Westover — Strategic Human Resource Management — 1

Chapter 1:
The Role of Human Resources

Human Resource Management Day to Day What Is Human Resources?

You have just been hired to work in the human resource LEARNING OBJECTIVES
department of a small company. You heard about the job
1. Explain the role of HRM in organizations.
through a conference you attended, put on by the Society for
Human Resource Management (SHRM). Previously, the 2. Define and discuss some of the major HRM activities.
owner of the company, Jennifer, had been doing everything
Every organization, large or small, uses a variety of capital to
related to human resource management (HRM). You can tell
make the business work. Capital includes cash, valuables, or
she is a bit critical about paying a good salary for something
goods used to generate income for a business. For example,
she was able to juggle all on her own. On your first day, you
a retail store uses registers and inventory, while a consulting
meet the ten employees and spend several hours with the
company owner, hoping to get a handle on which human firm may have proprietary software or buildings. No matter
resource processes are already set up. the industry, all companies have one thing in common: they
must have people to make their capital work for them. This
will be our focus throughout the text: generation of revenue
Shortly after the meeting begins, you see she has a completely
through the use of people’s skills and abilities.
different perspective of what HRM is, and you realize it will
be your job to educate her on the value of a human resource
What Is HRM?
manager. You look at it as a personal challenge—both to
Human resource management (HRM) is the process of
educate her and also to show her the value of this role in the
employing people, training them, compensating them,
organization.
developing policies relating to them, and developing
strategies to retain them. As a field, HRM has undergone
First, you tell her that HRM is a strategic process having to
many changes over the last twenty years, giving it an even
do with the staffing, compensation, retention, training, and
more important role in today’s organizations. In the past,
employment law and policies side of the business. In other
HRM meant processing payroll, sending birthday gifts to
words, your job as human resources (HR) manager will be
employees, arranging company outings, and making sure
not only to write policy and procedures and to hire people
forms were filled out correctly—in other words, more of an
(the administrative role) but also to use strategic plans to
administrative role rather than a strategic role crucial to the
ensure the right people are hired and trained for the right job
success of the organization. Jack Welch, former CEO of
at the right time. For example, you ask her if she knows what
General Electric and management guru, sums up the new role
the revenue will be in six months, and Jennifer answers, “Of
of HRM: “Get out of the parties and birthdays and
course. We expect it to increase by 20 percent.” You ask,
enrollment forms.… Remember, HR is important in good
“Have you thought about how many people you will need
times, HR is defined in hard times.” [1]
due to this increase?” Jennifer looks a bit sheepish and says,
“No, I guess I haven’t gotten that far.” Then you ask her
It’s necessary to point out here, at the very beginning of this
about the training programs the company offers, the software
text, that every manager has some role relating to human
used to allow employees to access pay information online,
resource management. Just because we do not have the title
and the compensation policies. She responds, “It looks like
of HR manager doesn’t mean we won’t perform all or at least
we have some work to do. I didn’t know that human
some of the HRM tasks. For example, most managers deal
resources involved all of that.” You smile at her and start
with compensation, motivation, and retention of
discussing some of the specifics of the business, so you can
employees—making these aspects not only part of HRM but
get started right away writing the strategic human resource
also part of management. As a result, this book is equally
management plan.
important to someone who wants to be an HR manager and
to someone who will manage a business.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 2

