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This is “Recruiting, Motivating, and Keeping Quality Employees”, chapter 7 from the book An Introduction to Business (index.html) (v. 2.0). This book is licensed under a Creative Commons by-nc-sa 3.0 ( 3.0/) license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz ( in an effort to preserve the availability of this book. Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page ( . For more information on the source of this book, or why it is available for free, please see the project's home page ( . You can browse or download additional books there. i

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  • This is Recruiting, Motivating, and Keeping Quality Employees, chapter 7 from the book An Introduction toBusiness (index.html) (v. 2.0).

    This book is licensed under a Creative Commons by-nc-sa 3.0 ( license. See the license for more details, but that basically means you can share this book as long as youcredit the author (but see below), don't make money from it, and do make it available to everyone else under thesame terms.

    This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz( in an effort to preserve the availability of this book.

    Normally, the author and publisher would be credited here. However, the publisher has asked for the customaryCreative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally,per the publisher's request, their name has been removed in some passages. More information is available on thisproject's attribution page (

    For more information on the source of this book, or why it is available for free, please see the project's home page( You can browse or download additional books there.


    www.princexml.comPrince - Non-commercial LicenseThis document was created with Prince, a great way of getting web content onto paper.


  • Howard Schultz toasts at thelaunch of their new everydaybrew, Pike Place Roast, April 8,2008, in Bryant Park in New YorkCity.

    Chapter 7

    Recruiting, Motivating, and Keeping Quality Employees

    The Grounds of a Great Work Environment

    Howard Schultz has vivid memories of his father slumped on the couch with his legin a cast.Introductory material on Howard Schultz and Starbucks comes fromHoward Schultz and Dori Jones Yang, Pour Your Heart into It: How Starbucks Built aCompany One Cup at a Time (New York: Hyperion, 1997), 38. The ankle would heal,but his father had lost another jobthis time as a driver for a diaper service. It wasa crummy job; still, it put food on the table, and if his father couldnt work, therewouldnt be any money. Howard was seven, but he understood the gravity of thesituation, particularly because his mother was seven months pregnant, and thefamily had no insurance.

    This was just one of the many setbacks that plagued Schultzs father throughout hislifean honest, hard-working man frustrated by a system that wasnt designed tocater to the needs of common workers. Hed held a series of blue-collar jobs (cabdriver, truck driver, factory worker), sometimes holding two or three at a time.Despite his willingness to work, he never earned enough money to move his familyout of Brooklyns federally subsidized housing projects. Schultzs father died neverhaving found fulfillment in his work lifeor even a meaningful job. It was thesaddest day of Howards life.

    As a kid, did Schultz ever imagine that one day hed bethe founder and chairman of Starbucks CoffeeCompany? Of course not. But he did decide that if hewas ever in a position to make a difference in the livesof people like his father, hed do what he could.Remembering his fathers struggles anddisappointments, Schultz has tried to make Starbucksthe kind of company where he wished his father hadworked. Without even a high school diploma, Schultzadmits, my father probably could never have been anexecutive. But if he had landed a job in one of our storesor roasting plants, he wouldnt have quit in frustrationbecause the company didnt value him. He would havehad good health benefits, stock options, and an


  • Photo by Mario Tama/GettyImages

    atmosphere in which his suggestions or complaintswould receive a prompt, respectful response.HowardSchultz and Dori Jones Yang, Pour Your Heart into It: HowStarbucks Built a Company One Cup at a Time (New York:Hyperion, 1997), 138.

    Schultz is motivated by both personal and business considerations: Whenemployees have self-esteem and self-respect, he argues, they can contribute somuch more: to their company, to their family, to the world.Howard Schultz andDori Jones Yang, Pour Your Heart into It: How Starbucks Built a Company One Cup at aTime (New York: Hyperion, 1997), 67. His commitment to his employees isembedded in Starbucks mission statement, whose first objective is to provide agreat work environment and treat each other with respect and dignity.OurStarbucks Mission Statement, Starbucks, (accessed October 8, 2011). Thoseworking at Starbucks are called partners because Schultz believes working for hiscompany is not just a job, its a passion.Our Starbucks Mission Statement,Starbucks, (accessed October 8, 2011).

    Video Clip

    (click to see video)

    A major piece of the Starbucks success story has been the superior service provided by its motivatedemployees.

    Chapter 7 Recruiting, Motivating, and Keeping Quality Employees


  • 7.1 Human Resource Management


    1. Define human resource management and explain how managers developand implement a human resource plan.

    Employees at Starbucks are vital to the companys success. They are its public face,and every dollar of sales passes through their hands.Howard Schultz and Dori JonesYang, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time (NewYork: Hyperion, 1997), 125. According to Howard Schultz, they can make or breakthe company. If a customer has a positive interaction with an employee, thecustomer will come back. If an encounter is negative, the customer is probably gonefor good. Thats why its crucial for Starbucks to recruit and hire the right people,train them properly, motivate them to do their best, and encourage them to staywith the company. Thus, the company works to provide satisfying jobs, a positivework environment, appropriate work schedules, and fair compensation andbenefits. These activities are part of Starbuckss strategy to deploy human resourcesin order to gain competitive advantage. The process is called human resourcemanagement (HRM)1, which consists of all actions that an organization takes toattract, develop, and retain quality employees. Each of these activities is complex.Attracting talented employees involves the recruitment of qualified candidates andthe selection of those who best fit the organizations needs. Developmentencompasses both new-employee orientation and the training and development ofcurrent workers. Retaining good employees means motivating them to excel,appraising their performance, compensating them appropriately, and doing whatspossible to retain them.

    Human Resource Planning

    How does Starbucks make sure that its worldwide retail locations are staffed withjust the right number of committed employees? How does Walt Disney Worldensure that it has enough qualified cast members to provide visitors with amagical experience? How does Norwegian Cruise Lines make certain that whenthe Norwegian Dawn pulls out of New York harbor, it has a complete, fully trainedcrew on board to feed, entertain, and care for its passengers? Managing these tasksis a matter of strategic human resource planning2the process of developing aplan for satisfying an organizations human resources (HR) needs.

    1. All actions that an organizationtakes to attract, develop, andretain quality employees.

    2. Process of developing a planfor satisfying an organizationshuman resource needs.

    Chapter 7 Recruiting, Motivating, and Keeping Quality Employees


  • A strategic HR plan lays out the steps that an organization will take to ensure that ithas the right number of employees with the right skills in the right places at theright times. HR managers begin by analyzing the companys mission, objectives, andstrategies. Starbuckss objectives, for example, include the desire to developenthusiastically satisfied customersOur Starbucks Mission Statement, Starbucks, October 8, 2011). as well as to foster an environment in which employeestreat both customers and each other with respect. Thus, the firms HR managerslook for people who are adaptable, self-motivated, passionate, creative teammembers.25 Top MBA Employers, CNNMoney, (accessed October 8,2011). Likewise, Disneys overall objectives include not only making all visitors feelas if theyre special in a special place but also ensuring that employees appearancereflects a special image (theres even a forty-seven-page book on the subject).HowDisney Puts the Magic in Recruiting, Vault, (accessed May6, 2006). Disney looks for people who best fulfill these job requirements. The maingoal of Norwegian Cruise Linesto lavish passengers with personalattentiondetermines not only the type of employee desired (one withexceptionally good customer-relation skills and a strong work ethic) but also thenumber needed (one for every two passengers on the Norwegian Dawn).Overview ofCareers on Cruise Ships, Career Prospects in Virginia, May 6, 2006).

    Job Analysis

    To develop an HR plan, HR managers must obviously be knowledgeable about thejobs that the organization needs performed. They organize information about agiven job by performing a job analysis3 to identify the tasks, responsibilities, andskills that it entails, as well as the knowledge and abilities needed to perform it.Managers also use the information collected for the job analysis to prepare twodocuments:

    A job description4, which lists the duties and responsibilities of aposition

    A job specification5, which lists the qualificationsskills, knowledge,and abilitiesneeded to perform the job

    3. Identification of the tasks,responsibilities, and skills of ajob, as well as the knowledgeand abilities needed to performit.

