Chapter 1 The Nature of Human Resource Management Closing Case: Low Prices, High Pay Case Summary Most major retailers follow a simple path—low prices made possible in part by low wages and minimal benefits for their employees. However, in recent years another set of retailers has started to thrive, often using a different business model—paying employees more and treating them better, under the assumption that they will be more satisfied and provide better customer service. None of them sets the bar quite as high as Costco. For starters, Costco pays its employees an average hourly wage of $20.89, and all full-time employees get health insurance heavily subsidized by the company. Under the leadership of James Sinegal the company took its current shape in 1993. One area where Costco does invest is in its employees. The company pays well and offers very good benefits. In addition to healthcare coverage, employees get up to 5 weeks of paid vacation time a year. When Sinegal retired in 2012, Craig Jelinek, a long-time Costco executive, took the helm. Under Jelinek’s leadership the retailing behemoth seems to have actually improved its trajectory. Case Questions 1. Compare your shopping experiences at retailers like Costco, Nordstrom, or Whole Foods with experiences you may have had at Walmart, Sears, or Kroger. Shopping experiences can vary widely between different types of retailers. Here's a general comparison between the two sets of retailers you mentioned: Costco, Nordstrom, Whole Foods: • Costco: Known for its warehouse-style stores, bulk products, and membership model. Shopping here often involves navigating large aisles and stocking up on essentials. • Nordstrom: A high-end department store known for its excellent customer service and wide range of fashion and beauty products. Shopping here is often seen as a more luxurious experience. • Whole Foods: A health-focused grocery store known for its organic and natural products. Shopping here often involves a focus on quality and sustainability. Walmart, Sears, Kroger: • Walmart: Known for its low prices and wide selection of products. Shopping here often involves a larger, more crowded store with a focus on value. • Sears: Historically known for its department stores offering a wide range of products. However, in recent years, it has faced challenges and has closed many stores. • Kroger: A grocery store chain known for its variety and value. Shopping here often involves a focus on grocery items and everyday essentials. The shopping experience at each of these retailers can be influenced by factors such as store layout, product selection, pricing, customer service, and overall atmosphere. 2. Under what circumstances might Costco have to start paying its workers less? There are several circumstances under which Costco might consider reducing worker pay, although these decisions are complex and depend on various factors. Some potential reasons could include: 1. Economic downturn: During a recession or economic downturn, companies often face pressure to reduce costs, which could lead to cutting employee wages or benefits. 2. Competitive pressures: If competitors in the retail industry significantly lower their labor costs, Costco might feel compelled to follow suit to remain competitive. 3. Changes in labor market conditions: Shifts in the labor market, such as an oversupply of workers or changes in skill requirements, could impact wage levels. 4. Company financial performance: If Costco experiences a significant decline in profitability or faces financial challenges, it might need to make cost-cutting measures, including reducing labor costs. 5. Regulatory changes: Changes in labor laws or regulations could impact labor costs for companies like Costco, potentially leading to wage adjustments. It's important to note that Costco has a reputation for paying its workers relatively well compared to other retailers, and any decision to reduce wages would likely be carefully considered and weighed against the potential impact on employee morale, retention, and overall company culture. 3. Costco has a policy of not hiring business school graduates because it wants employees to start at the bottom and work their way up. What are the advantages and disadvantages of this approach? Costco's policy of not hiring business school graduates and preferring to promote from within has both advantages and disadvantages: Advantages: 1. Promotes loyalty and long-term commitment: By hiring employees who start at the bottom and work their way up, Costco fosters a sense of loyalty and commitment among its workforce. Employees are more likely to stay with the company long-term if they see opportunities for advancement. 2. Develops a skilled and knowledgeable workforce: Employees who start at entry-level positions and work their way up gain valuable experience and knowledge about the company's operations. This can result in a workforce that is skilled, knowledgeable, and understands the company's values and culture. 3. Cost-effective: Hiring and promoting from within can be more cost-effective than hiring external candidates. It eliminates the need for costly recruitment processes and reduces the risk of hiring candidates who may not be a good fit for the company. 