Introduction To Human Resource Management

Introduction to Human Resource Management
Introduction to HRM
Two questions: Does it matter? Why does it matter?
What is HRM? Organizations methods and procedures for managing people to enhance skills and motivation Activities to enhance the organizations 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?

HRs rebirth
Sources: Caudron (2003); Schuler (1990); Schuler & Walker (1990); Stewart (1996); Sunoo & Laabs (1999); Ulrich (2000); Wells (2003)
Page 3
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
Fall 2008
Approaches to Revitalizing HR
Accounting for human resources
Managing people for competitive
advantage
Page 5
Fall 2008
Accounting for Human Resources

Cascios 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
Fall 2008
Costing HR: Example

The costs of turnover per individual:

Exit interviews Unemployment tax Recruitment advertising Staff time to interview applicants Reference checking, medical exams Training new employees
Calculated per person, then totaled
Costs of reducing turnover

Additional training Realistic job previews
Net savings
Source: Cascio (1982) Fall 2008
Page 7
Human Capital: The Steps

Determine three years total pretax earnings
Determine average assets over same three years Calculate firms return on assets (ROA) Determine industry average ROA Calculate excess returns Subtract taxes Calculate net present value of excess return Result: intangible value of firms 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)

Traditional Sources of Competitive Advantageand Where Theyve Gone
Product and process technology

Technological innovations make innovation easier and faster Development and manufacturing technology freely available Move to global economy
Protected and regulated markets
Deregulation
Global capital market Venture capital Fragmented markets Less important with advances in technology
Access to financial resources

Economies of scale

So, whats leftpeople

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

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

Fall 2008

Page 12 Management 412 / Intro to HRM
The Research Evidence

Garment manufacturing
Steel minimills Initial public offerings
Page 13
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 selfmanaged work teams, team pay
Performance Measure Gross margin Operating profit Average discount Sewing throughput (days)
Source: Pfeffer (1998)
Bundle 26.0% 7.9% 14.6% 9.5 days
Modular 31.6% 13.0% 10.2% 1.8 days
The Minimills
Management Practice Wages % of employees in teams Decentralization * General training * Labor hours / ton Scrap rate % Control Commitment Improvement $18.07 $21.52 19% 36.6% 2.42 1.92 52.4% 3.04 3.35 43% 26% 74%
- 34% - 63%
* 1 = very little to 6 = very much

The Case of the IPOs

Probability of 5 Year Survival of IPO
Top 16% of Firms Bottom 16% of Firms
79% 60%
87%
45%
HR Value
Rewards
Page 16
Fall 2008
Why Not? The Downward Performance Spiral

Performance Problems
Low profits High costs Poor customer service Low stock price
Organizational Response
Reduce training Layoffs Salary freeze Contingent staffing
Decreased motivation More accidents Higher turnover Reduced effort

Individual Behaviors
Aligning Strategy and HR

Determine the firms strategy
Determine the competencies needed to carry
out the strategy

Examine current management practices
Determine congruence
Do the current practices work to enhance
needed competencies? Are the current practices internally consistent?

External Influences on HRM

Economic conditions
Legal requirements and constraints Demographics Technology
Page 19
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 companys product, which
determines available resources

Sources: Challenger (2003); Cole, et al. (2003)
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 Manufacturing Information Leisure & Hospitality
Source: U.S. Department of Labor, Bureau of Labor Statistics Page 21 Management 412 / Intro to HRM Fall 2008
Construction Trade, Transportation & Utilities Professional & Business Services Government
N et wo rk sy st em s an d da ta
Fastest Growing Occupations, 2006-2016 (by percentage growth)
Page 22
100.0% 20.0% 40.0% 60.0% 80.0%
Pe r co m
0.0%
so na l& at ... ho m e ca re ai de s om e he al th ai de s ic
m un
C om pu te r so ftw ar e en g in ee rs , ap pl ic at io ns hn ic lf in an th ea tri c al ci an d al a H
Ve te r in a ry te c hn ol og is ts an d te c
Source: Department of Labor, Bureau of Labor Statistics

M ak eu p ar tis ts , rs on a Pe ia ns dv pe M Su bs t an c ed ic e iso rfo rs rm an c al ab us as s e Ve an d be h av i is e
Technology Age Society
ta n te rin a or al d Sk in ca re
ts
ria n is or d sp
e. .. ec
ia l
is
Fall 2008
ts
Fastest Growing Occupations, 2006-2016 (by number of jobs)

