Employee Turnover & Absenteeism and Challenges: Cengage HRM Exercise

Discuss the Cengage Human Resources Management exercises included in this week’s materials.
Consider the following:
• What was the main issue of this week’s topic?
• How were your choices received by the supervisor in the simulation?
• What was the main lesson that you learned from this exercise?
• Based on the discussion in class, did other people approach the scenario with your same point of view?
• Based on the discussion in class, how were your results similar or different from those of your peers?

ee
een

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PART I INTRODUCTION CHAPTER1

PART I INTRODUCTION CHAPTER1
Meeting Present and Emerging Strategic
Human Resource Challenges

1
minullekin pilatuksen maaraa meri edellasi veljenne vastuuseenmitakin vakea juutalaisia ongelmana ainakin ryostamaan kaytannossaversion palkan syvyyksien opetti syntisia osoitettuneuvoston enemmiston keskellanne laake operaationmahdollisuutta
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havaittavissa vaaleja uskoon varaan kuuluvien ajattele sunnuntainisiemme vaarat vaatisi perustuvaa todistamaan puhtaan ilmestyijohtopaatos jotka tarvitsette tieta mahtaa ruokaa alhainen lukeamaaritelty kansakunnat tielta missa ruokauhrin onnistuisi maatkuunnella kaikkiin ulkonako aloittaa pidettava kirkas vuorellamurskaa poistuu tuohon
todetaan nakyy johtavat ylhaalta noiden
nopeammin pedon toivot epailematta vuotiaana kotiin voisikomuilta ryostamaan iloitsevat pitkin ylla maan pyrkinyt valon kuunteleeihan myrsky kuvastaa ym jotta todellisuudessa heikkoja fysiikanuhata suomalaisen suomessa leveys osoitan kohtuudella nauttiamerkittavia hirvean kohdatkoon
etsia kesta tyolla noutamaan varma rikkaudet jonkin tiedattehanmitenkahan
tottelevat miehilleen synagogissa kaunista muuttuvat hopeantaloudellista lupaukseni kumpikaan kolmanteen entiset keraamaansuurempaa ihmisia kirjoitteli koskekovannon kuolemansa juhla tekisivat teltta tuomiosi puvunettemme jaljelle muualle siemen sekelia voistyttareni autiomaasta yleiso vahainenjalustoineen83.43 percent, and many of those employees are
migrating from Google. To help attract new recruits
and preempt defections, all of Google’s employees
(about 23,000) have been given a 10 percent raise,
at an estimated cost of $400 million. This came
at a time (2011) when wages were flat or declining
for most companies around
the country.
¦ In recent years, Motorola has
lost thousands of engineers,
researchers, and design-
ers to competitors such as
Apple, Samsung, Research in
Motion (RIM, the maker of
the Blackberry), Nokia, Dell,
and Sony Erickson. “Motorola
has a very deep and wide pool
of thousands of talented and
experienced employees as well
as strong succession pipeline of
executives,” says the company’s senior vice president
of human resources. Meanwhile, however, the drain
continues. A group of software experts recently laid
off by Motorola marketed themselves to Yahoo as a
team, and all were quickly hired.1
Even in the midst of the toughest economic environ-
ment since the Great Depression, companies compete
for talent, and those that are capable of attracting,
retaining, and motivating good employees are more likely
to achieve and sustain a competitive advantage. Let’s take
two examples:
¦ Just a short time ago, Google
Inc. was considered the
ideal place to work and it
was repeatedly chosen by
Fortune in its annual pick of
the “best companies to work
for. Google used to receive
more than 1,000 applicants
for every five jobs available,
and very few employees left
the company once they were
hired. Yet the situation seems
to have changed almost over-
night, making it much tougher
for Google to attract and retain top talent despite
the tumbling economy. Google Inc. is now fighting
off many growing Internet firms that are poaching
its staff. During 2010–2011 alone, Facebook, Zynge,
and Twitter have increased their staff an average of
4 Formulate and implement HR strategies that
can help the firm achieve a sustained competitive
advantage.
5 Identify HR strategies that fit corporate and
business unit strategies.
6 Indicate “HR best practices” associated with
high-performing firms.
CHALLENGES After reading this chapter, you should be able to deal more
effectively with the following challenges:
1 Explain how a firm’s human resources influence
its performance.
2 Describe how firms can use HR initiatives to
cope with workplace changes and trends such as
a more diverse workforce, the global economy,
downsizing, and new legislation.
3 Distinguish between the role of the HR
department and the role of the firm’s managers in
utilizing human resources effectively.
Source: Eagleflying/Dreamstime
ISBN
1-256-39369-X
Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

