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Chapter 6 Human Resource Decision Making in Organizations Closing Case: Hard Facts and Half-Truths Case Summary Stanford University professors Jeffrey Pfeffer and Bob Sutton, authors of Hard Facts, Dangerous Half-Truths, and Total Nonsense, have put out a call for a renewed reliance on rationality in managerial decision making—an approach that they call evidence-based management (EBM). They define evidence-based management as “a commitment to finding and using the best theory and data available at the time to make decisions,” but their “Five Principles of Evidence-Based Management” make it clear that EBM means more than just sifting through data and crunching numbers. Pfeffer and Sutton’s research shows that pay-for-performance policies get good results when employees work solo or independently. But it’s another matter altogether when it comes to the kind of collaborative teams that make organizational decisions today. According to Pfeffer and Stutton, wide disparities in pay often weaken both trust among team members and the social connectivity that contributes to strong, team-based decision making. Or consider another increasingly prevalent policy for evaluating and rewarding talent. Pfeffer and Stutton found that, according to many HR managers, forced rankings impaired morale and collaboration and ultimately reduced productivity. Case Questions 1. Do you think evidence-based management seems like common sense? If so, why wasn’t it advocated earlier? Evidence-based management does seem like common sense in many ways. The idea that decisions should be based on the best available evidence, rather than on intuition or tradition alone, is intuitively appealing. However, several factors may have contributed to its delayed advocacy: 1. Historical Context: In the past, management practices were often based on hierarchical structures and authoritative decision-making. The focus was on efficiency and productivity rather than on evidence-based approaches. 2. Availability of Data: Collecting, analyzing, and interpreting data has become easier and more accessible with advancements in technology. Earlier, obtaining and analyzing large amounts of data to inform decisions was more challenging and time-consuming. 3. Awareness and Education: The concept of evidence-based management may not have been widely known or understood until more recently. As awareness and education about the importance of evidence-based practices have grown, so has its advocacy. 4. Resistance to Change: Like any new approach, there may have been resistance from those comfortable with traditional methods. Change can be difficult, especially when it challenges established norms and practices. 5. Complexity and Context: Management decisions often involve complex interactions between various factors. It can be challenging to apply evidence-based practices in such contexts, which may have contributed to the delay in its advocacy. Overall, while evidence-based management may seem like common sense, its widespread adoption may have been delayed due to a combination of historical practices, technological limitations, awareness, resistance to change, and the complexity of decision-making processes. 2. Are there circumstances in which evidence-based management might not be the best approach? Yes, there are circumstances in which evidence-based management might not be the best approach. Here are a few examples: 1. Emergencies or Crisis Situations: In urgent or crisis situations, there may not be enough time to gather and analyze extensive evidence. Decisions often need to be made quickly based on limited information and expert judgment. 2. Highly Innovative or Unpredictable Environments: In rapidly changing or highly innovative fields, such as technology or creative industries, relying solely on past evidence may limit the ability to innovate and adapt to new trends and opportunities. 3. Value-Based Decisions: Some decisions are based more on values, ethics, or cultural considerations rather than empirical evidence. For example, decisions related to corporate social responsibility or employee well-being may require a balance between evidence-based practices and ethical considerations. 4. Complex Systems with Unknown Variables: In complex systems where variables are not fully understood or where cause-and-effect relationships are unclear, relying solely on evidence may lead to oversimplification or misinterpretation of the situation. 5. Limited Data Availability: In some cases, there may be limited or unreliable data available to inform decisions. Relying on incomplete or inaccurate data could lead to flawed decision-making. In these situations, a more flexible and adaptive approach that combines evidence-based practices with expert judgment, creativity, and ethical considerations may be more appropriate. It's important to recognize that evidence-based management is a valuable tool, but it should be applied judiciously and in consideration of the specific circumstances and context of the decision-making process. 3. Could automated evidence-based management ever replace human decision makers? Why or why not? Automated evidence-based management could potentially supplement human decision-makers in certain contexts, but it is unlikely to completely replace them. Here are a few reasons why: 1. Complexity of Decision-Making: Many management decisions involve nuanced considerations that may not be easily captured by data or algorithms. Human judgment, creativity, and emotional intelligence are often critical in making these decisions. 2. Ethical and Moral Considerations: Some decisions require ethical or moral considerations that go beyond what can be determined by data alone. Human decision-makers are better equipped to navigate these complex ethical dilemmas. 3. Contextual Understanding: Human decision-makers often have a deeper understanding of the specific context in which decisions are made, including organizational culture, history, and dynamics. This contextual understanding can be difficult to replicate with automated systems. 