Human Resource Recall  Ethics policy

Have you ever had to work with a human resource  Internet usage policy
department at your job? What was the interaction like? What
was the department’s role in that specific organization? Compensation and Benefits Administration
HRM professionals need to determine that compensation is
fair, meets industry standards, and is high enough to entice
The Role of HRM people to work for the organization. Compensation includes
Keep in mind that many functions of HRM are also tasks anything the employee receives for his or her work. In
other department managers perform, which is what makes addition, HRM professionals need to make sure the pay is
this information important, despite the career path taken. comparable to what other people performing similar jobs are
Most experts agree on seven main roles that HRM plays in being paid. This involves setting up pay systems that take into
organizations. These are described in the following sections. consideration the number of years with the organization,
years of experience, education, and similar aspects. Examples
Staffing of employee compensation include the following:
You need people to perform tasks and get work done in the  Health Benefits
organization. Even with the most sophisticated machines,  Pay
humans are still needed. Because of this, one of the major
 401(k) (retirement plans)
tasks in HRM is staffing. Staffing involves the entire hiring
 Stock purchase plans
process from posting a job to negotiating a salary package.
Within the staffing function, there are four main steps:  Vacation time
1. Development of a staffing plan. This plan allows HRM to see  Sick leave
how many people they should hire based on revenue  Bonuses
expectations.  Tuition reimbursement
2. Development of policies to encourage multiculturalism at work.
Multiculturalism in the workplace is becoming more and Retention
more important, as we have many more people from a Human resource people must be aware of all the laws that
variety of backgrounds in the workforce. affect the workplace. HRM Retention involves keeping and
3. Recruitment. This involves finding people to fill the open motivating employees to stay with the organization.
positions. Compensation is a major factor in employee retention, but
4. Selection. In this stage, people will be interviewed and there are other factors as well. Ninety percent of employees
selected, and a proper compensation package will be leave a company for the following reasons:
negotiated. This step is followed by training, retention, 1. The job they are performing
and motivation. 2. Challenges with their manager
3. Poor fit with organizational culture
Development of Workplace Policies 4. Poor workplace environment
Every organization has policies to ensure fairness and
continuity within the organization. One of the jobs of HRM Despite this, 90 percent of managers think employees leave
is to develop the verbiage surrounding these policies. In the as a result of pay. [2] As a result, managers often try to change
development of policies, HRM, management, and executives their compensation packages to keep people from leaving,
are involved in the process. For example, the HRM when compensation isn’t the reason they are leaving at all.
professional will likely recognize the need for a policy or a
change of policy, seek opinions on the policy, write the policy, Training and Development
and then communicate that policy to employees. It is key to Once we have spent the time to hire new employees, we want
note here that HR departments do not and cannot work alone. to make sure they not only are trained to do the job but also
Everything they do needs to involve all other departments in continue to grow and develop new skills in their job. This
the organization. Some examples of workplace policies might results in higher productivity for the organization. Training is
be the following: also a key component in employee motivation. Employees
 Discipline process policy who feel they are developing their skills tend to be happier in
 Vacation time policy their jobs, which results in increased employee retention.
 Dress code Examples of training programs might include the following:

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 3

those things the company has no direct control over;

 Job skills training, such as how to run a particular
however, they may be things that could positively or
computer program
negatively impact human resources. External factors might
 Training on communication
include the following:
 Team-building activities 1. Globalization and offshoring
 Policy and legal training, such as sexual harassment 2. Changes to employment law
training and ethics training 3. Health-care costs
4. Employee expectations
Dealing with Laws Affecting Employment 5. Diversity of the workforce
6. Changing demographics of the workforce
Human resource people must be aware of all the laws that
7. A more highly educated workforce
affect the workplace. An HRM professional might work with
8. Layoffs and downsizing
some of these laws:
9. Technology used, such as HR databases
 Discrimination laws 10. Increased use of social networking to distribute
 Health-care requirements information to employees
 Compensation requirements such as the minimum wage
 Worker safety laws For example, the recent trend
 Labor laws in flexible work schedules (allowing employees to set their
own schedules) and telecommuting (allowing employees to
The legal environment of HRM is always changing, so HRM work from home or a remote location for a specified period
must always be aware of changes taking place and then of time, such as one day per week) are external factors that
communicate those changes to the entire management have affected HR. HRM has to be aware of these outside
organization. Rather than presenting a chapter focused on issues, so they can develop policies that meet not only the
HRM laws, we will address these laws in each relevant needs of the company but also the needs of the individuals.
chapter. Another example is the Patient Protection and Affordable
Care Act, signed into law in 2010. Compliance with this bill
Worker Protection has huge implications for HR. For example, a company with
more than fifty employees must provide health-care coverage
Safety is a major consideration in all organizations. or pay a penalty. Currently, it is estimated that 60 percent of
Oftentimes new laws are created with the goal of setting employers offer health-care insurance to their employees.
federal or state standards to ensure worker safety. Unions and [3] Because health-care insurance will be mandatory, cost
union contracts can also impact the requirements for worker concerns as well as using health benefits as a recruitment
safety in a workplace. It is up to the human resource manager strategy are big external challenges. Any manager operating
to be aware of worker protection requirements and ensure without considering outside forces will likely alienate
the workplace is meeting both federal and union standards. employees, resulting in unmotivated, unhappy workers.
Worker protection issues might include the following: Not understanding the external factors can also mean
 Chemical hazards breaking the law, which has a concerning set of
 Heating and ventilation requirements implications as well.
 Use of “no fragrance” zones
 Protection of private employee information One way managers can be aware of the outside forces is to
attend conferences and read various articles on the web. For
Communication example, the website of the Society for Human Resource
Besides these major roles, good communication skills and Management, SHRM Online, [4] not only has job postings in
excellent management skills are key to successful human the field but discusses many contemporary human resource
resource management as well as general management. issues that may help the manager make better decisions when
it comes to people management.
Awareness of External Factors

