CHAPTER 7 PERFORMANCE MANAGEMENT AND APPRAISAL CHAPTER 7 - DISCUSSION QUESTIONS 1. Why has performance appraisal taken on increased significance in recent years? First, performance management is one strategy for improving productivity, and performance appraisal is the foundation of performance management. Effective PA is a High Performance Work Practice, and is linked to increased financial performance. Second, performance appraisal is today's most highly litigated personnel practice. This means that performance appraisal will be brought under closer scrutiny. Finally, important employment decisions are made based on the results of PA. New strategies, techniques, and policies must be developed in order for performance appraisal to provide the most effective, valid means to measure performance. 2. As the work force becomes more diverse, why does performance appraisal become a more difficult process? PA will be a more difficult process than it already is because the perceived or real biases and unfairness that are currently present in PA practices may become more magnified as more women, minority, and older workers enter the workforce. This diversification may result in larger differences between raters and ratees, which may make perceived or real unfairness and biases an even larger problem (e.g., stereotypes, similarity effect). 3. Ford was accused of age discrimination based on the use of its forced-distribution rating system. What evidence would you investigate to test this allegation? The most important evidence would be statistical data related to age. There are many factors to consider when assessing the legal defensibility of the PA system, including the appraisal system's procedures, content, documentation, and raters. Regarding the procedures, a legally defensible system should have a formal appeal process, specific performance standards, a formal review system, and written procedures for conducting appraisals. Moreover, the performance appraisal system should be uniform for all employees regardless of race, sex, national origin, religion, disability, and age. Regarding the content, the system should be based on a thorough job analysis, appraisals should be based on objective, observable data, constraints beyond the employees control should be accounted for, and performance dimensions should be job related rather than global. Regarding the documentation, all termination decisions and extreme ratings should be documented. Also, the design of the system should be tracked and documented (e.g., paper trail which includes job analysis, results, surveys, etc.). Regarding raters, all raters should be trained and have ample opportunity to observe performance. As U.S. firms move toward a total quality approach, training should also emphasize the accountability of situational constraints to performance. Further, one may even want to train raters in how to provide and deal with performance feedback. Finally, more than one rater should be used for each employee. 4. Many managers describe performance appraisal as the responsibility that they like the least. Why is this? What could be done to improve the situation? The main reason is that people in general do not like to give negative feedback. Students may note several factors that cause managers to dislike performance appraisal (PA). An example response might be: Managers typically find this task unappealing because appraisal systems rarely do what they say they will do. Due to all the problems inherent in today's systems (e.g., weak performance standards, intentional biasing on the part of raters, weak linkages between appraisal systems and personnel decisions), most people are dissatisfied with their current systems. To improve the situation, HR professionals should create PA systems that have those features that research has shown can increase appraisal accuracy, such as behavioral ratings, multiple raters, and specific feedback. Further, using the results of PA as the basis for personnel decisions will likely increase buy in and commitment to the system. 5. Describe several advantages and disadvantages to using rating instruments that are based on comparisons among ratees’ performance, comparisons among anchors, and comparisons to anchors. Rater biases, particularly leniency, can be mitigated when a forced choice among performance level anchors is used. However, raters don’t like the key being hidden. Feedback on behaviorally anchored rating scales, which is a comparison to performance level anchor system, is effective at improving performance. Generally the choice of rating instruments has little effect on rating accuracy. The most important feature is the specificity of how performance is defined. 6. What steps would you take if your performance appraisal system resulted in disparate or adverse impact? First, one should determine whether the group that was affected was given more difficult or aversive assignments. Second, one should determine whether the affected group had more constraints placed on them than other groups. Third, one should determine whether the group received lower appraisals than it deserved based on other data. If any one of these conditions is present, then use of the appraisal system may need to be modified or terminated. 7. Under what circumstances would you use customer or client evaluation as one basis for appraising employees? Responses will vary, but most students will suggest that customer evaluations will be especially important to organizations in the service industry. A possible response would be as follows: In industries that are chiefly service oriented, such as Burger King, Marriott, McDonalds, Dominos Pizza, Taco Bell, and Delta believe a good source of performance data is the customer. Since the main objective of these types of industries is to provide services for clients or customers, whether or not the service is being performed is crucial to the industry's success. In most cases, the customer is the best source of data regarding whether or not the service is being performed. Thus, if one had a company that was mainly service oriented, the customer or client may be the best source of appraisal information, due to his or her unique perspective. 8. Why are so many companies using 360-degree feedback systems? What are the benefits of such systems? 360-degree feedback uses multiple raters for a broader and more complete picture of the individual’s performance, and of the company’s performance as well. In addition, the 360-degree appraisal is thought to be more accurate, have fewer biases, perceived to be more fair, less often targets of lawsuits and is one of the characteristics of high performance work systems that have been linked to a company’s superior financial performance. 9. Why should managers provide ongoing and frequent feedback to employees about their performance? If a manager provides feedback only on an annual basis, then the manager will be providing feedback regarding performance that may have taken place up to a year earlier. In most circumstances, the employee will not remember his or her behavior, thus he or she will be less likely to accept the feedback or learn from it. Frequent feedback, on the other hand, allows the employee to see the connection between behavior and reward, thus facilitating the learning process. Further, frequent feedback will increase employee's acceptance of the feedback and the appraisal system by eliminating surprises, etc. This may also lead to improvements in performance. 10. As an employee, how would you react to a forced distribution rating system? Research indicates that individuals give lower overall evaluation to forced distribution systems, even if they do a better job differentiating employee performance. Employees may see them as unfair if they feel their peers are all excellent employees. In addition, supervisors are forced to confront poorer performers. This can be unsettling for individuals who do not enjoy confrontation or the feedback process in appraising performance. CHAPTER 8 TRAINING AND DEVELOPMENT CHAPTER 8 – DISCUSSION QUESTIONS 1. Why should a training (or HRD) department develop a mission and goals? Why should these goals be tied into the organization’s strategic objectives? How would you ensure that this occurs? The development of the mission and goals for a training department would help to ensure that the objectives of the training were being met. A Mission statement focuses on the core competencies for competitive advantage. Research has found that effective training is an element in High Productive Work Systems and contributes to the bottom line. In order to take more advantage of this, companies should make sure that the training goals match the company’s goals and strategies. Otherwise the training department may train for the wrong competency. In addition, goal setting has been found to increase productivity. In this case, the goals of training would help to ensure that those that need to have the training would get the training. One way to ensure the match of training goals to the organization’s strategic objectives is to have the senior management “buy in” to the training goals. Since senior management is interested in accountability and ROI, it is essential that the effects of the training be measured in terms of the company’s strategic goals. 