8 Managing Human Resources and Labor Relations

Introduction

Learning Outcomes

After reading this chapter, you should be able to answer these questions:

What is the human resource management process, and how are human resource needs determined?How do firms recruit applicants?How do firms select qualified applicants?What types of training and development do organizations offer their employees?How are performance appraisals used to evaluate employee performance?What are the types of compensation and methods for paying workers?What is a labor union and how is it organized, what is collective bargaining, and what are some of thekey negotiation issues?How are grievances between management and labor resolved, and what tactics are used to force acontract settlement?What are the key laws and federal agencies affecting human resource management and labor relations?What trends and issues are affecting human resource management and labor relations?

Exhibit 8.1 (Credit: Ludovic Bertron /flickr / Attribution 2.0 Generic (CC BY 2.0))

Andrea Herran, Human Resources Consultant

In college, Andrea Herran studied business administration and minored in psychology. Always interestedin a business career, she initially took psychology simply because it was interesting. Little did she know

E X P L O R I N G B U S I N E S S C A R E E R S

1.2.3.4.5.6.7.

8.

9.10.

8

Managing Human Resources and Labor Relations

This chapter looks at the role of human resources within an organization, from the general processes ofdeveloping and planning to the more specific tasks of employee evaluation and compensation.

Human resource management and labor relations involve acquisition, development, use, and maintenance ofa human resource mix (people and positions) to achieve strategic organizational goals and objectives.

how applicable that minor would become. As a human resources (HR) consultant, she often benefitsfrom her psychology background. “Studying human behavior really gave me the background necessaryto put myself in the position of others, to see things from their point of view, which has definitely beenhelpful in my career in human resources.”

Herran started out as an administrative assistant in the HR department of a hotel, and her career hasrun the gamut of human resources over the 25 years since she graduated from college. She has been anemployment coordinator, focusing on employee recruitment and selection, and a personnel manager,where she learned the skills necessary to maintain and evaluate employees. As a training manager, shesharpened her talent for developing, coordinating, and even administering staff training. Eventually, shebecame the director of human resources for companies both in the United States and abroad. Indeed,beyond the United States, she has worked in Mexico, Argentina, and South Africa.

Andrea worked her way up in the corporate world, but entrepreneurship was more consistent with herdesire for a fast-paced, changing environment, both in terms of what she does and who she works with,so she made the move to consulting. “Consulting allows me to draw upon all my human resources skills.I have opened five HR departments in my career, so I bring my full experience to bear on the challengeseach company has.”

Today, Andrea’s passion is working with small businesses, entrepreneurs, managers, and owners as anadvisor to “uncomplicate the people side of your business.” As the principal of Focus HR Consulting, sheadvises firms how to set up human resource programs and ensure legal compliance. She also providesleadership coaching and training and mentors employees. She has worked in several industries,including hospitality (hotels and restaurants), advertising, professional services, logistics, technology,and manufacturing.

When Andrea was hired by Aquion Water Treatment Products, she was tasked with updating thecompany’s HR policies and procedures. The company’s performance reviews were very task-orientedversus behavior-oriented. Instead of determining whether a task was completed, behavior-orientedreviews seek to evaluate not only whether the person completed the task but also how he or she did so,especially examining the interactions involved in the task. Is an employee punctual at returningconsumer request calls? How does he or she relate to customers? As a manager, does he or she expressthoughts clearly? “By evaluating specific behaviors, you create an environment with clearly setqualifications for advancement and opportunities for targeted employee development. Without this, thehuman aspect of human resources can be overlooked.”

Andrea has never looked back on her choice to become an entrepreneur, and she believes her variedemployment history was a key to her success. “Anyone interested in this field should experience as manypossibilities within human resources as possible. You leave school with the theory, but only throughexperience do you really get to see what the potential of such a career is.”

Sources: “About Us,” http://focushr.biz, accessed February 8, 2018; “Member Spotlight: Andrea Herran,”http://www.centerforguiltfreesuccess.com, accessed February 8, 2018; Insureon blog, “5 HR Pros Revealthe Secret to Hiring the Right Employees the First Time,” http://www.insureon.com, June 3, 2016.

286 Chapter 8 Managing Human Resources and Labor Relations

This OpenStax book is available for free at http://cnx.org/content/col25734/1.7

Successful human resource management is based on a company’s ability to attract and hire the bestemployees, equip them with the knowledge and skills they need to excel, compensate them fairly, andmotivate them to reach their full potential and perform at high levels. Today’s business environment presentsnumerous challenges to effectively managing employees:

• Technology continues to advance, which places great importance on knowledge workers, especially whendemand outstrips the supply of high-talent individuals.

• Global business operations involve rapid data transfer and necessitate accelerated decision-making byexecutive and technical employees.

• The workforce is increasingly more diversified and multicultural, which places increased emphasis oncommunication and cultural understanding.

• Work, life, and family priorities are more difficult to balance as dual-worker families populate the laborforce.

• Employment and labor laws continue to greatly influence employee recruitment and hiring,compensation decisions, and employee retention and turnover in both union and nonunionorganizations.

Each day, human resource experts and front-line supervisors deal with these challenges while sharingresponsibility for attracting and retaining skilled, motivated employees. Whether faced with a large or smallhuman resources problem, supervisors need some understanding of difficult employee-relations issues,especially if there are legal implications.

In this chapter, you will learn about the elements of the human resource management process, includinghuman resource planning and job analysis and design, employee recruitment and selection, training anddevelopment of employees, performance planning and evaluation, and compensation of the workforce. Thechapter also describes labor unions and their representation of millions of American workers in construction,manufacturing, transportation, and service-based industries.

8.1 Achieving High Performance through Human Resources Management

1. What is the human resource management process, and how are human resource needs determined?

Human resource (HR) management is the process of hiring, developing, motivating, and evaluatingemployees to achieve organizational goals. The goals and strategies of the firm’s business model form thebasis for making human resource management decisions. HR practices and systems comprise the firm’shuman resource decision support system that is intended to make employees a key element for gainingcompetitive advantage. To this end, the HR management process contains the following sequenced activities:

• Job analysis and design• Human resource planning and forecasting• Employee recruitment• Employee selection• Training and development• Performance planning and evaluation• Compensation and benefits

The human resource management process shown in Exhibit 8.3 encourages the development of high-performance employees. The process is sequential because employees can’t be trained and paid until selectedand placed in jobs, which follows recruitment, which is preceded by human resource planning and job analysisand design. Good HR practices used along this sequence foster performance improvement, knowledge andskill development, and loyal employees who desire to remain with the organization.

Chapter 8 Managing Human Resources and Labor Relations 287

Exhibit 8.2 A job fair, career fair or career expo, are events in which employers, recruiters, and schools give information to potentialemployees and job seekers attend hoping to make a good impression to potential employers. They also interact with potential coworkers byspeaking face-to-face, exchanging résumés, and asking questions in attempt to get a good feel on the work needed. Likewise, online job fairsare held, giving job seekers another way to get in contact with probable employers using the internet. How do you plan on using events like this inseeking your job? How can utilize the courses that you are taking to illustrate your skills that you can discuss at job fairs. (Credit: Taavi Burns/ flickr/Attribution 2.0 Generic (CC BY 2.0))

HR Planning and Job Analysis and DesignTwo important, and somewhat parallel, aspects of the human resource management process are determiningemployee needs of the firm and the jobs to be filled. When Alcon Labs gained approval from the Food andDrug Administration for sales of a new contact lens disinfectant solution in its Opti-Free product line, it had todetermine if additional sales representatives were needed and whether new sales positions with differentknowledge and skill requirements should be established.1 Human resource planning at Alcon means havingthe right number of people, with the right training, in the right jobs, to meet its sales goals for the newproduct. Once the need for sales representatives is determined, human resource specialists assess the skills ofthe firm’s existing employees to see whether new people must be hired or current people can be trained. SeeExhibit 8.3 for a representation of the human resource management process.



Exhibit 8.3 Human Resource Management Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Human resource planners must know what skills different jobs require. Information about a specific jobtypically begins with a job analysis, which is a study of the tasks required to do a job well. This information isused to specify the essential skills, knowledge, and abilities required for the job. When Hubert Joly started asthe CEO at Best Buy, the retailer was facing serious financial pressures. The threat of online competition fromAmazon was real. Joly was also facing a staffing issue with a lot of turnover. He and his team instituted a planto keep and promote staff as a core competency that would differentiate Best Buy from online retailers.2 Also,a key HR responsibility is that jobs are examined to make any changes in job duty and task responsibilities. Thetasks and responsibilities of a job are listed in a job description. The skills, knowledge, and abilities a personmust have to fill a job are spelled out in a job specification. These two documents help human resourceplanners find the right people for specific jobs. A sample job description and specification is shown in Table8.1.

HR Planning and ForecastingForecasting an organization’s human resource needs, known as an HR demand forecast, is an essential aspectof HR planning. This process involves two forecasts: (1) determining the number of people needed by somefuture time (in one year, for example) and (2) estimating the number of people currently employed by theorganization who will be available to fill various jobs at some future time; this is an internal supply forecast.


Job Description and Specification

Position: College RecruiterReports to: Vice President

of Human

Location: Corporate Offices Resources Classification: Salaried/Exempt

Job Summary:

Member of HR corporate team. Interacts with managers and department heads to determinehiring needs for college graduates. Visits 20 to 30 college and university campuses each year toconduct preliminary interviews of graduating students in all academic disciplines. Following initialinterviews, works with corporate staffing specialists to determine persons who will be intervieweda second time. Makes recommendations to hiring managers concerning best-qualified applicants.

Job Duties and Responsibilities:

Estimated time spent and importance:

15% Working with managers and department heads, determines collegerecruiting needs.

10% Determines colleges and universities with degree programsappropriate to hiring needs to be visited.

15% Performs college relations activities with numerous colleges anduniversities.

25% Visits campuses to conduct interviews of graduating seniors.

15% Develops applicant files and performs initial applicant evaluations.

10% Assists staffing specialists and line managers in determining who toschedule for second interviews.

5% Prepares annual college recruiting report containing informationand data about campuses, number interviewed, number hired, andrelated information.

5% Participates in tracking college graduates who are hired to aid indetermining campuses that provide the most outstandingemployees.

Job Specification (Qualifications):

Bachelor’s degree in human resource management or a related field. Minimum of two years ofwork experience in HR or department that annually hires college graduates. Ability to perform in ateam environment, especially with line managers and department heads. Very effective oral andwritten communication skills. Reasonably proficient in Excel, Word, and Windows computerenvironment and familiar with PeopleSoft software.



The Advancement Planning process at Best Buy involved reducing the turnover that occurs in most retailenvironments. The company has achieved a second-place ranking, behind only Costco, and its generalmanagers’ tenure at a store averages five years. The performance of managers at Best Buy is reviewed toidentify people who can fill vacancies and be promoted, a process known as succession planning.3 If Best Buyhas a temporary shortage of sales professionals, at the holiday shopping season, for example, they can hire anexperienced contractor or interim executive as a temporary or contingent worker, someone who wants towork but not on a permanent, continuous basis. Exhibit 8.4 summarizes the process of planning andforecasting an organization’s personnel needs.

Exhibit 8.4 Human Resource Planning Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)


8.2 Employee Recruitment

2. How do firms recruit applicants?

When a firm creates a new position or an existing one becomes vacant, the firm starts looking for people withqualifications that meet the requirements of the job. Two sources of job applicants are the internal andexternal labor markets. The internal labor market consists of employees currently employed by the firm; theexternal labor market is the pool of potential applicants outside the firm.