    4. Outline of the duties andresponsibilities of a position.

    5. Detailed list of thequalifications needed toperform a job, includingrequired skills, knowledge, andabilities.

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  • HR Supply and Demand Forecasting

    Once theyve analyzed the jobs within the organization, HR managers must forecastfuture hiring (or firing) needs. This is the three-step process summarized in Figure7.1 "How to Forecast Hiring (and Firing) Needs".

    Figure 7.1 How to Forecast Hiring (and Firing) Needs

    Starbucks, for instance, might find that it needs three hundred new employees towork at stores scheduled to open in the next few months. Disney might determinethat it needs two thousand new cast members to handle an anticipated surge invisitors. The Norwegian Dawn might be short two dozen restaurant workers becauseof an unexpected increase in reservations.

    After calculating the disparity between supply and future demand, HR managersmust draw up plans for bringing the two numbers into balance. If the demand forlabor is going to outstrip the supply, they may hire more workers, encouragecurrent workers to put in extra hours, subcontract work to other suppliers, orintroduce labor-saving initiatives. If the supply is greater than the demand, theymay deal with overstaffing by not replacing workers who leave, encouraging earlyretirements, laying off workers, or (as a last resort) firing workers.

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  • Recruiting Qualified Employees

    Armed with information on the number of new employees to be hired and the typesof positions to be filled, the HR manager then develops a strategy for recruitingpotential employees. Recruiting6 is the process of identifying suitable candidatesand encouraging them to apply for openings in the organization.

    Before going any further, we should point out that, in recruiting and hiring,managers must comply with antidiscrimination laws; violations can have legalconsequences. Discrimination7 occurs when a person is treated unfairly on thebasis of a characteristic unrelated to ability. Under federal law, its illegal todiscriminate in recruiting and hiring on the basis of race, color, religion, sex,national origin, age, or disability. (The same rules apply to other employmentactivities, such as promoting, compensating, and firing.)The U.S. Equal EmploymentOpportunity Commission, Discriminatory Practices, (accessed October 8, 2011). The Equal EmploymentOpportunity Commission (EEOC)8 enforces a number of federal employment laws,including the following:

    Title VII of the Civil Rights Act of 1964, which prohibits employmentdiscrimination based on race, color, religion, sex, or national origin.Sexual harassment is also a violation of Title VII.

    The Equal Pay Act of 1963, which protects both women and men whodo substantially equal work from sex-based pay discrimination.

    The Age Discrimination in Employment Act of 1964, which protectsindividuals who are forty or older.

    Title I and Title V of the Americans with Disabilities Act of 1990, whichprohibits employment discrimination against individuals withdisabilities.The U.S. Equal Employment Opportunity Commission,Federal Equal Employment Opportunity (EEO) Laws, (accessed October 8,2011).

    Where to Find Candidates

    The first step in recruiting is to find qualified candidates. Where do you look forthem, and how do you decide whether theyre qualified? Lets start with the secondpart of the question first. A qualified person must be able to perform the dutieslisted in the job description and must possess the skills, knowledge, and abilitiesdetailed in the job specification. In addition, he or she must be a good fit for thecompany. A Disney recruiter, for example, wants a candidate who fits a certainimagesomeone whos clean-cut and wholesome looking. The same recruitermight also favor candidates with certain qualitiessomeone who has a good

    6. Process of identifying suitablecandidates and encouragingthem to apply for openings inthe organization.

    7. Practice of treating a personunfairly on the basis of acharacteristic unrelated toability.

    8. Federal agency in charge ofenforcing federal laws onemployment discrimination.

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  • attitude, whos a go-getter and a team player, and whos smart, responsible,and stable.Bob Nelson and Peter Economy, Managing for Dummies, 2nd ed. (NewYork: Wiley, 2003), 60.

    Internal versus External Recruiting

    Where do you find people who satisfy so many criteria? Basically, you can look intwo places: inside and outside your own organization. Both options have pluses andminuses. Hiring internally sends a positive signal to employees that they can moveup in the companya strong motivation tool and a reward for good performance. Inaddition, because an internal candidate is a known quantity, its easier to predicthis or her success in a new position. Finally, its cheaper to recruit internally. Onthe other hand, youll probably have to fill the promoted employees position. Goingoutside gives you an opportunity to bring fresh ideas and skills into the company. Inany case, its often the only alternative, especially if no one inside the company hasjust the right combination of skills and experiences. Entry-level jobs usually have tobe filled from the outside.

    How to Find Candidates

    Whether you search inside or outside the organization, you need to publicize theopening. If youre looking internally in a small organization, you can alertemployees informally. In larger organizations, HR managers generally postopenings on bulletin boards (often online) or announce them in newsletters. Theycan also seek direct recommendations from various supervisors.

    Recruiting people from outside is more complicated. Its a lot like marketing aproduct to buyers: in effect, youre marketing the virtues of working for yourcompany. Starbucks uses the following outlets to advertise openings:

    A dedicated section of the corporate Web site (Job Center, which listsopenings, provides information about the Starbucks experience, andfacilitates the submission of online applications)

    College campus recruiting (holding on-campus interviews andinformation sessions and participating in career fairs)

    Internships designed to identify future talent among college students Announcements on employment Web sites like,,, and Newspaper classified ads Facebook and Twitter Local job fairs In-store recruiting posters

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  • Informative business cards for distribution to customersTargetYour Recruitment Market, InFocus: Recruiter News, (accessedOctober 6, 2011).

    When asked what it takes to attract the best people, Starbuckss senior executiveDave Olsen replied, Everything matters. Everything Starbucks does as a companybears on its ability to attract talent. Accordingly, everyone is responsible forrecruiting, not just HR specialists. In fact, the best source of quality applicants is thecompanys own labor force.David Lee, Becoming a Talent Magnet: Your First Taskas a Recruiter: Recruit Senior Management onto Your Team, (accessedOctober 8, 2011).

    The Selection Process

    Recruiting gets people to apply for positions, but once youve received applications,you still have to select the best candidateanother complicated process. Theselection9 process entails gathering information on candidates, evaluating theirqualifications, and choosing the right one. At the very least, the process can betime-consumingparticularly when youre filling a high-level positionand ofteninvolves several members of an organization.

    Lets examine the selection process more closely by describing the steps that youdtake to become a special agent for the Federal Bureau of Investigation (FBI).Theinformation in this section comes from two sources: Federal Bureau ofInvestigation, Jobs: Special Agents, (accessed October 9,2011); Special Agent Application and Hiring Process, Federal Bureau ofInvestigations,, (accessed October 9, 2011). Mostbusiness students dont generally aspire to become FBI agents, but the FBI is quiteinterested in business graduatesespecially if you have a major in accounting orfinance. With one of these backgrounds, youll be given priority in hiring. Why?Unfortunately, theres a lot of white-collar crime that needs to be investigated, andpeople who know how to follow the money are well suited for the task.


    The first step in becoming a gun-toting accountant is, obviously, applying for thejob. Dont bother unless you meet the minimum qualifications: you must be a U.S.citizen, be age twenty-three to thirty-seven, be physically fit, and have a bachelorsdegree. To provide factual information on your education and work background,youll submit an application10, which the FBI will use as an initial screening tool.

    9. Process of gatheringinformation on candidates,evaluating their qualifications,and choosing the right one.

    10. Document completed by a jobapplicant that provides factualinformation on the personseducation and workbackground.

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  • Figure 7.2

    Interviewing candidates is themain way to gather theinformation necessary to makegood hiring decisions.

    2010 JupiterimagesCorporation

    Employment Tests

    Next comes a battery of tests (a lot more than youd take in applying for aneveryday business position). Like most organizations, the FBI tests candidates onthe skills and knowledge entailed by the job. Unlike most businesses, however, theFBI will also measure your aptitude, evaluate your personality, and assess yourwriting ability. Youll have to take a polygraph (lie-detector) test to determine thetruthfulness of the information youve provided, uncover the extent of any druguse, and disclose potential security problems.


