Introduction to Human

Resource Management
Introduction to HRM
• Two questions:
• Does it matter?
• Why does it matter?
• What is HRM?
• Organization’s methods and procedures for
managing people to enhance skills and
motivation
• Activities to enhance the organization’s ability to
attract, select, retain and motivate people

Page 2 Management 412 / Intro to HRM Fall 2008

The Death of HR ?
• Traditional “personnel” function
• Recordkeeping
• Perceived as a dumping ground
• The death of HR?
• HR’s rebirth

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

Page 3 Management 412 / Intro to HRM Fall 2008

Outsourcing HR
• Would it just make more sense to
outsource HR functions?
• Many organizations are doing just
this
• Recordkeeping and administrative,
perhaps
• Basic functions…..
Sources: Caudron (2003); Stewart & Woods (1996); Zimmerman (April 2001)

Page 4 Management 412 / Intro to HRM Fall 2008

Approaches to Revitalizing
HR

• Accounting for human resources

• Managing people for competitive
advantage

Page 5 Management 412 / Intro to HRM Fall 2008

Accounting for Human
Resources
• Cascio’s costing approach:
• Cost accounting for employee outcomes
• Calculate cost of interventions and outcomes on
individual basis
• Tracking costs and contributions to firm net
profitability
• Human capital approach
• Employees are intangible assets, but can still be valued
• Based on assumed contribution of employees to
corporate earnings
Sources: Cascio (1982); Sheley (1996) Solomon (2000); Stewart (1995); Zimmerman (February 2001)

Page 6 Management 412 / Intro to HRM Fall 2008

Costing HR: Example
• The costs of turnover per individual:
• Exit interviews
• Unemployment tax Calculated
• Recruitment advertising per person,
• Staff time to interview applicants then
• Reference checking, medical exams totaled
• Training new employees
• Costs of reducing turnover
• Additional training
• Realistic job previews
• Net savings

Page 7 Management 412 / Intro to HRM Source: CascioFall(1982)

2008
 Human Capital: The Steps
• Determine three years’ total pretax earnings
• Determine average assets over same three years
• Calculate firm’s return on assets (ROA)
• Determine industry average ROA
• Calculate “excess returns”
• Subtract taxes
• Calculate net present value of excess return
• Result: “intangible value” of firm’s human capital

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

Page 8 Management 412 / Intro to HRM Fall 2008

Human Resources and
Competitive Advantage
• The basic idea: establishing and
maintaining competitive advantage
through people.
• Competitive advantage:
• Valuable, rare, inimitable, nonsubstitutable
• Achieved not through strategy, but
strategy implementation

Source: Pfeffer (1994, 1998)

Page 9 Management 412 / Intro to HRM Fall 2008

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

• Product and process technology

• Technological innovations make innovation easier and faster
• Development and manufacturing technology freely available
• Protected and regulated markets
• Move to global economy
• Deregulation
• Access to financial resources
• Global capital market
• Venture capital
• Economies of scale
• Fragmented markets
• Less important with advances in technology
• So, what’s left…people
Source: Pfeffer (1994, 1998)

Page 10 Management 412 / Intro to HRM Fall 2008

Competitive Advantage
Through People
• Viewing the work force as an asset, not
an expense
• The result:
• Harder work, from increased involvement
and commitment
• Smarter work, through enhanced skills and
competence
• Lower overhead, by pushing responsibility
downward
• High performance work systems
Source: Pfeffer (1994, 1998)

Page 11 Management 412 / Intro to HRM Fall 2008

High-Performance Work
Systems: The Seven
Practices
• Employment security
• Selective hiring
• Self managed teams and decentralized
decision making
• High compensation, based on organizational
performance
• Extensive training
• Reduced status distinctions
• Extensive information sharing (both financial
and performance)
Critical to remember that all of these
are part of a system
Source: Pfeffer (1994, 1998)

Page 12 Management 412 / Intro to HRM Fall 2008

The Research Evidence
• Garment manufacturing
• Steel minimills
• Initial public offerings

Page 13 Management 412 / Intro to HRM Fall 2008

Garment Manufacturing
• Bundle system = traditional assembly line (the employee receives a bundle
of garments, does one thing, then passes the bundle on to the next worker)
• Modular system = small cross-trained and self-managed work teams, team
pay

Performance Measure Bu
Gross margin
Operating profit
Source: Pfeffer (1998)

Page 14
Average discount Management 412 / Intro to HRM Fall 2008
 The Minimills

Management Practice Control

Wages $18
% of employees in
36.6
teams
Decentralization *
* 1 = very little to 6 = very much 2
Source: Pfeffer (1998)

General training *
Page 15 Management 412 / Intro to HRM Fall 2008
1
The Case of the IPOs

Probability of 5 Year Survival of IPO

Top 16% of Firms Bottom 16% of Firms

87%
79%
60%
45%

HR Value Rewards

Source: Pfeffer (1998)

Page 16 Management 412 / Intro to HRM Fall 2008

Why Not?
The Downward Performance
Spiral
Performance Problems Organizational Response
Low profits Reduce training
High costs Layoffs
Poor customer service Salary freeze
Low stock price Contingent staffing

Individual Behaviors
Decreased motivation
More accidents
Higher turnover
Reduced effort
Source: Pfeffer (1998)

Page 17 Management 412 / Intro to HRM Fall 2008

Aligning Strategy and HR
• Determine the firm’s strategy
• Determine the competencies needed to
carry out the strategy
• Examine current management practices
• Determine congruence
• Do the current practices work to enhance
needed competencies?
• Are the current practices internally
consistent?
Source: Pfeffer (1998)

