Chapter 5 Information for Making Human Resource Decisions Learning Objectives After studying this chapter, the student should be able to: 1. Describe human resource planning as a source of information for decision making. 2. Discuss strategy as a source of information for making human resource decisions. 3. Discuss economic conditions as a source of information for making human resource decisions. 4. Describe job-analysis as a source of information for making human resource decisions. 5. Discuss the job-analysis process and identify and summarize common job-analysis methods. Chapter Outline Opening Case: Forecasting the Future Information plays a vital role in all organizational activities. Marketing managers need information about customer preferences and competitors’ products. Operations managers need information about inventories and product demand. Financial managers need information about interest rates and cash flows. And human resource managers need information about all of these areas so they can ensure they have the right employees with the right skills in the right place at the right time. Consider, for example, three recent news announcements related to employment in the United States. In one, major employers in the U.S. pharmaceutical and financial services sectors announced over 45,000 job cuts. These cuts largely were due to industry slowdowns and corporate restructurings. But, surprisingly, some cuts were related to improvements in the economy. At about the same time, in an annual ritual, major U.S. retailers announced that they were planning to hire hundreds of thousands of temporary workers for the holiday season. Finally, late in 2013, Starbucks announced a long-term plan to increase its global workforce from around 200,000 to 500,000. Introduction With an understanding of the nature of HRM and the HR environment as a foundation, it is now possible to begin a more focused and detailed analysis of the kinds of decisions that HR managers must make and the information they need to make those decisions. I. Human Resource Planning as a Source of Information Probably the most important factor that affects the human resource management function is the labor force. The successful management of this component requires what is called human resource planning, and this planning can often make the difference between organizational success and failure. Human resource planning, illustrated in Figure 5.1, can be defined as the process of forecasting the supply and demand for human resources within an organization and developing action plans for aligning the two. A. Forecasting the Supply of Human Resources An important first step in HR planning is forecasting the future supply of human resources—predicting the availability of current and potential employees with skills, abilities, and motivation to perform jobs that the organization expects to have available. By looking internally at its own records, the organization is likely to be able to draw about its own abilities to hire and retain employees. All of this information is then useful in predicting the internal supply of human resources in the future. An increasingly important element in this part of the HR planning process for most organizations is the effective use of the organization’s human resource information system. A human resource information system is an integrated and increasingly automated system for maintaining a database regarding the employees in an organization. B. Labor Force Trends and Issues Several changes in the labor force continues to emerge and affect human resource management. Decades ago, the labor force in the United States was primarily male and white. Now, however, the workforce is much more diverse in numerous ways. Several reasons have contributed to this pattern: The baby boom generation continues to age. Declining birthrates for the post–baby boom generation are simultaneously accounting for a smaller percentage of new entrants into the labor force. Improved health and medical care also contribute to an aging workforce. Mandatory retirement ages have been increased or dropped altogether, allowing people to remain in the labor force for longer periods. Gender differences in the workforce also play an important role. More and more women have entered the workforce, and their presence is felt in more and more occupational groupings that were traditionally dominated by men. Changing ethnicity is also reflected in the workforce today. The percentage of whites in the workforce is gradually dropping, while the percentage of Hispanics is climbing at an almost comparable rate. The percentage of African Americans and Asians in the workforce is also growing but at a much smaller rate. In addition to age, gender, and ethnicity, other diversity forces are also affecting the labor force. In addition, external data can also be used to predict the supply of labor in specific regions. In any case, immigration patterns are important inputs for forecasting the supply of labor. Future labor supplies are typically forecast by developing mathematical trend models using data from the past, with appropriate adjustments for migratory trends and predictions. Finally, one should also note the special forecasting situation generally known as executive succession. Executive succession involves systematically planning for future promotions into top management positions. This process is far more complicated because it is often critical that exactly the right person gets selected for a top position, the development costs to groom this person are very high, and actual decision may have major effects on the firm’s future. C. Forecasting the Demand for Human Resources In addition to supply, strategic planning requires that HR managers must also develop forecasts about future demand. In other words, they need to ascertain the numbers and types of people the organization will actually need to employ in the future. One important ingredient in this assessment is the organization’s own strategic plans regarding anticipated growth, stability, or decline. It is also necessary to consider larger, broader trends in the economy when forecasting the demand for human resources. These general demand trends influence the availability of human resources for two reasons. First, employees for jobs in high demand will be more difficult to hire and will be more expensive to hire. In addition, students and future employees who track these demand trends often make decisions about what majors to pursue in college based on their anticipated employability. II. Strategy as a Source of Information The need for human resources in an organization depends to a large extent on the organization’s overall strategy. In each case, it is up to the human resource manager to implement the chosen strategy. Therefore, there are implications of each strategy for HRM decisions.