4. Adaptability and Creativity: Humans are capable of adapting to new information and changing circumstances in ways that automated systems may struggle with. Creativity and innovation are also areas where human decision-makers often excel. 5. Trust and Acceptance: There may be resistance to fully automated decision-making systems, especially in areas where trust in human judgment is important, such as leadership or employee management. While automated evidence-based management systems can provide valuable insights and support to human decision-makers, they are unlikely to replace them entirely. Instead, they are more likely to be used as tools to enhance decision-making processes, providing data-driven recommendations that can be considered alongside human judgment and expertise. 4. Would you want your work under Jack Welch’s system at General Electric? Why or why not? Jack Welch's system at General Electric (GE) was known for its focus on performance, competitiveness, and accountability. While it led to significant growth and success for GE during Welch's tenure, there are aspects of his management style and practices that could be viewed as controversial or challenging. Some potential benefits of working under Welch's system might include: 1. Clear Goals and Expectations: Welch was known for setting clear, ambitious goals for GE businesses, which could provide employees with a sense of direction and purpose. 2. Meritocracy: Welch emphasized a meritocratic culture where performance was rewarded and underperformers were not tolerated. This could create a competitive environment that motivates employees to excel. 3. Focus on Leadership Development: Welch invested heavily in leadership development programs at GE, which could benefit employees seeking to advance their careers and develop their skills. However, there are also potential drawbacks to working under Welch's system: 1. High Pressure and Stress: Welch's system was known for its intensity and high expectations, which could lead to stress and burnout for some employees. 2. Job Insecurity: Welch famously implemented a policy of "rank and yank," where the bottom 10% of performers in each business unit were routinely fired. This could create a sense of insecurity among employees. 3. Risk of Short-Termism: Welch's focus on quarterly earnings and shareholder value maximization has been criticized for leading to short-term decision-making at the expense of long-term sustainability. Overall, whether someone would want to work under Jack Welch's system at GE would depend on their personal values, goals, and tolerance for the intensity and competitiveness of such an environment. The following items appear on the in-text Instructor Prep Cards. These notes and suggested talking points should help instructors conduct these exercises with the students. Discussion Questions 1. Explain how organizations can temporarily increase the size of their workforce. There are several methods that can be used to temporarily increase the size of the workforce. Offering overtime to employees is one such method, which gives employees additional hours and pay. The use of temporary workers and employee leasing can also increase the size of the workforce temporarily. Finally, part-time workers can also be used to complete the increased work associated with greater demand. 2. Identify and discuss examples of distributive, procedural, and interactional justice that you have experienced. Sure, here are some examples of distributive, procedural, and interactional justice: 1. Distributive Justice: • Example: In a team project at work, bonuses are distributed based on individual performance ratings. Everyone agrees that the ratings are fair and accurately reflect each person's contributions. • Discussion: Distributive justice focuses on the fairness of outcomes. In this example, if the bonus distribution is perceived as fair and based on objective criteria, it enhances perceptions of distributive justice. 2. Procedural Justice: • Example: During a company restructuring, managers provide clear explanations for the decision-making process, listen to employees' concerns, and offer opportunities for feedback. • Discussion: Procedural justice is about the fairness of the decision-making process. In this case, the transparency and openness of the process contribute to perceptions of procedural justice. 3. Interactional Justice: • Example: A manager treats employees with respect, listens to their opinions, and communicates decisions in a clear and considerate manner. • Discussion: Interactional justice relates to the quality of interpersonal treatment. When employees feel respected and valued by their manager, it enhances perceptions of interactional justice. In each of these examples, the experience of justice—whether distributive, procedural, or interactional—can influence employees' perceptions of fairness, trust in the organization, and overall job satisfaction. 3. Summarize the basic legal issues involved in layoffs. Layoffs become legally problematic if the actual strategy used for determining who will be laid off is not reasonable. A layoff strategy that targets older workers is probably illegal and would rarely be considered as fair. Another important legal consideration is the use of performance as a criterion for layoffs. If formal performance appraisals are used as the basis for layoffs, they legally become an employment test and are subject to the same close inspection that other tests are given. Thus, if there is evidence of disparate impact in the layoffs, the organization will need to demonstrate that the performance ratings are job related or valid. The third important consideration is the legal requirement that the Worker Adjustment and Retraining Notification (WARN) Act requires firms to provide at least sixty days’ notice of impending large-scale layoffs or facility closings. Failure to do so can bring stiff financial penalties, especially for a firm facing pressure to reduce costs. 