Fundamentals of Human Resource Management

Summary written in 2012-2013.

Part A: Management of Human Resources

A.1 Human resource management (HRM)

The policies, practices, and systems that influence employees’ behavior, attitudes, and performance.

There are several important HRM practices: analyzing work and designing jobs, attracting potential employees (recruiting), choosing employees (selection), teaching employees how to perform their jobs and preparing them for the future (training and development), evaluating their performance (performance management), rewarding employees (compensation), creating a positive work environment (employee relations) and supporting the organization’s strategy (HR planning and change management).

HRM practices can be valuable. Decisions such as whom to hire, what to pay, what training to offer, and how to evaluate employee performance directly affect employees’ motivation and ability to provide goods and services that customers value. By influencing who works and how those people work, HRM contributes to basic measures of success such as quality, profitability and customer satisfaction.

So HRM helps determine the effectiveness and competitiveness of businesses.


A company’s ability to maintain and gain market share in its industry, this is linked to effectiveness.



Is determined by whether the company satisfies the needs of the stakeholders.


Human capital

An organization’s employees, described in terms of their training, experience, judgment, intelligence, relationships, and insight.

In terms of business strategy, an organization can succeed if it has a sustainable competitive advantage (is better than competitors at something and can hold that advantage over a sustained period of time). Therefore, we can conclude that organizations need the kind of resources that will give them such an advantage.

Human resources have these necessary qualities:

  1. Human resources are valuable. High-quality employees provide a needed service as they perform many critical functions;
  2. Human resources are rare in the sense that a person with high levels of the needed skills and knowledge is not common. An organization may spend months looking for a talented and experienced manager or technician;
  3. Human resources cannot be imitated. To imitate human resources at a high-performing competitor, you would have to figure out which employees are providing the advantage and how. Then you have to recruit people who can do precisely the same thing and set up the systems that enable those people to imitate your competitor;
  4. Human resources have no good substitutes. When people are well trained and highly motivated, they learn, develop their abilities, and care about customers. It is difficult to imagine another resource that can match committed and talented employees.

High-performance work system

An organization in which technology, organizational structure, people, and processes all work together to give an organization an advantage in the competitive environment.

Maintaining a high-performance work system may include development of training programs, recruitment of people with new skill sets, and establishment of rewards for such behaviours as teamwork, flexibility, and learning.

A.2 Responsibility of HR departments

On average, an organization has one HR staff person for every 100 employees served by the department. The responsibilities of HR departments are:

  1. Analyzing and designing jobs: based on job analysis and design, an organization can determine the kinds of employees it needs;

    1. Job analysis: the process of getting detailed information about jobs.

    2. Job design: the process of defining the way work will be performed and the tasks that a given job requires.

  2. Recruiting and selection;

    1. Recruitment: the process through which the organization seeks applicants for potential employment.

    2. Selection: the process by which the organization attempts to identify applicants with the necessary knowledge, skills, abilities and other characteristics that will help the organization achieve its goals.

  3. Training and development;

    1. Training: a planned effort to enable employees to learn job-related knowledge, skills and behavior.

    2. Development: the acquisition of knowledge, skills and behaviors that improve an employee’s ability to meet changes in job requirements and in customer demands.

  4. Performance management;

The process of ensuring that employee’s activities and outputs match the organization’s goals. The activities of performance management include specifying the tasks and outcomes of a job that contribute to the organization’s success. Then various measures are used to compare the employee’s performance over some time period with the desired performance.

  1. Compensation and benefits;

The pay and benefits that employees earn play an important role in motivating them. This is especially true when rewards such as bonuses are linked to the individual’s or group’s achievements. Employees need information about their health plan, retirement plan, and other benefits. Keeping track of this involves extensive record keeping and reporting to management, employees, the government, and others.

  1. Employee relations;

Employees turn to the HR department for answers to questions about benefits and company policy. If employees feel they have been discriminated against, see safety hazards, or have other problems and are dissatisfied with their supervisor’s response, they may turn to the HR department for help.

The HR department maintains communication with union representatives to ensure that problems are resolved as they arise.

  1. Personnel policies;

Organizations depend on their HR department to help establish policies related to hiring, discipline, promotions, and benefits.

  1. Compliance with laws;

Laws govern such matters as equal employment opportunity, employee safety and health, employee pay and benefits, employee privacy, and job security.

  1. Support for strategy.

Human resource planning: Implies identifying the num­bers and types of employees the organization requires to meet its objectives. Using these estimates, the HR department helps the organization forecast its needs for hiring, training and reassigning employees.

Top 10 skills employers are looking for:

  1. Communication skills;
  2. Honesty/integrity;
  3. Interpersonal skills;
  4. Strong work ethic;
  5. Teamwork skills;
  6. Analytical skills;
  7. Motivation/inititative;
  8. Flexibility/adaptability;
  9. Computer skills;
  10. Detail orientation.

A.3 Skills of HRM professionals

  1. Credible activists —means being so well respected in the organization that you can influence the positions taken by managers. HR professionals who are competent in this area have the most influence over the organization’s success, but to buildthis competency, they have to gain credibility by mastering all the others.
  2. Cultural steward —involves understanding the organization’s culture and helping to build and strengthen or change that culture by identifying and expressing its values through words and actions
  3. Talent manager/organizational designer —knows the ways that people join the organization and move to different positions within it. To do this effectively requires knowledge of how the organization is structured and how that structure might be adjusted to help it meet its goals for developing and using employees’ talents.
  4. Strategy architect —requires awareness of business trends and an understanding of how they might affect the business, as well as opportunities and threats they might present. A person with this capability spots ways effective management of human resources can help the company seize opportunities and confront threats to the business.
  5. Business allies —know how the business makes money, who its customers are, and why customers buy what the company sells.
  6. Operational executors —at the most basic level carry out particular HR functions such as handling the selection, training, or compensation of employees. All of the other HR skills require some ability as operational executor, because this is the level at which policies and transactions deliver results by legally, ethically, and efficiently acquiring, developing, motivating, and deploying human resources.

A.4 HR responsibilities of supervisors

HRM has moved from personnel managers as intermediaries to HRM integration with strategy. Although many organizations have human resource departments, non-HR managers must be familiar with the basics of HRM and their own role with regard to managing human resources. Supervisors typically have responsibilities related to all the HR functions: supervisors help defining jobs, forecast HR needs, provide training, interview candidates, appraise performance, recommend pay increases and promotions, communicate policies and motivate with support from pay, benefits and other rewards. On a day-to-day basis, supervisors repre­sent the company to their employees, so they also play an important role in employee relations.

A.5 Ethics in HRM


The fundamental principles of right and wrong.


Employee rights

  • Right of free consent: people have the right to be treated only as they knowingly and willingly consent to be treated;
  • Right of privacy: people have the right to do as they wish in their private lives and they have the right to control what they reveal about private activities;
  • Right of freedom of speech: people have the right to criticize an organization’s ethics if they do so in good conscience and their criticism does not violate the rights of individuals in the organization;
  • Right of freedom of conscience: people have the right to refuse to do what violates their moral beliefs as long as these beliefs reflect commonly accepted norms;
  • Right to due process: if people believe their rights are being violated, they have the right to a fair and impartial hearing.

Standards for ethical behavior

Ethical, successful companies act according to four principles:

  1. First, in their relationships with customers, vendors, and clients, ethical and successful companies emphasize mutual benefits;
  2. Second, employees assume responsibility for the actions of the company;
  3. Third, such companies have a sense of purpose and vision that employee’s value and use in their day-to-day work;
  4. Fourth, they emphasize fairness; that is, another person’s interest count as much as their own.


For HR practices to be considered ethical, they must satisfy the three basic standards:

  1. First, HRM practices must result in the greatest good for the largest number of people;
  2. Second, employment practices must respect basic human rights of privacy, due process, consent and free speech;
  3. Third, managers must treat employees and customers equitably and fairly.

Part B: Trends in HRM

B.1 Change in the labor force

  • An aging workforce;

    • One report indicates that if employees receive opportunities to fully use and develop their skills, have greater job responsibilities, believe the promotion system is fair, and have a trustworthy manager who represents employees’ best interests, they are more committed to their companies.

  • A diverse workforce: hiring people with diverse backgrounds helps build a sales force that understands customers’ needs and communicates effectively;

  • The practices required for successfully managing diversity do more than meet employee needs; they reduce turnover costs and ensure that customer receive the best service possible. For instance, Molina Healthcare operates clinics whose clients are mostly African American, Hispanic, and Southeast Asian. The company tries to hire staffers who live in the clinics’ neighbourhoods and speak their patients’ languages. This commitment to diversity helps improve communications and the quality of health care provided by the company.

  • Skill deficiencies in the workforce.

The term labour force is a general way to refer to all people willing and able to work.


Internal labour force

An organization’s workers - its employees and the people who have contracts to work at the organization.


External labour market

Individuals who are actively seeking employment.


Skill deficiencies of the workforce

The increasing use of computers to do routine tasks has shifted the kinds of skills needed for employees in the economy. Qualities such as physical strength and mastery of a particular piece of machinery are no longer important for many jobs.More employers are looking for mathematical, verbal, and interpersonal skills. Today’s employees must be able to handle a variety of responsibilities, interact with customers, and think creatively.

The gap between skills needed and skills available has decreased companies’ abilities to compete because as a consequence of the deficiency they sometimes lack the capacity to upgrade technology, reorganize work, and empower employees.


B.2 High-performance work systems

Organizations that have the best possible fit between their social system (people and how they interact) and technical system (equipment and processes). As the nature of the workforce and the technology available to organizations have changed, so have the requirements for creating a high-performance work system.

Customers are demanding high quality and customized products, employees are seeking flexible work arrangements, and employers are looking for ways to tap people’s creativity and interpersonal skills.


Trends in high-performance work systems:

  • Knowledge workers: employees who own the means of producing a product or a service, they have specialised knowledge. They own a certain level of power since they possess the knowledge that companies are looking for;

    • Some companies that are unable to find qualified employees rely on training; a skill gap (unqualified personnel) decreases competitiveness.

  • Employee empowerment: means giving employees responsibility and authority to make decisions regarding all aspects of product development or customer service. By assigning the work to teams, one can reinforce employee’s responsibility and control, giving employees responsibility and authority to make decisions regarding all aspects of product development or customer service;

  • Mangers must also encourage employees to interact with staff throughout the organization, must ensure that employees receive the information they need, and must reward cooperation.

  • Virtual teams: teams that rely on communications technology such as videoconferences, e-mail, and cell phones to keep in tough and coordinate activities.

  • Teamwork: the assignment of work to groups of employees with various skills who interact to assemble a product or provide a service.


B.3 Focus on strategy

The strategic role of HRM has changed from acting as an administrative function to a more central position in a company’s strategy. Strategy is a way to survive and proper, it is a process used to compete and face the competitive challenges and achieving company goals. Strategy is the pattern or plan that integrates an organisation's major goals, policies and action sequences into a cohesive whole. Strategic issues include emphasis on quality and decisions about growth and efficiency.

Human resource management can support these strategies, including efforts such as quality improvement programs, mergers and acquisitions, and restructuring. Decisions to use reengineering and outsourcing can make an organization more efficient and also give rise to many human resource challenges. International expansion presents a wide variety of HRM challenges and opportunities:


The strategic issues facing HRM include:

  • High quality standards: providing a high quality product or service is very important to compete in today’s economy. the quality has to meet a certain level;

    • To manage quality, companies use total quality management (TQM) which is a company wide effort to continuously improve the ways people quality, machines and systems accomplish work. The core values of the TQM are:

      • Methods and processes are designed to meet the needs of internal and external customers;

      • Every employee in the organization receives training in quality;

      • Quality is designed into a product/service in order to prevent errors;

      • The organization promotes cooperation with vendors, suppliers and customers with the purpose to improve quality and hold down costs.

      • Managers measure progress with feedback based on data.


  • Mergers and acquisitions;

    • According to a report by the Conference Board, one of the major reasons for the failure of mergers and acquisitions are “people-issues.” Recognizing this, some companies now heavily weigh the other organization’s culture before they embark on a merger or acquisition. HRM needs to put efforts in communicating the changes to all employees, providing training programs to acquire new skills, and making sure that conflicts are prevented.


  • Downsizing: the planned elimination of large numbers of personnel with the goal of enhancing the organization's competitiveness. It gets rid of bad employees, makes ways for fresh ideas, and creates a new culture;

    • Why else do companies opt for downsizing?

      • Reduction in costs;

      • Closing outdated plants, replacement of labour with technology;

      • Mergers and acquisitions: reduce the need for bureaucratic overhead, displacing many managers and staff members;

      • Changing locations to more economic ones.


  • Reengineering; a complete review of the organization's critical work processes to make them more efficient and able to deliver higher quality;

    • Ideally, reengineering involves reviewing all the processes performed by all the organization’s major functions, including production, sales, accounting, and human resources. Therefore, reengineering affects human resource management in two ways. First, the way the HR department itself accomplishes its goals may change dramatically. Second, the fundamental change thought the organization requires the HR department to help design and implement change so that all employees will be committed to the success of the reengineered organization. Employees may need training for their engineered jobs. Structure, pay, and benefits might need to be changed as well.


  • Outsourcing: contracting with another organization (vendor, third party provider or consultant) to provide services;

  • Expanding into Global Markets: business must develop global markets, keep up with competition from overseas, hire from an international labor pool and prepare employees for global assignments.


Competition through globalization makes HRM more important in the company, since there is increased value placed on knowledge. In addition, global business practices are supported by HRM, such as the need to develop international competence of workers through cross-cultural training, creating a ‘learning organization’, developing effective systems for transfer of personnel and knowledge-sharing, and the need for increased productivity leads to workplace innovations including HPWS (High Performance Working Systems), where the HR function is at the forefront.

  • Offshoring: moving operations from the country where a company is headquartered to a country where pay rates are lower but the necessary skills are available. For an organization to operate in other countries, its HR practices must take into consideration differences in culture and business practices;

  • Expatriates: employee who take assignments in other countries.


B.4 Technological changes in HRM

Human resource information system (HRIS)

A computer system used to acquire, store, manipulate, analyze, retrieve, and distribute information related to an organization’s human resources.


The Internet Economy

The way business is conducted has changed rapidly during the past two decades and will continue to do so. Much of the change is related to the widespread adoption of the

Internet by businesses and individuals. The Internet economy creates many HRM challenges. The fast pace of change in information technology requires companies to continually update their skill requirements and then recruit and train people to meet those requirements.


Electronic business (e-business)

Is any process that a business conducts electronically, especially business involving use of the Internet.

E-business relies on the Internet to enable customers to obtain product information online, directly order products and services, receive after-sale technical support, and view the statues of order and deliveries. E-business creates many HRM challenges. The fast pace of change in information technology requires companies to continually update their skills requirements and then recruit and train people to meet those requirements. It can take on several forms:

  • Business-to-business transactions;
  • Business-to-consumer transactions;
  • Consumer-to-consumer transactions.


Electronic human resource management (e-HRM)

The processing and transmission of digitized HR information especially using computer networking and the Internet.


Sharing of human resource information

Self-service: a system in which employees have online ac­cess to information about HR issues and go online and enrol themselves in programs and provide feedback through surveys.


B.5 Change in the employment relationship


A New Psychological contract

A description of what an employee expects to contribute in an employment relationship and what the employer will provide the employee in exchange for hose contributions.

In the traditional version of a psychological contract, organizations expected their employees to contribute time, effort, skills, abilities, and loyalty. In return, the organizations would provide job security and opportunities for promotion. However, this arrangement is being replaced with a new type of psychological contract. To stay competitive, modern organizations must frequently change the quality, innovation, creativeness, and timeliness of employee contributions and the skills needed to make those contributions. The new expectations of companies result in less job security for employees, who can count on working for several companies over the course of a career.


Alternative work arrangements

Methods of staffing other than the traditional hiring of full-time employees:

  • Independent contractors: are self-employed individuals with multiple clients;

  • On-call workers: are persons who work for an organization only when they are needed;

  • Temporary workers: are employed by a temporary agency, client organizations pay the agency for the services of these workers;

  • Contract company workers: are employed directly by a company for a specific time specified in a written contract.


Flexible Work Schedules

The globalization of the world economy and the development of e-commerce have

made the notion of a 40-hour workweek obsolete. As a result, companies need to be

staffed 24 hours a day, seven days a week. Many organizations are taking steps to provide more flexible work schedules, to protect employees’ free time, and to more productively use employees’ work time.



Part C: Work Analysis and Job Design


C.1 Work flow in organizations


Work flow design

The process of analyzing the tasks necessary for the production of a product or service. With this information, they assign these tasks to specific jobs and positions.



The set of duties (jobs) performed by a particular person.



A set of related duties.


Work flow analysis

Work flow analysis provides a means for the managers to understand all the tasks required to produce a high quality product and the skills necessary to perform those tasks. It requires huge amounts of effort, money and time. It involves a “Big Picture” (helicopter view) appreciation of work, jobs and relationships between jobs, planning of new jobs, revision (is it necessary anymore?) of existing jobs and all that within a strategic context.


