Student Manual

HRManagement The Human Resource Management

Simulation

Jerald R. Smith, Florida Atlantic University Peggy A. Golden, Florida Atlantic University

Michael Deighan, Interpretive Simulations

Charlottesville, Virginia, USA

COPYRIGHT NOTICE This manual and the simulation described in it are copyrighted with all rights reserved by Interpretive Software, Inc. Under the copyright laws, neither this manual nor the software may be copied, in whole or in part, without written consent of the authors, except in the normal use of the simulation for educational purposes, and then only by those with a valid license for use. The same proprietary and copyright notices must be affixed to any permitted copies as were affixed to the original. This exception does not allow copies to be made for others, whether or not sold. Under the law, copying includes translating into another language or format. Purchasing the simulation experience gives the owner the right to participate in a unique learning event. Each student or participant must purchase the simulation to take part in the event or the institution sponsoring the event must purchase for the entire group participating in the event. Limited Warranty on Media and Manuals In no event, will Interpretive Software, Inc. be liable for direct, indirect, special, incidental, or consequential damages resulting from any defect in the software or its documentation, even if advised of the possibility of such damages. In particular, the authors shall have no liability for any programs or data stored in or used with the computer products, including the cost of recovering such programs or data. This simulation experience is sold, "as is," and you, the purchaser, are assuming the entire risk as to its quality and performance. The warranty and remedies set forth above are exclusive and in lieu of all other, oral or written, express or implied. For more information about other products from Interpretive Software, please contact: Interpretive Simulations 1421 Sachem Place, Suite 2 Charlottesville, VA 22901 Phone: (434) 979-0245 Fax: (434) 979-2454 Website: http://www.interpretive.com Discover a Better Way to Learn. Active Learning through Business Simulations. Copyright © 1994 Jerald R. Smith and Peggy A. Golden; Copyright © 2005 Prentice Hall, Inc.; Copyright 1996 – 2007 Jerald R. Smith and Peggy A. Golden; Copyright © 2008 – 2011 Interpretive Software, Inc. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission of Interpretive Software, Inc. Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within the text.

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TABLE OF CONTENTS

Introduction ................................................................................................................................................. 1Overview of HRManagement ................................................................................................................... 1Key Simulation Objectives ....................................................................................................................... 2The HRManagement Manual ................................................................................................................... 5

Section 1: Management Essentials ............................................................................................................ 7Goals and Strategies ................................................................................................................................. 7Team Organization ................................................................................................................................... 9Peer Evaluation ....................................................................................................................................... 10Simulation Starting Point ....................................................................................................................... 10

Section 2: The HRManagement Case ..................................................................................................... 11Human Resources Department Budget ................................................................................................... 11Staffing ................................................................................................................................................... 13Replacing Employees ............................................................................................................................. 14Training .................................................................................................................................................. 15Wages ..................................................................................................................................................... 17Fringe Benefits ....................................................................................................................................... 18Productivity ............................................................................................................................................ 18Programs ................................................................................................................................................. 19

Section 3: HRManagement Operations Guide ...................................................................................... 21Simulation Navigation ............................................................................................................................ 21Detail of Menu Choices .......................................................................................................................... 23

Startup ................................................................................................................................................ 23Decisions ............................................................................................................................................ 25Analysis .............................................................................................................................................. 36Reports ............................................................................................................................................... 38Environment ....................................................................................................................................... 42Simulation .......................................................................................................................................... 44

Appendix .................................................................................................................................................... 45Forms and Worksheets ........................................................................................................................... 45Glossary .................................................................................................................................................. 49

Index ....................................................................................................................................................... 53

Print date: November 17, 2010

ABOUT THE AUTHORS

Dr. Peggy Golden is currently Professor of Management and International Business at Florida Atlantic University teaching graduate and doctoral courses in Strategy and the Environment of Business. She has also taught courses on global competition in Spain and to computer industry executives in Asia. Prior to her arrival at FAU, Golden taught at the University of Louisville for five years in a variety of areas including the management of information systems. All courses are taught through extensive use of cases, experiential exercises, and simulation experiences to reinforce the learning process. In addition to teaching college courses, Dr. Golden has also conducted numerous workshops in the development of competitive strategy, general management principles, special topics for women managers, time management, decision-making, and team-building. Consulting activities include strategic planning, systems analysis and design, and management of change. Dr. Golden is an active researcher and writer. She is currently studying corporate reputation and the interaction of corporate governance on top management team pay disparity. She has published seven management simulation games and numerous articles and papers in the area of strategy formulation and implementation, and simulation development and use. Visit Dr. Golden's homepage at

http://professorgolden.net

Dr. Jerald Smith is Professor Emeritus of Business Strategy and Policy at Florida Atlantic University. He is the author of eight simulation games spanning many interest areas in Management and Marketing. He has taught a broad range of courses at the undergraduate, masters, and doctoral level. He was one of the first to teach a course on the Internet as a host for professional MBA's who are on the go. Dr. Smith has consulted for Fortune 100 companies in diverse areas such as ethics training, supervision, and has helped formulate strategic initiatives for these companies. He is the author of numerous articles. Visit Dr. Smith's homepage at

http://www.fau.edu/~jrsmith

Michael Deighan is a co-author on the new web-based editions of Airline, Entrepreneur, and HRManagement. His expertise, insight, and creativity proved invaluable and made it possible to convert these models to their current web-based versions. Michael joined Interpretive Simulations in 1989 as lead software developer, and is now Chief Technology Officer. He is co-author on a number of Interpretive simulations: PharmaSim, AutoSim, BizCafe, StratSimMarketing, StratSimManagement, StratSimChina, ServiceSim, CountryManager, and MarketShare. In addition to developing software, he has been teaching computer programming classes at Piedmont Virginia Community College, in Charlottesville, Virginia, since 1990. Michael received his B.A. in German and Economics from Washington and Lee University, and an M.A. in German from the University of Virginia.

ACKNOWLEDGEMENTS Many professors from many universities and colleges

have made several excellent suggestions concerning the algorithm and student manual. In fear that we may leave someone out, we would still like to thank the following early adopters and beta testers: Dick Barth, Bob Beaver, Robin Berkley, Monty Bohrer, Michiel Buys, Melisa Cardon, Julia M. Chambers, Chan Teng Heng, Beth Crockford, Tom Corrigan, Carrell Decker, Teri Domagalski, Janice Downton, Sandy Edwards, Ann Fiedler, Frank, Eleanna Galanaki, Paul Gillard, Gretchen Gemeinhardt, Catherine Giunta, David Hayes, Chan Teng Heng, Brian Hoekstra, Greet Van Hoye, Laura Kozloski, Jane Knight, Bonnie Leonhardt, Julie Indvik, Robert C. McHenry, Bob McHenry, Mary Markert, James R. Maxwell, Jim Pavelle, Latha Poonamallee, Chet Robie, Larry Siebers, Wendy L. Seligmann, Joe Smith, Pauline Stamp, Scot Trossen, Kevin Tasa, Tom Timmerman, Temeca Valian, Allen Wilson, Kenneth Zantow, Katrina Zalatan, and Deborah Zinni. If there were an Emeritus award, it would go to Emeric Solymossy at Western Illinois University–Quad Cities, Robyn Berkley at Rensselaer Tech and Stan Malos for additional testing beyond the call of duty on the 2nd edition. Award of Honor James Schreier, President of Far Cliffs Human Resource Consultants ([email protected]) was instrumental in the original version and updates in salary levels and fringe benefit choices to let the simulation reflect real world levels. He also gave us new Incidents and helped to test this edition.

Introduction—Page 1

INTRODUCTION

Welcome to the exciting world of simulation! Unlike most education and training exercises, this simulation provides you and your team an opportunity to practice managing the human resource functions of an organization. You will have the unique opportunity to make decisions, see how the decisions work out, and then try again. Thus, you will get a "hands on" experience with manipulating key human resource variables in a dynamic setting. Simulation techniques have been used for some time in creating business models that can aid in explaining the "real world." In this simulation, we have attempted to combine human resource elements found in the real world with the typical business environment. This model will take the decisions each team makes and simulate how the labor marketplace and the firm will react. The relative "appropriateness" of each team's decisions will be displayed in the simulation Newsletter and in the many team reports, furnished each decision quarter. Overview of HRManagement You will be managing a medium-sized firm that will be competing with other teams (up to a maximum of 18). This web-based application is programmed to simulate either a profit or non-profit organization, in either the manufacturing or service industry. Your instructor has the option of designating the type of firm and naming industry designations in which you will be operating (i.e.; 1, 2, 3, etc.). We recommend a team size of 3-4 students. Each team will manage their own firm in the simulation. Typically, each team's organization is left up to the team. Teams are expected to establish objectives, plan their strategy, and then make the required decisions dictated by these plans. These decisions are input directly into simulation decision screens online, which produce a variety of reports for each team concerning their firm's results. This is done for several decision periods. HRManagement has 12 possible decision periods (simulated quarters). Your instructor will inform you of the number of periods in your particular game. It is strongly recommended that you approach the simulation as if competing against other firms in the labor market of a real world

Page 2—HRManagement Student Guide

environment and not attempt to "play against" the computer.