4. Distinguish between involuntary and voluntary turnover. There are times when the organization seeks to sever the employment relationship, not with a large number of employees but with specific employees. Involuntary turnover is terminating employees whose services are no longer desired. Mangers cannot always control who leave the organization or why they leave, but they should not assume that all turnover is negative even in the case of voluntary turnover. The effects of different types of turnover on the remaining workers are quite different too. A phenomenon known as survivor syndrome can counteract many of the presumed cost savings that led to the layoffs in the first place. This syndrome describes employees who feel guilty over keeping their jobs (that is, they survived) when others lost their jobs. Their morale and commitment to the organization drop dramatically. Evidence suggests that the increasing rates of layoffs and the resulting joblessness are causing serious emotional problems for employees—both those actually affected by layoffs and those who think they might be affected by layoffs. 5. Discuss the process of progressive discipline, and explain its importance to organizations. Progressive discipline is a system whereby employees who do not perform up to standards or who exhibit behavior that is problematic for the organization are given increasingly severe punishments. The severity of the punishment also depends on the severity of the problems. In order, employers will employ verbal warnings, written warnings, suspension, and finally, termination. This process is important to organizations for two reasons. If well documented, it shows a history of the organization’s attempts to change the unacceptable behavior of the employee, which can be important in the case of a lawsuit. The progression impresses on both the problem employee and other employees the seriousness with which the organization will deal with problems. Managers who use progressive discipline assume that, without the ability to make credible threats, they will not be able to persuade some employees to change their unacceptable behavior. 6. What is employment-at-will? Comment on the positive and negative characteristics of this concept. Employment at will asserts that because an employee can terminate an employment relationship at any time, the employer should have similar rights. Therefore, employment at will states that an employer can terminate any employee at any time for any reason (good or bad)—or for no reason at all. For the organization, this is a mechanism for ridding itself of undesirable employees. For workers, the threat of losing their job may induce improved performance. However, on the negative side, workers may be fired for little or no cause, and this is not beneficial to the firm or the workers. 7. What are the basic causes of job dissatisfaction? A major cause for turnover is job dissatisfaction, or being unhappy with one’s job. Employees become dissatisfied with their jobs for a number of reasons, including that the work itself is boring, too physically demanding, seems insignificant, or doesn’t bring enough status. Other factors include pay or benefits that are too low in comparison to other workers’, lack of shared values or social support from coworkers, and dislike of a boss who is a poor leader. 8. Discuss the fundamental issues of validity as they relate to measures of job satisfaction. Validity concerns are made up of two separate issues: reliability and validity. A measure of job satisfaction is reliable if it returns consistent results, that is, if a measurement can be duplicated and give the same results. However, when companies develop their own measures, as they often do, there is no guarantee that the items will be reliable across time, persons, or situations. Standardized surveys are more likely to be reliable, because they have probably been subjected to reliability tests. If a measure is reliable, then validity indicates the degree to which the measure does measure that particular item. Does the measure really capture job satisfaction? Validity could be threatened by problems with the survey instrument or with the way in which the respondent answers survey items. Validity would therefore depend on a number of factors, including the wording of the specific items and the response choices, whether a respondent’s answer changes based on non job-related factors such as mood, and whether the respondent truly believes the survey results will be reported anonymously. 9. What are the basic consequences of job dissatisfaction in the workforce? A primary concern with job dissatisfaction is that it leads to increased voluntary turnover. Job dissatisfaction is a major determinant of turnover, but it also predictive of other types of withdrawal behavior such as absenteeism or tardiness. A more subtle form of withdrawal that does not involve being away from the job is reduction of commitment to the organization. Such employees are also unlikely to exert extra effort or even to encourage others to join the organization. Dissatisfied employees are also more likely to join unions. Finally, they are less likely to engage in behaviors on the job known broadly as organizational citizenship behaviors or sometimes as contextual performance. Organizational citizenship behaviors (OCBs) include those behaviors that are beneficial to the organization but are not formally required as part of an employee’s job. These behaviors include activities such as volunteering to carry out extra tasks, helping and cooperating with others, following rules even when such behavior is inconvenient, and endorsing and supporting organizational goals. Job dissatisfaction has been found to be strongly linked to stress, job burnout, and employee health. One thing that is not an indicator of job dissatisfaction is productivity; no