Exhibit 8.5 Online recruiting is among the top internet success stories of the past decade. LinkedIn, Monster, and CareerBuilder are hotspots for job hunters and recruiters seeking to establish a working relationship. What are the advantages and disadvantages of online recruitingcompared to traditional forms of recruitment? (Credit: Bill Gates LinkedIn Profile screen capture, 3/23/2018)

Internal Labor MarketInternal recruitment can be greatly facilitated by using a human resource information system that contains anemployee database with information about each employee’s previous work experience, skills, education andcertifications, job and career preferences, performance, and attendance. Promotions and job transfers are themost common results of internal recruiting. BNSF Railway, Walmart, Boeing, Ritz-Carlton Hotels, and mostother firms, large and small, promote from within and manage the upward mobility of their employees.

External Labor MarketThe external labor market consists of prospects to fill positions that cannot be filled from within theorganization. Recruitment is the process of attracting qualified people to form an applicant pool. Numerous

C O N C E P T C H E C K

1. Define human resource management.2. Distinguish between job analysis, job description, and the job specification.3. Describe the human resource management process.



methods are used to attract applicants, including print, radio, web, and television advertising. Hospitality andentertainment firms, such as Ritz-Carlton Hotels and Six Flags, frequently use job fairs to attract applicants. Ajob fair, or corporate open house, is usually a one- or two-day event at which applicants are briefed about jobopportunities, given tours, and encouraged to apply for jobs. For firms needing accountants, engineers, salesmanagers, and others for professional and scientific positions, college recruiting is very common. These firms(Deloitte, Cisco Systems, Salesforce.com, and thousands of others) schedule job fairs and on-campusinterviews with graduating seniors.

Online Recruiting and Job SearchThe internet, social media, and specialized software have completely changed the employee recruitmentprocess. Dozens of companies such as Monster.com, Indeed, StartWire, and Glassdoor enable applicants tosearch for job openings, post their résumés, and apply for jobs that companies have posted. Most companiesprovide links to their company website and to the career page on their site so applicants can learn about thecompany culture, listen to or read testimonials from employees about what it is like to work for the company,and search for additional openings that may interest them.

Large firms may receive thousands of online applications per month. To review and evaluate thousands ofonline résumés and job applications, firms depend on software to scan and track applicant materials using keywords to match skills or other requirements for a particular job. Social media has also changed howcompanies search for applicants and verify applicant information.

M A N A G I N G C H A N G E

Social Networking and Employee Recruitment

Referrals and professional networking are commonly used methods of identifying job prospects,particularity for managerial, professional, and technical positions. Several software applications andsocial networks facilitate employee referrals, reference checking, and hiring based on networks ofpersonal relationships. ExecuNet and ExecRank are just two of the many career sites that allow membersto search for contacts and network with other professionals in their fields.

LinkedIn is the most popular social network for professionals. It is a giant database of contacts withprofiles that provide an overview of a person’s past and present professional experience, skills,professional referrals, and affiliations with business and professional associations. A member can searchthrough an extended network of contacts based on his or her professional acquaintances. The basis for asearch can be job, job title, company, geography, zip code, or membership in a professional organization.LinkedIn uses the concept that there are no more than six degrees of separation between two people, orone person can be linked to any other individual through no more than six other people. With more than530 million members worldwide, LinkedIn’s extensive platform is an ideal network for both recruitersand those looking to make their next career move.

LinkedIn, like other social networks, is based on voluntary participation, and members consent to beingnetworked. Nevertheless, important questions can be raised regarding privacy concerns and use of one’ssocial network.

Critical Thinking Questions


Recruitment BrandingRecruitment branding involves presenting an accurate and positive image of the firm to those beingrecruited. Carbone Smolan Agency (CSA) is a New York–based image consulting firm that assists in developinga recruitment branding strategy.4 The materials developed by CSA comprise a realistic job preview, whichinforms job candidates about organizational realities of the job and the firm so they can more accuratelyevaluate jobs and firm expectations concerning work assignments, performance standards, promotionalopportunities, company culture, and many other characteristics of the job.

8.3 Employee Selection

3. How do firms select qualified applicants?

After a firm has attracted enough job applicants, employment specialists begin the selection process.Selection is the process of determining which people in the applicant pool possess the qualificationsnecessary to be successful on the job. The steps in the employee selection process are shown in Exhibit 8.6.An applicant who can jump over each step, or hurdle, will very likely receive a job offer; thus, this is known asthe successive hurdles approach to applicant screening. Alternatively, an applicant can be rejected at any stepor hurdle. Selection steps or hurdles are described below:

1. Initial screening. During initial screening, an applicant completes an application form and/or submits arésumé, and has a brief interview of 30 minutes or less. The job application includes information abouteducational background, previous work experience, and job duties performed.

2. Employment testing. Following initial screening, the applicant may be asked to take one or more tests, suchas the Wonderlic Personnel Tests. Wonderlic offers a suite of pre-employment tests for each phase of thehiring process. Used individually or together, the tests can assess cognitive ability (ability to learn, adapt,

1. Social networks can easily generate a name for an HR recruiting target, but how can the hiring firmconvert the target into a candidate who is interested in the job?

2. A social network like LinkedIn is an excellent tool that can be used to build a personal brand and finda new job. In what ways could a job seeker potentially harm their career opportunities on a socialnetworking site?

Sources: “About ExecuNet,” https://www.execunet.com, accessed February 8, 2018; “LinkedIn Statistics,”https://expandedramblings.com, accessed February 8, 2018; “Social Recruiting Tips,”https://www.betterteam.com, January 24, 2018; Susan M. Heathfield, “Use LinkedIn for RecruitingEmployees,” The Balance, https://www.thebalance.com, April 7, 2017.


1. What are the two sources of job applicants?2. What are some methods firms use to recruit applicants?3. What is meant by recruitment branding?



and solve problems), motivation potential (attitude, behavior performance, and productivity), andknowledge and skills (math, verbal, data entry, software proficiency).5

HR Senior Vice President Martha LaCroix of the Yankee Candle Company uses personality assessments tomake sure that prospective employees will fit the firm’s culture. LaCroix was helped by Predictive Index(PI) Worldwide in determining Yankee Candle’s best- and worst-performing store managers fordeveloping a best practice behavioral profile of a top-performing store manager.6 The profile was usedfor personality testing and to develop interview questions that reveal how an applicant may behave incertain work situations.

Exhibit 8.6 Steps of the Employee Selection Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

3. Selection interview. The tool most widely used in making hiring decisions is the selection interview, an in-depth discussion of an applicant’s work experience, skills and abilities, education, and career interests.For managerial and professional positions, an applicant may be interviewed by several persons, includingthe line manager for the position to be filled. This interview is designed to determine a person’scommunication skills and motivation. During the interview, the applicant may be presented with realisticjob situations, such as dealing with a disgruntled customer, and asked to describe how he or she wouldhandle the problem. Carolyn Murray of W.L. Gore & Associates (maker of Gore-Tex, among otherproducts) listens for casual remarks that may reveal the reality behind applicant answers to herquestions. Using a baseball analogy, Murray gives examples of how three job candidates struck out withher questions. See Table 8.2.7


Striking Out at the Interview Game

The Pitch (Questionto Applicant)

The Swing (Applicant’s Response) The Miss (Interviewer’s Reaction toResponse)

“Give me anexample of a timewhen you had aconflict with ateam member.”

“Our leader asked me to handleall of the FedExing for our team. Idid it, but I thought that FedExingwas a waste of my time.”

“At Gore, we work from a teamconcept. Her answer shows that shewon’t exactly jump when one of herteammates needs help.”

“Tell me how yousolved a problemthat was impedingyour project.”

“One of the engineers on myteam wasn’t pulling his weight,and we were closing in on adeadline. So I took on some of hiswork.”

“The candidate may have resolvedthe issue for this particular deadline,but he did nothing to prevent theproblem from happening again.”

“What’s the onething that youwould changeabout your currentposition?”

“My job as a salesman hasbecome boring. Now I want theresponsibility of managingpeople.”

“He’s probably not maximizing hiscurrent territory, and he iscomplaining. Will he find his next role‘boring’ and complain about thatrole, too?”

Table 8.2

4. Background and reference check. If applicants pass the selection interview, most firms examine theirbackground and check their references. In recent years, an increasing number of employers, such asAmerican Airlines, Disney, and Microsoft, are carefully researching applicants’ backgrounds, particularlytheir legal history, reasons for leaving previous jobs, and even creditworthiness.

5. Physical exams and drug testing. A firm may require an applicant to have a medical checkup to ensure heor she is physically able to perform job tasks. Drug testing is common in the transportation and healthcare industries. Southwest Airlines, BNSF Railway, Texas Health Resources, and the U.S. Postal Service usedrug testing for reasons of workplace safety, productivity, and employee health.

6. Decision to hire. If an applicant progresses satisfactorily through all the selection steps (or jumps all of theselection hurdles), a decision to hire the person is made; however, the job offer may be contingent onpassing a physical exam and/or drug test. The decision to hire is nearly always made by the manager ofthe new employee.

An important aspect of employee recruitment and selection involves treating job applicants as valuedcustomers; in fact, some applicants may be customers of the firm.

C U S T O M E R S A T I S FA C T I O N A N D Q U A L I T Y

Puttin’ on the Ritz—For Potential Employees

Your meeting with a human resource representative is often your first exposure to the company you areapplying to work for, and firms must provide good customer service to applicants if they expect to hire



the most qualified employees.

Companies have several opportunities to create a positive impression of their organization during thesekey points in the employee selection process. These include a variety of communication channels, suchas:

• In-person greetings at a job fair or at the interview itself• Phone calls to a prospective employee from a human resource professional to set up the interview

and any follow-up conversations between human resources and the applicant• E-mail correspondence to acknowledge receipt of an application and to thank applicants for

submitting their job application• A thank-you note from the employer following the second interview

A firm that is recognized for treating prospective employees especially well is Ritz-Carlton Hotels, asubsidiary of Marriott International. When the Washington D.C. Ritz-Carlton was recruiting employees tostaff a new hotel, the goal was to provide applicants with a personal demonstration of the famous Ritz-Carlton service-oriented culture.

As applicants arrived, they experienced the Ritz-Carlton “warm welcome” from several employees whogreeted them, wished them luck, and escorted them past a violinist and piano player to the waitingroom, where beverages and snacks were available. Applicants went through a standardized screeningquestionnaire, and those who passed went on to a professionally developed structured interview.Individuals were then personally escorted to the “fond farewell,” where they were thanked, given Ritz-Carlton chocolates, and escorted out of the hotel. The goal of Ritz-Carlton managers is to give applicantsthe same experience they would expect to receive as a customer staying in the hotel. Every applicantreceives a personal, formal thank-you note for coming to the job fair, and those who are considered forpositions but later rejected receive another note. Ritz-Carlton wants to make a good impression becausean applicant could be a future Ritz-Carlton hotel guest, or the son or daughter of a guest.

Ritz-Carlton continues to show exemplary service during the employee orientation process. Everyemployee must go through seven days of training before ever working in a Ritz-Carlton. Two full days ofthe orientation are indoctrination in the Ritz-Carlton values and philosophy. The goal is to create asignificant emotional experience for new employees during their first few days. This happens themoment new employees arrive for training at 6:00 a.m. and see senior leaders lined up outside the doorsof the hotel, clapping and cheering as they greet them. The message is clear: You are important and wewill treat you exactly as we want you to treat customers.

The leadership team is involved in facilitating the program, sending a powerful message about theimportance of consensual commitment. “For these next few days, we will orient you to who we are—ourheart, our soul, our goals, our vision, our dreams—so you can join us, and not just work for us.”

Horst Schultz, former president and COO of the Ritz-Carlton, first implemented the motto “We Are Ladiesand Gentlemen Serving Ladies and Gentlemen” in the mid-1980s, and the motto is still at the heart of thecompany’s values today. In an address to employees, Schultz said, “You are not servants. We are notservants. Our profession is service. We are Ladies and Gentlemen, just as the guests are, who we respectas Ladies and Gentlemen. We are Ladies and Gentlemen and should be respected as such.”