Example: a school has many teaching positions, the person filling each of those positions is performing the job of teacher. Although there are an infinite number of ways to combine the elements of an organization’s structure, we can make some general observation about structure and work design. If the structure is strongly based on function, workers tend to have low authority and to work alone at highly specialized jobs. Jobs that involve teamwork or broad responsibility tend to require a structure based on division other than functions. When the goal is to empower employees, companies therefore need to set up structures and jobs that enable broad responsibility, such as jobs that involve employees in serving a particular group of customers or producing a particular product, rather than performing a narrowly defined function.

C.2 Job analysis

The process of getting detailed information about jobs:

  • Training: almost every employee hired by an organisation will require training. The trainer has to have identified the tasks performed in the job to ensure that the training will prepare individuals to perform their jobs effectively;

  • Performance appraisal: this is about looking how well the employee is performing in order to reward them. Through job analysis the organisation can identify the behaviours and results that distinguish effective performance from ineffective performance;

  • Career planning: career planning entails matching an individual’s skills and aspirations with opportunities that the organisations have;

  • Job evaluation: the process of job evaluation involves assessing the relative dollar value of each job to the organisation to set up internally equitable pay structures.


In job analysis two types of information are useful:

  1. Job description: a list of the tasks, duties, and responsibilities (TDRs) that a particular job entails;

  2. Job specification: a list of the knowledge, skills, abilities, and other characteristics (KSAOs) that an individual must have to perform a particular job:

    1. Knowledge: refers to factual or procedural information that is necessary for successfully performing a task. For example, this course is providing you with knowledge in how to manage human resources;

    2. Skill: is an individual’s level of proficiency at performing a particular task, that is, the capability to perform it well;

    3. Ability: refers to a more general enduring capability that an individual possesses. A person might have the ability to cooperate with others or to write clearly and precisely.


Sources of job information

Information for analyzing an existing job often comes from incumbents and their supervisors. The Labour Department publishes general background information about jobs in the Dictionary of Occupational Titles (DOT) and Occupational Information Network (O*NET). Job an­alysts, employees, and managers may complete a Position Analysis Questionnaire or task analysis inven­tory, or fill out a survey for the Fleishman Job Analysis System. There is no one best way. We will deal with these methods in depth now:

  • Position analyses questionnaire (PAQ) : a standardized job analysis questionnaire containing 194 questions (about work behaviours, work conditions, and job characteristics that apply to a wide variety of jobs addressing six sections (information input, mental preocesses, work output, relationships with other persons, job context and other characteristics). The analyst rates each item on six scales: extent of use, amount of time, importance to the job, possibility of occurence, applicability and special code.

The ratings of job incumbents tend to be less reliable than rating by supervisors and trained analysts (people usually rate the tasks that they do higher than what is the case);

  • Task analysis inventory: job analysis method that involves listing the tasks performed in a particular job and rating each task according to a defined set of criteria;

  • Fleishman job analysis system: this is a job analysis technique that asks subject-matter experts to evaluate a job in terms of the abilities required to perform the job.


Important note: job analysis is extremely important to HR managers because it affects many areas, which include: work redesign, human resource planning, selection, training, performance appraisal, career planning, and job evaluation.


Trends in job analysis

Although errors in job analysis can have many sources, most inaccuracy is likely to result from job descriptions being outdated. For this reason, job analysis must not only define jobs when they are created, but also detect changes in jobs as time passes.

Some researchers and businesspeople have observed a trend they call dejobbing: viewing organization as a field of work needed to be done rather than as a set or series of jobs held by individuals.


C.3 Job design

The process of defining the way work will be performed and the tasks that will be required in a given job. Approaches to job design:


  • Design for efficiency (industrial engineering): looks for the simplest way to structure work in order to maximize efficiency. Typically, applying industrial engineering to a job reduces the complexity of the work, making it so simple that almost anyone can be trained quickly and easily to perform the job. Such jobs tend to be highly specialized and repetitive;


  • Design for motivation:

    • Job enlargement: broadening the types of tasks performed in a job;

      • Job extension: enlarging jobs by coming in several relatively simple jobs to form a job with a wider range of tasks;

      • Job rotation: enlarging jobs by moving employees among several different jobs.

    • Job enrichment: empowering workers by adding more decision-making authority to jobs (intrinsic aspects: achievement, recognition, growth, responsibility and performance of the entire job);

    • Self-managing work teams: teams have authority for an entire work process or segment;

    • Flexible work schedules;

    • Job sharing: a work option in which two part-time employees carry out the tasks associated with a single job.

    • Flextime: a scheduling policy in which full-time employees may choose staring and ending times within guidelines specified by the organization;

    • Telework: the broad term for doing one’s work away from a centrally located office;


  • Design for safety and health (ergonomics): the study of the interface between individuals’ physiology and the characteristics of the physical work environment. Ergonomic job design has been applied in redesigning equipment used in jobs that are physically demanding. Such redesign is often aimed at reducing the physical demands of certain jobs so that anyone can perform them. In addition, many interventions focus on redesigning machines and technology, for example adjusting the keyboard to minimize ex. Carpal tunnel syndrome ;


  • Design for mental capacity (filtering information, clear displays and instructions, memory aids).


Job redesign

The process of changing the tasks or the way work is performed in an existing job. The specific types of job (re)design are work simplification, job enlargement, job rotation, job enrichment, and team-based job design.


Job Characteristics Model

Can make jobs look more attractive and motivating. It describes five aspects:

  • Skill variety is the extent to which the job requires a variety of skills;

  • Task identity is the degree to which a job requires completing a whole piece of work from beginning to end;

  • Task significance implies how important the job is to people;

  • Autonomy is the degree to which the job allows an individual to make decisions about the way the work will be carried out;

  • Feedback is the extent to which a person receives clear information about performance effectiveness from the work itself.


These five job characteristics determine the motivating potential of a job by affecting the three critical physiological states of experienced meaningfulness, responsibility and knowledge of results. According to the model, when the core job characteristics are high, individuals will have a high level of internal work motivation (for example, when employees are allowed to make their own decisions (high level of autonomy), it was found that it increases the motivation). This is expected to result in higher quantity and quality of work as well as a higher level of job satisfaction.


Designing Ergonomic Jobs

Ergonomics- The study of the interface between individuals’ physiology and the characteristics of the physical work environment.

The way people use their bodies when they work affects their physical well-being and may affect how well and how long they can work. The goal of ergonomics is to minimize physical strain on the worker by structuring the physical work environment around the way the human body works.


Designing Jobs That Meet Mental Capabilities and Limitations

Besides hiring people with certain mental skills, organizations can design jobs so that they can be accurately and safely performed given the way the brain processes information. Generally, this means reducing the information-processing requirements of a job.



Part D: Human Resource Recruitment and Planning


D.1 The process of HR planning


Two of the major ways that societal trends and events affect employers are through:

  • Consumer markets: affect the demand for goods and services;

  • Labour markets: affect the supply of people to produce goods and services.


Organizations should carry out human resource planning so as to meet business objectives and to gain an advantage over competitors. To do this, organizations need a clear idea of the strengths and weaknesses of their existing internal labour force. They also must know what they want to be doing in the future: what size they want the organization to be, what products and services it should be producing, and so on. This knowledge helps them define the number and kinds of employees they will need. Human resource planning compares the present state of the organization with its goals for the future, then identifies what changes it must make in its human resources to meet those goals .The changes may include downsizing, training existing employees in new skills, or hiring new employees.


Human resource planning consists of three stages forecasts of labor demand and labor supply):

  1. Forecasting: through trend analysis and good judg­ment, the planner tries to determine the supply of and demand for various human resources;

  2. Goal setting and strategic planning: based on whether a surplus or a shortage is expected, the planner sets goals and creates a strategy for achieving those goals;

  3. Program implementation and evaluation: The organization then implements its HR strat­egy and evaluates the results.


1) Forecasting

The attempt to determine the supply of and demand for various types of human resources; to predict areas within the organization where there will be labour shortages or surpluses. Forecasting supply and demand can use statistical methods or judgment. Statistical methods capture historic trends in a company’s demand for labour. Pooling experts’ guesses is an important source of ideas about the future.

  • Trend analysis: constructing and applying statistical models that predict labour demand for the next year, given relatively objective statistics from the previous year;

    • Leading indicators: objective measures that accurately predict future labour demand.

  • Statistical planning models are useful when there is a long, stable history that can be used to reliably detect relationships among variables. However, these models almost always have to be complemented with subjective judgments of experts;

  • Transitional matrix: a chart that lists job categories held in one period and shows the proportion of employees in each of these job categories in a future period. Please refer to Table 5.1 on page 139, and read the two last paragraphs to thoroughly understand it.


2) Goal setting and Strategic Planning

The second step in human resource planning is goal setting and strategic planning. In the goal setting and strategic planning stage, the plans are ideally derived from assessment of Labour Demand or Labour Supply Forecasts and often supplemented by expert judgment. The purpose of setting specific quantitative goals is to focus attention on the problem and provide a benchmark for determining the relative success of any programs aimed at redressing a pending labour shortage or surplus. The goals should come directly from analysis of labour supply and demand and should include a future prediction and a timetable for when results should be achieved.


Once these goals are established, the firm needs to choose from many different strategies available for redressing labour shortages or surplus. This stage is critical because the many options available to the planner differ widely in expense, speed, effectiveness etc. The most used options are downsizing, using temporary employees and outsourcing. In addition to this, firms need to consider whether the employees will bring a significant contribution to their success. Do they have core competencies that would help the companies to have superior performance and value to customers?


To reduce a surplus, downsizing, pay reductions, and de­motions deliver fast results but at a high cost in human suffering that may hurt surviving employees' motivation and future recruiting. Also, the organization may lose some of its best employees. Transferring employees and requiring them to share work are also fast methods and the consequences in human suffering are less severe. A hiring freeze or natural attrition is slow to take effect but avoids the pain of layoffs. Early-retirement packages may unfortunately induce the best employees to leave and may be slow to implement; however, they too are less painful than layoffs. Retraining can improve the organi­zation's overall pool of human resources and maintain high morale, but it is relatively slow and costly. This can be summarized in the chart below:


Core competency

A set of knowledge and skills that make the organization superior to competitors and create value for customers. At a store, for example, core competencies include choosing merchandise that shoppers want and providing shoppers with excellent service.


a. Downsizing

The planned elimination of large numbers of personnel with the goal of enhancing the organization’s competitiveness. The primary reason organizations engage in downsizing is to promote future competitiveness. According to surveys, they do this by meeting four objectives:

  1. Reducing costs;

  2. Replacing labour with technology;

  3. Mergers and acquisitions;

  4. Moving to more economical locations.


Results have found that downsizing has not lead to a rise in a company’s competitiveness. Research reveals that it is far from universally successful for achieving the goals of increased productivity and increased profitability. Not all companies achieve their goal of increased productivity by downsizing; some companies had to downsize later again which is not effective. There a number of reasons why downsizing is not effective. Three of them are:


  • Although the initial costs savings are of short-term benefit, the long-term effects of an improperly managed downsizing effort can be negative. Downsizing leads to a loss of talent and in many cases it disrupts the social network needed to promote creativity and flexibility;

  • Many downsizing campaigns let go of people who turn out to be irreplaceable assets. So people have to be hired back to fill in that position but they cannot be as competent as the previous employee. A solution to that problem can be maintaining a list of people that are fired because of downsizing and hiring them again in times of need;

  • A third reason downsizing efforts often fail is that employees who survive the purges often become narrow minded, self absorbed and risk averse. Downsizing disrupts the work atmosphere – motivation, creativity, flexibility etc. Motivation level drops off because any hope of future promotion dies out. Many employees start looking for another job just in case they get fired too. There is also negative publicity when a company makes use of downsizing that can hurt the company’s image.


b. Early retirement

Another means of reducing a labour surplus is to offer an early retirement. Although an older workforce has some advantages for employers in terms of experience and stability, it also poses problems. Older workers are more costly than younger workers, and they keep the job position occupied for younger dynamic employees. Next to the early retirement program, there are the phased retirement programs.

Phased retirement programs allow the organisation to tap into the experience of older workers while reducing the number of hours they work (and hence reducing costs). This option is often helpful psychologically for workers, who can easing into retirement rather than being thrust all at once into a remarkably different way of life.


To avoid a labour shortage, requiring overtime is the easiest and fastest strategy, which can easily be changed if conditions change. However, overtime may exhaust workers and can hurt morale. Using temporary employ­ees and outsourcing do not build an in-house pool of tal­ent, but by these means staffing levels can be quickly and easily modified. Transferring and retraining employees require investment of time and money, but can enhance the quality of the organization's human resources. How­ever, this may backfire if a labour surplus develops. Hiring new employees is slow and expensive but strengthens the organization if labour needs are expected to expand for the long term. Using technology as a substitute for labour can be slow to implement and costly, but it may improve the organization's long-term performance. New technology and hiring are difficult to reverse if conditions change. This is summarized in the chart below:

This can be summarized in the chart below:

c. Temporary employment

Gives the firm flexibility needed to operate efficiently and frees the company of the administrative work around the employer. Another advantage is that the company gets employees who are tested by the employment agency so they get good workers, and save money because they don’t have to test and train them. Because the temporary worker has little experience in the host company, he brings an objective perspective to the organisation. The temporary worker can also have experience working everywhere from which the company can benefit. The disadvantages of temporary workers can be the tension between them and the workers of the company. This can be overcome to hire the temporary worker at the right time, for example not directly after a downsizing because the employees may relate the new one with the fired ones. The employees of the company need to be given the feeling that they aren’t replaced and that both the temporary and the ‘old’ employees are of equal value. All the employees, new and old, should be treated the same.


d. Outsourcing

Contracting with another organization to perform a broad set of services. They choose outsourcing firms that promise to deliver the same or better quality at a lower cost.

A major downside of overtime is that the employer must pay non-management employees one-and-a-half time their normal wages for work done overtime. Even so, employers see overtime pay as preferable to the costs of hiring and training new employees.


3) Program implementation and evaluation

HRM planning is an important function that should be applied to an organisations entire labour force. It is also important to plan for various subgroups within the labour force. Many organizations have a HR strategy that includes affirmative action in order to deal with diversity or meet government requirements. This means that apart from looking at the workforce and needs, the company should also examine subgroups – e.g. minorities and women. When implementing the HR strategy, the organization must hold some individual accountable for achieving the goals.


Workforce utilization review

A comparison of the proportion of employees in protected groups with the proportion that each group represents in the relevant labour market. Note: the organization can use this process to determine whether there is any subgroup whose proportion in the relevant labour market differs substantially from the proportion in the job category.


To adopt affirmative action planning, the company needs to assess current utilisation patterns and then forecast how these are likely to change in the near future. If these analysis suggest an underutilisation problem, goals and timetables need to be set to change the problem. Certain strategic choices need to be made in the pursuit of these goals that might affect recruitment or selection practices and then the success of these strategies has to be evaluated against the goals established.


D.2 Recruiting

Any activity carried on by the organization with the primary purpose of identifying and attracting potential employees. It thus creates a buffer between planning and the actual selection of new employees. Because of differences in companies’ strategies, they may assign different degrees of importance to recruiting. In general, all companies have to make decisions in three areas of recruiting: personnel policies, recruitment resources and the characteristics and behavior of the recruiter. These aspects of recruiting have different effects on whom the organization ultimately hires.

Personnel policies influence the characteristics of the positions to be filled. Recruitment sources influence the kinds of job applicants an organization reaches. And the nature and behavior of the recruiter affect the characteristics of both the vacancies and the applicants. Ultimately, an applicant’s decision to accept a job offer and the organization’s decision to make the offer depend on the match between vacancy characteristics and applicant characteristics (see the figure below).


D.3 1) Personnel policies

Organization’s decisions about how it will carry out HRM, including how it will fill job vacancies. Several personnel policies are especially relevant to recruitment:

  • Internal versus external recruiting;

  • Meeting or exceeding the market rate of pay;

    • Lead-the-market pay strategies: pay more than the current market wages for a job.

  • Employment-at-will policies: employment principle that if there is no specific employment contract saying otherwise, the employer or employee may end an employment relationship at any time, regardless of cause;

  • Due-process policies: policies that formally lay out the steps an employee may take to appeal the employer’s decision to terminate that employee.

  • Image advertising: advertising designed to create a generally favorable impression of the organization.


D.4 2) Recruitment sources

  • Internal sources: managers also may identify candidates to recommend for vacancies. For the employer, relying on internal sources offers several advantages. First, it generates applicants who are well known to the organization. Also, it is generally cheaper and faster then looking outside the organization. Despite the advantages of internal recruitment, organizations often have good reasons to recruit externally;

    • Job posting: the process of communicating information about a job vacancy on company bulletin boards, in employee publications, on corporate intranets, and anywhere else the organization communicates with employees.


  • External sources: for entry-level positions and perhaps for specialized upper-level positions, the organization has not internal recruits from which to draw. Also, brining in outsiders may expose the organization to new ideas or new ways of doing business. Lastly, insiders can be poorly suited to innovation.