HR in the 21st Century: Coming and Going Managers attempting to forecast the future supply of and demand for jobs, and employees face numerous uncertainties. One major uncertainty for long-term planning is the extent to which any given job may become more or less popular in the future. Over the course of the twentieth century, the structure of U.S. employment has changed enormously, and this change continued (and perhaps even accelerated) in the first decade of the twenty-first century.
A. Implications of a Growth Strategy A strategy of growth indicates growing sales, increasing demand, and expanding operations for the organization. When the organization is growing and expanding, it most likely needs to hire new employees in the future. In some cases, the organization may be able to hire employees readily without additional work. In other situations, implementing a growth strategy may be more difficult. Market conditions may be such that qualified employees are hard to find. The organization may have to increase its recruiting efforts to attract more job applicants and even perhaps begin to provide additional support to apprentice or training programs. B. Implications of a Stability Strategy In many ways, a stability strategy may be the easiest for the HR manager to implement because the organization presumably must do what it has been doing all along. But, even here, specific and subtle planning nuances must be considered. Some people will leave for better jobs, some people will retire, some will leave because of poor performance, and others will leave for reasons such as career relocation on the part of a spouse or significant other. Thus, even an organization that is projecting a period of stability is likely to need to augment its labor force to replace those individuals who leave the organization for various reasons. C. Implications of a Reduction Strategy In some cases, an organization may find itself facing reductions. Sometimes these reductions can be handled through normal attrition processes. A popular alternative to terminations and layoffs, especially for managers, is early retirement. Clearly, the actual strategy chosen is an important source of information for decision making because it determines what kinds of decisions will need to be made. It will determine whether the HR manager needs to be concerned with recruiting new talent or finding ways to reduce the workforce. Strategy will also determine whether the HR manager needs to worry about reducing turnover or encouraging it. III. Economic Conditions as a Source of Information The economy influences the supply of and demand for different types of employees, but the economy also has a more general effect on the workforce that the HR manager must consider. Many factors could affect a person’s decision to enter the labor market and seek employment. A. Unemployment Rates The rate of unemployment (or the rate of employment) is an important determinant of an individual’s employment choices. The national unemployment rate is, of course, relevant, but the local unemployment rate is more closely linked to an individual’s choices. There is considerable evidence that turnover rates are better predicted by unemployment statistics than by any other variable. Therefore, if unemployment is relatively high, then individuals are less likely to leave their current jobs to look for alternatives. B. Market Wage Rates A related factor that will influence decisions about joining the labor force is the market wage rates. The differences in salaries and wage rates partly result from differences in the cost of living, but they also are caused by different levels of competitiveness for talent in the market. Figure 5.2 illustrates the range of salaries paid for different jobs in different parts of the United States. The simplest explanation relies on supply and demand. Some firms try to attract the best employees they can. These organizations seek to be “the employer of choice” in their market and will pay more than the going market rate to attract the best employees. These “efficiency wages” are believed to be justified by the fact that the best employees are assumed to be more productive and that the higher wages will bind the employee more tightly to the firm, thus reducing turnover. C. Human Capital Investments Just as a firm can differentiate itself by paying higher wages, individuals can differentiate themselves as well by making human capital investments. In other words, individuals can invest in themselves to increase their value to the employers. These investments must be made in areas that an employer considers valuable enough to pay more for, but general education is usually a worthwhile investment and will yield a higher wage. In fact, employers often make decisions about where to locate a facility based on the human capital available in a market. Thus, the state of the economy (both local and national) is an important source of information for the HR manager. Only by understanding the economic forces operating can the human resource manager make the decisions that need to be made. Each type of information is important for the HR manager who will need to make critical decisions. But the HR manager also needs information at a much more basic level—information about what is required on each of the jobs that will be staffed, evaluated, compensated, and so on. That information comes from job analysis. IV. Job Analysis as a Source of Information Job analysis is the process of gathering and organizing detailed information about various jobs within the organization so that managers can better understand the processes through which the jobs are performed most effectively. Job analysis is a fundamental input and building block of the planning process, but, as illustrated by Exhibit 5.3, it also relates to other HRM processes. Under the Americans with Disabilities Act (ADA), job analysis has taken on an even more important role in the selection of new employees in many companies. The ADA does not require an organization to hire someone who cannot perform the job in question, of course, but it does require an organization to hire a “qualified individual with a disability,” specified as “an individual with a disability who, with or without a reasonable accommodation, can perform the essential functions of the employment position that such an individual holds or desires” (Americans with Disabilities Act, Title 1, section 101). Further, imagine the implications of an organization fusing to hire a disabled applicant because a manager assumes that the individual cannot perform the job. The individual might have grounds