In addition to managing internal factors, the HR manager

needs to consider the outside forces at play that may affect
the organization. Outside forces, or external factors, are

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 4

One of the major factors of a successful manager or human

KEY TAKEAWAYS
resource (HR) manager is an array of skills to deal with a
 Capital includes all resources a company uses to generate varietyof situations. It simplyisn’t enough tohave knowledge
revenue. Human resources or the people working in the of HR, such as knowing which forms need to be filled out. It
organization are the most important resource. takes multiple skills to create and manage people, as well as a
 cutting-edge human resource department.
people, training them, compensating them, developing The first skill needed is organization. The need for this skill
policies relating to the workplace, and developing makes sense, given that you are managing people’s pay,
strategies to retain employees. benefits, and careers. Having organized files on your
 There are seven main responsibilities of HRM managers: computer and good time-management skills are crucial for
staffing, setting policies, compensation and success in any job, but especially if you take on a role in
human resources.
protection. In this book, each of these major areas will be
included in a chapter or two. Like most jobs, being able to multitask—that is, work on
 In addition to being concerned with the seven internal more than one task at a time—is important in managing
aspects, HRM managers must keep up to date with human resources. A typical person managing human
resources may have to deal with an employee issue one
minute, then switch and deal with recruiting. Unlike many
employees. The trends
management positions, which only focus on one task or one
examples of
part of the business, human resources focuses on all areas of
aspects.
the business, where multitasking is a must.
 To effectively understand how the external forces might
affect human resources, it is important for the HR
As trite as it may sound, people skills are necessary in any type
manager to read the HR literature, attend conferences,
of management and perhaps might be the most important
and utilize other ways to stay up to date with new laws,
skills for achieving success at any job. Being able to manage
trends, and policies.
a variety of personalities, deal with conflict, and coach others
EXERCISES are all in the realm of people management. The ability to
communicate goes along with people skills. The ability to
1. State arguments for and against the following statement: communicate good news (hiring a new employee), bad news
there are other things more valuable in an organization (layoffs), and everything in between, such as changes to
besides the people who work there. policy, makes for an excellent manager and human resource
2. Of the seven tasks an HR manager does, which do you management (HRM) professional.
think is the most challenging? Why?
Keys to a successful career in HRM or management include
[1] Kristen B. Frasch, David Shadovitz, and Jared Shelly, “There’s No
understanding specific job areas, such as managing the
Whining in HR,” Human Resource Executive Online, June 30, 2009, accessed
September 24, 2010, employee database, understanding employment laws, and
http://www.hreonline.com/HRE/story.jsp?storyId=227738167. knowing how to write and develop a strategic plan that aligns
[2] Leigh Rivenbark, “The 7 Hidden Reasons Why Employees Leave,” HR with the business. All these skills will be discussed in this
Magazine, May 2005, accessed October 10, 2010,
book.
http://findarticles.com/p/articles/mi_m3495/is_5_50/ai_n13721406.
[3] Peter Cappelli, “HR Implications of Healthcare Reform,” Human
Resource Executive Online, March 29, 2010, accessed August 18, A strategic mind-set as an HR professional is a key skill as
2011, http://www.hreonline.com/HRE/story.jsp?storyId=379096509. well. A person with a strategic mind-set can plan far in
[4] Society for Human Resource Management, accessed August 18, 2011,
advance and look at trends that could affect the environment
http://www.shrm.org/Pages/default.aspx.
in which the business is operating. Too often, managers focus
1.2 Skills Needed for HRM on their own area and not enough on the business as a whole.
LEARNING OBJECTIVES The strategic HR professional is able to not only work within
his or her area but also understand how HR fits into the
1. Explain the professional and personal skills needed to be bigger picture of the business.
successful in HRM.
2. Be able to define human resource management and the
certifications that can be achieved in this profession.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 5

an HR department. In this test, the greater focus is on

Ethics and a sense of fairness are also necessary in human
resources. Ethics is a concept that examines the moral rights the strategic aspect of HRM.
and wrongs of a certain situation. Consider the fact that many 3. Global Professional in Human Resources (GPHR). This exam
is for HR professionals who perform many of their tasks
HR managers negotiate salary and union contracts and
manage conflict. In addition, HR managers have the task of on a global level and whose companies often work
ensuring compliance with ethics standards within the across borders. This exam is three hours long, with 165
multiple-choice questions. A person with two years of
organization. Many HR managers are required to work with
highly confidential information, such as salary information, professional experience can take the certification test.
However, because the test has the international aspect,
so a sense of ethics when managing this information is
essential. someone who designs HR-related programs and
processes to achieve business goals would be best suited
HUMAN RESOURCE RECALL to earn this certification.