Critical Thinking Questions1. What are the benefits of an employer treating a job applicant like a customer? Are there costs

associated with treating applicants poorly?2. What is the Ritz-Carlton motto? How does it teach both applicants and employees about the


8.4 Employee Training and Development

4. What types of training and development do organizations offer their employees?

To ensure that both new and experienced employees have the knowledge and skills to perform their jobssuccessfully, organizations invest in training and development activities. Training and development involveslearning situations in which the employee acquires additional knowledge or skills to increase job performance.Training objectives specify performance improvements, reductions in errors, job knowledge to be gained, and/or other positive organizational results. The process of creating and implementing training and developmentactivities is shown in Exhibit 8.8. Training is done either on the job or off the job.

company’s values?

Sources: “Gold Standards,” http://www.ritzcarlton.com, accessed February 8, 2018; “Lifetime LearningOpportunities,” http://www.marriott.com, accessed February 8, 2018; Justin Hoffman, “Secrets of theRitz-Carlton’s ‘Legendary’ Customer Service,” https://www.psafinancial.com, May 8, 2014; Sandra J.Sucher and Stacy McManus, “The Ritz-Carlton Hotel Company,” Harvard Business School Case #601-163,March 2001; revised September 2005.


1. Describe the employee selection process.2. What are some of the ways that prospective employees are tested?



Exhibit 8.7 Here is the final assembly process on an Airbus 787-10 for Singapore Airlines. This plant is one of Airbus’s largest and mosttechnologically advanced manufacturing facilities. How is technology helping companies develop skilled workers both on and off the job? (Credit:airbus777/Flickr/ Attribution 2.0 Generic (CC BY 2.0))

On-the-Job TrainingNew-employee training is essential and usually begins with orientation, which entails getting the newemployee ready to perform on the job. Formal orientation (often a half-day classroom program) providesinformation about the company history, company values and expectations, policies, and the customers thecompany serves, as well as an overview of products and services. More important, however, is the specific joborientation by the new employee’s supervisor concerning work rules, equipment, and performanceexpectations. This second briefing tends to be more informal and may last for several days or even weeks.

Exhibit 8.8 Employee Training and Development Process (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)


Beyond employee orientation, job training takes place at the job site or workstation and is directly related tothe job. This training involves specific job instruction, coaching (guidance given to new employees byexperienced ones), special project assignments, or job rotation. Job rotation is the reassignment of workers toseveral different jobs over time. At Walmart, management trainees rotate through three or moremerchandizing departments, customer service, credit, and even the human resource department during thefirst year or two on the job.

Two other forms of on-the-job training are apprenticeship and mentoring. An apprenticeship usuallycombines specific on-the-job instruction with classroom training. It may last as long as four years and can befound in the skilled trades of carpentry, plumbing, and electrical work. Mentoring involves a senior manageror other experienced employee providing job- and career-related information to a mentee. Inexpensive andproviding instantaneous feedback, mentoring is becoming increasingly popular with many firms, includingFedEx, Merrill Lynch, Dow Chemical, and Bank of America. Whereas mentoring is typically conducted throughongoing face-to-face interactions between mentor and mentee, technology now allows for a long-distancementoring relationship. Dow Chemical uses e-mail and video conferencing to facilitate long-distancementoring between persons who are working in different countries. For a mentee whose second language isEnglish, writing e-mail messages in English helps the individual become fluent in English, which is arequirement of all Dow Chemical employees regardless of location and country of origin.8

E X P A N D I N G A R O U N D T H E G L O B E

Employees on the (International) Move

Working abroad at one of the thousands of American or foreign multinational firms can be exciting andlook good on your résumé. But is an international job assignment a step up the ladder to a morerewarding career path or a potential minefield of professional and family risk? The answer depends asmuch on an employee’s family situation as his or her ambition, as well as how well the companysupports and handles a transfer to an international location.

International job experience is increasingly seen as an essential leadership competency; therefore, manycompanies have developed robust rotational programs designed to give individuals critical globalexperience. According to the BGRS 2016 Global Mobility Trends Survey, providing high levels of service torelocating employees and their families is a fundamental expectation.

Brookfield Global Relocation Services (BGRS) is a talent mobility and relocation services firm thatmanages more than 60,000 relocations in 140 countries each year for its corporate and governmentclients. With 15 offices around the world, the company’s staff (that speaks 40 languages) can tap intotheir network of 1,900 trusted suppliers to help employees and families acclimate to their new work andhome environments.

Increasing numbers of recent college graduates and experienced professionals are offered opportunitiesfor overseas work assignments ranging from a few days to 24 months or longer. But acclimating to anew country and culture, as well as a new work environment, can be daunting and involves some uniquechallenges.

Challenges face expatriates aside from the demands of work include:



Off-the-Job TrainingEven with the advantages of on-the-job training, many firms recognize that it is often necessary to trainemployees away from the workplace. With off-the-job training, employees learn the job away from the job.There are numerous popular methods of off-the-job training. It frequently takes place in a classroom, wherecases, role-play exercises, films, videos, lectures, and computer demonstrations are used to develop workplaceskills.

• Choosing schools for children• Securing housing• Finding medical facilities• Opening bank accounts• Finding transportation and obtaining a driver’s license• Completing government forms• Locating food stores• Learning about community and entertainment offerings

With 189,000 worldwide staff and partners, KPMG International is one of the world’s largest professionalservices and accounting firms, with a presence in 152 countries. Through programs like the KPMG GlobalOpportunities (GO) program, the professionals at KPMG can explore job rotation assignments, transferto a new location, or change to a new job function or group. The company’s Career Mobility Connectiontool allows employees to evaluate opportunities based on their interests and to seek guidance from atransition advisor on potential career opportunities.

KPMG has developed several programs and standards to guide employees and establish consistency,whether they work in the United States or abroad. One of the most important is the KPMG Code ofConduct, which defines the values and standards by which KPMG conducts business and is intended tohelp guide actions and behaviors of its global workforce.

Every year, all KPMG employees and partners are required to affirm their agreement to comply with theCode of Conduct. In addition, all partners and employees are required to complete mandatory trainingthat reinforces the principles of the Code and further builds understanding of the firm’s expectations.

Critical Thinking Questions1. How is KPMG’s Global Code of Conduct intended to influence and guide the personal values and

behaviors of its employees and partners?2. Why must the Code of Conduct be affirmed by employees and partners every year? Why does KPMG

include their partners in this program?3. What are the top four or five job qualifications an employee should have to be considered for an

overseas assignment?

Sources: Corrine Purtill, “Expat Couples Do Best When They’ve Moved for the Woman’s Job,” Quartz atWork, December 6, 2017; https://work.qz.com/1134685/expat-couples-do-best-when-theyve-moved-for-the-womans-job/; Donald Murray, “The 7 Greatest Challenges of Moving Overseas and How to ResolveThem,” International Living, March 15, 2018, https://internationalliving.com/the-7-greatest-challenges-of-moving-overseas-and-how-to-resolve-them/; “KPMG’s Code of Conduct,” Accessed March 15, 2018,https://home.kpmg.com/us/en/home/about/kpmgs-code-of-conduct.html.


Web-based technology is increasingly being used along with more traditional off-the-job training methods. E-learning and e-training involve online computer presentation of information for learning new job tasks. UnionPacific Railroad has tens of thousands of its employees widely dispersed across much of the United States, so itdelivers training materials online to save time and travel costs. Technical and safety training at Union Pacificare made available as programmed instruction, an online, self-paced, and highly structured training methodthat presents trainees with concepts and problems using a modular format. Software provided can make surethat employees receive, undergo, and complete, as well as sign off on, various training modules.9

Web-based training can also be done using a simulation, for example, a scaled-down version of amanufacturing process or even a mock cockpit of a jet airplane. American Airlines uses a training simulator forpilots to practice hazardous flight maneuvers or learn the controls of a new aircraft in a safe, controlledenvironment with no passengers. The simulator allows for more direct transfer of learning to the job.

8.5 Performance Planning and Evaluation

5. How are performance appraisals used to evaluate employee performance?

Along with employee orientation and training, new employees learn about performance expectations throughperformance planning and evaluation. Managers provide employees with expectations about the job. Theseare communicated as job objectives, schedules, deadlines, and product and/or service quality requirements.As an employee performs job tasks, the supervisor periodically evaluates the employee’s efforts. Aperformance appraisal is a comparison of actual performance with expected performance to determine anemployee’s contributions to the organization and to make decisions about training, compensation, promotion,and other job changes. The performance planning and appraisal process is shown in Exhibit 8.9 and describedbelow.

1. The manager establishes performance standards.2. The employee works to meet the standards and expectations.3. The employee’s supervisor evaluates the employee’s work in terms of quality and quantity of output and

various characteristics such as job knowledge, initiative, relationships with others, and attendance andpunctuality.

4. Following the performance evaluation, reward (pay raise) and job change (promotion) decisions can bemade. If work is unsatisfactory, the employee may be put on a performance improvement plan, whichoutlines the behaviors or performance that must be improved, the milestones and time periods toimprove performance, and what will occur if performance is not improved.

5. Rewards are positive feedback and provide reinforcement, or encouragement, for the employee tocontinue improving their performance.

It was once common practice for performance approvals to be conducted on an annual basis, but mostcompanies have moved away from that standard. Instead, managers are encouraged to provide employees


1. Describe several types of on-the-job training.2. What are the advantages of simulation training?3. How is technology impacting off-the-job training?



with continuous real-time feedback so that skill development and job performance can be improved morerapidly.

Information for performance appraisals can be assembled using rating scales, supervisor logs of employee jobincidents, and reports of sales and production statistics. Regardless of the source, performance informationshould be accurate and a record of the employee’s job behavior and efforts. Table 8.3 illustrates a rating scalefor one aspect of a college recruiter’s job. A rating of “9” is considered outstanding job behavior andperformance; a rating of “1” is viewed as very poor to unacceptable.

Exhibit 8.9 Performance Planning and Evaluation

Example of Behavior-Based Rating Scale for Performance Appraisal

Position: College Recruiter

Job Description: Visits campuses and conducts interviews of graduating seniors

Explanation of Rating PerformanceRating

Explanation of Rating

This recruiter plans and organizes spring-semester college-recruiting schedule tominimize travel expenses and maximize thenumber of colleges visited and studentsinterviewed.

9

8 Even with tight travel schedulesbetween campuses, thisrecruiter completes eachcampus report before arrival atnext campus.

7 In making plans to visit a newcampus, this recruiter might nothave identified two or threefaculty

Table 8.3


Example of Behavior-Based Rating Scale for Performance Appraisal

Position: College Recruiter

Job Description: Visits campuses and conducts interviews of graduating seniors

Explanation of Rating PerformanceRating

Explanation of Rating

6 members for obtaining pre-visitinformation about degreeprograms.

This recruiter occasionally does not check withcollege placement office to request studentrésumés two days before arrival.

5

4 Sometimes this recruiter’s notesare incomplete concerning astudent’s response to interviewquestions.

3 This recruiter is often severalminutes late in startinginterviews.

This recruiter is frequently late in sendingthank-you letters to students interviewed.

2

1 This recruiter is always latecompleting campus-recruitingreports.

Table 8.3

8.6 Employee Compensation and Benefits

6. What are the types of compensation and methods for paying workers?

Compensation, which includes both pay and benefits, is closely connected to performance appraisals.Employees who perform better tend to get bigger pay raises. Several factors affect an employee’s pay:


1. What are the steps in the performance planning and appraisal process?2. What purposes do performance appraisals serve?3. Describe some sources of information for the performance appraisal.



1. Pay structure and internal influences. Wages, salaries, and benefits are based on skills, experience, and thelevel of the job. The most important high-level positions, such as president, chief information officer, andchief financial officer, are compensated at the highest rates. Likewise, different jobs of equal importanceto the firm are compensated at similar rates. As the level of management responsibility increases, so doespay. For instance, if a drill-press operator and a lathe operator are considered of equal importance, theymay both be paid $21 per hour.

