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This 20 page Study Guide was uploaded by Cole Campeas on Monday February 23, 2015. The Study Guide belongs to BADM 3101 at George Washington University taught by Sharon Hill in Spring2015. Since its upload, it has received 111 views. For similar materials see Human Resource Management in Business at George Washington University.
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Class Outline and Learning Objectives Introduction to Human Resource Management Human Resource Management HRM Basics 11 human resource managementThe process surrounding management and acquisition of talent encompassing all the processes of hiring socialization management and utilizing the resources of the company in an operationally effective and socially intelligent manager The goal being to get the best out of your employees and ensure that they are intrinsically motivated to do their job for the company in a mutually beneficial way of presenting it HRM and Firm Performance 21 Effective HRM allows for effective hiring processes to ensure that the inputs of a company can reach their full potential and create the best output 22 Explain the role of HRM as a source of sustained competitive advantages for a companyHuman resource strategy when implemented well allows for a company to use its employees in the most effective manner possible Describe the role of HR vs managers in the HRM process Define diversity management and its purposeDiversity management within a company is essentially ensuring that a culturallyideologically diverse staff is maintained The purpose of this is to both broaden the horizons of who a company can do business with but also bring in a more diverse set of ideas Explain the benefits of effective diversity management for organizations Why do organizations focus on diversity managementOrganizations focus on diversity management because when it s done correctly it can be greatly beneficial for the company to have a diverse staff Diverse staff not only recruits a more diverse staff since that is a competitive advantage in recruiting talent gain a better picture of customers and it brings a wider range of ideas values and assumptions for decisionmaking while increasing the diversity of companiesclients they can do business with Better problemsolving better information greater system exibility and greater creativity Diversity Management challengesChallenges such as appropriately valuing employee diversity balancing individual needs with group fairness dealing with resistance to change ensuring group cohesiveness and open communication avoiding employee resentment and backlash retaining valued performers and maximizing opportunity for all Solutions Cultural relativity concept of managementcalls for molding management practices to the workforce s different set of values beliefs attitudes and patterns of behaviors Avoid standardized management practices Eliminating the segmented communication channels amongst those of the same race or gender Also eliminating the theoretical glass ceiling that often thwarts a minority s attempt to rise since they feel as though they don t have the same growth opportunities Establish an inclusive organizational culture Topmanagement must be committed to valuing diversity one must do so by appraising and rewarding managers for doing so Wells Fargo and other companies rate managers then give them a reward or financial incentive for performance in diversity management Diversity training support groups and accommodation of family needs can help as well 7 Performance Appraisal Overview 71 the three components of the performance appraisal process Identification determining what areas of work the manager should be examining when measuring performance Requires a measurement system based on job analysis Measurement making managerial judgments of how good or bad employee performance was Management the overriding goal of an appraisal is to establish a futureoriented view of how one can improve 72 Explain the different reasons for doing performance appraisalcan develop employees and improve their performance indicates what criteria within selection systems is validated plays an important rule in personnel decisions like termination promotion etc Allows an organization to make their strategy more real 73 Distinguish between administrative and developmental uses of performance appraisalsUsed administratively to make decisions about the employee s work conditions including promotions termination and rewards Used developmentally to improve employee s performance and job skills done by providing feedback counseling employees on effective work behaviors and offering them training or learning opportunities 8 Identi cation 81 Trait appraisal instrumentslooks at rating in traits such as decisiveness reliability energy and loyalty Focuses on a person opposed to performance categorizes workers poorly can be offensive often the traits measured are too vague cannot be used in court and it often frustrates the employee Behavioral appraisal instrumentsasks if a worker exhibits certain behaviors that are consistent or inconsistent with what the company demands does so by recording how frequently a behavior listed on the form occurs Advantages gives specific examples unambiguous standards makes clear to the employees what needs to be changed Disadvantages can be too specific anchors bias on certain criteria development is timeconsuming Outcome Appraisal Instrumentsrates work based off of achievements such as products sold or produced based off decided goals between a supervisor and an employee Management by objective setting goals for the next performance appraisal Advantages unambiguous criteria eliminates subjectivity potential for error or bias lessoned provides increased exibility Disadvantages distorts view of employee performance if outcomes are unattainable machines can take a long time to organize them can be difficult to break down reports to find a specific