2. Why is e-Learning so popular today? What is the future of social media techniques for training? How can we ensure that everyone in the firm is comfortable using these types of techniques? Self-paced Standardization over time Feedback given Convenient Generally, Web-based trainees learned more when they were practicing the training material, when they received feedback during training, and in long courses Control of learning is shifting from trainer to the learner e-learning has been able to deliver training to large numbers of employees at reduced costs and that there was an increased usage of e-learning during an economic downturn Web-based instruction was more effective than classroom instruction for teaching declarative knowledge and procedural knowledge. More than 80 percent of respondents to an ASTD survey indicated that they expected the use of social media for learning in their organizations to increase over the next 3 years. 3. How would you set up a study to evaluate the effects of an on-line training program versus a lecture-based approach? The first step would be to analyze which method would best fit with what is to be trained, (i.e. software skills, best online, vs. diversity training, best lecture-based with discussion). In addition, an analysis of the people to be trained could be done (using something like the Big Five) to determine how each best learns (i.e. anxious and introverted persons may find on-line training more suited to their personality than a discussion group). It may be found that on-line training would not be the method of choice because the audience may lack the necessary computer skills (in other words, the trainee would have to be trained before the training could take place). The organizational constraints should also be taken into consideration (how much time allowed for the training to take place, where the training is to occur, etc.). Initially, the evaluation methods would be the same for both the on-line training program and the lecture-based approach. The data collected would be the trainees’ reactions, what learning the training facilitated, if there have been any behavior changes since the training, information on the results of the training objective, and finally the ROI of the training. Since the measurement component is extremely important, one of the pre-training – post-training methods should be used. Record keeping on all data collected (reactions, learning, behavior, results, and ROI) would facilitate the assessment of each of the training methods thereby ensuring greater efficiency. 4. Why is it important to understand a systems model of training (needs assessment, development, evaluation)? Which aspects are employers most likely to skip when developing training programs? Why is this a problem? Training, like all business practices, should be evaluated in terms of ROI. In order to do that, a systems approach to training must be followed. It is important to determine what needs to be trained, how to do the training, and how valuable the training was to the organization. Without a system in place, it would be difficult to measure those items. A step-by-step process of the system will help in assessing the efficiency of the program and its effect on the bottom line of the organization. When developing a training program, small companies rarely did a formal needs assessments, written specific instructional objectives, and evaluated the training with something other than a simple, post-training reaction questionnaire, the majority of all classes of respondents did none of these things. In addition, less than 10 percent of companies used any form of control group to evaluate the effects of the training. This is a major issue because many organizations are developing unnecessary and costly training programs that are will not translate into employee skills that will be used on the job. Furthermore, the utility of the training programs are likely reduced if not tied into the organizations strategic goals. Furthermore, firms are using training programs without any oversight in to the effectiveness of the programs. 5. Suppose you are instructed to determine whether a training curriculum is needed to address literacy issues in the workplace. How would you conduct the needs assessment? Be specific about the techniques you would use to conduct an organizational, task and person analysis. The main purpose of the needs assessment is to determine if the proposed training program is actually needed. To begin, getting information from human resources planning would be helpful for determining the literacy of the workforce. If the workforce is below the literacy standards set by the company, then one would proceed with the needs assessment. One should target the needs assessment at the organizational, job, and person levels. Conducting the needs assessment at the organizational level will answer the question of where the training is needed and what factors will affect the effectiveness of training. For example, preliminary results may show that shipping and receiving have the lowest literacy levels of the organization, and that they are not performing at expected levels on the job, and that there is high turnover in new positions. Conducting the needs assessment at the job level will answer the question of what should be taught. For example, when analyzing the dockhand’s position it may be discovered that topics such as dealing with English as a second language are not covered in orientation training. Finally, conducting a needs analysis at the person level will answer the question of who needs training. From assessing all three areas, one should have information regarding where the training is needed, what training is needed, and who needs it. Based on this information, one could begin designing the training program. 6. You have been contracted to deliver a training program for employees on generational differences in the workplace. You ask the CEO for the results of the needs assessment indicating that this training is needed. You are informed that no needs assessment was performed. How would you respond to this? If you decide to convince the CEO that a needs assessment must be performed, what would you say? If you decide to design the training program, how would you proceed? First, assess why the CEO thinks training needs to be done. If the CEO indicates that he/she would like an improvement in how employees of different ages work with each other, ask what that improvement would look like. Tell the CEO that a systematic method of training is important to determine the ROI of the investment. Compare what the CEO says the ideal would look like to the existing perception of inter-generational work relations. Determine if training will adequately address the deficiencies. It may be that the organization’s structure and reporting relationships need to be evaluated in terms of awareness of generational differences. Inform the CEO that you want to make sure that the organization’s resources are used wisely. If the needs assessment indicates training needs to be done, develop the training program. In order to develop an effective training program, several items need to be addressed. A conducive learning environment should be established. Second, the trainability of the persons to be trained and the support of trainees, supervisors, coworkers and subordinates should be ascertained. Third, the training should keep in mind aspects of adult learning (whole vs. part, massed vs. spaced, overlearning, goal setting, knowledge of results, attention, and retention). Fourth, the training should maximize the transfer of training to job and attempt to prevent relapse. The method the training takes will depend on what the objectives of the training are, who is to be trained, when the training is to take place, and where the training will be held. In addition, those objectives should tie into the strategic plan of the organization. Metrics can then be established for reactions, learning, behavior, results, and ROI. 7. Results from a preliminary company needs assessment indicate that managers have a negative opinion of the training offered by the firm, think the training is a waste of time, and are resistant to attend future training by the training staff. What additional information would you want to collect from the managers before sending them to a training program? What methods would you use to collect the information? What recommendations would you offer to the firm to ensure that managers still receive future training? It would be important to find out why the managers had such a poor view of training. The best way is to ask the managers directly by either interview or survey. Either a structured interview or standardized survey should be used for consistency. Addressing the issues the survey or interviews identified as problem areas would help in gaining support of future training. In addition, explanation of intrinsic and extrinsic benefits, gaining support from the managers’ superiors, coworkers, and subordinates can help attendance. Superiors’ attendance and the managers’ input as to the content, times and location of the training may also garner support for managers’ attendance. Tying training to compensation (as at Saturn) will also ensure success. 