2. Pay level and external influences. In deciding how much to pay workers, the firm must also be concernedwith the salaries paid by competitors. If competitors are paying higher wages, a firm may lose its bestemployees. HR professionals regularly evaluate salaries by geography, job position, and competitor andmarket wages. Wage and salary surveys conducted by the U.S. Chamber of Commerce and the U.S.Department of Labor can also be useful. There are also several websites such as Glassdoor that postsalaries for jobs by company.

An employer can decide to pay at, above, or below the going rate. Most firms try to offer competitive wagesand salaries within a geographic area or an industry. If a company pays below-market wages, it may not beable to hire skilled people. The level of a firm’s compensation is determined by the firm’s financial condition(or profitability), efficiency, and employee productivity, as well as the going rates paid by competitors. Forexample, MillerCoors Brewing Co. is considered a high-paying firm ($29–$33 per hour for productionemployees).10

Types of Compensation or PayThere are two basic types of compensation: direct and indirect. Direct pay is the wage or salary received by theemployee; indirect pay consists of various employee benefits and services. Employees are usually paid directlyon the basis of the amount of time they work, the amount they produce, the type of work performed, or somecombination of skill, time, and output. An hourly rate of pay or a monthly salary is considered base pay, or anamount of pay received by the employee regardless of output level. In many jobs, such as sales andmanufacturing, an employee can earn additional pay as a result of a commission or an incentive payarrangement. The accelerated commission schedule for a salesperson shown below indicates that as salesincrease the incentive becomes increasingly more attractive and rewarding; therefore, pay can function as apowerful motivator. In this example, a salesperson receives a base monthly salary of $1,000, then earns 3percent on the first $50,000 of product sold, 4 percent on the next $30,000, and 5 percent on any sales beyond$80,000.

Base pay $1,000 per month

3% of 50,000 1,500

4% of 30,000 1,200

5% of 20,000 1,000

$4,700

Two other incentive pay arrangements are bonuses and profit-sharing. Employees may be paid bonuses forreaching certain monthly or annual performance goals or achieving a specific cost-saving objective. In this


instance, employees are rewarded based on achieving certain goals.

In a profit-sharing plan, employees may receive some portion of the firm’s profit. Employee profit shares areusually based on annual company financial performance and therefore are paid once a year. With either abonus or a profit share, an important incentive pay consideration is whether the bonus or profit share is thesame for all employees or whether it is differentiated by level in the organization, base pay, or some othercriterion. Choice Homes, a large-scale builder of starter homes, pays an annual incentive share that is thesame for everyone; the president receives the same profit share or bonus as the lowest-paid employee.

Indirect pay includes pensions, health insurance, vacation time, and many others. Some forms of indirect payare required by law: unemployment compensation, worker’s compensation, and Social Security, which are allpaid in part by employers. Unemployment compensation provides former employees with money for acertain period while they are unemployed. To be eligible, the employee must have worked a minimum numberof weeks, be without a job, and be willing to accept a suitable position offered by the state UnemploymentCompensation Commission. Some state laws permit payments to strikers. Worker’s compensation paysemployees for lost work time caused by work-related injuries and may also cover rehabilitation after a seriousinjury. Social Security is mainly a government pension plan, but it also provides disability and survivor benefitsand benefits for people undergoing kidney dialysis and transplants. Medicare (health care for seniors) andMedicaid (health care for the poor) are also part of Social Security.

Many employers also offer benefits not required by law. Among these are paid time off (vacations, holidays,sick days, even pay for jury duty), health insurance (including dental and vision), supplemental benefits(disability, life, pet insurance, legal benefits), 401K contributions, pensions and retirement savings accounts,and stock purchase options.

Some firms with numerous benefits allow employees to mix and match benefit items or select items based onindividual needs. A younger employee with a family may desire to purchase medical, disability, and lifeinsurance, whereas an older employee may want to put more benefit dollars into a retirement savings plan.Pay and benefits are obviously important elements of human resource management and are frequentlystudied as aspects of employee job satisfaction. Pay can be perceived as very satisfactory, or it can be a pointof job dissatisfaction. In a study of job satisfaction conducted by SAP, direct compensation was the mostimportant element of job satisfaction by employees from various companies.11 As the cost of health insuranceand other benefits has risen sharply over the past few years, benefits have become increasingly important toworkers.

C A T C H I N G T H E E N T R E P R E N E U R I A L S P I R I T

Starbucks Perks More Than Coffee

At Starbucks, CEO Howard Schultz understood that the single most important aspect of creating anenduring brand is its people. Schultz wanted to set Starbucks apart from other coffee shops and servicebusinesses, and he did this by offering health benefits and stock ownership for people who work part-time. It had never been done before, and it came with a cost.

In addition to employee benefits, funding to build the brand was funneled into operations to create anexperience that would enable the brand to endure and be sold profitably for many years to come. So



instead of expensive marketing and advertising campaigns, the company focused on experientialmarketing.

Scott Bedbury, the president of marketing of Starbucks at the time, explains. “The stores were once fourwhite walls. There was no comfortable furniture or fireplaces or music. So we set out to create anexperience in the stores and a level of brand equity that most traditionally marketed brands couldn’ttouch. That meant constant creative development of products, and the look and feel in the stores. Itwasn’t cheap. The first year, we spent $100 million building out stores, which is a significant marketingbudget for anyone.”

But the defining moment for the brand was the stock option and employee benefit plan. This laid thefoundation for the company’s internal brand, and was Schultz’s mission from the very beginning,explains Bedbury. “When Howard took over the company, he was not a rich man and he didn’t own ahouse or even a car. Howard grew up poor in Brooklyn and was influenced strongly by his dad, whonever got health benefits from any of his employers. This fueled Howard’s drive to create a company thatput employees first. He is passionate that when it comes to customers versus employees, employees willalways come first.”

But it wasn’t easy, and it took a lot of courage to present this idea to investors. Bedbury said, “WhenHoward tried to raise $2.8 million to buy the company from the three founders, he made 220presentations and he got shut down in all but 12 of them. He was seen as an idealist who was going toput an unnecessary burden on the bottom line by offering benefits to part-time employees who viewedthis as a temporary job. But Howard convinced them that turnover would drop, which it did. Storemanager attrition was 15 percent, part-time hourly employees was 65 percent, compared to McDonaldsand Taco Bell, which were about 200–300 percent a year. That’s turning over your work force every fourmonths, and when you do that, your service suffers and there are all kinds of problems. I don’t know whymore people don’t do it. If you give up some equity to employees, they’ll reward you for that.”

Critical Thinking Questions1. How can a company like Starbucks sustain its strong employee culture while continuing to grow

rapidly?2. Can a firm give its employees too much in terms of benefits and services? Explain.

Sources: Blog, MarketSmarter, http://www.marketsmarter.com/blog, accessed March 12, 2018; CarmineGallo, “How Starbucks CEO Howard Schultz Inspired Us to Dream Bigger,” Forbes,https://www.forbes.com, December 2, 2016; Tanza Loudenback, “The Story Behind the Rise of Starbucks’Howard Shultz, Who Just Gave a Raise to Every US Employee of His $82 Billion Coffee Company,” BusinessInsider, http://www.businessinsider.com, July 11, 2016; Monique Reece, Real-Time Marketing for BusinessGrowth (Upper Saddle River, NJ: FT Press/Pearson, 2010).


1. How does a firm establish a pay scale for its employees?2. What is the difference between direct and indirect pay?


8.7 The Labor Relations Process

7. What is a labor union and how is it organized, what is collective bargaining, and what are some of the keynegotiation issues?

Tens of thousands of American firms are unionized, and millions of U.S. workers belong to unions. Historically,the mining, manufacturing, construction, and transportation industries have been significantly unionized, butin recent years, service-based firms, including health care organizations, have been unionized.

A labor union, such as the International Brotherhood of Teamsters, is an organization that represents workersin dealing with management over disputes involving wages, hours, and working conditions. The labor relationsprocess that produces a union-management relationship consists of three phases: union organizing,negotiating a labor agreement, and administering the agreement. In phase one, a group of employees withina firm may form a union on their own, or an established union (United Auto Workers, for example) may targetan employer and organize many of the firm’s workers into a local labor union. The second phase constitutescollective bargaining, which is the process of negotiating a labor agreement that provides for compensationand working arrangements mutually acceptable to the union and to management. Finally, the third phase ofthe labor relations process involves the daily administering of the labor agreement. This is done primarilythrough handling worker grievances and other workforce management problems that require interactionbetween managers and labor union officials.

The Modern Labor MovementThe basic structure of the modern labor movement consists of three parts: local unions, national andinternational unions, and union federations. There are approximately 60,000 local unions, 75 national andinternational unions, and two federations. Union membership has been declining over the past three decadesand is now half what it once was. The number of employed union members has declined by 2.9 million since1983, the first year union statistics were reported. In 1983, union membership was 20.1 percent of workers,with 17.7 million union workers. In 2017, membership declined to 10.7 percent of workers, with 14.8 millionmembers.12

A local union is a branch or unit of a national union that represents workers at a specific plant or over aspecific geographic area. Local 276 of the United Auto Workers represents assembly employees at the GeneralMotors plant in Arlington, Texas. A local union (in conformance with its national union rules) determines thenumber of local union officers, procedures for electing officers, the schedule of local meetings, financialarrangements with the national organization, and the local’s role in negotiating labor agreements.

The three main functions of the local union are collective bargaining, worker relations and membershipservices, and community and political activities. Collective bargaining takes place every three or four years.Local union officers and shop stewards in the plant oversee labor relations on a day-to-day basis. A shopsteward is an elected union official who represents union members to management when workers havecomplaints. For most union members, his or her primary contact with the union is through union officials at

3. Why are health insurance and benefits so important to employees?



the local level.

A national union can range in size from a few thousand members (Screen Actors Guild) to more than a millionmembers (Teamsters). A national union may have a few to as many as several hundred local unions. Thenumber of national unions has steadily declined since the early twentieth century. Much of this decline hasresulted from union mergers. In 1999, for example, the United Papermakers International Union (UPICU) andthe Oil, Chemical and Atomic Workers Union (OCAW) agreed to merge under the new name of PACE, or Paper,Allied-Industrial, Chemical and Energy International Union. PACE has about 245,000 members.

For 50 years, one union federation (the American Federation of Labor-Congress of Industrial Organization, orAFL-CIO) dominated the American labor movement. A federation is a collection of unions banded together tofurther organizing, public relations, political, and other mutually-agreed-upon purposes of the memberunions. In the summer of 2005, several unions (Teamsters, Service Employees International Union, Laborers’International Union, United Farm Workers, Carpenters and Joiners, Unite Here, and the United Food andCommercial Workers Union) split from the AFL-CIO and formed a new federation named the Change to WinCoalition.13 The new federation and its member unions represent more than 5.5 million union members.Change to Win Coalition member unions left the AFL-CIO over leadership disagreements and ineffectiveorganizing strategies of the AFL-CIO; one of its primary goals is to strengthen union-organizing drives andreverse the decline in union membership.14

Union OrganizingA nonunion employer becomes unionized through an organizing campaign. The campaign is started eitherfrom within, by unhappy employees, or from outside, by a union that has picked the employer for anorganizing drive. Once workers and the union have made contact, a union organizer tries to convince all theworkers to sign authorization cards. These cards prove the worker’s interest in having the union representthem. In most cases, employers resist this card-signing campaign by speaking out against unions in letters,posters, and employee assemblies. However, it is illegal for employers to interfere directly with the card-signing campaign or to coerce employees into not joining the union.

