MGMT 2103 Exam #3 UARK Stephen Trainor

Human Resources Management (HRM)

Policies, practices, and systems that influence employee's, behavior, attitudes, and performance

Four dimensions of HRM practice

- Managing HR environment
- Acquiring and preparing HR
- Assessment and development of HR
- Compensating HR

Competencies of HR professionals

- Technical expertise
- Business acumen (metrics)
- Critical evaluation (ROI)
- Ethical practice
- Global and cultural effectiveness
- Communications
- Organizational leadership and navigation
- Consultation
- Relationship management

Junior HR requirements

- 4 year degree
- Professional certification
- Work experience in transactions, data management, and answering employee questions

Senior HR requirements

- 4 year degree
- Graduate HR/ MBA
- Work experience in recruitment, retention, planning, and developing culture

HR careers

- Chief HR officer
- Global HR managers
- Management developer
- Health & safety manager
- Employee benefits manager
- Labor relations
- Campus recruiter
- HR generalist

Components of Porter's Strategy Typology

- Low-cost strategy (cheap)
- Differentiation strategy (unique)

Core capabilities

Integrated knowledge sets within an organization that distinguish it from its competitors and delivers value

Criteria for core capabilities to advance competition

- Firm specific v. general skills
- Teams v. individuals
- Entire system of HRM practices
- Human capital

Human capital

The economic value of an individual based on their skills, knowledge, and experience

Dimensions of human capital

- Value (potential to create competitive advantage)
- Uniqueness (skills and knowledge needed)

Types of workers in Human Capital Architecture Model

- Strategic knowledge workers (unique skills linked to strategy)
- Core employees (valuable, but easy to replace)
- Supporting labor (less valuable and easy to replace)
- Complementary/ alliance partners (unique skills not related to strategy)

Generic HR strategies

- Generic control (combo of structures and processes that minimize employee requirements)
- Commitment-oriented work system (workforce identifies with firm to enhance attachment)

High performance work system (HPWS)

Specific combination of processes and structures that maximize employee knowledge, skills, commitment, and flexibility

Employee benefits of HPWS

- More involvement
- Growth, satisfaction, and increased value

Organization benefits of HPWS

-Higher productivity and profitability
-Greater flexibility and competitiveness
-Higher customer satisfaction
-Higher quality
-Lower turnover and costs

Equal Employee Opportunity (EEO)

Ensures all individuals have an equal chance for employment regardless of race, religion, sex, age, disability, or origin.

Major provisions of EEO

- Title VII Civil rights act 1964
- Age discrimination act 1967
- Occupational health and safety act 1973
- Disabilities act 1990
- Civil rights act 1991
- Family/ Medical leave act 1993

Title VII Civil rights act 1964

- Protects race, religion, sex, and origin
- Established EEO
- Employers with 15+ workers (plus unions and agencies)

Age discrimination act 1967

- Protects ages 40+
- Allows favoring older workers
- Employers with 20+ workers

Occupational health and safety act 1973 (OSHA)

- Safe workplace
- Receive info about hazards, injuries, illnesses, and medical records
- Hazard training
- Participate in OSHA inspection

Americans with disabilities act 1990 (ADA)

- Considered disabled if there is impairment to one or more major life activities
- Reasonable accommodations

Civil Rights Act 1991

- Clarified burden of proof
- Allows for jury trial
- Compensatory and punitive damages (only for sex, religion, and disability, not race)

Family and medical leave act 1993 (FMLA)

- Up to 12 weeks of unpaid leave

Uniform guidelines on employee selection

- Employer must demonstrate that procedures are valid in measuring performance
- Must prove a direct link to job success

Forms of Discrimination

- Disparate treatment (treated different due to protected characteristic)
- Disparate impact (identical treatment, but different outcome)

Disparate treatment legal defense

- Plaintiff's burden is prima facie (prove it occurred)
- Defendant's rebuttal is bona fide occupational qualification
- Plaintiff's rebuttal is mixed motive cases