8. Some people say that employees already understand racial and sexual harassment and that we no longer need training for managers. What do you think? Why is this training needed or not needed? Defend your view. If you were to design a program, what would be the major features of a training program designed to make employees and managers aware of racial and sexual harassment issues in the workplace? Whom would you select to attend such a training program and how would you evaluate the effects of the training? Would such training be effective? Explain your answer. We are working in an increasingly diverse workforce. This is increasing discrimination claims from immigrants, women, older workers, gays, lesbians, various racial and ethnic groups, those with physical disabilities, and those of varying religious affiliations. In addition, different values, attitudes, and behaviors of generations (e.g., Baby Boomers, Generation Y) or types of workers (blue collar vs. white collar. Organizations can limit its liability by having mandatory training programs for both employees and managers. Training on racial or sexual harassment should include a strong organizational statement of no tolerance to harassment, definitions of sexual harassment and racial harassment, a procedure for report harassment, a procedure for investigation, and descriptions of punishments and/or disciplinary actions for offenders. Research has found that the most effective programs are those that are fully integrated with organization’s objectives, mandatory attendance, and incentives developed to ensure fulfillment. 9. Suppose that you are going to design a training program for newly hired sales associates for a retail chain. Results from the needs assessment indicate that they will need training on company policies and procedures, selling clothing to customers, and handling customer complaints and returns. What learning principles would you build into the program? What training methods would you choose for your training program? Explain your choices. Typical responses might be as follows: It is extremely important that a training environment be established that allows for maximum learning and transfer. To do this, trainers need to make decisions about how best to arrange the training environment. That is, should they use whole or part learning? Massed or spaced practice? Overlearning? Should they provide immediate feedback to trainees? Most importantly, they also need to determine how to maximize trainees' attention to and retention of information. When designing the training program for new sales associates, it would probably be important to include overlearning and relapse prevention. Sales associates may have to make quick decisions and they may not have the time to refer to the policy manual when making such decisions. To help ensure transfer of training, it would be a good idea to conduct training where the trainees can give full attention to the training program. Spaced practice may be helpful in this situation. Training methods such as lectures and audiovisuals may be readily available and as recent evidence indicates, quite effective. On the job training would be helpful, if there will be supervision available from the managers. Learning to deal with customer complaints and returns might best be achieved through the use of role-playing and behavior modeling, as both of these methods are effective for teaching interpersonal skills. A recent meta-analysis determined the effectiveness of organizational training. While the effects differed as a function of the type of criteria used to evaluate the training, the overall effect of the training was comparable to (or larger) than those reported for other organizational interventions, such as the effects for performance appraisal and feedback, management by objectives, and goal setting on productivity. One other clear trend from the study was that there was a decrease in effect sizes from learning criteria to behavioral or results criteria. 10. A group of 60 consultants in a large firm has just completed SAP and PeopleSoft training. You have been called in to evaluate the training. What might you do to evaluate the effectiveness of the training at this point (you were not able to collect any pre-measures with this group)? You did hear that another group of 60 consultants will be attending the same training in 2 months. Since there was no pretest measure of the first group a post-training test could be administered to those 60. Hopefully, before the first training, objectives were specified. The post-test can then measure against those objectives. A pre-training test could be administered to the group of 60 that will be attending the training in six months. The second group could act as the control group for the first group of consultants that took the training. The second group could take the post-test at the same time as the first and the results from the two groups compared. After the second group receives the training, the post-test should again be administered and compared to that group’s pre-test results. 11. Describe a number of ideas for building motivation of trainees before and during a program. What suggestions would you offer for ensuring that trainees are motivated to transfer their skills after they leave the training and are back at their jobs? Stress the similarity between the training content and the job content. Allow plenty of opportunities for practice new skills and behavior during training and in between training sessions. Vary the examples and situations so that learning is generalized. Break training down into recognizable steps. Use reminders and aids of training at place of work. Follow up training by providing opportunities while on the job to use new skills and knowledge and encourage continuous learning. 12. Why is it important that trainees receive support from others for attending training and applying their training skills? Do you think they often receive the necessary support? Why or why not? If superiors do not see the value of training they may not give the employee the time off from regular duties to attend the training sessions. If the peers ridicule the trainees for attending the training, they may not complete the training or refuse to use the new skills or knowledge. 13. Distance learning is becoming the fastest-growing technique for training employees and students. Describe the benefits and drawbacks for distance learning for employees in the workforce. What would the advantages and disadvantages of a distance education graduate degree program in human resource management or an MBA? Advantages for training employees through a distance-learning program are: More bang for the training buck Reduced travel costs Reduced travel time Make it possible to train more people more often with more flexibility Can add more trainers or trainees without huge expenses Consistency in what is trained and in a timely manner Real-time updates and just-in-time information Sites of training are more convenient (home and/or office) Can be interactive for group learning Enables more control over pace and sequencing of learning Easy access to learning resources. Disadvantages include the cost to setup and maintain such a program. Another drawback is not being able to have face-to-face feedback (unless video conferencing equipment was used). Major advantage to a graduate degree program in human resources or an MBA is the convenience and the time factor. The student could set the pace of learning. The disadvantage would be mainly for the instructors, in that assurance that that particular person was the one actually taking exams and such since there would be limited face-to-face interaction. Additionally, since human resource management is interactivity with others, the student may be missing some valuable opportunities that regular classroom exercises may provide. 