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Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage LO LEARNING OBJECTIVES After reading this chapter, you should be able to: LO1 Discuss the roles and activities of a company’s human resource management function. page 5 LO2 Discuss the implications of the economy, the makeup of the labor force, and ethics for company sustainability. page 14 LO3 Discuss how human resource management affects a company’s balanced scorecard. page 27 LO4 Discuss what companies should do to compete in the global marketplace. page 43 LO5 Identify the characteristics of the workforce and how they influence human resource management. page 48 LO6 Discuss human resource management practices that support high-performance work systems. page 49 LO7 Provide a brief description of human resource management practices. page 56 ne3076_h0_02-68nddi2 77/9920052PM Confirming Pages Enter the World of Business Starbucks continues to offers comprehensive Starbucks: Refocusing on health benefits that exceed those provided by other retailers. Although 85 percent of its the Brew Using HR Practices employees are part-time, they are still eligible for full-time benefits if they work 240 hours a quar- Starbucks, the Seattle-based coffee store, has experienced incredible growth in the past several ter. Less than 30 percent of part-time workers in the United States receive health care, paid sick years by opening more than four stores and add- ing 200 employees each day. However, Starbucks leave, or eligibility for bonuses or stock options. Starbucks provides all employees and their has had to change its strategy and reposition its brand to cope with the recession that has caused same-sex or opposite-sex partners comprehen- consumers to save more and spend less. Because sive health benefits that include medical, dental, of its growth goals, the company made poor and vision care as well as tuition reimbursement, selection for new stores, cluttered the stores with stock options, vacation, and the 401(k) retire- merchandise, and lost its focus on coffee. Howard ment plan. Schultz, who returned to the Starbucks chief exec- To cope with the economic conditions, Star- utive officer (CEO) position in 2008, has supported bucks’ best customers are saving money by refocusing the company on coffee by ordering making fewer visits to Starbucks each month. To a phaseout of breakfast sandwiches and cutting ensure that customers are delighted and coffee the number of new store openings. The company served meets high-quality standards, Starbucks has had to change its human resource policies went so far as to shut down operations of most and emphasize certain practices more than others of its stores in February 2008 for three and a half while still trying to preserve its value-and-treat- hours for a full-day training event. Training is inte- employees-right approach that is part of the com- gral for Starbucks to successfully compete in the pany culture. One of the company’s six guiding weak economy in which customers are spending principles is “to provide a great work environment less. The training event, known as “Perfect the and treat each other with respect and dignity.” Art of Expresso,” was designed to help baris- Starbucks has taken several drastic steps in tas deliver high-quality expresso. One activity its human resource practices to ensure that it consisted of pulling an expresso shot and then can survive the sharp decline in its sales. CEO evaluating the process and the product (Was it Howard Schultz and other top executives did not the right color? Did it take too long or too short earn bonuses in 2008 as a result of the company’s a time?). Staff discussions about how the training poor financial performance. Schultz asked the would benefit customers were held at each store. board of directors to reduce his $1.2million in Employees were told to greet regular customers base pay to $1. The compensation committee by their first name and to not resteam milk that agreed to cut his pay to less than $4 per month had been steamed once. To counter percep- in salary, although he will still receive his stock tions that Starbucks is the home of the $4 cup compensation. The committee put the company’s of coffee, the company is training baristas to tell new corporate jet up for sale. Starbucks has had customers that the average price of a Starbucks to close 300 underperforming stores and layoff beverage is less than $3 and 90 percent of Star- 6,700 employees. Starbucks also announced that bucks drinks cost less than $4. Baristas are also it would no longer match employees’ contribu- encouraged to promote to customers its new dis- tions to their 401(k) retirement plans. However, counted paring of coffee and breakfast for $3.95. no30476_h01_02-68.ndd3 7/709020216PM Confirming Pages 4 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage Schultz believes that one of Starbucks’ most up saying, “Don’t ask for permission, ask for serious problems is that its successes have left forgiveness.” the company too cautious. Part of this is because he is seen as the soul of the company, which