HUMAN RESOURCEMANAGEMENT

Managing Employees for Competitive Advantage

DAVID LEPAKRutgers University

MARY GOWANMartha and Spencer Love School of

Business at Elon University

PEARSON

Pearson Education International

<1c h a t e r MANAGING EMPLOYEES FOR COMPETITIVE ADVANTAGE 2

MANAGING EMPLOYEES 4What's in a Name? 4 • The Costs and Benefits of Managing HR 5

FRAMEWORK FOR THE STRATEGIC MANAGEMENT OF EMPLOYEES 7

PRIMARY HR ACTIVITIES 8

Work Design and Workforce Planning 8 • Job Design 9 • Workforce Planning 9 • ManagingEmployee Competencies 10 • Recruitment 10 • Selection 10 • Training 11 • ManagingEmployee Attitudes and Behaviors 11 • Performance Management 11 • Compensation andIncentives 12 • Employee Benefits, Health, and Wellness 12 • HR Activities Alignment 13

HR CHALLENGES 14

Challenge 1: Cultures Meeting Organizational Demands 14 • Strategy 14 • Company Characteristics 15

• Organizational Cultures 15 • Employee Concerns 15 • Challenge 2: Environmental Influences 16• Labor Force Trends 16 • Technology 17 • Globalization 17 • Ethics and Social Responsibility 18• Challenge 3: Regulatory Issues 18

THE PLAN FOR THIS BOOK 19

Chapters 2-3: HR Challenges 19' • Chapters 4-5: Work Design and Workforce Planning 19• Chapters 6-8: Managing Employee Competencies 19 • Chapters 9-12: Managing EmployeeAttitudes and Behaviors 19 • Chapters 13-14: Special Topics 20

Summary 21 « Key Terms 21 H Discussion Questions 21 • Learning Exercise 1 21 •Learning Exercise 2 22 • Case Study 1: The New Job 22 • Case Study 2: Employees LoveWegmans 23

PARTI HR CHALLENGES 25

ORGANIZATIONAL DEMANDS AND ENVIRONMENTALINFLUENCES 26

THE IMPORTANCE OF CONTEXT 28

MEETING ORGANIZATIONAL DEMANDS 28Strategy 30 • Low-Cost Strategy and Managing Employees 31 • Differentiation Strategy and ManagingEmployees 31 • Company Characteristics 32 • Company Size 32 • Stage of Development 32• Organizational Culture 33 • Employee Concerns 34 • Work /Life Balance 36 • Justice 36

VII

Vlli CONTENTS

ENVIRONMENTAL INFLUENCES 38

Labor Force Trends 38 • The Aging Workforce 38 • Demographic Diversity 40 • Technology 41• Globalization 41 • International Strategies 42 • Global Factors 42 • Implications of Global Factors onManaging Employees 44 • Ethics and Social Responsibility 44

Summary 47 • Key Terms 48 • Discussion Questions 48 • Learning Exercise 1 48• Learning Exercise 2 48 • Case Study 1: Sustaining Success at St. Stevens CommunityCollege 49 • Case Study 2: Globalization at Levi Strauss 49

REGULATORY ISSUES 50

EQUAL EMPLOYMENT OPPORTUNITY AND OTHER WORKPLACE LAWS 52

INTRODUCTION TO EQUAL EMPLOYMENT OPPORTUNITY 53

Protected Classifications 54 • Bona Fide Occupational Qualification (BFOQ) and BusinessNecessity 54 • Discriminatory Practices 55 • Disparate Treatment 55 • Disparate Impact 56• Harassment 58 • Retaliation 59

EQUAL EMPLOYMENT LEGISLATION 60

Equal Pay Act of 1963 (EPA) 61 • Title VII of the Civil Rights Act of 1964 (CRA 64) 61 • Race andColor Discrimination 63 • Religious Discrimination 64 • Gender Discrimination 65 • National OriginDiscrimination 66 • Civil Rights Act of 1991 (CRA 91) 67 • Age Discrimination in Employment Actof 1967 (ADEA) 68 • Americans with Disabilities Act of 1990 (ADA) 69

