. Concepts students should take away include the impact of culture on compensation systems, an understanding of the factors that should be considered in setting up a compensation system in a foreign subsidiary and the extent to which firm strategy may impact the appropriate level of compensation system integration. The case can be used as a vehicle to discuss specific compensation issues in a global setting and as a starting point for a wider discussion of the role of the global economy on employees. The immediate issues facing O’Dell include both compensation levels and the extent to which the home company compensation package is appropriate for the Indian subsidiary. To resolve these issues, O’Dell is going to need to reconcile corporate needs and company wide “best practices” with national differences. Description This exercise should take students 30 minutes to an hour to prepare by reading the case and to give thoughtful answers to Form 2.1.1. This should stimulate students to think of all the HRM questions that need to be addressed in organizations expanding into global operations. Table 2.1.1 Answers for Form 2.1.1 How does culture affect the role of pay as a motivating force for workers? Would this issue be raised differently in the United States? The instructor may want to discuss the manner in which the compensation issues were raised in the case. How employee satisfaction (or more importantly, dissatisfaction) is communicated may also differ by country. In this exercise the issue is raised in a conversation that was “overheard” by one of the actors. The U.S. custom or “asking the boss for a raise” (uncomfortable enough in our culture), might be even more difficult in a culture which ranks high in Hofstede’s concept of power distance (as India does). In a high power distance culture employees may be hesitant to directly approach a supervisor. Similarly in some cultures dissatisfaction with pay levels may not be raised with a supervisor because the employees do not feel that they can influence their environment. For the U.S. manager, it is important to remember that silence does not necessarily indicate satisfaction with existing salary structures. It should be noted that cultures appear to differ in terms of their tolerance for disparities in pay between employees at the same level and across levels, and that they may also differ in the way in the extent and manner in which compensation serves as a performance motivator. These factors suggest that it is difficult to develop a global compensation plan that is also the “ideal” for each nation in which a firm operates. What would be the advantages and disadvantages of using the existing LG compensation package in India? How might it differ from a more typical Indian package? What additional information would O’Dell need to make this decision? Whether the existing compensation package is appropriate for the new subsidiary can only be determined by considering both legal aspects and broader cultural factors that may determine what will work in the new context. Adopting the existing package may seem to counter some of the apparent dissatisfaction about compensation differences. It may also be argued that it will simplify HR management. Having separate compensation/benefits packages for each subsidiary can be very confusing. However, there are generally both legal and cultural reasons barring the direct transfer of the existing system. Although the class may not have sufficient knowledge to describe an appropriate benefits package for India, they should be able to identify areas of legal concern. Some have been suggested in the case, while others should come to mind if students are prompted to consider areas in which US legislation shapes benefits packages (for example the role ERISA). Typical items mentioned should include: Local laws on compensation; local taxes policies; national norms on health care (is health care socialized or does the firm provide it; if socialized should the firm provide a supplemental plan; does the firm or the individual usually pay the premiums); national norms on retirement systems (does the government have a social security system or is retirement planning left to firms and individual employees; does the firm or the individual pay the premiums); and the extent of regulation of employee stock option and profit sharing plans. When vacation is discussed, it should be noted that national norms for vacations vary. German employees, for instance, may expect 25 to 30 days paid vacation days a year. Similarly some countries’ benefits include employee housing, meals, vacation camps and paid tuition for employees or their families. There are substantial differences across nations in the portion of total compensation provided in the form of benefits rather than direct pay to the employees. These factors suggest that even if the broad outlines of a compensation plan are adopted by the firm for global use, there must be substantial changes to adjust the plan to meet local legal requirements. What other human resource issues might O’Dell need to be concerned about? Prepare a list and explain how they might interact. It is, of course, difficult to contemplate a compensation system that is not tied to the related HR practices of selection, training, and performance evaluation. The most closely related issues in this case would be performance evaluation. In the U.S. context, a relationship between employee performance and compensation levels is taken as a given. This relationship is not universally accepted, however. In other cultural contexts, it is accepted that compensation will be tied more directly to employee traits (loyalty, honesty, hard work, and similar characteristics rather than specific outcomes), to seniority, or to group as opposed to individual performance. Planning and forecasting How many engineers will he need and for which projects? How soon does he need them and how long will take them to obtain the skill level necessary? When does he need to start recruiting in order to get the people in place by the time he needs them? Recruiting How are the engineers and workers currently recruited in India (and the U.S)? How can he become an employer of choice so that he has a large number of highly qualified applicants for each engineering position both in India and the U.S.? (This is another characteristic of HPWS.) Selection Once he has the candidates, how can he ensure he has made the best match for the employee, the organization and the customer? Training How can he provide the training necessary to improve the skills of the Indian team that will lead to the higher productivity and improved quality he is looking for? How can he disseminate the company’s culture and expectations? How can he make sure his staff will always stay ahead of the technological curve so that he can offer uniqueness? Performance Appraisal He needs to establish a specifically designed performance appraisal system on outcomes that will give constant feedback to the engineers especially on the critical projects. The outcomes need to be detailed and specific in order to identify the inputs it takes to produce the outcomes. Those inputs need to also have metrics set on them for the constant feedback so that the staff knows how, when and what it takes to increase productivity and improve quality. Career Development O’Dell should think about how he wants his company structured in the future so that he can begin to develop the key people for the critical positions. In addition, he should think of the way all employees move within the organization and design a system that makes this possible. Of course, this is dependent on the systems working together (plan for the future, recruit for the future, etc.). Other compensation What are the current benefits offered in both the U.S. and in India? Are there government regulations in India in regards to those benefits (i.e. mandated health care)? Do additional benefits matter to Indian workers? Do additional benefits attract and sustain the best talent in India as they do here in the U.S.? Health and Safety What (if any) entity such as OSHA does India have that is chartered with employee health and safety? How can he make sure his employees will participate in keeping a healthy work environment? (Another aspect of an HPWS.) How do these issues relate to the strategic choices that the firm has made? Does the analogy to a manufacturing firm seem appropriate? Firms operating internationally vary in the extent to which they integrate systems globally. In some, subsidiaries operate on a stand alone basis, adapting closely to the host country norms. In others, subsidiary operations are coordinated with those of the parent company and other subsidiaries to form a global network with more standardized systems. (The standard may either be an expanded version of the home country standard or one specifically developed to apply on a global basis). The extent of integration will usually be related to strategic choices made by the firm. In this case, tension appears to have been triggered by the decision to bring the Indian subsidiary operations “in house”. Although this will allow greater control and closer connections between the work done in India and the work in Boston it adds complexity to HR management which to date has been multi-domestic (adapting to local norms) in nature. This tension is aggravated as the firm integrates operations to include the use of cross-national teams to develop software, throwing together employees with similar skills but very different HR regimes and compensation levels. The case allows the students to see that there may be tension between the cost saving aims of the firm and other strategic aims. Other issues that might be explored by the instructor include a discussion of other HR systems that may need to be integrated to allow the firm to meet its strategic aims (an analysis of how training might have to change should prove interesting); a look at how strategic choices regarding entry modes (greenfield versus acquisition) influence the firms’ ability to introduce new HR systems; or an analysis of whether the motivation and commitment needs of the knowledge-based service firm distinguishes this case from that of the typical manufacturing firm. Chapter Exercise 2.2 Going Global with Marriott Corporation Dave Ulrich Objectives. The major objective of Exercise 2.2 is to emphasize how HRM practices can create and sustain competitive advantage through "organizational capability." Marriott's goal is to become the "employer of choice" and the future employee perspective on this matter is relevant. The key issue in this exercise is to determine how Marriott could achieve this goal at a minimum cost so that a financial, competitive disadvantage is not created while making Marriott the "employer of choice." Description. The unique, financial capabilities of the Marriott Corporation provide an opportunity for competitive advantage. In order for Marriott to continue its growth, it should adopt several actions that will contribute to the creation and endurance of an "employer of choice" image and to increase international expansion. BACKGROUND Traditionally, both financial management and customer service are emphasized. These two priorities help Marriott deliver services that are cheaper and better. The third priority has been to be the “employer of choice.” Being the “employer of choice” is essential to providing the excellent service Marriott customers have received in the past and expect when they stay at a Marriott property. It is also essential in order to deliver the services better. a) It cuts cost. With over 100,000 employees at Marriott even after big cuts in 2008 and 2009, a reduction of turnover rate (e.g. 1 or 2%) through better HR practices can save millions of dollars. Of course, attracting and retaining better employees will also affect customer satisfaction. b) It enhances customer service. If employees are not happy, who is going to suffer? Clearly, customers who are in direct contact with employees will suffer. Then, if customers are not happy, who is going to suffer? Marriott Corporation. Research indicates there is a direct correlation between customer satisfaction and employee satisfaction. | X | X Customer | X Satisfaction | X | X | Employee