THE HUMAN RESOURCE ENVIRONMENT Chapter 2 Trends in Human Resource Management Chapter 3 Providing Equal Employment Opportunity and a Safe Workplace Chapter 4 Analyzing Work and Designing Jobs 29 TRENDS IN HUMAN What Do I Need to Know? RESOURCE MANAGEMENT After reading this chapter, you should be able to: 1. Describe trends in the labor force composition and how they affect human resource manage- ment. 2. Summarize areas in which hu- INTRODUCTION man resource management can The early years of the 21st century shook the compla- support the goal of creating a cency of U.S. workers and forced them to take a fresh high-performance work system. look at the ways they are working. The previous 3. Deﬁne employee empower- decade of turbulent growth gave way to caution as hir- ment and explain its role in the ing slowed and many companies created jobs overseas. modern organization. Terrorist attacks on U.S. soil followed by wars in two countries forced a new sense of life’s uncertainties. 4. Identify ways HR professionals And a revolution in information technology redeﬁned can support organizational such fundamental notions as what it means to be “in strategies for quality, growth, touch” or “at work.” More and more voices in the and efﬁciency. workplace, in the community, and in the media tell of 5. Summarize ways in which hu- people who are mulling over why they work the way man resource management can they do, what the future holds, and how they want to support organizations expand- change to meet new demands and opportunities. ing internationally. More than ever, organizations today must be able to respond creatively to uncertainty and change. For 6. Discuss how technological de- some companies, the challenge involves juggling the velopments are affecting human workload when some employees who are military re- resource management. servists or National Guard members are called into ac- 7. Explain how the nature of the tive duty. When these service members return home, employment relationship is their employers must return them to their jobs at the changing. pay level they would have received had they not been away, and they must try to make accommodations for 8. Discuss how the need for ﬂexi- them if they have become disabled. That means many bility affects human resource employers either hire people to ﬁll the vacant posi- management. tions temporarily or ask their other employees to han- dle the service members’ work as well as they can. When Navy reservist Warren White returned to his sales job after six months of duty in Iraq, he needed six 30 CHAPTER 2 Trends in Human Resource Management 31 months to rebuild his sales to their level before his military service. Facing similar dif- ﬁculties, some companies have stumbled in fulﬁlling legal requirements. When National Guard Pfc. Ron Vander Wal returned to his job in tech support after 15 months of active duty, his employer told him his job was unavailable; he ﬁled a law- suit to get the job back. And in Thomasville, Alabama, a police ofﬁcer returning from military service in Iraq initially learned that he could not be reemployed because he had sustained a foot injury. Other employers are taking a much different point of view, seeing reservists and National Guard members as individuals whose experiences give them an added level of maturity and leadership ability. For example, Harley-Davidson pays employees on active duty the difference between their military pay and what they had been earning on the job, including beneﬁts. The company also sends care packages to their employees, who make up 14 percent of the company’s workforce.1 While some employees are coming and going because of military service, a sizable chunk of the U.S. workforce is retiring. Persons over the age of 65 represent a growing share of the U.S. population, and as they retire, they are taking years of experience with them. Employers are challenged not only to ﬁll the jobs but also to make impor- tant knowledge available to the new people. Defense contractor Northrop Grumman is one company that has met this challenge; the average age of its aerospace engineers is 54. Before these experienced workers retire, the company has been hiring new engi- neers at a rapid pace. The company established a “community of practice”—a group whose members are invited to meet in person and online to share ideas—for new em- ployees. The group has arranged for project managers to lead seminars and for young engineers to shadow experienced ones, accompanying them throughout the workday to see how they handle various situations. One of those beneﬁting is Tamra Johnson, a young engineer working on a project to provide NASA with orbiters for Jupiter’s moons. Johnson says she is learning from her more experienced colleagues and also teaching Northrop about how to orient new employees, “so the knowledge transfer really goes both ways.”2 As more and more of the workforce reaches retirement age, some companies have set up mentoring programs between older and younger workers so that knowledge is not lost but passed on. How does the company beneﬁt from these mentoring programs? 32 PART 1 The Human Resource Environment Another face of change is the temporary executive—a top-level employee hired to carry out a special assignment or to ﬁll a post until the company makes a long-term hiring decision. Stephen McElfresh, who headed the Saratoga Institute until it was acquired by a larger ﬁrm, now accepts temporary management assignments of up to 18 months in companies’ HR divisions. In his positions, McElfresh has the authority to hire and ﬁre, but he avoids major staff shakeups, seeing that responsibility as more appropriate for a company insider. Instead, he leads new projects, such as product launches or the opening of a facility. Although McElfresh enjoyed his years of expe- rience as a corporate insider, he says, “There is more opportunity to make a real dif- ference in an interim role, because I am touching people and organizations at the mo- ment of change.”3 These creative responses to change and uncertainty illustrate the kinds of people and situations that shape the nature of human resource management today. This chap- ter describes major trends that are affecting human resource management. It begins with an examination of the modern labor force, including trends that are determining who will participate in the workforce of the future. Next, we explore ways HRM can support a number of trends in organizational strategy, from efforts to maintain high- performance work systems to changes in the organization’s size and structure. Often, growth includes the use of human resources on a global scale, as more and more or- ganizations hire immigrants or open operations overseas. The chapter then turns to major changes in technology, especially the role of the Internet. As we will explain, the Internet is changing organizations themselves, as well as providing new ways to carry out human resource management. Finally, we explore the changing nature of the employment relationship, in which careers and jobs are becoming more ﬂexible. LO1 CHANGE IN THE LABOR FORCE Describe trends in The term labor force is a general way to refer to all the people willing and able to work. the labor force For an organization, the internal labor force consists of the organization’s workers— composition and how they affect its employees and the people who have contracts to work at the organization. This in- human resource ternal labor force has been drawn from the organization’s external labor market, that management. is, individuals who are actively seeking employment. The number and kinds of peo- ple in the external labor market determine the kinds of human resources available to internal labor force an organization (and their cost). Human resource professionals need to be aware of An organization’s trends in the composition of the external labor market, because these trends affect the workers (its organization’s options for creating a well-skilled, motivated internal labor force. employees and the people who have contracts to work at An Aging Workforce the organization). In the United States, the Bureau of Labor Statistics (BLS), an agency of the Department of Labor, tracks changes in the composition of the U.S. labor force and external labor forecasts employment trends. The BLS has projected that from 2002 to 2012, the to- market tal U.S. labor force will grow from 128 million to 162 million workers.4 This 12 per- Individuals who are actively seeking cent increase represents slightly lower growth than during the previous decade. employment. Some of the expected change involves the distribution of workers by age. During the 2002–2012 period, the fastest-growing age groups are expected to be workers 55 and older. Young workers will enter the labor force, but at a much slower rate. The 35- to 44-year-old age group is actually expected to shrink, as baby boomers move into the older age groups and fewer workers enter this group. This combination of trends will cause the overall workforce to age. Figure 2.1 shows the change in age distribu- CHAPTER 2 Trends in Human Resource Management 33 tion, as forecast by the Bureau of Labor Statistics, between 2002 and 2012. By 2010, more than half of U.S. workers will be older than 40, and a signiﬁcant share will be nearing retirement.5 Human resource professionals will therefore spend much of their time on concerns related to retirement planning, retraining older workers, and moti- vating workers whose careers have plateaued. Organizations will struggle with ways to control the rising costs of health care and other beneﬁts. At the same time, organiza- tions will have to ﬁnd ways to attract, retain, and prepare the youth labor force. In doing so, organizations will be reminded that values tend to change from one generation to the next, as well as when people reach different life stages.6 For exam- ple, members of Generation Y (born between 1976 and 1995) begin their career with the assumption that they will frequently change jobs. They are likely to place a high value on money as well as on helping others. Most employees, however, value several aspects of work, regardless of their age. Employees view work as a means to self- fulﬁllment—that is, a means to more fully use their skills and abilities, meet their in- terests, and live a desirable lifestyle.7 One report indicates that if employees receive opportunities to fully use and develop their skills, have greater job responsibilities, be- lieve the promotion system is fair, and have a trustworthy manager who represents employees’ best interests, they are more committed to their companies.8 Employers will likely ﬁnd that many talented older workers want to continue con- tributing through their work, though not necessarily in a traditional nine-to-ﬁve job. For organizations to attract and keep talented older workers, many will have to re- think the ways they design jobs. In Princeton, Minnesota, Lucille Decker retired af- ter 60 years as a ﬁrst-grade teacher, but she missed the action and returned as a sub- stitute teacher. In Saint Louis, endoscopy nurse Josephine Godfrey returned to St. Mary’s Health Center to work part-time after her early retirement. She appreciates being able to schedule work around visits with her two dozen grandchildren and says, “I’ll continue working as long as I’m productive.” And Lloyd Baker, a civil engineer and surveyor in his nineties, continues to operate his business, partly for the income but also to continue providing work for his company’s employees.9 Older employees may be more likely to stay in jobs with limited physical demands, fewer work hours, and less stress. Especially for jobs requiring a college degree, today’s jobs are less likely to be physically difﬁcult, which may help employers ﬁll positions by keeping older workers.10 Figure 2.1 Age Distribution of U.S. Labor Force, 2002 and 2012 SOURCE: Bureau of Labor Statistics, “Labor Force,” Occupational Outlook Quarterly, Winter 2003–2004, pp. 42–48, downloaded at www.bls.gov. 34 PART 1 The Human Resource Environment A Diverse Workforce Another kind of change affecting the U.S. labor force is that it is growing more diverse in racial, ethnic, and gender terms. As Figure 2.2 shows, the 2012 workforce is ex- pected to be 66 percent white (and non-Hispanic), 15 percent Hispanic (any race), 12 percent black (non-Hispanic), and 7 percent Asian and other minorities. The fastest- growing of these categories are “Asian and other” and Hispanics because these groups are experiencing immigration and birth rates above the national average. Along with greater racial and ethnic diversity, there is also greater gender diversity. More women are in the paid labor force than in the past. Thus far in the current decade, women have made up 47 percent of the U.S. labor force, up slightly from the 1990s.11 The greater diversity of the U.S. labor force challenges employers to create HRM practices that ensure they fully utilize the talents, skills, and values of all employees. The growth in the labor market of female and minority populations will exceed the growth of white non-Hispanic persons. As a result, organizations cannot afford to ig- nore or discount the potential contributions of women and minorities. Employers will have to ensure that employees and HRM systems are free of bias and value the per- spectives and experience that women and minorities can contribute to organizational goals such as product quality and customer service. As we will discuss further in the next chapter, managing cultural diversity involves many different activities. These in- clude creating an organizational culture that values diversity, ensuring that HRM sys- tems are bias-free, encouraging career development for women and minorities, pro- moting knowledge and acceptance of cultural differences, ensuring involvement in education both within and outside the organization, and dealing with employees’ re- sistance to diversity.12 Figure 2.3 summarizes ways in which HRM can support the management of diversity for organizational success. Many U.S. companies have already committed themselves to ensuring that they rec- ognize the diversity of their internal labor force and use it to gain a competitive advan- tage. According to a recent survey of HR professionals, the most common approaches include recruiting efforts with the goal of increasing diversity and training programs re- lated to diversity.13 The majority of respondents believed that these