MGMT Exam #3 Review

4 Dimensions of Human Resource Management

1. Managing the Human Resource Environment

2. Acquiring and preparing Human Resources.

3. Assessment and development of Human Resources.

4. Compensating Human Resources.

Competencies of HR Professionals

• Most HRM professionals are Generalists.

• Less focus and experience on business acumen (until senior levels).

HR Technical Expertise and Practice Competency

Apply the principles of Human Resource Management to contribute to the success of the business.

Business Acumen Competency

Understand business functions and metrics within the organization and industry.

Critical Evaluation Competency

Interpret information to determine return on investment and organizational impact in making recommendations and business decisions.

Ethical Practice Competency

Integrate core values, integrity, and accountability throughout all organizational and business practices.

Global and Cultural Effectiveness Competency

Manage HR both within and across boundaries.

Communications Competency

Effectively exchange and create a free flow of information with and among various stakeholders at all levels of the organization to produce meaningful outcomes.

Organizational Leadership and Navigation Competency

Direct initiatives and processes within the organization and gain buy-in from stakeholders.

Consultation Competency

Provide guidance to stakeholders such as employees and leaders seeking expert advice on a variety of circumstances and situations.

Relationship Management Competency

Manage interactions with and between others with the specific goal of providing service and organizational success.

Junior HR Role: Education and Experiences

Education: Four-year degree; professional certification

Experiences:

• Handle transactions related to paperwork, benefits, and payroll administration.

• Answer employee questions.

• Data managment.

Senior HR Role: Education and Experiences

Education: Four-year degree; graduate HR / MBA

Experiences:

• Develop and support the company culture.

• Employee recruitment, retention, and engagement.

• Succession planning.

• Designing company’s overall HR strategy.

Dimensions along which human capital differs according to the human capital architecture

1. Value of Human Capital

   1. “Potential to contribute to ... competitive advantage

2. Uniqueness of Human Capital

   1. Are the skills and knowledge needed to perform firm-specific or general?

Four types of workers identified by the human capital architecture model

1. Strategic Knowledge Workers

2. Supporting Labor

3. Core Employees

4. Complimentary/Alliance Partners

Title VII Civil Rights Act of 1964

• Forbids discrimination based on race, color, religion, sex, or national origin.

• Established the Equal Employment Opportunity Commission (EEOC)

• Employers with 15 or more employees and others (unions, employment agencies

Civil Rights Act of 1991

• Prohibits discrimination (same as Title VII)

• Clarified the burden of proof issue

• Allowed for a jury trial

• Allowed for compensatory and punitive damages in cases of intentional discrimination

• Punitive damages capped for sex, religious, and disability discrimination, not for race or national origin

Uniform Guidelines on Employee Selection Procedures

• Issued to help employers make equitable employment decisions, such as for hiring and selection, retention, and test use, per Title VII of the Civil Rights Act

• Employer must be able to demonstrate that selection procedures that selection procedures are valid in predicting or measuring performance in a particular job

2 Main Forms of Discrimination in Employee Selection

1. Disparate Treatment

2. Disparate Impact

Four-Fifths Rule

• Rule of thumb followed by the EEOC in determining adverse impact for use in enforcement proceedings.

• According to the Uniform Guidelines, a selection program has an adverse impact when the selection rate for any racial, ethnic, or sex class is less than four-fifths (or 80 percent) of the rate of the class with the highest selection rate.

• This rule is not a legal definition of discrimination, rather it is used to monitor severe discrimination practices.

Reliability

Extent to which measurement is free from random error.

• Reliable measurement generates consistent results.

• Organizations use statistics, like correlation coefficients, to compare results and determine whether measurements are correct.

Validity

Extent to which performance on measure (test score) relates to what the measure is trying to assess (job performance).

• All of what you want and none of what you don’t want.

• Test scores are compared to existing measures of job performance.

Utility

Selection method should produce information that is actually beneficial to the company.

• Testing and interviewing cost money.

• Enhances the selection process.