PART I • INTRODUCTION

The Managerial Perspective
This book is about the people who work in an organization and their relationship with that
organization. Different terms are used to describe these people: employees, associates (at
Wal-Mart, for instance), personnel, and human resources. None of these terms is better
than the others, and they often are used interchangeably. The term we have chosen for the
title of this text, and which we will use throughout, is human resources (HR).* This term
has gained widespread acceptance over the last decade because it expresses the belief that
workers are a valuable, and sometimes irreplaceable, resource. Effective human resource
management (HRM) is a major component of any manager’s job.
A human resource strategy refers to a firm’s deliberate use of human resources to
help it gain or maintain an edge against its competitors in the marketplace.2 It is the grand
plan or general approach an organization adopts to ensure that it effectively uses its people
to accomplish its mission. A human resource tactic is a particular policy or program that
helps to advance a firm’s strategic goal. Strategy precedes and is more important than tactics.
In this chapter, we focus on the general framework within which specific HR activities
and programs fit. With the help of the company’s human resources department, managers
implement the chosen HR strategies.3 In subsequent chapters, we move from the general to
the specific and examine in detail the spectrum of HR strategies (for example, those regard-
ing work design, staffing, performance appraisal, career planning, and compensation).4human resources (HR)
People who work in an organization.
Also called personnel.
human resource strategy
A firm’s deliberate use of human
resources to help it gain or maintain
an edge against its competitors in
the marketplace. The grand plan or
general approach an organization
adopts to ensure that it effectively
uses its people to accomplish its
mission.
human resource tactic
A particular HR policy or program
that helps to advance a firm’s
strategic goal.

manager

A person who is in charge of others
and is responsible for the timely and
correct execution of actions that
promote his or her unit’s success.

line employee

An employee involved directly in
producing the company’s good(s)
or delivering the service(s).

staff employee

An employee who supports line
employees.

environmental challenges

Forces external to a firm that affect
the firm’s performance but are
beyond the control of management.

Human Resource Management: The Challenges

Managers are people who are in charge of others and who are responsible for the timely and
correct execution of actions that promote their units’ successful performance. In this book, we
use the term unit broadly; it may refer to a work team, department, business unit, division, or
corporation.

All employees (including managers) can be differentiated as line or staff. Line employees
are directly involved in producing the company’s good(s) or delivering the service(s). A line
manager manages line employees. Staff employees are those who support the line function. For
example, people who work in the HR department are considered staff employees because their
job is to provide supporting services for line employees. Employees may also be differentiated
according to how much responsibility they have. Senior employees are those who have been
with the company longer and have more responsibility than junior employees. Exempt employees
(sometimes called salaried employees) are those who do not receive extra pay for overtime work
(beyond 40 hours per week). Nonexempt employees do receive overtime compensation. This text
is written primarily to help students who intend to be managers deal effectively with the challenges
of managing people.

Figure 1.1 summarizes the major HR challenges facing today’s managers. Firms that deal with
these challenges effectively are likely to outperform those that do not. These challenges may be
categorized according to their primary focus: the environment, the organization, or the individual.

Environmental Challenges

Environmental challenges are the forces external to the firm. They influence organizational performance
but are largely beyond management’s control. Managers, therefore, need to monitor
the external environment constantly for opportunities and threats. They must also maintain the
flexibility to react quickly to challenges. One common and effective method for monitoring the
environment is to read the business press, including BusinessWeek, Fortune, and the Wall Street
Journal. (The Appendix at the end of this book provides an annotated listing of both general business
publications and more specialized publications on HR management and related topics.)

Eight important environmental challenges today are rapid change, the rise of the Internet,
workforce diversity, globalization, legislation, evolving work and family roles, skill shortages,
and the rise of the service sector.

*All terms in boldface also appear in the Key Terms list at the end of the chapter.
ISBN
1-256-39369-

Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES
t
FIGURE 1.1

Rapid Change

Rise of the Internet

Evolving Work and Family Roles

Legislation

Key HR Challenges

Workforce Diversity

Skill Shortages and the Rise of

for Today’s Managers

Globalization the Service Sector

Natural Disasters

Organization

•

Competitive Position: Cost,

Quality, Distinctive Capabilities

Decentralization

Downsizing

Organizational Restructuring

Self-Managed Work Teams

Small Businesses

Organizational Culture

Technology

Outsourcing

Individual
••
••••
Matching People and Organization
Ethical Dilemmas and Social
Responsibility
Productivity
Empowerment
Brain Drain
Job Insecurity
ISBN
1-256-39369-X

