Ethics and trends in hr management

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See the attached files for guidance (Questions and Instructions). 

  

Please make sure you: 

1) Answer all questions and each part of the question in detail that demonstrates an extension of learning.

2) Response to questions demonstrates understanding and application of concepts covered in class, uses in-text citations and scholarly resources to support all answers.

3) No grammatical errors; Complete sentences are used. Proper formatting is used. Citations are used according to APA

Ethics and Trends in HR Management

Part A: HR Professional Ethics

Discuss three examples of ethical challenges that HR professionals may encounter as they apply to modern organizations. Discuss how you would address each situation (not necessarily the solution, but how you would approach the problem).  Use the resources provided to support your ideas.

Part B: Emerging HR Trends

Discuss three current or future trends impacting the HR profession.  What opportunities and challenges might these trends present for HR and for the organization? As a human resource professional, what new skills and/or competencies would you need to further develop to adapt to these trends and to continue to be successful in your role? Use the resources provided to support your ideas.

Respond to three of your colleagues for further dialogue 

8 2

16
Global Issues for Human

Resource Managers

Case 16.1. Globalization of
Business and HRM: Should Your
Marketing Director Become an Expatriate?
Daniel had a successful career in marketing for IToys Corporation in New York.
Daniel’s career has been an exciting journey through IToys, which is the fastest grow-
ing toy business in the United States. However, IToys had plans to enter the global
marketplace, and human resources called Daniel with an offer to manage the new
office in England for the next 3 years. Daniel’s career would be kicked up a notch by
being the director of marketing for the entire United Kingdom.

HR determined that Daniel had many of the Big 5 personality traits (extrover-
sion, openness to new experiences, conscientiousness, agreeableness, and not being
neurotic) that would help him to be successful running IToys in different countries.
Daniel is an extrovert; he is outgoing, makes new friends, and builds relationships
easily. Some evidence shows that being an extrovert, open to learning about new
international cultures and experiences, and working well with new people will help
him adjust to a different culture.1

Although Daniel was surprised about the offer to take an assignment in England,
he knew that he was open to new experiences. Before working at IToys, Daniel spent
plenty of time in Europe at trade shows demonstrating toys for his previous employer.
The problem was that Daniel had a wife, Hannah, and three children between the ages
of 5 and 10. Daniel had a tough decision to make in regard to uprooting his family
and moving them all the way to England. Hannah had been a great supporter of her
husband for the last 5 years. She had moved up and down the East Coast (New Jersey,
Rhode Island, Pennsylvania, and Massachusetts) in support of Daniel. Daniel had to
consider the impact on his wife since she would be thrown into a new country with no
friends. Daniel’s children would have to start school in a strange country.

Still, Daniel and Hannah decided to become expatriates, and they accepted the
new position in England. An expatriate is an employee who leaves his or her home
country to go to work in another country. Many decisions have to be made since the

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Chapter 16 • Global Issues for Human Resource Managers 8 3

“expat” is usually in another country for about 3 years. One decision that would have
to be made was in regard to schooling for their children. Daniel and Hannah decided
that their children would attend the American School and attend classes with the
children of other American executives.

Human resources at IToys offered various services to help Daniel make the move to
England. HR explained that his home in New York would be paid for by the company
while he was away for 3 years. HR would provide training on cultural issues such as
language (a lesser problem in this case due to English being spoken in both countries).
HR would also process Daniel’s pay so he would be paid in U.S. dollars, which he could
then transfer to English pounds or euros. HR would be the contact point for Daniel
throughout his international journey.

Daniel and Hannah ended up enjoying their 3 years of marketing IToys in England.
Hannah was an integral piece of the puzzle. She became an important person in the
expat community. While Daniel was busy setting up new retail accounts for IToys to
sell their product lines, Hannah was busy taking care of the children and making sure
they adjusted to a new set of friends. Hannah also made trips back to the United States
to attend to elderly family members or to attend important family celebrations. IToys
allows its expats to return to their home country once a year.

It is important for the expats to be compensated above normal to help alleviate the
extra costs of living overseas. The executives and their families move to another coun-
try and experience the international lifestyle. However, they still need to be part of their
family back in their home country, which requires extra money for travel expenses.

Other issues, besides language, that can cause problems with an overseas job
include determining whom the person reports to in the host country versus the home
country, who appraises the expat in regard to performance, whether there will be a
mentor in the host country to help train Daniel, and what support will be available
from human resources during and after the assignment is complete.

After 3 years, Daniel was offered the chance to start up a new division of IToys in
Brazil. Being in Brazil would bring them to another expat community. However, this
time they could experience more culture shock, as Portuguese is the primary language
of 99 percent of the people in Brazil. Daniel would need to have more cultural training
since doing business in Brazil would be quite different than it was in England. Still,
Daniel and his family thrived in England, so they are experienced expats. They certainly
appear to be flexible, and they may enjoy learning more about the Brazilian culture.

Case Questions

1. What does it mean to be an expatriate?

2. What would it have meant to Daniel’s career
if he had declined the position in England?

3. Why was Hannah such an important part
of the entire expatriate experience?

4. What is the role of human resources
in assisting expatriates?

5. How did language play a part of the
decision to go to either England or
Brazil?

6. Should Daniel take the new job in
Brazil?

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Part V • Protecting and Expanding Organizational Reach8 4

Case 16.2. Global Staffing: Developing,
Staffing, and Managing Global Human
Resources—Katya and Her Russian Background
Katya Malkin is proof that we are living in a global village. Companies have to search
for talented employees, like Katya, throughout the world. In Katya’s case, she was a
gifted student while in school in Russia. But she was raised in a very poor home envi-
ronment. Although she had a lovely mother and father, she lived in a small one-bed-
room apartment.

Fortunately, at school Katya excelled at math and science, like many of her fellow
Russian-born students. She also spoke English very well. Katya was quite social and
interacted very well with teachers and counselors. At 15, Katya was extremely fortu-
nate, and she went to the United States for high school. She lived with a wonderful
family in a suburb of Connecticut. She applied and was accepted at a small Catholic
College in Danbury, Connecticut.

Katya had 4 wonderful years studying management, marketing, and accounting.
She found that large employers were especially interested in hiring her for her degree
in accounting.

Katya wrote a senior thesis on how companies hired international students to
help give organizations a global view. She found that employers like international
students but consider the process of hiring an international student rather complex.
Understanding the American immigration process is often stressful and confusing
because there are many different categories of visas. The eligibility requirements are
constantly changing, which makes the process even harder to follow.2

On the positive side, international students like Katya have already shown that
they can leave their home country and learn the language of a new country, and they
show a desire to work in the United States. Katya assumed it would be easy to entice
international students to also live as expats in other countries.

The human resources department of a company can help employees renew a visa.
HR can also help international students become part of the local community, find
schools that offer programs for bilingual students, and make spouses feel like a part
of the company.

A company is only as good as the people who work for it. Employees will be needed
to replace people who are retiring from the workforce, who are transferring to another
company, or who have passed away. HR has to fill these spots with talented people
in every country where their product is sold. Hiring recently graduated international
college students can help fill job openings within and outside the United States.

The HR function becomes more complex as companies experience different stages
of developing a global organization. HR has to develop HRIS systems that take into
account the culture and business practices of every country in which they operate.
Still, for those people like Katya who are extroverted, agreeable, and open to new
experiences, taking a chance and becoming an expatriate can lead to an exciting life
of travel, meeting people from different countries, negotiating deals around the globe,
and working for the large global companies in places as diverse as China, Poland,
and Israel.

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Chapter 16 • Global Issues for Human Resource Managers 8 5

Case Questions

1. What are the advantages of hiring a
recently graduated international college
student?

2. What are the disadvantages of hiring a
recently graduated international college
student?

3. What is the impact on HR when hiring an
international student?

4. Use the website http://www.reed
.co.uk/jobs/human-resources to
look for a human resources job in the
United Kingdom.

5. Find a job in another country of your
choice. You should feel that you
would have a good opportunity to be
selected for the job.

Notes

1. Lussier, Robert, and John R. Hendon, Human Resource Management, 2nd ed. (Thousand
Oaks, CA: Sage, 2016).

2. http://www.internationalstudent.com/study_usa/way-of-life/working-in-the-usa/.

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7 7

15
Organizational Ethics,

Sustainability, and Social
Responsibility

Case 15.1. Corporate Social
Responsibility (CSR): Can Human
Resources Help Companies Develop a CSR Program?
One of the hotter topics in business in the last 10 years has been corporate social
responsibility (CSR). CSR means taking all stakeholders into account. All stakeholders
means all—not just shareholders or executives. The business case for CSR is based on
the ability of the organization to help or harm various stakeholder groups and to iden-
tify, of those stakeholder groups, which ones help or harm the company. Each stake-
holder group has different, and sometimes competing, interests. The organization
must balance these social responsibilities among all the groups in order to succeed.

A CSR program recognizes that organizations have a duty to all stakeholders
to operate in a manner that takes each of their needs into account. It signifies an
attempt by organizations to be more aware of and to develop programs to create
a triple P concept—people, planet, and profits. The goal is to save the planet, help
people live a better lives, and still produce a profit for the shareholders, owners, and
employees to share.

HR can play a role in helping organizations and employees be more CSR oriented.
So far, HR hasn’t been active enough in this area. But HR can make sure that man-
agement is ethically oriented. HR can make sure employees are ethically oriented by
providing training and development on CSR. HR can make sure that ethics is adhered
to at the board level of the company.1

Ethics is commonly understood to include morals, values, beliefs, and principles.
An employee with these characteristics will have personal integrity and be known as a

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Part V • Protecting and Expanding Organizational Reach7 8

trustworthy person. An ethical employee can be expected to want to help a company
develop a CSR program.

In terms of the planet, HR can teach employees to think about sustainable issues.
Employees look for improvements in their work areas. They can use suppliers that
employ sustainable measures, such as paper packaging produced from recycled paper
or renewable forests. Businesses and their employees can lower the use of environmen-
tally damaging chemicals in the production of their products. Employees can learn to
reduce or reuse waste products.

In regard to people, HR can help employees take care of their health by pro-
moting the use of health-care benefits, such as reimbursement for membership to
health-care clubs. Or HR can help employees find a better balance between work
and family life.

However, the goal remains being a profitable business. Even a nonprofit business
needs to break even to ensure staying in operation. The Triple P concept looks for ways
to improve the environment, help employees, and yet still be profitable.

The American economist Milton Friedman felt that using any money to improve
the environment, beyond what is required by the government, was not a good use of
company finances since it would reduce overall profits.2 Accordingly, Friedman did
not support the widespread use of CSR. He felt a company should do only what it
legally needed to do as required by the law.

However, research by Edward Freeman resulted in a different view. Freeman’s stake-
holder theory called for managers to create value for customers, suppliers, employees,
communities, and shareholders. Freeman took a much broader view on creating value
for everyone instead of just making profits for shareholders.3 Thus, Freeman would
support the concept of CSR and the idea that a company should go beyond its legal
requirements and help the people, planet, and profits all at the same time.

Since 2012, Apple Computers has faced troubles in regard to its supplier Foxconn
in Taiwan. Foxconn has 1.2 million employees who make Apple’s very profitable iPads,
iPhones, and other high-tech products. However, the employees work under extreme
conditions to ensure that Apple products are consistently produced at a high quality.4
The repetition of the work has led many of the employees to feel depressed, and some
employees have tried to commit suicide. Foxconn has installed nets around the roof
of the company to prevent jumping off the building.5

Still, just because Apple has trouble with a supplier doesn’t automatically make it
an unethical company. Nike had a very similar problem with its suppliers in the 1990s.
Nike footwear was made in sweatshop conditions in Indonesia. Nikes were made by
workers who were paid low wages and experienced poor working conditions.6 Nike
was also accused of using children to make its footwear. Nike did its own research and
found that the poor working conditions were real and needed to be corrected. The
company has spent the last decade trying to publish where its footwear is produced
and trying to train the managers in those locations not to use hurtful tactics (such as
forcing workers to stay outside in the blazing sun after failing to reach their goal of
60 pairs of shoes on time).7 Nike has joined the Fair Labor Association, a group that
includes other footwear and clothing makers, nongovernment organizations (NGOs),
and universities, which conducts independent audits designed to improve standards
across the industry.

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Chapter 15 • Organizational Ethics, Sustainability, and Social Responsibility 7 9

Case Questions

1. How do Milton Friedman and Edward
Freeman differ on their views of an
organization’s role in corporate social
responsibility?

2. Has HR been active enough in CSR?

3. What can HR do to promote CSR in an
organization?

4. How can HR help the planet?

5. Why did Apple have trouble with
Foxconn?

Case 15.2. Equal Opportunity, Diversity,
and Multiple Generations at Work Together
Title VII of the Civil Rights Act of 1964 was enacted to stop discrimination based on
race, color, sex, national origin, and religion. In later years, the meaning of diversity
expanded to include individuals with disabilities, workers aged 40 years and over, and
veterans.8 Today, workplace diversity includes differences attributed to generation,
culture, and lifestyles.