Results are a function of the decisions that all teams have entered. In the real world, managers must make decisions without perfect information, under conditions of uncertainty, and within time constraints. This simulation is no different. Your team will need to get as much information as possible through the survey research reports provided each quarter, keep good records in order to study the interactions between decision variables, and then make decisions for the next quarter. It is recommended that you not use the "stab in the dark" method of making decisions but rather plan to hold certain variables constant while manipulating others. This will allow you to begin to determine which elements are more effective in obtaining desired results. Do not rely on information gathered from others who have competed in the simulation in the past, as your instructor can change the simulation environment for each class. All teams will make a few mistakes throughout the simulation but mistakes happen in the real world, too. Remember to keep your enthusiasm and competitive spirit high and do not allow a few setbacks to affect your play. Key Simulation Objectives Your team's performance might be judged against the goals you have (formally or informally) set, in terms of your ability to manage: a budget, unit labor cost, quality, morale, grievances, absenteeism, accident rate, and turnover. As in the real world, your firm will not have enough funds in the budget to implement every available improvement option. Your team must make choices as to what variables are most important and concentrate your budget expenditures on those factors. You will, in a sense, be competing with all other teams on the items mentioned above. However, in terms of direct competition, your firm will be competing with other firms for new employees only within the local labor market. The other firms (teams) in your class will comprise the local labor area. To get the most out of the HRManagement experience, we recommend the approach outlined on the following pages.


Sections 1 & 2 of this manual present a description of your firm and your industry's current situation. A thorough understanding of your firm, its current situation, and decision variables will help your group decision-making process. Section 3 (Operations Guide) provides information on how to use the simulation, as well as a detailed description of each menu option. In order to quickly learn the functions of the menu commands and become familiar with operating the program, it will be helpful to have access to your simulation as you work through this section. Survey research studies are available for purchase as needed and contain data from studies conducted in the local industry. Here, your firm will find local and average industry wage rates and compensation packages, along with industry average allocations for training, safety, and quality programs. Also included are industry index rates for morale, absenteeism, grievances, and productivity. From this information, you will devise and implement an appropriate budgeting plan for your human resource department and know how other firms in your industry are positioned. Just as in real life, however, some information and reports will prove more useful than others. Part of your decision process will include deciding which information is most useful to your firm. After reviewing information about your firm and the local labor market, your team will decide how to manage your HR department in terms of employee compensation, training, and participation programs, all within the constraints of the department budget. Make sure you allow sufficient time to analyze your resources thoroughly and make informed decisions.

Implement your Strategy

Develop a Goals and Strategies

Learn How to Operate

the Software

Read Sections 1 and 2

of the Manual


.

When you enter your decisions, they are automatically saved to the web. When satisfied with your decisions, if playing in benchmark mode, you (or your team leader) can use the advance option under the simulation menu to move to the next quarter. If you are using the directly competitive version, the simulation will be advanced at a specified time according to your course schedule so that everyone competing in the industry will have a chance to enter their decisions. Information will be updated, and your firm will have access to the updated results. Once the simulation has been advanced, see how your team is doing compared with other teams in your class by viewing the comparative results screen on your class website. Review the results in the local labor market before making decisions for the next quarter. Compare your results with those of the entire industry and consider how well your strategy is working. Repeat the decision-making process until all periods have been completed. At the end of the simulation, you will be able to see how your firm performed over the entire game and view comparative results with other teams.

NOTE: You may find it helpful to print out some reports and step back from the computer from time to time. Analyzing information and determining an integrated management plan is a complex task. It is important to take time and reflect on the information, especially when working in groups.

Competing firms will be following their own strategies and reacting to your decisions. The simulation always starts from the same position, but each game will proceed on a unique course depending on the strategy that each team chooses. This will allow competitive comparisons and illustrate how businesses can evolve differently.

Enter Decisions

Advance to the Next Period

Review Results

Repeat


.

The HRManagement Manual The remainder of this manual is divided into three sections: Section 1: HRManagement Essentials This section provides a brief introduction to human resources management: team goals and strategies, team organization, and what type of decisions you will be making in the simulation. Section 2: The HRManagement Case The section presents the information about your firm and its human resources function in a form similar to a business school case. This will also serve as an introduction to the current situation at the start of the simulation. Section 3: HRManagement Operations Guide This section outlines the operational aspects of using HRManagement, including how to get started, the menu and help systems, and a detailed description of each report and decision screen. Appendix The Appendix includes several forms, worksheets, and a glossary of terms used in the simulation and student guide.


Management Essentials—Page 7

SECTION 1: MANAGEMENT ESSENTIALS

Goals and Strategies Setting and pursuing organizational goals are an integral part of the HRManagement simulation. As you begin your decision-making, several points are worth noting. • Goals are usually long-range objectives that are not likely to

change significantly from quarter to quarter. Some goals may not be reachable even within the 7-12 decision periods you will have in the HRManagement simulation.

• Strategies generally will change fairly often to meet varying

external and internal operating constraints. There are many routes that you can take to get from point A to point B.

• Team goals should be both ambitious and realistic. Goals Once you have analyzed your current situation and operating environment, the next step is to select goals and strategies. Your firm should express its goals in some quantifiable fashion such as a percentage, ratio, or total dollars so that the firm's CEO and your instructor can readily evaluate them. Also, although less easily measurable, some objectives such as being an "aggressive" firm are completely in line with reality and might well impress the CEO. Goals may also be expressed in superlatives such as "the most," "the biggest," and so on; or within some comparative framework such as "average," or "group median;" or in a combination of the two such as "better than the average." Goals easily achieved are often less commendable than ambitious goals only partially fulfilled. Some suggested possible goal topics are: turnover, productivity, overtime, absenteeism, morale, quality, accident rate, wages, minority and female workforce, training, and grievances. Strategies Goals express the position of your firm at some point in the future, while strategies are general policies for reaching these goals. You may decide to stress some decision areas more than other areas. Some examples are: to achieve a goal for wage rates by becoming more aggressive, to decrease the turnover rate, or to increase the


NOTE: One professor points out that perhaps wages and percentages of female/minorities should be treated as strategies instead of goals. The reasoning is that they are not ends but means to better morale (wages), and productivity (well-managed diversity). This may be a good discussion point for your team.

morale index. After you have analyzed your firm's situation and set your goals, you will be required to state clearly your strategies to achieve these goals. Your strategies should guide your decisions pertaining to wage rates, new programs, employment, promotion, and training. It may be difficult to comprehend the interrelationships among items on various reports. For morale reasons, you may wish to implement a quality program, but this may affect your turnover rate or your ability to increase wages. In other words, it is rarely obvious what the human resources manager should do to help the firm achieve its management goals. Performance in one area may be improved but only at the expense of another area, resulting in a conflict with your overall goals. HRManagement forces you to be aware of these tradeoffs and relationships and should help participants to better plan their future human resource objectives. The following are some sample goals and strategies for an HR department. Your team may have an entirely different emphasis from the list given here. 1. To be the highest paying firm. Spend 50% of available budget

on wage increases. 2. To increase morale to 90. Allocate money to fringe benefits

every third quarter. 3. To be a people-oriented firm. Aim to fill a minimum of 25%

of all job vacancies with minority or female employees. Your strategies should guide your decisions on wage rates, new programs, employment, promotion, and training options. You will want to set quantitative goals for 12 major areas of firm management, which are listed below.

• Wages • Turnover • Productivity • Minority Workforce • Female Workforce • Morale

• Quality • Accident Rate • Grievances • Fringe Benefits • Absenteeism • Budget Utilization

Management Essentials—Page 9

Summary

After you have selected your goals, you might apply a final test by asking the following questions:

1. Is each goal one that can be met in the face of an adverse economy? If not, your "goal" may really be more of a strategy, or it may benefit from restatement.

2. Is each goal a relatively long-range one—unlikely to change

much over a short time span? If not, your "goal" may really be more of a strategy, or may benefit from restatement.

3. Have you omitted any areas in which, if other firms surpass

you, you will wish that you had been more competitive? If so, you should consider their inclusion as goals.