Satisfaction c) HR, not capital, becomes scarce resource in the 1990s (baby bust, aging workforce, diverse workforce, etc.). Managing HR competencies becomes much more uncertain and critical than before. High | Capital Competence Scarcity | of | resource | | Competence Capital Low | In the 21st Century, human resources will become increasingly scarce in the U.S. as a result of demographic changes. Marriott's operation is quite labor intensive. In 2008, the Department of Labor ranked the hospitality industry as one of the fastest growing sectors but also reported in 2009 that the sector that lost more jobs between Dec, 2007 and May, 2009. The Marriott should be able to attract great employees from the very large pool of unemployed but very skillful and well trained individuals. Management identified two major factors as central to Marriott's continuing success. First, Marriott has to manage effectively its financial assets. Construction costs in the hotel division could be accurately predetermined and related to the type of facility to be built --- for example, a conference center versus an economy hotel. The occupancy rates required to cover these costs could also be identified and established as goals. In the food business, Marriott knew the cost of each meal it produced and its net revenues on the food served. On an ongoing basis, these calculations enabled Marriott to monitor current expenses and anticipate future costs. Marriott also demonstrated commitment to effectively deploying financial assets by offering weekend rates to keep rooms filled on otherwise low volume Friday and Saturday nights, by putting breakfast menus on beds at night to increase the use of kitchens, and by selling the hotels to syndications while maintaining management responsibility. The second major factor in this company's success has been Marriott's efforts to meet its goal of becoming the provider of choice, or the preferred provider, in the hotel industry. In guest satisfaction surveys, Marriott consistently ranks at the top. To meet guest demands, Marriott has initiated a number of programs aimed at maintaining its preferred provider status, such as: Concierge service, video checkout, frequent flier points, weekend rates, and customer satisfaction cards. All these programs help ensure that guests' needs are anticipated and met. Likewise, in the food service sector, Marriott continually administers surveys to identify current and future customer needs to keep service well above par. By the late 1980s, as Marriott management looked at changing economic, social, demographic, and technological shifts, it recognized that a third key success factor would be required. Marriott executives saw the need to add a new dimension to their corporate strategy. To compete successfully, management realized that it also had to ignite within each employee a burning and self sustaining commitment to outstanding customer service. To be consistent with Marriott's provider of choice philosophy, management set the goal of becoming the employer of choice. Being the employer of choice would be critical because (1) customers judge Marriott's service primarily on the basis of the impression created by Marriott employees, and (2) changing demographics, with fewer people in the 20 to 25 year old age group -- the traditional hiring pool -- mean that the challenge of attracting high quality employees will be greater than in the past. First, employees must prefer working at Marriott, as measured by reduced turnover of high quality employees. Second, high quality job applicants must be attracted to Marriott, as measured by the acceptance rate among chosen job candidates. Marriott is almost always ranked in the top 100 of Fortune’s “Best Companies to Work For” (2009 rank was #78; 72nd in 2008). Given the travel slump, Marriott put every category of spending under review in 2009, reduced headcount, and left noncritical open positions unfilled. Marriott now waives co-pays for most preventive health care. METHODOLOGY TO MEET "EMPLOYER OF CHOICE" GOALS The first order of business is to study the population of new employees and get a reliable measure of what they prefer in a job and a career. Marriott has studied recent college graduates to determine the relative importance of the various options to be considered. Surveys were distributed and interviews were conducted for purposes of gathering data on this subject. Marriott would then study these data and run some cost figures for purposes of determining what is financially feasible to do. For example, one easy intervention is to increase the starting salary so that Marriott is at (or near) the top of the competitive scale. While direct compensation was important to the recent graduates, other aspects of the job and the company were considered as (or more) important. Many respondents placed considerable weight on indirect compensation (i.e., benefits) in areas in which the Marriott could offer at a competitive advantage relative to most other companies. For example, due to the nature of their business, Marriott developed a most attractive travel accommodation benefit package which employees perceived to be much more valuable than the actual cost to Marriott. Since Marriott had a problem with early turnover among recent graduates, the travel benefit package could be used only after six months of employment. Recent graduates also expressed a strong interest in a career development program that described the progression of a Marriott employee in the system. Marriott studied the normal progression of graduates and developed a realistic program for career development. A brochure describing the program was developed with a clear stipulation that normal career progression does not constitute an employment contract or long-term commitment. College graduates also prefer compensation systems that are performance based. Marriott thus developed a pay for performance system that appealed to these highly motivated individuals and integrated the "employer of choice" goal with the "provider of choice" goal (these systems are discussed in detail in Chapter 11). The performance goals, which were the basis of