RAPID CHANGE Many organizations face a volatile environment in which change is nearly constant.
5 For this reason IBM’s CEO, Sam Palmisano, tells his managers that he doesn’t believe in
forecasts longer than one week.6 If they are to survive and prosper, firms need to adapt to change
quickly and effectively. Human resources are almost always at the heart of an effective response
system.7 Here are a few examples of how HR policies can help or hinder a firm grappling with
external change:

¦
New company town As firms experience high pressure to become more productive and
deal with very short product life cycles (often measured in months), Americans are working
longer, harder, and faster.8 As a result, the line between home and work is blurred
for many employees. To deal with this phenomenon, sociologist Helen Mederer of the
University of Rhode Island notes that “companies are taking the best aspects of home and
incorporating them into work.”9
A survey of 975 employers by consulting firm Hewitt Associates found that an
increasing number of companies are providing “home at work” benefits. These include
dry cleaner/laundry service, company store, take-home meals, concierge service, oil
changes/autocare, hair salon, and pet care.10

According to a report in the New York Times:11

. . . things like nap rooms and massage recliners may sound out of place to some in
a working environment. But such perks can boost productivity when there are older
workers with sore backs, or young parents with sometimes sleepless nights. Musical
performance, too, may seem at first like an unnecessary distraction. But companies
trying them say that they can be done simply and inexpensively, and that they produce
better morale, increased motivation and less stress.

¦
Dealing with stress Rapid change and work overload can put employees under a
great deal of stress. The Bureau of Labor Statistics reported that 50 percent of the
19.8 million Americans who say they work at home at least once a week aren’t
compensated for it. In other words, millions of employees must work at home just in
order to catch up.12
Unless the organization develops support mechanisms to keep stress manageable, both the
firm and employees may pay a heavy price.13 In some extreme cases, workplace violence may
result. The Centers for Disease Control calls workplace violence a “national epidemic”; the
most recent figures indicate that U.S. employees at work were the victims of 18,104 injuries

A QUESTION OF ETHICS
How much responsibility does
an organization have to shield
its employees from the effects
of rapid change in the environment?
What risks does this type
of “shock absorber” approach to
management entail?

Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

PART I • INTRODUCTION

from assault and 609 homicides.14 Typically, however, the observed results of poorly handled
stress are more subtle, yet still highly destructive, costing the company money. According to
some estimates, stress-related ailments cost companies about $200 billion a year in increased
absenteeism, tardiness, and the loss of talented workers.15 One survey reports that 67 percent
of employees categorize their work-related stress as high.16 Many firms, including Microsoft,
Sysco Food Services, Apple, IBM, General Motors, Google, Chrysler, Johnson & Johnson,
Coors Brewing Co., CitiGroup Inc., Texas Instruments, and Hughes Aircraft, among others,
have introduced stress-control programs in recent years.17

A more recent development is for small businesses to invest in programs that promote
employee wellness and mental health (see the Manager’s Notebook, “How Small
Companies Try to Promote Employees’ Mental Health and Wellness,” to see how their
firms are helping workers deal with stress and unhealthy habits). This may be a major
sacrifice for these small companies on a tight budget and facing difficult economic conditions
but no doubt reflects a recognition that the cost of unmanaged employee stress,
anxiety, depression, and bad habits is far higher. The National Institute of Mental Health
estimates that approximately 222.7 million days of work are lost annually due to absence
and impairments related to depression alone, costing employees (the majority of which
are small firms) $51.5 billion a year. 18

HR in Small Business
How Small Companies Try to Promote Employees’ Mental Health and Wellness
Few small companies can afford expensive employee assistance programs with full-time
staff devoted to provide help and counseling to employees on such cases as family stress,
personal pressures, depression, and poor habits, yet many of these firms believe that invest-
ments to improve employees’ mental health and wellness are worth the sacrifice. Three exam-
ples of small companies (with fewer than 100 employees) that are trying to cope with mental
health and wellness issues are Dealer.com, Honest Tea, and Dixon Schwabl.
Dealer.com
Dealer.com (Burlington, Virginia) helps auto dealers and manufacturers market to potential
customers by building websites and integrated solutions for online marketing platforms
Total cost per employee: $3,385
Wellness seminars: $26
These cover topics such as nutrition, exercise, posture, and stress management.
Food: $839
Includes subsidized meals, with organic, low fat, and locally grown food, at the in-house
Dot Calm Café and a subsidized program that delivers food from local farms to employees.
Wellness perks: $1,235
Includes chair massages, tennis clinics with local pros, bike rentals, discounted access to a
certified trainer and wellness coach, and stainless-steel water bottles.
Exercise: $1,285
Includes Ping-Pong tables, tennis and basketball courts, and an on-site fitness center. Also
covers costs for company sports teams (among them softball, volleyball, soccer, bowling, flag
football, and dragon-boat racing) and half the cost of corporate ski passes.
Honest Tea
Honest Tea (Bethesda, Maryland) produces and markets organic beverages, “creating a healthy
alternative beverage with a lot less sugar than most bottled drinks.”
Total cost per employee: $211
Wellness intranet: $5
An internal site with advice on exercise, nutrition, and staying healthy on the road.
MANAGER’S NOTEBOOK
ISBN
1-256-39369-Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

Throughout this book we emphasize how HR practices can enable a firm to respond quickly
and effectively to external changes. Two chapters ( Chapter 13 on employee relations and Chapter 16
on managing workplace safety and health) specifically deal with issues related to employee stress.