efforts were beneﬁ- cial; 91 percent said they helped the company maintain a competitive advantage. For Home Depot, diversity in the ranks of employees is an obvious way to provide top-notch customer service. Hiring people with diverse backgrounds helps build a Figure 2.2 Projected Racial/Ethnic Makeup of the U.S. Workforce, 2012 SOURCE: Bureau of Labor Statistics, “Tomorrow’s Jobs,” Occupational Outlook Handbook, last modiﬁed June 2, 2004, downloaded at www.bls.gov/oco/. CHAPTER 2 Trends in Human Resource Management 35 Figure 2.3 HRM Practices That Support Diversity Management SOURCE: Based on M. Loden and J. B. Rosener, Workforce America! (Homewood, IL: Business One Irwin, 1991). sales force that understands customers’ needs and communicates effectively. And ex- tra effort to recruit from many groups widens the pool of talent, so the company can hire the best people. Home Depot arranged a partnership with four Hispanic organi- zations to increase the company’s visibility as an employer. The company hopes the effort will allow it to hire more bilingual employees. Home Depot has also arranged hiring partnerships to recruit senior citizens (through a partnership with the AARP) and military veterans (through a partnership with the U.S. Departments of Defense, Labor, and Veterans Affairs). According to Dennis Donovan, Home Depot’s execu- tive vice president of human resources, “Sales have increased substantially over the four years that we’ve really been at a lot of these things.” He adds, “Talented associ- ates are the customer service differentiator.”14 The practices required for successfully managing diversity do more than meet em- ployee needs; they reduce turnover costs and ensure that customers 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’ neighborhoods and speak their patients’ languages. This commitment to diversity helps improve communications and the quality of health care provided by the company.15 Throughout this book, we will show how diversity affects HRM practices. For ex- ample, from a stafﬁng perspective, it is important to ensure that tests used to select em- ployees are not unfairly biased against minority groups. From the perspective of work design, employees need ﬂexible schedules that allow them to meet nonwork needs. In terms of training, it is clear that employees must be made aware of the damage that stereotypes can do. With regard to compensation, organizations are providing bene- ﬁts such as elder care and day care as a way to accommodate the needs of a diverse workforce. As we will see later in the chapter, successfully managing diversity is also critical for companies that compete in international markets. 36 PART 1 The Human Resource Environment 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 U.S. economy. Such qualities 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, such as the ability to solve math or other problems or reach decisions as part of a team. Often, when organizations are looking for technical skills, they are looking for skills related to computers and using the Internet. Today’s employees must be able to han- dle a variety of responsibilities, interact with customers, and think creatively. To ﬁnd such employees, most organizations are looking for educational achieve- ments. A college degree is a basic requirement for many jobs today. Competition for qualiﬁed college graduates in many ﬁelds is intense. At the other extreme, workers with less education often have to settle for low-paying jobs. Some companies are unable to ﬁnd qualiﬁed employees and instead rely on training to correct skill deﬁciencies.16 Other companies team up with universities, community colleges, and high schools to design and teach courses ranging from basic reading to design blueprint reading. Not all the skills employers want require a college education. Employers surveyed by the National Association of Manufacturers report a deﬁciency in qualiﬁed pro- duction workers—not just engineers and computer experts. In the words of Bill Bachman, president of Bachman Machine Company in St. Louis, “Kids think these are dirty, dead-end jobs. . . . When we ﬁnd someone good, we try to hang onto them. When we lose them, they’re extremely hard to replace.”17 Part of the challenge is that today’s U.S. production jobs rely on intelligence and skills as much as on strength. Workers often must operate sophisticated computer-controlled machinery and moni- tor quality levels. In some areas, companies and communities have set up apprentice- ship and training programs to ﬁx the worker shortage. The gap between skills needed and skills available has decreased U.S. companies’ ability to compete because as a consequence of the deﬁciency they sometimes lack the capacity to upgrade technol- ogy, reorganize work, and empower employees. LO2 Summarize areas in which human HIGH-PERFORMANCE WORK SYSTEMS resource Human resource management is playing an important role in helping organizations management can gain and keep an advantage over competitors by becoming high-performance work support the goal of systems. These are organizations that have the best possible ﬁt between their social creating a high- system (people and how they interact) and technical system (equipment and performance work processes).18 As the nature of the workforce and the technology available to organi- system. zations have changed, so have the requirements for creating a high-performance work system. Customers are demanding high quality and customized products, employees high-performance are seeking ﬂexible work arrangements, and employers are looking for ways to tap work systems people’s creativity and interpersonal skills. Such demands require that organizations Organizations that make full use of their people’s knowledge and skill, and skilled human resource man- have the best agement can help organizations do this. possible ﬁt between their social system Among the trends that are occurring in today’s high-performance work systems are (people and how reliance on knowledge workers; the empowerment of employees to make decisions; they interact) and and the use of teamwork. The following sections describe those three trends, and technical system Chapter 16 will explore the ways HRM can support the creation and maintenance of (equipment and a high-performance work system. HR professionals who keep up with change are well processes). positioned to help create high-performance work systems. The nearby “HR How To” HR HOW TO KEEPING UP WITH CHANGE Many of the changes in today’s Know Your Business To ing about their work and the business environment have a support your organization’s organization’s performance, direct impact on human strategy, you have to know the listen for the HR implications. resource management. company’s line of work. Read Does the organization have the Changes in the population, in industry and general business right amounts and kinds of technology, in employees’ publications, with an eye on knowledge, skills, and motiva- expectations, and other aspects news about what’s happening tion to carry out its goals? Can of the business environment in your company’s industry. You some of the new ideas in your place heavy demands on mod- can customize Web portals and ﬁeld help your organization? ern HR professionals—and any- news Web sites to deliver head- Keep Your Résumé Up-to-Date one else involved in manage- lines related to your industry. If new job or career opportuni- ment. The career advantage Follow Trends Government ties become available with your goes to those who keep an agencies publish news releases current employer (or another eye on what’s happening in and data related to their area of organization), you will be ready the business environment. responsibility. Pay regular visits to take advantage of them. Here are some ways to keep up with change: to relevant agency Web sites, Take Time Out to Relax such as those for the Bureau of Change creates long work Know Your Specialty Join and Labor Statistics (www.bls.gov), hours and stress. Work can participate in trade and profes- the Equal Employment become all-consuming. If you sional groups. In human re- Opportunity Commission are stressed out, you are not a source management, the (www.eeoc.gov), and the valuable employee or a happy largest group is the Society for Occupational Safety and Health person to be around. Make Human Resource Management. Administration (www.osha.gov) sure you take time for leisure Attendance at meetings and to ﬁnd the latest information. activities you enjoy. Dance, visits to the SHRM home page read, exercise—have fun! will help you stay abreast of the Listen at Work When employ- latest ideas in the ﬁeld. ees and management are talk- box suggests ways HR professionals can make a commitment to adapt to change in or- der to keep up with a fast-changing work environment. Knowledge Workers The growth in e-commerce, plus the shift from a manufacturing to a service and in- formation economy, has changed the nature of employees that are most in demand. The Bureau of Labor Statistics forecasts that between 2002 and 2012, most new jobs will be in service occupations, especially education and health services. The number of service jobs has important implications for human resource man- agement. Research shows that if employees have a favorable view of HRM practices— say, their career opportunities, training, pay, and feedback on performance—they are more likely to provide good service to customers. Therefore, quality HRM for service employees can translate into customer satisfaction. The second-largest category of new 37 TOP 10 OCCUPATIONS FOR JOB GROWTH The following graph shows the occupations that are expected to add the most new jobs between 2002 and 2012. These jobs require widely different levels of training and responsibility, and pay levels vary considerably. Query: OK to set by full width instead of 3-column? SOURCE: Bureau of Labor Statistics, “Occupational Employment,” Occupational Outlook Quarterly, Winter 2003–2004, pp. 6–27; and Bureau of Labor Statistics, “Tomorrow’s Jobs,” Occupational Outlook Handbook, last modiﬁed June 2, 2004, both downloaded at www.bls.gov. jobs is professional and business services, with the fastest growth expected to come from employment services. Among goods-producing industries, the fastest job growth is expected in construction. Also, even though some industries, such as mining, man- ufacturing, and agriculture, are expected to have fewer jobs by 2012, companies in those industries still need to ﬁll jobs when workers retire. And as noted in the previ- 38 CHAPTER 2 Trends in Human Resource Management 39 Knowledge workers are employees whose value to their employers stems primarily from what they know. Engineers such as the ones pictured here have in-depth knowledge of their ﬁeld and are hard to replace because of their special knowledge. ous section, ﬁnding qualiﬁed people to ﬁll these jobs is not always easy, especially when new workers avoid these industries. Besides differences among industries, job growth varies according to the type of job. The “Did You Know . . . ?” box lists the 10 occupations expected to gain the most jobs between 2002 and 2012. Of the jobs expected to have the greatest percentage in- creases, most are related to health care and computers. The fastest-growing occupa- tions are medical assistants, network systems and data communications analysts, and physician assistants.19 Most of these occupations require a college degree. In contrast, the occupations expected to have the largest numerical increases more often require only on-the-job training. (Exceptions are registered nurses, postsecondary teachers, and general and operations managers.) This means that many companies’ HRM de- partments will need to provide excellent training as well as hiring. What most of these high-growth jobs have in common is specialized knowledge. To meet their human capital needs, companies are increasingly trying to attract, de- knowledge velop, and retain knowledge workers. Knowledge workers are employees whose main workers contribution to the organization is specialized knowledge, such as knowledge of cus- Employees whose main contribution tomers, a process, or a profession. Knowledge workers are especially needed for jobs in to the organization health services, business services, social services, engineering, and management. is specialized Knowledge workers are in a position of power, because they own the knowledge knowledge, such that the company needs in order to produce its products and services, and they must as knowledge of share their knowledge and collaborate with others in order for their employer to suc- customers, a ceed. An employer cannot simply order these employees to perform tasks. Managers process, or a depend on the employees’ willingness to share information. Furthermore, skilled profession. 