Chapter

Meeting

1
5

Human Resource Management

Ragil Sriharto
FEB UGM

The Framework

Human Resource
Practices

Firm Performance

Recruitment/
Selection

Competence (Employee
Skills)

HR Planning

Employee
Attitude

Market Value of
the Company

Employee
Motivation

Market Share

Rewards
Participation

Strategy

HRM Effectiveness/
Outcomes

Decentralization
Training
Internal Promotion
More Autonomy

Employee Commitment/
Involvement/trust/loyalty/
cooperation
Employee
Satisfaction

Effectiveness:
Profit

Increase in
Sales
Efficiency:
Productivity
Product Quality
Customer Satisfaction

Coaching

Social Climate
Development of
Product (Innovation)

Complaint resolution
Performance
Appraisal

Employee
retention and
presence

Future Investment

Strategic Human Resource

Management
lHuman

Activities that managers engage in to attract and

retain employees and to ensure that they perform
at a high level and contribute to the
accomplishment of organizational goals.

lHRM

Resource Management (HRM)

activities

Recruitment and selection

Training and development
Performance appraisal and feedback
Pay and benefits
Labor relations

Components
of a Human
Resource
Management
System

Human Resource Planning

Human Resource Planning (HRP)

Activities that managers engage in to forecast their

current and future needs for human resources.
HRP must be done prior to recruitment and
selection
Demand forecasts
l

Estimates of the number and qualifications of employees

the firm will need.

Supply forecasts
l

Estimates of the availability and qualifications of current

workers and those in the labor market.

Job Analysis
Identifying the the tasks, duties and
responsibilities that make up a job
and the knowledge, skills, and abilities
needed to perform the job.
Should be done for each job in the
organization.
Job analysis methods:

l Observing

what current workers do.

l Having workers and manages fill out
questionnaires.

Recruitment and Selection

lRecruitment

Activities that managers engage in to

develop a pool of candidates for open
positions.

lSelection

The process that managers use to

determine the relative qualifications of job
applicants and their potential for performing
well in a particular job.

The Recruitment and Selection System

Recruitment
External Recruiting

Seeking outside the firm for people who have not

worked at the firm previously.
l

Newspapers advertisements, open houses, on-campus

recruiting, employee referrals, and through the Internet.

External recruitment is difficult since many new

jobs have specific skill needs.
l

A multi-prong approach to external recruiting works best.

Recruitment
Internal Recruiting

Seeking to fill open positions with current

employees from within the firm.
Benefits of internal recruiting:
Job candidates, their qualifications, and availability are
already known.
l Current employees know the firms culture and are
familiar with the organization.
l Internal advancement (promotion from within) can serve to
motivate employees.
l

Honesty in Hiring
l The

temptation to over-rate and oversell the

attractiveness of the job and firm.

Managers may feel that if they are honest, an

applicant may not be willing to work there.
l

Research indicates this is a poor strategy.

l Realistic

Job Preview

Providing an honest assessment of the advantage

and disadvantages of a job and organization.
l

Avoids hiring, training and then losing an employee

because as applicants, they misperceived the job before
agreeing to come to work.

Selection Tools

The Selection Process

Determining an applicants qualifications
related to the job requirements

Background information
l

Education, prior employment, and college major

Interviews
Structured interviews where managers ask each applicant
the same job-related questions.
l Unstructured interviews that resemble normal
conversations.
l Usually structured interviews preferred; bias is possible in
unstructured interviews.
l

The Selection Process

Determining an applicants qualifications
related to the job requirements

Physical ability tests

Measures of dexterity, strength, and stamina for physically
demanding jobs
l Measures must be job related to avoid discrimination.
l

Paper-and-Pencil Tests
Ability tests assess if applicants have the right skills for
the job.
l Personality tests seek to determine if applicants possess
traits relevant to job performance.
l

Selection Process
Determining an applicants qualifications
related to the job requirements

Performance Tests
Tests that measure an applicants current ability to
perform the job or part of the job such as requiring an
applicant to take typing speed test.
l Assessment centers are facilities where managerial
candidates are assessed on job-related activities over a
period of a few days.
l

References
l

Obtaining relevant information can be difficult to due to

legal liability and privacy issues

Reliability and Validity

Selection tools must be reliable and
valid.

