Fall 2005 Management 412 / Intro to HRM / Page 1 Introduction to Human Resource Management.

Fall 2005

Management 412 / Intro to HRM / Page 1

Introduction to Human Resource Management

Management 412 / Intro to HRM / Page 2Fall 2005

Reading ListCaudron, S. (January 2003). HR is dead - Long live HR. Workforce, pp. 26-30.

Challenger, J. A. (July 2003). Solving the looming labor crisis. USA Today Magazine, pp. 28-30.

Cole, C. L., Gale, S. F., Greengard, S., Kiger, P. J., Lachnit, C., Raphael, T., Shuit, D. P., & Wiscombe, J. (June 2003). 25 trends that will change the way you do business. Workforce, pp. 43-56.

Pfeffer, J. (Winter 1998). Seven practices of successful organizations. California Management Review, 96-124.

Raphael, T. (2003, March). At Google, the proof is in the people. Workforce, pp. 50-51.

Sheley, E. (June, 1996). Share your worth. HRMagazine, pp. 86-96.

Stewart, T. A. (April 13, 1998). A new way to think about employees. Fortune, pp. 169-170.

Stewart, T. A. , & Woods, W. (January 15, 1996). Taking on the last bureaucracy. Fortune, pp.105-106.

Stewart, T. A. (October 2, 1995). Trying to grasp the intangible. Fortune, pp. 157-161.

Ulrich, D. (January/February 1998). A new mandate for human resources. Harvard Business Review, pp. 124-134.

Zimmerman, E. (February 2001). What are employees worth? Workforce, pp. 32-36.


Introduction to HRM Two questions:

Does it matter? Why does it matter?

What is HRM? Organization’s methods and procedures for

managing people to enhance skills and motivation Activities to enhance the organization’s ability to

attract, select, retain and motivate people


The Death of HR ? Traditional “personnel” function

Recordkeeping Perceived as a dumping ground

The death of HR? HR’s rebirth

Sources: Caudron (2003); Schuler (1990); Schuler & Walker (1990); Stewart (1996); Sunoo & Laabs (1999); Ulrich (2000); Wells (2003)


Outsourcing HR Would it just make more sense to

outsource HR functions? Many organizations are doing just this

Recordkeeping and administrative, perhaps

Basic functions…..

Sources: Caudron (2003); Stewart & Woods (1996); Zimmerman (April 2001)


Approaches to Revitalizing HR

Accounting for human resources Managing people for competitive

advantage


Accounting for Human Resources Cascio’s costing approach:

Cost accounting for employee outcomes Calculate cost of interventions and outcomes on individual

basis Tracking costs and contributions to firm net

profitability Human capital approach

Employees are intangible assets, but can still be valued Based on assumed contribution of employees to corporate

earningsSources: Cascio (1982); Sheley (1996) Solomon (2000); Stewart (1995); Zimmerman (February 2001)


Costing HR: Example The costs of turnover per individual:

Exit interviews Unemployment tax Recruitment advertising Staff time to interview applicants Reference checking, medical exams Training new employees

Costs of reducing turnover Additional training Realistic job previews

Net savings

Calculated per person,

then totaled

Source: Cascio (1982)


Human Capital: The Steps Determine three years’ total pretax earnings Determine average assets over same three years Calculate firm’s return on assets (ROA) Determine industry average ROA Calculate “excess returns” Subtract taxes Calculate net present value of excess return Result: “intangible value” of firm’s human capital

Sources: Stewart (October 1995); Zimmerman (February 2001)


Human Resources and Competitive Advantage

The basic idea: establishing and maintaining competitive advantage through people.