40 PART 1 The Human Resource Environment knowledge workers have many job opportunities, even in a slow economy. If they choose, they can leave a company and take their knowledge to another employer. Replacing them may be difﬁcult and time-consuming. As more organizations become knowledge-based, they must promote and capture learning at the level of employees, teams, and the overall organization. Buckman Laboratories, for example, is known for its knowledge management practices.20 Buck- man Laboratories develops and markets specialty chemicals. Buckman’s CEO, Robert Buckman, has developed an organizational culture, technology, and work processes that encourage the sharing of knowledge. Employees have laptop computers so they can share information anywhere and anytime via the Internet. The company set up rewards for innovation and for creating and exchanging knowledge. The rewards are based on performance measures related to the percentage of sales of new products. Buckman also changed the focus of the company’s information systems department, renaming it the “knowledge transfer department” to better match the service it is supposed to provide. The reliance on knowledge workers also affects organizations’ decisions about the kinds of people they are recruiting and selecting.21 They are shifting away from fo- cusing on speciﬁc skills, such as how to operate a particular kind of machinery, and toward a greater emphasis on general cognitive skills (thinking and problem solving) and interpersonal skills. Employers are more interested in evidence that job candi- dates will excel at working in teams or interacting with customers. These skills also support an employee’s ability to gather and share knowledge, helping the organization to innovate and meet customer needs. To the extent that technical skills are impor- tant, employers often are most interested in the ability to use information technology, including the Internet and statistical software. LO3 Employee Empowerment Deﬁne employee To completely beneﬁt from employees’ knowledge, organizations need a management empowerment and style that focuses on developing and empowering employees. Employee empowerment explain its role in the modern means giving employees responsibility and authority to make decisions regarding all as- organization. pects of product development or customer service.22 Employees are then held account- able for products and services. In return, they share the resulting losses and rewards. employee HRM practices such as performance management, training, work design, and com- empowerment pensation are important for ensuring the success of employee empowerment. Jobs Giving employees must be designed to give employees the necessary latitude for making a variety of de- responsibility and cisions. Employees must be properly trained to exert their wider authority and use in- authority to make formation resources such as the Internet, as well as tools for communicating informa- decisions regarding tion. Employees also need feedback to help them evaluate their success. Pay and other all aspects of rewards should reﬂect employees’ authority and be related to successful handling of product their responsibility. In addition, for empowerment to succeed, managers must be development or trained to link employees to resources within and outside the organization, such as customer service. customers, coworkers in other departments, and Web sites with needed information. Managers must also encourage employees to interact with staff throughout the or- ganization, must ensure that employees receive the information they need, and must reward cooperation. As with the need for knowledge workers, use of employee empowerment shifts the recruiting focus away from technical skills and toward general cognitive and inter- personal skills. Employees who have responsibility for a ﬁnal product or service must be able to listen to customers, adapt to changing needs, and creatively solve a variety of problems. CHAPTER 2 Trends in Human Resource Management 41 Teamwork Modern technology places the information that employees need for improving qual- ity and providing customer service right at the point of sale or production. As a re- sult, the employees engaging in selling and producing must also be able to make de- cisions about how to do their work. Organizations need to set up work in a way that gives employees the authority and ability to make those decisions. One of the most popular ways to increase employee responsibility and control is to assign work to teams. Teamwork is the assignment of work to groups of employees with various skills teamwork who interact to assemble a product or provide a service. Work teams often assume The assignment of many activities traditionally reserved for managers, such as selecting new team mem- work to groups of bers, scheduling work, and coordinating work with customers and other units of the employees with organization. Work teams also contribute to total quality by performing inspection various skills who interact to assemble and quality-control activities while the product or service is being completed. a product or provide In some organizations, technology is enabling teamwork even when workers are at a service. different locations or work at different times. These organizations use virtual teams— teams that rely on communications technology such as videoconferences, e-mail, and cell phones to keep in touch and coordinate activities. Teamwork can motivate employees by making work more interesting and signiﬁ- cant. At organizations that rely on teamwork, labor costs may be lower as well. Spurred by such advantages, a number of companies are reorganizing assembly oper- ations—abandoning the assembly line in favor of operations that combine mass pro- duction with jobs in which employees perform multiple tasks, use many skills, control the pace of work, and assemble the entire ﬁnal product. One example of this type of teamwork is the Marion, North Carolina, factory of Rockwell Automation’s Power Systems Division, where almost every employee works on a team. The facility is or- ganized into 20 manufacturing cells; 16 make routine products accounting for 80 per- cent of the division’s revenue, and the other 4 make special-order products in lots as small as one unit. These machining and assembly employees are cross-trained to per- form at least three jobs, so they can step in wherever they are needed. Management also is carried out by teams, each of which brings together a supervisor, an engineer, and a planner. These management teams are responsible for buying materials, hiring employees, providing customer service, and scheduling overtime. Employees and management are all involved in monitoring product data and introducing improve- ments to products and processes. This setup has enabled Power Systems to produce excellent quality with fast turnaround times, exceptionally low costs, high customer satisfaction, and no accidents.23 FOCUS ON STRATEGY LO4 As we saw in Chapter 1, traditional management thinking treated human resource Identify ways HR management primarily as an administrative function, but managers today are begin- professionals can support ning to see a more central role for HRM. They are beginning to look at HRM as a organizational means to support a company’s strategy—its plan for meeting broad goals such as prof- strategies for quality, itability, quality, and market share.24 This strategic role for HRM has evolved gradu- growth, and ally. At many organizations, managers still treat HR professionals primarily as experts efﬁciency. in designing and delivering HR systems. But at a growing number of organizations, HR professionals are strategic partners with other managers.25 This means they use their knowledge of the business and of human resources to help the organization develop strategies and to align HRM policies and practices with those strategies. To do this, human resource managers must focus on the future as well 42 PART 1 The Human Resource Environment Figure 2.4 Business Strategy: Issues Affecting HRM as the present, and on company goals as well as human resource activities. They may, for example, become experts at analyzing the business impact of HR decisions or at developing and keeping the best talent to support business strategy. An example of an HRM professional who understands this new role is Kiyoski Shinozaki, a manager with Nikkei, a Japanese business publishing company. Shinozaki’s education includes a master’s degree in human resource management, and he is adding to his business credentials by taking further courses in ﬁnance and accounting. He predicts that deeper business knowledge will help him plan and suggest initiatives, rather than merely reacting to strategies devised by other managers.25 The speciﬁc ways in which human resource professionals support the organization’s strategy vary according to their level of involvement and the nature of the strategy. Strategic issues include emphasis on quality and decisions about growth and efﬁ- ciency. 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 efﬁ- cient and also give rise to many human resource challenges. International expansion presents a wide variety of HRM challenges and opportunities. Figure 2.4 summarizes these strategic issues facing human resource management. total quality management (TQM) High Quality Standards A companywide effort to To compete in today’s economy, companies need to provide high-quality products and continuously services. If companies do not adhere to quality standards, they will have difﬁculty sell- improve the ways ing their product or service to vendors, suppliers, or customers. Therefore, many or- people, machines, ganizations have adopted some form of total quality management (TQM)—a com- and systems panywide effort to continuously improve the ways people, machines, and systems accomplish work. accomplish work.26 TQM has several core values:27 CHAPTER 2 Trends in Human Resource Management 43 • Methods and processes are designed to meet the needs of internal and external cus- tomers (that is, whomever the process is intended to serve). • Every employee in the organization receives training in quality. • Quality is designed into a product or service so that errors are prevented from oc- curring, rather than being detected and corrected in an error-prone product or service. • The organization promotes cooperation with vendors, suppliers, and customers to improve quality and hold down costs. • Managers measure progress with feedback based on data. Based on these values, the TQM approach provides guidelines for all the organi- zation’s activities, including human resource management. To promote quality, or- ganizations need an environment that supports innovation, creativity, and risk taking to meet customer demands. Problem solving should bring together managers, em- ployees, and customers. Employees should communicate with managers about cus- tomer needs. Human resource management supports the strong commitment to quality at TRW Automotive Holdings Corporation’s factory in Fowlerville, Michigan. The facility produces automotive slip-control units, a category that encompasses automobile com- ponents such as antilock brakes and vehicle stability systems. Auto companies are al- ways looking for product and price improvements, but in spite of constant changes, the Fowlerville plant continues to operate efﬁciently and with an amazing defect rate of just 3 customer rejections out of every million items. In addition, all deliveries have been made on time. The company credits its efﬁcient plant layout and its workforce for the exceptional practices. With low turnover, the facility beneﬁts from employees’ experience, and training ensures that its people are knowledgeable. Plant manager Bob Holman comments, “People here know what to do without being told,” and manufacturing employee Andrew Bogdan explains, “This is probably the most multi- tasked plant ﬂoor you’ll ever see. Seventy percent of our people can do 90 percent of the jobs here.” In addition, the organization fosters employee involvement and team- work. For example, production workers serve on Policy and Procedure Panels, which have a voice in administrative decisions.28 Mergers and Acquisitions Increasingly, organizations are joining forces through mergers (two companies be- coming one) and acquisitions (one company buying another). Some mergers and ac- quisitions result in consolidation within an industry, meaning that two ﬁrms in one industry join to hold a greater share of the industry. For example, British Petroleum’s acquisition of Amoco Oil represented a consolidation, or reduction of the number of companies in the oil industry. Other mergers and acquisitions cross industry lines. In a merger to form Citigroup, Citicorp combined its banking business with Traveller’s Group’s insurance business. Furthermore, these deals more frequently take the form of global megamergers, or mergers of big companies based in different countries (as in the case of BP-Amoco). These deals do not always meet expectations, however. According to a report by the Conference Board, one of the major reasons for their failure may be “people is- sues.” Recognizing this, some companies now heavily weigh the other organization’s culture before they embark on a merger or acquisition. For example, before acquiring ValueRx, executives at Express Scripts interviewed senior executives and middle 44 PART 1 The Human Resource Environment managers at ValueRx in order to get a sense of its values and practices.29 Even so, in a recent survey, fewer than one-third of the HRM executives said they had a major inﬂuence in how mergers are planned. Not surprisingly, 80 percent of them said peo- ple issues have a signiﬁcant impact after the deals go through.30 HRM should have a signiﬁcant role in carrying out a merger or acquisition. Differences between the businesses involved in the deal make conﬂict inevitable. Training efforts should therefore include development of skills in conﬂict resolution. Also, HR professionals have to sort out differences in the two companies’ practices with regard to compensation, performance appraisal, and other HR systems. Settling on a consistent structure to meet the combined organization’s goals may help to bring employees together. Cisco Systems heads off conﬂict following its acquisitions by preparing employees at the ﬁrm to be acquired. Cisco tries to make sure that employ- ees of the acquired ﬁrm understand that major change will follow the acquisition, so that they will not be surprised afterward. Cisco also addresses career paths. It provides signiﬁcant roles for the acquired company’s top talent in order to keep them on board with challenging opportunities. With such HR-related efforts, Cisco outperforms most ﬁrms in retaining talented employees after an acquisition.31 Downsizing It would have been hard to ignore the massive “war for talent” that went on during the late 1990s, particularly with the dot-com craze, as Internet-based companies seemingly became rich overnight. During this time, organizations sought to become “employers of choice,” to establish “employment brands,” and to develop “employee value propositions.” All these slogans were meant as ways to ensure that the organi- zations would be able to attract and retain talented employees. However, what was less noticeable was that in spite of the hiring craze, massive layoffs also were occur- ring. In fact, as shown in Figure 2.5, 1998, the height of the war for talent, also saw the largest number of layoffs in the decade.32 This pattern seems to represent a “churning” of employees. In other words, orga- nizations apparently were laying off employees with outdated skills or cutting whole Figure 2.5 Number of Employees Laid Off during the 1990s SOURCE: Challenger, Gray, and Christmas, Outplacement Firm, Workforce Reports 1998. CHAPTER 2 Trends in Human Resource Management 45 businesses that were in declining markets while simultaneously building businesses and employee bases in newer, higher-growth markets. For example, IBM cut 69,256 people yet