14. What ideas do you have for training employees who are going on an international assignment? What about for those employees coming back to an organization after an international assignment? What issues would you discuss and what techniques would you recommend for both programs? The training for returning expatriates may depend on whether their assignment was successful or cut short. For instance, for the successful returnee, the assimilation back into the home culture may include the training of the replacement or future international assignee. This would help to disseminate information for the returnee and aid in the cultural transition for both the returnee and the new assignee. For the employee whose international assignment was cut short, the assessment of the reasons behind the failure could be the basis of the training, provided it was not specific to the culture from which the employee is returning. For instance, if the failure was attributed to the lack of technical competence then the employee could be given that training upon his/her return. However, both may not only be in the need for training but to also have that training integrated with career development. Many returnees are unsure of their place in the organization after their international assignment. This issue may have to be addressed before or during the training period in order to facilitate the transfer of learning. A three-level construct called "cultural intelligence" has been proposed where a person's self-efficacy through social interaction in cross-cultural settings plays a key role in the subsequent effectiveness of such interactions. High self-efficacy resulted in the initiation of cross-cultural interactions that persisted in the face of early failures. In addition, individuals with high self-efficacy engaged in problem solving in order to master required skills. Such research should be considered for international training programs. 15. Why is it important to assess the costs and benefits of training? Primarily, the assessment of the costs and benefits to training is to create and maintain a competitive advantage. Since there is extreme pressure to compete, wise use of capital will help ensure success. Justification that the training is adding to the bottom line is essential for success of training programs. 16. Why is it important to collect multiple criteria to assess the effectiveness of a training program? What if a company was insistent that only reactions needed to be collected? How might you convince them of the importance of also collecting learning, behavioral, and results measures? Evaluation of more than just the reactions of the trainees is important to make sure that the programs are accountable, are cost effective and are meeting the needs of the organization and the employees. Reactions to the program do not ensure that the training is cost-effective or meeting the organizations objectives. The collection of the other elements will tell an organization whether or not the training positively affected the desired outcome (i.e. increased productivity). Although most organizations rely on reactive measures as the sole basis for evaluating their training, scores on reactive measures say very little about the more important criteria. As summarized in Chapter 8, “there is very little reason to believe that how trainees feel about or whether they like a training program tells researchers much, if anything, about (a) how much they learned from the program (learning criteria), (b) changes in their job-related behaviors or performance (behavioral criteria), or (c) the utility of the program to the organization (results criteria). This is supported by the lack of relationship between reaction criteria and the other three criteria.” What do you see as the future trends for the field of training? Training is becoming increasingly important to organizations. This trend will continue. In order to compete, organizations will have to have the right mix of talent with the right skills. One way to ensure this is through training. Recent evidence indicates that many U.S. workers are not competing well on the trainability criterion. In 2005, Toyota selected Ontario, Canada over the U.S. as the place for a new plant for its mini-S.U.V.'s. Computerized training programs are plentiful and will be utilized more as organizations continue to utilize technology. Training will be looked at as a prevention program for the increase in employment litigation (diversity training and sexual harassment training). Training will not be considered an employee benefit but as a way to develop and maintain a competitive advantage. CHAPTER 9 CAREER DEVELOPMENT CHAPTER 9 – DISCUSSION QUESTIONS 1. Should organizations adopt formal career development policies and programs? How do these programs affect their ability to be flexible in terms of staffing? How do they influence their ability to recruit employees? Corporations can't afford not to have formal career development policies and programs. Properly designed programs will allow for organizations to be flexible. Organizational growth and effectiveness requires career development to assure that needed talent will be available since the availability of an external qualified labor force is declining in many occupations. Career development systems can help attract and retain high quality employees, which increases the chance that their skills and knowledge can be utilized to benefit the organization. 2. What would you say to those who argue that establishing attractive career programs for employees will only enhance their own marketability and enable them to leave the firm faster? They should address the changing demographics of the workforce and the need to develop talent to fill the gap that will be left by baby boomers. By providing career development a company is more likely experience increased employee loyalty, improved communication and lower turnover rates. To those who argue that establishing attractive career programs for employees will only enhance their marketability and enable them to leave the firm faster, I would offer the following perspectives: 1. Employee Retention Benefits: While it's true that offering attractive career programs may make employees more marketable, it can also significantly enhance employee retention. Employees are more likely to stay with a company that invests in their growth and development, provides opportunities for advancement, and fosters a supportive work environment. By prioritizing employee satisfaction and career progression, firms can reduce turnover rates and retain valuable talent. 2. Enhanced Employee Engagement: Attractive career programs can increase employee engagement and commitment to the organization. When employees feel supported in their career aspirations and see clear pathways for advancement within the company, they are more likely to be motivated and invested in their work. Engaged employees tend to be more productive, innovative, and loyal to their employers, contributing to overall organizational success. 3. Positive Employer Branding: Offering attractive career programs can enhance a company's reputation as an employer of choice. Organizations that prioritize employee development and provide meaningful career opportunities are more likely to attract top talent in the recruitment process. A positive employer brand can also contribute to employee morale and retention by instilling a sense of pride and belonging among current employees. 4. Long-Term Investment in Talent: Viewing career programs as an investment in talent rather than a risk of losing employees can shift the perspective on their value. While some employees may eventually leave the firm to pursue other opportunities, investing in their development and growth benefits both the individual and the organization in the long run. Former employees who have received valuable training and experience from the company may become ambassadors, referring others to work there or even returning in the future with enhanced skills and perspectives. 5. Adaptation to Modern Workforce Expectations: In today's competitive labor market, employees increasingly prioritize career development and growth opportunities when considering job opportunities. By aligning with these expectations and offering attractive career programs, firms can attract and retain top talent. Ignoring these expectations may result in difficulty attracting qualified candidates and higher turnover rates. Ultimately, while there may be concerns about employees leaving after receiving career development opportunities, the benefits of investing in attractive career programs often outweigh the risks. By fostering a supportive and growth-oriented workplace culture, companies can cultivate a loyal and engaged workforce that contributes to long-term organizational success. 