Human Resource Management

[Author removed at request of original publisher]

This edition adapted from a work originally produced in 2011 by a publisher who has requested that it not receive attribution.

Human Resource Management by [Author removed at request of original publisher] is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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Publisher Information

Human Resource Management is adapted from a work produced and distributed under a Creative Commons license (CC BY-NC-SA) in 2011 by a publisher who has requested that they and the original author not receive attribution. The adapted edition was produced by the University of Minnesota Libraries Publishing through the eLearning Support Initiative. Nicolet College faculty further adapted the work to fit our learners needs in 2017. The UoM work can be located here. The Employment Law chapter was taken from Business Law and the Legal Environment by Mayer, Warner, and Siedel.

This adaptation has removed some of the the original text, and replaced some images and figures to make the resulting whole more shareable. This work is made available under the terms of a Creative Commons Attribution-NonCommercial-ShareAlike license.

1

What Is Human Resources?

Learning Objectives

1. Explain the role of HRM in organizations.

2. Define and discuss some of the major HRM activities.

Every organization, large or small, uses a variety of capital to make the business work. Capital includes cash, valuables, or goods used to generate income for a business. For example, a retail store uses registers and inventory, while a consulting firm may have proprietary software or buildings. No matter the industry, all companies have one thing in common: they must have people to make their capital work for them. This will be our focus throughout the text: generation of revenue through the use of people’s skills and abilities.

What Is HRM?

Human resource management (HRM) is the process of employing people, training them, compensating them, developing policies relating to them, and developing strategies to retain them. As a field, HRM has undergone many changes over the last twenty years, giving it an even more important role in today’s organizations. In the past, HRM meant processing payroll, sending birthday gifts to employees, arranging company outings, and making sure forms were filled out correctly—in other words, more of an administrative role rather than a strategic role crucial to the success of the organization. Jack Welch, former CEO of General Electric and management guru, sums up the new role of HRM: “Get out of the parties and birthdays and enrollment forms.… Remember, HR is important in good times, HR is defined in hard times” (Frasch, et. al., 2010).

It’s necessary to point out here, at the very beginning of this text, that every manager has some role relating to human resource management. Just because we do not have the title of HR manager doesn’t mean we won’t perform all or at least some of the HRM tasks. For example, most managers deal with compensation, motivation, and retention of employees—making these aspects not only part of HRM but also part of management. As a result, this book is equally important to someone who wants to be an HR manager and to someone who will manage a business.

Human Resource Recall

Have you ever had to work with a human resource department at your job? What was the interaction like? What was the department’s role in that specific organization?

The Role of HRM

Keep in mind that many functions of HRM are also tasks other department managers perform, which is what makes this information important, despite the career path taken. Most experts agree on seven main roles that HRM plays in organizations. These are described in the following sections.

Staffing

You need people to perform tasks and get work done in the organization. Even with the most sophisticated machines, humans are still needed. Because of this, one of the major tasks in HRM is staffing. Staffing involves the entire hiring process from posting a job to negotiating a salary package. Within the staffing function, there are four main steps:

1. Development of a staffing plan. This plan allows HRM to see how many people they should hire based on revenue expectations.

2. Development of policies to encourage multiculturalism at work. Multiculturalism in the workplace is becoming more and more important, as we have many more people from a variety of backgrounds in the workforce.

3. Recruitment. This involves finding people to fill the open positions.

4. Selection. In this stage, people will be interviewed and selected, and a proper compensation package will be negotiated. This step is followed by training, retention, and motivation.

Development of Workplace Policies

Every organization has policies to ensure fairness and continuity within the organization. One of the jobs of HRM is to develop the verbiage surrounding these policies. In the development of policies, HRM, management, and executives are involved in the process. For example, the HRM professional will likely recognize the need for a policy or a change of policy, seek opinions on the policy, write the policy, and then communicate that policy to employees. It is key to note here that HR departments do not and cannot work alone. Everything they do needs to involve all other departments in the organization. Some examples of workplace policies might be the following:

- Discipline process policy

- Vacation time policy

- Dress code

- Ethics policy

- Internet usage policy

These topics are addressed further in Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and Motivation”, Chapter 8 “Training and Development”, and Chapter 9 “Successful Employee Communication”.

Compensation and Benefits Administration

HRM professionals need to determine that compensation is fair, meets industry standards, and is high enough to entice people to work for the organization. Compensation includes anything the employee receives for his or her work. In addition, HRM professionals need to make sure the pay is comparable to what other people performing similar jobs are being paid. This involves setting up pay systems that take into consideration the number of years with the organization, years of experience, education, and similar aspects. Examples of employee compensation include the following:

- Pay

- Health benefits

- 401(k) (retirement plans)

- Stock purchase plans

- Vacation time

- Sick leave

- Bonuses

- Tuition reimbursement

Since this is not an exhaustive list, compensation is discussed further in Chapter 6 “Compensation and Benefits”.

Retention

Retention involves keeping and motivating employees to stay with the organization. Compensation is a major factor in employee retention, but there are other factors as well. Ninety percent of employees leave a company for the following reasons:

1. Issues around the job they are performing

2. Challenges with their manager

3. Poor fit with organizational culture

4. Poor workplace environment

Despite this, 90 percent of managers think employees leave as a result of pay (Rivenbark, 2010). As a result, managers often try to change their compensation packages to keep people from leaving, when compensation isn’t the reason they are leaving at all. Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment” discuss some strategies to retain the best employees based on these four factors.

Training and Development

Once we have spent the time to hire new employees, we want to make sure they not only are trained to do the job but also continue to grow and develop new skills in their job. This results in higher productivity for the organization. Training is also a key component in employee motivation. Employees who feel they are developing their skills tend to be happier in their jobs, which results in increased employee retention. Examples of training programs might include the following:

- Job skills training, such as how to run a particular computer program

- Training on communication

- Team-building activities

- Policy and legal training, such as sexual harassment training and ethics training

We address each of these types of training and more in detail in Chapter 8 “Training and Development”.

Dealing with Laws Affecting Employment

Human resource people must be aware of all the laws that affect the workplace. An HRM professional might work with some of these laws:

- Discrimination laws

- Health-care requirements

- Compensation requirements such as the minimum wage

- Worker safety laws

- Labor laws

The legal environment of HRM is always changing, so HRM must always be aware of changes taking place and then communicate those changes to the entire management organization. Rather than presenting a chapter focused on HRM laws, we will address these laws in each relevant chapter.

Worker Protection

Safety is a major consideration in all organizations. Oftentimes new laws are created with the goal of setting federal or state standards to ensure worker safety. Unions and union contracts can also impact the requirements for worker safety in a workplace. It is up to the human resource manager to be aware of worker protection requirements and ensure the workplace is meeting both federal and union standards. Worker protection issues might include the following:

- Chemical hazards

- Heating and ventilation requirements

- Use of “no fragrance” zones

- Protection of private employee information

We take a closer look at these issues in Chapter 12 “Working with Labor Unions” and Chapter 13 “Safety and Health at Work”.

Caption: Knowing the law regarding worker protection is generally the job of human resources. In some industries it is extremely important; in fact, it can mean life or death.

ReSurge International – Tom Davenport Operating On A Patient – CC BY-NC-ND 2.0.

Communication

Besides these major roles, good communication skills and excellent management skills are key to successful human resource management as well as general management. We discuss these issues in Chapter 9 “Successful Employee Communication”.

Awareness of External Factors

In addition to managing internal factors, the HR manager needs to consider the outside forces at play that may affect the organization. Outside forces, or external factors, are those things the company has no direct control over; however, they may be things that could positively or negatively impact human resources. External factors might include the following:

1. Globalization and offshoring

2. Changes to employment law

3. Health-care costs

4. Employee expectations

5. Diversity of the workforce

6. Changing demographics of the workforce

7. A more highly educated workforce

8. Layoffs and downsizing

9. Technology used, such as HR databases

10. Increased use of social networking to distribute information to employees

For example, the recent trend in flexible work schedules (allowing employees to set their own schedules) and telecommuting (allowing employees to work from home or a remote location for a specified period of time, such as one day per week) are external factors that have affected HR. HRM has to be aware of these outside issues, so they can develop policies that meet not only the needs of the company but also the needs of the individuals. Another example is the Patient Protection and Affordable Care Act, signed into law in 2010. Compliance with this bill has huge implications for HR. For example, a company with more than fifty employees must provide health-care coverage or pay a penalty. Currently, it is estimated that 60 percent of employers offer health-care insurance to their employees (Cappelli, 2010). Because health-care insurance will be mandatory, cost concerns as well as using health benefits as a recruitment strategy are big external challenges. Any manager operating without considering outside forces will likely alienate employees, resulting in unmotivated, unhappy workers. Not understanding the external factors can also mean breaking the law, which has a concerning set of implications as well.

An understanding of key external factors is important to the successful HR professional. This allows him or her to be able to make strategic decisions based on changes in the external environment. To develop this understanding, reading various publications is necessary.

One way managers can be aware of the outside forces is to attend conferences and read various articles on the web. For example, the website of the Society for Human Resource Management, SHRM Online^1, not only has job postings in the field but discusses many contemporary human resource issues that may help the manager make better decisions when it comes to people management. In Section 1.3 “Today’s HRM Challenges”, we go into more depth about some recent external issues that are affecting human resource management roles. In Section 1.1.2 “The Role of HRM”, we discuss some of the skills needed to be successful in HRM.

Most professionals agree that there are seven main tasks HRM professionals perform. All these need to be considered in relation to external and outside forces.

Key Takeaways

- Capital includes all resources a company uses to generate revenue. Human resources or the people working in the organization are the most important resource.

- Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees.

- There are seven main responsibilities of HRM managers: staffing, setting policies, compensation and benefits, retention, training, employment laws, and worker protection. In this book, each of these major areas will be included in a chapter or two.

- In addition to being concerned with the seven internal aspects, HRM managers must keep up to date with changes in the external environment that may impact their employees. The trends toward flexible schedules and telecommuting are examples of external aspects.

- To effectively understand how the external forces might affect human resources, it is important for the HR manager to read the HR literature, attend conferences, and utilize other ways to stay up to date with new laws, trends, and policies.

Exercises

1. State arguments for and against the following statement: there are other things more valuable in an organization besides the people who work there.

2. Of the seven tasks an HR manager does, which do you think is the most challenging? Why?

1Society for Human Resource Management, accessed August 18, 2011, http://www.shrm.org/Pages/default.aspx.

References

Cappelli, P., “HR Implications of Healthcare Reform,” Human Resource Executive Online, March 29, 2010, accessed August 18, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509.

Frasch, K. B., David Shadovitz, and Jared Shelly, “There’s No Whining in HR,” Human Resource Executive Online, June 30, 2009, accessed September 24, 2010, http://www.hreonline.com/HRE/story.jsp?storyId=227738167.

Rivenbark, L., “The 7 Hidden Reasons Why Employees Leave,” HR Magazine, May 2005, accessed October 10, 2010, http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406.

2

Skills Needed for HRM

Learning Objectives

1. Explain the professional and personal skills needed to be successful in HRM.

2. Be able to define human resource management and the certifications that can be achieved in this profession.

One of the major factors of a successful manager or human resource (HR) manager is an array of skills to deal with a variety of situations. It simply isn’t enough to have knowledge of HR, such as knowing which forms need to be filled out. It takes multiple skills to create and manage people, as well as a cutting-edge human resource department.

The first skill needed is organization. The need for this skill makes sense, given that you are managing people’s pay, benefits, and careers. Having organized files on your computer and good time-management skills are crucial for success in any job, but especially if you take on a role in human resources.

Like most jobs, being able to multitask—that is, work on more than one task at a time—is important in managing human resources. A typical person managing human resources may have to deal with an employee issue one minute, then switch and deal with recruiting. Unlike many management positions, which only focus on one task or one part of the business, human resources focuses on all areas of the business, where multitasking is a must.

As trite as it may sound, people skills are necessary in any type of management and perhaps might be the most important skills for achieving success at any job. Being able to manage a variety of personalities, deal with conflict, and coach others are all in the realm of people management. The ability to communicate goes along with people skills. The ability to communicate good news (hiring a new employee), bad news (layoffs), and everything in between, such as changes to policy, makes for an excellent manager and human resource management (HRM) professional.

Keys to a successful career in HRM or management include understanding specific job areas, such as managing the employee database, understanding employment laws, and knowing how to write and develop a strategic plan that aligns with the business. All these skills will be discussed in this book.

A strategic mind-set as an HR professional is a key skill as well. A person with a strategic mind-set can plan far in advance and look at trends that could affect the environment in which the business is operating. Too often, managers focus on their own area and not enough on the business as a whole. The strategic HR professional is able to not only work within his or her area but also understand how HR fits into the bigger picture of the business.

Ethics and a sense of fairness are also necessary in human resources. Ethics is a concept that examines the moral rights and wrongs of a certain situation. Consider the fact that many HR managers negotiate salary and union contracts and manage conflict. In addition, HR managers have the task of ensuring compliance with ethics standards within the organization. Many HR managers are required to work with highly confidential information, such as salary information, so a sense of ethics when managing this information is essential. We discuss ethics from the organizational perspective in Section 1.1.2 “The Role of HRM”.

Dilbert and the Evil HR Director

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=94

Ethics is perhaps one of the most important aspects to being a great HR professional. This humorous video shows how unethical behavior can undermine motivation at work.

Human Resource Recall

Think of your current skills. Are there personal or professional skills you would like to work on?

Finally, while we can list a few skills that are important, understanding the particular business, knowing the business strategy, and being able to think critically about how HR can align itself with the strategy are ways to ensure HR departments are critical parts of the business. HR is a specialized area, much like accounting or finance. However, many individuals are placed in HR roles without having the specific knowledge to do the job. Oftentimes people with excellent skills are promoted to management and then expected (if the company is small) to perform recruiting, hiring, and compensation tasks. This is the reason we will refer to management and HR management interchangeably throughout the chapters. In addition, these skills are important for HRM professionals and managers alike.

Having said that, for those of you wanting a career in HRM, there are three exams you can take to show your mastery of HRM material:

1. Professional in Human Resources (PHR). To take this exam, an HR professional must have at least two years’ experience. The exam is four hours long and consists of 225 multiple-choice questions in a variety of areas. Twelve percent of the test focuses on strategic management, 26 percent on workforce planning, 17 percent on human resource development, 16 percent on rewards, 22 percent on employee and labor relations, and 7 percent on risk management. The application process for taking the exam is given on the Human Resource Certification Institute website at http://www.hrci.org.

2. Senior Professional in Human Resources (SPHR). This exam is designed for HR professionals who focus on designing and planning, rather than actual implementation. It is recommended that the person taking this exam has six to eight years of experience and oversees and manages an HR department. In this test, the greater focus is on the strategic aspect of HRM.

3. Global Professional in Human Resources (GPHR). This exam is for HR professionals who perform many of their tasks on a global level and whose companies often work across borders. This exam is three hours long, with 165 multiple-choice questions. A person with two years of professional experience can take the certification test. However, because the test has the international aspect, someone who designs HR-related programs and processes to achieve business goals would be best suited to earn this certification.

The benefits of achieving certifications are great. In addition to demonstrating the abilities of the HR professional, certification allows the professional to be more marketable in a very competitive field.

Figure 1.4

Caption: Perhaps one of the most important skills in any kind of management is the ability to communicate.

Baltic Development Forum – Kristovskis-meeting-41.jpg – CC BY 2.0.

Most companies need a human resource department or a manager with HR skills. The industries and job titles are so varied that it is possible only to list general job titles in human resources:

1. Recruiter

2. Compensation analyst

3. Human resources assistant

4. Employee relations manager

5. Benefits manager

6. Work-life coordinator

7. Training and development manager

8. Human resources manager

9. Vice president for human resources

This is not an exhaustive list, but it can be a starting point for research on this career path.

People Skills in HR

<a data-iframe-code=”” href=”http://www.youtube.com/v/L1Jfo0Iym94″ class=”replaced-iframe”>(click to see video)

This chapter makes the point that communication and people skills, or “soft skills,” are necessary to be successful in any job. This video addresses the importance of these skills.

Key Takeaways

- There are a number of skills crucial to human resource management. First, being able to organize and multitask is necessary. In this job, files must be managed, and an HR manager is constantly working in different areas of the business.

- Communication skills are necessary in HRM as well. The ability to present good and bad news, work with a variety of personalities, and coach employees is important in HRM.

- Specific job skills, such as computer skills, knowledge of employment law, writing and developing strategic plans, and general critical-thinking skills are important in any type of management, but especially in human resource management.

- A sense of fairness and strong ethics will make for the best HR manager. Because HR works with a variety of departments to manage conflict and negotiate union contracts and salary, the HR professional needs ethics skills and the ability to maintain confidentiality.

- Since one of the major responsibilities of an HR department is to align the HR strategic plan with the business strategic plan, critical and creative thinking, as well as writing, are skills that will benefit the HR manager as well.

- Many people find themselves in the role of HR manager, so we will use the term HR manager throughout this book. However, many other types of managers also perform the tasks of recruiting, selecting, and compensating, making this book and the skills listed in this section applicable to all majors.

- Certification exams can be taken to make you more marketable in the field of HRM. These certifications are offered by the HR Certification Institute (HRCI).

Exercise

1. What are your perceptions of what an HR manager does on a day-to-day basis? Research this job title and describe your findings. Is this the type of job you expected?

3

Today’s HRM Challenges

If you were to ask most business owners what their biggest challenges are, they will likely tell you that cost management is a major factor to the success or failure of their business. In most businesses today, the people part of the business is the most likely place for cuts when the economy isn’t doing well.

Consider the expenses that involve the people part of any business:

1. Health-care benefits

2. Training costs

3. Hiring process costs

4. And many more…

These costs cut into the bottom line of any business. The trick is to figure out how much, how many, or how often benefits should be offered, without sacrificing employee motivation. A company can cut costs by not offering benefits or 401(k) plans, but if its goal is to hire the best people, a hiring package without these items will most certainly not get the best people. Containment of costs, therefore, is a balancing act. An HR manager must offer as much as he or she can to attract and retain employees, but not offer too much, as this can put pressure on the company’s bottom line. We will discuss ways to alleviate this concern throughout this book.

For example, there are three ways to cut costs associated with health care:

1. Shift more of the cost of health care to employees

2. Reduce the benefits offered to cut costs

3. Change or better negotiate the plan to reduce health-care costs

Health care costs companies approximately $4,003 per year for a single employee and $9,764 for families. This equals roughly 83 percent and 73 percent of total health-care costs for single employees and employees with families^1, respectively. One possible strategy for containment for health-care plans is to implement a cafeteria plan. Cafeteria plans started becoming popular in the 1980s and have become standard in many organizations (Allen, 2010). This type of plan gives all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional health care or vacation time. It creates more flexible benefits, allowing the employee, based on his or her family situation, to choose which benefits are right for them. For example, a mother of two may choose to spend her flexible benefits on health care for her children, while a single, childless female may opt for more vacation days. In other words, these plans offer flexibility, while saving money, too. Cost containment strategies around benefits will be discussed in Chapter 6 “Compensation and Benefits”.

Another way to contain costs is by offering training. While this may seem counterintuitive, as training does cost money up front, it can actually save money in the long run. Consider how expensive a sexual harassment lawsuit or wrongful termination lawsuit might be. For example, a Sonic Drive-In was investigated by the Equal Opportunity Employment Commission (EEOC) on behalf of seventy women who worked there, and it was found that a manager at one of the stores subjected the victims to inappropriate touching and comments. This lawsuit cost the organization $2 million^2. Some simple training up front (costing less than the lawsuit) likely would have prevented this from happening. Training employees and management on how to work within the law, thereby reducing legal exposure, is a great way for HR to cut costs for the organization as a whole. In Chapter 8 “Training and Development”, we will further discuss how to organize, set up, and measure the success of a training program.

The hiring process and the cost of turnover in an organization can be very expensive. Turnover refers to the number of employees who leave a company in a particular period of time. By creating a recruiting and selection process with cost containment in mind, HR can contribute directly to cost-containment strategies company wide. In fact, the cost of hiring an employee or replacing an old one (turnover) can be as high as $9,777 for a position that pays $60,000 (Del Monte, 2010). By hiring smart the first time, HR managers can contain costs for their organization. This will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”. Reducing turnover includes employee motivational strategies. This will be addressed in Chapter 7 “Retention and Motivation”.

In a survey reported on by the Sales and Marketing Management newsletter^3, 85 percent of managers say that ineffective communication is the cause of lost revenue. E-mail, instant messaging, text messages, and meetings are all examples of communication in business. An understanding of communication styles, personality styles, and channels of communication can help us be more effective in our communications, resulting in cost containment. In HRM, we can help ensure our people have the tools to communicate better, and contain costs and save dollars in doing so. Some of these tools for better communication will be addressed in Chapter 9 “Successful Employee Communication”.

One cost-containment strategy for US businesses has been offshoring. Offshoring refers to the movement of jobs overseas to contain costs. It is estimated that 3.3 million US jobs will be moved overseas by 2015 (Agrawal & Farrell, 2003). According to the US Census Bureau, most of these jobs are Information Technology (IT) jobs as well as manufacturing jobs. This issue is unique to HR, as the responsibility for developing training for new workers and laying off domestic workers will often fall under the realm of HRM. Offshoring will be discussed in Chapter 14 “International HRM”, and training for new workers will be discussed in Chapter 8 “Training and Development”.

Figure

Caption: One of the biggest contemporary challenges in HRM is figuring out the balance between what benefits to offer versus the impact those benefits have on employee motivation.

winnifredxoxo – balance scale – CC BY 2.0.

Of course, cost containment isn’t only up to HRM and managers, but as organizations look at various ways to contain costs, human resources can certainly provide solutions.

Technology

Technology has greatly impacted human resources and will continue to do so as new technology is developed. Through use of technology, many companies have virtual workforces that perform tasks from nearly all corners of the world. When employees are not located just down the hall, management of these human resources creates some unique challenges. For example, technology creates an even greater need to have multicultural or diversity understanding. Since many people will work with individuals from across the globe, cultural sensitivity and understanding is the only way to ensure the use of technology results in increased productivity rather than decreased productivity due to miscommunications. Chapter 3 “Diversity and Multiculturalism” and Chapter 14 “International HRM” will discuss some specific diversity issues surrounding a global workforce.

Technology also creates a workforce that expects to be mobile. Because of the ability to work from home or anywhere else, many employees may request and even demand a flexible schedule to meet their own family and personal needs. Productivity can be a concern for all managers in the area of flextime, and another challenge is the fairness to other workers when one person is offered a flexible schedule. Chapter 6 “Compensation and Benefits” and Chapter 7 “Retention and Motivation” will discuss flextime as a way to reward employees. Many companies, however, are going a step further and creating virtual organizations, which don’t have a physical location (cost containment) and allow all employees to work from home or the location of their choice. As you can imagine, this creates concerns over productivity and communication within the organization.

The use of smartphones and social networking has impacted human resources, as many companies now disseminate information to employees via these methods. Of course, technology changes constantly, so the methods used today will likely be different one year or even six months from now.

The large variety of databases available to perform HR tasks is mind boggling. For example, databases are used to track employee data, compensation, and training. There are also databases available to track the recruiting and hiring processes. We will discuss more about technology in HR in Chapter 4 “Recruitment” through Chapter 8 “Training and Development”.

Of course, the major challenge with technology is its constantly changing nature, which can impact all practices in HRM.

How Would You Handle This?

Too Many Friends

You are the HR manager for a small company, consisting of twenty-three people plus the two owners, Steve and Corey. Every time you go into Steve’s office, you see he is on Facebook. Because he is Facebook friends with several people in the organization, you have also heard he constantly updates his status and uploads pictures during work time. Then, at meetings, Steve will ask employees if they saw the pictures he recently uploaded from his vacation, weekend, or backpacking trip. One employee, Sam, comes to you with a concern about this. “I am just trying to do my job, but I feel if I don’t look at his photos, he may not think I am a good employee,” she says. How would you handle this?

How Would You Handle This?

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The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/medias/1371241/embed.

Cyberloafing, a term used to describe lost productivity as a result of an employee using a work computer for personal reasons, is another concern created by technology. One study performed by Nucleus Research found that the average worker uses Facebook for fifteen minutes per day, which results in an average loss of 1.5 percent of productivity^4. Some workers, in fact, use Facebook over two hours per day during working hours. Restricting or blocking access to the Internet, however, can result in angry employees and impact motivation at work. Motivational factors will be discussed in Chapter 7 “Retention and Motivation”.

Technology can create additional stress for workers. Increased job demands, constant change, constant e-mailing and texting, and the physical aspects of sitting in front of a computer can be not only stressful but also physically harmful to employees. Chapter 13 “Safety and Health at Work” will deal with some of these stress issues, as well as safety issues such as carpal tunnel, which can occur as a result of technology in the workplace. More on health and safety will be covered in Chapter 10 “Managing Employee Performance”.

The Economy

Tough economic times in a country usually results in tough times for business, too. High unemployment and layoffs are clearly HRM and managerial issues. If a human resource manager works for a unionized company, union contracts are the guiding source when having to downsize owing to a tough economy. We will discuss union contracts in greater detail in Chapter 12 “Working with Labor Unions”. Besides union restrictions, legal restrictions on who is let go and the process followed to let someone go should be on the forefront of any manager’s mind when he or she is required to lay off people because of a poor economy. Dealing with performance issues and measuring performance can be considerations when it is necessary to lay off employees. These issues will be discussed in Chapter 10 “Managing Employee Performance” and Chapter 11 “Employee Assessment”.

Likewise, in a growth economy, the HR manager may experience a different kind of stress. Massive hiring to meet demand might occur if the economy is doing well. For example, McDonald’s restaurants had to fill six hundred positions throughout Las Vegas and held hiring day events in 2010^5. Imagine the process of hiring this many people in a short period of time The same recruiting and selection processes used under normal circumstances will be helpful in mass hiring situations. Recruiting and selection will be discussed in Chapter 4 “Recruitment” and Chapter 5 “Selection”.

The Changing and Diverse Workforce

Human resources should be aware that the workforce is constantly changing. For example, in the 2010 census, the national population was 308,745,538, with 99,531,000 in 2010 working full time, down from 2008 when 106,648,000 were working full time^6. For full-time workers, the average weekly salary was higher the more educated the worker. See below figure for details.

Figure

The average weekly earnings for workers in the United States increase with more education.

Source: Data from US Bureau of Labor Statistics, “Usual Weekly Earnings of Wage and Salary Workers,” Table 5, Economic News Release, July 20, 2010, accessed August 19, 2011, http://www.bls.gov/opub/ted/2010/ted_20100726_data.htm.

Fortune 500 Focus

Multigenerational is here to stay, and Xerox is the leader in recruiting of Generation Y talent. This age group has been moving into the labor market over the last six years, and this major demographic change, along with the retirement of baby boomers, has many companies thinking. Fortune 500 companies know they must find out where their new stars are coming from. In recruiting this new talent, Xerox isn’t looking to old methods, because they know each generation is different. For example, Xerox developed the “Express Yourself” recruiting campaign, which is geared around a core value of this generation, to develop solutions and change. Joe Hammill, the director of talent acquisition, says, “Gen Y is very important. Xerox and other companies view this emerging workforce as the future of our organization” (Armour, 2005). Besides the new recruiting campaign, recruiters are working at what they term “core colleges”—that is, those that produce the kind of talent they need. For example, they developed recruitment campaigns with specific institutions such as the Rochester Institute of Technology because of its strong engineering and printing science programs. On their company website, they have a specific tab for the recent college graduate, emphasizing core values of this generation, including the ability to contribute, support, and build skills. With its understanding of multicultural generations, Xerox has created a talent pool for years to come.

It is expected that over the next ten years, over 40 percent of the workforce will retire, and there will not be enough younger workers to take the jobs once held by the retiring workforce (Fernandez, 2007). In fact, the American Society of Training and Development says that in the next twenty years, seventy-six million Americans will retire, and only forty-six million will replace them. As you can imagine, this will create a unique staffing obstacle for human resources and managers alike, as they try to find talented people in a pool that doesn’t have enough people to perform necessary jobs. The reason for this increase in retirement is the aging baby boomers. Baby boomers can be defined as those born between the years 1946 and 1964, according to the Census Bureau. They are called the baby boomers because there was a large increase of babies born after soldiers came back from World War II. Baby boomers account for seventy-six million people in the United States in 2011, the same year in which the first of the baby boomers have started to retire.

The impact of the baby boomer generation on our country and on human resource management is huge. First, the retirement of baby boomers results in a loss of a major part of the working population, and there are not enough people to fill those jobs that are left vacant. Second, the baby boomers’ knowledge is lost upon their retirement. Much of this knowledge isn’t formalized or written down, but it contributes to the success of business. Third, elderly people are living longer, and this results in higher health-care costs for all currently in the workforce. It is estimated that three out of five baby boomers do not have enough money saved for retirement (Weisenthal, 2010), meaning that many of them will depend on Social Security payments to meet basic needs. However, since the Social Security system is a pay-as-you-go system (i.e., those paying into the system now are paying for current retirees), there may not be enough current workers to cover the current Social Security needs. In fact, in 1950 there were 16 workers to support each Social Security beneficiary, but today there are only 3.3 workers supporting each beneficiary (Wenning, 2010). The implications can mean that more will be paid by current workers to support retirees.

As a result of the aging workforce, human resources should keep abreast of changes in Social Security legislation and health-care costs, which will be discussed in Chapter 6 “Compensation and Benefits”. In addition, human resource managers should review current workers’ skill levels and monitor retirements and skills lost upon those retirements, which is part of strategic planning. This will be discussed in Chapter 2 “Developing and Implementing Strategic HRM Plans”. Having knowledge about current workers and skills, as well as predicting future workforce needs, will be necessary to deal with the challenges of an aging workforce.

Figure

Developing an HR strategy around retirement of workers is a key factor in working with a multigenerational workforce. In addition, HR must understand the various psychologies of varying ages of workers and develop benefits and compensation that meet the needs of all generations.

Christopher Schwarzkopf – Wikimedia Diversity Conference 2013 – CC BY-SA 3.0.

Human Resource Recall

Have you ever worked in a multigenerational organization? What were some of the challenges in working with people who may have grown up in a different era?

Another challenge, besides lack of workers, is the multigenerational workforce. Employees between the ages of seventeen and sixty-eight have different values and different expectations of their jobs. Any manager who tries to manage these workers from varying generations will likely have some challenges. Even compensation preferences are different among generations. For example, the traditional baby boomer built a career during a time of pensions and strongly held values of longevity and loyalty to a company. Compare the benefit needs of this person to someone who is younger and expects to save through a 401(k) plan, and it is clear that the needs and expectations are different(Capezza, 2010). Throughout this book, we will discuss compensation and motivational strategies for the multigenerational workforce.

Awareness of the diversity of the workforce will be discussed in Chapter 3 “Diversity and Multiculturalism”, but laws regarding diversity will be discussed throughout the book. Diversity refers to age, disability, race, sex, national origin, and religion. Each of these components makes up the productive workforce, and each employee has different needs, wants, and goals. This is why it is imperative for the HRM professional to understand how to motivate the workforce, while ensuring that no laws are broken. We will discuss laws regarding diversity (and the components of diversity, such as disabilities) in Chapter 3 “Diversity and Multiculturalism”, Chapter 4 “Recruitment”, Chapter 5 “Selection”, Chapter 6 “Compensation and Benefits”, and Chapter 7 “Retention and Motivation”.

Figure  Demographic Data for the United States by Race

Source: Map courtesy of the US Census Department.

Ethics

A discussion of ethics is necessary when considering challenges of human resources. Much of the discussion surrounding ethics happened after the early to mid-2000s, when several companies were found to have engaged in gross unethical and illegal conduct, resulting in the loss of billions of dollars from shareholders. Consider the statistics: only 25 percent of employees trusted their CEO to tell the truth, and 80 percent of people said that employers have a moral responsibility to society^7. Based on these numbers, an ethical workplace is important not only for shareholder satisfaction but for employee satisfaction as well. Companies are seeing the value of implementing ethics codes within the business.

Many human resource departments have the responsibility of designing codes of ethics and developing policies for ethical decision making. Some organizations hire ethics officers to specifically focus on this area of the business. Out of four hundred companies surveyed, 48 percent had an ethics officer, who reported to either the CEO or the HR executive (McGraw, 2011). According to Steve Miranda, chief human resources officer for the Society for Human Resource Management (SHRM), “[the presence of an ethics officer] provides a high-level individual with positional authority who can ensure that policies, practices, and guidelines are effectively communicated across the organization” (McGraw, 2011).

For example, the insurance company Allstate recently hired a chief ethics and compliance officer (CECO) who offers a series of workshops geared toward leaders in the organization, because they believe that maintaining high ethical standards starts at the top of an organization. In addition, the CECO monitors reports of ethics complaints within the organization and trains employees on the code of ethics or code of conduct (McGraw, 2011). A code of ethics is an outline that explains the expected ethical behavior of employees. For example, General Electric (GE) has a sixty-four-page code of conduct that outlines the expected ethics, defines them, and provides information on penalties for not adhering to the code. The code of conduct is presented below. Of course, simply having a written code of ethics does little to encourage positive behavior, so many organizations (such as GE) offer stiff penalties for ethics violations. Developing policies, monitoring behavior, and informing people of ethics are necessary to ensure a fair and legal business.

The following is an outline of GE’s code of conduct^8:

- Obey the applicable laws and regulations governing our business conduct worldwide.

- Be honest, fair, and trustworthy in all your GE activities and relationships.

- Avoid all conflicts of interest between work and personal affairs.

- Foster an atmosphere in which fair employment practices extend to every member of the diverse GE community.

- Strive to create a safe workplace and to protect the environment.

- Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees.

Key Takeaways

- One of the most important aspects to productive HRM is to ensure the department adds value to the rest of the organization, based on the organization’s strategic plan.

- One of the major challenges of HRM is containment of costs. This can be done in several ways, for example, in the way health care and benefits are offered. Many companies are developing cafeteria plans that satisfy the employee and help contain costs.

- HRM can also contain costs by developing and managing training programs and ensuring employees are well trained to be productive in the job.

- Hiring is a very expensive part of human resources, and therefore HRM should take steps to ensure they are hiring the right people for the job the first time. Turnover is a term used to describe the departure of an employee.

- Poor communication results in wasting time and resources. We can communicate better by understanding communication channels, personalities, and styles.

- Technology is also a challenge to be met by human resources. For example, employees may request alternative work schedules because they can use technology at home to get their work done.

- Because technology is part of our work life, cyberloafing, or employees spending too much time on the Internet, creates new challenges for managers. Technology can also create challenges such as workplace stress and lack of work-life balance.

- The economy is a major factor in human resource management. HR managers, no matter what the state of the economy, must plan effectively to make sure they have the right number of workers at the right time. When we deal with a down economy, the legal and union implications of layoffs must be considered, and in an up economy, hiring of workers to meet the internal demand is necessary.

- The retirement of baby boomers is creating a gap in the workplace, related to not only the number of people available but also the skills people have. Multigenerational companies, or companies with workers of a variety of ages, must find ways to motivate employees, even though those employees may have different needs. HR must be aware of this and continually plan for the challenge of a changing workforce. Diversity in the workplace is an important challenge in human resource management. Diversity will be discussed in Chapter 3 “Diversity and Multiculturalism”.

- Ethics and monitoring of ethical behavior are also challenges in HRM. Setting ethical standards and monitoring ethical behavior, including developing a code of conduct, is a must for any successful business.

Exercises

1. Research the various generations: baby boomers, Generation X, and the Y Generation (millennials). Compare and contrast five differences between the generations. How might these differences impact HRM?

2. Review news articles on the current state of the economy. Which aspects of these articles do you think can relate to HRM?

1“Use Three Strategies to Cut Health Care Costs,” Business Management Daily, September 9, 2010, accessed October 10, 2010, http://www.businessmanagementdaily.com/articles/23381/1/Use-3-strategies-to-cut-health-care-costs/Page1.html.

2“LL Sonic Settles EEOC Lawsuit for $2 Million,” Valencia County News Bulletin, June 23, 2011.

3“The Cost of Poor Communications,” Sales and Marketing, December 22, 2006, accessed October 1, 2010, http://www.allbusiness.com/marketing-advertising/4278862-1.html.

4“Facebook Use Cuts Productivity at Work,” Economic Times, July 25, 2009, accessed October 4, 2010, http://economictimes.indiatimes.com/tech/internet/Facebook-use-cuts-productivity-at-work-Study/articleshow/4818848.cms.

5“McDonald’s Readies for Massive Hiring Spree,” Fox 5 News, Las Vegas, May 2010, accessed October 5, 2010, http://www.fox5vegas.com/news/23661640/detail.html (site discontinued).

6Bureau of Labor Statistics, Current Population Survey Report, accessed July 7, 2011, http://www.bls.gov/cps/earnings.htm#education.

7Strategic Management Partners, “Unethical Statistics Announced At Business Leaders Event,” news release, http://www.consult-smp.com/archives/2005/02/unethical_stati.html, accessed August 31, 2011.

8“The Spirit and the Letter,” General Electric Company, accessed August 10, 2011, http://files.gecompany.com/gecom/citizenship/pdfs/TheSpirit&TheLetter.pdf.

References

Agrawal, V. and Diana Farrell, “Who Wins in Offshoring?” in “Global Directions,” special issue, McKinsey Quarterly, (2003): 36–41, https://www.mckinseyquarterly.com/Who_wins_in_offshoring_1363.

Allen, M., Benefits, Buffet Style—Flexible Plans,” Nation’s Business, January 1997, accessed October 1, 2010, http://findarticles.com/p/articles/mi_m1154/is_v75/ai_4587731.

Armour, S., “Generation Y: They’ve Arrived at Work with a New Attitude,” USA Today, November 6, 2005.

Capezza, M., “Employee Benefits in a Multigenerational Workplace,” EpsteinBeckerGreen, August 12, 2010, accessed October 6, 2010, http://www.ebglaw.com/showNewsletter.aspx?Show=13313.

Del Monte, J., “Cost of Hiring and Turnover,” JDA Professional Services, Inc., 2010, accessed October 1, 2010, http://www.jdapsi.com/Client/articles/coh.

Fernandez, A., “Training the Aging Workforce,” SharpBrains, August 10, 2007, accessed October 6, 2010, http://www.sharpbrains.com/blog/2007/08/10/training-the-aging-workforce-and-their-brains.

McGraw, M., “The HR-Ethics Alliance,” HR Executive Online, June 16, 2011, accessed July 7, 2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153.

Weisenthal, J., “3 of 5 Baby Boomers Don’t Have Enough for Retirement,” Business Insider Magazine, August 16, 2010, http://www.businessinsider.com/boomers-cutting-back-2010-8.

Wenning, B., “Baby Boomer Retirement May Be a Bust,” Metrowest News Daily, March 21, 2010.

4

Cases and Problems

Chapter Summary

- Human resource management is the process of employing people, training them, compensating them, developing policies relating to the workplace, and developing strategies to retain employees. Three certification exams, which are offered by the Human Resource Certification Institute, can be taken to show HRM skills and become more marketable.

- Human resource management involves seven main areas: (1) staffing, (2) workplace policies, (3) benefits and compensation, (4) retention, (5) training, (6) employment laws, and (7) employee protection.

- Human resource managers need many different types of skills. Being able to organize, multitask, and communicate effectively, as well as having specific job skills, such as how to run a particular computer program, and a sense of fairness and ethics, is crucial to a successful career in HRM.

- There are many contemporary challenges associated with HRM. First, it is up to everyone in the organization to contain costs. HR managers need to look at their individual departments and demonstrate the necessity and value of their functions to the organization. HR managers can also help contain costs in several ways, such as managing benefits plans and compensation and providing training.

- The fast-changing nature of technology is also a challenge in HRM. As new technologies are developed, employees may be able to implement innovative ways of working such as flextime. HR managers are also responsible for developing policies dealing with cyberloafing and other workplace time wasters revolving around technology. Employee stress and lack of work-life balance are also greatly influenced by technology.

- Awareness of the changes in the economy allows the human resource manager to adequately plan for reductions and additions to the workforce.

- The aging and changing workforce is our final factor. As baby boomers retire, there likely will not be enough people to replace them, and many of the skills the baby boomers have may be lost. In addition, having to work with multiple generations at once can create challenges as different expectations and needs arise from multigenerational workforces.

Chapter Case

Changes, Changes

Jennifer, the owner and manager of a company with ten employees, has hired you to take over the HRM function so she can focus on other areas of her business. During your first two weeks, you find out that the company has been greatly affected by the up economy and is expected to experience overall revenue growth by 10 percent over the next three years, with some quarters seeing growth as high as 30 percent. However, five of the ten workers are expected to retire within three years. These workers have been with the organization since the beginning and provide a unique historical perspective of the company. The other five workers are of diverse ages.

In addition to these changes, Jennifer believes they may be able to save costs by allowing employees to telecommute one to two days per week. She has some concerns about productivity if she allows employees to work from home. Despite these concerns, Jennifer has even considered closing down the physical office and making her company a virtual organization, but she wonders how such a major change will affect the ability to communicate and worker motivation.

Jennifer shares with you her thoughts about the costs of health care on the organization. She has considered cutting benefits entirely and having her employees work for her on a contract basis, instead of being full-time employees. She isn’t sure if this would be a good choice.

Jennifer schedules a meeting with you to discuss some of her thoughts. To prepare for the meeting, you perform research so you can impress your new boss with recommendations on the challenges presented.

1. Point out which changes are occurring in the business that affect HRM.

2. What are some considerations the company and HR should be aware of when making changes related to this case study?

3. What would the initial steps be to start planning for these changes?

4. What would your role be in implementing these changes? What would Jennifer’s role be?

Team Activities

1. In a group of two to three people, research possible career paths in HRM and prepare a PowerPoint presentation to discuss your findings.

2. Interview an HR manager and discuss his or her career path, skills, and daily tasks. Present your findings to your class.

5

The Recruitment Process

Learning Objectives

1. Discuss the need for forecasting human resource needs and techniques for forecasting.

2. Be able to explain the steps to an effective recruitment strategy.

3. Be able to develop a job analysis and job description.

The recruitment process is an important part of human resource management (HRM). It isn’t done without proper strategic planning. Recruitment is defined as a process that provides the organization with a pool of qualified job candidates from which to choose. Before companies recruit, they must implement proper staffing plans and forecasting to determine how many people they will need. The basis of the forecast will be the annual budget of the organization and the short- to long-term plans of the organization—for example, the possibility of expansion. In addition to this, the organizational life cycle will be a factor. Organization life cycle is discussed in Chapter 2 “Developing and Implementing Strategic HRM Plans”. Forecasting is based on both internal and external factors. Internal factors include the following:

1. Budget constraints

2. Expected or trend of employee separations

3. Production levels

4. Sales increases or decreases

5. Global expansion plans

External factors might include the following:

1. Changes in technology

2. Changes in laws

3. Unemployment rates

4. Shifts in population

5. Shifts in urban, suburban, and rural areas

6. Competition

Once the forecasting data are gathered and analyzed, the HR professional can see where gaps exist and then begin to recruit individuals with the right skills, education, and backgrounds. This section will discuss this step in HR planning.

Recruitment Strategy

Although it might seem easy, recruitment of the right talent, at the right place and at the right time, takes skill and practice, but more importantly, it takes strategic planning. In Chapter 2 “Developing and Implementing Strategic HRM Plans”, development of staffing plans is discussed. An understanding of the labor market and the factors determining the relevant aspects of the labor market is key to being strategic about your recruiting processes.

Based on this information, when a job opening occurs, the HRM professional should be ready to fill that position. Here are the aspects of developing a recruitment strategy:

1. Refer to a staffing plan. This is discussed in Chapter 2 “Developing and Implementing Strategic HRM Plans”.

2. Confirm the job analysis is correct through questionnaires.

3. Write the job description and job specifications.

4. Have a bidding system to recruit and review internal candidate qualifications for possible promotions.

5. Determine the best recruitment strategies for the position.

6. Implement a recruiting strategy.

The first step in the recruitment process is acknowledgment of a job opening. At this time, the manager and/or the HRM look at the job description for the job opening (assuming it isn’t a new job). We discuss how to write a job analysis and job description in Section 4.1.2 “Job Analysis and Job Descriptions”.

Assuming the job analysis and job description are ready, an organization may decide to look at internal candidates’ qualifications first. Internal candidates are people who are already working for the company. If an internal candidate meets the qualifications, this person might be encouraged to apply for the job, and the job opening may not be published. Many organizations have formal job posting procedures and bidding systems in place for internal candidates. For example, job postings may be sent to a listserv or other avenue so all employees have access to them. However, the advantage of publishing open positions to everyone in and outside the company is to ensure the organization is diverse. Diversity is discussed in Chapter 3 “Diversity and Multiculturalism”. We discuss more about internal and external candidates and bidding systems in Chapter 5 “Selection”.

Then the best recruiting strategies for the type of position are determined. For example, for a high-level executive position, it may be decided to hire an outside head-hunting firm. For an entry-level position, advertising on social networking websites might be the best strategy. Most organizations will use a variety of methods to obtain the best results. We discuss specific strategies in Section 4.3 “Recruitment Strategies”.

Another consideration is how the recruiting process will be managed under constraining circumstances such as a short deadline or a low number of applications. In addition, establishing a protocol for how applications and résumés will be processed will save time later. For example, some HRM professionals may use software such as Microsoft Excel to communicate the time line of the hiring process to key managers.

Once these tasks are accomplished, the hope is that you will have a diverse group of people to interview (called the selection process). Before this is done, though, it is important to have information to ensure the right people are recruited. This is where the job analysis and job description come in. We discuss this in Section 4.1.2 “Job Analysis and Job Descriptions”.

Job Analysis and Job Descriptions

The job analysis is a formal system developed to determine what tasks people actually perform in their jobs. The purpose of a job analysis is to ensure creation of the right fit between the job and the employee and to determine how employee performance will be assessed. A major part of the job analysis includes research, which may mean reviewing job responsibilities of current employees, researching job descriptions for similar jobs with competitors, and analyzing any new responsibilities that need to be accomplished by the person with the position. According to research by Hackman and Oldham (Hackman & Oldham, 1976), a job diagnostic survey should be used to diagnose job characteristics prior to any redesign of a job. This is discussed in Chapter 7 “Retention and Motivation”.

To start writing a job analysis, data need to be gathered and analyzed, keeping in mind Hackman and Oldham’s model. Figure 4.1 “Process for Writing the Job Analysis” shows the process of writing a job analysis. Please note, though, that a job analysis is different from a job design. Job design refers to how a job can be modified or changed to be more effective—for example, changing tasks as new technology becomes available. We discuss job design in Chapter 7 “Retention and Motivation” and Chapter 11 “Employee Assessment”.

Process for Writing the Job Analysis

The information gathered from the job analysis is used to develop both the job description and the job specifications. A job description is a list of tasks, duties, and responsibilities of a job. Job specifications, on the other hand, discuss the skills and abilities the person must have to perform the job. The two are tied together, as job descriptions are usually written to include job specifications. A job analysis must be performed first, and then based on that data, we can successfully write the job description and job specifications. Think of the analysis as “everything an employee is required and expected to do.”

Sample Job Analysis Questionnaire

This questionnaire shows how an HR professional might gather data for a job analysis. Questionnaires can be completed on paper or online.

Two types of job analyses can be performed: a task-based analysis and a competency- or skills-based analysis. A task-based analysis focuses on the duties of the job, as opposed to a competency-based analysis, which focuses on the specific knowledge and abilities an employee must have to perform the job. An example of a task-based analysis might include information on the following:

1. Write performance evaluations for employees.

2. Prepare reports.

3. Answer incoming phone calls.

4. Assist customers with product questions.

5. Cold-call three customers a day.

With task job analysis, the specific tasks are listed and it is clear. With competency based, it is less clear and more objective. However, competency-based analysis might be more appropriate for specific, high-level positions. For example, a competency-based analysis might include the following:

1. Able to utilize data analysis tools

2. Able to work within teams

3. Adaptable

4. Innovative

You can clearly see the difference between the two. The focus of task-based analyses is the job duties required, while the focus of competency-based analyses is on how a person can apply their skills to perform the job. One is not better than the other but is simply used for different purposes and different types of jobs. For example, a task-based analysis might be used for a receptionist, while a competency-based analysis might be used for a vice president of sales position. Consider the legal implications, however, of which job analysis is used. Because a competency-based job analysis is more subjective, it might be more difficult to tell whether someone has met the criteria.

Once you have decided if a competency-based or task-based analysis is more appropriate for the job, you can prepare to write the job analysis. Of course, this isn’t something that should be done alone. Feedback from managers should be taken into consideration to make this task useful in all levels of the organization. Organization is a key component to preparing for your job analysis. For example, will you perform an analysis on all jobs in the organization or just focus on one department? Once you have determined how you will conduct the analysis, a tool to conduct the analysis should be chosen. Most organizations use questionnaires (online or hard copy) to determine the duties of each job title. Some organizations will use face-to-face interviews to perform this task, depending on time constraints and the size of the organization. A job analysis questionnaire usually includes the following types of questions, obviously depending on the type of industry:

1. Employee information such as job title, how long in position, education level, how many years of experience in the industry

2. Key tasks and responsibilities

3. Decision making and problem solving: this section asks employees to list situations in which problems needed to be solved and the types of decisions made or solutions provided.

4. Level of contact with colleagues, managers, outside vendors, and customers

5. Physical demands of the job, such as the amount of heavy lifting or ability to see, hear, or walk

6. Personal abilities required to do the job—that is, personal characteristics needed to perform well in this position

7. Specific skills required to do the job—for example, the ability to run a particular computer program

8. Certifications to perform the job

Once all employees (or the ones you have identified) have completed the questionnaire, you can organize the data, which is helpful in creating job descriptions. If there is more than one person completing a questionnaire for one job title, the data should be combined to create one job analysis for one job title. There are a number of software packages available to help human resources perform this task, such as AutoGOJA.

Once the job analysis has been completed, it is time to write the job description and specifications, using the data you collected. Job descriptions should always include the following components:

1. Job functions (the tasks the employee performs)

2. Knowledge, skills, and abilities (what an employee is expected to know and be able to do, as well as personal attributes)

3. Education and experience required

4. Physical requirements of the job (ability to lift, see, or hear, for example)

Sample Job Description

Notice how the job description includes the job function; knowledge, skills, and abilities required to do the job; education and experience required; and the physical requirements of the job.

Once the job description has been written, obtaining approval from the hiring manager is the next step. Then the HR professional can begin to recruit for the position. Before we discuss specific recruitment strategies, we should address the law and how it relates to hiring. This is the topic of Section 4.2 “The Law and Recruitment”.

Tips to Writing a Good Job Description

- Be sure to include the pertinent information:

- Title

- Department

- Reports to

- Duties and responsibilities

- terms of employment

- qualifications needed

- Think of the job description as a snapshot of the job.

- Communicate clearly and concisely.

- Make sure the job description is interesting to the right candidate applying for the job.

- Avoid acronyms.

- Don’t try to fit all job aspects into the job description.

- Proofread the job description.

Writing a Job Description

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=124

A short video on how to write an effective job description, with examples.

Human Resource Recall

Does your current job or past job have a job description? Did it closely match the tasks you actually performed?

Key Takeaways

- The recruitment process provides the organization with a pool of qualified applicants.

- Some companies choose to hire internal candidates—that is, candidates who are already working for the organization. However, diversity is a consideration here as well.

- A job analysis is a systematic approach to determine what a person actually does in his or her job. This process might involve a questionnaire to all employees. Based on this analysis, an accurate job description and job specifications can be written. A job description lists the components of the job, while job specifications list the requirements to perform the job.

Exercises

1. Do an Internet search for “job description.” Review three different job descriptions and then answer the following questions for each of the jobs:

1. What are the job specifications?

2. Are the physical demands mentioned?

3. Is the job description task based or competency based?

4. How might you change this job description to obtain more qualified candidates?

2. Why do the five steps of the recruitment process require input from other parts of the organization? How might you handle a situation in which the employees or management are reluctant to complete a job analysis?

References

Hackman J. R. and Greg R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance 16, no. 2 (August 1976): 250–79.

6

The Law and Recruitment

Learning Objective

1. Explain the Immigration Reform and Control Act (IRCA), Patriot Act, and equal employment opportunity (EEO) laws and how they relate to recruiting.

One of the most important parts of HRM is to know and apply the law in all activities the HR department handles. Specifically with hiring processes, the law is very clear on a fair hiring that is inclusive to all individuals applying for a job. The laws discussed here are applied specifically to the recruiting of new employees.

Immigration Reform and Control Act

The Immigration Reform and Control Act (IRCA) was adopted by Congress in 1986^1. This law requires employers to attest to their employees’ immigration status. It also makes it illegal to hire or recruit illegal immigrants. The purpose of this law is to preserve jobs for those who have legal documentation to work in the United States. The implications for human resources lie in the recruitment process, because before entering employees into the selection process (interviewing, for example), it is important to know they are eligible to work in the United States. This is why many application forms ask, “Are you legally able to work in the United States?” Dealing with the IRCA is a balancing act, however, because organizations cannot discriminate against legal aliens seeking work in the United States.

The IRCA relates not only to workers you hire but also to subcontractors. In a subcontractor situation (e.g., your organization hires an outside firm to clean the building after hours), your organization can still be held liable if it is determined your organization exercises control over how and when the subcontractors perform their jobs. In 2005, undocumented janitorial workers sued Walmart, arguing that the contracting company they worked for didn’t pay them a minimum wage^2. Because the retailer controlled many of the details of their work, Walmart was considered to be a coemployer, and as a result, Walmart was held responsible not only for back wages but for the fact their subcontractor had hired undocumented workers.

HR professionals must verify both the identity and employment eligibility of all employees, even if they are temporary employees. The INS I-9 form (Employment Eligibility Verification form) is the reporting form that determines the identity and legal work status of a worker.

If an audit is performed on your company, you would be required to show I-9 forms for all your workers. If an employer hires temporary workers, it is important to manage data on when work visas are to expire, to ensure compliance. Organizations that hire illegal workers can be penalized $100 to $1,000 per hire. There is a software solution for management of this process, such as HR Data Manager. Once all data about workers are inputted, the manager is sent reminders if work authorization visas are about to expire. Employers are required to have the employee fill out the I-9 form on their first day of work, and the second section must be filled out within three days after the first day of employment. The documentation must be kept on file three years after the date of hire or for one year after termination. Some states, though, require the I-9 form be kept on file for as long as the person is employed with the organization.

In 2010, new rules about the electronic storage of forms were developed. The US Department of Homeland Security said that employees can have these forms electronically signed and stored.

The I-9 form must be completed by management within three days of hire and be kept for at least three years, but in some states, it must be kept on file for the duration of employment.

Patriot Act

In response to the September 11, 2001, terrorist attacks against the United States, the Patriot Act was signed, introducing legislative changes to enhance the federal government’s ability to conduct domestic and international investigations and surveillance activities. As a result, employers needed to implement new procedures to maintain employee privacy rights while also creating a system that allowed for release of information requested by the government.

The act also amended the Electronic Communications Privacy Act, allowing the federal government easier access to electronic communications. For example, only a search warrant is required for the government to access voice mail and e-mail messages.

The act also amended the Foreign Intelligence Surveillance Act. The government is allowed to view communications if an employee is suspected of terrorism, and the government does not have to reveal this surveillance to the employer.

It is prudent for HR professionals and managers to let potential employees know of these new requirements, before the hiring process begins.

How Would You Handle This?

Wrong Job Description

Aimee, a highly motivated salesperson, has come to you with a complaint. She states that she had her performance evaluation, but all the items on her evaluation didn’t relate to her actual job. In the past two years, she explains, her job has changed because of the increase of new business development using technology. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1371475/embed

The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/medias/1371475/embed.

