Chapter 1

Introduction to Human
Resource Management
IE 262 Human Relations Management

İpek Mete, Ph.D.

Week 2
Outline
Definition of human resource management and its
relation to the management process

The important trends influencing human resource

management

Six important components or pillars of human

management today

Human resource manager competencies

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What is Human Resource
Management?

Organization:
• A group consisting of people with formally
assigned roles who work together to achieve
the organization’s goals.

Manager:
• responsible for accomplishing the
organization’s goals, and does so by managing
the efforts of the organization’s people

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Five Basic Management Functions:

Staffing

Organizing Leading

The
Planning Management Controlling
Process

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What Is Human Resource
Management?

• Human resource management (HRM):

– the process of acquiring, training,

appraising, and compensating employees,
and of attending to their labor relations,
health and safety, and fairness concerns.

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Why Is Human Resource Management
Important to All Managers?
• To avoid personnel mistakes
• To improve profits and performance
• You may spend some time as an HR
manager
• You may end up as your own human
resource manager

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Non-HR managers → HR executives

Kathleen Hogan (Microsoft) Beth Galletti (Amazon)

Senior Vice president of HR
Chief People Officer
Background in Engineering and
Background in marketing and services
operations

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Line and Staff Aspects of Human
Resource Management

• Recruiting
• Interviewing
• Selecting
• Training

How do the duties of the HR manager and department relate

to the HR duties of sales and production and other
managers?
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Line and Staff Aspects of Human
Resource Management
• Authority is the right to make decisions, to direct the work
of others, and to give orders.
• Managers usually distinguish between line authority and
staff authority.
– Line authority gives you the right to issue orders
▪ superior-subordinate relationship
– Staff authority gives you the right to advise others in
the organization
▪ advisory relationship

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Line Manager’s HR Management
Responsibilities (1 of 2)
1. Placing the right person in the right job
2. Starting new employees in the organization
(orientation)
3. Training employees for jobs that are new to them
4. Improving the job performance of each person
5. Gaining creative cooperation and developing
smooth working relationships

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Line Manager’s HR Management
Responsibilities (2 of 2)
6. Interpreting the company policies and
procedures
7. Controlling labor cost
8. Developing the abilities of each person
9. Creating and maintaining departmental morale
10.Protecting employees’ health and physical
conditions

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The Human Resource Department
Figure 1-1 Human Resource Department Organization Chart Showing
Typical HR Job Titles

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Organizing the HR Department’s
Responsibilities
• Recruiters
• Equal Employment Opportunity
• Job analysts
• Compensation managers
• Training specialists
• Labor relations specialists

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Trends in Human Resource Management
• Workforce Demographics and Diversity Trends
– More women, minorities and older workers
• Trends in Jobs People Do
– More service jobs, on-demand workers, high-tech jobs,
remote/hybrid jobs
• Globalization Trends
• Economic Trends
• Technology Trends

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More on HR Technology Trends
Digital technologies driving HR
professionals to automation:
• Social Media
• Mobile Applications
• Cloud Computing
• Data Analytics
• Artificial Intelligence
• Augmented Reality

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How AI changes HR

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Today’s New Human Resource Management
• A Brief History of Personnel/Human
Resource Management
– Personnel tasks were mostly just part of every
manager’s job, until the late 1800s.
– By 1900, employers set up the first “hiring offices,”
training programs, and factory schools.
– Personnel managers took over hiring and firing from
supervisors, ran the payroll departments, and
administered benefits plans.

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6 Pillars of New Human Resource
Management

Distributed
Strategic Performance
HR and the
HRM and HRM
New HRM

Employee
Sustainability Ethics and
Engagement
and HRM HRM
and HRM

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Distributed HR
Figure 1-4 What Trends Mean for Human Resource Management

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Strategic Human Resource
Management
• Strategic human resource management – means
formulating and executing human resource policies and
practices that produce the employee competencies and
behaviors that the company needs to achieve its strategic
aims.

Decide what HR
policies and
Pinpoint the
practices will
employee
enable us to
Set the firm’s behaviors and
produce these
strategic aims skills we need
necessary
to achieve these
employee
strategic aims
behaviors and
skills.

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Performance and HR
The Human Resource Manager is expected to lead
employee performance-improvement efforts.
Three levers can be applied to do so:

1. HR Department Lever
2. Employee Cost Lever
3. Strategic Results Lever

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HR and Evidence-Based Management
• Evidence-based HRM – is the
use of data, facts, analytics,
scientific rigor, critical evaluation,
and critically evaluated
research/case studies to support
HRM proposals, decisions,
practices, and conclusions.
– Actual measurements
– Existing data
– Research studies

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HR and Adding Value
• Adding value – means helping the firm and
its employees improve in a measurable way
as a result of the human resources
manager’s actions.

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Sustainability and HRM
• It is about measuring companies in terms of
maximizing profits but also on their
environmental and social performance as
well.

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Employee Engagement and HRM
• Employee engagement refers to being
psychologically involved in, connected to,
and committed to getting one’s job done.

• It drives performance!
• HR programs can help improve employee
engagement.

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Ethics and HRM
• Ethics means the standards someone uses
to decide what his or her conduct should be.

• Many ethical issues are HR-related and HR

plays a big role in cultivating organizational
ethics today.
• Fairness, workplace safety, etc.

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The Skills of the New HR Manager
• HR managers can’t just be good at traditional
personnel tasks like hiring and training, but must
“speak the CFO’s language” by defending human
resource plans in measurable terms.

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The New Human Resource Manager
The Society of Human Resource Management
(SHRM) has a new “competency model” called the
SHRM Body of Competency and Knowledge that
itemizes what a new HR Manager needs
• What should they be able to exhibit?
• Of what basic functional areas of HR should they
have command?

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 HR Manager Competencies
● Leadership & Navigation
● Ethical Practice
● Business Acumen
● Relationship Management
● Consultation
● Critical Evaluation
● Global & Cultural Effectiveness
● Communication

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HR and the Manager’s HR Philosophy
• An initial philosophy based on experiences, education,
values, assumptions, and background.

• The basic assumptions you make about people—Can they

be trusted? Do they dislike work? Why do they act as they
do? How should they be treated?—together comprise your
philosophy of human resource management.
• Every personnel decision you make—the people you hire,
the training you provide, your leadership style, etc.—
reflects this basic philosophy.

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the needs of other instructors who rely on these materials.

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1
Employers can’t intelligently design their human resource policies and
practices without understanding the role these policies and practices are to
play in achieving their companies’ strategic goals. In this chapter, we look at
how managers design strategic and human resource plans, and how they
evaluate the results of their plans. We start with an overview of the basic
management planning process.

We will examine the nuts and bolts of human resource management, such as
how to analyze jobs and recruit and select employees. However a company’s
HR policies and practices should produce the employee behaviors and
competencies the firm needs to achieve its strategic goals.

Therefore, the main purpose of this chapter is to explain how managers

formulate human resource strategies for their companies. We’ll address the
strategic management process, types of strategies, strategic human resource
management, HR metrics and benchmarking, high-performance work systems,
and employee engagement.

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The Strategic Management Process – Is defined as the process of
identifying and executing the organization's strategic plan by matching the
company’s capabilities with the demands of the environment.

The Management Planning Process – The basic management planning

process consists of five steps: setting objectives, making basic planning
forecasts, reviewing alternative courses of action, evaluating which options are
best, and then choosing and implementing your plan.

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The Hierarchy of Goals – In companies, it is traditional to view the goals from
the top of the firm down to front-line employees as a chain or hierarchy of
goals. Figure 3-1 illustrates this.

Figure 3-1 provides a sample hierarchy of goals diagram for a company. At

the top, the president sets long-term or “strategic” goals (such as “double sales
revenue to $16 million in fiscal year 2020”). His or her vice presidents then set
goals for their units that flow from, and make sense in terms of accomplishing,
the president’s goal. Then their own subordinates set goals, and so on down
the chain.

Policies and Procedures – Policies provide day-to-day guidance employees

need to do their jobs in a manner that is consistent with the company’s plans
and goals. Policies set broad guidelines delineating how employees should
proceed. For example, “It is the policy of this company to comply with all laws,
regulations, and principles of ethical conduct.” Procedures spell out what to
do if a specific situation arises.

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A strategic plan is the company’s overall plan for how it will match its internal
strengths and weaknesses with its external opportunities and threats in order
to maintain a competitive position.

The strategic planner asks, “Where are we now as a business, and where do
we want to be?” He or she then formulates a strategic plan to help guide the
company to the desired destination.

A strategy is a course of action.

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6
Figure 3-2 summarizes the strategic management process.

Its seven steps include:

(1) ask, “Where are we now as a business?” Specifically, “What products do
we sell, where do we sell them, and how do our products or services differ
from our competitors’?
(2) evaluate the firm’s internal and external strengths, weaknesses,
opportunities, and threats (SWOT analysis)
(3) formulate a new business direction,
(4) decide on strategic goals, and
(5) choose specific strategies or courses of action.
(6) and (7) are to implement and then evaluate the strategic plan.

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The strategic management process begins (step 1) by asking, “What business
are we in?” Here the manager defines the company’s current business.
Specifically, “What products do we sell, where do we sell them, and how do
our products or services differ from our competitors’?”
For example, the Coca-Cola Company sells mostly sweetened beverages
such as Coke and Sprite, while PepsiCo sells drinks but also foods such as
Quaker Oats and Frito chips.

The second step is to ask, “Are we in the right business given our strengths
and weaknesses and the challenges that we face?” To answer this, managers
“audit” or study both the firm’s environment and the firm’s internal strengths
and weaknesses. In any case, the manager’s aim is to create a strategic plan
that makes sense in terms of the company’s strengths, weaknesses,
opportunities, and threats.

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Next, based on this analysis (in other words, on the environmental scan,
SWOT, and PEST analyses), the task in step 3 is to decide what should our
new business be, in terms of what we sell, where we will sell it, and how our
products or services differ from competitors’ products and services?

Ford example:
3. Mission: «Quality job done» à 4. Strategic goal: «no more than 1 defect per
10000 cars produced» à 5. Strategies: «open two new high-tech plants, and
put in place new, rigorous employee selection, training, and performance-
appraisal procedures»

Step 6, strategy execution, means translating the strategies into action. This
means actually hiring (or firing) people, building (or closing) plants, and adding
(or eliminating) products and product lines.
Finally, in step 7, the manager evaluates the results of his or her planning and
execution. Things don’t always turn out as planned. All managers should
periodically assess the progress of their strategic decisions.

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10
11
Types of Strategies

Let’s examine some of the types of strategies:

1. Corporate Strategy
2. Competitive Strategy
3. Functional Strategy

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For any business, the corporate strategy answers the question, “What businesses
will we be in?” A company’s corporate-level strategy identifies the portfolio of
businesses that, in total, comprise the company and how these businesses relate
to each other.
A company’s corporate-level strategy, again, identifies the portfolio of
businesses that, in total, comprise the company and how these businesses relate
to each other.
Let's examine the different types of corporate-level strategies:

1. Concentration – (single-business) corporate strategy, this is where the

company offers one product or product line, usually in one market. WD-40
Company is an example. With one spray lubricant, its product scope is
narrow.
2. Diversification – means the firm will expand by adding new product lines.
PepsiCo is diversified. Thus, PepsiCo added Frito-Lay chips and Quaker Oats
to its drinks businesses. Here product scope is wider.
3. Vertical integration –means the firm expands by, perhaps, producing its own
raw materials, or selling its products directly. For example, Apple opened its
own Apple stores.
4. Consolidation strategy – is the corporate strategy in which the company
reduces its size.
5. Geographic expansion – is the corporate strategy in which the company
grows by entering new territorial markets, for instance, by taking the business
abroad.