4. Boosts morale and motivation: Knowing that there are opportunities for advancement based on merit can boost employee morale and motivation. Employees are more likely to work hard and strive for excellence if they believe they can advance within the company. Disadvantages: 1. Limited pool of talent: By not hiring business school graduates or external candidates, Costco may limit its pool of talent. Business school graduates often bring fresh perspectives, new ideas, and specialized skills that could benefit the company. 2. Lack of diversity: Hiring and promoting primarily from within could result in a lack of diversity in terms of skills, experiences, and perspectives within the workforce. This could hinder innovation and creativity within the company. 3. Potential for stagnation: Without the influx of new talent from external sources, Costco may risk becoming stagnant or complacent. External hires can bring new ideas, best practices, and industry trends that can help the company stay competitive. 4. Skills gaps: Depending solely on internal promotions could result in skills gaps within the organization. Not all employees may have the necessary skills or qualifications to move up to higher-level positions, which could hinder succession planning. Overall, Costco's approach of promoting from within has its advantages in terms of fostering loyalty, developing a skilled workforce, and being cost-effective. However, it also has its disadvantages, particularly in terms of limiting the pool of talent and potential for innovation. The following items appear on the in-text Instructor Prep Cards. These notes and suggested talking points should help the instructor conduct these exercises with the students. Discussion Questions 1. Identify five examples of human resources in your college or university. Here are five examples of human resources functions that you might find at a college or university: 1. Recruitment and hiring: The HR department is responsible for recruiting and hiring faculty, staff, and administrators. This includes advertising job openings, reviewing applications, conducting interviews, and making hiring decisions. 2. Employee benefits: HR manages employee benefits programs, such as health insurance, retirement plans, and tuition reimbursement. They also handle enrollment, changes, and questions related to these programs. 3. Training and development: HR oversees training and development programs for faculty and staff. This includes orientation for new hires, ongoing professional development opportunities, and training on topics such as diversity, equity, and inclusion. 4. Performance management: HR helps to manage employee performance through processes such as performance evaluations and goal setting. They may also provide guidance and support to supervisors on how to address performance issues. 5. Employee relations: HR handles employee relations issues, such as conflicts between employees or between employees and supervisors. They may also be involved in resolving complaints of discrimination or harassment. These are just a few examples of the many functions that HR departments in colleges and universities perform. The specific responsibilities of HR may vary depending on the size and structure of the institution. 2. Summarize the evolution of the human resource function in organizations. The industrial revolution in the eighteenth century sparked business growth and expansion, with a resulting emergence of management as a profession. Scientific management (early 1900s) brought about the study of structuring jobs to maximize efficiency and productivity. In the early twentieth century, large organizations continued to grow even more, and therefore needed to hire more and more workers. They created specialized units (i.e., employment departments) to hire and manage their workforce. Individual differences among people were recognized by Darwin, Binet, and Simon, leading to the first intelligence tests used during World War I. By 1923, the book Personnel Management was being used to match a person’s skills and aptitudes with job requirements. The human relations era emerged, primarily due to the Hawthorne studies (1927 to 1932). Maslow’s hierarchy of needs and McGregor’s Theory X and Theory Y, which focused attention on worker satisfaction and productivity, were popularized. Personnel management was well established as an administrative function by the 1930s and 1940s. World War II brought psychological testing of employees. The Civil Rights Act of 1964 made human resource management more complex. In the 1970s, human resources were becoming increasingly recognized as an important and strategic part of the organization. People (or human resources) are now seen as an organization’s most valuable resource. Technological advancements and changing social and business environments are causing the evolution of the human resource management function. 3. Summarize the basic ideas underlying the human resource management system concept. Human resource activities are not self-contained, but instead are highly interrelated and impact one another. Human resource managers should consider the interrelatedness of human resource activities when designing or redesigning particular human resource processes. Further, human resource management is part of a larger organizational system where functional activities affect each other. The organization can even be conceptualized as part of a larger global system, impacted by societal similarities and differences across country borders. 