    • Direct applicants: people who apply for a vacancy without prompting from the organization;

    • Referrals: people who apply for a vacancy because someone in the organization prompted them to do so. The major downside of referrals is that they limit the likelihood of exposing the organization to fresh viewpoints. People tend to refer others who are like themselves;

    • Nepotism: the practice of hiring relatives;

    • Newspaper and magazine advertising: reaches a wide audience and may generate many applications, although many are likely to be unsuitable;

    • Electronic re­cruiting: gives organizations access to a global labour mar­ket, tends to be inexpensive, and allows convenient searching of databases. Internet and e-recruitment is a very important contemporary development because it is inexpensive, has a massive potential audience, involves employer websites, and e-recruitment agencies. On the other hand, its problems are the large number of applications, the fact that screening techniques are poorly developed, security and confidentiality fears, and the ethics of agencies. The growth of the information supply has opened up new ways to recruit talent for instance through the Internet. Increasingly organisations are refining their use of this medium many companies have a web of their own so you can immediately see if there are job openings. This is mainly a good alternative for big companies; smaller companies don’t attract that much attention;

    • Public employment agencies: are inexpensive and typically have screened applicants (BV arbeidsbureau). Public employment agencies promote the blue-collar labour market (employees that tend to perform manual labour);

    • Private employment agencies: charge fees but may pro­vide many services (gewone uitzendbureau.) Private employment agencies promote the white-collar labour market (e.g. lawyers, doctors etc);

    • Another inexpensive channel is schools and colleges (on-campus interviewing is the most important source of recruits for entry-level professional and managerial vacancies).


In the diagram below you can find a summary of the recruitment sources mentioned above (the sources in the circles are external recruitment sources).


Job postings


Management referrals


Evaluating the quality of a source


In general, there are few rules that say what recruitment source is best for a given job vacancy. Therefore, it is wise for employers to monitor the quality of all their recruitment sources. One way to do this is to develop and compare yield ratios for each source. Another way is the cost per hire.


Yield ratio

A ratio that expresses the percentage of applicants who successfully move from one stage of the recruitment and selection process to the next. A high yield ratio (large percentage) means that the source is an effective way to find candidates to interview. By comparing the yield ratios of different recruitment sources, HR professionals can determine which source is the best or most efficient for the type of vacancy.


Cost per hire

To compute this amount, find the cost of using a particular recruitment source for a particular type of vacancy. Then divide that cost by the number of people hired to fill that type of vacancy. A low cost per hire means that the recruitment source is efficient, it delivers qualified candidates at minimal cost.


D.5 3) Recruiter traits and behavior

Through their behavior and other characteristics, re­cruiters influence the nature of the job vacancy and the kinds of applicants generated. Applicants tend to per­ceive job experts as more credible than recruiters who are HR specialists. They tend to react more favourably to recruiters who are warm and informative. Warmth reflects the degree to which the recruiter seems to care about the applicants and is enthusiastic about her potential to contribute to the company.


Recruiters should not mislead candidates. Recruiters should not overly exaggerate the positive qualities of the job vacancy otherwise the new employee might feel that they were lied to and misled, creating frustration and disappointment. That is why realistic job previews are used, where a background is done on the positive and negative qualities of the vacancy.


Realistic job preview

Background information about a job’s positive and negative qualities - can get around the problem (that the job is misrepresented) and help organizations minimize turnover among new employees. On the whole, the research suggests that realistic job previews have a weak and inconsistent effect on turnover. Realistic job previews are helpful, but have a weak and inconsistent effect on job turnover compared to personnel policies and actual job conditions.


Recruiters can improve their impact by:

  • By providing timely feedback: the timeliness of the response from the recruiters is extremely important (delays are perceived as very negative);

  • By avoiding offensive behaviour: defensive behavior produces unfavorable reactions;

  • By having a recruitment team rather than individual recruiters increasing the credibility (teams of HR specialists and job experts may be most effective).


Part E: Selection of Employees


E.1 Selection process

Poor hiring practices are costly because there are eroding advantages of strategic HRM practices in terms of planning, job analysis and recruitment, high costs from the perspective of the Resource Based View, there is poor performance of inappropriately selected job candidates, costs associated with dismissal of inappropriately selected job candidates, effects on survivors (de-motivating symbolic effects of dismissal of inappropriately selected job candidates), time to look for a new candidates, and loss of or damage to reputation of company.


In general, poor selection methods have a profound effect on recruitment and performance. Therefore, careful selection practices are vital. The most important considerations when choosing the selection methods include: that the selection decisions are congruent with the strategic goals of the organization, the selection criteria for the post to be filled, the acceptability and appropriateness of the methods, the abilities of the staff involved in the selection process, the administrative ease, time factors, accuracy, and cost. Moreover, the selection methods should be highly related to the particular job.


Any organisation that intends to compete through people must take the utmost care with how it chooses organisational members. Personnel selection decisions made by the organisation are instrumental to its ability to survive, adapt, and grow. The competitive aspects of selection decisions become especially critical when organizations are confronted with tight labour markets and when competitors tap the same market for personnel. The goal by personnel selection is to minimise the errors in selection and placement to improve the company’s competitive position.


At most organizations, selection includes the following steps;

  1. Screening applications and resumes;

  2. Testing and reviewing work samples;

  3. Interviewing candidates;

  4. Checking references and background;

  5. Making a selection.


Personnel selection

The process through which organization make decisions about who will or will not be

allowed to join the organization.


Criteria for evaluating selection methods:

  • Reliability: the extent to which a measurement is free from random error (correlation coefficients);


  • Validity: the extent to which performance on a measure (such as a test score) is related to what the measure is designed to assess (such as job performance);

    • Criterion-related validity: a measure of validity based on showing a substantial correlation between test scores and job performance scores. Note: the types of criterion-related validity include: predictive validation and concurrent validation;

      • Predictive validation: research that uses the test scores of all applicants and looks for a relationship between the scores and future performance of the applicants who were hired;

      • Concurrent validation: a measure of validity based on showing a substantial correlation between test scores and job performance scores.

    • Content validity: consistency between the test items or problems and the kinds of situations or problems that occur on the job. Content validation has limitations: a) an assumption is that the person who is to be hired must have the knowledge, skills, or abilities at the same time she is hired. So it is not useable when the person is expected to learn the job. b) Because subjective judgement plays a large role in content validation it is critical to minimise the amount of inference involved on the part of judges. c) Content validation would be inappropriate for assessing more abstract characteristics such as intelligence, leadership and integrity etc;

    • Construct validity: consistency between a high score on a test and high level of construct such as intelligence or leadership ability, as well as between mastery of this construct and successful performance of the job. Construct validity establishes that the test actually measures a specified construct, such as intelligence or leadership ability, which is presumed to be associated with success on the job.


  • Generalizability: valid in other contexts beyond the context in which the selection method was developed. A selection method also should be generalizable, so that it applies to more than one specific situation. Generalizability is the degree to which the validity of a selection method established in one context extends to other contexts such as different situations, different samples of people, and different time periods. The three contexts include different situations, different samples of people, and different time periods. The aim is to find out whether a selection method is valid in other contexts beyond the context in which it was developed;


  • Utility: the extent to which something provides economic value greater than its cost. Each selection method should have utility, meaning it provides economic value greater than its cost. Utility is the degree to which the information provided by selection techniques enhances the effectiveness of selecting personnel in organizations. It is impacted by reliability, validity, and generalizability. In general the more reliable valid and generalizable the selection method is the more utility it will have. The utility of any test generally increases as the selection ratio gets lower, so long as the additional costs of recruiting and testing are not excessive. Many other factors relate to the utility of a test like the value of a product or service produced by a job, the more value a certain job the more value there is in selecting the best personnel. Utility depends on the job vacancy. If it involves offering a product of high value to the company, then more money will be spent to find qualified applicants;


  • Legality: finally, selection methods should meet the legal requirements for employment decisions. Legality refers to the fact that all selection methods must conform to existing laws and legal precedents. Various acts around the world form the basis of legal standards to which selection methods are judged, and challenges to selection decisions made. Legality and job relatedness go together, which is supported by clear employment laws for all Western European countries. Legal standards pertain to the prevention of discrimination (e.g. sex, race, individuals with disabilities etc). All selection methods should conform to existing laws and existing legal precedents. Three primary laws are most common on the work floor: the civil rights act, the age discrimination law, and the disability act.


The selection process must be conducted in a way that avoids discrimination and provides access to persons with disabilities. This means selection methods must be valid for job performance, and scores may not be ad­justed to discriminate against or give preference to a group. Questions may not gather information about a person's membership in a protected class, such as race, sex, or religion, nor may the employer investigate person's disability status. Employers must respect can­didates' privacy rights and ensure that they keep per­sonal information confidential. They must obtain con­sent before conducting background checks and notify candidates about adverse decisions made as a result of background checks. Recruiters gather background information on the candidate and also to conduct checks on the reliability and validity of the résumés (e.g. references).



Job Applications and Resumes

Employers usually gather background information on applicants before the real selection process starts, by asking applicants to fill out application forms and provide résumés.


Application forms

Employers either buy general-purpose application forms from an office supply store,

or they may create their own forms to meet unique needs. All employment applications include areas for applicants to provide several types of information:

  • Contact Information- name, address, number, e-mail

  • Work Experience- job titles, dates of employment, previous companies

  • Educational background- high school, college, degrees awarded

  • Applicants signature- signature following a statement that the applicant has provided true and complete information



Resumes are the usual way for applicants to introduce themselves to a potential employer.

A drawback of this information source is that applicants control the content of the information, as well as the way it is presented. This type of information is therefore biased in favor of the applicant.



For references, applicants often provide contact details of former employers or others who

can vouch for their abilities and past job performance. It is then the organization that must contact the someone to gather information or verify the accuracy of the information provided by the applicant.


Background Checks

Background check are a way to verify that applicants are as they represent themselves

to be. The Internet makes it easy for potential employers to uncover information

that can reveals applicants in an unflattering light.



E.2 Employment tests and work samples

Employment tests and work samples are more objective than resumes, references and background checks. To be legal, any test must measure abilities that actually are associated with successful job performance. Employment tests range from general to specific. General-purpose tests are rela­tively inexpensive and simple to administer. Tests should be selected to be related to successful job per­formance and avoid charges of discrimination. Tests are used because testing is essentially an attempt to achieve objectivity or to put it more accurately to reduce subjectivity in selection decision-making. The tests fall into two broad categories:

  1. Aptitude tests: test that assesses how well a person can learn or acquire skills and abilities;

  2. Achievement tests: tests that measure a person’s existing knowledge and skills.


Physical ability tests

Measure strength, endurance, psy­chomotor abilities, and other physical abilities.


Cognitive ability tests

Tests designed to measure such mental abilities as verbal skills, quantitative skills, and reasoning ability. Cognitive ability tests include the following dimensions:

  1. Verbal comprehension refers to a person’s capacity to understand and use written and spoken language;

  2. Quantitative ability concerns the speed and accuracy with which one works;

  3. Reasoning ability refers to a person capacity to invent solutions to many diverse problems;

  4. Memory;

  5. Numerical ability.


Assessment center

A wide variety of specific selection programs that use multiple selection methods to rate applicants or job incumbents on their management potential.


Personality tests

Measure personality traits such as extroversion and adjustment. Research supports their validity for appropriate job situations, especially for in­dividuals who score high on conscientiousness, extro­version, and agreeableness. These tests are relatively simple to administer and generally meet legal require­ments.


Personality of candidates can be examined by looking at the ‘Big Five’ (on previous exam) traits:

  • Extroversion: sociable, gregarious, assertive, talkative, expressive;

  • Adjustment: emotionally stable, non-depressed, secure, content;

  • Agreeableness: courteous, trusting, good-natured, tolerant, cooperative;

  • Conscientiousness: dependable, organized, persevering, thorough;

  • Inquisitiveness: curious, imaginative, broadminded, playful.


Conscientiousness is considered one of the most important factors. The validity for the almost all of these five factors in terms of predicting job performance also seems to be higher when the scores are not obtained from the applicant but instead taken from other people because people sometimes lack the insight of what their own personalities are. Second applicants can fake their responses.


Medical examinations

Passing a medical examination may be a condition of employment, but to avoid discrimination against per­sons with disabilities, organizations usually administer a medical exam only after making a job offer.


Test results should be reported back to the applicant, who should be allowed an avenue of appeal and perhaps re testing. Tests should be conducted in an environment that is as unintrusive as possible and results from those tests should be held in strict confidence. Finally, when testing current employees, the program should be part of a wider organisational program that provides rehabilitation counselling.


E.3 Interviews

A selection interview has been defined as a dialogue initiated by one or more persons to gather information and evaluate the qualifications of an applicant for employment. The selection interview is the most widespread selection method employed in organisations. Interviews are widely used to obtain information about a candidate's interpersonal and communication skills and to gather more detailed information about a candidate's background. Interviewers should identify job requirements and create a list of questions related to the requirements.


Without proper care it can be unreliable, low in validity and biased against a number of different groups. Moreover, interviews are relatively costly because they require person-to-person interviews, which involve travelling to these persons. Interviews are costly and may introduce bias into the selection process. Interviewers should be trained to recognize their own personal biases and conduct objective interviews. They involve a certain amount of subjectivity since the selection choice is based on interviewers’ personal judgments. It is important that interviewers avoid subjective errors that can result when one human being is asked to rate another. To limit the subjective errors, here are trainings and the interviewers are thought to be witnesses of a fact that can later be integrated via objective formulas as opposed to being judges. Many employers are now videotaping interviews and then analyse the tapes. This is seen as a cost effective means of allowing numerous ratters to evaluate the candidate under standard conditions.


The utility of an interview can be increased by the following suggestions: interviews should be structured, standardized, and focused on goals oriented to skills and behaviors that are observable, the interviewer should ask questions that force the applicant to display job-required behaviors or knowledge, and companies should use multiple trained interviewers who can avoid personal bias. Organizations can minimize the drawbacks through preparation and training. Interviewers should put candidates at ease in a comfortable place that is free of distractions. Questions should ask for descriptions of relevant expe­riences and job-related behaviors. The interviewers also should be prepared to provide information about the job and the organization.


Structured Interviews

A selection interview that consists of a predetermined set of questions for the interviewer to ask. There are two types:

  1. Situational interviews: a structured interview in which the interviewer describes a situation likely to arise on the job, then asks the candidate what he or she would do in that situation;

  2. Behavior description interview (BDI): a structure interview in which the interviewer asks the candidate to describe how he or she handled a type of situation in the past. This has the highest validity.


Less Structured Interviews

A nondirective Interview is a type of less structured interview. In this case, the applicants are queried using questions that are developed from the answers to previous questions.


Unstructured Interviews

When conducting unstructured interviews, there is the danger of not gaining useful or valid information, that questions may not be job-related or legally defensible, and that comparison across candidates is difficult.


Panel interview

Selection interview in which several members of the organization meet to interview each candidate. It provides the organization with the judgments of more than one person, to reduce the effect of personal biases in selection decisions.


Interviewing is not necessarily the most accurate basis for a making a selection decision. Research has shown that interviews can be unreliable, low in validity, and biased against a number of different groups. Interviews are also costly. The interview should not try to measure abilities and skills, for example, intelligence, that test can measure better.


Advantages and Disadvantages of Interviewing



• they can provide evidence of communication and interpersonal skills

• they can give insights into job knowledge and skill; and they decreases the probability lying

• they can check the accuracy of the resume

• they are low in validity, unreliable, and may be biased towards certain groups

• they cost a lot of time and money

• they are subjective, and increase the probability of discrimination complaints



E.5 Selection decisions


Multiple-hurdle model

Process of arriving at a selection decision by eliminating some candidates at each stage of the selection process.


Compensatory model

Process of arriving at a selection decision in which a very high score on one type of assessment can make up for a low score on another.


The following figure shows the different types of selection methods:

An issue in selecting interviews is that the interview’s usefulness can be undermined by first impressions, impression management, negative emphasis, the halo effect, and the pressure to hire.

The interviewer‘s post-interview evaluation of the applicant conform, to a substantial degree, to their pre-interview impressions of issues such as physical characteristics, clothes, firmness of handshake, gestures, and tone of voice. Impression Management involves the efforts to produce a favorable first impression. Its techniques include self - enhancement, which is to boost one’s appeal, or other - enhancement, which means to induce positive moods in others. The cognitive tuning model suggests that when others smile, we sense that the current situation is safe so we process information superficially (heuristic processing). On the other hand, when others frown, we sense that careful thought about their words is required (systematic processing). The halo effect is concerned with the issue of when an interviewer allows one strong point about the candidate to overshadow or have an effect on everything else. The 'horn' effect is just the opposite - allowing one weak point to influence everything else.


Part F: Employee Training


F.1 Training linked to organizational needs



An organization’s planned efforts to help employees acquire job-related knowledge, skills, abilities, and behaviors, with the goal of applying these on the job. Continuous learning requires employees to understand the relationship between their jobs, their work units, and the company and to be familiar with company business goals.


The success of a company can depend on how fast employees can learn new technologies and apply them to serving customers. An investment in training can gain the company a competitive advantage.


Training Linked to Organizational Needs

Rapid changes, especially in the area of technology, require employees continually to learn new skills. The growing reliance on teamwork creates a demand for the ability to solve problems in teams, an ability that often requires formal training. An effective training program teaches what it is designed to teach, and it teaches skills and behaviors that will help the organization achieve its goals.


Instructional design — A process of systematically developing training to meet specified needs. Instructional design is a systematic approach for developing training programs. It has five steps:

  1. Needs assessment;

  2. Ensure employees’ readiness for training;

  3. Training methods;

  4. Implementing the training program;

  5. Measuring results of training.


To carry out this process more efficiently and effectively, organizations often are using a learning management system (LMS).