Competitive advantage: Valuable, rare, inimitable, nonsubstitutable Achieved not through strategy, but strategy

implementation

Source: Pfeffer (1994, 1998)


Traditional Sources of Competitive Advantage…and Where They’ve Gone

Product and process technology Technological innovations make innovation easier and faster Development and manufacturing technology freely available

Protected and regulated markets Move to global economy Deregulation

Access to financial resources Global capital market Venture capital

Economies of scale Fragmented markets Less important with advances in technology

So, what’s left…peopleSource: Pfeffer (1994, 1998)


Competitive Advantage Through People Viewing the work force as an asset, not an

expense The result:

Harder work, from increased involvement and commitment

Smarter work, through enhanced skills and competence

Lower overhead, by pushing responsibility downward

High performance work systemsSource: Pfeffer (1994, 1998)


Employment security Selective hiring Self managed teams and decentralized decision

making High compensation, based on organizational

performance Extensive training Reduced status distinctions Extensive information sharing (both financial and

performance)

High-Performance Work Systems: The Seven Practices

Critical to remember that all of these are part of a system

Source: Pfeffer (1994, 1998)


The Research Evidence Garment manufacturing Steel minimills Initial public offerings


Garment Manufacturing

Performance Measure Bundle Modular Gross margin 26.0% 31.6% Operating profit 7.9% 13.0% Average discount 14.6% 10.2% Sewing throughput (days) 9.5 days 1.8 days

Bundle system = traditional assembly line (the employee receives a bundle of garments, does one thing, then passes the bundle on to the next worker)

Modular system = small cross-trained and self-managed work teams, team pay

Source: Pfeffer (1998)


The MinimillsManagement

Practice Control Commitment %

Improvement Wages $18.07 $21.52 19% % of employees in teams

36.6% 52.4% 43%

Decentralization * 2.42 3.04 26% General training * 1.92 3.35 74% Labor hours / ton - 34% Scrap rate - 63%

* 1 = very little to 6 = very much



The Case of the IPOsProbability of 5 Year Survival of IPO

79%87%

60%45%

HR Value Rewards

Top 16% of Firms Bottom 16% of Firms



Why Not?The Downward Performance Spiral

Individual BehaviorsDecreased motivation

More accidentsHigher turnoverReduced effort

Performance ProblemsLow profitsHigh costs

Poor customer serviceLow stock price

Organizational ResponseReduce training

LayoffsSalary freeze

Contingent staffing



Aligning Strategy and HR Determine the firm’s strategy Determine the competencies needed to carry

out the strategy Examine current management practices Determine congruence

Do the current practices work to enhance needed competencies?

Are the current practices internally consistent?



External Influences on HRM Economic conditions Legal requirements and constraints Demographics Technology

7


General Economic Conditions Global economy

Lower wage levels vs. quality and productivity Ethical issues and political considerations

Domestic factors Move from manufacturing economy to service / information

economy Mergers duplication of functions layoffs

Supply and demand of labor, which, in turn, influences price.

Supply and demand of company’s product, which determines available resources

Sources: Challenger (2003); Cole, et al. (2003)


Changes in the U.S. Economy, 1939 to Present

0%

20%

40%

60%

80%

100%

1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

Natural Resources & Mining Construction Manufacturing

Trade, Transportation & Utilities Information Professional & Business Services

Leisure & Hospitality Government

Source: U.S. Department of Labor, Bureau of Labor Statistics


Fastest Growing Occupations, 2002-2012 (by percentage growth)

0

0.2

0.4

0.6

0.8

1

Technology Demographic

Source: Department of Labor, Bureau of Labor Statistics


Fastest Growing Occupations, 2002-2012 (by number of jobs)

0

1,000

2,000

3,000

4,000

5,000

Num

be

r o

fJo

bs

(00

0)

Jobs in 2002 Growth



Legal Requirements and Constraints Government now an intermediary in the

relationship between employers and employees

Legal requirements and constraints are usually a reflection of social attitudes and opinions


Demographics Supply of labor (number of people, skills, etc.)

New skills needed, but are they present in workforce? Basic skills availability?

Different needs of different groups in the population Increasing number of women in paid workforce Dual-earner families Family friendly benefits Aging population

Sources: Challenger (2003); Cole, et al. (2003)


Participation in the Paid Labor Force by Gender: 1948 to 2004

0102030405060708090

100

% L

abor

For

ce P

artic

ipat

ion

Men Women



Technology New jobs; old jobs vanish Need for new skills Need for continuous skills development Managing the HR function

Data management Employee communications


HR Functions: What We’ll Be Looking At

RewardSystem

s

LegalComplianc

e

Staffing

Planning

Trainingand

Development

Employee andLabor

Relations

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Fall 2005 Management 412 / Intro to HRM / Page 1 Introduction to Human Resource Management.

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