Employee diversity will continue to grow, and we will have to become better at man-
aging that diversity than we have in the past. To exclude a qualified person because that
individual is different in some way is counterproductive to business success. Managing
diversity is becoming critical in all organizations and in all industries. We have to con-
tinue to get better at the HRM task in order to engage all our future employees.

Generational differences are one of the latest and most interesting areas of potential
differences. Workplaces often have four or five different generations working together.
These generations are labeled Traditionalist (born 1922–1945), Baby Boomers (born
1946–1964), Generation X (born 1965–1980), and Generation Y (born 1980–1994),
also known as the Millennial Generation or Generation Next.9

Traditionalists tend to work late and on weekends. They grew up in a time when
wives stayed at home and didn’t work. They are loyal employees and expect to be paid
fairly well. Changing jobs did not occur often, since that meant something was not
going well.

Baby Boomers were born in an era of general affluence. Many grew up in a house-
hold with a single parent working. Women are often as educated as men. Boomers can
be driven to succeed.

Gen Xers are often children who lived with two working parents. They tend to
be individualistic, confident, and self-reliant. They believe that balancing family life
and work life is most important. Xers are the first generation to feel comfortable with
technology and diversity.

Millennials are very knowledgeable about technology. They are also very under-
standing of diversity and expressing personal lifestyle choices. They are able to multi-
task and like to work at their own pace.10

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Part V • Protecting and Expanding Organizational Reach8 0

Today’s business environment is the first one in which five generations of people
are likely to be working at the same time. The differences in age could create con-
flict between the younger and older employees. However, the differences between
employee ages should be cherished and used as a source of information to help sell
company products. Managing older workers will be important as younger people take
over the leadership role in all organizations.11

Older employees (such as Traditionalists and Baby Boomers) are often the mentors
for teaching younger (Gen X and Y) employees. Older workers can teach younger
workers about the culture of the company and how things normally get done.

However, Gen X and Y employees have been born in the technology era. That
being so, the younger employees can teach older employees about topics such as social
media marketing techniques. So younger employees can become reverse mentors and
teach the older employees how to better use technology in the workplace.

Case Questions

1. What are the traditional areas of
discrimination the human resources
department normally helps to resolve?

2. How do equal opportunity, diversity, and
generational issues intersect?

3. What generation do you belong to? Do
the characteristics describe yourself?

4. What differences do you experience
between yourself and a coworker
(or teacher) from a different
generation?

5. What potential discrimination issues
do you think exist between employees
of different generations?

Notes

1. Higginbottom, Karen, “Why HR Needs to Take a Leadership Role in CSR,” Forbes, January 6,
2006.

2. Friedman, Milton, “The Social Responsibility of Business Is to Increase Its Profits,” The New
York Times Magazine, September 13, 1970.

3. Freeman, Edward, Strategic Management (Boston, MA: Pitman, 1984).
4. Leach, Anna, “Foxconn Is World’s 10th Largest Employer: 1.2 Million Employees,” The

Register, March 20, 2012.

5. Myers, Connor, “Corporate Social Responsibility in the Consumer Electronics Industry: A
Case Study of Apple Inc.,” Georgetown University, http://lwp.georgetown.edu/wp-content/
uploads/Connor-Myers.pdf.

6. Nisen, Max, “How Nike Solved Its Sweatshop Problem,” Business Insider.com, May 9, 2013.
7. Teather, David, “Nike Lists Abuses at Asian Factories,” The Guardian, April 14, 2005.
8. Mayhew, Ruth, “What Are an Employer’s Responsibilities for Diversity in the Workplace?”

Houston Chronicle: Small Business, http://smallbusiness.chron.com/employers-responsibilities-
diversity-workplace-10417.html.

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Chapter 15 • Organizational Ethics, Sustainability, and Social Responsibility 81

9. http://www.valueoptions.com/spotlight_YIW/gen_y.htm.
10. Jerome, Alicia, and Michael Scales, “Millennials in the Workforce: Gen Y Workplace

Strategies for the Next Century,” e-Journal of Social & Behavioural Research in Business 5, no. 1
(2014): 1–12.

11. Hoving, Allan, “Managing Older Workers,” Human Resources IQ.com, October 24, 2013.

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Chapter 2: Developing and Implementing Strategic HRM Plans

The Value of Planning

James stumbled into his position as the human resource manager. He had been working for Techno, Inc. for three years, and when the company grew, James moved from a management position into a human resource management position. Techno, Inc. is a technology and software consulting company for the music industry.

James didn’t have a good handle on how to effectively run a human resources (HR) department, so for much of the time he tried to figure it out as he went. When Techno started seeing rapid growth, he hired thirty people within a one-month period to meet the demand. Proud of his ability to accomplish his task of meeting the business’s current needs, James was rather pleased with himself. He had spent numerous hours mulling over recruitment strategies, putting together excellent compensation plans, and then eventually sifting through résumés as a small part of the hiring process. Now the organization had the right number of people needed to carry out its projects.

Fast forward five months, however, and it turned out the rapid growth was only temporary. James met with the executives of the business who told him the contracts they had acquired were finished, and there wasn’t enough new work coming in to make payroll next month if they didn’t let some people go. James felt frustrated because he had gone through so much effort to hire people, and now they would be laid off. Never mind the costs of hiring and training his department had taken on to make this happen. As James sat with the executives to determine who should be laid off, he felt sad for the people who had given up other jobs just five months before, only to be laid off.

After the meeting, James reflected on this situation and realized that if he had spoken with the executives of the company sooner, they would have shared information on the duration of the contracts, and he likely would have hired people differently, perhaps on a contract basis rather than on a full-time basis. He also considered the fact that the organization could have hired an outsourcing company to recruit workers for him. As Jason mulled this over, he realized that he needed a strategic plan to make sure his department was meeting the needs of the organization. He vowed to work with the company executives to find out more about the company’s strategic plan and then develop a human resource management (HRM) strategic plan to make sure Techno, Inc. has the right number of workers with the right skills, at the right time in the future.

2.1  Strategic Planning

Learning Objectives

1. Explain the differences been HRM and personnel management.

1. Be able to define the steps in HRM strategic planning.

In the past, human resource management (HRM) was called the personnel department. In the past, the personnel department hired people and dealt with the hiring paperwork and processes. It is believed the first human resource department was created in 1901 by the National Cash Register Company (NCR). The company faced a major strike but eventually defeated the union after a lockout. (We address unions in  Chapter 11 “Working with Labor Unions”.) After this difficult battle, the company president decided to improve worker relations by organizing a personnel department to handle grievances, discharges, safety concerns, and other employee issues. The department also kept track of new legislation surrounding laws impacting the organization. Many other companies were coming to the same realization that a department was necessary to create employee satisfaction, which resulted in more productivity. In 1913, Henry Ford saw employee turnover at 380 percent and tried to ease the turnover by increasing wages from $2.50 to $5.00, even though $2.50 was fair during this time period. [1] Of course, this approach didn’t work for long, and these large companies began to understand they had to do more than hire and fire if they were going to meet customer demand.

More recently, however, the personnel department has divided into human resource management and human resource development, as these functions have evolved over the century. HRM is not only crucial to an organization’s success, but it should be part of the overall company’s strategic plan, because so many businesses today depend on people to earn profits. Strategic planning plays an important role in how productive the organization is.

Table 2.1 Examples of Differences between Personnel Management and HRM

Personnel Management Focus

HRM Focus

Administering of policies

Helping to achieve strategic goals through people

Stand-alone programs, such as training

HRM training programs that are integrated with company’s mission and values

Personnel department responsible for managing people

Line managers share joint responsibility in all areas of people hiring and management

Creates a cost within an organization

Contributes to the profit objectives of the organization

Most people agree that the following duties normally fall under HRM. Each of these aspects has its own part within the overall strategic plan of the organization:

1. Staffing. Staffing includes the development of a strategic plan to determine how many people you might need to hire. Based on the strategic plan, HRM then performs the hiring process to recruit and select the right people for the right jobs. We discuss staffing in greater detail in  Chapter 4 “Recruitment”, Chapter 5 “Selection”, and Chapter 6 “Compensation and Benefits”.

1. Basic workplace policies. Development of policies to help reach the strategic plan’s goals is the job of HRM. After the policies have been developed, communication of these policies on safety, security, scheduling, vacation times, and flextime schedules should be developed by the HR department. Of course, the HR managers work closely with supervisors in organizations to develop these policies. Workplace policies will be addressed throughout the book.

1. Compensation and benefits. In addition to paychecks, 401(k) plans, health benefits, and other perks are usually the responsibility of an HR manager. Compensation and benefits are discussed in  Chapter 6 “Compensation and Benefits” and Chapter 7 “Retention and Motivation”.

1. Retention. Assessment of employees and strategizing on how to retain the best employees is a task that HR managers oversee, but other managers in the organization will also provide input.  Chapter 9 “Managing Employee Performance” and Chapter 10 “Employee Assessment” cover different types of retention strategies, from training to assessment.

1. Training and development. Helping new employees develop skills needed for their jobs and helping current employees grow their skills are also tasks for which the HRM department is responsible. Determination of training needs and development and implementation of training programs are important tasks in any organization. Succession planning includes handling the departure of managers and making current employees ready to take on managerial roles when a manager does leave.

1. Regulatory issues and worker safety. Keeping up to date on new regulations relating to employment, health care, and other issues is generally a responsibility that falls on the HRM department. While various laws are discussed throughout the book, unions and safety and health laws in the workplace are covered in Chapter 11 “Working with Labor Unions” and Chapter 12 “Safety and Health at Work”.

In smaller organizations, the manager or owner is likely performing the HRM functions. [2] They hire people, train them, and determine how much they should be paid. Larger companies ultimately perform the same tasks, but because they have more employees, they can afford to employ specialists, or human resource managers, to handle these areas of the business. As a result, it is highly likely that you, as a manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic components of HRM.

HRM vs. Personnel Management

Human resource strategy is an elaborate and systematic plan of action developed by a human resource department. This definition tells us that an HR strategy includes detailed pathways to implement HRM strategic plans and HR plans. Think of theHRM strategic plan as the major objectives the organization wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In other words, the strategic plan may include long-term goals, while the HR plan may include short-term objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, human resource departments in the past were called personnel departments. This term implies that the department provided “support” for the rest of the organization. Companies now understand that the human side of the business is the most important asset in any business (especially in this global economy), and therefore HR has much more importance than it did twenty years ago. While personnel management mostly involved activities surrounding the hiring process and legal compliance, human resources involves much more, including strategic planning, which is the focus of this chapter. The Ulrich HR model, a common way to look at HRM strategic planning, provides an overall view of the role of HRM in the organization. His model is said to have started the movement that changed the view of HR; no longer merely a functional area, HR became more of a partnership within the organization. While his model has changed over the years, the current model looks at alignment of HR activities with the overall global business strategy to form a strategic partnership. [3] His newly revised model looks at five main areas of HR:

1. Strategic partner. Partnership with the entire organization to ensure alignment of the HR function with the needs of the organization.

1. Change agent. The skill to anticipate and respond to change within the HR function, but as a company as a whole.

1. Administrative expert and functional expert. The ability to understand and implement policies, procedures, and processes that relate to the HR strategic plan.

1. Human capital developer. Means to develop talent that is projected to be needed in the future.

1. Employee advocate. Works for employees currently within the organization.

According to Ulrich, [4] implementation of this model must happen with an understanding of the overall company objectives, problems, challenges, and opportunities. For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labor markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR can determine how best to meet the needs of the organization within these five main areas.

HRM as a Strategic Component of the Business

Keeping the Ulrich model in mind, consider these four aspects when creating a good HRM strategic plan:

1. Make it applicable. Often people spend an inordinate amount of time developing plans, but the plans sit in a file somewhere and are never actually used. A good strategic plan should be the guiding principles for the HRM function. It should be reviewed and changed as aspects of the business change. Involvement of all members in the HR department (if it’s a larger department) and communication among everyone within the department will make the plan better.

Figure 2.1

To be successful in writing an HRM strategic plan, one must understand the dynamic external environment.

1. Be a strategic partner. Alignment of corporate values in the HRM strategic plan should be a major objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and objectives of the organization as a whole. For example, if the mission of the organization is to promote social responsibility, then the HRM strategic plan should address this in the hiring criteria.

1. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone in the organization. For example, as the plan develops, the HR manager should meet with various people in departments and find out what skills the best employees have. Then the HR manager can make sure the people recruited and interviewed have similar qualities as the best people already doing the job. In addition, the HR manager will likely want to meet with the financial department and executives who do the budgeting, so they can determine human resource needs and recruit the right number of people at the right times. In addition, once the HR department determines what is needed, communicating a plan can gain positive feedback that ensures the plan is aligned with the business objectives.