EEO Set of Laws

We discuss Equal Employment Opportunity (EEO) laws in Chapter 3. They are worth mentioning again here in relation to the recruitment process. The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with the task of enforcing federal employment discrimination laws. While there are restrictions on the type of company covered (companies with at least fifteen employees), the EEOC requires collection of data and investigates discrimination claims, again, for organizations with more than fifteen employees.

Under EEO law related to the recruitment process, employers cannot discriminate based on age (forty years or older), disability, genetic information, national origin, sex, pregnancy, race, and religion. In a job announcement, organizations usually have an EEO statement. Here are some examples:

1. (Company name) is fully committed to Equal Employment Opportunity and to attracting, retaining, developing, and promoting the most qualified employees without regard to their race, gender, color, religion, sexual orientation, national origin, age, physical or mental disability, citizenship status, veteran status, or any other characteristic prohibited by state or local law. We are dedicated to providing a work environment free from discrimination and harassment, and where employees are treated with respect and dignity.

2. (Company name) does not unlawfully discriminate on the basis of race, color, religion, national origin, age, height, weight, marital status, familial status, handicap/disability, sexual orientation, or veteran status in employment or the provision of services, and provides, upon request, reasonable accommodation including auxiliary aids and services necessary to afford individuals with disabilities an equal opportunity to participate in all programs and activities.

3. It is the policy of (college name), in full accordance with the law, not to discriminate in employment, student admissions, and student services on the basis of race, color, religion, age, political affiliation or belief, sex, national origin, ancestry, disability, place of birth, general education development certification (GED), marital status, sexual orientation, gender identity or expression, veteran status, or any other legally protected classification. (College name) recognizes its responsibility to promote the principles of equal opportunity for employment, student admissions, and student services taking active steps to recruit minorities and women.

4. (Company name) will not discriminate against or harass any employee or applicant for employment on the basis of race, color, creed, religion, national origin, sex, sexual orientation, disability, age, marital status, or status with regard to public assistance. (Company name) will take affirmative action to ensure that all practices are free of such discrimination. Such employment practices include, but are not limited to, the following: hiring, upgrading, demotion, transfer, recruitment or recruitment advertising, selection, layoff, disciplinary action, termination, rates of pay or other forms of compensation, and selection for training.

In addition to including the EEO policy in the job announcement, HR is required to post notices of EEOC policies in a visible part of the work environment (such as the break room).

Although the EEOC laws in hiring are clear about discrimination, an exception may occur, called the bona fide occupational qualification (BFOQ). BFOQ is a quality or attribute that is reasonably necessary to the normal operation of the business and that can be used when considering applicants. To obtain a BFOQ exception, a company must prove that a particular person could not perform the job duties because of sex, age, religion, disability, and national origin. Examples of BFOQ exceptions might include the following:

1. A private religious school may require a faculty member to be of the same denomination.

2. Mandatory retirement is required for airline pilots at a certain age.

3. A clothing store that sells male clothing is allowed to hire only male models.

4. If an essence of a restaurant relies on one sex versus another (e.g., Hooters), they may not be required to hire male servers.

However, many arguments for BFOQ would not be considered valid. For example, race has never been a BFOQ, nor has customers’ having a preference for a particular gender. Generally speaking, when going through the recruitment process and writing job descriptions, assuming a BFOQ would apply might be a mistake. Seeking legal council before writing a job description would be prudent.

Other aspects to consider in the development of the job description are disparate impact and disparate treatment. These are the two ways to classify employment discrimination cases. Disparate impact occurs when an organization discriminates through the use of a process, affecting a protected group as a whole, rather than consciously intending to discriminate. Some examples of disparate impact might include the following:

1. Requirement of a high school diploma, which may not be important to employment, could discriminate against racial groups

2. A height requirement, which could limit the ability of women or persons of certain races to apply for the position

3. Written tests that do not relate directly to the job

4. Awarding of pay raises on the basis of, say, fewer than five years of experience, which could discriminate against people older than forty

Disparate treatment, when one person is intentionally treated differently than another, does not necessarily impact the larger protected group as a whole, as in disparate impact. The challenge in these cases is to determine if someone was treated differently because of their race or gender or if there was another reason for the different treatment. Here are two examples:

1. Both a male and a female miss work, and the female is fired but the male is not.

2. A company does not hire people of a certain race or gender, without a BFOQ.

Human Resource Recall

Can you think of other examples of disparate impact that might affect a certain protected group of people under EEOC?

The Concept of Disparate Impact

<a data-iframe-code=”” href=”http://www.youtube.com/v/Nzar2FXOhfA” class=”replaced-iframe”>(click to see video)

An attorney from Berkent Legal Services explains the concept of disparate impact.

Key Takeaways

- IRCA stands for Immigration and Reform Act. This law requires all employers to determine eligibility of an employee to work in the United States. The reporting form is called an I-9 and must be completed and kept on file (paper or electronic) for at least three years, but some states require this documentation to be kept on file for the duration of the employee’s period of employment.

- The Patriot Act allows the government access to data that would normally be considered private—for example, an employee’s records and work voice mails and e-mails (without the company’s consent). The HR professional might consider letting employees know of the compliance with this law.

- The EEOC is a federal agency charged with ensuring discrimination does not occur in the workplace. They oversee the equal employment opportunity (EEO) set of laws. Organizations must post EEO laws in a visible location at their workplace and also include them on job announcements.

- Related to the EEOC, the bona fide occupational qualification (BFOQ) makes it legal to discriminate in hiring based on special circumstances—for example, requiring the retirement of airline pilots at a certain age due to safety concerns.

- Disparate impact refers to a policy that may limit a protected EEO group from receiving fair treatment. Disparate impact might include a test or requirement that negatively impacts someone based on protected group status. An example is requiring a high school diploma, which may not directly impact the job. Disparate treatment refers to discrimination against an individual, such as the hiring of one person over another based on race or gender.

Exercises

1. Describe the difference between disparate treatment and disparate impact.

2. Explain a situation (other than the ones described in this section) in which a BFOQ might be appropriate. Then research to see if in the past this reasoning has been accepted as a BFOQ.

1U.S. Citizenship and Immigration Services website. Accessed January 17, 2011. http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextchannel=b328194d3e88d010VgnVCM10000048f3d6a1RCRD&vgnextoid =04a295c4f635f010VgnVCM1000000ecd190aRCRD.

2Zavala v. Wal-Mart, No. 03-5309, DC NJ (2005).

7

Recruitment Strategies

Learning Objective

1. Explain the various strategies that can be used in recruitment.

Now that we have discussed development of the job analysis, job description, and job specifications, and you are aware of the laws relating to recruitment, it is time to start recruiting. It is important to mention, though, that a recruitment plan should be in place. This plan can be informal, but you should outline where you plan to recruit and your expected time lines. For example, if one of your methods is to submit an ad to a trade publication website, you should know their deadlines. Also of consideration is to ensure you are recruiting from a variety of sources to ensure diversity. Lastly, consider the economic situation of the country. With high unemployment, you may receive hundreds of applications for one job. In an up economy, you may not receive many applications and should consider using a variety of sources.

Some companies, such as Southwest Airlines, are known for their innovative recruitment methods. Southwest looks for “the right kind of people” and are less focused on the skills than on the personality of the individual (Carey, 2011). When Southwest recruits, it looks for positive team players that match the underdog, quirky company culture. Applicants are observed in group interviews, and those who exhibit encouragement for their fellow applicants are usually those who continue with the recruitment process. This section will discuss some of the ways Southwest and many other Fortune 500 companies find this kind of talent.

Recruitment Videos at Zappos

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=130

Zappos has developed and posted a series of YouTube videos called “Why Do I Like Working at Zappos?” The videos show the culture of the organization and provide a great tool for recruitment.

Recruiters

Some organizations choose to have specific individuals working for them who focus solely on the recruiting function of HR. Recruiters use similar sources to recruit individuals, such as professional organizations, websites, and other methods discussed in this chapter. Recruiters are excellent at networking and usually attend many events where possible candidates will be present. Recruiters keep a constant pipeline of possible candidates in case a position should arise that would be a good match. There are three main types of recruiters:

1. Executive search firm. These companies are focused on high-level positions, such as management and CEO roles. They typically charge 10–20 percent of the first year salary, so they can be quite expensive. However, they do much of the upfront work, sending candidates who meet the qualifications.

2. Temporary recruitment or staffing firm. Suppose your receptionist is going on medical leave and you need to hire somebody to replace him, but you don’t want a long-term hire. You can utilize the services of a temporary recruitment firm to send you qualified candidates who are willing to work shorter contracts. Usually, the firm pays the salary of the employee and the company pays the recruitment firm, so you don’t have to add this person to your payroll. If the person does a good job, there may be opportunities for you to offer him or her a full-time, permanent position. Kelly Services, Manpower, and Snelling Staffing Services are examples of staffing firms.

3. Corporate recruiter. A corporate recruiter is an employee within a company who focuses entirely on recruiting for his or her company. Corporate recruiters are employed by the company for which they are recruiting. This type of recruiter may be focused on a specific area, such as technical recruiting.

A contingent recruiter is paid only when the recruiter starts working, which is often the case with temporary recruitment or staffing firms. A retained recruiter gets paid up front (in full or a portion of the fee) to perform a specific search for a company.

While the HR professional, when using recruiters, may not be responsible for the details of managing the search process, he or she is still responsible for managing the process and the recruiters. The job analysis, job description, and job specifications still need to be developed and candidates will still need to be interviewed.

Fortune 500 Focus

In 2009, when Amazon purchased Zappos for 10 million shares of Amazon stock (roughly $900 million in 2009), the strategic move for Amazon didn’t change the hiring and recruiting culture of Zappos. Zappos, again voted one of the best one hundred companies to work for by CNN Money (Sowa, 2011) believes it all starts with the people they hire. The recruiting staff always asks, “On a scale of 1–10, how weird do you think you are?” This question ties directly to the company’s strategic plan and core value number three, which is “create fun and a little weirdness.” Zappos recruits people who not only have the technical abilities for the job but also are a good culture fit for the organization. Once hired, new employees go through two weeks of training. At the end of the training, newly hired employees are given “the offer.” The offer is $2,000 to quit on the spot. This ensures Zappos has committed people who have the desire to work with the organization, which all begins with the recruiting process.

Campus Recruiting

Colleges and universities can be excellent sources of new candidates, usually at entry-level positions. Consider technical colleges that teach cooking, automotive technology, or cosmetology. These can be great sources of people with specialized training in a specific area. Universities can provide people that may lack actual experience but have formal training in a specific field. Many organizations use their campus recruiting programs to develop new talent, who will eventually develop into managers.

For this type of program to work, it requires the establishment of relationships with campus communities, such as campus career services departments. It can also require time to attend campus events, such as job fairs. IBM, for example, has an excellent campus recruiting program. For IBM, recruiting out of college ensures a large number of people to grow with the organization^1.

Setting up a formal internship program might also be a way to utilize college and university contacts. Walgreens, for example, partners with Apollo College to recruit interns; this can result in full-time employment for the motivated intern and money saved for Walgreens by having a constant flow of talent.

Professional Associations

Professional associations are usually nonprofit organizations whose goal is to further a particular profession. Almost every profession has its own professional organization. For example, in the field of human resources, the Society for Human Resource Management allows companies to post jobs relating to HR. The American Marketing Association, also a professional organization, allows job postings as well. Usually, there is a fee involved, and membership in this association may be required to post jobs. Here are some examples of professional associations:

1. Professional Nursing Association

2. Society of Women Engineers

3. International Federation of Accountants

4. Institute of Management Consultants

5. United Professional Sales Association

6. National Lawyers Guild

7. National Organization of Minority Architects

8. International Federation of Journalists (union)

9. International Metalworkers Federation (union)

10. Association of Flight Attendants (union)

Labor unions can also be excellent sources of candidates, and some unions also allow job postings on their website. We will discuss unions further in Chapter 12 “Working with Labor Unions”. The key to using this as a successful recruitment strategy is to identify the organizations that relate to your business and to develop relationships with members in these organizations. This type of networking can help introduce you to people in your industry who may be looking for a job or know of someone who needs a job.

Human Resource Recall

What do you think is the best way to determine the right set of recruitment methods for your organization? What methods would be best for your current job?

Overview of the Steps to the Recruitment Process

Websites

If you have ever had to look for a job, you know there are numerous websites to help you do that. From the HR perspective, there are many options to place an ad, most of which are inexpensive. The downside to this method is the immense number of résumés you may receive from these websites, all of which may or may not be qualified. Many organizations, to combat this, implement software that searches for keywords in résumés, which can help combat this problem. We discuss more about this in Chapter 5 “Selection”. Some examples of websites might include the following:

- Your own company website

- Yahoo HotJobs

- Monster

- CareerBuilder

- JobCentral

Social Media

Facebook, Twitter, LinkedIn, YouTube, and MySpace are excellent places to obtain a media presence to attract a variety of workers. In 2007, Sodexo, which provides services such as food service and facilities management, started using social media to help spread the word about their company culture. Since then, they have saved $300,000 on traditional recruiting methods (Sodexo, 2011). Sodexo’s fifty recruiters share updates on Twitter about their excellent company culture. Use of this media has driven traffic to the careers page on Sodexo’s website, from 52,000 to 181,000.

The goal of using social media as a recruiting tool is to create a buzz about your organization, share stories of successful employees, and tout an interesting culture. Even smaller companies can utilize this technology by posting job openings as their status updates. This technique is relatively inexpensive, but there are some things to consider. For example, tweeting about a job opening might spark interest in some candidates, but the trick is to show your personality as an employer early on. According to Bruce Morton of Allegis Group Services, using social media is about getting engaged and having conversations with people before they’re even thinking about you as an employer (Lindow, 2011). Debbie Fisher, an HR manager for a large advertising agency, Campbell Mithun, says that while tweeting may be a good way to recruit people who can be open about their job hunt, using tools such as LinkedIn might be a better way to obtain more seasoned candidates who cannot be open about their search for a new job, because of their current employment situation. She says that LinkedIn has given people permission to put their résumé online without fear of retribution from current employers.

Creativity with a social media campaign also counts. Campbell Mithun hired thirteen interns over the summer using a unique twist on social media. They asked interested candidates to submit thirteen tweets over thirteen days and chose the interns based on their creativity.

Many organizations, including Zappos (Video 4.4), use YouTube videos to promote the company. Within the videos is a link that directs viewers to the company’s website to apply for a position in the company.

Facebook allows free job postings in Facebook Marketplace, and the company Facebook page can also be used as a recruiting tool. Some organizations decide to use Facebook ads, which are paid on a “per click” or per impression (how many people potentially see the ad) basis. Facebook ad technology allows specific regions and Facebook keywords to be targeted (Black, 2011). Some individuals even use their personal Facebook page to post status updates listing job opportunities and asking people to respond privately if they are interested.

Events

Many organizations, such as Microsoft, hold events annually to allow people to network and learn about new technologies. Microsoft’s Professional Developer Conference (PDC), usually held in July, hosts thousands of web developers and other professionals looking to update their skills and meet new people.

Some organizations, such as Choice Career Fairs, host job fairs all over the country; participating in this type of job fair may be an excellent way to meet a large variety of candidates. Other events may not be specifically for recruiting, but attending these events may allow you to meet people who could possibly fill a position or future position. For example, in the world of fashion, Fashion Group International (FGI) hosts events internationally on a weekly basis, which may allow the opportunity to meet qualified candidates.

Special/Specific Interest Groups (SIGs)

Special/specific interest groups (SIGs), which may require membership of individuals, focus on specific topics for members. Often SIGs will have areas for job posting, or a variety of discussion boards where jobs can be posted. For example, the Women in Project Management SIG provides news on project management and also has a place for job advertisements. Other examples of SIGs might include the following:

- Oracle Developer SIG

- African American Medical Librarians Alliance SIG

- American Marketing Association Global Marketing SIG

- Special Interest Group for Accounting Information Systems (SIG-ASYS)

- Junior Lawyer SIG

Recruiting using SIGs can be a great way to target a specific group of people who are trained in a specific area or who have a certain specialty.

Referrals

Most recruiting plans include asking current employees, “Who do you know?” The quality of referred applicants is usually high, since most people would not recommend someone they thought incapable of doing the job. E-mailing a job opening to current employees and offering incentives to refer a friend can be a quick way of recruiting individuals. Due to the success of most formalized referral programs, it is suggested that a program be part of the overall HRM strategic plan and recruitment strategy. However, be wary of using referrals as the only method for recruitment, as this can lead to lack of diversity in a workplace. Nepotism means a preference for hiring relatives of current employees, which can also lead to lack of diversity and management issues in the workplace.

For example, the University of Washington offers $1,200 any time a current employee successfully refers a friend to work at their medical centers. Usually, most incentives require the new employee to be hired and stay a specified period of time. Some examples of incentives that can be used to refer a friend might include the following:

- A gift card to the employee

- A financial incentive

- Raffles for most referrals

These types of programs are called employee referral programs (ERPs) and tend to generate one of the highest returns on investment per hire (Lefkow, 2002). To make an ERP program effective, some key components should be put into place:

1. Communicate the program to existing employees.

2. Track the success of the program using metrics of successful hires.

3. Be aware of the administrative aspect and the time it takes to implement the program effectively.

4. Set measureable goals up front for a specialized program.

Accenture recently won the ERE Media Award for one of the most innovative ERPs. Its program has increased new hires from referrals from 14 percent to 32 percent, and employee awareness of the program jumped from just 20 percent to 99 percent (Sullivan, 2009). The uniqueness of their program lies with the reward the employee receives. Instead of offering personal financial compensation, Accenture makes a donation to the charity of the employee’s choice, such as a local elementary school. Their program also seeks to decrease casual referrals, so the employee is asked to fill out an online form to explain the skills of the individual they are referring. The company has also developed a website where current employees can go to track the progress of referrals. In addition, employee referral applications are flagged online and fast-tracked through the process—in fact, every referral is acted upon. As you can see, Accenture has made their ERP a success through the use of strategic planning in the recruitment process.

Advantages and Disadvantages of Recruiting Methods

Recruitment Method

Advantages

Disadvantages

Outside recruiters, executive search firms, and temporary employment agencies

Can be time saving

Expensive

Less control over final candidates to be interviewed

Campus recruiting/educational institutions

Can hire people to grow with the organization

Time consuming

Plentiful source of talent

Only appropriate for certain types of experience levels

Professional organizations and associations

Industry specific

May be a fee to place an ad

Networking

May be time-consuming to network

Websites/Internet recruiting

Diversity friendly

Could be too broad

Low cost

Be prepared to deal with hundreds of résumés

Quick

Social media

Inexpensive

Time consuming

Overwhelming response

Events

Access to specific target markets of candidates

Can be expensive

May not be the right target market

SIG

Industry specific

Research required for specific SIGS tied to jobs

Referrals

Higher quality people

Concern for lack of diversity

Retention

Nepotism

Unsolicited résumés and applications

Inexpensive, especially with time-saving keyword résumé search software

Time consuming

Internet and/or traditional advertisements

Can target a specific audience

Can be expensive

Employee leasing

For smaller organizations, it means someone does not have to administer compensation and benefits, as this is handled by leasing company

Possible costs

Can be a good alternative to temporary employment if the job is permanent

Less control of who interviews for the position

Public employment agencies

The potential ability to recruit a more diverse workforce

May receive many résumés, which can be time-consuming

No cost, since it’s a government agency

2,300 points of service nationwide

Labor unions

Access to specialized skills

May not apply to some jobs or industries

Builds relationship with the union

Costs of Recruitment

Part of recruitment planning includes budgeting the cost of finding applicants. For example, let’s say you have three positions you need to fill, with one being a temporary hire. You have determined your advertising costs will be $400, and your temporary agency costs will be approximately $700 for the month. You expect at least one of the two positions will be recruited as a referral, so you will pay a referral bonus of $500. Here is how you can calculate the cost of recruitment for the month:

cost per hire = advertising costs + recruiter costs + referral costs + social media costs + event costs.

$400 + $700 + $500 = $1600/3 = $533 recruitment cost per hire.

In addition, when we look at how effective our recruiting methods are, we can look at a figure called the yield ratio. A yield ratio is the percentage of applicants from one source who make it to the next stage in the selection process (e.g., they get an interview). For example, if you received two hundred résumés from a professional organization ad you placed, and fifty-two of those make it to the interview state, this means a 26 percent yield (52/200). By using these calculations, we can determine the best place to recruit for a particular position. Note, too, that some yield ratios may vary for particular jobs, and a higher yield ratio must also consider the cost of that method, too. For an entry-level job, campus recruiting may yield a better ratio than, say, a corporate recruiter, but the corporate recruiter may have higher cost per hires.

After we have finished the recruiting process, we can begin the selection process. This is the focus of Chapter 5 “Selection”.

Key Takeaways

- HR professionals must have a recruiting plan before posting any job description. The plan should outline where the job announcements will be posted and how the management of candidate materials, such as résumés, will occur. Part of the plan should also include the expected cost of recruitment.

- Many organizations use recruiters. Recruiters can be executive recruiters, which means an outside firm performs the search. For temporary positions, a temporary or staffing firm such as Kelly Services might be used. Corporate recruiters work for the organization and function as a part of the HR team.

- Campus recruiting can be an effective way of recruiting for entry-level positions. This type of recruiting may require considerable effort in developing relationships with college campuses.

- Almost every profession has at least one professional association. Posting announcements on their websites can be an effective way of targeting for a specific job.

- Most companies will also use their own website for job postings, as well as other websites such as Monster and CareerBuilder.

- Social media is also a popular way to recruit. Usage of websites such as Twitter and Facebook can get the word out about a specific job opening, or give information about the company, which can result in more traffic being directed to the company’s website.

- Recruiting at special events such as job fairs is another option. Some organizations have specific job fairs for their company, depending on the size. Others may attend industry or job-specific fairs to recruit specific individuals.

- SIGs, or special/specific interest groups, are usually very specialized. For example, female project managers may have an interest group that includes a discussion board for posting of job announcements.

- Employee referrals can be a great way to get interest for a posted position. Usually, incentives are offered to the employee for referring people they know. However, diversity can be an issue, as can nepotism.

- Our last consideration in the recruitment process is recruitment costs. We can determine this by looking at the total amount we have spent on all recruiting efforts compared to the number of hires. A yield ratio is used to determine how effective recruiting efforts are in one area. For example, we can look at the number of total applicants received from a particular form of media, and divide that by the number of those applicants who make it to the next step in the process (e.g., they receive an interview).

Exercises

1. Perform an Internet search on professional associations for your particular career choice. List at least three associations, and discuss recruiting options listed on their websites (e.g., do they have discussion boards or job advertisements links?).

2. Have you ever experienced nepotism in the workplace? If yes, describe the experience. What do you think are the upsides and downsides to asking current employees to refer someone they know?

1“University Students,” IBM, n.d., accessed January 17, 2011, http://www-03.ibm.com/employment/start_university.html.

References

Black, T., “How to Use Social Media as a Recruiting Tool,” Inc., April 22, 2010, accessed July 12, 2011, http://www.inc.com/guides/2010/04/social-media-recruiting.html.

Carey, W. P., “Employees First: Strategy for Success,” Knowledge @ W. P. Carey, W. P. Carey School of Business, Arizona State University, June 26, 2008, accessed July 11, 2011, http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1620.

Lefkow, D., “Improving Your Employee Referral Program and Justifying Your Investment,” ERE.net, February 21, 2002, accessed July 12, 2011, http://www.ere.net/2002/02/21/improving-your-employee-referral-program-and-justifying-your-investment.

Lindow, A., “How to Use Social Media for Recruiting,” Mashable, June 11, 2011, accessed July 12, 2011, http://mashable.com/2011/06/11/social-media-recruiting.

Sodexo, “Sodexo Earns SNCR Excellent Award for Innovative Use of Social Media,” news release, December 2, 2009, accessed January 17, 2011, http://www.sodexousa.com/usen/newsroom/press/press09/sncrexcellenceaward.asp.

Sowa, C., “Going Above and Beyond,” America’s Best, September/October 2008, accessed July 11, 2011, http://www.americasbestcompanies.com/magazine/articles/going-above-and-beyond.aspx.

Sullivan, J., “Amazing Practices in Recruiting—ERE Award Winners 2009,” pt. 1, ERE.net, April 13, 2009, accessed July 12, 2011, http://www.ere.net/2009/04/13/amazing-practices-in-recruiting-ere-award-winners-2009-part-1-of-2.

8

Cases and Problems

Chapter Summary

- The recruitment process provides the organization with a pool of qualified applicants.

- Some companies choose to hire internal candidates—that is, candidates who are already working for the organization. However, diversity is a consideration here as well.

- A job analysis is a systematic approach to determine what a person actually does in his or her job. This process might involve a questionnaire to all employees. Based on this analysis, an accurate job description and job specifications can be written. A job description lists the components of the job, while job specifications list the requirements to perform the job.

- IRCA stands for Immigration and Reform Act. This law requires all employers to determine eligibility of an employee to work in the United States. The reporting form is called an I-9 and must be completed and kept on file (paper or electronic) for at least three years, but some states require this documentation to be kept on file for the duration of the employee’s period of employment.

- The Patriot Act allows the government access to data that would normally be considered private, for example, an employee’s records and work voice mails and e-mails (without the company’s consent). The HR professional might consider letting employees know of the compliance with this law.

- The Equal Employment Opportunity Commission (EEOC) is a federal agency charged with ensuring discrimination does not occur in the workplace. They oversee the EEO set of laws. Organizations must post EEO laws in a visible location at their workplace and also include them on job announcements.

- Related to the EEOC, the bona fide occupational qualification (BFOQ) makes it legal to discriminate in hiring based on special circumstances, for example, requiring the retirement of airline pilots at a certain age due to safety concerns.

- Disparate impact refers to a policy that may limit a protected EEO group from receiving fair treatment. Disparate impact might include a test or requirement that negatively impacts someone based on protected group status. An example is requiring a high school diploma, which may not directly impact the job. Disparate treatment refers to discrimination against an individual, such as the hiring of one person over another based on race or gender.

- HR professionals must have a recruiting plan before posting any job description.

- Many organizations use recruiters. Recruiters can be executive recruiters, which means an outside firm performs the search. For temporary positions, a temporary or staffing firm such as Kelly Services might be used. Corporate recruiters work for the organization and function as a part of the HR team.

- Campus recruiting can be an effective way of recruiting for entry-level positions. This type of recruiting may require considerable effort in developing relationships with college campuses.

- Almost every profession has at least one professional association. Posting announcements on their websites can be an effective way of targeting for a specific job.

- Most companies will also use their own website for job postings, as well as other websites such as Monster and CareerBuilder.

- Social media is also a popular way to recruit. Usage of websites such as Twitter and Facebook can get the word out about a specific job opening, or give information about the company, which can result in more traffic being directed to the company’s website.

- Recruiting at special events such as job fairs is another option. Some organizations have specific job fairs for their company, depending on the size. Others may attend industry or job specific fairs to recruit specific individuals.

- SIGs or special/specific interest groups are usually very specialized. For example, female project managers may have an interest group that includes a discussion board for posting of job announcements.

- Employee referrals can be a great way to get interest for a posted position. Usually, incentives are offered to the employee for referring people they know. However, diversity can be an issue, as can nepotism.

- Our last consideration in the recruitment process is recruitment costs. We can determine this by looking at the total amount we have spent on all recruiting efforts compared to the number of hires. A yield ratio is used to determine how effective recruiting efforts are in one area. For example, we can look at the number of total applicants received from a particular form of media, and divide that by the number of those applicants who make it to the next step in the process (e.g., they receive an interview).

Chapter Case

Recruitment Statistics

As the assistant to the human resources director at Tally Group, you normally answer phones and set appointments for the director. You are interested in developing skills in HRM, and one day, your HR director presents you with a great opportunity for you to show what you can do. She asks you to analyze last year’s recruitment data to determine which methods have worked best. As you look at the data, you aren’t sure how to start, but you remember something on this from your HRM class in college. After reviewing the data in your book, you feel confident to analyze these numbers. Please go ahead and perform calculations on these numbers, then provide answers to the questions that follow.

Tally Group Recruiting Numbers, 2012

Method

Total Number Recruited

Yearly Cost ($)

Temporary placement firms

8

3,200

Campus recruiting

2

1,500

Professional association ads

10

4,500

Social media/company website

33

300

Job fair

3

500

Referrals

26

26,000

1. Prepare a report summarizing your findings for the recruitment cost per hire and yield ratio for each type of recruiting method.

2. Make a recommendation to your human resource director on where the department should spend more of its time recruiting.

Team Activities

1. Students should be in teams of four or five. Choose a recruitment method from Table 4.2 “Tally Group Recruiting Numbers, 2012” and perform research on additional advantages and disadvantages of that method and then present ideas to the class.

2. Visit the Dictionary of Occupational Titles (http://www.occupationalinfo.org) and view the list of job titles presented on the website. Create a sample job description for a job title of your team’s choice.

9

Goals of a Compensation Plan

Learning Objective

1. Be able to explain the goals of a compensation plan.

So far, we have discussed the process for strategic plan development and the recruitment and selection process. The next aspect of HRM is to develop compensation plans that will help in the recruitment and retention of employees. This is the topic of this chapter.

The goal of a compensation plan is not only to attract people, but to retain them.

johnhain – Pixabay – CC0 public domain.

Most of us, no matter how much we like our jobs, would not do them without a compensation package. When we think of compensation, often we think of only our paycheck, but compensation in terms of HRM is much broader. A compensation package can include pay, health-care benefits, and other benefits such as 401(k) plans, which will all be discussed in this chapter. Before we discuss specifics, you should be aware of courses and certifications that can be earned through the WorldatWork Society of Certified Professionals, specifically related to compensation (other certifications will be discussed in their respective chapters).

WorldatWork offers several certifications in the area of compensation:

- Certified Compensation Professional (CCP)

- Certified Benefits Professional (CBP)

- Certified Sales Compensation Professional (CSCP)

- Certified Executive Compensation Professional (CECP)

These certifications involve taking a multiple-choice exam online or at one of the WorldatWork testing locations. The exams test for knowledge, experience, and skills in each of the compensation certification areas and can be a valuable asset to you when applying for HR positions.

The certifications are based on many of the aspects of this chapter, including understanding the goals of compensation packages for employees, which is our focus for this section.

First, the compensation package should be positive enough to attract the best people for the job. An organization that does not pay as well as others within the same industry will likely not be able to attract the best candidates, resulting in a poorer overall company performance.

Once the best employees and talent come to work for your organization, you want the compensation to be competitive enough to motivate people to stay with your organization. Although we know that compensation packages are not the only thing that motivates people, compensation is a key component. We discuss other motivations in Chapter 10 “Managing Employee Performance”.

Third, compensation can be used to improve morale, motivation, and satisfaction among employees. If employees are not satisfied, this can result not only in higher turnover but also in poor quality of work for those employees who do stay. A proper compensation plan can also increase loyalty in the organization.

Pay systems can also be used to reward individual or team performance and encourage employees to work at their own peak performance. In fact, in the 2011 list of the Best Companies to Work For by Fortune magazine, all the companies who topped the list (SAS and Boston Consulting Group, for example) had satisfied employees—not only with their pay, but their entire benefits package^1.

With an appropriate pay system, companies find that customer service is better because employees are happier. In addition, having fairly compensated, motivated employees not only adds to the bottom line of the organization but also facilitates organizational growth and expansion. Motivated employees can also save the company money indirectly, by not taking sick days when the employee isn’t really sick, and companies with good pay packages find fewer disability claims as well.

So far, our focus on HRM has been a strategic focus, and the same should be true for development of compensation packages. Before the package is developed for employees, it’s key to understand the role compensation plays in the bottom line of the organization. For example, in 2010, the US military spent 22 percent of its budget on personnel salaries^2. One-fifth of the total budget—or more—is not uncommon for most US organizations, depending on the industry. As a result, it is easy to see why the compensation plan should be an important aspect of the overall HRM strategic plan. The next few sections will detail the aspects of creating the right compensation packages: for your organization, including legal considerations.

Human Resource Recall

If you have had or currently have a job, do you feel the compensation plan motivated you? Why or why not?

Key Takeaways

- A compensation package is an important part of the overall strategic HRM plan, since much of the company budget is for employee compensation.

- A compensation package can include salary, bonuses, health-care plans, and a variety of other types of compensation.

- The goals of compensation are to attract people to work for your organization and to retain people who are already working in the organization.

- Compensation is also used to motivate employees to work at their peak performance and improve morale.

- Employees who are fairly compensated tend to provide better customer service, which can result in organizational growth and development.

Exercise

1. Visit a website that gives salary information for a variety of jobs, such as http://www.salary.com. Using the search box, type in your ideal job and research salary information. What is the median salary for the job you searched? What is the lowest salary you would be willing to accept for this job? At which point would you be completely satisfied with the pay for this job?

1“100 Best Companies to Work For,” CNN Money, accessed February 11, 2011, http://money.cnn.com/magazines/fortune/bestcompanies/2011/snapshots/1.html?iid=EL.

2US Department of Defense, Financial Summary Tables, May 2009, accessed February 11, 2011, http://comptroller.defense.gov/defbudget/fy2010/fy2010_summary_tables_whole.pdf.

10

Developing a Compensation Package

Learning Objectives

1. Be able to explain the internal and external considerations of compensation package development.

2. Know how to develop a compensation philosophy.

There are a few basic aspects of compensation packages we should discuss before moving into the specific aspects of compensation. These foundations can assist in the development of a compensation strategy that meets the goals of your organization and is in line with your strategic plan.

Before beginning work on your compensation packages, some analysis should be done to determine your organization’s philosophy in regard to compensation. Before development of your compensation philosophies, there are some basic questions to address on your current compensation packages.

1. From the employee’s perspective, what is a fair wage?

2. Are wages too high to achieve financial health in your organization?

3. Do managers and employees know and buy-into your compensation philosophy?

4. Does the pay scale reflect the importance of various job titles within the organization?

5. Is your compensation good enough to retain employees?

6. Are state and federal laws being met with your compensation package?

7. Is your compensation philosophy keeping in line with labor market changes, industry changes, and organizational changes?

Once these basic questions are addressed, we can see where we might have “holes” in our compensation package and begin to develop new philosophies in line with our strategic plan, which benefits the organization. Some possible compensation policies might include the following:

1. Are salaries higher or lower depending on the location of the business? For example, orthopedic surgeons are paid higher in the North Central states ($537,000) than in Hawaii ($250,000), according to the Medscape Physical report of 2011 (Miller, 2011). Reasons could include cost of living in the area and fewer qualified people in a given area, giving them leverage to ask for a higher salary.

2. Are salaries lower or higher than the average in your region or area? If the salary is lower, what other benefits will the employee receive to make up for this difference? For example, wages might not be as high, but offering flextime or free day care might offset the lower salary.

3. Should there be a specific pay scale for each position in the organization, or should salaries be negotiated on an individual basis? If there is no set pay scale, how can you ensure individual salary offers are fair and nondiscriminatory?

4. What balance of salary and other rewards, such as bonuses, should be part of your compensation package? For example, some organizations prefer to offer a lower salary, but through bonuses and profit sharing, the employee has the potential to earn more.

5. When giving raises, will the employee’s tenure be a factor, or will pay increases be merit based only, or a combination of both?

Let’s discuss some internal and external factors in determining compensation in more detail.

Internal and External Pay Factors

One major internal factor is the compensation strategy the company has decided to use. Sixty-two percent of organizations have a written, documented compensation policy (Scott, 2011).

Some organizations choose a market compensation policy, market plus, or market minus philosophy. A market compensation policy is to pay the going rate for a particular job, within a particular market based on research and salary studies. The organization that uses a market plus philosophy will determine the going rate and add a percentage to that rate, such as 5 percent. So if a particular job category median pays $57,000, the organization with a market plus of 5 percent philosophy will pay $59,850. A market minus philosophy pays a particular percentage less than the market; so in our example, if a company pays 5 percent less, the same job would pay $54,150. The University of Arizona, for example, posts its compensation philosophy on its website^1:

In order to fulfill its mission, the University of Arizona shall maintain a compensation program directed toward attracting, retaining, and rewarding a qualified and diverse workforce. Within the boundaries of financial feasibility, employee compensation shall be externally competitive and internally equitable, and shall be based upon performance as recognized within the work unit.

In addition to their compensation philosophy, the university lists compensation objectives, such as “average salaries will be targeted at the average salary levels of employees in comparable positions in our various labor markets.” This is an example of a market compensation policy.

An example of an organization with a market plus philosophy is Cisco Systems, listed as one of the top-paying companies on Fortune’s annual list. For example, they pay $131,716 for software engineers, while at Yahoo! software engineers are paid an average of $101,669, using a market philosophy. The pay at Cisco reflects its compensation philosophy and objectives:

Cisco operates in the extremely competitive and rapidly changing high-technology industry. The Board’s Compensation Committee believes that the compensation programs for the executive officers should be designed to attract, motivate, and retain talented executives responsible for the success of Cisco and should be determined within a framework based on the achievement of designated financial targets, individual contribution, customer satisfaction, and financial performance relative to that of Cisco’s competitors. Within this overall philosophy, the Compensation Committee’s objectives are to do the following:

Offer a total compensation program that is flexible and takes into consideration the compensation practices of a group of specifically identified peer companies and other selected companies with which Cisco competes for executive talent
Provide annual variable cash incentive awards that take into account Cisco’s overall financial performance in terms of designated corporate objectives, as well as individual contributions and a measure of customer satisfaction
Align the financial interests of executive officers with those of shareholders by providing appropriate long-term, equity-based incentives

An example of an organization with a market minus philosophy is Whole Foods. The executive compensation for Whole Foods is a maximum of nineteen times the average store worker (or $608,000), very low by Fortune 500 executive pay standards, which average 343 times (Allen, 2011). According to John Mackey, Whole Foods CEO, paying on a market minus philosophy makes good business sense: “Fewer things harm an organization’s morale more than great disparities in compensation. When a workplace is perceived as unfair and greedy, it begins to destroy the social fabric of the organization” (Hamner & McNichol, 2011). Another example of an organization with a market minus philosophy is Southwest Airlines. Despite the lower pay (and more hours), the organization boasts just a 1.4 percent turnover rate, which can be attributed not to pay but to the workplace culture and, as a result, loyalty to the company (Eggers, 2011).

There are many reasons why an organization would choose one philosophy over another. A market minus philosophy may tie into the company’s core values, as in Whole Foods, or it may be because the types of jobs require an unskilled workforce that may be easier and less expensive to replace. A company may use a market plus philosophy because the industry’s cutting-edge nature requires the best and the brightest.

Other internal pay factors might include the employer’s ability to pay, the type of industry, and the value of the employee and the particular job to the organization. In addition, the presence of a union can lead to mandated pay scales. Unions are discussed in Chapter 12 “Working with Labor Unions”.

External pay factors can include the current economic state. For example, in June 2011, the US unemployment rate was 9.2 percent, which is quite high for the country. As a result of surplus workers, compensation may be reduced within organizations because of oversupply of workers. Inflation and cost of living in a given area can also determine compensation in a given market.

Once an organization has looked at the internal and external forces affecting pay, it can begin to develop a pay system within the organization. We discuss how to develop a pay system in Section “Types of Pay Systems”.

Key Takeaways

- Before beginning work on a pay system, some general questions need to be answered. Important starting points include questions ranging from what is a fair wage from the employees’ perspectives to how much can be paid but still retain financial health.

- After some pay questions are answered, a pay philosophy must be developed, based on internal and external factors. Some companies implement a market compensation philosophy, which pays the going market rate for a job. Other companies may decide to utilize a market plus philosophy, which pays higher than the average. A company could decide its pay philosophy is a market minus philosophy, which pays less than the market rate. For example, an organization may decide to pay lower salaries but offer more benefits.

- Once these tasks are done, the HR manager can then build a pay system that works for the size and industry of the organization.

Exercise

1. Think of your current organization or a past organization. What do you think their pay policy is/was? Describe and analyze whether you think it was or is effective. If you haven’t worked before, perform an Internet search on pay policies and describe/analyze the pay policy of an organization.

1University of Arizona, “Compensation Philosophy,” accessed July 23, 2011, http://www.hr.arizona.edu/compensation_philosophy.

References

Allen, T., “AFL-CIO Defends Pay Equality Disclosure Mandate,” ISS (blog), July 19, 2011, accessed July 23, 2011, http://blog.riskmetrics.com/gov/2011/07/afl-cio-defends-pay-equity-disclosure-mandate-1.html.

Eggers, K., “Why It’s OK to Be Paid Less,” Fins Technology, n.d., accessed July 23, 2011, http://it-jobs.fins.com/Articles/SB130816636352923783/Why-It-s-Okay -to-Get-Paid-Less.

Hamner S. and Tom McNichol, “Ripping Up the Rules of Management,” CNN Money, n.d., accessed July 23, 2011, http://money.cnn.com/galleries/2007/biz2/0705/gallery.contrarians.biz2/3.html.

Miller, L., “9 Statistics on Orthopedic Surgeon Compensation by Location,” OS Review, May 25, 2011, accessed August 3, 2011, http://www.beckersorthopedicandspine.com/orthopedic-spine-practices-improving-profits/item/4061-9-statistics-on-2010-orthopedic-surgeon-compensation-by-location.

Scott, D., “Survey of Compensation Policies and Practices,” WorldatWork, accessed July 23, 2011, http://www.worldatwork.org/waw/research/html/comppol03.html.

11

Types of Pay Systems

Learning Objectives

1. Explain types of job evaluation systems and their uses.

2. Be able to define and discuss the types of pay systems and factors determining the type of pay system used.

3. Know the laws relating to compensation.

Once you have determined your compensation strategy based on internal and external factors, you will need to evaluate jobs, develop a pay system, and consider pay theories when making decisions. Next, you will determine the mix of pay you will use, taking into consideration legal implications.

The Process for Implementing Compensation Strategy

Job Evaluation Systems

As mentioned when we discussed internal and external factors, the value of the job is a major factor when determining pay. There are several ways to determine the value of a job through job evaluation. Job evaluation is defined as the process of determining the relative worth of jobs to determine pay structure. Job evaluation can help us determine if pay is equitable and fair among our employees. There are several ways to perform a job evaluation. One of the simplest methods, used by smaller companies or within individual departments, is a job ranking system. In this type of evaluation, job titles are listed and ranked in order of importance to the organization. A paired comparison can also occur, in which individual jobs are compared with every other job, based on a ranking system, and an overall score is given for each job, determining the highest-valued job to the lowest-valued job. For example, in Table  “Example of a Paired Comparison for a Job Evaluation”, four jobs are compared based on a ranking of 0, 1, or 2. Zero indicates the job is less important than the one being compared, 1 means the job is about the same, and 2 means the job is more important. When the scores are added up, it is a quick way to see which jobs are of more importance to the organization. Of course, any person creating these rankings should be familiar with the duties of all the jobs. While this method may provide reasonably good results because of its simplicity, it doesn’t compare differences between jobs, which may have received the same rank of importance.

Example of a Paired Comparison for a Job Evaluation

Job

Receptionist

Project Manager

Account Manager

Sales

Director

Receptionist

X

0

0

0

0 = 4th

Project Administrative Assistant

1

X

0

0

1 = 3rd

Account Manager

2

1

X

0

3 = 2nd

Sales Director

2

2

2

X

6 = 1st

Based on the paired ranking system, the sales director should have a higher salary than the project administrative assistant, because the ranking for that job is higher. Likewise, a receptionist should be paid less than the project administrative assistant because this job ranks lower.

In a job classification system, every job is classified and grouped based on the knowledge and skills required for the job, years of experience, and amount of authority for that job. The US military is perhaps the best known for this type of classification system. The navy, for example, has job classification codes, such as HM (hospitalman). Then the jobs are divided into specialties, such as HM-8483, the classification for surgical technologist, and HM-8451 for a hospitalman-X-ray technician. The federal government and most state governments use this type of system. Tied to each job are the basic function, characteristics, and typical work of that job classification, along with pay range data. A sample of a job classification system is shown in Table “Example of a Job Classification System at the University of Washington”.

Table Example of a Job Classification System at the University of Washington

Job Code

Job Title

State Job Class Code Reference

Representative Group

Pay Table

Pay Range

Minimum Mo. Rate

Maximum Mo. Incremental Rate

OT Eligible

7715

ACCELERATOR TECHNICIAN 1

SEIU Local 925 Clerical Nonsupervisory

B4

40

$2689

$3583

Y

7300

ACCOUNTANT 1

SEIU Local 925 Clerical Nonsupervisory

B4

40

$2689

$3583

Y

7301

ACCOUNTANT 2

SEIU Local 925 Clerical Nonsupervisory

B4

44

$2949

$3956

N

7302

ACCOUNTANT, SENIOR

SEIU Local 925 Clerical Nonsupervisory

B4

50

$3410

$4587

N

7011

ACCOUNTING SUPERVISOR

SEIU Local 925 Clerical Supervisory

B4

50

$3410

$4587

N

7045

ADMINISTRATIVE ASSISTANT A

SEIU Local 925 Clerical Nonsupervisory

B4

39

$2623

$3493

Y

7044

ADMINISTRATIVE ASSISTANT A-SUPV

SEIU Local 925 Clerical Supervisory

B4

41

$2751

$3667

Y

7046

ADMINISTRATIVE ASSISTANT B

SEIU Local 925 Clerical Supervisory

B4

42

$2816

$3763

Y

7080

ADMINISTRATIVE COORDINATOR

SEIU Local 925 Clerical Nonsupervisory

B4

37

$2506

$3325

Y

7490

ADMISSIONS SPECIALIST

SEIU Local 925 Clerical Nonsupervisory

B4

41

$2751

$3667

Y

7583

AFFIRMATIVE ACTION/HUMAN RIGHTS ASST

SEIU Local 925 Clerical Nonsupervisory

B4

41

$2751

$3667

Y

8696

ALCOHOLISM THERAPIST 1

WFSE HMC

B0

56

$3507

$5021

Y

6119

ALCOHOLISM THERAPIST 2

359F

Classified Non-Union

C0

63

$3761

$5224

Y

6329

ANATOMIC PATHOLOGY LABORATORY LEAD

315H

Classified Non-Union

C0

73

$4154

$5771

Y

6328

ANATOMIC PATHOLOGY LABORATORY SUPERVISOR

315I

Classified Non-Union

C0

79

$4412

$6126

N

8146

ANATOMIC PATHOLOGY TECHNICIAN

SEIU Local 925-HMC Technical

B7

55

$3472

$4822

Y

8326

ANATOMIC PATHOLOGY TECHNICIAN

SEIU LOCAL 925 Medical/Laboratory Tech

B7

55

$3472

$4822

Y

8145

ANATOMIC PATHOLOGY TECHNICIAN TRAINEE

SEIU Local 925-HMC Technical

B7

40

$2991

$4155

Y

8325

ANATOMIC PATHOLOGY TECHNICIAN TRAINEE

SEIU LOCAL 925 Medical/Laboratory Tech

B7

40

$2991

$4155

Y

8147

ANATOMIC PATHOLOGY TECHNOLOGIST

SEIU Local 925-HMC Technical

B7

66

$3874

$5383

Y

8327

ANATOMIC PATHOLOGY TECHNOLOGIST

SEIU LOCAL 925 Medical/Laboratory Tech

B7

66

$3874

$5383

Y

6313

ANESTHESIOLOGY TECHNICAL SERVICES SUPV

320H

Classified Non-Union

CA

61

$3686

$5277

N

6310

ANESTHESIOLOGY TECHNICIAN 1

320E

Classified Non-Union

CA

13

$2287

$3271

Y

8711

ANESTHESIOLOGY TECHNICIAN 1

WFSE HMC

BA

10

$2219

$3271

Y

8312

ANESTHESIOLOGY TECHNICIAN 2

SEIU LOCAL 925 Medical/Laboratory Tech

BS

46

$3344

$4933

Y

8960

ANESTHESIOLOGY TECHNICIAN 2

1199NW-HMC Respiratory/Anesthesiology

BS

46

$3344

$4933

Y

6311

ANESTHESIOLOGY TECHNICIAN LEAD

320G

Classified Non-Union

CA

52

$3370

$4826

Y

8959

ANESTHESIOLOGY TECHNICIAN LEAD

1199NW-HMC Respiratory/Anesthesiology

BS

53

$3585

$5288

Y

7724

ANIMAL TECHNICIAN 1

SEIU Local 925 Clerical Nonsupervisory

B4

25

$1903

$2506

Y

7725

ANIMAL TECHNICIAN 2

SEIU Local 925 Clerical Nonsupervisory

B4

26

$1948

$2567

Y

7726

ANIMAL TECHNICIAN 3

SEIU Local 925 Clerical Nonsupervisory

B4

30

$2134

$2816

Y

4727

ANIMAL TECHNICIAN SUPERVISOR

525H

Classified Non-Union

C1

35

$2370

$3063

Y

4658

ASSISTANT FACILITIES DESIGNER

540L

Classified Non-Union

C1

48

$3213

$4214

Y

8874

ASSISTANT STEAM ENGINEER

WFSE Skilled Trades

BL

46G

$3566

$4106

Y

8507

BAKER

WFSE Campuswide

BI

30

$2113

$2789

Y

8508

BAKER LEAD

WFSE Campuswide

BI

33

$2266

$2994

Y

4700

BIOMEDICAL ELECTRONICS TECHNICIAN 1

511E

Classified Non-Union

CA

54

$3438

$4924

Y

4701

BIOMEDICAL ELECTRONICS TECHNICIAN 2

511F

Classified Non-Union

CA

68

$3954

$5659

Y

4702

BIOMEDICAL ELECTRONICS TECHNICIAN 3

511G

Classified Non-Union

CA

78

$4368

$6249

Y

4703

BIOMEDICAL ELECTRONICS TECHNICIAN LEAD

511H

Classified Non-Union

CA

83

$4591

$6568

Y

4704

BIOMEDICAL ELECTRONICS TECHNICIAN SUPV

511I

Classified Non-Union

CA

88

$4826

$6903

N

8875

BOILER OPERATOR

WFSE Skilled Trades

BL

42G

$3247

$3736

Y

7613

BOOK PRODUCTION COORDINATOR

SEIU Local 925 Clerical Nonsupervisory

B4

44

$2949

$3956

Y

7075

BOOKKEEPING MACHINE OPERATOR

SEIU Local 925 Clerical Nonsupervisory

B4

29

$2088

$2751

Y

7550

BROADCAST TECHNICIAN 1

SEIU Local 925 Clerical Nonsupervisory

B4

41

$2751

$3667

Y

7551

BROADCAST TECHNICIAN 2

SEIU Local 925 Clerical Nonsupervisory

B4

47

$3166

$4255

Y

7552

BROADCAST TECHNICIAN 3

SEIU Local 925 Clerical Nonsupervisory

B4

51

$3493

$4699

Y

7553

BROADCAST TECHNICIAN SUPERVISOR

SEIU Local 925 Clerical Supervisory

B4

55

$3856

$5186

N

7335

BUDGET ANALYST

SEIU Local 925 Clerical Nonsupervisory

B4

42

$2816

$3763

Y

7336

BUDGET/FISCAL ANALYST

SEIU Local 925 Clerical Nonsupervisory

B4

46

$3093

$4154

N

7337

BUDGET/FISCAL ANALYST LEAD

SEIU Local 925 Clerical Nonsupervisory

B4

51

$3493

$4699

N

7339

BUDGET/FISCAL OPERATIONS SUPERVISOR

SEIU Local 925 Clerical Supervisory

B4

57

$4053

$5448

N

7338

BUDGET/FISCAL UNIT SUPERVISOR

SEIU Local 925 Clerical Supervisory

B4

54

$3763

$5059

N

7021

BUILDING SERVICES COORDINATOR

SEIU Local 925 Clerical Nonsupervisory

B4

33

$2289

$3023

Y

7022

BUILDING SERVICES SUPERVISOR

SEIU Local 925 Clerical Supervisory

B4

38

$2567

$3410

Y

5215

BUILDINGS AND GROUNDS SUPERVISOR A

598G

Classified Non-Union

C1

49

$3293

$4322

N

5216

BUILDINGS AND GROUNDS SUPERVISOR B

598H

Classified Non-Union

C1

55

$3819

$5010

N

7119

BUYER 1

SEIU Local 925 Clerical Nonsupervisory

B4

38

$2567

$3410

Y

7120

BUYER 2

SEIU Local 925 Clerical Nonsupervisory

B4

44

$2949

$3956

Y

7122

BUYER 3

SEIU Local 925 Clerical Nonsupervisory

B4

49

$3325

$4472

N

Source: Reprinted from The University of Washington website, Compensation: A Division of Human Resources, http://www.washington.edu/admin/hr/ocpsp/compensation/alpha.sort.files/alpha.sort.html (accessed September 14, 2011).

Another type of job evaluation system is the point-factor system, which determines the value of a job by calculating the total points assigned to it. The points given to a specific job are called compensable factors. These can range from leadership ability to specific responsibilities and skills required for the job. Once the compensable factors are determined, each is given a weight compared to the importance of this skill or ability to the organization. When this system is applied to every job in the organization, expected compensable factors for each job are listed, along with corresponding points to determine which jobs have the most relative importance within the organization. Tompkins County in New York uses a point-factor system. Some of their compensable factors include the following:

1. Knowledge

2. Autonomy

3. Supervision

4. Psychological demands

5. Interpersonal skills

6. Internal and external contacts

In this point-factor system, autonomy ranks the highest and is given a weight of twenty-nine, while knowledge is given a rate of twenty, for example. Each of the compensable factors has a narrative that explains how points should be distributed for each factor. In this system, one hundred points are given for knowledge for a bachelor’s degree and two to three years of experience, and eighty points are given if an employee has an associate’s degree or high school diploma and two to three years of experience. The points are then multiplied by the weight (for knowledge, the weight is twenty) to give a final score on that compensable factor. After a score is developed for each, the employee is placed on the appropriate pay level for his or her score, as illustrated in Figure  “Example of a Point-Factor System”.

Figure Example of a Point-Factor System

Another option for job evaluation is called the Hay profile method. This proprietary job evaluation method focuses on three factors called know-how, problem solving, and accountability. Within these factors are specific statements such as “procedural proficiency.” Each of these statements is given a point value in each category of know-how, problem solving, and accountability. Then job descriptions are reviewed and assigned a set of statements that most accurately reflect the job. The point values for each of the statements are added for each job description, providing a quantitative basis for job evaluation and eventually, compensation. An advantage of this method is its quantitative nature, but a disadvantage is the expense of performing an elaborate job evaluation.

Pay Systems

Once you have performed a job evaluation, you can move to the third step, which we call pay grading. This is the process of setting the pay scale for specific jobs or types of jobs.

The first method to pay grade is to develop a variety of pay grade levels. Figure “Sample Pay Scale for General Federal Jobs” shows an example. Then once the levels are developed, each job is assigned a pay grade. When employees receive raises, their raises stay within the range of their individual pay grade, until they receive a promotion that may result in a higher pay grade. The advantage of this type of system is fairness. Everyone performing the same job is within a given range and there is little room for pay discrimination to occur. However, since the system is rigid, it may not be appropriate for some organizations in hiring the best people. Organizations that operate in several cities might use a pay grade scale, but they may add percentages based on where someone lives. For example, the cost of living in Spokane, Washington, is much lower than in New York City. If an organization has offices in both places, it may choose to add a percentage pay adjustment for people living within a geographic area—for example, 10 percent higher in New York.

One of the downsides to pay grading is the possible lack of motivation for employees to work harder. They know even if they perform tasks outside their job description, their pay level or pay grade will be the same. This can incubate a stagnant environment. Sometimes this system can also create too many levels of hierarchy. For large companies, this may work fine, but smaller, more agile organizations may use other methods to determine pay structure. For example, some organizations have moved to a delayering and banding process, which cuts down the number of pay levels within the organization. General Electric delayered pay grades in the mid-1990s because it found that employees were less likely to take a reassignment that was at a lower pay grade, even though the assignment might have been a good development opportunity (Ferris, 1995). So, delayering enables a broader range of pay and more flexibility within each level. Sometimes this type of process also occurs when a company downsizes. Let’s assume a company with five hundred employees has traditionally used a pay grade model but decided to move to a more flexible model. Rather than have, say, thirty pay levels, it may reduce this to five or six levels, with greater salary differentials within the grades themselves. This allows organizations to better reward performance, while still having a basic model for hiring managers to follow.