Sources: Based on G. Weber, “Preserving the Counter Culture,” Work- force Management, February 2005, pp. 28–34; J. Adamy, “Schultz’s causes employees to consider “What will How- Second Act Jolts Starbucks,”Wall Street Journal, May 19, 2008, pp. A1, ard think?” before making decisions. He creates A11; M. Weinstein, “Fresh Cup of Training,” Training, May 2008, p. 10; passion but also creates anxiety. Schultz is trying J. Adamy, “Starbucks Plays Common Joe,”The Wall Street Journal, February 9, 2009, p. B3; J. Adamy, “Starbucks CEO, Top Officials Didn’t to change his image and at the same time make Get Bonuses for 2008,” The Wall Street Journal, January 23, 2009, B3; Starbucks more innovative. When one employee J. Adamy, “Starbucks Could Cut 410(k) Match,”The Wall Street Journal, December 24, 2008, p. B3; J. Adamy, “At Starbucks, a Tall Order for in a California store suggested that he could New Cuts, Store Closures,” The Wall Street Journal, January 29, 2009, create better artwork than what was hanging pp. B2,B3; J. Adamy, “Starbucks Shift Focus to Value, Cost Cutting,” on the walls, Schultz told him to put his pictures Wall Street Journal, December 5, 2008, p. B1. Introduction Starbucks illustrates the key role that human resource management (HRM) plays in determining the survival, effectiveness, and competitiveness of U.S. businesses. Competitiveness Competitiveness refers to a company’s ability to maintain and gain market share in A company’s ability its industry. Starbucks’ human resource management practices are helping support to maintain and gain the company’s business strategy and provide services the customer values. The value market share in its of a product or service is determined by its quality and how closely the product fits industry. customer needs. Competitiveness is related to company effectiveness, which is determined by whether the company satisfies the needs of stakeholders (groups affected by business practices). Important stakeholders include stockholders, who want a return on their investment; customers, who want a high-quality product or service; and employees, who desire interesting work and reasonable compensation for their services. The community, which wants the company to contribute to activities and projects and minimize pollution of the environment, is also an important stakeholder. Companies that do not meet stakeholders’ needs are unlikely to have a competitive advantage over other firms in their industry. Human Resource Human resource management (HRM) refers to the policies, practices, and sys- Management tems that influence employees’ behavior, attitudes, and performance. Many compa- (HRM) nies refer to HRM as involving “people practices.” Figure 1.1 emphasizes that there Policies, practices, are several important HRM practices. The strategy underlying these practices needs and systems to be considered to maximize their influence on company performance. As the fig- that influence employees’ ure shows, HRM practices include analyzing and designing work, determining human resource needs (HR planning), attracting potential employees (recruiting), choosing behavior, attitudes, and performance. employees (selection), teaching employees how to perform their jobs and preparing them for the future (training and development), rewarding employees (compensa- tion), evaluating their performance (performance management), and creating a posi- tive work environment (employee relations). The HRM practices discussed in this chapter’s opening highlighted how effective HRM practices support business goals and objectives. That is, effective HRM practices are strategic! Effective HRM has been shown to enhance company performance by contributing to employee and cus- tomer satisfaction, innovation, productivity, and development of a favorable reputa- 1 tion in the firm’s community. The potential role of HRM in company performance has only recently been recognized. noe3476_ch0_002-68.nddn4 7/7090203:25PM Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage 5 figure1.1 Human Resource Management Practices Strategic HRM Company HR Performance planning relations Analysis and RecruitingelectioTraining and Employee design of work developmCompensationanagement We begin by discussing the roles and skills that a human resource management department and/or managers need for any company to be competitive. The second section of the chapter identifies the competitive challenges that U.S. companies cur- rently face, which influence their ability to meet the needs of shareholders, custom- ers, employees, and other stakeholders. We discuss how these competitive challenges are influencing HRM. The chapter concludes by highlighting the HRM practices covered in this book and the ways they help companies compete. What Responsibilities and Roles Do HR Departments Perform? Only recently have companies looked at HRM as a means to contribute to profit- LO1 Discuss the roles and ability, quality, and other business goals through enhancing and supporting business operations. activities of a company’s human resource Table 1.1 shows the responsibilities of human resource departments. The average management function. ratio of HR department staff to total number of employees has been 1.0 for every 93 employees served by the department. 