Reliability is the degree to which the tool

measures the same thing each time it is
used.
l Example:

scores should be similar for the same

person taking the same test over time.

Validity is the degree to which the test

measures what it is supposed to measure
l Example:

how well a physical ability test predicts

the job performance of a firefighter.

Training and Development

lTraining

Teaching organizational members how to

perform current jobs and helping them to
acquire the knowledge and skills they need
to be effective performers.

lDevelopment

Building the knowledge and skills of

organizational members to enable them to
take on new duties and challenges.

Training and Development

Needs Assessment
An assessment of which employees need
training or development
and what type of skills
or knowledge they need
to acquire.

Training and Development

Types of Training
l Classroom

Employees acquire skills in a classroom setting.

l

Includes use of videos, role-playing, and simulations.

l On-the-Job

Instruction

Training

Employee learning occurs in the work setting as

new worker does the job.
l

Training is given by co-workers and can be done

continuously to update the skills of current employees.

Types of Development
l Varied

Top managers have need to and must build

expertise in many areas.
l

Employees identified as possible top managers are

assigned different tasks and a variety of positions in an
organization.

l Formal

Work Experiences

Education

Tuition reimbursement is common for managers

taking classes for MBA or job-related degrees.
l

Long-distance learning can also be used to reduce travel

and other expenses for managerial training.

Developing the Workforce

Turnover

Employees voluntarily leave (quit); involuntary

leave (fired); management must replace workers

Promotion

Advancement to higher-level job with increased authority, responsibility,

and pay

Transfer

Move to another job within the company usually at same or similar level
and wage rate

Separations

Employment changes involving resignation, retirement, termination, or

layoff

Performance Appraisal and

Feedback
l Performance

The evaluation of employees job performance

and contributions to their organization.

l Performance

Appraisal

Feedback

The process through which managers share

performance appraisal information, give
subordinates and opportunity to reflect on their
own performance, and develop, with subordinates,
plans for the future.

Performance Appraisal and

Feedback
l Trait

Appraisals

Assessing subordinates on personal

characteristics that are relevant to job
performance.
Disadvantages of trait appraisals
Employees with a particular trait may choose not to use
that particular trait on the job.
l Traits and performance are not always obviously linked
l It is difficult to give feedback on traits.
l

Performance Appraisal and

Feedback
l Behavior

Assesses how workers perform their jobsthe

actual actions and behaviors that exhibit on the
job.
Focuses on what a worker does right and wrong
and provides good feedback for employees to
change their behaviors.

l Results

Appraisals

appraisals

Assesses what a worker accomplishes or the

results they obtain from performing their jobs.

Performance Appraisal and

Feedback
l Objective

appraisals

Assesses performance based on facts (e.g., sales

figures).

l Subjective

appraisals

Assessments based on a managers perceptions

of traits, behavior, or results.
Graphic rating scales
l Behaviorally anchored rating scales (BARS)
l Behavior observation scales (BOS)
l Forced ranking systems
l

Subject Measures of Performance:

Graphic Rating Scale

Subject Measures of Performance:

Behaviorally Anchored Rating Scale

Subject Measures of Performance:

Behavioral Observation Scale

Who Appraises Performance?

Who Appraises Performance?

l Self

Self appraisals can supplement manager view.

l Peer

Coworkers provide appraisal; common in team

settings.

l 360

appraisal

Degree

A performance appraisal by peers, subordinates,

superiors, and clients who are in a position to
evaluate a managers performance

Pay and Benefits

Pay level

The relative position of an organizations

incentives in comparison with those of other
firms in the same industry employing similar
kinds of workers
l Managers

can decide to offer low, average or

high relative wages.
l High wages attract and retain high performers
but raise costs; low wages can cause turnover
and lack of motivation but provide lower costs.