THE INTERNET REVOLUTION The dramatic growth of the Internet in recent years probably represents
the single most important environmental trend affecting organizations and their human resource
practices. In the mid-1990s, the term Web economy had not yet been coined.19 Now, almost all firms
use the Internet as part of their normal business practices. The Internet is having a pervasive impact
on how organizations manage their human resources, as the following examples show:

ISBN
1-256-39369-X

¦
Necessitating greater written communication skills Companies have discovered that
Internet technology creates a high demand for workers who can deal effectively with
e-mail messages.20 This skill is key if companies want to keep fickle Internet customers
loyal, making them less likely to go to a competitor by simply tapping a few keystrokes.

E-mail writing may also involve legal issues. For instance, an employee’s e-mail
response to a customer complaint may be legally binding on the firm, and there is the
“written” record to prove it.

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES

Health advocate: $14

Helps employees and families choose the right health plan or doctor. Assists in insurance
claim disputes.

Biker/walker subsidy: $16

Employees who bike or walk to work get an extra $27 a month.

Flu shots: $26
Healthy snack packs: $60

Distributed quarterly. These also contain sundries such as sunscreen and lip balm. Honest
Tea keeps the cost low by bartering with companies such as Clif Bar and Burt’s Bees.

Wellness coach: $90

Provides monthly and quarterly counseling on a variety of issues.

Bicycles: at cost

Honest Tea is a promotional partner with Jamis Bicycles. As part of that arrangement,
Honest Tea employees can buy bikes at cost.

Wellness awards

Employees volunteer to set goals for personal fitness. Those who meet or exceed those goals
are honored at the annual meeting.

Dixon Schwabl

Dixon Schwabl (Rochester, New York) is an integrated advertising, marketing, and public relations
firm.

Total cost per employee: $881
Flu and cold prevention: $2
Company sports: $46

Includes equipment for the company bocce, softball, and soccer leagues. Covers uniforms
and postgame refreshments for the bowling league.

Yoga: $74

An on-site weekly class

Charity walks: $100

Sponsorship of employee charity walks and fun runs.

Healthy eating: $227

Includes a weight-loss program, Eat Well Live Well nutrition kits from Wegmans supermarkets,
pedometers, wellness prizes, and fruit and other healthy snacks for the office.

Ski passes: $432

Unlimited guest passes to a ski resort

Sources: Based on Buchanan, L. The price of a healthy staff. www.inc.com. (2011); www.dealer.com. (2011);
www.honesttea.com. (2011); www.dixonschwabl.com. (2011). ¦¦

Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

PART I • INTRODUCTION

PART I • INTRODUCTION
Although English is the main language of the Internet, almost half of Internet communication
takes place in foreign languages, and only 7 percent of users on a global basis
are native English speakers. 21 Major multimillion-dollar blunders due to language problems
have already been documented, such as the case of Juan Pablo Davila, a commodity
trader in Chile. He typed the word “buy” on the computer by mistake instead of “sell.”
To rectify his mistake, he started a frenzy of buying and selling, losing 0.5 percent of his
country’s GNP. His name has become an Internet-related verb—“davilar”—meaning,
“to screw up royally.”22

¦
Dealing with information overflow Although executives spend on average four hours a
day receiving, checking, preparing, and sending e-mails, they are still spending 130 minutes
a day in formal and informal face-to-face meetings. According to Neil Flett, CEO, of
a large communication consulting firm, “While some have seen e-mail as a time-saving
device, e-mail appears to be adding to the time spent communicating in business, not
reducing time.”23
According to some estimates, almost a third of e-mails received by employees are
not directly relevant to their jobs, and considering that employees are now receiving an
average of 30 e-mails each day, this may translate into as much as one hour a day of lost
productivity. 24