problem 9 Measurement 91 Relative judgmentcompares an employee s performance to that of other employees with the same job Advantages forces supervisors to differentiate among workers provides a rank order Disadvantages do not make big or small differences clear among employees do not provide any absolute information forces managers to identify differences among workers that may not eXist and requires assessment of overall performance Absolute judgmentasks supervisors to make judgments on an employee solely on performance standards Advantages feedback is more specific and helpful allow different employees to be compared more easily more fair and avoid creating con ict among workers Disadvantages all workers can receive the same evaluation if the supervisor is reluctant to differentiate and different supervisors can have markedly different standards 92 Selfreviewworkers rate themselves allows input from the employee into the appraisal process and can help gain insights into the causes of performance problems Helpful but not an accurate measure since it can be very biased Manager Review Peer Reviewworkers at the same level in an organization rate one another Can be very useful since these workers often work alongside one another but can be very biased because of that Subordinate reviewworkers review their supervisors Angered employees could be biased but allows for greater insight into one s leadership skills 360 Feedback peer subordinate customer and self reviews The most allencompassing helps eliminate bias 93 Rater erroran error in performance appraisal that re ects consistent biases Halo errorthe tendency to rate similarly across dimensions If a supervisor sees one dimension as valuable more than others it can skew the other ratings positively or negatively or if someone has a general judgment it can often do the same Restriction of range errorwhen a manager restricts all of his or her ratings to a small portion of the rating scale Leniency errorsrestricting ratings to the high portion of the scale Central tendency errorsusing only the middle points of the scale Severity errorsusing only the low portion of the scale Recency and primacy effectThe rater makes ratings based mostly on observations of the ratee either at the beginning primacy or end recency of the rating period Likingfavoritism hostility etc Stereotyping or the Similar to me bias Fundamental attribution errorThe rater views the ratee as solely responsible for his or her performance without considering how the ratee s behavior is affected by situational factors 94 How to reduce errors and biases in the performance measurement processComparabilityused to ensure that standards used by supervisors in one department for evaluation are the same for others within the same company Frameofreference traininguses fictitious behavioral examples of performance that a worker might exhibit to prepare supervisors Rater error training and keeping records of workers behaviors 10 Management 101 causes of poor performance problems and identify strategies to address these causes SAME acronymSituati0nal Factors situational constraints on performance correct situational constraints due to time material procedures etc AbilitySkillsLack of capacity Change personnel Insufficient knowledge and skill Provide training coaching etc Measurement amp FeedbackLack of performance standards Develop and publicize standards Inadequate feedback Provide adequate feedback EffortmotivationLow motivation Implement motivational strategies eg job redesign rewards etc 102 Describe how to conduct an effective performance appraisal meetingquotTELL AND SELLquot approachManager attempts to sell the employee on manager s assessment of the problem and associated recommendations for improvement Manager does most of the talking during the meeting quotPROBLEMSOLVINGquot approachFocuses on a participative and open dialogue between the manager and the employee Perceptions of the problem and solutions are mutually discussed Manager s goal is to get employee to help define the performance problem and its solution 103 The Equal Pay Act of 1963women and men must be paid the same if their jobs are equal in skill effort responsibility and working conditions Pay can be different if one employee has significant extra job duties works different shifts is in a different geographic region one employee is doing a better job than another merit pay and seniority program applies 104 Title VII of the Civil Rights Act of 1964mandates that employment decisions cannot be based on race gender or religion 1041Pr0tected classGroup of people who have suffered discrimination in the past and are given special protection by the judicial system 1042Disparate treatment vs adverse impactthe doctrine of disparate impact holds that employment practices may be considered discriminatory and illegal if they have a disproportionatequot adverse impactquot on members of a minority group 1043F0urfifths ruleTypically adverse impact is determined by using the four fifths or eighty percent rule The four fifths or 80 rule is described by the guidelines as a selection rate for any race sex or ethnic group which is less than four fifths or 80 of the rate for the group with the highest rate will generally be regarded by the Federal enforcement agencies as evidence of adverse impact while a greater than four fifths rate will generally not be regarded by Federal enforcement agencies as evidence of adverse impact 1044Employer defensesDefenses l employer exercised care to prevent and correct sexual harassment problems in a timely manner 2 plaintiff failed to use internal procedures for reporting sexual harassment 1045Pregnancy 1046Sexual harassmentEmployers can be held liable for sexual harassment on the part of employees or for retaliation e g firing cutting pay denying promotion against employees who file complaints about discrimination 1047 The Age Discrimination in Employment Act of 1967 Under the ADEA it is unlawful to discriminate against a person