Pay and Benefits

Pay Structure

The arrangement of jobs

into categories based on
their relative importance
to the organization
and its goals,
level of skills, and
other characteristics.

Financial Compensation
Wages
Financial

rewards based on hours worked

and/or level of output achieved
Time

Used when quality is more important than quantity no incentive to increase

production

Piece

Wages

Wages

Based on level of output achieved. Motivate employees to increase output little

incentive to improve quality

Commission

Incentive system that pays a fixed dollar amount or a percentage of the employee s
sales. Motivates employees to sell as much as possible

Compensation
Salary

Financial reward calculated on weekly, monthly, or annual basis

Associated with white collar employees, executives, professionals

Bonuses

Monetary rewards provided by firm for exceptional performance or incentive

to increase productivity

Compensation
Profit Sharing

A percentage of company profits distributed to employees, sometimes in the

form of stock

Employee Stock Ownership Plan (ESOP)

Company distributes shares to employees as a form of compensation

Gaining in popularity

Pay and Benefits

Benefits

Legally required: social security, workers

compensation
Voluntary: health insurance, retirement, day care
Cafeteria-style benefits plans allow employees to
choose the best mix of benefits for them; can be
hard to manage.

Benefits

Non-financial forms of compensation

Pension plans

Insurance (health, disability, life)

Child & elder care

Employee Assistance Programs

Benefits
Traditional Fringe Benefits

Sick leave

Pension plans

Health plans

Extra compensation (Bonuses)

Benefits
Soft Benefits/Perks

Emphasize work-life balance

On-site child care

Spas

Food service

Hair salons

Turnover
Turnover : occurs when employees quit or
are fired and must be replaced by new
employees
J Promotion : an advancement to a higherlevel job with increased authority,
responsibility, and pay
J Transfer : a move to another job within the
company at essentially the same level and
wage
J Separations : employment changes involving
resignation, retirement, termination, or layoff
J

Labor Relations
Labor Relations

The activities managers engage in to ensure they

have effective working relationships with the labor
unions that represent their employees interests.
Laws regulating areas of employment.
Fair Labor Standards Act (1938) prohibits child labor, sets
a minimum wage and maximum working hours.
l Equal Pay Act (1963) men and women doing equal work
will get equal pay.
l Work Place Safety (1970) OSHA mandates procedures
for safe working conditions.
l

Unions
Represent workers interests to management
in organizations.

The power that a manager has over an individual

worker causes workers to join together in unions to
try to prevent this.
Unions are permitted by the National Labor Relations Act
(1935) which also created the NLRB to oversee the
relationship between employers and unions.
l Not all workers want unions. Union membership costs
money in dues and workers might not want to strike.
l Union membership is lower today than 40 years ago.
l

Unions
Collective bargaining

Negotiation between labor and management to

resolve conflicts and disputes about issues such
as working hours, wages, benefits, working
conditions, and job security.
The process that unions and management go
through to negotiate work agreements that are
included in a contract which spells out agreedupon terms such as the grievance procedure for
resolving differences between the union and
management over managements administration
of the contract.

Collective Bargaining Process

Diversity Management
The Characteristic of Diversity
Secondary
Characteristic :
Education
Work Background
Income
Marital Status
Parental Status
Military Experience
Religious Beliefs
Geographic Location

Primary Characteristic
Sexual
Orientation

Age

Gender

Race

Ethnicity

Abilities

Diversity Management
Benefit of Diversity
1.
2.

3.
4.
5.

6.