4. What are the goals of human resource management? The four goals given in Chapter 1 are facilitating organizational competitiveness, enhancing productivity and quality, complying with legal and social obligations, and promoting individual growth and development. 5. Who is responsible for human resource management? In contemporary organizations, human resource management responsibilities are shared. Human resource managers and staff within the human resource department may carry out the majority of human resource activities or may serve as human resource advisers to others within the organization. Operations managers often carry out many human resource activities such as hiring, salary determination, training needs assessment, and performance management. Selfmanaged teams may even be given responsibility for the human resource activities associated with their own work teams. Organizational executives, especially human resource executives, are responsible for the strategic aspects of human resource management. 6. Do you think human resource management would have become more important even if laws such as the 1964 Civil Rights Act had never been passed? Why or why not? Yes, human resource management (HRM) would likely have become more important even without laws like the 1964 Civil Rights Act. Several factors contribute to this: 1. Changing Workforce Dynamics: As businesses evolve, so do the needs of their workforce. The increasing complexity of job roles, skill requirements, and employee expectations necessitate more sophisticated HRM practices to attract, retain, and develop talent. 2. Globalization: The interconnected nature of today's economy means businesses often operate across borders. HRM plays a crucial role in managing a diverse workforce, understanding different cultures, and ensuring compliance with various labor laws and regulations. 3. Technology: Advances in technology have transformed the workplace, leading to the need for HRM to manage remote teams, leverage data analytics for workforce planning, and address cybersecurity and privacy concerns. 4. Focus on Employee Well-being: There is a growing emphasis on employee well-being, mental health, and work-life balance. HRM is key in creating supportive work environments that promote employee health and happiness. 5. Organizational Culture: HRM plays a vital role in shaping and maintaining organizational culture. A strong culture can enhance employee engagement, productivity, and overall organizational performance. While legal requirements have certainly influenced HRM practices, the evolving nature of work and the increasing importance of people in organizations would have likely driven the need for effective HRM practices regardless of legislative mandates. 7. What are some of the challenges that will face human resource managers as a result of the recent Supreme Court decisions regarding same-sex marriage? The Supreme Court decisions regarding same-sex marriage have significant implications for human resource managers. Some of the challenges they may face include: 1. Policy changes: HR managers may need to update company policies and procedures to ensure compliance with the new legal landscape. This could include revising policies related to benefits, leave, and anti-discrimination practices. 2. Benefits administration: With same-sex marriage now recognized nationwide, HR managers may need to ensure that employee benefits programs are extended to same-sex spouses. This could involve changes to health insurance, retirement plans, and other benefits. 3. Training and education: HR managers may need to provide training and education to employees and supervisors on the new legal requirements and company policies related to samesex marriage. This could include training on diversity and inclusion. 4. Legal compliance: HR managers will need to ensure that their company's policies and practices are in compliance with federal, state, and local laws regarding same-sex marriage. This may require working closely with legal counsel to understand and implement these requirements. 5. Cultural sensitivity: HR managers may need to promote a culture of inclusivity and respect for all employees, regardless of sexual orientation or gender identity. This could involve implementing diversity and inclusion initiatives and addressing any instances of discrimination or harassment. Overall, the Supreme Court decisions regarding same-sex marriage present both challenges and opportunities for HR managers to ensure that their organizations are inclusive, equitable, and legally compliant. 8. Identify several consequences of an organization’s failure to recognize that its human resource management practices make up an interrelated system. Failure to recognize that human resource management (HRM) practices form an interrelated system can lead to several consequences for an organization: 1. Inconsistencies in Policies: Without an understanding of the interconnectedness of HRM practices, there may be inconsistencies in policies and procedures across different functions or departments. This can lead to confusion among employees and hinder the organization's ability to achieve its goals. 2. Lack of Alignment with Business Objectives: When HRM practices are not aligned with the organization's overall business objectives, it can result in a mismatch between employee skills and organizational needs. This can lead to decreased productivity, poor performance, and ultimately, hinder the organization's competitiveness. 