Once the union gets signed authorization cards from at least 30 percent of the employees, it can ask NationalLabor Relations Board (NLRB) for a union certification election. This election, by secret ballot, determineswhether the workers want to be represented by the union. The NLRB posts an election notice and defines thebargaining unit—employees who are eligible to vote and who will be represented by the particular union if it iscertified. Supervisors and managers cannot vote. The union and the employer then engage in a pre-electioncampaign conducted through speeches, memos, and meetings. Both try to convince workers to vote in theirfavor. Table 8.4 lists benefits usually emphasized by the union during a campaign and common argumentsemployers make to convince employees a union is unnecessary.

The election itself is conducted by the NLRB. If a majority vote for the union, the NLRB certifies the union asthe exclusive bargaining agent for all employees who had been designated as eligible voters. The employerthen has to bargain with the union over wages, hours, and other terms of employment. The completeorganizing process is summarized in Exhibit 8.10.

In some situations, after one year, if the union and employer don’t reach an agreement, the workers petitionfor a decertification election, which is similar to the certification election but allows workers to vote out theunion. Decertification elections are also held when workers become dissatisfied with a union that hasrepresented them for a longer time. In recent years, the number of decertification elections has increased to


several hundred per year.

Benefits Stressed by Unions in Organizing Campaigns and Common Arguments AgainstUnions

Almost Always Stressed Often Stressed Seldom Stressed

Grievance procedures More influence in decision-making Higher-quality products

Job security Better working conditions Technical training

Improved benefits Lobbying opportunities More job satisfaction

Higher pay Increased production

Employer Arguments Against Unionization:• An employee can always come directly to management with a problem; a third party (the

union) isn’t necessary.• As a union member, you will pay monthly union dues of $15 to $40.• Merit-based decisions (promotions) are better than seniority-based decisions.• Pay and benefits are very similar to the leading firms in the industry.• We meet all health and safety standards of the Federal Occupational Safety and Health

Administration.• Performance and productivity are more important than union representation in determining

pay raises.

Table 8.4



Exhibit 8.10 Union Organizing Process and Election (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Negotiating Union Contracts through Collective BargainingA labor agreement, or union contract, is created through collective bargaining. Typically, both management andunion negotiation teams are made up of a few people. One person on each side is the chief spokesperson.Bargaining begins with union and management negotiators setting a list of contract issues that will bediscussed. Much of the bargaining over specific details takes place through face-to-face meetings and theexchange of written proposals. Demands, proposals, and counterproposals are exchanged during severalrounds of bargaining. The resulting contract must be approved by top management and ratified by the unionmembers. Once both sides approve, the contract is a legally binding agreement that typically covers such


issues as union security, management rights, wages, benefits, and job security. The collective bargainingprocess is shown in Exhibit 8.11. We will now explore some of the bargaining issues.

Exhibit 8.11 The Process of Negotiating Labor Agreements (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Union SecurityA union wants all employees to be union members. This can be accomplished by negotiating a union securityclause. The most common union security arrangement is the union shop, whereby nonunion workers can behired by the firm, but then they must join the union, normally within 30 to 60 days. An agency shop does notrequire employees to join the union, but to remain employees, workers must pay the union a fee (known asthe agency fee) to cover the union’s expenses in representing them. The union must fairly represent allworkers, including those in the bargaining unit who do not become members.

Under the Taft-Hartley Act of 1947, a state can make any and all forms of union security illegal by enacting aright-to-work law. In the 28 states that have these laws, employees can work at a unionized company withouthaving to join the union. This arrangement is commonly known as an open shop. Workers don’t have to jointhe union or pay dues or fees to the union.



Management RightsWhen a company becomes unionized, management loses some of its decision-making abilities. Butmanagement still has certain rights that can be negotiated in collective bargaining. One way to resist unioninvolvement in management matters is to put a management rights clause in the labor agreement. Mostunion contracts have one. A typical clause gives the employer all rights to manage the business except asspecified in the contract. For instance, if the contract does not specify the criteria for promotions, with amanagement rights clause, managers will have the right to use any criteria they wish. Another way to preservemanagement rights is to list areas that are not subject to collective bargaining. This list might securemanagement’s right to schedule work hours; hire and fire workers; set production standards; determine thenumber of supervisors in each department; and promote, demote, and transfer workers.

Wage and BenefitsMuch bargaining effort focuses on wage adjustments and changes in benefits. Once agreed to, they remain ineffect for the length of the contract. For example, in 2015, the United Auto Workers negotiated a four-yearcontract containing modest hourly wage increases with U.S. car manufacturers; pay hikes were about 3percent for first and third years and 4 percent in year four.15 Hourly rates of pay can also increase under someagreements when the cost of living increases above a certain level each year, say 4 percent. No cost-of-livingadjustment is made when annual living cost increases are under 4 percent, which has been the case for theearly years of the twenty-first century.

In addition to requests for wage increases, unions usually want better benefits. In some industries, such assteel and auto manufacturing, benefits are 40 percent of the total cost of compensation. Benefits may includehigher wages for overtime work, holiday work, and less desirable shifts; insurance programs (life, health andhospitalization, dental care); payment for certain nonwork time (rest periods, vacations, holiday, sick time);pensions; and income-maintenance plans. Supplementary unemployment benefits (income-maintenance)found in the auto industry are provided by the employer and are in addition to state unemploymentcompensation given to laid-off workers. The unemployment compensation from the state and supplementaryunemployment pay from the employer together maintain as much as 80 percent of an employee’s normal pay.

Job Security and SeniorityWage adjustments, cost-of-living increases, supplementary unemployment pay, and certain other benefits giveemployees under union contracts some financial security. But most financial security is directly related to jobsecurity—the assurance, to some degree, that workers will keep their jobs. Of course, job security dependsprimarily on the continued success and financial well-being of the company. For example, thousands of airlineemployees lost their jobs after the 9/11 terrorist attack in 2001; these were employees with the least seniority.

Seniority, the length of an employee’s continuous service with a firm, is discussed in about 90 percent of alllabor contracts. Seniority is a factor in job security; usually, unions want the workers with the most seniority tohave the most job security.


8.8 Managing Grievances and Conflicts

8. How are grievances between management and labor resolved, and what tactics are used to force acontract settlement?

In a unionized work environment, employees follow a step-by-step process for handling grievances or disputesbetween management and labor. Conflicts over contracts, however, are far more challenging to resolve andmay result in the union or employer imposing economic pressure, as described in this section.

Grievance Handling and ArbitrationThe union’s main way of policing the contract is the grievance procedure. A grievance is a formal complaint byan employee or the union that management has violated some part of the contract. Under a typical contract,the employee starts by presenting the grievance to the supervisor, either in person or in writing. The typicalgrievance procedure is illustrated in Exhibit 8.13. An example grievance is a situation in which an employee isdisciplined with a one-day suspension (and loss of pay) for being late for work several times in one month.


1. Discuss the modern labor movement.2. What are the various topics that may be covered during collective bargaining?3. Explain the differences among a union shop, agency shop, and an open shop.



Exhibit 8.12 Ezekiel Elliott is a star running back for the Dallas Cowboys who was suspended by NFL commissioner Roger Goodell for sixgames in the 2017 season. The controversial NFL running back, with the support of the NFL Players Association (NFLPA), appealed the decisionseveral times and was able to delay the suspension, but eventually lost a highly publicized case in federal court. U.S. District Judge KatherinePolk Failla ruled that the NFL’s decision to suspend Elliott did not violate the labor agreement. What options did Elliott and the NFLPA have afterlosing this court case? (Credit: grantlairdjr/ flickr/ Attribution 2.0 Generic (CC BY 2.0))

If the problem isn’t solved, the grievance is put in writing. The employee, one or more union officials, thesupervisor, and perhaps the plant manager then discuss the grievance. If the matter still can’t be resolved,another meeting takes place with higher-level representatives of both parties present. If top management andthe local union president can’t resolve the grievance, it goes to arbitration.

Arbitration is the process of settling a labor-management dispute by having a third party—a single arbitratoror a panel—make a decision. The decision is final and binding on the union and employer. The arbitratorreviews the grievance at a hearing and then makes the decision, which is presented in a document called theaward. In the one-day suspension mentioned above, the arbitrator might rule that the discipline wasimproperly made because the employee’s attendance record for the month was not accurately maintained bythe firm.


Exhibit 8.13 Typical Grievance Procedure (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)

Tactics for Pressuring a Contract SettlementVirtually all labor agreements specify peaceful resolution of conflicts, usually through arbitration. However,when a contract expires and a new agreement has not been reached, the union is free to strike or engage inother efforts to exert economic pressure on the employer. A strike occurs when employees refuse to work. TheUnited Auto Workers union used a selective strike strategy, a strategy of conducting a strike at a criticalplant that supplies parts to other plants, against General Motors. The union conducted its strike at a stampingand parts facility in Flint, Michigan, that supplied critical parts to other plants. The 54-day strike caused thecompany to stop production at many of its assembly plants because parts were not available from the Flintplant. General Motors lost approximately $2.2 billion during that dispute. Likewise, the employer can putpressure on the union through a lockout or by hiring strike replacements if the union has called a strike. Forexample, in 2018 aluminum producer Alcoa locked out more than 1,000 union workers from its smelter facility



in Quebec, Canada, after union members went on strike.16 Table 8.5 provides a summary of union andemployer pressure strategies for forcing a contract settlement.

Strategies of Unions and Employers

UnionStrategies

EmployerStrategies

Strike: Employees refuse to work. Lockout: Employer refuses to letemployees enter plant to work.

Boycott: Employees try to keepcustomers and others fromdoing business withemployer.

Strikereplacements:

Employer uses nonunionemployees to do jobs ofstriking union employees.

Picketing: Employees march nearentrance of firm to publicizetheir view of dispute anddiscourage customers.

Mutual-aidpact:

Employer receives money fromother companies in industry tocover some of income lostbecause of strikes.

Corporatecampaign:

Union disrupts stockholdermeetings or buys companystock to have more influenceover management.

Shiftproduction:

Employer moves production tononunion plant or out ofcountry.

Table 8.5

8.9 Legal Environment of Human Resources and Labor Relations

9. What are the key laws and federal agencies affecting human resource management and labor relations?

Federal laws help ensure that job applicants and employees are treated fairly and not discriminated against.Hiring, training, and job placement must be unbiased. Promotion and compensation decisions must be basedon performance. These laws help all Americans who have talent, training, and the desire to get ahead. The keylaws that currently impact human resource management and labor relations are listed in Table 8.6.