In order to assist you to record and analyze quarterly expenditures, a Budget Planning Form and Staffing Worksheet are included in this manual. Your instructor may assign additional forms and worksheets that will help you to record and analyze your team's goal-setting and planning process, quarter by quarter. Team Organization Getting off to a good start is critically important in managing a firm or participating in a simulation. Your team should be organized as soon as it is formed. Specific duties should be assigned with each person to be held accountable for his/her responsibilities. It is recommended that you assign a "lead" person to head up the team, perhaps with the title of Director of Human Resources. If you do decide to operate as a self-managed work team, you should consult your course textbook or other resources in order to learn how to make it work. Picture your team functioning as a team, rather than as a "group"—can you visualize the difference? The duties that we have described below are merely a suggestion for your team's firm. If there are fewer team members than jobs, share responsibility of an open position. Refer to the following chart for suggested roles and record keeping duties.

NOTE: Although a team may operate as a leaderless group, it often requires one person to keep things moving.


TITLE RECORD KEEPING DUTIES HR Director % Female and Minority Employees, Over/Under Budget,

Morale

Operations Liaison Quality Index, Productivity per Employee, Overtime Units, Unit Labor Cost, Quality Budget vs. Industry Average

Director of Safety Training Accident Rate vs. Industry Average, Safety Budget vs. Industry Average, Absenteeism, Training Budget vs. Industry Average, Training for Promotions, Turnover vs. Industry Average

Wage and Salary Administrator Wages vs. Industry Average, Fringe Benefits vs. Industry Average, Grievances, Employee Participation Programs in the Industry

NOTE: If a team has interpersonal problems, the team must solve them or it will go through the simulation crippled with conflict. Managing team conflicts is an important part of the educational process for you as future managers.

Peer Evaluation Your instructor may ask you to complete a written or online peer evaluation either at mid-term and/or at the end of the semester. When duties have been clearly assigned at the beginning, a peer (performance) evaluation will be easy to accomplish. This evaluation is to be completed without consultation with other team members. You should be very honest in evaluating the performance of your team, as your instructor knows the strengths and weaknesses of your team from administrative reports that are furnished each quarter to him/her. It is imperative, however, that you be able to verbalize the team's performance. There is great learning value in taking a historical look at your team's decisions and outcomes. Simulation Starting Point Each team begins in the first quarter of a new budget year (Quarter 1, Year 1). For the first quarter, the beginning budget is $350,000 ($1,400,000/4). This is the starting position for all firms

.

Each quarter, you will be entering decisions pertaining to Staffing, Wages, Benefits, Training, and Programs; as well as a Special (Incident) decision if your instructor has selected this option. By competing in the HRManagement environment, analyzing information, making decisions, and observing the results, you will experience firsthand the challenges and rewards of running a human resources department. Have fun and good luck!

The HRManagement Case—Page 11

SECTION 2: THE HRMANAGEMENT CASE

HUMAN RESOURCE

MANAGEMENT Includes: human resource planning; recruitment, selection, and hiring of new employees; the orientation, training, and appraisal of current employees; and employee remuneration, motivation, and retention.

You are to assume the newly-created position of Human Resource Director for a medium sized firm with approximately 660 employees. The firm has experienced significant expansion in the past few years; the human resource department and its functions have not kept pace with company growth. The Chief Executive Officer (CEO) has instructed you to get the human resource department organized and build a strong HR function. You have wide latitude in this area and the CEO has encouraged you to "get this organization moving." You will want to set some ambitious, yet realistic, quantifiable goals for the Human Resource department. Although the industry is slowly becoming unionized, currently this has no impact on your firm. At the lower job level, your workforce has both skilled and semi-skilled workers (about 500). The firm has no policy on promotions and has hired into the upper levels of management from the outside as well as promoted from within. Employee training is currently the responsibility of each department head and consists solely of on-the-job learning; no formal instruction is provided. Economic conditions in your region are good and unemployment rates are average. Human Resources Department Budget You will be notified of your annual budget at the start of the simulation. Each succeeding quarter your remaining annual budget will be displayed in the Budget Report. Your yearly budget will need to cover expenses for any new programs, employee overtime expense, training, and any other special programs you may wish to initiate. When you add a fringe benefit to the employee compensation package or increase wages, your budget will be charged for the additional fringe benefit expense or wage increase for that first quarter and that quarter only

; in subsequent quarters, the firm will absorb these expenses.

Carefully analyze your budget to ensure that you do not overspend. You might have to drop critical programs in the last quarter of the year if you do not have enough funds in the budget. Dropping programs will have a negative effect on employee morale, which could result in increased turnover and decreased production.


NOTE: For Year 1, your budget is $1,400,000. Twenty-five percent ($350,000) should be your target budget for the first quarter.

Quarterly decisions must be made within certain budgetary constraints:

• If you do not allocate your entire annual budget, the remainder is returned to the financial office—you may not carry over any unused monies to the next year

.

• If your expenditures exceed your budget, the overage will be subtracted from your next quarter's budget (as long as the next quarter does not start a new year)—

you may not "dip" into next year's budget.

It is important, therefore, to remain as close as possible to the quarterly budget in the 4th, 8th, and 12th quarters. This is standard business procedure. Exceeding the budget at the end of the year (every 4th quarter) is a serious managerial deficiency and will have negative consequences. Your budget is limited and cannot immediately meet all your departmental needs. Therefore, a budgeting plan should be made while keeping your departmental objectives in mind and allow these to guide your decisions each quarter. You may find that your plan will need adjustment as the simulation progresses. The budget for Year 1 and the estimated budget for Year 2 are shown below. You will be notified in the simulation Newsletter if the CEO modifies these projections. As in the "real world," budgets are not guaranteed and the financial officer may need to change your budget at any time. If so, you will be notified via the simulation Newsletter.

Budget Projections

Year and Quarter Numbers Annual Budget Avg. Quarterly Budget

Year 1 — Quarters 1 – 4 $1,400,000 $350,000 Year 2 — Quarters 5 – 8 $1,600,000 estimate $400,000 Year 3 — Quarters 9 – 12 To be announced


DEMOGRAPHICS The characteristics of human populations and population segments.

Staffing Demographics One of the problems facing the Human Resource Director is the lack of females and minorities at all job levels. The firm has fewer female and minority workers than would be expected given the local working population. Due to the rapid growth of the firm, little effort has been made to have a representative workforce. Although there is no litigation concerning this unbalance at the present time, the new Human Resource Director has been directed by the CEO to begin integrating the workforce. A percentage of total hires can be established in each quarter for hiring minorities and females. The percentage represents a policy that should be considered something between an optimum and a minimum percentage. There is no guarantee that the exact number of females and minorities can be hired as other firms are also attempting to correct imbalances. Males or females can do all the jobs in the firm. The table below gives the current workforce status. The "In Local Community Labor Force Available" column shows percentages of females and minorities the firm should have as a long-range goal.

Community Workforce Demographics

In Your Firm Labor Force

In Local Community Labor Force Available

Job Level

Total Positions

Total Females

Total Minorities Females Minorities

5 20 0 ( 0% ) 0 ( 0% ) 25% 20% 4 25 1 ( 4% ) 0 ( 0% ) 20% 25% 3 50 10 ( 20% ) 5 ( 10% ) 30% 25% 2 60 12 ( 20% ) 6 ( 10% ) 35% 25% 1 500 60 ( 12% ) 40 ( 8% ) 40% 30%


Outside Hiring Costs

Job

Level

Automatic Charge

Per Employee

5 15,000

4 12,000

3 10,000

2 7,000

1 2,000

Employee Turnover The current turnover rate of this firm (9.8%) is comparatively high. Employee morale could be a contributing factor. Department heads estimate that morale is 50 on a scale of 0 to 100; a rating of 50 indicates morale is lackluster and many employees are coming to work with indifferent attitudes. Some managers in the firm have mentioned one or all of the following as contributing factors: the lack of a formal performance appraisal program, lower than local equivalent wage rates and fringe benefits, the lack of a grievance procedure, and a lack of training. You may discover that the turnover rate of Level 1 employees is relatively high. One of the special programs that may become available to you during the simulation is a formal hiring process which would include aptitude testing, health screening, and drug testing of new employees. One of the budget decisions you will face—additional employee training—should help decrease employee turnover at all levels. Note that the numbers of expected vacancies displayed each quarter are estimates only

and that actual vacancies may vary somewhat from the projected figures.

Replacing Employees There are two methods of replacing employees. The first method is to hire qualified people on the open market; the second is to promote employees from within. Although the latter method has been a primary method of filling management positions in the past, a lack of formal training has often resulted in less-than-desired performance by promoted employees. One advantage to hiring from outside the firm is new hires can bring fresh ideas and new methods into the firm. There is a distinct cost difference between these two methods. Method 1: Hiring from Outside The table at left displays the hiring costs for each job level. Hiring costs are automatically charged against your budget when you hire a new employee. The hiring costs for Levels 2 to 5 include employment agency fees, travel expenses, and additional costs (for recruiting, interviewing, and testing). The cost for Level 1 employees includes on-the-job training and lower productivity during the first few days or weeks of employment.