2The median HR department expenditure per employee was $1,409. Labor costs represent approximately 30 percent of company revenue. The HR department is solely responsible for outplacement, labor law compliance, record keeping, testing, unemployment compensation, and some aspects of benefits administration. The HR department is most likely to collaborate with other company functions on employment interviewing, performance management and discipline, and efforts to improve quality and productivity. Large companies are more likely than small ones to employ HR specialists, with benefits specialists being the most preva- lent. Other common specializations include recruitment, compensation, and training and development. 3 Many different roles and responsibilities can be performed by the HR department depending on the size of the company, the characteristics of the workforce, the indus- try, and the value system of company management. The HR department may take full responsibility for human resource activities in some companies, whereas in others it may share the roles and responsibilities with managers of other departments such as noe0476_h01_002068nddi5 77/09 20325PM Confirming Pages 6 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage table 1.1 Responsibilities of Employment and Interviewing, recruiting, testing, temporary labor HR Departments recruiting coordination Training and Orientation, performance management skills training, development productivity enhancement Compensation Wage and salary administration, job descriptions, executive compensation, incentive pay, job evaluation Benefits Insurance, vacation leave administration, retirement plans, profit sharing, stock plans Employee services Employee assistance programs, relocation services, outplacement services Employee and Attitude surveys, labor relations, publications, labor law community relations compliance, discipline Personnel records Information systems, records Health and safety Safety inspection, drug testing, health, wellness Strategic planning International human resources, forecasting, planning, mergers and acquisitions SOURCE: Based on SHRM-BNA Survey No. 66, “Policy and Practice Forum: Human Resource Activities, Budgets, and Staffs, 2000–2001,” Bulletin to Management, Bureau of National Affairs Policy and Practice Series, June 28, 2001. Washington, DC: Bureau of National Affairs. finance, operations, or information technology. In some companies the HR depart- ment advises top-level management; in others the HR department may make deci- sions regarding staffing, training, and compensation after top managers have decided relevant business issues. One way to think about the roles and responsibilities of HR departments is to consider HR as a business within the company with three product lines.Figure 1.2 shows the three product lines of HR. The first product line, administrative services and transactions, is the traditional product that HR has historically provided. The newer HR products—business partner services and the strategic partner role—are the HR functions that are being challenged by top managers to deliver. For example, figure1.2 HR as a Business with Three Product Lines Administrative Services and Business Partner Services: StrategicPartner: Transactions: Compensation, Developing effective Contributing tbusiness hirinandstaffing HR systems and helping strategy based on Emphasis: Resource efficiency implement business plans, considerations of human and service quality talent anagement capital, business capabilities, Emphasis: Knowing the readinessa,nddeveloping business and exercising HR practices as strategic influence—problem solving, differentiators designing effective systems to Emphasis: Knowledge of HR ensure needed competencies and of the business, competition, the market, and business strategies SOURCE: Adapted from Figure 1, “HR Product Lines,” in E. E. Lawler, “From Human Resource Management to Organizational Effectiveness,” Human Resource Management 44 (2005), pp. 165–69. noe3476_ch0_002068.nddn6 770902:0326PM Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage 7 consider the expectations and perceptions the CEOs of Hyperion, Revlon, and Air Products and Chemicals Inc. have for HR. 4 The Hyperion CEO wants his HR leaders to be able to question the CEO and executive team members and ensure the success of basic administrative functions, thus the HR team can elevate itself to a higher level of performance within the company culture and ensure that employees are able to perform at the highest level. At Revlon, the expectation is that HR can think strate- gically and innovatively, plan and execute, and have a very strong connection to the business. The CEO of Air Products and Chemicals believes the HR function is criti- cal for the long-term success of the company because it can help get people excited about change, when most are by nature resistant to change. HR at SYSCO Corporation, the number one food service marketer