    If you pass all these tests (with sufficiently high marks),youll be granted an interview11. It serves the samepurpose as it does for business recruiters: it allows theFBI to learn more about you and gives you a chance tolearn more about your prospective employer and yourpossible future in the organization. The FBI conductsstructured interviewsa series of standard questions.Youre judged on both your answers and your ability tocommunicate orally.

    Physical Exam and Reference Checks

    Lets be positive and say you passed the interview.Whats next? You still have to pass a rigorous physicalexamination (including a drug test), as well asbackground and reference checks. Given its mission, theFBI sets all these hurdles a little higher than the averageretail clothing chain. Most businesses will ask you totake a physical exam, but you probably wont have to meet the fitness standards setby the FBI. Likewise, many businesses check references to verify that applicantshavent lied about (or exaggerated) their education and work experience. The FBIgoes to great lengths to ensure that candidates are suitable for law-enforcementwork.

    Final Decision

    The last stage in the process is out of your control. Will you be hired or rejected?This decision is made by one or more people who work for the prospectiveemployer. For a business, the decision maker is generally the line manager whooversees the position being filled. At the FBI, the decision is made by a team at FBI

    11. Formal meeting during whichthe employer learns moreabout an applicant and theapplicant learns more aboutthe prospective employer.

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  • headquarters. If youre hired as a special agent, youll spend twenty-one weeks ofintensive training at the FBI Academy in Quantico, Virginia.

    Contingent Workers

    Though most people hold permanent, full-time positions, theres a growing numberof individuals who work at temporary or part-time jobs. Many of these arecontingent workers12 hired to supplement a companys permanent workforce.Most of them are independent contractors, consultants, or freelancers who are paidby the firms that hire them. Others are on-call workers who work only when needed,such as substitute teachers. Still others are temporary workers (or temps) who areemployed and paid by outside agencies or contract firms that charge fees to clientcompanies.

    The Positives and Negatives of Temp Work

    The use of contingent workers provides companies with a number of benefits.Because they can be hired and fired easily, employers can better control labor costs.When things are busy, they can add temps, and when business is slow, they canrelease unneeded workers. Temps are often cheaper than permanent workers,particularly because they rarely receive costly benefits. Employers can also bring inpeople with specialized skills and talents to work on special projects withoutentering into long-term employment relationships. Finally, companies can tryout temps: if someone does well, the company can offer permanent employment; ifthe fit is less than perfect, the employer can easily terminate the relationship.There are downsides to the use of contingent workers, including increased trainingcosts and decreased loyalty to the company. Also, many employers believe thatbecause temps are usually less committed to company goals than permanentworkers, productivity suffers.

    What about you? Does temporary work appeal to you? On the plus side, you canmove around to various companies and gain a variety of skills. You can see acompany from the inside and decide up front whether its the kind of place youdlike to work at permanently. If it is, your temporary position lets you showcase yourskills and talents and grab the attention of management, which could increase thelikelihood youll be offered a permanent position. There are also some attractivelifestyle benefits. You might, for example, work at a job or series of jobs for, say, tenmonths and head for the beach for the other two. On the other hand, youllprobably get paid less, receive no benefits, and have no job security. For mostpeople, the idea of spending two months a year on the beach isnt that appealing.

    12. Temporary or part-timeworker hired to supplement acompanys permanentworkforce.

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    The process of human resource management consists of all the actionsthat an organization takes to attract, develop, and retain qualityemployees.

    To ensure that the organization is properly staffed, managers engage instrategic human resource planningthe process of developing a planfor satisfying the organizations human resource needs.

    Managers organize information about a given job by performing a jobanalysis, which they use to prepare two documents: a job descriptionlisting the duties and responsibilities of a position and a jobspecification, which lists the qualificationsskills, knowledge, andabilitiesneeded to perform the job.

    After analyzing the jobs that must be performed, the HR managerforecasts future hiring needs and begins the recruiting process toidentify suitable candidates and encourage them to apply.

    In recruiting and hiring, managers must comply with antidiscriminationlaws enforced by the Equal Employment Opportunity Commission(EEOC).

    Discrimination occurs when a person is treated unfairly on the basis ofa characteristic unrelated to ability, such as race, color, religion, sex,national origin, age, or disability.

    Once a pool of suitable candidates has been identified, managers beginthe selection process, reviewing information provided by candidates onemployment applications and administering tests to assess candidatesskills and knowledge.

    Candidates who pass this stage may be granted an interview and,perhaps, offered a job.


    Youre the chairperson of the management department at your college.Describe the steps youd take to ensure that your department has enoughqualified faculty to meet its needs.

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  • 7.2 Developing Employees


    1. Explain how companies train and develop employees, and discuss theimportance of a diverse workforce.

    Because companies cant survive unless employees do their jobs well, it makeseconomic sense to train them and develop their skills. This type of support beginswhen an individual enters the organization and continues as long as he or she staysthere.

    New-Employee Orientation

    Have you ever started your first day at a new job feeling upbeat and optimistic onlyto walk out at the end of the day thinking that maybe youve taken the wrong job?If this happens too often, your employer may need to revise its approach toorientation13the way it introduces new employees to the organization and theirjobs. Starting a new job is a little like beginning college; at the outset, you may beexperiencing any of the following feelings:

    Somewhat nervous but enthusiastic Eager to impress but not wanting to attract too much attention Interested in learning but fearful of being overwhelmed with

    information Hoping to fit in and worried about looking new or

    inexperiencedInduction: Orienting the New Employee, HRM GuideNetwork, (accessedOctober 9, 2011).

    The employer who understands how common such feelings are is more likely notonly to help newcomers get over them but also to avoid the pitfalls often associatedwith new-employee orientation:

    Failing to have a workspace set up for you Ignoring you or failing to supervise you

    13. Activities involved inintroducing new employees tothe organization and their jobs.

    Chapter 7 Recruiting, Motivating, and Keeping Quality Employees


  • Neglecting to introduce you to coworkers (or introducing you to somany people that you have no chance of remembering anybodysname)

    Assigning you no work or giving you busywork unrelated to youractual job

    Swamping you with facts about the companySusan Heathfield, TopTen Ways to Turn Off a New Employee, About, Inc., October 9, 2011).

    A good employer will take things slowly, providing you with information about thecompany and your job on a need-to-know basis while making you feel ascomfortable as possible. Youll get to know the companys history, traditions,policies, and culture over time. Youll learn more about salary and benefits and howyour performance will be evaluated. Most importantly, youll find out how your jobfits into overall operations and whats expected of you.

    Training and Development

    It would be nice if employees came preprogrammed with all the skills they need todo their jobs. It would also be nice if job requirements stayed the same: once youvelearned how to do a job (or been preprogrammed), youd know how to do it forever.In reality, new employees must be trained; moreover, as they grow in their jobs oras their jobs change, theyll need additional training. Unfortunately, training iscostly and time-consuming.

    How costly? On average, for every $1 in payroll, large companies spend close to$0.03 in employee training and development.2010 Training Industry Report,Training Magazine, November 2010, (accessed October 9, 2011). The consulting firm BoozAllen Hamilton invests almost $0.08 in employee training and development. AtPfizer, the worlds largest pharmaceutical company, the total is $0.14 out of everypayroll dollar.Top 100: Top Five Profile and Rank, Training Magazine, March 2004,42. Whats the payoff? Why are such companies willing to spend so much money ontheir employees? Pfizer, whose motto is Succeed through People, regardsemployee growth and development as its top priority. At Booz Allen Hamilton,consultants specialize in finding innovative solutions to client problems, and theiremployer makes sure that theyre up-to-date on all the new technologies bymaintaining a technology petting zoo at its training headquarters. Its called apetting zoo because employees get to see, touch, and interact with new andemerging technologies. For example, those attending the petting zoo severalyears ago got to try out the Segway Human Transporter even before it hit the

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  • market.Tammy Galvin, The 2003 Training Top 100, Training Magazine, March 2003,2.