Figure Sample Pay Scale for General Federal Jobs

Rather than use a pay grade scale, some organizations use a going rate model. In this model, analysis of the going rate for a particular job at a particular time is considered when creating the compensation package. This model can work well if market pressures or labor supply-and-demand pressures greatly impact your particular business. For example, if you need to attract the best project managers, but more are already employed (lack of supply)—and most companies are paying $75,000 for this position—you will likely need to pay the same or more, because of labor supply and demand. Many tools are available, such as salarywizard.com, to provide going rate information on particular jobs in every region of the United States.

Compensation Strategies

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=160

The president of HR That Works provides some tips on determining compensation.

Another pay model is the management fit model. In this model, each manager makes a decision about who should be paid what when that person is hired. The downside to this model may be potential discrimination, halo effects, and resentment within the organization. Of course, these factors can create morale issues, the exact thing we want to avoid when compensating employees.

In addition to the pay level models we just looked at, other considerations might include the following:

1. Skill-based pay. With a skill-based pay system, salary levels are based on an employee’s skills, as opposed to job title. This method is implemented similarly to the pay grade model, but rather than job title, a set of skills is assigned a particular pay grade.

2. Competency-based pay. Rather than looking at specific skills, the competency-based approach looks at the employee’s traits or characteristics as opposed to a specific skills set. This model focuses more on what the employee can become as opposed to the skills he or she already has.

3. Broadbanding. Broadbanding is similar to a pay grade system, except all jobs in a particular category are assigned a specific pay category. For example, everyone working in customer service, or all administrative assistants (regardless of department), are paid within the same general band. McDonald’s uses this compensation philosophy in their corporate offices, stating that it allows for flexibility in terms of pay, movement, and growth of employees (McDonald’s Corporation, 2011).

4. Variable pay system. This type of system provides employees with a pay basis but then links the attainment of certain goals or achievements directly to their pay. For example, a salesperson may receive a certain base pay but earn more if he or she meets the sales quota.

How Would You Handle This?

You have been working for your organization for five years. After lots of hard work, you are promoted to sales manager. One of your first tasks is to develop goals for your sales team, then create a budget based on these goals. First, you look at the salaries of all the sales staff to find major pay discrepancies. Some salespeople, who perform equally well, are paid much lower than some sales staff whom you consider to be nonperformers. As you dig deeper, you see this is a problem throughout the sales team. You are worried this might affect motivation for your team if they find out what others are making. How would you handle this?

Pay Theories

Now that we have discussed pay systems, it is important to look at some theories on pay that can be helpful to know when choosing the type of pay system your organization will use.

The equity theory is concerned with the relational satisfaction employees get from pay and inputs they provide to the organization. It says that people will evaluate their own compensation by comparing their compensation to others’ compensation and their inputs to others’ inputs. In other words, people will look at their own compensation packages and at their own inputs (the work performed) and compare that with others. If they perceive this to be unfair, in that another person is paid more but they believe that person is doing less work, motivational issues can occur. For example, people may reduce their own inputs and not work as hard. Employees may also decide to leave the organization as a result of the perceived inequity. In HR, this is an important theory to understand, because even if someone is being paid fairly, they will always compare their own pay to that of others in the organization. The key here is perception, in that the fairness is based entirely on what the employee sees, not what may be the actual reality. Even though HR or management may feel employees are being paid fairly, this may not be the employee’s belief. In HR, we need to look at two factors related to pay equity: external pay equity and internal pay equity. External pay equity refers to what other people in similar organizations are being paid for a similar job. Internal pay equity focuses on employees within the same organization. Within the same organization, employees may look at higher level jobs, lower level jobs, and years with the organization to make their decision on pay equity. Consider Walmart, for example. In 2010, Michael Duke, CEO of Walmart, earned roughly $35 million in salary and other compensation (Gomstyne, 2010), while employees earned minimum wage or slightly higher in their respective states. While Walmart contends that its wages are competitive in local markets, the retail giant makes no apologies for the pay difference, citing the need for a specialized skill set to be able to be the CEO of a Fortune 500 company. There are hundreds of articles addressing the issue of pay equity between upper level managers and employees of an organization. To make a compensation strategy work, the perceived inputs (the work) and outputs (the pay) need to match fairly.

The expectancy theory is another key theory in relation to pay. The expectancy theory says that employees will put in as much work as they expect to receive. In other words, if the employee perceives they are going to be paid favorably, they will work to achieve the outcomes. If they believe the rewards do not equal the amount of effort, they may not work as hard.

The reinforcement theory, developed by Edward L. Thorndike (Indiana University, 2011), says that if high performance is followed by some reward, that desired behavior will likely occur in the future. Likewise, if high performance isn’t followed by a reward, it is less likely the high performance will occur in the future. Consider an extreme example of the reinforcement theory in the world of finance. On Wall Street, bonuses for traders and bankers are a major part of their salary. The average bonus in 2010 was $128,530 (Smith, 2011), which does not take into account specific commissions on trades, which can greatly increase total compensation. One interesting consideration is the ethical implications of certain pay structures, particularly commission and bonus plans. For example, after the US government bailed out American International Group (AIG) with $170 billion in 2009, it was reported AIG would still provide some $165 million in bonuses to the same business unit that brought the company to near collapse, because of contractual issues. Traditionally, a bonus structure is designed to reward performance, rather than be a guaranteed part of the compensation plan, as was the case with AIG. Bonus and commission plans should be utilized to drive desired behavior and act as a reward for the desired behavior, as the reinforcement theory states.

All these theories provide us information to make better decisions when developing our own pay systems. Other considerations are discussed next.

Pay Decision Considerations

Besides the motivational aspect of creating a pay structure, there are some other considerations. First, the size of the organization and the expected expansion of the organization will be a factor. For example, if you are the HR manager for a ten-person company, you likely use a going rate or management fit model. While this is appropriate for your company today, as your organization grows, it may be prudent to develop a more formal pay structure. Ascentium Corporation, based in Seattle, Washington, found this to be the case. When the company started with fewer than fifteen employees, a management fit model was used. As the company ballooned to over five hundred employees in four cities, a pay banding model had to be put into place for fairness.

If your organization also operates overseas, a consideration is how domestic workers will be paid in comparison to the global market. One strategy is to develop a centralized compensation system, which would be one pay system for all employees, regardless of where they live. The downside to this is that the cost of living may be much less in some countries, making the centralized system possibly unfair to employees who live and work in more expensive countries. Another consideration is in what currency employees will be paid. Most US companies pay even their overseas workers in dollars, and not in the local currency where the employee is working. Currency valuation fluctuations could cause challenges in this regard (Watson, 2005). We further discuss some global compensation policies in Chapter 14 “International HRM”.

How you communicate your pay system is extremely important to enhance the motivation that can be created by fair and equitable wage. In addition, where possible, asking for participation from your employees through the use of pay attitude surveys, for example, can create a transparent compensation process, resulting in higher performing employees.

Organizations should develop market pay surveys and review their wages constantly to ensure the organization is within expected ranges for the industry.

Human Resource Recall

Why do you think a transparent compensation policy is so important to motivating a workforce?

Table  Types of Pay

Pay

Attributes

Salary

Fixed compensation calculated on a weekly, biweekly, or monthly basis. No extra pay for overtime work.

Hourly Wage

Employees are paid on the basis of number of hours worked.

Piecework System

Employees are paid based on the number of items that are produced.

Types of Incentive Plans

Attributes

Commission Plans

An employee may or may not receive a salary but will be paid extra (e.g., a percentage for every sale made).

Bonus Plans

Extra pay for meeting or beating some goal previously determined. Bonus plans can consist of monetary compensation, but also other forms such as time off or gift certificates.

Profit-Sharing Plans

Annual bonuses paid to employees based on the amount of profit the organization earned.

Stock Options

When an employee is given the right to purchase company stock at a particular rate in time. Please note that a stock “option” is different from the actual giving of stock, since the option infers the employee will buy the stock at a set rate, obviously, usually cheaper than the going rate.

Other Types of Compensation

Attributes

Fringe Benefits

This can include a variety of options. Sick leave, paid vacation time, health club memberships, daycare services.

Health Benefits

Most organizations provide health and dental care benefits for employees. In addition, disability and life insurance benefits are offered.

401(k) Plans

Some organizations provide a retirement plan for employees. The company would work with a financial organization to set up the plan so employees can save money, and often, companies will “match” a percentage of what the employee contributes to the plan.

Types of Pay

After a pay system has been developed, we can begin to look at specific methods of paying our employees. Remember that when we talk about compensation, we are referring to not only an actual paycheck but additional types of compensation, such as incentive plans that include bonuses and profit sharing. We can divide our total pay system into three categories: pay, incentives, and other types of compensation. Pay is the hourly, weekly, or monthly salary an employee earns. An incentive, often called a pay-for-performance incentive, is given for meeting certain performance standards, such as meeting sales targets. The advantage to incentive pay is that company goals can be linked directly to employee goals, resulting in higher pay for the employee and goal achievement by the organization. The following are desirable traits of incentive plans:

- Clearly communicated

- Attainable but challenging

- Easily understandable

- Tied to company goals

Table “Types of Pay” illustrates the three types of compensation.

Most organizations use a combination of pay, incentives, and other compensation, as outlined in Table “Types of Pay”, to develop the total compensation package.

Laws Relating to Pay

As you have already guessed from our earlier chapter discussions, people cannot be discriminated against when it comes to development of pay systems. One issue hotly debated is the issue of comparable worth. Comparable worth states that people should be given similar pay if they are performing the same type of job. Evidence over the years shows this isn’t the case, with women earning less than men in many industries. On average, a woman earns 79 cents for every $1.00 a man earns. For women of color, the gap is wider at 69 cents for African-American women and 59 cents for Latina women (National Organization for Women, 2011). Many publications state that women earn less than men for a few reasons:

1. Women work fewer hours because of family care and maternity leave.

2. The career path or job choice of women tends to be lower as a whole.

3. There is a bias favoring men as the “breadwinners,” and therefore they are paid more.

4. Women are valued less than men in the workplace.

5. Women don’t negotiate salaries as well as men do.

While the reasons are certainly debatable, there is evidence that young women (without children) entering the workforce actually earn more than their male counterparts, owing to higher levels of education (Dougherty, 2010). As you may remember from Chapter 3 “Diversity and Multiculturalism”, the EEOC covers discrimination in the workplace, including pay discrimination based on race, color, religion, sex, and national origin. The Equal Pay Act of 1963 makes it illegal to pay different wages to men and women if they perform equal work in the same workplace.

More recent legislation on pay includes the Lilly Ledbetter Fair Pay Act of 2009, the first law signed by President Obama. This bill amends the Civil Rights Act stating that the 180-day statute of limitations for filing an equal pay lawsuit regarding pay discrimination resets with each discriminatory paycheck. The bill stemmed from a lawsuit against Goodyear Tire and Rubber Company by Lilly Ledbetter, who claimed that her nineteen-year career at the company consisted of unfair pay, compared to male workers in the organization. Her complaint was time barred by the US Supreme Court, and the new act addressed the time (180 days) constraint in which people have to file claims.

The Fair Labor Standards Act, or FLSA, was established in 1938 and set a minimum wage for jobs, overtime laws, and child labor laws. FLSA divides workers into exempt and nonexempt status, and jobs under exempt status do not fall under the FLSA guidelines. An exempt employee is usually paid a salary and includes executive, professional, outside sales, and administrative positions. A nonexempt employee is usually an hourly employee. For nonexempt employees, some states may implement a higher minimum wage than that established by the federal government. For example, in 2011, the minimum wage is $8.67 per hour in Washington State, while the federal minimum wage is $7.25 per hour. Obviously, as an HR manager or manager, it is your responsibility to ensure everyone is being paid the minimum wage. This law also requires overtime pay if employees work over forty hours per week. Organizations must also post the FLSA poster in a visible part of the workplace, outlining these laws.

Child labor also falls under FLSA. The goal of these laws is to protect the education of children, prohibit the employment of children in dangerous jobs, and limit the number of working hours of children during the school year and other times of the year (US Department of Labor, 2011).

According to the FLSA, tipped employees are those earning $30 or more per month in tips, such as servers in a restaurant. Employers whose employees receive more than $30 in tips may consider tips as part of wages, but they also must pay $2.12 an hour in direct wages. They must also be able to show that the employee receives at least the applicable minimum wage. If the tips and direct wage do not meet the minimum wage, the employer must pay the difference.

Also relating to pay is the Federal Unemployment Tax Act (FUTA). FUTA provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay a federal and a state unemployment tax, and portions of these funds go toward unemployment benefits should the worker lose his or her job. The Federal Employees Compensation Act (FECA) provides federal employees injured in the performance of their jobs compensation benefits, such as disability. Please note that this is elective for private companies but required of federal agencies.

Negotiating Salary

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=160

This video provides tips on negotiating salary from the perspective of an employee.

Key Takeaways

- A job evaluation system should be used to determine the relative value of one job to another. This is the first step in setting up a pay system.

- Several types of pay systems can be implemented. A pay grade system sets up specific pay levels for particular jobs, while a going rate system looks at the pay through the industry for a certain job title. Management fit gives maximum flexibility for managers to pay what they think someone should earn.

- HR managers can also develop pay systems based on skills and competency and utilize broadbanding, which is similar to pay grades. Another option might include variable pay.

- There are several motivational theories in regard to pay. First, the equity theory says that people will evaluate their own satisfaction with their compensation by comparing it to others’ compensation. The expectancy theory says people will put in only as much work as they expect to receive in rewards. Finally, the reinforcement theory says if high performance is followed by a reward, high performance is likely to happen in the future.

- Other pay considerations include the size of the organization, whether the company is global, and the level of communication and employee involvement in compensation. HR managers should always be aware of what others are paying in the industry by performing market surveys.

- There are several laws pertaining to pay. Of course, the EEOC ensures that pay is fair for all and does not discriminate. FLSA sets a minimum wage and establishes standards for child labor. FUTA requires employers to pay unemployment taxes on employees. FECA ensures that federal employees receive certain benefits.

Exercises

1. Name and describe three considerations in developing a pay system. Which do you think is best?

2. Which pay theory do you think is the most important when developing your pay system? Why?

3. Visit http://www.dol.gov/dol/topic/wages/minimumwage.htm (please note that sometimes web address change so you may need to search for the information), which publishes minimum wage data for the United States. View the map and compare your state with the federal minimum wage. Is it higher or lower? Which two states have the highest minimum wage? The lowest?

References

Dougherty, C., “Young Women’s Pay Exceeds Male Peers,” Wall Street Journal, September 1, 2010.

Ferris, G., Handbook of Human Resource Management (Cambridge, MA: Blackwell, 1995).

Gomstyn, A., “Walmart CEO Pay,” ABC News Money, July 2, 1010, accessed July 23, 2011, http://abcnews.go.com/Business/walmart-ceo-pay-hour-workers-year/story?id=11067470.

Indiana University, “Edward L. Thorndike,” accessed February 14, 2011, http://www.indiana.edu/~intell/ethorndike.shtml.

McDonald’s Corporation, “Your Pay and Rewards,” accessed July 23, 2011, http://www.aboutmcdonalds.com/mcd/corporate_careers/benefits/highlights_of_what_we_offer/pay_and_rewards.html.

National Organization for Women, “Facts about Pay Equity,” accessed February 15, 2011, http://www.now.org/issues/economic/factsheet.html.

Smith, A., “The 2010 Wall Street Bonus,” CNN Money, February 24, 2011, accessed July 23, 2011, http://money.cnn.com/2011/02/24/news/economy/wall_street_bonus/index.htm.

US Department of Labor, “Child Labor,” accessed February 15, 2011, http://www.dol.gov/whd/childlabor.htm.

Watson, B., “Global Pay Systems, Compensation in Support of a Multinational Strategy,” Compensation Benefits Review 37, no. 1 (2005): 33–36.

12

Other Types of Compensation

Learning Objective

1. Explain the various types of benefits that can be offered to employees.

As you already know, there is more to a compensation package than just pay. There are many other aspects to the creation of a good compensation package, including not only pay but incentive pay and other types of compensation. First, we will discuss benefits that are mandated by the federal government, and then we will discuss types of voluntary benefits, including both incentive pay and other types of compensation.

Mandated: Social Security and Medicare

The Social Security Act of 1935 requires employers to withdraw funds from workers’ paychecks to pay for retirement benefits. This is called a payroll tax. Please note that all organizations are legally compelled to offer this benefit. After several revisions, we now call this OASDHI or the Old Age, Survivors, Disability, and Health Insurance Program. To be insured, employees must work forty quarters, with a minimum of $1,000 earned per quarter. Once this money is put aside, anyone born after 1960 will receive benefits at 67. The OASDHI tax in 2011 is 4.2 percent on earnings for employees, up to $106,800 and 6.2 percent for the employer up to the same limits. This covers both retirement income as well as medical benefits, called Medicare, once the employee reaches retirement age.

Mandated: Unemployment Insurance and Workers’ Compensation

Unemployment insurance is required under the Social Security Act of 1935 and is also called the Federal Unemployment Tax Act (FUTA). This program’s goals include providing some lost income for employees during involuntary unemployment, helping workers find a new job, incentivizing employers to continue employment, and developing worker skills if they are laid off. The majority of this plan is funded by employers’ payroll taxes, which account for .8 percent per employee. The rate is actually 6.2 percent of compensation, but employers are allowed a tax credit for these payments, which results in the net .8 percent. With this benefit, employees receive unemployment benefits and/or job training when they are laid off or let go from a current job. However, employees would be ineligible to receive these benefits if they quit their job, as it must be involuntary. Just like Social Security, this payroll tax on employers is required.

Some employers also offer workers’ compensation benefits. If an employee is hurt on the job, he or she would receive certain benefits, such as a percentage of pay. Jobs are classified into risk levels, and obviously the higher the risk level, the higher the cost of insurance. This is not a federally mandated program, but for some occupations in some states, it may be a requirement.

Mandated: COBRA

While the government does not require companies to provide health-care and medical benefits to employees, the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires companies to allow employees to extend their group coverage for up to thirty-six months. The restrictions for this plan include the requirement of a qualifying event that would mean a loss of benefits, such as termination or reduction in hours. For example, if an employee works forty hours a week with medical insurance, but the schedule is reduced to twenty hours, no longer qualifying him or her for benefits, COBRA would be an option.

Voluntary: Incentive Pay Systems

As we discussed earlier, there are several types of incentive pay systems that can be tied directly to business objectives and the employees’ ability to help the company meet those objectives. They include commissions, bonuses, profit sharing, stock options, team pay, and merit pay.

Commissions are usually calculated on the basis of a percentage and earned based on the achievement of specific targets that have been agreed upon by the employee and employer. For example, many salespeople receive commissions from each item sold. Many commission incentive plans require employees to meet a minimum level of sales, who then are paid a comission on each sale beyond the minimum. A straight commission plan is one in which the employee receives no base pay and entire pay is based on meeting sales goals. Many plans, however, include a base pay and commission for each sale. Base pay is the guaranteed salary the employee earns.

Several types of bonuses can be given to employees as incentive pay. Meeting certain company goals or successfully completing a project or other objectives can be tied to a bonus, which is a one-time payment to an employee. A spot bonus is an unplanned bonus given to an employee for meeting a certain objective. These types of bonuses do not always have to be money; they can be other forms such as a gift certificate or trip. Fifty-eight percent of WorldatWork members (WorldatWork, 2000) said that they provide spot bonuses to employees for special recognition above and beyond work performance.

Some organizations choose to reward employees financially when the organization as a whole performs well, through the use of profit sharing as an incentive. For example, if an organization has a profit-sharing program of 2 percent for employees, the employees would earn 2 percent of the overall profit of the company. As you have guessed, this can be an excellent incentive for employees to both work as a team and also monitor their own personal performance so as not to let down the team. For example, in 2011, US automaker General Motors gave one of its highest profit-sharing payouts ever. Forty-five thousand employees received $189 million in a profit-sharing bonus, which equaled about $4,200 per person (Bunkley, 2011). While profit sharing can be a great incentive, it can also be a large expense that should be carefully considered.

Employee ownership of the organization is similar to profit sharing but with a few key differences. In this type of plan, employees are granted stock options, which allow the employees to buy stock at a fixed price. Then if the stock goes up in value, the employee earns the difference between what he or she paid and the value of the stock. With this type of incentive, employees are encouraged to act in the best interest of the organization. Some plans, called employee stock ownership plans, are different from stock options, in that in these plans the employee is given stock as reward for performance.

Profit sharing and stock ownership can be a good way to motivate employees to work toward the goals of the organization.

Chris Potter – 3D Budget Pie Chart – CC BY 2.0.

In a smaller organization, team pay or group incentives can be popular. In this type of plan, if the group meets a specified goal, such as the increase of sales by 10 percent, the entire group receives a reward, which can consist of additional pay or bonus. Please note that this is different from individualized bonuses, discussed earlier, since the incentive is a reward for the group as opposed for the individual.

Merit pay is a pay program that links pay to how well the employee performs within the job, and it is normally tied to performance appraisals. Performance appraisals are discussed further in Chapter 10 “Managing Employee Performance”. Merit base is normally an annual pay increase tied to performance. The problem with merit pay is that it may only be received once per year, limiting incentive flexibility. To make merit pay work, performance guidelines should be predetermined. Some organizations offer cost of living annual increases (COLAs), which is not tied to merit but is given to employees as an annual inflationary increase.

Fortune 500 Focus

While the cost of health insurance premiums may be going up for most Americans, these premiums do not hit the individual employee’s pocketbook at Microsoft. Microsoft, based in Redmond, Washington, finds itself once again on the Fortune 500 Best Companies to Work For list in several areas, including paying for 100 percent of employees’ health-care premiums^1. In addition to cutting this cost for employees, Microsoft also offers domestic partner benefits, one of the first Fortune 500 companies to do so. In 2005, Microsoft also began to offer partial coverage for transgender surgery to its existing health-care coverage, which earned Microsoft the highest attainable score by the Human Rights Campaign (HRC) Equality Index (GLEAM, 2011). Microsoft also promotes fitness and wellness as part of its health-care plan, providing an on-site fitness center and subsidized gym memberships.

Voluntary: Medical Insurance

According to the Bureau of Labor Statistics, 62 percent of companies in 2010 offered health-care benefits to employees (US Bureau of Labor Statistics, 2010). The yearly cost for employee medical insurance averages $9,552, according to the 2009 Towers Perrin survey (Watson, 2009). With such a significant cost to companies, it is up to HR managers to contain these costs, while not negatively affecting employee motivation. Medical insurance usually includes hospital expenses, surgical expenses, and routine health-care visits. Most insurance plans also allow for wellness visits and other alternative care (e.g., massage and acupuncture) within the plans. Many employers also offer vision and dental care benefits as part of their benefits packages. Disability insurance is also provided by some employers as well. We will discuss each of these in detail next.

One important law to keep in mind regarding medical insurance is the Health Insurance Portability and Accountability Act (HIPAA) of 1996. It provides federal protections for personal health information held by covered entities, such as employers. In other words, employers cannot divulge or share health care information they may have on an employee.

As you can see from MetLife’s 9th annual study in 2010, cost containment is an important aspect to health-care plans.

Source: MetLife, “9th Annual Study of Employee Benefits Trends,” 2010, http://www.metlife.com/assets/institutional/services/insights-and-tools/ebts/Employee-Benefits-Trends-Study.pdf (accessed July 23, 2011).

As the HR professional, it will likely be your responsibility to choose the health-care plan that best meets the needs of your employees. Some options include the following:

1. Fee-for-service plans. In this type of plan, people pay for medical expenses out of pocket, and then are reimbursed for the benefit level. For example, if your insurance plan covers doctor visits, you could see any doctor, pay the bill, and then submit payment to your insurer for reimbursement. Most companies will have a base plan, which covers more serious issues requiring hospitalization, while the major medical part of the plan would cover routine services, such as doctor’s visits. As you can imagine, the disadvantage of this type of plan can be twofold: first, the initial expense for the employee, and second, the time it may take to receive reimbursement for employees. Remember that medical insurance can help retain and motivate employees and help you recruit new employees, so consideration of the disadvantages is important.

2. Health maintenance organizations (HMOs). The HMO will likely have greater coverage than the fee-for-service plan, but it limits the ability of employees to see the doctors they choose. There may be a limited number of physicians and specialists for the employee to see, and going outside the plan and seeing another doctor may result in an out-of-pocket expense for the employee. Most HMOs cover a wide range of medical issues and will usually require a copayment by the employee. Some may have minimum deductibles they must meet before the HMO will cover in full. For example, if you are part of an HMO with a deductible of $500 and copayments of $25, you would need to see the doctor for a value of $500 (paid out of pocket) before you can begin to just make the $25 copayment for visits. Some HMOs will not allow members to see a specialist, such as a dermatologist, without prior approval from the primary care physician.

3. Preferred provider organization (PPO). This type of medical plan is similar to HMOs but allows employees to see a physician outside the network. They will likely still have to pay a deductible as mentioned above, but PPOs do allow employees more freedom to see specialists, such as dermatologists.

Figure Considerations When Choosing Medical Insurance

When choosing the best type of plan for your organization, the following aspects should be considered:

1. The cost of the plan

2. The type of coverage

3. The quality of the care

4. Administration of the plan

First, the cost is usually a major consideration for the HR professional. Developing a budget for health-care costs, initiating bids from possible providers, and then negotiating those bids is a key factor in controlling this cost for employers.

Second, asking for employees’ opinions about the type of coverage they would prefer is a way to ensure your plan meets the needs of your employees. Next, consider the quality of care your employees will receive and, finally, how simple will the plan be for your HR department to administer. For example, many HMO plans offer fully automated and online services for employees, making them easy to administer.

Disability insurance provides income to individuals (usually a portion of their salary) should they be injured or need long-term care resulting from an illness. Short-term disability insurance (STD) provides benefits to someone if they are unable to work for six months or less, while long-term disability insurance (LTD) covers the employee for a longer period of time. Normally, disability insurance provides income to the employee that is 60–80 percent of their normal salary.

One of the biggest challenges in health-care benefits planning is to manage the growing cost of health insurance premiums for employees while still managing cost containment for the organization.

Source: Economic Policy Institute, “The State of Working America: Health Premiums,” http://stateofworkingamerica.org/charts/growth-rate-of-premiums-earnings-and-inflation/ (accessed July 23, 2011).

Voluntary: 401(k) Plans

As the scenery of the workforce has changed, benefits have changed, too. One such recent change is the movement of employee pension plans to 401(k) plans. While some organizations still offer pension plans, such plans are far more rare. A pension plan is a set dollar amount an employee will receive when they retire from their organization. This type of plan was popular when most people worked their entire life at the same company. However, many pension plans have gone bankrupt, and the United States has an agency to protect people from losing pension benefits. The Pension Benefit Guaranty Corporation (PBGC) was created by the Employee Retirement Income Security Act (ERISA) to protect pension benefits in private sector pension plans. If a pension plan ends or isn’t able to pay all benefits, PBGC’s insurance program pays the benefit that should have been provided. Financing for this plan comes from insurance premiums paid by the companies whose plans PBGC protects.

As more mobility in the workplace has occurred, most organizations no longer offer pension plans, but instead, they offer 401(k) plans. While a pension plan can motivate employee loyalty, 401(k) plans are far more popular. According to the US Bureau of Labor Statistics, employer-provided retirement plans, such as 401(k) plans, were available to 74 percent of all full-time workers in the United States (US Bureau of Labor Statistics, 2010), while 39 percent of part-time workers had access to retirement benefits.

A 401(k) plan is a plan set up by the organization in which employees directly deposit money from their paycheck. The funds are tax deferred for the employee until retirement. If an employee leaves the job, their 401(k) plan goes with them. As an extra incentive, many organizations offer to match what the employee puts into the plan, usually based on a percentage. For example, an employee can sign up to contribute 5 percent of salary into a 401(k) plan, and the company will contribute the same amount. Most companies require a vesting period—that is, a certain time period, such as a year, before the employer will match the funds contributed.

Usually, 401(k) plans are easy to administer, after the initial setup has occurred. If the employer is matching employee contributions, the expense of such a plan can be great, but it also increases employee retention. Some considerations when choosing a 401(k) plan are as follows:

1. Is the vendor trustworthy?

2. Does the vendor allow employees to change their investments and account information online?

3. How much are the management fees?

It is first important to make sure the vendor you are considering for administration of your 401(k) plan has a positive reputation and also provides ease of access for your employees. For example, most 401(k) plans allow employees to change their address online and move investments from a stock to a bond. Twenty-four-hour access has become the expectation of most employees, and as a result, this is a major consideration before choosing a plan. Most 401(k) plans charge a fee to manage the investments of your employees. The management fees can vary greatly, so receiving a number of bids and comparing these fees is important to ensure your employees are getting the best deal.

It is important to mention the Employee Retirement Income Security Act (ERISA) here, as this relates directly to administration of your 401(k) plan. First, ERISA does not require employers to offer a pension or 401(k) plan, but for those who do, it requires them to meet certain standards when administering this type of plan. Some of these standards include the following:

1. Requires participants receive specific information about the plan, such as plan features and funding

2. Sets minimum standards for participation and vesting

3. Requires accountability of plan’s fiduciary responsibilities

4. Requires payment of certain benefits, should the plan be terminated

Voluntary: Paid Time Off

Time off is a benefit we should address, since this type of benefit varies greatly, especially in other parts of the world. French companies, for example, are mandated by law to provide five weeks of paid vacation time to employees (Leung, 2009). In the United States, the number of days off provided is a major budget item worth considering. Here are the general types of time off:

Paid Holidays

Many companies offer a set number of paid holidays, such as New Year’s Day, Memorial Day, Christmas, Independence Day, and Thanksgiving.

Sick Leave

The number of sick leave days can vary greatly among employers. The average in the United States is 8.4 paid sick days offered to employees per year (HRM Guide, 2011).

Paid Vacation

With full-time employment, many organizations also offer paid vacation to employees, and it is generally expected as part of the compensation package. According to a survey performed by Salary.com, the average number of paid vacation days in the United States is nine days for one year of service, fourteen days for five years of service, and seventeen days for ten years of service to the organization (Yang, 2011).

Organizations vary greatly in how vacation time is accrued. Some organizations give one hour for a certain number of days worked, while others require a waiting period before earning any paid time off (PTO). In addition, some organizations allow their employees to carry over unused vacation time from one year to the next, while other employees must use their vacation every year or risk losing it.

Paid Time Off (PTO)

One option is to provide a set number of days off, which can be used for vacation time, holidays, and/or sick leave.

To promote longevity, some organizations offer paid (or for example, 60 percent of salary paid) sabbaticals. For example, after five years of employment, the employee may take a paid sabbatical for one month.

A Final Note on Compensation and Benefits Strategy

When creating your compensation plan, of course the ability to recruit and retain should be an important factor. But also, consideration of your workforce needs is crucial to any successful compensation plan. The first step in development of a plan is to ask the employees what they care about. Some employees would rather receive more pay with fewer benefits or better benefits with fewer days off. Surveying the employees allows you, as the HR professional, to better understand the needs of your specific workforce. Once you have developed your plan, understand that it may change to best meet the needs of your business as it changes over time.

Once the plan is developed, communicating the plan with your employees is also essential. Inform your employees via an HR blog, e-mails, and traditional methods such as face to face. Your employees might not always be aware of the benefits cost to the company, so making sure they know is your responsibility. For example, if you pay for 80 percent of the medical insurance premiums, let your employees know. This type of communication can go a long way to allowing the employees to see their value to you within the organization.

Compensation Strategies

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=166

Lynn Cameron, managing partner of TechEdge, discusses compensation strategies.

Key Takeaways

- Before beginning work on a pay system, some general questions need to be answered. Questions such as what is a fair wage from the employee’s perspective and how much can be paid but still retain financial health are important starting points.

- After some pay questions are answered, development of a pay philosophy must be developed. For example, an organization may decide to pay lower salaries but offer more benefits.

- Once these tasks are done, the HR manager can then build a pay system that works for the size and industry of the organization.

- Besides salary, one of the biggest expenses for compensation is medical benefits. These can include health benefits, vision, dental, and disability benefits.

- Social Security and unemployment insurance are both required by federal law. Both are paid as a percentage of income by the employee and employer.

- Depending on the state, workers’ compensation might be a requirement. A percentage is paid on behalf of the employee in case he or she is hurt on the job.

- A mandatory benefit, COBRA was enacted to allow employees to continue their health insurance coverage, even if they leave their job.

- There are three main types of health-care plans. A fee-based plan allows the insured to see any doctor and submit reimbursement after a visit. An HMO plan restricts employees to certain doctors and facilities and may require a copayment and/or deductibles. A PPO plan is similar to the HMO but allows for more flexibility in which providers the employee can see.

- Pension funds were once popular, but as people tend to change jobs more, 401(k) plans are becoming more popular, since they can move with the employee.

- Profit sharing is a benefit in which employees receive a percentage of profit the organization earns. Stock ownership plans are plans in which employees can purchase stock or are granted stock and become an owner in the organization.

- Team rewards are also a popular way to motivate employees. These can be in the form of compensation if a group or the company meets certain target goals.

- Paid time off, or PTO, can come in the form of holidays, vacation time, and sick leave. Usually, employees earn more days as they stay with the company.

- Communication with employees is key to a successful benefits strategy.

Exercises

1. Of the benefits we discussed, which ones are required by law? Which are not?

2. Research current Federal Insurance Contributions Act (FICA) tax rates and Social Security limits, as these change frequently. Write down each of these rates and be prepared to share in class.

3. Describe the considerations when developing medical benefits. Which do you think would be the most important to you as the HR manager?

4. Visit websites of three companies you might be interested in working for. Review the incentives they offer and be prepared to discuss your findings in class.

1“100 Best Companies to Work For,” Fortune, accessed July 21, 2011, http://money.cnn.com/magazines/fortune/bestcompanies/2010/snapshots/51.html.

References

Bunkley, N., “GM Workers to Get $189 Million in Profit Sharing,” New York Times, February 14, 2011, accessed February 21, 2011, http://www.nytimes.com/2011/02/15/business/15auto.html?_r=2&ref=business.

Gay, Lesbian, Bisexual, and Transgender Employees at Microsoft (GLEAM), Microsoft website, accessed July 21, 2011, http://www.microsoft.com/about/diversity/en/us/programs/ergen/gleam.aspx.

HRM Guide, “Sick Day Entitlement Survey,” accessed February 21, 2011, http://www.hrmguide.com/health/sick-entitlement.htm.

Leung, R., “France: Less Work, More Time Off,” CBS News, February 11, 2009, accessed July 23, 2011, http://www.cbsnews.com/stories/2005/06/27/60II/main704571.shtml.

US Bureau of Labor Statistics, “Employee Benefits Survey,” 2010, accessed July 23, 2011, http://www.bls.gov/ncs/ebs/benefits/2010/ownership/private/table01a.htm.

Watson, T., “2009 Health Care Cost Survey Reveals High-Performing Companies Gain Health Dividend,”

WorldatWork, “Spot Bonus Survey,” July 2000, accessed July 23, 2011, http://www.worldatwork.org/waw/research/html/spotbonus-home.html.

Yang, J., “Paid Time Off from Work Survey,” Salary.com, accessed September 15, 2011, http://www.salary.com/Articles/ArticleDetail.asp?part=par088.

13

Cases and Problems

Chapter Summary

- A compensation package is an important part of the overall strategic HRM plan, since much of the company budget is for employee compensation.

- A compensation package can include salary, bonuses, health-care plans, and a variety of other types of compensation.

- The goals of compensation are first to attract people to work for your organization. Second, they can be used to retain people who are already working in the organization.

- Compensation is also used to motivate employees to work at their peak performance and improve morale of the organization.

- Employees who are fairly compensated tend to provide better customer service, which can result in organizational growth and development.

- Several types of pay systems can be implemented. A pay grade system sets up specific pay levels for particular jobs, while a going rate system looks at the pay throughout the industry for a certain job title. Management fit gives maximum flexibility for managers to pay what they think someone should earn.

- HR managers can also develop pay systems based on skills and competency and utilize a broadbanding approach, which is similar to pay grades. Another option might include variable pay.

- There are several motivational theories in regard to pay. First, the equity theory says that people will evaluate their own satisfaction with their compensation by comparing it to others’ compensation. The expectancy theory says people will put in only as much work as they expect to receive in rewards. Finally, the reinforcement theory says that if high performance is followed by a reward, high performance is likely to happen in the future.

- Other pay considerations include the size of the organization, whether the company is global, and the level of communication and employee involvement in compensation. HR managers should always be aware of what others are paying in the industry by performing market surveys.

- There are several laws pertaining to pay. Of course, the Equal Employment Opportunity Commission (EEOC) ensures that pay is fair for all and does not discriminate. The Fair Labor Standards Act (FLSA) sets a minimum wage and establishes standards for child labor. The Federal Unemployment Tax Act (FUTA) requires employers to pay unemployment taxes on employees. The Federal Employees Compensation Act (FECA) ensures that federal employees receive certain benefits.

- Besides salary, one of the biggest expenses for compensation is medical benefits. These can include health benefits, vision, dental, and disability benefits.

- The Consolidated Omnibus Budget Reconciliation Act(COBRA) was enacted to allow employees to continue their health insurance coverage, even if they leave their job.

- There are three main types of health-care plans. A fee-based plan allows the insured to see any doctor and submit reimbursement after a visit. An HMO plan restricts employees to certain doctors and facilities and may require a copayment and/or deductibles. A PPO plan is similar to the HMO but allows for more flexibility in which providers the employee can see.

- Pension funds were once popular, but as people tend to change jobs more, 401(k) plans are becoming more popular, since they can move with the employee.

- Profit sharing is a benefit in which employees receive a percentage of profit the organization earns. Stock ownership plans are plans in which employees can purchase stock or are granted stock and become an owner in the organization.

- Team rewards are also a popular way to motivate employees. These can be in the form of compensation if a group or the company meets certain target goals.

- Social Security and unemployment insurance are both required by federal law. Both are paid as a percentage of income by the employee and employer.

- Depending on the state, workers’ compensation might be a requirement. A percentage is paid on behalf of the employee in case he or she is hurt on the job.

- Paid time off, or PTO, can come in the form of holidays, vacation time, and sick leave. Usually, employees earn more days as they stay with the company.

- Communication with employees is key to a successful benefits strategy. This includes communication before implementing the plan as well as communication about the plan.

Chapter Case

PTO: Too Little or Too Much?

You just finished analyzing information for the current compensation and benefits program. You find that some changes should be made, as the majority of employees (you have 120 employees) are not happy with what is being offered. In fact, the plan had not been revised in over fifteen years, making it dated and definitely ready for some changes.

One of the major points of contention is the PTO the organization offers. Employees feel the current system of sick time and vacation time offers too few options. For example, one employee says, “I often come to work sick, so I can still have my vacation time for my vacation.” Another employee says, “I have given nine years to this organization, but I receive only three days more than someone who has just started.” Here is the current PTO offering:

1+ year

7 days

5+years

10 days

10+ years

14 days

1. What cost considerations would you take into account when revising this part of your compensation plan?

2. What other considerations would you take into account when developing a new PTO plan?

3. Propose a new plan and estimate the cost of your plan on an Excel spreadsheet. Be prepared to present to the board of directors.

Team Activity

1. Work in teams of four or five. Assume your organization is expanding and wants to open a sales office overseas. What compensation factors would be a concern? Brainstorm a list and be prepared to present to the rest of the class.

2. Go to http://www.bls.gov/oco/ and review the information on the Occupational Outlook Handbook in teams of three. Pick three different jobs under the management category and record their average salary. Discuss reasons for the pay difference between the jobs you choose.

14

The Selection Process

Learning Objective

1. Be able to name and discuss the steps in the selection process.

Once you have developed your recruitment plan, recruited people, and now have plenty of people to choose from, you can begin the selection process. The selection process refers to the steps involved in choosing people who have the right qualifications to fill a current or future job opening. Usually, managers and supervisors will be ultimately responsible for the hiring of individuals, but the role of human resource management (HRM) is to define and guide managers in this process. Similar to the recruitment process discussed in Chapter 4 “Recruitment”, the selection process is expensive. The time for all involved in the hiring process to review résumés, weight the applications, and interview the best candidates takes away time (and costs money) that those individuals could spend on other activities. In addition, there are the costs of testing candidates and bringing them in from out of town for interviews. In fact, the US Department of Labor and Statistics estimates the combined direct and indirect cost of hiring someone new can reach upwards of $40,000 (Hamm, 2011). Because of the high cost, it is important to hire the right person from the beginning and ensure a fair selection process. For example, the Austin, Texas, fire department calculated it would cost $150,000 to reinterview candidates, after the interview questions were leaked to the public, giving some candidates possibly unfair advantages in the interview process^1.

Interviews can be nerve wracking. In this chapter, we will discuss what goes into making the best hiring decision.

Alan Cleaver – Interview – CC BY 2.0.

The selection process consists of five distinct aspects:

1. Criteria development. All individuals involved in the hiring process should be properly trained on the steps for interviewing, including developing criteria, reviewing résumés, developing interview questions, and weighting the candidates.
The first aspect to selection is planning the interview process, which includes criteria development. Criteria development means determining which sources of information will be used and how those sources will be scored during the interview. The criteria should be related directly to the job analysis and the job specifications. This is discussed in Chapter 4 “Recruitment”. In fact, some aspects of the job analysis and job specifications may be the actual criteria. In addition to this, include things like personality or cultural fit, which would also be part of criteria development. This process usually involves discussing which skills, abilities, and personal characteristics are required to be successful at any given job. By developing the criteria before reviewing any résumés, the HR manager or manager can be sure he or she is being fair in selecting people to interview. Some organizations may need to develop an application or a biographical information sheet. Most of these are completed online and should include information about the candidate, education, and previous job experience.

2. Application and résumé review. Once the criteria have been developed (step one), applications can be reviewed. People have different methods of going through this process, but there are also computer programs that can search for keywords in résumés and narrow down the number of résumés that must be looked at and reviewed.

3. Interviewing. After the HR manager and/or manager have determined which applications meet the minimum criteria, he or she must select those people to be interviewed. Most people do not have time to review twenty or thirty candidates, so the field is sometimes narrowed even further with a phone interview. This is discussed in Section 5.3.1 “Types of Interviews”.

4. Test administration. Any number of tests may be administered before a hiring decision is made. These include drug tests, physical tests, personality tests, and cognitive tests. Some organizations also perform reference checks, credit report checks, and background checks. Types of tests are discussed in Section 5.4.1 “Testing”. Once the field of candidates has been narrowed down, tests can be administered.

5. Making the offer. The last step in the selection process is to offer a position to the chosen candidate. Development of an offer via e-mail or letter is sometimes a more formal part of this process. Compensation and benefits will be defined in an offer. We discuss this in Chapter 6 “Compensation and Benefits”.

The Selection Process at a Glance

Criteria Development

- Understand KSAOs

- Determine sources of KSAO information such as testing, interviews

- Develop scoring system for each of the sources of information

- Create an interview plan

Application and Resume Review

- Should be based on criteria developed in step one

- Consider internal versus external candidates

Interview

- Determine types of interview(s)

- Write interview questions

- Be aware of interview bias

Test Administration

- Perform testing as outlined in criteria development; could include reviewing work samples, drug testing or written cognitive and personality tests

Selection

- Determine which selection method will be used

- Compare selection method criteria

Making the Offer

- Use negotiation techniques

- Write the offer letter or employment agreement

We will discuss each of these aspects in detail in this chapter.

Fortune 500 Focus

In a 2010 interview (Bryant, 2010), Robert Selander, then CEO of MasterCard, cited presence as one of the most important aspects to acing an interview. He describes how, in any large organization, an employee will be expected to engage with a variety of stakeholders, from a member of Congress to a contractor replacing the carpet in the building. He says that a good employee—at any level of the organization—should be able to communicate well but also be able to communicate to a variety of stakeholders. We discuss communication in Chapter 9 “Successful Employee Communication”. Selander also says he will always ask the candidate about his or her weaknesses, but more importantly, how the candidate plans to address those weaknesses to make sure they do not become a barrier to success. He always asks the question “What can you do for us?” When asked if he could pose only one interview question, what would it be, his answer was, “Share with me two situations, work related that you are proud of, where something was achieved based on your own personal initiative and the other where the achievement was a result of the team getting something done that you could not have done alone.” In other words, Selander is looking for not only personal ability but the ability to work within a team to accomplish tasks. Selander offers advice to new college grads: try to find an organization where you can be involved and see all aspects of the business and be provided training to help you with certain skills that will be needed.

Human Resource Recall

When was the last time you interviewed for a job? Did the process seem to flow smoothly? Why or why not?

Key Takeaways

- The selection process refers to the steps involved in choosing someone who has the right qualifications to fill a current or future job opening.

- There are five main steps in the selection process. First, criteria are developed to determine how the person will be chosen. Second is a review of the applications and résumés, often done via a computer program that can find keywords. Next is interviewing the employee. The last steps involve testing, such as a personality test or drug test, and then finally, making the offer to the right candidate.

Exercise

1. What components are included in the selection process? Which one do you think is the most important?

1KVUE News, “Re-Interview Process to Cost $150,000,” June 23, 2011, accessed August 2, 2011, http://www.kvue.com/news/local/AFD–124452379.html.

References

Bryant, A., “The X Factor When Hiring? Call It Presence,” June 26, 2010, New York Times, accessed July 12, 2011, http://www.nytimes.com/2010/06/27/business/27corner.html?scp=1&sq=Selander&st=cse&pagewanted=1.

Hamm, L., “Pre-Employment Testing,” IHD Corporation, n.d., accessed August 2, 2011, http://www.ihdcorp.com/articles-hr/pre-employment-testing.htm.

15

Criteria Development and Résumé Review

Learning Objectives

1. Be able to explain why criteria development is an important part of the selection process.

2. Give examples of types of criteria that can be developed.

3. Describe the advantages and disadvantages of internal and external candidates.

Before we begin to review résumés and applications, we must have a clear idea of the person we want to hire for the position. Obviously, the job specifications will help us know the minimum qualifications, such as education level and years of experience. However, additional criteria might include the attitude of the potential hire, the ability to take initiative, and other important personal characteristics and professional abilities that may not always be demonstrated in an application or résumé. A specific score on a personality test, quality of work samples, and other tools to determine qualifications should be included as part of the criteria. In other words, knowing exactly what you want before you even begin the process of looking through résumés will make this process much easier. In human resources, this is called KSAOs, or knowledge, skills, abilities, and other personal characteristics that make a person successful on the job. Some organizations, such as the United States Department of Veterans Affairs, require applicants to address each one of the KSAOs listed in the job position within their cover letter^1.

Criteria Development Considerations

Many HR professionals and managers develop the criteria for hiring, as well as the interview questions, before reviewing any résumés. This allows for a streamlined process with specific guidelines already set before reviewing a résumé. For example, criteria for a project management job might include the following:

1. Two years of experience managing a $2 million or more project budget

2. A bachelor’s degree in business or closely related field

3. Ability to work on multiple projects at once

4. Problem-solving ability

5. Conflict-management ability

6. Ability to manage a team of five to six diverse workers

7. Score of at least a 70 on cognitive ability test

8. Score of excellent from most recent employer

By setting criteria ahead of time, the hiring team has a clear picture of exactly what qualifications they are looking for. As a result, it is easier to determine who should move forward in the selection process. For example, if someone does not have a bachelor’s degree, given this is a criterion, their application materials can be filed away, perhaps for another job opening. Likewise, the HR manager can include those résumés with two or more years of experience and bachelor’s degree in the interview pile and then develop interview questions that show the candidates’ problem-solving, multitasking, and conflict-management abilities.

Résumé parsing or résumé scanning software is readily available and can make the initial screening easier. For example, Sovren software allows the HR manager to include keywords such as bachelor’s degree or management. This software scans all received résumés and selects the ones that have the keywords. While it still may be necessary to review résumés, this type of software can save time having to look through résumés that obviously do not meet the minimum qualifications.

Validity and Reliablity

The validity refers to how useful the tool is to measure a person’s attributes for a specific job opening. A tool may include any and all of the following:

1. Résumé-scanning software

2. Reference checks

3. Cognitive ability tests

4. Work samples

5. Credit reports

6. Biographical information blanks

7. Weighted application forms

8. Personality tests

9. Interview questions

Biographical information blanks (BIBs) are a useful part of the application process. A BIB is a series of questions about a person’s history that may have shaped his or her behavior. The BIB can be scored in the same way as an interview or a résumé, assuming the organization knows which types of answers are predictable for success in a given job. Similarly, a weighted application form involves selecting an employee characteristic to be measured and then identifying which questions on the application predict the desired behavior. Then scores are assigned to each predictor. Of course, the development of the scoring should be determined before any résumés and application forms have been reviewed. In other words, any tool you use to determine someone’s qualifications for a job should have validity to determine they are the right fit for the job.

Reliability refers to the degree in which other selection techniques yield similar data over time. For example, if you ask the same interview question of every applicant for the project management position, and the “right” answer always yields similar, positive results, such as the hiring of a successful employee every time, the question would be considered reliable. An example of an unreliable test might occur with reference checks. Most candidates would not include a reference on their résumé who might give them a poor review, making this a less reliable method for determining skills and abilities of applicants.

Fit Issues

Fit includes not only the right technical expertise, education, and experience but also fit in company culture and team culture. For example, at Facebook headquarters in Palo Alto, California, engineers are selected based on their willingness to take risks, as risk taking is nurtured at Facebook (McGirt, 2010). In addition to this component of their company culture, the company looks for the “hacker” personality, because a hacker is someone who finds ways around the constraints placed upon a system. At Zappos, profiled in Chapter 4 “Recruitment”, the company culture is one focused on customer service and the willingness of people to provide the best customer service in all aspects of the business. At Amazon, the huge online retailer, a core value in their company culture is a focus on developing leaders to grow with the organization. If a potential candidate is not interested in long-term career growth, he or she might not be deemed an appropriate strategic fit with the organization. In today’s organizations, most people are required to work within teams. As a result, fit within a team is as important as company culture fit. Microsoft, for example, does an immense amount of teamwork. The company is structured so that there are marketers, accountants, developers, and many others working on one product at a time. As a result, Microsoft looks for not only company culture fit but also fit with other team members.

Reviewing Résumés

Once we have developed our criteria for a specific job, we can begin the review process. Everyone prefers to perform this differently. For example, all the hiring decision makers may review all résumés, list the people they would like to meet in person, and then compare the lists. Another method might be to rate each candidate and interview only those above a certain score. This is discussed in Section 5.4.2 “Selection Methods”. Obviously, much of the process will depend on the organization’s size and the type of job. None of this process can be done fairly without first setting criteria for the job.

When looking at résumés to determine whom to interview, a manager should be concerned with the concepts of disparate impact and disparate treatment. This is discussed in Chapter 4 “Recruitment”. Disparate impact is unintended discrimination against a protected group as a whole through the use of a particular requirement. Disparate impact may be present in the interviewing process, as well as other employment-related processes such as pay raises and promotions. For example, a requirement of being able to lift 110 pounds might be considered as having disparate impact on women, unless the job requires this ability. Every criteria developed should be closely considered to see if it might have disparate impact on a protected group of individuals. For example, the requirement of a certain credit score might have a negative impact on immigrants, who may not have a well-developed credit rating. However, if being able to manage money is an important requirement of the job, this requirement might not be discriminatory.

Disparate treatment in hiring might include not interviewing a candidate because of one’s perception about the candidate’s age, race, or gender.

The last consideration is the hiring of internal versus external candidates. An internal candidate is someone who already works within the organization, while an external candidate is someone who works outside the organization. A bidding process may occur to notify internal candidates of open positions. This is discussed in Chapter 4 “Recruitment”. Generally speaking, it is best to go through a formal interview process with all candidates, even if they work within the organization. This way, an HR professional can be assured that disparate treatment does not occur because of favoritism. For example, a senior executive of your organization just left, and you believe the manager in that department is qualified to take over the position. Suppose, though, that the manager has been lobbying you for the job for some time and has even taken you out to lunch to talk about the job. While this person has maintained high visibility and lobbied for the promotion, there may be equally qualified internal candidates who did not use the same lobbying techniques. Automatically offering the position to this internal candidate might undermine others who are equally qualified. So while hiring internally can be a motivator, making assumptions about a particular person may not be a motivator to others. This is why it is best, even if you hire internally, to post a formal job announcement listing the job description and job qualifications, so everyone in the organization can have an equal opportunity to apply for the job.

Once you have completed the criteria for the particular job and narrowed down the field, you can begin the interview process. We discuss this in Section 5.3 “Interviewing”.

Possible Advantages and Disadvantages of Hiring an Internal versus an External Candidate

Advantages

Disadvantages

Internal Candidates

Rewards contributions of current staff

Can produce “inbreeding,” which may reduce diversity and difference perspectives

Can be cost effective, as opposed to using a traditional recruitment strategy

May cause political infighting between people to obtain the promotions

Can improve morale

Can create bad feelings if an internal candidate applies for a job and doesn’t get it

Knowing the past performance of the candidate can assist in knowing if they meet the criteria

External Candidates

Brings new talent into the company

Implementation of recruitment strategy can be expensive

Can help an organization obtain diversity goals

Can cause morale problems for internal candidates

New ideas and insight brought into the company

Can take longer for training and orientation

How Would You Handle This?

Poor Interviewer

As the assistant to the HR manager, one of your jobs is to help managers get ready to interview candidates. When you offer help to Johnathan, he says he has interviewed hundreds of people and doesn’t need your help in planning the interview process. When you sit in the interview with him, he asks inappropriate questions that you don’t feel really assess the abilities of a candidate. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1360625/embed

The author discusses the How Would You Handle This situation in this chapter at: https://api.wistia.com/v1/medias/1360625/embed.

Key Takeaways

- The first step in selection is to begin reviewing résumés. Even before you do this, though, it is important to develop criteria that each candidate will be measured against. This can come from the job description as well as the job qualifications.

- Other tools, such as cognitive ability tests, credit checks, and personality tests, can be used to determine qualifications. When developing your criteria for interviewing, determine the level the applicant needs to meet to meet the minimum criteria, for example, a minimum score on a personality test.

- We should be concerned with validity and reliability of measurement tools. Validity refers to how valid the test is, that is, how well a test measures a candidate’s abilities to do a job. Reliability refers to which selection techniques yield similar data or results over time. It is important to choose the right measurement tool used to determine whether the candidate meets the criteria.

- Setting criteria before the interview process starts ensures that disparate impact or disparate treatment does not occur in the interview process.

- When hiring, there is the option of internal and external candidates. Each has its own set of advantages and disadvantages. Internal candidates may be able to “hit the ground running,” but external candidates may come in with new perspectives. Even if an internal candidate seems to be the best hire, it is best to still perform the process of posting the job and interviewing, since other less vocal employees might be qualified internal candidates as well. In other words, don’t assume one person is the obvious choice for the promotion.

Exercises

1. Develop criteria for the position of a retail salesperson working in teams.

2. Describe the advantages and disadvantages of hiring an internal and external candidate. Give an example of when you don’t think an external candidate should be considered for a position.

3. How can development of criteria or minimum standards help in a case of disparate treatment accusations?

1“What Are KSAs?” US Department of Veterans Affairs, accessed August 2, 2011, http://www.va.gov/jobs/hiring/apply/ksa.asp.

References

McGirt, E., “Most Innovative Companies,” Fast Company, February 2010, accessed July 12, 2011, http://www.fastcompany.com/mic/2010/profile/facebook.

