Deze samenvatting is gebaseerd op het studiejaar 2013-2014.

Hoorcollege 1

Human Resource Management: Policies, practices, and systems that influence employees’ behaviour, attitudes, and performance.

HR department responsibilities à bijlage 1.1

HR manager competences à bijlage 1.2

Sustainability is the ability to be profitable without sacrificing valuable resources (e.g., the environment, employees’ well-being).

Stakeholders are all parties that have an interest in the company’s success and viability.

Challenges for HRM in 21^st century

1. Economic

2. People

3. Technology

4. Globalization

Economic

• A poor global economy means a greater need for downsizing.

–More stress on current employees (both at work & at home)

–Uncertainty in their work environments

–Hold on hiring new employees

• Rising cost of corporations providing healthcare

–Not as much of a concern in Europe as it is in the US

People

Contributors to employee engagement:

1. Pride in Employer

2. Satisfaction with employer

3. Satisfaction with the job

4. Opportunity to perform challenging work

5. Recognition and positive feedback

6. Personal support from managers

7. Effort above and beyond the minimum

8. Understand the link between one’s job and the company mission

9. Prospects for future growth with the company

10. Intention to stay with the company

Psychological contract: expectations of employee contributions and what the company will provide in return.

• Comfortable conditions

• More autonomy

• Training and development opportunities

Diversity

• Increasing diversity of the workforce

–More women and minority groups

–Immigrants

• An older workforce

–Within the next 30 years, the segment of older workers is going to grow 5xs faster than the rate of the entire workforce.

• By 2050, 40% of Japan’s population will be elderly.

• In Europe, almost 3 out of 10 people will be over 65 years of age.

• In the developing world, the population over 60 will grow by 1.1 billion.

–Retirement planning

–Skills that are no longer relevant

Other advantages of hiring older workers

• Wisdom, Emotional Intelligence, Team Players

• Sometimes they also provide patience as they have seen things come and go and understand the big picture cycle of things.

• Older workers are more apt to work for not for profits

• Generally have more drive because they have living expenses and we pay on commission so need folks who are 'hungry' and produce results.

• Extend the available workforce

• Dependability

• Attendance & Performance

Other disadvantages of hiring older workers

• The value of relationships are more important to older workers - this can create productivity issues and conflict with those on a career track.

• Some older workers have issues with manual labor positions, standing for long periods of time, heavy or repetitive lifting, etc.

• Productivity and safety issues more challenging with older workers

• Older workers have more trouble with the physical demands of the job.

• Older workers have less opportunity for longevity; closer to retirement

• Not likely to remain with the organization for long

• Less productive

Perceptions across generations

• Young workers thing they are more efficient in multitasking and more creative.

• Older workers think they have a stronger work ethic.

Actual benefits

• Workers over 40 are most engaged in their work and demonstrate the highest commitment levels

• Workers over 50 are the most satisfied with their jobs.

Hiring and retaining older workers

–Part-time employment

–Flexible work schedules (e.g., flextime)

–Changing jobs within the company

–Telework arrangements

–Phased-out retirement

–Mentorship programs (in both directions)

EU initiatives for aging workforce

• To maintain & promote the health and working capacity of workers as they age.

• To develop the skills and employability of older workers.

• To provide suitable working conditions, as well as employment opportunities for an aging workforce.

Technology

Increasing value of intangible assets à bijlage 1.3

Why are intangible assets important?

Intangible assets provide a value to the company that is difficult for competitors to reproduce.

(Up to 75% of a company can be made up of intangible assets.)

Why are intangible assets relevant to HRM?

Because HRM policies have a direct impact on human and social capital.

Globalization

Offshoring

Exporting jobs from developed to less developed countries.

Benefits

• Reduced labor cost

• Greater availability of a skilled labor force

• People’s willingness to accept lower working standards

Costs

• Are the standards of performance as strong as in the home country?

• Lower ability to monitor worker conditions

• Negative public image

• Political unrest

Offshoring vs. Outsourcing

Offshoring is a type of outsourcing.

• Offshoring implies that you take the labor outside of the country – often to a place with lower labor costs.

• Outsourcing can occur within your own country. It simply means that the service is not provided by employees within the company.

Hoorcollege 2 – Recht zie bijlage.

Hoorcollege 3

Last part of first college.

Globalization

Workforce vs. Market

These challenges affect both the:

1.  Internal labor force: Current employees

2.  External labor market: Persons outside firm who are seeking employment

The changing face of HR

•  For most of the history of industrialized society, HR was concerned with administrative tasks.

– Payroll

– Healthcare

– Benefits

– Legal

This is rapidly changing!

Strategic HRM: A pattern of planned HR activities intended to enable an organization to reach its goals.

HRM and Organizational Strategy

What does it mean that HRM is “tied to the organization’s strategy?”