because of hisher age with respect to any term condition or privilege of employment including hiring firing promotion layoff compensation benefits job assignments and training The ADEA permits employers to favor older workers based on age even when doing so adversely affects a younger worker who is 40 or older 105 The Americans with Disabilities Act of 1990Forbids discrimination against people with disabilities who are able to perform the essential function of the job with or without reasonable accommodation Disability Physical or mental impairment that substantially affects one or more major life activities Essential functions Job duties that each person in a certain position must do or be able to do to be an effective employee Reasonable accommodation Action taken to accommodate the known disabilities of applicants or employees so that disabled persons enjoy equal employment opportunity provided individual is otherwise qualified for the job 11 Equal Employment Opportunity Commission EEOCProcess complaints investigation conciliation litigation Issues regulations and guidelines Gathers and disseminates information Investigates and reconciles complaints in addition to pursuing lawsuits issuing guidelines and monitoring hiring practices 12 Office of Federal Contract Compliance Programs OFCCPEnforces laws that apply to the federal government and contractors Enforces affirmative action guidelines 13 Describe actions that organizations can take to avoid violation of EEO lawsProvide training Establish a complaint resolution process Document decisions Be honest Ask only for information that you need to know Phrase the question in terms of the ability of the candidate to meet the requirements for the job 14 Identify the types of questions that should be avoided in a job interview due to legal considerationsquestions regarding children age physicalmental disabilities height weight maiden name AIDS or HIV smoking crime history and citizenship 15 De ne the term negligent hiring and how it applies to the selection process Describe what employers can do to avoid liability for negligent hiringOccurs when a manager hires an employee who then commits a crime or does something bad due to reasonable care on the manager s part 16 The Hiring Process 161 Describe the importance of the hiring process to an organization including the costs of poor hiringhiring people is where your business begins recruitment is one of the most important aspects of a company If a company is recruiting poorly their people won t be able to meet their standards 162 Describe criteria for an effective hiring process 163 De ne the three steps in the hiring process Recruitment Selection then Socialization 17 Recruiting 171 Compare the advantages of internal and external recruiting Intemal recruiting ensures that every potential employee is somewhat known by the staff which eliminates ambiguity but can yield bad employees since their friends within the company may try to skew the manager s interpretation of them External recruiting brings in a wider diversity and variety of people allows for new ideas and skillsets Diversifies both the age group and racialreligiouscultural composition of the company s outreach 172 Describe the concept of yield ratios as it relates to evaluating recruiting sourcesYield ratios help a company tell if a medium of recruitment is doing its job Yield ratios start with how many people call or apply for an ad then it takes the number of people who are offered and accept interviews Then one adds together the amount of people who took the job who got it how long they stayed and how effective of workers they were This helps establish the medium of recruiting that best suits a company 18 Selection 181 De ne important criteria for evaluating selection methods including reliability and validity Applicant and manager reaction Cost to develop and administer Reliability Consistency or stability of measurement over time across judges Empirical Validity The extent to which scores obtained by using the method are valid predictors of subsequent performance on the job 182 Describe different methods used in the selection process and compare their validityLetters 0f Reccan be helpful but they re always positive can often skew the description of the person not always valid about the person Good if based solely on content opposed to positivity Application formsOften hard to make nondiscriminatory often weeds people out early Basically seeks to ensure the employee meets the minimum job requirements Ability Testsmeasures quantitiative and qualitative skills for the job good for work sampling very valid Personality Teststypically tests for extroversion agreeableness conscientiousness emotional stability and openness to experience Can be job specific and valid but skill sets differ and depends on accuracy of job description Honesty Testsmeasures ratings in problem behaviors and honesty typically not accurate Interviewsbased on thorough job analysis can be valid but often biased Assessment Centersa set of simulated tasks or exercises related to the job to perform background checksvalid normal handwriting analysistests handwriting not a valid performance measure 183 Interview types Structuredbased directly on a thorough job analysis Unstructuredlacks consistency questions change too much that experience interviewee to interviewee drastically changes Starts with a question like tell me about yourself then questions change from there based of the answer 184 Multiple hurdle strategyeach applicant must clear each hurdle to continue selection decisions if one doesn t clear the hurdle they re eliminated Clinical strategythe decision maker subjectively evaluates all the information and comes to an overall judgment Statistical strategy various pieces of info are combined according to a formula and the job goes to the candidate of the highest scores 19 Socializationprocess by which a new employee is informed on what is expected of them the values and culture of the