16

Interviewing

Learning Objectives

1. Explain the various types of interviews and interview questions.

2. Discuss interview methods and potential mistakes in interviewing candidates.

3. Explain the interview process.

Interviewing people costs money. As a result, after candidates are selected, good use of time is critical to making sure the interview process allows for selection of the right candidate. In an unstructured interview, questions are changed to match the specific applicant; for example, questions about the candidate’s background in relation to their résumé might be used. In a structured interview, there is a set of standardized questions based on the job analysis, not on individual candidates’ résumés. While a structured interview might seem the best option to find out about a particular candidate, the bigger concern is that the interview revolves around the specific job for which the candidate is interviewing. In a structured interview, the expected or desired answers are determined ahead of time, which allows the interviewer to rate responses as the candidate provides answers. This allows for a fair interview process, according to the US Office of Personnel Management^1. For purposes of this section, we will assume that all interviews you perform will be structured, unless otherwise noted.

Types of Interviews

Interview processes can be time-consuming, so it makes sense to choose the right type of interview(s) for the individual job. Some jobs, for example, may necessitate only one interview, while another may necessitate a telephone interview and at least one or two traditional interviews. Keep in mind, though, that there will likely be other methods with which to evaluate a candidate’s potential, such as testing. Testing is discussed in Section 5.4.1 “Testing”. Here are different types of interviews:

1. Traditional interview. This type of interview normally takes place in the office. It consists of the interviewer and the candidate, and a series of questions are asked and answered.

2. Telephone interview. A telephone interview is often used to narrow the list of people receiving a traditional interview. It can be used to determine salary requirements or other data that might automatically rule out giving someone a traditional interview. For example, if you receive two hundred résumés and narrow these down to twenty-five, it is still unrealistic to interview twenty-five people in person. At this point, you may decide to conduct phone interviews of those twenty-five, which could narrow the in-person interviews to a more manageable ten or so people.

3. Panel interview. A panel interview occurs when several people are interviewing one candidate at the same time. While this type of interview can be nerve racking for the candidate, it can also be a more effective use of time. Consider some companies who require three to four people to interview candidates for a job. It would be unrealistic to ask the candidate to come in for three or four interviews, so it makes sense for them to be interviewed by everyone at once.

4. Information interview. Informational interviews are usually used when there is no specific job opening, but the candidate is exploring possibilities in a given career field. The advantage to conducting these types of interviews is the ability to find great people ahead of a job opening.

5. Meal interviews. Many organizations offer to take the candidate to lunch or dinner for the interview. This can allow for a more casual meeting where, as the interviewer, you might be able to gather more information about the person, such as their manners and treatment of waitstaff. This type of interview might be considered an unstructured interview, since it would tend to be more of a conversation as opposed to a session consisting of specific questions and answers.

6. Group interview. In a group interview, two or more candidates interview at the same time. This type of interview can be an excellent source of information if you need to know how they may relate to other people in their job.

7. Video interviews. Video interviews are the same as traditional interviews, except that video technology is used. This can be cost saving if one or more of your candidates are from out of town. Skype, for example, allows free video calls. An interview may not feel the same as a traditional interview, but the same information can be gathered about the candidate.

8. Nondirective interview (sometimes called an unstructured interview). In a nondirective interview, the candidate essentially leads the discussion. Some very general questions that are planned ahead of time may be asked, but the candidate spends more time talking than the interviewer. The questions may be more open ended; for example, instead of asking, “Do you like working with customers?” you may ask, “What did you like best about your last job?” The advantage of this type of interview is that it can give candidates a good chance to show their abilities; however, the downside is that it may be hard to compare potential candidates, since questions are not set in advance. It relies on more of a “gut feeling” approach.

It is likely you may use one or more of these types of interviews. For example, you may conduct phone interviews, then do a meal interview, and follow up with a traditional interview, depending on the type of job.

Interview Questions

Most interviews consist of many types of questions, but they usually lean toward situational interviews or behavior description interviews. A situational interview is one in which the candidate is given a sample situation and is asked how he or she might deal with the situation. In a behavior description interview, the candidate is asked questions about what he or she actually did in a variety of given situations. The assumption in this type of interview is that someone’s past experience or actions are an indicator of future behavior. These types of questions, as opposed to the old “tell me about yourself” questions, tend to assist the interviewer in knowing how a person would handle or has handled situations. These interview styles also use a structured method and provide a better basis for decision making. Examples of situational interview questions might include the following:

1. If you saw someone stealing from the company, what would you do?

2. One of your employees is performing poorly, but you know he has some personal home issues he is dealing with. How would you handle complaints from his colleagues about lack of performance?

3. A coworker has told you she called in sick three days last week because she actually decided to take a vacation. What would you do?

4. You are rolling out a new sales plan on Tuesday, which is really important to ensure success in your organization. When you present it, the team is lukewarm on the plan. What would you do?

5. You disagree with your supervisor on her handling of a situation. What would you do?

Examples of behavior description interview questions might include the following:

1. Tell me about a time you had to make a hard decision. How did you handle this process?

2. Give an example of how you handled an angry customer.

3. Do you show leadership in your current or past job? What would be an example of a situation in which you did this?

4. What accomplishments have given you the most pride and why?

5. What plans have you made to achieve your career goals?

Top 36 Interview Questions and Answers

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=142

Examples of how to answer those difficult interview questions.

As you already know, there are many types of interview questions that would be considered illegal. Here are some examples:

1. National origin. You cannot ask seemingly innocent questions such as “That’s a beautiful name, where is your family from?” This could indicate national origin, which could result in bias. You also cannot ask questions about citizenship, except by asking if a candidate is legally allowed to work in the United States. Questions about the first language of the candidate shouldn’t be asked, either. However, asking “Do you have any language abilities that would be helpful in this job?” or “Are you authorized to work in the United States?” would be acceptable.

2. Age. You cannot ask someone how old they are, and it is best to avoid questions that might indicate age, such as “When did you graduate from high school?” However, asking “Are you over 18?” is acceptable.

3. Marital status. You can’t ask direct questions about marital status or ages of children. An alternative may be to ask, “Do you have any restrictions on your ability to travel, since this job requires 50 percent travel?”

4. Religion. It’s illegal to ask candidates about their religious affiliation or to ask questions that may indicate a religion-affiliated school or university.

5. Disabilities. You may not directly ask if the person has disabilities or recent illnesses. You can ask if the candidate is able to perform the functions of the job with or without reasonable accommodations.

6. Criminal record. While it is fine to perform a criminal record check, asking a candidate if they have ever been arrested is not appropriate; however, questions about convictions and guilty pleadings are acceptable.

7. Personal questions. Avoid asking personal questions, such as questions about social organizations or clubs, unless they relate to the job.

Besides these questions, any specific questions about weight, height, gender, and arrest record (as opposed to allowable questions about criminal convictions) should be avoided.

HR professionals and managers should be aware of their own body language in an interview. Some habits, such as nodding, can make the candidate think they are on the right track when answering a question. Also, be aware of a halo effect or reverse halo effect. This occurs when an interviewer becomes biased because of one positive or negative trait a candidate possesses. Interview bias can occur in almost any interview situation. Interview bias is when an interviewer makes assumptions about the candidate that may not be accurate (Lipschultz, 2010). These assumptions can be detrimental to an interview process. Contrast bias is a type of bias that occurs when comparing one candidate to others. It can result in one person looking particularly strong in an area, when in fact they look strong compared to the other candidates. A gut feeling bias is when an interviewer relies on an intuitive feeling about a candidate. Generalization bias can occur when an interviewer assumes that how someone behaves in an interview is how they always behave. For example, if a candidate is very nervous and stutters while talking, an assumption may be made that he or she always stutters. Another important bias called cultural noise bias occurs when a candidate thinks he or she knows what the interviewer wants to hear and answers the questions based on that assumption. Nonverbal behavior bias occurs when an interviewer likes an answer and smiles and nods, sending the wrong signal to the candidate. A similar to me bias (which could be considered discriminatory) results when an interviewer has a preference for a candidate because he or she views that person as having similar attributes as themselves. Finally, recency bias occurs when the interviewer remembers candidates interviewed most recently more so than the other candidates.

Human Resource Recall

What are the dangers of a reverse halo effect?

A halo effect occurs when a desirable trait makes us believe all traits possessed by the candidate are desirable. This can be a major danger in interviewing candidates.

OpenClipartVectors – Pixabay – CC0 Public Domain.

Interview Process

Once the criteria have been selected and interview questions developed, it is time to start interviewing people. Your interviewing plan can determine the direction and process that should be followed:

1. Recruit new candidates.

2. Establish criteria for which candidates will be rated.

3. Develop interview questions based on the analysis.

4. Set a time line for interviewing and decision making.

5. Connect schedules with others involved in the interview process.

6. Set up the interviews with candidates and set up any testing procedures.

7. Interview the candidates and perform any necessary testing.

8. Once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria.

9. Put together an offer for the candidate.

As you can see, a large part of the interviewing process is planning. For example, consider the hiring manager who doesn’t know exactly the type of person and skills she is looking to hire but sets up interviews anyway. It is difficult, if not impossible, to determine who should be hired if you don’t know what you are looking for in the first place. In addition, utilizing time lines for interviewing can help keep everyone involved on track and ensure the chosen candidate starts work in a timely manner. Here are some tips to consider when working with the interview process:

1. Make sure everyone is trained on the interviewing process. Allowing someone who has poor interviewing skills to conduct the interview will likely not result in the best candidate. In a worst-case scenario, someone could ask an illegal question, and once hired, the candidate can sue the organization. UCLA researchers (Hanricks, 2011) calculated that plaintiffs win about half of hiring discrimination cases that go to trial, sometimes because of interviewers asking illegal questions. For example, “I see you speak Spanish, where did you study it?” is a seemingly harmless question that could be indirectly asking a candidate his or her ethnic background. To avoid such issues, it’s important to train managers in the proper interviewing process.

2. Listen to the candidate and try to develop a rapport with them. Understand how nervous they must be and try to put them at ease.

3. Be realistic about the job. Do not try to paint a “rosy” picture of all aspects of the job. Being honest up front helps a candidate know exactly what they will be in for when they begin their job.

4. Be aware of your own stereotypes and do not let them affect how you view a potential candidate.

5. Watch your own body language during the interview and that of the candidate. Body language is a powerful tool in seeing if someone is the right fit for a job. For example, Scott Simmons, vice president at Crist|Kolder, interviewed someone for a CFO position. The candidate had a great résumé, but during the interview, he offered a dead-fish handshake, slouched, and fidgeted in his chair. The candidate didn’t make eye contact and mumbled responses, and, of course, he didn’t get the job (Reeves, 2006), because his body language did not portray the expectations for the job position.

6. Stick to your criteria for hiring. Do not ask questions that have not been predetermined in your criteria.

7. Learn to manage disagreement and determine a fair process if not everyone on the interviewing team agrees on who should be hired. Handling these types of disagreements is discussed further in Chapter 9 “Successful Employee Communication”.

Once you have successfully managed the interview process, it is time to make the decision. Section 5.4.1 “Testing” discusses some of the tools we can use to determine the best candidate for the job.

Human Resource Recall

Can you think of a time when the interviewer was not properly trained? What were the results?

Key Takeaways

- Traditional, telephone, panel, informational, meal, group, and video are types of interviews. A combination of several of these may be used to determine the best candidate for the job. A structured interview format means the questions are determined ahead of time, and unstructured means the questions are based on the individual applicant. The advantage of a structured interview is that all candidates are rated on the same criteria. Before interviewing occurs, criteria and questions for a structured interview should be developed.

- Interview questions can revolve around situational questions or behavioral questions. Situational questions focus on asking someone what they would do in a given situation, while behavioral questions ask candidates what they have done in certain situations.

- Interview questions about national origin, marital status, age, religion, and disabilities are illegal. To avoid any legal issues, it is important for interviewers to be trained on which questions cannot be asked. The halo effect, which assumes that one desirable trait means all traits are desirable, should also be avoided.

- The process involved in interviewing a person includes the following steps: recruit new candidates; establish criteria for which candidates will be rated; develop interview questions based on the analysis; set a time line for interviewing and decision making; connect schedules with others involved in the interview process; set up interviews with candidates and set up any testing procedures; interview the candidates and perform any necessary testing; and once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria; then finally, put together an offer for the candidate.

- Developing a rapport, being honest, and managing the interview process are tips to having a successful interview.

Exercises

1. With a partner, develop a list of five examples (not already given in the chapter) of situational and behavioral interview questions.

2. Why is it important to determine criteria and interview questions before bringing someone in for an interview?

3. Visit Monster.com and find two examples of job postings that ask those with criminal records not to apply. Do you think, given the type of job, this is a reasonable criteria?

1“Structured Interviews: A Practical Guide,” US Office of Personnel Management, September 2008, accessed January 25, 2011, https://apps.opm.gov/ADT/ContentFiles/SIGuide09.08.08.pdf.

References

Hanricks, M., “3 Interview Questions That Could Cost You $1 Million,” BNET, March 8, 2011, accessed August 2, 2011, http://www.bnet.com/blog/business-myths/3-interview-questions-that-could-cost-your-company-1-million/791.

Lipschultz, J., “Don’t Be a Victim of Interview Bias,” Career Builder, June 15, 2010, accessed July 12, 2011, http://jobs.aol.com/articles/2010/06/15/interview-bias/.

Reeves, S., “Is Your Body Betraying You in Job Interviews?” Forbes, February 2006, accessed August 2, 2011, http://www.forbes.com/2006/02/15/employment-careers-interviews-cx_sr_0216bizbasics.html.

17

Testing and Selecting

Learning Objectives

1. Explain the types of tests that can be administered as part of the selection process.

2. Be able to discuss the types of selection models.

Besides the interview, we can also look at several other aspects that may predict success on the job. If any test is to be criteria for measuring a candidate, this should be communicated to each person interviewing, and criteria should be developed on specific test scores and expectations before interviewing and testing begins.

Testing

A variety of tests may be given upon successful completion of an interview. These employment tests can gauge a person’s KSAOs in relation to another candidate. The major categories of tests include the following:

1. Cognitive ability tests

2. Personality tests

3. Physical ability tests

4. Job knowledge tests

5. Work sample

A number of written tests can be administered. A cognitive ability test can measure reasoning skills, math skills, and verbal skills. An aptitude test measures a person’s ability to learn new skills, while an achievement test measures someone’s current knowledge. Depending on the type of job, one or both will be better suited.

A cognitive ability test measures intelligences, such as numerical ability and reasoning. The Scholastic Aptitude Test (SAT) is an example of a cognitive ability test. It is important to note that some cognitive ability tests can have disparate impact. For example, in EEOC v. Ford Motor Co. and United Automobile Workers of America, African Americans were rejected from an apprentice program after taking a cognitive test known as the Apprenticeship Training Selection System (ATSS)1. The test showed significant disparate impact on African Americans, and it was then replaced by a different selection procedure, after costing Ford $8.55 million. Some sample test categories might include the following:

1. Reasoning questions

2. Mathematical questions and calculations

3. Verbal and/or vocabulary skills

Aptitude tests can measure things such as mechanical aptitude and clerical aptitude (e.g., speed of typing or ability to use a particular computer program). Usually, an aptitude test asks specific questions related to the requirements of the job. To become a New York City police offer, for example, an aptitude test is required before an application will be considered. The written exam is given as a computerized test at a computerized testing center in the city. The test measures cognitive skills and observational skills (aptitude test) required for the job^2.

Personality tests such as Meyers-Briggs and the “Big Five” personality factors may be measured and then compared with successful employee scores. For example, The University of Missouri Health Care system recently launched a patient satisfaction initiative as part of its strategic plan. The plan includes training for current employees and personality testing for nursing, managerial, and physician candidates (Silvey, 2011). The goal of the test is to assess talent and to see if the candidate has the potential to meet the expectations of patients. They hired a private company, Talent Plus, who conducts the test via phone interviews. However, many companies administer tests themselves, and some tests are free and can be administered online.

The Big Five personality test looks at extroversion, agreeableness, conscientiousness, neuroticism, and openness. Self-assessment statements might include the following:

1. I have an assertive personality.

2. I am generally trusting.

3. I am not always confident in my abilities.

4. I have a hard time dealing with change.

Some institutions also require physical ability tests; for example, to earn a position in a fire department, you may have to be able to carry one hundred pounds up three flights of stairs. If you use tests in your hiring processes, the key to making them useful is to determine a minimum standard or expectation, specifically related to the requirements of the job. An HR manager should also consider the legality of such tests. In the EEOC v. Dial Corp. case^1, women were disproportionately rejected for entry-level positions. Prior to the test, 46 percent of hires were women, but after implementation of the test, only 15 percent of the new hires were women. The Equal Employment Opportunity Commission (EEOC) established that the test was considerably more difficult than the job, resulting in disparate impact. Physical ability tests need to show direct correlation with the job duties.

A job knowledge test measures the candidate’s level of understanding about a particular job. For example, a job knowledge test may require an engineer to write code in a given period of time or may ask candidates to solve a case study problem related to the job.

Work sample tests ask candidates to show examples of work they have already done. In the advertising business, this may include a portfolio of designs, or for a project manager, this can include past project plans or budgets. When applying for a pharmaceutical representative position, a “brag book” might be required (Hansen, 2011). A brag book is a list of recommendation letters, awards, and achievements that the candidate shares with the interviewer. Work sample tests can be a useful way to test for KSAOs. These work samples can often be a good indicator of someone’s abilities in a specific area. As always, before looking at samples, the interviewer should have specific criteria or expectations developed so each candidate can be measured fairly.

Once the interview is completed and testing occurs, other methods of checking KSAOs, including checking references, driving records, and credit history, can be performed. Some companies even use Facebook as a way of gauging the candidate’s professionalism.

Reference checking is essential to verify a candidate’s background. It is an added assurance that the candidate’s abilities are parallel with what you were told in the interview. While employment dates and job titles can be verified with previous employers, many employers will not verify more than what can be verified in the employment record because of privacy laws. However, if you do find someone who is willing to discuss more than just dates and job titles, a list of questions is appropriate. Some of these questions might include the following:

1. What was the title and responsibilities of the position the candidate had while at your company?

2. Do you think the candidate was qualified to assume those responsibilities?

3. Does this person show up on time and have good attendance?

4. Would you consider this person a team player?

5. What are the three strongest and weakest characteristics of this candidate?

6. Would you rehire this person?

If a candidate will be driving a company car or vehicle, such as a UPS truck, driving records may be checked. Criminal background checks may also be used if the position will include interaction with the public. If the position requires handling of money, a credit check may be required, although a written notice is required to be given to the candidate before the credit check is carried out. In addition, written permission must be provided to the credit agency, and the applicants must receive a copy of the report and a copy of their rights under the Consumer Credit Reporting Reform Act (CCRRA). All these types of tests can be used to determine if someone has been honest about their past employment.

Some companies require drug testing, which causes some debate. While some organizations say this is a safety issue (and pay lower insurance premiums), others say it is an invasion of privacy. As long as drug tests are administered for a defensible reason (safety), many organizations will continue to require them. Some organizations will also require physical examinations to ensure the candidate can perform the tasks required. A final form of testing is the honesty test. A number of “what would you do” questions are asked. The challenge with this type of test is that many people know the “right” answer but may not be honest in their responses.

Reasons Why Employers Acted upon Data Found on Social Networking Sites

Provocative or inappropriate photos or info

53%

Drinking or drug use

44%

Badmouthing previous employer, colleague, or client

35%

Poor communication skills

29%

Discriminatory comments

26%

Lied about qualifications

24%

Leaked confidential information about previous job

20%

Source: Kit Eaton “If You’re Applying for a Job, Censor Your Facebook Page,” Fast Company, August 19, 2009, accessed January 27, 2011, http://www.fastcompany.com/blog/kit-eaton/technomix/if-youre-applying-job-censor-your-facebook-page.

Forty-five percent of organizations use social networking such as Facebook, Twitter, or LinkedIn to gather information about potential candidates (Eaton, 2009). See Table “Reasons Why Employers Acted upon Data Found on Social Networking Sites” for the types of data found on social networking sites that disqualified candidates, according to an article by Fast Company. This can be an effective method to see the kind of image the candidate portrays in his or her personal time.

Selection Methods

Tell Me about Yourself

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=144

How to answer that famous “tell me about yourself” question in an interview.

A clinical selection approach is probably the most common selection method, and it involves all who will be making the decision to hire a candidate. The decision makers review the data and, based on what they learn from the candidate and the information available to them, decide who should be hired for a job. Because interviewers have a different perception about the strengths of a candidate, this method leaves room for error. One consideration is disparate treatment, in which one’s biases may result in not hiring candidates based on their age, race, or gender. One way to handle this and limit the personal stereotypes and perceptions of the interviewers is to use a statistical method in hiring.

In the statistical method, a selection model is developed that assigns scores and gives more weight to specific factors, if necessary. For example, for some jobs, the ability to work in a team might be more important, while in others, knowledge of a specific computer program is more important. In this case, a weight can be assigned to each of the job criteria listed. For example, if the job is a project manager, ability to work with the client might be more important than how someone dresses for the interview. So, in the example shown in Figure “Sample Selection Model, with Sample Scores and Weighting Filled In”, dress is weighted 1, while being able to give bad news to a client is weighted 5. In the example, the rating is multiplied by the weight to get the score for the particular job criteria. This method allows for a fairer process and can limit disparate treatment, although it may not limit disparate impact. A statistical method may work like this: you and the hiring team review the job analysis and job description and then determine the criteria for the job. You assign weights for each area and score ranges for each aspect of the criteria, rate candidates on each area as they interview, and then score tests or examine work samples. Once each hiring manager has scored each candidate, the hiring team can compare scores in each area and hopefully hire the best person in the best way. A sample candidate selection model is included in Figure “Sample Selection Model, with Sample Scores and Weighting Filled In”.

With the statistical approach, there is more objectivity than with the clinical approach. Statistical approaches include the compensatory model, multiple cutoff model, and the multiple hurdle model. In the compensatory model, a similar method of scoring is used as the weighted model but permits a high score in an important area to make up for a lower score in another area. In our Figure “Sample Selection Model, with Sample Scores and Weighting Filled In” example, ability to give bad news to a client might outweigh a test score. These decisions would be made before the interviews happen.

A multiple cutoff model requires that a candidate has a minimum score level on all selection criteria. In our Figure  “Sample Selection Model, with Sample Scores and Weighting Filled In” example, the candidate may be required to have a score of at least 2 out of 5 on each criteria. If this was the case, the candidate in Figure  “Sample Selection Model, with Sample Scores and Weighting Filled In” scored low on “bad news to a client,” meaning he or she wouldn’t get the job in a multiple cutoff model. In the multiple hurdle model, only candidates with high (preset) scores go to the next stages of the selection process. For example, the expectations might be to score a 4 on at least three of the items in Figure “Sample Selection Model, with Sample Scores and Weighting Filled In”. If this were the case, this candidate might make it to the next level of the selection process, since he or she scored at least a 4 on three criteria areas.

Once the discussion on whom to hire has occurred and a person has been selected, the final phase of the process is to make an offer to the candidate. This is discussed in Section “Making the Offer”.

Figure Sample Selection Model, with Sample Scores and Weighting Filled In

Job Criteria

Rating*

Weight**

Total

Comments

Dress

4

1

4

Candidate dressed appropriately.

Personality

2

5

10

Did not seem excited about the job.

Interview questions

Give an example of a time you showed leadership.

3

3

9

Descriptive but didn’t seem to have experience required.

Give an example of when you had to give bad news to a client.

0

5

0

Has never had to do this.

Tell us how you have worked well in a team

5

4

20

Great example of teamwork given.

Score on cognitive ability test.

78

5

390

Meets minimum required score of 70

458

*Rating system of 1-5, with 5 being the highest

**Weighting of 1-5, with 5 being the most important

Key Takeaways

- Once the interview process is complete, some companies use other means of measuring candidates. For example, work samples are an excellent way of seeing how someone might perform at your company.

- An aptitude test or achievement test can be given. An aptitude test measures how well someone might be able to do something, while an achievement test measures what the candidate already knows. Tests that measure cognitive ability and personality are examples.

- Some organizations also perform drug tests and physical tests. A physical test might consist of being able to lift a certain amount of weight, if required for the job. Honesty tests are also given; these measure the honesty level of the candidate. However, these tests may not be reliable, since someone can guess the “right” answer.

- Facebook, Twitter, and other social networking websites are also used to gather information about a candidate. Calling references is another option.

- Every person interviewing the candidate should have a selection model; this method utilizes a statistical approach as opposed to a clinical approach. The selection table lists the criteria on the left and asks interviewers to provide a rating for each. This method can allow for a more consistent way of measuring candidates.

Exercises

1. Develop a sample candidate selection for your current job.

2. Visit your or another person’s Facebook page. Consider the content from an interviewer’s point of view. Should anything be removed or changed?

1“Employment Tests and Selection Procedures,” US Equal Employment Opportunity Commission, accessed August 2, 2011, http://www.eeoc.gov/policy/docs/factemployment_procedures.html.

2“Exam Schedule,” New York Police Department, accessed August 2, 2011, http://www.nypdrecruit.com/exam-center/exam-overview.

References

Eaton, K., “If You’re Applying for a Job, Censor Your Facebook Page,” Fast Company, August 19, 2009, accessed January 27, 2011, http://www.fastcompany.com/blog/kit-eaton/technomix/if-youre-applying-job-censor-your-facebook-page.

Hansen, K., “So, You Want to Get into Paramedical Sales?” n.d., Quintessential Careers, accessed August 2, 2011, http://www.quintcareers.com/pharmaceutical_sales_careers.html.

Silvey, J., “MU Health Care to Renew Satisfaction Effort,” Columbia Daily Tribune, August 2, 2011, accessed August 2, 2011, http://www.columbiatribune.com/news/2011/aug/02/mu-health-care-to-renew-satisfaction-effort/.

18

Making the Offer

Learning Objective

1. Explain the steps in making the offer to the candidate.

Oftentimes once the decision is made to hire a candidate, HR professionals feel their job is finished. But making the offer to the chosen candidate can be equally as important as the interview process. If the offer is not handled properly, you can lose the candidate, or if the candidates takes the job, he or she could start off on the wrong foot.

According to Paul Falcone, vice president for human resources at the Fortune 500 company Time Warner, detailed information should be asked of the candidate before the offer is even made (Falcone, 2011). He says that as soon as the offer is made, power is shifted to the candidate. To handle this, he suggests asking salary questions in the interview, including the following:

1. “If we were to make a job offer today, when would you be in a position to accept or reject the offer?” If the candidate answers “right now,” this indicates they do not have other job offers on the table or if they do, you are their first choice.

2. “At what point, dollar wise, would you accept our job offer and at what point, dollar wise would you reject the offer?” The advantage of using this strategy is that it gets to the point of understanding the candidate’s expectations. If the interviewee does not respond right away, you can clarify by asking, “I am asking this question because I would like to gauge your interest level. Share with me the ideal salary offer versus at what point you would be willing to walk away from this opportunity.”

Asking these questions can assist in qualifying candidates, based on salary expectations. For example, if a candidate requests 20 percent more than you are able to pay for the job, this discussion can be had before the offer is even made, perhaps making this candidate no longer viable.

Once you have determined in the interview process that the salary expectation is in the range of what you can offer, the first step is to make the offer as soon as the decision is made. In a tight labor market, waiting a week or two may impact your ability to hire your first choice. You probably already have a salary range in mind and can begin to narrow down the offer based on the individual’s KSAOs. Based on the range of salary you can offer, consider the following questions when making the offer to a candidate:

- What is the scarcity of the particular skills set?

- What are the “going” wages in your geographic area?

- What are the current economic conditions?

- What is the current pay for similar positions in your organization?

- What is your organizational compensation strategy?

- What is the fair market value of the job?

- What is the level of the job within the organization?

- What are your budget constraints?

- How soon will the employee be productive in the organization?

- Are there other candidates equally qualified that might have lower salary expectations?

- What are the national and regional unemployment rates?

- If you cannot pay more, can you offer other perks such as a signing bonus or flexible work schedule?

Once the offer has been made, it is reasonable to give the candidate some time to decide, but not too long, as this can result in losing other candidates should this candidate reject the job offer. It is likely the candidate may come back and ask for higher salary or benefits. Some tips to successfully negotiate are included below and in Video 5.4:

1. Be prepared. Know exactly what you can and can’t offer.

2. Explain the career growth the organization can provide.

3. Address the benefits of the candidate’s joining the organization.

4. Discuss the entire offer, including other benefits offered to the employee.

5. View the negotiation as a win-win situation.

6. Be able to provide salary research of similar positions and competitors for the same job title.

7. Use the trading technique. For example, “I cannot offer you the salary you are requesting right now, but what if we were able to review salary at your six-month performance review, assuming ____ objectives are met?”

Once the phone call is made and the candidate accepts the offer, an e-mail or formal letter should follow, outlining details of the employment agreement. The employment agreement or offer letter should include the following:

1. Job title

2. Salary

3. Other compensation, such as bonuses or stock options

4. Benefits, such as health-care coverage, 401(k)

5. Vacation time/paid holidays

6. Start date

7. Noncompete agreement expectations

8. Additional considerations such as relocation expenses

Once the pay and benefits package has been successfully negotiated and the offer letter (or e-mail) sent, you should clarify acceptance details in writing and receive confirmation of the start date. It is not unusual for people in higher-level positions to need a month or even two to transition from their old jobs. During this period, make sure to stay in touch and even complete the new hire paperwork in the meantime.

Pirates of the Caribbean Negotiation Analysis

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=146

This lively video, using the movie Pirates of the Caribbean, offers great analysis and tips on how to successfully negotiate just about anything.

Key Takeaways

- The HR professional’s job isn’t finished once the selection is made. The next step is to actually make the offer. This step is important, because if it isn’t done properly, you could lose the candidate or have ill feelings at the onset of the employment relationship.

- Once you have made the decision to hire someone, make the offer to the candidate right away. Normally this is done through a phone call and a follow-up e-mail, outlining the details of the offer.

- It is not unusual for someone to negotiate salary or benefits. Know how far you can negotiate and also be aware of how your current employees will be affected if you offer this person a higher salary.

- If you are having trouble coming to an agreement, be creative in what you can offer; for example, offer flextime instead of higher pay.

Exercise

1. Research “salary negotiation” on the Internet. What tips are provided for job seekers? Do you think these same tips could apply to the HR professional? Why or why not?

References

Falcone, P., “The New Hire: Five Questions to Ask before Making the Job Offer,” n.d., Monster.com, accessed July 13, 2011, http://hiring.monster.com/hr/hr-best-practices/recruiting-hiring-advice/acquiring-job-candidates/making-a-job-offer.aspx.

19

Cases and Problems

Chapter Summary

- The selection process refers to the steps involved in choosing someone who has the right qualifications to fill a current or future job opening.

- There are five main steps in the selection process. First, criteria should be developed to determine how the person will be chosen. Second, a review of the applications and résumés is conducted, often via a computer program that can find keywords. Next, interview the employee. The last steps involve administering tests, such as a personality test or drug test, and making the offer to the right candidate.

- The first step in selection is to review résumés. Even before you do this, though, it is important to develop criteria against which each candidate will be measured. Criteria can come from the job description as well as the job qualifications.

- Other tools, such as cognitive ability tests, credit checks, or personality tests, can be used to determine qualifications. When developing your criteria for interviewing, determine the level the applicant needs to meet to meet the minimum criteria—for example, a minimum score for a personality test.

- We should be concerned with validity and reliability of measurement tools. Validity refers to how valid the test is—that is, how well a test measures a candidate’s abilities to do a job. Reliability refers to which selection techniques yield similar data or results over time. It is important to choose the right measurement tool used to determine whether the candidate meets the criteria.

- Use of criteria before the interview process starts is also important to make sure disparate impact or disparate treatment do not occur in the interview process.

- When hiring, there is the option of internal and external candidates. Each has its own set of advantages and disadvantages. Internal candidates may be able to “hit the ground running” but external candidates may come in with new perspectives. Even if an internal candidate seems to be the best hire, it is best to still perform the process of posting the job and interviewing, since other less vocal employees might be qualified internal candidates as well. In other words, don’t assume one person is the obvious choice for the promotion.

- Traditional, telephone, panel, informational, meal, group, and video are types of interviews. A combination of several of these may be used to determine the best candidate for the job. A structured interview format means the questions are determined ahead of time, and unstructured means the questions are based on the individual applicant. The advantage of a structured interview is that all candidates are rated on the same criteria. Before interviewing occurs, criteria and questions for a structured interview should be developed.

- Interview questions can revolve around situational questions or behavioral questions. Situational questions focus on asking someone what they would do in a given situation, while behavioral questions ask candidates what they would have done in certain situations.

- Interview questions about national origin, marital status, age, religion, and disabilities are illegal. To avoid any legal issues, it is important for interviewers to be trained on which questions cannot be asked. The halo effect, which assumes that one desirable trait means all traits are desirable, should also be avoided.

- The process involved in interviewing a person includes the following steps: recruit new candidates; establish criteria for which candidates will be rated; develop interview questions based on the analysis; set a time line for interviewing and decision making; connect schedules with others involved in the interview process; set up interviews with candidates and set up any testing procedures; interview the candidates and perform any necessary testing; and once all results are back, meet with the hiring team to discuss each candidate and make a decision based on the established criteria. Finally, put together an offer for the candidate.

- Developing a rapport, being honest, and managing the interview process are tips to having a successful interview.

- Once the interview process is complete, some companies use other means of measuring candidates. For example, work samples are an excellent way of seeing how someone might perform at your company.

- An aptitude test or achievement test can be given. An aptitude test measures how well someone might be able to do something, while an achievement test measures what the candidate already knows. Tests that measure cognitive ability and personality are examples.

- Some organizations also perform drug tests and physical tests. A physical test might consist of being able to lift a certain amount of weight, if required for the job. Honesty tests are also given, which measure the honesty level of the candidate. However, these tests may not be reliable, since someone can guess the “right” answer.

- Facebook, Twitter, and other social networking websites are used to gather information about a candidate. Calling references is another option.

- Every person interviewing the candidate should have a selection model; this method utilizes a statistical approach as opposed to a clinical approach. The selection table lists the criteria on the left and asks interviewers to provide a rating for each. This method can allow for a more consistent way of measuring candidates.

- The job of the HR professional isn’t finished once the selection is made. The next step is to make the offer. This step is important, because if it isn’t done properly, you could lose the candidate or have ill feelings at the onset of the employment relationship.

- Once you have made the decision to hire someone, make the offer to the candidate right away. Normally this is done through a phone call and a follow-up e-mail, outlining the details of the offer.

- It is not unusual for someone to negotiate salary or benefits. Know how far you can negotiate, and also be aware of how your current employees will be affected if you offer this person a higher salary.

- If you are having trouble coming to an agreement, be creative in what you can offer; for example, offer flextime instead of higher pay.

Chapter Case

The Four-Fifths Rule

The four-fifths rule is a way of measuring adverse impact in selection processes of organizations. It works like this: assume your organization requires a cognitive test for employment. You set a test score of 70 as the required pass rate for the candidate to be considered for an interview. Based on our numbers, if 50 percent of men passed this test with a score of 70, then four-fifths or 40 percent of women should also be able to pass the test. You might calculate it like this:

Gender

Total who scored 70 or above

Total who took the test

Percent

Male

52

62

83.8 or 84% passed

Female

36

58

62.07 or 62%

If you divide the total of who scored above 70 by the total number who took the test, it shows the percentage of 84 percent passed the test. If you divide the number of women who passed by the total number of women who took the test, you come up with 62 percent. Then divide 62 percent by 84 percent (62/84 = 73.8%). The resulting 74 percent means that it is below the 80 percent or the four-fifths rule, and this test could be considered to have disparate impact.

52/62 = 84% of men who took the test passed the test
36/58 = 62% of women who took the test passed the test
62/84 = 73.8%, less than 80%, which could show disparate impact

This is only an indicator as to how the selection process works for the organization, and other factors, such as sample size, can impact the reliability of this test. Using the tables below, please calculate possible disparate impact and then answer the questions that follow.

National Origin

Passing Test Score

Total Number Taking the Test

Percent

Caucasians

56

89

Minority groups

48

62

Age

Passing Test Score

Total Number Taking the Test

Percent

People under 40

28

52

People over 40

23

61

Gender

Passing Test Score

Total Number Taking the Test

Percent

Male

71

82

Female

64

85

1. Please calculate the above numbers using the four-fifths rule. Based on your calculation:

1. Which group or groups might be affected negatively by this test?

2. What would be your considerations before changing any selection tools based on this data?

3. How might you change your selection process to ensure disparate impact isn’t occurring at your organization?

Team Activity

1. In a team of two, take the Big Five personality test online (http://www.outofservice.com/bigfive/) and compare scores.

2. Assume you are hiring a retail salesperson and plan to administer the same Big Five personality test you took above. In your team, develop minimum percentile scores for each of the five areas that would be acceptable for your new hire.

20

Steps to Take in Training an Employee

Learning Objective

1. Explain the four steps involved when training an employee.

Any effective company has training in place to make sure employees can perform his or her job. During the recruitment and selection process, the right person should be hired to begin with. But even the right person may need training in how your company does things. Lack of training can result in lost productivity, lost customers, and poor relationships between employees and managers. It can also result in dissatisfaction, which means retention problems and high turnover. All these end up being direct costs to the organization. In fact, a study performed by the American Society for Training and Development (ASTD) found that 41 percent of employees at companies with poor training planned to leave within the year, but in companies with excellent training, only 12 percent planned to leave (Branham, 2005). To reduce some costs associated with not training or undertraining, development of training programs can help with some of the risk. This is what this chapter will address.

For effective employee training, there are four steps that generally occur. First, the new employee goes through an orientation, and then he or she will receive in-house training on job-specific areas. Next, the employee should be assigned a mentor, and then, as comfort with the job duties grows, he or she may engage in external training. Employee training and development is the process of helping employees develop their personal and organization skills, knowledge, and abilities.

Employee Orientation

The first step in training is an employee orientation. Employee orientation is the process used for welcoming a new employee into the organization. The importance of employee orientation is two-fold. First, the goal is for employees to gain an understanding of the company policies and learn how their specific job fits into the big picture. Employee orientation usually involves filling out employee paperwork such as I-9 and 401(k) program forms.

The goals of an orientation are as follows:

1. To reduce start-up costs. If an orientation is done right, it can help get the employee up to speed on various policies and procedures, so the employee can start working right away. It can also be a way to ensure all hiring paperwork is filled out correctly, so the employee is paid on time.

2. To reduce anxiety. Starting a new job can be stressful. One goal of an orientation is to reduce the stress and anxiety people feel when going into an unknown situation.

3. To reduce employee turnover. Employee turnover tends to be higher when employees don’t feel valued or are not given the tools to perform. An employee orientation can show that the organization values the employee and provides tools necessary for a successful entry.

4. To save time for the supervisor and coworkers. A well-done orientation makes for a better prepared employee, which means less time having to teach the employee.

5. To set expectations and attitudes. If employees know from the start what the expectations are, they tend to perform better. Likewise, if employees learn the values and attitudes of the organization from the beginning, there is a higher chance of a successful tenure at the company.

Some companies use employee orientation as a way to introduce employees not only to the company policies and procedures but also to the staff. For an example of an orientation schedule for the day, see below figure.

Some companies have very specific orientations, with a variety of people providing information to the new hires. This can create a welcoming environment, besides giving the employee the information they need. This is an example of one such orientation.

Source: Sample schedule courtesy of Louis Stokes Cleveland VA Medical Center, http://www.cleveland.va.gov/docs/NEOSchedule.pdf (accessed September 2, 2011).

Human Resource Recall

Have you ever participated in an orientation? What was it like? What components did it have?

In-House Training

In-house training programs are learning opportunities developed by the organization in which they are used. This is usually the second step in the training process and often is ongoing. In-house training programs can be training related to a specific job, such as how to use a particular kind of software. In a manufacturing setting, in-house training might include an employee learning how to use a particular kind of machinery.

Many companies provide in-house training on various HR topics as well, meaning it doesn’t always have to relate to a specific job. Some examples of in-house training include the following:

- Ethics training

- Sexual harassment training

- Multicultural training

- Communication training

- Management training

- Customer service training

- Operation of special equipment

- Training to do the job itself

- Basic skills training

As you can tell by the list of topics, HR might sometimes create and deliver this training, but often a supervisor or manager delivers the training.

Mentoring

After the employee has completed orientation and in-house training, companies see the value in offering mentoring opportunities as the next step in training. Sometimes a mentor may be assigned during in-house training. A mentor is a trusted, experienced advisor who has direct investment in the development of an employee. A mentor may be a supervisor, but often a mentor is a colleague who has the experience and personality to help guide someone through processes. While mentoring may occur informally, a mentorship program can help ensure the new employee not only feels welcomed but is paired up with someone who already knows the ropes and can help guide the new employee through any on-the-job challenges.

To work effectively, a mentoring program should become part of the company culture; in other words, new mentors should receive in-house training to be a mentor. Mentors are selected based on experience, willingness, and personality. IBM’s Integrated Supply Chain Division, for example, has successfully implemented a mentorship program. The company’s division boasts 19,000 employees and half of IBM’s revenues, making management of a mentorship program challenging. However, potential mentors are trained and put into a database where new employees can search attributes and strengths of mentors and choose the person who closely meets their needs. Then the mentor and mentee work together in development of the new employee. “We view this as a best practice,” says Patricia Lewis-Burton, vice president of human resources, Integrated Supply Chain Division. “We view it as something that is not left to human resources alone. In fact, the program is imbedded in the way our group does business” (Witt, 2005).

In-house training occurs when someone from within the company is delivering the training information, while external training is usually delivered by someone who does not work for the company and is not physically on-site.

Tadas1980 – FL Technics Training – CC BY-SA 3.0.

Some companies use short-term mentorship programs because they find employees training other employees to be valuable for all involved. Starbucks, for example, utilizes this approach. When it opens a new store in a new market, a team of experienced store managers and baristas are sent from existing stores to the new stores to lead the store-opening efforts, including training of new employees.

External Training

External training includes any type of training that is not performed in-house. This is usually the last step in training, and it can be ongoing. It can include sending an employee to a seminar to help further develop leadership skills or helping pay tuition for an employee who wants to take a marketing class. To be a Ford automotive technician, for example, you must attend the Ford ASSET Program, which is a partnership between Ford Motor Company, Ford dealers, and select technical schools^1.

How Would You Handle This?

To Train or Not to Train

Towanda Michaels is the human resource manager at a medium-size pet supply wholesaler. Casey Cleps is a salesperson at the organization and an invaluable member of the team. Last year, his sales brought in about 20 percent of the company revenue alone. Everybody likes Casey: he is friendly, competent, and professional.

Training is an important part of the company, and an e-mail was sent last month that said if employees do not complete the required safety training by July 1, they would be let go.

It is July 15, and it has just come to Towanda’s attention that Casey has not completed the online safety training that is required for his job. When she approaches him about it, he says, “I am the best salesperson here; I can’t waste time doing training. I already know all the safety rules anyway.”

Would you let Casey go, as stated in the e-mail? How would you handle this?

- Employee training and development is the framework for helping employees develop their personal and organizational skills, knowledge, and abilities. Training is important to employee retention.

- There are four steps in training that should occur. Employee orientation has the purpose of welcoming new employees into the organization. An effective employee orientation can help reduce start-up costs, reduce anxiety for the employee, reduce turnover, save time for the supervisor and colleagues, and set expectations and attitudes.

- An in-house training program is any type of program in which the training is delivered by someone who works for the company. This could include management or HR. Examples might include sexual harassment training or ethics training. In-house training can also include components specific to a job, such as how to use a specific kind of software. In-house training is normally done as a second and ongoing step in employee development.

- A mentor form of training pairs a new employee with a seasoned employee. This is usually the third step in employee training. A mentor program for training should include a formalized program and process.

- External training is any type of training not performed in-house; part of the last training step, external training can also be ongoing. It can include sending employees to conferences or seminars for leadership development or even paying tuition for a class they want to take.

Exercises

1. Why do you think some companies do not follow the four training steps? What are the advantages of doing so?

2. What qualities do you think a mentor should have? List at least five.

3. Have you ever worked with a mentor in a job, at school, or in extracurricular activities? Describe your experience.

1“Automotive Technology/Ford ASSET Course,” Sheridan Technical Center, accessed July 29, 2011, http://www.sheridantechnical.com/Default.aspx?tabid=692.

References

Branham, L., The 7 Hidden Reasons Why Employees Leave (New York: American Management Association, 2005), 112–5.

Thompson, A., “Starbucks Corporation,” July 24, 2011, accessed July 29, 2011, http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html.

Witt, B., “Serious Leadership: IBM Builds a Successful Mentoring Program,” Material Handling Management, December 1, 2005, accessed July 25, 2010, http://mhmonline.com/workforce-solutions/mhm_imp_4483/.

21

Types of Training

Learning Objective

1. Be able to explain and give examples of the types of training that can be offered within an organization.

There are a number of different types of training we can use to engage an employee. These types are usually used in all steps in a training process (orientation, in-house, mentorship, and external training). The training utilized depends on the amount of resources available for training, the type of company, and the priority the company places on training. Companies such as The Cheesecake Factory, a family restaurant, make training a high priority. The company spends an average of $2,000 per hourly employee. This includes everyone from the dishwasher and managers to the servers. For The Cheesecake Factory, this expenditure has paid off. They measure the effectiveness of its training by looking at turnover, which is 15 percent below the industry average (Ruiz, 2006). Servers make up 40 percent of the workforce and spend two weeks training to obtain certification. Thirty days later, they receive follow-up classes, and when the menu changes, they receive additional training (Ruiz, 2006). Let’s take a look at some of the training we can offer our employees.

As you will see from the types of training below, no one type would be enough for the jobs we do. Most HR managers use a variety of these types of training to develop a holistic employee.

Technical or Technology Training

Depending on the type of job, technical training will be required. Technical training is a type of training meant to teach the new employee the technological aspects of the job. In a retail environment, technical training might include teaching someone how to use the computer system to ring up customers. In a sales position, it might include showing someone how to use the customer relationship management (CRM) system to find new prospects. In a consulting business, technical training might be used so the consultant knows how to use the system to input the number of hours that should be charged to a client. In a restaurant, the server needs to be trained on how to use the system to process orders. Let’s assume your company has decided to switch to the newest version of Microsoft Office. This might require some technical training of the entire company to ensure everyone uses the technology effectively. Technical training is often performed in-house, but it can also be administrered externally.

Quality Training

In a production-focused business, quality training is extremely important. Quality training refers to familiarizing employees with the means of preventing, detecting, and eliminating nonquality items, usually in an organization that produces a product. In a world where quality can set your business apart from competitors, this type of training provides employees with the knowledge to recognize products that are not up to quality standards and teaches them what to do in this scenario. Numerous organizations, such as the International Organization for Standardization (ISO), measure quality based on a number of metrics. This organization provides the stamp of quality approval for companies producing tangible products. ISO has developed quality standards for almost every field imaginable, not only considering product quality but also certifying companies in environmental management quality. ISO9000 is the set of standards for quality management, while ISO14000 is the set of standards for environmental management. ISO has developed 18,000 standards over the last 60 years^1. With the increase in globalization, these international quality standards are more important than ever for business development. Some companies, like 3M (QAI, 2011), choose to offer ISO training as external online training, employing companies such as QAI to deliver the training both online and in classrooms to employees.

Training employees on quality standards, including ISO standards, can give them a competitive advantage. It can result in cost savings in production as well as provide an edge in marketing of the quality-controlled products. Some quality training can happen in-house, but organizations such as ISO also perform external training.

Skills Training

Skills training, the third type of training, includes proficiencies needed to actually perform the job. For example, an administrative assistant might be trained in how to answer the phone, while a salesperson at Best Buy might be trained in assessment of customer needs and on how to offer the customer information to make a buying decision. Think of skills training as the things you actually need to know to perform your job. A cashier needs to know not only the technology to ring someone up but what to do if something is priced wrong. Most of the time, skills training is given in-house and can include the use of a mentor. An example of a type of skills training is from AT&T and Apple (Whitney, 2011), who in summer 2011 asked their managers to accelerate retail employee training on the iPhone 5, which was released to market in the fall.

Continuing Education Matters

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=177

A small business owner explains the advantages of offering informal skills training about new products.

Soft Skills Training

Our fourth type of training is called soft skills training. Soft skills refer to personality traits, social graces, communication, and personal habits that are used to characterize relationships with other people. Soft skills might include how to answer the phone or how to be friendly and welcoming to customers. It could include sexual harassment training and ethics training. In some jobs, necessary soft skills might include how to motivate others, maintain small talk, and establish rapport.

In a retail or restaurant environment, soft skills are used in every interaction with customers and are a key component of the customer experience. In fact, according to a Computerworld magazine survey, executives say there is an increasing need for people who have not only the skills and technical skills to do a job but also the necessary soft skills, such as strong listening and communication abilities (Hoffman, 2007). Many problems in organizations are due to a lack of soft skills, or interpersonal skills, not by problems with the business itself. As a result, HR and managers should work together to strengthen these employee skills. Soft skills training can be administered either in-house or externally.

Professional Training and Legal Training

In some jobs, professional training must be done on an ongoing basis. Professional training is a type of training required to be up to date in one’s own professional field. For example, tax laws change often, and as a result, an accountant for H&R Block must receive yearly professional training on new tax codes (Silkey, 2010). Lawyers need professional training as laws change. A personal fitness trainer will undergo yearly certifications to stay up to date in new fitness and nutrition information.

Some organizations have paid a high cost for not properly training their employees on the laws relating to their industry. In 2011, Massachusetts General Hospital paid over $1 million in fines related to privacy policies that were not followed (Donnelly, 2011). As a result, the organization has agreed to develop training for workers on medical privacy. The fines could have been prevented if the organization had provided the proper training to begin with. Other types of legal training might include sexual harassment law training and discrimination law training.

Professional training is normally given externally and is usually required for specific professions in which updates occur often, as in the accounting industry.

Wikimedia Commons – public domain.

Team Training

Do you know the exercise in which a person is asked to close his or her eyes and fall back, and then supposedly the team members will catch that person? As a team-building exercise (and a scary one at that), this is an example of team training. The goal of team training is to develop cohesiveness among team members, allowing them to get to know each other and facilitate relationship building. We can define team training as a process that empowers teams to improve decision making, problem solving, and team-development skills to achieve business results. Often this type of training can occur after an organization has been restructured and new people are working together or perhaps after a merger or acquisition. Some reasons for team training include the following:

- Improving communication

- Making the workplace more enjoyable

- Motivating a team

- Getting to know each other

- Getting everyone “onto the same page,” including goal setting

- Teaching the team self-regulation strategies

- Helping participants to learn more about themselves (strengths and weaknesses)

- Identifying and utilizing the strengths of team members

- Improving team productivity

- Practicing effective collaboration with team members

Team training can be administered either in-house or externally. Ironically, through the use of technology, team training no longer requires people to even be in the same room.

Human Resource Recall

What kind of team training have you participated in? What was it like? Do you think it accomplished what it was supposed to accomplish?

Managerial Training

After someone has spent time with an organization, they might be identified as a candidate for promotion. When this occurs, managerial training would occur. Topics might include those from our soft skills section, such as how to motivate and delegate, while others may be technical in nature. For example, if management uses a particular computer system for scheduling, the manager candidate might be technically trained. Some managerial training might be performed in-house while other training, such as leadership skills, might be performed externally.

For example, Mastek, a global IT solutions and services provider, provides a program called “One Skill a Month,” which enables managers to learn skills such as delegation, coaching, and giving feedback. The average number of total training days at Mastek is 7.8 per employee^2 and includes managerial topics and soft skills topics such as e-mail etiquette. The goal of its training programs is to increase productivity, one of the organization’s core values.

Safety Training

Safety training is a type of training that occurs to ensure employees are protected from injuries caused by work-related accidents. Safety training is especially important for organizations that use chemicals or other types of hazardous materials in their production. Safety training can also include evacuation plans, fire drills, and workplace violence procedures. Safety training can also include the following:

- Eye safety

- First aid

- Food service safety

- Hearing protection

- Asbestos

- Construction safety

- Hazmat safety

The Occupational Safety and Health Administration, or OSHA, is the main federal agency charged with enforcement of safety and health regulation in the United States. OSHA provides external training to companies on OSHA standards. Sometimes in-house training will also cover safety training.

Starbucks Training Video

This is a short video Starbucks uses to train new employees on customer service.

Please view this video at http://www.youtube.com/watch?v=OAmftgYEWqU.

Key Takeaways

- There are several types of training we can provide for employees. In all situations, a variety of training types will be used, depending on the type of job.

- Technical training addresses software or other programs that employees use while working for the organization.

- Quality training is a type of training that familiarizes all employees with the means to produce a good-quality product. The ISO sets the standard on quality for most production and environmental situations. ISO training can be done in-house or externally.

- Skills training focuses on the skills that the employee actually needs to know to perform their job. A mentor can help with this kind of training.

- Soft skills are those that do not relate directly to our job but are important. Soft skills training may train someone on how to better communicate and negotiate or provide good customer service.

- Professional training is normally given externally and might be obtaining certification or specific information needed about a profession to perform a job. For example, tax accountants need to be up to date on tax laws; this type of training is often external.

- Team training is a process that empowers teams to improve decision making, problem solving, and team-development skills. Team training can help improve communication and result in more productive businesses.

- To get someone ready to take on a management role, managerial training might be given.

- Safety training is important to make sure an organization is meeting OSHA standards. Safety training can also include disaster planning.

Exercises

1. Which type of training do you think is most important for an administrative assistant? What about for a restaurant server? Explain your answer.

2. Research OSHA. What are some of the new standards and laws it has recently developed? Outline a training plan for the new standards.

1“The ISO Story,” International Organization for Standards, accessed July 26, 2010, http://www.iso.org/iso/about/the_iso_story/iso_story_early_years.htm.

2Mastek website, accessed July 30, 2011, http://www.mastek.com/careers/learning-development.html.

References

Donnelly, J., “Mass. General to Pay $1M to Settle Privacy Claims,” Boston Business Journal, February 24, 2011, accessed February 26, 2011, http://www.bizjournals.com/boston/news/2011/02/24/mass-general-to-pay-1m-to-settle.html.

Hoffman, T., “Nine Nontechie Skills That Hiring Managers Wish You Had,” Computerworld, November 12, 2007, accessed July 26, 2010, http://www.computerworld.com/s/article/305966/Are_You_the_Complete_Package_.

QAI website, accessed July 30, 2011, http://www.trainingforquality.com/Content.aspx?id=26.

Ruiz, G., “Cheesecake Factory Cooks Up a Rigorous Employee Training Program,” Workforce Management, April 24, 2006, accessed July 25, 2010, http://www.workforce.com/section/11/feature/24/35/18/.

Silkey, J., “Tax Preparer Certifications,” Suite 101, January 28, 2010, accessed July 26, 2010, http://personal-tax-planning.suite101.com/article.cfm/tax-preparer-certifications.

Whitney, L., “Apple, AT&T Reportedly Prepping Staff for iPhone 5 Launch,” CNET, July 26, 2011, accessed July 29, 2011, http://news.cnet.com/8301-13579_3-20083435-37/apple-at-t-reportedly-prepping-staff-for-iphone-5-launch/.

22

Training Delivery Methods

Learning Objective

1. Explain the types of training delivery methods.

Depending on the type of training occurring, you may choose one delivery method over another. This section discusses the types of delivery methods we can use to execute the types of training. Keep in mind, however, that most good training programs will use a variety of delivery methods.

Wendy’s Grill Training, circa 1989

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=181

This excellent training video was used at Wendy’s to teach employees how to grill the perfect burger. Although the video is over twenty years old, the concepts used in it are still true today.