• Methods that provide economic value greater than the cost of using them are said to have this.

Generalizability

Degree to which the validity of a selection method established in one context extends to other contexts.

• How well does it hold up

• 3 Contexts:

  • Different situations (jobs or organizations)

  • Different samples of people

  • Different time periods

Legality

All selection methods should adhere to existing laws and legal precedents

Neutral-appearing selection methods• Equal employment opportunity laws affect info organizations can gather onforms and in interviews

Importance of Reliability and Validity in choosing and using Selection Devices

The two determine the overall accuracy of the data provided by the performance measurements.

Selection methods become essentially useless with an erratic and inconsistent degree of error from testing.

• Even more so if multiple variables are tested at once while only one matters toward performance evaluations.

Interviews

Dialogue initiated by one or more persons to gather information and evaluate the qualifications of an applicant for employment.

• The most widespread selection method.

• Unreliable, low in validity, and biased against of number of different groups.

References

Applicants provide names and contact info of people who can vouch for abilities and past job performance.

• Biased: applicants choose people who will say nice things.

• Usually checked when the candidate is a finalist for the job.

Cognitive Ability Tests

Tests that include three dimensions:

• Verbal comprehension

• Quantitative ability

• Reasoning ability.
  i. Highly reliable commercial tests measuring these kinds of abilities are widely available, and they are generally valid predictors of job performance.
  ii. The validity of the tests is related to the complexity of the job.

• Pose legal risks: Especially when it’s a protected class.

Personality Inventories

Five major dimensions of personality("Big Five"):

• Extroversion

• Adjustment

• Agreeableness

• Conscientiousness

• Openness to experience.

• Although it is possible to find reliable, commercially available measures of each of these traits, the evidence for their validity and generalizability is mixed at best.

Work Samples

Attempt to stimulate the job in a pre-hiring context to observe how the applicant performs is in the simulated job.
i. Drawbacks:

• The nature of the tests are job-specific, so generalizability is low.

• Tests are generally expensive.

• These events tend to attract more male applicants than female.

Standards used to judge performance measures

1. Strategic Congruence

2. Validity

   1. Validity Contamination

   2. Criterion Deficiency

3. Reliability

4. Acceptability

5. Specificity

Strategic Congruence

Extent to which performance management system elicits job performance that contributes to the organization’s strategy, goals, and culture.

• Must be flexible to adapt to change.

• Uses nonfinancial performance measures (quality,customer satisfaction, loyalty, etc.)

Validity (Contamination & Deficiency)

• Extent to which a performance measure assesses all relevant aspects of performance.

• Must not be deficient or contaminated:

  • Deficient: It does not measure all aspects of performance.

  • Contaminated: It evaluates irrelevant aspects of performance or aspects that are not job job-related.

• Concerned with maximizing overlap between actual job performance and measure of job performance.

Reliability (Performance Measure)

Consistency of a performance measure.

• Interrater reliability:

  • Consistency among individuals who evaluate employee performance.

• Test-retest reliability:

  • Should be reliable over time.

Acceptability

The extent to which a performance measure is deemed satisfactory or adequate.

• May take too much time or not be accepted as fair.

• Three categories of fairness

1. Procedural

2. Interpersonal

3. Outcome

Specificity

• The extent to which a performance measure tells employees what is expected and how to meet expectations.

• Relevant to both strategic and developmental purposes.

  • Must measure what an employee must do to achieve the company’s goals.

  • Must point out employee performance problems.

Methods raters use to improve subjective performance appraisals

1. Rater error training attempts to make managers aware of rating errors while helping them to develop strategies for minimizing those errors.

2. Rater accuracy training aka “frame of reference” training - emphasizes multidimensional nature of performance; and familiarizes the rater with the actual content of various performance dimensions

3. Calibration meetings Provide a way to discuss employees’ performance with the goal of ensuring that similar standards are applied across evaluations

Market Pay Surveys

• Form of external data.

• Compares salaries of certain positions and benchmarks them.

  • Benchmarking against product market and labor market competitors is typically accomplished through one or more pay surveys.