for a discrimination claim if ambiguity exists about exactly which job elements are essential to the organization and which are less essential or optional and if the applicant can demonstrate a capacity for performing the job. Thus, it becomes more important than ever for managers to determine the essential functions of the jobs within the organization because they must identify those parts of jobs (e.g., tasks, duties) that must be carried out effectively for the person to be successful in performing the job. Figure 5.3 also indicates that job analysis relates to performance appraisal. This relationship stems from the understanding of what an employee should be capable of doing in a job before one can assess how well that employee is actually performing. Job analysis similarly affects training and development because it provides information that helps managers better understand the kind of training and development programs that are necessary to enhance employee competencies and capabilities so the employees can achieve ideal levels of performance. Job-analysis information is also important for compensation (job-analysis methods used for establishing compensation rates are often referred to as job evaluation) because work behaviors have traditionally been a primary basis for compensation. In addition to its fundamental role in HR planning and other aspects of the HR function, job analysis is also important to line managers for various general reasons. First, they must thoroughly understand the work-flow processes that characterize their particular work units. To develop this understanding, of course, they must also have a fundamental insight into the basic mechanics, character, and nature of each job. Also, because line managers are often involved in hiring and appraisal decisions, they must rely on the information provided by job analysis to help determine who should be hired and how well employees are doing their jobs. Job analysis provides fundamental input to the human resource manager by defining the kinds of both general work and specific jobs that the organization currently relies on and will be relying on in the future. Whereas the focus of job analysis is typically an individual job, in many organizations the tasks and responsibilities on some jobs may be similar to those on other jobs. Likewise, the knowledge, skills, and abilities (KSA) requirements may be similar for a set of jobs. As a result, for planning purposes, organizations often try to form job families—groups of jobs that have task and KSA requirements that are quite similar. These job families can be quite useful in several ways. First, if the jobs within a job family have similar KSA requirements, then it might be possible to train employees so that they can apply what they have learned to the entire family of jobs, making them much more flexible resources for the organization. Well-conceived job families can also be used to help organizations in career planning. Finally, job families can be used in selection decisions. In fact, if it is reasonable to believe that an employee will progress through all of the jobs in a job family, then the organization might well choose to select individuals based on the needs of the highest-level job within the family rather than on those of the specific job for which an individual is applying. V. The Job Analysis Process The job-analysis process itself is generally clear and straightforward. As illustrated in Figure 5.4 the job analysis process generally follows three steps: Determining information needs Determining methods for obtaining information Determining who will collect information The first step is determining the organization’s precise information needs. The exact type and nature of the information obtained, however, depend on both the intended purposes of the job-analysis information and various constraints imposed by the organization such as time and budget limitations. Job-analysis information might include general work activities and the machines, tools, equipment, and work aids used to perform the job. Other useful information that may be collected includes details regarding the job context. Information may also be collected regarding the organizational context and social context on the job. In addition, details regarding work schedule, various financial and nonfinancial incentives, and personal requirements are usually desirable pieces of information. The next step in the job-analysis process is to determine how that information will be collected. The most-common methods of collecting job-analysis information include the observations of task and job behaviors, interviews with job incumbents, and the use of questionnaires and checklists. For example, the individuals who perform the job analysis—job analysts—can sometimes gather the desired information on jobs simply by observing people performing them. This method is especially useful for unskilled manual jobs but is less relevant for jobs involving creative thought and analytical skills. Someone other than the incumbent who is also knowledgeable about the job can also be interviewed. Any such person, whether the incumbent or someone like the supervisor, is referred to as a subject matter expert (SME). SMEs are the individuals from whom job analysts obtain data for the job analysis; they may be existing job incumbents, supervisors, or other knowledgeable employees such as higher-level managers, or industrial engineers. The job analyst could be a specialist within the human resource management function or a consultant hired from the outside. Many times, however, firms (especially smaller ones) do not actually collect their own job-analysis information at all. Instead, when they need to obtain information about jobs, they may instead refer to available reference materials. The major source of such information is a system known as the Occupational Information Network (O*NET), a computerized job classification system that contains updated information regarding the KSAs required for virtually every job in the U.S. economy. O*NET is technically not a job-analysis procedure; it is a database that provides both basic and advanced job-analysis information. As such, it can be viewed as an alternative to conducting job analysis. For each occupation, information is provided about the relative importance of worker characteristics, including fifty-two separate abilities for effective job performance. These abilities are classified as representing: Cognitive abilities such as oral comprehension, deductive reasoning, and spatial orientation Psychometric abilities such as manual dexterity and reaction time