On-the-Job Coaching Training Delivery

On-the-job coaching is one way to facilitate employee skills training. On-the-job coaching refers to an approved person training an employee on the skills necessary to complete tasks. A manager or someone with experience shows the employee how to perform the actual job. The selection of an on-the-job coach can be done in a variety of ways, but usually the coach is selected based on personality, skills, and knowledge. This type of skills training is normally facilitated in-house. The disadvantage of this training revolves around the person delivering the training. If he or she is not a good communicator, the training may not work. Likewise, if this person has “other things to do,” he or she may not spend as much time required to train the person and provide guidance. In this situation, training can frustrate the new employee and may result in turnover.

On-the-job coaching is similar to mentoring. Think of on-the-job coaching as more skills-based training, while mentoring is usually a training delivery method that is more long term and goes beyond just showing the employee skills to do the job.

Helen Beatham – Digital Enviornment – CC BY-NC-ND 2.0.

Mentoring and Coaching Training Delivery

Mentoring is also a type of training delivery. A mentor is a trusted, experienced advisor who has direct investment in the development of an employee. Mentoring is a process by which an employee can be trained and developed by an experienced person. Normally, mentoring is used as a continuing method to train and develop an employee. One disadvantage of this type of training is possible communication style and personality conflict. It can also create overdependence in the mentee or micromanagement by the mentor. This is more different than on-the-job coaching, which tends to be short term and focuses on the skills needed to perform a particular job.

Brown Bag Lunch Training Delivery

Brown bag lunches are a training delivery method meant to create an informal atmosphere. As the name suggests, brown bag lunch training is one in which the training occurs during lunchtime, employees bring their food, and someone presents training information to them. The trainer could be HR or management or even another employee showing a new technical skill. Brown bag lunches can also be an effective way to perform team training, as it brings people together in a more relaxed atmosphere. Some companies offer brown bag lunch training for personal development as well. For example, HR might want to bring in a specialist on 401(k) plans, or perhaps an employee provides a slide presentation on a trip he or she has taken, discussing the things learned on the trip. One disadvantage to this type of training can be low attendance and garnering enough interest from employees who may not want to “work” during lunch breaks. There can also be inconsistency in messages if training is delivered and not everyone is present to hear the message.

Human Resource Recall

What types of brown bag lunch training would employees be most willing to attend? Do you think this type of training should be required?

Web-Based Training Delivery

Web-based training delivery has a number of names. It could be called e-learning or Internet-based, computer-based, or technology-based learning. No matter what it is called, any web-based training involves the use of technology to facilitate training. There are two types of web-based learning. First, synchronous learning uses instructor-led facilitation. Asynchronous learning is self-directed, and there is no instructor facilitating the course. There are several advantages to web-based training. First, it is available on demand, does not require travel, and can be cost efficient. However, disadvantages might include an impersonal aspect to the training and limited bandwidth or technology capabilities^1.

Web-based training delivery lends itself well to certain training topics. For example, this might be an appropriate delivery method for safety training, technical training, quality training, and professional training. However, for some training, such as soft-skills training, job skills training, managerial training, and team training, another more personalized method may be better for delivery. However, there are many different platforms that lend themselves to an interactive approach to training, such as Sun Microsystems’ Social Learning eXchange (SLX) training system, which has real-time video and recording capabilities. Hundreds of platforms are available to facilitate web-based training. DigitalChalk, for example, allows for both synchronous and asynchronous training and allows the instructor or human relations manager to track training progress and completion (DigitalChalk, 2010). Some companies use SharePoint, an intranet platform, to store training videos and materials (Microsoft SharePoint, 2010). Blackboard and Angel (used primarily by higher education institutions) allows human resource managers to create training modules, which can be moderated by a facilitator or managed in a self-paced format. In any of the platforms available, media such as video and podcasts can be included within the training.

Considerations for selecting a web-based platform include the following:

- Is there a one-time fee or a per-user fee?

- Do the majority of your employees use a Mac or a PC, and how does the platform work with both systems?

- Is there enough bandwidth in your organization to support this type of platform?

- Is the platform flexible enough to meet your training needs?

- Does the software allow for collaboration and multimedia?

- Is there training for the trainer in adoption of this system? Is technical support offered?

Job Shadowing Training Delivery

Job shadowing is a training delivery method that places an employee who already has the skills with another employee who wants to develop those skills. Apprenticeships use job shadowing as one type of training method. For example, an apprentice electrician would shadow and watch the journeyman electrician perform the skills and tasks and learn by watching. Eventually, the apprentice would be able to learn the skills to do the job alone. The downside to this type of training is the possibility that the person job shadowing may learn “bad habits” or shortcuts to performing tasks that may not be beneficial to the organization.

Fortune 500 Focus

It takes a lot of training for the Walt Disney Company to produce the best Mickey Mouse, Snow White, Aladdin, or Peter Pan. In Orlando at Disneyworld, most of this training takes place at Disney University. Disney University provides training to its 42,000 cast members (this is what Disney calls employees) in areas such as culinary arts, computer applications, and specific job components. Once hired, all cast members go through a two-day Disney training program called Traditions, where they learn the basics of being a good cast member and the history of the company. For all practical purposes, Traditions is a new employee orientation.

Training doesn’t stop at orientation, though. While all positions receive extensive training, one of the most extensive trainings are especially for Disney characters, since their presence at the theme parks is a major part of the customer experience. To become a character cast member, a character performer audition is required. The auditions require dancing and acting, and once hired, the individual is given the job of several characters to play. After a two-week intensive training process on character history, personalities, and ability to sign the names of the characters (for the autograph books sold at the parks for kids), an exam is given. The exam tests competency in character understanding, and passing the exam is required to become hired (Hill, 2005).

While Disney University trains people for specific positions, it also offers an array of continuing development courses called Disney Development Connection. Disney says in 2010, more than 3,254,596 hours were spent training a variety of employees^2, from characters to management. The training doesn’t stop at in-house training, either. Disney offers tuition reimbursement up to $700 per credit and pays for 100 percent of books and $100 per course for cost of other materials. In 2010, Disney paid over $8 million in tuition expenses for cast members^2.

Disney consistently ranks in “America’s Most Admired Companies” by Fortune Magazine, and its excellent training could be one of the many reasons.

Job Swapping Training Delivery

Job swapping is a method for training in which two employees agree to change jobs for a period of time. Of course, with this training delivery method, other training would be necessary to ensure the employee learns the skills needed to perform the skills of the new job. Job swap options can be motivational to employees by providing a change of scenery. It can be great for the organization as well to cross-train employees in different types of jobs. However, the time spent learning can result in unproductive time and lost revenue.

Vestibule training is also known as “near site” training and can work great for many types of training needs, such as team training and technical training.

Wikimedia Commons – CC BY-SA 3.0.

Vestibule Training Delivery

In vestibule training, training is performed near the worksite in conference rooms, lecture rooms, and classrooms. This might be an appropriate method to deliver orientations and some skills-based training. For example, to become a journeyman electrician, an apprentice performs job shadowing, on-the-job training, and vestibule training to learn the law and codes related to electricity installation. During the busy holiday season, Macy’s uses vestibule training to teach new hires how to use the cash register system and provides skills training on how to provide great customer service (Macy’s, 2010).

Many organizations use vestibule training for technical training, safety training, professional training, and quality training. It can also be appropriate for managerial training, soft skills training, and team training. As you can tell, this delivery method, like web-based training delivery, is quite versatile. For some jobs or training topics, this may take too much time away from performing the actual “job,” which can result in lost productivity.

International Assignment Training

Since we are working within a global economy, it might be necessary to provide training to employees who are moving overseas or working overseas. Up to 40 percent of international assignments are terminated early because of a lack of international training (Sullivan & Tu, 2011). Ensuring success overseas is reliant upon the local employee’s learning how to navigate in the new country. The following topics might be included in this type of training:

1. Cultural differences and similarities

2. Insight and daily living in the country

3. Social norms and etiquette

4. Communication training, such as language skills

This training is best delivered by a professional in the region or area in which the employee will be working. We discuss this topic in more detail in Chapter 14 “International HRM”.

Key Takeaways

- Training delivery methods are important to consider, depending on the type of training that needs to be performed.

- Most organizations do not use only one type of training delivery method; a combination of many methods will be used.

- On-the-job coaching delivery method is a training delivery method in which an employee is assigned to a more experienced employee or manager to learn the skills needed for the job. This is similar to the mentor training delivery method, except a mentor training method is less about skills training and more about ongoing employee development.

- Brown bag lunch training delivery is normally informal and can involve personal development as well as specific job-related skills.

- Web-based training is any type of training that is delivered using technology.

- There are numerous platforms that can be used for web-based training and considerations, such as cost, when selecting a platform for use.

- A synchronous training method is used for web-based training and refers to delivery that is led by a facilitator. An asynchronous training method is one that is self-directed.

- Job shadowing is a delivery method consisting of on-the-job training and the employee’s learning skills by watching someone more experienced.

- To motivate employees and allow them to develop new skills, job swapping training delivery may be used. This occurs when two people change jobs for a set period of time to learn new skills. With this method, it is likely that other methods will also be used, too.

- Vestibule training delivery is also known as “near site” training. It normally happens in a classroom, conference room, or lecture room and works well to deliver orientations and some skills-based training. Many organizations also use vestibule training for technical training, safety training, professional training, and quality training.

- Since many companies operate overseas, providing training to those employees with international assignments can better prepare them for living and working abroad.

Exercises

1. Do an Internet search on web-based training. Discuss two of the platforms you found. What are the features and benefits?

2. Which training delivery method do you think you personally would prefer in a job and why?

3. What do you see as advantages and disadvantages to each type of training method?

1“Advantages and Disadvantages,” Web Based Training Information Center, accessed July 27, 2010, http://www.webbasedtraining.com/primer_advdis.aspx.

2“Training and Development,” Disney, accessed July 30, 2011, http://corporate.disney.go.com/citizenship2010/disneyworkplaces/overview/traininganddevelopment/.

References

DigitalChalk website, accessed August 12, 2010, http://www.digitalchalk.com/.

Hill, J., “Blood, Sweat, and Fur,” Jim Hill Media, May 2005, accessed July 30, 2011, http://jimhillmedia.com/guest_writers1/b/rob_bloom/archive/2005/05/03/1703.aspx.

Macy’s website, accessed July 27, 2010, http://www.macysjobs.com/about/.

Microsoft’s SharePoint website, accessed August 12, 2010, http://sharepoint.microsoft.com/en-us/Pages/default.aspx.

Sullivan, S. E. and Howard Tu, “Preparing Yourself for an International Assignment,” Bnet, accessed September 15, 2011, http://findarticles.com/p/articles/mi_m1038/is_n1_v37/ai_14922926/.

23

Designing a Training Program

Learning Objectives

1. Be able to design a training program framework.

2. Understand the uses and applications of a career development program.

The next step in the training process is to create a training framework that will help guide you as you set up a training program. Information on how to use the framework is included in this section.

Training Program Framework Development

When developing your training plan, there are a number of considerations. Training is something that should be planned and developed in advance.

Figure Training Program Development Model

The considerations for developing a training program are as follows:

1. Needs assessment and learning objectives. This part of the framework development asks you to consider what kind of training is needed in your organization. Once you have determined the training needed, you can set learning objectives to measure at the end of the training.

2. Consideration of learning styles. Making sure to teach to a variety of learning styles is important to development of training programs.

3. Delivery mode. What is the best way to get your message across? Is web-based training more appropriate, or should mentoring be used? Can vestibule training be used for a portion of the training while job shadowing be used for some of the training, too? Most training programs will include a variety of delivery methods.

4. Budget. How much money do you have to spend on this training?

5. Delivery style. Will the training be self-paced or instructor led? What kinds of discussions and interactivity can be developed in conjunction with this training?

6. Audience. Who will be part of this training? Do you have a mix of roles, such as accounting people and marketing people? What are the job responsibilities of these individuals, and how can you make the training relevant to their individual jobs?

7. Content. What needs to be taught? How will you sequence the information?

8. Timelines. How long will it take to develop the training? Is there a deadline for training to be completed?

9. Communication. How will employees know the training is available to them?

10. Measuring effectiveness of training. How will you know if your training worked? What ways will you use to measure this?

Human Resource Recall

Can you think of a time where you received training, but the facilitator did not connect with the audience? Does that ever happen in any of your classes (of course not this one, though)?

Needs Assessment

The first step in developing a training program is to determine what the organization needs in terms of training. There are three levels of training needs assessment: organizational assessment, occupational (task) assessment, and individual assessment:

1. Organizational assessment. In this type of needs assessment, we can determine the skills, knowledge, and abilities a company needs to meet its strategic objectives. This type of assessment considers things such as changing demographics and technological trends. Overall, this type of assessment looks at how the organization as a whole can handle its weaknesses while promoting strengths.

2. Occupational (task) assessment. This type of assessment looks at the specific tasks, skills knowledge, and abilities required to do jobs within the organization.

3. Individual assessment. An individual assessment looks at the performance of an individual employee and determines what training should be accomplished for that individual.

We can apply each of these to our training plan. First, to perform an organizational assessment, we can look at future trends and our overall company’s strategic plan to determine training needs. We can also see how jobs and industries are changing, and knowing this, we can better determine the occupational and individual assessments.

Researching training needs can be done through a variety of ways. One option is to use an online tool such as SurveyMonkey to poll employees on what types of training they would like to see offered.

As you review performance evaluations turned in by your managers, you may see a pattern developing showing that employees are not meeting expectations. As a result, this may provide data as to where your training is lacking.

There are also types of training that will likely be required for a job, such as technical training, safety training, quality training, and professional training. Each of these should be viewed as separate training programs, requiring an individual framework for each type of training. For example, an employee orientation framework will look entirely different from an in-house technical training framework.

Training must be tied to job expectations. Any and all training developed should transfer directly to the skills of that particular employee. Reviewing the HR strategic plan and various job analyses may help you see what kind of training should be developed for specific job titles in your organization.

Learning Objectives

After you have determined what type of training should occur, learning objectives for the training should be set. A learning objective is what you want the learner to be able to do, explain, or demonstrate at the end of the training period. Good learning objectives are performance based and clear, and the end result of the learning objective can be observable or measured in some way. Examples of learning objectives might include the following:

1. Be able to explain the company policy on sexual harassment and give examples of sexual harassment.

2. Be able to show the proper way to take a customer’s order.

3. Perform a variety of customer needs analyses using company software.

4. Understand and utilize the new expense-tracking software.

5. Explain the safety procedure in handling chemicals.

6. Be able to explain the types of communication styles and strategies to effectively deal with each style.

7. Demonstrate ethics when handling customer complaints.

8. Be able to effectively delegate to employees.

Once we have set our learning objectives, we can utilize information on learning styles to then determine the best delivery mode for our training.

Learning Styles

Understanding learning styles is an important component to any training program. For our purposes, we will utilize a widely accepted learning style model. Recent research has shown that classifying people into learning styles may not be the best way to determine a style, and most people have a different style depending on the information being taught. In a study by Pashler et al., the authors look at aptitude and personality as key traits when learning, as opposed to classifying people into categories of learning styles. Bearing this in mind, we will address a common approach to learning styles next.

An effective trainer tries to develop training to meet the three different learning styles^1:

1. Visual learner. A visual learner usually has a clear “picture” of an experience. A visual learner often says things such as “I can see what you are saying” or “This looks good.” A visual learner is best reached using graphics, pictures, and figures.

2. Auditory learner. An auditory learner learns by sound. An auditory learner might say, “If I hear you right” or “What do you hear about this situation?” The auditory learner will learn by listening to a lecture or to someone explaining how to do something.

3. Kinesthetic learner. A kinesthetic learner learns by developing feelings toward an experience. These types of learners tend to learn by doing rather than listening or seeing someone else do it. This type of learner will often say things such as “This feels right.”

Most individuals use more than one type of learning style, depending on what kinds of information they are processing. For example, in class you might be a visual learner, but when learning how to change a tire, you might be a kinesthetic learner.

Delivery Mode

Depending on the type of training that needs to be delivered, you will likely choose a different mode to deliver the training. An orientation might lend itself best to vestibule training, while sexual harassment training may be better for web-based training. When choosing a delivery mode, it is important to consider the audience and budget constrictions. For example, Oakwood Worldwide, a provider of temporary housing, recently won the Top 125 Training Award for its training and development programs^2. It offers in-class and online classes for all associates and constantly add to its course catalog. This is a major recruitment as well as retention tool for its employees. In fact, the company credits this program for retaining 25 percent of its workforce for ten years or more. Table “Types of Training and Delivery” looks at each of the types of training and suggests appropriate options for delivery modes.

Table Types of Training and Delivery

Delivery Method

Type of Training Suggested

On-the-job coaching

Technical training

Skills training

Managerial training

Safety training

Mentor

Technical training

Skills training

Managerial training

Safety training

Brown bag lunch

Quality training

Soft skills training

Professional training

Safety training

Web-based

Technical training

Quality training

Skills training

Soft skills training

Professional training

Team training

Managerial training

Safety training

Job shadowing

Technical training

Quality training

Skills training

Safety training

Job swapping

Technical training

Quality training

Skills training

Professional training

Team training

Managerial training

Safety training

Vestibule training

Technical training

Quality training

Skills training

Soft skills training

Professional training

Team training

Managerial training

Safety training

Budget

How much money do you think the training will cost? The type of training performed will depend greatly on the budget. If you decide that web-based training is the right delivery mode, but you don’t have the budget to pay the user fee for the platform, this wouldn’t be the best option. Besides the actual cost of training, another cost consideration is people’s time. If employees are in training for two hours, what is the cost to the organization while they are not able to perform their job? A spreadsheet should be developed that lists the actual cost for materials, snacks, and other direct costs, but also the indirect costs, such as people’s time.

Delivery Style

Taking into consideration the delivery method, what is the best style to deliver this training? It’s also important to keep in mind that most people don’t learn through “death by PowerPoint”; they learn in a variety of ways, such as auditory, kinesthetic, or visual. Considering this, what kinds of ice breakers, breakout discussions, and activities can you incorporate to make the training as interactive as possible? Role plays and other games can make the training fun for employees. Many trainers implement online videos, podcasts, and other interactive media in their training sessions. This ensures different learning styles are met and also makes the training more interesting.

Audience

Considering your audience is an important aspect to training. How long have they been with the organization, or are they new employees? What departments do they work in? Knowing the answers to these questions can help you develop a relevant delivery style that makes for better training. For example, if you know that all the people attending the training are from the accounting department, examples you provide in the training can be focused on this type of job. If you have a mixed group, examples and discussions can touch on a variety of disciplines.

Content Development

The content you want to deliver is perhaps one of the most important parts in training and one of the most time-consuming to develop. Development of learning objectives or those things you want your learners to know after the training makes for a more focused training. Think of learning objectives as goals—what should someone know after completing this training? Here are some sample learning objectives:

1. Be able to define and explain the handling of hazardous materials in the workplace.

2. Be able to utilize the team decision process model.

3. Understand the definition of sexual harassment and be able to recognize sexual harassment in the workplace.

4. Understand and be able to explain the company policies and structure.

After you have developed the objectives and goals, you can begin to develop the content of the training. Consideration of the learning methods you will use, such as discussion and role playing, will be outlined in your content area.

Development of content usually requires a development of learning objectives and then a brief outline of the major topics you wish to cover. With that outline, you can “fill in” the major topics with information. Based on this information, you can develop modules or PowerPoint slides, activities, discussion questions, and other learning techniques.

Timelines

For some types of training, time lines may be required to ensure the training has been done. This is often the case for safety training; usually the training should be done before the employee starts. In other words, in what time frame should an employee complete the training?

Another consideration regarding time lines is how much time you think you need to give the training. Perhaps one hour will be enough, but sometimes, training may take a day or even a week. After you have developed your training content, you will likely have a good idea as to how long it will take to deliver it. Consider the fact that most people do not have a lot of time for training and keep the training time realistic and concise.

From a long-term approach, it may not be cost effective to offer an orientation each time someone new is hired. One consideration might be to offer orientation training once per month so that all employees hired within that month are trained at the same time.

Development of a dependable schedule for training might be ideal, as in the following example:

1. Orientation is offered on the first Thursday of every month.

2. The second and third Tuesday will consist of vestibule training on management skills and communication.

3. Twice yearly, in August and March, safety and sexual harassment training will be given to meet the legal company requirements.

Developing a dependable training schedule allows for better communication to your staff, results in fewer communication issues surrounding training, and allows all employees to plan ahead to attend training.

Communication

Once you have developed your training, your next consideration is how you will communicate the available training to employees. In a situation such as an orientation, you will need to communicate to managers, staff, and anyone involved in the training the timing and confirm that it fits within their schedule. If it is an informal training, such as a brown bag lunch on 401(k) plans, this might involve determining the days and times that most people are in the office and might be able to participate. Because employees use Mondays and Fridays, respectively, to catch up and finish up work for the week, these days tend to be the worst for training.

Consider utilizing your company’s intranet, e-mail, and even old-fashioned posters to communicate the training. Many companies have Listservs that can relay the message to only certain groups, if need be.

Human Resource Recall

What can happen if training is not communicated to employees appropriately?

Measuring Effectiveness

After we have completed the training, we want to make sure our training objectives were met. One model to measure effectiveness of training is the Kirkpatrick model (Kirkpatrick, 2006), developed in the 1950s. His model has four levels:

1. Reaction: How did the participants react to the training program?

2. Learning: To what extent did participants improve knowledge and skills?

3. Behavior: Did behavior change as a result of the training?

4. Results: What benefits to the organization resulted from the training?

Each of Kirkpatrick’s levels can be assessed using a variety of methods. We will discuss those next.

Figure Kirkpatrick’s Four Levels of Training Evaluation

Review the performance of the employees who received the training, and if possible review the performance of those who did not receive the training. For example, in your orientation training, if one of the learning objectives was to be able to request time off using the company intranet, and several employees who attended the training come back and ask for clarification on how to perform this task, it may mean the training didn’t work as well as you might have thought. In this case, it is important to go back and review the learning objectives and content of your training to ensure it can be more effective in the future.

Many trainers also ask people to take informal, anonymous surveys after the training to gauge the training. These types of surveys can be developed quickly and easily through websites such as SurveyMonkey. Another option is to require a quiz at the end of the training to see how well the employees understand what you were trying to teach them. The quiz should be developed based on the learning objective you set for the training. For example, if a learning objective was to be able to follow OSHA standards, then a quiz might be developed specifically related to those standards. There are a number of online tools, some free, to develop quizzes and send them to people attending your training. For example, Wondershare QuizCreator offers a free trial and enables the manager to track who took the quiz and how well they did. Once developed by the trainer, the quiz can be e-mailed to each participant and the manager can see how each trainee did on the final quiz. After you see how participants do on the quiz, you can modify the training for next time to highlight areas where participants needed improvement.

It can be easy to forget about this step in the training process because usually we are so involved with the next task: we forget to ask questions about how something went and then take steps to improve it.

One way to improve effectiveness of a training program is to offer rewards when employees meet training goals. For example, if budget allows, a person might receive a pay increase or other reward for each level of training completed.

Once the training framework has been developed, the training content can be developed. The training plan serves as a starting point for training development.

Career Development Programs and Succession Planning

Another important aspect to training is career development programs. A career development program is a process developed to help people manage their career, learn new things, and take steps to improve personally and professionally. Think of it as a training program of sorts, but for individuals. Sometimes career development programs are called professional development plans.

Figure Sample Career Development Plan Developed by an Employee and Commented on by Her Manager

Today’s Date

February 15, 2012

Employee

Sammie Smith

Current job title

Clerk, Accounts Payable

Goals

- Develop management skills

- Learn accounting standards

- Promoted to Accounts Payable Manager

Estimated Costs

- Management training

- Peachtree accounting software Advanced training

- Earn AAAS online degree in accounting

- Take tax certification course

- Communications training

Completion Date

Spring of 2014

Manager Notes:

- In-house training offered yearly: “Reading Body Language,” and “Writing Development,” and “Running an Effective Meeting”

- External Training needed: Peachtree software, AAAS Degree, Tax certification Training Course

- Assign Sammie to Dorothy Redgur, the CFO for mentorship

- Next steps: Sammie should develop a timeline for when she plans to complete the seminars.

The budget allows us to pay up to $1,000 per year for external training for all employees. Talk with Sammie about how to receive reimbursement.

As you can see, the employee developed goals and made suggestions on the types of training that could help her meet her goals. Based on this data, the manager suggested in-house training and external training for her to reach her goals within the organization.

Career development programs are necessary in today’s organizations for a variety of reasons. First, with a maturing baby-boom population, newer employees must be trained to take those jobs once baby boomers retire. Second, if an employee knows a particular path to career development is in place, this can increase motivation. A career development plan usually includes a list of short- and long-term goals that employees have pertaining to their current and future jobs and a planned sequence of formal and informal training and experiences needed to help them reach the goals. As this chapter has discussed, the organization can and should be instrumental in defining what types of training, both in-house and external, can be used to help develop employees.

To help develop this type of program, managers can consider a few components (Heller, 2005):

1. Talk to employees. Although this may seem obvious, it doesn’t always happen. Talking with employees about their goals and what they hope to achieve can be a good first step in developing a formal career development program.

2. Create specific requirements for career development. Allow employees to see that if they do A, B, and C, they will be eligible for promotion. For example, to become a supervisor, maybe three years of experience, management training, and communication training are required. Perhaps an employee might be required to prove themselves in certain areas, such as “maintain and exceed sales quota for eight quarters” to be a sales manager. In other words, in career development there should be a clear process for the employees to develop themselves within the organization.

3. Use cross-training and job rotation. Cross-training is a method by which employees can gain management experience, even if for short periods of time. For example, when a manager is out of the office, putting an employee “in charge” can help the employee learn skills and abilities needed to perform that function appropriately. Through the use of job rotation, which involves a systematic movement of employees from job to job within an organization, employees can gain a variety of experiences to prepare them for upward movement in the organization.

4. Utilize mentors. Mentorship can be a great way for employees to understand what it takes to develop one’s career to the next level. A formal mentorship program in place with willing mentees can add value to your career development program.

Figure  Career Development Sample Process to Become an Accounts Payable Manager

There are many tools on the web, including templates to help employees develop their own career development plans. Many organizations, in fact, ask employees to develop their own plans and use those as a starting point for understanding long-term career goals. Then hopefully the organization can provide them with the opportunities to meet these career goals. In the late 1980s, many employees felt that career opportunities at their current organizations dwindled after seeing the downsizing that occurred. It gave employees the feeling that companies were not going to help develop them, unless they took the initiative to do so themselves. Unfortunately, this attitude means that workers will not wait for career opportunities within the company, unless a clear plan and guide is put into place by the company (Capelli, 2010). Here is an example of a process that can be used to put a career development program in place (Adolfo, 2010):

1. Meet individually with employees to identify their long-term career interests (this may be done by human resources or the direct manager).

2. Identify resources within the organization that can help employees achieve their goals. Create new opportunities for training if you see a gap in needs versus what is currently offered.

3. Prepare a plan for each employee, or ask them to prepare the plan.

4. Meet with the employee to discuss the plan.

5. During performance evaluations, revisit the plan and make changes as necessary.

Identifying and developing a planning process not only helps the employee but also can assist the managers in supporting employees in gaining new skills, adding value, and motivating employees.

Figure Career Development Planning Process

Key Takeaways

- There are a number of key considerations in developing a training program. Training should not be handled casually but instead developed specifically to meet the needs of the organization. This can be done by a needs assessment consisting of three levels: organizational, occupational, and individual assessments.

- The first consideration is the delivery mode; depending on the type of training and other factors, some modes might be better than others.

- Budget is a consideration in developing training. The cost of materials, but also the cost of time, should be considered.

- The delivery style must take into account people’s individual learning styles. The amount of lecture, discussion, role plays, and activities are considered part of delivery style.

- The audience for the training is an important aspect when developing training. This can allow the training to be better developed to meet the needs and the skills of a particular group of people.

- The content obviously is an important consideration. Learning objectives and goals for the training should be developed before content is developed.

- After content is developed, understanding the time constraints is an important aspect. Will the training take one hour or a day to deliver? What is the time line consideration in terms of when people should take the training?

- Letting people know when and where the training will take place is part of communication.

- The final aspect of developing a training framework is to consider how it will be measured. At the end, how will you know if the trainees learned what they needed to learn?

- A career development process can help retain good employees. It involves creating a specific program in which employee goals are identified and new training and opportunities are identified and created to help the employee in the career development process.

Exercises

1. Develop a rough draft of a training framework using Figure 8.8 for a job you find on Monster.com.

2. Write three learning objectives you think would be necessary when developing orientation training for a receptionist in an advertising firm.

3. Why is a career development plan important to develop personally, even if your company doesn’t have a formal plan in place? List at least three reasons and describe.

1“What’s YOUR Learning Style?” adapted from Instructor Magazine, University of South Dakota, August 1989, accessed July 28, 2010, http://people.usd.edu/~bwjames/tut/learning-style/.

2“Oakwood Worldwide Honored by Training Magazine for Fifth Consecutive Year Training also Presents Oakwood with Best Practice Award,” press release, February 25, 2011, Marketwire, accessed February 26, 2011, http://www.live-pr.com/en/oakwood-worldwide-honored-by-training-magazine-r1048761409.htm.

References

Adolfo, J. T., “The Career Development Plan: A Quick Guide for Managers and Supervisors,” n.d., National Career Development Association, accessed July 29, 2010, http://associationdatabase.com/aws/NCDA/pt/sd/news_article/6420/_PARENT/layout_details/false.

Capelli, P., “A Balanced Plan for Career Development,” n.d., Microsoft, accessed July 29, 2010, http://office.microsoft.com/en-us/word-help/a-balanced-plan-for-career-development-HA001126815.aspx.

Heller, M., “Six Tips for Effective Employee Development Programs,” CIO Magazine, June 15, 2005, accessed July 28, 2010, http://www.cio.com/article/29169/Six_Tips_for_Effective_Career_Development_Programs.

Kirkpatrick, D., Evaluating Training Programs, 3rd ed. (San Francisco: Berrett-Koehler, 2006).

Pashler, H., Mark McDaniel, Doug Rohrer, and Robert Bjork, “Learning Styles: Concepts and Evidence,” Psychological Science in the Public Interest 9, no. 3 (2008): 109–19, accessed February 26, 2011, http://www.psychologicalscience.org/journals/pspi/PSPI_9_3.pdf.

WonderShare QuizCreator, accessed July 29, 2010, http://www.sameshow.com/quiz-creator.html#172.

24

Cases and Problems

Chapter Summary

- Employee training and development is a necessity in today’s work environment. Training and development can lead to lower turnover and increased motivation.

- There are four basic steps to employee training: employee orientation, in-house training, mentoring, and external training.

- Different types of training can be delivered, each falling into the steps of employee training. These include technical or technology training, quality training, skills training, soft skills training, professional training, team training, managerial training, and safety training.

- Within the types of training, we need to determine which method is best for the actual delivery of training. Options include on-the-job training, mentor training, brown bag lunches, web-based training, job shadowing, job swapping, and vestibule training.

- Development of a training development framework is the first step in solidifying the training.

- Considerations and steps to developing the training framework include determining the training needs, delivery modes, budget, delivery style, audience, content, time lines, communication of the training, and measurement of the training.

- Career development programs can be an essential piece to the training puzzle. A comprehensive program or plan, either developed by employees or administered by HR, can help with motivation and fill the gap when people in the organization leave or retire. It can also be used as a motivational tool.

Chapter Case

New on the Job

JoAnn Michaels just started her job as human resources manager at In the Dog House, a retail chain specializing in dog apparel and accessories. She is a good friend of yours you met in college.

The organization has 35 stores with 250 employees in Washington, Idaho, and Oregon. As the chain has grown, the training programs have been conducted somewhat piecemeal. Upon visiting some of the stores in a three-week tour, JoAnn has realized that all the stores seem to have different ways of training their in-store employees.

When she digs further, she realizes even the corporate offices, which employ seventy-five people, have no formal training program. In the past, they have done informal and optional brown bag lunch training to keep employees up to date. As a result, JoAnn develops a survey using SurveyMonkey and sends it to all seventy-five corporate employees. She created a rating system, with 1 meaning strongly disagree and 5 meaning strongly agree. Employees were not required to answer all questions, hence the variation in the number of responses column. After this task, JoAnn creates a slightly different survey and sends it to all store managers, asking them to encourage their retail employees to take the survey. The results are shown here.

In the Dog House Corporate Employee Survey Results

Question

Number of Responses

Average Rating

I am paid fairly.

73

3.9

I feel my group works well as a team.

69

2.63

I appreciate the amount of soft skills training offered at In the Dog House.

74

2.1

I can see myself growing professionally here.

69

1.95

I feel I am paid fairly.

74

3.8

I have all the tools and equipment I need to do my job.

67

4.2

I feel confident if there were an emergency at the office, I would know what to do and could help others.

73

2.67

I think my direct supervisor is an excellent manager.

55

2.41

The orientation training I received was helpful in understanding the expectations of the job.

75

3.1

I would take training related to my job knowing there would be a reward offered for doing so.

71

4.24

In the Dog House Retail Employee Survey Results

Question

Number of Responses

Average Rating

I am content with the benefits I am receiving.

143

1.2

I feel my store works well as a team.

190

4.1

I appreciate the amount of product training and information offered at In the Dog House.

182

2.34

I can see myself growing professionally here.

158

1.99

I feel I am paid fairly.

182

3.2

My supervisor works with my schedule, so I work at times that are convenient for me.

172

3.67

I feel confident if I had to evacuate the store, I would know what to do and could help customers.

179

2.88

I think my store manager is a great manager.

139

3.34

The orientation training I received was helpful in understanding the expectations of the job.

183

4.3

I am interested in developing my career at In the Dog House.

174

1.69

Based on the information JoAnn received from her survey, she decided some changes need to be made. JoAnn asks you to meet for coffee and take a look at the results. After you review them, JoAnn asks you the following questions. How would you respond to each?

1. “Obviously, I need to start working on some training programs. Which topics do you think I should start with?”

2. “How do I go about developing a training program that will be really useful and make people excited? What are the steps I need to take?”

3. “How should I communicate the training program to the corporate and retail employees? Should the new training I develop be communicated in the same way?”

4. “Do you think that we should look at changing pay and benefits? Why or why not?”

5. “Can you please help me draft a training program framework for what we have discussed? Do you think I should design one for both the corporate offices and one for the retail stores?” (Hint: Look at Figure 8.8 for guidelines.)

Team Activity

1. In teams of three to four, outline a two-hour training program for managers to better understand motivation for their employees. Motivation is discussed in Chapter 7 “Retention and Motivation”. Use the training development model discussed in this chapter. Your training should address learning objectives, delivery modes, budget, delivery style, time line, communication, and measurement. Prepare a five-minute presentation to present in class.

2. Using the same plan above, plan and deliver the content to the rest of the class.

25

Handling Performance

Learning Objectives

1. Explain the types of performance issues that occur in the workplace, and the internal and external reasons for poor performance.

2. Understand how to develop a process for handling employee performance issues.

3. Be able to discuss considerations for initiating layoffs or downsizing.

As you know from reading this book so far, the time and money investment in a new employee is overwhelming. The cost to select, hire, and train a new employee is staggering. But what if that new employee isn’t working out? This next section will provide some examples of performance issues and examples of processes to handle these types of employee problems.

Types of Performance Issues

One of the most difficult parts of managing others isn’t when they are doing a great job—it is when they aren’t doing a good job. In this section, we will address some examples of performance issues and how to handle them.

1. Constantly late or leaves early. While we know that flexible schedules can provide a work-life balance, managing this flexible schedule is key. Some employees may take advantage and, instead of working at home, perform nonwork-related tasks instead.

2. Too much time spent doing personal things at work. Most companies have a policy about using a computer or phone for personal use. For most companies, some personal use is fine, but it can become a problem if someone doesn’t know where to draw the line.

3. Inability to handle proprietary information. Many companies handle important client and patient information. The ability to keep this information private for the protection of others is important to the success of the company.

4. Family issues. Child-care issues, divorce, or other family challenges can cause absenteeism, but also poor work quality. Absenteeism is defined as a habitual pattern of not being at work.

5. Drug and alcohol abuse. The US Department of Labor says that 40 percent of industrial fatalities and 47 percent of industrial injury can be tied to alcohol consumption. The US Department of Labor estimates that employees who use substances are 25–30 percent less productive and miss work three times more often than nonabusing employees (US Department of Labor, 2011). Please keep in mind that when we talk about substance abuse, we are talking about not only illegal drugs but prescription drug abuse as well. In fact, the National Institute on Drug Abuse says that 15.2 million Americans have taken a prescription pain reliever, tranquilizer, or sedative for nonmedical purposes at least once (Fisher, 2011). Substance abuse can cause obvious problems, such as tardiness, absenteeism, and nonperformance, but it can also result in accidents or other more serious issues.

6. Nonperforming. Sometimes employees are just not performing at their peak. Some causes may include family or personal issues, but oftentimes it can mean motivational issues or lack of tools and/or ability to do their current job.

7. Conflicts with management or other employees. While it is normal to have the occasional conflict at work, some employees seem to have more than the average owing to personality issues. Of course, this affects an organization’s productivity.

8. Theft. The numbers surrounding employee theft are staggering. The American Marketing Association estimates $10 billion is lost annually owing to employee theft, while the FBI estimates up to $150 billion annually^1. Obviously, this is a serious employee problem that must be addressed.

9. Ethical breaches. The most commonly reported ethical breaches by employees include lying, withholding information, abusive behavior, and misreporting time or hours worked, according to a National Business Ethics study^2. Sharing certain proprietary information when it is against company policy and violating noncompete agreements are also considered ethical violations. Many companies also have a nonfraternization policy that restricts managers from socializing with nonmanagement employees.

10. Harassment. Engagement of sexual harassment, bullying, or other types of harassment would be considered an issue to be dealt with immediately and, depending on the severity, may result in immediate termination.

11. Employee conduct outside the workplace. Speaking poorly of the organization on blogs or Facebook is an example of conduct occurring outside the workplace that could violate company policy. Violating specific company policies outside work could also result in termination. For example, in 2010, thirteen Virgin Atlantic employees were fired after posting criticisms about customers and joking about the lack of safety on Virgin airplanes in a public Facebook group (Smith, 2010). In another example, an NFL Indianapolis Colts cheerleader was fired after racy Playboy promotional photos surfaced (before she became a cheerleader) that showed her wearing only body paint (Chandler, 2011).

While certainly not exhaustive, this list provides some insight into the types of problems that may be experienced. As you can see, some of these problems are more serious than others. Some issues may only require a warning, while some may require immediate dismissal. As an HR professional, it is your job to develop policies and procedures for dealing with such problems. Let’s discuss these next.

Fortune 500 Focus

To handle attendance problems at many organizations, a no-fault attendance plan is put into place. In this type of plan, employees are allowed a certain number of absences; when they exceed that number, a progressive discipline process begins and might result in dismissal of the employee. A no-fault attendance policy means there are no excused or unexcused absences, and all absences count against an employee. For example, a company might give one point for an absence that is called in the night before work, a half point for a tardy, and two points for a no-call and no-show absence. When an employee reaches a certain number determined by the company, he or she is disciplined. This type of policy is advantageous in industries in which unplanned absences have a direct effect on productivity, such as manufacturing and production. Another advantage is that managers do not need to make judgment calls on what is an excused versus an unexcused absence, and this can result in fairness to all employees.

One such company with a no-fault attendance policy is Verizon Communications. However, the Equal Employment Opportunity Commission (EEOC) investigated this policy and announced that Verizon will pay $20 million to resolve a disability discrimination lawsuit (Evans, 2011). The lawsuit said that the company, through use of the no-fault attendance policy, denied reasonable accommodations required by the Americans with Disabilities Act (ADA). As a result, hundreds of Verizon employees were disciplined or fired. In this case, the EEOC cites paid or unpaid leave as one way for an employer to provide reasonable accommodations for an employee with a disability. The policy specified there would be no exceptions made to the no-fault attendance policy to accommodate employees with ADA disabilities. When discussing the case, the EEOC chair justified the agency’s position by saying, “Flexibility on leave can enable a worker with a disability to remain employed and productive, a win for the worker, employer, and the economy. By contrast, an inflexible leave policy may deny workers with disabilities a reasonable accommodation” (Evans, 2011). Part of the settlement also involved additional training to Verizon employees on ADA and how to administer the attendance plan. This successful lawsuit shows that even the most seemingly clear performance expectations must be flexible to meet legal obligations.

Human Resource Recall

What would you do if you saw a coworker taking a box of pens home from the office?

What Influences Performance?

When an employee isn’t performing as expected, it can be very disapointing. When you consider the amount of time it takes to recruit, hire, and train someone, it can be disappointing to find that a person has performance issues. Sometimes performance issues can be related to something personal, such as drug or alchol abuse, but often it is a combination of factors. Some of these factors can be internal while others may be external. Internal factors may include the following:

1. Career goals are not being met with the job.

2. There is conflict with other employees or the manager.

3. The goals or expectations are not in line with the employee’s abilities.

4. The employee views unfairness in the workplace.

5. The employee manages time poorly.

6. The employee is dissatisfied with the job.

Some of the external factors may include the following:

1. The employee doesn’t have correct equipment or tools to perform the job.

2. The job design is incorrect.

3. External motivation factors are absent.

4. There is a lack of management support.

5. The employee’s skills and job are mismatched.

All the internal reasons speak to the importance once again of hiring the right person to begin with. The external reasons may be something that can be easily addressed and fixed. Whether the reason is internal or external, performance issues must be handled in a timely manner. This is addressed in Section  “Defining Discipline”. We discuss performance issues in greater detail in Chapter 11 “Employee Assessment”.

Defining Discipline

If an employee is not meeting the expectations, discipline might need to occur. Discipline is defined as the process that corrects undesirable behavior. The goal of a discipline process shouldn’t necessarily be to punish, but to help the employee meet performance expectations. Often supervisors choose not to apply discipline procedures because they have not documented past employee actions or did not want to take the time to handle the situation. When this occurs, the organization lacks consistency among managers, possibility resulting in motivational issues for other employees and loss of productivity.

To have an effective discipline process, rules and policies need to be in place and communicated so all employees know the expectations. Here are some guidelines on creation of rules and organizational policies:

1. All rules or procedures should be in a written document.

2. Rules should be related to safety and productivity of the organization.

3. Rules should be written clearly, so no ambiguity occurs between different managers.

4. Supervisors, managers, and human resources should communicate rules clearly in orientation, training, and via other methods.

5. Rules should be revised periodically, as the organization’s needs change.

Of course, there is a balance between too many “rules” and giving employees freedom to do their work. However, the point of written rules is to maintain consistency. Suppose, for example, you have a manager in operations and a manager in marketing. They both lead with a different style; the operations manager has a more rigid management style, while the marketing manager uses more of a laissez-faire approach. Suppose one employee in each of the areas is constantly late to work. The marketing manager may not do anything about it, while the operations manager may decide each tardy day merits a “write-up,” and after three write-ups, the employee is let go. See how lack of consistency might be a problem? If this employee is let go, he or she might be able to successfully file a lawsuit for wrongful termination, since another employee with the same performance issue was not let go. Wrongful termination means an employer has fired or laid off an employee for illegal reasons, such as violation of antidiscrimination laws or violation of oral and/or written employee agreements. To avoid such situations, a consistent approach to managing employee performance is a crucial part of the human resources job.

The Role of the Performance Appraisal in Discipline

Besides the written rules, each individual job analysis should have rules and policies that apply to that specific job. We discuss performance appraisal in further detail in Chapter 11 “Employee Assessment”, but it is worth a mention here as well. The performance appraisal is a systematic process to evaluate employees on (at least) an annual basis. The organization’s performance appraisal and general rules and policies should be the tools that measure the employee’s overall performance. If an employee breaks the rules or does not meet expectations of the performance appraisal, the performance issue model, which we will discuss next, can be used to correct the behavior.

Performance Issue Model

Because of the many varieties of performance issues, we will not discuss how to handle each type in detail here. Instead, we present a model that can be used to develop policies around performance, for fairness and consistency.

We can view performance issues in one of five areas. First, the mandated issue is serious and must be addressed immediately. Usually, the mandated issue is one that goes beyond the company and could be a law. Examples of mandated issues might include an employee sharing information that violates privacy laws, not following safety procedures, or engaging in sexual harassment. For example, let’s say a hospital employee posts something on his Facebook page that violates patient privacy. This would be considered a mandated issue (to not violate privacy laws) and could put the hospital in serious trouble. These types of issues need to be handled swiftly. A written policy detailing how this type of issue would be handled is crucial. In our example above, the policy may state that the employee is immediately fired for this type of violation. Or, it may mean this employee is required to go through privacy training again and is given a written warning. Whatever the result, developing a policy on how mandated issues will be handled is important for consistency.

The second performance issue can be called a single incident. Perhaps the employee misspeaks and insults some colleagues or perhaps he or she was over budget or late on a project. These types of incidents are usually best solved with a casual conversation to let the employee know what he or she did wasn’t appropriate. Consider this type of misstep a development opportunity for your employee. Coaching and working with the employee on this issue can be the best way to nip this problem before it gets worse.

Figure The Process for Handling Performance Issues

Often when single incidents are not immediately corrected, they can evolve into a behavior pattern, which is our third type of performance issue. This can occur when the employee doesn’t think the incident is a big deal because he hasn’t been correct before or may not even realize his is doing something wrong. In this case, it’s important to talk with the employee and let him know what is expected.

If the employee has been corrected for a behavior pattern but continues to exhibit the same behavior, we call this a persistent pattern. Often you see employees correct the problem after an initial discussion but then fall back into old habits. If they do not self-correct, it could be they do not have the training or the skills to perform the job. In this phase of handling performance issues, it is important to let the employee know that the problem is serious and further action will be taken if it continues. If you believe the employee just doesn’t have the skills or knowledge to perform the job, asking him or her about this could be helpful to getting to the root of the problem as well. If the employee continues to be nonperforming, you may consider utilizing the progressive discipline process before initiating an employee separation. However, investigating the performance issue should occur before implementing any sort of discipline.

Investigation of Performance Issues

When an employee is having a performance issue, often it is our responsibility as HR professionals to investigate the situation. Training managers on how to document performance failings is the first step in this process. Proper documentation is necessary should the employee need to be terminated later for the performance issue. The documentation should include the following information:

1. Date of incident

2. Time of incident

3. Location (if applicable) of incident

4. A description of the performance issue

5. Notes on the discussion with the employee on the performance issue

6. An improvement plan, if necessary

7. Next steps, should the employee commit the same infraction

8. Signatures from both the manager and employee

With this proper documentation, the employee and the manager will clearly know the next steps that will be taken should the employee commit the infraction in the future. Once the issue has been documented, the manager and employee should meet about the infraction. This type of meeting is called an investigative interview and is used to make sure the employee is fully aware of the discipline issue. This also allows the employee the opportunity to explain his or her side of the story. These types of meetings should always be conducted in private, never in the presence of other employees.

In unionized organizations, however, the employee is entitled to union representation at the investigative interview. This union representation is normally called interest based bargaining referring to a National Labor Relations Board case that went to the United States Supreme Court in 1975. Recently, Weingarten rights continued to be protected when Alonso and Carus Ironworks was ordered to cease and desist from threatening union representatives who attempted to represent an employee during an investigative interview (National Labor Relations Board, 2011).

Options for Handling Performance Issues

Our last phase of dealing with employee problems would be a disciplinary intervention. Often this is called the progressive discipline process. It refers to a series of steps taking corrective action on nonperformance issues. The progressive discipline process is useful if the offense is not serious and does not demand immediate dismissal, such as employee theft. The progressive discipline process should be documented and applied to all employees committing the same offenses. The steps in progressive discipline normally are the following:

1. First offense: Unofficial verbal warning. Counseling and restatement of expectations.

2. Second offense: Official written warning, documented in employee file.

3. Third offense: Second official warning. Improvement plan (discussed later) may be developed. Documented in employee file.

4. Fourth offense: Possible suspension or other punishment, documented in employee file.

5. Fifth offense: Termination and/or alternative dispute resolution.

University of Iowa’s Progressive Discipline Process

The chart below shows the typical progressive discipline process at the University of Iowa:

Counseling and Restatement of Expectations

Counseling and Restatement of Expectations
Counseling by the immediate supervisor is the initial step to mentor or coach performance.

- Meet with the staff member and affirm expectations regarding performance.

- Discuss the performance deficit or behavioral concern.

- Provide a timeline and resources for improvement.

- Report consequences for no improvement.

- Document for an anecdotal file.

Written Reprimand

Written ReprimandAt this time, the immediate supervisor may want to consult a Human Resources representative. After an investigation, follow the procedure outline above for the counseling process, with the exception of providing documentation to the employee in a letter of reprimand. The letter should outline previous informal efforts and the current problem. Send copies of the signed letter to the department personnel file, proper University authority, and the respective Union, if applicable.

Short Suspension (or Equivalent)*
Long Suspension (or Equivalent)*

Suspension or EquivalentFully investigate the concern, followed by discussion with the employee. Summarize previous progressive discipline and the current problem, and specify the timeframe for suspension in writing. Identify further discipline and possible termination as a potential consequence for not meeting and maintaining standards for improvement. Provide copies as for the written reprimand.

Termination

TerminationTermination may be necessary when discipline is not successful in improving performance. Review the work history and record of progressive discipline with proper University authority. Schedule a final meeting with the employee and conduct a meeting at which a letter of termination is provided. If necessary, the termination notice may be sent via certified mail. Provide copies as for previous disciplinary measures.

*Salary reduction cannot be imposed on professional and scientific and faculty staff, due to union contracts

The Seven Tests of Just Cause

The seven test[s] of just cause represent a practical and effective way to determine whether a proposed disciplinary action is firmly and fairly grounded. It is fair to assume that these tests will be applied by arbitrators in the event that disciplinary actions are challenged, and it is therefore good practice to apply them prospectively when considering the imposition of progressive discipline.

Seven tests:

1. Notice

- Prior to imposition of discipline, employee must have notice of rules and expectations.

- Establish through:

- New employee orientation

- Orientation checklists

- Receipts for departmental handbooks

- Periodic reinforcement/coaching

2. Reasonable Rules and Orders

- Cannot be inconsistent with collective bargaining agreement(s)

- Cannot be arbitrary or capricious

- Must be reasonably related to business necessity

3. Investigation

- Must be thorough; consider all evidence, pro and con.

- Must be timely:

- Should be completed expeditiously

- Occurs before discipline imposed

- Give accused opportunity to respond (Loudermill hearing).

- Allow union representation (Weingarten rights).

4. Fair Investigation

- Result must not be forgone conclusion.

- Test assumptions/bias.

5. Proof

- Level of proof is normally substantial evidence.

- Greater proof required for more serious allegations.

6. Equal Treatment

Equal treatment must be balanced against just application:

- Rules must be applied even-handedly and without discrimination.

- Rules must be applied justly.

- Don’t blindly apply the same rule to all situations—managers/supervisors are expected to exercise judgment.

7. Penalty

- Must be fair, not arbitrary and capricious, or based on emotional response.

- Factor in length of service, prior performance history, and previous progressive discipline.

Source: Reprinted from the University of Iowa’s Office of the Vice President for Research, http://research.uiowa.edu/pimgr/?get=discipline and http://research.uiowa.edu/pimgr/?get=7steps (accessed September 15, 2011).

Another option for handling continued infractions is to consider putting the employee on an improvement plan, which outlines the expectations and steps the employee should take to improve performance. We address this in greater detail in Chapter 11 “Employee Assessment”. The plan is detailed and outlined and ensures both parties understand the specific expectations for improvement. If the improvement plan does not work, a progressive discipline process might be used.

Figure  Sample of a Performance Improvement Plan

Whichever direction is taken with disciplining of the employee, documentation is key throughout the process to avoid wrongful termination issues.

Alternative Dispute Resolution

Another option in handling disputes, performance issues, and terminations is alternative dispute resolution (ADR). This method can be effective in getting two parties to come to a resolution. In ADR, an unbiased third party looks at the facts in the case and tries to help the parties come to an agreement. In mediation, the third party facilitates the resolution process, but the results of the process are not binding for either party. This is different from arbitration, in which a person reviews the case and makes a resolution or a decision on the situation. The benefits of ADR are lower cost and flexibility, as opposed to taking the issue to court. We discuss these types of systems in greater detail in Chapter 12 “Working with Labor Unions”.

Some organizations use a step-review system. In this type of system, the performance issue is reviewed by consecutively higher levels of management, should there be disagreement by the employee in a discipline procedure. Some organizations also implement a peer resolution system. In this type of system, a committee of management and employees is formed to review employee complaints or discipline issues. In this situation, the peer review system normally involves the peer group reviewing the documentation and rendering a decision. Another type of ADR is called the ombudsman system. In this system, a person is selected (or elected) to be the designated individual for employees to go to should they have a complaint or an issue with a discipline procedure. In this situation, the ombudsman utilizes problem-solving approaches to resolve the issue. For example, at National Geographic Traveler Magazine an ombudsman handles employee complaints and issues and also customer complaints about travel companies.

Employee Separation

Employee separation can occur in any of these scenarios. First, the employee resigns and decides to leave the organization. Second, the employee is terminated for one or more of the performance issues listed previously. Lastly, absconding is when the employee decides to leave the organization without resigning and following the normal process. For example, if an employee simply stops showing up to work without notifying anyone of his or her departure, this would be considered absconding. Let’s discuss each of these in detail. Employee separation costs can be expensive, as we learned in Chapter 7 “Retention and Motivation”. In the second quarter in 2011, for example, Halliburton reported $8 million in employee separation costs (Lemaire, 2011).

Employee Separations and Layoffs

Resignation means the employee chooses to leave the organization. First, if an employee resigns, normally he or she will provide the manager with a formal resignation e-mail. Then the HR professional usually schedules an exit interview, which can consist of an informal confidential discussion as to why the employee is leaving the organization. If HR thinks the issue or reasons for leaving can be fixed, he or she may discuss with the manager if the resignation will be accepted. Assuming the resignation is accepted, the employee will work with the manager to determine a plan for his or her workload. Some managers may prefer the employee leave right away and will redistribute the workload. For some jobs, it may make sense for the employee to finish the current project and then depart. This will vary from job to job, but two weeks’ notice is normally the standard time for resignations.

If it is determined an employee should be terminated, different steps would be taken than in a resignation. First, documentation is necessary, which should have occurred in the progressive discipline process. Performance appraisals, performance improvement plans, and any other performance warnings the employee received should be readily available before meeting with the employee. It should be noted that the reliability and validity of performance appraisals should be checked before dismissing an employee based upon them. Questionable performance appraisals come from the real-world conditions common to rating situations, particularly because of limitations in the abilities of the raters (Weekley, 1989). Reliability and validity of performance appraisals are discussed in detail in Chapter 11 “Employee Assessment”.

Remember that if the discipline process is followed as outlined prior, a termination for nonperformance should never be a surprise to an employee. Normally, the manager and HR manager would meet with the employee to deliver the news. It should be delivered with compassion but be direct and to the point. Depending on previous contracts, the employee may be entitled to a severance package. A severance package can include pay, benefits, or other compensation for which an employee is entitled when they leave the organization. The purpose of a severance plan is to assist the employee while he or she seeks other employment. The HR professional normally develops this type of package in conjunction with the manager. Some considerations in developing a severance package (preferably before anyone is terminated) might include the following:

1. How the severance will be paid (i.e., lump sum or in x equal increments)

2. Which situations will pay a severance and which will not. For example, if an employee is terminated for violation of a sexual harassment policy, is a severance still paid?

3. A formula for how severance will be paid, based on work group, years with the organization, etc.

4. Legal documents, such as legal releases and noncompete agreements

5. How accrued vacation and/or sick leave will be paid, if at all

The last topic that we should discuss in this section is the case of an absconded employee. If an employee stops showing up to work, a good effort to contact this person should be the first priority. If after three days this person has not been reachable and has not contacted the company, it would be prudent to stop pay and seek legal help to recover any company items he or she has, such as laptops or parking passes.