Think of your current skills. Are there personal or The benefits of achieving certifications are great. In addition
professional skills you would like to work on? to demonstrating the abilities of the HR professional,
certification allows the professional to be more marketable in
Finally, while we can list a few skills that are important, a very competitive field.
understanding the particular business, knowing the business
strategy, and being able to think critically about how HR can Most companies need a human resource department or a
align itself with the strategy are ways to ensure HR manager with HR skills. The industries and job titles are so
departments are critical parts of the business. HR is a varied that it is possible only to list general job titles in human
specialized area, much like accounting or finance. However, resources:
many individuals are placed in HR roles without having the 1. Recruiter
specific knowledge to do the job. Oftentimes people with 2. Compensation analyst
excellent skills are promoted to management and then 3. Human resources assistant
expected (if the company is small) to perform recruiting, 4. Employee relations manager
hiring, and compensation tasks. This is the reason we will 5. Benefits manager
refer to management and HR management interchangeably 6. Work-life coordinator
throughout the chapters. In addition, these skills are 7. Training and development manager
important for HRM professionals and managers alike. 8. Human resources manager
9. Vice president for human resources
Having said that, for those of you wanting a career in HRM, 10. This is not an exhaustive list, but it can be a
there are three exams you can take to show your mastery of starting point for research on this career path.
HRM material:
1. Professional in Human Resources (PHR). To take this exam, KEY TAKEAWAYS
an HR professional must have at least two years’
experience. The exam is four hours long and consists of  There are a number of skills crucial to human resource
225 multiple-choice questions in a variety of areas. management. First, being able to organize and
Twelve percent of the test focuses on strategic multitask is necessary. In this job, files must be
management, 26 percent on workforce planning, 17 managed, and an HR manager is constantly working in
percent on human resource development, 16 percent on different areas of the business.
rewards, 22 percent on employee and labor relations, and  Communication skills are necessary in HRM as well. The
7 percent on risk management. The application process ability to present good and bad news, work with a variety
for taking the exam is given on the Human Resource of personalities, and coach employees is important in
Certification Institute website at http://www.hrci.org. HRM.
2. Senior Professional in Human Resources (SPHR). This exam  Specific job skills, such as computer skills, knowledge of
is designed for HR professionals who focus on designing employment law, writing and developing strategic plans,
and planning, rather than actual implementation. It is and general critical-thinking skills are important in any
recommended that the person taking this exam has six type of management, but especially in human resource
to eight years of experience and oversees and manages management.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 6

Consider the expenses that involve the people part of any

 A sense of fairness and strong ethics will make for the
business:
best HR manager. Because HR works with a variety of
1. Health-care benefits
departments to manage conflict and negotiate union
2. Training costs
contracts and salary, the HR professional needs
3. Hiring process costs
ethics skills and the ability to maintain confidentiality.
4. And many more…
 Since one of the major responsibilities of an HR
department is to align the HR strategic plan with the
These costs cut into the bottom line of any business. The
business strategic plan, critical and creative thinking, as
trick is to figure out how much, how many, or how often
well as writing, are skills that will benefit the HR manager
benefits should be offered, without sacrificing employee
as well.
motivation. A company can cut costs by not offering benefits
 Many people find themselves in the role of HR manager, or 401(k) plans, but if its goal is to hire the best people, a
so we will use the term HR manager throughout this hiring package without these items will most certainly not get
book. However, many other types of managers also the best people. Containment of costs, therefore, is a
perform the tasks of recruiting, selecting, and balancing act. An HR manager must offer as much as he or
compensating, making this book and the skills listed in
she can to attract and retain employees, but not offer too
this section applicable to all majors.
much, as this can put pressure on the company’s bottom line.
 Certification exams can be taken to make you more We will discuss ways to alleviate this concern throughout this
marketable in the field of HRM. These certifications are book.
offered by the HR Certification Institute (HRCI).
For example, there are three ways to cut costs associated with
EXERCISE health care:
1. Shift more of the cost of health care to employees
1. What are your perceptions of what an HR manager does
2. Reduce the benefits offered to cut costs
on a day-to-day basis? Research this job title and describe
3. Change or better negotiate the plan to reduce health-care
your findings. Is this the type of job you expected?
costs
1.3 Today’s HRM Challenges
Health care costs companies approximately $4,003 per year
LEARNING OBJECTIVE
for a single employee and $9,764 for families. This equals
1. Identify and explain some of the challenges associated roughly 83 percent and 73 percent of total health-care costs
with HRM. for single employees and employees with families,
[1] respectively. One possible strategy for containment for