consistent link has been established between the two. 10. Describe realistic job previews and comment on their role in rightsizing. In a Realistic job previews (RJP) are pre-employment previews that provide accurate and realistic information to the job applicant. They are often used with new employees as a means of socializing them in their new job roles, but they are also effective in rightsizing turnover. Because potential employees who receive RJPs have more complete information about the job, those who are more likely to be dissatisfied are less likely to accept the jobs. Therefore, RJPs help ensure that the people on the job are those more likely to be satisfied and thus remain. In addition, when new employees are made aware of potential sources of dissatisfaction before encountering them, the employees can prepare themselves (psychologically or even physically) so that, when they encounter the problem, they are ready to deal with it. Ethical Dilemmas in HR Management Scenario Summary A human resource manager has been asked to resolve a situation that has developed between a supervisor and his recently terminated employee. This employee has threatened to take legal action. The employee maintains that she was terminated for attending a meeting of employees who were thinking about a union organization campaign. The supervisor claims that the union organization meeting had nothing to do with the termination of the employee and that he documented poor performance over a period of almost 6 months. When the HR manager spoke to the supervisor, he showed the HR manager the documentation and also made it clear that he did know that the employee attended the union meeting. He stated that she had been a “troublemaker” all along. What should the human resource manager do? Questions 1. What are the ethical issues in this situation? The employee has a legal right to join a union, and the company has no moral grounds for objecting to her interest. If she was fired because of her union interest, then ethics dictate that she should be reinstated or compensated for her job loss. The supervisor has the legal and moral right to terminate employees with poor performance and he documented her problems properly. The human resource manager is stuck with not knowing whom to believe, in the absence of hard proof. However, the HR manager must have some suspicion that the supervisor may have been prejudiced against this employee, either because of her union activities or because of a work or personal conflict that led him to call her a troublemaker. If the supervisor is prejudiced against a worker who is capable of making a valuable contribution to the firm, it may be appropriate to suggest that the employee be transferred to another supervisor’s unit. At least the HR manager should counsel the supervisor about the problems that arise when there is an appearance of personal motives in terminating an employee. 2. Do you believe that the termination was the result of poor performance alone? The fact that the manager seems to have personal animosity toward the employee makes me believe that the termination was not only due to poor performance, although that might have played a part. 3. How important is the fact that the company lawyers have suggested this case is a “sure win” for the company? Ethically, not at all important. Practically, of only moderate importance. Given the high cost of litigation and the risk of negative publicity, the company would probably be willing to make a small settlement on the employee in exchange for dropping the lawsuit. Assignment Purpose: The purpose of this exercise is to help students develop a better understanding of how experts retain valuable employees. Step 1 (5 minutes): Divide the class into small groups of four to five students. Each student group should select a local employer to serve as a hypothetical client. An example might be a neighborhood Italian restaurant, a family-owned discount store, or an independent coffee shop. Step 2 (5 minutes): Student groups should assume that they represent a consulting firm. They have been approached by the client identified in Step 1. The problem is that a large national firm is planning to move in across the street. Step 3 (20 to 30 minutes): The client is only somewhat concerned about business competition with the new firm because of its large and loyal customer base. However, the client is more concerned about the new business luring away its best employees. The student group is asked to develop a retention plan. Step 4 (10 to 20 minutes): Develop answers to the following: 1. What information will you need to help your client? Students will need information about every factor that leads to job satisfaction or dissatisfaction, as well as factors related to retention. They will need to gather information pertinent to job design, pay and benefits, and relationships with supervisors and coworkers, both at the client firm and at the national rival. 2. Where can you obtain this information? The client firm information is easily accessible, with the cooperation of the business’s owner. Information about the rival firm may be more difficult to find. Speaking to former employees of that business would be helpful, but approaching current employees would certainly be unethical. Information about things such as industry average pay and benefits is probably publicly available, either from industry trade associations or from government sources. 3. What kinds of retention ideas come to mind first? One retention technique would be to work on issues of job design and job enrichment to make employees’ current jobs more satisfying. An increase in pay or better benefit packages would be helpful, if it the firm finds it financially feasible. A good relationship with supervisors and coworkers is also valuable, and the firm’s owner should be in a position to influence this variable at relatively low cost. Solution Manual for Human Resources Angelo Denisi, Ricky Griffin 9781285867571