Page 18 Management 412 / Intro to HRM Fall 2008

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

Page 19 Management 412 / Intro to HRM Fall 2008

 General Economic
Conditions
• Global economy
• Lower wage levels vs. quality and productivity
• Ethical issues and political considerations
• Domestic factors
• Move from manufacturing economy to service /
information economy
• Mergers  duplication of functions  layoffs
• Supply and demand of labor influences price
• Supply and demand of company’s product,
which determines available resources
Sources: Challenger (2003); Cole, et al. (2003)

Page 20 Management 412 / Intro to HRM Fall 2008

Changes in the U.S.
Economy, 1939 to Present
100%

80%

60%

40%

20%

0%
1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004

Natural Resources & Mining Construction

Manufacturing Trade, Transportation & Utilities
Information Professional & Business Services
Leisure & Hospitality Government

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

Page 21 Management 412 / Intro to HRM Fall 2008

 N
et
wo
rk
sy
st
em
s

Page 22
an
d
da
ta
co
Pe m
r so m
100.0%

20.0%
40.0%
60.0%
80.0%

0.0%
un
na ic
l& at
ho ...
C m
om e
ca
pu re
te
r so H
ai
de
ftw om s
ar e
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te en al
g th
rin in ai
a ry ee de
te rs s
ch ,a
no pp
l og li c
is at
ts io
ns
an
M d
ak Pe te
eu r so c hn
p na ic
ar lf ia

Source: Department of Labor, Bureau of Labor Statistics

tis in ns
ts an
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he al
at a dv
ri c
al iso
an r s
d
pe
rfo
rm
M an
c
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Management 412 / Intro to HRM

ab an
ts
Technology

us
e Ve
an te
d rin
be a
2016 (by percentage growth)

h av ria
io ns
ra
ld
is
Age

or
Sk d
i n
e.
..
ca
re
sp
ec
ia
l is
ts
Fastest Growing Occupations, 2006-

Society

Fall 2008
 Number ofJobs (000)

Page 23
1,000
2,000
3,000
4,000
5,000
6,000

0
R R
C et N
ai
us l
t om sa
Fo le
o er s pe
d se rs
pr rv
e i on
pa ce s
ra re
tio pr
n es
an en
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se t iv
rv es
in
g
w
or
ke
rs
,i
O n.
f fi ..
ce
Pe cle
rs rk
on s,
al ge
an ne
d ra
ho l
m
e
Ja ca

Source: Department of Labor, Bureau of Labor Statistics

ni
to Po re
rs st ai
- se de
an
d c s
cle ond
an ar
er y
N s te
ur , e
ac
si
ng x ce
he
pt rs
ai
de m
s, ai
Bo or ds
ok de an
2016 (by number of jobs)

ke rl i d.
ep es ..
in

Management 412 / Intro to HRM

,a
g, nd
ac at
co te
un nd
Jobs in 2006

tin an
g, ts
an
d
au
di
W tin
g
ai c.
te ..
rs
an
d
w
ai
t re
ss
es
Growth
Fastest Growing Occupations, 2006-

Fall 2008
 Number ofJobs (000)
St
oc
k

Page 24
cl
e rk
s
an
d
2016
or

1,000
2,000
3,000
4,000

0
C de

2016
as rf
h ie
ille
rs rs
,e
Pa xc
c ep
ke
rs t ga
an m
d in
pa g
ck
a ge
rs
,h
an
d

Decline
Fi
le
cle
Fa r ks
r m
er
s
&
ra
nc
he
rs

O
Se rd
El wi er
ec n g cl
t ric m
er
al ks
ac
an h in
d e
C el
ec op
ut
ti tro e ra
ng to
, pu
ni
c rs
n eq

Management 412 / Intro to HRM

ch ui
in p m
g, en
an t
d a.
pr ..
e ss
m
ac
hi
ne
s.
..
Te
l em
ar
Largest Job Losses, 2006-

ke
te
r s
Fall 2008
Legal Requirements and
Constraints
• Government now an intermediary in the
relationship between employers and
employees
• Legal requirements and constraints are
usually a reflection of social attitudes
and opinions

Page 25 Management 412 / Intro to HRM Fall 2008

 Demographics
• Supply of labor (number of people, skills, etc.)
• New skills needed, but are they present in
workforce?
• Basic skills availability?
• Different needs of different groups in the
population
• Increasing number of women in paid workforce
• Dual-earner families
• Family friendly benefits
• Aging population
Sources: Challenger (2003); Cole, et al. (2003)

Page 26 Management 412 / Intro to HRM Fall 2008

 Participation in the Paid
Labor Force by Gender: 1948
to 2007% Labor Force Participation

100
90
80
70
60
50
40
30
20
10
0
48

53

58

63

68

73

78

83

88

93

98

03
19

19

19

19

19

19

19

19

19

19

19

20
Men Women

Source: Department of Labor, Bureau of Labor Statistics

Page 27 Management 412 / Intro to HRM Fall 2008

Labor Force By Age, 2006-
2016
Labor Force By Age, 2006
Projected % Change in Labor Force By Age,
2006-2016 65 +
4%

75 and older
65 to 74

55 to 64
25 to 54

16 to 24

Labor Force By Age, 2016

-50% 0% 50% 100%
65 +
6%

Page 28 Management 412 / Intro to HRM Fall 2008

Technology
• New jobs; old jobs vanish
• Need for new skills
• Need for continuous skills
development
• Managing the HR function
• Data management
• Employee communications

Page 29 Management 412 / Intro to HRM Fall 2008

HR Functions: What We’ll
Be Looking At
Planning
Employee and
Legal
Labor Relations
Compliance

Training
and
Staffing
Development

Reward
Systems
Page 30 Management 412 / Intro to HRM Fall 2008