1. Understand how technology can be used. Organizations oftentimes do not have the money or the inclination to research software and find budget-friendly options for implementation. People are sometimes nervous about new technology. However, the best organizations are those that embrace technology and find the right technology uses for their businesses. There are thousands of HRM software options that can make the HRM processes faster, easier, and more effective. Good strategic plans address this aspect.

HR managers know the business and therefore know the needs of the business and can develop a plan to meet those needs. They also stay on top of current events, so they know what is happening globally that could affect their strategic plan. If they find out, for example, that an economic downturn is looming, they will adjust their strategic plan. In other words, the strategic plan needs to be a living document, one that changes as the business and the world changes.

The Steps to Strategic Plan Creation

As we addressed in Section 2.1.2 “The Steps to Strategic Plan Creation”, HRM strategic plans must have several elements to be successful. There should be a distinction made here: the HRM strategic plan is different from the HR plan. Think of the HRM strategic plan as the major objectives the organization wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved. Oftentimes the strategic plan is viewed as just another report that must be written. Rather than jumping in and writing it without much thought, it is best to give the plan careful consideration.

The goal of Section 2 “Conduct a Strategic Analysis”is to provide you with some basic elements to consider and research before writing any HRM plans.

Conduct a Strategic Analysis

A strategic analysis looks at three aspects of the individual HRM department:

1. Understanding of the company mission and values. It is impossible to plan for HRM if one does not know the values and missions of the organization. As we have already addressed in this chapter, it is imperative for the HR manager to align department objectives with organizational objectives. It is worthwhile to sit down with company executives, management, and supervisors to make sure you have a good understanding of the company mission and values.

Another important aspect is the understanding of the organizational life cycle. You may have learned about the life cycle in marketing or other business classes, and this applies to HRM, too. An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization, which can vary over time. For example, when the organization first begins, it is in the introduction phase, and a different staffing, compensation, training, and labor/employee relations strategy may be necessary to align HRM with the organization’s goals. This might be opposed to an organization that is struggling to stay in business and is in the decline phase. That same organization, however, can create a new product, for example, which might again put the organization in the growth phase. Table 2.2 “Lifecycle Stages and HRM Strategy” explains some of the strategies that may be different depending on the organizational life cycle.

1. Understanding of the HRM department mission and values. HRM departments must develop their own departmental mission and values. These guiding principles for the department will change as the company’s overall mission and values change. Often the mission statement is a list of what the department does, which is less of a strategic approach. Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should express how an organization’s human resources help that organization meet the business goals. A poor mission statement might read as follows: “The human resource department at Techno, Inc. provides resources to hiring managers and develops compensation plans and other services to assist the employees of our company.”

A strategic statement that expresses how human resources help the organization might read as follows: “HR’s responsibility is to ensure that our human resources are more talented and motivated than our competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates, compensation, and company sales data and comparing that data to our competitors.” [5] When the mission statement is written in this way, it is easier to take a strategic approach with the HR planning process.

1. Understanding of the challenges facing the department. HRM managers cannot deal with change quickly if they are not able to predict changes. As a result, the HRM manager should know what upcoming challenges may be faced to make plans to deal with those challenges better when they come along. This makes the strategic plan and HRM plan much more usable.

Table 2.2 Lifecycle Stages and HRM Strategy

Life Cycle Stage

Staffing

Compensation

Training and Development

Labor / Employee Relations

Introduction

Attract best technical and professional talent.

Meet or exceed labor market rates to attract needed talent.

Define future skill requirements and begin establishing career ladders.

Set basic employee-relations philosophy of organization.

Growth

Recruit adequate numbers and mix of qualifying workers. Plan management succession. Manage rapid internal labor market movements.

Meet external market but consider internal equity effects. Establish formal compensation structures.

Mold effective management team through management development and organizational development.

Maintain labor peace, employee motivation, and morale.

Maturity

Encourage sufficient turnover to minimize layoffs and provide new openings. Encourage mobility as reorganizations shift jobs around.

Control compensation costs.

Maintain flexibility and skills of an aging workforce.

Control labor costs and maintain labor peace. Improve productivity.

Decline

Plan and implement workforce reductions and reallocations; downsizing and outplacement may occur during this stage.

Implement tighter cost control.

Implement retraining and career consulting services.

Improve productivity and achieve flexibility in work rules. Negotiate job security and employment-adjustment policies

Source: Seattle University Presentation, accessed July 11, 2011, 
http://fac-staff.seattleu.edu/gprussia/web/mgt383/HR%20Planning1.ppt
.

Identify Strategic HR Issues

In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the department may see that it is not strategically aligned with the company’s mission and values and opt to make changes to its departmental mission and values as a result of this information.

Many organizations and departments will use a strategic planning tool that identifies strengths, weaknesses, opportunities, and threats (SWOT analysis) to determine some of the issues they are facing. Once this analysis is performed for the business, HR can align itself with the needs of the business by understanding the business strategy. See Table 2.3 “Sample HR Department SWOT Analysis for Techno, Inc.” for an example of how a company’s SWOT analysis can be used to develop a SWOT analysis for the HR department.

Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR manager finds that a department’s strength is its numerous training programs, this is something the organization should continue doing. If a weakness is the organization’s lack of consistent compensation throughout all job titles, then the opportunity to review and revise the compensation policies presents itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the organization, but it can be whittled down to also address issues within the department.

Table 2.3 Sample HR Department SWOT Analysis for Techno, Inc.

Strengths

Hiring talented people

Company growth

Technology implementation for business processes

Excellent relationship between HRM and management/executives

Weaknesses

No strategic plan for HRM

No planning for up/down cycles

No formal training processes

Lacking of software needed to manage business processes, including go-to-market staffing strategies

Opportunities

Development of HRM staffing plan to meet industry growth

HRM software purchase to manage training, staffing, assessment needs for an unpredictable business cycle

Continue development of HRM and executive relationship by attendance and participation in key meetings and decision-making processes

Develop training programs and outside development opportunities to continue development of in-house marketing expertise

Threats

Economy

Changing technology

Prioritize Issues and Actions

Based on the data gathered in the last step, the HRM manager should prioritize the goals and then put action plans together to deal with these challenges. For example, if an organization identifies that they lack a comprehensive training program, plans should be developed that address this need. (Training needs are discussed in  Chapter 8 “Training and Development” .) An important aspect of this step is the involvement of the management and executives in the organization. Once you have a list of issues you will address, discuss them with the management and executives, as they may see other issues or other priorities differently than you. Remember, to be effective, HRM must work with the organization and assist the organization in meeting goals. This should be considered in every aspect of HRM planning.

Draw Up an HRM Plan

Once the HRM manager has met with executives and management, and priorities have been agreed upon, the plans are ready to be developed. Detailed development of these plans will be discussed in Section 2.2 “Writing the HRM Plan”. Sometimes companies have great strategic plans, but when the development of the details occurs, it can be difficult to align the strategic plan with the more detailed plans. An HRM manager should always refer to the overall strategic plan before developing the HRM strategic plan and HR plans.

Even if a company does not have an HR department, HRM strategic plans and HR plans should still be developed by management. By developing and monitoring these plans, the organization can ensure the right processes are implemented to meet the ever-changing needs of the organization. The strategic plan looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the HR plan addresses specific issues in the human resource department.

[1] Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, accessed July 11, 2011,http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399.

[2] Jan de Kok and Lorraine M. Uhlaner, “Organization Context and Human Resource Management in the Small Firm” (Tinbergen Institute Discussion Papers 01-038/3, Tinbergen Institute, 2001), accessed August 13, 2011, 
http://ideas.repec.org/s/dgr/uvatin.html
.

[3] David Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005), 9–14.

[4] David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed July 11, 2011,http://www.goingforhr.be/extras/web-specials/hr-according-to-dave-ulrich#ppt_2135261.

[5] Gary Kaufman, “How to Fix HR,” Harvard Business Review, September 2006, accessed July 11, 2011, 
http://hbr.org/2006/09/how-to-fix-hr/ar/1
.

2.2  Writing the HRM Plan

Learning Objective

1. Describe the steps in the development of an HRM plan.

As addressed in Section 2.1 “Strategic Planning”, the writing of an HRM strategic plan should be based on the strategic plans of the organization and of the department. Once the strategic plan is written, the HR professional can begin work on the HR plan. This is different from the strategic plan in that it is more detailed and more focused on the short term. The six parts described here are addressed in more detail in Chapter 4 “Recruitment”, Chapter 5 “Selection”, Chapter 6 “Compensation and Benefits”, Chapter 7 “Retention and Motivation”, Chapter 8 “Training and Development”, Chapter 9 “Managing Employee Performance”, and Chapter 10 “Employee Assessment”.

The six parts of the HRM plan include the following:

Figure 2.3

As you can see from this figure, the company strategic plan ties into the HRM strategic plan, and from the HRM strategic plan, the HR plan can be developed.

1. Determine human resource needs. This part is heavily involved with the strategic plan. What growth or decline is expected in the organization? How will this impact your workforce? What is the economic situation? What are your forecasted sales for next year?

1. Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a strategy addressing how you will recruit the right people at the right time.

1. Select employees. The selection process consists of the interviewing and hiring process.

1. Develop training. Based on the strategic plan, what training needs are arising? Is there new software that everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR manager should address plans to offer training in the HRM plan.

1. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and other compensation such as health care, bonuses, and other perks.

1. Appraise performance. Sets of standards need to be developed so you know how to rate the performance of your employees and continue with their development.

Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic knowledge of planning for each area.

Determine Human Resource Needs

The first part of an HR plan will consist of determining how many people are needed. This step involves looking at company operations over the last year and asking a lot of questions:

1. Were enough people hired?

1. Did you have to scramble to hire people at the last minute?

1. What are the skills your current employees possess?

1. What skills do your employees need to gain to keep up with technology?

1. Who is retiring soon? Do you have someone to replace them?

1. What are the sales forecasts? How might this affect your hiring?

These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot be done alone. Involvement of other departments, managers, and executives should take place to obtain an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail in Chapter 4 “Recruitment”.

Many HR managers will prepare an inventory of all current employees, which includes their educational level and abilities. This gives the HR manager the big picture on what current employees can do. It can serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their development. For example, by taking an inventory, you may find out that Richard is going to retire next year, but no one in his department has been identified or trained to take over his role. Keeping the inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is addressed further in Chapter 4 “Recruitment”.

HR managers will also look closely at all job components and will analyze each job. By doing this analysis, they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR manager has performed the needs assessment and knows exactly how many people, and in what positions and time frame they need to be hired, he or she can get to work on recruiting, which is also called astaffing plan. This is addressed further in Chapter 4 “Recruitment”.

Recruit

Recruitment is an important job of the HR manager. More detail is provided in Chapter 4 “Recruitment”. Knowing how many people to hire, what skills they should possess, and hiring them when the time is right are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type of job you are hiring for, you might place traditional advertisements on the web or use social networking sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable and diversity should be considered. We discuss diversity in greater detail in Chapter 3 “Diversity and Multiculturalism”.

Depending on availability and time, some companies may choose to outsource their recruiting processes. For some types of high-level positions, a head hunter will be used to recruit people nationally and internationally. A head hunter is a person who specializes in matching jobs with people, and they usually work only with high-level positions. Another option is to use an agency that specializes in hiring people for a variety of positions, including temporary and permanent positions. Some companies decide to hire temporary employees because they anticipate only a short-term need, and it can be less expensive to hire someone for only a specified period of time.

No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job. In our next step, we review those résumés, interview, and select the best person for the job.

Select

After you have reviewed résumés for a position, now is the time to work toward selecting the right person for the job. Although we discuss selection in great detail in Chapter 6 “Compensation and Benefits”, it is worth a discussion here as well. Numerous studies have been done, and while they have various results, the majority of studies say it costs an average of $45,000 to hire a new manager. [1] While this may seem exaggerated, consider the following items that contribute to the cost:

1. Time to review résumés

1. Time to interview candidates

1. Interview expenses for candidates

1. Possible travel expenses for new hire or recruiter

1. Possible relocation expenses for new hire

1. Additional bookkeeping, payroll, 401(k), and so forth

1. Additional record keeping for government agencies

1. Increased unemployment insurance costs

1. Costs related to lack of productivity while new employee gets up to speed

Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the right skills are selected for interviews. Many organizations perform phone interviews first so they can further narrow the field. The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular candidate. Usually, the more senior the position is, the longer the interview process takes, even up to eight weeks. [2] After the interviews are conducted, there may be reference checks, background checks, or testing that will need to be performed before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once the applicant has met all criteria, the HR manager will offer the selected person the position. At this point, salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management.