3. What is the role of EEO in career development? What is the role of the training or career staff in designing and implementing career development programs? The increasing rate of litigation concerning employment opportunity through laws such as the Age Discrimination in Employment Act (ADEA), and Americans with Disabilities Act (ADA), the 1991 Civil Rights Act, and the Equal Pay Act has placed more responsibility on companies to avoid discrimination in their career development programs. Since there are few women and minorities who occupy middle and upper management positions, compliance with EEO will mean fostering activities designed to enable women and minorities to advance up the career ladder. These actions can include providing formal mentoring programs, educational opportunities, counseling, and career management seminars. Employers must also take steps to discourage age discrimination. Organizations can use the experience of older employees by placing them in mentoring or consultative roles, and help them prepare for retirement through phased retirement programs. Finally, organizations must also begin to make provisions designed to assist employees with disabilities. A number of companies have begun offering diversity-training programs to reduce discrimination due to disability, race, gender, and age. The following is a four step-planning model, which emphasizes an organizational change perspective in its recommendations for designing career systems that may be used by HR professionals. 1. Needs: The first step is for the HR staff to identify where the problem areas are, what the desired end state is and how to obtain the solution. 2. Vision: The second step is, to identify what the ideal career development system is. It is recommended that middle managers or those who will be mainly responsible for dealing with the changes be consulted. This will enhance the probability of success by creating a feeling of ownership. 3. Action plan: The action plan is a detailed account of the activities involved in implementing the new career development program. In order for the intervention to be successful, it is also necessary to obtain top management support so they can help "sell" the plan to other organizational members. 4. Results: The action plan must also include a means to assess whether or not the intervention has worked as it was intended. The intervention needs to be periodically assessed and improved if necessary. The outcomes of the career development program must be integrated with employee training and selection systems for maximal organizational effectiveness. 4. Recently, the role of managers has changed and today more are being called to be career “coaches” for their employees. What suggestions would you give to managers about what the new role involves? What is they say they don’t have time to be a career coach? How would you convince them that this role is critical today for retaining today’s workers, especially Gen Y workers? Career coaching takes an active involvement in the career development system. This includes understanding the organization’s strategy and core competencies so that the implementation of career development is an organizational capability for competitive advantage. Using employees to their fullest potential and satisfaction will improve organizational effectiveness. The critical ingredients of being a good coach are providing honest and accurate feedback and listening. Performance appraisals are opportune times to coach the employee to take classes in skills training or to help further their career in other ways (training peers). Listening to personal career goals of the individual and tailoring them to meet the needs of the organization will benefit not only the employee, but the organization as well. Career coaching and development is critical for Gen Y workers who are seeking self-fulfillment in their work. They are looking for developmental opportunities and are interested in exploring different jobs. Career coaching can provide a means to meet these needs and interests 5. Describe several career development programs that would be useful for individuals planning on making a career or job change. Suppose they have worked in one field for 7-10 years (e.g. engineering) and have decided to switch jobs (e.g. to consulting ). How should they prepare for this change? Some commonly used programs for development include assessment centers, job rotation programs, in house training programs, tuition refund plans, and mentoring. Developmental assessment centers can be used to provide feedback on individuals' strengths and weaknesses across a wide variety of supervisory/managerial competencies (e.g., interpersonal skills, analysis, decision making, planning and organizing skills, etc.). Job rotation can be used to develop a broader knowledge and skill base. In house training programs and tuition refund plans can serve to continue the education of employees. Mentoring programs can serve career functions (e.g., improve contacts and the availability of resources and provide challenging work assignments) and psychosocial functions (e.g., role modeling for new employees and counseling on job performance). Mentoring may also be valuable for improving the job involvement and satisfaction of the mentor. The individual may opt to take a sabbatical in order to gain more information regarding the career that the individual is looking to move into. For instance, the individual could apprentice, shadow, or intern in the new career for the sabbatical period. This way the KASOCs needed for the new career could be ascertained and then the individual could set goals to obtain the needed KASOCs if there were any deficiencies. In addition, the trial would give the individual a realistic job preview and see if a match existed. 6. What is the value of self assessment for individual career planning and organizational career management? Why should employees seek feedback from others regarding their job performance and career plans? How could performance-appraisal information (360-degree appraisal) be used to assist individuals in career development? Many organizations simply do not have the resources to completely plan individual careers. This leaves the responsibility of career planning up to the individual. Self assessment allows for individuals to do their own career planning and provides information about their abilities and competencies. Moreover, many forms of self assessment provide information about an individual's career preferences that can be important for obtaining a position that is well suited for the individual. External sources are invaluable for completing a self assessment. External sources can include the supervisor as well as peers and subordinates. All of the different sources can provide information that will result in a more accurate self assessment since they can offer a more objective appraisal than an individual can. Companies that use 360-degree appraisal systems gain a more accurate picture of the SWOTs of the individual and of the organization. The more complete picture of the employee’s efforts and products will enable the employee to recognize more fully his/her SWOTs. A career development program can then be designed to more fully address the employee’s needs while linking it specifically to the organization’s strategy and competitive advantage. 7. Why is it important to integrate career development programs with other programs in organizations (e.g., performance appraisal, training, selection, compensation)? Offer some suggestions for how this can be done. The integration of career development programs with other HR programs allows for the employees' needs to be merged with those of the company's human resource needs and business objectives. Good business planning needs to include all HR systems and not just the traditional focus on marketing and finance. Today's organizations cannot solely rely on technology since competitors often use the same technology and method of production. Competitive advantage is increasingly determined by the human factor and which organization can use its human capital most effectively. Career development systems can be integrated with other systems to assure that qualified people will be available to fill future business needs. The strategic business objectives need to include human resource needs. The human resource needs can be filled by selection, training, and providing individuals the opportunities to learn new skills in varied positions (job rotation). Managers can take on a counseling role to identify an employee's strengths and weaknesses, discuss career plans, and work closely with them at an individual level to develop an action plan to improve performance and reach career goals. Performance appraisal can be used to identify areas of training needs, document progress towards developmental goals, document the effectiveness of training programs, and serve as a basis for salary administration. Career development workshops can help employees develop a personal career plan within the system. They can cover personal needs, career interests and goals, and the development of specific career plans. Placement summaries can be used which describe current and future staffing needs in terms of incumbents, ready replacement, and future replacements. 