    At Booz Allen Hamiltons technology petting zoo, employees are receiving off-the-job training14. This approach allows them to focus on learning without thedistractions that would occur in the office. More common, however, is informal on-the-job training15, which may be supplemented with formal training programs.This is the method, for example, by which youd move up from mere coffee makerto a full-fledged barista if you worked at Starbucks.Brooke Locascio, Working atStarbucks: More Than Just Pouring Coffee, Tea and Coffee, January/February 2004, (accessed October 9, 2011). Youdbegin by reading a large spiral book (titled Starbucks University) on theresponsibilities of the barista. After youve passed a series of tests on the readingmaterial, youll move behind the coffee bar, where a manager or assistant managerwill give you hands-on experience in making drinks. According to the rules, youcant advance to a new drink until youve mastered the one youre working on; theprocess, therefore, may take a few days (or even weeks). Next, you have to learnenough about different types of coffee to be able to describe them to customers.(Because this course involves drinking a lot of coffee, you dont have to worry aboutstaying awake.) Eventually, youll be declared a coffee connoisseur, but theres stillone more set of skills to master: you must complete a customer-service course,which trains you in making eye contact with customers, anticipating their needs,and making them feel welcome.Howard Schultz and Dori Jones Yang, Pour YourHeart into It: How Starbucks Built a Company One Cup at a Time (New York: Hyperion,1997), 25051.

    Diversity in the Workplace

    The makeup of the U.S. workforce has changed dramatically over the past 50 years.In the 1950s, more than 60 percent was composed of white males.JudithLindenberger and Marian Stoltz-Loike, Diversity in the Workplace, TheEconomics and Policy Resource Center, (accessed October 9, 2011). Todays workforce, however,reflects the broad range of differences in the populationdifferences in gender,race, ethnicity, age, physical ability, religion, education, and lifestyle. As you cansee in Table 7.1 "Employment by Gender and Ethnic Group", more women andminorities have entered the workforce, and white males now make up only 36percent of the workforce.U.S. Equal Employment Opportunity Commission,Occupational Employment in Private Industry by Race/Ethnic Group/Sex, and byIndustry, United States, 2006, (accessed October 10, 2011). Their percentage representationdiminished as more women and minorities entered the workforce.

    14. Formal employee training thatoccurs in a location away fromthe office.

    15. Employee training (ofteninformal) that occurs while theemployee is on the job.

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  • Most companies today strive for diverse workforces. HR managers work hard torecruit, hire, develop, and retain a workforce thats representative of the generalpopulation. In part, these efforts are motivated by legal concerns: discrimination inrecruiting, hiring, advancement, and firing is illegal under federal law and isprosecuted by the EEOC.U.S. Equal Employment Opportunity Commission, FederalLaws Prohibiting Job Discrimination: Questions and Answers, Federal EqualEmployment Opportunity (EEO) Laws, October 9, 2011). Companies that violate antidiscrimination laws not onlyare subject to severe financial penalties but also risk damage to their reputations. InNovember 2004, for example, the EEOC charged that recruiting policies atAbercrombie & Fitch, a national chain of retail clothing stores, had discriminatedagainst minority and female job applicants between 1999 and 2004. The employer,charged the EEOC, had hired a disproportionate number of white salespeople,placed minorities and women in less visible positions, and promoted a virtually all-white image in its marketing efforts. Six days after the EEOC filed a lawsuit, thecompany settled the case at a cost of $50 million, but the negative publicity willhamper both recruitment and sales for some time to come.U.S. Equal EmploymentOpportunity Commission, EEOC Agrees to Landmark Resolution of DiscriminationCase Against Abercrombie & Fitch, October 10, 2011).

    Table 7.1 Employment by Gender and Ethnic Group

    Group Total (%) Males (%) Females (%)

    All employees 100 52 48

    White 68 36 32

    African American 14 6 8

    Hispanic or Latino 13 7 5

    Asian/Pacific Islander/Other 5 3 3

    Theres good reason for building a diverse workforce that goes well beyond merecompliance with legal standards. It even goes beyond commitment to ethicalstandards. Its good business. People with diverse backgrounds bring fresh points ofview that can be invaluable in generating ideas and solving problems. In addition,they can be the key to connecting with an ethnically diverse customer base. If alarge percentage of your customers are Hispanic, it might make sense to have aHispanic marketing manager. In short, capitalizing on the benefits of a diverseworkforce means that employers should view differences as assets rather thanliabilities.

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    The process of introducing new employees to their jobs and to thecompany is called orientation.

    An effective approach is to take things slowly, providing new employeeswith information on a need-to-know basis while making them feel ascomfortable as possible.

    New employees will need initial training to start their jobs, and theyllneed additional training as they grow in or change their jobs.

    Off-the-job training allows them to focus on learning without thedistractions that would occur in the office, but on-the-job training ismore common.

    In addition to having well-trained employees, its important that aworkforce reflects the broad range of differences in the population.

    The efforts of HR managers to build a workforce thats representative ofthe general population are driven in part by legal concerns:discrimination is illegal, and companies that violate antidiscriminationlaws are subject to prosecution.

    But ensuring a diverse workforce goes well beyond both legalcompliance and ethical commitment. Its good business, because adiverse group of employees can bring fresh points of view that may bevaluable in generating ideas and solving problems.

    Additionally, people from varied backgrounds can help an organizationconnect with an ethnically diverse customer base.

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    1. (AACSB) Reflective Skills

    Think about a full-time or part-time job that youve held. Wasyour orientation to the job satisfactory? If not, how would youhave improved the process? Did you receive any training? Was ituseful? What additional training would have helped you do abetter job? How would it have benefited the company?

    2. (AACSB) Diversity

    While visiting a mall in Los Angeles, you noticed two storeslocated side by side selling electronic-entertainmentproductsCDs, DVDs, and so on. All the employees in one storewere white males. The mix of workers in the other storewhichhappened to be more profitablewas more diverse. Why do youthink the store with the diverse workforce did more business? Interms of diversity, what would be your ideal workforce in a storesimilar to these in Los Angeles?

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  • 7.3 Motivating Employees


    1. Define motivation and describe several theories of motivation.

    Motivation16 refers to an internally generated drive to achieve a goal or follow aparticular course of action. Highly motivated employees focus their efforts onachieving specific goals; those who are unmotivated dont. Its the managers job,therefore, to motivate employeesto get them to try to do the best job they can.But what motivates employees to do well? How does a manager encourageemployees to show up for work each day and do a good job? Paying them helps, butmany other factors influence a persons desire (or lack of it) to excel in theworkplace. What are these factors? Are they the same for everybody? Do theychange over time? To address these questions, well examine four of the mostinfluential theories of motivation: hierarchy-of-needs theory, two-factor theory,expectancy theory, and equity theory.

    Hierarchy-of-Needs Theory

    Psychologist Abraham Maslows hierarchy-of-needs theory17 proposed that we aremotivated by the five unmet needs, arranged in the hierarchical order shown inFigure 7.3 "Maslows Hierarchy-of-Needs Theory", which also lists examples of eachtype of need in both the personal and work spheres of life. Look, for instance, at thelist of personal needs in the left-hand column. At the bottom are physiological needs(such life-sustaining needs as food and shelter). Working up the hierarchy weexperience safety needs (financial stability, freedom from physical harm), socialneeds (the need to belong and have friends), esteem needs (the need for self-respectand status), and self-actualization needs (the need to reach ones full potential orachieve some creative success).

    16. Internally generated drive toachieve a goal or follow aparticular course of action.

    17. Theory of motivation thatholds that people aremotivated by a hierarchicalseries of unmet needs.

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  • Figure 7.3 Maslows Hierarchy-of-Needs Theory

    There are two things to remember about Maslows model:

    1. We must satisfy lower-level needs before we seek to satisfy higher-level needs.

    2. Once weve satisfied a need, it no longer motivates us; the next higherneed takes its place.

    Lets say, for example, that youve just returned to college and that for a variety ofreasons that arent your fault, youre broke, hungry, and homeless. Because youllprobably take almost any job that will pay for food and housing (physiologicalneeds), you go to work repossessing cars. Fortunately, your student loan finallycomes through, and with enough money to feed yourself, you can look for a jobthats not so risky (a safety need). You find a job as a night janitor in the library, andthough you feel secure, you start to feel cut off from your friends, who are activeduring daylight hours. You want to work among people, not books (a social need). Sonow you join several of your friends selling pizza in the student center. This jobimproves your social life, but even though youre very good at making pizzas, itsnot terribly satisfying. Youd like something that will let you display yourintellectual talents (an esteem need). So you study hard and land a job as an intern

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  • in the governors office. On graduation, you move up through a series ofgovernment appointments and eventually run for state senator. As youre sworninto office, you realize that youve reached your full potential (a self-actualizationneed) and you comment to yourself, It doesnt get any better than this.