  • Learning management system (LMS) - A computer application that automates the administration, development, and delivery of training programs.

Managers and employees use the LMS to identify training needs and enroll in courses. This approach can make training programs more widely available and help companies reduce travel and other costs by providing online training.


F.2 1) Needs assessment

The process of evaluating the organization, individual employees, and employees’ tasks to determine what kinds of training, if any, are necessary. As this definition indicates, the needs assessment answers question in three broad areas:

  1. Organization - what is the contest in which training will occur?

  2. Person - who needs training?

  3. Task - what subjects should the training cover?


Organization analysis

A process for determining the appropriateness of training by evaluating the characteristics of the organization. Even if training fits the organization’s strategy and budget, it can be viable only if the organization is willing to support the investment in training.


Person analysis

A process of determining individuals’ needs and readiness for training.


Task analysis

The process of identifying and analyzing tasks to be trained for. Usually, task analysis is conduct along with person analysis. Understanding shortcoming in performance usually requires knowledge about the tasks and work environment as well as the employee.


A variety of conditions may prompt an organization to conduct a needs assessment. Management may observe that some employees lack basic skills or are performing poorly. Decisions to produce new products, apply new technology, or design new jobs would prompt a needs assessment, because these changes tend to require new skills.


F.3 2) Ensuring employees’ readiness for training


Readiness for training

A combination of employee characteristics and positive work environment that permit training. Employees learn more from training programs when they are highly motivated to learn; that is, when they really want to learn the content of the training program. Readiness for training also depends on two broad characteristics of the work environment: situational constraints and social support. Managers play an especially important role in providing social support.


Planning the training program

Employees need to know why they should learn. They have to understand the objective of the training program to learn best. A training objective has three components:

  1. A statement of what the employee is expected to do;

  2. A statement of the quality or level of performance;

  3. A statement of the conditions under which the trainee is expected to perform the desirable outcome.


Request for proposal (RFP) is needed, which is a document that outlines for potential vendors and consultants the types of service the company is seeking, references needed, number of employees who should be trained, project funding, the follow-up process expected completion date and the date when proposals must be received by the company. The next step is to choose a provider. It is necessary to consider the extent to which the program will be customised or if there will be used a generic framework. The time you need the consultant depends on the information, the number of employees and the need for feedback.

The second step in instructional design process is to evaluate whether employees are ready to learn. Readiness for training refers to whether employees have the personal characteristics and the work environment will have to facilitate the learning. Managers play an important role in motivating employees. They can do this by ensuring employees self-efficacy. Self efficacy is the employer’s belief that they can successfully learn the content of a training program. Managers can increase this level by:

  • Letting employees know the purpose of the training;

  • Providing as much as information as possible about the training;

  • Showing employees the success of the training program;

  • Providing employees with feedback that learning is under their control;

  • Pointing out the benefits that may come of the training program like career possibilities.


Presentation methods

Training methods in which trainees receive information provided by instructors or via computers or other media.


Hands-on methods

Training methods that actively involve the trainee in trying out skills being taught. These methods are ideal for developing specific skills, understanding how skills and behaviours can be transferred to the job.


Group building methods

Training techniques that help trainees share ideas and experiences, build group identity understand the dynamics of interpersonal relationships and get to know their own strengths and weaknesses and those of their coworkers. All the various techniques involve examination of feelings, perceptions, and beliefs about the functioning of the team, discussion and development of plans to apply what was learned in training to the team’s performance in the work setting.

The transfer of training requires technological support, manager support, peer support, self-management skills, and opportunity to use the learned capability, and a climate for transfer.


Employees need the training program to be properly co-ordinated and arranged, which is one of the aspects of training administration. This involves communicating courses and programs, enrolling employees, preparing and processing materials, arranging the training room, testing equipment, having backup, providing support during the training, distributing training material, facilitating communications between trainer and the group, recording course completion. Good co-ordination ensures that trainees aren’t distracted. The end of the program can be used to evaluate and make some adjustments when needed.


The transfer of training refers to on the job use of knowledge, skills and behaviour. It is influenced by:

  • Climate for transfer which refers to the trainee’s perception about a wide variety of characteristics of the work environment that facilitate or inhibit use of trained skills or behaviour;

  • Manager support refers to the degree to which they emphasise the importance of attending the training programs, and stress the application of training content to the job. They can also attend the program themselves to give support. Or they can write an action plan to ensure the training transfers to the job. The action plan includes a goal, a strategy to achieve this goal, getting feedback and an expected outcome;

  • Peer support. Transfer of training can also be enhanced by creating a support network among the trainees which helps trainees to discuss progress in using learned capabilities;

  • Opportunity to use learned capabilities this refers to the extent to which the trainee is provided with or actively seeks experience with newly learned knowledge, skills and behaviour form the training program. This can be through assigned work experiences that require their use. Opportunity to perform can be measured by asking former trainees to indicate whether they perform a task, how many times and how difficult it is;

  • Technological support. This can be by computer applications that can provide skills training, information access and expert advice;

  • Self management skills. Training programs should prepare employees to self manage their use of new skills and behaviours on the job. Specifically within the training program trainees should set goals for using skills or behaviours on the job, identify under which conditions they might fail to use them. Identify the positive and negative consequences for them and monitor their use of them. Trainees need to create their own reward system and ask managers for feedback.


F. 4 3) Training methods

A wide variety of methods is available for conducting training:

  • Classroom instruction;

  • Audiovisual training;


  • Computer-based training;

    • Electronic Performance Support Systems (EPSSs): compter applications that provide access to skills training, information and expert advice when a problem occurs on the job;


  • E-learning: receiving training via the Internet or the organization’s intranet.


  • On-the-job learning: training methods in which a person with job experience and skill guides trainees in practicing job skills at the workplace;

    • Apprenticeship: a work-study training method that teaches job skills through a combination of on-the-job training and classroom training;

    • Internship: on-the-job learning sponsored by an educational institution as a component of an academic program.


  • Simulation: a training method that represents a real-life situation, with trainees making decisions resulting in outcomes that mirror what would happen on the job. Simulations enable trainees to see the impact of their decisions in an artificial, risk-free environment. They are used to teaching production and process skills as well as management and interpersonal skills;

    • Virtual reality: a computer-based technology that provides an interactive, three-dimensional learning experience;


  • Business games and case studies: used to develop management’s skills;

  • Behavior modeling: training sessions in which participants observe other people demonstrating the desired behavior, then have opportunities to practice the behavior themselves;


  • Experiential programs: training programs in which participants learn concepts and apply them by simulating behaviors involved and analyzing the activity, connecting it with real-life situations;

    • Adventure learning: a teamwork and leadership training based on the use of challenging, structured outdoor activities.


  • Team training: coordinates the performance of individuals who work together to achieve a common goal;

    • Cross-training: team training in which team members understand and practice each other’s kills so that they are prepared to step in and take another member’s place;

    • Coordination training: team training that teaches the team how to share information and make decisions to obtain the best team performance;

    • Team leader training: training in the skills necessary for effectively leading the organization’s teams.


  • Action learning: training in which teams get an actual problem, work on solving it and commit to an action plan, and are accountable for carrying it out.


F.5 4) Implementing the training program

Employees are most likely to learn when training is linked to their current job experiences and tasks. For employees to have to be motivated to learn in training activities the degree to which they have basic skills can influence that basic skills consist of reading, writing, and cognitive ability. Cognitive ability includes three dimensions: verbal comprehension, quantitative ability and reasoning ability; this is very important and has a great influence on performance in general. When the employee doesn’t have the right reading level (readability) the training can be given on a different way, the reading level of the employee has to be determined, the reading level has to be improved or the training has to be adapted to the reading level of the employee.


The motivation to learn is the desire of the trainee to learn the content of the training program. Self-efficacy is the employees' belief that they can successfully learn the content of the training program. Managers can increase employees' self-efficacy level by: letting employees know that the purpose of training is to improve performance, not identify incompetencies, providing as much information as possible about the training program and its purpose, showing employees the training success of their peers, and providing employees with feedback.


Employees need meaningful training content, the training has to be meaningful to the employer to make it easy to learn. To do this the training content will have to be familiar to the employee, and the training context should mirror the working environment. The training context is the physical, intellectual and emotional environment in which the training occurs. When they have done the training program the employee needs the opportunity to practice. Practice involves having the employee demonstrate what they have learned in training.

It is important to consider how much should be practised. Employees need feedback. Feedback is the information about how well people are meeting the training objectives. To be effective feedback should focus on specific behaviours and be provided as soon as possible after the training.


According to the social learning theory people learn by observing and imitating the actions of models. Employees learn by observing, experience, and interacting with others. For the model to be effective the desired skills or behaviours need to clearly specified and the model should have characteristics similar to the target audience. Communities of practice are employees who work together learn form each other and have a common understanding of how to accomplish work.


F.6 5) Measuring results of training

The stage to prepare for evaluating a training program is when the program is being developed. Along with designing course objectives and content, the planner should identify how to measure achievement of objectvies. Examining the outcomes of a program helps evaluating its effectiveness.


Training outcomes can be categorised:

  • Cognitive outcomes: the degree to which trainees are familiar with principles, facts, techniques or procedures;

  • Skill based outcomes: the use and learning of skills;

  • Affective outcomes: include attitudes and motivation;

  • Reaction outcomes: the trainees perceptive of the program;

  • Results: used to determine the training’s pay-off for the company;

  • Return on investments: comparing the benefits to the costs. There are direct and indirect costs.



Transfer of training

On-the-job use of knowledge, skills, and behaviors learned in training.


There are a number of evaluation designs that can be applied to training programs:

  1. Pretest/posttest with comparison group, this method compares a group of employees who receive training and a group who do not. The outcomes are collected and that is use as evidence to change;

  2. Pretest/ protest this is similar to the above but without the comparison group;

  3. Posttest only. Only training outcomes are collected;

  4. Time series method training outcomes are collected periodically before and after training.


The best one is Pretest/Post-test with the comparison group, because the improvement relative to the control group can be explained through the treatment.


F.7 Applications of training


Orientation of new employees

Training designed to prepare employees to perform their jobs effectively, learn about their organization, and establish work relationships.


Diversity training

Training designed to change employee attitudes about diversity and/or develop skills needed to work with a diverse workforce.


Part G: Employee Performance Management


G.1 Process of performance management


Performance management

Is the process through which managers ensure that employees’ activities and outputs contribute to the organization’s goals.


Performance appraisal

Traditional approaches to management have viewed performance appraisal which is the measurement of specified areas of an employee’s performance.


Many of executives report that performance measurement encourages employees to cooperate and helps the company focus on smooth operations, customer loyalty and employee development.

To meet these objectives, performance management extends beyond mere appraisals to include several activities which are defining performance, measuring performance ad feeding back performance information.

Traditionally the former performance appraisal system has been viewed as the primary means for managing employee performance. Performance appraisal was an administrative duty and was primarily the function of HRM.


G.2 Purposes of performance management


Performance management has three purposes:

  • Strategic purpose: the performance system has to be linked with the company’s strategy and goals. The performance system can also be useful for communicating corporate culture and values in companies whose business operations are becoming more global;

  • Administrative purpose. Organisations use performance management information in many administrative decisions like salary, promotion, termination and recognition of individual performances;

  • Developmental purpose. To develop employees who are effective at their jobs. When employees are not performing as well as they should performance management seeks to improve this by feedback and determine the causes of the low performance.


Fulfilling these three purposes is central to gaining competitive advantage.


G.3 Criteria for effective performance management

There are many ways to measure the performance of an employee. For performance management to achieve its goals, its methods for measuring performance must be good. Selecting these measures is a critical part of planning a performance management system.

Criteria that determine the effectiveness of performance measures include:

  1. Fit with strategy —A performance management system should aim at achieving employee behavior and attitudes that support the organization’s strategy, goals, and culture.

  2. Validity —validity is the extent to which a measurement tool actually measures what it is intended to measure. In the case of performance appraisal, validity refers to whether the appraisal measures all the relevant aspects of performance and omits irrelevant aspects of performance.

  3. Reliability —With regard to a performance measure, reliability describes the consistency of the results that the performance measure will deliver. Interrater reliability is consistency of results when more than one person measures performance.

  4. Acceptability —Whether or not a measure is valid and reliable, it must meet the practical standard of being acceptable to the people who use it.

  5. Specific feedback —A performance measure should specifically tell employees what is expected of them and how they can meet those expectations. Being specific helps performance management meet the goals of supporting strategy and developing employees.


G.4 Methods for measuring performance


Making comparisons:

  • Simple ranking: method of performance measurement that requires managers to rank employees in their group from the highest performer to the poorest performer;

  • Forced-distribution method: method of performance measurement that assigns a certain percentage of employees to each category in a set of categories;

  • Paired-comparison method: method of performance measurement that compares each employee with each other employee to establish rankings.


Rankings systems can be useful for supporting decisions about how to distribute pay raises or layoffs. However, rankings are not helpful for employee development and may hurt morale or result in legal challenges.




Fit with Strategy






Poor, unless manager takes time to make link

Can be high if ratings are done carefully

Depends on rater, but usually no measure of agreement used

Moderate, easy to develop and use but resistant to normative standards

Very low


Usually low; requires manager to make link

Usually low; can be fine if developed carefully

Usually low; can be improved by specific definitions of attributes

High; easy to develop and use

Very low


Can be quite high

Usually high; minimizes contamination and deficiency

Usually high

Moderate; difficult to develop, but accepted well for use

Very high


Very high

Usually high; can be both contaminated and deficient

High; main problem can be test-retest- depends on timing of measure

High; usually developed with input from those to be evaluated

High regarding results, but low regarding behaviors necessary to achieve them


Very high

High, but can be both contaminated and deficient


High; usually developed with input from those to be evaluated

High regarding results, but low regarding behaviors necessary to achieve them


Rating attributes:

  • Graphic rating scale: method of performance measurement that lists traits and provides a rating scale for each trait; the employer uses the scale to indicate the extent to which an employee displays each trait;

  • Mixed-standard scales: method of performance measurement that uses several statements describing teach trait to produce a final score for that trait.


Rating behaviors:

  • Critical-incident method: method of performance measurement based on managers’ records of specific examples of the employee acting in ways that are either effective or ineffective;

  • Behaviorally anchored rating scale (BARS): method of performance measurement that rates behavior in terms of a scale showing specific statements of behavior that describes different levels of performance;

  • Behavioral observation scale (BOS): a variation of a BARS which uses all behaviors necessary for effective performance to rate performance at a task;

  • Organizational behavior modification (OBM): a plan for managing the behavior of employees through a formal system of feedback and reinforcement.


Measuring results

Two of the most popular methods for measuring results are measurement of productivity and management by objeectives.

  • Management by objectives (MBO): a system in which people at each level of the organization set goals in a process that flows form top to bottom, so employees at all levels are contributing to the organization’s overall goals; these goals become the standards for evaluating each employee’s performance.


MBO system has three components:

  1. Goals are specific, difficult, and objective;

  2. Managers and their employees work together to set the goals;

  3. The manager gives objective feedback through the rating period to monitor progress toward the goals.


Total Quality Management (TQM)

It differs from traditional performance measurement in that it assesses both individual performance and the system within which the individual works.

The feedback aims at helping employees continuously improve the satisfaction of their customers. The focus on continuously improving customer satisfaction is intended to avoid the pitfall of rating individuals on outcomes, such as sales or profits, over which they do not have complete control.

With TQM, performance measurement essentially combines measurements of attributes and results. The feedback is of two kinds:

  • Subjective feedback from managers, peers and customers about the employee’s personal qualities;

  • Objective feedback based on the work process. This feedback comes from a variety of methods called statistical quality control.


G.5 Source of performance information


360-degree performance appraisal

Performance measurement that combines information from the employee’s mangers, peers, subordinates, self, and customers.


360 Degree Feedback is a multi-rater feedback, with a wide variety of sources and increased opportunities for observation and rating. The line manager influence is balanced by alternative inputs and there is increased access to credible feedback sources. Moreover, it aligns with the changing nature of work since it is more service centered and more knowledge based, and with the changing nature of organizing processes since there are fewer supervisory layers, more team work, and it is closer to the customer.


360 Degree Feedback is a formal process, including a questionnaire, which is bought in or developed internally. It is based on behavioral competencies, the score is based on a scale, and the analysis is conducted using computer software. Its potential uses include developmental purposes; pay determination, Training Effectiveness, motivation, team-building, Management Development, Organization Development, and selection in assessment centers.


Its drawbacks and obstacles are that the uses of the 360 Degree feedback can clash. In addition, there are legal difficulties if it would be used for pay awards. Moreover, the anonymity of the feedback can be compromised in small teams, departments and organizations. Finally, the feedback could be not followed through in training, development opportunities, and promotion patterns.


G.6 Errors in performance measurement


Similar-to-me error

Rating error of giving a higher evaluation to people who seem similar to oneself.


Contrast error

Rating error caused by comparing employee’s performance to co-workers rather than to an objective standard.


Leniency error

Rating error of assigning inaccurately high ratings to all employees.


Strictness error

Rating error of giving low ratings to all employees, holding them to unreasonably high standards.