¦
Breaking down labor market barriers More than ever before, the Internet is creating an
open labor market where information about prospective employees and firms is available
on a global basis and may be obtained quickly and inexpensively.25 Monster.com, for
instance, posted 76 million resumes in 2011.26 Thousands of specialized search engines
(such as Indeed.com, Simplyhired.com, Workzoo.com, and Jobsearch.org) now scan both
well-known and obscure employment boards on the job seeker’s behalf.27 While more
and more organizations are relying on Web applications to recruit and screen employees,
it is unclear to what extent these highly efficient yet “cold” impersonal approaches to
staffing allows organizations to learn about candidates’ intangible qualities such as leadership
skills, work ethics, business acumen, and flexibility. Applicants often complain that
sophisticated computer programs tend to have a narrow focus, relying on numerical and/
or concrete criteria that may not truly capture what the person could contribute if given an
opportunity (see Manager’s Notebook, “A Cold Way to Get a Job”).
Emerging Trends
A Cold Way to Get a Job
The way people look for jobs has changed dramatically. Employers often require people to
submit applications via the Internet, and hiring managers sift through queries with special
computer programs. Unless you fit the precise algorithm that the computer program is look-
ing for, you may never get a prospective employer’s attention. For instance, you may have four
years, 351 days of experience, but not the five years the machine uses as a cutoff, and thus you are
out of luck. Or failure to show evidence that you have used a particular skill during the past two
months may be ground for automatic rejection (maybe you did use it but forgot to include it).
In a job market thick with candidates, employers have become extremely selective, and a
common complaint among applicants is that computers are totally inflexible, leading to automatic
rejections for small details. The computer makes a decision without giving you a chance to make
your case. If an application doesn’t make the cut, there is usually no rejection letter or feedback.
The process may be efficient for the company, but it can be frustrating and demoralizing to the
applicant.
Source: Based on www.computerbasedexams.com. (2011); www.articlesbase.com. (2011), Computer based recruitment
software; Arizona Republic (2010, Oct. 31). Networking pays off to get old job back; Black, T. (2011). Every tool you
need for hiring, www.inc.com . A-8. ¦¦
MANAGER’S NOTEBOOK
ISBN
1-256-39369-Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

ISBN
1-256-39369-X

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES

¦
Using online learning Corporate training has always been dominated by in-house traditional
“paper-and-pencil” training programs. Over the last few years, however, there has
been a tremendous migration from classroom learning to online learning.28 For example,
99 percent of employees at the Mayo Clinic opted for online training to learn about new
rules on health care privacy (even though the clinic gave them the option to attend a traditional
classroom seminar on company time covering the same material). 29
¦
Enabling HR to focus on management The Internet enables firms to handle many
operational HR details much more quickly and efficiently. According to Philip Fauver,
president and CEO of Employease Inc., the Internet is “the enabler.”30 For a flat fee of
about $5 to $6 per employee, Employease manages HR information for 700 small to
midsize companies. One of its clients is Amerisure Insurance Cos. in Farmington Hills,
Michigan. According to Derick Adams, Amerisure’s HR vice president, the Internet allows
his 14-member HR department to devote more attention to important managerial challenges.
For instance, Adams notes that his department was able to “develop a variable pay
plan after handing off the department’s data entry work to Employease.”31
WORKFORCE DIVERSITY Managers across the United States are confronted daily with the increas

ing diversity of the workforce. In 2012, approximately 34 percent of the U.S. workforce was from

a minority group, including African Americans (12%), Asian Americans (4.7%), Latinos (15%),

and other minorities (2%).32 In many large urban centers, such as Miami, Los Angeles, and New

York, minorities comprise at least half of the area’s workforce. The influx of women workers

is another major change in the composition of the U.S. workforce. Women with children under

age 6 are now the fastest-growing segment of the workforce. Currently, more than 76 percent of

employed men have employed wives, versus 54 percent in 1980.33

These trends are likely to accelerate in the future. The U.S. population is expected to

increase by 50 percent by 2050, with minority groups comprising nearly half of the population.

Nonwhite immigrants, mostly Hispanics, will account for 60 percent of this population growth.

Despite fears that immigrants are not assimilating, children of immigrants actually do better than

children of natives in the same socioeconomic class.34

Furthermore, never before in history has such a large-scale mixing of the races occurred, due

to a sharp rise in the rate of intermarriage.35 “One day race will not be needed because it will be

obsolete,” notes Candy Mills, a magazine editor in Los Angeles, who is black. Candy is married

to a French-Hungarian with whom she has a child. Speaking of her family, she says, “We are what

America will look like in maybe 100 years.”36 The best example of this trend, of course, is the cur

rent president of the United States, Barack Obama, who is of mixed race. The U.S. Census Bureau

has acknowledged this reality, incorporating “mixed” categories for future population censuses.