Sometimes rather than dealing with individual performance issues and/or terminations, we find ourselves having to perform layoffs of several to hundreds of employees. Let’s address your role in this process next.

Rightsizing and Layoffs

Rightsizing refers to the process of reducing the total size of employees, to ultimately save on costs. Downsizing ultimately means the same thing as rightsizing, but the usage of the word has changed in that rightsizing seems to define the organization’s goals better, which would be to reduce staff to save money, or rightsize. When a company decides to rightsize and, ultimately, engage in layoffs, some aspects should be considered.

First, is the downturn temporary? There is nothing worse than laying people off, only to find that as business increases, you need to hire again. Second, has the organization looked at other ways to cut expenses? Perhaps cutting expenses in other areas would be advisable before choosing to lay people off. Finally, consideration should be given to offering temporary sabbaticals, voluntary retirement, or changing from a full- to part-time position. Some employees may even be willing to take a temporary pay cut to reduce costs. Organizations find they can still keep good people by looking at some alternatives that may work for the employee and the organization, even on a temporary basis.

If the company has decided the only way to reduce costs is to cut full-time employees, this is often where HR should be directly involved to ensure legal and ethical guidelines are met. Articulating the reasons for layoffs and establishing a formalized approach to layoffs is the first consideration. Before it is decided who should get cut, criteria should be developed on how these decisions will be made. Similar to how selection criteria might be developed, the development of criteria that determines which jobs will be cut makes the process of cutting more fair, albeit still difficult. Establishing the criteria ahead of time can also help avoid managers’ trying to “save” certain people from their own departments. After development of criteria, the next phase would be to sit down with management and decide who does or doesn’t meet the criteria and who will be laid off. At this point, before the layoffs happen, it makes sense to discuss severance packages. Usually, when an employee signs for a severance package, the employee should also sign a form (the legal department can help with this) that releases the organization from all future claims made by the employee.

After criteria have been developed, people selected, and severance packages determined, it’s key to have a solid communication plan as to how the layoffs will be announced. Usually, this involve an initial e-mail to all employees, letting them know of impending layoffs. Speak with each employee separately, then announce which positions were eliminated. The important thing to remember during layoffs is keeping your employees’ dignity; they did not do anything wrong to lose their job—it was just a result of circumstances.

Announcing Layoffs

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=196

We know that communicating a layoff announcement is important. This video, starring Kermit the Frog, is a good example of how not to announce layoffs—even on Sesame Street.

Key Takeaways

- Performance issues in the workplace are common. Examples of performance issues might include constant tardiness, too much time at work handling personal issues, mishandling of proprietary information, family issues, drug and alcohol problems, nonperformance, theft, or conflicts in the workplace.

- Employees choose to leave organizations for internal and external reasons. Some of these may include a mismatch of career goals, conflict, too high expectations, time-management issues, and mismatch of job and skills.

- HR professionals should develop a set of policies that deal with performance issues in the workplace. The advantage of having such a policy is that it can eliminate wrongful termination legal action.

- A mandated issue is usually one that deals with safety or legal issues that go beyond the workplace. An infringement of this type of issue requires immediate attention.

- A single incident may include a misstep of the employee, and he or she should immediately be spoken with to ensure it doesn’t happen again.

- A behavior pattern occurs when an employee consistently exhibits a performance issue. This type of issue should be discussed with the employee and plans taken, such as more training, to ensure it does not continue. A persistent pattern occurs when an employee consistently exhibits a performance issue and does not improve, despite HR’s talking with him or her.

- At some point during the persistent pattern, disciplinary action will likely need to be taken. It is important to develop consistent procedures on how to record and handle disciplinary issues. Most employers use a progressive discipline process to accomplish this goal.

- Employee separation occurs in one of three ways. First, the employee resigns from the organization. Second, the employee is terminated for performance issues, and third, an employee absconds. Absconds means the employee abandons his or her job without submitting a formal resignation.

- In some cases, a severance package may be offered to the employee upon his or her departure from the organization.

- Rightsizing is a term used when an organization must cut costs through layoffs of employees. Development of criteria for layoffs, communication, and severance package discussion are all parts of this process.

Exercises

1. What are some considerations before developing a severance package? What are the advantages of offering a severance package to your departing employees?

2. What are some common performance issues? What is HR’s role in handling these issues?

3. What process should you use to initiate layoffs?

1“Employee Theft and Legal Aspects,” Net Industries, accessed March 8, 2011, http://law.jrank.org/pages/1084/Employee-Theft-Legal-Aspects-Estimates-cost.html.

2“Careers By the Numbers,” InfoWorld, October 2, 2000, accessed August 1, 2011, http://books.google.com/books?id=ST0EAAAAMBAJ&pg=PA93&lpg=PA93&dq=Careers+By+the+Numbers +InfoWorld+October+2,+2000&source=bl&ots=KU2eMTa3C3&sig=rU3s8ywYcc0Z kUbuydMO3wrO1Rc&hl=en&sa=X&ei=yoVsT6PfGYSw0QH11u3TBg&ved=0CCIQ6 AEwAA#v=onepage&q= Careers%20By%20the%20Numbers%20InfoWorld%20October %202%2C%202000&f=false.

References

Chandler, R., “Ex-Colts Cheerleader Sues Team Over Dismissal for Playboy Pics,” NBC Sports, May 11, 2011, accessed August 1, 2011, http://offthebench.nbcsports.com/2011/05/11/ex-colts-cheerleader-sues-team-over-dismissal-for-playboy-pics/.

Evans, J., “EEOC Finds Fault with Company’s No Fault Attendance Plan,” Zanesville Times, July 17, 2011, accessed August 1, 2011, http://www.businessmanagementdaily.com/19860/eeoc-finds-fault-with-no-fault-attendance-policies.

Fisher, B., “Targeting Prescription Drug Abuse,” Ventura County Star, March 6, 2011, accessed March 8, 2011, http://www.vcstar.com/news/2011/mar/06/targeting-prescription-drug-abuse/.

Lemaire, B., “Halliburton Posts 54% Q2 Growth,” Proactive Investors, July 18, 2011, accessed August 1, 2011, http://www.proactiveinvestors.com/companies/news/16404/halliburton-posts-54-q2-profit-growth-16404.html.

National Labor Relations Board website, “Administrative Law Judge Orders San Juan Company to Respect Employee Weingarten Rights,” March 28, 2011, accessed August 17, 2011.

Smith, C., “Fired Over Facebook,” Huffington Post, July 2010, accessed August 1, 2011, http://www.huffingtonpost.com/2010/07/26/fired-over-facebook-posts_n_659170.html#s115752&title=13_Virgin_Atlantic.

United States Department of Labor, “General Workplace Impact,” 2011, accessed March 8, 2011, http://www.esrcheck.com/wordpress/2011/08/12/studies-show-drugs-in-workplace-cost-employers-billions- and-small-businesses-employ-more-drug-users-but-drug-test-less/.

Weekley, J., Academy of Management Journal 32, no. 1 (1989): 213–22.

26

Employee Rights

Learning Objectives

1. Be able to explain employee rights.

2. Define unions and explain their relation to the HRM function.

Employee rights is defined as the ability to receive fair treatment from employers. This section will discuss employee rights surrounding job protection, privacy, and unionization.

Job Protection Rights

If HR doesn’t understand or properly manage employee rights, lawsuits are sure to follow. It is the HR professional’s job to understand and protect the rights of employees. In the United States, the employment-at-will principle (EAW) is the right of an employer to fire an employee or an employee to leave an organization at any time, without any specific cause. The EAW principle gives both the employee and employer freedom to terminate the relationship at any time. There are three main exceptions to this principle, and whether they are accepted is up to the various states:

1. Public policy exception. With a public policy exception, an employer may not fire an employee if it would violate the individual state’s doctrine or statute. For example, in Borse v. Piece Goods Shop in Pennsylvania, a federal circuit court of appeals ruled that Pennsylvania law may protect at-will employees from being fired for refusing to take part in drug test programs if the employee’s privacy is invaded. Borse contended that the free speech provisions of the state and of the First Amendment protected the refusal to participate. Some public policy exceptions occur when an employee is fired for refusing to violate state or federal law.

2. Implied contract exception. In a breach of an implied contract, the discharged employee can prove that the employer indicated that the employee has job security. The indication does not need to be formally written, only implied. In Wright v. Honda, an Ohio employee was terminated but argued that the implied contract exception was relevant to the employment-at-will doctrine. She was able to prove that in orientation, Honda stressed to employees the importance of attendance and quality work. She was also able to prove that the language in the associate handbook implied job security: “the job security of each employee depends upon doing your best on your job with the spirit of cooperation.” Progress reports showing professional development further solidified her case, as she had an implied contract that Honda had altered the employment-at-will doctrine through its policies and actions.

3. Good faith and fair dealing exception. In the good faith and fair dealing exception, the discharged employee contends that he was not treated fairly. This exception to the employment-at-will doctrine is less common than the first two. Examples might include firing or transferring of employees to prevent them from collecting commissions, misleading employees about promotions and pay increases, and taking extreme actions that would force the employee to quit.

Table  State’s Acceptance of Employment-at-Will Exceptions

State

Public-Policy Exception

Implied-Contract Exception

Good Faith and Fair Dealing Exception

Alabama

no

yes

yes

Alaska

yes

yes

yes

Arizona

yes

yes

yes

Arkansas

yes

yes

no

California

yes

yes

yes

Colorado

yes

yes

no

Connecticut

yes

yes

no

Delaware

yes

no

yes

District of Columbia

yes

yes

no

Florida

no

no

no

Georgia

no

no

no

Hawaii

yes

yes

no

Idaho

yes

yes

yes

Illinois

yes

yes

no

Indiana

yes

no

no

Iowa

yes

yes

no

Kansas

yes

yes

no

Kentucky

yes

yes

no

Louisiana

no

no

no

Maine

no

yes

no

Maryland

yes

yes

no

Massachusetts

yes

no

yes

Michigan

yes

yes

no

Minnesota

yes

yes

no

Mississippi

yes

yes

no

Missouri

yes

no

no

Montana

yes

no

no

Nebraska

no

yes

no

Nevada

yes

yes

yes

New Hampshire

yes

yes

no

New Jersey

yes

yes

no

New Mexico

yes

yes

no

New York

no

yes

no

North Carolina

yes

no

no

North Dakota

yes

yes

no

Ohio

yes

yes

no

Oklahoma

yes

yes

no

Oregon

yes

yes

no

Pennsylvania

yes

no

no

Rhode Island

no

no

no

South Carolina

yes

yes

No

South Dakota

yes

yes

no

Tennessee

yes

yes

no

Texas

yes

no

no

Utah

yes

yes

yes

Vermont

yes

yes

no

Virginia

yes

no

no

Washington

yes

yes

no

West Virginia

yes

yes

no

Wisconsin

yes

yes

no

Wyoming

yes

yes

yes

Bold text indicates a state with all three exceptions.

Italic text indicates a state with none of the three exceptions.

When one of the exceptions can be proven, wrongful discharge accusations may occur. The United States is one of the few major industrial powers that utilize an employment-at-will philosophy. Most countries, including France and the UK, require employers to show just cause for termination of a person’s employment (USLegal, 2011). The advantage of employment at will allows for freedom of employment; the possibility of wrongful discharge tells us that we must be prepared to defend the termination of an employee, as to not be charged with a wrongful discharge case.

Employees also have job protection if they engage in whistleblowing. Whistleblowing refers to an employee’s telling the public about ethical or legal violations of his or her organization. This protection was granted in 1989 and extended through the Sarbanes-Oxley Act of 2002. Many organizations create whistleblowing policies and a mechanism to report illegal or unethical practices within the organization (Ravishankar, 2011).

Another consideration for employee job protection is that of an implied contract. It is in the best interest of HR professionals and managers alike to avoid implying an employee has a contract with the organization. In fact, many organizations develop employment-at-will policies and ask their employees to sign these policies as a disclaimer for the organization.

A constructive discharge means the employee resigned, but only because the work conditions were so intolerable that he or she had no choice. For example, if James is being sexually harassed at work, and it is so bad he quits, he would need to prove not only the sexual harassment but that it was so bad it required him to quit. This type of situation is important to note; should James’s case go to court and sexual harassment and constructive discharge are found, James may be entitled to back pay and other compensation.

The Worker Adjustment and Retraining Notification Act (WARN) requires organizations with more than one hundred employees to give employees and their communities at least sixty days’ notice of closure or layoff affecting fifty or more full-time employees. This law does not apply in the case of unforeseeable business circumstances. If an employer violates this law, it can be subject to back pay for employees (US Department of Labor, 2011). This does not include workers who have been with the organization for less than six months, however.

Retaliatory discharge means punishment of an employee for engaging in a protected activity, such as filing a discrimination charge or opposing illegal employer practices. For example, it might include poor treatment of an employee because he or she filed a workers’ compensation claim. Employees should not be harassed or mistreated should they file a claim against the organization.

Privacy Rights

Technology makes it possible to more easily monitor aspects of employees’ jobs, although a policy on this subject should be considered before implementing it. In regard to privacy, a question exists whether an employer should be allowed to monitor an employee’s online activities. This may include work e-mail, websites visited using company property, and also personal activity online.

Digital Footprints, Inc. is a company that specializes in tracking the digital movements of employees and can provide reports to the organization by tracking these footprints. This type of technology might look for patterns, word usage, and other communication patterns between individuals. This monitoring can be useful in determining violations of workplace policies, such as sexual harassment. This type of software and management can be expensive, so before launching it, it’s imperative to address its value in the workplace.

Another privacy concern can include monitoring of employee postings on external websites. Companies such as Social Sentry, under contract, monitor employee postings on sites such as Facebook, Twitter, LinkedIn, and YouTube (Teneros Corporation, 2011). Lawyers warn, however, that this type of monitoring should only be done if the employee has consented (People Management, 2011). A monitoring company isn’t always needed to monitor employees’ movements on social networking. And sometimes employees don’t even have to tweet something negative about their own company to lose their job. A case in point is when Chadd Scott, who does Atlanta sports updates for 680/The Fan, was fired for tweeting about Delta Airlines. In his tweet, he complained about a Delta delay and said they did not have enough de-icing fluid. Within a few hours, he was fired from his job, because Delta was a sponsor of 680/The Fan (Ho, 2011).

The US Patriot Act also includes caveats to privacy when investigating possible terrorist activity. The Patriot Act requires organizations to provide private employee information when requested. Overall, it is a good idea to have a clear company policy and perhaps even a signed waiver from employees stating they understand their activities may be monitored and information shared with the US government under the Patriot Act.

Depending on the state in which you live, employees may be given to see their personnel files and the right to see and correct any incorrect information within their files. Medical or disability information should be kept separate from the employee’s work file, per the Americans with Disabilities Act. In addition, the Health Insurance Portability and Accountability Act (HIPAA) mandates that health information should be private, and therefore it is good practice to keep health information in a separate file as well.

Finally, drug testing and the right to privacy is a delicate balancing act. Organizations that implement drug testing often do so for insurance or safety reasons. Because of the Drug-Free Workplace Act of 1988, some federal contractors and all federal grantees must agree they will provide a drug-free workplace, as a condition of obtaining the contract. The ADA does not view testing for illegal drug use as a medical examination (making them legal), and people using illegal drugs are not protected under the ADA (US Equal Employment Opportunity Commission, 2011); however, people covered under ADA laws are allowed to take medications directly related to their disability. In a recent case, Bates v. Dura Automotive Systems, an auto parts manufacturer had a high accident rate and decided to implement drug testing to increase safety. Several prescription drugs were banned because they were known to cause impairment. The plaintiffs in the case had been dismissed from their jobs because of prescription drug use, and they sued, claiming the drug-testing program violated ADA laws (Lewis, 2010). However, the Sixth Circuit Court reversed the case because the plaintiffs were not protected under ADA laws (they did not have a documented disability).

In organizations where heavy machinery is operated, a monthly drug test may be a job requirement. In fact, under the Omnibus Transportation Employee Testing Act of 1991, employers are legally required to test for drugs in transportation-related businesses such as airlines, railroads, trucking, and public transportation, such as bus systems. Medical marijuana is a relatively new issue that is still being addressed in states that allow its use. For example, if the company requires a drug test and the employee shows positive for marijuana use, does asking the employee to prove it is being used for medical purposes violate HIPAA privacy laws? This issue is certainly one to watch over the coming years.

Figure  Sample Policies on Privacy Relating to Technology

Human Resource Recall

What does the term retaliatory discharge mean?

Labor Unions

A union is an organization of employees formed to bargain with an employer. We discuss labor unions in greater detail in Chapter 12 “Working with Labor Unions”. It is important to mention unions here, since labor contracts often guide the process for layoffs and discipline. Labor unions have been a part of the US workplace landscape since the late 1920s, but the Wagner Act of 1935 significantly impacted labor and management relations by addressing several unfair labor practices. The National Labor Relations Board is responsible for administering and enforcing the provisions outlined in the Wagner Act. The act made acts such as interfering with the formation of unions and discriminating on the basis of union membership illegal for employers. By the 1940s, 9 million people were members of a union, which spurred the passage of the Taft-Hartley Act. This act set a new set of standards for fair practices by the unions, within a unionized environment.

The purpose of a union is to give collective bargaining power to a group of individuals. For example, instead of one person negotiating salary, a union gives people the power to bargain as a group, creating a shift from the traditional power model. Issues to negotiate can include pay, health benefits, working hours, and other aspects relating to a job. People often decide to form a union if they perceive the organization or management of the organization is treating them unfairly. Some people also believe that belonging to a union means higher wages and better benefits.

Many employers feel it is not in the best interest of the organization to unionize, so they will engage in strategies to prevent unionization. This is discussed further in Chapter 12 “Working with Labor Unions”. However, the Taft-Hartley Act says that employers can express their views about unions but may not threaten employees with loss of job or other benefits if they unionize. Some of the talking points an organization might express about unions include the following:

1. Less ability to deal more informally with the organization

2. Possibility of strikes

3. Payment of union dues by employees

4. Emphasis on what positive aspects the employer has provided

If employees still unionize, managers and HR professionals alike will engage in the bargaining process. The collective bargaining process is the process of negotiating an agreement between management and employees. This process ultimately defines the contract terms for employees. In negotiating with the union, being prepared is important. Gathering data of what worked with the old contract and what didn’t can be a good starting point. Understanding the union’s likely requests and preparing a counteraction to these requests and possible compromises should be done before even sitting down to the bargaining table. One of the better strategies for negotiating a contract is called interest-based bargaining. In this type of bargaining, mutual interests are brought up and discussed, rather than each party coming to the table with a list of demands. This can create a win-win situation for both parties.

Once an agreement has been decided, the union members vote whether to accept the new contract. If the contract is accepted, the next task is to look at how to administer the agreement.

First, the HR professional must know the contract well to administer it well. For example, if higher pay is successfully negotiated, obviously it would be the job of HR to implement this new pay scale. The HR professional may need to develop new sets of policies and procedures when a new agreement is in place. One such procedure HR may have to work with occasionally is the grievance process. As we will discuss in Chapter 12 “Working with Labor Unions”, the grievance process is a formal way by which employees can submit a complaint regarding something that is not administered correctly in the contract. Usually, the grievance process will involve discussions with direct supervisors first, discussions with the union representative next, and then the filing of a formal, written grievance complaint. Management is then required to provide a written response to the grievance, and depending on the collective bargaining agreement, a formalized process is stated on how the appeals process would work, should the grievance not be solved by the management response. One such example is the dismissal of members of the National Air Traffic Controller Association (union). In 2011, of the 140 proposed dismissals of air traffic controllers, 58 had penalties rescinded, reduced, or deferred (Hughes, 2011). This is because of due-process protections used to prevent mass firings when a new administration comes to power. Federal workers, including controllers, can challenge disciplinary action penalties through a government panel called the Merit Systems Protection Board. The process is described in union contracts and mentions involvement of an arbitrator, if necessary.

How Would You Handle This?

To Join or Not to Join

As the HR manager for a two-hundred-person company, you have always worked hard to ensure that workers received competitive benefits and salaries. When you hear rumors of the workers’ wanting to form a union, you are a little distressed, because you feel everyone is treated fairly. How would you handle this?

Key Takeaways

- The employment-at-will principle means that an employer can separate from an employee without cause, and vice versa.

- Even though we have employment at will, a wrongful discharge can occur when there are violations of public policy, an employee has a contract with an employer, or an employer does something outside the boundaries of good faith.

- Whistleblowing is when an employee notifies organizations of illegal or unethical activity. Whistleblowers are protected from discharge due to their activity.

- A constructive discharge means the conditions are so poor that the employee had no choice but to leave the organization.

- The Worker Adjustment and Retraining Notification Act (WARN) is a law that requires companies of one hundred or more employees to notify employees and the community if fifty or more employees are to be laid off.

- A retaliatory discharge is one that occurs if an employer fires or lays off an employee owing to a charge the employee filed. For example, if an employee files a workers’ compensation claim and then is let go, this could be a retaliatory discharge.

- The privacy of employees is an issue that HR must address. It is prudent to develop policies surrounding what type of monitoring may occur within an organization. For example, some organizations monitor e-mail, computer usage, and even postings on social network sites.

- Drug testing is also a privacy issue, although in many industries requiring safe working conditions, drug testing can be necessary to ensure the safety of all employees.

- A union is a group of workers who decide to work together toward a collective bargaining agreement. This agreement allows workers to negotiate as one, rather than as individuals.

- The Wagner Act, passed in 1935, addresses many issues related to workers’ unionization.

- The process of collective bargaining means to negotiate a contract between management and workers. HR is generally part of this process.

- Interest based bargaining occurs when mutual interests are discussed, rather than starting with a list of demands.

- Once an agreement is reached, HR is generally responsible for knowing the agreement and implementing any changes that should occur as a result of the agreement. One such example is understanding the grievance process.

Exercises

1. Perform an Internet search and find a union agreement. Discuss how the union agreement handles terminations and grievances.

2. Compare and contrast the differences between a retaliatory discharge and a constructive discharge.

References

Ho, R., “Chadd Scott Said He Was Fired for Tweets about Delta,” Access Atlanta (blog), accessed March 16, 2011, http://blogs.ajc.com/radio-tv-talk/2011/03/15/680the-fans-chadd-scott-said-he-was-fired-for-tweets-about-delta-airlines/?cxntlid=thbz_hm.

Hughes, J., “You’re Fired Doesn’t Mean Fired to Four of 10 Air Traffic Controllers,” Bloomberg News, July 24, 2011, accessed August 1, 2011, http://www.bloomberg.com/news/2011-07-25/-you-re-fired-doesn-t-mean-fired-to-four-of-10-air-controllers.html.

Lewis, J., “Employees’ ADA Claims on Prescription-Drug-Use Dismissals Rejected by Federal Court,” December 1, 2010, accessed August 1, 2011, http://www.jacksonlewis.com/resources.php?NewsID=3478.

People Management, “Employers Should Have Monitoring Policy for Social Networks,” accessed March 17, 2011, http://www.peoplemanagement.co.uk/pm/articles/2011/02/employers-should-have-monitoring-policy-for-social-networks.htm.

Ravishankar, L., “Encouraging Internal Whistle Blowing,” Santa Clara University, accessed March 15, 2011, http://www.scu.edu/ethics/publications/submitted/whistleblowing.html.

Teneros Corporation, “Social Sentry Lets Employers Track Their Workers across the Internet,” accessed March 17, 2011, http://www.readwriteweb.com/archives/social_sentry_track_employees_across_the_web.php.

US Department of Labor, “WARN Fact Sheet,” accessed March 15, 2011, http://www.doleta.gov/programs/factsht/warn.htm.

US Equal Employment Opportunity Commission, “The ADA, Your Responsibilities as an Employer,” accessed August 1, 2011, http://www.eeoc.gov/facts/ada17.html.

USLegal, “Employment at Will,” accessed March 15, 2011, http://employment.uslegal.com/employment-at-will/.

27

Cases and Problems

Chapter Summary

- Performance issues in the workplace are common. Examples of performance issues include constant tardiness, too much time at work handling personal issues, mishandling of proprietary information, family issues, drug and alcohol problems, nonperformance, theft, and conflicts in the workplace.

- Employees choose to leave organizations for internal and external reasons. Some of these may include a mismatch of career goals, conflict, too high expectations, time-management issues, and a mismatch between job and skills.

- HR professionals should develop a set of policies that deal with performance issues in the workplace. The advantage to having such policies is that they can eliminate wrongful termination legal action.

- A mandated issue is usually one that deals with safety or legal issues that go beyond the workplace. An infringement of this type of issue requires immediate attention.

- A single incident may include a misstep of the employee, and the employee should immediately be spoken with about it, to ensure it doesn’t happen again.

- A behavior pattern occurs when an employee consistently exhibits a performance issue. This type of issue should be discussed with the employee and actions taken, such as providing more training, to ensure it does not continue. A persistent pattern occurs when an employee consistently exhibits a performance issue and does not improve, despite HR’s talking with him or her.

- At some point during the persistent pattern, disciplinary action will likely need to be taken. It is important to develop consistent procedures on how to record and handle disciplinary issues.

- Employee separation occurs in one of three ways. First, the employee resigns from the organization. Second, the employee is terminated for performance issues, and third, an employee absconds. Absconds means the employee abandons his or her job without submitting a formal resignation.

- In some cases, a severance package may be offered to the employee upon his or her departure from the organization.

- Rightsizing is a term used when an organization must cut costs through layoffs of employees. Development of criteria for layoffs, communication, and severance package discussion are all parts of this process.

- Employment at will means that an employer can separate from an employee without cause, and vice versa.

- Even though we have employment at will, a wrongful discharge can occur when there are violations of public policy, an employee has a contract with an employer, or an employer does something outside the boundaries of good faith.

- Whistleblowing is when an employee notifies organizations of illegal or unethical activity. Whistleblowers are protected from discharge due to their activity.

- A constructive discharge means the conditions are so poor that the employee has no choice but to leave the organization.

- The Worker Adjustment and Retraining Notification Act (WARN) is a law that requires companies of one hundred or more employees to notify employees and the community if fifty or more employees are to be laid off.

- A retaliatory discharge is one that occurs if an employer fires or lays off an employee because of a charge the employee filed. For example, if an employee files a workers’ compensation claim and then is let go, this could be a retaliatory discharge.

- The privacy of employees is an issue that HR must address. It is prudent to develop policies surrounding what type of monitoring may occur within an organization. For example, some organizations monitor e-mail, computer usage, and even postings on social network sites.

- Drug testing is also a privacy issue, although in many industries requiring safe working conditions, drug testing can be necessary to ensure the safety of all employees.

- A union is a group of workers who decide to work together toward a collective bargaining agreement. This agreement allows workers to negotiate as one, rather than as individuals.

- The Wagner Act, passed in 1935, addresses many issues related to workers’ unionization.

- The process of collective bargaining means to negotiate a contract between management and workers. HR is generally part of this process.

- Interest based bargaining occurs when mutual interests are discussed, rather than starting with a list of demands.

- Once an agreement is reached, HR is generally responsible for knowing the agreement and implementing any changes that should occur as a result of the agreement. One such example is understanding the grievance process.

Chapter Case

Who Goes, Who Stays?

The consulting firm you have worked for over the last year is having some financial troubles. The large contracts it once had are slowly going away, and as your company struggles to make payroll, it is clear that layoffs must occur. The sales staff has not been meeting the sales goals set for them, resulting in incorrect budgets.

It has been decided that at least three people in the sales department should be laid off. You create a spreadsheet with pertinent sales employee data:

Name

Title

Years with the company

Last overall rating on performance evaluation (1–5 scale, 5 being highest)

Last year’s sales goal met?

Deb Waters

Sales Manager

1

3

N/A as her position is managerial

Jeff Spirits

Account Manager

5

3

Yes, 1% over

Orlando Chang

Account Manager

3

4

Yes, 10% over goal

Jake Toolmeyer

Account Manager

2

4

No, 2% under goal

Audrey Barnes

Account Manager

5

5

Yes, 15% over goal

Kelly Andrews

Account Manager

1

2

No, 20% under goal

Amir Saied

Account Manager

8

5

Yes, 5% over goal

Winfrey Jones

Account Manager

4

2

No, 10% under goal

1. Making reasonable assumptions, develop criteria for the layoffs in the sales department.

2. Develop a plan as to how layoffs will be communicated with the individual as well as within the company.

3. Discuss strategies to motivate those sales employees who stay with the organization.

Team Activities

1. In a team of three to four people, discuss each of the situations and determine if you think the employee should receive immediate termination or a progressive discipline process, and provide justification for your responses:

1. The employee stole one pack of office paper, stating he would be using it at home to perform his job.

2. An employee posted how boring her job is on a Facebook status update. You know she is Facebook friends with several clients.

3. The employee groped a colleague in the break room.

4. You saw the employee’s résumé posted on LinkedIn, stating she was looking for a new job.

5. The manager has told you the employee is difficult to work with and not liked by his colleagues.

2. In teams of three to four, discuss the following situation: Your marketing manager has just told you she plans to dismiss her administrative assistant for nonperformance and needs help designing a severance package. The administrative assistant was with the organization for two-and-a-half years and his current salary is $35,670. What would you suggest he be offered? Discuss and be prepared to share your ideas with the class.

28

Performance Evaluation Systems

Learning Objectives

1. Define the reasons for a formal performance evaluation system.

2. Explain the process to develop a performance review system.

A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job. If you notice, the word systematic implies the performance evaluation process should be a planned system that allows feedback to be given in a formal—as opposed to informal—sense. Performance evaluations can also be called performance appraisals, performance assessments, or employee appraisals.

There are four reasons why a systematic performance evaluation system should be implemented. First, the evaluation process should encourage positive performance and behavior. Second, it is a way to satisfy employee curiosity as to how well they are performing in their job. It can also be used as a tool to develop employees. Lastly, it can provide a basis for pay raises, promotions, and legal disciplinary actions.

Designing a Performance Appraisal System

There are a number of things to consider before designing or revising an existing performance appraisal system. Some researchers suggest that the performance appraisal system is perhaps one of the most important parts of the organization (Lawrie, 1990), while others suggest that performance appraisal systems are ultimately flawed (Derven, 1990), making them worthless. For the purpose of this chapter, let’s assume we can create a performance appraisal system that will provide value to the organization and the employee. When designing this process, we should recognize that any process has its limitations, but if we plan it correctly, we can minimize some of these.

The first step in the process is to determine how often performance appraisals should be given. Please keep in mind that managers should constantly be giving feedback to employees, and this process is a more formal way of doing so. Some organizations choose to give performance evaluations once per year, while others give them twice per year, or more. The advantage to giving an evaluation twice per year, of course, is more feedback and opportunity for employee development. The downside is the time it takes for the manager to write the evaluation and discuss it with the employee. If done well, it could take several hours for just one employee. Depending on your organization’s structure, you may choose one or the other. For example, if most of your managers have five or ten people to manage (this is called span of control), it might be worthwhile to give performance evaluations more than once per year, since the time cost isn’t high. If most of your managers have twenty or more employees, it may not be feasible to perform this process more than once per year. To determine costs of your performance evaluations, see Table “Estimating the Costs of Performance Evaluations”. Asking for feedback from managers and employees is also a good way to determine how often performance evaluations should be given.

Table Estimating the Costs of Performance Evaluations

Narrow Span of Control

Average span of control

8

Average time to complete one written review

1 hour

Average time to discuss with employee

1 hour

Administrative time to set up meetings with employees

1/2 hour

8 employees × 2 hours per employee + 1/2 hour administrative time to set up times to meet with employees = 16.5 hours of time for one manager to complete all performance reviews

Wider Span of Control

Average span of control

25

Average time to complete one written review

1 hour

Average time to discuss with employee

1 hour

Administrative time to set up meetings with employees

1 hour

25 employees × 2 hours per employee + 1 hour administrative time to set up times to meet with employees = 51 hours

Once you have the number of hours it takes, you can multiply that by your manager’s hourly pay to get an estimated cost to the organization

16 hours × $50 per hour = $850
51 hours × $50 per hour = $2550

Should pay increases be tied to performance evaluations? This might be the second consideration before development of a performance evaluation process. There is research that shows employees have a greater acceptance of performance reviews if the review is linked to rewards (Bannister & Balkin, 1990).

The third consideration should include goal setting. In other words, what goals does the organization hope to achieve with the performance appraisal process?

Once the frequency, rewards, and goals have been determined, it is time to begin to formalize the process. First, we will need to develop the actual forms that will be used to evaluate each job within the organization. Every performance evaluation should be directly tied with that employee’s job description.

Determining who should evaluate the performance of the employee is the next decision. It could be their direct manager (most common method), subordinates, customers or clients, self, and/or peers. Table  “Advantages and Disadvantages of Each Source for Performance Evaluations” shows some of the advantages and disadvantages for each source of information for performance evaluations. Ultimately, using a variety of sources might garner the best results.

A 360-degree performance appraisal method is a way to appraise performance by using several sources to measure the employee’s effectiveness. Organizations must be careful when using peer-reviewed information. For example, in the Mathewson v. Aloha Airlines case, peer evaluations were found to be retaliatory against a pilot who had crossed picket lines during the pilot’s union strike against a different airline.

Management of this process can be time-consuming for the HR professional. That’s why there are many software programs available to help administer and assess 360 review feedback. Halogen 360, for example, is used by Princess Cruises and media companies such as MSNBC (Halogen Software, 2011). This type of software allows the HR professional to set criteria and easily send links to customers, peers, or managers, who provide the information requested. Then the data are gathered and a report is automatically generated, which an employee can use for quick feedback. Other similar types of software include Carbon360 and Argos.

Performance Appraisal System Errors

Before we begin to develop our performance review process, it is important to note some of the errors that can occur during this process. First, halo effects can occur when the source or the rater feels one aspect of the performance is high and therefore rates all areas high. A mistake in rating can also occur when we compare one employee to another, as opposed to the job description’s standards. Sometimes halo effects will occur because the rater is uncomfortable rating someone low on a performance assessment item. Of course, when this occurs, it makes the performance evaluation less valuable for employee development. Proper training on how to manage a performance appraisal interview is a good way to avoid this. We discuss this in Section  “Performance Appraisal Interviews”.

Validity issues are the extent to which the tool measures the relevant aspects of performance. The aspects of performance should be based on the key skills and responsibilities of the job, and these should be reviewed often to make sure they are still applicable to the job analysis and description.

Reliability refers to how consistent the same measuring tool works throughout the organization (or job title). When we look at reliability in performance appraisals, we ask ourselves if two raters were to rate an employee, how close would the ratings be? If the ratings would be far apart from one another, the method may have reliability issues. To prevent this kind of issue, we can make sure that performance standards are written in a way that will make them measurable. For example, instead of “increase sales” as a performance standard, we may want to say, “increase sales by 10 percent from last year.” This performance standard is easily measured and allows us to ensure the accuracy of our performance methods.

Acceptability refers to how well members of the organization, manager and employees, accept the performance evaluation tool as a valid measure of performance. For example, let’s assume the current measurement tools of Blewett Gravel, Inc. are in place and show validity for each job function. However, managers don’t think the tool is useful because they take too much time. As a result, they spend minimal time on the evaluation. This could mean the current process is flawed because of acceptability error.

Another consideration is the specificity, which tells employees the job expectations and how they can be met. If they are not specific enough, the tool is not useful to the employee for development or to the manager to ensure the employee is meeting expectations. Finally, after we have developed our process, we need to create a time line and educate managers and employees on the process. This can be done through formal training and communicated through company blogs or e-mails. According to Robert Kent (Kent, 2011), teaching people how to receive benefit from the feedback they receive can be an important part of the process as well.

Performance Appraisal Legal Considerations

The legality of performance appraisals was questioned in 1973 in Brito v. Zia, in which an employee was terminated based on a subjective performance evaluation. Following this important case, employers began to rethink their performance evaluation system and the legality of it.

The Civil Service Reform Act of 1978 set new standards for performance evaluation. Although these standards related only to public sector employees, the Reform Act began an important trend toward making certain performance evaluations were legal. The Reform Act created the following criteria for performance appraisals in government agencies:

1. All agencies were required to create performance review systems.

2. Appraisal systems would encourage employee participation in establishing the performance standards they will be rated against.

3. The critical elements of the job must be in writing.

4. Employees must be advised of the critical elements when hired.

5. The system must be based exclusively on the actual performance and critical elements of the job. They cannot be based on a curve, for example.

6. They must be conducted and recorded at least once per year.

7. Training must be offered for all persons giving performance evaluations.

8. The appraisals must provide information that can be used for decision making, such as pay decisions and promotion decisions.

Early performance appraisal research can provide us a good example as to why we should be concerned with the legality of the performance appraisal process (Field & Holley, 1982). Holley and Field analyzed sixty-six legal cases that involved discrimination and performance evaluation. Of the cases, defendants won thirty-five of the cases. The authors of the study determined that the cases that were won by the defendant had similar characteristics:

1. Appraisers were given written instructions on how to complete the appraisal for employees.

2. Job analysis was used to develop the performance measures of the evaluation.

3. The focus of the appraisal was actual behaviors instead of personality traits.

4. Upper management reviewed the ratings before the performance appraisal interview was conducted.

This tells us that the following considerations should be met when developing our performance appraisal process:

1. Performance standards should be developed using the job analysis and should change as the job changes.

2. Provide the employees with a copy of the evaluation when they begin working for the organization, and even consider having the employees sign off, saying they have received it.

3. All raters and appraisers should be trained.

4. When rating, examples of observable behavior (rather than personality characteristics) should be given.

5. A formal process should be developed in the event an employee disagrees with a performance review.

Now that we have discussed some of the pitfalls of performance appraisals, we can begin to discuss how to develop the process of performance evaluations.

Table  Advantages and Disadvantages of Each Source for Performance Evaluations

Source

Advantages

Disadvantages

Manager/Supervisor

Usually has extensive knowledge of the employee’s performance and abilities

Bias

Favoritism

Self

Self-analysis can help with employee growth

In the employee’s interest to inflate his or her own ratings

Peer

Works well when the supervisor doesn’t always directly observe the employee

Relationships can create bias in the review

Can bring a different perspective, since peers know the job well

If evaluations are tied to pay, this can put both the employee and the peer in an awkward situation

If confidential, may create mistrust within the organization

Customer/Client

Customers often have the best view of employee behavior

Can be expensive to obtain this feedback

Can enhance long-term relationships with the customer by asking for feedback

Possible bias

Subordinate

Data garnered can include how well the manager treats employees

Possible retaliation if results are not favorable

Can determine if employees feel there is favoritism within their department

Rating inflation

Subordinates may not understand the “big picture” and rate low as a result

Can be used as a self-development tool for managers

If confidential, may create mistrust within the organization

If nothing changes despite the evaluation, could create motivational issues among employees

Human Resource Recall

What are the steps we should take when developing a performance review process?

Key Takeaways

- A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.

- The use of the term systematic implies the process should be planned.

- Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.

- The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.

- Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determine how this will be handled in the next step in the performance appraisal development process.

- Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.

- After determining how often the evaluations should be given, if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.

- After you have determined what forms will be used (or developed), determine who will be the source for the information. Perhaps managers, peers, or customers would be an option. A 360 review process combines several sources for a more thorough review.

- There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating employees only on the objectives. Other errors might include validity, reliability, acceptability, and specificity.

- Performance evaluations should always be based on the actual job description.

- Our last step in development of this process is to communicate the process and train employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.

Exercises

1. Perform an Internet search on 360 review software. Compare at least two types of software and discuss advantages and disadvantages of each.

2. Discuss the advantages and disadvantages of each type of performance evaluation source.

References

Bannister, B. and David Balkin, “Performance Evaluation and Compensation Feedback Messages: An Integrated Model,” Journal of Occupational Psychology 63 (June 1990): 97–111.

Derven, M., “The Paradox of Performance Appraisals,” Personnel Journal 69 (February 1990): 107–11.

Field, H. and William Holley, “The Relationship of Performance Appraisal System Characteristics to Verdicts in Selected Employment Discrimination Cases,” Academy of Management Journal 25, no. 2 (1982): 392–406.

Halogen Software, accessed March 22, 2011, http://www.halogensoftware.com.

Kent, R., “Why You Should Think Twice about 360 Performance Reviews,” ManagerWise, accessed March 22, 2011, http://www.managerwise.com/article.phtml?id=128.

Lawrie, J., “Prepare for a Performance Appraisal,” Personnel Journal 69 (April 1990): 132–36.

29

Appraisal Methods

Learning Objective

1. Be able to describe the various appraisal methods.

It probably goes without saying that different industries and jobs need different kinds of appraisal methods. For our purposes, we will discuss some of the main ways to assess performance in a performance evaluation form. Of course, these will change based upon the job specifications for each position within the company. In addition to industry-specific and job-specific methods, many organizations will use these methods in combination, as opposed to just one method. There are three main methods of determining performance. The first is the trait method, in which managers look at an employee’s specific traits in relation to the job, such as friendliness to the customer. The behavioral method looks at individual actions within a specific job. Comparative methods compare one employee with other employees. Results methods are focused on employee accomplishments, such as whether or not employees met a quota.

Within the categories of performance appraisals, there are two main aspects to appraisal methods. First, the criteria are the aspects the employee is actually being evaluated on, which should be tied directly to the employee᾿s job description. Second, the rating is the type of scale that will be used to rate each criterion in a performance evaluation: for example, scales of 1–5, essay ratings, or yes/no ratings. Tied to the rating and criteria is the weighting each item will be given. For example, if “communication” and “interaction with client” are two criteria, the interaction with the client may be weighted more than communication, depending on the job type. We will discuss the types of criteria and rating methods next.

Graphic Rating Scale

The graphic rating scale, a behavioral method, is perhaps the most popular choice for performance evaluations. This type of evaluation lists traits required for the job and asks the source to rate the individual on each attribute. A discrete scale is one that shows a number of different points. The ratings can include a scale of 1–10; excellent, average, or poor; or meets, exceeds, or doesn’t meet expectations, for example. A continuous scale shows a scale and the manager puts a mark on the continuum scale that best represents the employee’s performance. For example:

Poor

—

—

—

—

—

—

—

—

Excellent

The disadvantage of this type of scale is the subjectivity that can occur. This type of scale focuses on behavioral traits and is not specific enough to some jobs. Development of specific criteria can save an organization in legal costs. For example, in Thomas v. IBM, IBM was able to successfully defend accusations of age discrimination because of the objective criteria the employee (Thomas) had been rated on.

Many organizations use a graphic rating scale in conjunction with other appraisal methods to further solidify the tool’s validity. For example, some organizations use a mixed standard scale, which is similar to a graphic rating scale. This scale includes a series of mixed statements representing excellent, average, and poor performance, and the manager is asked to rate a “+” (performance is better than stated), “0” (performance is at stated level), or “−” (performance is below stated level). Mixed standard statements might include the following:

- The employee gets along with most coworkers and has had only a few interpersonal issues.

- This employee takes initiative.

- The employee consistently turns in below-average work.

- The employee always meets established deadlines.

An example of a graphic rating scale is shown in Figure “Example of Graphic Rating Scale”.

Essay Appraisal

In an essay appraisal, the source answers a series of questions about the employee’s performance in essay form. This can be a trait method and/or a behavioral method, depending on how the manager writes the essay. These statements may include strengths and weaknesses about the employee or statements about past performance. They can also include specific examples of past performance. The disadvantage of this type of method (when not combined with other rating systems) is that the manager’s writing ability can contribute to the effectiveness of the evaluation. Also, managers may write less or more, which means less consistency between performance appraisals by various managers.

Checklist Scale

A checklist method for performance evaluations lessens the subjectivity, although subjectivity will still be present in this type of rating system. With a checklist scale, a series of questions is asked and the manager simply responds yes or no to the questions, which can fall into either the behavioral or the trait method, or both. Another variation to this scale is a check mark in the criteria the employee meets, and a blank in the areas the employee does not meet. The challenge with this format is that it doesn’t allow more detailed answers and analysis of the performance criteria, unless combined with another method, such as essay ratings. A sample of a checklist scale is provided in Figure 11.3 “Example of Checklist Scale”.

Figure Example of Graphic Rating Scale

Figure  Example of Essay Rating

Figure Example of Checklist Scale

Critical Incident Appraisals

This method of appraisal, while more time-consuming for the manager, can be effective at providing specific examples of behavior. With a critical incident appraisal, the manager records examples of the employee’s effective and ineffective behavior during the time period between evaluations, which is in the behavioral category. When it is time for the employee to be reviewed, the manager will pull out this file and formally record the incidents that occurred over the time period. The disadvantage of this method is the tendency to record only negative incidents instead of postive ones. However, this method can work well if the manager has the proper training to record incidents (perhaps by keeping a weekly diary) in a fair manner. This approach can also work well when specific jobs vary greatly from week to week, unlike, for example, a factory worker who routinely performs the same weekly tasks.

Work Standards Approach

For certain jobs in which productivity is most important, a work standards approach could be the more effective way of evaluating employees. With this results-focused approach, a minimum level is set and the employee’s performance evaluation is based on this level. For example, if a sales person does not meet a quota of $1 million, this would be recorded as nonperforming. The downside is that this method does not allow for reasonable deviations. For example, if the quota isn’t made, perhaps the employee just had a bad month but normally performs well. This approach works best in long-term situations, in which a reasonable measure of performance can be over a certain period of time. This method is also used in manufacuring situations where production is extremely important. For example, in an automotive assembly line, the focus is on how many cars are built in a specified period, and therefore, employee performance is measured this way, too. Since this approach is centered on production, it doesn’t allow for rating of other factors, such as ability to work on a team or communication skills, which can be an important part of the job, too.

Ranking Methods

In a ranking method system (also called stack ranking), employees in a particular department are ranked based on their value to the manager or supervisor. This system is a comparative method for performance evaluations.The manager will have a list of all employees and will first choose the most valuable employee and put that name at the top. Then he or she will choose the least valuable employee and put that name at the bottom of the list. With the remaining employees, this process would be repeated. Obviously, there is room for bias with this method, and it may not work well in a larger organization, where managers may not interact with each employee on a day-to-day basis.

To make this type of evaluation most valuable (and legal), each supervisor should use the same criteria to rank each individual. Otherwise, if criteria are not clearly developed, validity and halo effects could be present. The Roper v. Exxon Corp case illustrates the need for clear guidelines when using a ranking system. At Exxon, the legal department attorneys were annually evaluated and then ranked based on input from attorneys, supervisors, and clients. Based on the feedback, each attorney for Exxon was ranked based on their relative contribution and performance. Each attorney was given a group percentile rank (i.e., 99 percent was the best-performing attorney). When Roper was in the bottom 10 percent for three years and was informed of his separation with the company, he filed an age discrimination lawsuit. The courts found no correlation between age and the lowest-ranking individuals, and because Exxon had a set of established ranking criteria, they won the case (Grote, 2005).

Another consideration is the effect on employee morale should the rankings be made public. If they are not made public, morale issues may still exist, as the perception might be that management has “secret” documents.

Fortune 500 Focus

Critics have long said that a forced ranking system can be detrimental to morale; it focuses too much on individual performance as opposed to team performance. Some say a forced ranking system promotes too much competition in the workplace. However, many Fortune 500 companies use this system and have found it works for their culture. General Electric (GE) used perhaps one of the most well-known forced ranking systems. In this system, every year managers placed their employees into one of three categories: “A” employees are the top 20 percent, “B” employees are the middle 70 percent, and “C” performers are the bottom 10 percent. In GE’s system, the bottom 10 percent are usually either let go or put on a performance plan. The top 20 percent are given more responsibility and perhaps even promoted. However, even GE has reinvented this stringent forced ranking system. In 2006, it changed the system to remove references to the 20/70/10 split, and GE now presents the curve as a guideline. This gives more freedom for managers to distribute employees in a less stringent manner^1.

The advantages of a forced ranking system include that it creates a high-performance work culture and establishes well-defined consequences for not meeting performance standards. In recent research, a forced ranking system seems to correlate well with return on investment to shareholders. For example, the study (Sprenkel, 2011) shows that companies who use individual criteria (as opposed to overall performance) to measure performance outperform those who measure performance based on overall company success. To make a ranking system work, it is key to ensure managers have a firm grasp on the criteria on which employees will be ranked. Companies using forced rankings without set criteria open themselves to lawsuits, because it would appear the rankings happen based on favoritism rather than quantifiable performance data. For example, Ford in the past used forced ranking systems but eliminated the system after settling class action lawsuits that claimed discrimination (Lowery, 2011). Conoco also has settled lawsuits over its forced ranking systems, as domestic employees claimed the system favored foreign workers (Lowery, 2011). To avoid these issues, the best way to develop and maintain a forced ranking system is to provide each employee with specific and measurable objectives, and also provide management training so the system is executed in a fair, quantifiable manner.

In a forced distribution system, like the one used by GE, employees are ranked in groups based on high performers, average performers, and nonperformers. The trouble with this system is that it does not consider that all employees could be in the top two categories, high or average performers, and requires that some employees be put in the nonperforming category.

In a paired comparison system, the manager must compare every employee with every other employee within the department or work group. Each employee is compared with another, and out of the two, the higher performer is given a score of 1. Once all the pairs are compared, the scores are added. This method takes a lot of time and, again, must have specific criteria attached to it when comparing employees.

Human Resource Recall

How can you make sure the performance appraisal ties into a specific job description?

Management by Objectives (MBO)

Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice of Management (Drucker, 2006). This method is results oriented and similar to the work standards approach, with a few differences. First, the manager and employee sit down together and develop objectives for the time period. Then when it is time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine whether they were met. The advantage of this is the open communication between the manager and the employee. The employee also has “buy-in” since he or she helped set the goals, and the evaluation can be used as a method for further skill development. This method is best applied for positions that are not routine and require a higher level of thinking to perform the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To write objectives, they should be SMART (Doran, 1981):

1. Specific. There should be one key result for each MBO. What is the result that should be achieved?

2. Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number can be attached to an objective to make it measurable, for example “sell $1,000,000 of new business in the third quarter.”

3. Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.

4. Result oriented. The objective should be tied to the company’s mission and values. Once the objective is made, it should make a difference in the organization as a whole.

5. Time limited. The objective should have a reasonable time to be accomplished, but not too much time.

Setting MBOs with Employees

To make MBOs an effective performance evaluation tool, it is a good idea to train managers and determine which job positions could benefit most from this type of method. You may find that for some more routine positions, such as administrative assistants, another method could work better.

Behaviorally Anchored Rating Scale (BARS)

A BARS method first determines the main performance dimensions of the job, for example, interpersonal relationships. Then the tool utilizes narrative information, such as from a critical incidents file, and assigns quantified ranks to each expected behavior. In this system, there is a specific narrative outlining what exemplifies a “good” and “poor” behavior for each category. The advantage of this type of system is that it focuses on the desired behaviors that are important to complete a task or perform a specific job. This method combines a graphic rating scale with a critical incidents system. The US Army Research Institute (Phillips, et. al., 2006) developed a BARS scale to measure the abilities of tactical thinking skills for combat leaders. Figure “Example of BARS” provides an example of how the Army measures these skills.

Figure Example of BARS

Figure  More Examples of Performance Appraisal Types

How Would You Handle This?

Playing Favorites

You were just promoted to manager of a high-end retail store. As you are sorting through your responsibilities, you receive an e-mail from HR outlining the process for performance evaluations. You are also notified that you must give two performance evaluations within the next two weeks. This concerns you, because you don’t know any of the employees and their abilities yet. You aren’t sure if you should base their performance on what you see in a short time period or if you should ask other employees for their thoughts on their peers’ performance. As you go through the files on the computer, you find a critical incident file left from the previous manager, and you think this might help. As you look through it, it is obvious the past manager had “favorite” employees and you aren’t sure if you should base the evaluations on this information. How would you handle this?

Table Advantages and Disadvantages of Each Performance Appraisal Method

Type of Performance Appraisal Method

Advantages

Disadvantages

Graphic Rating Scale

Inexpensive to develop

Subjectivity

Easily understood by employees and managers

Can be difficult to use in making compensation and promotion decisions

Essay

Can easily provide feedback on the positive abilities of the employee

Subjectivity

Writing ability of reviewer impacts validity

Time consuming (if not combined with other methods)

Checklist scale

Measurable traits can point out specific behavioral expectations

Does not allow for detailed answers or explanations (unless combined with another method)

Critical Incidents

Provides specific examples

Tendency to report negative incidents

Time consuming for manager

Work Standards Approach

Ability to measure specific components of the job

Does not allow for deviations

Ranking

Can create a high-performance work culture

Possible bias

Validity depends on the amount of interaction between employees and manager

Can negatively affect teamwork

MBOs

Open communication

Many only work for some types of job titles

Employee may have more “buy-in”

BARS

Focus is on desired behaviors

Time consuming to set up

Scale is for each specific job

Desired behaviors are clearly outlined

No one performance appraisal is best, so most companies use a variety of methods to ensure the best results.

Key Takeaways

- When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.

- The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.

- The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.

- In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.

- An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee’s job performance.

- A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee’s job.

- Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.

- The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.

- In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.

- An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.

- An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.

- A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.

Exercise

1. Review each of the appraisal methods and discuss which one you might use for the following types of jobs, and discuss your choices.

1. Administrative Assistant

2. Chief Executive Officer

3. Human Resource Manager

4. Retail Store Assistant Manager

1“The Struggle to Measure Performance,” BusinessWeek, January 9, 2006, accessed August 15, 2011, http://www.businessweek.com/magazine/content/06_02/b3966060.htm.

References

Doran, G. T., “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,” Management Review 70, no. 11 (1981): 35.

Drucker, P., The Practice of Management (New York: Harper, 2006).

Grote, R., Forced Ranking: Making Performance Management Work (Boston: Harvard Business School Press, 2005).

Lowery, M., “Forcing the Issue,” Human Resource Executive Online, n.d., accessed August 15, 2011, http://www.hrexecutive.com/HRE/story.jsp?storyId=4222111&query=ranks.

Phillips, J., Jennifer Shafter, Karol Ross, Donald Cox, and Scott Shadrick, Behaviorally Anchored Rating Scales for the Assessment of Tactical Thinking Mental Models (Research Report 1854), June 2006, US Army Research Institute for the Behavioral and Social Sciences, accessed August 15, 2011, http://www.hqda.army.mil/ari/pdf/RR1854.pdf.

Sprenkel, L., “Forced Ranking: A Good Thing for Business?” Workforce Management, n.d., accessed August 15, 2011, http://homepages.uwp.edu/crooker/790-iep-pm/Articles/meth-fd-workforce.pdf.

30

Completing and Conducting the Appraisal

Learning Objectives

1. Be able to discuss best practices in performance review planning.

2. Be able to write an improvement plan for an employee.

So far, we have discussed the necessity of providing formal feedback to employees through a systematic performance evaluation system. We have stressed the importance of making sure the HR professional knows how often performance evaluations should be given and if they are tied to pay increases.

The next step is to make sure you know the goals of the performance evaluation; for example, is the goal to improve performance and also identify people for succession planning? You will then determine the source for the performance evaluation data, and then create criteria and rating scales that relate directly to the employee’s job description. Once this is done, the successful functioning of the performance evaluation system largely depends on the HR professional to implement and communicate the system to managers and employees. This will be the primary focus of our next section.

Best Practices in Performance Appraisals

The most important things to remember when developing a performance evaluation system include the following:

1. Make sure the evaluation has a direct relationship to the job. Consider developing specific criteria for each job, based on the individual job specifications and description.