It means that the organization’s goals and business model are aligned with how it selects and trains people.

Strategic HRM

Formulation

Deciding on a strategic direction by defining a company’s mission and goals, its opportunities

and threats, and its internal strengths and weaknesses.

Implementation

The process of devising structures and allocating resources to realize the strategy a company has chosen.

The Balanced Scorecard

A way to gauge the company performance based on the satisfaction of multiple stakeholders.

By 2004, approximately 57% of companies worldwide were using the balanced scorecard approach.

• Should be communicated to employees.

• It should be used to link HRM practices to the corporation’s strategy.

• It should be used to evaluate how the HR practices are serving the corporation’s strategy.

What is a business model?

1.  Fixed Costs: costs that result regardless of the number of units produced.

1.  Rent for the stores, Maintenance of coffee machines

2. Variable Costs: costs that vary directly with the number of units produced.

1.  Costs of cups, Utilities to run machines, Food & drink costs

3.  Contribution Margin: what you charge for a product and how much the product costs to produce. (contributes to your ability to pay for the fixed & variable costs).

1.  If it costs .50€ to make a latte and you sell it for 4€, 3.50€ is your contribution margin.

4.  Gross Margin: Total profit (N units sold x Contribution Margin).

1.  If you sell 500 lattes, your gross margin is 1.750€.

How a firm will profitably create value for customers.

HRM and Competitive Strategy

Strategic HRM also involves knowledge and management of one’s competition.

• Where to compete? In this building? In the DUI building? Off campus? By the bus stop?

• How to compete?

Will we offer the same products as X? How will we be different? What will we charge? How much will it cost us?

• With what will we compete?

Will our strategy differentiate ourselves from X? How will we acquire the resources need to compete with X?

The analysis and design of work

Louis Vuitton

•  Founded by Louis Vuitton, who started out making luggage for Napoleon’s wife in the

mid-19th century.

•  Label was founded in 1854, and in 1919, they opened the largest travel-goods store in the world in Paris. By 1978, they were on the Asian continent.

•  €3.2B/year in revenue; 9,671 employees worldwide

•  10th most valuable brand in the world, valued at $26B

•  Owned by LVMH

The Louis Vuitton Production Process

•  It used to take 20-30 workers 7 days to put together a single handbag.

•  Taking instructions from Toyota’s manufacturing process, they now use

groups of 6-12 workers.

•  Move new products to boutiques every 6 weeks.

•  “Zero-defect policy”.

•  Workers now trained on multiple tasks.

Workflow Analysis à bijlage 3.1

Definition: The process of analysing the inputs and processes necessary for the production of a product or service, PRIOR to allocating and assigning these tasks to a particular job category or person.

Why is this important for HRM?

Only after you figure out the tasks needed can you bundle them together and assign them to the right people.

Workflow Analysis: Work Inputs

Definition: The inputs used in the development of the work unit’s product.

– Can be broken down into raw materials, equipment, and human skills needed to perform the tasks.

Why is this a challenge for the HR function?

A company must marry the best people in the industry with the best products available.

Workflow Analysis: Work Processes

Definition: The activities that members of a work unit engage in to produce an output.

Workflow Analysis: Output

Definition: a work unit’s finished product.

•  It is often tangible thing (e.g., a completed purchase order, a hamburger)

•  But it can also be a service (e.g., an airline flight, a clean house)

Louis Vuitton analysis à bijlage 3.2

What creates successful outputs?

The relationships between the units of the organization and the individuals in the organization.

• Organizational Structure

Organizational Structure

Definition: The stable, formal network of interconnections among jobs that constitute an organization.

•  Why is organizational structure important?

– Only when the interconnection among jobs is understood can processes be developed, perfected, or revolutionized.

– If there is a problem in the system; you can understand where the problem originates.

Two dimensions of structure:

– Centralization

– Departmentalization

Centralization

Definition: Degree to which decision-making authority resides at the top of the organizational

hierarchy.

Departmentalization

Definition: How units/groups within the organization are organized.

•  On similarity of what they do

or

•  On similarity of their overarching work goal

Merging Centralization & Departmentalization

Two most common methods for doing so:

– Functional Structure

– Divisional Structure

Functional Structure

Definition: functional departmentalization with high levels of centralization

In plain English: Work units are based on the tasks that they perform with lots of control at the top of the organization.

 Functional

• Narrow in focus/skill

• Individuals work alone

• Little decision-making control

• Executives need to be more experienced

• More rule-based

• Good for new companies without established culture

• Less repetition across company – more streamlined

• Employees don’t have as much ownership

• Errors can quickly spread through the organization

• Help companies to compete on culture and image

Divisional Structure

Definition: divisional departmentalization with a low level of centralization

In plain English: Work units are based on an ultimate goal/purpose for their work with less control at the top of the organization

Divisional

• Requires a broad skill base

• Individuals work in goal- (rather than task-) focused teams

• Managers have significant decision-making authority

• Requires more experienced managers

• More relationship-based

• Good for companies that need to maximize innovation & flexibility

• Can lead to redundancy across divisions

• More favored by employees

• Errors are quickly stopped at the source

• Help companies to compete on innovation

Job Analysis

Job Analysis

Definition: getting detailed information about jobs.