8. Should organizations make special efforts to deal with career-family issues through part-time work, job-sharing, flextime, relocation assistance, and other programs? Should they also have special programs in place for employees who are not married nor parents? Given the demographic changes in the workforce, companies would be well advised to institute programs like these for competitive advantage. Especially since it has been found that the part-time work, job-sharing and flextime are the most effective in terms of increasing retention and productivity with lowest associated costs involved. The reluctance of an individual to move because of the spouse’s career makes relocation assistance a good program to offer dual career families. Family friendly firms have been found to have lower turnover rates even for those employees who do not take advantage of the programs. Many firms offer flex-benefits so that the employees who do not take advantage of programs such as childcare can in turn use the dollars associated with things like wellness benefits (e.g. gym memberships). 9. With the increasing number of organizations experiencing downsizings and layoffs, it has become critical that they have career programs in place to assist out placed employees. What suggestions would you offer for the types of assistance that are needed in outplacement programs? Ideally, the assistance would start before the employee was let go. Gradually phasing jobs out by reducing hours, freeing up employees to either go to classes for training or job seeking, while providing an income and benefits during the process seems to be one of the best ways of assisting out placed employees. Additionally, assistance in skills assessment, resume writing, and job placement would ease the stress of being laid off. Providing a place to voice the anger and disappointment regarding being laid off is helpful to get over the initial shock. Action is then called for in the form of phasing-out, temporary work, part-time work and career planning and assistance. 10. Companies are increasingly expecting their employees to take international assignments, and yet they are not providing much career development for them while they are away and when they return. Why is it important to do? What recommendations would you offer? Since 15 to 40 percent of expatriates leave the company after returning home, companies are losing valuable and skilled employees because the companies did not do a good job of repatriation. For the transition to be successful, the following career development could help retain the employee. They should start the repatriation a year before the move back home. They should reorient and retrain for any changes while the employee was away. Since the international experience is valuable, the employee should use the skills and knowledge used while in the international assignment. They should give the employee definite assignments that are linked to a clear career path. They should assign mentors to the repatriate to ease the transition. They should provide continuing career management. And, if needed, they should help the employee with housing and compensation issues during the transition. 11. How can companies use career programs to retain their most talented employees? How might these differ for the various generations at the workplace (e.g. gen Y, Gen X, Baby Boomers, Traditionalists)? What career programs would keep you employed at a particular firm? With more information regarding the career plan within an organization, employees will have a better idea how to use their skills to further their career path. Development and training can then be enhanced to help the employee reach his or her career objectives. The company benefits from lower turnover and employee satisfaction, which raises productivity. Most students will probably choose a developmental program (mentoring, tuition reimbursement, internal or external training programs) that will help with retention. Flexible work arrangements are also gaining in popularity. Companies can use career programs strategically to retain their most talented employees by tailoring these programs to meet the diverse needs and preferences of different generations in the workplace. Here's how career programs can be customized for each generation: 1. Generation Y (Millennials): • Flexible Career Paths: Offer opportunities for diverse career paths within the organization, allowing Millennials to explore different roles and interests. • Work-Life Balance Initiatives: Implement flexible work arrangements, remote work options, and initiatives that promote work-life balance to accommodate Millennials' desire for flexibility. • Continuous Learning and Development: Provide access to ongoing training, mentorship programs, and opportunities for skill development to support Millennials' desire for personal and professional growth. 2. Generation X: • Leadership Development Programs: Offer structured leadership development programs and pathways for advancement to engage and retain Generation X employees who are seeking career progression. • Work-Life Integration: Provide support for managing work and personal responsibilities, such as flexible scheduling, parental leave policies, and family-friendly benefits. • Recognition and Rewards: Implement recognition programs that acknowledge the contributions and achievements of Generation X employees, fostering a sense of appreciation and loyalty. 3. Baby Boomers: • Phased Retirement Options: Offer flexible retirement planning and phased retirement options, allowing Baby Boomers to gradually transition out of the workforce while continuing to contribute their expertise. • Knowledge Transfer Programs: Create opportunities for Baby Boomers to mentor younger employees and transfer their institutional knowledge, facilitating succession planning and talent development. • Career Reinvention Opportunities: Provide resources and support for Baby Boomers who are interested in exploring new career paths or pursuing encore careers after retirement. 4. Traditionalists: • Respect for Experience: Recognize and value the experience, wisdom, and contributions of Traditionalist employees, providing opportunities for them to share their insights and expertise. • Tailored Benefits: Offer benefits and perks that cater to Traditionalists' needs and preferences, such as healthcare benefits, retirement planning assistance, and wellness programs. • Legacy Projects: Engage Traditionalist employees in meaningful projects that allow them to leave a lasting impact and contribute to the company's legacy. As for career programs that would keep me employed at a particular firm, I value opportunities for continuous learning and development, a supportive work culture that values work-life balance, and transparent pathways for career advancement. Mentorship programs, leadership development initiatives, and a collaborative environment where employees are empowered to contribute ideas and make a difference would also be important factors in retaining my loyalty to a company. Additionally, a company that demonstrates a commitment to diversity, equity, and inclusion, and offers competitive compensation and benefits packages, would further incentivize me to stay long-term. 12. During troubled economic times (e.g. financial crisis), what advice would you give to today’s workers so that they could continue to thrive in their careers? Individuals need to see career as a series of lifelong work-related experiences and personal learning. The more flexible and adaptable you are the more employable you will be. To thrive you need to take control of your development, focus on employability, and understand the importance of networking and reputation building. CHAPTER 10 COMPENSATION: BASE PAY AND FRINGE BENEFITS CHAPTER 10 -DISCUSSION QUESTIONS Research CEO pay on the Internet (try www.aflcio.org/paywatch and Graef Crystal’s column at www.bloomberg.com/columns). Identify persons you believe to be the most overpaid and underpaid and explain why. Determine if any new legislation or regulation could affect executive pay.
2007 SEC 2007 AFL-CIO calculation method
General Motors $14,415,914 $19,791,874
Ford Motor Co. $21,670,674 $22,750,385
MicroSoft $1,350,834 $1,350,834
Apple, Inc $1 $1
General Electric Co. $19,591,580 $14,287,557
Citigroup $15,105,376 $25,502,621
Fannie Mae $11,648,409 $14,231,650
Feddie Mac $18,289,575 $14,497,981
1. H.R. 1257, the Shareholder Vote on Executive Compensation Act. The bill will require that public companies ensure that shareholders have an annual nonbinding vote on their company’s executive compensation plans. It also requires a nonbinding advisory vote if the company awards a new golden parachute package while simultaneously negotiating the purchase or sale of the company Source: http://www.speaker.gov/legislation?id=0020 “Say-on-Pay” legislation: House passed legislation that gives shareholders a nonbinding say on executive compensation in April 2007. Source: http://money.cnn.com/2007/04/20/news/economy/house_executive_pay/index.htm It has been proposed that HR managers should be more involved with compensation committees charged with determining executive pay packages. How should HR be involved?