More productive use of a companys human resources

Reduced conflict among employees of different ethnicities,
races, religions, and sexual orientations as they learn to
respect each others differences
More productive working relationships among diverse
employees as they learn more about and accept each other
Increased commitment to and sharing of organizational
goals among diverse employees at all organizational levels
Increased innovation and creativity as diverse employees
bring new, unique perspectives to decision-making and
problem-solving tasks
Increased ability to serve the needs of an increasingly
diverse customer base

Motivation and
Performance: HRM Outcomes
Ragil Sriharto
FEB UGM

Chapter
Meeting

1
5

The Nature of Motivation

Motivation

The psychological forces acting on an individual

that determine:
Directionpossible behaviors the individual could engage
in
l Efforthow hard the individual will work
l Persistencewhether the individual will keep trying or
give up
l

Explains why people behave the way they do in

organizations

Motivating the Workforce

How can managers boost morale?

What motivates employees to perform?

How do you maximize worker performance?

How can you encourage creativity and innovation?

Morale

An employee s attitude
toward his or her job,
employer and colleagues
Morale is a prominent aspect of human relations

Morale
High Morale

Higher productivity, returns to shareholders, worker productivity

and loyalty

Lower absenteeism and employee turnover

Low Morale

Contributes to absenteeism, high employee turnover and lack of commitment

Morale
Morale Boosters

Respect

Involvement

Appreciation

Compensation

Promotion

Pleasant work environment

Positive organizational culture

Rewards
Intrinsic Rewards

The personal satisfaction and enjoyment you feel from

attaining a goal
Feeling of accomplishment

Extrinsic Rewards

Benefits and/or recognition you receive from someone else

Awards, benefits, pay increases

Intrinsic and extrinsic rewards both are important in motivating

employees to contribute to business goals

Outcomes and Inputs

lOutcome

Anything a person gets from a job or an

organization
l Pay,

job security, autonomy, accomplishment

lInput

Anything a person contributes to his or her

job or organization
l Time,

effort, skills, knowledge, work behaviors

Employee Motivation
It can be difficult to motivate employees
Motivation is difficult to define and varies from person to person

The Nature of Motivation (contd)

l Intrinsically

Motivated Behavior

Behavior that is performed for its own sake.

The source of the motivation that comes from actually
engaging in the behavior.
l The sense of accomplishment and achievement derived
from doing the work itself
l

l Extrinsically

Motivated Behavior

Behavior that is performed to acquire material or

social rewards or to avoid punishment.
l

The source of the motivation is the consequences of the

behavior and not the behavior itself.

Classic Theory of Motivation

Early 20th century
Frederick W. Taylor & Lillian Gilbreth

Scientific focus on work tasks & productivity

Money

Thought to be the sole motivator for workers

Satisfactory pay & job security motivate employees to work hard

Hawthorne Studies
1924-1932 at the Hawthorne Works Plant

Elton Mayo

Postulated that physical conditions in workplace stimulate

productivity

Findings show social and psychological factors influence

productivity/morale

Marks beginning of concern for human relations in the workplace

Theories of Employee
Motivation

Maslow s Hierarchy of Needs

Herzberg s Two-Factor Theory

McGregor s Theory X and Theory Y

Theory Z

Variations on Theory Z

Equity Theory

Expectancy Theory

The Motivation Equation

Expectancy Theory
Motivation will be high when workers
believe:
High levels of effort will lead to high
performance.
High performance
will lead to the
attainment of
desired outcomes.

Expectancy Theory
Major Factors of Motivation
Expectancythe belief that effort (input)
will result in a certain level of performance
Instrumentalitythe belief that performance
results in the attainment of outcomes
Valencehow desirable each of the
available outcomes from the job is to a
person

Expectancy, Instrumentality, and

Valence

Expectancy Theory in Practice

Expectancy: Effort will result in a level of

performance.
l

Instrumentality: Performance leads to outcomes.

l

Employees will work work hard if they believe they can

attain high performanceorganizations must provide the
resources that support performance.
Workers are only motivated if they think performance
leads to an outcomemanagers must link performance to
outcomes.

Valence: How desirable an outcome is to a person.

l

Workers have preferences for outcomesmanagers must

determine which outcomes are valued.