NOTE: When promoting, do not forget to hire new people for the positions vacated by workers who are moving up the corporate ladder. The most common error made by students is failing to hire the correct number of employees to replace those who have resigned or been promoted.

Suggested Training

Allocations Job

Level Per

Employee

5 3,000

4 2,000

3 2,000

2 1,000

1 200

Method 2: Promoting from Within When promoting an employee in your firm to a higher level position, you can decide whether the employee will receive formal, or simply on-the-job, training. Although training is not required, it is recommended that all employees receive training to help ensure their success—whether they are hired from outside the firm or promoted from within. Suggested training allocations per job level are displayed in the table at left. A comparison between training and hiring costs shows that promoting employees from within is more economical. When promoting an employee, no training costs are automatically charged against your budget. It is up to you whether to allocate any budget amount toward training costs for new and/or existing employees. Cost to Lay Off Employees If the firm's productivity per employee increases, it may find itself with too many employees. The firm may allow normal attrition to bring the employees needed into line or layoff the excess. The cost

to layoff an employee is 50% of the hiring cost for that level. Thus, the cost to layoff each Level 1 employee is $1,000, (i.e.; $2000 divided by 2).

Training Training for External Hires and Promotions At present, the firm does not have any training programs. Training promoted employees and external hires will increase the probability of employee success and reduce turnover. Failure to train a person who has been promoted will result in reduced productivity and decreased morale if the employee fails at his/her new job and must be placed back in their old position. General managerial and career development training can prepare an employee for new job responsibilities by updating employees' technical skills. You will have the opportunity to allocate any amount from $0 to $80,000 toward training both external hires and promoted employees. Managerial and Supervisor Training Sometimes hiring on the open market gives the firm a well-trained manager or supervisor who requires no further training. However, whether hiring from within or without, it is believed that


NOTE: Although the simulation allows for large amounts to be allocated in these expenditure categories, there will be a point of diminishing return

supervisors and managers will be better prepared and have a greater chance of success to assume new managerial positions when they take advantage of a training program. You will have the opportunity to allocate any amount from $0 to $80,000 to manager and supervisor training. The more you allocate, the greater the emphasis placed on employee training aspects of your firm. . This

point is reached when your increased expenditure no longer produces an increase in results.

Safety and Accident Prevention Program One of the problems facing the Human Resource Director is an accident rate that is higher than it should be. It is believed that this is caused by a greater than average number of employee turnovers (i.e., there are always new, untrained employees coming into the firm), a less than satisfactory morale level, and a lack of any type of accident prevention or safety program. The accident rate for the firm (as measured by employee days lost per 1 million employee-hours) is 494; the industry average is also 494. However, these rates are above local accident rates and those of many other industries. It is estimated that the cost for a safety program could range from $1,000 to $20,000 or more, per quarter. As Human Resource Director, you have the budget funds necessary and the option of implementing such a program. In order to have a full-time Safety Director, you will need to allocate at least $12,000 per quarter. You may allocate any

amount to this category from $1,000 to $80,000 and the more you allocate, the greater the emphasis placed on safety and accident prevention aspects of your firm.

Quality Program At the present time, the firm has an "average" quality rating of 50 using an index ranging from 100 (high quality) to 0 (extremely low quality). Although quality control is not normally the responsibility of a Human Resources Director, it is incorporated into the simulation because it is closely related to personnel areas such as grievances, training, and turnover.

PRODUCTION INFORMATION Units Required This Quarter 100.000 Quality Index (100 = High, 0 = Low) 50

Units Produced @ Regular Time 100,000 Production Units

Required Next Quarter 100,000

Units Produced @ Overtime 0 Productivity Next Quarter 200


The quality of the goods produced (or services rendered) will be

found on the Production Report each quarter. At the present time, product/service quality is checked at the end of the process (post-process control). A minimal quality control program can be established with $4,000. A program to train supervisors to conduct quality checks during the process (concurrent control) could be established for $5,000 per quarter. An allocation of $13,000 per quarter would need to be set in order to have a full time Quality Control Manager. A Total Quality Management (TQM) program could be established for $25,000 per quarter, which includes a full time manager and concurrent controls. A more formal quality control system could be established with funds of up to $40,000, or more. To summarize, you may allocate any

amount to this category from $1,000 to $80,000, and the more you allocate, the greater the emphasis placed on the quality aspects of your firm.

Wages Wage rates for the firm are slightly below average for the local community. Decisions concerning the level of wages and benefits are not traditionally the sole responsibility of a Human Resource Director. However, the CEO has given you the responsibility for making these decisions as long as they are within your budget. Be careful in calculating the total cost of a wage increase as an error could deplete your entire annual budget. The following table illustrates the quarterly wage rates (including benefits) that are currently in effect at the firm and the local area average wage rates.

Job Titles and Quarterly Wage Rates

Level Local Area Wages Wages at this Firm Typical Job Titles 5 $19,000 $18,000 Key managers; engineers

4 16,000 14,000 Staff specialists; dept. heads

3 14,000 12,000 Supervisors; technicians

2 11,400 10,000 Skilled positions

1 9,000 8,000 Semi-skilled positions


Fringe Benefits

The firm has very meager fringe benefits; these benefits are presently 20% of wages. An analysis of your current benefits and costs (as a percentage of payrolls) is shown below.

Fringe Benefits % Social Security tax 7.65

Unemployment Insurance 1.0

Health Care Plan Costs (Low-benefit, high-deductible—$500) 4.35

Workmen's Compensation Benefits (Injuries on-the-job) 1.0

Vacation/Holiday Policy 5.0

Sickness Pool 1.0

Total % of Payroll Cost 20.0

The current health care plan covers off-the-job injuries and illnesses. It is known as a "catastrophic" plan because it is designed to protect against serious health problems that could prove devastating to an employee's finances. The employee must pay the first $500 of any claim. Employees do not pay any part of the additional fringes listed above. You will have the opportunity to add other fringe benefits to the employee compensation package. Productivity Productivity at the start of the simulation is 200 units per employee. Although industry-wide figures are not available, it is felt that improvements can be made. Productivity is not normally the responsibility of the Human Resources manager; however; it is included in the simulation because of its close relationship to key human resource areas such as turnover, quality, grievances, etc. As you might expect, the higher the productivity per employee, the fewer employees are needed. If productivity increases, there will be fewer Level 1 and 2 workers to employ; therefore, hiring costs and all costs associated with wages (e.g., fringe benefits) will be lower. Keep in mind that productivity can drop suddenly when there is a drop in employee morale

.


Overtime If you do not have enough employees to meet production quota while working standard shifts, employees will have to put in extra hours to make the units required to meet sales. The firm will be charged $45 per overtime unit produced. This will increase the unit labor cost for the quarter. The HR Department budget will be charged $2 per overtime unit up to a maximum charge of $5,000 for the quarter. If the firm continues to have overtime, the maximum charge to the HR department will be increased

.

Programs There are six programs available that will have a positive impact on the Human Resources division. These programs include: 1) an employee participation program, 2) a system for handling employee grievances, 3) an orientation program for new employees, 4) a computerized HR Information System, 5) a procedure for evaluating employee performance, and 6) an affirmative action program. The costs for these programs differ and range from $3,000 to $11,000 per quarter. Below each program title is some background information about the firm and some possible benefits that will result from initiating these programs. Keep in mind, however, that any benefit gained can be lost if these programs are discontinued due to budgetary constraints in a later quarter. Employee Participation Program Contemporary human resource practices include various employee participation programs that attempt to give workers more self-direction and control over their work and working conditions. Programs range from voluntary problem-solving groups to formal quality circle programs. The program costs include funds for establishing and supervising new training programs, and pay for employees time while they attend training sessions. Results from this type of program are typically an increase in employee morale and a decrease in turnover. Grievance Procedure The firm does not have a grievance procedure; department heads handle grievances informally. The department heads estimate there were 31 grievances last quarter. It is felt there are probably


many more than this number, but employees either quit or continue working with lower morale instead of seeking resolution. The high turnover rate and average morale index adds credence to this theory. A formal grievance procedure should increase employee morale and decrease turnover. New Employee Orientation The firm does not have an orientation program for new employees. This fact could possibly contribute to the higher than average accident and turnover rates. Orientation programs for new employees tend to reduce accidents and decrease turnover. Computerized HR Information System Human Resource records and the record keeping system have not kept up with the rapid growth of the firm; only payroll records and payroll checks are computerized. The Human Resource Director has received a bid for $11,000 per quarter to install and maintain personnel records on a computer. The vendor claims the benefit of this system would be improved decision-making in all areas of the Human Resource function—benefits, selection, staffing, training and development, performance appraisal, and job analysis. Performance Appraisal The firm does not have a formal performance appraisal system. Some employees complain that the supervisors and managers give raises and perks to those they like and not necessarily to those who are the most productive. Decreased turnover, increased morale, and greater productivity are likely to result from this new system. Affirmative Action Program The percentage of female and minority workers at the firm is lower than the local working population. Hiring has been generally done on a "walk in" basis, and there is no formal plan to increase the number of women and minorities employed. This program would assign a high level manager to assume the additional duties as Affirmative Action Officer. The AA Officer will develop goals and initiate programs to achieve the desired results.