It is important for HR to provide empirical data to senior management in order to fully capitalize on the human resources of an organization. Executives are part of that human capital. HR managers, then, need a way to measure the executives in terms of the HR domains. Dr. John Sullivan, Head and Professor of Human Resource Management College of Business, San Francisco State University proposes the metrics CEOs should ask of HR professionals. Here are some of his questions adapted for HR managers to ask CEOs. Are we over paying our executives for the output they produce? Can HR show the impact of pay increases? What is the % increase in executive performance as the result of every 1% increase in pay? Does paying top dollar matter? Do the executives paid in the top quartile of the salary range produce proportionally more output than those paid in the middle quartile? Demonstrate that we have tied a higher proportion of our total compensation to productivity and company performance than our competitors. How much differently do we treat (pay) our top contributors from our average contributors? Is there evidence that the CEO is a major contributor (among overhead functions) to our corporate success/ profitability? Do we survey our managers and ask them to force rank executives on how they contributed to departmental and divisional profitability? Do the executives rank toward the top? Do the executives provide evidence they contribute to increasing our shared vision and the strengthening of our corporate culture? In our employee pulse survey do employees rate the executives as a contributors or barriers to productivity? Are our executives efficient and do they continually improve? Is there evidence that putting more executive resources in an area dramatically impacts that areas productivity and profitability? What percent of all corporate spending goes to executives? How does it compare to last year and our best competitors. Are our costs per unit of executive service below those of our best competitors given an equal quality of service? Do key departments and products get the most executive help? Is there evidence that the CEO has significantly added to our shareholders value? Has our stock options program added to or diluted our share's value? Demonstrate what the CEO has done to increase our over-all corporate capabilities, competencies and capacity to beat our competitors. (Since, on average, over 60% of all corporate dollars are spent on people costs). 3. Critique market-pricing pay with the traditional approach to compensation. Which approach is more important for organizational effectiveness? Which approach would you implement and why? Internal pay equity is the determination of the pay structure for the various jobs within an organization. At the individual level, internal pay equity concerns whether or not an employee in a position feels his or her level of compensation is fair compared to that of other levels. External pay equity is the determination of pay level based on the wage rates of other organizations for the same position. At the individual level, external pay equity concerns whether or not an employee in a position feels his or her level of compensation is fair compared to that of other organizations. Both internal and external pay equity is important for an organization. However, each can attain more importance according to the labor market of any particular organization. For example, if the labor market is high and demands for these employees are weak, then external equity becomes less of an issue. However, if there is a scarcity of potential employees and competition among companies for these employees is high, then external equity will be extremely important. In an industry where salaries are similar across organizations, then internal pay equity becomes more important. 4. Pay expert Ed Lawler says pay the person, not the job. Explain what you think he means and how that would work. Traditional pay structures reward employees for learning and developing skills that will help them get promoted. Ed Lawler believes that pay structures need to reward employees for developing skills that expand team capabilities and the organization’s core competencies. In The Guru Guide, Lawler’s pay-for-knowledge plan is four-fold: Tie raises to learning identified skills. Increase broad pay bands so there is a wide differential from top to bottom (50%). Give lump-sum one-time payments when they develop new skills (products). Tie promotions and pay grades into skill attainment. 5. What is broadbanding and what does the latest research say about its effectiveness? In a 2002 article, Edwin W. Arnold and Clyde J. Scott, review the most current writings on broadbanding and its effectiveness. Their conclusion is that most organizations that use broadbanding do not measure its effects. The most current research on broadbanding has been done in Australia. The Australian Department of Foreign Affairs and Trade did a study of the effects of their broadbanding and performance management system they adopted under a certified agreement for 1998-2000. The study found modest savings, effective framework for performance management, and improvement in matching person to job with the use of wider bands. The new contract has been refined to include a fourth band (the original agreement collapsed positions into three bands). The most extensive study was published in 1996 in the ACA Journal 5:3. In “Broadbanding in the Federal Government: A 16-Year Experiment,” Brigitte Schay found that although salary costs increased administrative costs decreased. In addition, she found increased satisfaction of pay, improved organizational performance, and increased HRM authority by managers. Turnover was higher for low performers and lower for high performers (natural attrition). Governing.com grades the states in terms of performance. In its 2001 Report Card, three states, South Carolina, Washington and Wisconsin, made their A-List for human resources. South Carolina and Wisconsin already have broadbanding in place. Washington is adopting the method to be fully implemented by 2004. There were five criteria for the Government Performance Project, 1) Conduct strategic analysis of present and future needs (25% of the total score), 2) Obtain a skilled workforce (25%), 3) Maintain an appropriately skilled workforce (12.5%), and 4) Motivate the workforce to perform effectively in support of the government’s goals (25%), and 5) Structuring the workforce (12.5%). Nineteen areas in each of the states’ workforce plans were analyzed to derive the scores. Only 8% of the states use broadbanding for all of their employees. South Carolina found that broadbanding refocused its workforce on customer needs and created more accountability for end results. However, it also found that more emphasis was placed on support, which requires more generalists and new skill need to be developed to administer the plan. 6. The Paycheck Fairness Act has been proposed to promote pay equity. Research this legislation and determine its status and/or effects. The Paycheck Fairness Act (H.R. 1338 and S.766) was introduced March 6, 2007 by Sen. Hillary Clinton and Rep. Rosa DeLauro to strengthen the Equal Pay Act of 1963. The bill expands damages under the Equal Pay Act and amends its very broad fourth affirmative defense. In addition, the Paycheck Fairness Act calls for a study of data collected by the EEOC and proposes voluntary guidelines to show employers how to evaluate jobs with the goal of eliminating unfair disparities. The bill was passed by the House of Representatives on July 31, 2008 Source: http://www.pay-equity.org/info-leg.html The Paycheck Fairness Act would improve protections for workers under the Equal Pay Act of 1963 by allowing individuals to better fight pay discrimination, strengthening penalties for violation, compelling employers to explain wage gaps, and developing training for women and girls about salary negotiation Source: http://blog.seattlepi.nwsource.com/northwestlaw/archives/159464.asp?from=blog_last3 The Paycheck Fairness Act (PFA, H.R. 1338) undermines this policy. In the name of protecting women from discrimination, the Act permits the government and the courts to micromanage employers, tying them up in a sea of red tape. The Act gives a windfall to trial lawyers, exposing employers to unlimited punitive damages for unintentional mistakes. Any financial benefits reaped by trial lawyers, however, will come at the expense of workers, whose wages will fall in order to cover the increased cost of legal liability insurance. The Act also obliges the government to adopt junk science by requiring the use of a highly flawed survey while declaring the best scientific practices for assessing discrimination superfluous. The PFA will hurt the very workers it is meant to help. Source: http://www.heritage.org/Research/labor/wm2007.cfm 7. A constant political debate is whether the minimum wage should be increased. Research this topic and justify your position on the topic. Arguments for increasing a minimum wage might include: A minimum wage is necessary to protect employees who occupy lower level positions to provide them with a minimum level of compensation. Without a minimum wage, employers may take advantage of these employees and try to increase profits and their competitive edge by paying as little as possible. The minimum wage standard is needed because it helps to ensure that each individual will receive fair compensation for the effort he or she puts into performing a job. Arguments against a minimum wage might resemble the following: A minimum wage is not necessary, and goes against the spirit of a market economy. Many people might believe that without a minimum wage, large numbers of employees would not receive the same level of compensation. However, the vast majority of employees are in positions that pay more than the minimum wage. Further, eliminating the minimum wage may actually increase the pay level of most employees. Employers would still have to compete with each other for employees, and the absence of a minimum wage may encourage employers to focus more on different wage levels. The lack of available employees has already caused many traditional minimum wage employers (e.g., fast food franchises) to offer starting wages higher than minimum wage. 8. Some argue that workers’ compensation programs and the FMLA have proven to be problematic laws for employers. Research these issues to determine the recent controversies and proposed solutions. Why are there so many lawsuits regarding overtime? Arguments for a government mandate might include: A family leave policy provides many benefits to the organization as well as the employees. From the organization's viewpoint, when an employee is on family leave, the organization can use the vacated position to develop other employees. Further, a family leaves policy shows organization support and can increase employee commitment, trust and motivation. From the employee viewpoint, a family leave policy allows the new parent time to adjust to the new family addition and feel less stress knowing that he or she will have a job when he or she returns to the organization. Arguments against a government mandated family leave policy might include: Many organizations do not have the resources to train new employees to fill those positions vacated by individuals who take family leave. A federal mandate may seriously threaten the competitiveness of many organizations due to the added expenses involved. 