1. Individuals must differ in their abilities.

2. Unique abilities must be required to complete different jobs.

3. Society must place individuals in jobs that meet their abilities.

Job Analysis & HRM

This is the building block of everything that an HR manager does!

Why?

1.  It is needed to understand the workflow process in a manager’s work group.

2.  Managers must understand job requirements in order to make intelligent hiring decisions.

3.  Managers must be able to assess performance in each individual’s respective job.

Relates to:

• Work redesign

• HR planning

• Selection

• Training

• Performance Appraisal

• Career Planning

• Job Evaluation

Components of Job Analysis

Job Descriptions: list of tasks, duties, and responsibilities that a job entails.

Job Specifications: list of the knowledge, skills, abilities, and other characteristics that an individual must have to perform on the job.

•  Position Analysis Questionnaire (PAQ)

– 194 items

– Characterize work behaviors, work conditions, job characteristics

– Divided into 6 sections: information input, mental processes, work output, relationships with other persons, job context, other characteristics

– For those of the 194 items that are relevant to the job, rates the item along 6 scales: extent of use, amount of time, importance to the job, possibility of occurrence, applicability, other/special

•  Occupational Information Network (O*NET)

– Generalizes across jobs to describe the abilities, work styles, work activities, and work context required for various occupations that are broadly defined.

– Translatable across countries

– Can help employers to fit current employees to new jobs.

Job Design

Definition: the way of defining the tasks that will be required in a given job and how the work needed to complete these tasks will be performed.

 Requires previously conducted:

•  Workflow analysis

•  Job analysis

Job Design Methods à bijlage 3.3

1.  Motivational

2.  Biological

3.  Mechanistic

4.  Perceptual Motor

Motivational Approach

•  Focuses on the job characteristics that affect:

– the psychological meaning of the job

– motivational potential of the job

•  Focuses on increasing job engagement through:

– Meaningfulness of work

– Responsibility

– Knowledge of results

Biological Approach

• Comes primarily from the sciences of biomechanics, or the study of body movements

• Ergonomics

• Looks at the context of work, more than the work itself

• Focuses on outcomes such as:

– physical fatigue

– aches and pains

– health complaints

Mechanistic Approach

•  Has its roots in classical industrial engineering

•  Focuses on designing jobs around the concepts of:

– task specialization

– skill simplification

– repetition

Perceptual-Motor Approach

•  Has its roots in the human-factors literature.

•  Focuses on constructing jobs so that they do not exceed individuals’ mental capacities and limitations.

•  Tries to improve reliability, safety, and user reactions by designing jobs in a way that reduces the information processing requirements of the job.

Why is job (re)design important?

• It determines who you hire for a position.

• It determines what expectations this person needs to have.

• It determines how this person is evaluated and compensated.

•  Analysis of Work includes both:

– Workflow Analysis

– Organizational Structure

•  Job Analysis is getting information about jobs.

– Includes both job descriptions & job specifications.

•  Job Design is the way of defining the tasks that will be required in a given job and how the work needed to complete these tasks will be performed.

Society & The Firm

Two ways in which society affects a company’s HR needs:

•  Consumer markets

•  Labor markets

The Labor Market and Competitive Advantage

How to use the current ILF to a company’s competitive advantage:

1.  Understand the strengths and weaknesses of the current ILF.

2.  Understand where the company is going and how the ILF does/doesn’t meet that direction.

3.  If there is a discrepancy, determine what plans of action are needed

The Human Resource Planning Process à bijlage 3.4

Forecasting

Definition: The attempts to determine the supply of and demand for various types of human resources.

Determining Labor Demands

•  Using leading indicators

– Objective measures that accurately predict labor demand

Determining Internal Labor Supply

•  Internal Labor Supply

•  Analysis of the Δinternal labor supply

– Transitional Matrix

Hoorcollege 4

Last part college 3

Offshoring

Exporting jobs from developed to less developed countries.

Benefits

•  Reduced labor cost

•  Greater availability of a skilled labor force

•  People’s willingness to accept lower working standards

Downsides

•  Are the standards of performance as strong as in the home country?

•  Lower ability to monitor worker conditions

•  Negative public image

•  Political unrest

Demands + Supply Analysis

= Labor surplus? Labor shortage?