Several laws govern wages, pensions, and unemployment compensation. For instance, the Fair LaborStandards Act sets the federal minimum wage, which is periodically raised by Congress. Many minimum-wage


1. Describe the grievance procedure.2. In what ways do arbitrators act like judges?3. What are some tactics for pressuring for a contract settlement?


jobs are found in service firms, such as fast-food chains and retail stores. The Pension Reform Act protects theretirement income of employees and retirees. Federal tax laws also affect compensation, including employeeprofit-sharing and stock purchase plans. When John F. Kennedy signed the Equal Pay Act into law in 1963, thegoal was to stop the practice of paying women lower wages for the same job based on their gender. At thetime, women with full-time jobs earned between 59 and 64 cents for every dollar their male counterpartsearned in the same jobs. Although this law has been in place for several decades, progress has been slow. OnApril 17, 2012, President Barack Obama proclaimed National Equal Pay Day, noting that women who work fulltime earn only 77 cents for every dollar their male counterparts make. In 2016, the wage gap changed slightly,with women making 80.5 percent of what men earn.17

Laws Impacting Human Resource Management

Law Purpose Agency of Enforcement

Social Security Act (1935) Provides for retirement incomeand old-age health care

Social Security Administration

Wagner Act (1935) Gives workers the right tounionize and prohibitsemployer unfair labor practices

National Labor Relations Board

Fair Labor Standards Act(1938)

Sets minimum wage, restrictschild labor, sets overtime pay

Wage and Hour Division,Department of Labor

Taft-Hartley Act (1947) Obligates the union to bargainin good faith and prohibitsunion unfair labor practices

Federal Mediation andConciliation Service

Equal Pay Act (1963) Eliminates pay differentialsbased on gender

Equal EmploymentOpportunity Commission

Civil Rights Act (1964), TitleVII

Prohibits employmentdiscrimination based on race,color, religion, gender, ornational origin


Age Discrimination Act(1967)

Prohibits age discriminationagainst those over 40 years ofage


Occupational Safety andHealth Act (1970)

Protects worker health andsafety, provides for hazard-freeworkplace

Occupational Safety andHealth Administration

Vietnam Veterans’Readjustment Act (1974)

Requires affirmativeemployment of Vietnam Warveterans

Veterans Employment Service,Department of Labor

Table 8.6



Laws Impacting Human Resource Management

Law Purpose Agency of Enforcement

Employee RetirementIncome Security Act(1974)—also called PensionReform Act

Establishes minimumrequirements for privatepension plans

Internal Revenue Service,Department of Labor, andPension Benefit GuarantyCorporation

Pregnancy DiscriminationAct (1978)

Treats pregnancy as a disability,prevents employmentdiscrimination based onpregnancy


Immigration Reform andControl Act (1986)

Verifies employment eligibility,prevents employment of illegalaliens

Employment VerificationSystems, Immigration andNaturalization Service

Americans with DisabilitiesAct (1990)

Prohibits employmentdiscrimination based on mentalor physical disabilities

Department of Labor

Family and Medical LeaveAct (1993)

Requires employers to provideunpaid leave for childbirth,adoption, or illness


Table 8.6

Employers must also be aware of changes to laws concerning employee safety, health, and privacy. TheOccupational Safety and Health Act (OSH Act) requires employers to provide a workplace free of health andsafety hazards. For instance, manufacturers must require their employees working on loading docks to wearsteel-toed shoes so their feet won’t be injured if materials are dropped. Drug and AIDS testing are alsogoverned by federal laws.

Another employee law that continues to affect the workplace is the Americans with Disabilities Act. To beconsidered disabled, a person must have a physical or mental impairment that greatly limits one or moremajor life activities. More than 40 million Americans, 12.6 percent of the population, were disabled in 2015,according to the U.S. Census Bureau.18 Employers may not discriminate against disabled persons. They mustmake “reasonable accommodations” so that qualified employees can perform the job, unless doing so wouldcause “undue hardship” for the business. Altering work schedules, modifying equipment so a wheelchair-bound person can use it, and making buildings accessible by ramps and elevators are considered reasonable.Two companies often praised for their efforts to hire the disabled are McDonald’s and DuPont.

The Family and Medical Leave Act went into effect in 1993. The law guarantees continuation of paid healthbenefits, plus a return to the same or equivalent job, and applies to employers with 50 or more employees. Itrequires these employers to provide unpaid leave of up to 12 weeks during any 12-month period to workerswho have been employed for at least a year and worked at least 1,250 hours during the past year. The reasonsfor the leave include the birth or adoption of a child; the serious illness of a child, spouse, or parent; or aserious illness that prevents the worker from doing the job.


According to the Bureau of Labor Statistics, only 11 percent of all private industry workers have access to paidfamily leave. Low-wage earners fare even worse. Only 5 percent of low-wage earners get any paid maternityleave, and nearly half will not take time off because they cannot afford to go without income. The UnitedStates continues to be one of only four countries in the world (along with Liberia, Suriname, and Papua NewGuinea) that do not guarantee paid parental leave.19

The Wagner and Taft-Hartley Acts govern the relationship between an employer and union. Employees havethe right to unionize and bargain collectively with the company. The employer must deal with the union fairly,bargain in good faith, and not discriminate against an employee who belongs to the union. The union mustalso represent all employees covered by a labor agreement fairly and deal with the employer in good faith.

Several federal agencies oversee employment, safety, compensation, and related areas. The OccupationalSafety and Health Administration (OSHA) sets workplace safety and health standards, provides safetytraining, and inspects places of work (assembly plants, construction sites, and warehouse facilities, forexample) to determine employer compliance with safety regulations.

Exhibit 8.14 For some occupations, danger is part of the job description. Tallies of work-related casualties routinely identify miners, loggers,pilots, commercial fishermen, and steel workers as holding the most deadly jobs. Job fatalities are often linked to the use of heavy or outdatedequipment. However, many work-related deaths also happen in common highway accidents or as homicides. Pictured here are miners at theCoal Miner’s Memorial and Pennsylvania Welcome Center. What laws and agencies are designated to improve occupational safety? (Credit: MikeSteele/ Flickr/ Attribution 2.0 Generic (CC BY 2.0))

The Wage and Hour division of the Department of Labor enforces the federal minimum-wage law andovertime provisions of the Fair Labor Standards Act. Employers covered by this law must pay certainemployees a premium rate of pay (or time and one-half) for all hours worked beyond 40 in one week.

The Equal Employment Opportunity Commission (EEOC) was created by the 1964 Civil Rights Act. It is one ofthe most influential agencies responsible for enforcing employment laws. The EEOC has three basic functions:processing discrimination complaints, issuing written regulations, and gathering and disseminatinginformation. An employment discrimination complaint can be filed by an individual or a group of employees



who work for a company. The group may comprise a protected class, such as women, African Americans, orHispanic Americans. The protected group may pursue a class-action complaint that may eventually become alawsuit. As a measure to prevent employment discrimination, many employers set up affirmative actionprograms to expand job opportunities for women and minorities

Even with affirmative action and other company efforts to follow the law, each year the EEOC receives tens ofthousands of complaints from current or former employees. The monetary benefits that the EEOC wins foremployees has grown substantially during the past 10 years. Large monetary settlements often occur whenthe EEOC files a class-action suit against an employer. For example, the Ford Motor Company settled sexualand racial harassment claims by more than 30 women for more than $10 million at two Chicago-areamanufacturing plants in 2017.20 Also, Sears, Motorola, and AT&T have had to make large back-pay awards andto offer special training to minority employees after the court found they had been discriminated against.

The NLRB was established to enforce the Wagner Act. Its five members are appointed by the president; theagency’s main office is in Washington, DC, and regional and field offices are scattered throughout the UnitedStates. NLRB field agents investigate charges of employer and union wrongdoing (or unfair labor practices)and supervise elections held to decide union representation. Judges conduct hearings to determine whetheremployers and unions have violated the law.

The Federal Mediation and Conciliation Service helps unions and employers negotiate labor agreements.Agency specialists, who serve as impartial third parties between the union and company, use two processes:conciliation and mediation, both of which require expert communication and persuasion. In conciliation, thespecialist assists management and the union with focusing on the issues in dispute and acts as a go-between,or communication channel through which the union and employer send messages to and share informationwith each other. The specialist takes a stronger role in mediation by suggesting compromises to the disputingorganizations.

8.10 Trends in Human Resource Management and Labor Relations

10. What trends and issues are affecting human resource management and labor relations?

Some of today’s most important trends in human resource management are using employee diversity as acompetitive advantage, improving efficiency through outsourcing and technology, and hiring employees whofit the organizational culture. Although overall labor union enrollment continues to decline, a possible surge inmembership in service unions is anticipated.

Employee Diversity and Competitive AdvantageAmerican society and its workforce are becoming increasingly more diverse in terms of racial and ethnicstatus, age, educational background, work experience, and gender. A company with a demographic employee


1. Discuss the laws that govern wages, pensions, and employee compensation.2. Describe the Americans with Disabilities Act.3. How do the Wagner and Taft-Hartley Acts impact labor-management relations?


profile that looks like its customers may be in a position to gain a competitive advantage, which is a set ofunique features of a company and its product or service that are perceived by the target market as superior tothose of the competition. Competitive advantage is the factor that causes customers to patronize a firm andnot the competition. Many things can be a source of competitive advantage: for Southwest Airlines it is routestructure and high asset utilization; for Ritz-Carlton hotels it is very high-quality guest services; for Toyota it ismanufacturing efficiency and product durability; and for Starbucks it is location, service, and outstandingcoffee products. For these firms, a competitive advantage is also created by their HR practices. Many firms aresuccessful because of employee diversity, which can produce more effective problem-solving, a strongerreputation for hiring women and minorities, greater employee diversity, quicker adaptation to change, andmore robust product solutions because a diverse team can generate more options for improvement.21

In order for an organization to use employee diversity for competitive advantage, top management must befully committed to hiring and developing women and minority individuals. An organization that highly valuesemployee diversity is the United States Postal Service (USPS). In 1992 the Postal Service launched a diversitydevelopment program to serve as the organization’s “social conscience and to increase employees’ awarenessof and appreciation for ethnic and cultural diversity both in the postal workplace and among customers.”Twenty-five years later, 39 percent of postal service employees are minority persons: 21 percent African-American, 8 percent Hispanic, and more than 8.0 percent other minorities. In addition, women make up 40percent of the organization’s workforce.22

Outsourcing HR and TechnologyThe role of the HR professional has changed noticeably over the past 20 years. One significant change hasbeen the use of technology in handling relatively routine HR tasks, such as payroll processing, initial screeningof applicants, and benefits enrollments. Large firms such as Nokia and Lockheed Martin purchase specializedsoftware (SAP and Oracle/PeopleSoft) to perform the information-processing aspects of many HR tasks. Otherfirms, such as Jacobs Engineering Group (a large professional services firm), outsource—or contractout—these tasks to HR service providers such as Aon Hewitt and Workforce Solutions.

HR outsourcing is done when another firm can perform a task better and more efficiently, thus saving costs.Sometimes HR activities are outsourced because HR requirements are extraordinary and too overwhelming toexecute in-house in a timely fashion. Frequently, HR activities are outsourced simply because a provider hasgreater expertise. For example, media conglomerate CBS Corp. recently announced that it hired FidelityInvestments to manage its 401(k) plan, which has more than $4 billion in assets.23

Organizational Culture and Hiring for FitRegardless of general business and economic conditions, many firms are expanding operations and hiringadditional employees. For many growing firms, corporate culture can be a key aspect of developing employeesinto a competitive advantage for the firm. Corporate culture refers to the core values and beliefs that supportthe mission and business model of the firm and guide employee behavior. Companies such as JetBlue, Ritz-Carlton, and Cypress frequently hire for fit with their corporate cultures. This necessitates recruitment andselection of employees who exhibit the values of the firm. Ritz-Carlton and Cypress use carefully craftedapplicant questionnaires to screen for values and behaviors that support the corporate culture. JetBlue usesbehavioral-based interview questions derived from its corporate values of safety, integrity, caring, fun, andpassion. Southwest Airlines has non-HR employees (flight attendants, gate agents, and pilots) and even



frequent flyer passengers interview applicants to screen for cultural fit as well as strong customer-serviceorientation.

In addition to cultural fit, firms are increasingly hiring for technical knowledge and skills fit to the job. Techcompanies such as IBM, Amazon, and Microsoft receive thousands of résumés and job applications each yearand continue to look for the best and the brightest when it comes to technical knowledge and skills. Forexample, IBM is now focusing on a skills-based approach rather than a candidate’s education level andnumber of academic degrees. Amazon is all about the customer and looks for employees who continue to be“relentlessly curious.” Microsoft continues to raise the talent bar by embracing job applicants who havedemonstrated leadership, achieved concrete results, and can prove that they love to learn.24

More Service Workers Joining Labor UnionsOrganized labor has faced tumultuous times during the last several decades due to declining unionmembership, loss of factory jobs, dwindling political clout, and the shifting of jobs outside the United States.With union membership now down to a little more than 10 percent of the U.S. workforce, some wonder if laborunions, who organize as a united front against poor working conditions, still have a place in the country. MaryKay Henry, international president of Service Employees International Union (SEIU), is optimistic that unionsare capable of resurgence by organizing the growing number of service workers into labor unions. The SEIU isthe fastest-growing union in the nation, having jumped to 2 million members from 1.1 million a decade ago.25

Henry’s goal is to focus on recruiting the country’s millions of low-wage service workers, positions that areprimarily filled by the working poor. These workers are disproportionately women, immigrants, and membersof minority groups, which have all been traditionally more open to unionization. If these workers aresuccessfully recruited into the SEIU, Henry believes that their wages and benefits would increase in much thesame way unions brought factory workers into the middle class in the 1930s.