increased its workforce by 16,000 in 1996. Although downsizing always poses problems for human resource management, the impact can be especially con- fusing in an organization that “churns” employees. How can such an organization de- velop a reputation as an employer of choice and motivate employees to care about the organization? The way organizations answer such questions will play a signiﬁcant part in determining the quality of employees on the payroll. Whether or not the organization is churning employees, downsizing presents a number of challenges and opportunities for HRM. In terms of challenges, the HRM function must “surgically” reduce the workforce by cutting only the workers who are less valuable in their performance. Achieving this is difﬁcult because the best work- ers are most able (and often willing) to ﬁnd alternative employment and may leave voluntarily before the organization lays off anyone. In 1992 General Motors and the United Auto Workers agreed to an early-retirement program for individuals between the ages of 51 and 65 who had been employed for 10 or more years. For those who agreed to retire, even if they obtained employment elsewhere, the program provided full pension beneﬁts and as much as $13,000 toward the purchase of a GM car.33 Such early-retirement programs are humane, but they essentially reduce the workforce with a “grenade” approach—not distinguishing good from poor performers but rather elim- inating an entire group of employees. In fact, research indicates that when companies downsize by offering early-retirement programs, they usually end up rehiring to re- place essential talent within a year. Often the company does not achieve its cost- cutting goals because it spends 50 to 150 percent of the departing employee’s salary in hiring and retraining new workers.34 Another HRM challenge is to boost the morale of employees who remain after the reduction; this is discussed in greater detail in Chapter 5. Survivors may feel guilt over keeping their jobs when their friends were laid off. Or they may envy their friends who retired with attractive severance and pension beneﬁts. Their reduced satisfaction and lower commitment to the organization may interfere with their performance of their work. To address these problems, HR professionals should maintain open com- munication with remaining employees to build their trust and commitment, rather than withholding information.35 All employees should be informed why the downsiz- ing is necessary, what costs are to be cut, how long the downsizing will last, and what strategies the organization intends to pursue. Finally, HRM can provide downsized employees with outplacement services to help them ﬁnd new jobs. Such services are ways an organization can show that it cares about its employees, even though it can- not afford to keep all of them on the payroll. Reengineering Rapidly changing customer needs and technology have caused many organizations to rethink the way they get work done. For example, when an organization adopts new reengineering technology, its existing processes may no longer result in acceptable quality levels, A complete review meet customer expectations for speed, or keep costs to proﬁtable levels. Therefore, of the organization’s many organizations have undertaken reengineering—a complete review of the orga- critical work nization’s critical work processes to make them more efﬁcient and able to deliver processes to make higher quality. them more efﬁcient Ideally, reengineering involves reviewing all the processes performed by all the and able to deliver organization’s major functions, including production, sales, accounting, and human higher quality. 46 PART 1 The Human Resource Environment resources. Therefore, reengineering affects human resource management in two ways. First, the way the HR department itself accomplishes its goals may change dramati- cally. Second, the fundamental change throughout the organization requires the HR department to help design and implement change so that all employees will be com- mitted to the success of the reengineered organization. Employees may need training for their reengineered jobs. The organization may need to redesign the structure of its pay and beneﬁts to make them more appropriate for its new way of operating. It also may need to recruit employees with a new set of skills. Often, reengineering results in employees being laid off or reassigned to new jobs, as the organization’s needs change. HR professionals should help with this transition, as described above in the case of downsizing. Outsourcing outsourcing Many organizations are increasingly outsourcing business activities. Outsourcing The practice of refers to the practice of having another company (a vendor, third-party provider, or having another consultant) provide services. For instance, a manufacturing company might outsource company (a vendor, its accounting and transportation functions to businesses that specialize in these ac- third-party provider, tivities. Outsourcing gives the company access to in-depth expertise and is often more or consultant) economical as well. provide services. Not only do HR departments help with a transition to outsourcing, but many HR functions are being outsourced. A recent study suggests that 8 out of 10 companies outsource at least one human resource activity.36 HR functions that are commonly outsourced include payroll administration, training, and recruitment and selection of employees. For example, Bank of America signed a 10-year contract with Exult Inc. to manage much of the bank’s HR function.37 Among the functions that Bank of America is outsourcing are payroll, accounts payable, and beneﬁts administration. Other services Exult is handling include delivery of HR services and a call center to provide employees with information about human resources and beneﬁts. Bank of America retained the HR functions of recruiting and compensation, as well as legal counsel. This arrangement frees HR managers at Bank of America to work on strat- egy and vision, focusing them on HRM responsibilities that add value to the business. LO5 Expanding into Global Markets Summarize ways Companies are ﬁnding that to survive they must compete in international markets as in which human well as fend off foreign competitors’ attempts to gain ground in the United States. To resource management can meet these challenges, U.S. businesses must develop global markets, keep up with support competition from overseas, hire from an international labor pool, and prepare em- organizations ployees for global assignments. expanding Study of companies that are successful and widely admired suggests that these com- internationally. panies not only operate on a multinational scale, but also have workforces and cor- porate cultures that reﬂect their global markets.38 These companies, which include General Electric, Coca-Cola, Microsoft, Walt Disney, and Intel, focus on customer satisfaction and innovation. In addition, they operate on the belief that people are the company’s most important asset. Placing this value on employees requires the companies to emphasize human resource practices, including rewards for superior per- formance, measures of employee satisfaction, careful selection of employees, promo- tion from within, and investment in employee development. 1 line short CHAPTER 2 Trends in Human Resource Management 47 The Global Workforce For today’s and tomorrow’s employers, talent comes from a global workforce. Organizations with international operations hire at least some of their employees in the foreign countries where they operate. In fact, regardless of where their customers are located, more and more organizations are looking overseas to hire talented people willing to work for less pay than the U.S. labor market requires. Intel, for example, has projected that most of its future employees will be hired outside U.S. borders. The efforts to hire workers in other countries are common enough that they have spurred the creation of a popular name for the practice: offshoring. Just a few years ago, most offshoring offshoring involved big manufacturers building factories in countries with lower labor Moving operations costs. But today it is so easy to send information and software around the world that from the country even start-ups are hiring overseas. In one study, almost 4 out of 10 new companies em- where a company is ployed foreign analysts, marketers, engineers, and other employees. In contrast to headquartered to a country where pay computer and printer manufacturer Hewlett-Packard, which hired its ﬁrst foreign rates are lower but workers 20 years after its founding in 1939, search engine Google employed people the necessary skills outside the United States just three years after its 1998 start.39 are available. Technology is lowering barriers to overseas operations. OfﬁceTiger, which provides business services to banks, insurance companies, and other clients, has 200 employ- ees in the United States and 2,000 in southern India. Whether its clients need type- setting or marketing research, the Indian employees can readily submit their work over the Internet. Because Indian workers are generally paid only about one-ﬁfth of U.S. earnings for comparable jobs, OfﬁceTiger offers attractive prices. The company is growing, and it expects that two-thirds of its future hires will be in India, Sri Lanka, and countries other than the United States.40 Hiring in developing nations such as India, Mexico, and Brazil gives employers ac- cess to people with potential who are eager to work yet who will accept lower wages than elsewhere in the world. Challenges, however, may include employees’ lack of fa- miliarity with technology and corporate practices, as well as political and economic instability in the areas. Important issues that HR experts can help companies weigh include whether workers in the offshore locations can provide the same or better skills, how offshoring will affect motivation and recruitment of employees needed in the United States, and whether managers are well prepared to manage and lead off- shore employees. Despite the risks, many organizations that have hired globally are realizing high re- turns. General Electric has been a pioneer in offshoring and is reaping its rewards.41 The foundation was laid in 1989, when most U.S. companies viewed India as too un- derdeveloped to be an attractive investment. GE’s ﬁrst attempt was to establish a part- nership to develop an ultrasound machine. Sales to the Indian market were dis- appointing, but from the business relationship, GE executives discovered the engineering and programming talent India had to offer. They soon began arranging to have work done in India at far lower costs than if the same work had been done in the United States—not only through contracts but also by setting up GE operations in India. Besides engineers and programmers, GE has hired customer service repre- sentatives, accountants, and market researchers. For an organization to operate in other countries, its HR practices must take into consideration differences in culture and business practices. Consider how Starbucks Coffee handled its expansion into Beijing, China.42 Demand for qualiﬁed managers in Beijing exceeds the local supply. Employers therefore have to take steps to attract and retain managers. Starbucks researched the motivation and needs of potential 1 line short BEST PRACTICES BUILDING A COMMON CULTURE AT PRICEWATERHOUSECOOPERS PricewaterhouseCoopers (PWC) The program helps partici- courage people to defer to is a global organization that pants develop skills in many ar- those with higher status. Also, provides tax and accounting eas, including coaching, strategic the business issues of most im- services through ofﬁces in 769 thinking, and global networking. portance may differ from one cities spread across 144 coun- They learn to offer feedback, lis- country to another. As partici- tries. Of the company’s more ten effectively, and understand pants struggle with these differ- than 120,000 employees, about personality differences. ences, they learn to be effective one-fourth are located in North Participants are actively en- across countries and cultures. America. To create a common gaged, working on projects and PWC has enjoyed several culture, develop leaders, and interacting with company leaders beneﬁts from Genesis Park. Not encourage innovation, the com- as they explore topics such as only do participants learn the pany offers a global training how the company should be subject matter, but they also program it calls Genesis Park, structured in the future and what develop professional networks held in Washington, D.C. its objectives should be. of colleagues who can help The ﬁve-month Genesis Park What’s really special about them in the future. Genesis Park program is designed to remove Genesis Park is the learning that graduates often contact gradu- any cultural biases its partici- comes when individuals of dif- ates from other countries when pants may have about team- ferent cultural backgrounds in- they need help on projects in work and creative thinking. It teract. In the projects and exer- those countries. They also de- builds them into an effective cises, participants are expected velop greater conﬁdence and multinational team that can to inﬂuence one another willingness to challenge the sta- help solve problems for the or- through their leadership abilities, tus quo. Through Genesis Park, ganization and its clients. The rather than their job titles. For PWC is shaping leaders for its unique program exposes the some participants, the lack of a role in a global economy. participants, drawn from many “boss” and a hierarchy is chal- of the countries where PWC lenging. For example, partici- SOURCE: Based on C. Patton, “The operates, to goals that are uni- pants from Singapore, Malaysia, Genesis of Talent,” Human Resource Executive, February 2004, pp. 34–38; versal throughout the company, and other Asian countries some- and PricewaterhouseCoopers, “About including effective communica- times feel awkward selling their Us,” PWC Web site, www.pwcglobal. tions and mentoring. ideas because their cultures en- com, accessed March 29, 2005. managers. The company learned that in traditional Chinese-owned companies, rules and regulations allowed little creativity and self-direction. Also, in many joint U.S.