Operations Guide—Page 21

SECTION 3: HRMANAGEMENT OPERATIONS GUIDE

.Simulation Navigation .HRManagement is designed to be easy to use and is compatible with most Internet browsers. This chapter contains the information needed to make the decisions for each quarter and an interpretation of the results found on the analyses and reports. This section will first detail simulation access and then will give an overview of the decision-making process of HRManagement. Each page of the HRManagement site contains an easy-to-use menu system consisting of three parts: (1) specific menu options and links to decision-making tools and input screens, found on the left side of the HRManagement browser window; (2) green navigation and general control buttons across the top; and (3) pull-down menu to show the current week in the upper right-hand corner

Sample Screen

Navigation buttons

Menu system: six categories

& choices HRManagement screen display

Change the period view

Firm name and user info


SIMULATION NAVIGATION NOTE: Until you make your startup decisions, no other menu options will be available.

The left-hand menu is divided into six parts: Startup, Decisions, Analysis, Reports, Environment, and Simulation. Each part includes menu links that correspond to different reports, decisions, or actions. For example, under Startup there are links for Case and Startup Decision. The menu system is expandable and collapsible. For instance, click on the button to the left of Startup, and the Case and Startup Decision will collapse back into Startup.

The navigation and general control buttons found at the top of the simulation screen are: Back, Home, Print, Help, and Logout. The Print button applies to the report currently on the screen. For instance, if you click on the Print button when viewing the Budget Report, the report will be sent to your default printer. Clicking on the Help button will open the operations guide. The Back button lets you reach the last page you visited and the Home button brings you to the homepage of the simulation.

The box in the upper right-hand corner of the simulation screen has a pull-down menu that lets you choose which quarter you would like to view. It will automatically default to "current quarter" unless you change it. Changing this will show you your results for previous quarters once the simulation has been advanced. This can be helpful for reviewing historical information.


DETAIL OF

MENU CHOICES

The links on the left of the HRManagement window lead to all the information and tools you will need to analyze your current position, plan a strategy, and input your decisions. These links are divided into six categories: Startup, Decisions, Analysis, Reports, Environment, and Simulation. One of the easiest ways to find out more about an option is just to try it out. If you need more information, use the on-screen HELP button to consult the student guide. All of the menu links may be expanded or contracted. For instance, after entering your firm name (under Startup), you can click on Decisions to expand that menu to see all the different decision areas for your decision process.

STARTUP MENU

Case Under the STARTUP section you will find a copy of the HRManagement case from this manual. The case presents information on your firm in a form similar to a business school case and also serves as an introduction to the situation at the start of the simulation. Remember that not everything provided in the CASE is immediately available to you. For example, you may not be able to enter a decision in response to an Incident unless your instructor has activated that option. Please make sure to carefully read the case before making ANY decisions.

Startup Screen: Case


STARTUP MENU NOTE: At the beginning of the simulation, you will be required to create a name for your firm. Your firm name must be completed and finalized before you can proceed past the startup menu.

Startup Decision One Startup decision is required at the beginning of the simulation. You will need to enter a name for your firm. When your team has thoughtfully agreed upon a name, the team leader will need to enter the business name into the simulation decision screen. When this has been entered, and finalized, the remaining simulation menu items will become accessible. NOTE: Once your firm has been named and that decision finalized, you will not be able to change your firm name.

Startup Decisions Input Screen

Enter your firm name.

Finalize and then submit your decisions.


DECISIONS

MENU NOTE: "Expected Vacancies" displayed in the Staffing Report are estimates only;

Staffing

actual numbers may differ from these projections.

The Staffing decision input screen displays the number of vacancies per job level. Use the Staffing decision input screen to enter the number of promotions and new hires for each job level. If you wish to layoff personnel, enter a negative number in the "Hire" column. In addition, enter target percentages for females and minorities. You may wish to review the resulting personnel changes in the Staff Analysis screen. A brief description of each job level follows: Level 5: Key Managers; Engineers Cost to Hire: $15,000 Level 4: Staff Specialists; Dept. Heads Cost to Hire: $12,000 Level 3: Supervisors; Technicians Cost to Hire: $10,000 Level 2: Skilled Positions Cost to Hire: $7,000 Level 1: Semi-skilled Positions Cost to Hire: $2,000 The costs for hiring from outside the firm are calculated as shown above and should be considered while planning your budget. The program will automatically charge these costs against your budget (you will not need to enter hiring costs into the simulation). The cost of hiring qualified people on the open market for Levels 2 to 5 include: employment agency fees, recruiting costs, interviewing costs, testing costs, and travel expenses. The cost to hire Level 1 employees includes on-the-job training and lower productivity during the first few days or weeks of employment. NOTE: The cost to lay off an employee is 50% of the job level hiring cost.

NOTE: If you promote from a level, you will need to hire an equal number of replacement employees in addition to the "number of expected vacancies" shown on your Staffing Report.

Workforce Demographics

Labor Force in Your Firm

Labor Force Available in Local

Community Job

Level Total

Positions %

Females %

Minorities Females Minorities 5 20 0 ( 0% ) 0 ( 0% ) 25% 20% 4 25 1 ( 4% ) 0 ( 0% ) 20% 25% 3 50 10 ( 20% ) 5 ( 10% ) 30% 25% 2 60 5 ( 8% ) 6 ( 10% ) 35% 25% 1 500 60 ( 12% ) 40 ( 8% ) 40% 30%


DECISIONS

MENU

Promoting from Within If you want to ensure that your promote-from-within policy is successful, you will need to allocate the suggested amounts for training those who are promoted. Personnel must be hired and/or promoted to fill all vacancies. Failure to hire and promote sufficient personnel at all levels will result in overtime in order to meet production requirements and/or a higher-than-usual turnover rate at non-production (managerial) levels.

Cost to Lay Off Employees If the firm's productivity per employee increases, it may find itself with too many employees. The firm may allow normal attrition to bring the number of employees needed into line or layoff the excess. The cost to layoff an employee is 50% of the "hiring from outside" cost for that level. Thus, the cost to layoff each Level 1 employee is $1,000, (i.e.; $2000 divided by 2). To enter your decision to lay off employees, use a minus sign in front of the number of employees you want to layoff. Enter this negative number in the appropriate Job Level (1, 2, 3, 4, 5) row of the "Hire" column.

NOTE: The cost to lay off an employee is 50% of the job level hiring cost.

Staffing Decision Screen

Hiring Example: # Level 1 expected vacancies: (50) 50 + Plus the number of promotions from Level 1 to Level 2 (1) + 1 = Total Hires for Level 1: 50 + 1 = (51) = 51

Enter target percentages for female and minority

hires.

Enter number of external hires (negative number for layoffs) and promotions for

each job level.


DECISIONS

MENU

Wages Wages for each job level may be increased in any decision period by inserting the quarterly increase (dollar amount) into the Wages decision input screen. The additional wage figures you submit will be displayed in your Budget Report. The total quarterly cost of any wage increase will be automatically calculated and subtracted from the available budget that quarter. The ongoing cost of wage increases will be built into the total cost of wages in subsequent quarters and the firm will pick up the cost. Thus, only the first quarter a wage increase is paid will be charged against your quarterly budget. After entering a wage increase decision, you may check the Budget Analysis to see its effect on your budget. In addition, your instructor may assign the Analysis Worksheet (Wage Rate Worksheet) that may assist your team in making wage rate increase decisions. The example below illustrates how the additional cost of a small wage increase is calculated. The "Old Rate" values used here are from Quarter 1.

Wage Rate Analysis

Wages Decision Screen

Enter quarterly wage increase

amounts for each job level.


DECISIONS

MENU

Benefits The Benefits decision input screen allows users to select additional benefits beyond the basic 20% provided at the beginning of the simulation. Any additional benefits cost will be displayed in your quarterly Budget Report. All figures are a percentage of wages and represent an increase to fringe benefits by the percentages shown. You will not need to enter your fringe benefit rate each quarter. Any additional cost incurred from an increase in fringe benefits will be charged to your budget only during the quarter in which you add it. Thereafter, the extra cost is absorbed into the production department's operating budget. For an example of benefit expense, a 4% benefit would cost $236,400 (total wages $5,910,000 x 0.04). Note the relatively high cost of adding fringes. Do not miscalculate and spend your entire budget! Additional fringe benefits and their associated cost (percentage of payroll) are shown in the table below.