The SEIU believes that the service industry provides a target of opportunity, with the largest expectedemployment growth through 2026 in low-paid local services:

Job Projected Growth26

Home health aides 47%

Personal care aides 39%

Food preparation 17%

Janitorial 10%

Many believe that the future of labor lies primarily in the success of recruitment efforts and in enrolling themassive numbers of employees who are in fast-growing, low-wage service jobs. For example, the SEIU wassuccessful recently in unionizing hundreds of workers who provide services to people with disabilities inCalifornia, with an eye toward raising standards for their work and increasing hourly wages and benefits.Reversing labor’s decline will be challenging, but the SEIU looks positively toward the future.27



1. How can employee diversity give a company a competitive advantage?2. Explain the concept of hiring for fit.3. Why does the service industry provide an opportunity for labor union growth?



affirmative action programs

agency shopapprenticeship

arbitrationcollective bargainingcompetitive advantage

conciliation

contingent workerEqual Employment Opportunity Commission (EEOC)

federationgrievancehuman resource (HR) management

human resource planningincentive payjob analysisjob descriptionjob fair

job rotation

job specificationlabor unionlocal unionmanagement rights clause

mediation

mentoring

Occupational Safety and Health Administration (OSHA)

open shoporientationperformance appraisal

programmed instructionprotected classes

Key Terms

Programs established by organizations to expand job opportunities forwomen and minorities.

Workers don’t have to join a union but must pay union dues.A form of on-the-job training that combines specific job instruction with classroom

instruction.Settling labor-management disputes through a third party. The decision is final and binding.

Negotiating a labor agreement.A set of unique features of an organization that are perceived by customers and

potential customers as significant and superior to the competition.Negotiation process in which a specialist in labor-management negotiations acts as a go-

between for management and the unions and helps focus on the problems.Person who prefers temporary employment, either part-time or full-time.

Processes discrimination complaints, issuesregulations regarding discrimination, and disseminates information.

A collection of unions banded together to achieve common goals.A formal complaint by a union worker that management has violated the contract.

The process of hiring, developing, motivating, and evaluatingemployees to achieve organizational goals.

Creating a strategy for meeting current and future human resource needs.Additional pay for attaining a specific goal.

A study of the tasks required to do a particular job well.The tasks and responsibilities of a job.

An event, typically one or two days, held at a convention center to bring together job seekers andfirms that are searching for employees.

Reassignment of workers to several different jobs over time so that they can learn the basics ofeach job.

A list of the skills, knowledge, and abilities a person must have to fill a job.An organization that represents workers in dealing with management.

Branch of a national union that represents workers in a specific plant or geographic area.Clause in a labor agreement that gives management the right to manage the

business except as specified in the contract.Negotiation process in which a specialist facilitates labor-management contract discussions and

suggests compromises.A form of on-the-job training in which a senior manager or other experienced employee provides

job- and career-related information to a mentee.Sets workplace safety and health standards and

assures compliance.Workers do not have to join the union or pay union dues.Presentation to get the new employee ready to perform his or her job.

A comparison of actual performance with expected performance to assess anemployee’s contributions to the organization.

A form of computer-assisted off-the-job training.The specific groups who have legal protection against employment discrimination;


recruitmentrecruitment brandingright-to-work lawselection

selection interview

selective strike strategyshop steward

simulationsuccession planning

training and development

unemployment compensationunion shopworker’s compensation

include women, African-Americans, Native Americans, and others.The attempt to find and attract qualified applicants in the external labor market.

Presenting an accurate and positive image of the firm to those being recruited.State laws that an employee does not have to join a union.

The process of determining which persons in the applicant pool possess the qualificationsnecessary to be successful on the job.

An in-depth discussion of an applicant’s work experience, skills and abilities, education,and career interests.

Strike at a critical plant that typically stops operations system-wide.An elected union official that represents union members to management when workers have

complaints.A scaled-down version or mock-up of equipment, processes, or a work environment.

Examination of current employees to identify people who can fill vacancies and bepromoted.

Activities that provide learning situations in which an employee acquiresadditional knowledge or skills to increase job performance.

Government payment to unemployed former workers.Nonunion workers can be hired but must join the union later.

Pay for lost work time due to employment-related injuries.

Summary of Learning Outcomes

8.1 Achieving High Performance through Human Resources Management1. What is the human resource management process, and how are human resource needs determined?

The human resource management process consists of a sequence of activities that begins with the job analysisand HR planning; progresses to employee recruitment and selection; then focuses on employee training,performance appraisal, and compensation; and ends when the employee leaves the organization.

Creating a strategy for meeting human resource needs is called human resource planning, which begins withthe job analysis. Job analysis is a process of studying a job to determine its tasks and duties for setting pay,determining employee job performance, specifying hiring requirements, and designing training programs.Information from the job analysis is used to prepare a job description, which lists the tasks and responsibilitiesof the job. A job specification describes the skills, knowledge, and abilities a person needs to fill the jobdescribed in the job description. By examining the human resource demand forecast and the internal supplyforecast, human resource professionals can determine if the company faces a personnel surplus or shortage.

8.2 Employee Recruitment2. How do firms recruit applicants?

When a job vacancy occurs, most firms begin by trying to fill the job from within the ranks of their ownemployees, known as the internal labor market. If a suitable internal candidate is not available, the firm turnsto the external labor market. Firms use local media to recruit nontechnical, unskilled, and nonsupervisoryworkers. To locate highly trained recruits, employers use college recruiters, executive search firms, job fairs,and company websites to promote job openings. During the job search process, firms present an accurate andpositive image of the company to those being recruited, called recruitment branding.

8.3 Employee Selection3. How do firms select qualified applicants?



The selection process helps identify the candidates in the applicant pool who possess the best qualificationsfor the open position. Typically, an applicant submits an application or résumé and then receives a short,structured interview. If an applicant makes it past the initial screening, he or she may be asked to take anaptitude, personality, or skills test. The next step is the selection interview, which is an in-depth discussion ofthe applicant’s work experience, skills and abilities, education, and career interests. If the applicant passes theselection interview, most firms conduct background checks and talk with their references. Physical exams anddrug testing may also be part of the selection process.

8.4 Employee Training and Development4. What types of training and development do organizations offer their employees?

Training and development programs are designed to increase employees’ knowledge, skills, and abilities inorder to foster job performance improvements. Formal training (usually classroom in nature and off-the-job)takes place shortly after being hired. Development programs prepare employees to assume positions ofincreasing authority and responsibility. Job rotation, executive education programs, mentoring, and special-project assignments are examples of employee development programs.

8.5 Performance Planning and Evaluation5. How are performance appraisals used to evaluate employee performance?

A performance appraisal compares an employee’s actual performance with the expected performance.Performance appraisals serve several purposes, but are typically used to determine an employee’scompensation, training needs, and advancement opportunities.

8.6 Employee Compensation and Benefits6. What are the types of compensation and methods for paying workers?

Direct pay is the hourly wage or monthly salary paid to an employee. In addition to the base wage or salary,direct pay may include bonuses and profit shares. Indirect pay consists of various benefits and services. Somebenefits are required by law and include unemployment compensation, worker’s compensation, and SocialSecurity. Many employers also offer benefits not required by law. These include paid vacations and holidays,pensions, health and other insurance, employee wellness programs, and college tuition reimbursement.

8.7 The Labor Relations Process7. What is a labor union and how is it organized, what is collective bargaining, and what are some of the key

negotiation issues?

A labor union is an organization that represents workers in dealing with management over disputes involvingwages, hours, and working conditions. A company is unionized through an organizing drive that begins eitherinside, with a small group of existing employees, or outside, with an established union that targets theemployer. When the union gets signed authorization cards from 30 percent of the firm’s employees, the NLRBconducts a union certification election. A majority vote is needed to certify the union as the exclusivebargaining agent. The union and the employer then begin collective bargaining and have one year in which toreach an agreement.

Collective bargaining is the process of negotiating, administering, and interpreting labor agreements. Bothunion and management negotiators prepare a bargaining proposal. The two sides meet and exchangedemands and ideas. Bargaining consists of compromises and concessions that lead to a tentative agreement.Top management then approves or disapproves the agreement for the management team. Union membersvote to either approve or reject the contract. The key issues included in a union contract are wage increases,fringe benefits, and job security.


8.8 Managing Grievances and Conflicts8. How are grievances between management and labor resolved, and what tactics are used to force a

contract settlement?

In most labor agreements, the grievance procedure consists of three or four steps. In the initial step, theemployee files a grievance; this is an oral and/or written presentation to the supervisor and may involve aunion steward as representative of the grievant. Steps two and three involve meetings of the employee, one ormore union officials, the appropriate supervisor, and one or more management officials. If the grievance is notresolved at step three, either party (union or management) can request that an arbitrator, or neutral thirdparty, hear and decide the grievance. The arbitrator reviews the grievance at a hearing and then makes thedecision, which is presented in a document called the award.

When a union contract expires and a new agreement has not been reached, the union may impose economicpressure on the firm. These tactics may take the form of strikes, boycotts, picketing, or corporate campaigns.Similarly, employers may implement lockouts, hire replacements, or move production to another facility toplace pressure on a union to accept a new contract.

8.9 Legal Environment of Human Resources and Labor Relations9. What are the key laws and federal agencies affecting human resource management and labor relations?

A number of federal laws (listed in Table 8.6) affect human resource management. Federal law prohibitsdiscrimination based on age, race, gender, color, national origin, religion, or disability. The Americans withDisabilities Act bans discrimination against disabled workers and requires employers to change the workenvironment to accommodate the disabled. The Family and Medical Leave Act requires employers, with certainexceptions, to provide employees up to 12 weeks of unpaid leave a year. The leave can be for the birth oradoption of a child or due to serious illness of the worker or a family member.

Federal agencies that deal with human resource administration are the EEOC, OSHA, the Office of FederalContract Compliance Programs (OFCCP), and the Wage and Hour Division of the Department of Labor. TheEEOC and OFCCP are primary agencies for the enforcement of employment discrimination laws, OSHAenforces safety regulations, and the Wage and Hour Division enforces the minimum wage and related laws.Many companies employ affirmative action and safety officers to ensure compliance with antidiscriminationand workplace safety laws. The Wagner and Taft-Hartley Acts govern the union-management relationship, inpart through the functions performed by the National Labor Relations Board. The law gives workers the rightto form and join labor unions and obligates the employer to deal with the union fairly.

8.10 Trends in Human Resource Management and Labor Relations10. What trends and issues are affecting human resource management and labor relations?

Human resource managers recognize that diverse workforces create an environment that nurtures creativedecision-making, effective problem-solving, more agility in adapting to change, and a strong competitiveadvantage. Therefore, firms are becoming committed to recruiting and hiring a diverse workforce. Tomaximize efficiency, many firms are outsourcing HR functions and using technology to reduce costs andimprove efficiency. Firms are also striving to hire employees who possess qualities that match those of thecorporate culture. Although labor unions have faced declining membership in the last several decades,enrollment of service workers into labor unions may increase as low-wage earners seek improved workingconditions, pay, and health benefits.