• Pregnancy Discrimination Act of 1978 (PDA) 71

EEO RESPONSIBILITIES OF MULTINATIONAL EMPLOYERS 72

FILING PROCESS FOR DISCRIMINATION CHARGES 72

EXECUTIVE ORDERS AND AFFIRMATIVE ACTION 73

Executive Order 11246 (EO 11246) 73 • Affirmative Action 73

RELATED EMPLOYMENT LEGISLATION 75

Immigration Reform and Control Act of 1986 (IRCA) 75 • Family and Medical Leave Act of 1993,2008 (FMLA) 75 • Vietnam Era Veteran's Readjustment Act of 1974 76 • Uniformed ServicesEmployment and Reemployment Act of 1994 76

FAIR EMPLOYMENT PRACTICES 77

EMPLOYMENT-AT-WILL AND WRONGFUL DISCHARGE 77

REGULATORY ISSUES AND COMPETITIVE ADVANTAGE 78

Summary 78 • Key Terms 79 • Discussion Questions 79 • Learning Exercise 1 79• Learning Exercise 2 79 • Case Study 1: A Case of Age and Gender Discrimination? 80• Case Study 2: Are Affirmative Action Plan Goals Evidence of Discrimination? 80

PART I PROSPERA EXERCISES 82

C O N T E N T S JX

PART II Work Design and Workforce Planning 83

e r JOB DESIGN AND JOB ANALYSIS 84

THE IMPORTANCE OF JOB DESIGN AND JOB ANALYSIS 86

JOB DESIGN 88

Efficiency Approaches to Job Design 88 • Motivational Approaches to Job Design 90 • ChangingJob Tasks 91 • Increasing Responsibility and Participation 92 • Employee Teams 93 • WhichApproach to Use? Balancing Efficiency and Motivational Approaches 94

JOB DESCRIPTIONS AND JOB SPECIFICATIONS 94

JOB ANALYSIS 96

Job Information 96 • Observations and Diaries 97 • Interviews 97 • Questionnaires 98• Occupational Information Network (O*NET) 98 • Job Analysis Techniques 98

JOB DESIGN IN PRACTICE: MEETING ORGANIZATIONAL DEMANDS 700

Strategy and Job Design 101 • Job Design Approach Adopted 101 • Breadth of Tasks, Duties, andResponsibilities Performed 101 • Company Characteristics and Job Design 101 • Formalization ofJobs 101 • Breadth and Depth of Tasks 102 • Culture and Job Design 102 • Managerial Choices of JobDesign Tactics 102 • Employee Acceptance of Job Design Decisions 102 • Employee Concerns and JobDesign 102 • Perception of Fairness of Job Duties 103 • Need for Flexible Work Arrangements 103

JOB DESIGN IN PRACTICE: ENVIRONMENTAL INFLUENCES 104

Labor Force Trends and Job Design 104 • Skill Availability to Perform Tasks 104 • Job Design Decisionsfor the Aging Labor Force 105 • Technology and Job Design 105 • Telecommuting 105 • VirtualTeams 106 • Globalization and Job Design 106 • Need to Address Cross-Cultural Issues 107• Relevant Labor Market 107 • Ethics and Job Design 107 • Concerns about Types of TasksRequired 107 • Attitudes Toward Physical Conditions of Job Design 108

JOB DESIGN IN PRACTICE: REGULATORY ISSUES 108

Importance of Identifying Essential and Non-Essential Job Duties 109 • Job Design and EmployeeSafety 109

Summary 110 • Key Terms 110 a Discussion Questions 110 H Learning Exercise 1 111• Learning Exercise 2 111 • Learning Exercise 3 111 m Case Study 1: Home-Sourcing at AlpineAccess 111 • Case Study 2: Rethinking Jobs at Ellers Technical Support Professionals (ETSP) 112

Appendix to Chapter 4 Standardized and Customized Approaches to Job Analysis 113

STANDARDIZED APPROACHES TO JOB ANALYSIS 113

Functional Job Analysis (FJA) 113 • Position Analysis Questionnaire (PAQ) 115

C O N T E N T S

CUSTOMIZED APPROACHES TO JOB ANALYSIS 116

Critical Incidents Approach 116 • Task Inventory Approach 116 • Job Element Approach 116

* r WORKFORCE PLANNING 118

THE IMPORTANCE OF WORKFORCE PLANNING 120

WORKFORCE PLANNING 121

FORECASTING LABOR SUPPLY AND LABOR DEMAND 122

Internal Factors 122 • Turnover 122 • Employee Movements 124 • Employee Productivity 125• Company Performance 126 • Strategic Direction 126 • External Factors 127 • Local LaborMarket 127 • Economic Conditions 127 • Industry Trends 127