    Needs Theory and the Workplace

    Figure 7.4

    Employees are motivated by different factors. For some, the ability to have fun at work is a priority.

    Thinkstock Corporation

    What implications does Maslows theory have for business managers? There are twokey points: (1) Not all employees are driven by the same needs, and (2) the needsthat motivate individuals can change over time. Managers should consider whichneeds different employees are trying to satisfy and should structure rewards andother forms of recognition accordingly. For example, when you got your first jobrepossessing cars, you were motivated by the need for money to buy food. If youdbeen given a choice between a raise or a plaque recognizing your accomplishments,youd undoubtedly have opted for the money. As a state senator, by contrast, youmay prefer public recognition of work well done (say, election to higher office) to apay raise.

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  • Two-Factor Theory

    Another psychologist, Frederick Herzberg, set out to determine which work factors(such as wages, job security, or advancement) made people feel good about theirjobs and which factors made them feel bad about their jobs. He surveyed workers,analyzed the results, and concluded that to understand employee satisfaction (ordissatisfaction), he had to divide work factors into two categories:

    Motivation factors. Those factors that are strong contributors to jobsatisfaction

    Hygiene factors. Those factors that are not strong contributors tosatisfaction but that must be present to meet a workers expectationsand prevent job dissatisfaction

    Figure 7.5 "Herzbergs Two-Factor Theory" illustrates Herzbergs two-factortheory18. Note that motivation factors (such as promotion opportunities) relate tothe nature of the work itself and the way the employee performs it. Hygiene factors (suchas physical working conditions) relate to the environment in which its performed.(Note, too, the similarity between Herzbergs motivation factors and Maslowsesteem and self-actualization needs.)

    Figure 7.5 Herzbergs Two-Factor Theory

    18. Theory that holds thatmotivation involves bothmotivation factors (whichcontribute to job satisfaction)and hygiene factors (whichhelp to prevent jobdissatisfaction).

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  • Two-Factor Theory and the Workplace

    Well ask the same question about Herzbergs model as we did about Maslows: Whatdoes it mean for managers? Suppose youre a senior manager in an accounting firm,where you supervise a team of accountants, each of whom has been with the firmfor five years. How would you use Herzbergs model to motivate the employees whoreport to you? Lets start with hygiene factors. Are salaries reasonable? What aboutworking conditions? Does each accountant have his or her own workspace, or arethey crammed into tiny workrooms? Are they being properly supervised or are theyleft on their own to sink or swim? If hygiene factors like these dont meetemployees expectations, they may be dissatisfied with their jobs.

    As you can see in Figure 7.5 "Herzbergs Two-Factor Theory", fixing problemsrelated to hygiene factors may alleviate job dissatisfaction, but it wont necessarilyimprove anyones job satisfaction. To increase satisfaction (and motivate someone toperform better), you must address motivation factors. Is the work itself challengingand stimulating? Do employees receive recognition for jobs well done? Will thework that an accountant has been assigned help him or her to advance in the firm?According to Herzberg, motivation requires a twofold approach: eliminatingdissatisfiers and enhancing satisfiers.

    Expectancy Theory

    If you were a manager, wouldnt you like to know how your employees decide towork hard or goof off? Wouldnt it be nice to know whether a planned rewardsprogram will have the desired effectnamely, motivating them to perform better intheir jobs? Wouldnt it be helpful if you could measure the effect of bonuses onemployee productivity? These are the issues considered by psychologist VictorVroom in his expectancy theory19, which proposes that employees will work hardto earn rewards that they value and that they consider obtainable.

    As you can see from Figure 7.6 "Vrooms Expectancy Theory", Vroom argues that anemployee will be motivated to exert a high level of effort to obtain a reward underthree conditions:

    1. The employee believes that his or her efforts will result in acceptableperformance.

    2. The employee believes that acceptable performance will lead to thedesired outcome or reward.

    3. The employee values the reward.19. Theory of motivation that

    proposes that employees willwork hard to earn rewardsthey value and considerobtainable.

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  • Figure 7.6 Vrooms Expectancy Theory

    Expectancy Theory and the Workplace

    To apply expectancy theory to a real-world situation, lets analyze an automobile-insurance company with one hundred agents who work from a call center. Assumethat the firm pays a base salary of $2,000 a month, plus a $200 commission on eachpolicy sold above ten policies a month. In terms of expectancy theory, under whatconditions would an agent be motivated to sell more than ten policies a month?

    1. The agent would have to believe that his or her efforts would result inpolicy sales (that, in other words, theres a positive link between effortand performance).

    2. The agent would have to be confident that if he or she sold more thanten policies in a given month, there would indeed be a bonus (apositive link between performance and reward).

    3. The bonus per policy$200would have to be of value to the agent.

    Now lets alter the scenario slightly. Say that the company raises prices, thusmaking it harder to sell the policies. How will agents motivation be affected?According to expectancy theory, motivation will suffer. Why? Because agents maybe less confident that their efforts will lead to satisfactory performance. What if thecompany introduces a policy whereby agents get bonuses only if buyers dontcancel policies within ninety days? How will this policy affect motivation? Nowagents may be less confident that theyll get bonuses even if they do sell more thanten policies. Motivation will decrease because the link between performance andreward has been weakened. Finally, what will happen if bonuses are cut from $200to $25? Obviously, the reward would be of less value to agents, and, again,motivation will suffer. The message of expectancy theory, then, is fairly clear:

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  • managers should offer rewards that employees value, set performance levels thatthey can reach, and ensure a strong link between performance and reward.

    Equity Theory

    What if you spent thirty hours working on a class report, did everything you weresupposed to do, and handed in an excellent assignment (in your opinion). Yourroommate, on the other hand, spent about five hours and put everything togetherat the last minute. You know, moreover, that he ignored half the requirements andnever even ran his assignment through a spell-checker. A week later, your teacherreturns the reports. You get a C and your roommate gets a B+. In all likelihood,youll feel that youve been treated unfairly relative to your roommate.

    Your reaction makes sense according to the equity theory20 of motivation, whichfocuses on our perceptions of how fairly were treated relative to others. Applied tothe work environment, this theory proposes that employees analyze theircontributions or job inputs (hours worked, education, experience, workperformance) and their rewards or job outcomes (salary, benefits, recognition).Then they create a contributions/rewards ratio and compare it to those of otherpeople. The basis of comparison can be any one of the following:

    Someone in a similar position Someone holding a different position in the same organization Someone with a similar occupation Someone who shares certain characteristics (such as age, education, or

    level of experience) Oneself at another point in time

    When individuals perceive that the ratio of their contributions to rewards iscomparable to that of others, they perceive that theyre being treated equitably;when they perceive that the ratio is out of balance, they perceive inequity.Occasionally, people will perceive that theyre being treated better than others.More often, however, they conclude that others are being treated better (and thatthey themselves are being treated worse). This is what you concluded when you sawyour grade. Youve calculated your ratio of contributions (hours worked, researchand writing skills) to rewards (project grade), compared it to your roommatesratio, and concluded that the two ratios are out of balance.

    What will an employee do if he or she perceives an inequity? The individual mighttry to bring the ratio into balance, either by decreasing inputs (working fewerhours, refusing to take on additional tasks) or by increasing outputs (asking for araise). If this strategy fails, an employee might complain to a supervisor, transfer to

    20. Theory of motivation thatfocuses on our perceptions ofhow fairly were treatedrelative to others.

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  • another job, leave the organization, or rationalize the situation (perhaps decidingthat the situation isnt so bad after all). Equity theory advises managers to focus ontreating workers fairly, especially in determining compensation, which is,naturally, a common basis of comparison.