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A competitive strategy identifies how to build and strengthen the business unit’s
long-term competitive position in the marketplace, also known as a business-
level/competitive strategy

Competitive Strategy examines – on what basis will each of our businesses

compete? For example, within a company like PepsiCo, each business unit (such
as Pepsi and Frito-Lay) needs a business-level competitive strategy.

Managers typically adopt one or more of three standard competitive strategies—

cost leadership, differentiation, or focus—to achieve competitive advantage.

1. Cost leadership – this competitive strategy means becoming the low-cost

leader in an industry. Walmart is an example.

2. Differentiation – for this competitive strategy, the firm seeks to be unique in

its industry along the dimensions that are widely valued by buyers. Volvo and
Papa John’s are examples. Volvo stresses the safety of its cars, and Papa
John’s stresses fresh ingredients.

3. Focusers – for this competitive strategy, the company carves out a market
niche. Bugatti cars is an example. They offer a product or service that their
customers cannot get from generalist competitors, such as Toyota.

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Each department should operate within the framework of its business’s
strategic plan. Functional strategies identify what each department must do
to help the business accomplish its strategic competitive goals.

Thus, for, say, P&G to make its Pantene hair products a toptier brand, its
product development, production, marketing, sales, and human resource
departments must engage in activities that are consistent with this unit’s high-
quality mission. Inferior products, cheap packaging, or sloppy salespeople
would not do.

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Every company’s human resource management policies and activities should
make sense in terms of the firm’s strategic aims. For example, a high-end
hotel like the Shanghai Portman will have different employee selection,
training, and pay policies than will a small roadside motel because the
Shanghai’s customers expect exceptional service.

Strategic human resource management means formulating and executing

human resource policies and practices that produce the employee
competencies and behaviors the company needs to achieve its strategic aims.

The HR strategy is dynamic, not static. In other words, the manager should
determine where each HR activity (recruiting, and so on) is now, and where it
should be in order to support the employer’s strategic aims. The key to
success is to think through how the manager is going to transform the various
HR activities so that they align with and support the company’s strategic
priorities. The bottom line is that the manager should not design any HR
activities without understanding very clearly the business’s strategic
needs, and how to align the HR activities with those strategic needs.
Figure 3-6 outlines this idea.

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FIGURE 3-6 The HR Strategy Model
Note: This figure opens each chapter of the book and says this: The
company’s HR policies and practices should produce the employee
competencies and behaviors that the company needs to achieve its strategic
goals.

• First, the manager formulates strategic plans and goals.

• Next, he or she asks, “What employee skills and behaviors will we need to
achieve these plans and goals?”
• And finally, he or she asks, “Specifically what recruitment, selection,
training, and other HR policies and practices should we put in place so as to
produce the required employee skills and behaviors?”

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When the Ritz-Carlton Company took over managing the Portman Hotel in
Shanghai, China, the new management reviewed the Portman’s strengths and
weaknesses, and its fast-improving local competitors. They decided that in
order to compete, they had to improve the hotel’s level of service. Achieving
that meant formulating new human resource management plans for hiring,
training, and rewarding hotel employees. It meant putting in place a new
human resource strategy for the Portman Hotel, one aimed at improving
customer service.

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Their new human resource plans and practices helped to produce the
employee behaviors required to improve the Portman’s level of service, thus
attracting new guests. Travel publications were soon calling it the “best
employer in Asia,” “overall best business hotel in Asia,” and “best business
hotel in China.” Profits soared, in no small part due to effective strategic
human resource management.

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Today’s emphasis on sustainability has important consequences for human
resource management. Strategic human resource management means having
human resource policies and practices that produce the employee skills and
behaviors that are necessary to achieve the company’s strategic goals, and
these include sustainability goals.

For example, PepsiCo wants to deliver “Performance with Purpose.” This

means achieving financial performance while also achieving human
sustainability, environmental sustainability, and talent sustainability.

PepsiCo’s human resource managers can help the company achieve these
goals. For example, they can work with top management to institute flexible
work arrangements that help sustain the environment by reducing commuting.
They can use incentive systems to motivate employees to achieve PepsiCo’s
sustainability goals. The bottom line is that HR policies and practices can
support a firm’s sustainability strategy and goals.

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Managers use several tools to translate the company’s strategic goals into
human resource management policies and practices. These tools include the
strategy map, the HR scorecard, and the digital dashboard.

• Strategy map – this shows the “big picture” of how each department’s
performance contributes to achieving the company’s overall strategic goals.
It also summarizes how each department’s performance contributes to
achieving the company’s overall strategic goals. It helps the manager and
each employee visualize and understand the role his or her department
plays in achieving the company’s strategic plan.
• The HR Scorecard – is not a scorecard. It does however refer to a process
for assigning financial and nonfinancial goals or metrics to important human
resource management–related chain of activities. That chain is required in
order to achieve the company’s strategic aims and for monitoring results.
Many employers quantify and computerize the strategy map’s activities by
utilizing the HR Scorecard.
• Digital Dashboard – presents the manager with desktop graphs and
charts, showing a computerized picture of how the company is doing on all
the metrics from the HR Scorecard process.

21
Strategy map – this shows the “big picture” of how each department’s performance
contributes to achieving the company’s overall strategic goals.
It helps the manager and each employee visualize and understand the role his or
her department plays in achieving the company’s strategic plan.

Figure 3-7 presents a strategy-map example for Southwest Airlines.

• The top-level target is to achieve its profitability, costs, and revenue goals. Then
the strategy map shows the chain of activities that help Southwest Airlines
achieve these goals. Like Walmart, Southwest has a low-cost- leader strategy.
• So, for example, to boost revenues and profitability Southwest must fly fewer
planes (to keep costs down), maintain low prices, and maintain on-time flights.
• In turn (further down the strategy map), on- time flights and low prices require fast
turnaround*.
• This, in turn, requires motivated ground and flight crews.
• The resulting strategy map helps each department understand what it needs to
do to support Southwest’s low-cost strategy. For example, what steps must
Southwest’s human resource team take to boost the motivation and dedication of
its ground crews?
*Turnaround Time in aviation refers to the time interval between an aircraft's arrival
at an airport and its departure on the next flight.

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The HR Scorecard – is not a scorecard. It does however refer to a process for
assigning financial and nonfinancial goals or metrics to important human
resource management–related chain of activities. That chain is required in
order to achieve the company’s strategic aims and for monitoring results.
Many employers quantify and computerize the strategy map’s activities by
utilizing the HR Scorecard.

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24
Digital Dashboard – presents the manager with desktop graphs and charts,
showing a computerized picture of how the company is doing on all the metrics
from the HR Scorecard process.

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Human resource metrics – is the quantitative gauge of a human resource
management activity, such as employee turnover, hours of training per
employee, or qualified applicants per position.

Benchmarking – means comparing the practices of high-performing

companies results to your own, in order to understand what they do that
makes them better.

Data Analytics – means using statistical and mathematical analysis and

algorithms to find relationships and make predictions.

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27
Benchmarking means comparing the practices of high-performing companies’
results to your own, in order to understand what they do that makes them
better.

Just measuring how one is doing (for instance, in terms of employee

productivity) is rarely enough for deciding what (if anything) to change.
Instead, most managers want to know “How are we doing?” in relation to
something.

For example, are our accident rates rising or falling? Similarly, the manager
may want to benchmark the results.

https://www.shrm.org/mena/topics-tools/research/shrm-benchmarking

28
Strategy-based metrics specifically focus on measuring the activities that
contribute to achieving a company’s strategic aims.

Benchmarking provides one perspective on how your company’s human resource

management system is performing. It shows how your human resource
management system’s performance compares to the competition. However, it
may not reveal the extent to which your firm’s HR practices are supporting its
strategic goals. Managers use strategy-based metrics to answer such questions.

Thus, if the strategy calls for doubling profits by improving customer service, to
what extent are our new training practices helping to improve customer service?
Managers use strategy-based metrics to answer such questions. Strategy-based
metrics measure the activities that contribute to achieving a company’s strategic
aims.

Thus, for the Portman Shanghai, the strategic HR metrics might include 100%
employee testing, 80% guest returns, incentive pay as a percent of total salaries,
and sales up 50%. If changes in HR practices such as increased training have
their intended effects, then strategic metrics like guest returns should also rise.

29
Human resource managers often assess matters like employee turnover and
safety via human resource audits.

The HR audit generally involves using a checklist to review the company’s

human resource functions (recruiting, testing, training, and so on), as well as
ensuring that the firm is adhering to regulations, laws, and company policies.
The HR auditor may first review payroll data, focusing on what and when each
employee was paid. He or she will then turn to whether the human resource
records are in order (for instance, are medical records kept separate from
résumés?). He or she will also review the employer’s handbooks and policies,
for instance, checking for disability accommodation policies, social media
policies, and family and medical leave policies. He or she may also want to
benchmark the results to comparable companies’.

HR audits vary in scope.

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Trends Shaping HR: Digital and Social Media

Data like monthly labor costs are interesting but relatively useless until
converted to information. Information is data presented in a form that makes it
useful for making decisions. For example, knowing your cost per hire is
interesting. However, presenting cost-per-hire data in a way that shows
whether the cost is trending up or down provides information you can use to
make decisions. Yet in one study, only 10% of respondents said they use such
data to analyze their workplace practices’ effectiveness. But this is changing.

Data analytics means using statistical and mathematical analysis and

algorithms to find relationships and make predictions.

Big data is basically data analytics on steroids.

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Talent Analytics. Data analytics tools like these also enable employers (including
Walmart) to analyze in new ways employee data both on obvious things (like
employee demographics, training, and performance ratings), but also data from new
sources (like company internal social media sites, GPS tracking, and e-mail activity).
Employers then use talent analytics (data analytics applied to HR issues) to answer
questions that in the past they couldn’t answer, or couldn’t answer as well.

Talent analytics can produce striking profitability results. For example, Best Buy used
talent analytics to discover that a 0.1% increase in employee engagement led to a
more than $100,000 rise in a Best Buy store annual operating income. Employers use
talent analytics to answer several types of talent management questions.
Human Capital Facts. For example, “What are the key indicators of my
organization’s overall health?” JetBlue found that employee engagement correlated
with financial performance.
Analytical HR. For example, “Which units, departments, or individuals need
attention?” Lockheed Martin collects performance data in order to identify units
needing improvement.
Human Capital Investment Analysis. For example, “Which actions have the
greatest impact on my business?” By monitoring employee satisfaction levels, Cisco
was able to improve its employee retention rate from 65% to 85%, saving the
company nearly $50 million in recruitment, selection, and training costs.

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Trends Shaping HR: Science in Talent Management

Data analytics involves making decisions based on a measurable and objective review of the
situation. Managers have a name for this. Evidence-based human resource management
means using data, facts, analytics, scientific rigor, critical evaluation, and critically evaluated
research/case studies to support human resource management proposals, decisions,
practices, and conclusions.