Determine Compensation

What you decide to pay people is much more difficult than it seems. This issue is covered in greater detail in Chapter 6 “Compensation and Benefits”. Pay systems must be developed that motivate employees and embody fairness to everyone working at the organization. However, organizations cannot offer every benefit and perk because budgets always have constraints. Even governmental agencies need to be concerned with compensation as part of their HR plan. For example, in 2011, Illinois State University gave salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The university president said, “Our employees have had a very good year and hopefully this is a good shot in the arm that will keep our morale high.” [3]

The process in determining the right pay for the right job can have many variables, in addition to keeping morale high. First, as we have already discussed, the organization life cycle can determine the pay strategy for the organization. The supply and demand of those skills in the market, economy, region, or area in which the business is located is a determining factor in compensation strategy. For example, a company operating in Seattle may pay higher for the same job than their division in Missoula, Montana, because the cost of living is higher in Seattle. The HR manager is always researching to ensure the pay is fair and at market value. In Chapter 6 “Compensation and Benefits”, we get into greater detail about the variety of pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk. Employees can develop their skills while getting paid for it. Training is the next step in the HR planning process.

Develop Training

Once we have planned our staffing, recruited people, selected employees, and then compensated them, we want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One way we can ensure success is by training our employees in three main areas:

1. Company culture. A company culture is the organization’s way of doing things. Every company does things a bit differently, and by understanding the corporate culture, the employee will be set up for success. Usually this type of training is performed at an orientation, when an employee is first hired. Topics might include how to request time off, dress codes, and processes.

1. Skills needed for the job. If you work for a retail store, your employees need to know how to use the register. If you have sales staff, they need to have product knowledge to do the job. If your company uses particular software, training is needed in this area.

1. Human relations skills. These are non-job-specific skills your employees need not only to do their jobs but also to make them all-around successful employees. Skills needed include communication skills and interviewing potential employees.

Perform a Performance Appraisal

The last thing an HR manager should plan is the performance appraisal. While we discuss performance appraisals in greater detail in Chapter 10 “Employee Assessment”, it is definitely worth a mention here, since it is part of the strategic plan. Aperformance appraisal is a method by which job performance is measured. The performance appraisal can be called many different things, such as the following:

1. Employee appraisal

1. Performance review

1. 360 review

1. Career development review

No matter what the name, these appraisals can be very beneficial in motivating and rewarding employees. The performance evaluation includes metrics on which the employee is measured. These metrics should be based on the job description, both of which the HR manager develops. Various types of rating systems can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms. The HR manager also usually ensures that every manager in the organization is trained on how to fill out the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers letting them know it is almost time to write an evaluation.

[1] Susan Herman, Hiring Right: A Practical Guide (Thousand Oaks, CA: Sage, 1993), xv.

[2] John Crant, “How Long Does an Interview Process Take?” Jobsinminneapolis.com, December 2, 2009, accessed October 28, 2010,http://www.jobsinminneapolis.com/articles/title/How-Long-Does-an-Interview-Process-Take/3500/422.

[3] Stephanie Pawlowski, “Illinois State University to Get Salary Bump,” WJBC Radio, July 11, 2011, accessed July 11, 2011, 
http://wjbc.com/illinois-state-university-faculty-to-get-salary-bump
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2.3  Tips in HRM Planning

Learning Objective

1. Explain the aspects needed to create a usable and successful HRM plan.

As you have learned from this chapter, human resource strategic planning involves understanding your company’s strategic plan and HR’s role in the organization. The planning aspect meets the needs of the strategic plan by knowing how many people should be hired, how many people are needed, and what kind of training they need to meet the goals of the organization. This section gives some tips on successful HR strategic planning.

Fortune 500 Focus

Like many Fortune 500 companies throughout the world, IBM in India finds that picking the best prospects for job postings isn’t always easy. By using advanced analytics, however, it aims to connect the strategic plan, staffing needs, and the hiring process using a simple tool. The project was originally developed to assign people to projects internally at IBM, but IBM found this tool able to not only extract essential details like the number of years of experience but also make qualitative judgments, such as how good the person actually is for the job. [1] This makes the software unique, as most résumé-scanning software programs can only search for specific keywords and are not able to assess the job fit or tie the criteria directly to the overall strategic plan. The project uses IBM India’s spoken web technology, in which the prospective employee answers a few questions, creating the equivalent of voice résumé. Then using these voice résumés, the hiring manager can easily search for those prospects who meet the needs of the organization and the objectives of the strategic plan.

Some of the challenges noted with this software include the recognition of language and dialect issues. However, the IBM human resources solution is still one of the most sophisticated of such tools to be developed. “Services is very people-intensive. Today, there is talk of a war for talent, but attracting the right kind of people is a challenge, yet unemployment is very high. Our solution applies sophisticated analytics to workforce management,” says Manish Gupta, director at IBM Research-India. [2]

It is likely that this is only the beginning of the types of technology that allow HR professionals to tie their HR plans directly to a strategic plan with the touch of a few buttons.

Link HRM Strategic Plan to Company Plan

Understanding the nature of the business is key to being successful in creating a strategic plan for HRM. Because every business is different, the needs of the business may change, depending on the economy, the season, and societal changes in our country. HR managers need to understand all these aspects of the business to better predict how many people are needed, what types of training are needed, and how to compensate people, for example. The strategic plan that the HR manager writes should address these issues. To address these issues, the HR manager should develop the departmental goals and HR plans based on the overall goals of the organization. In other words, HR should not operate alone but in tandem with the other parts of the organization. The HRM plan should reflect this.

Monitor the Plan Constantly

Oftentimes a great strategic plan is written, taking lots of time, but isn’t actually put into practice for a variety of reasons, such as the following:

1. The plan wasn’t developed so that it could be useful.

1. The plan wasn’t communicated with management and others in the HRM department.

1. The plan did not meet the budget guidelines of the organization.

1. The plan did not match the strategic outcomes of the organization.

1. There was lack of knowledge on how to actually implement it.

There is no point in developing a plan that isn’t going to be used. Developing the plan and then making changes as necessary are important to making it a valuable asset for the organization. A strategic plan should be a living document, in that it changes as organizational or external factors change. People can get too attached to a specific plan or way of doing things and then find it hard to change. The plan needs to change constantly or it won’t be of value.

Measure It

A good strategic plan and HR plan should discuss the way “success” will be measured. For example, rather than writing, “Meet the hiring needs of the organization,” be more specific: “Based on sales forecasts from our sales department, hire ten people this quarter with the skills to meet our ten job openings.” This is a goal that is specific enough to be measured. These types of quantitative data also make it easier to show the relationship between HR and the organization, and better yet, to show how HR adds value to the bottom line. Likewise, if a company has a strategic objective to be a safe workplace, you might include a goal to “develop training to meet the needs of the organization.” While this is a great goal, how will this be measured? How will you know if you did what you were supposed to do? It might be difficult to measure this with such a general statement. On the other hand, a goal to “develop a safety training workshop and have all employees complete it by the end of the year” is specific and can be measured at the end to determine success.

Sometimes Change Is Necessary

It can be difficult to base an entire plan on forecasted numbers. As a result, an HRM department that is willing to change quickly to meet the needs of the organization proves its worthiness. Consider a sales forecast that called for fifteen new hires, but you find out months later the organization is having a hard time making payroll. Upon digging deeper, you find the sales forecasts were overexaggerated, and now you have fifteen people you don’t really need. By monitoring the changes constantly (usually done by asking lots of questions to other departments), you can be sure you are able to change your strategic plan as they come.

Be Aware of Legislative Changes

One of the major challenges in HRM, as we discuss in Chapter 1 “The Role of Human Resources”, is having an awareness of what is happening from a legal perspective. Because most budgets are based on certain current laws, knowing when the law changes and how it will affect department budgets and planning (such as compensation planning) will create a more solid strategic plan. For example, if the minimum wage goes up in your state and you have minimum wage workers, reworking the budget and communicating this change to your accounting team is imperative in providing value to the organization. We will discuss various legislation throughout this book.

[1] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, accessed July 11, 2011, 
http://www.istockanalyst.com/business/news/5283887/ibm-automates-parsing-of-resumes
.

[2] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, accessed July 11, 2011, 
http://www.istockanalyst.com/business/news/5283887/ibm-automates-parsing-of-resumes
.

2.4   Case and Summary

Chapter Summary

· Human resource management was once called the personnel department. In the past, hiring people and working with hiring paperwork was this department’s job. Today, the HRM department has a much broader role, and as a result, HR managers must align their strategies with the company’s strategies.

· Functions that fall under HRM today include staffing, creation of workplace policies, compensation and benefits, retention, training and development, and working with regulatory issues and worker protection.

· Human resource strategy is a set of elaborate and systematic plans of action. The company objectives and goals should be aligned with the objectives and goals of the individual departments.

· The steps to creating an HRM strategic plan include conducting a strategic analysis. This entails having an understanding of the values and mission of the organization, so you can align your departmental strategy in the same way.

· The second step is to identify any HR issues that might impact the business.

· The third step, based on the information from the first and second steps, is to prioritize issues and take action. Finally, the HRM professional will draw up the HRM plan.

· The HRM plan consists of six steps. The first is to determine the needs of the organization based on sales forecasts, for example. Then the HR professional will recruit and select the right person for the job. HRM develops training and development to help better the skills of existing employees and new employees, too. The HR manager will then determine compensation and appraise performance of employees. Each of these parts of the HRM plan is discussed in its own separate chapter in greater detail.

· As things in the organization change, the strategic plan should also change.

· To make the most from a strategic plan, it’s important to write the goals in a way that makes them measurable.

Chapter Case

We Merged…Now What?

Earlier this month, your company, a running equipment designer and manufacturer called Runners Paradise, merged with a smaller clothing design company called ActiveLeak. Your company initiated the buyout because of the excellent design team at ActiveLeak and their brand recognition, specifically for their MP3-integrated running shorts. Runners Paradise has thirty-five employees and ActiveLeak has ten employees. At ActiveLeak, the owner, who often was too busy doing other tasks, handled the HRM roles. As a result, ActiveLeak has no strategic plan, and you are wondering if you should develop a strategic plan, given this change. Here are the things you have accomplished so far:

· Reviewed compensation and adjusted salaries for the sake of fairness. Communicated this to all affected employees.

· Developed job requirements for current and new jobs.

· Had each old and new employee fill out a skills inventory Excel document, which has been merged into a database.

From this point, you are not sure what to do to fully integrate the new organization.

1. Why should you develop an HRM strategic plan?

1. Which components of your HR plan will you have to change?

1. What additional information would you need to create an action plan for these changes?



Chapter 6: Compensation and Benefits

Matching Compensation with Core Values

As you sit down to review the compensation package your company offers, one thing that stands out is that your compensation package no longer matches the core values of your organization. When your organization merged five years ago with a similar firm that specializes in online shoe retailing, your company had to hire hundreds of people to keep up with growth. As a result—and what happens with many companies—the compensation plans are not revised and revisited as they should be. The core values your company adopted from the merging company focused on customer service, freedom to work where employees felt they could be most productive, and continuing education of employees, whether or not the education was related to the organization. The compensation package, providing the basic salary, health benefits, and 401(k) plans, seems a bit old-fashioned for the type of company yours has become.

After reviewing your company’s strategic plan and your human resource management (HRM) strategic plan, you begin to develop a compensation plan that includes salary, health benefits, and 401(k) plans, but you feel it might be smart to better meet the needs of your employees by making some changes to these existing plans. For example, you are considering implementing a team bonus program for high customer service ratings and coverage for alternative forms of medicine, such as acupuncture and massage. Instead of guessing what employees would like to see in their compensation packages, you decide to develop a compensation survey to assess what benefits are most important to your employees. As you begin this task, you know it will be a lot of work, but it’s important to the continued recruitment, retention, and motivation of your current employees.

6.1  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.

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 9 “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.

[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.

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

6.2  Developing a Compensation Package

Learning Objectives

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

1. 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?

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

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

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

1. Is your compensation good enough to retain employees?

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

1. 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. [1] 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.

1. 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.

1. 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?

1. 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.

1. 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. [2]

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: [3]

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. [4] 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. [5] 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.” [6] 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. [7]

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 6.3 “Types of Pay Systems”.

[1] Laura Miller, “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.

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

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

[4] “Top 25 Paying Companies,” Fortune, accessed July 23, 2011,http://money.cnn.com/galleries/2011/pf/jobs/1101/gallery.best_companies_top_paying.fortune/14.html.

[5] Ted Allen, “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
.

[6] Susanna Hamner 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.

[7] Kelly Eggers, “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.

6.3  Types of Pay Systems

Learning Objectives

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

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

1. 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.

Figure 6.2 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. Apaired 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 6.1 “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.

Table 6.1 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 6.2 “Example of a Job Classification System at the University of Washington”.

Table 6.2 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

1. Autonomy

1. Supervision

1. Psychological demands

1. Interpersonal skills

1. 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 6.3 “Example of a Point-Factor System”.

Figure 6.3 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.

Figure 6.4 Sample Pay Scale for General Federal Jobs

The first method to pay grade is to develop a variety of pay grade levels.  Figure 6.4 “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 adelayering 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.[1] 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.

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.

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.

1. 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.

1. 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. [2]

1. 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.

