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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

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Management 412 / Intro to HRM

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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)

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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)
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Approaches to Revitalizing HR
Accounting for human resources Managing people for competitive

advantage

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Management 412 / Intro to HRM

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)
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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
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Source: Cascio (1982) Fall 2008

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)
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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)


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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 Deregulation Global capital market Venture capital Fragmented markets Less important with advances in technology

Protected and regulated markets


Access to financial resources


Economies of scale

So, whats leftpeople


Source: Pfeffer (1994, 1998)
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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)
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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)

Source: Pfeffer (1994, 1998)


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


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Management 412 / Intro to HRM

The Research Evidence


Garment manufacturing Steel minimills Initial public offerings

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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 Gross margin Operating profit Average discount Sewing throughput (days)
Source: Pfeffer (1998)
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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


Source: Pfeffer (1998)
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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
Source: Pfeffer (1998)
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Rewards

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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

Individual Behaviors Decreased motivation More accidents Higher turnover Reduced effort
Source: Pfeffer (1998)
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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?
Source: Pfeffer (1998)
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External Influences on HRM


Economic conditions Legal requirements and constraints Demographics Technology

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Management 412 / Intro to HRM

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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)
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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 r k sy st em s an d da ta co m m

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

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100.0% 20.0% 40.0% 60.0% 80.0%
Pe r

0.0%

so na l& ho m e ca re ai de s un ic at ...

C om pu te r so ftw ar e en g in ee rs ,a pp li c at io ns de s ai al th he om e H

Ve te rin a ry te c hn ol og is ts an d te ch ni c lf in an th ea tri c al ci an d M ed ic Su bs ta nc e al a pe

Source: Department of Labor, Bureau of Labor Statistics


M ak eu p ar tis ts , so na Pe r ia ns dv rfo al ab us iso rm rs an ce as si st an e an d be h Ve te rin a av i or al d

Management 412 / Intro to HRM

Technology Age Society

ts

ria n Sk in is ca re or d sp e

s e. .. cia l

is ts

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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

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C Fo o d pr ep ar a tio n an d se rv i ng w or ke rs , in . .. es en ta t iv es re pr rv ic e on s se rs er pe us to m sa le s N R et ai l R O f fi ce cle rk s, ge n ca re co nd d cle a in g ne rs ,e N ur s ai d Bo ok ke e es pi n ,o g, er a e

Source: Department of Labor, Bureau of Labor Statistics


Pe rs on a la nd ho m l ai ar y xc ep t rd ac co er li Ja ni to rs an Po st -s e de s te ac he m ai d es ,a un tin s nd g, a W ai rs an d. .. at te nd nd te rs au

Management 412 / Intro to HRM

Jobs in 2006 Growth

an ts di ti an d

ng w

c. .. ai t re ss e

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Largest Job Losses, 2006-2016


Number ofJobs (000)
St oc k cl er ks an d

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

2016
C as hi er s, e rs xc ep t ga m in g rs ,h an d or

de rf ille

Pa c ke rs an d pa ck a ge

Decline
Fi le Fa rm er s & cl er ra n ks ch er s Se wi n El ec t C ric al ut ti ng , an d pu n O rd g el m ac h ec tro ch in ni c g, an er in cl e er ks op e eq d ui p pr es

Management 412 / Intro to HRM


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

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

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Management 412 / Intro to HRM

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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)


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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
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
Source: Department of Labor, Bureau of Labor Statistics Page 27 Management 412 / Intro to HRM Fall 2008

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%

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

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Management 412 / Intro to HRM

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HR Functions: What Well Be Looking At


Planning Employee and Labor Relations Legal Compliance

Training and Development Reward Systems


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Staffing

Fall 2008