You may sense that being evidence-based is similar to being scientific, and if so, you are
correct.
In gathering evidence, scientists (or managers) first need to be objective, or there’s no way to
trust their conclusions.
Being scientific also requires experimentation. An experiment is a test one sets up in such a
way as to ensure that he or she understands the reasons for the results obtained.
If you want to judge a new incentive plan’s impact on corporate profits, don’t start by
implementing the plan with all employees. Instead, implement it with an “experimental” group
(which gets the incentive plan) and with a “control” group (a group that does not get the
incentive plan). Doing so will help you gauge if any performance improvement stemmed from
the incentive or from some other cause (such as a new company-wide training program).
And, it will enable you to predict how changing the incentive plan will affect performance.

How managers use evidence to make better human resource management decisions

For example: Which recruitment source produces our best candidates? Does it pay to use this
testing program? And, does our safety program really lead to fewer accidents?

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One reason to measure, benchmark, and scientifically analyze HR practices is
to promote high-performance work practices.

A High-Performance Work System (HPWS) is a set of human resource

management policies and practices that promote organizational effectiveness.

High-performance work systems’ policies and practices differ from less

productive ones. Table 3-1 provides examples of practices in high-performance
and low-performance companies.

First, it shows examples of human resource metrics.

Second, it illustrates what employers must do to have high-performance
systems.
Third, it shows that high-performance work practices usually aspired to
encourage employee involvement and self-management.

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Studies show that high-performance work systems’ policies and practices do
differ from less productive ones (Table 3-1). For example, high-performing
companies recruit more job candidates, use more selection tests, and spend
many more hours training employees. Table 3-1 illustrates three things.
• First, it shows examples of human resource metrics such as hours of
training per employee, or qualified applicants per position. (In Table 3-1, the
metric for “Number of qualified applicants per position” is 37 in the high-
performing companies.) Managers use these to assess their companies’
performance and to compare one firm with another.
• Second, it illustrates what employers must do to have high-performance
systems. For example, high-performing companies have more than four
times the number of qualified applicants per job than do low performers.
They also hire based on validated selection tests, and extensively train
employees.
• Third, Table 3-1 shows that high-performance work practices usually aspire
to encourage employee involvement and self-management. In other
words, an aim of the high-performance recruiting, screening, training, and
other human resources practices is to nurture an engaged, involved,
informed, empowered, and self-motivated workforce.

35
Employee engagement refers to being psychologically involved in, connected
to, and committed to getting one’s jobs done. Engaged employees “experience
a high level of connectivity with their work tasks,” and work hard to accomplish
their task-related goals.

Employee engagement is important because it drives performance and

productivity.

According to one review of the evidence, employee engagement is correlated

with employees’ customer service productivity, and improvements in employee
engagement were associated with significant increases in sales, product
quality, productivity, safety incidents at work, retention and absenteeism, and
revenue growth.

The problem is that, depending on the study, only about 21-30% of

employees nationally are engaged. Gallup distinguishes among engaged
employees “who work with passion and feel a profound connection to their
company,” not-engaged employees who are essentially “checked out,” and
actively disengaged employees. Gallup found that about 30% of employees
were engaged, 50% were not engaged, and 20% were actively disengaged.

36
Managers improve employee engagement by taking concrete steps to do so:

Providing supportive supervision. For example, a Gallup survey found that

managers who focus their support and coaching on their employees’
strengths can “practically eliminate active disengagement”; conversely,
“bosses from hell” kill employee engagement.

Making sure employees understand how their departments contribute to

the company’s success.

See how their efforts contribute to achieving the company’s goals.

Get a sense of accomplishment from working at the firm.

Are highly involved—as when working in self-managing teams.

Employers should also hold managers responsible for employee

engagement.

37
38
1
After studying this chapter, you will be able to:

4-1. Define talent management and explain what talent management-oriented

managers do.
4-2. Discuss the process of job analysis, including why it is important.
4-3. Explain and use at least three methods of collecting job analysis
information.

2
We can define talent management also as the goal-oriented and integrated
process of planning, recruiting, developing, managing, and compensating
employees.

The usual process of talent management consists of the following steps:

1. Decide what positions to fill
2. Build a pool of job candidates
3. Obtain application forms
4. Use selection tools
5. Decide to whom to make an offer
6. Orient, train, and develop employees
7. Appraise employees
8. Compensate employees to maintain their motivation

3
• The problem with the stepwise view is twofold.
• First, the process usually isn’t really stepwise. For example, managers
don’t just train employees (step 6) and then appraise how they’re doing
(step 7). Instead, the appraisal may well also loop back to shape the
employee’s subsequent training. So, first, rather than view these eight HR
activities as stepwise, it is best to view them holistically— because the
steps interactively affect each other and work together.
• The second problem is that focusing just on each step may cause the
manager to miss the forest for the trees. It’s not just each step but the
results you obtain by applying them together that’s important. So, second,
it’s important to remember that each and every step should be focused on
achieving, in unison, some specific result (such as, say, improving
customer service).
• Recognizing all this, the trend today is to view these eight activities not stepwise
but as part of a coordinated talent management effort.

4
What does this mean in practice? The manager who takes a talent
management approach tends to take actions such as the following:
1. He or she starts with the results and asks, “What recruiting, testing, training,
or pay action should I take to produce the employee competencies we need to
achieve our company’s goals?”
2. He or she treats activities such as recruiting and training as interrelated. For
example, the manager knows that having employees with the right skills
depends as much on recruiting and training as on applicant testing.
3. Because talent management is holistic and integrated, he or she will
probably use the same “profile” of required human skills, knowledge, and
behaviors (“competencies”) for formulating a job’s recruitment plans as for
making selection, training, appraisal, and compensation decisions for it.
4. And, to ensure the activities are all focused on the same ends, the manager
will take steps to coordinate the talent management functions (recruiting and
training, for example). Doing so often involves using talent management
software.

5
Talent management starts with understanding what jobs need to be filled, and
the human traits and competencies employees need to do those jobs
effectively.

Job analysis produces information for writing job descriptions (a list of what
the job entails) and job (or “person”) specifications (what kind of people to
hire for the job).

Virtually every personnel-related action— interviewing applicants, and training

and appraising employees, for instance—requires knowing what the job entails
and what human traits one needs to do the job well.

6
The supervisor or human resources specialist normally collects one or more of
the following types of information via the job analysis:
● Work activities. Information about the job’s actual work activities, such as
cleaning, selling, teaching, or painting. This list may also include how, why, and
when the worker performs each activity.
● Human behaviors. Information about human behaviors the job requires, like
sensing, communicating, lifting weights, or walking long distances.
● Machines, tools, equipment, and work aids. Information regarding tools
used, materials processed, knowledge dealt with or applied (such as finance or
law), and services rendered (such as counseling or repairing).
● Performance standards. Information about the job’s performance
standards (in terms of quantity or quality levels for each job duty, for instance).
● Job context. Information about such matters as physical working conditions,
work schedule, incentives, and, for instance, the number of people with whom
the employee would normally interact.
● Human requirements. Information such as knowledge or skills and required
personal attributes.

7
Figure 4-2 summarizes why job analysis is important. It supports just about all
human resource management activities.

Recruitment and Selection. Information about what duties the job entails and
what human characteristics are required to perform these activities helps
managers decide what sort of people to recruit and hire.

EEO Compliance. Job analysis is crucial for validating all major human
resources practices. For example, to comply with the Americans with
Disabilities Act, employers should know each job’s essential job functions—
which in turn requires a job analysis.

Performance Appraisal. A performance appraisal compares each employee’s

actual performance with his or her duties and performance standards.
Managers use job analysis to learn what these duties and standards are.

Compensation. Compensation (such as salary and bonus) usually depends

on the job’s required skill and education level, safety hazards, degree of
responsibility, and so on—all factors you assess through job analysis.

Training. The job description lists the job’s specific duties and requisite

8
skills—thus pinpointing what training the job requires.

8
There are six steps in conducting a job analysis:

Step 1: Decide how you’ll use the information because this will determine how
you collect the information
Some data collection techniques—like interviewing the employee—are good
for writing job descriptions. Other techniques, like the position analysis
questionnaire we describe later, provide numerical ratings for each job; these
can be used to compare jobs for compensation purposes.

Step 2: Review relevant background information such as organization charts,

process charts, and job descriptions.
Step 3: Select representative positions.
Step 4: Actually analyze the job by collecting data on job activities, working
conditions, and human traits and abilities needed to perform the job.
Step 5: Verify the job analysis information with the worker performing the job
and with his or her immediate supervisor.
Step 6: Develop a job description and job specification.

9
Organization chart. A chart that shows the organizationwide distribution of
work, with titles of each position and interconnecting lines that show who
reports to and communicates with whom.

Process chart. A workflow chart that shows the flow of inputs to and outputs
from a particular job.

Workflow analysis. A detailed study of the flow of work from job to job in a
work process. Usually, the analyst focuses on one identifiable work process,
rather than on how the company gets all its work done.
In conducting a workflow analysis, the manager may use a flow process chart;
this lists in order each step of the process. The manager may convert this
step-by-step flow process chart into a diagrammatic process chart.

10
11
Business Process Reengineering. Business process reengineering means
redesigning business processes, usually by combining steps, so that small
multifunction teams, often using information technology, do the jobs formerly
done by a sequence of departments.

12
Job enlargement. assigning workers additional same-level activities. Thus,
the worker who previously only bolted the seat to the legs might attach the
back too.
Job rotation. systematically moving workers from one job to another.
Job enrichment. redesigning jobs in a way that increases the opportunities for
the worker to experience feelings of responsibility, achievement, growth, and
recognition—and therefore more motivation.
It does this by empowering the worker—for instance, by giving the worker the
skills and authority to inspect the work, instead of having supervisors do that.
Herzberg said empowered employees would do their jobs well because they
wanted to, and quality and productivity would rise. That philosophy, in one form
or another, is the theoretical basis for the team-based self-managing jobs in
many companies around the world today.

13
There are many ways (interviews, or questionnaires, for instance) to collect job
information. The basic rule is to use those that best fit your purpose.

1. Thus, an interview might be best for creating a list of job duties.

2. The more quantitative “position analysis questionnaire” method may
be best for quantifying each job’s worth for pay purposes.
3. Before actually analyzing the job, keep several things in mind:

• Make the job analysis a joint effort by a human resources manager, the
worker, and the worker’s supervisor. The human resource manager
might observe the worker doing the job, and have both the supervisor and
worker fill out job questionnaires. Then he or she lists the job’s duties and
required human traits. The supervisor and worker then verify the HR
manager’s list of job duties.
• Make sure the questions and the process are both clear to the
employees. (For example, some might not know what you mean when you
ask about the job’s “mental demands.”)
• Use several job analysis methods. For example, a questionnaire might
miss a task the worker performs just occasionally. Therefore, it’s prudent to
follow up the questionnaire with a short interview.

14
Job analysis interviews range from unstructured (“Tell me about your job”) to
highly structured ones containing hundreds of specific items to check off.

Typical Questions.
Structured Interviews. Many managers use questionnaires to guide the
interview. Figure 4-4 presents one example. It includes questions regarding
matters like the general purpose of the job; supervisory responsibilities; job
duties; and education, experience, and skills required.

Pros and Cons. The interview’s wide use reflects its advantages. It’s a simple
and quick way to collect information. However there are cons as well.
Distortion of information is the main problem. There may be a tendency for
people to inflate their job’s importance when abilities are involved, to impress
the perceptions of others.

Interviewing Guidelines. To get the best information possible:

● Establish rapport with the interviewee. Know the person’s name, speak
understandably, briefly review the interview’s purpose, and explain how the
person was chosen for the interview.
● Use a structured guide that lists questions and provides space for answers.