.

Fringe Benefits Options

Fringe Benefit Cost % Fringe Benefit Cost % Dental Care and Legal Services 0.1 Prescription Drug Plan 3.20

Term Life Insurance and Eye Care 0.2 Employer Sponsored 401K Plan—Starter 3.40

Employee-Funded 401K (Pension) 0.4 Employer Sponsored 401K Plan—Moderate 4.15

Tuition Reimbursement 0.8 Employer Sponsored 401K Plan—High 6.80

Add 1 Vacation/Personal/Sick Day 1.60 Incentive (merit pay) Plan 3.26

Add Another Vacation/Personal/Sick Day 1.61 Health Insurance with lower deductibles 3.27

Add Another Vacation/Personal/Sick Day 1.62 Health Insurance—Average Industry Plan 6.81

Add Another Vacation/Personal/Sick Day 1.63 Cafeteria Plan—Employees choose benefits 9.66

Add Another Vacation/Personal/Sick Day 1.64

NOTE: The Wage Rate Worksheet assignment and the Budget Analysis simulation screen will aid you in calculating the cost of additional benefits.


DECISIONS

MENU Do not revert to the 20% base fringes after a fringe addition or that benefit will be dropped, along with an accompanying drop in morale. You may wish to grant another fringe benefit in a later quarter. You will be charged only for the increase made that quarter, and only for one quarter.

Vacation/Personal days earned are 10 days after one year for Level 1 and 2 employees and 3 weeks for Levels 3-5, with 6 paid holidays for everyone. Each of the items "Add another Vacation/Personal/Sick Day" will add one additional non-work day to be accrued and used appropriately. For example, if 4 days were added, a beginning employee would have 14 days to use as vacation, personal, or sick days (10 base + 4 new). Adding one of these days could also be assumed to be another paid holiday.

Fringe Benefit Example: If you wish to add tuition reimbursement, you would click into the box marked “Tuition Reimbursement – 0.80%. If you wish to add a Dental Care and Legal Services plan too, you would also select "Dental Care and Legal Services –0.10%". This cost will be automatically calculated and displayed in the Budget Report.

NOTE: When you add a fringe benefit to the employee compensation package or increase wages, your budget will be charged for the additional fringe benefit expense or wage increase for that first quarter and that quarter only; the firm will absorb the future expenses generated in subsequent quarters.

Benefits Decision Screen

Select or deselect additional benefits

here.

Increase or decrease current benefits

here.


DECISIONS MENU NOTE: When promoting, do not forget to hire new people for the positions vacated by workers who are moving up the corporate ladder. The most common error made by students is failing to hire the correct number of employees to replace those who have resigned or been promoted.

Training Each quarter, you can allocate budget dollars to a variety of training programs that may positively impact your firm's operations. These additional training costs will be displayed in your Budget Report. You may allocate any amount from $0–$80,000 for each of the training categories found on the Training decision screen. For help with determining realistic training program allocations, refer to the costs given below. Level 1: $200 Level 2: $1,000 Levels 3 and 4: $2,000 Level 5: $3000 Training costs remain the same when either promoting from within or when hiring from outside the firm. This information is given to assist you in allocating an amount ($) for employee training. You can allocate any amount from $0 (no training at all) to $80,000 (training all promoted employees). The simulation will assume that the more you allocate to employee promotion training costs, the more training is conducted.

Training Programs The chart below lists a variety of training programs and costs. This information is given to assist you in entering an amount ($) for manager, supervisor, and other employee training costs. A normal class size for training would be 20 employees. The simulation does not allow you to select specific programs (as described in the chart below), but does assume the more you allocate, the more training is conducted.

Samples of Training Program Costs Per Employee

One half day program for production employees in technical skills $1,000

One day program for supervisors or supervisors on management skills $2,000

One half day program on various topics; such as time management, stress management, managing change, computer skills, etc. $1,000


DECISIONS

MENU Training Decision Screen

Safety and Accident Prevention It is estimated that the cost for safety and accident prevention training could range from $1,000 to $20,000, or more per quarter. In order to have a full time Safety Director, you would need to allocate at least $12,000 per quarter. You may allocate any amount from $0 to $80,000 to safety and accident prevention training, thereby emphasizing the importance you place on safety and prevention in your firm. Quality Control System A minimal quality control system can be established with an allocation of $4,000. A more formal quality control system could be established that would train supervisors to conduct quality checks during the production process (concurrent control) for an allocation of $5,000 per quarter. An allocation of $13,000 per quarter would need to be established in order to have a full-time Quality Control Manager. A Total Quality Management (TQM) system (including a full-time manager and concurrent controls) could be established for $25,000 per quarter. To summarize, you may allocate any amount to this category from $0 to $80,000 and the more you allocate, the greater the emphasis placed on the quality aspects of your firm. There is a point of diminishing return in this category as with any other expenditure in the simulation.

Enter allocation amounts for each

type of training program

($0–$80,000).


DECISIONS

MENU Programs Select one or more employee performance programs. Employee Participation Program ($12,000 per quarter) This program will give workers more self-direction and control over their work and working conditions. Topics range from voluntary problem-solving groups to formal quality circle programs. You may expect an increase in morale and decrease in employee turnover from implementing this program. You should not start the program if you do not plan to continue it, or heavy morale problems will result.

Grievance Procedure Program ($6,000 per quarter) This program should decrease employee turnover and boost morale by allowing employees a safe environment in which to air grievances. The program should not be discontinued once it is initiated. Orientation Program ($3,000 per quarter) This program should reduce employee accident and turnover rates. The cost of a "no-frills" orientation program would be $3,000 per quarter. Human Resource Information System ($11,000 per quarter) The benefits of this system would be improved decision-making in all areas of the Human Resource function—benefits, selection, staffing, training and development, performance appraisal, and job analysis. The program should not be discontinued once it is initiated. Performance Appraisal Program ($5,000 per quarter) Decreased turnover, increased morale, and increased productivity should result from this program. The program should not be discontinued once it is initiated. Affirmative Action Program ($7,000 per quarter) This program assigns an Affirmative Active Officer would will develop goals and specific programs aimed at achieving a workforce that mirrors community workforce demographic percentages. The program should not be discontinued once it is initiated. NOTE: If a program is canceled, any benefits accrued to that point are lost and there could be a negative result of canceling the program. For example, if the employee participation program were canceled, you might have a decrease in morale and an increase in turnover.


DECISIONS

MENU Programs Decision Screen

Select the check box for each type of

training program you wish to

add/continue. To discontinue a

program, uncheck the box.


DECISIONS

MENU Special If your instructor has decided to include the Incidents option in your simulation, each quarter you will have the opportunity to take advantage of a variety of additional opportunities to make onetime expenditures for programs, speakers, or other special projects. These opportunities require your analysis and decision. A notice regarding an available Incident will be displayed in the Newsletter section of the simulation during the quarter in which it is offered. In addition, the Newsletter will display feedback (if applicable) about your previous Incident selection. To read the full Incident, click on the Incident title link, and the text will open. You may need to scroll up or down to the appropriate page. You will need to indicate your desire to implement a special program or project by making that selection in the "Special" decision input screen. The decision you make could impact your operating results or costs, immediately or at some time in the future. There are no right and wrong responses to most Incidents although there may be some responses which are more correct than others. If you select a Special program option, you may select only one per quarter and the cost will be automatically deducted from your quarterly budget and charged as "Incident Expense" on your Budget Report. An Incident will not be available in subsequent quarters; it is only available during the quarter in which it is first offered. Expenditures for Special projects and programs must be made within the budgetary limitations of the current quarter unless you are willing to use funds from the next quarter's budget to make the expenditure.

Special Decision Screen

Make your Special Decision selection and submit your

choice.


DECISIONS

MENU

Decision Summary Refer to the Decision summary to review your current quarter decisions. In addition, select a different period to review former period decisions. It may also be worthwhile to print this out for your records, though you may always view old decisions by changing the week from the list box at the top of the screen. This printout will contain the same information as in each decision menu for the period, but all in one place. Displayed are the following decision categories: Staffing, Wages, Benefits, Training, Programs, and Special. IMPORTANT: Remember to check the DECISION SUMMARY screen at the end of your decision process to make sure all your choices have been entered and saved correctly. Also note that you can change your decisions as often as you like until the simulation is advanced.

Decision Summary Screen

The Decision Summary displays each decision made during the

current quarter. Review this report before advancing the simulation to

the next period.

Decision Summaries from previous periods can always be accessed by selecting the appropriate period #

from the dropdown menu at the top of the simulation menu bar.