- China ventures, local managers were not trusted. Starbucks distinguished itself as an employer by emphasizing its casual culture and opportunities for career development. The company also spends considerable time training employees. It sends new man- agers to Tacoma, Washington, where they learn the corporate culture as well as the secrets of brewing ﬂavorful coffee. Another company that trains foreign workers in the United States is PricewaterhouseCoopers, described in the “Best Practices” box. Even hiring at home may involve selection of employees from other countries. The 1990s and the beginning of the 21st century, like the beginning of the last century, 48 1 line short CHAPTER 2 Trends in Human Resource Management 49 Figure 2.6 Where Immigrants to the United States Came from in 2003 SOURCE: Department of Homeland Security, Ofﬁce of Immigration Statistics, Yearbook of Immigration Statistics: 2003, Table 3, downloaded at http://uscis.gov (March 23, 2005). have been years of signiﬁcant immigration. Immigrants will likely account for an ad- ditional million persons in the U.S. workforce each year through 2012.43 Figure 2.6 shows the distribution of immigration by continent of origin. The impact of immi- gration will be especially large in some regions of the United States. In the states on the Paciﬁc Coast, 7 out of 10 entrants to the labor force are immigrants.44 About 70 percent of immigrant workers will be Hispanics and Asians. Employers in tight labor markets—such as those seeking experts in computer science, engineering, and infor- mation systems—are especially likely to recruit international students.45 The war against terrorism has not changed the use of immigrants by U.S. employers, but heightened concern for national security has resulted in longer waits for visas to be approved by the government and for hiring decisions to be approved. International Assignments Besides hiring an international workforce, organizations must be prepared to send em- ployees to other countries. This requires HR expertise in selecting employees for in- ternational assignments and preparing them for those assignments. Employees who take assignments in other countries are called expatriates. expatriates U.S. companies must better prepare employees to work in other countries. The Employees who take failure rate for U.S. expatriates is greater than that for European and Japanese expa- assignments in other triates.46 To improve in this area, U.S. companies must carefully select employees to countries. work abroad based on their ability to understand and respect the cultural and business norms of the host country. Qualiﬁed candidates also need language skills and techni- cal ability. In Chapter 15, we discuss practices for training employees to understand other cultures. LO6 TECHNOLOGICAL CHANGE IN HRM Discuss how technological Advances in computer-related technology have had a major impact on the use of in- developments are formation for managing human resources. Large quantities of employee data (includ- affecting human ing training records, skills, compensation rates, and beneﬁts usage and cost) can eas- resource ily be stored on personal computers and manipulated with user-friendly spreadsheets management. 1 line short 50 PART 1 The Human Resource Environment TABLE 2.1 TECHNOLOGY WHAT IT DOES EXAMPLE New Technologies Inﬂuencing HRM Internet portal Combines data from several A company’s manager can sources into a single site; lets track labor costs by work user customize data without group. programming skills. Shared service Consolidate different HR AlliedSignal combined more centers functions into a single than 75 functions, including location; eliminate ﬁnance and HR, into a shared redundancy and reduce service center. administrative costs; process all HR transactions at one time. Application service Lets companies rent space KPMG Consulting uses an provider (ASP) on a remote computer ASP to host the company’s system and use the system’s computerized learning software to manage its HR program. activities, including security and upgrades. Business Provides insight into business Managers use the system to intelligence trends and patterns and analyze labor costs and helps businesses improve productivity among different decisions. employee groups. human resource or statistical software. Often these features are combined in a human resource infor- information system mation system (HRIS), a computer system used to acquire, store, manipulate, ana- (HRIS) lyze, retrieve, and distribute information related to an organization’s human re- A computer system sources.47 An HRIS can support strategic decision making, help the organization used to acquire, avoid lawsuits, provide data for evaluating programs or policies, and support day-to- store, manipulate, day HR decisions. Table 2.1 describes some of the new technologies that may be in- analyze, retrieve, and distribute cluded in an organization’s HRIS. information related The support of an HRIS can help HR professionals navigate the challenges of today’s to an organization’s complex business environment. For example, rapidly changing technology can cause em- human resources. ployees’ skills to become obsolete. Organizations must therefore carefully monitor their employees’ skills and the organization’s needed skills. Often the employees and needs are distributed among several locations, perhaps among several countries. Florida Power & Light Company, based in Juno Beach, Florida, uses HRIS applications to provide infor- mation to employees and to support decision making by managers. More than 10,000 employees in 20 states can use the information system to learn about their beneﬁts. Managers use the system to track employees’ vacation and sick days and to make changes in stafﬁng and pay. If managers want a personnel report, they no longer have to call the human resource department to request one; the HRIS will prepare it automatically.48 electronic business The Internet Economy (e-business) Any process that a The way business is conducted has changed rapidly during the past decade and will business conducts continue to do so. Much of the change is related to the widespread adoption of the electronically, Internet by businesses and individuals. More than two-thirds of the U.S. population especially business uses the Internet, and their numbers have more than doubled over the ﬁrst half of this involving use of the decade.49 Greater use of the Internet has prompted the spread of electronic business Internet. (e-business)—any process that a business conducts electronically, especially business CHAPTER 2 Trends in Human Resource Management 51 The internet and e-HRM are helpful for employees who work outside the ofﬁce because they can receive and share information online easily. The beneﬁts of products such as PDAs’ and Blackberrys’ are enormous but is it possible to be too accessible? involving use of the Internet. E-business includes several forms of buying and selling goods and business services: • Business-to-consumer transactions, such as purchasing books and tickets and con- ducting services, including banking, online. • Business-to-business transactions, including sales among manufacturers, retailers, wholesalers, and construction ﬁrms. • Consumer-to-consumer transactions—in particular, individuals buying and selling through auctions. E-business relies on the Internet to enable buyers to obtain product information on- line, directly order products and services, receive after-sale technical support, and view the status of orders and deliveries. Internet sites may also allow the customer and seller to communicate with each other through e-mail, chat, and voice connections. Companies may set up customer service centers offering e-mail and live telephone con- nections to provide help, advice, or product information not found on their Web sites. E-business creates many HRM challenges.50 The fast pace of change in informa- tion technology requires companies to continually update their skill requirements and then recruit and train people to meet those requirements. The competition for such employees may be stiff and, as described earlier, often involves recruiting on an in- ternational scale. Motivation can also be a challenge. A decade ago, many e-business organizations were small start-up companies founded by young, forward-looking people who saw the potential of a then-new technology. These companies sometimes made up for inexpe- rienced management with a culture based on creativity, enthusiasm, and intense com- mitment. Policies and procedures sometimes took a backseat to team spirit and work- place fun. But as competition from established companies heated up and as investors withdrew funding, the start-up companies were acquired, went out of business, or had to radically cut back hiring and spending. In this changed environment, employees no longer believed the vision that they could invest long hours at modest pay for the hope of a huge payoff when their company became the next Amazon or Google. In this less frenzied, more practical environment, programmers and game designers are beginning to demand overtime pay for their 60-hour workweeks and refusing stock options as sub- stitutes for pay raises. In an extreme case, current and former employees of videogame company Electronic Arts ﬁled a lawsuit complaining that it had not paid them over- time wages to which they were entitled.51 In this environment, HRM needs to help 52 PART 1 The Human Resource Environment companies comply with labor laws, motivate employees, and craft human resource policies that seem fair to workers and meet employers’ competitive demands. Electronic Human Resource Management (e-HRM) The development of e-business has included ways to move HRM activities onto the Internet. Electronic HRM applications let employees enroll in and participate in training programs online. Employees can go online to select from items in a beneﬁts package and enroll in the beneﬁts they choose. They can look up answers to HR- related questions and read company news. This processing and transmission of digi- electronic human tized HR information is called electronic human resource management (e-HRM). resource E-HRM has the potential to change all traditional HRM functions. Table 2.2 shows management some major implications of e-HRM. For example, employees in different geographic (e-HRM) areas can work together. Use of the Internet lets companies search for talent without The processing and geographic limitations. Recruiting can include online job postings, applications, and transmission of candidate screening from the company’s Web site or the Web sites of companies that digitized HR information, specialize in online recruiting, such as Monster.com or HotJobs. Employees from dif- especially using ferent geographic locations can all receive the same training over the company’s com- computer puter network. networking and the Privacy is an important issue in e-HRM. A great deal of HR information is conﬁ- Internet. dential and not suitable for posting on a Web site for everyone to see. One solution is to set up e-HRM on an intranet, which is a network that uses Internet tools but limits access to authorized users in the organization. However, to better draw on the Internet’s potential, organizations are increasingly replacing intranets with Web por- tals (Web sites designed to serve as a gateway to the Internet, highlighting links to rel- evant information).52 Whether a company uses an intranet or a Web portal, it must ensure that it has sufﬁcient security measures in place to protect employees’ privacy. Another issue that involves privacy concerns, the Internet, and personnel policy is employees’ use of e-mail. Many employees believe that the e-mail messages they send are private and not accessible once they delete them. In fact, employers legiti- mately point out that they have a right to see and control communications employ- ees create on company time and send from the company’s address. Over half of U.S. companies recently surveyed said they monitor incoming and outgoing e-mail.53 Some companies also monitor e-mail messages sent within the company. Scanning TABLE 2.2 HRM PRACTICES IMPLICATIONS OF E-HRM Implications of e-HRM for HRM Analysis and design Employees in geographically dispersed locations can Practices of work work together in virtual teams using video, e-mail, and the Internet. Recruiting Post job openings online; candidates can apply for jobs online. Training Online learning can bring training to employees anywhere, anytime. Selection Online simulations, including tests, videos, and e-mail, can measure job candidates’ ability to deal with real-life business challenges. Compensation and Employees can review salary and bonus information and beneﬁts seek information about and enroll in beneﬁt plans. CHAPTER 2 Trends in Human Resource Management 53 software can ﬂag messages that use potentially embarrassing words or that mention sensitive topics such as competitors, client or patient ﬁles, or code names for products under development. Webcor Builders, a California construction company, uses scan- ning software that can search for keywords, word patterns, and names of competitors. Few states have laws requiring companies to notify employees of such practices, but ethical principles and good employee relations call upon HR personnel to ensure that the company is clear about its policy and the reasons for it. Sharing of Human Resource Information Information technology is changing the way HR departments handle record keeping and information sharing. Today, HR employees use modern technology to automate much of their work in managing employee records and giving employees access to in- formation and enrollment forms for training, beneﬁts, and other programs. As a re- sult, HR employees play a smaller role in maintaining records, and employees now get information through self-service. This means employees have online access to infor- self-service mation about HR issues such as training, beneﬁts, compensation, and contracts; go System in which online to enroll themselves in programs and services; and provide feedback through employees have online surveys. Today, employees routinely look up workplace policies and informa- online access to tion about their beneﬁts online, and they may receive electronic notiﬁcation when information about HR issues and go deposits are made directly to their bank accounts. online to enroll Mapics, a software developer based in Atlanta, provides self-service software geared themselves in to managers as well as nonmanagement