2. Involve managers when developing the process. Garner their feedback to obtain “buy-in” for the process.

3. Consider involving the employee in the process by asking the employee to fill out a self-evaluation.

4. Use a variety of methods to rate and evaluate the employee.

5. Avoid bias by standardizing performance evaluations systems for each job.

6. Give feedback on performance throughout the year, not just during performance review times.

7. Make sure the goals of the performance evaluation tie into the organizational and department goals.

8. Ensure the performance appraisal criteria also tie into the goals of the organization, for a strategic HRM approach.

9. Review the evaluation for each job title often, since jobs and expectations change.

Figure Best Practices in Performance Appraisal Systems

As you can see from Figure “Performance Review System”, the performance appraisal aspect is just one part of the total process. We can call this a performance review system. The first step of the process is goal setting with the employee. This could mean showing the employee his or her performance appraisal criteria or sitting down with the employee to develop MBOs. The basic idea here is that the employee should know the expectations and how his or her job performance will be rated.

Constant monitoring, feedback, and coaching are the next step. Ensuring the employee knows what he or she is doing well and is not doing well in a more informal manner will allow for a more productive employee.

Next, of course, is the formal performance evaluation process. Choosing the criteria, rating scale, and source of the evaluation are steps we have already discussed. The next step is to work with the employee to develop improvement plans (if necessary) and offer any rewards as a result of excellent performance. The process then begins again, setting new goals with the employee.

Figure  Performance Review System

Training Managers and Employees

As HR professionals, we know the importance of performance evaluation systems in developing employees, but this may not always be apparent to the managers we work with on a daily basis. It is our job to educate managers and employees on the standards for completing performance evaluation forms as well as train them on how to complete the necessary documents (criteria and ratings), how to develop improvement plans when necessary, and how to deliver the performance appraisal interview.

Employee Feedback

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=217

This video gives excellent tips on providing feedback to employees during the performance appraisal process.

First, after you have developed the new performance appraisal system (or adjusted an old one), consider offering training on how to effectively use it. The training, if required, can save time later and make the process more valuable. What we want to avoid is making it seem as if the performance appraisal process is “just one more thing” for managers to do. Show the value of the system in your training or, better yet, involve managers in developing the process to begin with.

Set standards should be developed for managers filling out the performance ratings and criteria. The advantage of this is accuracy of data and limiting possible bias. Consider these “ground rules” to ensure that information is similar no matter which manager is writing the evaluation:

1. Use only factual information and avoid opinion or perception.

2. For each section, comments should be at least two sentences in length, and examples of employee behavior should be provided.

3. Reviews must be complete and shared with the employee before the deadline.

4. Make messages clear and direct.

5. Focus on observable behaviors.

Once your managers are trained, understand how to fill out the forms, and are comfortable with the ground rules associated with the process, we can coach them on how to prepare for performance evaluations. For example, here are the steps you may want to discuss with your managers who provide performance evaluations:

1. Review the employee’s last performance evaluation. Note goals from the previous evaluation period.

2. Review the employee’s file and speak with other managers who interface with this person. In other words, gather data about performance.

3. Fill out the necessary forms for this employee’s appraisal. Note which areas you want to address in the appraisal interview with the employee.

4. If your organization bases pay increases on the performance evaluation, know the pay increase you are able to offer the employee.

5. Write any improvement plans as necessary.

6. Schedule a time and date with the employee.

Most people feel nervous about giving and receiving performance evaluations. One way to limit this is to show the employee the written evaluation before the interview, so the employee knows what to expect. To keep it a two-way conversation, many organizations have the employee fill out the same evaluation, and answers from the employee and manager are compared and discussed in the interview. When the manager meets with the employee to discuss the performance evaluation, the manager should be clear, direct, and to the point about positives and weaknesses. The manager should also discuss goals for the upcoming period, as well as any pay increases or improvement plans as a result of the evaluation. The manager should also be prepared for questions, concerns, and reasons for an employee’s not being able to meet performance standards.

Improvement plans should not be punitive, but the goal of an improvement plan should be to help the employee succeed. Improvement plans are discussed in Chapter 7 “Retention and Motivation”. Coaching and development should occur throughout the employee’s tenure, and he or she should know before the performance evaluation whether expectations are not being met. This way, the introduction of an improvement plan is not a surprise. There are six main components to an employee improvement plan:

1. Define the problem.

2. Discuss the behaviors that should be modified, based on the problem.

3. List specific strategies to modify the behavior.

4. Develop long- and short-term goals.

5. Define a reasonable time line for improvements.

6. Schedule “check-in” dates to discuss the improvement plan.

An employee improvement plan works best if it is written with the employee, to obtain maximum buy-in. Once you have developed the process and your managers are comfortable with it, the process must be managed. This is addressed in Section “Organizing the Performance Appraisal Process”.

Just the thought of a performance review can make even the most confident person stressed out.

Giuseppe Savo – stress – CC BY-NC-ND 2.0.

Organizing the Performance Appraisal Process

While it will be up to the individual manager to give performance appraisals to employees, as an HR professional, it will be up to you to develop the process (which we have already discussed) and to manage the process. Here are some things to consider to effectively manage the process:

1. Provide each manager with a job description for each employee. The job description should highlight the expectations of each job title and provide a sound basis for review.

2. Provide each manager with necessary documents, such as the criteria and rating sheets for each job description.

3. Give the manager instructions and ground rules for filling out the documents.

4. Work with the manager on pay increases for each employee, if your organization has decided to tie performance evaluations with pay increases.

5. Provide coaching assistance on objectives development and improvement plans, if necessary.

6. Give time lines to the manager for each performance review he or she is responsible for writing.

Most HR professionals will keep a spreadsheet or other document that lists all employees, their manager, and time lines for completion of performance evaluations. This makes it easier to keep track of when performance evaluations should be given.

Of course, the above process assumes the organization is not using software to manage performance evaluations. Numerous types of software are available that allow the HR professional to manage key job responsibilities and goals for every employee in the organization. This software tracks progress on those goals and allows the manager to enter notes (critical incidents files) online. The software can track 360 reviews and send e-mail reminders when it is time for an employee or manager to complete evaluations. This type of software can allow for a smoother, more streamlined process. Of course, as with any new system, it can be time-consuming to set up and train managers and employees on how to use the system. However, many organizations find the initial time to set up software or web-based performance evaluation systems well worth the easier recording and tracking of performance goals.

No matter how the system is managed, it must be managed and continually developed to meet the ultimate goal—continuing development of employees.

The Performance Appraisal

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=217

This role-play highlights some of the things NOT to do when discussing a performance evaluation with an employee.

Performance Appraisal Interviews

Once a good understanding of the process is developed, it is time to think about the actual meeting with the employee. A performance review process could be intricately detailed and organized, but if the meeting with the employee doesn’t go well, the overall strategic objective of performance reviews may not be met. In Norman R. F. Maier’s famous book The Appraisal Interview, he addressed three types of appraisal interview styles. The first is the tell and sell interview. In this type of interview, the manager does most of the talking and passes his or her view to the employee. In the tell and listen type of interview, the manager communicates feedback and then addresses the employee’s thoughts about the interview. In the problem-solving interview, the employee and the manager discuss the things that are going well and those that are not going well, which can make for a more productive discussion. To provide the best feedback to the employee, consider the following:

1. Be direct and specific. Use examples to show where the employee has room for improvement and where the employee exceeds expectations, such as, “The expectation is zero accidents, and you have not had any accidents this year.”

2. Do not be personal; always compare the performance to the standard. For example, instead of saying, “You are too slow on the production line,” say, the “expectations are ten units per hour, and currently you are at eight units.”

3. Remember, it is a development opportunity. As a result, encourage the employee to talk. Understand what the employee feels he does well and what he thinks he needs to improve.

4. Thank the employee and avoid criticism. Instead of the interview being a list of things the employee doesn’t do well (which may give the feeling of criticizing), thank the employee for what the employee does well, and work on action plans together to fix anything the employee isn’t doing well. Think of it as a team effort to get the performance to the standard it needs to be.

The result of a completed performance evaluation usually means there are a variety of ramifications that can occur after evaluating employee performance:

1. The employee now has written, documented feedback on his or her performance.

2. The organization has documented information on low performance, in case the employee needs to be dismissed.

3. The employee has performed well and is eligible for a raise.

4. The employee has performed well and could be promoted.

5. Performance is not up to expectations, so an improvement plan should be put into place.

6. The employee hasn’t done well, improvement plans have not worked (the employee has been warned before), and the employee should be dismissed.

In each of these cases, planning in advance of the performance appraisal interview is important, so all information is available to communicate to the employee. Consider Robin, an employee at Blewett Gravel who was told she was doing an excellent job. Robin was happy with the performance appraisal and when asked about promotion opportunities, the manager said none was available. This can devalue a positive review and impact employee motivation. The point, of course, is to use performance evaluations as a development tool, which will positively impact employee motivation.

Preparing and Giving the Performance Appraisal

A YouTube element has been excluded from this version of the text. You can view it online here: https://nicoletcollege.pressbooks.pub/humanresourcemanagement/?p=217

Some great tips on preparing for the performance appraisal meeting, and how to handle the meeting.

Key Takeaways

- There are many best practices to consider when developing, implementing, and managing a performance appraisal system. First, the appraisal system must always tie into organization goals and the individual employee’s job description.

- Involvement of managers in the process can initiate buy-in.

- Consider using self-evaluation tools as a method to create a two-way conversation between the manager and the employee.

- Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in conjunction with self- and manager evaluations can create a clearer picture of employee performance.

- Be aware of bias that can occur with performance appraisal systems.

- Feedback should be given throughout the year, not just at performance appraisal time.

- The goals of a performance evaluation system should tie into the organization’s strategic plan, and the goals for employees should tie into the organization’s strategic plan as well.

- The process for managing performance evaluations should include goal setting, monitoring and coaching, and doing the formal evaluation process. The evaluation process should involve rewards or improvement plans where necessary. At the end of the evaluation period, new goals should be developed and the process started over again.

- It is the HR professional’s job to make sure managers and employees are trained on the performance evaluation process.

- Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.

- The HR professional can assist managers by providing best practices information on how to discuss the evaluation with the employee.

- Sometimes when performance is not up to standard, an improvement plan may be necessary. The improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the expected behavior. The improvement plan should also address goals, time lines to meet the goals, and check-in dates for status on the goals.

- It is the job of the HR professional to organize the process for the organization. HR should provide the manager with training, necessary documents (such as criteria and job descriptions), instructions, pay increase information, and coaching, should the manager have to develop improvement plans.

- Some HR professionals organize the performance evaluation information in an Excel spreadsheet that lists all employees, job descriptions, and due dates for performance evaluations.

- There are many types of software programs available to manage the process. This software can manage complicated 360 review processes, self-evaluations, and manager’s evaluations. Some software can also provide time line information and even send out e-mail reminders.

- The performance evaluation process should be constantly updated and managed to ensure the results contribute to the success of the organization.

- A variety of ramifications can occur, from the employee’s earning a raise to possible dismissal, all of which should be determined ahead of the performance appraisal interview.

Exercises

1. What are the important aspects of an improvement plan? Why are these so important?

2. Name and describe three best practices for a performance evaluation system.

31

Cases and Problems

Chapter Summary

- A performance evaluation system is a systematic way to examine how well an employee is performing in his or her job.

- The use of the term systematic implies the process should be planned.

- Depending on which research you read, some believe the performance evaluation system is one of the most important to consider in HRM, but others view it as a flawed process, which makes it less valuable and therefore ineffective.

- The first step in designing a performance appraisal process is to determine how often the appraisals will be given. Consideration of time and effort to administer the evaluation should be a deciding factor.

- Many companies offer pay increases as part of the system, while some companies prefer to separate the process. Determining how this will be handled is the next step in the performance appraisal development process.

- Goals of the performance evaluation should be discussed before the process is developed. In other words, what does the company hope to gain from this process? Asking managers and employees for their feedback on this is an important part of this consideration.

- After determining how often the evaluations should be given, and if pay will be tied to the evaluations and goals, you can now sit down and develop the process. First, determine what forms will be used to administer the process.

- After you have determined what forms will be used (or developed), determine who will be the source for the information. Managers, peers, and customers are options. A 360 review process combines several sources for a more thorough review.

- There are some errors that can occur in the process. These include halo effects or comparing an employee to another as opposed to rating them only on the objectives.

- Performance evaluations should always be based on the actual job description.

- Our last step in the development of this process is to communicate the process and train our employees and managers on the process. Also, training on how best to use feedback is the final and perhaps most important step of the process.

- When developing performance appraisal criteria, it is important to remember the criteria should be job specific and industry specific.

- The performance appraisal criteria should be based on the job specifications of each specific job. General performance criteria are not an effective way to evaluate an employee.

- The rating is the scale that will be used to evaluate each criteria item. There are a number of different rating methods, including scales of 1–5, yes or no questions, and essay.

- In a graphic rating performance evaluation, employees are rated on certain desirable attributes. A variety of rating scales can be used with this method. The disadvantage is possible subjectivity.

- An essay performance evaluation will ask the manager to provide commentary on specific aspects of the employee’s job performance.

- A checklist utilizes a yes or no rating selection, and the criteria are focused on components of the employee’s job.

- Some managers keep a critical incidents file. These incidents serve as specific examples to be written about in a performance appraisal. The downside is the tendency to record only negative incidents and the time it can take to record this.

- The work standards performance appraisal approach looks at minimum standards of productivity and rates the employee performance based on minimum expectations. This method is often used for sales forces or manufacturing settings where productivity is an important aspect.

- In a ranking performance evaluation system, the manager ranks each employee from most valuable to least valuable. This can create morale issues within the workplace.

- An MBO or management by objectives system is where the manager and employee sit down together, determine objectives, then after a period of time, the manager assesses whether those objectives have been met. This can create great development opportunities for the employee and a good working relationship between the employee and manager.

- An MBO’s objectives should be SMART: specific, measurable, attainable, results oriented, and time limited.

- A BARS approach uses a rating scale but provides specific narratives on what constitutes good or poor performance.

- There are many best practices to consider when developing, implementing, and managing a performance appraisal system. First, the appraisal system must always tie into organization goals and the individual employee’s job description.

- Involvement of managers in the process can initiate buy-in for the process.

- Consider using self-evaluation tools as a method to create a two-way conversation between the manager and the employee.

- Use a variety of rating methods to ensure a more unbiased result. For example, using peer evaluations in conjunction with self and manager evaluations can create a clearer picture of employee performance.

- Be aware of bias that can occur with performance appraisal systems.

- Feedback should be given throughout the year, not just at performance appraisal time.

- The goals of a performance evaluation system should tie into the organization’s strategic plan, and the goals for employees should tie into the organization’s strategic plan as well.

- The process for managing performance evaluations should include goal setting, monitoring and coaching, and doing the formal evaluation process. The evaluation process should involve rewards or improvement plans where necessary. At the end of the evaluation period, new goals should be developed and the process started over again.

- It is the HR professional’s job to make sure managers and employees are trained on the performance evaluation process.

- Standards should be developed for filling out employee evaluations, to ensure consistency and avoid bias.

- The HR professional can assist managers by providing best practices information on how to discuss the evaluation with the employee.

- Sometimes when performance is not up to standard, an improvement plan may be necessary. The improvement plan identifies the problem, the expected behavior, and the strategies needed to meet the expected behavior. The improvement plan should also address goals, time lines to meet the goals, and check-in dates for status on the goals.

- It is the job of the HR professional to organize the process for the organization. HR should provide the manager with training, necessary documents (such as criteria and job descriptions), instructions, pay increase information, and coaching, should the manager have to develop improvement plans.

- Some HR professionals organize the performance evaluation information in an Excel spreadsheet that lists all employees, job descriptions, and due dates for performance evaluations.

- There are many types of software available to manage the process. This software can manage complicated 360 review processes, self-evaluations, and manager’s evaluations. Some software can also provide time line information and even send out e-mail reminders.

- The performance evaluation process should be constantly updated and managed to ensure the results contribute to the success of the organization.

Chapter Case

Revamping the System

It is your first six months at your new job as an HR assistant at Groceries for You, a home delivery grocery service. When you ask the HR director, Chang, about performance evaluations, he just rolls his eyes and tells you to schedule a meeting in his Outlook calendar to discuss them. In the meantime, you gather some data that might be helpful in your discussion with Chang.

Number of managers

4

Number of employees

82

Average span of control

Delivery—38

Warehouse—24

Marketing/technology—16

Job types

11—customer service

1—delivery manager

1—warehouse manager

1—marketing and technology manager

38—delivery drivers

24—warehouse workers

1—tech support

5—marketing and website design

When you meet, Chang is very forward with you about the current process. “Right now, managers groan when they are told they need to complete evaluations. The evaluations are general—we use the same form for all jobs in the organization. It appears that promotion decisions are not based on the evaluations but instead tend to be based on subjective criteria, such as how well the manager likes the individual. We really need to get a handle on this system, but I haven’t had the time to do it. I am hoping you can make some recommendations for our system and present them to me and then to the managers during next month’s meeting. Can you do this?”

1. Detail each step you will take as you develop a new performance evaluation system.

2. Identify specifics such as source, type of rating system, and criteria plans for each job category. Discuss budget for each performance evaluation. Address how you will obtain management buy-in for the new process.

3. Develop PowerPoint slides for your presentation to management about your proposed process and forms.

Team Activity

1. In a group of three to four, develop a performance evaluation sheet, using at least two methods, for the following job description, and present to the class:

Job Class Specification for:

ACCOUNTANT, City of Seattle

Class Specification Schematic Number: 2000504

Class Summary:

Performs a variety of professional accounting functions and tasks for a city department or utility. Audits, monitors, researches, and recommends revisions to accounting procedures and operations. Performs and coordinates the maintenance and production of accounting reports and records and ensures compliance with established accounting procedures and practices.

Distinguishing Characteristics of the Class:

The accountant class is capable of performing a range of professional accounting functions and tasks within the established guidelines of the department/city and according to generally accepted accounting practices, procedures, and methods. This class is supervised by a higher level accountant or manager and supervises accounting support personnel as required.

Assignments are performed under moderate supervision within established guidelines, generally accepted accounting principles, standards, and methods. Receives direction on special projects or where guidelines and rules are unclear. Knowledge of accounting practices, methods, laws, rules, ordinances, and regulations is required to determine the most appropriate accounting methods and procedures to apply and to ensure appropriate compliance.

Personal contacts are with department employees, other departments, agencies, or the public to provide information, coordinate work activities, and resolve problems.

Examples of Work:

- Analyzes and prepares cash flow forecasts and updates forecasts based on actual revenues and expenditures.

- Prepares financial reports, statements, and schedules.

- Audits and reconciles assigned accounts in the general ledger.

- Monitors and controls accounting activities in the recording of financial transactions, that is, accounts receivables, accounts payables, collections, and fixed assets.

- Verifies and reviews accounting transactions. Makes appropriate corrections, entries, and adjustments to ensure accuracy of reports.

- Researches, analyzes, and prepares journals for financial transactions.

- Analyzes and maintains subsidiary ledgers (i.e., investments). Monitors and maintains investment ledger entries and investment schedules.

- Prepares variance reports required by outside auditors and program summaries explaining variances.

- Coordinates, trains, and monitors the work of accounting support personnel to ensure proper work operations.

- Assists in development and modification of internal accounting control policies, procedures, and practices.

- Assists in special projects such as research and analysis of financial information, long-term debt schedules, investment security reports, and reports for special information requested by departmental personnel.

- Performs other related duties of a comparable level/type as assigned.

Work Environment/Physical Demands:

Work is performed in an office environment.

Minimum Qualifications:

Bachelor’s Degree in Accounting (or a combination of education and/or training and/or experience that provides an equivalent background required to perform the work of the class).

Learning Objectives

After reading this chapter, you should understand the following:

1. How common-law employment at will is modified by common-law doctrine, federal statutes, and state statutes

2. Various kinds of prohibited discrimination under Title VII and examples of each kind

3. The various other protections for employees imposed by federal statute, including the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA)

In the next chapter, we will examine the laws that govern the relationship between the employer and the employee who belongs, or wants to belong, to a union. Although federal labor law is confined to that relationship, laws dealing with the employment relationship—both state and federal—are far broader than that. Because most employees do not belong to unions, a host of laws dealing with the many faces of discrimination shapes employers’ power over and duties to their employees. Beyond the issue of discrimination, the law also governs a number of other issues, such as the extent to which an employer may terminate the relationship itself. We examine these issues later in this chapter.

Even before statutes governing collective bargaining and various state and federal discrimination laws, the common law set the boundaries for employer-employee relationships. The basic rule that evolved prior to the twentieth century was “employment at will.” We will look at employment at will toward the end of this chapter. But as we go through the key statutes on employment law and employment discrimination, bear in mind that these statutes stand as an important set of exceptions to the basic common-law rule of employment at will. That rule holds that in the absence of a contractual agreement otherwise, an employee is free to leave employment at any time and for any reason; similarly, an employer is free to fire employees at any time and for any reason.

32

Federal Employment Discrimination Laws

Learning Objectives

1. Know the various federal discrimination laws and how they are applied in various cases.

2. Distinguish between disparate impact and disparate treatment cases.

3. Understand the concept of affirmative action and its limits in employment law.

As we look at federal employment discrimination laws, bear in mind that most states also have laws that prohibit various kinds of discriminatory practices in employment. Until the 1960s, Congress had intruded but little in the affairs of employers except in union relationships. A company could refuse to hire members of racial minorities, exclude women from promotions, or pay men more than women for the same work. But with the rise of the civil rights movement in the early 1960s, Congress (and many states) began to legislate away the employer’s frequently exercised power to discriminate. The most important statutes are Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967, and the Americans with Disabilities Act of 1990.

Title VII of the Civil Rights Act of 1964

The most basic antidiscrimination law in employment is in Title VII of the federal Civil Rights Act of 1964. The key prohibited discrimination is that based on race, but Congress also included sex, religion, national origin, and color as prohibited bases for hiring, promotion, layoff, and discharge decisions. To put the Civil Rights Act in its proper context, a short history of racial discrimination in the United States follows.

The passage of the Civil Rights Act of 1964 was the culmination of a long history that dated back to slavery, the founding of the US legal system, the Civil War, and many historical and political developments over the ninety-nine years from the end of the Civil War to the passage of the act. The years prior to 1964 had seen a remarkable rise of civil disobedience, led by many in the civil rights movement but most prominently by Dr. Martin Luther King Jr. Peaceful civil disobedience was sometimes met with violence, and television cameras were there to record most of it.

While the Civil War had addressed slavery and the secession of Southern states, the Thirteenth, Fourteenth, and Fifteenth Amendments, ratified just after the war, provided for equal protection under the law, guaranteed citizenship, and protected the right to vote for African Americans. The amendments also allowed Congress to enforce these provisions by enacting appropriate, specific legislation.

But during the Reconstruction Era, many of the Southern states resisted the laws that were passed in Washington, DC, to bolster civil rights. To a significant extent, decisions rendered by the US Supreme Court in this era—such as Plessy v. Ferguson, condoning “separate but equal” facilities for different races—restricted the utility of these new federal laws. The states effectively controlled the public treatment of African Americans, and a period of neglect set in that lasted until after World War II. The state laws essentially mandated segregated facilities (restaurants, hotels, schools, water fountains, public bathrooms) that were usually inferior for blacks.

Along with these Jim Crow laws in the South, the Ku Klux Klan was very strong, and lynchings (hangings without any sort of public due process) by the Klan and others were designed to limit the civil and economic rights of the former slaves. The hatred of blacks from that era by many whites in America has only gradually softened since 1964. Even as the civil rights bill was being debated in Congress in 1964, some Young Americans for Freedom in the right wing of the GOP would clandestinely chant “Be a man, join the Klan” and sing “We will hang Earl Warren from a sour apple tree,” to the tune of “Battle Hymn of the Republic,” in anger over the Chief Justice’s presiding over Brown v. Board of Education, which reversed Plessy v. Ferguson.

But just a few years earlier, the public service and heroism of many black military units and individuals in World War II had created a perceptual shift in US society; men of many races who had served together in the war against the Axis powers (fascism in Europe and the Japanese emperor’s rule in the Pacific) began to understand their common humanity. Major migrations of blacks from the South to industrial cities of the North also gave impetus to the civil rights movement.

Bills introduced in Congress regarding employment policy brought the issue of civil rights to the attention of representatives and senators. In 1945, 1947, and 1949, the House of Representatives voted to abolish the poll tax. The poll tax was a method used in many states to confine voting rights to those who could pay a tax, and often, blacks could not. The Senate did not go along, but these bills signaled a growing interest in protecting civil rights through federal action. The executive branch of government, by presidential order, likewise became active by ending discrimination in the nation’s military forces and in federal employment and work done under government contract.

The Supreme Court gave impetus to the civil rights movement in its reversal of the “separate but equal” doctrine in the Brown v. Board of Education decision. In its 1954 decision, the Court said, “To separate black children from others of similar age and qualifications solely because of their race generates a feeling of inferiority as to their status in the community that may affect their hearts and minds in a way never to be undone.…We conclude that in the field of public education the doctrine of separate but equal has no place. Separate educational facilities are inherently unequal.”

This decision meant that white and black children could not be forced to attend separate public schools. By itself, however, this decision did not create immediate gains, either in public school desegregation or in the desegregation of other public facilities. There were memorable standoffs between federal agents and state officials in Little Rock, Arkansas, for example; the Democratic governor of Arkansas personally blocked young black students from entering Little Rock’s Central High School, and it was only President Eisenhower’s order to have federal marshals accompany the students that forced integration. The year was 1957.

But resistance to public school integration was widespread, and other public facilities were not governed by the Brown ruling. Restaurants, hotels, and other public facilities were still largely segregated. Segregation kept blacks from using public city buses, park facilities, and restrooms on an equal basis with whites. Along with inferior schools, workplace practices throughout the South and also in many Northern cities sharply limited African Americans’ ability to advance economically. Civil disobedience began to grow.

The bus protests in Montgomery, Alabama, were particularly effective. Planned by civil rights leaders, Rosa Parks’s refusal to give up her seat to a white person and sit at the back of the public bus led to a boycott of the Montgomery bus system by blacks and, later, a boycott of white businesses in Montgomery. There were months of confrontation and some violence; finally, the city agreed to end its long-standing rules on segregated seating on buses.

There were also protests at lunch counters and other protests on public buses, where groups of Northern protesters—Freedom Riders—sometimes met with violence. In 1962, James Meredith’s attempt to enroll as the first African American at the University of Mississippi generated extreme hostility; two people were killed and 375 were injured as the state resisted Meredith’s admission. The murders of civil rights workers Medgar Evers and William L. Moore added to the inflamed sentiments, and whites in Birmingham, Alabama, killed four young black girls who were attending Sunday school when their church was bombed.

These events were all covered by the nation’s news media, whose photos showed beatings of protesters and the use of fire hoses on peaceful protesters. Social tensions were reaching a postwar high by 1964. According to the government, there were nearly one thousand civil rights demonstrations in 209 cities in a three-month period beginning May 1963. Representatives and senators could not ignore the impact of social protest. But the complicated political history of the Civil Rights Act of 1964 also tells us that the legislative result was anything but a foregone conclusion.See CongressLink, “Major Features of the Civil Rights Act of 1964,” at http://www.congresslink.org/print_basics_histmats_civilrights64text.htm.

In Title VII of the Civil Rights Act of 1964, Congress for the first time outlawed discrimination in employment based on race, religion, sex, or national origin:. Title VII declares: “It shall be an unlawful employment practice for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” Title VII applies to (1) employers with fifteen or more employees whose business affects interstate commerce, (2) all employment agencies, (3) labor unions with fifteen or more members, (4) state and local governments and their agencies, and (5) most federal government employment.

In 1984, the Supreme Court said that Title VII applies to partnerships as well as corporations when ruling that it is illegal to discriminatorily refuse to promote a female lawyer to partnership status in a law firm. This applies, by implication, to other fields, such as accounting.Hishon v. King & Spalding, 467 U.S. 69 (1984). The remedy for unlawful discrimination is back pay and hiring, reinstatement, or promotion.

Title VII established the Equal Employment Opportunity Commission (EEOC) to investigate violations of the act. A victim of discrimination who wishes to file suit must first file a complaint with the EEOC to permit that agency to attempt conciliation of the dispute. The EEOC has filed a number of lawsuits to prove statistically that a company has systematically discriminated on one of the forbidden bases. The EEOC has received perennial criticism for its extreme slowness in filing suits and for failure to handle the huge backlog of complaints with which it has had to wrestle.

The courts have come to recognize two major types of Title VII cases:

1. Cases of disparate treatment

- In this type of lawsuit, the plaintiff asserts that because of race, sex, religion, or national origin, he or she has been treated less favorably than others within the organization. To prevail in a disparate treatment suit, the plaintiff must show that the company intended to discriminate because of one of the factors the law forbids to be considered. Thus in McDonnell Douglas Corp. v. Green, the Supreme Court held that the plaintiff had shown that the company intended to discriminate by refusing to rehire him because of his race.McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). In general, there are two types of disparate treatment cases: (1) pattern-and-practice cases, in which the employee asserts that the employer systematically discriminates on the grounds of race, religion, sex, or national origin; and (2) reprisal or retaliation cases, in which the employee must show that the employer discriminated against him or her because that employee asserted his or her Title VII rights.

2. Cases of disparate impact

- In this second type of Title VII case, the employee need not show that the employer intended to discriminate but only that the effect, or impact, of the employer’s action was discriminatory. Usually, this impact will be upon an entire class of employees. The plaintiff must demonstrate that the reason for the employer’s conduct (such as refusal to promote) was not job related. Disparate impact cases often arise out of practices that appear to be neutral or nondiscriminatory on the surface, such as educational requirements and tests administered to help the employer choose the most qualified candidate. In the seminal case of Griggs v. Duke Power Co., the Supreme Court held that under Title VII, an employer is not free to use any test it pleases; the test must bear a genuine relationship to job performance.Griggs v. Duke Power Co., 401 U.S. 424 (1971).Griggs stands for the proposition that Title VII “prohibits employment practices that have discriminatory effects as well as those that are intended to discriminate.”

Figure  A Checklist of Employment Law

Discrimination Based on Religion

An employer who systematically refuses to hire Catholics, Jews, Buddhists, or members of any other religious group engages in unlawful disparate treatment under Title VII. But refusal to deal with someone because of his or her religion is not the only type of violation under the law. Title VII defines religion as including religious observances and practices as well as belief and requires the employer to “reasonably accommodate to an employee’s or prospective employee’s religious observance or practice” unless the employer can demonstrate that a reasonable accommodation would work an “undue hardship on the conduct of the employer’s business.” Thus a company that refused even to consider permitting a devout Sikh to wear his religiously prescribed turban on the job would violate Title VII.

But the company need not make an accommodation that would impose more than a minimal cost. For example, an employee in an airline maintenance department, open twenty-four hours a day, wished to avoid working on his Sabbath. The employee belonged to a union, and under the collective bargaining agreement, a rotation system determined by seniority would have put the worker into a work shift that fell on his Sabbath. The Supreme Court held that the employer was not required to pay premium wages to someone whom the seniority system would not require to work on that day and could discharge the employee if he refused the assignment.Trans World Airlines v. Hardison, 432 U.S. 63 (1977).

Title VII permits religious organizations to give preference in employment to individuals of the same religion. Obviously, a synagogue looking for a spiritual leader would hire a rabbi and not a priest.

Sex Discrimination

A refusal to hire or promote a woman simply because she is female is a clear violation of Title VII. Under the Pregnancy Act of 1978, Congress declared that discrimination because of pregnancy is a form of sex discrimination. Equal pay for equal or comparable work has also been an issue in sex (or gender) discrimination. Barbano v. Madison County (see Section 50.4.1 “Disparate Treatment: Burdens of Proof”), presents a straightforward case of sex discrimination. In that case, notice how the plaintiff has the initial burden of proving discriminatory intent and how the burden then shifts to the defendant to show a plausible, nondiscriminatory reason for its hiring decision.

The late 1970s brought another problem of sex discrimination to the fore: sexual harassment. There is much fear and ignorance about sexual harassment among both employers and employees. Many men think they cannot compliment a woman on her appearance without risking at least a warning by the human resources department. Many employers have spent significant time and money trying to train employees about sexual harassment, so as to avoid lawsuits. Put simply, sexual harassment involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature.

There are two major categories of sexual harassment: (1) quid pro quo and (2) hostile work environment.

Quid pro quo comes from the Latin phrase “one thing in return for another.” If any part of a job is made conditional on sexual activity, there is quid pro quo sexual harassment. Here, one person’s power over another is essential; a coworker, for example, is not usually in a position to make sexual demands on someone at his same level, unless he has special influence with a supervisor who has power to hire, fire, promote, or change work assignments. A supervisor, on the other hand, typically has those powers or the power to influence those kinds of changes. For example, when the male foreman says to the female line worker, “I can get you off of the night shift if you’ll sleep with me,” there is quid pro quo sexual harassment.

In Harris v. Forklift Systems, Inc.Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993). and in Meritor v. Vinson,Meritor v. Vinson, 477 U.S. 57 (1986). we see examples of hostile work environment. Hostile work environment claims are more frequent than quid pro quo claims and so are more worrisome to management. An employee has a valid claim of sexual harassment if sexual talk, imagery, or behavior becomes so pervasive that it interferes with the employee’s ability to work to her best capacity. On occasion, courts have found that offensive jokes, if sufficiently frequent and pervasive in the workplace, can create a hostile work environment. Likewise, comments about body parts or public displays of pornographic pictures can also create a hostile work environment. In short, the plaintiff can be detrimentally offended and hindered in the workplace even if there are no measurable psychological injuries.

In the landmark hostile work environment case of Meritor v. Vinson, the Supreme Court held that Title VII’s ban on sexual harassment encompasses more than the trading of sexual favors for employment benefits. Unlawful sexual harassment also includes the creation of a hostile or offensive working environment, subjecting both the offending employee and the company to damage suits even if the victim was in no danger of being fired or of losing a promotion or raise.

In recalling Harris v. Forklift Systems (Chapter 1 “Introduction to Law and Legal Systems”, Section 1.6 “A Sample Case”), we see that the “reasonable person” standard is declared by the court as follows: “So long as the environment would reasonably be perceived, and is perceived, as hostile or abusive there is no need for it also to be psychologically injurious.” In Duncan v. General Motors Corporation (see Section 50.4.2 “Title VII and Hostile Work Environment”), Harris is used as a precedent to deny relief to a woman who was sexually harassed, because the court believed the conditions were not severe or pervasive enough to unreasonably interfere with her work.

Sex discrimination in terms of wages and benefits is common enough that a number of sizeable class action lawsuits have been brought. A class action lawsuit is generally initiated by one or more people who believe that they, along with a group of other people, have been wronged in similar ways. Class actions for sexual harassment have been successful in the past. On June 11, 1998, the EEOC reached a $34 million settlement with Mitsubishi over allegations of widespread sexual harassment at the Normal, Illinois, auto plant. The settlement involved about five hundred women who split the $34 million, although only seven received the maximum $300,000 allowed by law. The others received amounts ranging from $8,000 to $225,000.

Class action lawsuits involve specific plaintiffs (called class plaintiffs or class representatives) who are named in the class action lawsuit to assert the claims of the unnamed or absent members of the class; thus all those with a common complaint need not file their own separate lawsuit. From the point of view of plaintiffs who may have lost only a few thousand dollars annually as a result of the discrimination, a class action is advantageous: almost no lawyer would take a complicated civil case that had a potential gain of only a few thousand dollars. But if there are thousands of plaintiffs with very similar claims, the judgment could be well into the millions. Defendants can win the procedural battle by convincing a court that the proposed class of plaintiffs does not present common questions of law or of fact.

In the Wal-Mart class action case decided by the Supreme Court in 2011, three named plaintiffs (Dukes, Arana, and Kwapnoski) represented a proposed class of 1.5 million current or former Wal-Mart employees. The plaintiffs’ attorneys asked the trial court in 2001 to certify as a class all women employed at any Wal-Mart domestic retail store at any time since December of 1998. As the case progressed through the judicial system, the class grew in size. If the class was certified, and discrimination proven, Wal-Mart could have been liable for over $1 billion in back pay. So Wal-Mart argued that as plaintiffs, the cases of the 1.5 million women did not present common questions of law or of fact—that is, that the claims were different enough that the Court should not allow a single class action lawsuit to present such differing kinds of claims. Initially, a federal judge disagreed, finding the class sufficiently coherent for purposes of federal civil procedure. The US Court of Appeals for the Ninth Circuit upheld the trial judge on two occasions.

But the US Supreme Court agreed with Wal-Mart. In the majority opinion, Justice Scalia discussed the commonality condition for class actions.

Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.564 U.S. ___ (2011).

Finding that there was no common contention, the Supreme Court reversed the lower courts. Many commentators, and four dissenting Justices, believed that the majority opinion has created an unnecessarily high hurdle for class action plaintiffs in Title VII cases.

Discrimination Based on Race, Color, and National Origin

Title VII was primarily enacted to prohibit employment discrimination based on race, color, and national origin. Race refers to broad categories such as black, Caucasian, Asian, and Native American. Color simply refers to the color of a person’s skin, and national origin refers to the country of the person’s ancestry.

Exceptions to Title VII

Merit

Employers are allowed to select on merit and promote on merit without offending title VII’s requirements. Merit decisions are usually based on work, educational experience, and ability tests. All requirements, however, must be job related. For example, the ability to lift heavy cartons of sixty pounds or more is appropriate for certain warehouse jobs but is not appropriate for all office workers. The ability to do routine maintenance (electrical, plumbing, construction) is an appropriate requirement for maintenance work but not for a teaching position. Requiring someone to have a high school degree, as in Griggs vs. Duke Power Co., is not appropriate as a qualification for common labor.

Seniority

Employers may also maintain seniority systems that reward workers who have been with the company for a long time. Higher wages, benefits, and choice of working hours or vacation schedules are examples of rewards that provide employees with an incentive to stay with the company. If they are not the result of intentional discrimination, they are lawful. Where an employer is dealing with a union, it is typical to see seniority systems in place.

Bona Fide Occupational Qualification (BFOQ)

For certain kinds of jobs, employers may impose bona fide occupational qualifications (BFOQs). Under the express terms of Title VII, however, a bona fide (good faith) occupational qualification of race or color is never allowed. In the area of religion, as noted earlier, a group of a certain religious faith that is searching for a new spiritual leader can certainly limit its search to those of the same religion. With regard to sex (gender), allowing women to be locker-room attendants only in a women’s gym is a valid BFOQ. One important test that the courts employ in evaluating an employer’s BFOQ claims is the “essence of the business” test.

In Diaz v. Pan American World Airways, Inc., the airline maintained a policy of exclusively hiring females for its flight attendant positions.Diaz v. Pan American World Airways, Inc., 442 F.2d 385 (5th Cir. 1971). The essence of the business test was established with the court’s finding that “discrimination based on sex is valid only when the essence of the business operation would be undermined by not hiring members of one sex exclusively.” Although the court acknowledged that females might be better suited to fulfill the required duties of the position, this was not enough to fulfill the essence of the business test:

The primary function of an airline is to transport passengers safely from one point to another. While a pleasant environment, enhanced by the obvious cosmetic effect that female stewardesses provide as well as…their apparent ability to perform the non-mechanical functions of the job in a more effective manner than most men, may all be important, they are tangential to the essence of the business involved. No one has suggested that having male stewards will so seriously affect the operation of an airline as to jeopardize or even minimize its ability to provide safe transportation from one place to another.Diaz v. Pan American World Airways, Inc., 442 F.2d 385 (5th Cir. 1971).

The reason that airlines now use the gender-neutral term flight attendant is a direct result of Title VII. In the 1990s, Hooters had some difficulty convincing the EEOC and certain male plaintiffs that only women could be hired as waitstaff in its restaurants. With regard to national origin, directors of movies and theatrical productions would be within their Title VII BFOQ rights to restrict the roles of fictional Asians to those actors whose national origin was Asian, but could also permissibly hire Caucasian actors made up in “yellow face.”

Defenses in Sexual Harassment Cases

In the 1977 term, the US Supreme Court issued two decisions that provide an affirmative defense in some sexual harassment cases. In Faragher v. City of Boca RatonFaragher v. City of Boca Raton, 524 U.S. 775 (1998). and in Burlington Industries, Inc. v. Ellerth,Burlington Industries v. Ellerth, 524 U.S. 742 (1988). female employees sued for sexual harassment. In each case, they proved that their supervisors had engaged in unconsented-to touching as well as verbal sexual harassment. In both cases, the plaintiff quit her job and, after going through the EEOC process, got a right-to-sue letter and in fact sued for sexual harassment. In Faragher, the employer had never disseminated the policy against sexual harassment to its employees. But in the second case, Burlington Industries, the employer had a policy that was made known to employees. Moreover, a complaints system had been established that was not used by the female employee.

Both opinions rejected the notion of strict or automatic liability for employers when agents (employees) engage in sexual harassment. But the employer can have a valid defense to liability if it can prove (1) that it exercised reasonable care to prevent and correct any sexual harassment behaviors and (2) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to otherwise avoid harm. As with all affirmative defenses, the employer has the burden of proving this defense.

Affirmative Action

Affirmative action is mentioned in the statutory language of Title VII, as courts have the power to order affirmative action as a remedy for the effects of past discriminatory actions. In addition to court-ordered affirmative action, employers may voluntarily use an affirmative action plan to remedy the effects of past practices or to achieve diversity within the workforce to reflect the diversity in their community. In Johnson v. Santa Clara County Transportation Agency,Johnson v. Santa Clara County Transportation Agency, 480 U.S. 616 (1987). the agency had an affirmative action plan. A woman was promoted from within to the position of dispatcher, even though a male candidate had a slightly higher score on a test that was designed to measure aptitude for the job. The man brought a lawsuit alleging sex discrimination. The Court found that voluntary affirmative action was not reverse discrimination in this case, but employers should be careful in hiring and firing and layoff decisions versus promotion decisions. It is in the area of promotions that affirmative action is more likely to be upheld.

In government contracts, President Lyndon Johnson’s Executive Order 11246 prohibits private discrimination by federal contractors. This is important, because one-third of all US workers are employed by companies that do business with the federal government. Because of this executive order, many companies that do business with the government have adopted voluntary affirmative action programs. In 1995, the Supreme Court limited the extent to which the government could require contractors to establish affirmative action programs. The Court said that such programs are permissible only if they serve a “compelling national interest” and are “narrowly tailored” so that they minimize the harm to white males. To make a requirement for contractors, the government must show that the programs are needed to remedy past discrimination, that the programs have time limits, and that nondiscriminatory alternatives are not available.Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995).

The Age Discrimination in Employment Act

The Age Discrimination in Employment Act (ADEA) of 1967 (amended in 1978 and again in 1986) prohibits discrimination based on age, and recourse to this law has been growing at a faster rate than any other federal antibias employment law. In particular, the act protects workers over forty years of age and prohibits forced retirement in most jobs because of age. Until 1987, federal law had permitted mandatory retirement at age seventy, but the 1986 amendments that took effect January 1, 1987, abolished the age ceiling except for a few jobs, such as firefighters, police officers, tenured university professors, and executives with annual pensions exceeding $44,000. Like Title VII, the law has a BFOQ exception—for example, employers may set reasonable age limitations on certain high-stress jobs requiring peak physical condition.

There are important differences between the ADEA and Title VII, as Gross v. FBL Financial Services, Inc. (Section 50.4.3 “Age Discrimination: Burden of Persuasion”) makes clear. It is now more difficult to prove an age discrimination claim than a claim under Title VII.

Disabilities: Discrimination against the Handicapped

The 1990 Americans with Disabilities Act (ADA) prohibits employers from discriminating on the basis of disability. A disabled person is someone with a physical or mental impairment that substantially limits a major life activity or someone who is regarded as having such an impairment. This definition includes people with mental illness, epilepsy, visual impairment, dyslexia, and AIDS. It also covers anyone who has recovered from alcoholism or drug addiction. It specifically does not cover people with sexual disorders, pyromania, kleptomania, exhibitionism, or compulsive gambling.

Employers cannot disqualify an employee or job applicant because of disability as long as he or she can perform the essential functions of the job, with reasonable accommodation. Reasonable accommodation might include installing ramps for a wheelchair, establishing more flexible working hours, creating or modifying job assignments, and the like.

Reasonable accommodation means that there is no undue hardship for the employer. The law does not offer uniform standards for identifying what may be an undue hardship other than the imposition on the employer of a “significant difficulty or expense.” Cases will differ: the resources and situation of each particular employer relative to the cost or difficulty of providing the accommodation will be considered; relative cost, rather than some definite dollar amount, will be the issue.

As with other areas of employment discrimination, job interviewers cannot ask questions about an applicant’s disabilities before making a job offer; the interviewer may only ask whether the applicant can perform the work. Requirements for a medical exam are a violation of the ADA unless the exam is job related and required of all applicants for similar jobs. Employers may, however, use drug testing, although public employers are to some extent limited by the Fourth Amendment requirements of reasonableness.

The ADA’s definition of disability is very broad. However, the Supreme Court has issued several important decisions that narrow the definition of what constitutes a disability under the act.

Two kinds of narrowing decisions stand out: one deals with “correctable conditions,” and the other deals with repetitive stress injuries. In 1999, the Supreme Court reviewed a case that raised an issue of whether severe nearsightedness (which can be corrected with lenses) qualifies as a disability under the ADA.Sutton v. United Airlines, Inc., 527 U.S. 471 (1999). The Supreme Court ruled that disability under the ADA will be measured according to how a person functions with corrective drugs or devices and not how the person functions without them. In Orr v. Wal-Mart Stores, Inc., a federal appellate court held that a pharmacist who suffered from diabetes did not have a cause of action against Wal-Mart under the ADA as long as the condition could be corrected by insulin.Orr v. Wal-Mart Stores, Inc., 297 F.3d 720 (8th Cir. 2002).

The other narrowing decision deals with repetitive stress injuries. For example, carpal tunnel syndrome—or any other repetitive stress injury—could constitute a disability under the ADA. By compressing a nerve in the wrist through repetitive use, carpal tunnel syndrome causes pain and weakness in the hand. In 2002, the Supreme Court determined that while an employee with carpal tunnel syndrome could not perform all the manual tasks assigned to her, her condition did not constitute a disability under the ADA because it did not “extensively limit” her major life activities. (See Section 50.4.4 “Disability Discrimination”.)

Equal Pay Act

The Equal Pay Act of 1963 protects both men and women from pay discrimination based on sex. The act covers all levels of private sector employees and state and local government employees but not federal workers. The act prohibits disparity in pay for jobs that require equal skill and equal effort. Equal skill means equal experience, and equal effort means comparable mental and/or physical exertion. The act prohibits disparity in pay for jobs that require equal responsibility, such as equal supervision and accountability, or similar working conditions.

In making their determinations, courts will look at the stated requirements of a job as well as the actual requirements of the job. If two jobs are judged to be equal and similar, the employer cannot pay disparate wages to members of different sexes. Along with the EEOC enforcement, employees can also bring private causes of action against an employer for violating this act. There are four criteria that can be used as defenses in justifying differentials in wages: seniority, merit, quantity or quality of product, and any factor other than sex. The employer will bear the burden of proving any of these defenses.

A defense based on merit will require that there is some clearly measurable standard that justifies the differential. In terms of quantity or quality of product, there may be a commission structure, piecework structure, or quality-control-based payment system that will be permitted. Factors “other than sex” do not include so-called market forces. In Glenn v. General Motors Corp., the US Court of Appeals for the Eleventh Circuit rejected General Motor’s argument that it was justified in paying three women less than their male counterparts on the basis of “the market force theory” that women will work for less than a man.Glenn v. General Motors Corp., 841 F.2d 1567 (1988).

Key Takeaways

Starting with employment at will as a common-law doctrine, we see many modifications by statute, particularly after 1960. Title VII of the Civil Rights Act of 1964 is the most significant, for it prohibits employers engaged in interstate commerce from discriminating on the basis of race, color, sex, religion, or national origin.

Sex discrimination, especially sexual harassment, has been a particularly fertile source of litigation. There are many defenses to Title VII claims: the employer may have a merit system or a seniority system in place, or there may be bona fide occupational qualifications in religion, gender, or national origin. In addition to Title VII, federal statutes limiting employment discrimination are the ADEA, the ADA, and the Equal Pay Act.

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Employment at Will

Learning Objectives

1. Understand what is meant by employment at will under common law.

2. Explain the kinds of common-law (judicially created) exceptions to the employment-at-will doctrine, and provide examples.

At common law, an employee without a contract guaranteeing a job for a specific period was an employee at will and could be fired at any time and for any reason, or even for no reason at all. The various federal statutes we have just examined have made inroads on the at-will doctrine. Another federal statute, the Occupational Safety and Health Act, prohibits employers from discharging employees who exercise their rights under that law.

The courts and legislatures in more than forty states have made revolutionary changes in the at-will doctrine. They have done so under three theories: tort, contract, and duty of good faith and fair dealing. We will first consider the tort of wrongful discharge.

Courts have created a major exception to the employment-at-will rule by allowing the tort of wrongful discharge. Wrongful discharge means firing a worker for a bad reason. What is a bad reason? A bad reason can be (1) discharging an employee for refusing to violate a law, (2) discharging an employee for exercising a legal right, (3) discharging an employee for performing a legal duty, and (4) discharging an employee in a way that violates public policy.

Discharging an Employee for Refusing to Violate a Law

Some employers will not want employees to testify truthfully at trial. In one case, a nurse refused a doctor’s order to administer a certain anesthetic when she believed it was wrong for that particular patient; the doctor, angry at the nurse for refusing to obey him, then administered the anesthetic himself. The patient soon stopped breathing. The doctor and others could not resuscitate him soon enough, and he suffered permanent brain damage. When the patient’s family sued the hospital, the hospital told the nurse she would be in trouble if she testified. She did testify according to her oath in the court of law (i.e., truthfully), and after several months of harassment, was finally fired on a pretext. The hospital was held liable for the tort of wrongful discharge. As a general rule, you should not fire an employee for refusing to break the law.

Discharging an Employee for Exercising a Legal Right

Suppose Bob Berkowitz files a claim for workers’ compensation for an accident at Pacific Gas & Electric, where he works and where the accident that injured him took place. He is fired for doing so, because the employer does not want to have its workers’ comp premiums increased. In this case, the right exercised by Berkowitz is supported by public policy: he has a legal right to file the claim, and if he can establish that his discharge was caused by his filing the claim, he will prove the tort of wrongful discharge.

Discharging an Employee for Performing a Legal Duty

Courts have long held that an employee may not be fired for serving on a jury. This is so even though courts do recognize that many employers have difficulty replacing employees called for jury duty. Jury duty is an important civic obligation, and employers are not permitted to undermine it.

Discharging an Employee in a Way That Violates Public Policy

This is probably the most controversial basis for a tort of wrongful discharge. There is an inherent vagueness in the phrase “basic social rights, duties, or responsibilities.” This is similar to the exception in contract law: the courts will not enforce contract provisions that violate public policy. (For the most part, public policy is found in statutes and in cases.) But what constitutes public policy is an important decision for state courts. In Wagenseller v. Scottsdale Memorial Hospital,Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370; 710 P.2d 1025 (1085). for example, a nurse who refused to “play along” with her coworkers on a rafting trip was discharged. The group of coworkers had socialized at night, drinking alcohol; when the partying was near its peak, the plaintiff refused to be part of a group that bared their buttocks to the tune of “Moon River” (a composition by Henry Mancini that was popular in the 1970s). The court, at great length, considered that “mooning” was a misdemeanor under Arizona law and that therefore her employer could not discharge her for refusing to violate a state law.

Other courts have gone so far as to include professional oaths and codes as part of public policy. In Rocky Mountain Hospital and Medical Services v. Diane Mariani, the Colorado Supreme Court reviewed a trial court decision to refuse relief to a certified public accountant who was discharged when she refused to violate her professional code.Rocky Mountain Hospital and Medical Services v. Diane Mariani, 916 P.2d 519 (Colo. 1996). (Her employer had repeatedly required her to come up with numbers and results that did not reflect the true situation, using processes that were not in accord with her training and the code.) The court of appeals had reversed the trial court, and the Supreme Court had to decide if the professional code of Colorado accountants could be considered to be part of public policy. Given that accountants were licensed by the state on behalf of the public, and that the Board of Accountancy had published a code for accounting professionals and required an oath before licensing, the court noted the following:

The Colorado State Board of Accountancy is established pursuant to section 12-2-103, 5A C.R.S. (1991). The Board has responsibility for making appropriate rules of professional conduct, in order to establish and maintain a high standard of integrity in the profession of public accounting. § 12-2-104, 5A C.R.S. (1991). These rules of professional conduct govern every person practicing as a certified public accountant. Id. Failure to abide by these rules may result in professional discipline. § 12-2-123, 5A C.R.S. (1991). The rules of professional conduct for accountants have an important public purpose. They ensure the accurate reporting of financial information to the public. They allow the public and the business community to rely with confidence on financial reporting. Rule 7.1, 3 C.C.R. 705-1 (1991). In addition, they ensure that financial information will be reported consistently across many businesses. The legislature has endorsed these goals in section 12-2-101, 5A C.R.S.

The court went on to note that the stated purpose of the licensing and registration of certified public accountants was to “provide for the maintenance of high standards of professional conduct by those so licensed and registered as certified public accountants.” Further, the specific purpose of Rule 7.1 provided a clear mandate to support an action for wrongful discharge. Rule 7.1 is entitled “Integrity and Objectivity” and states, “A certificate holder shall not in the performance of professional services knowingly misrepresent facts, nor subordinate his judgment to others.” The fact that Mariani’s employer asked her to knowingly misrepresent facts was a sufficient basis in public policy to make her discharge wrongful.

Contract Modification of Employment at Will

Contract law can modify employment at will. Oral promises made in the hiring process may be enforceable even though the promises are not approved by top management. Employee handbooks may create implied contracts that specify personnel processes and statements that the employees can be fired only for a “just cause” or only after various warnings, notice, hearing, or other procedures.

Good Faith and Fair Dealing Standard

A few states, among them Massachusetts and California, have modified the at-will doctrine in a far-reaching way by holding that every employer has entered into an implied covenant of good faith and fair dealing with its employees. That means, the courts in these states say, that it is “bad faith” and therefore unlawful to discharge employees to avoid paying commissions or pensions due them. Under this implied covenant of fair dealing, any discharge without good cause—such as incompetence, corruption, or habitual tardiness—is actionable. This is not the majority view, as the case in Section 50.4.4 “Disability Discrimination” makes clear.

Key Takeaways

Although employment at will is still the law, numerous exceptions have been established by judicial decision. Employers can be liable for the tort of wrongful discharge if they discharge an employee for refusing to violate a law, for exercising a legal right or performing a legal duty, or in a way that violates basic public policy.

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Other Employment-Related Laws

Learning Objectives

1. Understand the various federal and state statutes that affect employers in the areas of plant closings, pensions, workers’ compensation, use of polygraphs, and worker safety.

The Federal Plant-Closing Act

A prime source of new jobs across the United States is the opening of new industrial plants—which accounted for millions of jobs a year during the 1970s and 1980s. But for every 110 jobs thus created, nearly 100 were lost annually in plant closings during that period. In the mid-1980s alone, 2.2 million plant jobs were lost each year. As serious as those losses were for the national economy, they were no less serious for the individuals who were let go. Surveys in the 1980s showed that large numbers of companies provided little or no notice to employees that their factories were to be shut down and their jobs eliminated. Nearly a quarter of businesses with more than 100 employees provided no specific notice to their employees that their particular work site would be closed or that they would suffer mass layoffs. More than half provided two weeks’ notice or less.

Because programs to support dislocated workers depend heavily on the giving of advance notice, a national debate on the issue in the late 1980s culminated in 1988 in Congress’s enactment of the Worker Adjustment and Retraining Notification (WARN) Act, the formal name of the federal plant-closing act. Under this law, businesses with 100 or more employees must give employees or their local bargaining unit, along with the local city or county government, at least sixty days’ notice whenever (1) at least 50 employees in a single plant or office facility would lose their jobs or face long-term layoffs or a reduction of more than half their working hours as the result of a shutdown and (2) a shutdown would require long-term layoffs of 500 employees or at least a third of the workforce. An employer who violates the act is liable to employees for back pay that they would have received during the notice period and may be liable to other fines and penalties.