TACTICS FIRMS USE TO BALANCE THEIR SUPPLY AND DEMAND FOR LABOR 128

Labor Shortage Tactics 128 • Employee Overtime 128 • Outsourcing and Contingent Labor 130• Employee Retention 130 • Employee Promotions, Transfers, and Demotions 130 • New Hires 130• Labor Surplus Tactics 130 • Layoffs 130 • Attrition and Hiring Freezes 131 • Early Retirement 131• Employee Promotions, Transfers, and Demotions 132

WORKFORCE PLANNING IN PRACTICE: ORGANIZATIONAL DEMANDS 732

Strategy and Workforce Planning / 132 • Required Speed to Deal with Shortages and Surpluses 133• Critkality of Employee Groups 133 • Company Characteristics and Workforce Planning 133 • TheRelative Impact of Labor Shortages and Surpluses 133 • Who Carries Out Workforce Planning 133 •Corporate Culture and Workforce Planning 134 • Likelihood of Firms Using Different Tactics 134

• Employee Reactions to Workforce Planning Tactics 134 • Employee Concerns and Workforce Planning 134• Employee Stress and Work/Life Balance Issues 134 • Perceptions of Procedural and Distributive Justice 135

ENVIRONMENTAL INFLUENCES AND WORKFORCE PLANNING 735

Labor Force Trends and Workforce Planning 136 • Availability of Internal and External Workers 136• Which Tactics to Use 136 • Technology and Workforce Planning 136 • The Number of EmployeesNeeded 137 • The Types of Workers Needed 137 • The Quality of Workforce Planning Forecasts 138

• Globalization and Workforce Planning 138 • Where the Workers Are 138 • Which Workforce PlanningTactics to Use 138 • Ethics and Workforce Planning 139 • Community Reactions to Workforce PlanningTactics 139 • How Companies Help Employees Cope 140

REGULATORY ISSUES AND WORKFORCE PLANNING 740

Requirements for Mass Layoffs and Plant Closings 140 • Determining Who Is an Employee versus anIndependent Contractor 141

Summary 142 • Key Terms 143 B Discussion Questions 143 • Learning Exercise 1 143• Learning Exercise 2 144 • Case Study 1: Planning for the Future at East Coast Bank 144• Case Study 2: The Turnaround at Ford 145

PART II PROSPERA EXERCISES 746

C O N T E N T S XI

PART III Managing Employee Competencies 147

e r RECRUITMENT 148

THE PURPOSE OF RECRUITMENT 750

THE RECRUITMENT PROCESS 757

INTERNAL RECRUITMENT 752Internal Recruitment Methods 152 • Advantages and Disadvantages of Internal Recruitment 154

EXTERNAL RECRUITMENT 754Advertising 155 • Educational Institutions 157 • Employment Agencies and Employee SearchFirms 158 • Professional Associations 159 • Temporary Employees 159 • EmployeeReferrals 159 • Sourcing Applicants 159 • Re-recruiting 160 • Advantages andDisadvantages of External Recruitment 160

MAXIMIZING RECRUITMENT EFFECTIVENESS 760

Preparing Recruitment Advertisements 161 • Developing a Recruitment Value Proposition 161• Writing a Recruitment Message 162 • Recruiters 164 • Realistic Job Previews 164• Recruitment Follow-Up 164 • Recruitment Effectiveness 165

RECRUITMENT IN PRACTICE: ORGANIZATIONAL DEMANDS 765

Strategy and Recruitment 166 • Content of a Recruitment Message 166 • Choice of RecruitmentMethods 166 • Company Characteristics and Recruitment 167 • Use of Internal versus ExternalRecruiting 167 • Who Manages Recruitment 167 • Culture and Recruitment 167 • RecruitmentValue Proposition 168 • Balance of Internal versus External Recruiting 168 • Employee Concerns andRecruitment 168 • Appraisal of Recruitment Message 168 • Perception of Fairness of the Process 169

RECRUITMENT IN PRACTICE: ENVIRONMENTAL INFLUENCES 769

The Labor Force and Recruitment 169 • Target of Recruitment 169 • How Much Recruitment IsNeeded 171 • Technology and Recruitment 171 • How Recruitment Is Managed 171 • SkillsRecruited 172 • Globalization and Recruitment 173 • How Recruiting Is Done 173 • WhereRecruiting Is Done 173 • Ethics, Corporate Social Responsibility, and Recruitment 174 • ValueProposition Offered 174 • Truth-in-Hiring 174 • Targets of Recruitment 174