ANALYSIS

MENU Staff Analysis The Staff Analysis report shows projected coverage of staffing needs along with the cost of new hires based on your current staffing decisions. For each employee level, the analysis will show: 1. The beginning number of employees 2. Projected number of resignations 3. Number of promotions (from current decision) 4. Number of hires (from current decision) 5. Projected number of employees available for the quarter 6. Total number required to meet production 7. Shortfall/overage (based on current decision) 8. Total cost of new hires/layoffs (based on current decision)

Staff Analysis

Wage Rate Analysis The Wage Rate Analysis will help you to estimate the cost impact of wage increase decisions. Any changes to wage decisions will result in a change to this report.

Wage Rate Analysis

Total expense of a wage increase is shown here.

Wage rate increases from Wages decision input appear in the Wage Rate

Analysis.


ANALYSIS

MENU Budget Analysis The Budget Analysis will allow you to forecast the effect on your budget based upon your current quarter's decisions. Any changes to the current decisions will result in a change to this report. The report allows you to see the projected budget amount remaining once the simulation is advanced. Keep in mind, these figures are projections only; your actual remaining budget will vary from this projection.

Budget Analysis


REPORTS MENU The "Number Required Next Qtr." is calculated by dividing the required production by the productivity per employee. For example, 100,000 units required divided by 200 Productivity per Level 1 employee = 500 employees required.

Staffing Report The Staffing Report provides information about employees at all five job levels based on the results of the simulation. Information provided includes the current quarter's beginning number of employees, hires, promotions, and resignations, and the total number of employees available at each level. The report also shows the number required for production this quarter, as well as a projection of the number of employees required to meet production next quarter, and projected vacancies. The rows titled "Total Required", "Projected Vacancies", and "Required Next Qtr." are calculated by the computer according to the number of employees needed for the given level of production. "External Hires" and "Promotions" figures will reflect how promotions from a lower level require additional hires at the lower level to replace those promoted. Below is a replica of the report you will receive after each decision quarter.

Staffing Report


REPORTS MENU

Demographics Report The Demographics Report allows the firm to monitor progress on its affirmative action program. In addition, your instructor may assign the Analysis Worksheet, which will help you to monitor your firm's progress each quarter.

Demographics Report

Wages Report The Wages Report provides information on compensation for each employee job level in your firm with a comparison to local area wages. Additionally, current quarter projected additional pay increase totals per job level are displayed.

Wages Report


REPORTS MENU

Production Report The Production Report provides feedback of your staffing decisions on production. Key items in this report are "Production Required Next Quarter" and "Productivity Next Quarter (Units)." In addition, the quality of goods produced (or services rendered) is listed on the Production Report each quarter. An index has been established that has a range of 100 (high quality) down to 0 (extremely low quality). NOTE: The number of Level 1 employees needed next quarter is calculated by dividing "Production Next Quarter" (units required) by "Productivity Next Quarter" (units per employee).

Production Report

Performance Report The Performance Report displays your firm's percentage rates for Fringe Benefits, Turnover, Morale, Grievances, and Accident Rate during the current quarter. In addition, your firm's Labor Unit Cost is displayed.

Performance Report


REPORTS

MENU Budget Report The Budget Report provides a summary of the financial impact of your previous quarter's decisions and notes whether you were over or under budget. The budget for the next quarter and the balance for the year are also given. While the Budget Analysis forecasts the budget impact of your current decisions, this report shows the results from the previous period's decisions

.

Any budget surplus or deficit will be carried over to the next quarter. Any surplus will not be carried forward to the next year. Exceeding the budget at the end of the year (every 4th quarter) will reduce your budget for the next year and is a serious managerial deficiency and will have negative consequences. Information given above is only an example. Your actual costs will be determined by your decisions each quarter.

NOTE: Fringe benefit costs for your firm start at 20% of total wages. Any additional fringe benefit costs will be displayed here.


ENVIRONMENT

MENU NOTE: Higher wages and overtime will increase Unit Labor Cost, while higher productivity (per employee) will decrease this cost.

Newsletter The Newsletter informs you about several important measures of your firm's condition, along with industry averages. "Industry" averages in the simulation refer to all the teams that are competing in your class. Any mention of "Local" averages (e.g. wages) refers to the local community labor market where your firm is located. The Newsletter will contain the following information:

• Production forecast for the next 4 quarters to assist you with deciding whether to pay overtime for a short "blip" in demand or hire additional permanent employees

• Incident (Special decision) to be used for next quarter • Your total payroll cost • Specific feedback message to your team regarding your

previous Special (Incident) decision. • Projected budget for upcoming quarter and year • General messages to all firms • Unit Labor Cost* (calculated using the formula given below)

*Unit Labor Cost: + plus overtime costs ($45 per overtime unit)

= total payroll (excluding fringes)

/ divided by units produced

$5,910,000 Total Payroll ($5,910,000) Example:

+ $90,000 $6,000,000

Plus Overtime Costs ($45 x 2,000 Units)

/ 100,000 = $60 Equals Production Labor Cost Per Unit

Divided by Total Units Produced

Sample Newsletter


ENVIRONMENT MENU

Survey Research Studies Each decision quarter you will have the opportunity to purchase industry research that will aid you in your decision-making process. Purchasing industry surveys can help you determine how you measure up to other firms in the industry. Available surveys are described and sample screen shots are shown below. You may order any combination of these reports each quarter. Wages Survey ($1,000) The Wages Survey will display a table of: firm, industry average, and local comparable wages (excluding benefits) for each job level.

Training Survey ($1,000)

The Training Survey will display a table of: average industry training; safety and quality allocations; and the number of firms with employee participation programs.

Performance Survey ($2,000) The Performance Survey will display a table showing industry averages of: quality, morale, grievances, and absenteeism.


SIMULATION

MENU IMPORTANT: Advance, Replay and Restart would only be available if running the benchmark version of the simulation. In the direct competition version, everyone will be advanced based on a schedule set by your instructor. Please see your course website for the current schedule.

This section of the menu contains links that control the game. The ADVANCE, REPLAY, and RESTART buttons may or may not be available during your simulation. If your instructor chooses, the advancement, replay and restart of the game may be turned off. If your instructor does allow students to use these options, only the team leader can perform them.

Advance If the ADVANCE menu link is available to you during the simulation, the team leader can control when your game is advanced to the next week. In other words, once your decisions are made for one week, you can choose the advance link and see your results to then determine what changes will need to be made to your decisions for the following week.

Replay If your instructor allows it, you can go back one week in time by having your team leader choose the REPLAY menu link. This will set you back one week in time and allow you to make adjustments to the most recent week's decisions. In effect, an undo button for the simulation.

Restart The team leader may choose the RESTART menu link, if allowed by the instructor, to erase all decisions and results for all periods, and completely start over. Some instructors like students to do a few practice weeks and then restart, in which case this button would be used to reset you back to the beginning of the simulation.

BE CAREFUL WHEN CHOOSING RESTART!

Appendix—Page 45

STAFFING WORKSHEET (EXAMPLE) The Staffing Worksheet (on following page) can be used to help your team determine the number of employees to hire and promote. Given below is an example of the worksheet filled in with values found during Quarter 0.

1 2 3 4 5 6 7 8 9

Level Total Avail. Prev. Qtr

Minus Est.

Vacancies

Net # of Employees (Col. 1 – 2)

Required for

Production this

Quarter

Total # Needed (Col. 4 –

3)

# to Promote Into this

Level

# to Hire Due to

Promotion

Add'l Hires

(Col 5 – 6)

Total Hires

(Col. 7 + 8)

5 20 0 20 20 0 0 a 0 0 0

4 25 0 25 25 0 0 b 0 a 0 0

3 50 4 46 50 4 0 c 0 b 4 4

2 60 5 55 60 5 1 d 0 c 4 4

1 500 50 450 500 50 1 d 50 51

Note: In this example, the team decided to promote one employee and hire the balance. 1. While column 2 and 5 happen to be the same this quarter, in future quarters they will not be the same because the "Required for

Production" number will vary in future quarters. 2. The team must hire or promote a sufficient number to satisfy column 5. 3. The purpose of the "a, b, c, d" in columns 6 and 7 is to make sure the team replaces any employee they promote UP a level. So

copy the "a, b, c, d" values in column 6 to the "a, b, c, d" slots in column 7 and that will aid in arriving at the correct number of hires.