Central tendency

Incorrectly rating all employees at or near the middle of a rating scale.


Halo error

Rating error that occurs when the rater reacts to one positive performance aspect by rating the employee positively in all areas of performance.


Horns error

Rating error that occurs when the rater responds to one negative aspect by rating an employee low in other aspects.


Raters can be trained how to avoid rating errors.


There are two approaches to reduce rating errors:

  1. Rater error training attempts to make managers aware of ratings and help them develop strategies to avoid the errors;

  2. Rater accuracy training attempts to emphasis the multidimensional nature of performance and thoroughly familiarise raters with the actual content of various performance dimensions.


Appraisal politics are a situation in which evaluators purposefully distort ratings to achieve personal or company goals. The players in the appraisal process are managers, professionals, skilled and semi-skilled workers, regular and irregular employees, although the appraisal systems are extending to new groups.


G.7 Giving performance feedback


Performance feedback should be a regular, expected management activity.


During the feedback session, managers can take any of three approaches. In the ‘tell-and-sell’ approach, managers tell the employees their ratings and then justify those ratings. In the ‘tell-and-listen’ approach, managers tell employees their ratings and then let the employees explain their side of the story. In the ‘problem-solving’ approach, managers and employees work together to solve performance problems in an atmosphere of respect and encouragement.

The feedback session should end with goal setting and a decision about when to follow up.


G.8 Finding solutions to performance problems


In sum, the final feedback stage of performance management involves identifying areas for improvement and ways to improve performance in those areas.


The most effective way to improve performance varies according to the employee’s ability and motivation. In general, when employees have high levels of ability and motivation, they perform at or above standards. But when they lack ability, motivation or both, corrective action is needed. The type of action depends on the type of lack.

  • Lack of ability —When a motivated employee lacks knowledge, skills, or abilities in some area, the manager may offer coaching, training, and more detailed feedback. Sometimes it is appropriate to restructure the job so the employee can handle it.

  • Lack of motivation —Managers with an unmotivated employee can explore ways to demonstrate that the employee is being treated fairly and rewarded adequately. The solution may be as simple as more positive feedback (praise). Employees may need a referral for counseling or help with stress management.

  • Lack of both —Performance may improve if the manager directs the employee’s attention to the significance of the problem by withholding rewards or providing specific feedback. If the employee does not respond, the manager may have to demote or terminate the employee.

In general, employees who possess high ability with high motivation are solid performers.


Legal and Ethical Issues in Performance Management

In the development and usage of performance management systems, human resource professionals need to ensure that these systems meet legal requirements, such as the avoidance of discrimination. Besides, those performance management systems should meet ethical standards, such as protection of employees’ privacy.


Part H: Developing Employees


H.1 Training, development and career management


Employee development

The combination of formal education, job experiences, relationships, and assessment of personality and abilities to help employees prepare for the future of their careers.

Organizations and their employees must constantly expand their knowledge, skills, and behavior to meet customer needs and compete in today’s demanding and rapidly changing business environment.

Development implies learning that is not necessarily related to the employee’s current job. Instead, it prepares employees for other positions in the organization and increases their ability to move into jobs that may not yet exist. Development also may help employees prepare for change in their current jobs, such as change resulting from new technology, work designs, or customers. So development is about preparing for change in the form of new jobs, new responsibilities, or new requirements.

Training traditionally focuses on helping employees improve performance of their current jobs.

The differences between training and development can be viewed on the following diagram:

Careers have been described as a sequence of positions held within an occupation. The new concept of the career if often referred to as a protean career.


Protean career

A career that is frequently changing due to both changes in the person’s interests, abilities and values and changes in the work environment.

Compared to the traditionally career employees take major responsibilities for managing their career.

A psychological contract is the set of expectations that employees and employers have about each other. Psychological success is the feeling of pride and accomplishment that comes from achieving life goals that are not limited to achievements at work.

The traditional career requires ‘knowing how’ but a protean career also requires ‘know why’ and ‘know whom.’ Knowing why means understanding employer’s business and culture in order to apply knowledge and skills in a way that contributs to the business. Knowing whom means developing relationships that contrinute to employer’s success.

Changes in the economy have changed the development of the protean career. Employees need to develop new skills rather than rely on static knowledge base. This has resulted from companies need to be more responsive towards clients. To retain and motivate employees, companies need to provide a system to identify and meet the employees development needs. This is especially important to retain good performers and employees who have potential for managers’ positions. This system is often known as a career management system.


Career management system

A system to retain and motivate employees by identifying and meeting their development needs.

A Career Management System is also called a Development Planning System, and it is a long-term effort in which the organization helps the employees to utilize their full potential.


H.2 Approaches to employee development

The approaches to employee development involve formal education, assessment, job experiences, and interpersonal relationships. Although much development activity is targeted at managers, all levels of employees may be involved in the development.


Approaches to employee development consist of:

  1. Formal education;

  1. Assessment: collecting information and providing feedback to employees about their behaviour, communication style, or skills;

    1. Myers-Briggs Type Indicator: psychological test that identifies individuals’ preferences for source of energy, means of information gathering, way of decision making, and lifestyle, providing information for team building and leadership development;

    2. Assessment center: an assessment process in which multiple raters or evaluators (assessors) evaluate employees’ performance on a number of exercises, usually as they work in a group at an offsite location;

      1. Leaderless group discussion: an assessment centre exercise in which a team of five to seven employees is assigned a problem and must work together to solve it within a certain time period.

    3. Benchmarks assessment: a measurement tool that gathers ratings of a manager’s use of skills associated with success in managing;

    4. Performance appraisal: the process of measuring employees’s performance;

    5. 360 Degree Feedback: performance measurement by the employee’s supervisor, peers, employees and customers.


  1. Job experiences: the combination of relationships, problems, demands, tasks, and other features of an employee’s jobs;

    1. Job enlargement: involves adding challenges or

new responsibilities to employees’ current jobs;

  1. Job rotation: moving employees through a series of job assignments in one or more functional areas. Job rotation helps employees gain an appreciation for the companys’ goals, increases their understanding of different company functions, develops a network of contacts, and improves problem-solving and decision-making skills;

  2. Transfer: assignment of an employee to a position in a different area of the company, usually in a lateral move;

  3. Downward move: assignment of an employee to a position with less responsibility and authority;

  4. Promotion: assignment of an employee to a position with greater challenges, more responsibility, and more authority than in the previous job, usually accompanies by a pay increase;

  5. Externship: employee development through a full-time temporary position at another organization;

  6. Sabbatical: a leave of absence from an organization to renew or develop skills.


  1. Interpersonal relationships.

    1. Mentor: an experienced, productive senior employee who helps develop a less experienced employee;

    2. Coach: a peer or manager who works with an employee to motivate the employee, help him or her develop skills, and provide reinforcement and feedback.


A recent trend in performance appraisals for management development is the use of upward feedback which is a performance appraisal process for managers that includes subordinates evaluations and the 360-degree feedback. The 360 degree feedback system is a performance appraisal system for managers that include evaluations from a wide range of persons who interact with the manager. The process includes self-evaluations as well as evaluations from the managers’ boss. The raters complete a questionnaire asking them to rate the person on a number of different dimensions. The benefits of the 360 degree feedback include collecting multiple perspectives of managers’ performance, allowing employees to compare their own scores with others. Potential limitations of the 360 degree feedback include the time demands placed on the raters to complete the evaluation. Regardless of the assessment method, the information should be shared with employees for development to occur. Based on the assessment information and suggestions, the employee should develop an action plan to guide their self-improvements efforts.


To ensure that employees accept transfers, promotions and downward moves as development opportunities, companies can provide:

  • Information about the content, challenges and potential benefits of the new job and location;

  • Involvement in the transfer decision;

  • Clear performance objectives and early feedback about their job performance;

  • A host at the new location to help the employee to adjust;

  • Information about how the job opportunity will affect the employee;

  • Reimbursement and assistance in selling and purchasing or renting a place;

  • An orientation on how the job experiences will support the employees’ career plans;

  • Assistance for dependant family members.


Interpersonal relationships can be formed either with a mentor, who is an experienced productive senior employee who helps develop a less experienced employee; or a coach, who is a peer or manager who works with an employee to motivate her, help develop her skills and provide reinforcement and feedback. Mentoring relationships can also develop as a part of a planned company effort to bring together successful senior employees with less experienced employees.


Mentors provide career and psychosocial support to their protégés, mentoring relationships provide opportunities for mentors to develop their interpersonal skills and increase their feelings of self-esteem. The purpose of mentoring programs is that they socialise new employees, increase the likelihood of skill transfer and provide opportunities for minorities. The group mentoring program is a program pairing a successful senior employee with a group of four to six less experienced protégé’s.

The benefits of Mentoring involve career support through coaching, protection, sponsorship, and providing challenging assignments, exposure, and visibility. In addition, they include psychological support since the mentor is serving as a friend and role model, providing positive regard and acceptance, and creating an outlet for a protégé to talk about anxieties and fears. There are also additional benefits, such as promotion, higher salaries, and greater influence.


Action planning

Is the phase when employees determine how they will achieve their goals.


H.2 Systems for career management

A basic career management system involves four steps: self-assessment, reality check, goal setting and action planning.


Self assessment

The use of information by employees to determine their career interest, values, aptitudes, behavioral tendencies, and development needs.


Reality check

Information employers give employees about their skills and knowledge and where these assets fit into the organization’s plans.


H.3 Development-related challenges


Glass ceiling

Circumstances resembling an invisible barrier that keep most women and minorities from attaining the top jobs in organizations.


Succession planning

The process of identifying and tracking high potential employees who will be able to fill top management position when they become vacant.


Many companies are using succession planning which is the tracking and identification of high potential employees, capable of filling higher level managerial positions. This helps the company to review new leadership in the company. Not only employees need development but also managers. Managers can be very ineffective if they have the inability to be a team player or unable to meet business objectives. The solution to this is to develop action plans and implement them in daily work.


Part I: Separating and Retaining Employees


I.1 Managing (un)voluntary turnover

It is clear that many managers have been slow to pick up the relationship between retention and organisational performance. To compete effectively, organisations must take steps to ensure that good personnel is motivated to stay in the organisation and low performers leave the company. What needs to be done to retain employees involves compensation and benefits.


Involuntary turnover

Turnover initiated by an employer (often which employees who would prefer to stay).


Voluntary turnover

Turnover initiated by employees (often when the organization would prefer to keep them).


Replacing workers is expensive, and new employee need time to learn their jobs. In addition, people today are more ready to sue a former employer if they feel they were unfairly discharged. Effective human resource management can help the organization minimize both kinds of turnover, as well as carry it out effectively when necessary.


I.2 Employee separation

Despite the companies best efforts in the area of personnel selection and training, some employees will fail to meet performance requirements or will violate company policies while on the job. When this happens, organisations need to invoke a discipline program that could ultimately lead to the individuals discharge. Discharging employees can be a very difficult task and should be handled with care: there are legal aspects to this decision that can have an important impact on the discharging policy of the company.


Employment-at-will doctrine is a policy that allows for termination of an employee with or without a “good or just cause.” However, just because employers can, does not mean they should. In the absence of a specific contract, either an employer or employee could sever the employment relationship at any time. This doctrine has changed over time: now employees sue their employers when they are falsely discharged. This could be on the ground of violated implied contract, or violated public policy.


Violence in the workplace caused by involuntary turnover has become a major organizational problem in recent years. Therefore, a standardized, systematic approach to discipline and discharge is necessary. Employment-at-will is mostly used in the US and UK.


Outcome fairness

A judgment that the consequences given to employees are just.


Procedural justice

A judgment that fair methods were used to determine the consequences an employee receives.


Interactional justice

A judgment that the organization carried out its actions in a way that took the employee’s feelings into account.


Legal Requirements

The organization must also comply with the legal requirements in hiring and firing. For example, but employers must avoid wrongful discharge and illegal discrimination as well as meeting standards related to employees’ privacy and adequate notice of layoffs.


Hot-stove rule

Principle of discipline that says discipline would be like a hot stove, giving clear warning and following up with consistent, objective, immediate consequences.


Progressive discipline

A formal discipline process in which the consequences become more serious if the employee repeats the offense. This process fulfils the purpose of discipline by teaching employees what is expected of them and creating a situation in which employees must try to do what is expected.


Alternative dispute resolution (ADR)

Methods of solving a problem by bringing in an impartial outsider but not suing the court system. In general a system for alternative dispute resolution proceeds through the four stages:

  1. Open-door policy; an organization’s policy of making managers available to hear complaints;

  2. Peer review; process for resolving disputes by taking them to a panel composed of representatives from the organization at the same levels as the people in the dispute;

  3. Mediation; nonbinding process in which a neutral party from outside the organization hears the case and tries to help the people in conflict arrive at a settlement;

  4. Arbitration; binding process in which a professional arbitrator from outside the organization (usually a lawyer or judge) hears the case and resolves it by making a decision.


Employee assistance program (EAP)

A referral service that employees can use to seek professional treatment for emotional problems or substance abuse.

The terminal nature of an employee discharge not only leaves the person angry, it also leads to confusion on how to react. When the person has no where to go the potential for violence and litigation is higher. To help the employee manage the transition from one job to another the company provides outplacement counseling.


Outplacement counseling

A service in which professionals try to help dismissed employees manage the transition from one job to another.


I.3 Job withdrawal

A set of behaviors with which employees try to avoid the work situation physically, mentally, or emotionally.

Job withdrawal may take the form of behavior change, physical job withdrawal, or psychological withdrawal.


The causes of job dissatisfaction fall into four categories: personal dispositions, tasks and roles, supervisors and coworkers and pay and benefits.



The set of behaviors that people expect of a person in a particular job.


Role ambiguity

Uncertainty about what the organization expects from the employee in terms of what to do or how to do it.


Role conflict

An employee’s recognition that demands of the job are incompatible or contradictory.


Role overload

A state in which too many expectations or demands are placed on a person.


Every person in the company has a role what a company expects from an employee in terms of what to do and how to do it. Three aspects of organisational role stand out as significant influences on job satisfaction:

  • Role ambiguity uncertainty:

  • Role conflict:

  • Role overload.


The role problems can be solved through role analysis technique a method that enables a role occupant and other members of the role occupant’s role set to specify and examine their expectations for the role occupant.


Job involvement

The degree to which people identify themselves with their jobs.


Organizational commitment

The degree to which an employee identifies with the organization and is willing to put forth effort on its behalf.


Job involvement is the degree to which people identify themselves with their jobs. A second form of psychological disengagement is a lower level of organisational commitment this is the degree to which an employee identifies with the organisation and is willing to put forth effort on its behalf.



I.4 Job satisfaction

The key driver behind all the different forms of job withdrawal is job satisfaction.



Job satisfaction

The pleasurable feeling that results from the perception that one job fulfils or allows for the fulfilment of ones important job value. In sum, values, perceptions and ideas of what is important are the three components of job satisfaction.

Negative affective is a disposition dimension that reflects pervasive individual differences in satisfaction with any and all aspects of life. These people are more likely focus on negative aspects of themselves and others. It isn’t entirely clear where this feeling comes from. Another construct useful in understanding disposition aspects of job satisfaction is the notion of core self evaluations. Core self- evaluations have been defined as a basic positive or negative bottom line opinion that individuals hold about themselves.

The more positive an individual is about himself, the higher the job satisfaction will be because these people seek out jobs with more desirable characteristics. Job dissatisfaction can also be a result of private circumstances.


Job complexity

There is also a strong relationship between job complexity and job satisfaction. Boredom and simplicity, repetitive jobs that don’t challenge the worker lead to frustration and dissatisfaction. The second aspect of a task that affects job satisfaction is the degree to which the job involves physical strain and exertion. The third aspect is whether the job promotes something of value to the worker. Job enrichment add job rotation add complexity and meaningfulness to a person’s job or.


Supervisors and coworkers

The two primary people that affect job satisfaction are co-workers and supervisors. A person can be satisfied (or not) with these persons for three reasons:

  • The co-workers and supervisors have the same values as the employee;

  • The co-workers and supervisors provide social support to the employee;

  • The co-workers and supervisors helps attain some valued outcome for the employee.


Because a supporting environment helps attaining satisfaction with the job, many companies work in teams.


Role analysis technique

A process of formally identifying expectations associated with a role.


Pay and benefits

Another reason for job satisfaction is the pay and benefits the employer gets from working at that company. One standardised measure of dissatisfaction is the job descriptive index which emphasis among other things: pay, the work itself, supervision, co-workers and promotions.


Voicing is a formal opportunity to complain about one’s work situation.


Exit interview

A meeting of a departing employee with the employee’s supervisor and/or a human resource specialist to discuss the employee’s reasons for leaving.


The reasons for routinely surveying employee attitudes include the following:

  • It allows the company to monitor trends over time;

  • It provides a means of assessing change impacts in policy;

  • If a company uses a standardized scale, it can compare itself with others in the same industry;

  • If a company provides feedback and a corresponding action plan to deal with problems, dissatisfaction can become a plus.

Part J: Establishment of Pay Structures

J.1 Decisions about pay

From the employer’s point of view, pay is a powerful tool for meeting the organization’s goals. Pay has a large impact on employee attitudes and behaviors. It influences which kinds of employees are attracted to, and remain with the organization. By rewarding certain behaviors, it can align employees’ interests with the organization’s goals.