Surplus:

• Downsizing

• Pay reductions

• Demotions

• Transfers

• Work sharing

• Hiring freeze

• Natural attrition

• Early retirement

• Retraining

Shortage:

• Overtime

• Temporary employees

• Outsourcing

• Retrained transfers

• Turnover reduction

• External hires

• Technological innovation

Options for workforce reduction and their consequences. à bijlage 4.1

Options for avoiding labour shortage and consequences. à bijlage 4.2

Downsizing

Definition: The planned elimination of large numbers of personnel designed to enhance organizational effectiveness.

Reasons for Downsizing:

1.  Reducing organizational costs

2.  Changes in technology

3.  Change in location of business

Reasons why downsizing is sometimes ineffective:

•  Reduced productivity/motivation

•  Initial cost savings but disruption of social networks

•  Letting go of indispensible employees

•  Existing employees are changed

•  Forecasting includes both labor demands and labor supply

– The transitional matrix is one way to determine one’s internal labor supply forecast

•  There are multiple ways to avoid labor surpluses and shortages

– Each has their own benefit/downside

Personnel Recruitment, Retention, & Termination: Deciding how to get the best employees, how to keep them, & how to let them go

Recruitment: An answer to shortages

Definition: A practice or activity carried out by the organization with the primary purpose of identifying and attracting potential employees.

Goal: to ensure that the organization has a number of reasonably qualified applicants to choose from when a job opening occurs.

Recruitment influences: personnel policies, recruitment sources, recruiter traits and behaviour.

Personnel Policies

Definition: Organizational decisions that affect the nature of the vacancies for which people are recruited.

The characteristics of the vacancy are more important than the recruiting sources or recruiter characteristics for job choice.

•  Internal vs. External Recruiting Environment

•  Extrinsic & Intrinsic Rewards

•  Employment-at-will policies (vs. due process policies)

•  Image Advertising

Recruitment Sources

Definition: The sources from which a company recruits potential employees.

•  Internal vs. External Sources

•  Direct Applicants & Referrals

•  Electronic Recruitment

– monster.com; idealist.org

•  Public & Private Employment Agencies

– UWV vs. Headhunters

•  Universities/Colleges

Who to use: Internal Labor Force (ILF) vs. External Labor Market (ELM)

ILF

• Applicants already know the firm

• Know about the vacancies

• Cheaper & faster

ELM

• May not be appropriate internal recruits

• Exposure to new, fresher ideas

• Strengthen one’s own company and weaken competitors (e.g., using liftouts)

Dual-Purpose Interviews

Definition: Interviews in which the the recruiter aims to (1) select appropriate job candidates and (2) recruit potential job candidates.

Although widely used, they are not very effective because:

1.  Recruiters often provide less information than when they are solely recruiting.

2.  Job applicants remember less about the company being recruited for.

Recruiters

A recruiter’s job:

•  Information about the job.

•  “Sell them” on the company and perhaps, the specific job vacancy.

•  Represent the company.

Important Factors in the Recruiter

•  Realism

•  Recruiter Traits

– Warmth

– Informativeness

– Similarity

HR recruitment

Standards of Selection Methods

1.  Reliability

2.  Validity

•   Criterion-related validity

-  Predictive

-  Concurrent

2.  Content Validity

3.  Generalizability

4.  Utility

Reliability

Definition: The consistency of a performance measure (i.e., the degree to which a performance measure is free from random error). Refers to the measurement instrument – not what is being measured.

•  Interested in test-retest reliability and inter-rater reliability

•  No “true” reliability of a measure

•  Reliability is expressed using a correlation coefficient (r)

Correlation Coefficient

Definition: measure of the degree to which two sets of numbers

are related. Can range from -1.00 to 1.00.

Test-retest Reliability

Influences on Test-retest Reliability

•  Time between tests

•  Stability of construct being measured

Validity

Definition: Extent to which performance on a measure is related to performance-related behavior on the job.

•  Must be reliable to have validity

– But a measure can be reliable and not valid

•  Divided into:

– Criterion-related validity

•  Predictive

•  Concurrent

– Content validity

Validity: Criterion-Related Validity

Definition: Does a test show a substantial correlation (r) with job performance?

Bijlage 4.3 en 4.4

Downsides of Concurrent Validity

1.  current employees may be “lazy” in their performance.

2.  current employees have learned many things since being hired

3.  current employees tend to develop similarities over time (they learn from each other).

4.  current employees often show restriction of rang

Validity: Content Validity

Definition: determining if the problems on the test are similar to those encountered on the job.

Generalizability

Definition: the degree to which the validity of a selection method established in one context extends to other contexts.

•  Requires good validity

– But good validity does not mean it is generalizable!

Utility

Definition: The degree to which the information provided by a selection method enhances the bottom-line effectiveness of the organization.