9. The chapter covers the two problem areas of Dodd-Frank’s “clawback” provisions. If you were the regulator, how would you resolve those questions in actual application (and be specific…)? Research cases involving potential clawbacks under Sarbanes-Oxley and /or Dodd Frank Resolving the problem areas of Dodd-Frank's "clawback" provisions requires a balanced approach that ensures accountability for corporate misconduct while addressing potential challenges in implementation. Here's how I would approach each issue: 1. Determining Triggers for Clawback: • Specific Triggers: Define clear and specific triggers for invoking clawback provisions, such as financial restatements due to material errors or misconduct resulting in financial harm to the company. • Materiality Thresholds: Establish materiality thresholds to differentiate between minor errors and significant financial misstatements that warrant clawback actions. This threshold should be based on objective financial criteria, such as the magnitude of the error relative to the company's financial position. • Timeliness Requirements: Implement timeliness requirements for initiating clawback proceedings to ensure prompt action following the identification of misconduct or financial restatements. This helps prevent delays in holding responsible parties accountable. 2. Determining Scope and Amount of Clawback: • Tailored Approach: Adopt a tailored approach to determining the scope and amount of clawback based on the severity and nature of the misconduct. Consider factors such as the level of culpability, financial impact, and individual contribution to the wrongdoing. • Proportional Penalties: Ensure that clawback penalties are proportional to the severity of the misconduct and the level of financial harm inflicted on the company. This may involve adjusting the clawback amount based on the individual's role, compensation level, and degree of involvement in the wrongdoing. • Consideration of Individual Circumstances: Take into account individual circumstances, such as cooperation with investigations, remorse, and previous compliance history, when determining the scope and amount of clawback. This allows for fair and equitable treatment of individuals while still holding them accountable for their actions. Research involving potential clawbacks under Sarbanes-Oxley and Dodd-Frank can provide valuable insights into how regulators have addressed similar issues in practice. For example, cases such as the SEC's enforcement actions against executives involved in financial fraud or accounting irregularities can offer guidance on the application of clawback provisions and the factors considered in determining the scope and amount of clawback penalties. Additionally, studying court decisions and regulatory guidance related to clawback disputes can help inform regulatory approaches to resolving challenges in implementing Dodd-Frank's clawback provisions. 10. Consider the case of Jacobs Engineering and its 2001 experience with “say on pay.” Understanding that say on pay is an “advisory shareholder opinion,” how do you think organizations (like Jacobs) will be affected (if at all), if they refuse to accept shareholders’ say on pay? Refusing to accept shareholders' "say on pay" votes, as demonstrated in the case of Jacobs Engineering in 2001, can have several potential implications for organizations: 1. Reputation and Trust: Ignoring shareholders' advisory opinions on executive compensation can damage an organization's reputation and erode trust among investors and stakeholders. Shareholders may perceive the company's leadership as dismissive or unresponsive to their concerns, leading to a loss of confidence in the company's governance practices. 2. Shareholder Activism: Refusal to heed shareholders' say on pay votes may provoke shareholder activism and opposition from institutional investors, activist shareholders, or proxy advisory firms. These stakeholders may escalate their efforts to hold the company's board and executives accountable through various means, such as filing shareholder proposals, engaging in proxy contests, or advocating for board changes. 3. Legal and Regulatory Scrutiny: While say on pay votes are advisory and non-binding, regulatory bodies such as the Securities and Exchange Commission (SEC) may still scrutinize companies that consistently disregard shareholder preferences on executive compensation. Such actions could prompt regulatory inquiries or enforcement actions, particularly if there are concerns about potential breaches of fiduciary duties or violations of disclosure requirements. 4. Market Perception and Valuation: Persistent resistance to shareholder input on executive pay may negatively impact the company's market perception and valuation. Investors may view the organization as having poor corporate governance practices or lacking alignment with shareholder interests, potentially leading to share price volatility or reduced investment attractiveness. 5. Shareholder Engagement: Rejecting say on pay votes undermines the principles of shareholder engagement and shareholder democracy. Shareholders expect their voices to be heard on matters of executive compensation, and companies that disregard their input risk alienating investors and impairing long-term shareholder relationships. Overall, while say on pay votes are advisory in nature, companies like Jacobs Engineering that refuse to accept shareholder feedback on executive compensation may face a range of consequences, including reputational damage, shareholder activism, regulatory scrutiny, market repercussions, and diminished shareholder engagement. As such, it's essential for organizations to carefully consider and respond to shareholder concerns on executive pay to maintain trust, transparency, and accountability in their governance practices. 11. Research current trends in defined contribution versus defined benefits programs. From the employer’s perspective, what program is preferable and why? Now, consider the employee’s perspective. See chapter 10 for figures as of 2005. Many large companies cut their pensions in 2005 according to Watson Wyatt Worldwide, a compensation consulting firm. Eleven percent of these firms either discontinued their pension plans altogether or froze benefits to workers. It is estimated that defined-benefit plans fell about $350 billion into arrears in 2005. How did this happen? Companies lobbied for and received lax regulations on how to calculate pension obligations; estimating returns on pension investments twice as high as they actually returned. Companies do this so they can use more revenue to report as earnings. They of course have the PBGC to fall back on to bail them out if they cannot meet real pension obligations. Unfortunately, as of 2005, the PBGC had a $23 billion deficit, mainly because of the pension obligations they’ve already assumed and because companies do not pay sufficient premiums to adequately fund this federal insurance agency. While a bailout by Congress may have already occurred, the problem could have been alleviated by simply raising premiums and holding companies actually responsible for the promises they have made to their employees. Because of the costs and administrative work involved in defined benefits programs, most employers prefer defined contribution plans. The pending 2006 pension reform legislation is more likely to reduce the number of defined benefit programs. 12. What is the most typical pay policy for expatriate assignments? How would you determine the entire pay package? There are three approaches to expatriate pay. The going-rate approach, the balance sheet approach, and standardized approach. The most typical is the balance sheet approach that compensates employees for additional costs due to the international assignment. Four components are generally considered for expatriate pay, base salary, foreign service premiums, allowances and benefits. When looking at base salary, the cash compensation and the currency that the compensation is paid in are important because of the exchange rate. Foreign service premiums look at the hardships endured in international assignments. Allowances examine the costs for housing, education for children, relocation, spousal assistance, and how many times the company will pay for home visits. Benefits look at the indirect compensation such as medical and life insurance, and taxes in host countries. Solution Manual for Human Resource Management John H. Bernardin, Joyce E. A. Russell 9780078029165, 9780071326186