and distributor in North America, is successfully delivering business partner services and serving as a strategic partner.5 The senior vice president and chief administrative officer is respon- sible for ensuring that HR strategy is aligned with the business strategy. SYSCO tries to differentiate itself from competitors in the marketplace by providing value in its products and customer service to the customer. HR at SYSCO focuses on ensuring that five processes are in place. These processes stress a common understanding of the company’s mission values and goals, establishment of clear expectations between employees and managers using the performance management process, operating within laws, ensuring that employees are inspired to come to work, and giving every employee the skills and technology needed to contribute to the company. HR, a strate- gic partner in all of the processes, works together with senior management to develop programs and guidelines to support the processes. It then markets them to line manag- ers, who execute and customize the programs for their specific business. To determine if these processes are working three key dimensions are measured: employee satisfac- tion, number of employees the company uses per 100,000 cases it sells, and employee retention data for each function in the company. Top executives meet four times each year to review the metrics to see if they are consistent with operating expenses and pretax earnings. For example, since the late 1990s SYSCO has moved the retention rate for its 10,000 marketing associates from 70 to 82 percent, resulting in more than $70million dollars saved per year. What Competencies Do HR Professionals Need? HR professionals need to have the six competencies shown inFigure 1.3. These are the most recent competencies identified by the Human Resource Competency Study, which has identified HR competencies for more than 15 years. The compe- tencies are shown as a three-tier pyramid with the Credible Activist Competency the most important for high performance as an HR professional and effective HR leader. Demonstrating these competencies can help HR professionals show manag- ers that they are capable of helping the HR function create value, contribute to the business strategy, and shape the company culture. They also help the HR depart- ment effectively and efficiently provide the three HR products discussed earlier and shown in Figure 1.2. Although great emphasis is placed on the strategic role of HR, effective execution of the operational executor competency—necessary adminis- trative services filling open jobs, paying employees, benefits enrollment, keeping employee records, and completing legally required paperwork (such as W-2 forms and EEO reports)—is still important! As we discuss later in the chapter, technologi- cal advances have made available e-HRM and human resource information systems, noe3476_ch0_002-68.nddn7 7/7090203:26PM Confirming Pages 8 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage figure1.3 Six Competencies for the HR Profession Credible Activist Deliverresults with integrity Shareinformation Build trusting relationships Influencing others, providing candid observation, taking appropriate risks Cultural Talent Strategic Steward Manager/ Architect Facilitates Organizational Recognize Designer change businesstrends Developingand Developtalent and their impact on the business valuing the culture Designreward Helping employees systems Evidence-based navigate the culture Shapethe HR (find meaning in organization Developpeople their work, manage strategietshat work/life balance, contribute to encourage innovation) the business strategy Business Ally Operational Executor Understanding how the business Implementing workplace policies makes money Advancing HR technology Understand language of business Administer day-to-day work of managing people SOURCE: Based on R. Grossman, “New Competencies for HR,” HR Magazine (June 2007): pp. 58–62; HR Competency Assessment Tools at www.shrm.org/competencies/benefits.asp which make administration of services more efficient and effective and free up time for HR to focus on strategic issues. Successful HR professionals must be able to share infor- mation, build relationships, and influence persons both inside and outside the company, including managers, employees, community members, schools, customers, vendors, and suppliers. Sometimes helping employees can also involve crisis management activities such as those HR professionals had to perform during and following Hurricane Katrina. The Avis executive vice president of human resources was responsible for making sure that employees in Katrina’s path got to safety. 