All departments within an organization must prove their health-care plans is to implement a cafeteria plan. Cafeteria
value and contributions to the overall business strategy, and plans started becoming popular in the 1980s and have
the same is true with HRM. As companies are becoming become standard in many organizations. [2] This type of plan
more concerned with cutting costs, HRM departments must gives all employees a minimum level of benefits and a set
show the value they add to the organization through amount to spend on flexible benefits, such as additional
alignment with business objectives. Being able to add value health care or vacation time. It creates more flexible
starts with understanding some of the challenges of benefits, allowing the employee, based on his or her family
businesses and finding ways to reduce a negative impact on situation, to choose which benefits are right for them. For
the business. This section will discuss some of the HRM example, a mother of two may choose to spend her flexible
challenges, and the rest of this text will dive into greater detail benefits on health care for her children, while a single,
about how to manage these challenges. childless female may opt for more vacation days. In other
words, these plans offer flexibility, while saving money, too.
Containing Costs
If you were to ask most business owners what their biggest Another way to contain costs is by offering training. While
challenges are, they will likely tell you that cost management this may seem counterintuitive, as training does cost money
is a major factor to the success or failure of their business. In up front, it can actually save money in the long run. Consider
most businesses today, the people part of the business is the how expensive a sexual harassment lawsuit or wrongful
most likely place for cuts when the economy isn’t doing well. termination lawsuit might be. For example, a Sonic Drive-In

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 7

use of technology, many companies have virtual workforces

was investigated by the Equal Opportunity Employment
Commission (EEOC) on behalf of seventy women who that perform tasks from nearly all corners of the world. When
worked there, and it was found that a manager at one of the employees are not located just down the hall, management of
these human resources creates some unique challenges. For
stores subjected the victims to inappropriate touching and
comments. This lawsuit cost the organization $2 million. example, technology creates an even greater need to have
[3] Some simple training up front (costing less than the multicultural or diversity understanding. Since many people
will work with individuals from across the globe, cultural
lawsuit) likely would have prevented this from happening.
Training employees and management on how to work within sensitivity and understanding is the only way to ensure the
use of technology results in increased productivity rather than
the law, thereby reducing legal exposure, is a great way for
HR to cut costs for the organization as a whole. decreased productivity due to miscommunications.

The hiring process and the cost of turnover in an Technology also creates a workforce that expects to be
mobile. Because of the ability to work from home or
organization can be very expensive. Turnover refers to the
anywhere else, many employees may request and even
number of employees who leave a company in a particular
period of time. By creating a recruiting and selection process demand a flexible schedule to meet their own family and
personal needs. Productivity can be a concern for all
with cost containment in mind, HR can contribute directly to
cost-containment strategies company wide. In fact, the cost managers in the area of flextime, and another challenge is the
of hiring an employee or replacing an old one (turnover) can fairness to other workers when one person is offered a
flexible schedule.
be as high as $9,777 for a position that pays $60,000. [4] By
hiring smart the first time, HR managers can contain costs
for their organization. Many companies, however, are going a step further and
creating virtual organizations, which don’t have a physical
In a survey reported on by the Sales and Marketing location (cost containment) and allow all employees to work
Management newsletter, [5] 85 percent of managers say that from home or the location of their choice. As you can
ineffective communication is the cause of lost revenue. E- imagine, this creates concerns over productivity and
mail, instant messaging, text messages, and meetings are all communication within the organization.
examples of communication in business. An understanding
of communication styles, personality styles, and channels of The use of smartphones and social networking has impacted
communication can help us be more effective in our human resources, as many companies now disseminate
communications, resulting in cost containment. In HRM, we information to employees via these methods. Of course,
can help ensure our people have the tools to communicate technology changes constantly, so the methods used today
better, and contain costs and save dollars in doing so. will likely be different one year or even six months from now.
The large variety of databases available to perform HR tasks
is mind boggling. For example, databases are used to track
One cost-containment strategy for US businesses has been
employee data, compensation, and training. There are also
offshoring. Offshoring refers to the movement of jobs
databases available to track the recruiting and hiring
overseas to contain costs. It is estimated that 3.3 million US
processes.
jobs will be moved overseas by 2015. [6] According to the US
Census Bureau, most of these jobs are Information Of course, the major challenge with technology is its
constantly changing nature, which can impact all practices in
Technology (IT) jobs as well as manufacturing jobs. This
HRM.
issue is unique to HR, as the responsibility for developing
training for new workers and laying off domestic workers will
HOW WOULD YOU HANDLE THIS?
often fall under the realm of HRM.
Too Many Friends
Of course, cost containment isn’t only up to HRM and You are the HR manager for a small company, consisting of twenty-
managers, but as organizations look at various ways to three people plus the two owners, Steve and Corey. Every time you go
contain costs, human resources can certainly provide into Steve’s office, you see he is on Facebook. Because he is Facebook
solutions. friends with several people in the organization, you have also heard he
Technology constantly updates his status and uploads pictures during work time.
Technology has greatly impacted human resources and will Then, at meetings, Steve will ask employees if they saw the pictures he
continue to do so as new technology is developed. Through recently uploaded from his vacation, weekend, or backpacking trip. One