the system, were thus directly compatible with the measurement variables related to the "provider of choice" goals. The total cost of these adjustments to the compensation system was negligible since the cost would only be added when performance increased and performance increases translated directly into increased revenues and customer satisfaction. Another component of the new pay for performance system was the installation of an employee stock ownership plan (ESOP). Such an option would foster a more personal interest in the job and the company. In addition, it would create a consciousness of the company and at the same time give the employee a sense of worth, as he or she would also be an "owner." The development of incentive systems was pursued with a maximum of employee involvement, another organizational characteristic that had strong appeal to recent graduates. Employee focus groups were established to participate in the evaluation of operations and the development of the criteria to measure performance. In conclusion, by striving to establish and maintain an image of the "employer of choice," Marriott sought to create "organizational capability" as a competitive advantage. The actions they have taken were based on a study of job preferences by recent graduates. A similar method should be applied to its international goals to be the “employer of choice.” Exercise 2.2 Assessment Questions To what extent do the recommendations made by your group generalize to organizations other than Marriott? If they do not generalize, why not? The methodology recommended (i.e., to study the preferences of potential employees) generalizes to all organizations with an "employer of choice" goal. The recommendations for action derived from this research are unique to Marriott in the sense that the indirect compensation package is cost effective because of Marriott's unique situation. To what extent are the recommendations unique to international expansions and international operations? The recommendation to study the preferences of potential employees is not unique to international operations. However, since the surveys are distributed locally and the responses will have each country’s local flavor as well as each region and city will have its local culture highlighted. The recommendation on increasing local direct compensation is not unique to international operations either. The pay for performance and incentives are not unique to international operations. The benefit of travel packages as an incentive is unique to Marriott and unique to the fact that they have multinational locations. The recommendation to provide ESOP is probably more unique to the U.S. but as Starbucks has illustrated, the practice is expanding to foreign subsidiaries. Career development will have to take on an international scope in order to develop those employees for international assignments. The same holds true for training. Training the employees that are to be used in international assignments should include cultural differences for local customers. That would include training on what the customers value in order to maintain the “provider of choice” in total customer satisfaction. What competitive advantage principle did you consider in compiling your priority list? The financial capability of Marriott provides the opportunity to enhance the "organizational capability" by attracting and retaining more effective employees through superior indirect compensation and career development programs. Improve staffing practices? a) Reduce turnover rates through incentive systems. If workers work up to 1/2 year, some gifts are provided (e.g., walkman). If workers work for an even longer period, more valuable gifts are provided (e.g., a free vacation that includes flight and accommodations for two parties) are provided. According to internal survey findings, all incentives are appealing to the young labor pool that Marriott is employing. b) Attract high quality employees through training, promotion opportunities, job variety, joint venture with local high schools/colleges, job design, retirees, and other part time employees. Enhance its recruitment capacity Marriott has unique community development programs that could bring additional potential candidates for their positions. Two of Marriott's programs in particular are ideal for this tie in. The first is its educational program that has been started in many countries. This program could help train a workforce in the "Marriott Way" in addition to its literacy program. This would utilize a system already in place for recruiting the lower scale jobs such as room attendants and food service workers. The second program that Marriott has is the "teenagers at risk." This program would also facilitate in recruiting teens for part-time jobs in the room and food services division. Develop a compensation structure that makes sense As stated above, the compensation structure could, if financial resources allow, the above market direct pay as well as the indirect benefits of incentives and travel. Care must be taken to develop the pay for performance measures to ensure that employees see them as rewarding and fair. Training and development Provide ongoing training and development for the proposed career path for employees. if employees perceive that the company is doing its job in that department, job satisfaction should increase and retention should be higher. Explain how you would go about researching the problems with expatriate attrition and performance and difficulties in repatriation. A survey of expatriates regarding those issues would be beneficial. If done correctly, the survey would solicit information pertinent to the company. The company can use that information to design the appropriate expatriate and repatriate programs. Once the issues are identified and the programs in place, measurement of outcomes would help evaluate the extent of success of the programs. EXERCISE 2.3 International Assignment Problems at XYZ Corporation * Contributed by Dr. Stephanie Thomason Why were expatriate managers returning early from their international assignments? What could Sheila do to remedy