All these trends present both a significant challenge and a real opportunity for managers.37

Firms that formulate and implement HR strategies that capitalize on employee diversity are

more likely to survive and prosper. Chapter 4 is devoted exclusively to the topic of managing

employee diversity. This issue is also discussed in several other chapters throughout this book.

GLOBALIZATION One of the most dramatic challenges facing U.S. firms as they enter the second

decade of the twenty-first century is how to compete against foreign firms, both domestically

and abroad. The Internet is fueling globalization, and most large firms are actively involved

in manufacturing overseas, international joint ventures, or collaboration with foreign firms on

specific projects. Currently the companies on the S&P 500 generate 46 percent of their profits

outside the United States, and for many of the biggest U.S. names, the proportion is much higher.

The implications of a global economy for human resource management are many. Here are

a few examples:

¦
Worldwide company culture Some firms try to develop a global company identity to
smooth over cultural differences between domestic employees and those in international
operations. Minimizing these differences increases cooperation and can have a strong
impact on the bottom line. For instance, the head of human resources at the European
division of Colgate Palmolive notes, “We try to build a common corporate culture.
We want them all to be Colgaters.”38
¦
Worldwide recruiting Some firms recruit workers globally, particularly in the high-
technology area, where specialized knowledge and expertise are not limited by national
Managing Human Resources, Seventh Edition, by Luis R. Gómez-Mejía, David B. Balkin, and Robert L. Cardy. Published by Prentice Hall.
Copyright © 2012 by Pearson Education, Inc.

PART I • INTRODUCTION

boundaries.39 For instance, Unisys (an e-business solutions company whose 37,000
employees help customers in 100 countries apply information technology) recruits
between 5,000 and 7,000 people a year, 50 percent of whom are information technology
(IT) professionals. In the words of one Unisys executive, “If we were looking for someone
to run a practice in Europe, we would not hold the search to a single country. We
would be looking across borders to try to find the best person.” 40

Global recruitment, however, is no panacea because good employees everywhere are in

high demand, and there may not be as much information available to make the appropri

ate selection decision.41 Kevin Barnes, technical director for Store Perform, with facilities

in Bangalore, India, notes that “top Indian engineers are world-class, but most are taken.

Anyone in India who can spell Java already has a job.” And the labor market attracts

legions of unqualified candidates, Barnes says, making it harder to distinguish good from

mediocre performers.42

¦
Industrial metamorphosis The proportion of the American labor force in manufacturing
has dropped to less than 10 percent, down from 25 percent about 30 years ago. Similar
drops have been experienced in several European countries, including England, Germany,
and France. According to the Economist, “It has happened because rich-world companies
have replaced workers with new technology to boost productivity and shifted production
from labor-intensive products such as textiles to higher-tech, higher value-added, sectors
such as pharmaceuticals. Within firms, low-skilled jobs have moved offshore.”43 Labor
unions have lost much of their influence.44 For instance, in the 1950s almost 40 percent of
the U.S. workforce was unionized; by the time President Ronald Reagan took office in the
early 1980s this percentage had dropped by almost half (22%), and by the time President
Barrack Obama took office less than 20 years later (2009) this proportion had dropped by
more than two-thirds (to approximately 7% of the private-sector workforce).
¦
Global alliances International alliances with foreign firms require a highly trained and
devoted staff. For instance, Philips (a Dutch lighting and electronics firm) became the
largest lighting manufacturer in the world by establishing a joint venture with AT&T
and making several key acquisitions, including Magnavox, parts of GE Sylvania, and the
largest lighting company in France.45
¦
A virtual workforce Because of restrictive U.S. immigration quotas,46 U.S. firms are tapping
skilled foreign labor but not moving those workers to the United States. The Internet
is making this possible with little additional expense. For example, Microsoft Corp. and
Real Networks Inc. use a Bangalore, India, company, Adite Corp., to handle customer
e-mails.47 In addition, many “virtual” expatriates work abroad but live at home. As noted
in a Wall Street Journal article, “Virtual expatriation arises when someone takes an assignment
to manage an operation or area abroad without being located permanently in that
country. . . . Communications technology [allows them] to stay in touch with far-flung
troops. . . . The virtual expat is a new breed of manager that is multiplying.” 48
¦
The global enterprise Internationalization is growing at warp speed, creating a powerful
new reality. For instance, most people think of Coca-Cola as emblematic of the United States.
Yet its CEO, Muhtar Kent, describes Coca Cola in the following terms: “We are a global company
that happens to be headquartered in Atlanta. We have a factory in Ramallah that employs
2,000 people. We have a factory in Afghanistan. We have factories everywhere.” Nearly 80
percent of Coca-Cola’s revenue comes from 206 countries outside the United States.49
¦
Wage competition Not too long ago, many U.S. blue-collar workers could maintain a solid
middle-class standard of living that was the envy of the rest of the world. This was sustained,
in part, by higher productivity and superior technological innovation in the United States and
because American manufacturers enjoyed a high market share with little foreign competition.
Unfortunately, this is no longer the case in many sectors, particularly the automobile industry.
As noted in a recent report, “While businesses have a way to navigate this new world of
technological change and globalization, the ordinary American worker does not. Capital
and technology are mobile; labor isn’t. American workers are located in America.”50
An entire chapter of this book ( Chapter 17 ) is devoted to the HR issues firms face as they

expand overseas. We also include international examples throughout the book to illustrate how
firms in other countries manage their human resources.