Expectancy and Motivation

Motivation is highest when expectancy,
instrumentality, and valence levels are high.

If one of the values is low, motivation will be low.

Workers do not believe they can perform well.
l Workers do not believe that performance and rewards are
closely linked.
l Workers do not value the rewards offered for
performance.
l

Expectancy Theory

Need Theories
l Need

A requirement for survival and well-being.

l Need

Theories

Theories of motivation that focus on what needs

people are trying to satisfy at work and what
outcomes will satisfy those needs.
Basic premise is that people are motivated to
obtain outcomes at work to satisfy their needs.
l

Managers must determine what needs a worker wants

satisfied and ensure that a person receives the outcomes
when performing well.

Maslows Hierarchy of Needs

SelfActualization
Needs
Esteem Needs
Social Needs
Security Needs
Physiological Needs
Source: adapted from Abraham H. Maslow, A Theory of Human Motivation,
Psychology Review 50 (1943): 370-396.

Maslows Hierarchy of Needs

Needs
Highest-level
needs

Lowest-level
needs

Description

Examples

Selfactualization

Realize ones
full potential

Use abilities
to the fullest

Esteem

Feel good
about oneself

Promotions
and recognition

Belongingness

Social
interaction, love

Interpersonal
relations, parties

Safety

Security, stability

Job security,
health insurance

Physiological

Food, water,
shelter

Basic pay level

to buy items

Lower-level needs must be satisfied before

higher-level needs are addressed.

Alderfers ERG Theory

Needs
Highest-level
needs

Lowest-level
needs

Description

Examples

Growth

Self-development,
creative work

Continually
improve skills

Relatedness

Interpersonal
relations, feelings

Good relations,
accurate feedback

Existence

Food, water,
clothing, and shelter

Adequate pay
for necessities

After lower level needs satisfied, person seeks higher needs. When
unable to satisfy higher needs, lower needs motivation is raised.

Herzbergs Motivation-Hygiene
Theory
Focuses on outcomes that lead to higher
motivation and job satisfaction, and those
outcomes that can prevent dissatisfaction.

Motivator needs relate to the nature of the work

itselfautonomy, responsibility, interesting work.
Hygiene needs are related to the physical and
psychological context of the workcomfortable
work environment, pay, job security.
l

Unsatisfied hygiene needs create dissatisfaction;

satisfaction of hygiene needs does not lead to motivation
or job satisfaction.

Herzbergs Two-Factor Theory

lHygiene

Factors

Company policies
Supervision
Working conditions
Salary
Security

lMotivational

Factors

Achievement
Recognition
The work itself
Responsibility
Advancement

McClellands Needs for Achievement,

Affiliation, and Power
Need for
Achievement

A strong need to
perform challenging
tasks well and meet
personal standards
for excellence

McClellands Needs for Achievement,

Affiliation, and Power
lNeed

A concern for good interpersonal relations,

being liked, and getting along

lNeed

for Affiliation

for Power

A desire to control or influence others

Equity Theory
Focuses on peoples perceptions of the
fairness (or lack of fairness) of their work
outcomes in proportion to their work inputs.

A relative outcome to input ratio comparison to

oneself or to another person (referent) perceived
as similar to oneself.
Equity exists when a person perceives that their
outcome/input ratio to be equal to the referents
ratio.
l

If the referent receives more outcomes, they should also

give more inputs to achieve equity.

Equity Theory
Condition

Equity

Underpayment
Equity

Overpayment
Equity

Person

Outcomes
Inputs

Outcomes
Inputs

Outcomes
Inputs

Referent

Example

= Outcomes
Inputs

Worker contributes
more inputs but also
gets more outputs
than referent

< Outcomes
Inputs

Worker contributes
more inputs but also
gets the same outputs
as referent

> Outcomes
Inputs

Worker contributes
same inputs but also
gets more outputs
than referent

Equity Theory
Inequity exists when workers outcome/input
ratio is not equal to referent.