6Employees were given 1-800 phone numbers to call if they got into trouble. Employees were given release time to noe3476_ch1_002068.nddn8 77/99 20326PM Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage 9 evacuate their families as the storm approached. When employees called in following the storm, they were asked if they needed housing, food, or medical care or if they had missing relatives. HR called emergency shelters to find missing employees and sent trucks with Avis signs throughout the stricken area trying to locate missing employees who had evacuated. Employees were paid their salaries even if they were unable to work, and copayments for medical care were waived. How Is the HRM Function Changing? The amount of time that the HRM function devotes to administrative tasks is decreas- ing, and its roles as a strategic business partner, change agent, and employee advocate are increasing. 7HR managers face two important challenges: shifting their focus from 8 current operations to strategies for the future and preparing non-HR managers to develop and implement human resource practices (recall the role of HR in Starbucks’ success from the chapter-opening story). The role of HRM in administration is decreasing as technology is used for many administrative purposes, such as managing employee records and allowing employ- ees to get information about and enroll in training, benefits, and other programs. Advances in technology such as the Internet have decreased the HRM role in main- taining records and providing self-service to employees. 9Self-service refers to giving Self-Service employees online access to information about HR issues such as training, benefits, Giving employees compensation, and contracts; enrolling online in programs and services; and complet- online access to HR information. ing online attitude surveys. For example, General Motors’ (GM) goal for its e-HR investment was to create an employee-friendly one-stop shop for employees to enroll 10 in benefits, review their HR data, and get certificates for employee car discounts. The portal, known as “mySocrates,” is the place employees go for information about GM. Managers use the system for performance reviews. HR uses it for communica- tions of benefits, training programs, and other programs, which saves time as well as printing and distribution costs. Annual benefits enrollment used to take several days. Now it takes a few minutes. Outsourcing of the administrative role has also occurred.Outsourcing refers to the Outsourcing practice of having another company (a vendor, third-party provider, or consultant) The practice of having another provide services. One study suggests that 80 percent of companies now outsource at least one HR activity. 11The HR responsibilities most likely to be outsourced com- company provide services. pletely include employee assistance and counseling, flexible spending account admin- istration, and background and criminal background checks. Outsource providers such as ADP, Accenture HR Services, Convergys, and Hewitt provide payroll services as well as recruiting, training, record managements, and expatriation. The primary rea- sons for outsourcing are to save money and spend more time on strategic business issues. One study suggests that 91 percent of U.S. companies have taken steps to 12 standardize their HR processes to prepare for outsourcing. Examples of strategic business issues that HR might help address include identify- ing new business opportunities; assessing possible merger, acquisition, or divestiture strategies; or working on recruiting and developing talent. 13As a result, HR functions related to these areas such as employee development, performance management, communications plans and strategies, policy development and implementation and organizational development are outsourced least frequently. For example, outsourc- ing payroll and benefits administration is saving the American Stock Exchange in New York $2.8million per year. When the Canadian Imperial Bank of Commerce noe3476_ch0_002-68.nddn9 7/7090203:27PM Confirming Pages 10 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage contracted with Electronic Data Systems (EDS) Corporation to take over payroll, benefits administration, and other HR processing for the Toronto-based bank, the bank had 30 incompatible HR systems and had not invested in e-HRM (use of the Web for HR operations). 14 EDS revised the bank’s payroll, benefits, executive com- pensation, and human resources information technology systems, and it created my.HR, a Web portal used by managers and employees. Use of EDS has not required any additional costs over the bank’s yearly HR budget. When the bank outsourced payroll it cut 200 jobs from its centralized HR staff, leaving the remaining HR staff to focus on strategic issues such as recruiting, training, and union contract negotiations. The centralized staff members moved over to EDS. Cardinal Health, a provider of health care products, services, and technology, headquartered in Dublin, Ohio, signed a contract with ExcellerateHRO to provide administrative functions. 15 The goal of the outsourcing was to increase the contribu- tion of human resources to strategy and increase the company’s global human resource capabilities. Human resource professionals remaining at Cardinal will work in strate- gic areas such as talent management, organizational effectiveness, and total rewards. In addition, human resource “business partners” placed across the company will focus on strategic activities while establishing new HR operations in the field. Although the outsourcing of HR is expected to grow, many contracts have ended because of lack of understanding of the outsourcing provider’s capabilities, failure to reach goals such as anticipated cost reductions, and poor delivery of services. 