15
This ensures you’ll identify crucial questions ahead of time and that all
interviewers (if more than one) cover all the required questions. (However, also
ask, “Was there anything we didn’t cover with our questions?”)
● Make sure you don’t overlook crucial but infrequently performed activities—
like a nurse’s occasional emergency room duties. Ask the worker to list his or
her duties in order of importance and frequency of occurrence.
● After completing the interview, review the information with the worker’s
immediate supervisor and with the interviewee.

15
Having employees fill out questionnaires to describe their job duties and
responsibilities is another good way to obtain job analysis information. Some
questionnaires are structured checklists. At the other extreme, the
questionnaire may simply ask “describe the major duties of your job.”

Questionnaires have pros and cons. This is a quick and efficient way to obtain
information from a large number of employees and it’s less costly than
interviewing. However, developing and testing it can be time-consuming. And
employees may distort their answers.

16
Direct observation is especially useful when jobs consist mainly of observable
physical activities—assembly-line worker and accounting clerk are examples.
However, observation is usually not appropriate when the job entails a lot of
mental activity (lawyer, design engineer). Nor is it useful if the employee only
occasionally engages in important activities, such as a nurse who handles
emergencies. Reactivity is another problem.

17
Another method is to ask workers to keep a diary/log; for every activity
engaged in, the employee records the activity (along with the time) in a log.

Some firms give employees pocket dictating machines and pagers. Then at
random times during the day, they page the workers, who dictate what they
are doing at that time.

18
Qualitative methods like interviews and questionnaires are not always suitable.
For example, if your aim is to compare jobs for pay purposes, a mere listing of
duties may not suffice. You may need to say that, in effect, “Job A is twice as
challenging as Job B, and so is worth twice the pay.” To do this, it helps to
have quantitative ratings for each job.

The Position analysis questionnaire and the Department of Labor approach

are quantitative methods.

Position Analysis Questionnaire is a questionnaire used to collect

quantifiable data concerning the duties and responsibilities of various jobs. The
position analysis questionnaire (PAQ) is a very popular quantitative job
analysis tool, consisting of a questionnaire containing 194 items.

19
The final PAQ “score” reflects the job’s rating on each of these five activities.
To get those scores, the job analyst decides if each of the 194 items (such as
one on using “written materials”) applies to the job and, if so, to what extent.
For example, within the “Processing Information” activity section, an item on
the extent to which the job requires using “written materials” such as books
and reports might get a rating of 4. Since the PAQ scale ranges from 1 to 5, a
4 suggests that written materials do play a significant role in this job.

One of the PAQ’s strengths is in assigning jobs to job classes for pay
purposes. With ratings for each job’s decision-making, skilled activity, physical
activity, vehicle/equipment operation, and information-processing
characteristics, you can quantitatively compare jobs relative to one another,
and then classify jobs for pay purposes.

20
Department of Labor (DOL) Procedure. Experts at the U.S. Department of
Labor did much of the early work developing job analysis. They used their
results to compile what was, for many years, the bible of job descriptions, the
Dictionary of Occupational Titles. This mammoth book contained detailed
information on virtually every job in America. Internet-based tools have largely
replaced the Dictionary. However, the U.S. Department of Labor job analysis
procedure remains a good example of how to quantitatively rate, classify, and
compare jobs.

If you were analyzing the job of a receptionist/clerk, for example, you might
label the job 5, 6, 7 to represent copying data, speaking/signaling people, and
handling things. You might code a psychiatric aide in a hospital 1, 7, 5 in
relation to data, people, and things.

21
Now we will examine how to write a job description.

The most important product of job analysis is the job description. A job
description is a written statement of what the worker actually does, how he or
she does it, and what the job’s working conditions are. You use this information
to write a job specification; this lists the knowledge, abilities, and skills required
to perform the job satisfactorily.

22
There is no standard format for writing a job description. However, most
descriptions contain sections that cover:

1. Job identification
2. Job summary
3. Responsibilities and duties
4. Authority of incumbent
5. Standards of performance
6. Working conditions
7. Job specification

23
The job identification section (on top) contains several types of information.
The job title specifies the name of the job, such as supervisor of data
processing operations, or inventory control clerk. The Fair Labor Standards Act
(FLSA) status section identifies the job as exempt or nonexempt. (Under the
FLSA, certain positions, primarily administrative and professional, are exempt
from the act’s overtime and minimum wage provisions.) Date is the date the
job description was actually approved.

There may also be a space to indicate who approved the description and
perhaps a space showing the location of the job in terms of its facility/division
and department. This section might also include the immediate supervisor’s
title and information regarding salary and/or pay scale. There might also be
space for the grade/level of the job, if there is such a category.

Some job titles are quite creative. One study concluded that employees who
participated in retitling their jobs and have more descriptive job titles tend to be
more satisfied and to feel more recognized.

24
The job identification section (on top) contains several types of information.
The job title specifies the name of the job, such as supervisor of data
processing operations, or inventory control clerk.

Some job titles are quite creative. One study concluded that employees who
participated in retitling their jobs and have more descriptive job titles tend to be
more satisfied and to feel more recognized.

The job summary should summarize the essence of the job, and include only
its major functions or activities.

Thus (in Figure 4-7 above), the telesales rep “… is responsible for selling
college textbooks….”

25
This is the heart of the job description. It should present a list of the job’s
significant responsibilities and duties.

As in Figure 4-7, list each of the job’s major duties separately and describe it in
a few sentences.

Primary Responsibilities (List in order of importance and list amount of time

spent on task.)
Driving Sales (60%)
• Achieve quantitative sales goal for assigned territory of smaller colleges and
universities.
• Determine sales priorities and strategies for territory and develop a plan for
implementing those strategies.
• Conduct 15–20 professor interviews per day during the academic sales year
that accomplishes those priorities…
Publishing (editorial/marketing) 25%
• Report, track, and sign editorial projects.
• Gather and communicate significant market feedback and information to
publishing groups.
Territory Management 15%
• Track and report all pending and closed business in assigned database.

26
• Maintain records of customer sales interviews and adoption situations in
assigned database…

26
https://www.onetonline.org/

The U.S. Department of Labor’s online occupational information network,

called O*NET, enables anyone to see the most important characteristics of
various occupations, as well as the experience, education, and knowledge
required to do each job well. Both the Standard Occupational Classification
and O*NET list the specific duties associated with numerous occupations.

O*NET also lists skills, including basic skills such as reading and writing,
process skills such as critical thinking, and transferable skills such as
persuasion and negotiation. An O*NET job listing also includes information on
worker requirements (required knowledge, for instance), occupation
requirements (such as compiling, coding, and categorizing data, for instance),
and experience requirements (including education and job training). Employers
and career planners also use O*NET to check the job’s labor market
characteristics, such as employment projections and earnings data.

The steps in using O*NET to facilitate writing a job description are listed on the
next slide.

27
The steps in using O*NET to facilitate writing a job description are:

Step 1. Review your Plan. Ideally, the jobs you need should flow from your
departmental or company plans. Do you plan to enter or exit businesses?
What do you expect your sales to be in the next few years? What departments
will have to be expanded or reduced? What kinds of new positions will you
need?
Step 2. Develop an Organization Chart. Start with the organization as it is
now. Then produce a chart showing how you want it to look in a year or two.
Microsoft Word includes an organization charting function.
Step 3. Use a Job Analysis Questionnaire. Next, gather information about
each job’s duties. (You can use job analysis questionnaires, such as those
shown in Figures 4-4 and 4-9).
Step 4. Obtain Job Duties from O*NET. The list of job duties you uncovered
through the job analysis in Step 3 may or may not be complete. We’ll therefore
use O*NET to compile a more complete list. (Refer to the A, B, and C
examples in the text.) Start by going to http://online.onetcenter.org (A). Here,
click on Find Occupations. Assume you want to create job descriptions for a
retail salesperson. Key Retail Sales in the Keyword drop-down box. This
brings you to the Occupations matching “retail sales” page (B). Clicking on the
Retail Salespersons summary produces the job summary and specific

28
occupational Duties for retail salespersons (C). For a small store, you might
want to combine the duties of the “retail salesperson” with those of “first-line
supervisors/managers of retail sales workers.”
Step 5. List the Job’s Human Requirements from O*NET. Next, return to
the summary for Retail Salesperson (C). Here, click, for example, Knowledge,
Skills, and Abilities. Use this information to help develop a job specification for
your job. Use this information for recruiting, selecting, and training your
employees.
Step 6. Finalize the Job Description. Finally, perhaps using Figure 4-9 as a
guide, write an appropriate job summary for the job. Then use the information
obtained previously in Steps 4 and 5 to create a complete listing of the tasks,
duties, and human requirements of each of the jobs you will need to fill.

28
O*NET page for industrial engineers

https://www.onetonline.org/link/summary/17-2112.00

29
30
31
Now we will examine how to write a job description.

The most important product of job analysis is the job description. A job
description is a written statement of what the worker actually does, how he or
she does it, and what the job’s working conditions are. You use this information
to write a job specification; this lists the knowledge, abilities, and skills required
to perform the job satisfactorily.

32
33
Writing job specifications for trained and experienced employees is relatively
straightforward. Here job specifications tend to focus on factors such as length
of previous service, quality of relevant training, and previous job performance.
The problems are more complex when you’re filling jobs with untrained people
(with the intention of training them on the job). Here you must specify qualities
such as physical traits, personality, interests, or sensory skills that imply some
potential for performing the job or for trainability.

34
Most job specifications simply reflect the educated guesses of people like
supervisors and human resource managers. The basic procedure here is to
ask, “What does it take in terms of education, intelligence, training, and the like
to do this job well?”

How does one make such “educated guesses”? You could simply review the
job’s duties, and deduce from those what human traits and skills the job
requires. You can also choose human traits and skills from those listed in Web-
based job descriptions.

In any case, use common sense. Don’t ignore behaviors that may apply to
almost any job but that might not normally surface through a job analysis.
Industriousness is an example.

35
Basing job specifications on statistical analysis rather than on judgment is the
more defensible approach, but it’s also more difficult. The aim here is to
determine statistically the relationship between (1) some predictor (human trait
such as height, intelligence, or finger dexterity), and (2) some indicator or
criterion of job effectiveness, such as performance as rated by the supervisor.

36
A typical matrix lists the following information, in five columns:
Column 1: Each of the job’s four or five main job duties
Column 2: The task statements for the main tasks associated with each main
job duty
Column 3: The relative importance of each main job duty
Column 4: The time spent on each main job duty
Column 5: The knowledge, skills, ability, and other human characteristics
(KSAO) related to each main job duty

The main step in creating a job-requirements matrix involves writing the task
statements. Each task statement describes what the worker does on each of
a main job duty’s separate job tasks and how the worker does it.

37
Many people still think of a “job” as a set of specific duties someone carries out
for pay, but the concept of job is changing. Companies today are flattening
their hierarchies, squeezing out managers, and leaving the remaining workers
with more jobs to do. Changes like these tend to blur where one job starts and
another ends. In situations like these, relying on a list of job duties that
itemizes specific things you expect the worker to do is often impractical.

Many employers are therefore using a newer job analysis approach. Instead of
listing the job’s duties, they are listing, in competency models (or profiles), the
knowledge, skills, and experience someone needs to do the job. Such models
or profiles (see Figure 4-10 shown) list the competencies employees must be
able to exhibit to get their jobs done.

The competency model or profile then becomes the guidepost for recruiting,
selecting, training, evaluating, and developing employees for each job. For
instance, the manager hires new employees using tests that measure the
profile’s list of competencies, trains employees with courses that develop
these competencies, and appraises performance by assessing the worker’s
competencies. This is illustrated in the Strategic Context feature on the next
slide.