HR professionals develop pay structure based on legal requirements, market forces and the organization’s goals.


Pay structure: the pay policy resulting from job structure and pay-level decisions:

  • Job structure: the relative pay for different jobs within the organization;

  • Pay level: the average amount (including wages, salaries, and bonuses) the organization pays for a particular job.


J.2 Legal requirements for pay

Equal Employment Opportunity

Under the laws governing Equal Employment Opportunity, employers may not base differences in pay on an employee’s age, sex, race, or other protected status. Any differences in pay must instead be tied to such business-related considerations as job responsibilities or performance. The goal is for employers to provide equal pay for equal work. Job descriptions, job structures, and pay structures can help organizations demonstrate that they are upholding these laws


Minimum wage

The lowest amount that employers may pay under federal or state law, stated as an amount of pay per hour.


Fair Labour Standards Act (FLSA)

Federal law that establishes a minimum wage and requirements for overtime pay and child labour.


Exempt employees

Managers, outside salespeople, and any other employees not covered by the FLSA requirement for overtime pay.


Non-exempt employees

Employees covered by the FLSA requirements for overtime pay


Child Labor

The FLSA sharply restricts the use of child labor, with the aim of protecting children’s health, safety, and educational opportunities. The restrictions apply to children younger than 18.


Prevailing Wages

Two additional federal laws, the Davis-Bacon Act of 1931 and the Walsh-Healy Public Contracts Act of 1936, govern pay policies of federal contractors. Under these laws, federal contractors must pay their employees at rates at least equal to the prevailing wages in the area.


J.3 Economic influences on pay

Decisions about how to respond to the economic forces of product markets and labour markets limit an organization’s choices about pay structure.


Although labour and product markets limit organizations’ choices about pay levels, there is a range within which organizations can make decisions. The size of this range depends on the details of the organization’s competitive environment. If many workers are competing for a few jobs, employers will have more choice. Similarly, employers can be more flexible about pay policies if they use technology and work design to get better results from employees than their competitors do.



A procedure in which an organization compares its own practices against those of successful competitors.


J.4 Employee judgments about pay fairness

Employee’s opinion about fairness should be considered in developing a pay structure since this functions as a motivator.


Job evaluation

An administrative procedure for measuring the relative worth of the organizations’ jobs. Usually, the organization does this by assembling and training a job evaluation committee, consisting of people familiar with the jobs to be evaluated. The committee often includes a human resource specialist and, if its budget permits, may hire an outside consultant.


J.5 Job structure: relative value of jobs


Hay Guide-Chart Profile method

Method of job evaluation that creates a profile for each position based on its required know-how, degree of problem solving, and accountability. The Hay plan creates a profile for each position based on three variables:

  1. Know-how: the required skills, are of knowledge, and abilities;

  2. Problem solving; the required degree of analysis, creativity, and reasoning;

  3. Accountability; the level of responsibility and the job’s impact on the organization.


J.6 Pay structure


Piecework rate

Rate of pay for each unit produced.



Rate of pay for each week, month, or year worked.


Pay policy line

A graphed line showing the mathematical relationship between job evaluation points and pay rate.


Pay grades

Sets of jobs having similar worth or content, grouped together to establish rates of pay.


Pay ranges

A set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade.


Red-circle rate

Pay at a rate that falls above the pay range for the job.


Green-circle rate

Pay at a rate that falls below the pay range for the job.


Pay differential

Adjustment to a pay rate to reflect differences in working conditions or labour markets. Night hours are less desirable for most workers. Therefore, some companies pay a differential for night work to compensate them.



Reducing the number of levels in the organization’s job structure.


Skill-based pay systems

Pay structures that set pay according to the employees’ levels of skill or knowledge and what they are capable of doing.


Part K: Recognizing Employee Contributions


K.1 Incentive pay

The pay system must encourage behaviours that both contribute to profits in the short run and build customer satisfaction in the long run. Employees pay doesn’t solely depend on the job they are doing. Instead differences in performance are used as a basis for differentiating pay among the employees. Regardless of cost differences, different pay programs can have very different consequences for productivity and return on investment. Pay plans are usually used to energise, direct, or control employee behaviour.

Incentive pay

Forms of pay linked to an employee’s performance as an individual, group member, or organization member.


In general, employees compare their efforts and rewards with other employees’, considering a plan to be fair when the rewards are distributed according to what the employees contribute.


There are several theories of how pay influences individual employees:

  • According to the Reinforcement Theory, a response followed by a reward is more likely to recur in the future. The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely;


  • According to the Expectancy Theory, motivation is a function of valence, instrumentality, and expectancy. Behaviours can be described as a function of ability and motivation. The Expectancy Theory is a theory of motivation that holds that employees should exert greater work effort if they have reason to expect that it will result in a reward (for example pay) that they value. Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward. In practice, the expectancy theory works in the following way:

    • Expectancy: Effort will result in a level of performance;

      • Employees will work hard if they believe they can attain high performance — organizations must provide the resources that support performance.

    • Instrumentality: Performance leads to outcomes;

    • Workers are only motivated by pay if they think performance leads to pay outcomes — managers must link performance to pay outcomes.

    • Workers have preferences for outcomes — managers must determine if pay outcomes are valued.

    • Valence: How desirable pay is to a person.


  • According to the Agency Theory, the interests of the principals (owners) and their agents (managers) may not converge, producing agency costs. Agency theory focuses on the divergent interests and goals of the organisations. Agency costs may be minimized by the principal choosing a contracting scheme that helps align the interests of the agent with the interests of the principals, such as agents act in ways not beneficial to the principal (prerequisites, empire building), differences in risk preferences of principals and agents, or differences in decision-making horizons. The type of contract depends partly on the following factors: risk aversion, outcome uncertainty, job programmability, measurable job outcomes, ability to pay, and tradition.


The reinforcement, expectancy and agency theories all focus on the fact that behaviour reward contingencies can shape behaviours. However, agency theory is part of particular value in compensation management because of its emphasis on the risk-reward trade off, an issue that needs close attention when companies consider variable pay plans, which can carry significant risk. Different pay systems appear to attract different people. The design of compensation programs needs to be carefully co-ordinated with the business and human resource strategy.


There are three types of managers’ costs: managers can spend money on things not relevant to the stakeholders. Managers and stakeholders may differ in their attitudes towards risk. Decision making horizons may differ.

Agents are persons who are expected to act on behalf of a principal. Principals are persons who are seeking to direct another person’s behaviour. To minimise agent’s costs, the principal must choose a contracting scheme that helps align the interests of the agent with the principals own interests.


When deciding which type of contract to use, the following factors should be used:


  • Risk aversion among actors makes outcome orientated contracts less likely;

  • Outcome uncertainty;

  • Job programmability. As jobs become less programmable outcome orientated contracts become more likely because monitoring becomes more difficult;

  • Measurable job out comes;

  • Ability to pay;

  • Tradition of using outcome orientated contracts will make such contracts more likely.


K.2 Pay for individual performance


Piecework rate

A wage based on the amount workers produce


Straight piecework plan

Incentive pay in which the employer pays the same rate per piece, no matter how much the worker produces.


Differential piece rates

Incentive pay in which the piece rate is higher when a greater amount is produced. For example, the differential piece rate could be $1 per component for components exceeding 12 per hour and $.80 per component for up to 12 components per hour.


Standard hour plan

An incentive plan that pays workers extra for work done in less than a preset “standard time.”


Merit pay

A system of linking pay increases to ratings on performance appraisals.


Bonuses for individual performance can be extremely effective and give the organization great flexibility in deciding what kinds of behavior to reward.



Incentive pay calculated as a percentage of sales.

The nature of salespeople’s compensation also affects the kinds of people who will want to take and keep sale jobs with the organization. Hard-driving, ambitious, risk taking salespeople might enjoy the potential rewards of a straight commission plan. An organization that wants salespeople to concentrate on listening to customers and building relationships might want to attract a different kind of salesperson by offering more of the pay in the form of a salary.


K.3 Pay for group performance



Group incentive program that measures improvements in productivity and effectiveness and distributes a portion of each gain to employees.



Scanlon plan

A gainsharing program in which employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard.


K.4 Pay for organizational performance


Profit sharing

Incentive pay in which payments are a percentage of the organization’s profits and do not become part of the employee’ base salary.


If profit sharing is offered to all employees but most employees think only management decisions about products, price and marketing have much impact on profits, they will conclude that there is little connection between their actions and their rewards. In that case, profit-sharing plans will have little impact on employee behaviour.


Stock options

Rights to buy a certain number of shares of stock at a specified price.


Employee stock ownership plan (ESOP)

An arrangement in which the organization distributes shares of stock to all its employees by placing it in a trust.


Balanced scorecard

A combination of performance measures directed towards company’s long and short-term goals and used as the basis for awarding incentive pay.


Note I: a corporation would have financial goals to satisfy its stockholders (owners), quality- and price-related goals to satisfy its customers, efficiency goals to ensure better operations, and goals related to acquiring skills and knowledge for the future to fully tap into employees’ potential. Different jobs would contribute to those goals in different ways.

Note II: not only does the balanced scorecard combine the advantages of incentive-pay plans, it helps employees understand the organization’s goals. By communicating the balanced scorecard to employees, the organization shows employees information about what its goals are and what it expects employees to accomplish.


Extra note on Balanced Scorecard: the four categories of a balanced scorecard include financial, customer, internal learning and growth. The balanced scorecard is a means of performance measurement that gives managers a chance to look at their company from the perspective of internal and external customers, employees and shareholders. It shows what company aspects need to be focused on, and in which degree stakeholders are satisfied. Growth, customer satisfaction, time to launch new products and employee satisfaction are part of the things found on the card. The critical indicators are based on the business strategies and competitive demands. Employees also use the card so they can see the goals and strategies of the company and how this is measured. It gives them information about the company and its products. When evaluating the employees’ performance, the card is also used and this information is shared with the employee. HRM is using the card to see how the activities are linked to the company’s business strategy, and to evaluate the extent to which the HRM function is helping the company meet its strategic objectives. The measurements relate to productivity output divided by the input, people assessing behaviour, knowledge and processes; which is focusing on employee satisfaction.


Short-term incentive include bonuses based on the year’s profits, return on investment, and other measures related to the organization’s goals. Long-term incentives include stock options and stock purchase plans.


Part L: Employee Benefits


L.1 The role of employee benefits

Like pay, benefits help employers attract, retain, and motivate employees.


Employee benefits

Compensation in forms other than cash


The variety of possible benefits also helps employers tailor their compensation packages to attract the right kinds of employees. Employees ex­pect at least a minimum level of benefits, and providing more than the minimum helps an organization compete in the labor market. Benefits are also a significant ex­pense, but employers provide benefits because employ­ees value them and many benefits are required by law.


Benefits are a part of total compensation but they have unique aspects. First there is the question of legal compliance. Although direct compensation is subject to government regulation, the scope and impact of regulation on benefits is far greater. Law mandates some benefits, like social security. Others are mandated by regulations like pensions and savings. The heavy involvement of government in benefits decision reflects the central of benefits play in maintaining economic security. A second unique aspect of benefits is that organisations typically offer them that they have come to be institutionalised. A third unique aspect of benefits compared with other forms of compensation is their complexity.


The benefits have grown over the years because of laws, wage and price controls, and the tax treatment of benefits programs is often more favourable for employees than the tax treatment of wages and salaries. The marginal tax rate is the percentage of an additional dollar of earnings that goes to taxes. Deferring compensation until retirement allows the employee to receive cash, but ate the time when the employer’s tax rate is sometimes lower because of a lower income level. Organisations that represent large groups of employees can purchase insurance at lower rate because of economies of scale, which spread fixed costs over more employees to reduce the costs per person.


As a part of the total compensation paid to employees, benefits serve functions similar to pay. Benefits contribute to attracting, retaining, and motivating employees.


The variety of possible benefits also helps employers tailor their compensation to the kinds of employees they need. Different employees look for different types of benefits. Employers need to examine their benefits package regularly to see whether they meet the needs of today. At the same time, benefits packages are more complex than pay structures, so benefits are harder for employees to understand and appreciate. Employers need to communicate effectively so that the benefits succeed in motivating employees.


L.2 Benefits required by law

The federal and state governments require various forms of social insurance to protect workers from the financial hardships of being out of work. In general, Social Security provides support for retired workers, unemployment insurance assists laid-off workers, and workers’ compensation insurance provides benefits and services to workers injured on the job. Employers must also provide unpaid leave for certain family and medical needs. Because these benefits are required by law, employers cannot gain an advantage in the labor market by offering them, nor can they design the nature of these benefits. Rather, the emphasis must be on complying with the details of the law.


Unemployment insurance

A federally mandated program to minimize the hardships of unemployment through payments to unemployed workers, help in finding new jobs, and incentives to stabilize employment.


Experience rating

The number of employees a company has laid off in the past and the cost of providing them with unemployment benefits.


Workers’ compensation

State programs that provide benefits to workers who suffer work-related injuries or illnesses, or to their survivors.


L.3 Optional benefits programs

Paid Leave

The major categories of paid leave are vacations, holidays, and sick leave. Employers also establish policies for other situations that may require time off.


Group Insurance

When employees receive insurance as a benefit, rather than higher pay so they can buy their own insurance, employees can get more for their money.


Medical Insurance

Consolidated Omnibus Budget Reconciliation Act (COBRA): Federal law that requires employers to permit employees or their dependents to extend their health insurance coverage at group rates for up to 36 months following a qualifying event, such as a layoff, reduction in hours, or the employee’s death.


Health maintenance organization (HMO)

A health care plan that requires patients to receive their medical care from the HMO’s health care professionals, who are often paid a flat salary, and provides all services on a prepaid basis. Note; the premiums paid for the HMO cover all the patient’s visits and procedures, without an additional payment from the patient. By paying physicians a salary, rather than a fee for each service, the HMO hopes to remove any incentive to provide more services than the patients really need. HMO coverage tends to cost less than traditional health insurance.


Preferred provide organization (PPO)

A health care plan that contracts with health care professionals to provide services at a reduced fee and gives patients financial incentives to use network providers.


Flexible spending account

Employee-controlled pre-tax earnings set aside to pay for certain eligible expenses such as health care expenses during the same year.


Employee wellness program (EWP)

A set of communications, activities, and facilities designed to change health-related behaviors in ways that reduce health risks.


Short-term disability insurance

Insurance that pays a percentage of a disabled employee’s salary as benefits to the employee for six months or less.


Long-term disability insurance

Insurance that pays a percentage of a disabled employee’s salary after an initial period and potentially for the rest of the employee’s life.


Retirement Plans

Contributory plan

Retirement plan funded by contributions from the employer and employee.


Non-contributory plan

Retirement plan funded entirely by contributions from the employer.


Defined benefit plan

Pension plan that guarantees a specified level of retirement income.


Employee Retirement Income Security Act (ERISA) Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation.


Defined contribution plan

Retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account.


Cash balance plan

Retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee’s salary; the account earns interest at a predefined rate.


Vesting rights

Guarantee that when employees become participants in a pension plan and work a specified number of years, they will receive a pension at retirement age, regardless of whether they remained with the employer.


Summary plan description

Report that describes a pension plan’s funding, eligibility requirements, risks, and other details.

A defined benefit plan guarantees a specified retirement benefit level to employees based typically on a combination of years of service and age as well as on the employees’ earnings level. Defined plans insulate employees from investment risk that is borne by the company. In the event of severe financial difficulties that force the company to terminate or reduce employee pension benefits. To manage the benefits, the company compares their benefits plans with those of the competitors using information of consultants. The costs have to be controlled to do this you have to consider some factors:

  • The larger the cost of a benefit category, the greater the opportunity for savings;

  • The growth of the benefit category is also important even if costs are currently acceptable the rate of growth may result in serious costs in the future;

  • Cost containment efforts can only work to the extent that the employer has significant discretion in choosing how much to spend in a benefit category.


Unlike defined benefit plans, defined contribution plans do not promise a specific benefit level for employees upon retirement. Rather an individual account is set up for each employee with guaranteed size of contribution. The advantage of such plans for employers is that they shift investment risk to employees and present fewer administrative challenges because there is no need to calculate payments based on age and service and no need to make payments to the PBGC. There is a wide variety of defined contribution plans one of them is the money purchase plan under which an employer specifies a level of annual contribution. At retirement age, the employee is entitled to the contributions and the investment returns. Profit sharing plans and employee stock ownership plans are also often used as retirement vehicles.


Summary plan description: a reporting requirement of the employee retirement income security act that obligates employers to describe the plan’s funding, eligibility requirements risks and so forth within 90 days after an employee has entered the plan.


The major categories of paid leave are vacations, holi­days, and sick leave. Although vacation and other paid leave programs help attract and retain employees, there is a cost to providing time off with pay especially in a global economy. Paid time-off may seem uneco­nomical, which may be the reason U.S. employers tend to offer much less vacation time than is common in Western Europe. At large U.S. companies, paid vaca­tion is typically 10 days. The typical number of paid holidays is 10 in both Western Europe and the United States. Sick leave programs often provide full salary re­placement for a limited period of time, with the amount of sick leave usually based on length of service. Policies are needed to determine how the organization will han­dle unused sick days at the end of each year. Some or­ganizations let employees roll over some or all of the unused sick days into the next year, and others let un-used days expire at the end of the year. Other forms of paid leave include personal days and floating holidays. The employer pays the employee for time not spent working, receiving no tangible production value in return.