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 8

employee, Sam, comes to you with a concern about this. “I am just trying working full time, down from 2008 when 106,648,000 were
to do my job, but I feel if I don’t look at his photos, he may not think I working full time. [9] For full-time workers, the average
am a good employee,” she says. How would you handle this? weekly salary was higher the more educated the worker.

Cyber loafing, a term used to describe lost productivity as a FORTUNE 500 FOCUS
result of an employee using a work computer for personal Multigenerational is here to stay, and Xerox is the leader in
reasons, is another concern created by technology. One study recruiting of Generation Y talent. This age group has been
performed by Nucleus Research found that the average moving into the labor market over the last six years, and this
worker uses Facebook for fifteen minutes per day, which major demographic change, along with the retirement of
results in an average loss of 1.5 percent of productivity. baby boomers, has many companies thinking. Fortune 500
[7] Some workers, in fact, use Facebook over two hours per
companies know they must find out where their new stars are
day during working hours. Restricting or blocking access to coming from. In recruiting this new talent, Xerox isn’t
the Internet, however, can result in angry employees and looking to old methods, because they know each generation
impact motivation at work. is different. For example, Xerox developed the “Express
Yourself” recruiting campaign, which is geared around a core
Technology can create additional stress for workers. value of this generation, to develop solutions and change. Joe
Increased job demands, constant change, constant e-mailing Hammill, the director of talent acquisition, says, “Gen Y is
and texting, and the physical aspects of sitting in front of a very important. Xerox and other companies view this
computer can be not only stressful but also physically emerging workforce as the future of our organization.”
harmful to employees. [10] Besides the new recruiting campaign, recruiters are

working at what they term “core colleges”— that is, those

The Economy that produce the kind of talent they need. For example, they
Tough economic times in a country usually results in tough developed recruitment campaigns with specific institutions
times for business, too. High unemployment and layoffs are such as the Rochester Institute of Technology because of
clearly HRM and managerial issues. If a human resource its strong engineering and printing science programs. On
manager works for a unionized company, union contracts are their company website, they have a specific tab for the recent
the guiding source when having to downsize owing to a tough college graduate, emphasizing core values of this
economy. generation, including the ability to contribute, support, and
build skills. With its understanding of multicultural
Besides union restrictions, legal restrictions on who is let go generations, Xerox has created a talent pool for years to
and the process followed to let someone go should be on the come.
forefront of any manager’s mind when he or she is required
to lay off people because of a poor economy. Dealing with It is expected that over the next ten years, over 40 percent of
performance issues and measuring performance can be the workforce will retire, and there will not be enough
considerations when it is necessary to lay off employees. younger workers to take the jobs once held by the retiring
workforce. [11] In fact, the American Society of Training and
Likewise, in a growth economy, the HR manager may Development says that in the next twenty years, seventy-six
experience a different kind of stress. Massive hiring to meet million Americans will retire, and only forty-six million will
demand might occur if the economy is doing well. For replace them. As you can imagine, this will create a unique
example, McDonald’s restaurants had to fill six hundred staffing obstacle for human resources and managers alike, as
positions throughout Las Vegas and held hiring day events in they try to find talented people in a pool that doesn’t have
2010. [8] Imagine the process of hiring this many people in a enough people to perform necessary jobs. The reason for this
short period of time The same recruiting and selection increase in retirement is the aging baby boomers.
processes used under normal circumstances will be helpful in Baby boomers can be defined as those born between the
mass hiring situations. years 1946 and 1964, according to the Census Bureau. They
are called the baby boomers because there was a large
The Changing and Diverse Workforce increase of babies born after soldiers came back from World
Human resources should be aware that the workforce is War II. Baby boomers account for seventy-six million people
constantly changing. For example, in the 2010 census, the in the United States in 2011, the same year in which the first
national population was 308,745,538, with 99,531,000 in 2010 of the baby boomers have started to retire.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 9