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, [3] 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, [4] 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, [5] 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. [6] 

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.

Table 6.3 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 6.3 “Types of Pay”  illustrates the three types of compensation.

Most organizations use a combination of pay, incentives, and other compensation, as outlined in Table 6.3 “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. [7] 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.

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

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

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

1. 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. [8] 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. [9]

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. TheFederal 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.

[1] Gerald Ferris, Handbook of Human Resource Management (Cambridge, MA: Blackwell, 1995).

[2] 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.

[3] Alice Gomstyn, “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.

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

[5] Aaron Smith, “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
.

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

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

[8] Conor Dougherty, “Young Women’s Pay Exceeds Male Peers,” Wall Street Journal, September 1, 2010.

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

6.4  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, theConsolidated 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. Astraight 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 payand 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 [1] 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. [2] 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.

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 Fortune500 Best Companies to Work For list in several areas, including paying for 100 percent of employees’ health-care premiums. [3] In addition to cutting this cost for employees, Microsoft also offers domestic partner benefits, one of the first Fortune500 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. [4] 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. [5] The yearly cost for employee medical insurance averages $9,552, according to the 2009 Towers Perrin survey. [6] 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 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:

Figure 6.6

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).

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.

1. 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.

1. 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 6.7 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

1. The type of coverage

1. The quality of the care

1. 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.



Figure 6.8

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. ThePension 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, [7] 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?

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

1. 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

1. Sets minimum standards for participation and vesting

1. Requires accountability of plan’s fiduciary responsibilities

1. 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. [8] 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. [9]

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. [10]

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.

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

[2] Nick Bunkley, “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.

[3] “100 Best Companies to Work For,” Fortune, accessed July 21, 2011,http://money.cnn.com/magazines/fortune/bestcompanies/2010/snapshots/51.html.

[4] 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.

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

[6] Towers Watson, “2009 Health Care Cost Survey Reveals High-Performing Companies Gain Health Dividend,”

[7] US Bureau of Labor Statistics, “Employee Benefits in the United States: March 2010,” news release, July 27, 2010, accessed September 12, 2011,http://www.bls.gov/ncs/ebs/sp/ebnr0016.txt.

[8] Rebecca Leung, “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.

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

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

6.5  Case and Summary

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. TheFederal 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?

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

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



Chapter 12: Safety and Health at Work

Training for Safety

As the HR manager of a large construction company, your workers’ health and safety is of paramount concern. Last week, you reported an incidence rate of 7.5 accidents per 100 employees to the Occupational Safety and Health Administration (OSHA). When you compared these numbers to last year, you found the number had significantly increased, as it was 4.2. This is concerning, because you know an unsafe workplace is not only bad for employees and bad for business, but it could result in fines from OSHA. You ask your operations managers to meet with you about the situation. When you bring this to his attention, he doesn’t seem at all concerned about the almost double increase in accidents over the last year. He says the increase in accidents is a result of scaffolding falling during a building project where several workers were hurt. He says this one accident skewed the numbers. He mentions that the supervisor responsible for the scaffolding had been let go six months ago for other reasons, and he assures you that there is no reason to be concerned. A few weeks after this conversation, two of your workers spend time in the hospital because of a falling scaffolding injury. Again, you approach the operations manager and he assures you that those employees were just new and he will implement proper procedures. You know the incident will result in another high incident percentage, even if there isn’t another accident the rest of the year. You consider your options.

You look back over ten years of accident reports and find there are three areas for which your company seems to have 90 percent of all accidents. You decide you will develop a training program to address these safety issues in your workplace. You refer to your HRM textbook for tips on how to prepare and communicate this training to your employees. When you present this option to your operations manager, he says that employees don’t have the time to take from their jobs to go through this training and suggests you just let it go. You are prepared for this response, and you give him the dollar figure of money lost owing to worker injury in your organization. This gets his attention, especially when you compare it to the small cost of doing a two-hour training for all employees. Both of you check your Outlook schedules to find the best day of the week to schedule the training, for minimum impact on employees’ work.

12.1  Workplace Safety and Health Laws

Learning Objectives

1. Be able to explain OSHA laws.

1. Understand right-to-know laws.

Workplace safety is the responsibility of everyone in the organization. HR professionals and managers, however, play a large role in developing standards, making sure safety and health laws are followed, and tracking workplace accidents. Section 12.1.1 “Occupational Safety and Health Administration (OSHA) Laws”addresses workplace laws as they relate to safety.

Occupational Safety and Health Administration (OSHA) Laws

In 2009 (the most recent data available at the time of this writing), 4,340 fatalities and 3.3 million injuries were reported. [1] This staggering number represents not only the cost to employees’ well-being but also financial and time costs to the company. This is why health and safety is a key component of any human resource management (HRM) strategic plan.

What Is OSHA About?

The Occupational Safety and Health Act (OSHA), passed in 1970, created the Occupational Safety and Health Administration, which oversees health and safety in the workplace. The organization’s mission is to ensure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance. For example, OSHA offers ten- and thirty-hour courses on workplace hazards and also provides assistance to ensure companies are in compliance with standards. OSHA is part of the US Department of Labor, with the main administrator being the assistant secretary of labor for occupational safety and health. This person reports to the labor secretary, who is a member of the president’s cabinet.

Although OSHA applies to all companies, health and safety standards are specifically mentioned for the following types of businesses:

1. Construction

1. Shipyard

1. Marine terminals

Although OSHA standards may appear to apply only to companies in production, manufacturing, or construction, even companies with primarily an office function are required to abide by the laws set by OSHA. Examples (not at all an exhaustive list) of the types of safety laws (for all types of businesses) that are overseen by OSHA are as follows:

1. Regulations on walking/working surfaces. According to OSHA, slips, trips, and falls constitute the majority of general industry accidents and 15 percent of all accidental deaths. The standards apply to all permanent places of employment. The provision says that “all passageways, storerooms, and service rooms shall be kept clean and orderly. Every floor and working space shall be kept free of protruding nails, splinters, holes, or loose boards.” These are a few examples included in this provision.

1. Means of egress (exiting), which includes emergency evacuation plans.“Every building or structure shall be arranged and maintained as to provide free and unobstructed egress from all part of the buildings. No lock or fastening to prevent free escape from inside the building should be installed (except in penal or corrective institutions).” The provision also says that exits shall be marked by a visible sign.

1. Occupational noise exposure. “Protection against the effects of noise exposure shall be provided when the sound levels reach a specified level. Controls should be used to control the sound, and protective equipment should be provided.”

1. Hazardous handling of materials. OSHA regulates exposure to four hundred substances and requires communication about the possible chemical hazards to employees.

1. Protective equipment, such as eye, face, and respiratory protection.OSHA requires the use of personal protective equipment to reduce employee exposure to hazards. For example, head protection is required when workers are in an area where there is potential for falling, and eye and face protection is required when workers are exposed to eye or face hazards such as flying particles and molten metal.

1. Sanitation. Some examples of these OSHA requirements include the following: Potable water should be provided in all places of employment. Vermin control is required in all enclosed workplaces. Toilet facilities must be provided, separate for each sex. The number of toilets provided depends on the number of employees.

1. Requirement of first aid supplies on-site. First aid kits are mandatory and should include gauze pads, bandages, gauze roller bandages, and other required items.

1. Standards for fire equipment. Fire extinguishers are required to be on-site for use by employees, unless there is a written fire policy that requires the immediate and total evacuation of employees.

1. Standards for machine guards and other power tools. Moving machine parts require safeguards (depending upon the industry) to prevent crushed fingers, hands, amputations, burns, or blindness. Safeguards might include a guard attached to the machine.

1. Electrical requirements and standards. OSHA electrical standards are designed to protect employees from electric shock, fires, and explosions. Electrical protective devices are required to cover wiring. OSHA also addresses the installation of electrical wiring.

1. Commercial diving operation requirements. OSHA provides information on the safety aspects of commercial diving such as pre- and postdive procedures, mixed-gas diving, and necessary qualifications of the dive team.

HR professionals and managers should have a good understanding of these laws and make sure, no matter which industry, that all these standards are followed in the workplace. These standards are normally part of the overall strategic HRM plan of any organization and are even more crucial to organizations involved in manufacturing.

There exist many examples of OSHA violations. For example, in a Queensbury, Pennsylvania, Dick’s Sporting Goods store, OSHA found six violations, including blocked access to a fire extinguisher and workers’ entering a trash compactor with the power supply on. Dick’s was fined $57,300 by OSHA and told it had fifteen days to comply or contest the findings. [2]

The Most Frequently Violated and Cited OSHA Standards

1. 1926.451—Scaffolding

1. 1926.501—Fall Protection

1. 1910.1200—Hazard Communication

1. 1910.134—Respiratory Protection

1. 1926.1053—Ladders

1. 1910.147—Lockout/Tagout

1. 1910.305—Electrical, Wiring Methods

1. 1910.178—Powered Industrial Trucks

1. 1910.303—Electrical, General Requirements

1. 1910.212—Machine Guarding

Right-to-Know Laws

The Emergency Planning and Community Right to Know Act (EPCRA) or more simply, right-to-know laws, were established by Congress in 1986. The purpose of this act was to require local and state governments to provide emergency response plans to respond to a chemical emergency. [3] The other requirement is that these plans must be reviewed on an annual basis. Companies that handleextremely hazardous substances (EHSs) in large quantities must develop response plans as well. In addition, any organization that manufactures, processes, or stores certain hazardous chemicals must make available to local fire departments and state and local officials material data safety sheets. The material data safety sheet should also be provided to employees, as the data lists not only the chemical components but health risks of the substance, how to handle the material safely, and how to administer first aid in the case of an accident. This requirement also states that inventories of all on-site chemicals must be reported to local and state governments, but the data sheets must also be made public, too.

This law and how it will be reported should be facilitated by the HR professional. Although the HRM may not know the chemical makeup of the materials used, he or she is responsible for facilitating the process to ensure that reporting is done timely and accurately. For organizations that use EHSs often, it is worthwhile to include the reporting process within the orientation training and provide ongoing training as the law changes. The A-Treat Bottling facility in Allentown, Pennsylvania, was cited by OSHA for repeat violations of lacking material safety data sheets for the chemicals it uses in manufacturing, among other infractions such as blocked exits and forklift violations. The fines totaled $110,880, and the company had fifteen days to comply or contest the allegations. [4]

It is also important to note that some state standards are different from federal standards, which means the HR professional will need to be aware of the laws in the individual state in which the company is operating.

OSHA Enforcement

The record-keeping aspect of OSHA is perhaps as important as following the laws. Companies having fewer than ten employees in some industries are not required to keep records. The purpose of the record keeping does not imply that the employee or the company is at fault for a illness or injury. In addition, just because a record is kept doesn’t mean the employee will be eligible for workersworker’s compensation#8217; compensation. The record-keeping aspect normally refers to the keeping of incidence rates, or the number of illnesses or injuries per one hundred full-time employees per year, as calculated by the following formula

incidence rate=number of injuries and illness ×

200,000 total hours worked by all employees in the period

Two hundred thousand is the standard figure used, as it represents one hundred full-time employees who work forty hours per week for fifty weeks per year. An HR professional can then use this data and compare it to other companies in the same industry to see how its business is meeting safety standards compared with other businesses. This calculation provides comparable information, no matter the size of the company. If the incidence rate is higher than the average, the HR professional might consider developing training surrounding safety in the workplace.

Knowing what should be reported and what shouldn’t be reported is an important component to OSHA.  Figure 12.1 “The OSHA Decision Tree for Determining If an Injury or Illness Should Be Recorded” provides a decision tree that explains this. Data are reported using a form called OSHA 300, which is shown in .Figure 12.2 “OSHA Reporting Form 300”.As mentioned earlier, OSHA is responsible for enforcing standards. Besides requiring reporting, OSHA also performs inspections. OSHA is responsible for 7 million worksites across the country and so, of course, has to prioritize which ones it visits. OSHA has five main priorities for inspecting sites. First, it will inspect imminent danger situations. These are serious dangers that could cause death or serious harm. The second priority is for those sites where three or more employees were harmed, suffered illness, or were killed. These events are classified as fatalities or catastrophes and must be reported within an eight-hour time frame. The next priority is responding to complaints, which employees are allowed to file anonymously. Organizations that have had previous violations are prioritized next, and finally, planned programs. A planned program might be an organization that has had safety problems in the past and is working with OSHA to remedy the problem.

Figure 12.1 The OSHA Decision Tree for Determining If an Injury or Illness Should Be Recorded

Source: 

http://www.osha.gov/recordkeeping/ppt1/RK1flowchart.html

 (accessed September 2, 2011).

Figure 12.2 OSHA Reporting Form 300

Source: 

http://www.osha.gov/recordkeeping/new-osha300form1-1-04.pdfc

(accessed September 2, 2011).