Types of Selection Methods

1.  Interviews

2.  References and Biographical Data

3.  Ability Tests

1.  Physical

2.  Cognitive

4.  Personality Inventories

Selection Interviews

Definition: a dialogue initiated by one or more persons to gather information and evaluate the qualifications of an applicant for employment.  

How to increase the predictive validity of interviews:

1.  interviewer should keep the interview structured, standardized, and focused on attaining a small number of goals.

2.  Have a note-taking system that will aid recall when it comes to justifying employment decisions.

3.  Engage in experience-based or future-oriented situational interviewing

Hoorcollege 5

Last part college 4

References & Biographical Data

• References: soliciting information from the people who know the job applicant.

–Weak predictor of success on the job.

• Biographical data: information on the job applicant’s past and qualifications.

–Most helpful in predicting the person’s likelihood of turnover.

Ability Tests

1. Physical

1. Muscle strength & endurance

2. Cardiovascular endurance

3. Flexibility, balance, & coordination

2. Cognitive

1. Verbal

2. Quantitative

3. Reasoning

Personality Inventories

Definition: tests to categorize people by what they are like.

Examples:

• THE BIG FIVE (OCEAN)

• Regulatory Focus

–I frequently imagine how I will achieve my hopes and aspirations.

• Perspective-taking

–Other people’s misfortunes do not usually disturb me a great deal.

• Need for Cognition

–I would prefer a task that is intellectual, difficult, and important to one that is somewhat important but does not require much thought.

Programs to Retain Good Employees

• Employee Assistance Programs (EAPs)

–Began in the 1950s.

–Deal with health or psychological problems after they occur.

• Employee Wellness Programs (EWPs)

–Aimed at preventing health or psychological problems before they occur.

Job Withdraw

A Reason Why Good Employees Might Leave

Definition: A set of behaviors that dissatisfied employees enact to avoid the work situation.

Consequences

• Behavior Change

• Psychological Withdraw

• Physical Withdraw

Withdraw Consequence I:

Behavior Change

• Filing grievances with a union

• Voicing public dissatisfaction

• Whistle-blowing

Withdraw Consequence II:

Psychological Withdraw

• Lowered Job Involvement

• Lesser Organizational Commitment

Withdraw Consequence III:

Physical Withdraw

• Absenteeism

–Organizational contagion

• Leaving the job

Job Satisfaction

Definition: “a pleasurable feeling that results from the perception that one’s job fulfills or allows for the fulfillment of one’s important job values.” (Noe et al., 2012, p. 458)

Important Components

• Is a function of values

• Values differ from person to person

• Subjective

The HRM Manager’s Challenge: To gauge and assess potential employees’ values during the hiring process.

Sources of Job Satisfaction

• Safe Practices

–Job Engagement

–Also lead to cost savings (via insurance, litigation, & absenteeism) for the company!

• Personality

–Negative affectivity

• Job Roles and Tasks

–Think about job design!

• Supervisor & Co-workers

–One of the best predictors of job satisfaction

–Moral reasoning convergence

Gauging Job Satisfaction

1. Job Descriptive Index (JDI) (Smith, Kendall, & Hulin, 1969)

2. Pay Satisfaction Questionnaire (PSQ) (Haneman & Schwab, 1985)

1. I am satisfied with the size of my overall salary.

2. I am satisfied with how raises are determined.

3. I am satisfied with the influence my supervisor has over pay.

Involuntary Turnover (a.k.a., firing)

Definition: an employee’s leave of the organization at the request of the organization.

Why it is difficult to let employees go:

1. Legal regulations (due process contracts)

2. Employees believe that there is a violation of justice

1. Procedural Fairness

2. Interactional Justice

3. Outcome Fairness

Managing Involuntary Turnover

Unconstructive reactions to managing involuntary turnover:

1. Keeping poorly performing employees too long in order to establish a “paper trail”

2. Getting the employee to quit

3. Paying off the employee with severance pay

This is why selecting the right employees in the first place is so crucial!

Why not retain poor performers?

• Leads to significantly worse company performance

–Using a “Rank and Yank” system

Consequences to Poor Involuntary Turnover Management

• Litigation

• Union Intervention

• Increase in employee violence

–Outplacement counseling

Principles of justice à bijlage 5.1

I. Procedural Fairness: are the methods used to come to a decision fair?

à bijlage 5.2

II. Interactional Justice: was the outcome implemented in a fair way? à bijlage 5.3

III. Outcome fairness: a judgment based on social comparison between one’s own outcomes and the outcomes received by other people with whom one identifies with.

Employee Training

Definition: A planned effort to facilitate the learning of job-related knowledge, skills, and behavior by employees

The strategic value of training

Training as a way to enhance intellectual capital.

High Leverage Training

•Linked to strategic goals & objectives.

•Uses a design process to ensure that training is effective.

•Compares the company’s training programs against those of its competitors.