company and heling them cpe with the stresses of transition 20 the three phases of the socialization processAnticipatoryemployees have a variety of expectations about the organization and job based on accounts provided by the media typically A realistic job preview can always help present realistic expectations about the job the organization s expectations of the jobholder and the environment The Encounter Phasethe new hire faces work and the reality of their new job Even with an RJP giving the new employee information about policies procedures reporting relationships rules etc best optimizes this process The SettlingIn Phasenew workers begin to feel like part of the organization if successful they feel comfortable An employeementoring program can ensure that the worker feels comfortable 21 HRM Best Practices 211 Align business strategy workforce requirements and HR strategy with compensation rewards and benefits 212 Employment security selective recruitment high compensation employee ownership information sharing selfmanaged teams amp participation empowerment extensive training and promoting within are all associated with success 22 Organizational Structure 221 A at organization refers to an organization structure with few or no levels of management between management and staff level employees The at organization supervises employees less while promoting their increased involvement in the decision making process A hierarchical organization follows the layout of a pyramid Every employee in the organization except one usually the CEO is subordinate to someone else within the organization The layout consists of multiple entities that descend into the base of staff level employees who sit at the bottom of the pyramid 23 Job Design and Analysis 231 Twofactor theorythe higher the motivators the higher the hygiene or maintenance factors 2311J0b Characteristics TheoryEmployees will be more motivated to work and more satisfied with their jobs to the extent that jobs contain certain core characteristics Created through skill variety task identity task significance autonomy feedback experienced meaningfulness and responsibility and knowledge of results 2312GoalSetting TheoryBecause motivation is goaldirected behavior goals that are clear and challenging will result in higher levels of motivation 24 Job enlargementthe process of expanding a job s duties Job rotationthe process of rotating workers among different narrowly defined tasks without disrupting the ow of work Job Enrichmentthe process of putting specialized tasks back together so that one person is responsible for producing a whole product or an entire service 25 Job Analysis and Job Descriptions 251 Define job analysisa method a company uses to decide what the specific duties and characteristics that are included in a job Task inventory analysisthree steps interview survey and generation of task by KSAs to then rate the extent to which the skills needed for the job are shown in the task completion Critical incident techniqueused to establish behavioral descriptions of a job done so by generating incidents of jobs using four steps generate dimensions generate incidents retranslate and assign effectiveness values These incidents are produced then retranslated to ensure these are commonly viewed by other employees then assign values Position analysis questionnaireuses a fivepoint scale to rate importance of job elements in six sections information input mental processes and work output relationships with other persons job context and other characteristics Functional job analysisdone in public sector by questionnaire or interview asks about machines tools equipment materials projects or services and what methods and techniques the job incumbent uses Also what the incumbent does to people data and things 252 Develop different components of a job description job informationThe systematic process of collecting information used to identify the tasks duties and responsibilities of a particular job Composed of identification information job summary duties and responsibilities and specifications and minimum qualifications Identification information identifies the job title location and source of job analysis information Job summary then lists the duties and responsibilities of the job and then the certificates required and the minimum requirements one must meet Human Resource Management Organized Labor 1 Describe the structure purpose and important characteristics of unions in the United StatesAt the top is the American Federation of Labor and Congress of Industrial Organizations then there s a national union a local union and then shop stewards Organized by job or industry adversarial relationship between union and management focus on collective bargaining business unionism bread and butter issues labor contractsspecify terms of employment and work rules Passive role of government regulates the process but not the outcomes The Wagner ActDesigned to protect employees right to form and join unions and to engage in activities such as strikes picketing and collective bargaining Identified management unfair labor practices created National Labor Relations Board NLRB charged with labor relations oversight certifies elections investigates unfair labor practice charges can issue cease and desist order if unfair labor practices happen The TaftHartley Act1947protects management and workers from union coercion prohibits discrimination against nonunion employees illegal to refuse to bargain in good faith established Federal Mediation and Conciliation Service to monitor and mediate labor disputes The LandrumGriffin Act1959protects union members from union leaders unions must have bill of rights and constitution union elections regulated by government Describe the key activities related to the three steps in the labor relations process 41 Union organizingemployees exercise their right to form unions union solicitationcertification election to form the union or decertification to dissolve