Disparate impact legal defense

- Plaintiff's burden is 4/5 burden or SD rule
- Defendant's rebuttal is to prove business necessity
- Plaintiff's rebuttal is to prove other practices could meet goals

Four-fifth's rule

- Adverse rejection rate for EEO rule of thumb
- Adverse impact for any class less than 80% of the highest selected class rate

Types of sexual harassment in the workplace

- Quid pro quo (tit for tat / blackmail)
- Hostile Work Environment (between equals)

Affirmative action

Programs increase the representation of traditional underrepresented ethnic or racial groups

Purposes of affirmative action

- Remedy past wrongs
- Required of federal contractors
- Voluntary (court ordered)
- Affirmative action plans

Organization selection system

Process of choosing individuals with relevant qualifications to fill existing or projected job openings
- Goal is to minimize error and improve competitive position

General job selection models

- Person-job fit (analysis identifies required competencies for job success)
- Person-organization fit (degree people are matched to the culture and value of the org)

Selection devices

- Reliability
- Validity
- Generalizability
- Utility
- Legality

Reliability

Extent measurement is free from error
- Test-retest reliability (shows how scores relate to others from another time)
- Want consistency
- Uses statistics (r^2)
- Doesn't determine whether measurement matters

Validity

Extent performance relates to what you're measuring
- All of what you want and none of what you don't
- Three types (Criterion-related, Content, and Construct)

Criterion-related validity

Based on the substantial correction between scores and performance
- Predictive validity (compares scores with future performance)
- Concurrent validity (compares scores of current workers to existing performance)

Content validity

Consistency between test items and situations that occur
- Experts can evaluate and write test items

Construct validity

Used for tests that measure abstract qualities
- Establishes test accuracy
- Shows association between construct and job success

Generalizability

Degree which validity of a method established extends to other contexts
- Contexts include different situations, samples of people, and time periods

Utility

Selection method should produce info that is beneficial to the company
- Testing and interviewing cost
- Enhances selection process
- Provide economic value greater than the cost of using

Legality

All selection methods should adhere to existing laws and precedents
- EEO affects info companies can gather
- Neutral-appearing methods

Selection methods

- Applications and resumes
- Employment. tests and samples (two types)

Applications and resumes

- Positively biased
- Low-cost way to gather info

Employment tests and samples

- Aptitude tests (how well one can learn)
- Achievement tests (existing knowledge)
- Examples are physical and cognitive ability tests, personality inventories, work samples, drug and honesty tests

Drug testing rules

- Test all applicants
- For jobs with safety hazards
- Keep results confidential

Issues of faking on honesty tests

- 1 in 3 Americans have lied
- 35% of all people have lied
- 72% lied on resume
- 68% lied in interview
- 30% lied about race on application (27% on veteran & 23% on disability)
- 73% got a job using fradulent info (55% with their current job)
- 1 in 5 are still deceitful

Performance Management Process

Ensures employee activity and outputs contribute to business goals
- needs to define performance, provide feedback, and measure appraisals to be successful

Key purposes of performance appraisals

- Strategic (link behavior with expected results)
- Administrative (raises, promotions, layoffs, recognition)
- Developmental (feedback and coaching)
- Communication (emphasize how they're performing/ improvements)
- Organization maintenance (training and development needs)
- Documentation (administrative decisions and litigation info)

Standards used to judge performance measures

- Strategic congruence
- Validity
- Reliability
- Acceptability
- Specificity

Strategic congruence

Extent to which management system elicits performance contributing to goals, strategy, and culture
- Must be flexible
- Critical success factors (CSFs) or key performance indicators (KPIs)
- Nonfinancial measures (quality or service)

Validity criteria

Extent performance measure assesses all relevant aspects of performance
- Must not be deficient or contaminated
- Maximizes overlap between actual performance and its measure

Deficient

Does not measure all aspects

Contaminated

Measures irrelevants

Reliability criteria

Consistancy of a performance measure
- Interrater reliability (consistency among individuals who evaluate performance)
- Test-Retest reliability (should be reliable over time)