this situation? Expatriates were returning early because they or their family members had a difficult time adjusting to the local cultures in which they were immersed. The number one complaint, that the spouse had a difficult time adjusting, suggests that XYZ should make some changes in its international assignments program. XYZ should consider offering the following to spouses/families, along with expatriates: A classic study by Rosalie Tung (1982) suggests that expatriates should be provided with the following forms of cross-cultural training: (1) training on factual information about geography, climate, housing, and schools; (2) cultural orientation training; (3) cultural assimilation training; (4) language training, (5) sensitivity training, and (6) a field experience in the country of assignment prior to assignment. Schedule discussions with other executives and families who have had foreign assignments in the same country of assignment Help secure visas or work permits for spouse Offer tuition reimbursement for spouse What steps should Sheila take to establish a repatriation program? Some steps include: Provide a realistic job preview that includes a discussion of interpersonal, organizational, and cultural factors. A discussion with colleagues who share similar experiences would be helpful, along with a frank discussion of some of the organizational and cultural issues that may present problems. Discuss the career path of the expatriate; his or her plan for the future. Draw up a career development plan that includes the career path before, during, and after the international assignment. Establish a formal mentoring relationship between the expatriate and an executive in the home office to ensure that communication between the home office and subsidiary is constant. Discuss salary and benefits both during and following the assignment and how such changes may affect the expatriate’s lifestyle Consider a gradual reduction in benefits upon repatriation Include family members in discussions of lifestyle changes Ensure that international experience is capitalized upon following repatriation Ensure that repatriated executive moves upward in firm (considering performance, of course) XYZ is currently using a balance sheet approach to compensation. Should the company consider other alternatives, such as localization or cafeteria-style benefits? Localization is a viable alternative and is often used to reduce costs (GRTS, 2008), yet variations in the levels of development and typical local salaries between countries suggest that this alternative may not be attractive to expatriates from developed countries working in developing countries. Many companies are now offering a cafeteria-style plan in which they provide the expatriates with a package price and the expatriate can select from an array of benefit alternatives. Both alternatives could be considered if the company seeks to reduce costs. At the present time, the case does not make the assertion that the company needs to reduce costs, given its corporate strategy of innovation. What country-level factors should Sheila consider when developing an international compensation plan? Country-level factors include: Economy, inflation, and currency. For example, high inflation recently in China has caused some tension for many expatriates (GRTS 2008) Social and cultural factors. Cultural values, such as those from Hofstede (2001), may relate to preferences for performance-based pay, team-based pay, etc. Political, regulative, and legal environment. Many companies equalize taxes, where individuals are not adversely affected by double taxation from the home and host countries. The United States has treaties with many countries to reduce these taxes and the IRS offers a foreign tax credit to offset U.S. taxes. Companies will make up the difference in taxes not offset. Tax equalization may not be attractive to expatriates in countries without employment taxes, such as Dubai. The GRTS (2008) notes that selling tax equalization plans in Dubai is difficult as expatriates expect to pay no taxes. Should Sheila consider phasing out the extended benefits over time following repatriation to the United States? If so, how much time? The GRTS (2008) found that some companies now phase out benefits over a three year period. 36% of respondents indicated an immediate benefit transition, followed by 4% over one year, 13% over a two-year period, and 12% over a three-year period. What can Sheila do to reduce the “out of sight, out of mind” perceptions of expatriate managers? Sheila should consider the use of a mentor in the home country who communicates frequently with the expatriate in the host country. Also, planned trips to the home office annually would be helpful to mitigate feelings of distance. What can Sheila do to reduce the “reverse culture shock” of expatriates and their families? A number of alternatives exist: Benefits transition schedule Family counseling Referrals to expatriate support groups Mentors Support in job placement for spouses What can Sheila do to address the concerns of locals who feel that expatriates’ pay is excessive, given their own pay? To address this concern, Sheila might consider surveying the locals to determine how they feel about their pay. To whom do they compare are their pay when considering its fairness? Peers within the organization? Peers outside of the organization? Superiors? Subordinates? She might also consider the knowledge, skills, and abilities of the locals before sending expatriate managers over. Is there a skills gap? How long will it take to fill? How much and what type of training is needed? Sources: Global Relocation Trends Survey, GMAC, 2008 Hofstede, G. (2001). Culture’s consequences: Comparing values, behaviors, institutions, across nations (2nd Ed). Thousand Oaks, CA: Sage. Tung, R. (1982) Selection and training procedures of U.S., European, and Japanese multinationals: A model for U.S. firms? California Management Review, 25(1): 57-71. Solution Manual for Human Resource Management John H. Bernardin, Joyce E. A. Russell 9780078029165, 9780071326186

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