employees. Self-service at Mapics includes en- programs and rollment in beneﬁts plans, and managers use the system for such tasks as performance provide feedback appraisals and payroll planning. Mapics lacked reliable information on vacation time through surveys. used by its employees, many of whom work from home or at client sites. The company used HR self-service to solve this information problem. Not only was the existing in- formation tracked on paper inaccurate, but many employees were too engrossed in their work to take their vacations, and the days rolled over year after year, until the company was recording a liability of a million dollars’ worth of accrued, unused vaca- tion time. Mapics set up a vacation management system in which managers can look up the amount of vacation time their employees have used and the amount of re- maining vacation. Employees keep track of their vacation time too. This helps with scheduling and also enables managers to encourage employees to use their remaining time. Mapics changed its vacation policy to require that employees take their vacation or lose the time at the end of the year. At Mapics, self-service has improved manage- ment and employee satisfaction with HR services at the same time it has cut costs.54 Like Mapics, a growing number of companies are combining employee self-service with management self-service, such as the ability to go online to authorize pay in- creases, approve expenses, and transfer employees to new positions. More sophisti- cated systems extend management applications to decision making in areas such as compensation and performance management. For example, managers can schedule job interviews or performance appraisals, guided by the system to provide the neces- sary information and follow every step called for by the company’s procedures.55 Linking Employees and Teams Electronically Business today operates on a global scale. Many organizations therefore need em- ployees throughout the world, and employees need to collaborate with coworkers in different places. HR professionals must identify potential recruits, provide training, 54 PART 1 The Human Resource Environment and assess skills in many parts of the world. Organizations can save travel costs and time by applying e-HRM to a variety of HR practices. For example, members of a team could make hiring decisions during an online videoconference or chat session, and training technologies range from downloadable text ﬁles to streaming video. Electronic links pose a challenge that is especially signiﬁcant for human resource management: They lack the personal touch of face-to-face communication. When e-HRM includes sensitive matters, such as discrimination complaints, the lack of a per- sonal touch can prevent an organization from seeing important problems or meeting im- portant needs. In Detroit, two former employees ﬁled a sexual harassment lawsuit against a software company that had arranged for an outside company to provide its HR services online. In their complaint, the former employees said the software company’s human re- source provider had failed to respond appropriately when they reported the harassment. As a result, the former employer might be held responsible for the e-HRM provider’s in- action.56 The lesson for organizations interested in e-HRM is to plan how they will hear and respond to employees’ concerns when most communications take place online. LO7 CHANGE IN THE Explain how the nature of the EMPLOYMENT RELATIONSHIP employment Economic downturns will continue to occur, resulting in layoffs in all industries. In addi- relationship is tion, renewed interest in mergers and acquisitions suggests that layoffs may follow. changing. Following a merger or acquisition, companies typically look for ways to become more ef- ﬁcient by eliminating positions where two sets of employees are handling the same re- sponsibilities. Whatever the circumstances, the use of layoffs for improving efﬁciency has played a major role in changing the basic relationship between employers and employees. A New Psychological Contract psychological We can think of that relationship in terms of a psychological contract, a description contract of what an employee expects to contribute in an employment relationship and what A description of the employer will provide the employee in exchange for those contributions.57 Unlike what an employee a written sales contract, the psychological contract is not formally put into words. expects to Instead, it describes unspoken expectations that are widely held by employers and contribute in an employees. In the traditional version of this psychological contract, organizations ex- employment relationship and pected their employees to contribute time, effort, skills, abilities, and loyalty. In re- what the employer turn, the organizations would provide job security and opportunities for promotion. will provide the However, this arrangement is being replaced with a new type of psychological con- employee in tract.58 To stay competitive, modern organizations must frequently change the quality, exchange for those innovation, creativeness, and timeliness of employee contributions and the skills needed contributions. to make those contributions. This need has led to organizational restructuring, mergers and acquisitions, layoffs, and longer hours for many employees. Companies demand ex- cellent customer service and high productivity levels. They expect employees to take more responsibility for their own careers, from seeking training to balancing work and family. These expectations result in less job security for employees, who can count on working for several companies over the course of a career. The average length of time a person holds a job has declined during this decade from nine years to just seven.59 In exchange for top performance and working longer hours without job security, employees want companies to provide ﬂexible work schedules, comfortable working conditions, more control over how they accomplish work, training and development opportunities, and ﬁnancial incentives based on how the organization performs. CHAPTER 2 Trends in Human Resource Management 55 (Figure 2.7 provides a humorous look at an employee who seems to have beneﬁted from this modern psychological contract by obtaining a family-friendly work arrange- ment.) Employees realize that companies cannot provide employment security, so they want employability. This means they want their company to provide training and job experiences to help ensure that they can ﬁnd other employment opportunities. MTW, an information technology company, is exceptional in that it puts its psy- chological contracts into writing. Whenever a new employee joins the company, that person writes an “expectations agreement” stating his or her most important goals. Every six months or so, the employee and the team leader of the employee’s project team review the expectations agreement and modify it if the employee’s expectations have changed. For example, Dan Carier’s expectations agreement said he would stay knowledgeable about a type of software and that the company would let him continue work on his project, even if he had to move out of state (his wife had a job that might require relocation). Says Carier of the agreement, “I felt I was in control of my des- tiny.” MTW’s treatment of employees has translated into business success. Employee turnover is just 6.7 percent a year, in contrast to an industry average of 30 percent, and in a tough job market, most of the company’s new hires come from referrals by existing employees. Revenues have grown at a rate of 50 percent a year, and an im- pressive 14 percent of that revenue is proﬁts.60 Flexibility LO8 The new psychological contract largely results from the HRM challenge of building a Discuss how the need for ﬂexibility committed, productive workforce in turbulent economic conditions that offer oppor- affects human tunity for ﬁnancial success but can also quickly turn sour, making every employee ex- resource pendable. From the organization’s perspective, the key to survival in a fast-changing mangement. environment is ﬂexibility. Organizations want to be able to change as fast as customer needs and economic conditions change. Flexibility in human resource management includes ﬂexible stafﬁng levels and ﬂexible work schedules. The “e-HRM” box de- scribes how Sun Microsystems uses technology to create a ﬂexible work environment. Figure 2.7 A Family-Friendly Work Arrangement E-HRM AT SUN MICROSYSTEMS, OFFICES ARE “VIRTUAL” The employees of Sun Micro- Employees eligible for iWork than three-quarters connect to systems live out the company’s can work in any of several loca- the company from remote loca- slogan “Everyone and every- tions. They may use Sun’s ﬂexi- tions, rather than sitting in con- thing connected to the Net.” ble ofﬁces, located in 12 drop- ventional ofﬁces. Most are Because their work and infor- in centers, as well as 115 other pleased with the ﬂexibility— mation are available online, locations around the world. both the convenience of choos- they can work almost anywhere They also may receive approval ing a location and the greater and anytime. Based on the idea to use the system from home control to balance work and that ﬂexibility can help employ- up to ﬁve days per week. The personal time. In addition, Sun ees accomplish their goals, Sun locations of the drop-in centers is saving money by reducing its has set up a program called enable employees to reduce ofﬁce space. The company esti- iWork, which uses both ﬂexible the time they spend commut- mates that iWork has elimi- hours and ﬂexible workspaces. ing into a central location. nated the need for about 7,700 Under the iWork program, an Working closer to home also cubicles and workstations and employee sits at a customized helps employees set up ﬂexible has saved millions of dollars it computer and uses a smart card arrangements where they can would have spent for real es- (called a Sun Ray) to obtain ac- go to and from work to pick up tate, power consumption, and cess to the company’s com- and drop off family members, other expenses related to a puter network via the Internet. perhaps ﬁnishing the day’s work conventional ofﬁce arrange- The Sun Ray gives employees at home. ment. access to applications and ﬁles Employees who want to par- needed for their work. They can ticipate in the iWork program work independently or with one take an assessment that evalu- another online through video- ates their suitability for this SOURCE: Samuel Greengard, “Sun’s conferencing and collaboration work arrangement. Nearly all of Shining Example,” Workforce software. them are eligible, and more Management, March 2005, pp. 48–49. Flexible Stafﬁng Levels A ﬂexible workforce is one the organization can quickly reshape and resize to meet its alternative work arrangements changing needs. To be able to do this without massive hiring and ﬁring campaigns, Methods of stafﬁng organizations are using more alternative work arrangements. Alternative work other than the arrangements are methods of stafﬁng other than the traditional hiring of full-time traditional hiring of employees. There are a variety of methods, with the following being most common: full-time employees • Independent contractors are self-employed individuals with multiple clients. (for example, use of independent • On-call workers are persons who work for an organization only when they are contractors, on-call needed. workers, temporary • Temporary workers are employed by a temporary agency; client organizations pay workers, and the agency for the services of these workers. contract company • Contract company workers are employed directly by a company for a speciﬁc time workers). speciﬁed in a written contract. 56 1 line short CHAPTER 2 Trends in Human Resource Management 57 Multitasking has become a way of life for many employees who need to make the most of every minute. This is a new, but prevalent, trend that is affecting human resource management and the employees it supports. The Bureau of Labor Statistics estimates that there are 12.2 million “nontraditional workers,” including 8.2 million independent contractors, 2 million on-call workers, 1.2 million temporary workers, and approximately 800,000 contract company work- ers. According to one estimate, workers with alternative work arrangements make up more than one-fourth of the total workforce.61 FedEx Ground, a subsidiary of Federal Express Corporation, depends on a team of 14,300 independent contractors who work as either pickup and delivery contractors or long-haul contractors. During peak de- livery season, the company adds up to 2,800 temporary drivers and up to 2,000 part- time package handlers.62 More workers in alternative employment relationships are choosing these arrange- ments, but preferences vary. Most independent contractors and contract workers have this type of arrangement by choice. In contrast, temporary agency workers and on-call workers are likely to prefer traditional full-time employment. There is some debate about whether nontraditional employment relationships are good or bad. Some labor analysts argue that alternative work arrangements are substandard jobs featuring low pay, fear of unemployment, poor health insurance and retirement beneﬁts, and dis- satisfying work. Others claim that these jobs provide ﬂexibility for companies and em- ployees alike. With alternative work arrangements, organizations can more easily modify the number of their employees. Continually adjusting stafﬁng levels is espe- cially cost-effective for an organization that has ﬂuctuating demand for its products and services. And when an organization downsizes by laying off temporary and part- time employees, the damage to morale among permanent full-time workers is likely to be less severe. From employees’ perspective, alternative work arrangements provide some ﬂexi- bility for balancing work and nonwork activities. A study by the Families and Work Institute found that more than one out of six workers would prefer to work part- time.63 Some employers permit part-time work in principle, but the people on part- time schedules discover that work pressures keep them on the job longer than their scheduled hours—sometimes full-time. Legal and accounting ﬁrms have been estab- lishing policies designed to retain part-time professionals without limiting their future careers. Some, including PricewaterhouseCoopers and Ernst & Young, have hired