Benchmarking

Procedure in which an organization compares its practices against those of the competition.

Key Jobs

• Organizations define these to help create pay structures.

• Have relatively stable content and are common among many organizations.

• Pay can be based on survey data.

Non-Key Jobs

• Unique to organizations (and/or have content different from jobs in other organizations having the same title).

• Cannot be directly valued or compared through the use of market surveys.

• Treated differently in the pay-setting process.

Point System of Job Evaluation

Develop (or use) a point manual:

• Determine compensable factors (decide how many levels)

• Assign points to levels of compensable factors.

• Rate the job based on the compensable factors.

• Total points and group into grades/classifications.

How Organizations create Pay Structures

Combines:

1. Market Survey Data

2. Pay Policy Line

3. Pay Grades

4. Range Spread

To create a data-backed, fair pay structure for employees.

Pay-Policy Line

• A mathematical expression that describes the relationship between a job’s pay and its job evaluation points.

• Combines information from external and internal comparisons to derive pay rates for both key and non-key jobs.

• Introduces a greater degree of internal consistency into the structure due to the pay of all the jobs being directly linked to the number of job evaluation points.

Pay Grades

Jobs of similar worth or content grouped together for pay administration purposes.

Reinforcement Theory

Incentive Effect:

• Effect of pay plans on current employees.

• A response followed by a reward more likely to recur in the future.

• High employee performance followed by monetary reward makes future(behaviors) high performance more likely.

Expectancy Theory

Emphasizes expected rewards.

• Motivation is the function of perceptions:

  • Expectancy - can I achieve this performance?

  • Instrumentality - if I achieve this performance, will I receive a reward

  • Valence - how valuable is the reward?

• Compensation mainly influences instrumentality.

  • Direct Link between Behavior-Performance-Pay

Agency Theory

• Focuses on divergent interests and goals of the organization’s stakeholders and the ways that employee compensation can be used to align these interests and goals.

• Provides relevant implications for compensation design.

• An important characteristic of the modern corporation is the separation of ownership from management (or control).

Merit Pay

• Annual base pay increases (usually linked to performance ratings).

• Identify individual differences in performance, and reflect ability/motivation differences.

• Most information on performance collected from the immediate supervisor.

Criticisms of Merit Pay

• Unfair to rate individual performance because differences arise from the system, not from themselves. (e.g., poor performance measures, little communication andtransparency)

• Individual focus discourages teamwork.

• If performance measure is not perceived as fair and accurate, the entire program can break down.

• Infrequent feedback

• Doesn’t really exist.

  • Most employees don’t perceive a payoff to higher performance

Strategic Knowledge Workers

Employees who have unique skills that are directly linked to the company’s strategy

• Example: top management

Supporting Labor

Employees whose skills are of less strategic value and generally available in the labor market.

• Example: Clerical workers

Core Employees

Employees with skills to perform a predefined job that are quite valuable to a company, but not particularly unique or difficult to replace.

• Example: Salespeople

Complementary/Alliance Partners

Individuals and groups with unique skills, but those skills are not directly related to a company’s core strategy.

• Example: Consultants

Disparate Treatment

Exists when individuals in similar situations are treated differently and the different treatment is based on the individual’s race, color, religion, sex, national origin, age, or disability status.

Disparate Impact

Occurs when a facially neutral employment practice disproportionately excludes a protected group from employment opportunities.

• Facially neutral employment practice is one that lacks obvious discriminatory content yet affects one group to a greater extent than other groups, such as an employment test.

   

Porter’s Strategy Typology

Competitive advantage results from creating value.

Value is created in 2 ways:

1. Low-cost strategy: Create value by reducing costs

   1. Firm can charge less and maintain a profit.

2. Differentiation strategy: Create value by convincing the market that your product/service is different than all others.

   1. Firm can charge a premium, maintaining a profit.

Four-Fifths Rule Calculation

Core Capabilities

Integrated knowledge sets within an organization that distinguishes it from its competitors and delivers value to the customers.