Development process of high leverage training à bijlage 5.4

Causes of Ineffective Training

•Not linked to company’s strategy.

•Not linked to a performance problem.

•Outcomes are not properly evaluated.

Designing effective training activities. à bijlage 5.5

Step 1: Needs Assessment

•Organizational Analysis

•Person Analysis

•Task Analysis

Organizational analysis à bijlage 5.6

Person analysis à bijlage 5.7

Task analysis à bijlage 5.8

Components of job analysis

Job Descriptions: list of tasks, duties, and responsibilities that a job entails.

Job Specifications: list of the knowledge, skills, abilities, and other characteristics that an individual must have to perform on the job.

Step 2: Ensuring Employees’ Readiness for Training

•Motivation to learn

•Self-efficacy

•Understanding benefits/consequences

•Awareness of training needs, career interests, goals

•Work environment characteristics

•Ensuring that they have the basic skills

Step 4: Ensuring Transfer of Training à bijlage 5.8

Managers supportà 5.9

Step 5: Selecting Training Method

•Presentational Methods

•Hands-on Methods

Training Methods I

• Instructor-led Classroom Instruction

–Includes both in-person and distance learning

• On-the-job training (role modeling/shadowing)

• Self-directed learning

• Apprenticeship

• Simulations

• Audiovisual Techniques

–Overheads, slides, & videos

• E-learning

Training Methods II

• Mobile Technologies

–iPods, PDAs

• Group Training

–Adventure learning, Team training,Action learning

Step 6: Evaluating its Effectiveness

•Identification of training outcomes and design of training evaluation methods

•Cost-benefit analysis à bijlage 5.10

Cost-Benefit Analysis: a closer look at making the analysis

1. Identify the outcomes

2. Place a € value on these outcomes

3. Determine the change in performance after controlling for other potential influences on training results (benefits)

4. Obtain an annual amount of benefits from training by comparing results pre- and post-training (€ amount)

5. Determine the training costs

– Direct, indirect (overhead), development costs

– Compensation for trainees

6. Savings = benefits – training costs

7. ROI = benefits/training costs

Hoorcollege 6

Purposes of Performance Management à bijlage 6.1

Approaches to Measuring Performance

1.  Comparative Approach

2.  Attribute Approach

3.  Behavioral Approach

4. Results Approach

5.  Quality Approach

1. Comparative Approach

Definition: requires the rater to compare an individual’s performance with that of others.

 Example:

Forced Distribution

–  Uses a ranking format but individuals are ranked in groups.

1. Comparative Approach – Pros/Cons

Pros

• Easy to use

• Differentiates employees

Cons

• Leads employees to be competitive, not cooperative

• Often not linked to strategic focus of the organization

• Moderate inter-rater reliability

• Does not provide feedback for improving performance

2. Attribute Approach

Definition: focuses on the extent to which individuals have certain attributes believed desirable for the company’s success.

Example:

Graphic Rating Scales

–  List of traits (e.g., innovativeness, interpersonal skills) is evaluated by a

5-pt. scale.

2. Attribute Approach – Pros/Cons

Pros

• Most popular method in organizations.

• Generalizable across a variety of jobs and organizations.

Cons

• Don’t provide specific ways for an employee to improve.

• Elicit defensive attitudes in employees.

3. Behavioral Approach

Definition: define the behaviors an employee must exhibit to be effective at the job.

 Example:

Behaviorally-Anchored Rating Scales (BARS)

–  Rates employees based on various behavioral anchors associated with different levels of performance

Pros

• Very effective

• Good for linking employee behavior to company strategy.

• In-depth employee analysis.

• High inter-rater reliability.

Cons

• Measures must be constantly revised and updated in order to keep them relevant.

• Tends to create a “procrustean approach” to employee behavior.

• Not good for complex jobs where there might be numerous ways to reach an effective outcome.

4. Results Approach

Definition: Focuses on managing the objective, measurable results of a job or work group.

 Example:

1.  Management By Objectives (MBO)

–  Executives and managers define company goals, which are then used as standards by which employees are assessed.

Pros

• Minimizes subjectivity. Evaluation is based on objective indicators.

• Links individuals’ behavior directly to company strategy.

Cons

• Objectives may be affected by factors completely out of the employee’s control.

• May “teach” employees to only focus on the behaviors that are measured.

Employee Development

Worldwide, companies spend about €11B/year on employee development.

500 executives listed leadership development as one of their top three human-capital priorities.

Employee Development

I.  What is Employee Development?

II.  Four Approaches to Employee Development

I.  Formal Training

II.  Assessment

III. Job Experiences

IV. Interpersonal Interactions

Employee Development

Definition: The acquisition of knowledge, skills, and behaviors that improve an employee’s ability to meet job requirements and customer demands.

Training: a planned effort to facilitate the learning of job related knowledge, skills and behaviours by employees.