co- ordinators to oversee these arrangements. Flexible Work Schedules The globalization of the world economy and the development of e-commerce have made the notion of a 40-hour work week obsolete. As a result, companies need to be staffed 24 hours a day, seven days a week. Employees in manufacturing environments and service 1 line short 58 PART 1 The Human Resource Environment call centers are being asked to work 12-hour days or to work afternoon or midnight shifts. Similarly, professional employees face long hours and work demands that spill over into their personal lives. E-mail, pagers, and cell phones bombard employees with informa- tion and work demands. In the car, on vacation, on planes, and even in the bathroom, employees can be interrupted by work demands. The Bureau of Labor Statistics recently found that on workdays, one out of ﬁve employed persons do some or all of their work at home.64 More demanding work results in greater employee stress, less satisﬁed employ- ees, loss of productivity, and higher turnover—all of which are costly for companies. Many organizations are taking steps to provide more ﬂexible work schedules, to pro- tect employees’ free time, and to more productively use employees’ work time. Workers consider ﬂexible schedules a valuable way to ease the pressures and conﬂicts of trying to balance work and nonwork activities. Employers are using ﬂexible schedules to re- cruit and retain employees and to increase satisfaction and productivity. For example, Deloitte & Touche offers ﬂexible work arrangements if employees can continue meet- ing clients’ needs and the arrangement makes business sense. Employees who want such an arrangement must demonstrate they can meet job requirements. At Household International, ﬂexibility is designed into the company’s beneﬁts package. Employees select from a menu of beneﬁts that include ﬂexible hours, training oppor- tunities, and discounts for services, as well as the usual insurance and paid time off.65 To protect employees’ nonwork time, some companies, such as the consulting ﬁrm Ernst & Young, allow employees to wait until they return to work to answer weekend or vacation voice mail and e-mail messages.66 At SCJohnson in Racine, Wisconsin, employees often had to take work home on the weekends because they were so tied up in meetings from Monday through Friday that they had to ﬁnish duties on their own time.67 SCJohnson now bans all meetings for two Fridays each month. The pol- icy helps employees rest on at least two weekends and work at home on those Fridays because they won’t be afraid of missing a meeting. Flexible work schedules and ﬂexible job assignments also provide organizations with a way to adjust to slow periods without laying off valued workers. Lincoln Electric Company responded to slow demand by moving salaried employees to cleri- cal jobs at hourly wages that vary according to the assignment. Lincoln’s production workers also are trained to handle varied jobs, according to the size and types of or- ders the company receives from its customers. In the recession of the early 1980s, which hit the company hard, engineers and factory workers from Lincoln went on the road to try peddling Lincoln’s welding and cutting parts to potential customers. Of course, employees prefer the higher-paying jobs, not the demands of lean times. Still, they are glad for Lincoln’s commitment to keep them on the payroll—and on the re- ceiving end of beneﬁts like pensions and insurance.68 thinking ETHICALLY Whose Business Is It When You Blog? Just as companies have become used to the idea of warning employees that their e-mail messages are not private, along come blogs (Web logs), with their own set of privacy issues. Although some companies have begun to use blogs as a mar- keting tool, most blogs are written by individuals who enjoy posting their thoughts online. The privacy issue involves the line between what people do as employees and what they do on their own time. CHAPTER 2 Trends in Human Resource Management 59 Consider the case of Mark Jen. After he obtained a job with Google, he be- gan posting his observations about the company in a blog he named Ninetyninezeros. (Coincidentally or not, this title has one less zero than the num- ber of zeros in a googol, the number that inspired Google’s name.) About a week after the entries began, they disappeared temporarily, and they reappeared after some editing. Jen noted that Google was “pretty cool about” his blog, but a few days later, word leaked that he was no longer working for Google. Other bloggers weighed in. Jeremy Zawodny, who works for Yahoo! and said he spoke to Jen, wrote, “He doesn’t believe he was doing anything wrong (nei- ther do I based on what he told me).” Robert Scoble, a Microsoft employee, cau- tioned, “It’s not easy writing in public. All it takes is one paragraph to lose credi- bility, have people laugh at you, get you sued, create a PR ﬁrestorm, or get your boss mad at you.” Jen is not the ﬁrst blogger to lose his job. Ellen Simonetti was ﬁred after her Queen of the Sky blog posted pictures of herself posed humorously and a little provocatively in her ﬂight attendant uniform. Bank employee Peter Whitney was ﬁred after coworkers came across his Gravity Spike blog, which included com- plaints about work. Heather Armstrong’s blog at www.dooce.com included exag- gerated stories about work. They were intended to amuse her family and friends, but her boss, alerted by an anonymous tip, was not amused. SOURCE: Evan Hansen, “Google Blogger Has Left the Building,” CNet News.com, February 8, 2005, www.news.com; Neville Hobson, “Google Blogger Firing Highlights Why Guidelines Are Essential,” WebProNews.com, February 10, 2005, www.webpronews.com; and Todd Wallack, “Beware if Your Blog Is Related to Work,” San Francisco Chronicle, January 24, 2005, downloaded at www.sfgate.com. Questions 1. Who might be affected by a blog written about a company? What kinds of work-related information are public? What information does a company have a right to keep private? 2. Imagine that you work in human resources and you learn that an employee of your company has mentioned work-related topics in a blog. What would you do? SUMMARY 1. Describe trends in the labor force composition and differences. Organizations also need employees with how they affect human resource management. skills in decision making, customer service, and team- An organization’s internal labor force comes from its work, as well as technical skills. The competition for external labor market—individuals who are actively such talent is intense. Organizations facing a skills seeking employment. In the United States, this labor shortage often hire employees who lack certain skills, market is aging and becoming more racially and eth- then train them for their jobs. nically diverse. The share of women in the U.S. workforce has grown to nearly half of the total. To 2. Summarize areas in which human resource management compete for talent, organizations must be ﬂexible can support the goal of creating a high-performance enough to meet the needs of older workers, possibly work system. redesigning jobs. Organizations must recruit from a di- HRM can help organizations ﬁnd and keep the best verse population, establish bias-free HR systems, and possible ﬁt between their social system and technical help employees understand and appreciate cultural system. Organizations need employees with broad 60 PART 1 The Human Resource Environment skills and strong motivation. Recruiting and selection the HR department can lead in communicating with decisions are especially important for organizations that employees and providing training. It will also have to rely on knowledge workers. Job design and appropriate prepare new approaches for recruiting and appraising systems for assessment and rewards have a central role employees that are better suited to the reengineered in supporting employee empowerment and teamwork. jobs. Outsourcing presents similar issues related to job design and employee selection. 3. Deﬁne employee empowerment and explain its role in the modern organization. 5. Summarize ways in which human resource management Employee empowerment means giving employees re- can support organizations expanding internationally. sponsibility and authority to make decisions regarding Organizations with international operations hire em- all aspects of product development or customer ser- ployees in foreign countries where they operate, so vice. The organization holds employees accountable they need knowledge of differences in culture and for products and services, and in exchange, the em- business practices. Even small businesses discover that ployees share in the rewards (or losses) that result. qualiﬁed candidates include immigrants, as they ac- Selection decisions should provide the organization count for a signiﬁcant and growing share of the U.S. people who have the necessary decision-making and labor market. HRM needs to understand and train interpersonal skills. HRM must design jobs to give em- employees to deal with differences in cultures. HRM ployees latitude for decision making and train employ- also must be able to help organizations select and pre- ees to handle their broad responsibilities. Feedback pare employees for overseas assignments. To support and rewards must be appropriate for the work of em- efﬁciency and growth, HR staff can prepare compa- powered employees. HRM can also play a role in giv- nies for offshoring, in which operations are moved to ing employees access to the information they need. lower-wage countries. HR experts can help organiza- tions determine whether workers in offshore locations 4. Identify ways HR professionals can support organiza- can provide the same or better skills, how offshoring tional strategies for quality, growth, and efﬁciency. will affect motivation and recruitment of employees HR professionals should be familiar with the organiza- needed in the United States, and whether managers tion’s strategy and may even play a role in developing are prepared to manage offshore employees. the strategy. Speciﬁc HR practices vary according to the type of strategy. Job design is essential for empower- 6. Discuss how technological developments are affecting ing employees to practice total quality management. In human resource management. organizations planning major changes such as a merger Information systems have become a tool for more HR or acquisition, downsizing, or reengineering, HRM professionals, and often these systems are provided must provide leadership for managing the change in a through the Internet. In addition, e-business plays a role way that includes skillful employee relations and mean- in a growing number of organizations. The widespread ingful rewards. HR professionals can bring “people is- use of the Internet includes HRM applications. sues” to the attention of the managers leading these Organizations search for talent globally using online changes. They can provide training in conﬂict resolu- job postings and screening candidates online. tion skills, as well as knowledge of the other organiza- Organizations’ Web sites feature information directed tion involved in a merger or acquisition. HR profes- toward potential employees. Employees may receive sionals also must resolve differences between the training online. At many companies, online informa- companies’ HR systems, such as beneﬁts packages and tion sharing enables employee self-service for many HR performance appraisals. For a downsizing, the HR de- needs, from application forms to training modules to in- partment can help to develop voluntary programs to re- formation about the details of company policies and duce the workforce or can help identify the least valu- beneﬁts. Online communications also may link employ- able employees to lay off. Employee relations can help ees and teams, enabling organizations to structure work maintain the morale of employees who remain after a that involves collaboration among employees at differ- downsizing. Organizations with international opera- ent times and places. In such situations, HR profession- tions hire employees in foreign countries where they als must ensure that communications remain effective operate, so they need knowledge of differences in cul- enough to detect and correct problems when they arise. ture and business practices. Even small businesses ser- ving domestic markets discover that qualiﬁed candi- 7. Explain how the nature of the employment relation- dates include immigrants, as they account for a ship is changing. signiﬁcant and growing share of the U.S. labor market, The employment relationship takes the form of a so HRM requires knowledge of different cultures. “psychological contract” that describes what employ- Organizations also must be able to select and prepare ees and employers expect from the employment rela- employees for overseas assignments. In reengineering, tionship. It includes unspoken expectations that are 1 line long CHAPTER 2 Trends in Human Resource Management 61 widely held. In the traditional version, organizations 8. Discuss how the need for ﬂexibility affects human re- expected their employees to contribute time, effort, source management. skills, abilities, and loyalty in exchange for job secu- Organizations seek ﬂexibility in stafﬁng levels through rity and opportunities for promotion. Today, modern alternatives to the traditional employment relation- organizations’ needs are constantly changing, so ship. They may use outsourcing as well as temporary organizations are requiring top performance and and contract workers. The use of such workers can af- longer work hours but cannot provide job security. fect job design, as well as the motivation of the orga- Instead, employees are looking for ﬂexible work nization’s permanent employees. Organizations also schedules, comfortable working conditions, greater may seek ﬂexible work schedules, including shortened autonomy, opportunities for training and develop- workweeks. They may offer ﬂexible schedules as a way ment, and performance-related ﬁnancial incentives. for employees to adjust work hours to meet personal For HRM, the changes require planning for ﬂexible and family needs. Organizations also may move em- stafﬁng levels. ployees to different jobs to meet changes in demand. REVIEW AND DISCUSSION QUESTIONS 1. How does each of the following labor force trends of HR professional in an organization that outsources affect HRM? many HR activities or in the outside ﬁrm that has the a. Aging of the labor force. contract to provide the HR services? Why? b. Diversity of the labor force. 