Preparing for Tomorrow's Workplace Skills1. Would an overseas job assignment be good for your career development? If you think so, what country

would you prefer to live and work in for two or three years, and what type of job would you like to have inthat country? (Resources)

2. The benefits package of many employers includes numerous items such as health insurance, lifeinsurance, 401(k) plan, paid vacations, tuition reimbursement, employee price discounts on products ofthe firm, and paid sick leave. At your age, what are the three or four most important benefits? Why?Twenty years from now, what do you think will be your three or four most important benefits? Why?(Resources)

3. Assume you have been asked to speak at a local meeting of human resource and labor relationsprofessionals. The topic is whether union membership will increase or decline in the next 50 years. Takeeither the increase or the decline position and outline your presentation. (Information)

4. Go to the government documents section in your college or university library, and inspect publications ofthe Department of Labor (DOL), including Employment and Earnings, Compensation and Working Conditions,Monthly Labor Review, Occupational Outlook Handbook, and Career Guide to Industries. Alternatively, go tothe DOL Bureau of Labor Statistics website at http://stats.bls.gov. Access the most recent DOLpublications and locate the following information. (Information)

◦ Number of persons in the American workforce◦ Unemployment rate for last year◦ Demographic characteristics of the American workforce: race, ethnic status, age, marital status, and

gender◦ Occupations where there are projected shortages for the next five or 10 years◦ Union membership by major industry category: manufacturing, banking and finance, health care,

business and personal services, sports and entertainment, and any other area of interest to you

5. Assume you are a director of labor relations for a firm faced with a union certification election in 30 days.Draft a letter to be sent to your employees in which you urge them to vote “no union”; be persuasive inpresenting your arguments against the union. (Information)

6. Using the internet, research articles featuring a recent strike or a labor contract settlement. Report toyour class the specifics of the strike or settlement. (Technology, Resources)

7. Team Activity Select two teams of five. One team will take the position that employees are simply abusiness expense to be managed. The second team will argue that employees are an asset to bedeveloped to enable the firm to gain a competitive advantage. The remainder of the class will judge whichteam provided the stronger argument. (Interpersonal)

8. Have you or a family member ever been a union member? If so, name the union and describe it in termsof membership size, membership characteristics, strike history, recent bargaining issues, and employersunder union contracts. (Information)

9. Team Activity Divide the class into two groups. One group will take the position that workers should berequired to join unions and pay dues. The other group will take the position that workers should not berequired to join unions. Hold a debate in which a spokesperson from each group is given 10 minutes topresent the group’s arguments. (Interpersonal)

Ethics Activity


Tracking employee information through global positioning systems (GPS)—in particular, on company vehiclesdriven by employees—is becoming commonplace. Location information is transmitted to a server via the cellphone network (and sometimes via satellite phone service) and is then available to the company through theweb or mobile apps.

As the cost of GPS drops and the number of mobile workers rises—by some accounts, to as much as 75percent of the workforce by 2020—companies are depending on GPS to monitor the movement of personneland products to improve customer service and help with time management. “I wanted to see how much timewas spent on each job,” says one small business owner with a fleet of seven service vehicles. “We’ve had a fewproblems in the past—people weren’t where they said they’d be. With GPS, we can defend ourselves to thecustomers. We know how fast the drivers drove, what route they took, and how long they spent on each job.”Late in 2017, four wastewater plant mechanics employed by the city of Modesto, California, were fired afterGPS showed they used “work hours to socialize at the lift stations with [each other], go home, shop, sleep anddrive around in the City utility vehicle.”

Companies are not only tracking vehicles, but many now track employees through their mobile phones.Understandably, many employees don’t like the idea of Big Brother following their every move; most statesallow employers to track their employees’ location even in off hours. Many employees take their companyvehicles home after their shifts, but even employees with company-owned phones may be tracked after hours,too.

Surveys show that many GPS-tracked employees have serious concerns about after-hours tracking,micromanagement, and privacy [https://www.tsheets.com/gps-survey]. In 2015, a woman in California suedher employer, claiming that she was tracked 24 hours a day through her company-issued iPhone. And whenshe uninstalled the tracking app, she was fired.

Using a web search tool, locate articles about this topic, and then write responses to the following questions.Be sure to support your arguments and cite your sources.

Ethical Dilemma: Do GPS devices constitute an invasion of employee privacy? Are there guidelines companiescan develop for appropriate GPS use?

Sources: Kevin Valine, “Modesto Disciplines Sewer Workers for Goofing Off,” The Modesto Bee,http://www.modbee.com, January 1, 2018; Kaveh Waddell, “Why Bosses Can Track Their Employees 24/7,” TheAtlantic, https://www.theatlantic.com, January 6, 2017; Andrew Burger, “IDC: Mobile Workers Will Make UpNearly 75 Percent of U.S. Workforce,” http://www.telecompetitor.com, June 23, 2015; David Kravets, “WorkerFired for Disabling GPS App That Tracked Her 24 Hours a Day,” Ars Technica, https://arstechnica.com, May 11,2015.

Working the Net1. Go to the blog page of the College Recruiter website at https://www.collegerecruiter.com/blog, and

read the relevant articles to learn how to prepare a résumé that will get results. Develop a list of rules forcreating effective résumés. What tips were the most useful to you?

2. Working as a contingent employee can help you explore your career options. Visit the Manpower websiteat http://www.manpower.com, and use the Job Search feature to look for several types of jobs thatinterest you. Choose your current city and one where you would like to live, either in the United States orabroad. What are the advantages of being a temporary worker? What other services does Manpoweroffer job seekers?

3. As a corporate recruiter, you must know how to screen prospective employees. The Integrity Center



website at http://www.integctr.com offers a brief tutorial on pre-employment screening, a glossary ofkey words and phrases, and related information. Prepare a short report that tells your assistant how to goabout this process.

4. You’ve been asked to give a speech about the current status of affirmative action and equal employmentto your company’s managers. Starting with the website of the American Association for Access Equity andDiversity (https://www.aaaed.org) and its links to related sites, research the topic and prepare anoutline for your talk. Include current legislation and recent court cases.

5. Web-based training is popular at many companies as a way to bring a wider variety of courses to morepeople at lower costs. The Web-Based Training Information Center site athttp://www.webbasedtraining.com provides a good introduction. Learn about the basics of onlinetraining at its Primer page. Then link to the Resources section, try a demo, and explore other areas thatinterest you. Prepare a brief report on your findings, including the pros and cons of using the web fortraining, to present to your class.

6. What are the key issues facing labor unions today? Visit the AFL-CIO website, http://www.aflcio.org, andLabornet, http://www.labornet.org. Select three current topics and summarize the key points for theclass.

7. Not everyone believes that unions are good for workers. The National Right to Work Legal DefenseFoundation offers free legal aid to employees whose “human and civil rights have been violated bycompulsory unionism abuses.” Read the materials on its site (http://www.nrtw.org), and prepare ashort report on its position regarding the disadvantages of labor unions.

8. Although we tend to think of labor unions as representing manufacturing employees, many office andservice-industry employees, teachers, and professional belong to unions. Visit the websites of two of thefollowing nonmanufacturing unions and discuss how they help their members: the Office andProfessional Employees International Union (http://www.opeiu.org), the American Federation of State,County, and Municipal Employees (http://www.afscme.org), the National Education Association(http://www.nea.org), the Actor’s Equity Association (http://www.actorsequity.org), and the AmericanFederation of Musicians (http://www.afm.org). What are the differences, if any, between these unionsand those in other industries?

Critical Thinking CaseDiscrimination in the Workplace Continues

Although we live in enlightened times, a recent Gallup Poll found that 15 percent of American workers stillexperienced some form of workplace discrimination. The study was conducted to mark the anniversary of theCivil Rights Act of 1964 and the creation of the EEOC.

The poll found that the two most frequently cited types of discrimination are sexual discrimination (31 percent)and discrimination based on race or ethnicity (36 percent). Also mentioned were age, disability, sexualorientation, and religion. The work areas found to be most susceptible to discrimination are promotion andpay. Being selected for a job and treatment in the workplace were also cited. Wage discrimination and sexualharassment are two big battles women continue to fight. Both topics were in the headlines in 2017; one tookcenter stage and the other was brushed under the covers (at least for now).

Thanks to Harvey Weinstein, the topic of sexual harassment was in the spotlight, setting off a tsunami aswomen around the world reacted with their #MeToo stories. As the movement progressed from Hollywood, tomedia companies, to Capitol Hill, and finally into corporate America, the topic had a platform. From the


boardroom to the factory floor, women who had been sexually harassed shared their stories.

As companies rushed to put zero-tolerance policies into place and issue new training requirements, lawsuitsand class-action cases were settled more quickly, some very publicly. In August 2017, the EEOC reached a $10million settlement with Ford motor company for sexual and racial harassment at two Chicago plants.

In contrast, little was reported on the reversal of the new regulation designed to combat the wage gapbetween men and women. The revised EEO-1 would have gone into effect March 31, 2018, and requiredcompanies with 100 or more employees and federal contractors with 50 or more employees to report W-2wage information and total hours worked for all employees. The EEO-1 form already requires employers toreport data on race/ethnicity and gender.

The Office of Management and Budget (OMB) initiated a review and immediate stay to the U.S. EEOC “inaccordance with its authority under the Paperwork Reduction Act (PRA),” reversing the regulation that hadbeen revised on September 29, 2016.

Pay equity advocates who had supported expanded pay-data reporting were critical of the suspension. “Wesee through the Trump administration’s call to halt the equal pay rule that requires employers to collect andsubmit pay data by gender, race, and ethnicity to the government,” said Fatima Goss Graves, president andCEO of the National Women’s Law Center in Washington, D.C. “Make no mistake—it’s an all-out attack onequal pay. [It] sends a clear message to employers: if you want to ignore pay inequities and sweep them underthe rug, this administration has your back.”

How important is equal pay? According to the analyses of the 2014–2016 Annual Social and Economicsupplement published by the Institute for Women’s Policy Research, the United States economy would haveproduced additional income of $512.6 billion if women received equal pay; this represents 2.8 percent of 2016gross domestic product (GDP).

In addition, poverty rates would drop from 10.8 percent to 4.4 percent, and the number of children withworking mothers living in poverty would be nearly cut in half, dropping from 5.6 million to 3.1 million.

Critical Thinking Questions1. Why is workplace diversity so important in today’s business environment?2. What are the major sources of workplace discrimination? Cite specific examples from the case.3. What steps are companies taking to ensure that employees are not discriminated against?

Sources: Susan Chira and Catrin Einhorn, “How Tough Is It to Change a Culture of Harassment? Ask Women atFord,” The New York Times, https://www.nytimes.com, December 19, 2017; “Statement of Acting Chair VictoriaA. Lipnic about OMB Decision on EEO-1 Pay Data Collection,” https://www.eeoc.gov, August 29, 2017; StephenMiller, “White House Suspends Pay-Data Reporting on Revised EEO-1 Form,” https://www.shrm.org, August31, 2017; Heidi Hartmann, Jeff Hayes, and Jennifer Clark, “How Equal Pay for Working Women Would ReducePoverty and Grow the American Economy,” http://www.iwpr.org, January 13, 2014; “Gallup Poll onEmployment Discrimination Shows Progress, Problems, 40 Years after Founding of EEOC” (press release),https://www.eeoc.gov, December 8, 2005.

@ Hot Links Address Book1. Search the extensive job database of CareerBuilder.com (http://www.careerbuilder.com) for a job in a

new city.2. Get advice for brushing up your interview skills at the Job Hunting Advice page of The Wall Street Journal’s



career site, http://careers.wsj.com.3. How does the Equal Employment Opportunity Commission promote equal opportunity in employment?

Visit http://www.eeoc.gov to learn what the agency does.4. For the latest news in the human resources field, visit the website of the Society for Human Resource

Management at http://www.shrm.org.5. Many companies are using the web to help manage employees. Visit ADP, http://www.adp.com, to learn

how online services can streamline their HR tasks.6. At the NLRB website, http://www.nlrb.gov, you’ll learn about the agency’s many activities and how it

protects workers’ rights.7. Visit the Social Security Administration site to track the latest cost-of-living adjustment at

http://www.ssa.gov. You’ll find it in the Publications section.


8 Managing Human Resources and Labor Relations

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