Underpayment inequity: ratio is less than the

referent.
l

Workers feel they are not getting the outcomes they

should for their inputs.

Overpayment inequity: ratio is higher than the

referent.
l

Workers feel they are getting more outcomes than they

should for their inputs.

Equity Theory
Restoring Equity: Inequity creates tension in
workers causing them to attempt to restore
equity.

In underpayment, workers may reduce input levels

to correct (rebalance) the ratio or seek a raise.
In overpayment, workers may change the referent
person and readjust their ratio perception.
If inequity persists, workers will often choose to
leave the organization.

Strategy for Motivating Employee

Behavioral modification
Pay and Benefit
Job Design
l Job

Rotation
l Job Enlargement
l Job Enrichment

Flexible scheduling
l Flextime
l Compressed
l Job

sharing

workweek

Organizational Behavior
Modification
The systematic application of operant
conditioning techniques to
organizationally functional behaviors and
discourage dysfunctional behaviors.
Improves productivity, attendance,
punctuality and other behaviors that are
specific, objective and countable.

Organizational Behavior
Modification
Has been criticized for ethical implications
of application and effects on workers.
Appears to be effective in promoting
organizational efficiency.

Pay and Motivation

Pay as a Motivator

Expectancy: Instrumentality, the association

between performance and outcomes, must be high
for motivation to be high.
Need Theory: pay is used to satisfy many needs.
Equity Theory: pay is given in relation to inputs.
Goal Setting Theory: pay is linked to attainment of
goals.
Learning Theory: outcomes (pay), is distributed
upon performance of functional behaviors.

Merit Pay and Performance

Merit Pay Plan

A compensation plan that bases pay on based on

individual, group and/or organization performance.
Individual plan: when individual performance
(sales) can accurately measured.
Group plan: when group that works closely
together is measured and rewarded as a group.
Organization plan: when group or individual
outcomes not easily measured.

Salary Increase or Bonus?

l Motivational

When:

Salary levels are unrelated to current performance.

Changes in other compensation items (cost of
living, seniority) are not having a large effect in
increasing compensation.
Salaries rarely change and performance does.

l Benefits

Value of a Bonus Is Higher

of Using Bonuses

Do not become permanent part of compensation

Are more directly tied to current performance
Provide more flexibility in distributing rewards

Salary Increase or Bonus?

Employee Stock Option
A financial instrument that entitles the
bearer to buy shares of an organizations
stock at a certain price during a certain
period of time or under certain conditions.
Uses

lTo

attract high-level managers

lTo motivate employee performance through
ownership in the firm

Examples of Merit Pay Plans

l Piece-rate

Pay

Employees pay is based on the number of units

that the employee produces.

l Commission

Pay

Employees pay is based on a percentage of sales

that the employee makes.

l Organization-based

Merit Plans

Scanlon planfocuses on reduced expenses or

cutting costs
Profit sharingemployees receive a share of an
organizations profits

Strategies for Motivating Employees

Job Rotation
Movement of employees from one job
to another to relieve the boredom often
associated with job specialization

The drawback is that it does not totally eliminate risk of

boredom

Strategies for Motivating Employees

Job Enlargement
Addition of more tasks to a job instead
of treating each task as separate

Seeks to counteract the boredom of division of labor

Many small firms use job enlargement

Requires training employees in new tasks

Strategies for Motivating Employees

Job Enrichment
Incorporating motivational factors
(achievement, recognition,
responsibility) into the job

Idea developed by Herzberg in the 1950s

Gives employees feedback on their performance

Rewards for good performance

Strategies for Motivating Employees

Flexible scheduling strategies

Flextime

Compressed Workweek

Allows employees to choose their start and end times

40 hours in a 4-day workweek

Job Sharing

Occurs when two people share the same job

The Importance of
Motivational Strategies
lFosters

employee loyalty
lBoosts productivity
lAffects all relationships within the
organization
lInfluences promotion, pay, job design,
training, and reporting relationships