38
Instead of compiling lists of job duties, your aim is to finish the statement, “In
order to perform this job competently, the employee should be able to .…”

The ideal competency statement will include three elements:

1. One is the name and a brief description of the competency, such as
“Project Management—creating accurate and effective project schedules.”
2. The second is a description of the observable behaviors that represent
proficiency in the competency, such as “continuously manage project risks
and dependencies by making timely decisions.”
3. Third are proficiency levels.

39
BP EXAMPLE British Petroleum’s (BP’s) exploration division executives
wanted to shift employees from a job duties–oriented “that’s-not-my-job”
attitude to one that motivated employees to obtain the skills required to
accomplish broader responsibilities. Their solution was a skills matrix like that
in Figure 4-11. They had skills matrices for each job or job family (such as
drilling managers). As in Figure 4-11, each matrix listed (1) the types of skills
required to do that job, such as technical expertise, and (2) the minimum skill
required for proficiency at each level. The figure’s note shows how to actually
use the matrix.
BP’s talent management efforts in this unit could now focus on recruiting,
hiring, training, appraising, and rewarding employees based on the set of skills
employees need to perform the job in question.

Note: This is an example of a skills matrix for technical/engineering product

development employees. The blue numbered boxes show the level required
for each skill for these product development employees. An accompanying key
would provide specific examples for each level of each skill, with difficulty
increasing for each skill level starting at Level 1.
For example, Level 1 for Technical Expertise/Skills might say “has or is in
process of acquiring the basic knowledge necessary to do this type of job,”
while Level 6 might say, “Capable of conducting and supervising highly

40
complex analytical tasks requiring advanced technical know-how and skills.”

40
41
1
After studying this chapter, you will be able to:

5-1. Define workforce planning, and explain how to develop a workforce plan.
5-2. Explain the need for effective recruiting and how to make recruiting more
effective.
5-3. Discuss the main internal sources of candidates.

2
The recruitment and selection process is a series of “hurdles” aimed at
selecting the best candidate for the job.

3
Job analysis identifies the duties and human requirements for each of the
company’s jobs. The next step is to decide which of these jobs you need to fill,
and to recruit and select employees for them.

The traditional way to envision recruitment and selection is as a series of

hurdles (Figure 5-1):

1. Decide what positions to fill, through workforce/personnel planning and

forecasting.
2. Build a pool of candidates for these jobs, by recruiting internal or external
candidates.
3. Have candidates complete application forms and perhaps undergo initial
screening interviews.
4. Use selection tools like tests, background investigations, and physical
exams to screen candidates.
5. Decide who to make an offer to by having the supervisor and perhaps
others interview the candidates.

This chapter focuses on personnel planning and on recruiting employees.

Chapters 6 and 7 will address tests, background checks, physical exams, and
interviews.

4
• Workforce (or employment or personnel) planning is the process of
deciding what positions the firm will have to fill, and how to fill them.
• Its aim is to identify and to eliminate the gaps between the employer’s
projected workforce needs and the current employees who might be
suitable for filling those needs.
• Workforce planning should precede recruitment and selection.

5
Workforce planning shouldn’t occur in a vacuum. Instead,
workforce/employment planning is best understood as an outgrowth of the
firm’s strategic and business planning. Workforce planning should be an
integral part of the firm’s strategic planning process.

For example, plans to enter new businesses, to build new plants, or to reduce
activities will all influence the number of and types of positions to be filled. At
the same time, decisions regarding how to fill these positions will impact other
HR plans, for instance, training and recruitment plans.

The Strategic Context feature illustrates this. Let’s take a look…

6
Improving Performance: The Strategic Context

Four Seasons

As noted, Four Seasons builds its strategy around offering superior customer
service, and that requires highly motivated and high-morale employees. How
can Four Seasons use its recruitment practices to encourage such motivation
and morale? One way Four Seasons does this is by filling hotel positions
around the world with internal transfers. In one recent year, for instance, about
280 employees relocated from hotels in one country to another within the Four
Seasons chain. Employees love it. It gives them a chance for adventure and to
see the world, while building a career with a great hotel chain. And it’s great for
Four Seasons too, because the resulting high morale and motivation supports
Four Seasons’ strategic goal of superior customer service. In other words,
Four Seasons uses recruitment practices that produce the excellent service
the chain needs to achieve its strategic goals.

Talk About it (Discussion): Can you think of any other benefits Four Seasons
may derive from its policy of transferring employees among its hotels? What
are they?

7
Like any good plans, employment plans are built on forecasts—basic
assumptions about the future.
Here, the manager will usually need three sets of employment forecasts:
• one for personnel needs (demand),
• one for the supply of inside candidates,
• and one for the supply of outside candidates.
(As at Four Seasons, the employer will usually have to decide whether to fill
projected openings internally with current employees or externally by bringing
in new people).
Then with these three forecasts, the manager can identify needs-supply gaps,
and develop training and other plans to fill the anticipated gaps. We will start
with forecasting personnel needs/demand.

8
To answer the question “How many people with what skills will we need?,”
managers have to consider different factors:

A firm’s future staffing needs reflect demand for its products or services,
adjusted for changes the firm plans to make in its strategic goals, and for
changes in its turnover rate and productivity. Forecasting workforce demand
therefore starts with estimating what the demand will be for your products or
services.

Longer term managers will follow industry publications and economic forecasts
closely, to try to get a sense for future demand. Such future predictions won’t
be precise, but should help you address the potential changes in demand.

The basic process for forecasting personnel needs is to forecast revenues

first. Then estimate the size of the staff required to support this sales volume.
However, managers must also consider other factors. These include projected
turnover, decisions to upgrade (or downgrade) products or services,
productivity changes, financial resources, and decisions to enter or leave
businesses.

9
The basic tools for projecting personnel needs include trend analysis, ratio
analysis, the scatter plot, and managerial judgment.

Trend analysis means studying variations in the firm’s employment levels over the
past few years. For example, compute the number of employees at the end of each of
the last 5 years in each subgroup (like sales, production, secretarial, and
administrative) to identify trends.
Ratio analysis means making forecasts based on the historical ratio between (1)
some causal factor (like sales volume), and (2) the number of employees required
(such as number of salespeople). For example, suppose a salesperson traditionally
generates $500,000 in sales. If the sales revenue to salespeople ratio remains the
same, you would require six new salespeople next year (each of whom produces an
extra $500,000) to produce a hoped-for extra $3 million in sales.
A scatter plot shows graphically how two variables—such as sales and your firm’s
staffing levels—are related. If they are, then if you can forecast the business activity
(like sales), you should also be able to estimate your personnel needs.
MANAGERIAL JUDGMENT Few historical trends, ratios, or relationships will
continue unchanged into the future. Judgment is thus needed to adjust the forecast.
Important factors that may modify your initial forecast of personnel requirements
include decisions to upgrade quality or enter into new markets; technological and
administrative changes resulting in increased productivity; and financial resources
available, for instance, a projected budget crunch.

10
Figure demonstrates how prior knowledge of employee numbers can be used
in a trend analysis to predict future requirements.

June, July, August, …

11
12
For example, suppose a 500-bed hospital expects to expand to 1,200 beds
over the next 5 years. The human resource director wants to forecast how
many registered nurses the hospital will need.
The human resource director realizes she must determine the relationship
between hospital size (in number of beds) and number of nurses required. She
calls eight hospitals of various sizes and gets this table.

Figure 5-2’s graph compares hospital size and number of nurses. If the two
are related, then the points you plot (from the data in the table above) will tend
to fall on a straight line, as here. If you carefully draw in a line to minimize the
distances between the line and each one of the plotted points, you will be able
to estimate the number of nurses needed for each hospital size. Thus, for a
1,200-bed hospital, the human resource director would assume she needs
about 1,210 nurses.

13
The personnel demand forecast provides only half the staffing equation, by
answering the question: “How many employees in what positions will we
need?” Next, the manager must forecast the supply (availability) of inside and
outside candidates.

Most firms start with possible inside candidates. The main task here is
determining which current employees are qualified or trainable for the
projected openings.

Personnel replacement charts (illustrated here in Figure 5-3) are usually

used for the firm’s top positions. They show the present performance and
promoteability for each position’s potential replacement.

Computerized skills inventories may be used in larger firms.

14
Markov analysis is also a method that involves creating a matrix that shows
the probabilities that employees in the chain of feeder positions for a key job
(such as from junior engineer, to engineer, to senior engineer, to engineering
supervisor, to director of engineering) will move from position to position and
therefore be available to fill the key position.

15
Forecasting the Supply of Outside Candidates is done when there is not
enough skilled inside candidates to fill the anticipated openings.

Forecasting workforce availability depends first on the manager’s own sense

of what’s happening in his or her industry and locale. The manager then
supplements such observations with formal labor market analyses. For
example, look for economic projections online from the U.S. Congressional
Budget Office and the Bureau of Labor Statistics.

16
In 2018, Apple CEO Tim Cook announced that Apple’s board had a succession plan
for who could become CEO should Cook step down.

Succession planning involves developing workforce plans for the company’s top
positions. Succession planning is the ongoing process of systematically identifying,
assessing, and developing organizational leadership to enhance performance.

It entails three steps: identify key position needs, develop inside candidates, and
assess and choose those who will fill the key positions.
First, based on the company’s strategic and business plans, top management and the
human resource director identify what the company’s future key position needs will
be.
After identifying future key positions, management turns to creating candidates for
these jobs. “Creating” means identifying inside (or bringing in outside) candidates and
providing them with the developmental experiences they require to be viable
candidates.
Finally, succession planning requires assessing these candidates and selecting those
who will actually fill the key positions.

As at Apple, the firm’s board of directors should ensure that top management
succession plans are in place. In fact, monitoring plans for and approving top
management appointments is one of a corporate board’s essential roles.

17
Employee recruiting means finding and/or attracting applicants for the
employer’s open positions.

Recruiting is important. If only two candidates apply for two openings, you may
have little choice but to hire them. But if 10 or 20 applicants appear, you can
use techniques like interviews and tests to screen out all but the best.

The employer should carefully select and train recruiters on communication

skills, technical knowledge on recruiting, legal issues, etc.

Recruitment sourcing involves determining what your recruitment options

(referrals, online ads, etc) are, and then assessing which are best for the job in
question. Quantity and quality of applicants is important.

The employer’s brand or reputation affects recruiting success. The branding

often focuses on what it’s like to work at the company, including company
values and the work environment. GE, for instance, stresses innovation
(hiring “bright, interesting people working together on new and exciting
projects”). Others stress being environmentally responsible.

18
The recruiting yield pyramid is based on experience and solid record-keeping.
In our example, if a company needs 50 entry-level accountants, using the
pyramid, it will need to generate approximately 1,200 leads to fill the new-hire
requirement. Let’s take a look…

Filling a relative handful of positions might require recruiting dozens or

hundreds of candidates. Managers therefore use a staffing or recruiting yield
pyramid, as shown in Figure 5-5, to gauge the staffing issues it needs to
address. In Figure 5-5, the company knows it needs 50 new entry-level
accountants next year. From experience, the firm also knows the following:
● The ratio of offers made to actual new hires is 2 to 1.
● The ratio of candidates interviewed to offers made is 3 to 2.
● The ratio of candidates invited for interviews to candidates interviewed is
about 4 to 3.
● Finally, the firm knows that of the six leads that come in from all its recruiting
sources, it typically invites only one applicant for an interview—a 6-to-1 ratio.