Acceptability criteria

Extent the measure is satisfactory
- May take too much time or not be accepted as fair
- Three categories (Procedural, Interpersonal, and Outcome)

Specificity criteria

Extent to which performance measure tells employees what is expected and how to meet them
- Relevant to strategic and developmental purposes
- Measures what an employee must do to achieve goals
- Must point out problems

Methods of performance appraisal

- Comparative approach
- Attribute approach
- Behavioral approach
- Results approach
- Quality approach

Comparative approach

Compare an individual's performance to others
- Simple rank (highest to lowest performer)
- Alternative rank (cross off one name at a time)
- Forced distribution (ranked in categories)
- Paired comparison (compare every worker with all others)
- Eliminates leniency, central tendency, and strictness
- Lack specificity and often not linked to goals

Attribute approach

Graphic rating scales
- Can be discrete or continuous
- Mixed-standard scales
- Easy to develop and generalizable
- Little congruency and vague standards are open to interpretation

Behavioral approach

Can link strategy
- Provides specific guidance to behaviors
- Highly acceptable and reliable
- Must be continually monitored and revised
- No "one best way"
- Three types (BARS, BOS, and competency models)

Behaviorally anchored ratings (BARS)

Anchors associated with different performance levels
- Can increase interrator reliability
- Can bias info recall

Behavioral observation scales (BOS)

Many effective and poor behaviors necessary
- Managers rate the frequency with exhibited behavior
- Requires more info than most managers can process or remember

Competency models

Identify descriptions of common competencies
- For HR practices like recruiting, selection, training, and development
- Identifies best employees to fill open positions
- Used in development plans to target specific strengths and weaknesses

Results approach

Managers set goals that are used as standards to evaluate individual performance
- Three components (setting effective goals, types of measurements, and goals set by managers and subordinates)
- Minimizes subjectivity
- Contaminated and deficient
- Feedback may not be helpful
- Goals are "linked up"
- ProMES

ProMES

- Identify products and activities
- Define indicators
- Establish contingencies
- Develop feedback system

Quality approach

Evaluation of personal traits, which are difficult to relate to performance
- Systems-oriented focus
- Improves customer satisfaction
- Prevention approach to errors
- Continuous improvement
- Focus on employee feedback
- Many systems incompatible with this

Sources of performance information

- Managers (most used, bias)
- Peers (expert knowledge or requirements, bias)
- Direct reports (best to evaluate managers)
- Upward feedback (subordinate power over managers, focus on employee satisfaction over production)
- Customers (for services, expensive)
- Self (not often used because it's inflated)
- 360 appraisal (multiple raters, labor intensive and training)

Rating Errors

- Similar to me (overrating those who seem similar)
- Contrast error (underrating those who seem different)
- Halo error (overrating based on one good quality)
- Horns error (underrating based on one bad quality)
- Leniency (higher ratings for all)
- Central tendency (average ratings for all)

Methods for improving performance appraisals

- Reduce heuristics (unconscious bias)
- Reduce appraisal politics (purposefully distorting rates to meet goals)
- Provide rater error training or frame-of-reference training
- Calibration meetings (discuss ratings and provide evidence of ratings to eliminate intentional errors)

Recommendations for effective feedback

- Given frequently, not once a year
- Create the right context for discussion
- Ask employee to rate their own performance beforehand
- Ongoing, collaborative discussions
- Praise effective performance
- Focus on solving problems
- Focus on behaviors/ results, not person
- Minimize criticism
- Agree to specific goals and set dates

How performance management systems avoid legal scrutiny

- Conduct valid job analysis related to performance
- Base the system on specific behaviors or results
- Train raters to use system correctly
- Review ratings and allow for employee appeal
- Provide guidance and support for low performers
- Use multiple raters
- Document evaluations

Provisions of Equal Pay Act of 1963

Two employees doing the same job cannot be paid differently based on sex
- EEO added protected classes of age, race, religion, and origin