    Motivation describes an internally generated drive that propels peopleto achieve goals or pursue particular courses of action.

    There are four influential theories of motivation: hierarchy-of-needstheory, two-factor theory, expectancy theory, and equity theory.

    Hierarchy-of-needs theory proposes that were motivated by fiveunmet needsphysiological, safety, social, esteem, and self-actualization and must satisfy lower-level needs before we seek tosatisfy higher-level needs.

    Two-factor theory divides work factors into motivation factors (thosethat are strong contributors to job satisfaction) and hygiene factors(those that, though not strong contributors to satisfaction, must bepresent to prevent job dissatisfaction). To increase satisfaction (andmotivate someone to perform better), managers must addressmotivation factors.

    Expectancy theory proposes that employees work hard to obtain areward when they value the reward, believe that their efforts will resultin acceptable performance, and believe that acceptable performance willlead to a desired outcome or reward.

    Equity theory focuses on our perceptions of how fairly were treatedrelative to others. This theory proposes that employees createcontributions/rewards ratios that they compare to those of others. Ifthey feel that their ratios are comparable to those of others, theyllperceive that theyre being treated equitably.


    This chapter describes four theories of motivation: hierarchy-of-needstheory, two-factor theory, expectancy theory, and equity theory. Brieflydescribe each theory. Which one makes the most intuitive sense to you?Why do you find it appealing?

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  • 7.4 What Makes a Great Place to Work?


    1. Identify factors that make an organization a good place to work,including competitive compensation and benefits packages.

    Every year, the Great Places to Work Institute analyzes comments from thousandsof employees and compiles a list of The 100 Best Companies to Work for inAmerica, which is published in Fortune magazine. Having compiled its list for morethan twenty years, the institute concludes that the defining characteristic of a greatcompany to work for is trust between managers and employees. Employeesoverwhelmingly say that they want to work at a place where employees trust thepeople they work for, have pride in what they do, and enjoy the people they workwith.What Is a Great Workplace?, Great Place to Work Institute, October 10, 2011). They report that theyre motivated to perform wellbecause theyre challenged, respected, treated fairly, and appreciated. They takepride in what they do, are made to feel that they make a difference, and are givenopportunities for advancement.What do Employees Say? Great Place to WorkInstitute, (accessed May6, 2006). The most effective motivators, it would seem, are closely aligned withMaslows higher-level needs and Herzbergs motivating factors.

    Job Redesign

    The average employee spends more than two thousand hours a year at work. If thejob is tedious, unpleasant, or otherwise unfulfilling, the employee probably wontbe motivated to perform at a very high level. Many companies practice a policy ofjob redesign21 to make jobs more interesting and challenging. Common strategiesinclude job rotation, job enlargement, and job enrichment.

    Job Rotation

    Specialization promotes efficiency because workers get very good at doingparticular tasks. The drawback is the tedium of repeating the same task day in andday out. The practice of job rotation22 allows employees to rotate from one job toanother on a systematic basis, eventually cycling back to their original tasks. Acomputer maker, for example, might rotate a technician into the sales department

    21. Management strategy used toincrease job satisfaction bymaking jobs more interestingand challenging.

    22. Job redesign strategy thatallows employees to rotatefrom one job to another on asystematic basis.

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  • to increase the employees awareness of customer needs and to give the employee abroader understanding of the companys goals and operations. A hotel might rotatean accounting clerk to the check-in desk for a few hours each day to add variety tothe daily workload. Rotated employees develop new skills and gain experience thatincreases their value to the company, which benefits management because cross-trained employees can fill in for absentees, thus providing greater flexibility inscheduling.

    Job Enlargement

    Instead of a job in which you performed just one or two tasks, wouldnt you prefer ajob that gave you many different tasks? In theory, youd be less bored and morehighly motivated if you had a chance at job enlargement23the policy ofenhancing a job by adding tasks at similar skill levels (see Figure 7.7 "JobEnlargement versus Job Enrichment"). The job of sales clerk, for example, might beexpanded to include gift-wrapping and packaging items for shipment. Theadditional duties would add variety without entailing higher skill levels.

    Figure 7.7 Job Enlargement versus Job Enrichment

    Job Enrichment

    As you can see from Figure 7.7 "Job Enlargement versus Job Enrichment", merelyexpanding a job by adding similar tasks wont necessarily enrich it by making itmore challenging and rewarding. Job enrichment24 is the practice of adding tasksthat increase both responsibility and opportunity for growth. It provides the kindsof benefits that, according to Maslow and Herzberg, contribute to job satisfaction:stimulating work, sense of personal achievement, self-esteem, recognition, and achance to reach your potential.

    23. Job redesign strategy in whichmanagement enhances a job byadding tasks at similar skilllevels.

    24. Job redesign strategy in whichmanagement enriches a job byadding tasks that increase bothresponsibility and opportunityfor growth.

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  • Consider, for example, the evolving role of support staff in the contemporary office.Today, employees who used to be called secretaries assume many dutiespreviously in the domain of management, such as project coordination and publicrelations. Information technology has enriched their jobs because they can nowapply such skills as word processing, desktop publishing, creating spreadsheets, andmanaging databases. Thats why we now hear such a term as administrative assistantinstead of secretary.Sandra Kerka, The Changing Role of Support Staff, (accessed October10, 2011).

    Work/Life Quality

    Building a career requires a substantial commitment in time and energy, and mostpeople find that they arent left with much time for nonwork activities. Fortunately,many organizations recognize the need to help employees strike a balance betweentheir work and home lives.Jeffrey Greenhaus, Karen Collins, and Jason Shaw, TheRelationship between Work-Family Balance and Quality of Life, Journal of VocationalBehavior 63, 2003, 51031. By helping employees combine satisfying careers andfulfilling personal lives, companies tend to end up with a happier, less-stressed, andmore productive workforce. The financial benefits include lower absenteeism,turnover, and health care costs.

    Alternative Work Arrangements

    The accounting firm KPMG, which has made the list of the 100 Best Companies forWorking Mothers for twelve years,KPMG firm Web site, Careers Section, (accessed October 11,2011). is committed to promoting a balance between its employees work andpersonal lives. KPMG offers a variety of work arrangements designed toaccommodate different employee needs and provide scheduling flexibility.Forinformation on KPMGs programs and benefits, see Career, KPMG, (accessed October 10, 2011).


    Employers who provide for flextime25 set guidelines that allow employees todesignate starting and quitting times. Guidelines, for example, might specify that allemployees must work eight hours a day (with an hour for lunch) and that four ofthose hours must be between 10 a.m. and 3 p.m. Thus, you could come in at 7 a.m.and leave at 4 p.m., while coworkers arrive at 10 a.m. and leave at 7 p.m. Withpermission you could even choose to work from 8 a.m to 2 p.m., take two hours forlunch, and then work from 4 p.m. to 6 p.m.

    25. Alternative work arrangementthat allows employees todesignate starting and quittingtimes.

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  • Compressed Workweeks

    Rather than work eight hours a day for five days a week, you might elect to earn athree-day weekend by working ten hours a day for four days a week.

    Part-Time Work

    If youre willing to have your pay and benefits adjusted accordingly you can workfewer than forty hours a week.

    Job Sharing

    Under job sharing26, two people share one full-time position, splitting the salaryand benefits of the position as each handles half the job. Often they arrange theirschedules to include at least an hour of shared time during which they cancommunicate about the job.


    Telecommuting27 means that you regularly work from home (or from some othernonwork location). Youre connected to the office by computer, fax, and phone. Yousave on commuting time, enjoy more flexible work hours, and have moreopportunity to spend time with your family. A study of 5,500 IBM employees (one-fifth of whom telecommute) found that those who worked at home not only had abetter balance between work and home life but also were more highly motivatedand less likely to leave the organization.Reported in Work-Life and Human CapitalSolutions, The Business Case for Telecommuting (Minnetonka, MN: WFC Resources),, (accessed October 10, 2011).