Therefore, again the firm must generate about 1,200 leads to be able to invite
in 200 viable candidates of which it interviews about 150, and so on.

19
Recruiting typically brings to mind LinkedIn, employment agencies, and
classified ads, but internal sources—in other words, current employees or
“hiring from within”—is often the best source of candidates.

One study concluded that firms that hired their CEOs from inside rather than
outside performed better.

In a perfect world, the employer will adhere to formal internal-recruitment

policies and procedures. These typically rely heavily on job posting and on the
firm’s skills inventories. Job posting means publicizing the open job to
employees (usually by literally posting it on company intranets or bulletin
boards). Qualifications skills inventories may reveal employees who have the
right background for the open job. Rehiring someone who left your employ has
pros and cons.

20
In a perfect world, the employer will adhere to formal internal-recruitment
policies and procedures. These typically rely heavily on job posting and on the
firm’s skills inventories. Job posting means publicizing the open job to
employees (usually by literally posting it on company intranets or bulletin
boards). Qualifications skills inventories may reveal employees who have the
right background for the open job.
Ideally, the employer’s internal-recruitment system therefore matches the best
inside candidate with the job. In practice, this doesn’t always happen. For
better or worse, internal politics and having the right connections may well lead
to placements that seem (and indeed may be) unfair and suboptimal.

21
Employers can’t always get all the employees they need from their current
staff, and sometimes they just don’t want to. Next, we look at the sources firms
use to find outside candidates.

23
The author of Unlock the Hidden Job Market estimates that perhaps half of all
positions are filled informally (without formal recruiting). Similarly, one survey
found that 28% of those surveyed found their most recent job through word-of-
mouth. Nineteen percent used online job boards, 16% used direct approaches
from employers and employment services, 7% print ads, and only 1% used
social media sites (although 22% used sites like LinkedIn to search for jobs).

24
Most employers post ads on their own Websites, as well as on job boards
such as Indeed.com, Monster, and CareerBuilder.

Online recruiting is getting more sophisticated.

25
Virtual (fully online) job fairs are another option. Online visitors see a similar
setup to a regular job fair. They can listen to presentations, visit booths, leave
Résumés and business cards, participate in live chats, and get contact
information from recruiters and hiring managers.

26
Pros – Online recruiting generates more responses quicker and for a longer
time at less cost than just about any other method. And, because they are
richer and more comprehensive in describing the jobs, Web-based ads have a
stronger effect on applicant attraction than do printed ads.

Cons – Online recruiting has two potential problems. First, older people and
some minorities are less likely to use the Internet, so online recruiting may
inadvertently exclude more older applicants (and certain minorities).

The second problem is Internet overload: Employers end up deluged with

résumés. Self-screening helps: The Cheesecake Factory posts detailed job
duties listings, so those not interested needn’t apply. Another approach is to
have job seekers complete a short online prescreening questionnaire, then use
it to identify those who may proceed in the hiring process.

Most employers also use applicant tracking systems, to which we now turn.

27
• A deluge of applicants means that most employers now use applicant tracking
software to screen applications. Applicant tracking systems (ATS) are online
systems that help employers attract, gather, screen, compile, and manage
applicants. They also provide other services, including requisitions management
(for monitoring the firm’s open jobs), applicant data collection (for scanning
applicants’ data into the system), and reporting (to create various recruiting-related
reports such as cost per hire and hire by source). Most systems are from
application service providers (ASPs).
• As one example, a bank uses its ATS to bump applicants who don’t meet the job’s
basic requirements; it then e-mails them suggesting they review the bank’s site for
more appropriate positions. This bank then uses either phone or video interviews
to reduce the applicant pool to a few candidates. Then its recruiters interview those
at headquarters and send them through the final selection process.
• Employers also use artificial intelligence-based systems to improve recruitment.
The main focus is on automating the resume analysis. For example, Text Kernal
can quickly scan thousands of resumes and find viable candidates. It uses AI to
identify alternative words.
• If a recruiter wants a candidate with experience in autonomous driving
technology, Textkernel would scan the résumés not just for “autonomous
driving” but also forsimilar words (like “self-driving”) that its algorithms have
found people use in place of “autonomous driving.”
• Even with AI, beware of bias. How the bots define “good candidate” depends on
what the employer did in the past.

28
The employer’s online effort needs to be thought out. The best Web ads don’t
just transfer newspaper ads to the Web.

Figure 5-6 is an example of recycling a print ad to the Web. The ineffective

Web ad has needless abbreviations and doesn’t say much about why the job
seeker should want that job.

Employers take several steps for effectiveness: (Figure 5-6 illustrates

this)
• Provide a way for potential applicants to gauge if the job is a good fit.
• Give reasons to work for this company.
• Starts with an attention grabbing heading.
• Best to place employment information one click away from their home
pages. Applicants can submit their résumés online at most Fortune 500
firms’ websites.
• Furthermore, the best Web ads don’t just transfer newspaper ads to the
Web. As one specialist put it, “Getting recruiters out of the ‘shrunken want
ad mentality’ is a big problem.”

29
Trends Shaping HR: Digital and Social Media

Anyone seeking a job should probably sign up with LinkedIn. Accenture predicts that
about 80% of new recruits will soon come through prospective employees’ social
media connections.

Recruiters use social media recruiting in several ways:

1. They dig through social Websites and competitors’ publications to find applicants
who may not even be looking for jobs.
2. They seek passive candidates (people not actively looking for jobs) by using
social networking sites such as LinkedIn Recruiter Lite (a premium service) to
browse members’ résumés and to find such candidates.
3. Many firms use Twitter to announce job openings to job seekers who subscribe to
their Twitter feeds.
4. Theladders.com’s Pipeline™ networking tool lets recruiters maintain a dialogue
with prospective job seekers even before they’re interested in seeking a job.
5. Others use Facebook’s friend-finding search function, and Twitter, to learn more
about prospective and actual candidates.
6. TalentBin searches sites such as Pinterest to find qualified tech workers.

30
While Web-based recruiting is replacing traditional help wanted ads, a glance
at almost any paper will confirm that print ads are still popular. To use such
help wanted ads successfully, employers should address two issues: the
advertising medium and the ad’s construction.

The best medium depends on the positions for which you are recruiting.

Figure 5-7 gives an illustration of ad construction….Let’s take a look.

Experienced advertisers use the guide AIDA (attention, interest, desire, action)
to construct ads.
First, you must attract attention to the ad, or readers may ignore it. Why does
the ad attract attention? The phrase “next key player” helps.
Next, develop interest in the job. For instance, “are you looking to make an
impact?”
Create desire by spotlighting words such as travel or challenge. As an
example, having a graduate school nearby may appeal to engineers and
professional people.
Finally, the ad should prompt action with a statement like “call today.”

31
There are three main types of employment agencies:
(1) public agencies operated by federal, state, or local governments;
(2) agencies associated with nonprofit organizations; and
(3) privately owned agencies.

Every state has a public, state-run employment service agency. The U.S.
Department of Labor supports these agencies. Most states have turned their
local state employment service agencies into “one-stop” shops – neighborhood
training/employment/career assessment centers.

Most (nonprofit) professional and technical societies, such as the Institute for
Electrical and Electronic Engineers (IEEE), have units that help members find
jobs. Many special public agencies place people who are in special categories,
such as those who are disabled.

Private employment agencies are important sources of clerical, white-collar,

and management personnel. They charge fees for each applicant they place.
Most are “fee-paid” jobs, in which the employer pays the fee.

32
Recruitment process outsourcers are special vendors that handle all or
most of an employer’s recruiting needs. They usually sign short-term contracts
with the employer, and receive a monthly fee that varies with the amount of
actual recruiting the employer needs done.

On-demand recruiting services (ODRS) are recruiters who are paid by the
hour or project, instead of a percentage fee, to support a specific project.

33
Rather than bringing people in to do the company’s jobs, outsourcing and
offshoring send the jobs out.

Outsourcing – means having outside vendors supply services (such as

benefits management, market research, or manufacturing) that the company’s
own employees previously did in-house.

Offshoring – means having outside vendors or employees abroad supply

services that the company’s own employees previously did in-house.

Employers are sending jobs out, and not just blue-collar jobs. Sending jobs
out, particularly overseas, presents employers with special personnel
challenges. These include cultural misunderstandings, security and information
privacy concerns, foreign contract, liability, and legal systems issues, and
special training needs.

34
Executive recruiters (also known as headhunters) are special employment
agencies employers retain to seek out top-management talent for their clients.
The percentage of your firm’s positions filled by these services might be small.
However, these jobs include key executive and technical positions. For
executive positions, headhunters may be your only source of candidates. The
employer always pays the fees.

35
Referrals and Walk-Ins – Employee referral campaigns are a very important
recruiting option. Here the employer posts announcements of openings and
requests for referrals on its Website, bulletin boards, and/or wallboards. It
often offers prizes or cash awards for referrals that lead to hiring.

Remember that relying on referrals might be discriminatory where a workforce

is already homogeneous. Employee referral programs can also backfire when
most of a firm’s employees are nonminority. Here one suggestion is to offer
bigger bonuses for diversity hires.

36
Walk-Ins – Particularly for hourly workers, walk-ins—direct applications made at your
office—are a big source of applicants. Sometimes, posting a “Help Wanted” sign
outside the door may be the most cost-effective way of attracting good local
applicants. Treat walk-ins courteously, for both the employer’s community reputation
and the applicant’s self-esteem.

College recruiting – Sending an employer’s representatives to college campuses to

prescreen applicants and create an applicant pool from the graduating class—is
important. One study several years ago concluded, for instance, that new college
graduates filled about 40% of all externally filled jobs requiring a college degree.

Internships – Internships can be win–win situations. For students, they can mean
honing business skills, learning more about potential employers, and discovering
one’s career likes (and dislikes). And employers can use the interns to make useful
contributions while evaluating them as possible full-time employees. A recent study
found that about 60% of internships turned into job offers. Unfortunately, some
internships turn into nightmares. Many interns, particularly in industries like fashion
and media, report long unpaid days doing menial work.

37
College recruiting – Sending an employer’s representatives to college campuses to
prescreen applicants and create an applicant pool from the graduating class—is
important. One study several years ago concluded, for instance, that new college
graduates filled about 40% of all externally filled jobs requiring a college degree.

The campus recruiter has two main goals. One is to determine if a candidate is worthy
of further consideration. Traits to assess include communication skills, education,
experience, and technical and interpersonal skills. The other aim is to make the
employer attractive to candidates. A sincere and informal attitude, respect for the
applicant,
and prompt follow-up emails/letters can help sell the employer to the interviewee.

Internships – Internships can be win–win situations. For students, they can mean
honing business skills, learning more about potential employers, and discovering
one’s career likes (and dislikes). And employers can use the interns to make useful
contributions while evaluating them as possible full-time employees. A recent study
found that about 60% of internships turned into job offers. Unfortunately, some
internships turn into nightmares. Many interns, particularly in industries like fashion
and media, report long unpaid days doing menial work.

38
Women – Given the progress women have made in getting and excelling in a
wide range of professional, managerial, and military occupations, one might
assume that employers need no special recruitment efforts to recruit women,
but that’s not necessarily the case. For example, women still face headwinds
in certain male-dominated occupations such as engineering. Women also
carry the heavier burden of child-rearing, fill proportionately fewer high-level
managerial posts, and still earn only about 70% of what men earn for similar
jobs. Many employers therefore focus particular efforts on recruiting qualified
women.