3. Poor Employee Engagement and Retention: Failure to recognize the interrelated nature of HRM practices can result in poor employee engagement and retention. For example, if there is a disconnect between recruitment practices and training and development programs, employees may feel undervalued and seek opportunities elsewhere. 4. Higher Costs: Inefficient HRM practices can lead to higher costs for the organization. For example, if there is a high turnover rate due to poor recruitment and retention practices, the organization will incur costs associated with recruiting, hiring, and training new employees. 5. Legal and Compliance Issues: Failure to recognize the interrelatedness of HRM practices can result in legal and compliance issues. For example, if there are inconsistencies in how the organization handles employee grievances or disciplinary actions, it can lead to legal challenges and damage to the organization's reputation. 6. Diminished Organizational Culture: A lack of integration in HRM practices can result in a weakened organizational culture. For example, if there is a disconnect between the organization's stated values and its actual practices, employees may become disillusioned and disengaged. Overall, recognizing that HRM practices form an interrelated system is essential for ensuring that the organization's human capital is effectively managed and aligned with its strategic objectives. 9. Do you think some human resource management goals are more important than others? Why or why not? What implications might be drawn if a particular manager felt that certain goals were indeed more important than others? According to the text, the four goals of human resource management are: facilitating organizational competitiveness, enhancing productivity and quality, complying with legal and social obligations, and promoting individual growth and development. It seems reasonable to assume that students may find some goals more relevant or important than others, according to their individual needs, values, experiences, chosen major, and so on. If a manager felt that certain goals were more important than others, it could imply that the manager is focusing on what he or she “knows” in terms of functional expertise, professional experience, or organizational understanding. For example, a manager with a production background may find that productivity and quality are most important to organizational competitiveness, while a human resource manager may believe that individual growth and development are most important. The implication for the organization is that if some goals are emphasized while others are ignored, this could violate the concept of human resource management as a system. Emphasizing productivity while ignoring the importance of legal and social obligations could result in legal problems or a poor organizational reputation. Overemphasis on individual growth and development could negatively impact the organizational bottom line by ignoring competitiveness requirements. It is probably best to take a balanced approach to the human resource management goals. 10. Do you think it might be possible for a large company today to function without a human resources department? It is possible, but not likely. As human resource issues become increasingly important and complex, it is necessary to have one or more experts dedicated to the human resource function within the organization. In theory, an organization could outsource its entire human resource department. However, the organizations being outsourced to would not have the strategic knowledge of the organization. This would negatively impact the effectiveness of human resource programs and policies in supporting strategic imperatives of the organization. Ethical Dilemmas in HR Management Scenario Summary As a top human resource executive in a large, privately held company, students are responsible for compensation and benefits. The firm’s owners are satisfied with financial performance. The students’ boss takes little interest in specific human resource issues, as long as things are going well. The high quality of management in your firm is recognized. The student have been researching outsourcing opportunities and have found that the company could achieve modest savings by outsourcing compensation and benefits. Students would feel an obligation to consider this action, although fifteen employees may lose their jobs and their position would be diminished in importance as a result of the action. What do they do? Questions 1. What are the ethical issues in this situation? The ethical issues in this situation arise from the potential consequences of an organization's failure to recognize that its human resource management (HRM) practices make up an interrelated system. These ethical issues include: 1. Fairness and Equity: Inconsistencies in HRM practices can lead to unfair treatment of employees. For example, if there are inconsistencies in how performance evaluations are conducted or how promotions are awarded, it can result in perceptions of favoritism and discrimination. 2. Transparency and Accountability: Failure to align HRM practices with business objectives can lead to a lack of transparency and accountability. For example, if the organization's hiring practices are not based on merit or if there is a lack of transparency in how decisions are made, it can erode trust among employees. 