an existing union campaign is initiated to organize union authorization cards are distributed requires support from 30 of eligible employees Secret ballots majority vote required and union becomes official bargaining rep 42 Collective bargainingLabor contractformal agreement between union and management that outlines terms and conditions of employment Bargaining topicsmandatory wages and benefits hours employment conditions Good faith bargainingmeet at reasonable time and place realistic proposals realistic 10 proposals realistic counter proposals parties sign agreement once completed agreement is binding 43 Contract administrationapplication and enforcement of labor contract grievance procedures for labormanagement disputes union members represented by a shop steward escalation to national union if needed allows for arbitration Distributive Negotiationdividing a fixed pie winlose perceived incompatible goals focus on powerrights negotiations mistrust suspicion defensiveness perceived weakness Integrative Negotiationseeking mutual benefit winwin long term goals greatest good for both sides in framework of compatible goals focus on underlying interests trust openness perceived strength compatible issues issues where both parties see eyetoeye flexibility Union Avoidanceunion substitution or union suppression union substitutionan avoidance strategy that involves removing incentives to join a union by ensuring the needs of employees are met union suppressionlegal or illegal attempts to prevent unions from organizing by threatening job loss company shut down or attempting to get rid of an existing union Union Acceptancea labor strategy based on management s view that the union is the legitimate representative of the company s employees Describe advantages and disadvantages of union membership for employees higher wages more job security increased productivity allows unions and management to work together to achieve a middle ground but when labor management relations are poor each side tries to take a bigger share of the same size pie can cause conflict raises operation costs and costs more for members Compare HRM practices in a union vs nonunion work environmentWith unions work design becomes less flexible in work assignmentsjob design with hiring it s based upon seniority more stable workforce performance appraisals are more developmentally focused compensation has higher base pay incentives based on organization performance more generous benefits trainingdevelopment are given greater focus Training 11 Define training and its purpose in organizationsteaching employees how to do their job effectively in addition to other jobs to make work more interesting quite often Companies view employee skilllevel a a top priority and training as critical to organizational performance organizations with exceptional training opportunities are better able to retain employees motivation signal that employee is valued 12 Describe the three components of a needs assessment in the training process and the important questions related to training that each component addresses 121 Needs assessmentdetermining if training is needed for the specific employee then defining the location presentation and type of training to design the appropriate type of training to meet objectives First is the needs assessment then development and conduct of training then evaluation to assess effectiveness of training 1211 Organizational analysiswhat business challenges does the training help to address What strategic organizational goals and or organizational values does the training support 1212 Task analysisWhat KSAs will the training help to improve What are the specific behavioral training objectives What will the employees who attend the training do differently after attending 1213 Person analysisWho needs training ls training the appropriateonly solution Can you rule out other causes of poor performance Are employees motivated to learn 122 Kirkpatrick s training evaluation framework Leve 1reactions participant reactions to the training at the time of the training Level 2learning acquisition of knowledge skills attitudes behavior at the end of training while still in the training situation Level 3behaviorimprovement of behavior on the job use of new knowledge and skills on the job Level 4Return on investment company s return on the training investment business resultsgoals attained International Human Resource Management 13 14 15 16 Define Hofstede s cultural dimensions and how they influence human resource management practicesreflected in a society s norms values attitudes role expectations taboos symbols heroes beliefs morals customs and rituals Run deep and are not readily altered Hofstede s dimensionsPower Distance Individualism vs Collectivism Masculinity vs Feminity Uncertainty Avoidancethe degree to which a person is uncomfortable with a sense of uncertainty and ambiguity and long term vs short term orientation Define two additional cultural dimensions and their impact on employee behavior high vs low context monochronic vs polychronic timeEdward Hall states low v high contexthigh contextpeople rely heavily on nonverbal and situational cues family oonnections official position status body language for meaning when communicating with others High value placed on personal relations and goodwill Space is communal less personal space Low contextrely primarily on the written and spoken word for meaning in communications High value placed on one s expertise and ability to perform the job tend to prefer a greater amount of interpersonal space Tend to prefer a greater amount of interpersonal space Impact of low context prefer to be more frank and direct in speaking and be less concerned about how something is said openly confront issues and differences focus on facts say things clearly not leaving much open to interpretation Impact of high context prefer to focus as much on how something is said as what said avoid difficult or contentious issues saving face