39
Job analysis identifies the duties and human requirements for each of the
company’s jobs. The next step is to decide which of these jobs you need to fill,
and to recruit and select employees for them.

The traditional way to envision recruitment and selection is as a series of

hurdles (Figure 5-1):

1. Decide what positions to fill, through workforce/personnel planning and

forecasting.
2. Build a pool of candidates for these jobs, by recruiting internal or external
candidates.
3. Have candidates complete application forms and perhaps undergo initial
screening interviews.
4. Use selection tools like tests, background investigations, and physical
exams to screen candidates.
5. Decide who to make an offer to by having the supervisor and perhaps
others interview the candidates.

This chapter focuses on personnel planning and on recruiting employees.

Chapters 6 and 7 will address tests, background checks, physical exams, and
interviews.

40
Purpose: The application form is usually the first step in the prescreening
process. Application forms are a good way to quickly collect verifiable and
fairly accurate historical data from the job candidate. The form provides
information on education, prior work record, and skills.
A filled-in application provides four types of information.
• First, you can make judgments on substantive matters, such as whether
the applicant has the education and experience to do the job.
• Second, you can draw conclusions about the applicant’s previous
progress and growth, especially important for management candidates.
• Third, you can draw tentative conclusions about the applicant’s stability
based on previous work record (although years of downsizing suggest the
need for caution here).
• Fourth, you may be able to use the data in the application to predict which
candidates will succeed on the job.

41
Using Application Forms to Predict Job Performance
Some employers use analyses of application information (“bio data”) to predict
employee tenure and performance. In one study, the researchers found that
applicants who had longer tenure with previous employers were less likely to
quit, and also had higher performance within 6 months after hire.

Choose bio data items with three things in mind. First, equal employment law
limits the items you’ll want to use (avoid age, race, or gender, for instance).
And, noninvasive items are best. In one study, subjects perceived items such
as “dollar sales achieved” and “grade point average in math” as not invasive.
Items such as “birth order” and “frequent dates in high school” were more
invasive. Finally, some applicants will fake bio data answers in an effort to
impress the employer.

42
43
1
After studying this chapter, you will be able to:

6-1. Answer the question: Why is it important to test and select employees?
6-2. Explain what is meant by reliability and validity.

2
After studying this chapter, you will be able to:

6-3. List and briefly describe the basic categories of selection tests, with
examples.
6-4. Explain how to use two work simulations for selection.
6-5. Describe four ways to improve an employer’s background checking
process.

3
4
Why Employee Selection is Important

After reviewing the applicants’ résumés, the manager turns to selecting the best
candidate for the job. This usually means reducing the applicant pool by using the
screening tools we discuss in this and the following chapter: tests, assessment centers,
interviews, and background and reference checks.

The aim of employee selection is to achieve person-job fit. This means matching the
knowledge, skills, abilities, and other competencies (KSACs) that are required for
performing the job (based on job analysis) with the applicant’s KSACs. Of course, a
candidate might be “right” for a job, but wrong for the organization. For example, an
experienced airline pilot might excel at American Airlines but perhaps not at Southwest,
where the organizational values require that all employees help out, even with baggage
handling. Therefore, while person-job fit is usually the main consideration, person-
organization fit is important too.

Selecting the right person is crucial for several reasons.

First, employees with the right skills will perform better for you and the company.
Second, it is important because it’s costly to recruit and hire employees.
Third, it’s important because mismanaging hiring has legal consequences. Equal
employment laws require nondiscriminatory selection procedures.
-Negligent hiring: Hiring workers with questionable backgrounds without proper
safeguards.

5
The Basics of Testing and Selecting Employees

In this chapter, we’ll discuss several popular selection tools, starting with tests.
A test is basically a sample of a person’s behavior. Any test or screening tool
has two important characteristics, reliability and validity. We’ll start with the
former.

6
Reliability is a selection tool’s first requirement.

It is defined as the consistency of scores obtained by the same person when retested
with the identical tests or with alternate forms of the same test.

So therefore, “A reliable test is one that yields consistent scores when a person takes
two alternate forms of the test or when he or she takes the same test on two or more
different occasions.”

If a person scores 90 on an intelligence test on a Monday and 130 when retested on

Tuesday, you probably wouldn’t have much faith in the test.

• Test retest reliability: administer a test to a group one day, re-administer the
same test several days later to the same group, and then correlate the first set of
scores with the second.
• Equivalent or alternate form: administer a test and then administer what experts
believe to be an equivalent test later
• Internal comparison: compare the test taker’s answers to certain questions on
the test with his or her answers to a separate set of questions on the same test
aimed at measuring thesame thing. For example, a psychologist includes 10 items
on a test believing that they all measure interest in working outdoors, and then
determines the degree to which responses to these 10 items vary together.
(Cronbach’s alpha)

7
Because measuring reliability generally involves comparing two measures that
assess the same thing, it is typical to judge a test’s reliability in terms of a
reliability coefficient. This basically shows the degree to which the two
measures (say, test score one day and test score the next day) are correlated.
Figure 6-1 illustrates correlation.

In both the left and the right scatter plots, the psychologist compared each
applicant’s time 1 test score (on the x-axis) with his or her subsequent (time 2)
test score (on the y-axis). On the left, the scatter plot points (each point
showing one applicant’s test score and subsequent test performance) are
dispersed. There seems to be no correlation between test scores obtained at
time 1 and at time 2. On the right, the psychologist tried a new test. Here the
resulting points fall in a predictable pattern. This suggests that the applicants’
test scores correlate closely with their previous scores.

8
Validity

Test Reliability, while indispensable, tells you only that the test is measuring
something consistently.

Test Validity tells you whether the test is measuring what you think it’s
supposed to be measuring. Put another way, it refers to the correctness of the
inferences that we can make based on the test.

With employee selection tests, validity often refers to evidence that the test is
job related—in other words, that performance on the test accurately predicts
job performance.

A selection test must be valid because, without proof of validity, there is no

logical or (under EEO law) legally permissible reason to use it to screen job
applicants.

9
There are several ways to demonstrate a test’s validity.

Criterion validity involves demonstrating statistically a relationship between

scores on a selection procedure and job performance of a sample of workers.
For example, it means demonstrating that those who do well on the test also
do well on the job, and that those who do poorly on the test do poorly on the
job. The test has validity to the extent that the people with higher test scores
perform better on the job.

Content validity is a demonstration that the content of a selection procedure

is representative of important aspects of performance on the job. For example,
employers may demonstrate the content validity of a test by showing that the
test constitutes a fair sample of the job’s content. The basic procedure here is
to identify job tasks that are critical to performance, and then randomly select a
sample of those tasks to test.

Construct validity means demonstrating that (1) a selection procedure

measures a construct (an abstract idea such as morale or honesty), and (2)
that the construct is important for successful job performance.

10
Evidence-Based HR: How to Validate a Test

Employers often opt to demonstrate evidence of a test’s validity using criterion

validity. Here, in order for a selection test to be useful, you need evidence that
scores on the test relate in a predictable way to performance on the job. In
practice, anyone using tests (or test results) should know something about
validation. Then you can better understand how to use tests and interpret their
results.

The validation process consists of five steps:

Step 1: Analyze the Job – The first step is to analyze the job and write job
descriptions and job specifications. The aim here is to specify the human traits
and skills you believe are required for job performance. These requirements
become the predictors. In this first step, also define “success on the job,” since
it’s this success for which you want predictors. The standards of success are
criteria. You could use production-related criteria (quantity, quality, and so on),
personnel data (absenteeism, length of service, and so on), or worker
performance (reported by supervisors).

Step 2: Choose the Tests – Once you know the predictors (such as manual

11
dexterity) the next step is to decide how to test for them.

Step 3: Administer the Test – Next, administer the selected test(s). One
option is to administer the tests to employees currently on the job. You then
compare their test scores with their current performance; this is concurrent (at
the same time) validation. Its advantage is that data on performance is readily
available. The disadvantage is that current employees may not be
representative of new applicants (who, of course, are really the ones for whom
you are interested in developing a screening test).
Predictive validation is the second and more dependable way to validate a
test. Here you administer the test to applicants before you hire them, then hire
these applicants using only existing selection techniques, not the results of the
new tests. After they’ve been on the job for some time, measure their
performance and compare it to their earlier test scores. You can then
determine whether you could have used their performance on the new test to
predict their subsequent job performance.

Step 4: Relate Your Test Scores and Criteria – Here, ascertain if there is a
significant relationship between test scores (the predictor) and performance
(the criterion). The usual method is to determine the statistical relationship
between (1) scores on the test, and (2) job performance using correlation
analysis, which shows the degree of statistical relationship.

If there is a correlation between test and job performance, you can develop an
expectancy chart. This presents the relationship between test scores and job
performance graphically. Figure 6-4 illustrates this.

Step 5: Cross-Validate and Revalidate – Before using the test, you may
want to check it by “cross-validating”—in other words, by again performing
steps 3 and 4 on a new sample of employees. At a minimum, revalidate the
test periodically.

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One option is to administer the tests to employees currently on the job. You
then compare their test scores with their current performance; this is
concurrent (at the same time) validation. Its advantage is that data on
performance is readily available. The disadvantage is that current employees
may not be representative of new applicants (who, of course, are really the
ones for whom you are interested in developing a screening test). Current
employees have already had on-the-job training and screening by your existing
selection techniques.

Predictive validation is the second and more dependable way to validate a

test. Here you administer the test to applicants before you hire them, then hire
these applicants using only existing selection techniques, not the results of the
new tests. After they’ve been on the job for some time, measure their
performance and compare it to their earlier test scores. You can then
determine whether you could have used their performance on the new test to
predict their subsequent job performance.

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The usual method is to determine the statistical relationship between (1)
scores on the test and (2) job performance using correlation analysis, which
shows the degree of statistical relationship.

If there is a correlation between test and job performance, you can develop an
expectancy chart. This presents the relationship between test scores and job
performance graphically. Figure 6-4 illustrates this.

Note: This expectancy chart shows the relation between scores made on the
Minnesota Paper Form Board and rated success of junior draftspersons.
Example: Those who score between 37 and 44 have a 55% chance of being
rated high performer and those scoring between 57 and 64 have a 97%
chance.

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Bias

Most employers know they shouldn’t use biased tests in the selection process.
For example, a particular IQ test may provide a valid measure of cognitive
ability for middle-class whites but not for some minorities, if the score depends
on familiarity with certain aspects of middle-class culture.

Until recently, many industrial psychologists believed they were adequately

controlling test bias, but that issue is under review. Employers should therefore
redouble their efforts to ensure that the tests they’re using aren’t producing
biased decisions.

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Utility Analysis

Knowing that a test predicts performance isn’t always of practical use. For example, if it is
going to cost the employer $1,000 per applicant for the test, and hundreds of applicants
must be tested, the cost of the test may exceed the benefits derived from hiring a few
more capable employees.

Answering the question, “Does it pay to use the test?” requires utility analysis. Two
selection experts say, “Using dollar and cents terms, [utility analysis] shows the degree to
which use of a selection measure improves the quality of individuals selected over what
would have happened if the measure had not been used.” The information required for
utility analysis generally includes, for instance, the validity of the selection measure, a
measure of job performance in dollars, applicants’ average test scores, cost of testing an
applicant, and the number of applicants tested and selected.