    Though its hard to count telecommuters accurately, some estimates put thenumber of people who work at home at least one day a week at 20 percent. Thisestimate includes 2 percent of workers who run home-based businesses and 2percent who work exclusively at home for other companies.How Many PeopleTelecommute?, Telework Research Network, October 11, 2011). Telecommuting isnt for everyone. Working at homemeans that you have to discipline yourself to avoid distractions, such as TV,personal phone calls, home chores, or pets, and some people feel isolated fromsocial interaction in the workplace.

    26. Work arrangement in whichtwo people share one full-timeposition.

    27. Work arrangement in whichthe employee regularly worksfrom home.

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  • Family-Friendly Programs

    In addition to alternative work arrangements, many employers, including KPMG,offer programs and benefits designed to help employees meet family and homeobligations while maintaining busy careers. KPMG offers each of the followingbenefits.Career, KPMG, (accessedOctober 11, 2011).

    Dependent Care

    Caring for dependentsyoung children and elderly parentsis of utmostimportance to some employees, but combining dependent-care responsibilities witha busy job can be particularly difficult. KPMG provides on-site child care during taxseason (when employees are especially busy) and offers emergency backupdependent care all year round, either at a providers facility or in the employeeshome. To get referrals or information, employees can call KPMGs LifeWorksResource and Referral Service. KPMG is by no means unique in this respect: morethan eight thousand companies maintain on-site day care,Bonnie Harris, ChildCare Comes to Work, Los Angeles Times, November 19, 2000,, (accessed October 11,2011). and 18 percent of all U.S. companies offer child-care resources or referralservices.New List of Best Companies for Mom, CNNMoney, September 23, 2003 October 11, 2011).

    Paid Parental Leave

    Any employee (whether male or female) who becomes a parent can take two weeksof paid leave. New mothers also get time off through short-term disability benefits.

    Caring for Yourself

    Like many companies, KPMG allows employees to aggregate all paid days off anduse them in any way they want. In other words, instead of getting, say, ten sickdays, five personal days, and fifteen vacation days, you get a total of thirty days touse for anything. If youre having personal problems, you can contact the EmployeeAssistance Program. If staying fit makes you happier and more productive, you cantake out a discount membership at one of more than nine thousand health clubs.

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  • Unmarried without Children

    Youve undoubtedly noticed by now that many programs for balancing work andpersonal lives target married people, particularly those with children. Singleindividuals also have trouble striking a satisfactory balance between work andnonwork activities, but many single workers feel that they arent getting equalconsideration from employers.See Karen Collins and Elizabeth Hoover, Addressingthe Needs of the Single Person in Public Accounting, Pennsylvania CPA Journal, June1995, 16. They report that theyre often expected to work longer hours, travel more,and take on difficult assignments to compensate for married employees with familycommitments.

    Needless to say, requiring singles to take on additional responsibilities can make itharder for them to balance their work and personal lives. Its harder to plan andkeep personal commitments while meeting heavy work responsibilities, andestablishing and maintaining social relations is difficult if work schedules areunpredictable or too demanding. Frustration can lead to increased stress and jobdissatisfaction. In several studies of stress in the accounting profession, unmarriedworkers reported higher levels of stress than any other group, including marriedpeople with children.Data was obtained from 1988 and 1991 studies of stress inpublic accounting by Karen Collins and from a 1995 study on quality of life in theaccounting profession by Collins and Jeffrey Greenhaus. Analysis of the data onsingle individuals was not separately published.

    With singles, as with married people, companies can reap substantial benefits fromprograms that help employees balance their work and nonwork lives: they canincrease job satisfaction and employee productivity and reduce turnover. PepsiCo,for example, offers a concierge service, which maintains a dry cleaner, travelagency, convenience store, and fitness center on the premises of its national officein Somers, New York.Concierge Service Is A Surprisingly Low Cost Solution ThatCan Meet A Variety Of Needs With A Single Provider, Lifestyle Concierge Services, (accessed October 11, 2011). Single employees seem to find theseservices helpful, but what they value most of all is control over their time. Inparticular, they want predictable schedules that allow them to plan social andpersonal activities. They dont want employers assuming that being single meansthat they can change plans at the last minute. Its often more difficult for singles todeal with last-minute changes because, unlike married coworkers, they dont havethe at-home support structure to handle such tasks as tending to elderly parents orcaring for pets.

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  • Compensation and Benefits

    Though paychecks and benefits packages arent the only reasons why people work,they do matter. Competitive pay and benefits also help organizations attract andretain qualified employees. Companies that pay their employees more than theircompetitors generally have lower turnover. Consider, for example, The ContainerStore, which regularly appears on Fortune magazines list of The 100 BestCompanies to Work For.The 100 Best Companies to Work For, Fortune, October 10, 2011). The retail chain staffs its stores with fewer employeesthan its competitors but pays them morein some cases, three times the industryaverage for retail workers. This strategy allows the company to attract extremelytalented workers who, moreover, arent likely to leave the company. Low turnoveris particularly valuable in the retail industry because it depends on service-orientedpersonnel to generate repeat business.

    In addition to salary and wages, compensation packages often include otherfinancial incentives, such as bonuses and profit-sharing plans, as well as benefits,such as medical insurance, vacation time, sick leave, and retirement accounts.

    Wages and Salaries

    The largest, and most important, component of a compensation package is thepayment of wages or salary. If youre paid according to the number of hours youwork, youre earning wages28. Counter personnel at McDonalds, for instance, getwages, which are determined by multiplying an employees hourly wage rate by thenumber of hours worked during the pay period. On the other hand, if youre paidfor fulfilling the responsibilities of a positionregardless of the number of hoursrequired to do ityoure earning a salary29. The McDonalds manager gets a salaryfor overseeing the operations of the restaurant. He or she is expected to work aslong as it takes to get the job done, without any adjustment in compensation.

    Piecework and Commissions

    Sometimes it makes more sense to pay workers according to the quantity ofproduct that they produce or sell. Byrds Seafood, a crab-processing plant inCrisfield, Maryland, pays workers on piecework30: Workers pay is based on theamount of crabmeat thats picked from recently cooked crabs. (A good picker canproduce fifteen pounds of crabmeat an hour and earn about $100 a day.)See CrabPickers, Crisfield Off the Beaten Path, (accessed May 6, 2006); Neil Learner, Ashore, A Way of Life Builtaround the Crab, Christian Science Monitor, June 26, 2000, (accessed May 6,

    28. Compensation paid toemployees based on thenumber of hours worked.

    29. Compensation paid forfulfilling the responsibilities ofa position regardless of thenumber of hours required to doit.

    30. Compensation paid to workersaccording to the quantity of aproduct that they produce orsell.

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  • 2006). If youre working on commission31, youre probably getting paid for quantityof sales. If you were a sales representative for an insurance company, like TheHartford, youd get a certain amount of money for each automobile or homeownerpolicy that you sell.Benefits, The Hartford, (accessed October 11, 2011).

    Incentive Programs

    In addition to regular paychecks, many people receive financial rewards based onperformance, whether their own, their employers, or both. At computer-chipmaker Texas Instruments (TI), for example, employees may be eligible for bonuses,profit sharing, and stock options. All three plans are incentive programs32:programs designed to reward employees for good performance.Texas Instruments,Benefits, (accessed October 11,2011).

    Bonus Plans

    TIs year-end bonuses33annual income given in addition to salaryare based oncompany-wide performance. If the company has a profitable year, and if youcontributed to that success, youll get a bonus. If the company doesnt do well,youre out of luck, regardless of what you contributed.

    Bonus plans have become quite common, and the range of employees eligible forbonuses has widened in recent years. In the past, bonus plans were usually reservedfor managers above a certain level. Today, however, companies have realized thevalue of extending plans to include employees at virtually every level. Themagnitude of bonuses still favors those at the top. High-ranking officers (such asCEOs and CFOs) often get bonuses ranging from 30 percent to 50 percent of theirsalaries. Upper-level managers may get from 15 percent to 25 percent and middlemanagers from 10 percent to 15 percent. At lower levels, employees may expectbonuses from 3 percent to 5 percent of their annual compensation.Jeff D. Opdyke,Getting a Bonus Instead of a Raise, Wall Street Journal, December 29, 2004,, (accessed October 7,2011).