Employee training vs. development. à bijlage 6.2

Protean Careers: A career that is based on self-direction with the goal of psychological success in one’s work.

4 Approaches to Employee Development

I.  Formal Training

II. Assessment

III. Job Experiences

IV. Interpersonal Interactions

I. Formal Training

Definition: Development programs that include formal educational sessions.

• Can include off-site and on-site programs

• Can be offered by:

– Consultants

– Universities

– Executive MBA programs

• Can include:

– Lectures

– Business games

– Simulations

II. Assessment

Definition: Collecting information and providing feedback to employees about their behavior, communication style, and skills.

• Used for:

– Identifying employees with managerial or TMT potential

– Helping employees to identify their working styles and needs

– Measuring current managers’ strengths and weaknesses

– Identifying the strengths & weaknesses of work teams

•  Communication styles

•  Decision processes

Personality Tests

•  MBTI

– Energy preference (introverted vs. extroverted)

– Information gathering (sensing vs. intuition)

– Decision making (thinking vs. feeling)

– Speed of decision-making (judging vs. perceiving)

ISTJ, INTJ, ESTJ, ENTJ

•  Need for Cognition

•  Regulatory Focus

•  Tolerance for Ambiguity

Assessment Center

Definition: A process in which multiple raters evaluate employees’ performance on a number of exercises designed to measure employees’ administrative and interpersonal skills.

• Exercises can include:

– Leaderless group discussions

– Interviews

– In-basket exercises

– Role playing

Assessment Center Purposes

•  Career advancement

•  Salary decisions

•  Receive feedback regarding:

– strengths

– weaknesses

– attitudes

Benefits:

• Collects multiple perspectives (procedural fairness)

-allows employees to compare their own self ratings with those of others.

III. Job Experiences

Definition: The relationships, problems, demands and tasks that naturally occur in an employee’s job.

• Those most effective experiences are those involving:

– Job assignment

– Interpersonal relationships

– Important transitions

•  Job Enlargement

•  Job Rotation

•  Transfers

•  Promotions

•  Downward Moves

•  Externships

IV. Interpersonal Interactions

Definition: Interactions with other (often more experienced) members of the organization or outside of the organization.

• Mentoring

• Coaching

Mentoring

Definition: An experienced senior employee who helps to develop a junior employee.

Keys to Success:

1.  Well-matched

2.  Can interact with each other

Purposes:

1.  Socialize new employees

2.  Increase skill transfer from training

3.  Help minority groups to develop

Coaching

Definition: A peer, manager, or professional coach who works with an employee to help motivate her, develop her skills, and provide reinforcement and feedback.

Purposes:

1.  Develop high-potential managers

2.  Act as a “sounding board” for managers

3.  Change ineffective behavior

1.  Can follow 360 feedback

Mentoring: 2-way

Coaching: 1-way

Week 6 Take-aways

1.  You can rate employees based on blunt rankings, the attributes they possess, the behavior they show, or the results they produce.

2.  Development and training are two separate HR activities

3.  Development activities can include the use of formal classroom training, assessments, harnessing natural job experiences, and professional relationships.

Hoorcollege 7

Employees and Pay

• Level of pay and comparison to other employees (both within and across organizations) is important.

–People see it as indicative of status and success (Gardner et al., 2004; Kuvaas, 2006).

• Pay is the most important influence on employee behavior (Jenkins et al., 1998).

• Influences the jobs that people accept (Feldman & Arnold, 1978; Zedeck, 1977).

• Signals to an employee how he or she is performing and meeting (or exceeding) expectations (Locke & Latham, 1990).

Pay Decisions = Pay Structure + Individual Pay

I. Setting Pay Levels (pay structure)

II. Administering Pay (individual pay)

Composition of Labor Costs

1. Average Cost/Employee

1. Direct Payments, e.g., salary & wage

2. Indirect Payments, e.g., EWPs, relocation costs

2. Staffing Level: number of employees

Pay Structure:

• Pay Level

• Job Structure

Deciding What to Pay: Pay Structure

• Pay Level

–Average pay of ALL jobs in an organization

–Focuses on jobs across organizations

• Job Structure

–Relative pay of jobs within an organization

–Focuses on jobs within an organization

• About individual jobs – not individual employees

Equity Theory

• Individuals evaluate the fairness of a situation by comparing their own situation with that of others.

OutcomesE1/InputE1 =, >,

E1 = Employee 1; E2 = Employee 2

=, Perceptions of fairness

>, Rationalizations

(destructive) Ways to Reduce Negative Inequity

• Reducing one’s own input

• Increasing one’s outcome on his or her own (e.g., through theft)

• Leaving the organization

Developing Pay Levels: Market Pressures

Two important competitive market challenges in deciding what to pay employees:

1. Product-market competition – how an organization can complete against others selling the same product – that is, selling goods and services at a quantity and price that will bring a return on investment.