REGULATORY ISSUES AND RECRUITMENT 775

Content of a Recruitment Message 175 • Recruiter Words and Actions 175 • Record Keeping 176

Summary 176 • Key Terms 176 • Discussion Questions 177 • Learning Exercise 1 177• Learning Exercise 2 177 • Case Study 1: The Recruiting Game at L'Oreal 178 • Case Study 2:Enron: A Not So Happy Ending to a Good Recruiting Plan 178

C O N T E N T S

Appendix to Chapter 6 Metrics Used to Evaluate an Organization's Recruiting Effectiveness 179

YIELD RATIOS 179

COST-PER-HIRE 780

TIME-TO-FILL RATE 780

MANAGER FEEDBACK 780

BENCHMARKING BEST PRACTICES 787

SELECTION 182

EMPLOYEE SELECTION AND THE PERFORMANCE OF FIRMS 784

Selection Defined 184 • How Employee Selection Processes Affect the Performance of Firms 185

PERSON-JOB FIT 786

STANDARDS FOR EFFECTIVE SELECTION PROCESS 787

Reliability 187 • Validity 188 • Unbiased 189 • Candidates'Personal Characteristics 189Contrast Effect 189 ° Halo/Devil's Horns Effect 189 • Impression Management 189e

SELECTION METHODS: INITIAL SCREENING 790

Applications and Resumes 190 • Screening Interview 192

SELECTION METHODS: FINAL SCREENING 192

Employment Tests 192 • Ability Tests 192 • Achievement/Competency Tests 193 • PersonalityInventories 193 • When to Use Employment Tests 194 • Interviews 194 • UnstructuredInterviews 195 • Structured Interviews 195 • Reference Checks, Background Checks, Credit Reports,and Honesty Tests 196 • Assessment Centers 199 • Biodata 200 • Drug Tests 200

• Medical Examinations 200

CHOOSING AMONG SELECTION METHODS 207

Compensatory Approach 201 • Multiple-Hurdle Approach 203 • Multiple-Cutoff Approach 203• Choosing a Scoring Method 203

SELECTION IN PRACTICE: ORGANIZATIONAL DEMANDS 204

Strategy and Selection 204 • Core Competencies 205 • Selection Criteria for Person-Job Fit 206• Methods of Selection 206 • Company Characteristics and Selection 206 • Degree of Structure 206• Substance and Form of the Selection Process 206 • Culture and Selection 207 • Person-OrganizationFit 207 • Promotion-from-Within Policy 208 • Who Participates in the Selection Process 208 • EmployeeConcerns and Selection 208 • Fair and Equal Treatment 208 • Impact of Job on Work/Life Balance 208

C O N T E N T S XJM

SELECTION IN PRACTICE: ENVIRONMENTAL INFLUENCES 209

Labor Market and Selection 209 • Types of Applicants Available 209 • Willingness of Applicants to AcceptJobs 210 • Technology and Selection 210 • Technology and the Process of Selection 210 • Verificationof Credentials 211 • Globalization and Selection 211 • Labor Market at Home 211 • Labor MarketAbroad 212 • Ethics and Employee Selection 213 • Concerns about Privacy 213 • Amount andType of Information Given to Applicants 213

SELECTION IN PRACTICE: REGULATORY ISSUES 273

Procedures for Using Selection Measures 214 • Definition of an Applicant 214

Summary 215 • Key Terms 215 • Discussion Questions 216 • Learning Exercise 1 216• Learning Exercise 2 216 • Case Study 1: Selection at First Apparel 216 • Case Study 2: VirtualSelection at National City Corporation 217

Appendix to Chapter 7 Reliability and Validity 218

RELIABILITY 278

VALIDITY 278

Content Validity 218 • Criterion-Related Validity 218 • Construct Validity 219

TRAINING AND DEVELOPMENT 220

THE PURPOSE OF TRAINING AND DEVELOPMENT 222

Employee Orientation 223 8 Onboarding 224

TRAINING AND DEVELOPMENT DEFINED 224

DESIGNING AN EFFECTIVE TRAINING PROCESS 225

Part 1: Needs Assessment 225 • Organization Analysis 225 • Task Analysis 225 • PersonAnalysis 227 • Part 2: Design 228 • Instructional Objectives 228 » Lesson Planning 228• Principles of Learning 229 • Part 3: Implementation 230 • Training Methods 231 • Types ofTraining 236 • Part 4: Evaluation 238 • Level 1: Reaction 238 • Level 2: Learning 239 • Level 3:Behavior 239 * Level 4 and Level 5: Results and Return on Investment 240