Provisions of Fair Labor Standards Act 1938 (FLSA)

Federal law for minimum wage, child labor, and overtime
- Overtime is considered work beyond 40 hours per week
- FLSA requires 1.5x the usual rate for overtime except for exempt workers

Exempt v. nonexempt employees

- Exempted employees (managers, outside salesmen, etc.)
- Nonexempt (those covered by FLSA overtime)

Pay level v. Job structure

- Pay level is the average amount paid for a specific job
- Job structure is relative pay for different jobs in a firm

Pay level factors

- Product markets (firms offering similar products/services compete on quality, service, and price)
- Labor markets (firms must compete to obtain HR to establish minimum wage)
- Market rate surveys

Components of collecting market wage data

- Market pay surveys
- Benchmarking (compares practices to competitors)
- Key or non-key jobs

Key jobs

- Help create pay structure
- Relatively stable
- Common among many organizations
- Pay is based on survey data

Job evaluation

Measures intrenal value of organization's jobs
- Committee identifies each job's compensable factors
- Jobs related for each factor

Compensable factors of job evaluation

Characteristics organization's value and are willing to pay for
- Experience
- Education
- Complexity
- Working conditions
- Responsibility

Point Method

Employer's develop and use a point system on job evaluations
- Determine compensable factors and how many levels
- Rate the job based on those factors
- Total points then group into grades or classifications

Pay structure

Pay policy resulting from job structure and pay level decisions
- Uses pay policy line and pay grades

Pay-policy line

Shows the relationship between job evaluation points and pay rates on a graph
- Reflects pay structure in market, but does not always match organization

Pay grades

Set of jobs having similar worth or content grouped together to establish rates
- May not match market rate

Pay rates

Rates of key jobs can be based on market research
- Must be based on job evaluation by plotting data
- Non-key jobs often have no survey data available

Broad-banding (Delayering)

Reducing the number of levels in the job structure
- More assignments combined into a single layer called broadband
- Emphasis on acquiring experience, not promotions

External v internal equity

- External equity (fairness of one's pay relative to what employees in other organizations earn)
- Internal equity (fairness of one's pay relative to the pay of their coworkers)

Stock options as executive compensation

- Stock options include restricted stock and performance rewards
- Relevant to pay structure, but a small part of labor costs
- Executive pay is 64% stock options, 23% bonuses, and 13% salary

Employee pay/behavior perspectives

- Reinforcement theory
- Expectancy theory
- Agency theory

Reinforcement theory

Response followed by a reward is more likely to recur in the future
- High performance followed by monetary reward makes future high performance more likely
- Incentive effect (effect of pay plans on current employees)

Expectancy theory

- Emphasizes expected rewards
- Motivation is the function of perceptions (expectancy, instrumentality, and valence)
- Compensation mainly influences instrumentality
- Extrinsic and intrinsic motivation

Extrinsic v. Intrinsic motivations

- Extrinsic motivation (rewards controlled by external sources)
- Intrinsic motivation (rewards that flow naturally from work itself)

Agency theory

- Focus on divergent interests and goals of stakeholders (principals and agents)
- Use compensation to help align interests and goals
- Minimize agency costs from goal incongruence or information asymmetry
- Principals and agents are self-interested
- Interests are not inherently consistent
- Create contracts

Merit pay plan

Annual base pay increases are usually linked to performance ratings
- Identify individual differences
- Most info is collected from immediate supervisor

Criticisms of merit pay plans

- Unfair to rate individual performance because differences arise from the system
- Discourages teamwork
- Little communication and transparency
- If measure is not perceived as fair, the entire program can break down
- Infrequent feedback

Individual incentives

Rewards individual performance, but payments are not rolled into base pay
- Measured as physical output or subjective/ objective ratings
- Rare because most firms do not have a physical measure

Pros of individual incentives

- Designed for individual work
- Simple and repetitive
- Stable
- No need for irrigation

Cons of individual incentives

- Competitive
- Costly
- Can hurt culture
- Rewards output over quality/service