is important provide info beyond facts count on the listener to interpret meaning Polychronic high contextpeople perceive time as flexible schedules are loose and overlapping people like to do multiple things at one time Monochronic Iow contextpeople perceive time is structured time is money everyone is one the same clock and it is important to be on time people like to do one thing at a time Distinguish between segmentation and integration approaches to global HRM Segmentation is tailormade HR practices for different cultural contexts while integration is global consistency in HR practices Define cultural intelligence and how it applies to effective crosscultural interactionsthe ability to function effectively in culturally diverse settings linked to 17 18 more effective performance and adjustment in multicultural work groups study abroad programs and expatriate assignments 4 independent dimensions These dimensions include motivation knowledge strategy and behavior Motivation develop a curiosity for understanding other cultures Knowledge in being aware of your own cultural frame of reference and become familiar with cultural differences Strategy in making sense of culturally diverse experiences adjusting one s own cultural knowledge when interacting with those from a different culture Assume differences until similarity is proven suspend judgment focus on description rather than evaluation empathize with the person from the other culture treat your interpretations as guesses until you can confirm them Behaviorcapability to act appropriately in crosscultural interactions and flexibility to adjust behavior to each interaction take action to adapt Describe how EEO laws apply US to US citizens working outside the US and nonUS citizens working for US companies inside and outside the US EEO laws prevent businesses from basing employment decisions on race sex or age This prohibition applies to international assignments with the single exception that companies are not required to violate a host nation law If a nation prohibits women from working in a specific business context a US company doing business context a US company doing business in that nation is free to offer the particular international assignment covered by this host country law only to men Foreign employees of US companies working in other countries or in another foreign country are not covered by US laws and people who are not citizens of the US but have legal work status cannot be discriminated against Explain why expatriate assignments often fail and describe steps companies can take to avoid failurefailure is often caused by career blockage or the feeling that while an employee is abroad they are staying in the same place on the corporate hierarchy while their coworkers are moving up culture shock lack of pre departure crosscultural training overemphasis on technical qualifications wanting to get rid of troublesome employees often causes managers to send them on expatriate assignments and family problems can often cause problems as well 19 Describe common issues encountered during repatriation of employees after they complete an international assignmentmany managers leave the company after returning from their assignments 6070 of expatriates do not know what their position will be when they return 46 end up with jobs that give them reduced autonomy and authority 80 of returning expatriates experiences reverse culture shockwhile individual has been away company has changed individual has changed and culture has changed Employee Rights and Discipline 20 Employee and Management Rights 201 Describe the employment at will doctrine and limitations to this doctrineestablished for contractual work relationships in which an employer can terminate an employee at any time without just cause The limitations are that of statutory limitations employment contracts implied contracts lack of good faith and fair dealing and public policy exceptions Statutory rights are rights protected by specific laws contractual are those based on contracts other rights include limited right to privacy and limited right to free speech 202 Explain guidelines related to employee rights to privacy and free speech in the workplacelimited rights to privacy and free speech 21 Employee Discipline 211 Compare progressive and positive discipline proceduresprogressive discipline is done by verbal warnings written warnings suspension then discharge Positive disciplinefirst counseling session then second counseling session to develop a new plan employee develops a plan and then discharge 212 Describe how minor and serious violations are treated differently in the discipline processverbal warnings written warnings suspension and discharge 213 Describe the standards of discipline required to demonstrate discharge for just cause standard of discipline notification reasonable rule investigation before the discipline fair investigation proof of guilt absence of discrimination and reasonable penalty Includes right to appeal as well 214 Describe how the human resource management process can be used to avoid discipline problems Compensation 22 Reward Theories of Motivation 221 Describe the following theories of motivation and their application to compensation and rewards in organizations 2211 Equity theorythe reward received for work is directly proportional to the effort expended for the job along with your effort to reward ratio is equal with that of someone with a similar job or works in the same company 2212 Expectancy theorya theory that assumes that motivational strength is determined by perceived probabilities of success as perceived by the target individual Efforttoperformance probabilitywhat are my chances 0 getting the job done if I put forth the necessary effort Perceived performanceto reward probabilitywhat are my chances of being rewarded if I do a good job Then perceived value of rewards what rewards do I value 2213 Procedural justice theoryconcerned with perceived fairness of the process