3. Respect for Individuals: Effective HRM practices should respect the dignity and rights of individuals. Failure to recognize the interrelatedness of HRM practices can result in practices that disregard the individual needs and aspirations of employees. 4. Legal Compliance: Inconsistent or poorly aligned HRM practices can lead to legal and regulatory non-compliance. For example, if there are discrepancies in how the organization handles employee grievances or if there are disparities in pay based on gender or race, it can lead to legal challenges and reputational damage. 5. Organizational Culture: A lack of integration in HRM practices can result in a weakened organizational culture. For example, if there is a disconnect between the organization's stated values and its actual practices, it can lead to a culture of distrust and disengagement. 6. Social Responsibility: Organizations have a responsibility to ensure that their HRM practices contribute to the well-being of society. Failure to recognize the interrelatedness of HRM practices can lead to practices that exploit or harm individuals, communities, or the environment. Overall, addressing these ethical issues requires organizations to recognize the interrelatedness of HRM practices and to ensure that their practices are aligned with ethical principles and values. 2. What are the basic arguments for and against outsourcing in this situation? Arguments for outsourcing are as follows: • Modest cost savings • Reduced administrative burden • Focus on core human resource competencies Arguments against outsourcing are as follows: • Layoff of fifteen employees • Loss of focus on strategic aspects of compensation and benefits 3. What do you think most managers would do? What would you do? Most managers, when faced with the consequences of failing to recognize the interrelatedness of HRM practices, would likely take steps to address the issues and improve their HRM practices. This may involve conducting a thorough review of existing practices, identifying areas of inconsistency or ineffectiveness, and implementing changes to ensure alignment with the organization's strategic objectives. As for what I would do, I would approach the situation by first seeking to understand the specific challenges and issues facing the organization in relation to its HRM practices. I would then work collaboratively with key stakeholders, including HR professionals, department heads, and employees, to develop and implement a comprehensive plan to address these issues. This plan would likely include: 1. Conducting a thorough review of existing HRM practices to identify areas of inconsistency or ineffectiveness. 2. Developing clear and consistent policies and procedures that are aligned with the organization's strategic objectives. 3. Providing training and development opportunities for managers and employees to ensure they understand and are able to implement the new HRM practices. 4. Monitoring and evaluating the effectiveness of the new HRM practices and making adjustments as necessary. Overall, my approach would be to take a proactive and collaborative approach to address the ethical issues related to HRM practices and ensure that the organization's human capital is effectively managed and aligned with its strategic objectives. Assignment This is an excellent exercise to get students thinking about the relationship of human resource management to their chosen majors and subsequent career paths. Many students will not have considered human resource management as a career option. Students should be encouraged to explain their answers to the exercise questions by using information about the field of human resource management from Chapter 1. This exercise will take 50 to 90 minutes, depending on the amount of class time that the instructor is able or willing to devote to it. The instructor should tell the class that the amount of time for this exercise is limited. Groups should be made aware of the amount of time allotted to each step and should be encouraged to allow each group member a fair chance to provide input. Step 1 (5 minutes): The instructor should divide the class into groups of four to five members. Members should introduce themselves to one another if necessary. Step 2 (5 minutes): Each group member should write his or her major and career objectives on a sheet of paper. These sheets should then be placed in a central location so that all group members can view them. Step 3 (15 to 30 minutes): Groups should then respond to each of the questions provided in the exercise. The exercise will be more effective if adequate time is allotted for group discussion during this step. 1. How does HRM affect each academic major and set of career objectives represented in the group? Human resource management affects each student’s academic major and set of career objectives in that human resource management applies to any job in any organization. The design of human resource practices such as recruiting, hiring, compensation, performance appraisal, or labor relations may differ according to the type of organization and type of job. However, the fact remains that all employees experience and are influenced by human resource management. 