An employer is exempted from having to give notice if the closing is caused by business circumstances that were not reasonably foreseeable as of the time the notice would have been required. An employer is also exempted if the business is actively seeking capital or business that if obtained, would avoid or postpone the shutdown and the employer, in good faith, believes that giving notice would preclude the business from obtaining the needed capital or business.

The Employee Polygraph Protection Act

Studies calling into question the reliability of various forms of lie detectors have led at least half the states and, in 1988, Congress to legislate against their use by private businesses. The Employee Polygraph Protection Act forbids private employers from using lie detectors (including such devices as voice stress analyzers) for any reason. Neither employees nor applicants for jobs may be required or even asked to submit to them. (The act has some exceptions for public employers, defense and intelligence businesses, private companies in the security business, and manufacturers of controlled substances.)

Use of polygraphs, machines that record changes in the subject’s blood pressure, pulse, and other physiological phenomena, is strictly limited. They may be used in conjunction with an investigation into such crimes as theft, embezzlement, and industrial espionage, but in order to require the employee to submit to polygraph testing, the employer must have “reasonable suspicion” that the employee is involved in the crime, and there must be supporting evidence for the employer to discipline or discharge the employee either on the basis of the polygraph results or on the employee’s refusal to submit to testing. The federal polygraph law does not preempt state laws, so if a state law absolutely bars an employer from using one, the federal law’s limited authorization will be unavailable.

Occupational Safety and Health Act

In a heavily industrialized society, workplace safety is a major concern. Hundreds of studies for more than a century have documented the gruesome toll taken by hazardous working conditions in mines, on railroads, and in factories from tools, machines, treacherous surroundings, and toxic chemicals and other substances. Studies in the late 1960s showed that more than 14,000 workers were killed and 2.2 million were disabled annually—at a cost of more than $8 billion and a loss of more than 250 million worker days. Congress responded in 1970 with the Occupational Safety and Health Act, the primary aim of which is “to assure so far as possible every working man and woman in the Nation safe and healthful working conditions.”

The act imposes on each employer a general duty to furnish a place of employment free from recognized hazards likely to cause death or serious physical harm to employees. It also gives the secretary of labor the power to establish national health and safety standards. The standard-making power has been delegated to the Occupational Safety and Health Administration (OSHA), an agency within the US Department of Labor. The agency has the authority to inspect workplaces covered by the act whenever it receives complaints from employees or reports about fatal or multiple injuries. The agency may assess penalties and proceed administratively to enforce its standards. Criminal provisions of the act are enforced by the Justice Department.

During its first two decades, OSHA was criticized for not issuing standards very quickly: fewer than thirty national workplace safety standards were issued by 1990. But not all safety enforcement is in the hands of the federal government: although OSHA standards preempt similar state standards, under the act the secretary may permit the states to come up with standards equal to or better than federal standards and may make grants to the states to cover half the costs of enforcement of the state safety standards.

Employee Retirement Income Security Act

More than half the US workforce is covered by private pension plans for retirement. One 1988 estimate put the total held in pension funds at more than $1 trillion, costing the federal Treasury nearly $60 billion annually in tax write-offs. As the size of the private pension funds increased dramatically in the 1960s, Congress began to hear shocking stories of employees defrauded out of pension benefits, deprived of a lifetime’s savings through various ruses (e.g., by long vesting provisions and by discharges just before retirement). To put an end to such abuses, Congress, in 1974, enacted the Employee Retirement Income Security Act (ERISA).

In general, ERISA governs the vesting of employees’ pension rights and the funding of pension plans. Within five years of beginning employment, employees are entitled to vested interests in retirement benefits contributed on their behalf by individual employers. Multiemployer pension plans must vest their employees’ interests within ten years. A variety of pension plans must be insured through a federal agency, the Pension Benefit Guaranty Corporation, to which employers must pay annual premiums. The corporation may assume financial control of underfunded plans and may sue to require employers to make up deficiencies. The act also requires pension funds to disclose financial information to beneficiaries, permits employees to sue for benefits, governs the standards of conduct of fund administrators, and forbids employers from denying employees their rights to pensions. The act largely preempts state law governing employee benefits.

Fair Labor Standards Act

In the midst of the Depression, Congress enacted at President Roosevelt’s urging a national minimum wage law, the Fair Labor Standards Act of 1938 (FLSA). The act prohibits most forms of child labor and established a scale of minimum wages for the regular workweek and a higher scale for overtime. (The original hourly minimum was twenty-five cents, although the administrator of the Wage and Hour Division of the US Department of Labor, a position created by the act, could raise the minimum rate industry by industry.) The act originally was limited to certain types of work: that which was performed in transporting goods in interstate commerce or in producing goods for shipment in interstate commerce.

Employers quickly learned that they could limit the minimum wage by, for example, separating the interstate and intrastate components of their production. Within the next quarter century, the scope of the FLSA was considerably broadened, so that it now covers all workers in businesses that do a particular dollar-volume of goods that move in interstate commerce, regardless of whether a particular employee actually works in the interstate component of the business. It now covers between 80 and 90 percent of all persons privately employed outside of agriculture, and a lesser but substantial percentage of agricultural workers and state and local government employees. Violations of the act are investigated by the administrator of the Wage and Hour Division, who has authority to negotiate back pay on the employee’s behalf. If no settlement is reached, the Labor Department may sue on the employee’s behalf, or the employee, armed with a notice of the administrator’s calculations of back wages due, may sue in federal or state court for back pay. Under the FLSA, a successful employee will receive double the amount of back wages due.

Workers’ Compensation Laws

Since the beginning of the twentieth century, work-related injuries or illnesses have been covered under state workers’ compensation laws that provide a set amount of weekly compensation for disabilities caused by accidents and illnesses suffered on the job. The compensation plans also pay hospital and medical expenses necessary to treat workers who are injured by, or become ill from, their work. In assuring workers of compensation, the plans eliminate the hazards and uncertainties of lawsuits by eliminating the need to prove fault. Employers fund the compensation plans by paying into statewide plans or purchasing insurance.

Other State Laws

Although it may appear that most employment law is federal, employment discrimination is largely governed by state law because Congress has so declared it. The Civil Rights Act of 1964 tells federal courts to defer to state agencies to enforce antidiscrimination provisions of parallel state statutes with remedies similar to those of the federal law. Moreover, many states have gone beyond federal law in banning certain forms of discrimination. Thus well before enactment of the Americans with Disabilities Act, more than forty states prohibited such discrimination in private employment. More than a dozen states ban employment discrimination based on marital status, a category not covered by federal law. Two states have laws that protect those that may be considered “overweight.” Two states and more than seventy counties or municipalities ban employment discrimination on the basis of sexual orientation; most large companies have offices or plants in at least one of these jurisdictions. By contrast, federal law has no statutory law dealing with sexual orientation.

Key Takeaways

There are a number of important federal employment laws collective bargaining or discrimination. These include the federal plant-closing act, the Employee Polygraph Protection Act, the Occupational Safety and Health Act, the Employee Retirement Income Security Act, and the Fair Labor Standards Act. At the state level, workers’ compensation laws preempt common-law claims against employers for work-related injuries, and state equal opportunity employment laws provide remedies for certain kinds of workplace discrimination that have no parallel at the federal level.

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Cases

Disparate Treatment: Burdens of Proof

Barbano v. Madison County

922 F.2d 139 (2d Cir. 1990)

Factual Background

At the Madison County (New York State) Veterans Service Agency, the position of director became vacant. The County Board of Supervisors created a committee of five men to hold interviews for the position. The committee interviewed Maureen E. Barbano and four others. When she entered the interview room, she heard someone say, “Oh, another woman.” At the beginning of the interview, Donald Greene said he would not consider “some woman” for the position. Greene also asked Barbano some personal questions about her family plans and whether her husband would mind if she transported male veterans. Ms. Barbano answered that the questions were irrelevant and discriminatory. However, Greene replied that the questions were relevant because he did not want to hire a woman who would get pregnant and quit. Another committee member, Newbold, agreed that the questions were relevant, and no committee member said the questions were not relevant.

None of the interviewers rebuked Greene or objected to the questions, and none of them told Barbano that she need not answer them. Barbano did state that if she decided to have a family she would take no more time off than medically necessary. Greene once again asked whether Barbano’s husband would object to her “running around the country with men” and said he would not want his wife to do it. Barbano said she was not his wife. The interview concluded after Barbano asked some questions about insurance.

After interviewing several other candidates, the board hired a man. Barbano sued the county for sex discrimination in violation of Title VII, and the district court held in her favor. She was awarded $55,000 in back pay, prejudgment interest, and attorney’s fees. Madison County appealed the judgment of Federal District Judge McAvoy; Barbano cross-appealed, asking for additional damages.

The court then found that Barbano had established a prima facie case of discrimination under Title VII, thus bringing into issue the appellants’ purported reasons for not hiring her. The appellants provided four reasons why they chose Wagner over Barbano, which the district court rejected either as unsupported by the record or as a pretext for discrimination in light of Barbano’s interview. The district court then found that because of Barbano’s education and experience in social services, the appellants had failed to prove that absent the discrimination, they still would not have hired Barbano. Accordingly, the court awarded Barbano back pay, prejudgment interest, and attorney’s fees. Subsequently, the court denied Barbano’s request for front pay and a mandatory injunction ordering her appointment as director upon the next vacancy. This appeal and cross-appeal followed.

From the Opinion of FEINBERG, CIRCUIT JUDGE

Appellants argue that the district court erred in finding that Greene’s statements during the interview showed that the Board discriminated in making the hiring decision, and that there was no direct evidence of discrimination by the Board, making it improper to require that appellants prove that they would not have hired Barbano absent the discrimination. Barbano in turn challenges the adequacy of the relief awarded to her by the district court.

A. Discrimination

At the outset, we note that Judge McAvoy’s opinion predated Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S. Ct. 1775, 104 L. Ed. 2d 268 (1990), in which the Supreme Court made clear that a “pretext” case should be analyzed differently from a “mixed motives” case. Id. 109 S. Ct. at 1788-89. Judge McAvoy, not having the benefit of the Court’s opinion in Price Waterhouse, did not clearly distinguish between the two types of cases in analyzing the alleged discrimination. For purposes of this appeal, we do not think it is crucial how the district court categorized the case. Rather, we need only concern ourselves with whether the district court’s findings of fact are supported by the record and whether the district court applied the proper legal standards in light of its factual findings.

Whether the case is one of pretext or mixed motives, the plaintiff bears the burden of persuasion on the issue of whether gender played a part in the employment decision. Price Waterhouse v. Hopkins, at 1788. Appellants contend that Barbano did not sustain her burden of proving discrimination because the only evidence of discrimination involved Greene’s statements during the interview, and Greene was an elected official over whom the other members of the Board exercised no control. Thus, appellants maintain, since the hiring decision was made by the 19-member board, evidence of discrimination by one member does not establish that the Board discriminated in making the hiring decision.

We agree that discrimination by one individual does not necessarily imply that a collective decision-making body of which the individual is a member also discriminated. However, the record before us supports the district court’s finding that the Board discriminated in making the hiring decision.

First, there is little doubt that Greene’s statements during the interview were discriminatory. He said he would not consider “some woman” for the position. His questioning Barbano about whether she would get pregnant and quit was also discriminatory, since it was unrelated to a bona fide occupational qualification. King v. Trans World Airlines, 738 F.2d 255, 258 n.2 (8th Cir. 1984). Similarly, Greene’s questions about whether Barbano’s husband would mind if she had to “run around the country with men,” and that he would not want his wife to do it, were discriminatory, since once again the questions were unrelated to bona fide occupational qualifications. Hopkins, at 1786.

Moreover, the import of Greene’s discriminatory questions was substantial, since apart from one question about her qualifications, none of the interviewers asked Barbano about other areas that allegedly formed the basis for selecting a candidate. Thus, Greene’s questioning constituted virtually the entire interview, and so the district court properly found that the interview itself was discriminatory.

Next, given the discriminatory tenor of the interview, and the acquiescence of the other Committee members to Greene’s line of questioning, it follows that the judge could find that those present at the interview, and not merely Greene, discriminated against Barbano. Judge McAvoy pointed out that the Chairman of the Committee, Newbold, thought Greene’s discriminatory questions were relevant. Significantly, Barbano protested that Greene’s questions were discriminatory, but no one agreed with her or told her that she need not answer. Indeed, no one even attempted to steer the interview in another direction. This knowing and informed toleration of discriminatory statements by those participating in the interview constitutes evidence of discrimination by all those present. That each member was independently elected to the Board does not mean that the Committee itself was unable to control the course of the interview. The Committee had a choice of how to conduct the interview, and the court could find that the Committee exercised that choice in a plainly discriminatory fashion.

This discrimination directly affected the hiring decision. At the end of the interviewing process, the interviewers evaluated the candidates, and on that basis submitted a recommendation as to which candidate to hire for the position. “Evaluation does not occur in a vacuum. By definition, when evaluating a candidate to fill a vacant position, one compares that candidate against other eligible candidates.” Berl v. County of Westchester, 849 F.2d 712, 715 (2d Cir. 1988). Appellants stipulated that Barbano was qualified for the position. Again, because Judge McAvoy could find that the evaluation of Barbano was biased by gender discrimination, the judge could also find that the Committee’s recommendation to hire Wagner, which was the result of a weighing of the relative merits of Barbano, Wagner and the other eligible candidates, was necessarily tainted by discrimination.

The Board in turn unanimously accepted the Committee’s recommendation to hire Wagner, and so the Board’s hiring decision was made in reliance upon a discriminatory recommendation. The Supreme Court in Hopkins v. Price Waterhouse found that a collective decision-making body can discriminate by relying upon discriminatory recommendations, and we are persuaded that the reasoning in that case applies here as well.

In Hopkins’ case against Price Waterhouse, Ann Hopkins, a candidate for partnership at the accounting firm of Price Waterhouse, alleged that she was refused admission as a partner because of sex discrimination. Hopkins’s evidence of discrimination consisted largely of evaluations made by various partners. Price Waterhouse argued that such evidence did not prove that its internal Policy Board, which was the effective decision-maker as to partnership in that case, had discriminated. The Court rejected that argument and found the evidence did establish discrimination:

Hopkins showed that the partnership solicited evaluations from all of the firm’s partners; that it generally relied very heavily on such evaluations in making its decision; that some of the partners’ comments were the product of [discrimination]; and that the firm in no way disclaimed reliance on those particular comments, either in Hopkins’ case or in the past. Certainly, a plausible—and, one might say, inevitable—conclusion to draw from this set of circumstances is that the Policy Board in making its decision did in fact take into account all of the partners’ comments, including the comments that were motivated by [discrimination].

Hopkins, at 1794.

In a very significant sense, Barbano presents an even stronger case of discrimination because the only recommendation the Board relied upon here was discriminatory, whereas in Price Waterhouse, not all of the evaluations used in the decision-making process were discriminatory. On the other hand, it is true that the discriminatory content of some of the evaluations in Price Waterhouse was apparent from reading them, whereas here, the recommendation was embodied in a resolution to the Board and a reading of the resolution would not reveal that it was tainted by discrimination. Nonetheless, the facts in this case show that the Board was put on notice before making the appointment that the Committee’s recommendation was biased by discrimination.

Barbano was a member of the public in attendance at the Board meeting in March 1980 when the Board voted to appoint Wagner. Before the Board adopted the resolution appointing Wagner, Barbano objected and asked the Board if male applicants were asked the questions she was asked during the interview. At this point, the entire Board membership was alerted to the possibility that the Committee had discriminated against Barbano during her interview. The Committee members did not answer the question, except for Newbold, who evaded the issue by stating that he did not ask such questions. The Board’s ability to claim ignorance at this point was even further undermined by the fact that the Chairman of the Board, Callahan, was present at many of the interviews, including Barbano’s, in his role as Chairman of the Board. Callahan did not refute Barbano’s allegations, implying that they were worthy of credence, and none of the Board members even questioned Callahan on the matter.

It is clear that those present understood Barbano was alleging that she had been subjected to discrimination during her interview. John Patane, a member of the Board who had not interviewed Barbano, asked Barbano whether she was implying that Madison County was not an equal opportunity employer. Barbano said yes. Patane said the County already had their “token woman.” Callahan apologized to Barbano for “any improper remarks that may have been made,” but an apology for discrimination does not constitute an attempt to eliminate the discrimination from the hiring decision. Even though the Board was aware of possible improprieties, it made no investigation whatsoever into the allegations and did not disclaim any reliance upon the discrimination. In short, the circumstances show the Board was willing to rely on the Committee’s recommendation even if Barbano had been discriminated against during her interview. On these facts, it was not clearly erroneous for the district court to conclude that Barbano sustained her burden of proving discrimination by the Board.

B. The Employer’s Burden

Having found that Barbano carried her burden of proving discrimination, the district court then placed the burden on appellants to prove by a preponderance of the evidence that, absent the discrimination, they would not have hired Barbano for the position. Appellants argue that this burden is only placed on an employer if the plaintiff proves discrimination by direct evidence, and since Barbano’s evidence of discrimination was merely circumstantial, the district court erred by placing the burden of proof on them. Appellants, however, misapprehend the nature of Barbano’s proof and thus the governing legal standard.

The burden is properly placed on the defendant “once the plaintiff establishes by direct evidence that an illegitimate factor played a motivating or substantial role in an employment decision.” Grant v. Hazelett Strip-Casting Corp., 880 F.2d 1564, 1568 (2d Cir. 1989). Thus, the key inquiry on this aspect of the case is whether the evidence is direct, that is, whether it shows that the impermissible criterion played some part in the decision-making process. See Hopkins, at 1791; Grant, 880 F.2d at 1569. If plaintiff provides such evidence, the fact-finder must then determine whether the evidence shows that the impermissible criterion played a motivating or substantial part in the hiring decision. Grant, 880 F.2d at 1569.

As we found above, the evidence shows that Barbano’s gender was clearly a factor in the hiring decision. That the discrimination played a substantial role in that decision is shown by the importance of the recommendation to the Board. As Rafte testified, the Board utilizes a committee system, and so the Board “usually accepts” a committee’s recommendation, as it did here when it unanimously voted to appoint Wagner. Had the Board distanced itself from Barbano’s allegations of discrimination and attempted to ensure that it was not relying upon illegitimate criteria in adopting the Committee’s recommendation, the evidence that discrimination played a substantial role in the Board’s decision would be significantly weakened. The Board showed no inclination to take such actions, however, and in adopting the discriminatory recommendation allowed illegitimate criteria to play a substantial role in the hiring decision.

The district court thus properly required appellants to show that the Board would not have hired Barbano in the absence of discrimination. “The employer has not yet been shown to be a violator, but neither is it entitled to the…presumption of good faith concerning its employment decisions. At this point the employer may be required to convince the fact-finder that, despite the smoke, there is no fire.” Hopkins, at 1798-99 (O’Connor, J., concurring).

Judge McAvoy noted in his opinion that appellants claimed they chose Wagner over Barbano because he was better qualified in the following areas: (1) interest in veterans’ affairs; (2) experience in the military; (3) tactfulness; and (4) experience supervising an office. The judge found that the evidence before him supported only appellants’ first and second reasons for refusing to hire Barbano, but acknowledged that the Committee members “were enamored with Wagner’s military record and involvement with veterans’ organizations.” However, neither of these is listed as a job requirement in the job description, although the district court found that membership in a veterans’ organization may indicate an interest in veterans’ affairs. Nonetheless, the district court found that given Barbano’s “education and experience in social services,” appellants failed to carry their burden of proving by a preponderance of the evidence that, absent discrimination, they would not have hired Barbano.

The district court properly held appellants to a preponderance of the evidence standard. Hopkins, 109 S. Ct. at 1795.…

At the time of the hiring decision in 1980, Barbano had been a Social Welfare Examiner for Madison County for the three previous years. In this position, she determined the eligibility of individuals for public assistance, medicaid or food stamps, and would then issue or deny the individual’s application based on all federal, state and local regulations pertaining to the program from which the individual was seeking assistance. Barbano was thus familiar with the operation of public assistance programs, knew how to fill out forms relating to benefits and had become familiar with a number of welfare agencies that could be of use to veterans. Barbano was also working towards an Associate Degree in Human Services at the time. Rafte testified that Barbano’s resume was “very impressive.” Moreover, Barbano, unlike Wagner, was a resident of Madison County, and according to Rafte, a candidate’s residency in the county was considered to be an advantage. Finally, Barbano had also enlisted in the United States Marine Corps in 1976, but during recruit training had been given a vaccine that affected her vision. She had received an honorable discharge shortly thereafter.

Wagner had nine years experience as an Air Force Personnel Supervisor, maintaining personnel records, had received a high school equivalency diploma and took several extension classes in management. He had been honorably discharged from the Air Force in 1965 with the rank of Staff Sergeant. Wagner was a member of the American Legion, and his application for the position included recommendations from two American Legion members. However, for the six years prior to his appointment as Director, Wagner’s sole paid employment was as a school bus driver and part-time bartender at the American Legion. Wagner admitted that before he was hired he had no knowledge of federal, state and local laws, rules and regulations pertaining to veterans’ benefits and services, or knowledge of the forms, methods and procedures used to process veteran benefits claims. Wagner also had not maintained liaison with welfare agencies and was unfamiliar with the various welfare agencies that existed in the county.

To be sure, both candidates were qualified for the Director’s position, and it is not our job—nor was it the district court’s—to decide which one was preferable. However, there is nothing to indicate that Judge McAvoy misconceived his function in this phase of the case, which was to decide whether appellants failed to prove by a preponderance of the evidence that they would not have hired Barbano even if they had not discriminated against her. The judge found that defendants had not met that burden. We must decide whether that finding was clearly erroneous, and we cannot say that it was.

1. Madison County contended that Barbano needed to provide “direct evidence” of discrimination that had played a motivating or substantial part in the decision. What would such evidence look like? Is it likely that most plaintiffs who are discriminated against because of their gender would be able to get “direct evidence” that gender was a motivating or substantial factor?

2. The “clearly erroneous” standard is applied here, as it is in many cases where appellate courts review trial court determinations. State the test, and say why the appellate court believed that the trial judge’s ruling was not “clearly erroneous.”

Title VII and Hostile Work Environment

Duncan v. General Motors Corporation

300 F.3d 928 (8th Cir. 2002)

OPINION BY HANSEN, Circuit Judge.

The Junior College District of St. Louis (the College) arranged for Diana Duncan to provide in-house technical training at General Motors Corporation’s (GMC) manufacturing facility in Wentzville, Missouri. Throughout her tenure at GMC, Duncan was subjected to unwelcome attention by a GMC employee, James Booth, which culminated in Duncan’s resignation. Duncan subsequently filed this suit under Title VII of the Civil Rights Act and the Missouri Human Rights Act, see 42 U.S.C. §§ 2000e-2000e-17; Mo. Rev. Stat. §§ 213.010-213.137,2 alleging that she was sexually harassed and constructively discharged. A jury found in favor of Duncan and awarded her $4600 in back pay, $700,000 in emotional distress damages on her sexual harassment claim, and $300,000 in emotional distress damages on her constructive discharge claim. GMC appeals from the district court’s denial of its post trial motion for judgment as a matter of law, and the district court’s award of attorneys’ fees attendant to the post trial motion. We reverse.

I.

Diana Duncan worked as a technical training clerk in the high-tech area at GMC as part of the College’s Center for Business, Industry, and Labor program from August 1994 until May 1997. Duncan provided in-house training support to GMC employees.

Duncan first learned about the College’s position at GMC from Booth, a United Auto Workers Union technology training coordinator for GMC. Booth frequented the country club where Duncan worked as a waitress and a bartender. Booth asked Duncan if she knew anyone who had computer and typing skills and who might be interested in a position at GMC. Duncan expressed interest in the job. Booth brought the pre-employment forms to Duncan at the country club, and he forwarded her completed forms to Jerry Reese, the manager of operations, manufacturing, and training for the College. Reese arranged to interview Duncan at GMC. Reese, Booth, and Ed Ish, who was Booth’s management counterpart in the high-tech area of the GMC plant, participated in the interview. Duncan began work at GMC in August 1994.

Two weeks after Duncan began working at GMC, Booth requested an off-site meeting with her at a local restaurant. Booth explained to Duncan that he was in love with a married coworker and that his own marriage was troubled. Booth then propositioned Duncan by asking her if she would have a relationship with him. Duncan rebuffed his advance and left the restaurant. The next day Duncan mentioned the incident to the paint department supervisor Joe Rolen, who had no authority over Booth. Duncan did not report Booth’s conduct to either Reese (her supervisor) at the College or Ish (Booth’s management counterpart) at GMC. However, she did confront Booth, and he apologized for his behavior. He made no further such “propositions.” Duncan stated that Booth’s manner toward her after she declined his advance became hostile, and he became more critical of her work. For example, whenever she made a typographical error, he told her that she was incompetent and that he should hire a “Kelly Services” person to replace her. Duncan admitted that Booth’s criticisms were often directed at other employees as well, including male coworkers.

Duncan testified to numerous incidents of Booth’s inappropriate behavior. Booth directed Duncan to create a training document for him on his computer because it was the only computer with the necessary software. The screen saver that Booth had selected to use on his computer was a picture of a naked woman. Duncan testified to four or five occasions when Booth would unnecessarily touch her hand when she handed him the telephone. In addition, Booth had a planter in his office that was shaped like a slouched man wearing a sombrero. The planter had a hole in the front of the man’s pants that allowed for a cactus to protrude. The planter was in plain view to anyone entering Booth’s office. Booth also kept a child’s pacifier that was shaped like a penis in his office that he occasionally showed to his coworkers and specifically to Duncan on two occasions.

In 1995, Duncan requested a pay increase and told Booth that she would like to be considered for an illustrator’s position. Booth said that she would have to prove her artistic ability by drawing his planter. Duncan objected, particularly because previous applicants for the position were required to draw automotive parts and not his planter. Ultimately, Duncan learned that she was not qualified for the position because she did not possess a college degree.

Additionally in 1995, Booth and a College employee created a “recruitment” poster that was posted on a bulletin board in the high-tech area. The poster portrayed Duncan as the president and CEO of the Man Hater’s Club of America. It listed the club’s membership qualifications as: “Must always be in control of: (1) Checking, Savings, all loose change, etc.; (2) (Ugh) Sex; (3) Raising children our way!; (4) Men must always do household chores; (5) Consider T.V. Dinners a gourmet meal.”…

On May 5, 1997, Booth asked Duncan to type a draft of the beliefs of the “He-Men Women Hater’s Club.” The beliefs included the following:

—Constitutional Amendment, the 19th, giving women [the] right to vote should be repealed. Real He-Men indulge in a lifestyle of cursing, using tools, handling guns, driving trucks, hunting and of course, drinking beer.

—Women really do have coodies [sic] and they can spread.

—Women [are] the cause of 99.9 per cent of stress in men.

—Sperm has a right to live.

—All great chiefs of the world are men.

—Prostitution should be legalized.

Duncan refused to type the beliefs and resigned two days later.

Duncan testified that she complained to anyone who would listen to her about Booth’s behavior, beginning with paint department supervisor Joe Rolen after Booth propositioned her in 1994. Duncan testified that between 1994 and 1997 she complained several times to Reese at the College about Booth’s behavior, which would improve at least in the short term after she spoke with Reese.…

Duncan filed a charge of sex discrimination with the Equal Employment Opportunity Commission (EEOC) on October 30, 1997. The EEOC issued Duncan a right to sue notice on April 17, 1998. Alleging sexual harassment and constructive discharge, Duncan filed suit against the College and GMC under both Title VII of the Civil Rights Act and the Missouri Human Rights Act. Duncan settled with the College prior to trial. After the jury found in Duncan’s favor on both counts against GMC, GMC filed a post-trial motion for judgment as a matter of law or, alternatively, for a new trial. The district court denied the motion. The district court also awarded Duncan attorneys’ fees in conjunction with GMC’s post-trial motion. GMC appeals.

II.

A. Hostile Work Environment

GMC argues that it was entitled to judgment as a matter of law on Duncan’s hostile work environment claim because she failed to prove a prima facie case. We agree.…

It is undisputed that Duncan satisfies the first two elements of her prima facie case: she is a member of a protected group and Booth’s attention was unwelcome. We also conclude that the harassment was based on sex.…Although there is some evidence in the record that indicates some of Booth’s behavior, and the resulting offensive and disagreeable atmosphere, was directed at both male and female employees, GMC points to ten incidents when Booth’s behavior was directed at Duncan alone. GMC concedes that five of these ten incidents could arguably be based on sex: (1) Booth’s proposition for a “relationship”; (2) Booth’s touching of Duncan’s hand; (3) Booth’s request that Duncan sketch his planter; (4) the Man Hater’s Club poster; and (5) Booth’s request that Duncan type the He-Men Women Haters beliefs. “A plaintiff in this kind of case need not show…that only women were subjected to harassment, so long as she shows that women were the primary target of such harassment.” We conclude that a jury could reasonably find that Duncan and her gender were the overriding themes of these incidents. The evidence is sufficient to support the jury finding that the harassment was based on sex.

We agree, however, with GMC’s assertion that the alleged harassment was not so severe or pervasive as to alter a term, condition, or privilege of Duncan’s employment.…To clear the high threshold of actionable harm, Duncan has to show that “the workplace is permeated with discriminatory intimidation, ridicule, and insult.” Harris v. Forklift Systems, Inc., 510 U.S. 17, 21, 126 L. Ed. 2d 295, 114 S. Ct. 367 (1993) (internal quotations omitted). “Conduct that is not severe or pervasive enough to create an objectively hostile or abusive work environment—an environment that a reasonable person would find hostile or abusive—is beyond Title VII’s purview.” Oncale, 523 U.S. at 81 (internal quotation omitted). Thus, the fourth part of a hostile environment claim includes both objective and subjective components: an environment that a reasonable person would find hostile and one that the victim actually perceived as abusive. Harris, 510 U.S. at 21-22. In determining whether the conduct is sufficiently severe or pervasive, we look to the totality of the circumstances, including the “frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance.”…These standards are designed to “filter out complaints attacking the ordinary tribulations of the workplace, such as the sporadic use of abusive language, gender-related jokes, and occasional teasing.” Faragher v. City of Boca Raton, 524 U.S. 775, 788, 141 L. Ed. 2d 662, 118 S. Ct. 2275 (1998) (internal quotations omitted).

The evidence presented at trial illustrates that Duncan was upset and embarrassed by the posting of the derogatory poster and was disturbed by Booth’s advances and his boorish behavior; but, as a matter of law, she has failed to show that these occurrences in the aggregate were so severe and extreme that a reasonable person would find that the terms or conditions of Duncan’s employment had been altered.…Numerous cases have rejected hostile work environment claims premised upon facts equally or more egregious than the conduct at issue here. See, e.g., Shepherd v. Comptroller of Pub. Accounts, 168 F.3d 871, 872, 874 (5th Cir.) (holding that several incidents over a two-year period, including the comment “your elbows are the same color as your nipples,” another comment that plaintiff had big thighs, repeated touching of plaintiff’s arm, and attempts to look down the plaintiff’s dress, were insufficient to support hostile work environment claim), cert. denied, 528 U.S. 963, 145 L. Ed. 2d 308, 120 S. Ct. 395 (1999); Adusumilli v. City of Chicago, 164 F.3d 353, 357, 361-62 (7th Cir. 1998) (holding conduct insufficient to support hostile environment claim when employee teased plaintiff, made sexual jokes aimed at her, told her not to wave at police officers “because people would think she was a prostitute,” commented about low-necked tops, leered at her breasts, and touched her arm, fingers, or buttocks on four occasions), cert. denied, 528 U.S. 988, 145 L. Ed. 2d 367, 120 S. Ct. 450 (1999); Black v. Zaring Homes,, Inc., 104 F.3d 822, 823-24, 826 (6th Cir.) (reversing jury verdict and holding behavior merely offensive and insufficient to support hostile environment claim when employee reached across plaintiff, stating “nothing I like more in the morning than sticky buns” while staring at her suggestively; suggested to plaintiff that parcel of land be named “Hootersville,” “Titsville,” or “Twin Peaks”; and asked “weren’t you there Saturday night dancing on the tables?” while discussing property near a biker bar), cert. denied, 522 U.S. 865, 139 L. Ed. 2d 114, 118 S. Ct. 172 (1997); Weiss v. Coca-Cola Bottling Co., 990 F.2d 333, 337 (7th Cir. 1993) (holding no sexual harassment when plaintiff’s supervisor asked plaintiff for dates, asked about her personal life, called her a “dumb blond,” put his hand on her shoulder several times, placed “I love you” signs at her work station, and attempted to kiss her twice at work and once in a bar).

Booth’s actions were boorish, chauvinistic, and decidedly immature, but we cannot say they created an objectively hostile work environment permeated with sexual harassment. Construing the evidence in the light most favorable to Duncan, she presented evidence of four categories of harassing conduct based on her sex: a single request for a relationship, which was not repeated when she rebuffed it, four or five isolated incidents of Booth briefly touching her hand, a request to draw a planter, and teasing in the form of a poster and beliefs for an imaginary club. It is apparent that these incidents made Duncan uncomfortable, but they do not meet the standard necessary for actionable sexual harassment. It is worth noting that Duncan fails to even address this component of her prima facie case in her brief. We conclude as a matter of law that she did not show a sexually harassing hostile environment sufficiently severe or pervasive so as to alter the conditions of her employment, a failure that dooms Duncan’s hostile work environment claim. See Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 67, 91 L. Ed. 2d 49, 106 S. Ct. 2399 (1986).

For the foregoing reasons, we reverse the district court’s denial of judgment as a matter of law. Because GMC should have prevailed on its post-trial motion, the award of attorneys’ fees is likewise vacated.

RICHARD S. ARNOLD, Circuit Judge, dissenting.

The Court concludes that the harassment suffered by Ms. Duncan was not so severe or pervasive as to alter a term, condition, or privilege of her employment, and that, therefore, GMC is entitled to judgment as a matter of law on her hostile-work environment and constructive-discharge claims. I respectfully disagree.

Ms. Duncan was subjected to a long series of incidents of sexual harassment in her workplace, going far beyond “gender-related jokes and occasional teasing.” Faragher v. City of Boca Raton, 524 U.S. 775, 788 (1988). When the evidence is considered in the light most favorable to her, and she is given the benefit of all reasonable inferences, there is “substantial evidence to sustain the cause of action.” Stockmen’s Livestock Market, Inc. v. Norwest Bank of Sioux City, 135 F.3d 1236, 1240 (8th Cir. 1998) In Ms. Duncan’s case, a jury reached the conclusion that Mr. Booth’s offensive behavior created a hostile work environment. I believe this determination was reasonable and supported by ample evidence.

Ms. Duncan was subjected to a sexual advance by her supervisor within days of beginning her job. This proposition occurred during work hours and was a direct request for a sexual relationship. The Court characterizes this incident as a “single request,” (but) [t]his description minimizes the effect of the sexual advance on Ms. Duncan’s working conditions. During the months immediately following this incident, Mr. Booth became hostile to Ms. Duncan, increased his criticism of her work, and degraded her professional capabilities in front of her peers. Significantly, there is no suggestion that this hostile behavior occurred before Ms. Duncan refused his request for sex. From this evidence, a jury could easily draw the inference that Mr. Booth changed his attitude about Ms. Duncan’s work because she rejected his sexual advance.

Further, this sexual overture was not an isolated incident. It was only the beginning of a string of degrading actions that Mr. Booth directed toward Ms. Duncan based on her sex. This inappropriate behavior took many forms, from physical touching to social humiliation to emotional intimidation. For example, Mr. Booth repeatedly touched Ms. Duncan inappropriately on her hand. He publicly singled her out before her colleagues as a “Man Hater” who “must always be in control of” sex. He required her to choose between drawing a vulgar planter displayed in his office or not being considered for a promotion, an unfair choice that would likely intimidate a reasonable person from seeking further career advancement.

The Court cites cases in which our sister Circuits have rejected hostile-work environment claims premised upon facts that the Court determines to be “equally or more egregious” than the conduct at issue here. I do not agree that Ms. Duncan experienced less severe harassment than those plaintiffs. For example, in Weiss v. Coca-Cola Bottling Co., 990 F.2d 333 (7th Cir. 1993), the plaintiff did not allege that her work duties or evaluations were different because of her sex. This is not the situation Ms. Duncan faced. She was given specific tasks of a sexually charged nature, such as typing up the minutes of the “He-Man Women Hater’s Club.” Performing this “function” was presented to her as a required duty of her job.

Also Ms. Duncan was subjected to allegations that she was professionally “incompetent because of her sex.”…She adduced evidence of this factor when she testified that after she rejected his sexual advance, Mr. Booth became more critical of her work. With the request for her to draw the planter for a promotion, Ms. Duncan also faced “conduct that would prevent her from succeeding in the workplace,” a fact that Ms. Shepherd could not point to in her case. Additionally, Ms. Duncan was “propositioned” to sleep with her employer…a claim not made by Ms. Shepherd.

Finally, we note that in Ms. Duncan’s case the harassing acts were directed specifically at her. The Court in Black v. Zaring Homes, 104 F.3d 822, 826 (6th Cir.), cert. denied, 522 U.S. 865, 139 L. Ed. 2d 114, 118 S. Ct. 172 (1997), stated that the lack of specific comments to the plaintiff supported the conclusion that the defendant’s conduct was not severe enough to create actionable harm. By contrast, in the present case, a jury could reasonably conclude that Ms. Duncan felt particularly humiliated and degraded by Mr. Booth’s behavior because she alone was singled out for this harassment.

Our own Court’s Title VII jurisprudence suggests that Ms. Duncan experienced enough offensive conduct to constitute sexual harassment. For example, in Breeding v. Arthur J. Gallagher and Co. we reversed a grant of summary judgment to an employer, stating that a supervisor who “fondled his genitals [**25] in front of” a female employee and “used lewd and sexually inappropriate language” could create an environment severe enough to be actionable under Title VII. 164 F.3d 1151, 1159 (8th Cir. 1999). In Rorie v. United Parcel Service, we concluded that a work environment in which “a supervisor pats a female employee on the back, brushes up against her, and tells her she smells good” could be found by a jury to be a hostile work environment. 151 F.3d 757, 762 (8th Cir. 1998). Is it clear that the women in these cases suffered harassment greater than Ms. Duncan? I think not.

We have acknowledged that “there is no bright line between sexual harassment and merely unpleasant conduct, so a jury’s decision must generally stand unless there is trial error.” Hathaway v. Runyon, 132 F.3d 1214, 1221 (8th Cir. 1998). We have also ruled that “once there is evidence of improper conduct and subjective offense, the determination of whether the conduct rose to the level of abuse is largely in the hands of the jury.” Howard v. Burns Bros., Inc., 149 F.3d 835, 840 (8th Cir. 1998). The Court admits that Ms. Duncan took subjective offense to Mr. Booth’s behavior and characterizes Mr. Booth’s behavior as “boorish, chauvinistic, and decidedly immature.” Thus, the Court appears to agree that Mr. Booth’s behavior was “improper conduct.” I believe the Court errs in deciding as a matter of law that the jury did not act reasonably in concluding that Ms. Duncan faced severe or pervasive harassment that created a hostile work environment.

Therefore, I dissent from the Court’s conclusion that Ms. Duncan did not present sufficient evidence to survive judgment as a matter of law on her hostile work-environment and constructive-discharge claims.

1. Which opinion is more persuasive to you—the majority opinion or the dissenting opinion?

2. “Numerous cases have rejected hostile work environment claims premised upon facts equally or more egregious than the conduct at issue here.” By what standard or criteria does the majority opinion conclude that Duncan’s experiences were no worse than those mentioned in the other cases?

3. Should the majority on the appeals court substitute its judgment for that of the jury?

Age Discrimination: Burden of Persuasion

Gross v. FBL Financial Services, Inc.

557 U.S. ___ (2009)

JUSTICE CLARENCE THOMAS delivered the opinion of the court.

I

Petitioner Jack Gross began working for respondent FBL Financial Group, Inc. (FBL), in 1971. As of 2001, Gross held the position of claims administration director. But in 2003, when he was 54 years old, Gross was reassigned to the position of claims project coordinator. At that same time, FBL transferred many of Gross’ job responsibilities to a newly created position—claims administration manager. That position was given to Lisa Kneeskern, who had previously been supervised by Gross and who was then in her early forties. Although Gross (in his new position) and Kneeskern received the same compensation, Gross considered the reassignment a demotion because of FBL’s reallocation of his former job responsibilities to Kneeskern.

In April 2004, Gross filed suit in District Court, alleging that his reassignment to the position of claims project coordinator violated the ADEA, which makes it unlawful for an employer to take adverse action against an employee “because of such individual’s age.” 29 U. S. C. §623(a). The case proceeded to trial, where Gross introduced evidence suggesting that his reassignment was based at least in part on his age. FBL defended its decision on the grounds that Gross’ reassignment was part of a corporate restructuring and that Gross’ new position was better suited to his skills.

At the close of trial, and over FBL’s objections, the District Court instructed the jury that it must return a verdict for Gross if he proved, by a preponderance of the evidence, that FBL “demoted [him] to claims projec[t] coordinator” and that his “age was a motivating factor” in FBL’s decision to demote him. The jury was further instructed that Gross’ age would qualify as a “‘motivating factor,’ if [it] played a part or a role in [FBL]’s decision to demote [him].” The jury was also instructed regarding FBL’s burden of proof. According to the District Court, the “verdict must be for [FBL]…if it has been proved by the preponderance of the evidence that [FBL] would have demoted [Gross] regardless of his age.” Ibid. The jury returned a verdict for Gross, awarding him $46,945 in lost compensation. FBL challenged the jury instructions on appeal. The United States Court of Appeals for the Eighth Circuit reversed and remanded for a new trial, holding that the jury had been incorrectly instructed under the standard established in Price Waterhouse v. Hopkins, 490 U. S. 228 (1989). In Price Waterhouse, this Court addressed the proper allocation of the burden of persuasion in cases brought under Title VII of the Civil Rights Act of 1964, when an employee alleges that he suffered an adverse employment action because of both permissible and impermissible considerations—i.e., a “mixed-motives” case. 490 U. S., at 232, 244–247 (plurality opinion). The Price Waterhouse decision was splintered. Four Justices joined a plurality opinion, and three Justices dissented. Six Justices ultimately agreed that if a Title VII plaintiff shows that discrimination was a “motivating” or a “ ‘substantial’ “ factor in the employer’s action, the burden of persuasion should shift to the employer to show that it would have taken the same action regardless of that impermissible consideration. Justice O’Connor further found that to shift the burden of persuasion to the employer, the employee must present “direct evidence that an illegitimate criterion was a substantial factor in the [employment] decision.”…

Because Gross conceded that he had not presented direct evidence of discrimination, the Court of Appeals held that the District Court should not have given the mixed-motives instruction. Ibid. Rather, Gross should have been held to the burden of persuasion applicable to typical, non-mixed-motives claims; the jury thus should have been instructed only to determine whether Gross had carried his burden of “prov[ing] that age was the determining factor in FBL’s employment action.”

We granted certiorari, 555 U.S. ___ (2008), and now vacate the decision of the Court of Appeals.

II

The parties have asked us to decide whether a plaintiff must “present direct evidence of discrimination in order to obtain a mixed-motive instruction in a non-Title VII discrimination case.” Before reaching this question, however, we must first determine whether the burden of persuasion ever shifts to the party defending an alleged mixed-motives discrimination claim brought under the ADEA. We hold that it does not.

A

Petitioner relies on this Court’s decisions construing Title VII for his interpretation of the ADEA. Because Title VII is materially different with respect to the relevant burden of persuasion, however, these decisions do not control our construction of the ADEA.

In Price Waterhouse, a plurality of the Court and two Justices concurring in the judgment determined that once a “plaintiff in a Title VII case proves that [the plaintiff’s membership in a protected class] played a motivating part in an employment decision, the defendant may avoid a finding of liability only by proving by a preponderance of the evidence that it would have made the same decision even if it had not taken [that factor] into account.” 490 U. S., at 258; see also id., at 259–260 (opinion of White, J.); id., at 276 (opinion of O’Connor, J.). But as we explained in Desert Palace, Inc. v. Costa, 539 U. S. 90, 94–95 (2003), Congress has since amended Title VII by explicitly authorizing discrimination claims in which an improper consideration was “a motivating factor” for an adverse employment decision. See 42 U. S. C. §2000e–2(m) (providing that “an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex, or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice” (emphasis added))…

This Court has never held that this burden-shifting framework applies to ADEA claims. And, we decline to do so now. When conducting statutory interpretation, we “must be careful not to apply rules applicable under one statute to a different statute without careful and critical examination.” Unlike Title VII, the ADEA’s text does not provide that a plaintiff may establish discrimination by showing that age was simply a motivating factor. Moreover, Congress neglected to add such a provision to the ADEA when it amended Title VII to add §§2000e–2(m) and 2000e–5(g)(2)(B), even though it contemporaneously amended the ADEA in several ways.…

We cannot ignore Congress’ decision to amend Title VII’s relevant provisions but not make similar changes to the ADEA. When Congress amends one statutory provision but not another, it is presumed to have acted intentionally.…As a result, the Court’s interpretation of the ADEA is not governed by Title VII decisions such as Desert Palace and Price Waterhouse.

B

Our inquiry therefore must focus on the text of the ADEA to decide whether it authorizes a mixed-motives age discrimination claim. It does not. “Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.”…The ADEA provides, in relevant part, that “[i]t shall be unlawful for an employer…to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.” 29 U. S. C. §623(a)(1) (emphasis added).

The words “because of” mean “by reason of: on account of.” Webster’s Third New International Dictionary 194 (1966); see also Oxford English Dictionary 746 (1933) (defining “because of” to mean “By reason of, on account of” (italics in original)); The Random House Dictionary of the English Language 132 (1966) (defining “because” to mean “by reason; on account”). Thus, the ordinary meaning of the ADEA’s requirement that an employer took adverse action “because of” age is that age was the “reason” that the employer decided to act.…To establish a disparate-treatment claim under the plain language of the ADEA, therefore, a plaintiff must prove that age was the “but-for” cause of the employer’s adverse decision.…

It follows, then, that under §623(a)(1), the plaintiff retains the burden of persuasion to establish that age was the “but-for” cause of the employer’s adverse action. Indeed, we have previously held that the burden is allocated in this manner in ADEA cases. See Kentucky Retirement Systems v. EEOC, 554 U. S. ____. And nothing in the statute’s text indicates that Congress has carved out an exception to that rule for a subset of ADEA cases. Where the statutory text is “silent on the allocation of the burden of persuasion,” we “begin with the ordinary default rule that plaintiffs bear the risk of failing to prove their claims.” Schaffer v. Weast, 546 U. S. 49, 56 (2005)…

Hence, the burden of persuasion necessary to establish employer liability is the same in alleged mixed-motives cases as in any other ADEA disparate-treatment action. A plaintiff must prove by a preponderance of the evidence (which may be direct or circumstantial), that age was the “but-for” cause of the challenged employer decision.

III

Finally, we reject petitioner’s contention that our interpretation of the ADEA is controlled by Price Waterhouse, which initially established that the burden of persuasion shifted in alleged mixed-motives Title VII claims. In any event, it is far from clear that the Court would have the same approach were it to consider the question today in the first instance.

Whatever the deficiencies of Price Waterhouse in retrospect, it has become evident in the years since that case was decided that its burden-shifting framework is difficult to apply. For example, in cases tried to a jury, courts have found it particularly difficult to craft an instruction to explain its burden-shifting framework.…Thus, even if Price Waterhouse was doctrinally sound, the problems associated with its application have eliminated any perceivable benefit to extending its framework to ADEA claims.

IV

We hold that a plaintiff bringing a disparate-treatment claim pursuant to the ADEA must prove, by a preponderance of the evidence, that age was the “but-for” cause of the challenged adverse employment action. The burden of persuasion does not shift to the employer to show that it would have taken the action regardless of age, even when a plaintiff has produced some evidence that age was one motivating factor in that decision. Accordingly, we vacate the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

It is so ordered.

1. What is the practical effect of this decision? Will plaintiffs with age-discrimination cases find it harder to win after Gross?

2. As Justice Thomas writes about it, does “but-for” cause here mean the “sole cause”? Must plaintiffs now eliminate any other possible cause in order to prevail in an ADEA lawsuit?

3. Based on this opinion, if the employer provides a nondiscriminatory reason for the change in the employee’s status (such as “corporate restructuring” or “better alignment of skills”), does the employer bear any burden of showing that those are not just words but that, for example, the restructuring really does make sense or that the “skills” really do line up better in the new arrangement?

4. If the plaintiff was retained at the same salary as before, how could he have a “discrimination” complaint, since he still made the same amount of money?

5. The case was decided by a 5-4 majority. A dissent was filed by Justice Stevens, and a separate dissent by Justice Breyer, joined by Justices Ginsburg and Souter. You can access those at http://www.law.cornell.edu/supct/pdf/08-441P.ZD1.

Disability Discrimination

Toyota v. Williams

534 U.S. 184 (2000)

Factual Background

Ella Williams’s job at the Toyota manufacturing plant involved using pneumatic tools. When her hands and arms began to hurt, she consulted a physician and was diagnosed with carpal tunnel syndrome. The doctor advised her not to work with any pneumatic tools or lift more than twenty pounds. Toyota shifted her to a different position in the quality control inspection operations (QCIO) department, where employees typically performed four different tasks. Initially, Williams was given two tasks, but Toyota changed its policy to require all QCIO employees to rotate through all four tasks. When she performed the “shell body audit,” she had to hold her hands and arms up around shoulder height for several hours at a time.

She soon began to experience pain in her neck and shoulders. When she asked permission to do only the two tasks that she could perform without difficulty, she was refused. According to Toyota, Williams then began missing work regularly.

In 1997, Toyota Motor Manufacturing, Kentucky, Inc. terminated Ella Williams, citing her poor attendance record. Subsequently, claiming to be disabled from performing her automobile assembly line job by carpal tunnel syndrome and related impairments, Williams sued Toyota for failing to provide her with a reasonable accommodation as required by the Americans with Disabilities Act (ADA) of 1990.

Granting Toyota summary judgment, the district court held that Williams’s impairment did not qualify as a disability under the ADA because it had not substantially limited any major life activity and that there was no evidence that Williams had had a record of a substantially limiting impairment. In reversing, the court of appeals found that the impairments substantially limited Williams in the major life activity of performing manual tasks. Because her ailments prevented her from doing the tasks associated with certain types of manual jobs that require the gripping of tools and repetitive work with hands and arms extended at or above shoulder levels for extended periods of time, the appellate court concluded that Williams demonstrated that her manual disability involved a class of manual activities affecting the ability to perform tasks at work.

JUSTICE SANDRA DAY O’CONNOR delivered the unanimous opinion of the court.

When it enacted the ADA in 1990, Congress found that some 43 million Americans have one or more physical or mental disabilities. If Congress intended everyone with a physical impairment that precluded the performance of some isolated, unimportant, or particularly difficult manual task to qualify as disabled, the number of disabled Americans would surely have been much higher. We therefore hold that to be substantially limited in performing manual tasks, an individual must have an impairment that prevents or severely restricts the individual from doing activities that are of central importance to most people’s daily lives. The impairments impact must also be permanent or long-term.

When addressing the major life activity of performing manual tasks, the central inquiry must be whether the claimant is unable to perform the variety of tasks central to most people’s daily lives, not whether the claimant is unable to perform the tasks associated with her specific job. In this case, repetitive work with hands and arms extended at or above shoulder levels for extended periods of time is not an important part of most people’s daily lives. The court, therefore, should not have considered respondent’s inability to do such manual work in or specialized assembly line job as sufficient proof that she was substantially limited in performing manual tasks.

At the same time, the Court of Appeals appears to have disregarded the very type of evidence that it should have focused upon. It treated as irrelevant “[t]he fact that [respondent] can…ten[d] to her personal hygiene [and] carr[y]out personal or household chores.” Yet household chores, bathing, and brushing one’s teeth are among the types of manual tasks of central importance to people’s daily lives, and should have been part of the assessment of whether respondent was substantially limited in performing manual tasks.

The District Court noted that at the time respondent sought an accommodation from petitioner, she admitted that she was able to do the manual tasks required by her original two jobs in QCIO. In addition, according to respondent’s deposition testimony, even after her condition worsened, she could still brush her teeth, wash her face, bathe, tend her flower garden, fix breakfast, do laundry, and pick up around the house. The record also indicates that her medical conditions caused her to avoid sweeping, to quit dancing, to occasionally seek help dressing, and to reduce how often she plays with her children, gardens, and drives long distances. But these changes in her life did not amount to such severe restrictions in the activities that are of central importance to most people’s daily lives that they establish a manual task disability as a matter of law. On this record, it was therefore inappropriate for the Court of Appeals to grant partial summary judgment to respondent on the issue of whether she was substantially limited in performing manual tasks, and its decision to do so must be reversed.

Accordingly, we reverse the Court of Appeals’ judgment granting partial summary judgment to respondent and remand the case for further proceedings consistent with this opinion.

1. What is the court’s most important “finding of fact” relative to hands and arms? How does this relate to the statutory language that Congress created in the ADA?

2. The case is remanded to the lower courts “for further proceedings consistent with this opinion.” In practical terms, what does that mean for this case?

36

Summary

For the past forty-eight years, Title VII of the Civil Rights Act of 1964 has prohibited employment discrimination based on race, religion, sex, or national origin. Any employment decision, including hiring, promotion, and discharge, based on one of these factors is unlawful and subjects the employer to an award of back pay, promotion, or reinstatement. The Equal Employment Opportunity Commission (EEOC) may file suits, as may the employee—after the commission screens the complaint.

Two major types of discrimination suits are those for disparate treatment (in which the employer intended to discriminate) and disparate impact (in which, regardless of intent, the impact of a particular non-job-related practice has a discriminatory effect). In matters of religion, the employer is bound not only to refrain from discrimination based on an employee’s religious beliefs or preferences but also to accommodate the employee’s religious practices to the extent that the accommodation does not impose an undue hardship on the business.

Sex discrimination, besides refusal to hire a person solely on the basis of sex, includes discrimination based on pregnancy. Sexual harassment is a form of sex discrimination, and it includes the creation of a hostile or offensive working environment. A separate statute, the Equal Pay Act, mandates equal pay for men and women assigned to the same job.

One major exception to Title VII permits hiring people of a particular religion, sex, or nationality if that feature is a bona fide occupational qualification. There is no bona fide occupational qualification (BFOQ) exception for race, nor is a public stereotype a legitimate basis for a BFOQ.

Affirmative action plans, permitting or requiring employers to hire on the basis of race to make up for past discrimination or to bring up the level of minority workers, have been approved, even though the plans may seem to conflict with Title VII. But affirmative action plans have not been permitted to overcome bona fide seniority or merit systems.

The Age Discrimination in Employment Act protects workers over forty from discharge solely on the basis of age. Amendments to the law have abolished the age ceiling for retirement, so that most people working for employers covered by the law cannot be forced to retire.

The Americans with Disabilities Act of 1990 prohibits discrimination based on disability and applies to most jobs in the private sector.

At common law, an employer was free to fire an employee for any reason or for no reason at all. In recent years, the employment-at-will doctrine has been seriously eroded. Many state courts have found against employers on the basis of implied contracts, tortious violation of public policy, or violations of an implied covenant of good faith and fair dealing.

Beyond antidiscrimination law, several other statutes have an impact on the employment relationship. These include the plant-closing law, the Employee Polygraph Protection Act, the Occupational Safety and Health Act, the Employee Retirement Income Security Act, and the Fair Labor Standards Act.

1

This is where you can add appendices or other back matter.