CAREER DEVELOPMENT 240

Competency Analysis 241 • Career Development Activities 241

TRAINING AND DEVELOPMENT IN PRACTICE: ORGANIZATIONAL DEMANDS 247

Strategy and Training 241 • Level of Investment 242 • Emphasis of Investment 243 • CompanyCharacteristics and Training 243 • Where Training Is Done 243 • Who Handles Training 244 8 Type ofTraining 244 • How Training Is Provided 244 • Culture and Training 245 • Focus of Training 245

• Employees Willingness to Participate in Training 245 • Employee Concerns and Training 245• Fairness and Equity 245 • Work/Life Balance 246

XIV CONTENTS

TRAINING AND DEVELOPMENT IN PRACTICE: ENVIRONMENTAL INFLUENCES 246

Labor Market 246 • Who Needs Training 246 • Type of Training 247 • Technology 247 •Skills Inventories 247 • Method of Delivery 247 • Communication of Options 247 • Globalization andTraining 248 • Where Training will be Offered 248 • When Training will be offered 248 • How Trainingwill be Offered 248 • What Training will be Offered 249 • Ethics and Training 249• Obligation to Train 250 • Content of Training 250 • Use ofTraining to Change Behavior 250

TRAINING AND DEVELOPMENT IN PRACTICE: REGULATORY ISSUES 257

Accessibility of Training and Employee Development Opportunities 251 • Type of Training Needed 251

Summary 252 • Key Terms 252 • Discussion Questions 253 • Learning Exercise 1 253• Learning Exercise 2 253 • Case Study 1: Project Management and Next Steps at HP 253• Case Study 2: Quality and Customer Service at Michael's Coffee and Desserts 254

PART III PROSPERA EXERCISES 256

PART IV Managing Employee Attitudes and Behaviors 257

c h r PERFORMANCE MANAGEMENT 258

WHY PERFORMANCE MANAGEMENT IS SO IMPORTANT 260

PURPOSES OF PERFORMANCE MANAGEMENT 267

STEP 1: IDENTIFYING PERFORMANCE DIMENSIONS 267

STEP 2: DEVELOPING PERFORMANCE MEASURES 262

Valid Measures 263 • Performance Measurement Standards 263 • Specificity 263

STEP 3: EVALUATING EMPLOYEE PERFORMANCE 264

Individual Comparisons 264 • Absolute Approaches: Measuring Traits and Behaviors 265• Attribute-Based Approaches 266 • Behavior-Based Approaches 267 • Results-Based Approaches 268• Sources of Performance Data 269 • Supervisors 269 • Co-Workers 270 • Self-Appraisals 2709 Subordinates 270 • Customer Evaluation 270 • 360-Degree Appraisals 271 • WeightingPerformance Criteria 271 • Performance Measurement Errors 272

STEP 4: PROVIDING FEEDBACK 273

When to Appraise Employees 273 • The Feedback Meeting 274 • Separating Evaluation from

Development 274 • Targeting Behaviors or Outcomes Rather Than the Individual 274 • Being Balanced in

Your Appraisal 274 • Encouraging Employee Participation 274

STEP 5: DEVELOPING ACTION PLANS TO IMPROVE EMPLOYEEPERFORMANCE 274

Understanding the Causes of Poor Performance 275 • Taking Action 275 • DiscipliningEmployees 276 • Progressive Discipline 276 • Positive Discipline 277

CONTENTS XV

ORGANIZATIONAL DEMANDS AND PERFORMANCE MANAGEMENT 277Strategy and Performance Management 278 • Which Performance Dimensions are Emphasized 278

• The Performance Evaluation Method Used 279 • Company Characteristics and PerformanceManagement 280 • Which Performance Evaluation Approach is Used 280 • Who Carries Out theProcess 280 • Culture and Performance Management 280 • The Objective of the PerformanceManagement System 280 • Which Evaluation Approach is Used 280 • Effectiveness of PerformanceManagement Approaches 281 • Employee Concerns and Performance Management 281 • Perceptionsof Procedural and Distributive Justice 281 • Employees' Responsiveness to Performance Feedback 282