16A key aspect of any outsourcing decision is an understanding of the company’s vision for HR and an assessment of the costs of performing HR functions within the company compared with the potential savings through outsourcing. Traditionally, the HRM department (also known as “Personnel” or “Employee Relations”) was primarily an administrative expert and employee advocate. The department took care of employee problems, made sure employees were paid cor- rectly, administered labor contracts, and avoided legal problems. The HRM depart- ment ensured that employee-related issues did not interfere with the manufacturing or sales of products or services. Human resource management was primarily reactive; that is, human resource issues were a concern only if they directly affected the busi- ness. Although that still remains the case in many companies that have yet to recog- nize the competitive value of human resource management, other companies believe that HRM is important for business success and therefore have expanded the role of HRM as a change agent and strategic partner. Other roles such as practice development and strategic business partnering have increased. One of the most comprehensive studies ever conducted regarding HRM concluded that “human resources is being transformed from a specialized, stand- alone function to a broad corporate competency in which human resources and line managers build partnerships to gain competitive advantage and achieve over- all business goals.” 17HR managers are increasingly included on high-level commit- tees that are shaping the strategic direction of the company. These managers report directly to the CEO, president, or board of directors and propose solutions to busi- ness problems. Consider the role of HR at Google and FedEx Corporation. 18The Google vice president of HR is part of the company’s 13-member management group. He reports to the CEO and works with the rest of the executives to help them achieve their objectives. The HR function is organized around three principles: the HR function wants to (1) be as innovative as the product side of the business, (2) minimize the infrastructure needed to keep the business running by emphasizing that managers and noe3476_ch01002-08.nddn10 77/09 203:7 PM Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage 11 table 1.2 1. What is HR doing to provide value-added services to internal clients? Questions Used to 2. What can the HR department add to the bottom line? Determine If Human 3. How are you measuring the effectiveness of HR? Resources Are 4. How can we reinvest in employees? Playing a Strategic 5. What HR strategy will we use to get the business from point A to point B? Role in the Business 6. What makes an employee want to stay at our company? 7. How are we going to invest in HR so that we have a better HR department than our competitors? 8. From an HR perspective, what should we be doing to improve our marketplace position? 9. What’s the best change we can make to prepare for the future? SOURCES: Data from A. Halcrow, “Survey Shows HR in Transition,” Workforce, June 1988, p. 74; P.Wright, Human Resource Strategy: Adapting to the Age of Globalization (Alexandria, VA: Society for Human Resource Management Foundation, 2008). employees should work together rather than sending employees to HR, and (3) anti- cipate business needs and be prepared with a plan to meet those needs. The corporate vice president for human resources at FedEx keeps HR focused on business objectives by setting HR objectives based on those set by the CEO. She oversees different task forces on HR issues to ensure that the operating companies are involved and that HR objectives are consistent across the company. She sits on the nine-member strategic management committee, which includes the CEO, the CEOs from the operating companies, the chief financial officer, and the head of market- ing and communications. Also, she manages leadership development for the top 400 positions in the company and oversees a program for high-performing vice presidents that helps them develop a cross-functional perspective of the company. In the pro- gram, vice presidents learn about differences in the companies operating units and complete an international assignment in China to increase their understanding of different political environments. The FedEx HR function includes a team at each of four operating companies plus a corporate headquarters team that develops strategy and disseminates it to the operating units. As part of its strategic role, one of the key contributions that HR can make is to engage in evidence-based HR. Evidence-based HR refers to demonstrating that Evidence-Based HR human resources practices have a positive influence on the company’s bottom line or Demonstrating that human resource key stakeholders (employees, customers, community, shareholders). This