Therefore some employers may see little direct advantage. Sick programs often provide full salary replacement for a limited period of time, usually not exceeding 26 weeks. The amount of sick leave is often based on length of service, accumulating with service. Sick leave policies need to be carefully structured to avoid providing employees with the wrong incentives. Some organisations allow sick days to accumulate and then pay employee for these days.


Employers must contribute to the Old Age, Survivors, Disability, and Health Insurance program known as Social Security through a payroll tax shared by em­ployers and employees. Employers must also pay federal and state taxes for unemployment insurance, based on each employer's experience rating, or percentage of employees a company has laid off in the past. State laws require that employers purchase workers' compen­sation insurance.


To ease employers’ conflicts between work and non work organisations, firms may use family and friendly policies such as family leave policies and childcare. Employers have responded to work-family role conflicts by offering family-friendly benefits, including paid fam­ily leave, child care services or referrals, college savings plans, and elder care information and support. Under the Family and Medical Leave Act, employees who need to care for a baby following birth or adoption or for an ill family member must be granted unpaid leave of up to 12 weeks. Companies increasingly provide some form of child care support to their employees. This support comes in several forms that vary in their degree of organisation involvement. At the lowest level of support the company only gives information. At a higher level the company gives discounts to use at existing child care facilities. At the highest level the company provides a day care centre itself.


Retirement plans may be contributory, meaning funded by contributions from employer and employee, or non-contributory, meaning funded only by the employer. These plans may be defined benefit plans, which guar­antee a specified level of retirement income, usually based on the employee's years of service, age, and earn­ings level. Benefits under these plans are protected by the Pension Benefit Guarantee Corporation (PBGC). An alter­native is to set up a defined contribution plan, such as a 401(k) plan. The employer sets up an individual ac­count for each employee and guarantees the size of the investment into that account, rather than the amount to be paid out on retirement. Because employees have control over investment decisions, the organization may also offer financial planning services as an employee benefit. A cash balance plan combines some advantages of defined benefit plans and defined contribution plans. The employer sets up individual accounts and con­tributes a percentage of each employee's salary. The ac­count earns interest at a predetermined rate, so the con­tributions and benefits are easier to predict.


L.4 Selecting employee benefits


Cafeteria-style plan

A benefits plan that offers employees a set of alternatives from which they can choose the types and amounts of benefits they want. For example, some plans let employees give up vacation days for more pay or to purchase extra vacation days in exchange for a reduction in pay.


Legal Requirements for Employee Benefits

Some benefits are required by law. This requirement adds to the cost of compensating employees, thus organizations looking for ways to minimize staffing costs may look for ways to structure the workforce so as to minimize the expense of benefits.


Tax Treatment of Benefits

The IRS provides more favorable tax treatment of benefits classified as qualified plans. To obtain status as a qualified plan, a benefit plan must meet certain requirements, e.g. in the case of pensions, these involve vesting and nondiscrimination rules.


In the design of employee benefits programs, the organization should be aware of the antidiscrimination laws and the applicable accounting requirements of their country.


L.5 Communicating benefits to employees

Communicating information about benefits is impor­tant so that employees will appreciate the value of their benefits. Communicating their value is the main way benefits attract, motivate, and retain employees. Employers have many options for communicating in­formation about benefits, such as brochures, meetings, intranets, memos, and e-mail. Using a combination of such methods increases employees' understanding.



Part M: Labour Relations and Collective Bargaining


M.1 Role of unions and labor relations



Organizations formed for the purpose of representing their members’ interests in dealing with employers. Labour unions represent workers interest and the collective bargaining process provides a way to mange the conflict. In other words, through systems for hearing complaints and negotiating labour contracts, unions and mangers resolve conflicts between employers and employees.


Labour relations

Field that emphasizes skills managers and union leaders can use to minimize costly forms of conflict (such as strikes) and seek win-win solutions to disagreements. Labour relations involves three levels of decisions:

  1. Labour relations strategy. For management, the decision involves whether the organization will work with unions or develop (or maintain) non-union operations. For unions, the decision involves whether to fight changes in how unions relate to the organization or accept new kinds of labour-management relationships;

  2. Negotiating contracts;

  3. Administering contracts.


Craft union

Labour union whose members all have a particular skill or occupation.


Industrial union

Labour union whose members are linked by their work in particular industry.


Most national unions consist of multiple local units. Even when a national union plays the most critical role in negotiating the terms of a collective bargaining contract, negotiation occurs at the local level for work results and other issues that are locally determined.



American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)

An association that seeks to advance the shared interests of its member unions at the national level. Approximately 55 national and international unions are affiliated with AFL-CIO.


Union steward

An employee elected by union members to represent them in ensuring that the terms of the labour contract are enforced.

On average, unionized workers receive higher pay than their nonunionized counterparts, and the pressure is greater because of international competition.

Trends in Union Membership

The decline in union membership has been attributed to the following factors:

  • Change in the structure of the economy

  • Management efforts to control costs

  • Human resource practices

  • Government regulation


Unions in Government

Union membership among government workers has remained strong despite its decline in other sectors.


M.2 Goals of each group


Checkoff provision

Contract provision under which the employer, on behalf of the union, automatically deducts union dues from employees’ pay checks:

  • Closed shop: union security arrangement under which a person must be a union member before being hired;

  • Union shop: union security arrangement that requires employees to join the union within a certain amount of time (30 days) after beginning employment;

  • Agency shop: union security arrangement that requires the payment of union dues but not union membership;

  • Maintenance of membership: union security rules not requiring union membership but requiring that employees who join the union remain members of a certain period of time.


M.3 Laws and regulations


National Labor Relations Act (NLRA)

Federal law that supports collective bargaining and sets out the rights of employees to form unions.


Right-to-work laws

State laws that make union shops, maintenance of membership, and agency shop illegal.


Unions begin their involvement with an organization’s employees by conducting an organizing campaign. To meet its objectives, a union needs to convince a majority of workers that hey should receive better pay or other employment conditions and that the union will help them do so.


National Labor Relations Board (NLRB)

Federal government agency that enforces the BLRA by conducting and certifying representation elections and investigating unfair labor practices. It does not initiate either of these actions but responds to requests for action.



M.4 Union organizing


Associate union membership

Alternative form of union membership in which members receive discounts on insurance and credit cards rather than representation in collective bargaining.


Corporate campaigns

Brining public, financial, or political pressure on employers during union organization and contract negotiation.


M.5 Collective bargaining

Negotiation between union representatives and management representatives to arrive at a contract defining conditions of employment for the term of the contract and to administer that contract.


Clearly, the outcome of contract negotiations can have important consequences for labour costs, productivity, and the organization’s ability to compete. Therefore, unions and management need to prepare carefully for collective bargaining. Preparation includes establishing objectives for the contract, reviewing the old contract, gathering data, predicting the likely demands to be made, and establishing the cost of meeting the demands.



A collective decision by union members not to work until certain demands or conditions are met.



Conflict resolution procedure in which a mediator hears the views of both sides and facilitates the negotiation process but has no formal authority to dictate a resolution.


Fact finder

Third party to collective bargaining who report the reasons for a dispute, the views and arguments of both sides, and possibly a recommended settlement, which the parties may decline.



Conflict resolution procedure in which an arbitrator or arbitration board determines a binding settlement.


M.6 Contract administration

Grievance procedure

The process for resolving union-management conflicts over interpretation or violation of a collective bargaining agreement. A grievance procedure may be started by an employee or discharged employee who believes the employer violated the contract or by a union representative on behalf of a group of workers of union representatives.



Part N: Managing Human Resources Globally


N.1 HRM in global environment


Parent country

The country in which an organization’s headquarters is located.


Host country

A country (other than the parent country) in which an organization operates a facility.


Third country

A country that is neither the parent country nor the host country of an employer.



Employees assigned to work in another country.


International organization

An organization that sets up one or a few facilities in one or a few foreign countries.


Multinational company

An organization that builds facilities in a number of different countries in an effort to minimize production and distribution costs.


Global organization

An organization that chooses to locate a facility based on the ability to effectively, efficiently, and flexibly produce a product or service, using cultural differences as an advantage.


Transnational HRM system

Type of HRM system that makes decisions from a global perspective, includes managers from many countries, and is based on ideas contributed by people representing a variety of cultures.


N.2 Factors affecting HRM in international markets:

  1. Culture;

  2. Education and skill levels;

  3. Economic system;

  4. Political-legal system.


N.3 HR planning in a global economy

Decisions about where to locate include HR considerations such as the cost and availability of qualified workers. In addition, HR specialists must work with other members of the organization to weigh theses considerations against financial and operational requirements.


N.4 Selecting employees in a global labor market


Culture shock

Disillusionment and discomfort that occur during the process of adjusting to a new culture.


Virtual expatriates

Employees who manage an operation abroad without permanently locating in the country.

Developers of effective training programs for an international workforce must ask certain questions. The first is to establish the objectives for the training and its content. Decisions about the training should support those objectives.


The developers should next ask what training techniques, strategies, and media to use. Next, the developers should identify any another interventions and conditions that must be in place for the training to meet its objectives. Finally, the developers of a training program should identify who in the organization should be involved in reviewing and approving the training program. The plan for the training program must consider international differences among trainees.


N.5 Training and developing a global workforce


Cross-cultural preparation

Training to prepare employees and their family members for an assignment in a foreign country.


The general principles of performance management may apply in most countries, but the specific methods that work in one country may fail in another. Therefore, organizations have to consider legal requirements, local business practices, and national cultures where they establish performance management methods in other countries.


Compensating an International Workforce

Issues regarding compensation (decisions about pay structure, incentive pay, and employee benefits) become more complex when an organization has an international workforce.


International Labor Relations

Companies operating across national boundaries also need to work with unions in more than one country. The day-to-day decisions about labor relations are usually handled by each foreign subsidiary. The reason is that labor relations on an international scale involve differences in laws, attitudes, and economic systems, as well as differences in negotiation styles.


N.6 Managing expatriates



The process of preparing expatriates to return home from a foreign assignment.

Two activities help the process along: communication and validation.


Part O: Creation and Maintenance of High-Performance Organizations


O.1 High-performance work systems

HR managers need business competence knowing the company’s business and understanding its economic financial capabilities. They have to make logic decisions in order to support the business strategy based on accurate information. The HR manager must be fully capable of identifying the social and ethical issues attached to HRM practices. Second the HR manager needs professional technological knowledge which means the newest efficient ways to operate to get and keep the best employees. This involves hiring, rewarding, staffing, organisational design, development, performance and incentive plans. The HR manager also needs to be skilled in management of change process: diagnosing problems, implementing change and evaluating results. Furthermore, the HR manager needs to have integration competence next to knowledge implementing and integrating the competencies is necessary. The new HRM role has presented both opportunities and challenges.


High-performance work system

The right combination of people, technology, and organizational structure that makes full use of the organization’s resources and opportunities in achieving its goals.

Note: to function as a high-performance work system, each of these elements must fit well with the others in a smoothly functioning whole.


Outcomes of a high-performance work system thus include higher productivity and efficiency. These outcomes contribute to higher profits. A high-performance work system may have other outcomes, including high product quality, great customer satisfaction, and low employee turnover. Some of these outcomes meet intermediate goals that lead to higher profits. For example, high quality contributes to customer satisfaction, and customer satisfaction contributes to growth of the business.

O.2 Conditions that contribute to high performance


Learning organization

An organization that supports lifelong learning by enabling all employees to acquire and share knowledge. A learning organization involves:

  • Continuous learning: refers to each employee's and each group's ongoing efforts to gather information and apply the infor­mation to their decisions in a learning organization;

  • Generation and sharing of knowledge;

  • Thinking that is critical and systematic;

  • A culture that values learning;

  • Encouragement of flexibility and experimentation;

  • Appreciation of the value of each employee.


A condition underpinning any high-performance organization is that employee’s experience job satisfaction-they experience their jobs as fulfilling or allowing them to fulfill important values. Research supports the idea that employees’ job satisfaction and job performance are related.


Management of human resources plays a critical role in determining companies’ success in meeting the challenges of a rapidly changing, highly competitive environment. Compensation, staffing, training and development, performance management, and other HRM practices are investments that directly affect employees’ motivation and ability to provide products and services that are valued by customers.


In a high-performance organization, em­ployees experience job satisfaction or even 'occupa­tional intimacy.' For long-run high performance, or­ganizations and employees must be ethical as well.



The fundamental principles, by which employees and companies interact, these principles should be a part of the base of decisions made by a company and day-to-day values.

To serve the customer the best way a company should act responsible and ethical in their relationships with customers, vendors and clients for mutual benefit. Human resource practices can only be considered as ethical if they meet these three standards:

  1. HRM should work for the greatest good for the majority;

  2. Fair and equitable;

  3. There has to be mutual understanding and respect for beliefs, basic human rights, and personal values.


Ethical and successful organizations have four principles:

  • They emphasize mutual benefits;

  • They assume responsibility for their actions;

  • They create a sense of purpose or vision that employees value and will attempt to reach;

  • They emphasize fairness.


O.3 HRM’s contribution to high performance

One of the tasks of HRM is job determination: how work should be done (part of strategy formulation). How a job is done and assigned in an organisational structure is influenced by the way a company competes. When a company wants to compete via low-cost strategy it needs to maximise efficiency. Efficiency is maximised by breaking jobs down so that low wage workers can easily do them. Eliminating any redundancy of support services also enhances it, so that jobs are structured into functional clusters where everyone in the cluster is performing similar work. People working together in this way learn a great deal about the function and can increase efficiency via continuous evolutionary improvements. If the company want to compete via innovation, it needs to maximise flexibility.

Flexibility is maximised by aggregating work into larger, holistic pieces that are executed by teams of higher wage and higher skilled workers. Flexibility is also enhanced by giving the units their own support systems and decision-making authority in local markets. People working together in these cross-functional clusters generate a greater number of creative and novel ideas that can be leveraged into more discontinuous, revolutionary improvements. There is no one best way to design jobs and structure organisations. The organisation needs to create a fit between its environment, competitive strategy and philosophy and the jobs and goals on the other hand.

Jobs should be designed to foster teamwork and em­ployee empowerment. Recruitment and selection should focus on obtaining employees who have the qualities necessary for teamwork, empowerment, and knowledge sharing. When the organization selects for teamwork and decision-making skills, it may have to provide training in specific job tasks. Training also is important because of its role in creating a learning organization. The performance management system should be related to the organization's goals, with a fo­cus on meeting internal and external customers' needs.


Performance management

The process of ensuring that employees' activities and outputs match the organization's goals. Performance management is used to ensure that employee activity and outcomes meet the organisations objectives. The quantity but also the quality of work has to be checked.

To perform the best way it is necessary to exactly know how work should be performed. To make performance management systems support organizational goals, one must:

  1. Define and measure performance in precise terms;

  2. Link performance measures to meeting customer demands;

  3. Measure and correct for the effect of situational constraints.


Compensation should include links to performance, and employees should be included in decisions about compensation. Research suggests that it is more effec­tive to improve HRM practices as a whole than to fo­cus on one or two isolated practices.


Transaction processing

Computations and calculations involved in reviewing and documenting HRM decision and practices.


Decision support systems

Computer software systems designed to help managers solve problems by showing how results vary when the manger alters assumptions or data (forecasting and succession planning).


Expert system

Computer systems that support decision making by incorporating the decision rules used by people who are considered to have expertise in a certain area.


HR Dashboard: A display of a series of HR measures, showing human resource goals and objectives and progress toward meeting them.


Human Resource Management Online: E-HRM

During the last decade or so, organizations have seen the advantages of sharing information

in computer networks. The widespread adoption of the Internet has linked people around the globe and more and more organizations are engaging in e-HRM, providing HR-related information over the Internet. Because much human resource information is confidential, organizations may do this with an intranet, which uses Internet technology but allows access only to authorized users (such as the organization’s employees). For HR professionals, Internet access also offers a way to research new developments


O.4 Effectiveness of HRM


HRM audit

A formal review of the outcomes of HRM functions, based on identifying key HRM functions and measures of business performance.

After the effectiveness of the HRM is determined the managers of the HRM can evaluate how to improve effectiveness and efficiency they can do so by redesigning the structure. For HRM to be involved in a strategic way the managers of HRM have to be part of the top management. According to a generic structure HRM is divided in three divisions the centres for expertise, the field generalists and the service centre. The centres for expertise usually consist of the functional specialists in the traditional areas of HRM expertise like recruitment, selection training and compensation.

The field generalists consist of the HRM generalists who are assigned to a business unit within the firm. The service centre consists of individuals who ensure that the transactional activities are delivered throughout the organisation.

In addition to structural arrangements, process redesign enables HRM function to be more effective and efficient. Reengineering is the review and redesign of work processes to make them more efficient and improve the quality of the end product or service. The strategic decision making process for the HRM function requires that decision makers have a good sense of effectiveness of the current HRM function. This information provides the foundation for decision regarding which processes and systems need to be improved. Having good measures of the function’s effectiveness provides these benefits of marketing the function and providing accountability.