• Also known as “Strategic Capabilities”

• Serve as the dominant source of competitive advantages.

• Strategic resources that are leveraged to achieve strategic objectives.

• Valuable, rare, and difficult to imitate by competitors.

Resource Characteristics for Core Capabilities (Competitive Advantage)

• Is the resource Valuable?

• Is the resource Rare?

• Is the resource Inamitable?

• Are there Organizational processes in place to support valued resources?

Generic Control-vs-Commitment-Oriented Work System

Control: Specific combination of HR practices, work structures, and processes that minimizes employee knowledge and skill requirements, and seeks to limit the variability of performance across people.

Commitment: Focus on developing a workforce that identifies with the firm. Enhances attachment.

High Performance Work System (HWPS)

Specific combination of HR practices, work structures, and processes that maximize employee knowledge, skill, commitment, and flexibility.

Composed of many interrelated parts that complement one another to reach the goals of an organization, large or small.

Value Matrix Approach

Focus on tailoring HR strategies to specific job families/groups within the firm.

Firms distinguish jobs in terms of value to the firm & uniqueness in the labor market.

Age Discrimination in Employment Act of 1967

• Prohibits discrimination in employment against individuals 40 years of age and older.

• Allows employers to favor older workers

• Covers employers with 20 or more employees

Ex. Excluding older workers from important work activities, selecting younger job applicants over older, better-qualified candidates, pressuring older employees into early retirement.

Americans with Disabilities Act of 1990

Prohibits discrimination against individuals with disabilities.

• A person is considered to be disabled if:

  • He/she has or is regarded as having, a physical or mental impairment that substantially limits one or more major life activities

• Essential job functions are major non-trivial required employee tasks.

  • The function is the reason the job exists

  • There are a limited number of employees available to perform the function

  • The function is highly specialized

• Reasonable accommodation.

Reasonable Accommodation

Religion:

• Employees must demonstrate a legitimate religious belief and provide the employer with notice of the need to accommodate, and that adverse consequences occurred due to the employer’s failure to accommodate

Disability:

• Plaintiff must show that they are a qualified applicant with a disability and that an adverse action was taken by a covered entity.

Occupational Safety and Health Act (OSHA) of 1973

Authorizes federal government to establish and enforce occupational safety andhealth standards for all places of employment engaging in interstate commerce.

Employee rights under OSHA:

• General duty clause.

• NIOSH’s occupational safety and health standards

Rights Granted to Workers under OSHA

1. Work in safe and healthful workplaces

2. Know about hazardous chemicals in their workplaces

3. Receive information about injuries and illnesses in their workplaces

4. Complain or request hazard correction from their employers

5. Receive training about workplace hazards

6. Examine hazard exposure and medical records

7. File a complaint with OSHA

8. Participate in an OSHA inspection

9. Be free from retaliation for exercising rights.

Employment at Will

If there is no specific employment contract saying otherwise, the employer or employee may end an employment relationship at any time, regardless of cause.

Exceptions to Employment at Will

• Public Policy (Congressional Acts - law, regulations)

  • Prohibit discrimination

• Contracts

  • Explicit or implied

• Court Rulings

  • Identifying tort exceptions (violations)

    • Public policy

    • Implied contract

    • Good faith and fair dealing

Business Necessity as a Legal Defense

The legal concept used to justify an employer's employment criteria that disproportionately affect a group of individuals.

The justification resides in the possibility that a company has legitimate reasons to operate under such restrictive employment practices.

“Necessary for the safe and efficient operation of the organization”

Bona Fide Occupational Qualification

A legally authorized restriction granted to employers to refuse the hiring of a person based on their sex, religion, or national origin.

• Never used for race or color.

• “Reasonably necessary to the normal operation of that particular business or enterprise.”

Quid pro Quo Sexual Harrasment

• “Something for Something”.

• Two people in unequal bargaining positions.

• Sexual blackmail.

Hostile Working Environment

It can be between equals in the workplace—no “welcome or unwelcome” issues.