Most site visits are unannounced and begin with the inspector introducing himself or herself. Prior to this, the inspector has performed research on the organization to be inspected. Once this occurs, a representative of the organization is assigned to accompany the inspector and the inspector discusses the reasons for the site visit. The HR professional is normally responsible for this task.

The inspector then walks around, pointing out any obvious violations, and then the inspector and representative discuss the findings. Within six months a complete report is sent, along with any citations or fines based on what the inspector found. If the organization is in disagreement with the violation or citation, a follow-up meeting with the OSHA director is scheduled and some fines may be reduced if the organization can show how it has improved and met the standards since the original visit.

OSHA has several penalties (per violation) it can assess on organizations, ranging from $7,000 to $70,000. The higher penalties often are a result of very serious offenses, in which an employee could have been killed, but also are imposed for willful offenses that the employer was aware could cause serious injury or death and did nothing about them. This is considered blatant indifference to the law. For example, Northeastern Wisconsin Wood Products was issued $378,620 in fines for willful violations in the summer of 2011. The violations stemmed from repeat visits and citations to the facility, where no safety changes had been made. Some of the willful violations included lack of guards on dangerous machine belts and band saw blades and open-sided floors without a guardrail to prevent falls. Michael Connors, OSHA’s regional administrator in Chicago, said, “Northeastern Wisconsin Wood Products has a history of failing to comply with OSHA standards. The company has yet to abate many violations cited in previous inspections and are unduly placing their workers at risk.” [5] While any violation of OSHA is serious, a willful violation is more serious, and the fines associated with it represent this.

Fortune 500 Focus

PepsiCo is the world’s largest manufacturer, seller, and distributor of Pepsi-Cola products and generates $119 billion in sales every year. [6] Tropicana juice is owned by Pepsi-Co. In October of 2005, a spark triggered an explosion at a Tropicana juice processing plant in Bradenton, Florida, causing burns to two-thirds of a worker’s body. While the worker survived, he underwent multiple surgeries to treat his burns. In this case, OSHA concluded that the fire could have been prevented if Tropicana had followed basic safety requirements such as risk evaluation, given tools to workers that did not produce sparks, and monitored for a buildup of flammable vapors and ventilated the area. OSHA inspectors tallied up a dozen violations, including two serious ones. Vice president of operations Mike Haycock said the plant has an incidence rate that is far lower than others in the industry, and plants around the country have immediately addressed many of the problems and are constantly working to correct other problems. [7]

The irony is that although the Tropicana factory paid $164,250 in fines to OSHA, the company was part of the VPP or Voluntary Protection Program, whose membership benefits include exemption from regular inspections. Even after the fire, in 2007, OSHA formally reapproved the plant as a “star site,” the highest level in VPP, meaning the plant pledged to exceed OSHA standards. [8] OSHA contends the VPP program isn’t perfect but is still a useful model to all employers of what can be achieved. For admission into the VPP program, workplaces must show they have fewer accidents and missed work days than average for their industry. According to Robert Tuttle, president of the local Teamsters union representing Tropicana workers, accidents are more common when employees are shifted out of their normal responsibilities, which is more common as the weak economy has led to staff cuts. [9] Tropicana plants have had more than eighty deaths since 2000, varying from preventable explosions to chemical releases to crane accidents. [10]PepsiCo and Tropicana have taken a hard stance on these types of accidents, as each of the plants now has a safety manager trained on OSHA standards to prevent accidents. In addition, strict operating procedures have been implemented to prevent future problems.

[1] “Workplace Injuries and Illnesses: 2009,” Bureau of Labor Statistics, US Department of Labor, news release, October 21, 2010, accessed April 14, 2011,
http://www.bls.gov/news.release/archives/osh_10212010.pdf
.

[2] Chris Churchill, “OSHA Finds Violations at Queensbury Retailer,” Union Times, August 8, 2011, accessed August 21, 2011, 
http://www.timesunion.com/business/article/OSHA-finds-violations-at-Queensbury-retailer-1779404.php
.

[3] “Emergency Planning and Community Right-to-Know Act (EPCRA),” United States Environmental Protection Agency, accessed April 15, 2011,
http://www.epa.gov/epahome/r2k.htm
.

[4] “OSHA Cites Allentown Soft Drink Company,” NewsWire.com, August 4, 2011, accessed August 21, 2011, 
http://www.mmdnewswire.com/us-labor-departmen-57793.html
.

[5] “$378,620 in Fines Issued for Willful Violations,” Occupational Health and Safety, July 31, 2011, accessed August 21, 2011, 
http://ohsonline.com/articles/2011/07/31/378620-in-fines-issued-to-wisconsin-wood-firm-for-willful-violations.aspx? admgarea=news
.

[6] “PepsiCo Annual Report,” accessed September 15, 2011,
http://www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf
.

[7] Just-drinks editorial team, “US: Tropicana in Safety Hazards Payout,” just-drinks, April 18, 2006, accessed August 21, 2011, 
http://www.just-drinks.com/news/tropicana-in-safety-hazards-payout_id86183.aspx
.

[8] Chris Hamby, “Model Workforce Not Always Safe,” Massachusetts Coalition for Occupational Safety and Health, July 7, 2011, accessed August 21, 2011,
http://www.masscosh.org/node/721
.

[9] David Gulliver, “Employees Not Always Safe in Model Workplaces,” Florida Center for Investigative Reporting, July 22, 2011, KitchenAid Mixer Review, accessed August 21, 2011,
http://kitchenaidmixereview.com/2011/07/22/employees-not-always-safe-in-model-workplaces/
.

[10] Chris Hamby, “Model Workplaces Not Always Safe,” Iwatchnews, July 7, 2011, accessed August 21, 2011, 
http://www.iwatchnews.org/2011/07/07/5130/model-workplaces-not-always-so-safe
.

12.2  Health Hazards at Work

Learning Objective

1. Be able to explain health concerns that can affect employees at work.

While OSHA covers many areas relating to health and safety at work, a few other areas are also important to mention. Stress management, office-related injuries such as carpal tunnel syndrome, and no-fragrance areas are all contemporary issues surrounding employee health and safety. We will discuss these issues in this section.

Stress

In its annual survey on stress in America, [1] the American Psychological Association found that money (76 percent), work (70 percent), and the economy (65 percent) remain the most oft-cited sources of stress for Americans. Job instability is on the rise as a source of stress: nearly half (49 percent) of adults reported that job instability was a source of stress in 2010 (compared to 44 percent in 2009). At the same time, fewer Americans are satisfied with the ways their employers help them balance work and nonwork demands (36 percent in 2010 compared to 42 percent in 2009). The implications of these findings are obviously important for HRM professionals.

Before we discuss what HR professionals can do, let’s discuss some basic information about stress. As it is currently used, the term stress was coined by Hans Selye in 1936, who defined it as “the nonspecific response of the body to any demand for change.” [2]In other words, we can say that stress is the reaction we have to a stressor. Astressor is some activity, event, or other stimulus that causes either a positive or negative reaction in the body. Despite what people may think, some stress is actually good. For example, receiving a promotion at work may cause stress, but this kind of stress is considered to be positive. Stress is very much a personal thing, and depending on individual personalities, people may have different opinions about what is a stressor and what is not. For example, a professor does not normally find public speaking to be a stressor, while someone who does not do it on a daily basis may be very stressed about having to speak in public.

Stress Management

Selye recognized that not all stress is negative. Positive stress is called eustress. This type of stress is healthy and gives a feeling of fulfillment and other positive feelings. Eustress can cause us to push ourselves harder to meet an end goal. On the other hand,distress is the term used for negative stress. While eustress can push us, distress does not produce positive feelings and can go on for a long time without relief. We can further classify distress by chronic stress, which is prolonged exposure to stress, and acute stress, which is short-term high stress. For example, someone who receives little or no positive result from stress and is continuously stressed may experience chronic stress. Acute stress occurs in shorter bursts and may be experienced while someone is on a tight deadline for a project.

Two other terms related to stress are hyperstress and hypostress. Hyperstress is a type of stress in which there are extremes with little or no relief for a long period of time. This type of stress often results in burnout. Hypostress is the lack of eustress or distress in someone’s life. Remember, some stress can be good and pushes us to work harder. We see this type of stress with people who may work in a factory or other type of repetitive job. The effect of this type of stress is usually feelings of restlessness.

Figure 12.3 The Stress Curve

Source: Adapted from P. Nixon, 1979.

One last important thing to note is how a person goes through the cycle of stress.Figure 12.3 “The Stress Curve” shows an example of how stress is good up to a point, but beyond that point, the person is fatigued and negatively affected by the stress. Bear in mind, this varies from person to person based on personality type and stress-coping mechanisms.

As you have already guessed, stress on the job creates productivity issues, which is why it concerns HR professionals. We know that stress can cause headaches, stomach issues, and other negative effects that can result in lost productivity but also result in less creative work. Stress can raise health insurance costs and cause employee turnover. Because of this, according to HR Magazine, [3] many employers are taking the time to identify the chief workplace stressors in employees’ lives. With this information, steps can be taken to reduce or eliminate such stress.

PricewaterhouseCoopers, for example, implemented several strategies to reduce stress in its workplace. The firm restructured its work teams so that rather than having one employee work with one client, teams of employees work with groups of clients. Rather than having an employee say, “I can’t go to my son’s baseball game because I need to wait for this client call,” this arrangement allows employees to cover for each other.

The organization also requires employees to take vacation time and even promotes it with posters throughout the office. In fact, even weekends are precious at PricewaterhouseCoopers. If an employee sends an e-mail on the weekend, a popup screen reminds her or him it is the weekend and it is time to disconnect.

Being a Student Can Be Stressful

Here are the most common stressors for college students:

· Death of a loved one

· Relocating to a new city or state

· Divorce of parents

· Encounter with the legal system

· Transfer to a new school

· Marriage

· Lost job

· Elected to leadership position

· New romantic relationship

· Serious argument with close friend

· Increase in course load or difficulty of courses

· Change in health of family member

· First semester in college

· Failed important course

· Major personal injury or illness

· Change in living conditions

· Argument with instructor

· Outstanding achievement

· Change in social life

· Change in sleeping habits

· Lower grades than expected

· Breakup of relationship

· New job

· Financial problems

· Change in eating habits

· Chronic car trouble

· Pregnancy

· Too many missed classes

· Long commute to work/school

· Working more than one job

· Impending graduation

· Argument with family member

· Sexual concerns

· Changes in alcohol and/or drug use

· Roommate problems

· Raising children

Offering flextime is also a way to reduce employee stress. It allows employees to arrange their work and family schedule to one that reduces stress for them. This type of creative scheduling, according to Von Madsen, HR manager at ARUP Laboratories, [4]allows employees to work around a schedule that suits them best. Other creative ways to reduce stress might be to offer concierge services, on-site child care, wellness initiatives, and massage therapy. All these options can garner loyalty and higher productivity from employees.

Cumulative Trauma Disorders

Cumulative trauma disorders (CTDs) are injuries to the fingers, hands, arms, or shoulders that result from repetitive motions such as typing.

Carpal tunnel syndrome, or CTS, is a common cumulative disorder in which the hand and wrist is particularly affected. CTS is a disabling syndrome that fortunately can be prevented or at least minimized. According to one study of CTS, [5] the percentage of a workday at a computer, posture while at the workstation, and the individual’s body features all contribute to this workplace issue. More recently, CTD can be found in people who text a lot or use their smartphones to type or surf the Internet.

There are a number of keyboards, chairs, and other devices that can help limit or prevent CTD issues. CTD disorders cost companies money through higher health-care costs and workersworker’s

Figure 12.4 Example of an OSHA Standard for Retail Grocery Stores to Avoid CTD

Source:

http://www.osha.gov/ergonomics/guidelines/retailgrocery/retailgrocery.html#storewide

 (accessed September 2, 2011).

Compensation #8217; compensation payments. CTD is a required recordable case under OSHA. OSHA has voluntary employer guidelines for reducing CTD in specific industries such as poultry processing, shipyards, retail grocery, and nursing homes. OSHA is currently developing standards for industry-specific and task-specific jobs. [6]

Microsoft is attempting to relieve CTD by developing “surface” technology. First introduced in 2007, the system is controlled through intuitive touch rather than the traditional mouse and keyboard. Microsoft and Samsung in early 2011 introduced the newest consumer-ready product, which looks like a large tablet (or iPad) used to perform the same functions as one normally would on her computer. [7]

Video Display Terminals (VDTs)

In 1984, only 25 percent of people used computers at work, and today that number is 68 percent. [8] Awareness of the effects of computer monitors and other similar terminals are necessary to ensure a healthy workplace. Vision problems; fatigue; eye strain; and neck, back, arm, and muscle pain are common for frequent users of VDTs. OSHA recommands taking a break after every hour on a computer screen and reducing glare on screens. Proper posture and seat adjustment also limits the amount of injuries due to VDTs.