Part P: Sample Exam Questions

Open Questions

1. Discuss the following: “Performance appraisal is a core feature of systems to manage individual performance'

Because the questions asks you to ‘discuss the following’, your answer should include an indication of:

  • Whether or not you agree that performance appraisal is a core feature of systems to manage individual performance.

  • If you agree, explain why is it a core feature? In what ways is it a core feature?

  • If you disagree, explain why is it not a core feature?

You should also include any extra material of relevance to the question that you have gathered:

  • On performance appraisal

  • On systems of performance management

  • On any other relevant issue that allows you to discuss the question fully.


2. What is performance appraisal, and what methods can organisations use to appraise performance?

Your answer should include at least information of what performance appraisal is, including relevant definitions or approaches you have learned about during the course. Your answer should also include at least a list of methods of performance appraisal and how they work.

You should also include any extra material of relevance to the question that you have gathered:

  • On performance appraisal

  • On methods of performance appraisal.

  • On any other relevant issue that allows you to discuss the question fully.


Multiple Choice Questions

1. In the area of Human Resource Planning, the Census method is

  1. An analysis of leavers over a very long period of time

  2. An analysis of leavers over a reasonably short period of time

  3. An analysis of leavers as a group with similar characteristics

  4. An analysis of employees who job-share


2. In terms of Employee Relations Processes, Unilateral Action means that

  1. Workers and trade unions decide

  2. Management decides

  3. Trade unions and management decide

  4. The Government and trade unions decide


3. According to Torrington, Hall and Taylor (2002), which of the following selection methods

as rated as the most popular by students?

  1. Executive Search Consultants

  2. Commercial employment agencies

  3. Visiting universities

  4. Job centres


4. Marital status, income and religion are all described as

  1. Primary dimensions of diversity

  2. Secondary dimensions of diversity

  3. Personality dimensions of diversity

  4. Vertical dimensions of diversity


Answers multiple choice

1 b

2 b

3 c

4 b


  1. Successful total quality management organizations include all but one of the following HRM practices. Name the exception.

Specific job descriptions

  1. Which is not a standard that human resource managers must satisfy for practices to be ethical?

Managers must treat employees as family


  1. According to Guest 1987, the employee relations perspective associated with Human Resource Management is

Unitarist, individual, high trust


  1. Which is not one of the five important variables used to determine success in strategy implementation?

Customer awareness


  1. IBM has consistently emphasized its brand image and its reputation for superior service while charging a higher price for its computers. This is an example of which one of Porter's generic strategies?



  1. According to Wood (1999), “internal fit”, also known as “horizontal fit”, refers to

The fit between HR practices


7. A common error in performance rating is one where the manager lets the score on one measure influence the score on all other measures. How is this type of error referred to in Noe et al. (2006)?

Halo and horns


Glossary Part A


  • HRM
  • Competitiveness
  • Effectiveness
  • Human capital
  • Sustainable competitive advantage : HR are valuable, rare, cannot be imitated and have no good substitutes.
  • High-performance work system


  • HR department: analyzing and designing jobs, recruiting and selection, training and development, performance management, compensation and benefits, employee relations, personnel policies, compliance with laws and support for strategy.
  • Top 10 skills employers are looking for: communication skills, honesty/integrity, interpersonal skills, strong work ethic, teamwork skills, analytical skills, motivation/inititative, flexibility/adaptability, computer skills and detail orientation.


  • Skills of HRM professionals: human relations skills, decision-making skills, leadership skills and technical skills.
  • The amount of time that the HRM function devotes to administrative tasks is decreasing and its roles as a strategic business partner, change agent, and employee advocate are increasing.


  • HR responsibilities of supervisors


  • Ethics
  • Employee rights: right of free consent, right of privacy, right of freedom of speech, right of freedom of conscience and right to due process.
  • Standards for ethical behavior
  • For HR practices to be considered ethical, they must satisfy the three basic standards

Glossary Part B


  • Change in the labor force: an aging workforce, a diverse workforce and skill deficiencies in the workforce.
  • Internal labour force
  • External labour market


  • High-performance work systems
  • Trends in high-performance work systems: knowledge workers, employee empowerment, teamwork and virtual teams.


  • Focus on strategy
  • The strategic issues facing HRM include: high quality standards, mergers and acquisitions, downsizing, reengineering, outsourcing and expanding into global markets.


  • Human resource information system (HRIS)
  • Electronic business (e-business)
  • Electronic human resource management (e-HRM)
  • Sharing of human resource information: self-service


  • Psychological contract
  • Alternative work arrangements: independent contractors, on-call workers, temporary workers and contract company workers.

Glossary Part C


  • Work flow design
  • Position
  • Job
  • Work flow analysis


  • Job analysis: training, performance appraisal, career planning and job evaluation.
  • In job analysis two types of information are useful: job description and job specification.
  • Sources of job information: position analyses questionnaire (PAQ), task analysis inventory and fleishman job analysis system.
  • Trends in job analysis


  • Job design: design for efficiency (industrial engineering), design for motivation, job enlargement (job extension and job rotation), job enrichment, self-managing work teams, flexible work schedules (job sharing and flextime), telework, design for safety and design for mental capacity.
  • Job redesign
  • Job Characteristics Model: skill variety, task identity, task significance, autonomy and feedback.

Glossary Part D


  • Two of the major ways that societal trends and events affect employers are through: consumer markets and labour markets.
  • Human resource planning consists of three stages: forecasting (trend analysis, leading indicators, statistical planning models, transitional matrix), goal setting (downsizing, early retirement, temporary employment, outsourcing) and program implementation and evaluation.
  • Core competency


  • Recruiting


  • Personnel policies: internal versus external recruiting, meeting or exceeding the market rate of pay (lead-the-market pay strategies), employment-at-will policies (due-process policies) and image advertising.


  • Recruitment sources: internal sources (job posting), external sources (direct applicants, referrals, nepotism, newspaper and magazine advertising, electronic re­cruiting, public employment agencies, private employment agencies and another inexpensive channel is schools and colleges.
  • Evaluating the quality of a source: yield ratio and cost per hire


  • Recruiter traits and behavior
  • Realistic job preview

Glossary Part E


  • Selection process: screening applications and resumes, testing and reviewing work samples, interviewing candidates, checking references and background and making a selection.
  • Personnel selection
  • Criteria for evaluating selection methods: reliability (correlation coefficients), validity (criterion-related validity, predictive validation, concurrent validation, content validity, construct validity, generalizability, utility and legality.


  • Employment tests: aptitude tests and achievement tests
  • Physical ability tests
  • Cognitive ability tests: verbal comprehension, quantitative ability, reasoning ability, memory and numerical ability.
  • Assessment center
  • Personality tests
  • ‘Big Five’ traits: extroversion (sociable, gregarious, assertive, talkative, expressive), adjustment (emotionally stable, non-depressed, secure, content), agreeableness (courteous, trusting, good-natured, tolerant, cooperative), conscientiousness (dependable, organized, persevering, thorough) and inquisitiveness (curious, imaginative, broadminded, playful).
  • Medical examinations


  • Interviews: structured interviews (situational interviews and behavior description interview (BDI)), less structured interviews, unstructured interviews and panel interview.


  • Selection decisions: multiple-hurdle model and compensatory model

Glossary Part F


  • Training can increase employees’ knowledge of foreign competitors and cultures, which is critical for success in foreign markets, help ensure that employees have the basic skills to work with new technologies such as robots and computer assisted manufacturing processes, help employees understand how work effectively in teams to contribute to product and service quality, ensure that the company’s culture emphasises innovation, creativity and learning, ensure employment security by providing new ways for employees to contribute to the company when their jobs change, their interests change or their skills become obsolete and prepare employees to accept and work more effectively with each other, particularly with minorities and women.
  • Intellectual capital
  • High leverage training
  • Continuous learning
  • The learning organization
  • System level learning
  • Instructional design: asses needs for training, ensure employees’ readiness for training, plan training program, implement training program and evaluate results of training.


  • Needs Assessment: organization, person and task


  • Ensuring employees’ readiness for training
  • Planning the training program: a statement of what the employee is expected to do, a statement of the quality or level of performance and a statement of the conditions under which the trainee is expected to perform the desirable outcome.
  • Request for proposal (RFP)
  • Presentation methods
  • Hands-on methods
  • Group building methods

F. 4

  • Training methods: classroom instruction, audiovisual training, computer-based training (Electronic Performance Support Systems (EPSSs) and e-learning), on-the-job learning (apprenticeship and internship), simulation (virtual reality), business games and case studies, behavior modeling, experiential programs (adventure learning), team training (cross-training, coordination training and team leader training) and action learning.


  • Employees are most likely to learn when training is linked to their current job experiences and tasks.
  • The motivation to learn is the desire of the trainee to learn the content of the training program.
  • The training has to be meaningful to the employer to make it easy to learn.


  • Training outcomes can be categorised: cognitive outcomes, skill based outcomes, affective outcomes, reaction outcomes, results and return on investment.
  • Evaluation of training programs: pretest/posttest with comparison group, pretest/ protest without the comparison group, posttest only and time series method training outcomes are collected periodically before and after training.
  • The best one is Pretest/Post-test with the comparison group


  • Orientation of new employees
  • Diversity training

Glossary Part G


  • Performance management
  • Performance appraisal


  • Performance management has three purposes: strategic purpose, administrative purpose and developmental purpose.


  • Criteria that determine the effectiveness of performance measures include each measure’s fit with the organization’s strategy, its validity, its reliability, the degree to which it is acceptable to the organization and the extent to which it gives employees specific feedback.
  • Organizational behavior modification (OBM)
  • Management by objectives (MBO)
  • Total Quality Management (TQM) (subjective and objective feedback)


  • Simple ranking
  • Forced-distribution method
  • Paired-comparison method
  • Graphic rating scale
  • Mixed-standard scales
  • Critical-incident method
  • Behaviorally anchored rating scale (BARS)
  • Behavioral observation scale (BOS)


  • 360-degree performance appraisal


  • Similar-to-me error
  • Contrast error
  • Leniency error
  • Strictness error
  • Central tendency
  • Halo error
  • Horns error


  • Performance feedback should be a regular, expected management activity.

Glossary Part H


  • Employee development and training
  • Protean career
  • Career management system


  • The approaches to employee development involve formal education, assessment, job experiences, and interpersonal relationships.
  • Myers-Briggs Type Indicator
  • Assessment center
  • Leaderless group discussion
  • Benchmarks assessment
  • Performance appraisal
  • Job experiences
  • Job enlargement
  • Job rotation
  • Transfer
  • Downward move
  • Promotion
  • Externship
  • Sabbatical
  • Mentor
  • Coach
  • Action planning


  • Career management system involves four steps: self-assessment, reality check, goal setting and action planning.


  • Glass ceiling
  • Succession planning

Glossary Part I


  • Involuntary turnover
  • Voluntary turnover


  • Employee separation
  • Outcome fairness
  • Procedural justice
  • Interactional justice
  • Hot-stove rule
  • Progressive discipline
  • Alternative dispute resolution (ADR)
  • Employee assistance program (EAP)
  • Outplacement counseling


  • Job withdrawal
  • Role
  • Role ambiguity
  • Role conflict
  • Role overload
  • Job involvement
  • Organizational commitment


  • Job satisfaction
  • Job complexity
  • Supervisors and coworkers
  • Role analysis technique
  • Pay and benefits
  • Voicing
  • Exit interview

Glossary Part J


  • Pay structure


  • Minimum wage
  • Fair Labour Standards Act (FLSA)
  • Exempt employees
  • Non-exempt employees


  • Benchmarking


  • Job evaluation


  • Hay Guide-Chart Profile method (know-how, problem solving and accountability)


  • Piecework rate
  • Salary
  • Pay policy line
  • Pay grades
  • Pay ranges
  • Red-circle rate
  • Green-circle rate
  • Pay differential
  • Delayering
  • Skill-based pay systems

Glossary Part K


  • Incentive pay
  • Reinforcement Theory
  • Expectancy Theory (instrumentality, valence)
  • Agency Theory


  • Piecework rate
  • Straight piecework plan
  • Differential piece rates
  • Standard hour plan
  • Merit pay
  • Commissions


  • Gainsharing
  • Scanlon plan
  • Rucker plan
  • Improshare


  • Profit sharing
  • Stock options
  • Employee stock ownership plan (ESOP)
  • Balanced scorecard

Glossary Part L


  • Employee benefits


  • Unemployment insurance
  • Experience rating
  • Workers’ compensation


  • Health maintenance organization (HMO)
  • Preferred provide organization (PPO)
  • Flexible spending account
  • Employee wellness program (EWP)
  • Short-term disability insurance
  • Long-term disability insurance
  • Contributory plan
  • Non-contributory plan
  • Defined benefit plan
  • Defined contribution plan
  • Cash balance plan
  • Vesting rights
  • Summary plan description
  • Summary plan description


  • Cafeteria-style plan


  • Communicating benefits to employees

Glossary Part O


  • High-performance work systems


  • Learning organization
  • Job satisfaction
  • Ethics


  • Performance management
  • Transaction processing
  • Decision support systems
  • Expert system


  • HRM audit
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Summary Strategy and Human Resource Management (Boxall)

Summary Strategy and Human Resource Management (Boxall)

This summary of Strategy and Human Resource Management by Boxall is written in 2013-2014.

Chapter A – The goals of HRM

A.1 – Defining human resource management

- HRM: Refers to all those activities associated with the management of work and people in organizations. Human Resource Management.

A.1.1 – HRM: an inevitable process in organizations

It is virtually impossible to grow businesses without employing people. HRM is a process that accompanies the expansion of organizations: it is a correlate of entrepreneurial success and organizational growth.

A.1.2 – HRM: managing work and people

Our conception of HRM covers the policies and practices used to organize work an to employ people. HRM encompasses the management of work and the management of people to do the work. Work policies and practices are to do with the way the work itself is organized. Employment policies and practices, on the other hand, are concerned with how firms try to hire and manage people: recruiting, selecting, deploying, motivating, appraising, training, development, retaining individual employees, informing, consulting, negotiating, disciplining, terminating contracts and downsizing.

A.1.3 – HRM: involving line and specialist managers

HRM is an aspect of all management jobs. In this book, the word ‘HRM’ is used to refer to the totality of the firm’s management of work and people and not simply to those aspects where HR specialists are involved.

A.1.4 – HRM: building individual and workforce performance

HRM can usefully be understood as a set of activities aimed at building individual and workforce performance. On the level of individual performance, HRM consists of managerial attempts to influence individual stability (A), motivation (M) and the opportunity to perform (O).

P = f(A, M, O)

Individuals perform when they have the ability to perform (A), the motivation to perform (M) and the opportunity to perform (O). Figure 1.1 on page 5 shows the AMO model of individual performance. HRM is not the only factor influencing the AMO variables. The quality of information systems and the level of funding available are also influencers.

Figure 1.2 on page 6 shows the role of HRM on the collective level. HRM plays an important role in building workforce organization and collective capabilities and the general climate of employee attitudes. It typically includes attempts to build work systems that coordinate individuals in some kind of way, such as permanent teams, finite project groups and virtual teams.

- Critical mass: The stock of knowledge and skills managers need to fulfil the firm’s mission.

HRM needs to be understood as a management process that operates on more than one level. HRM is about building both human capital and social capital.

A.1.5 – HRM: incorporating a variety of management styles and ideologies

In the larger organizations, it is quite common for one approach to be taken to managing managers, another approach to permanent non-managerial employees and yet another to temporary and contract staff.

- Employment subsystems / Human resource architecture: The management chooses different HR systems for different groups based on their strategic value and the uniqueness of the skills that each group possesses.

- HRM definition by Storey: A distinctive approach to employment management, one which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques.

A.1.6 – HRM: embedded in industries and societies

HRM has been criticized by scholars for focusing too much on the firm and ignoring the wider context of the markets, networks and societies in which the firm operates. The different HR strategies of firms are better understood if they are examined in the wider context that helps to shape them. HRM is profoundly affected by the characteristics of the industries in which the firm choose to compete. Four types of technology:

- Craft: Products are made in small, distinctive, customized batches.

- Machine tending: Production is highly mechanized.

- Assembly line: Workers are located along a conveyer belt which propels the partially completed products towards them.

- Continuous process technology: 24/7 production, highly automated.

The problems of how best to motivate workers naturally vary across these working conditions.

HRM is also deeply affected by differences between societies. Nations provide a range of resources that affect workplaces and workforces: physical infrastructure, political and justice system, economic system, general education and social order.

A.2 – What are the goals of HRM?

HRM covers a broad range of activities associated with managing work and people and shows a huge range of variations across hierarchical levels, occupations, firms, industries and societies. It is therefore difficult to define the goals and objectives of HRM. However, we can analyze the goals of HRM in terms of two broad categories: economic and socio-political.

A.2.1 – Economic goals of HRM

Cost effectiveness

- Economic viability: A firm generates a return on investment that its shareholders consider acceptable or which meets the obligations it has to its bankers and other lenders. It is not essential for a firm to maximize profits but it is essential to provide investors and lenders with the kind of financial returns that sustain their commitment to the organization. Shareholders and other finance-providers form part of the political coalition of stakeholders that sustains a firm.Read more