• Achieving Work/Life Balance 282

ENVIRONMENTAL INFLUENCES ANDPERFORMANCE MANAGEMENT 283

Labor Force Trends and Performance Management 283 • Accuracy of Performance Evaluations 283• The Need to Evaluate Diversity Efforts 283 • Technology and Performance Management 283 • ThePerformance Management Process 283 • How Telecommuters are Evaluated 284 • Globalization andPerformance Management 284 • What is Evaluated 285 • The Acceptability of the PerformanceManagement System 285 • Who Provides Performance Data 285 • Ethics and PerformanceManagement 286 • Employees'Perceptions of the Performance Management System 286 • How EmployeesReact to Surveillance and Monitoring 286 • How Ethically Employees Behave at Work 286

PERFORMANCE MANAGEMENT AND REGULATORY ISSUES 287Efforts to Reduce Discrimination in the Performance Management Process 287 • The Importance of

Documenting Employee Performance 287

Summary 288 • Key Terms 289 • Discussion Questions 289 • Learning Exercise 1 289• Learning Exercise 2 289 • Case Study 1: A New System at Addillade and Partners 290 • CaseStudy 2: Kay Johnson at Human Capital Consultants (HCC) 290

c h COMPENSATING EMPLOYEES 292

PURPOSE OF COMPENSATION 294

TOTAL COMPENSATION 295

EQUITY THEORY 296

INTERNAL ALIGNMENT 298Job Ranking 298 • Job Classification 298 • Point Method 299 • Factor Comparison 300

EXTERNAL COMPETITIVENESS 307

Salary Surveys 301 • Job Pricing 301 • Company Pay Policy 303 • Pay Grades and PayRanges 303 • Broadbanding 304

PAY FOR INDIVIDUAL EMPLOYEES 305

X V I C O N T E N T S

ALTERNATIVE COMPENSATION APPROACHES 305

Skill-Based and Knowledge-Based Pay 306 • Competency-Based Pay 307 • Direct MarketPricing 307

ADMINISTERING COMPENSATION 308

COMPENSATION IN PRACTICE: ORGANIZATIONAL DEMANDS AND COMPENSATION 308

Strategy and Compensation 309 • Internal Value of Jobs 309 • Compensation Mix 310 • Company

Characteristics and Compensation 311 • Ability to Pay 311 • Type of Compensation 312 • Culture

and Compensation 312 • Priorities of a Firm's Compensation Policy 312 • Employees'Expectations and

Attitudes toward Compensation 312 • Employee Concerns and Compensation 312 • Equity versus

Equality 313 • Fairness of Rewards 313

COMPENSATION IN PRACTICE: ENVIRONMENTAL INFLUENCES ANDCOMPENSATION 374

Labor Force Trends and Compensation 314 • The Level of a Firm's Compensation 314 • Forms ofCompensation Employees Desire 315 • Technology and Compensation 315 • Ease of Collecting SalaryData 315 * How Compensation is Tracked and Delivered 315 * What is Considered Compensable Work 315• Globalization and Compensation 316 • Where Pay Decisions are Made 316 • Acceptableness ofCompensation 316 • Pay Rates 317 • Ethics/Social Responsibility and Compensation 317 • WhatCompensation Decisions Signal to Employees 317 • Attitudes About the Living Wage and Comparable Worth 317

COMPENSATION REGULATIONS 378

Davis-Bacon Act 318 • Walsh-Healey Public Contracts Act (PCA) 319 • Fair Labor Standards Act(FLSA) 319 8 Minimum Wage 319 • Exempt versus Nonexempt Employees 319 • Overtime 319 •Child Labor 320 • Recordkeeping 320

Summary 320 • Key Terms 321 • Discussion Questions 321 • Learning Exercise 1 322• Learning Exercise 2 322 • Case Study 1: An Ethical Dilemma? 322 • Case Study 2:Compensation at W.L Gore 323

INCENTIVES AND REWARDS 324

WHY ARE INCENTIVE PLANS IMPORTANT? 326

HOW INCENTIVES WORK 327Theories of Motivation 327

TYPES OF INCENTIVE PLANS 328

Individual Incentive Plans 328 * Merit Pay Programs 328 • Piecework Incentive Plans 329 • StandardHour Plan 330 • Awards 331 • Sales Incentive Plans 332 • Group/ Organizational Incentives 333• Team Incentive Plans 333 * Gainsharing Plans 333 • Profit Sharing Plans 334 • OwnershipPlans 334 Mixed-Level Plans 335 • Executive Compensation: Pay and Incentives 335 • WhatMakes an Incentive Plan Effective? 336