Example:
Financial services firm Key Bank knew it needed a better way to screen and select tellers
and call-center employees. The company calculated it cost about $10,000 to select and
train an employee, but it was losing 13% of new tellers and call-center employees within
the first 90 days. That turnover number dropped to 4% after Key Bank implemented a
computerized virtual job tryout candidate assessment screening tool. “We calculated a
$1.7 million cost savings in teller turnover in one year, simply by making better hiring
decisions, reducing training costs and increasing quality of hires,” said the firm’s human
resources director.

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Validity Generalization

If the test is valid in one company, to what extent can we generalize those
validity findings to our own company? Validity generalization “refers to the
degree to which evidence of a measure’s validity obtained in one situation can
be generalized to another situation without further study.”

Factors to consider include existing validation evidence regarding using the

test for various specific purposes, the similarity of the subjects with those in
your organization, and the similarity of the jobs.

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We can conveniently classify tests according to whether they measure cognitive
(mental) abilities, motor and physical abilities, personality and interests, or
achievement.

Cognitive tests include testing general reasoning ability or intelligence. In addition,

they include tests of specific mental abilities such as memory or inductive reasoning.

Intelligence tests are known as (IQ) tests of general intellectual abilities. They
measure not a single trait but rather a range of abilities, including memory,
vocabulary, verbal fluency, and numerical ability. An adult’s IQ score is a “derived”
score; it reflects the extent to which the person is above or below the “average”
adult’s intelligence score.

Tests of specific cognitive abilities measure specific mental abilities, such as

deductive reasoning, verbal comprehension, memory, and numerical ability.
Psychologists often call such tests aptitude tests, since they purport to measure
aptitude for the job in question.

Tests of motor and physical abilities – You also might need to measure motor
abilities, such as finger dexterity, manual dexterity, and (if hiring pilots) reaction time.
Tests of physical abilities may also be required. These include static strength (such
as lifting weights), dynamic strength (pull-ups), body coordination (jumping rope), and

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stamina.

Measuring personality and interests – Personality tests measure basic aspects of

an applicant’s personality, such as introversion, stability, and motivation. Industrial
psychologists often focus on the “big five” personality dimensions: extraversion,
emotional stability/neuroticism, agreeableness, conscientiousness, and openness to
experience.

Interest inventories – A personal development and selection device that compares

the person’s current interests with those of others now in various occupations so as to
determine the preferred occupation for the individual.

Achievement tests – Achievement tests measure what someone has learned. Most
of the tests you take in school are achievement tests. They measure your “job
knowledge.”

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Industrial psychologists often focus on the “big five” personality dimensions:
• Neuroticism represents a tendency to exhibit poor emotional adjustment and
experience negative effects, such as anxiety, insecurity, and hostility.
• Extraversion represents a tendency to be sociable, assertive, active, and to
experience positive effects, such as energy and zeal.
• Openness to experience is the disposition to be imaginative, nonconforming,
unconventional, and autonomous.
• Agreeableness is the tendency to be trusting, compliant, caring, and gentle.
• Conscientiousness is comprised of two related facets: achievement and
dependability

Personality test results do often correlate with job performance.

• For example, “in personality research, conscientiousness has been the most
consistent and universal predictor of job performance.”
• Neuroticism is negatively related to motivation and to job engagement.
• Extroversion correlates with success in sales, management, and expatriate jobs.
• Emotional stability, extroversion, and agreeableness predicted whether expatriates
would leave their overseas assignments early.

Make sure the personality tests you use predict performance for the jobs you are
testing for.

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Work Samples and Simulations

With work samples, you present examinees with situations representative of

the job for which they’re applying, and evaluate their responses. Experts
consider these (and simulations, like the assessment centers we also discuss
in this section) to be tests. But they differ from most tests because they directly
measure job performance.

Work samples for a cashier may include counting money.

Work sampling has advantages. It measures actual job tasks, so it’s harder to
fake answers. The work sample’s content—the actual tasks the person must
perform—is not as likely to be unfair to minorities (as might a personnel test
that possibly emphasizes middle-class concepts and values).82 Work
sampling doesn’t delve into the applicant’s personality, so there’s little chance
of applicants viewing it as an invasion of privacy. Designed properly, work
samples also exhibit better validity than do other tests designed to predict
performance.

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The work sampling technique tries to predict job performance by requiring job
candidates to perform one or more samples of the job’s tasks. The basic procedure
with work sampling is to select a sample of several tasks crucial to performing the job,
and then test applicants on them.

Situational judgment tests are personnel tests “…designed to assess an applicant’s

judgment regarding a situation encountered in the workplace.” Situational judgment
tests are effective and widely used.

A management assessment center is a 2- to 3-day simulation in which 10 to 12

candidates perform realistic management tasks (like making presentations) under the
observation of experts who appraise each candidate’s leadership potential. Most
experts view assessment centers as effective for selecting management candidates.
However, they are quite costly in terms of money and time.

Situational tests require examinees to respond to situations found on the job. Work
sampling and some assessment center tasks fall into this category. Some of the
testing may be video-based.

The video-based simulation presents the candidate with several online or computer
video situations, each followed by one or more multiple-choice questions.

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Using Work Sampling for Employee Selection:

Situational judgment tests are personnel tests “…designed to assess an applicant’s

judgment regarding a situation encountered in the workplace.” Situational judgment
tests are effective and widely used.

A management assessment center is a 2- to 3-day simulation in which 10 to 12

candidates perform realistic management tasks (like making presentations) under the
observation of experts who appraise each candidate’s leadership potential. Most
experts view assessment centers as effective for selecting management candidates.
However, they are quite costly in terms of money and time.

Situational tests require examinees to respond to situations found on the job. Work
sampling and some assessment center tasks fall into this category. Some of the
testing may be video-based.

The video-based simulation presents the candidate with several online or computer
video situations, each followed by one or more multiple-choice questions.
The Miniature Job Training and Evaluation Approach involves training candidates
to perform several of the job’s tasks, and then evaluating their performance prior to
hire. Like work sampling, miniature job training and evaluation tests applicants with
actual samples of the job, so it is inherently content relevant and valid.

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Realistic Job Previews – Sometimes, a dose of realism makes the best screening
tool. In general, applicants who receive realistic job previews are more likely to turn
down job offers, but their employers are more likely to have less turnover and be
more resilient.

Choosing a Selection Method – The employer needs to consider several things

before choosing to use a particular selection tool (or tools). These include the tool’s
reliability and validity, its return on investment (in terms of utility analysis), applicant
reactions, usability, adverse impact, and the tool’s selection ratio (does it screen out,
as it should, a high percentage of applicants or admit virtually all?).

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Typical simulated tasks include
●● The in-basket. The candidate gets reports, memos, notes of incoming phone
calls, e-mails, and other materials collected in the actual or computerized in- basket of
the simulated job he or she is about to start. The candidate must take appropriate
action on each item. Trained evaluators review the candidate’s efforts.
●● Leaderless group discussion. Trainers give a leaderless group a discussion
question and tell members to arrive at a group decision. They then evaluate each
group member’s interpersonal skills, acceptance by the group, leadership ability, and
individual influence.
●● Management games. Participants solve realistic problems as members of
simulated companies competing in a marketplace.
●● Individual oral presentations. Here trainers evaluate each participant’s
communication skills and persuasiveness.
●● Testing. These may include tests of personality, mental ability, interests, and
achievements.
●● The interview. Most require an interview with a trainer to assess interests, past
performance, and motivation.

Assessment center example video: https://youtu.be/T6nVuwr31wQ

Role-playing exercise example:
https://www.youtube.com/watch?v=tNYhwqjJQhA&ab_channel=GITPBV

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●● The in-basket. The candidate gets reports, memos, notes of incoming
phone calls, e-mails, and other materials collected in the actual or
computerized in- basket of the simulated job he or she is about to start. The
candidate must take appropriate action on each item. Trained evaluators
review the candidate’s efforts.

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Background Investigations and Other Selection Methods

Testing is only part of an employer’s selection process. Other tools may

include background investigations and reference checks, pre-employment
information services, honesty testing, and substance abuse screening.

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One of the easiest ways to avoid hiring mistakes is to check the candidate’s background
thoroughly. Doing so is inexpensive and (if done right) useful. There are two main
reasons to check backgrounds—to verify the applicant’s information and to uncover
damaging information. Lying on one’s application isn’t unusual.

How deeply you search depends on the position.

Most managers don’t view references as very useful.

Few employers will talk freely about former employees. For example, in one poll, the
Society for Human Resource Management found that 98% of 433 responding members
said their organizations would verify dates of employment for current or former
employees. However,
68% said they wouldn’t discuss work performance; 82% said they wouldn’t discuss
character or personality; and 87% said they wouldn’t disclose a disciplinary action. Many
supervisors don’t want to damage a former employee’s chances for a job; others might
prefer giving an incompetent employee good reviews to get rid of him or her.

Digital tools are changing the background-checking process. Employers are Googling
applicants or checking Facebook and LinkedIn, and what they’re finding isn’t always
pretty. One candidate described his interests on Facebook as smoking pot and shooting
people. The student may have been kidding, but didn’t get the job. An article called
“Funny, They Don’t Look Like My References” notes that the new LinkedIn premium
service “Reference Search” lets employers identify people in their own networks who

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worked for the same company when a job candidate did, and thus use them to get
references on the candidate. According to LinkedIn, you just select Reference Search,
then enter a company name, candidate’s name, and the timeframe, and click search.
Employers are integrating such tools with software solutions such as Oracle/Taleo Verify
to facilitate obtaining such information and then integrating it into the candidate’s
dashboard-accessible profile.

In any case, it’s probably best to get the candidate’s prior approval for social networking
searches. And do not use a pretext or fabricate an identity. Maryland law restricts
employer demands for applicant usernames and passwords. Other states will
undoubtedly follow.

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There are steps one can take to improve the usefulness of the background
information being sought. Specifically:

§ Include on the application form a statement for applicants to sign explicitly

authorizing a background and credit check.
§ Telephone references tend to produce more candid assessments.
§ Persistence and attentiveness to possible red flags improve results.
§ Compare the application to the résumé; people tend to be more creative on
their résumés than on their application forms, where they must certify the
information.
§ Try to ask open-ended questions to get the references to talk more about
the candidate.
§ But in asking for information: Only ask for and obtain information that you’re
going to use; remember that using arrest information is highly problematical;
use information that is specific and job related; and keep information
confidential.
§ Ask the references supplied by the applicant to suggest other references.
You might ask each of the applicant’s references.
§ Aim for “360” reference checking: A full picture requires contacting the
person’s former supervisors, colleagues, and subordinates.

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The Polygraph and Honesty Testing

The polygraph is a device that measures physiological changes like increased

perspiration. The assumption is that such changes reflect changes in
emotional state that accompany lying.

To administer a polygraph test for an ongoing investigation, an employer must

meet four standards:
1. It must show that it suffered an economic loss or injury.
2. It must show that the employee in question had access to the property.
3. It must have a reasonable suspicion before asking the employee to take the
polygraph.
4. The person to be tested must receive the details of the investigation before
the test, as well as the polygraph questions to be asked.

Written Honesty Tests – These are psychological tests designed to predict

job applicants’ proneness to dishonesty and other forms of counter
productivity. Studies support such tests’ validity.

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Graphology – Is the use of handwriting analysis to determine the writer’s
basic personality traits. It thus has some resemblance to projective personality
tests, although graphology’s validity is highly suspect. The handwriting analyst
studies an applicant’s handwriting and signature to discover the person’s
needs, desires, and psychological makeup.

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