Physical abilities such as explosive and static strength and stamina Sensory abilities such as peripheral vision, heat sensitivity, and speech clarity In addition, information is provided about appropriate worker requirements such as knowledge, skills, and education. There is also information about the experience requirements, as well as occupational requirements, including general work activities, work context, and organizational context. Links to other resources are provided, and they yield information about legal requirements, job hazards, and environmental conditions. A. Job Analysis Techniques The most commonly used methods are the straight narrative, the Fleishman job-analysis system, task-analysis inventory, functional job analysis, the Position Analysis Questionnaire, the Managerial Position Description Questionnaire, and the critical incidents approach. Narrative Job Analysis—the most common approach to job analysis is simply to have one or more SMEs prepare a written narrative or text description, of the job. To some extent, the quality of the information depends on the writing skills of the job analyst. Fleishman Job-Analysis System—another popular method of job analysis is the Fleishman job-analysis system. This approach defines abilities as enduring attributes of individuals that account for differences in performance. Task-Analysis Inventory—the task-analysis inventory method actually refers to a family of job-analysis methods, each with unique characteristics. However, each one focuses on analyzing all the tasks performed in the focal job. Functional Job Analysis—according to this approach, all jobs can be described in terms of the level of involvement with people, data, and things. The exact definition of each term is provided to the job analyst. Position Analysis Questionnaire (PAQ)—one of the most popular and widely used job-analysis methods is the Position Analysis Questionnaire (PAQ). The PAQ was developed by Ernest McCormick and his associates, and it is a standardized job analysis instrument consisting of 194 items. Management Position Description Questionnaire—the Management Position Description Questionnaire (MPDQ) is a standardized job-analysis instrument similar to the PAQ and also containing 197 items. Critical Incidents Approach—critical incidents are examples of particularly effective or ineffective performance. When used for job analysis, the critical incidents approach focuses on the critical behaviors that distinguish effective from ineffective performers. Although these techniques are the most commonly used in industry, in many cases, the organization simply develops its own job-analysis technique or instrument. Regardless of which job-analysis technique an organization employs, however, at some point a narrative description of the job will probably be needed. Therefore, it is important to draw a distinction between a job description and a job specification. B. Job Descriptions and Job Specifications A job description lists the tasks, duties, and responsibilities that a particular job entails. A job specification focuses more on the individual who will perform the job. Specifically, a job specification indicates the knowledge, abilities, skills, and other characteristics that an individual must have to be able to perform the job. Taken together then, the job description and the job specification should provide a parallel and mutually consistent set of information and details that focus on the job itself and the individual most likely to be successful performing that job. Figure 5.5 illustrates an actual job description and job specification for a particular kind of accountant at Johnson and Johnson. C. Modeling Competencies and the End of the “Job” Given the rate of change in work, some scholars and other HR experts have argued that the nature of work is changing so much that the concept of a “job” is becoming obsolete. In these settings, people usually work on teams where the focus is on getting the tasks accomplished rather than on specific task requirements. Thus, there is reason to suggest that one should think about roles that have to be filled within the organization and how employees will need to emphasize flexibility, teamwork, and accomplishing tasks, rather than job descriptions and sets of duties. Some view competencies as being broader than abilities, and others suggest that competencies exist at a deeper level and really underlie abilities. Clearly, this approach has the potential for providing critical information to the human resource manager in a more useful form because it emphasizes what a person needs to be successful. The critical difference is that the HR manager no longer focuses on what is needed to be successful at one job but instead focuses on what is needed to be successful at any and all jobs within the organization. D. Legal Issues in Job Analysis Because job analysis is a critical building block for much of the HRM process, it should not be surprising that numerous legal issues have been raised with regard to job analysis. In fact, federal guidelines on selection include discussion of the appropriate ways to conduct job analysis and the statement that any attempt to establish the job relatedness of a selection instrument must begin with a careful analysis of the jobs in question. Most of the specific cases, in fact, have been concerned more with the failure of an organization to perform a job analysis. The Americans with Disabilities Act of 1990 (ADA) and its recent modification raise additional legal issues associated with job analysis. The ADA states that an employer must offer a reasonable accommodation to any employee who has a disability and who can perform the “essential functions” of the job. Perhaps the most troubling of these issues relates to potential gender discrimination in job analysis. Specifically, evidence suggests that jobs occupied primarily by male incumbents are more likely to be rated as more complex and of higher level than similar jobs occupied primarily by female incumbents. Finally, the creation of autonomous work teams has presented a new legal challenge. In the Electromation decision, the National Labor Relations Board ruled that the autonomous work teams and action committees created at the company were illegal labor organizations. In other words, they were labor organizations because they scheduled work, determined wages, and made selection and promotion decisions—and they were illegal because they created and controlled management. Instructor Manual for Human Resources Angelo Denisi, Ricky Griffin 9781285867571
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