STAFFING WORKSHEET Industry_______ Quarter______ Firm_________________

1 2 3 4 5 6 7 8 9

Level Total Avail. Prev. Qtr

Less Est. Vacancies

Net # of Employees (Col. 1 – 2)

Required for

Production this

Quarter

Total # Needed

(Col. 4 – 3)

# to Promote Into this

Level

# to Hire Due to

Promotion Add'l Hires (Col 5 – 6)

Total Hires (Col. 7 + 8)

5 a 4 b a 3 c b 2 d c 1 d

The purpose of the "a, b, c, d" in columns 6 and 7 is to make sure the team replaces any employee they promote UP a level. So copy the "a, b, c, d" values in column 6 to the "a, b, c, d" slots in column 7 and that will aid in arriving at the correct number of hires. Note: Make sure you hire (and/or promote) the number of employees that are projected to be lost in the upcoming quarter ("Projected Vacancies") as found in the Staffing Report. When promoting, do not forget to hire replacement employees into the job level that promoted employee(s) are vacating A common error (or purposeful decision) is to budget less training for those who are promoted than the amount (as suggested in the Operations Guide). Not training those newly promoted will result in increased turnover of those promoted.

Appendix—Page 47

BUDGET PLANNING FORM Industry _______ Quarter ______ Firm _________________

Hiring and Promotion Training Cost

Level # To Train

Suggested Cost Per

Each = Training

Cost # To Hire

Cost to Hire Each

Hiring Cost

5 $3,000 = $ $15,000 $ 4 2,000 = 12,000 3 2,000 = 10,000 2 1,000 = 7,000 1 200 = 2,000

Total Hiring Cost $ Training Cost for Promotions $

Other Training $ Total Training Costs $

Wage Increase: Raises will be given to all employees who are in the same job level.

Level 5 @ $ ea. Level 4 @ $ ea. Level 3 @ $ ea. Level 2 @ $ ea. Level 1 @ $ ea.

Safety Program Quality Program Fringe Benefits

Employee Participation ($12,000) Grievance Program ($6,000)

Orientation Program ($3,000) HR Information System ($11,000)

Performance Appraisal ($5,000) Affirmative Action ($7,000)

Special Programs Survey Research

Incident Cost TOTAL EXPENSES this Quarter $

BUDGET this Quarter $


Appendix—Page 49

GLOSSARY Affirmative Action: A strategy intended to achieve fair employment by urging employers to hire certain groups of people who were discriminated against in the past. (Gomez-Mejia 2004) pg. 89

Demographics: Characteristics common to a particular group or population.

Fringe Benefits: are group membership rewards that provide security for employees and their family members; given in addition to direct wages. They are sometimes referred to as "indirect compensation" because they are given to employees in the form of a plan (such as health insurance) rather than cash. The benefits plan offered by a firm can support management's efforts to attract employees. (Gomez-Mejia 2004) pg. 399-400

Grievance: Any factor involving wages, hours, or conditions of employment that is used as a complaint against the employer. A grievance is often a symptom of an underlying problem. Sometimes, bad relationships between supervisors and subordinates are to blame. Organized factors such as automated job or ambiguous job descriptions that frustrate or aggravate employees also cause grievances. Other sources are union activism and problem employees who are negative, dissatisfied, and prone to complaints. (Dessler 2005) pg. 584-5

Human Resource Information System (HRIS): A system used to collect, record, store, analyze, and retrieve data concerning an organization's human resources. (Gomez-Mejia 2004) pg. 76

Job Analysis: The procedure for determining the duties and skill requirements of a job and the kind of person who should be hired for it. It encompasses work activities, human behaviors (job demands), tools used (machines, equipment), performance standards, job context, and human requirements (job-related skills, knowledge, training). Job analysis produces information used for writing job descriptions and job specifications. Job analysis is also used as a basis for recruitment and selection, compensation, performance appraisal, training, discovering unassigned duties, and EEO compliance. (Dessler 2005) pg. 112–3

Orientation: The process of informing new employees about what is expected of them in the job providing them with the background information required to perform the job satisfactorily, such as information about company rules. Programs may range from brief, informal introductions to lengthy, formal courses. Orientation typically includes information on employee benefits, personnel policies, the daily routine, company organization and operation, and safety measures and regulation, as well as a facilities tour. (Dessler 2005) pg. 268

Outplacement: A systematic process by which a terminated employee is trained and counseled in the techniques of self-appraisal and securing a new job appropriate to his or her needs and talents. The (former) employer does not place the person in a new job, but provides counseling that offers advice, instructions, and a sounding board to help formulate career goals and successfully execute a job search. Typically, outplacement counseling is conducted by a specialized outside firm. (Dessler 2005) pg. 544


Overtime: Work performed by an employee in excess of 40 hours per week. However, some firms voluntarily pay overtime for hours worked beyond eight in a given day and pay double time, or even more, for work on Sundays and holidays. (Mondy 2005) pg. 336

Performance Appraisal: A formal system of review and evaluation of individual or team task performance. Regardless of whether based upon an individual or team performance, an effective appraisal system evaluates accomplishments and initiates plans for development, goals, and objectives. It is vital for managers to realize that an employee performance appraisal must be comprehensive and is a continuous process; definitely not a periodic event. (Mondy 2005) pg. 252

Production Quota: The number or quantity of goods or services required to meet expected demand or sales figures.

Productivity: A measure of how much value individual employees add to the good or services that the organization produces. (Gomez-Mejia 2004) pg. 18

Promotions: Advancement to positions of increased responsibility. (Dessler 2005) pg. 698

Quality Circle: Group of employees who voluntarily meet regularly with their supervisors to discuss problems, investigate causes, recommend solutions, and take corrective action when authorized to do so. (Mondy 2005) pg. 505

Quid Pro Quo Sexual Harassment: Harassment that occurs when sexual activity is required in return for getting or keeping a job or job-related benefit. (Gomez-Mejia 2004) pg. 95

Self-Managed Team (SMT): A team responsible for producing an entire product, a component, or an ongoing service. (Gomez-Mejia 2004) pg. 54

Team: A small number of people with complementary skills who work toward common goals for which they hold themselves mutually accountable. (Gomez-Mejia 2004) pg. 54

Total Quality Management (TQM): An organization-wide approach to improving the quality of all the processes that lead to a final product or service. In a TQM program, every aspect of the organization is oriented toward providing a quality product or service. The term was first coined by the US Naval Air Systems Command in the early 1980s. (Gomez-Mejia 2004) pg. 10

Training: The process of providing employees with specific skills or helping them to correct deficiencies in their performance. (Gomez-Mejia 2004) pg. 260

Turnover Rate: The rate of employee separations in an organization. (Gomez-Mejia 2004) pg. 195

Appendix—Page 51

Dessler, Gary. Human Resource Management. Upper Saddle River, NJ: Pearson Pentice Hall, 2005.

Works Cited

Gomez-Mejia, Luis R., David Ballkin, Robert L. Cardy. Managing Human Resources. Upper Saddle River, NJ: Pearson Prentice Hall, 2004. Mondy, R. Wayne Mondy and Robert M. Noe. Human Resource Management. Upper Saddle River, NJ: Pearson Prentice Hall, 2005.


Index—Page 53

INDEX

A Affirmative Action program .............................................. 20 analysis

budget ......................................................................... 37 staff.............................................................................. 36 wage rate ..................................................................... 36

D decisions

benefits ........................................................................ 28 programs ..................................................................... 32 special .......................................................................... 34 staffing ......................................................................... 25 summary ...................................................................... 35 training ........................................................................ 30 wages ........................................................................... 27

demographics ................................................................... 13

E employee orientation program ........................................ 20 employee participation program ...................................... 19 employee turnover ........................................................... 14

F fringe benefits ................................................................... 18

G goals and strategies ............................................................ 7 grievance procedure ......................................................... 19

H hiring costs ........................................................................ 14 Human Resource Information System (HRIS) ................... 20

I input screens .................................................................... 21

L labor force ........................................................................ 13 layoff costs ........................................................................ 15

M manager and supervisor training ...................................... 15 menus

brief descriptions of ..................................................... 23 pull-down .................................................................... 21

N navigation buttons, green ................................................ 22 newsletter ........................................................................ 42

O operations

guide ............................................................................. 5 overtime costs .................................................................. 19

P performance appraisal ..................................................... 20 productivity ...................................................................... 18 promotions training costs ................................................ 15

Q quality program ................................................................ 16 quarterly budget .............................................................. 11

R reports

budget ......................................................................... 41 performance ............................................................... 40 production .................................................................. 40 staffing ........................................................................ 38 survey research ........................................................... 43 wages .......................................................................... 39

review historical information.................................................. 22

S safety and accident prevention program ......................... 16 simulation

ADVANCE .................................................................... 44 navigation ................................................................... 21 REPLAY ........................................................................ 44 RESTART ...................................................................... 44

startup case ....................................................................... 22, 23 decisions ..................................................................... 22

T tools

decision-making .......................................................... 21


V view old decisions ............................................................. 35

W wages ................................................................................ 17

Y yearly budget ................................................................... 11

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