CONTENTS XVII

INCENTIVES IN PRACTICE: ORGANIZATIONAL DEMANDS 337

Strategy and Incentives 338 • What is Rewarded 338 • Which Incentive Plans are Used 338 •Company Characteristics and Incentives 338 • Feasibility of Different Incentive Plans 338 • Impact ofIncentives on Employees 339 • Culture and Incentives 339 • Incentive Plans Managers Choose 339 •Employees'Acceptance of Incentive Plans 339 • Employee Concerns and Incentives 340 • Fairness ofIncentive Plan Standards 340 • Likelihood of Receiving Incentives 341 • Acceptability of Incentive Payouts 341

INCENTIVES IN PRACTICE: ENVIRONMENTAL INFLUENCES 347Labor Force Trends and Incentive Plans 342 • Using Incentives to Increase Diversity 342 • Desirability ofDifferent Rewards 342 • Technology and Incentives 342 • How Incentives are Managed 342 • IncentivePlans for a Virtual Workforce 343 • Globalization and Incentive Plans 343 • What is Rewarded 343• Acceptability of Incentive Plans 344 • Ethics, Social Responsibility, and Incentive Plans 344 • EthicalEmployee Behavior 344 • How Employees and Communities View Executive Incentive Plans 345

INCENTIVES IN PRACTICE: REGULATORY ISSUES 345Bias and Discrimination 345 • Stock Option Backdating 346

Summary 346 a Key Terms 347 • Discussion Questions 347 m Learning Exercise 1 347• Learning Exercise 2 347 • Case Study 1: A New Incentive System at the Auto Dealer 348 •Case Study 2: Executive Compensation at AB3D 348

EMPLOYEE BENEFITS AND SAFETY PROGRAMS 350

EMPLOYEE BENEFITS AND SAFETY PROGRAMS 352

BENEFITS AND SAFETY PHIILOSOPHY 354

MANDATORY BENEFITS 354

Social Security 354 • Unemployment Insurance (Ul) 355 • Workers' Compensation Insurance 356

VOLUNTARY BENEFITS 356

Health and Wellness Programs 356 • Health Care Plans 357 • Wellness Programs 361 • EmployeeAssistance Programs 363 • Short-and Long-Term Disability Insurance 363 • Accidental Death andDismemberment(AD&D) 365 • Life Management Benefits 365 • Paid Time Off 366 • EducationalAssistance 366 • Child Care and Elder Care 366 • Long-Term Care Benefits 366 • Life Insurance 367• Financial Planning 367 • Legal Services 367 • Retirement Benefits 367 • Contributory andNoncontributory Retirement Plans 368 • Defined Benefit Pension Plans 368 • Defined ContributionPlans 369 • Pension Protection Act of 2006 370 • Retiree Health Plans 370

BENEFITS ADMINSTRATION 370

SAFETY PROGRAMS 372

Programs Related to the Occupational Safety and Health Act 372 • Inspection Programs 372 •Partnership Programs 372 • Reporting Requirements 373 • Workplace Violence Programs 373 •Ergonomic Programs 373

XVill CONTENTS

EMPLOYEE BENEFITS IN PRACTICE: ORGANIZATIONAL DEMANDS 374

Strategy, Benefits, and Safety Programs 374 • Role of Programs in Total Compensation Package 374

• Funds Available for Benefits 375 • Company Characteristics, Benefits, and Safety Programs 375• Types of Benefits and Safety Programs 375 • Availability of Programs 376 • Company Culture,Benefits, and Safety Programs 377 • Employees'Attitudes Toward Their Firm's Benefits and SafetyPrograms 377 • Who Receives Nonmandatory Benefits 378 • Employees'Concerns About Their Firm'sBenefits and Safety Programs 378 • Perceptions of Fairness of the Firm's Benefits 378 • Safety in theWorkplace 379

EMPLOYEE BENEFITS, AND SAFETY IN PRACTICE: ENVIRONMENTALINFLUENCES 379

The Labor Market and Benefits and Safety Programs 379 • What Benefits Need to be Offered 379

• Need for Safety Modifications and Training 379 • Technology and Benefits and Safety Programs 380• How Benefits Information is Delivered 380 • Telecommuting and Safety 380 • Globalization andEmployee Benefits and Safety Programs 381 • Types of Benefits Offered 381 • Policies about BenefitsEqualization 382 • Norms Relative to Safety 382 • Ethics and Social Responsibility and Benefits andSafety Programs 382 • Management of Benefits 382 • Comprehensiveness of Safety Programs 383