Includes:

• Pornographic magazines

• Vulgar comments

• Offensive touching, such as friendly squeezes, pinches and pats

• Stories about your sex life

• Sexually oriented pictures, screen-savers, calendars or cartoons

• Dirty jokes

• Suggestive looks and leering

• Accidentally brushing against someone’s body

Filings by men have increased.

Affirmative Action

Programs increase the representation of traditionally underrepresented ethnic and racial groups.

• Imposed quota programs.

• Leads to questions of “reverse discrimination”.

Goal of an Organization Selection System

The overall objective is to minimize error & improve a company’s competitive position.

• Represents organizational investments to meet needs.

• Decisions promote the best interests of the company and meet legal standards.

• Impacts competitiveness, current & future employee experiences.

General Models of Employee Selection

1. Person-job fit:

   1. Job analysis identifies the required competencies for job success.

2. Person-organization fit:

   1. The degree to which individuals are matched to the culture and values of the organization.

Physical Ability Tests

Assess different aspects of physical ability including power, endurance, flexibility, balance, and coordination.

• Are they related to actual job requirements?

• Are they prominently included in the job description?

• Tend to exclude women and people with disabilities.

Compare and Contrast the Different Organizational Selection Devices

• Job Application and Résumés (Biodata)

  • Low-cost way to gather basic information.

  • Information can sometimes be biased toward applicants.

• References

  • Biased towards applicants, checked when a candidate is a finalist for a job.

• Physical Ability Tests

  • Assess different aspects of candidates’ physical attributes

  • Tends to exclude women and disabled individuals.

• Cognitive Ability Tests

  • Designed to measure skills and abilities, relatively low cost.

  • Pose legal risks, especially when it’s against a protected class.

• Work Samples

  • Validity depends on how representative/focused on key components of job.

  • Generally expensive to develop.

• Honest Tests

  • Use questions based on characteristics of “typical” dishonest employees.

  • Treat integrity as an aspect of personality.

  • Polygraph ruled illegal (question of validity).

• Drug Tests

  • Tests all applicants, used for jobs that involve safety hazards.

  • Confidential results, respect applicants’ privacy.

• Background Checks

  • Verify that applicants are who they say they are.

  • EEOC has guidelines for checking criminal histories.

Situational (Future-Oriented) Job Interviews

• Applicant is confronted with a pre-specified query of questions and issues that are likely to arise at the job.

• Intention is to predict behavior.

• Asked how to describe their reaction to specific situations, questions pose a dilemma.

Behavioral (Experience-Based) Job Interviews

• Applicant is confronted with a pre-specified query of questions regarding past work or non-work situations

• The best predictor of future behavior is past behavior.

• Asked how to describe how they have handled specific situations previously.

Performance Management Process

Ensure employee activity & outputs contribute to business goals.

1. Define performance

   1. Which aspects of performance are relevant and important to the business (Job Analysis).

2. Provide Performance Feedback

   1. Give employees information on their performance effectiveness and ways to judge performance.

3. Measure Performance (Appraisal)

   1. The organization gets information on how well an employee is doing on the job.

Key Purposes of Performance Appraisal

Strategic:

• Develop measures and feedback systems that push employees to engage in behaviors aligning with organizational goals.

Administrative:

• Used in personnel decisions (raises, layoffs).

Developmental:

• Provide feedback/identity, weaknesses and strengths, training and developmental needs.

Comparative Approach

Compare an individual’s performance to others.

• Ranking

  • Simple Ranking → Highest to Lowest

  • Alternation → Cross one name off at a time.

• Forced Distribution

  • Rank employees in predetermined categories.

  • Best way to identify high-potential employees and poor performers.

• Paired Comparison

  • Compare every employee with every other employee.

  • Time consuming.

Evaluating the Comparative Approach

• Virtually eliminates problems of leniency, central tendency, and strictness.

• Easy to develop and use.

Problems:

• Often not linked to strategic goals.

• Validity and reliability depend on the raters.

• Lack of specificity for feedback.