book, we will discuss compensation and motivational

The impact of the baby boomer generation on our country
and on human resource management is huge. First, the strategies for the multigenerational workforce.
retirement of baby boomers results in a loss of a major part
Diversity refers to age, disability, race, sex, national origin,
of the working population, and there are not enough people
to fill those jobs that are left vacant. Second, the baby and religion. Each of these components makes up the
boomers’ knowledge is lost upon their retirement. Much of productive workforce, and each employee has different
needs, wants, and goals. This is why it is imperative for the
this knowledge isn’t formalized or written down, but it
contributes to the success of business. Third, elderly people HRM professional to understand how to motivate the
workforce, while ensuring that no laws are broken.
are living longer, and this results in higher health-care costs
for all currently in the workforce. It is estimated that three
Ethics
out of five baby boomers do not have enough money saved
A discussion of ethics is necessary when considering
for retirement, [12] meaning that many of them will depend on
challenges of human resources. Much of the discussion
Social Security payments to meet basic needs. However, since
surrounding ethics happened after the early to mid-2000s,
the Social Security system is a pay-as-you-go system (i.e.,
when several companies were found to have engaged in gross
those paying into the system now are paying for current
unethical and illegal conduct, resulting in the loss of billions
retirees), there may not be enough current workers to cover
of dollars from shareholders. Consider the statistics: only 25
the current Social Security needs. In fact, in 1950 there were
percent of employees trusted their CEO to tell the truth, and
16 workers to support each Social Security beneficiary, but
80 percent of people said that employers have a moral
today there are only 3.3 workers supporting each
responsibility to society. [15] Based on these numbers, an
beneficiary. [13] The implications can mean that more will be
ethical workplace is important not only for shareholder
paid by current workers to support retirees.
satisfaction but for employee satisfaction as well. Companies
are seeing the value of implementing ethics codes within the
As a result of the aging workforce, human resources should
business.
keep abreast of changes in Social Security legislation and
health-care costs. In addition, human resource managers
Many human resource departments have the responsibility of
should review current workers’ skill levels and monitor
designing codes of ethics and developing policies for ethical
retirements and skills lost upon those retirements, which is
decision making. Some organizations hire ethics officers to
part of strategic planning. Having knowledge about current
specifically focus on this area of the business. Out of four
workers and skills, as well as predicting future workforce
hundred companies surveyed, 48 percent had an ethics
needs, will be necessary to deal with the challenges of an aging
officer, who reported to either the CEO or the HR
workforce.
executive. [16] According to Steve Miranda, chief human
resources officer for the Society for Human Resource
HUMAN RESOURCE RECALL
Management (SHRM), “[the presence of an ethics officer]
Have you ever worked in a multigenerational organization? provides a high-level individual with positional authority who
What were some of the challenges in working with people can ensure that policies, practices, and guidelines are
who may have grown up in a different era? effectively communicated across the organization.” [17]

Another challenge, besides lack of workers, is the For example, the insurance company Allstate recently hired a
multigenerational workforce. Employees between the ages of chief ethics and compliance officer (CECO) who offers a
seventeen and sixty-eight have different values and different series of workshops geared toward leaders in the
expectations of their jobs. Any manager who tries to manage organization, because they believe that maintaining high
these workers from varying generations will likely have some ethical standards starts at the top of an organization. In
challenges. Even compensation preferences are different addition, the CECO monitors reports of ethics complaints
among generations. For example, the traditional baby within the organization and trains employees on the code of
boomer built a career during a time of pensions and strongly ethics or code of conduct.[18] A code of ethics is an outline
held values of longevity and loyalty to a company. Compare that explains the expected ethical behavior of employees. For
the benefit needs of this person to someone who is younger example, General Electric (GE) has a sixty-four-page code of
and expects to save through a 401(k) plan, and it is clear that conduct that outlines the expected ethics, defines them, and
the needs and expectations are different. [14] Throughout this provides information on penalties for not adhering to the