2. How would group members feel about starting their careers in an HR department? Group members might have varied feelings about starting their careers in an HR department. Some may see it as an opportunity to gain valuable experience in a foundational aspect of business, learning about employee relations, recruitment, training, and development. Others might view it as less desirable, preferring roles that align more closely with their specific interests or career goals. It could also depend on the individual's perception of HR and whether they see it as a strategic, people-focused role or more administrative in nature. 3. How would group members feel about taking a position in human resources later in their careers? Group members might have different perspectives on taking a position in human resources later in their careers. Some may see it as a natural progression, especially if they have developed an interest in people management, organizational development, or strategic planning. Others might view it as a potential pivot from their current path, either as a way to explore new challenges or to leverage their existing skills and experience in a different context. Overall, feelings about this possibility could vary based on individual career goals, experiences, and perceptions of HR as a profession. 4. What specific skills and abilities do group members believe are most important for someone who wants to work in human resources? Group members might believe that several key skills and abilities are important for someone who wants to work in human resources. These could include: 1. Communication Skills: Being able to effectively communicate with employees, managers, and executives is crucial in HR roles, as it involves conveying information, listening to concerns, and resolving conflicts. 2. Interpersonal Skills: Building relationships and working well with others is essential in HR, as it involves interacting with a variety of people on a daily basis. 3. Problem-Solving Skills: HR professionals often deal with complex issues and conflicts, so the ability to analyze problems and develop solutions is important. 4. Ethical Judgment: HR deals with sensitive information and confidential matters, so having a strong sense of ethics and the ability to make ethical decisions is crucial. 5. Organizational Skills: HR professionals are often responsible for managing multiple tasks and priorities, so being organized and able to prioritize effectively is important. 6. Attention to Detail: HR involves dealing with a lot of paperwork, such as employee records and legal documents, so having good attention to detail is important to ensure accuracy. 7. Analytical Skills: Being able to analyze data and trends related to employee performance, engagement, and other HR metrics can help HR professionals make informed decisions. 8. Emotional Intelligence: Understanding and managing one's own emotions, as well as being able to empathize with others, can be valuable in HR roles, especially when dealing with sensitive or emotional situations. These skills and abilities can help someone succeed in a human resources role by allowing them to effectively manage people, processes, and issues within an organization. 5. What will group members expect from the HR department at the organizations where they begin their careers? Group members might expect the HR department at their organizations to provide several key services and support, including: 1. Onboarding and Training: They would expect HR to facilitate a smooth onboarding process, providing them with the necessary training and resources to succeed in their roles. 2. Employee Benefits: They would expect HR to manage employee benefits programs, including health insurance, retirement plans, and other perks, and to provide assistance with understanding and enrolling in these benefits. 3. Performance Management: They would expect HR to oversee performance management processes, including goal-setting, performance reviews, and feedback, and to provide support and guidance for career development. 4. Conflict Resolution: They would expect HR to help resolve conflicts and issues that arise in the workplace, whether between employees or between employees and management. 5. Compliance: They would expect HR to ensure that the organization complies with relevant employment laws and regulations, including those related to equal employment opportunity, wage and hour laws, and workplace safety. 6. Employee Relations: They would expect HR to be a resource for employee questions and concerns, providing guidance on company policies and procedures and addressing any issues that arise. Overall, group members would expect the HR department to be a supportive and resourceful partner in their professional development and in creating a positive work environment. Step 4 (15 to 30 minutes): Each group will select a representative to summarize the group’s responses either verbally or in writing. If responses are shared verbally, the instructor should only serve as a facilitator at this point by clarifying unclear points or concepts. The instructor should avoid providing extensive comments or value judgments, so that this step may be completed in an efficient manner. Step 5 (10 to 20 minutes): If time permits, allow the groups to reconvene and discuss areas of agreement and disagreement both within and between the groups. Solution Manual for Human Resources Angelo Denisi, Ricky Griffin 9781285867571
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