    Profit-Sharing Plans

    TI also maintains a profit-sharing plan34, which relies on a predetermined formulato distribute a share of the companys profits to eligible employees. Today, about 40percent of all U.S. companies offer some type of profit-sharing program.Lee AnnObringer, How Employee Compensation WorksStock Options/Profit Sharing,

    31. Compensation paid toemployees based on the dollaramount of sales that theymake.

    32. Program designed tofinancially reward employeesfor good performance.

    33. Annual income given toemployees (in addition tosalary) based on company-wideperformance.

    34. Incentive program that uses apredetermined formula todistribute a share of companyprofits to eligible employees.

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  • HowStuffWorks, (accessed October11, 2011). TIs plan, however, is a little unusual: while most plans dont allowemployees to access profit-sharing funds until retirement or termination, TIemployees get their shares immediatelyin cash.

    TIs plan is also pretty generousas long as the company has a good year. Hereshow it works. An employees profit share depends on the companys operatingprofit for the year. If profits from operations reach 10 percent of sales, theemployee gets a bonus worth 4 percent of his or her salary. If operating profit soarsto 20 percent, the employee bonuses go up to 26 percent of salary. But if operatingprofits fall short of a certain threshold, nobody gets anything.Texas Instruments,Benefits, (accessed October 11,2011).

    Stock-Option Plans

    Like most stock-option plans35, the TI plan gives employees the right to buy aspecific number of shares of company stock at a set price on a specified date. At TI,an employee may buy stock at its selling price at the time when he or she was giventhe option. So, if the price of the stock goes up, the employee benefits. Say, forexample, that the stock was selling for $30 a share when the option was granted in2007. In 2011, it was selling for $40 a share. Exercising his or her option, theemployee could buy TI stock at the 2007 price of $30 a sharea bargain price.TexasInstruments, Benefits, (accessedOctober 11, 2011).

    At TI, stock options are used as an incentive to attract and retain top people.Starbucks, by contrast, isnt nearly as selective in awarding stock options. AtStarbucks, all employees can earn Bean Stockthe Starbucks employee stock-option plan. Both full- and part-time employees get options to buy Starbucks sharesat a set price. If the company does well and its stock goes up, employees make aprofit. CEO Howard Schultz believes that Bean Stock pays off: because employeesare rewarded when the company does well, they have a stronger incentive to addvalue to the company (and so drive up its stock price). Shortly after the programwas begun, the phrase bean-stocking became workplace lingo for figuring outhow to save the company money.


    Another major component of an employees compensation package isbenefits36compensation other than salaries, hourly wages, or financial incentives.Types of benefits include the following:

    35. Incentive program that allowseligible employees to buy aspecific number of shares ofcompany stock at a set price ona specified date.

    36. Compensation other thansalaries, hourly wages, orfinancial incentives.

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    7.4 What Makes a Great Place to Work? 354

  • Legally required benefits (Social Security and Medicare,unemployment insurance, workers compensation)

    Paid time off (vacations, holidays, sick leave) Insurance (health benefits, life insurance, disability insurance) Retirement benefits

    Unfortunately, the cost of providing benefits is staggering. According to theEmployee Benefit Research Institute, it costs an employer 30 percent of a workerssalary to provide the same worker with benefits. If you include pay for time notworked (while on vacation or sick and so on), the percentage increases to 41percent. So if youre a manager making $100,000 a year, your employer is alsopaying out another $41,000 for your benefits. The most money goes for health care(8 percent of salary costs), paid time off (11 percent), and retirement benefits (5percent).FAQs About BenefitsGeneral Overview, Employee Benefit ResearchInstitute, (accessed October10, 2011).

    Some workers receive only benefits required by law, including Social Security,unemployment, and workers compensation. Low-wage workers generally get onlylimited benefits and part-timers often nothing at all.National Compensation Survey:Employee Benefits in Private Industry, 2003, U.S. Department of Labor, Bureau of LaborStatistics, March 2003, 2, (accessed October9, 2011). Again, Starbucks is generous in offering benefits. The company providesbenefits even to the part-timers who make up two-thirds of the companysworkforce; anyone working at least twenty hours a week gets medical coverage.

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    7.4 What Makes a Great Place to Work? 355


    Employees report that theyre motivated to perform well when theyrechallenged, respected, treated fairly, and appreciated.

    Other factors may contribute to employee satisfaction. Somecompanies use job redesign to make jobs more interesting andchallenging.

    Job rotation allows employees to rotate from one job toanother on a systematic basis.

    Job enlargement enhances a job by adding tasks at similarskill levels.

    Job enrichment adds tasks that increase both responsibilityand opportunity for growth.

    Many organizations recognize the need to help employees strike abalance between their work and home lives and offer a variety of workarrangements to accommodate different employee needs.

    Flextime allows employees to designate starting and quitting times,compress workweeks, or perform part-time work.

    With job sharing, two people share one full-time position. Telecommuting means working from home. Many employers also offer

    dependent care, paid leave for new parents, employee-assistanceprograms, and on-site fitness centers.

    Competitive compensation also helps. Workers who are paid by the hour earn wages, while those who are paid

    to fulfill the responsibilities of the job earn salaries. Some people receive commissions based on sales or are paid for output,

    based on a piecework approach. In addition to pay, many employees can earn financial rewards based on

    their own and/or their employers performance. They may receive year-end bonuses, participate in profit-sharing

    plans (which use predetermined formulas to distribute a share ofcompany profits among employees), or receive stock options (which letthem buy shares of company stock at set prices).

    Another component of many compensation packages isbenefitscompensation other than salaries, wages, or financialincentives. Benefits may include paid time off, insurance, andretirement benefits.

    Chapter 7 Recruiting, Motivating, and Keeping Quality Employees

    7.4 What Makes a Great Place to Work? 356


    (AACSB) Analysis

    1. Describe the ideal job that youd like to have once youve finishedcollege. Be sure to explain the type of work schedule that youd findmost satisfactory, and why. Identify family-friendly programs that youdfind desirable and explain why these appeal to you.

    2. Describe a typical compensation package for a sales manager in a largeorganization. If you could design your own compensation package, whatwould it include?

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    7.4 What Makes a Great Place to Work? 357

  • 7.5 Performance Appraisal


    1. Explain how managers evaluate employee performance and retainqualified employees.

    Employees generally want their managers to tell them three things: what theyshould be doing, how well theyre doing it, and how they can improve theirperformance. Good managers address these issues on an ongoing basis. On asemiannual or annual basis, they also conduct formal performance appraisals37 todiscuss and evaluate employees work performance.

    The Basic Three-Step Process

    Appraisal systems vary both by organization and by the level of the employee beingevaluated, but as you can see in Figure 7.8 "How to Do a Performance Appraisal", itsgenerally a three-step process:

    1. Before managers can measure performance, they must set goals andperformance expectations and specify the criteria (such as quality ofwork, quantity of work, dependability, initiative) that theyll use tomeasure performance.

    2. At the end of a specified time period, managers complete writtenevaluations that rate employee performance according to thepredetermined criteria.

    3. Managers then meet with each employee to discuss the evaluation.Jointly, they suggest ways in which the employee can improveperformance, which might include further training and development.

    37. Formal process in which amanager evaluates anemployees work performance.

    Chapter 7 Recruiting, Motivating, and Keeping Quality Employees


  • Figure 7.8 How to Do a Performance Appraisal

    It sounds fairly simple, but why do so many managers report that, except for firingpeople, giving performance appraisals is their least favorite task?Susan Heathfield,Performance Appraisals Dont Work, About, (accessed October 11, 2011). To get someperspective on this question, well look at performance appraisals from both sides,explaining the benefits and identifying potential problems with some of the mostcommon practices.

    Among other benefits, formal appraisals provide the following:

    An opportunity for managers and employees to discuss an employeesperformance and to set future goals and performance expectations

    A c