Number ofJobs (000)
1,000 2,000 3,000 4,000 5,000 6,000 0
Page 23
C N Fo o d pr ep ar at io n an d se rv i ng w or ke rs ,i n. .. en ta t iv es es re pr rv ic e on s se rs er pe us to m sa le s R et ai l R O f fi Pe rs on a la nd ho m e ca re st -s e an ng Bo ok k er s, N ur si ai d ee es pi n co nd d cle ex ks ,g en er a cle r ce
Source: Department of Labor, Bureau of Labor Statistics

l ai ar y ce pt ,o g, rd er li ac co Ja ni to rs an Po de s te ac h m ai d es , un tin er s an d g, a W ai an d. .. at te nd nd au te rs s
Jobs in 2006 Growth
an ts di ti an d
ng
c. .. w ai t re ss
es
Fall 2008
Largest Job Losses, 2006-2016

Number ofJobs (000)
St oc k cl er ks an d
Page 24
1,000 2,000 3,000 4,000
2016
C as h ie rs ,e xc ep t ga m in g rs or
de rf ille
Pa ck er s an d pa ck ag er s, ha nd
Decline
Fi le Fa rm er s & cle rk s ra n ch er Se ric a C ut ti la ng , O rd wi n nd g el pu n m ec ch in ac h tro ni c g, er in s El ec t cl er ks e op e eq an d ui p pr e

ra to rs m en t ss m ac a. .. hi ne Te l s. em ar .. ke te r
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
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)

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
Source: Department of Labor, Bureau of Labor Statistics Page 27 Management 412 / Intro to HRM Fall 2008
19 48 19 53 19 58 19 63 19 68 19 73 19 78 19 83 19 88 19 93 19 98 20 03
Men Women
Labor Force By Age, 2006-2016

Projected % Change in Labor Force By Age, 2006-2016
75 and older 65 to 74 55 to 64 25 to 54 16 to 24
Labor Force By Age, 2006

65 + 4%
Labor Force By Age, 2016
-50%
0%
50%
100%
65 + 6%
Page 28
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
Fall 2008
HR Functions: What Well Be Looking At

Planning Employee and Labor Relations Legal Compliance
Training and Development Reward Systems

Page 30 Management 412 / Intro to HRM
Staffing
Fall 2008

Introduction To Human Resource Management

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Introduction to Human Resource Management

Management 412 / Intro to HRM

The death of HR?

Management 412 / Intro to HRM

outsource HR functions? Many organizations are doing just this

Management 412 / Intro to HRM

Management 412 / Intro to HRM

Accounting for Human Resources

Tracking costs and contributions to firm net

profitability Human capital approach

Management 412 / Intro to HRM

Costing HR: Example

Calculated per person, then totaled

Costs of reducing turnover

Management 412 / Intro to HRM

Human Capital: The Steps

Human Resources and Competitive Advantage

competitive advantage through people.

Source: Pfeffer (1994, 1998)

Traditional Sources of Competitive Advantageand Where Theyve Gone

Product and process technology

Protected and regulated markets

Access to financial resources

So, whats leftpeople

Competitive Advantage Through People

expense The result:

Harder work, from increased involvement and

High performance work systems

High-Performance Work Systems: The Seven Practices

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

Source: Pfeffer (1994, 1998)

The Research Evidence

Management 412 / Intro to HRM

Bundle 26.0% 7.9% 14.6% 9.5 days

Modular 31.6% 13.0% 10.2% 1.8 days

* 1 = very little to 6 = very much

The Case of the IPOs

Management 412 / Intro to HRM

Why Not? The Downward Performance Spiral

Reduce training Layoffs Salary freeze Contingent staffing

Decreased motivation More accidents Higher turnover Reduced effort

Aligning Strategy and HR

out the strategy

needed competencies? Are the current practices internally consistent?

External Influences on HRM

Management 412 / Intro to HRM

General Economic Conditions

economy Mergers duplication of functions layoffs

determines available resources

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

Fastest Growing Occupations, 2006-2016 (by percentage growth)

Source: Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM

Technology Age Society

Fastest Growing Occupations, 2006-2016 (by number of jobs)

Source: Department of Labor, Bureau of Labor Statistics

Management 412 / Intro to HRM

Jobs in 2006 Growth

Largest Job Losses, 2006-2016

Management 412 / Intro to HRM

Legal Requirements and Constraints

relationship between employers and employees