used to determine the outcomes 23 Designing a Compensation System 231 Identify the three components of total compensationbase compensation pay incentives and indirect compensationbenefits 232 Describe the following criteria for designing a compensation system For each one explain the types of situations in which they would be most effective 2321 Fixed vs Variable PayVariablefluctuates according to some pre established criterion Fixed paya predictable monthly paycheck 2322 Internal vs External Equity also Individual Equityinternal equity distributive justice model establishes fairness of the pay structure within a firm External equity labor market modelfairness of pay relative to what other employers are paying for the same type of labor wage rate determined by supply and demand paying the going rate Individual equity is based on the value to the institution of a specific person 2323 Belowmarket vs Abovemarket Compensationhow employees are compensated relative to other companies in the same labor market benchmark data used as input to pay policy 2324 Job vs Individual Skillbased Pay jobbasedpay based on the value fo a job to the organization independent of the individual holding that job Individualpay based on knowledge skills and abilities that an employee brings to the job emphasizes the individual rather than the job 2325 Egalitarianism vs Elitismelitistdifferent compensation plans by organizational level andor employee group Egalitarian pay systemplaced most employees under the same compensation plan 2326 Open vs Secret PayOpen payemployees have access to information about other workers compensation Secret payemployees do not have access to other worker s compensation information 2327 Centralization vs Decentralization of Pay DecisionsCentralizedpay decisions are tightly controlled in a central location normally in the HR department at corporate headquarters Decentralizeddelegates pay decisions throughout the form normally to unit managers 2328 Monetary vs Nonmonetary AwardsCash or payments that can be converted into cash at some future point like stock or pension plans vs intangibles such as interesting work challenging assignments public recognition and benefits that provide workfamily balance 24 Fair Labor Standards Act 241 Describe the main provisions of the Fair Labor Standards Actbusiness with gt1 employee and over 500000 in annual gross sales minimum wage requirement overtime requirements does not apply to exempt employees 25 Payforperformance Systems 251 Describe important factors to consider when designing payfor performance systemsusing pay for performance as part of a broader HRM system building employee trust promoting the belief that performance makes a difference using multiple layers of rewards increasing employee involvement stressing the importance of acting ethically using motivation and nonfinancial incen ves 252 Describe the different types of payforperformance systems at the individual group business unit and organization level Describe when each type is most appropriateindividualbased plansmerit pay is often involved increases in base pay normally given once a year usually decided through supervisor rates also bonus programs or lumpsum payments are used given on onetime basis does not increase longterm base pay In addition to rewards such as vacations free dinners or other material objects like TVs etc Commonly piecerate systemscompensation in which employees are paid per unit constructed Good for sales reps and other commission or individually based or contractual jobs 25 3 Teambased planstypically utilize bonuse one time monetary payments that do not raise permanent base pay and awards usually given in the form of tangible rewards Good for group members in companies with a few levels in the hierarchy and teams of individuals at the same level are expected to complete most of their work with little dependence on supervisors or upperlevel management technology allows for the separation of work into relatively self contained or independent groups employees are committed to their work and intrinsically motivated the organization needs to insist on group goals team based incentives can help blend employees of diverse backgrounds to focus their efforts on a mutual goal important to the organization also works well when the objective is to foster entrepreneurship in selfmanaged work groups 25 4 Plantbased performance plans reward all workers in a plant or business unit based on the performance of the entire plant or unit This is done via awards bonuses and gainsharing plansplantwide plan in which a portion of the company s cost savings is returned to workers usually in the form of a lumpsum bonus This works best in small to midzie plants where employees can see connection between their work and performance of the unit when technology limits improvements in efficient gainsharing will not work well doesn t work well in firms with multiple plants since it is often based off of history doesn t work well in corporate cultures with a traditional hierarchy works well in a firm that is making the transition from a more autocratic hierarchy to a more participative management style Also most appropriate when the product market is relatively stable 25 5 Organizationwide plans are based on the entire organization s performance done via profit sharing plans that use a formula to allocate a portion of declared profits to employees often via a retirement plan then stock plans that reward employees with company stocks as an outright grant or at a favorable price that may be below market value the employee can then sell the stock at market value to make a profit Can be used with firms of any size but large firms are ideal for this also efficient for firms with interdepending parts of the business suits businesses with highly cynical ups and downs in the market helps firm cut costs and often work well when used in conjunction with other individual incentives
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