helps show that the money invested in HR programs is justified and that HR is contributing practices have a positive influence to the company’s goals and objectives. Evidence-based HR requires collecting data on such metrics as productivity, turnover, accidents, employee attitudes and medical on the company’s bottom line or costs and showing their relationship with HR practices. This provides evidence that key stakeholders HR is as important to the business as finance, accounting, and marketing! HR deci- (employees, sions should be made on the basis of data and not just intuition. The chapter opener customers, showed how Starbucks is using turnover and employee satisfaction data as metrics or community, indicators of the success of its HR programs. Throughout each chapter of the book, shareholders). we provide examples of evidence-based HR. Table 1.2 provides several questions that managers can use to determine if HRM is playing a strategic role in the business. If these questions have not been considered, it is highly unlikely that (1) the company is prepared to deal with competitive chal- lenges or (2) human resources are being used to help a company gain a competitive noe3476_ch0_002-68.nddn11 7/7090203:27PM Confirming Pages 12 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage advantage. The bottom line for evaluating the relationship between human resource management and the business strategy is to consider this question: “What is HR doing to ensure that the right people with the right skills are doing the right things in the 19 jobs that are important for the execution of the business strategy?” We will discuss strategic human resource management in more detail in Chapter 2. Why have HRM roles changed? Managers see HRM as the most important lever for companies to gain a competitive advantage over both domestic and foreign com- petitors. We believe this is because HRM practices are directly related to companies’ success in meeting competitive challenges. These challenges and their implications for HRM are discussed later in the chapter. The HRM Profession There are many different types of jobs in the HRM profession. Table 1.3 shows vari- ous HRM positions and their salaries. A survey conducted by the Society of Human Resource Management to better understand what HR professionals do found that the primary activities of HR professionals are performing the HR generalist role (provid- ing a wide range of HR services), with fewer involved in other activities such as the HR function at the executive level of the company, training and development, HR consulting, and administrative activities. 20 HR salaries vary depending on education and experience as well as the type of industry. As you can see from Table 1.3, some positions involve work in specialized areas of HRM like recruiting, training, or labor and industrial relations. HR gener- alists usually make between $50,000 and $80,000 depending on their experience and education level. Generalists usually perform the full range of HRM activities, including recruiting, training, compensation, and employee relations. Most HR pro- fessionals chose HR as a career because they found HR appealing as a career, they wanted to work with people, or they were asked by chance to perform HR tasks and responsibilities.21 A college degree is held by the vast majority of HRM professionals, many of whom also have completed postgraduate work. Business typically is the field of study (human resources or industrial relations), although some HRM professionals have degrees in the social sciences (economics or psychology), the humanities, or law. Those who have completed graduate work have master’s degrees in HR management, business management, or a similar field. This is important because to be successful in HR, you need to speak the same language as the other business functions. You have to have table 1.3 POSITION SALARY Median Salaries for HRM Positions Top HR executive $164,500 Employee benefits manager 91,800 HR manager 84,500 Compensation analyst 64,000 Professional and technical staff recruiter 62,200 Employee training specialist 58,200 HR generalist 58,000 SOURCE: Based on J. Dooney and E. Esen, “HR Salaries Weaken with the Economy,” HR Magazine’s 2009 HR Trendbook (Alexandria, VA: Society for Human Resource Management, 2009), p. 14. noe3476_ch1_002068.nddn12 77/99 20327PM Confirming Pages CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage 13 credibility as a business leader, which means being able to understand finance and build a business case for HR activities. Professional certification in HRM is less com- mon than membership in professional associations. A well-rounded educational back- ground will likely serve a person well in an HRM position. As one HR professional noted, “One of the biggest misconceptions is that it is all warm and fuzzy communica- tions with the workers. Or that it is creative and involved in making a more congenial atmosphere for people at work. Actually it is both of those some of the time, but most of the time it is a big mountain of paperwork which calls on a myriad of skills besides the ‘people’ type. It is law, accounting, philosophy, and logic as well as psychology, spirituality, tolerance, and humility.” 