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LEGISLATION Much of the growth in the HR function over the past four decades may be attributed
to its crucial role in keeping the company out of trouble with the law.51 Most firms are
deeply concerned with potential liability resulting from personnel decisions that may violate
laws enacted by the U.S. Congress, state legislatures, or local governments.52 Discrimination
charges filed by older employees, minorities, and the disabled, for instance, have been on the rise
for years. In some cases, such as charges of sex discrimination by Hispanic and Asian women,
the increase has exceeded 65 percent in the past 18 years.53

One legal area growing in importance is alleged misuse of “proprietary company information”
by ex-employees. Pitney Bowes, the world’s largest maker of postage meters and other
mailing equipment, recently sued eight ex-employees who opened a small competing firm called
Nexxpost. According to a Pitney Bowes’ spokesperson:

The company invests a great deal of time and money in areas of developing our intellectual
property, in marketing and training our sales force. We must protect our investment,
which also includes our customer lists, information about consumer preferences as well
as pricing. All that has a significant competitive value. When a former employee wants to
challenge us, we take that breach very seriously and do what we need to do to protect it.54

Operating within the legal framework requires keeping track of the external legal environment
and developing internal systems (for example, supervisory training and grievance procedures) to
ensure compliance and minimize complaints. Many firms are now developing formal policies on
sexual harassment and establishing internal administrative channels to deal with alleged incidents
before employees feel the need to file a lawsuit. In a country where mass litigation is on the rise,55
these efforts may well be worth the time and money.

Legislation may differentiate between public- and private-sector organizations. (Public sector
is another term for governmental agencies; private sector refers to all other types of organizations.)
For instance, affirmative action requirements (see Chapter 3 ) are typically limited to public organizations
and to organizations that do contract work for them. However, much legislation applies to
both public- and private-sector organizations. In fact, it is difficult to think of any HR practices that
are not influenced by government regulations. For this reason, each chapter of this book addresses
pertinent legal issues, and an entire chapter ( Chapter 3 ) provides an overall framework that consolidates
the main legal issues and concerns facing employers today.

EVOLVING WORK AND FAMILY ROLES The proportion of dual-career families, in which both
wife and husband (or both members of a couple) work, is increasing every year.

More companies are introducing “family-friendly” programs that give them a competitive
advantage in the labor market.56 Companies use these HR tactics to hire and retain the best-qualified
employees, male or female. Through the Office of Personnel Management, the federal government
provides technical assistance to organizations that wish to implement family-friendly policies. On
its 2012 Web page (opm.gov), for instance, the office makes available numerous publications on
issues such as adoption benefits, child care, elder-care resources, parenting support, and telework.

Family-friendly policies are discussed in detail in Chapter 12 under the heading “Employee
Services.” Special issues that women confront in the workplace are discussed in Chapter 4 .

SKILL SHORTAGES AND THE RISE OF THE SERVICE SECTOR As noted earlier, U.S. manufacturing
has dropped dramatically in terms of the percentage of employees who work in that sector.
Most employment growth has taken place in the service industry. The categories with the fastest
growth are expected to be professional specialties (27 percent) and technical occupations
(22 percent). The fastest-growing occupations demand at least two years of college training.57
Expansion of service-sector employment is linked to a number of factors, including changes in
consumer tastes and preferences, legal and regulatory changes, advances in science and tech-

A QUESTION OF ETHICS

nology that have eliminated many manufacturing jobs, and changes in the way businesses are

What is the ethical responsibility

organized and managed.

of an employer to employees whoUnfortunately, many available workers will be too unskilled to fill those jobs. Even now, lack basic literacy and numeracy

many companies complain that the supply of skilled labor is dwindling and that they must pro-
skills? Should companies be

vide their employees with basic training to make up for the shortcomings of the public education
required by law to provide training
opportunities for such employees,

system.58 For example, 84 percent of the 23,000 people applying for entry-level jobs at Bell

as some have proposed?