6. Suppose you have been hired to manage human re- c. Skill deﬁciencies of the labor force. sources for a small company that offers business ser- 2. At many organizations, goals include improving peo- vices including customer service calls and business re- ple’s performance by relying on knowledge workers, port preparation. The 20-person company has been empowering employees, and assigning work to teams. preparing to expand from serving a few local clients How can HRM support these efforts? that are well-known to the company’s owners. The 3. Merging, downsizing, and reengineering all can radi- owners believe that their experience and reputation cally change the structure of an organization. Choose for quality will help them expand to serve more and one of these changes, and describe HRM’s role in larger clients. What challenges will you need to pre- making the change succeed. If possible, apply your pare the company to meet? How will you begin? discussion to an actual merger, downsizing, or reengi- 7. What e-HRM resources might you use to meet the neering effort that has recently occurred. challenges in Question 4? 4. When an organization decides to operate facilities in 8. What HRM functions could an organization provide other countries, how can HRM practices support this through self-service? What are some advantages and change? disadvantages of using self-service for these functions? 5. Why do organizations outsource HRM functions? How 9. How is the employment relationship typical of mod- does outsourcing affect the role of human resource ern organizations different from the relationship of a professionals? Would you be more attracted to the role generation ago? WHAT’S YOUR HR IQ? The text Web site offers two more ways to check what ment. Go online with the Web Exercise to see how HRM you’ve learned so far. Use the Self-Assessment exercise to may be affected by new technologies. test your knowledge of trends in human resource manage- BusinessWeek CASE The Future of Work No low-wage worker in Shanghai, New Delhi, or Dublin speciﬁcally, 100 technicians who serve half a million cus- will ever take Mark Ryan’s job. No software will ever do tomers of Verizon Communications out of an ofﬁce in what he does, either. That’s because Ryan manages people— Santa Fe Springs, California. A telephone lineman before 1 line long 62 PART 1 The Human Resource Environment moving up the corporate ladder, Ryan is earning a master’s ple, have moved up from typing and answering phones to degree in organizational management at Verizon’s ex- planning meetings and keeping books. Bank tellers handle pense. In the master’s degree program he’s studying topics special requests while ATMs take deposits and dispense like conﬂict resolution. cash. The factory workers most likely to keep their jobs That’s heady stuff for a guy who used to climb poles. will be those who make themselves experts on a variety of “The technical side of the business is important,” says computer-controlled machines or who excel at quick Ryan, “but managing people and rewarding and recogniz- turnaround of custom orders. ing the people who do an outstanding job is how we are As the economy evolves, two kinds of jobs will remain going to succeed.” impossible to routinize. One kind involves complex pat- Sab Maglione is more vulnerable. The computer pro- tern recognition, such as spotting business opportunities grammer from Somerville, New Jersey, was hired by an in- or repairing a complex machine. The other relies on com- surance company as an independent contractor in 2000 for plex communication skills, such as those required to man- good money but soon found himself training the represen- age people or sell big-ticket items. At the same time, some tatives of Tata Consulting who would eventually move his jobs that are well paid could soon be routinized. Powerful work to India. His next contract in New York City paid computers, advanced software, and speedy communica- half as much—but even that soon ended when he found tions have made routine work vulnerable. Well-paid legal himself out of work in December 2003. Maglione, who has researchers, tax preparers, and accountants are seeing an associate’s degree in computer science, is studying hard their jobs outsourced abroad. Stock traders could eventu- and remains optimistic about getting a job but says he’s ally be replaced by automated trading systems; computer been stymied by the “barrelful” of recent experience in the programming has been partly taken over by clever soft- latest programming languages prospective employers de- ware, and part has been exported to lower-wage nations. mand. “If you don’t have it, they say, ‘Let’s outsource it.’” Clearly, the importance of nonroutine work increases Ryan, the happy manager, and Maglione, the worried the value of education. College graduates have steadily programmer, exemplify two powerful crosscurrents in the broadened their lead over the less-educated in earnings. American job market. Changes in the economy in recent As valuable as education is, technical knowledge alone years have made some people more valuable and secure than won’t cut it, because workers in other countries read the ever, while pushing others—even those with skills that were same textbooks. For many good jobs, in fact, education recently regarded as highly valuable—to the margins. isn’t as useful as specialized local knowledge. Demand is What makes the difference? Research by economists at hot for plant managers who can improve a factory’s efﬁ- Massachusetts Institute of Technology and Harvard ciency. Also, there’s plenty of demand for people who University concludes that the key factor is whether a job combine technical skills with industry-speciﬁc knowledge can be “routinized,” or broken down into repeatable steps and people skills. Companies are looking for technical ex- that vary little from day to day. Such a job is easier to re- perts who also can work with others, can change direction place with a clever piece of software or to hand over to a quickly, and understand their organization’s business. lower-paid worker outside the United States. By compari- SOURCE: Peter Coy, “The Future of Work,” BusinessWeek, March 22, 2004, son, the jobs that will pay well in the future will be ones pp. 50–52. that are hard to reduce to a recipe. These attractive jobs— from factory ﬂoor management to sales to teaching to the QUESTIONS professions—require ﬂexibility, creativity, and lifelong 1. How can HRM ensure that a company’s employees are learning. They generally also require subtle and frequent ﬂexible, and creative and provide good customer service? interactions with other people, often face to face. 2. How might modern technology help with the activities Nor do you need an advanced degree to have a non- you described in Question 1? routine job. You just need to do something that requires a 3. Which human resource functions are routine? Which lot of human interaction or that can’t be boiled down to a are likely to be part of the “future of work” as described repeatable procedure. The surviving secretaries, for exam- in this case? CASE: Fostering Innovation at IBM In a typical bureaucratic company, managers measure those same measures, Adkins’s next assignment was an their success by the number of people who report to them embarrassment: heading the new pervasive-computing di- and the size of their budgets (or, better yet, their earnings). vision, with zero employees. By those measures, Rod Adkins was a star at IBM when he In fact, IBM was depending on Adkins to help trans- managed its Unix computing division, which boasted form the company. IBM’s name once symbolized modern 35,000 employees and sales of $4 billion a year. And by technology, but the giant company had become too stodgy 1 line long CHAPTER 2 Trends in Human Resource Management 63 for the Internet age. Its research labs were still making dis- bearing fruit in the pilot phase, Harreld ends the project coveries and earning patents, but other companies more and assigns its leader to another important job at the com- often developed the ideas into successful business enter- pany. Harreld explains that it is important not to punish prises. Managers were reluctant to take risks, preferring to the leaders for failing when they take a risk, because even preserve their existing businesses. IBM’s executives de- the failures are learning opportunities. cided the solution was to encourage innovative employees One of the successes, the pervasive-computing project, to create new businesses with applications expected to be now operates the Pervasive Computing Advanced winners a few years in the future. They wanted the best Technology Lab in Austin, Texas. There, researchers and managers to be in charge of IBM’s new great ideas, not just engineers are investigating a wealth of high-tech ideas. to preserve the old ones. Early on, Bill Bodin, who manages research at the lab, de- Adkins’s new assignment, pervasive computing, was to cided they needed a “digital home,” and the group trans- extend the business of computers beyond machines on formed their bare research environment into a mockup of home and ofﬁce desks. Pervasive computing uses wireless a house that applies the technologies his group is research- technology to bring computer power practically every- ing. The home includes a kitchen and living room updated where—for example, in the voice-command navigation with the latest ideas in broadband, sensor, database, com- systems installed in automobiles. Under Adkins’s leader- munication, and voice recognition technologies. With a ship, the pervasive-computing business grew from an idea ﬂat-panel display in the living room, Bodin can open a to a division with sales of $2.4 billion in just three years. control portal that uses voice recognition to operate all the That performance helped IBM surpass its goal for devices in the living room, as well as the kitchen appli- transformation. The pervasive-computing division is part ances, home security system, the lawn’s sprinkler system, of a larger effort to develop emerging-business opportuni- and the heating and air conditioning for the entire house. ties (EBOs) under the leadership of IBM’s senior vice pres- In the kitchen, appliances are programmable and can be ident for strategy, J. Bruce Harreld. Harreld’s objective was controlled from anywhere via cell phone. for the EBOs to generate about $2 billion in new revenue The EBOs are part of IBM’s strategy to grow by devel- each year. In the program’s ﬁrst four years, IBM launched oping high-proﬁt products and services. Some of the com- 25 EBOs. Three failed, and the remaining EBOs bring in pany’s past products, notably personal computers, are now $15 billion a year and rising. commodities that compete on price. For IBM, proﬁtability The money is only part of the story. Successful new depends on ﬁnding new products by which the company ventures at IBM are changing the way employees think of can distinguish itself. In many cases, that means solving their company. According to Caroline Kovac, whose EBO problems for customers, rather than just selling products. involves computing for clients in the life sciences (for ex- Salespeople and even researchers like Bodin must be able ample, pharmaceuticals and biotechnology), “We’ve be- to work closely with customers to deﬁne needs and de- come more willing to experiment, more willing to accept velop solutions. failure, learn from it, and move on.” Kovac adds that lead- SOURCE: Alan Deutschman, “Building a Better Skunk Works,” Fast ing an EBO is now a coveted position at IBM. Company, March 2005; Brian Bergstein, “Palmisano Era in Full Swing,” To develop an EBO, its leader starts with as little as one Information Week, August 23, 2004; and Jeff O’Heir, “The Future Is Now,” employee and begins planning how to transform an idea Computer Reseller News, October 11, 2004, all downloaded from Infotrac at http://web7.infotrac.galegroup.com. into a business. Harreld meets regularly with the leader, guiding him or her away from the cautious thinking that is rewarded in an established bureaucracy. Harreld encour- QUESTIONS ages the EBO leaders to take risks and continue learning 1. What kinds of employees does IBM need to meet the and adjusting. Harreld ensures the group has the money it goals described in this case? needs but forbids empire building. He also encourages the 2. What challenges are involved in ﬁnding, motivating, EBO leaders to draw upon the expertise of other IBM em- and keeping these employees in today’s business envi- ployees. The EBO leaders develop pilot projects with ma- ronment? jor customers; if they meet their objectives, IBM gener- 3. Suggest a few ways HRM can help IBM meet those ously funds and staffs the project. If the initiative is not challenges. NOTES 1. Christopher Palmeri, Brian Grow, and Stan Crock, U.S. Troops: Handle with Care,” HR Magazine, “Served in Iraq? Come Work for Us,” BusinessWeek, October 2004, both downloaded from Infotrac at December 13, 2004; and Peter Weaver, “Returning http://web5.infotrac.galegroup.com. 1 line long 64 PART 1 The Human Resource Environment 2. Anne Fisher, “How to Battle the Coming Brain Work Systems,” Academy of Management Executive 9 Drain,” Fortune, March 21, 2005, downloaded from (1995), pp. 42–54. Infotrac at http://web7.infotrac.galegroup.com. 19. Bureau of Labor Statistics, “Occupational Employ- 3. Martha Frase-Blunt, “Short-Term Executives,” HR ment.” Occupational Outlook Quarterly, Winter 2003– Magazine, June 2004, downloaded from Infotrac at 2004, pp. 6–27; and BLS, “Tomorrow’s Jobs,” Occupa- http://web4.infotrac.galegroup.com. tional Outlook Handbook, last modiﬁed June 2, 2004, 4. Bureau of Labor Statistics, “Labor Force,” Occupa- both downloaded at www.bls.gov. tional Outlook Quarterly, Winter 2003–2004, pp. 42– 20. “CIO Panel: Knowledge-Sharing Roundtable,” 48, downloaded at www.bls.gov. 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Roberts, “Empowerment or Imposition?” 67. Ibid. 51. Pui-Wing Tam and Nick Wingﬁeld, “As Tech Matures, 68. C. Ansberry, “Old Industries Adopt Flex Stafﬁng to Workers File a Spate of Salary Complaints,” The Wall Adapt to Rapid Pace of Change,” The Wall Street Street Journal, February 24, 2005, pp. A1, A11. Journal, Interactive Edition, March 22, 2002.
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