Chemical and Fragrance Sensitivities

The EEOC defines a disability as a physical or mental impairment that substantially limits one or more of the major life activities of individuals and the ability to provide evidence of such an impairment. [9] Because of this definition, people who havemultiple chemical sensitivity (MCS) or environmental illness (EI) are eligible for reasonable accommodations in the workplace. MCS or EI is the inability to tolerate an environmental chemical or class of foreign chemicals. Symptoms can include headache, dizziness, inability to breathe, muscle pain, and many more depending on the person. As a result, implementing policies surrounding MCS may be not only a legal requirement but a best practice to keep employees safe and healthy in the workplace. Some examples of such policies might include the following:

1. Institute a fragrance-free workplace policy (e.g., no scented lotions, hair products, or perfumes).

1. Limit use of restroom air fresheners, cleaning agents, and candles.

1. Ensure the ventilation system is in good working order.

1. Provide a workspace with windows where possible.

1. Consider providing an alternate workspace.

1. Be cautious of remodels, renovations, and other projects that may cause excessive dust and odors.

If an organization is going to implement a fragrance-free work policy, this is normally addressed under the dress code area of the organization’s employee manual. However, many employers are reluctant to require employees to refrain from wearing or using scented products. In this case, rather than creating a policy, it might be worthwhile to simply request a fragrance-free zone from employees through e-mail and other means of communication. An example of such a policy is used by Kaiser Permanente:

Figure 12.5 VDT Checklist to Reduce Workplace Injuries

We recognize that exposure to strong scents and fragrances in the environment can cause discomfort, as well as directly impact the health of some individuals. Since we hope to support a healthful environment for employees, physicians, and visitors, it is the intent of Quality and Operations Support to strive for a fragrance-controlled workplace. Therefore, for the comfort and health of all, use of scents and fragrant products by QOS employees, other than minimally scented personal care products, is strongly discouraged. [10]

Chemicals and Substances

OSHA, as we mentioned earlier, has certain standards for how chemicals should be handled and how they should be labeled. Chemicals should be labeled in English, and employees must be able to cross-reference the chemicals to the materials safety data sheet, which describes how the chemicals should be handled.

It is estimated that 1,200 new chemicals are developed in North America alone every year. [11] For many of these chemicals, little is known about their immediate or long-term effects on the health of workers who come into contact with them. As a result, policies should be developed on how chemicals should be handled, and proper warnings should be given as to the harmful effects of any chemicals found in a job site.

In the United States, twenty-six of the fifty states have smoking bans in enclosed public spaces. These smoking bans are designed to protect workers’ health from the dangers of secondhand smoke. A recent report released by the Centers for Disease Control and Prevention [12] says that state or local smoke-free laws cover 47.8 percent of workplaces. The report says if the trend continues, the United States will be 100 percent smoke free by 2020. Many companies implement no-smoking policies because of health-care costs, and some companies, such as Humana, Inc., say their no-tobacco policy is simply setting a good example (since they are a health-care organization). Humana tests all applicants for tobacco in a preemployment screening that applies to all tobacco products. [13] Most workplaces have no-smoking policies, and some even prefer not to hire smokers because of the higher cost of health care. Policies dealing with substances and chemicals are an important part of any employee training and orientation.

Benefits to a Smoke-Free Work Environment and Sample Policy

For the employees

· A smoke-free environment helps create a safer, healthier workplace.

· Workers who are bothered by smoke will not be exposed to it at work.

· Smokers who want to quit may have more of a reason to do so.

· Smokers may appreciate a clear company policy about smoking at work.

· Managers are relieved when there is a clearly defined process for dealing with smoking in the workplace.

For the employer

· A smoke-free environment helps create a safer, healthier workplace.

· Direct health-care costs to the company may be reduced.

· A clear plan that is carefully put into action by the employer to lower employees’ exposure to secondhand smoke shows the company cares.

· Employees may be less likely to miss work due to smoking-related illnesses.

· Maintenance costs go down when smoke, matches, and cigarette butts are taken out of work facilities.

· Office equipment, carpets, and furniture last longer.

· The risk of fires is lower.

· It may be possible to get lower rates on health, life, and disability insurance coverage as fewer employees smoke.

Sample smoking policy

Because we recognize the hazards caused by exposure to environmental tobacco smoke, it shall be the policy of ____________ to provide a smoke-free environment for all employees and visitors. This policy covers the smoking of any tobacco product and the use of oral tobacco products or “spit” tobacco, and it applies to both employees and nonemployee visitors of ____________.

Source: American Cancer Society,
http://www.cancer.org/Healthy/StayAwayfromTobacco/Smoke-freeCommunities/CreateaSmoke-freeWorkplace/smoking-in-the-workplace-a-model-policy
 (accessed August 20, 2011).

Drugs and alcohol are discussed in Chapter 9 “Managing Employee Performance”on managing performance issues. Substance abuse in the workplace can cause many problems for the organization. Not only does it create impaired ability to perform a job—resulting in more accidents—but it results in more sick days and less productivity, and substance abusers are more likely to file workersworker’s compensation #8217; compensation claims. Keep in mind that taking prescription drugs, if not used in the proper amounts or used long after the prescribed use, is considered substance abuse. A drug-free policy, according to OSHA, [14] has five parts:

1. A policy

1. Supervisor training

1. Employee education

1. Employee assistance

1. Drug testing

According to the National Clearinghouse for Alcohol and Drug Information, substance abuse costs companies over $100 billion in the United States alone. [15]This staggering figure alone makes it worthwhile for companies to implement a policy and training on substance abuse.

Workplace Violence and Bullying

According to OSHA, 2 million American workers are victims of workplace violence every year. [16] OSHA addresses some of the workers who are at increased risk for workplace violence:

1. Workers who exchange money with the public

1. Workers who deliver goods, passengers, or services

1. People who work alone or in small groups

1. Workers who work late at night or early in the morning

1. Workers who work in high-crime areas

It is up to the organization and human resources to implement policies to ensure the safety of workers and provide a safe working environment. OSHA provides tips to provide a safer workplace:

1. Establish a workplace violence prevention policy, with a zero tolerance policy.

1. Provide safety education.

1. Secure the workplace with cameras, extra lighting, and alarm systems.

1. Provide a drop safe to limit the amount of cash on hand.

1. Provide cell phones to workers.

1. Require employees to travel in groups using a “buddy system.”

Development of workplace policies surrounding these items is important. Ongoing training and development in these areas are key to the creation of a safe workplace. While outside influences may affect employee safety, it is also important to be aware of the employee’s safety from other employees. There are several indicators of previolence as noted by the Workplace Violence Research Institute: [17]

1. Increased use of alcohol and/or illegal drugs

1. Unexplained increase in absenteeism

1. Noticeable decrease in attention to appearance and hygiene

1. Depression and withdrawal

1. Explosive outbursts of anger or rage without provocation

1. Threats or verbal abuse to coworkers and supervisors

1. Repeated comments that indicate suicidal tendencies

1. Frequent, vague physical complaints

1. Noticeably unstable emotional responses

1. Behavior indicative of paranoia

1. Preoccupation with previous incidents of violence

1. Increased mood swings

1. Has a plan to “solve all problems”

1. Resistance and overreaction to changes in procedures

1. Increase of unsolicited comments about firearms and other dangerous weapons

1. Repeated violations of company policies

1. Escalation of domestic problems

Workplace Violence

A video on workplace violence training.

Please view this video at 
http://www.youtube.com/watch?v=oiuWLkdUZ5o
.

Anyone exhibiting one or more of these preincident indicators should get the attention of HRM. The HR professional should take appropriate action such as discussing the problem with the employee and offering counseling.

Workplace bullying is defined as a tendency of individuals or groups to use persistent or repeated aggressive or unreasonable behavior against a coworker or subordinate. The Workplace Bullying Institute found that 35 percent of workers have reported being bullied at work. This number is worth considering, given that workplace bullying reduces productivity with missed work days and turnover. The Workplace Bullying Institute found that litigation and settlement of bullying lawsuits can cost organizations $100,000 to millions of dollars, in addition to the bad publicity that may be created. Examples of workplace bullying include the following:

1. Unwarranted or invalid criticism

1. Blame without factual information

1. Being treated differently than the rest of your work group

1. Humiliation

1. Unrealistic work deadlines

1. Spreading rumors

1. Undermining or deliberately impeding a person’s work



In an Indiana Supreme court case, a hospital employee who was repeatedly bullied by a surgeon sued for emotional distress and won. This ruling drew national attention because it was an acknowledgment by the courts of the existence of workplace bullying as a phenomenon. [18] Prevention of workplace bullying means creating a culture in which employees are comfortable speaking with HR professionals and managers (assuming they are not the ones bullying) about these types of situations. Similar to traditional bullying, cyberbullying is defined as use of the Internet or technology used to send text that is intended to hurt or embarrass another person. Examples include using Facebook to post negative comments or setting up a fake e-mail account to send out fake e-mails from that person. Comments or blogs and posts that show the victim in a bad light are other examples of cyberbullying. Similar to workplace bullying, cyberbullying is about power and control in workplace relationships. Elizabeth Carll’s research on cyberbullying shows that people who experience this type of harassment are more likely to experience heightened anxiety, fear, shock, and helplessness, which can result in lost productivity at work and retention issues, [19] a major concern for the HR professional. The US Justice Department shows that some 850,000 adults have been targets of online harassment. [20] Many states, including New York, Missouri, Rhode Island, and Maryland, have passed laws against digital harassment as far back as 2007. [21] In a recent cyberbullying case, a US Court of Appeals upheld a school’s discipline of a student for engaging in off-campus cyberbullying of another student. [22]In the case, the victim said a MySpace profile was created that included inappropriate pictures of her, and the page’s creator invited other people to join. The student who created the page sued the school after she was disciplined for it, saying it violated her right to free speech, but courts found that students do not have the right to cyberbully other students. While it seems that cyberbullying is for young people, as mentioned earlier, 35 percent of American workers feel they have been bullied. Bullying should be identified immediately and handled, as it affects workplace productivity, customer satisfaction, and eventually, profits.

Employee Privacy


In today’s world of identity theft, it is important that HR professionals work to achieve maximum security and privacy for employees. When private information is exposed, it can be costly. For example, in March of 2011, the Texas Comptroller’s office inadvertently disclosed on a public website the names, addresses, and social security numbers of 3.5 million state workers. [23] The state has already spent $1.8 million to remedy this problem by sending letters to affected parties and hiring technology consultants to review office procedures. While keeping employee information private is the responsibility of all management in an organization, ensuring privacy remains the job of the HR professional.

Some of the things to combat employee identity theft include the following:

1. Conduct background and criminal checks on employees who will have access to sensitive data.

1. Restrict access to areas where data is stored, including computers.

1. Provide training to staff who will have access to private employee information.

1. Keep information in locked files or in password-protected files.

1. Use numbers other than social security numbers to identify employees.


Another privacy issue that comes up often is the monitoring of employee activities on devices that are provided to them by the organization. Case law, for the most part, has decided that employees do not have privacy rights if they are using the organization’s equipment, with a few exceptions. As a result, more than half of all companies engage in some kind of monitoring. According to an American Management Association [24]survey, 73 percent of employers monitor e-mail messages and 66 percent monitor web surfing. If your organization finds it necessary to implement monitoring policies, ensuring the following is important to employee buy-in of the monitoring:

1. Develop a policy for monitoring.

1. Communicate what will be monitored.

1. Provide business reasons for why e-mail and Internet must be monitored.


Working with your IT department to implement standards and protect employee data kept on computers is a must in today’s connected world. Communication of a privacy policy is an important step as well. Agrium, a Canadian-based supplier of agricultural products in North America, states its employee privacy policy on its website and shares with employees the tactics used to prevent security breaches. [25]

At Agrium we are committed to maintaining the accuracy, confidentiality, and security of your personal information. This Privacy Policy describes the personal information that Agrium collects from or about you, and how we use and to whom we disclose that information.

Terrorism

Since the 9/11 attacks, terrorism and its effect on the workplace are in the forefront of the HR professional’s mind. Planning for evacuations is the job of everyone in an organization, but HR should initiate this discussion. OSHA provides free assistance in implementing plans and procedures in case of a terror attack. OSHA also provides a fill-in-the-blank system (
http://www.osha.gov/SLTC/etools/evacuation/expertsystem/default.htm
) to help organizations write a comprehensive report for evacuations and terrorist attacks.

Promoting a Culture of Safety and Health

Employee health and safety is a must in today’s high-stress work environments. Although some may see employee health as something that shouldn’t concern HR, the increasing cost of health benefits makes it in the best interest of the company to hire and maintain healthy employees. In fact, during the recession of the late 2000s, when cutbacks were common, 50 percent of all workplaces increased or planned to increase investments in wellness and health at their organization. [26]

Example of Health and Safety Policy

Cordis (A Johnson & Johnson Company) Environmental, Health, and Safety Policy

Cordis Corporation is committed to global Environmental, Health, and Safety (EHS) performance and leadership with respect to its associates, customers, suppliers, contractors, visitors, and communities. To fulfill this commitment, Cordis Corporation conducts its business emphasizing regulatory compliance and collaboration.