Atlantic Telephone (formerly NYNEX) failed the qualifying test.59 Chemical Bank reported that

it had to interview 40 applicants to find one proficient teller.60 David Hearns, former chairman
and CEO of Xerox, laments that “the American workforce is running out of qualified people.”61

To rectify these shortcomings, companies spend at least $55 billion a year on a wide variety
of training programs. This is in addition to the $24 billion spent on training programs by the
federal government each year.62 On the employee-selection side, an increasing number of organizations
are relying on job simulations to test for the “soft skills” needed to succeed in a service
environment, such as sound judgment in ambiguous situations, the ability to relate to diverse
groups of people, and effective handling of angry or dissatisfied customers.

Despite the high unemployment rate at the time of this writing (2012), the skill shortage
remains a major challenge for U.S. firms. New York has become the first state in the nation to
issue a “work readiness” credential to high school students who pass a voluntary test measuring
their ability to succeed in entry-level jobs. An article in the New York Times notes, “Employers
have complained for years that too many students leave high school without basic skills, despite
the battery of exams—considered among the most stringent in the nation—that New York
requires for graduation.”63 The test covers “soft skills,” including the ability to communicate,
follow directions, negotiate and make basic decisions, in 10 broad areas. Chapter 8 focuses
directly on training; Chapters 5 (staffing), 7 (appraising employee performance), and 9 (career
development) discuss issues related to the skills and knowledge required to succeed on the job.

NATURAL DISASTERS A stream of recent disasters, including the 2011 Japanese earthquake, the
tsunami that killed over 250,000 people in Asia in early 2005, the Haitian earthquake of 2010 and
subsequent colera epidemics during 2010–2012 that killed more than 200,000 people, the environmental
disaster of British Petroleum in the Gulf of Mexico, and a string of devastating hurricanes,
most notably Katrina, which destroyed most of the city of New Orleans in August 2005, have
increased awareness among HR professionals of the importance of having plans to deal with such
catastrophes. A survey conducted by Mercer Human Resource Consulting indicated that almost
3 million employees were affected in one way or another by Katrina. 64 Employers had to suddenly
deal with HR issues that they had given little thought to before. These included deciding whether
to keep paying employees who were unreachable and unable to report to work: paying for a variety
of living expenses for displaced staffers in temporary living quarters, providing telecommuting
equipment for employees working from hotels, awarding hazardous duty pay, hiring temporary
employees (many of whom were undocumented workers) to fill the labor void, and preventing
the loss of key talent to competitors outside the disaster area.65 Time Warner Inc. waived medical
deductibles and supported out-of-network medical coverage for affected Katrina families.
Wal-Mart, with more than 34,000 employees displaced by Katrina, guaranteed them work in any
other U.S. Wal-Mart store and created an “Associate Disaster Relief Fund” for employees whose
homes were flooded or destroyed.66 Surprisingly, even after Katrina, almost half of firms don’t
have HR policies to deal with major disasters.67 But this is likely to change as new potential threats
(such as avian flu, major earthquakes, chemical contamination, and more hurricanes) loom on the
horizon,68 along with terrorism fears, which we discuss later.

COLLAPSE OF THE HOUSING MARKET In most areas of the United States and in most of Europe,
the housing market crashed during 2001–2012. The end result is that in some regions (most
notably is Florida, Arizona, and Nevada) home prices have dropped as much as 50 percent and
over half of the families owe more in their mortgages than the value of their property. This
environmental jolt has created a major HR challenge for firms that are trying to hire employees
beyond the local area. Relocation costs have skyrocketed as firms are often forced to cover the
losses incurred by prospective employees, particularly those in managerial positions and those
with scarce skills. Good prospective applicants are unlikely to move because of the “house handcuff,”
unless they are offered additional compensation to cover the housing deficit. Companies
that can’t afford to compensate prospective employees for their housing losses may have little
choice but to look for recruits within driving distance to work, limiting the pool of qualified
applicants. For instance, Milwaukee-based staffing company Manpower Inc. now only recruits
within a certain mileage radius of a target company. 69 For the first time in history recruiters are
now asked to routinely question candidates from out of town whether they are “underwater on
their home” (that is, they owe more on the house than it is worth). “Recruiters are not going to
spend a lot of energy on someone when you know you can’t make up for a $100,000 home loss,”
says Manpower Inc.’s CEO Jeffrey Joerres.70

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CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 11

CHAPTER 1 • MEETING PRESENT AND EMERGING STRATEGIC HUMAN RESOURCE CHALLENGES 11
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Organizational Challenges

Organizational challenges are concerns or problems internal to a fir

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Employee Turnover & Absenteeism and Challenges: Cengage HRM Exercise

Employee Turnover & Absenteeism and Challenges: Cengage HRM Exercise

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