22 Many top-level managers and HR professionals believe that the best way to develop the future effective professionals needed in HR is to take employees with a business point of view and train them. For example, United Parcel Services (UPS) wants its leaders to move up in the company with lifelong careers in many different functions. 23 The senior vice president for human resources at UPS started out loading trucks and became a delivery truck driver and delivery supervisor before he moved to several HR positions. He then joined the legal department and served as general counsel before he took the top HR position at UPS. At companies like General Electric, Citigroup, and Baxter Health Care, training programs are used to develop HR profes- sionals’ skills. Also, HR professionals often rotate through job assignments in non-HR functions to help them learn about the business and become more strategic business partners. 24 For example, just several years ago for the first time in company history at General Motors, an HR person reported directly to the company CEO. 25Many of the transactional activities are being outsourced or performed with the use of technology. GM is trying to develop HR people so that they can take on the role of internal con- sultants. The company has a global HR curriculum that helps HR employees under- stand what the goals of HR are, what the changes in HR at GM mean to them, and what the plans are for the HR function. The courses focus on helping HR employees gain business knowledge such as finance, change management skills, and the ability to develop relationships across the company. GM hopes that in the near future HR employees will be able to work with business units to diagnose problems. At the same time HR employees are being trained, top HR managers are working with line man- agers to help them understand that HR is available to help them with strategy, not transactional work. Line managers are now taking responsibility for some HR activi- ties. For example, GM recently introduced a new compensation plan for employees that was implemented by line managers without any help from HR. The primary professional organization for HRM is the Society for Human Resource Management (SHRM). SHRM is the world’s largest human resource management association with more than 210,000 professional and student members throughout the world. SHRM provides education and information services, conferences and seminars, government and media representation, and online services and publications (such as HR Magazine). You can visit SHRM’s Web site to see their services at www.shrm.org. Competitive Challenges Influencing Human Resource Management Three competitive challenges that companies now face will increase the importance of human resource management practices: the challenge of sustainability, the global challenge, the technology challenge. These challenges are shown in Figure 1.4. noe3476_ch0_002068.nddn13 770902:0327PM Confirming Pages 14 CHAPTER 1 Human Resource Management: Gaining a Competitive Advantage figure1.4 Competing through Competing through Competing through Competitive Sustainability Globalization Technology Challenges Provide a return Expandinto Changeemployees‘ Influencing U.S. tshareholders foreignmarkets andmanagers‘ Companies Providehigh-quality Prepareemployees workroles products, services, and to work in foreign Createhigh- work experience for locations performance work employees systemsthrough Increased value placed integratintechnology on intangible assets and social systems and human capital Developmentof Socialandenviron- e-commerce and e-HRM mental responsibility Adapttochanging characteristicand expectations of the laborforce Legal and ethical issues Effectively use new workarrangements U.S. Business Competitiveness The Sustainability Challenge Traditionally, sustainability has been viewed as one aspect of corporate social respon- 26 sibility related to the impact of the business on the environment. However, we take Sustainability a broader view of sustainability. Sustainability refers to a company’s ability to make a The ability of a com- profit without sacrificing the resources of its employees, the community, or the envi- pany to survive in a ronment. 27 Company success is based on how well the company meets the needs of its dynamic competitive stakeholders. Stakeholders refers to shareholders, the community, customers, employ- environment. Based ees, and all of the other parties that have an interest in seeing that the company suc- on an approach to organizational deci- ceeds. Sustainability includes the ability to deal with economic and social changes, practice environmental responsibility, engage in responsible and ethical business sion making that considers company’s practices, provide high-quality products and services, and put in place methods to ability to make a determine if the company is meeting stakeholders’ needs. Several changes in the economy h
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