• Employees and managers are less likely to accept feedback.

Attribute Approach

Graphic Rating scales:

• Evaluate list of traits on a scale.

• Can be a discrete or continuous scale.

Mixed-Standard scales:

• Define relevant performance dimensions, then develop statements based on good, average, or poor for each dimension.

• Statements are then mixed with other statements from other dimensions.

• Can be trait or behavior-oriented scales.

Evaluating the Attribute Approach

Easy to develop and generalize.

Problems:

• Little congruence between the techniques and the company’s strategies.

• Vague performance standards are open to different interpretations by raters.

Behavioral Approach

• Behaviorally Anchored Rating Scales (BARS)

• Behavioral Observation Scales (BOS)

• Competency Models

Evaluation of Behavioral Approach

• Can link the company’s strategy to specific behavior necessary for implementing strategy.

• Provides specific feedback and guidance for employees about expected performance.

• High acceptability and reliability.

Problems:

• Behaviors and measures must be continually monitored and revised.

• Assumes “one best way” to do a job and behaviors that constitute this best way.

Results Approach

Managers set goals that are used as standards to evaluate individual performance.

3 Common Components:

1. Setting effective goals (SMART).

2. Different measurements can be used for goals or objectives.

3. Goals set with managers’ and subordinates’ participation.

Balanced Scorecard:

• 4 Perspectives of Performance:

  • Financial

  • Customer

  • Internal or Operations

  • Learning and Growth

The Results Approach: (Goal Setting)

1. Employees and managers should discuss and set no more than three to five goals.

2. Goals should be brief, meaningful, challenging, and include the results the employee is expected to achieve.

3. The time frame for goal achievement should be related to when they are expected to be accomplished.

4. The relationship between goals and rewards should be appropriate.

5. Goals should be “linked up” rather than “cascaded down.”

   1. This means that functions, teams, and employees should set their own goals that are related to company goals.

6. Employees will be more committed to achieving their goals and performance will be higher if they make their goals known to someone higher in perceived relative status (such as their manager or a mentor).

The Results Approach: Productivity Measurement and Evaluation System (ProMES)

1. Identify products or set of activities or objectives the organization expects to accomplish.

2. Define indicators of the products.

3. Establish contingencies between the amount of indicators and level of evaluation associatedwith that amount.

4. Develop a feedback system.

Behavioral Approach: Behaviorally Anchored Rating scales (BARS)

• Behavioral anchors associated with different levels of performance.

• Can increase interrater reliability.

• Can bias information recall.

Behavioral Approach: Behavioral Observation Scales (BOS)

• Uses many effective and poor behaviors to define all behaviors necessary for effective or poor performance.

• Requires managers to rate frequency with each employee based on behavior.

• May require more information than managers can remember.

Behavioral Approach: Competency Models

• Identifies and provides descriptions of common competencies.

• Useful for various HR practices (recruiting, selection, training, development).

• Helps identify the best employees to fill open positions.

• Used in development plans.

Evaluation of the Results Approach

• Minimizes subjectivity.

• Links individual’s results with organization’s strategies and goals.

Challenges:

• Can be both contaminated and deficient.

• Individuals may focus only on aspects of performance that are measured and neglecting others.

• Feedback may not help employees learn how to change behavior to increase performance.

The Quality Approach

Focuses on:

• Customer orientation.

• Prevention approach to errors.

• Continuous improvement.

• Primary goal is improving customer satisfaction.

Many performance management systems are incompatible with the Quality Approach.

Major focus should be to provide employees with feedback:

1. Subjective

   1. Managers, peers, and customers regarding personal qualities.

2. Objective

   1. Based on work process using statistical process control methods.

The Quality Approach: Statistical Feedback Methods

• Process-flow analysis.

• Cause-and-effect diagrams.

• Pareto charts.

• Control charts.

• Histograms.

• Scattergrams.

Evaluation of the Quality Approach

• Adopts a systems-oriented focus.

• Advocates evaluation of personal traits, which are difficult to relate to job performance except in work teams.