We strive for:

· Comprehensive risk management

· Pollution prevention

· Healthy lifestyle culture

· Continuous improvement and sustainability

· Engaging partnerships

· Possession of outstanding EHS capabilities and skill sets

We affirm that EHS is:

· A core business value and a key indicator of organizational excellence

· Considered in every task we perform and in every decision we make

We believe that:

· All incidents and injuries are preventable

· Process Excellence is the driver for continuous improvement and sustainable results in all aspects of EHS

· Every associate is responsible and accountable for complying with all aspects of EHS, creating a safe and healthy work environment while leaving the smallest environmental footprint

A safe culture doesn’t happen by requiring training sessions every year; it occurs by creating an environment in which people can recognize hazards and have the authority and ability to fix them. Instead of safety being a management focus only, every employee should take interest by being alert to the safety issues that can exist. If an employee is unable to handle the situation on his or her own, the manager should then take suggestions from employees seriously; making the change and then communicating the change to the employee can be an important component of a safe and healthy workplace.

A culture that promotes safety is one that never puts cost or production numbers ahead of safety. You do not want to create a culture in which health and safety priorities compete with production speedup, which can lead to a dangerous situation.

Another option to ensure health and safety is to implement anemployee assistance program (EAP). This benefit is intended to help employees with personal problems that could affect their performance at work. The EAP usually includes covered counseling and referral services. This type of program can assist employees with drug or alcohol addictions, emotional issues such as depression, stress management, or other personal issues. Sometimes these programs are outsourced to organizations that can provide in-house training and referral services to employees. For example, REI (Recreation Equipment Inc.), based in Seattle, has a comprehensive EAP for its employees in both retail stores and corporate offices.

Possible techniques you can implement to have a safe and healthy work environment include the following:

1. Know OSHA and other safety laws.

1. Provide training to employees on OSHA and safety laws.

1. Have a written policy for how violations will be handled.

1. Commit the resources (time and money) necessary to ensure a healthy work environment.

1. Involve employees in safety and health discussions, as they may have good ideas as to how the organization can improve.

1. Make safety part of an employee’s job description; in other words, hold employees accountable for always practicing safety at work.

1. Understand how the health (or lack of health) of your employees contributes to or takes away from the bottom line and implement policies and programs to assist in this effort.

[1] American Psychological Association, “Key Findings,” news release, n.d., accessed April 17, 2011, 
http://www.apa.org/news/press/releases/stress/key-findings.aspx
.

[2] The American Institute of Stress, accessed September 15, 2011,
http://www.stress.org/topic-definition-stress.htm
.

[3] Kathryn Tyler, “Stress Management,” HR Magazine, September 1, 2006, accessed April 19, 2011, 
http://www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0906tyler.aspx
.

[4] Kathryn Tyler, “Stress Management,” HR Magazine, September 1, 2006, accessed April 19, 2011, 
http://www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0906tyler.aspx
.

[5] A. C. Matias, G. Salvendy, and T. Kuczek, Ergonomics Journal 41, no. 2 (1998): 213–26, accessed April 19, 2011, 
http://www.ncbi.nlm.nih.gov/pubmed/9494433
.

[6] “OSHA Protocol for Developing Industry-Specific and Task-Specific Ergonomics Guidelines,” Occupational Safety and Health Administration, accessed April 25, 2011,
http://www.osha.gov/SLTC/ergonomics/protocol.html
.

[7] Microsoft News Center, “Microsoft and Samsung Unveil the Next Generation of Surface,” news release, January 2011, accessed August 21, 2011,
http://www.microsoft.com/presspass/press/2011/jan11/01-06mssurfacesamsungpr.mspx
.

[8] “Survey Shows Widespread Enthusiasm for High Technology,” NPR Online, n.d., accessed August 20, 2011, 
http://www.npr.org/programs/specials/poll/technology/
.

[9] “Section 902: Definition of the Term Disability,” Equal Employment Opportunity Commission, accessed April 25, 2011, 
http://www.eeoc.gov/policy/docs/902cm.html#902.1
.

[10] Kaiser Permanente Fragrance Policy, accessed September 15, 2011,
http://users.lmi.net/wilworks/ehnlinx/k.htm
.

[11] International Labor Organization, “Your Safety and Health at Work: Chemicals in the Workplace,” accessed April 25, 2011, 
http://actrav.itcilo.org/actrav-english/telearn/osh/kemi/ciwmain.htm
.

[12] Julie Steenhuysen, “26 US States Have Comprehensive Smoking Bans,” Reuters, April 21, 2011, accessed April 25, 2011, 
http://www.reuters.com/article/2011/04/21/usa-smoking-idUSN2128332820110421
.

[13] “Insurer Humana Inc. Won’t Hire Smokers in Arizona,” Associated Press, June 30, 2011, accessed August 20, 2011, 
http://finance.yahoo.com/news/Insurer-Humana-Inc-wont-hire-apf-961910618.html?x=0&.v=1
.

[14] “Workplace Substance Abuse,” Occupational Safety and Health Administration, accessed August 20, 2011, 
http://www.osha.gov/SLTC/substanceabuse/index.html
.

[15] T. Buddy, “Substance Abuse in the Workplace,” About.com, November 20, 2011, accessed August 20, 2011, 
http://alcoholism.about.com/cs/work/a/aa990120.htm
.

[16] “Workplace Violence” (OSHA Fact Sheet), Occupational Safety and Health Administration, accessed April 25, 2011, 
http://www.osha.gov/OshDoc/data_General_Facts/factsheet-workplace-violence.pdf
.

[17] Jurg Mattman, “Pre-Incident Indicators,” Workplace Violence Research Institute, June 2010, accessed April 27, 2011, 
http://www.nesdis.noaa.gov/RESPECT/pdf/RESPECT-Pre-IncidentIndicators24Jun09.pdf
.

[18] Karen Klein, “Employers Can’t Ignore Workplace Bullies,” Bloomberg Businessweek, May 7, 2008, accessed August 20, 2011,
http://www.businessweek.com/smallbiz/content/may2008/sb2008057_530667.htm
.

[19] Madeleine White, “Are Cyber Bullies Worse for Victims than Real Bullies?” Globe and Mail, August 8, 2011, accessed August 20, 2011, 
http://www.theglobeandmail.com/life/the-hot-button/are-cyber-bullies-worse-for-victims-than-real-bullies/article2122943/

[20] Madeleine White, “Are Cyber Bullies Worse for Victims than Real Bullies?” Globe and Mail, August 8, 2011, accessed August 20, 2011, 
http://www.theglobeandmail.com/life/the-hot-button/are-cyber-bullies-worse-for-victims-than-real-bullies/article2122943/
.

[21] National Conference of State Legislatures, “State Cyberstalking, Cyberharassment, and Cyberbullying Laws,” January 26, 2011, accessed August 20, 2011,
http://www.ncsl.org/default.aspx?tabid=13495
.

[22] Daniel Solove, “Off Campus Cyberbullying and the First Amendment,” Huffington Post, July 28, 2011, accessed August 20, 2011, 
http://www.huffingtonpost.com/daniel-j-solove/offcampus-cyberbullying-a_b_911654.html
.

[23] Patricia Hart, “Attorneys Seek to Question Texas Comptroller Over Exposed Info,”Houston Chronicle, April 26, 2011, accessed April 27, 2011,
http://www.chron.com/disp/story.mpl/metropolitan/7537769.html
.

[24] “Electronic Monitoring and Surveillance Survey,” American Management Association, 2007, accessed April 27, 2011, 
http://press.amanet.org/press-releases/177/2007-electronic-monitoring-surveillance-survey/
.

[25] “Employee Privacy Policy,” Agrium Inc., accessed August 21, 2011,
http://www.agrium.com/employee_privacy.jsp
.

[26] Donald Sears, “Gym Memberships and Wellness Programs Remain Standard Employee Benefits,” The Ladders Career Line, July 21, 2009, accessed April 27, 2011, 
http://www.career-line.com/job-search/gym-memberships-and-wellness-programs-remain-standard-employee-benefits/
.

12.3 Case and Summary

Chapter Summary

· Every year, 4,340 fatalities and 3.3 million injuries occur in the workplace in the United States.

· The Occupational Safety and Health Act was passed in 1970, with the goal of providing a safe and healthy work environment for all US workers.

· The Occupational Safety and Health Administration is part of the US Department of Labor and was created as a result of the act in 1970.

· OSHA applies to some specific industries such as construction, shipyards, and marine terminals. However, some of the regulations of OSHA apply to all industries.

· Some states may also have safety requirements, which may be more stringent than federal Laws.

· Right-to-know laws refer to a material data safety sheet, which discusses the types of chemicals, proper handling and storage, and first aid in case of an accident. These data sheets should be made available to the general public and employees.

· Right-to-know laws also require specific reporting to local and state agencies on chemicals used in certain quantities for some industries.

· OSHA requires recording keeping for all workplace accidents or illness. The record keeping is usually the responsibility of HR; OSHA Form 300 is used for reporting purposes.

· OSHA can inspect any site without prior notification. Usually, it will gather information, visit the site, and ask for a representative. The representative is normally the HR person. The site visit will be performed, followed by discussion with the company representative. Within six months of the visit a report and any penalties will be communicated.

· Stress is a major concern for organizations, since it can decrease productivity in the workplace. There are several types of stress.

· Eustress is a positive type of stress that can cause people to work harder toward a goal. Distress, on the other hand, is a type of negative stress.

· Acute stress occurs in short bursts, such as when finishing a project, whilechronic stress tends to persist for long periods of time.

· Hyperstress is stress that is unrelieved for long periods of time and can often result in employee burnout. Hypostress is the lack of eustress in one’s life, which can be as damaging as other types of stress, since stress is sometimes what pushes people harder.

· HR professionals can encourage employees to take vacation time, offer flextime, and encourage employees to take weekends off to help reduce stress.

· Cumulative trauma disorder (CTD) affects the hands, fingers, arms, or shoulders as a result of continuous repetitive motions. Carpel tunnel syndrome (CTS) is a type of CTD that affects the hand and wrist. People with these disorders often work in a factory or at a desk where they are doing repetitive motions constantly, such as typing or cashiering.

· OSHA has voluntary guidelines for reducing CTD in the workplace. HR can assist by ensuring employees are provided with proper equipment and training.

· Multiple chemical sensitivity (MCS) or environmental illness (EI) is extreme sensitivity to chemicals found in products such as hairsprays or lotions. Some individuals are extremely sensitive to other types of chemicals, such as those used in the manufacturing of carpets.

· MCS can be considered a disability if it limits one or more of life activities. In this case, reasonable accommodations must be made, such as implementing fragrance-free zones as part of a workplace dress code.

· OSHA has specific guidelines on how to handle chemicals, but other chemicals, such as those from secondhand smoke, are an important consideration in workplace safety. Twenty-six states, for example, have implemented no-smoking policies to help protect the health of workers.

· Workplace violence affects 2 million Americans every year. A number of groups, such as those that deliver goods, people, or services, are at greatest risk. However, workplace violence can occur internally, which is why we must be aware of the warning signs.

· Workplace bullying is when a person is aggressive and unreasonable in his or her behavior toward another individual. Cyberbullying is similar, except technology is used to humiliate and intimidate the employee.

· Keeping employee information private is the job of HR and IT. In addition, some organizations may engage in web or e-mail monitoring to ensure employees are on task. Specific policies should be developed and communicated to let employees know how they may be monitored.

· Some organizations have employee assistance programs (EAPs) that can provide assistance, counseling, and the like in case of personal problems or drug or alcohol abuse.

· To maintain a healthful working environment, know OSHA policies and make sure people are trained on the policies. Also ensure that specific policies on all areas of health and safety are communicated and employees are trained in those areas where necessary.

Chapter Case

Bullying Ming

You just ended a meeting with Ming (one of your six employees), who gave you some disturbing information. She feels she is being bullied by one of her coworkers and is seeking your advice on how to handle it. Ming said that Mindy has been saying “good morning” to everyone as she walks by their office but doesn’t say it to Ming. Ming also said that Mindy organized a farewell lunch for one of your departing employees last week and didn’t invite Ming. She also told you of nasty things that Mindy tells other colleagues about her. For example, last month when Ming ran into Mindy at the grocery store, Mindy told everyone the next day the medications that Ming had in her cart, which included medication for irritable bowel syndrome. Ming also showed you an e-mail that Mindy had sent blaming Ming for the loss of one of Mindy’s clients. Mindy had copied the entire department on the e-mail. Ming thinks that other employees have been reluctant to involve her in projects as a result of this e-mail. Ming left your office quite upset, and you think you may need to take some action.

1. Do you think Ming is correct in saying Mindy is bullying her? What are the indications of bullying?

1. What advice would you give to Ming?

1. How would you handle this situation with Mindy, without embarrassing Ming?


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