EMPLOYEE BENEFITS IN PRACTICE: REGULATORY ISSUES 383

What Happens When Workers Change Jobs 383 • Protection of Employee Information 384

Summary 384 • Key Terms 384 • Discussion Questions 385 • Learning Exercise 1 385• Learning Exercise 2 386 • Case Study 1: Keeping Up with ACUITY 386 • Case Study 2:Creating a Safety Culture at Custom Transportation 386

PART IV PROSPERA EXERCISES 388

PART V Special Topics 389

LABOR UNIONS AND EMPLOYEE MANAGEMENT 390

LABOR RELATIONS OVERVIEW 392

BRIEF HISTORY OF LABOR UNION MOVEMENT IN THE UNITED STATES 392

GOVERNMENT REGULATION OF LABOR UNIONS 394

Railway Labor Act of 1926 394 • Norris-LaGuardia Act of 1932 395 • Wagner Act (National LaborRelations Act) 395 • Employee Rights 395 • Unfair Labor Practices 396 • National Labor Relations Board(NLRB) 396 • Taft-Hartley Act of 1947 396 • Union Membership 397 • National EmergencyStrikes 398 • Federal Mediation and Conciliation Service 398 • Landrum-Griffin Act of 1959 398

TYPES OF UNIONS 398

Local Unions 399 • International Unions 400

CONTENTS XIX

THE UNION-ORGANIZING PROCESS 400

Role of Employees, Employers, and Union Organizers 401 • Card Checks and Neutrality Agreements 401

COLLECTIVE BARGAINING 402

Good Faith Bargaining 402 • Bad Faith Bargaining 402 • Negotiating the Agreement 402• Preparing to Negotiate 402 • Knowing the Interests of the Other Party 403 • Understanding the Consequences

of Not Reaching an Acceptable Agreement 403

THE GRIEVANCE PROCESS 404

THE NLRB'S ROLE IN UNFAIR LABOR PRACTICES 405

DECERTIFICATION 405

CORPORATE CAMPAIGNS 405

PUBLIC-SECTOR LABOR RELATIONS 406

TRENDS IN LABOR RELATIONS 406

Changes in Union Activities 406 • New Forms of Employee Organizations 407 • GlobalTrends 408

Summary 409 • Key Terms 409 • Discussion Questions 410 • Learning Exercise 1 410• Learning Exercise 2 410 • Case Study 1: Time for a Union at Starbuck's? 410 • Case Study 2:Not So Grand Morale at the Grand Limited Hotel 411

CREATING HIGH-PERFORMING HR SYSTEMS 412

PRINCIPLES OF HIGH-PERFORMING HR SYSTEMS 475

External Fit: Aligining HR Activities with HR Challenges 415 • Internal Fit: Aligning HR Activities withOne Another 416 • Deadly Combinations 417 • Powerful Connections 417 • Aligning HR Systemsand Employees' Contributions 417

MANAGING THE EMPLOYMENT PORTFOLIO 419

Strategic Value 419 • Uniqueness 420 • Mapping Your Employment Portfolio 421 • CoreEmployees 421 • Job-Based Employees 422 • Contract Workers 422 • Alliance Partners 422

EVALUATING YOUR HR SYSTEM: THE HR SCORECARD 423

Step 1: identify Your Firm's Strategic Performance Drivers 424 • Step 2: Evaluate Your Firm's ExternalAlignment 424 • Translate the Strategic Performance Drivers into HR Deliverables 424 • Evaluating the

Alignment of HR Deliverables with the Strategic Performance Drivers 425 • Step 3: Evaluate Your Firm's

Internal Alignment 425 • Evaluating the Alignment of the HR Practices with the HR Deliverables 425

• Evaluating the Alignment Among the Firm's HR Practices 427

X X C O N T E N T S

BUILDING YOUR OWN HIGH-PERFORMING ORGANIZATION 427

Customizing Your HR Scorecard 429 • Being Consistent 429 • Being Specific 429• Following Up on the Implementation of a Redesign 430

Summary 430 • Key Terms 430 • Discussion Questions 431 • Learning Exercise 1 431• Learning Exercise 2 432 • Case Study 1: The Puzzling Case at Digital Gaming 432 • Case Study2: People's Home Gadgets 433

PART V PROSPERA EXERCISES 434

REFERENCES 435

GLOSSARY 462

PHOTO CREDITS 471

NAME INDEX 472

COMPANY INDEX 476

SUBJECT INDEX 478