– HR influences: direct & indirect payments, staffing level

2. Labor-market competition – the amount an organization must pay to compete against other

organizations that hire similar employees.

Market Pay Surveys: Benchmarking

Definition: a procedure by which an organization compares its own practices against those of the competition. Achieved through pay surveys.

•The following issues must be determined before pay surveys are used:

–Which employers should be included in the survey?

• E.g., product-market competitors, labor-market competitors, geographical competitors?

–Which jobs are to be included in the survey?

– If multiple surveys are used, how are all the rates of pay weighted and combined?

Using Market Pay Surveys: Key & non-Key Jobs

• Key jobs (a.k.a., benchmark jobs) have relatively stable content and are common to many organizations (thus, market pay survey data can be obtained).

• Non-key jobs are unique to organizations and cannot be directly valued or compared through the use of market surveys.

Developing a Job Structure

Definition: the relative worth of various jobs in an organization.

•Based on internal comparisons

•Leads to pay decisions

•Can be measured using a job evaluation

–Composed of compensable factors: factors that an organization values and chooses to pay for.

–Measured using the Point-Factor System à bijlage 7.1

How do companies decide what to pay?

Two Methods:

1. Pay Policy Line: A regression equation that describes the relationship between a job’s pay and its job evaluation points.

• Pay Policy Lines Y_salary = a(x_JobEvalPts)+b

2. Pay Grades: Grouping jobs of similar worth or content together for pay administration purposes.

Comparing actual vs. intended pay

Compa-ratio:

Actual average pay for grade/Pay midpoint for grade

•

• > 1: rewarding higher than grade policy

Relevant Theories

1. Reinforcement Theory

2. Expectancy Theory

3. Agency Theory

Types of Pay Systems

I. Merit Pay

II. Individual Incentives

III.Profit-Sharing and Ownership

IV.Gainsharing

Merit Pay

• Compensation linked to performance appraisal ratings.

• Rolled into base pay.

–or sometimes given as a bonus.

Merit Pay: Downsides

• Employees’ performance may have more to do with the environment around them than their individual behavior.

• May not attract collective-minded individuals.

• Relies too much on supervisor evaluations.

• Process may be perceived as unfair.

• Doesn’t really exist.

–Expectancy Theory’s Instrumentality

Individual Incentives

• Like Merit Pay, but

–Payments are not rolled into base pay

–Performance measured on physical, tangible output (a.k.a., commission)

Individual Incentives: Downsides

• Not useful for knowledge workers

• Discourages employees from learning new skills

Profit-sharing & Ownership

• Payments based on measure of organizational performance

• Payments do NOT become part of base salary

–More easily adjusted

• Employee as Owner

–Increasing employee cooperation and citizenship

Profit-sharing: Benefits & Downsides

• Does it actually increase employee performance?

–Correlation ≠ Causation (e.g., Magnan & St-Onge, 2005)

• Can lower-level employees really see their work impact profit?

• Long-term payout structure

–Reinforcement Theory

–Expectancy Theory’s Instrumentality

A. Employee stock ownership plans (ESOPs)

An ownership plan that gives employers certain tax and financial advantages when stock is granted to employees.

B. Stock Options

• Employees own a piece of the organization, most commonly through stock options.

• Often used for executive compensation packages

1. When I joined Apple in 2003, I was given stock options, which meant that in 2004, I could purchase 7,500 shares at the price they were when I joined the organization ($47). The value of this “purchase” was $352,500.

2. The option agreement says that I can then “sell” (vest) the shares in 2005.

3. In 2005, the share price is up to $78/share. I sell my shares, making $232,500 ($585,000-$352,500).

Stock Options: Benefits & Downsides

1. Employees can see how the organization performs before “spending” any of their money.

-Very attractive for technology-based start-ups.

2. Employees are owners, so they can vote in shareholder decisions.

-Shareholder activism, etc.

3. But employees can lose money if the company does not do well!

-VERY risky for employees.

4. Companies don’t currently have to count this type of compensation as an expense – meaning it does not cut into profit like salary and monetary bonuses do.

Gainsharing

• Like profit sharing (in the sense that a company shares productivity gains with employees), but:

–A group- or plant-based performance measure is used

–Payouts are distributed frequently and not deferred to a later time

• Expectancy Theory’s Instrumentality

Gainsharing: Benefits

1. Encourages collective-minded efforts

2. More closely tied to actual employee performance

-Good for larger organizations

Lecture 7 Take-aways

1. Pay structure is a combination of pay level and job structure

2. Individuals’ assess the fairness of their pay by looking at comparable others.

3. In developing pay levels, you examine product market competition & labor market competition.

4. You can pay individuals based on individual, group, or company performance.