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 10

code. The code of conduct is presented below. Of course, Because technology is part of our work life, cyber loafing,
simply having a written code of ethics does little to encourage or employees spending too much time on the Internet,
positive behavior, so many organizations (such as GE) offer creates new challenges for managers. Technology can
stiff penalties for ethics violations. Developing policies, also create challenges such as workplace stress and lack
monitoring behavior, and informing people of ethics are of work-life balance.
necessary to ensure a fair and legal business.  The economy is a major factor in human resource
management. HR managers, no matter what the state of
The following is an outline of GE’s code of conduct: [19] the economy, must plan effectively to make sure they
 Obey the applicable laws and regulations governing our have the right number of workers at the right time. When
business conduct worldwide. we deal with a down economy, the legal and union
 Be honest, fair, and trustworthy in all your GE activities implications of layoffs must be considered, and in an up
and relationships. economy, hiring of workers to meet the internal demand
 Avoid all conflicts of interest between work and is necessary.
personal affairs.  The retirement of baby boomers is creating a gap in the
 Foster an atmosphere in which fair employment workplace, related to not only the number of people
practices extend to every member of the diverse GE available but also the people
community. or
 Strive to create a safe workplace and to protect the workers of a variety of ages, must find ways to motivate
environment. employees, even though those employees may have
 Through leadership at all levels, sustain a culture where different needs. HR must be aware of this and continually
ethical conduct is recognized, valued, and exemplified by plan for the challenge of a changing workforce. Diversity
all employees. in the workplace is an important challenge in human
resource management.
KEY TAKEAWAYS  Ethics and monitoring of ethical behavior are also
challenges in HRM. Setting ethical standards and
 One of the most important aspects to productive HRM monitoring ethical behavior, including developing a code
is to ensure the department adds value to the rest of the of conduct, is a must for any successful business.
organization, based on the organization’s strategic plan. EXERCISES
 One of the major challenges of HRM is containment of
1. Research the various generations: baby boomers,
costs. This can be done in several ways, for example, in
Generation X, and the Y Generation (millennials).
the way health care and benefits are offered. Many
Compare and contrast five differences between the
companies are developing cafeteria plans that satisfy the
generations. How might these differences impact HRM?
employee and help contain costs.
2. Review news articles on the current state of the economy.
 HRM can also contain costs by developing and managing
Which aspects of these articles do you think can relate to
training programs and ensuring employees are well
HRM?
trained to be productive in the job.
 Hiring is a very expensive part of human resources, and
therefore HRM should take steps to ensure they are [1] “Use Three Strategies to Cut Health Care Costs,” Business Management
hiring the right people for the job the first time. Daily, September 9, 2010, accessed October 10, 2010,
http://www.businessmanagementdaily.com/articles/23381/1/Use-3-
Turnover is a term used to describe the departure of an strategies-to-cut-health-care-costs/Page1.html.
employee. [2] Mary Allen, “Benefits, Buffet Style—Flexible Plans,” Nation’s
 Poor communication results in wasting time and Business, January 1997, accessed October 1,
2010, http://findarticles.com/p/articles/mi_m1154/is_v75/ai_4587731.
resources. We can communicate better by understanding
[3] “LL Sonic Settles EEOC Lawsuit for $2 Million,” Valencia County
communication channels, personalities, and styles. News Bulletin, June 23, 2011.
 Technology is also a challenge to be met by human [4] James Del Monte, “Cost of Hiring and Turnover,” JDA Professional
resources. For example, employees may request Services, Inc., 2010, accessed October 1,
2010, http://www.jdapsi.com/Client/articles/coh.
alternative work schedules because they can use [5] “The Cost of Poor Communications,” Sales and Marketing, December
technology at home to get their work done. 22, 2006, accessed October 1,
2010, http://www.allbusiness.com/marketing-advertising/4278862-1.html.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 11

[6] Vivek Agrawal and Diana Farrell, “Who Wins in Offshoring?” in  Human resource managers need many different types of
“Global Directions,” special issue, McKinsey Quarterly, (2003): 36–41,
https://www.mckinseyquarterly.com/Who_wins_in_offshoring_1363.
skills. Being able to organize, multitask, and
[7] “Facebook Use Cuts Productivity at Work,” Economic Times, July 25, communicate effectively, as well as having specific job
2009, accessed October 4, skills, such as how to run a particular computer program,
2010, http://economictimes.indiatimes.com/tech/internet/Facebook-use- and a sense of fairness and ethics, is crucial to a
cuts-productivity-at-work-Study/articleshow/4818848.cms.
successful career in HRM.
[8] “McDonald’s Readies for Massive Hiring Spree,” Fox 5 News, Las
Vegas, May 2010, accessed October 5,  There are many contemporary challenges associated
2010, http://www.fox5vegas.com/news/23661640/detail.html (site with HRM. First, it is up to everyone in the organization
discontinued). to contain costs. HR managers need to look at their
[9] Bureau of Labor Statistics, Current Population Survey Report, accessed
July 7, 2011, http://www.bls.gov/cps/earnings.htm#education.
individual departments and demonstrate the necessity
[10] Stephanie Armour, “Generation Y: They’ve Arrived at Work with a and value of their functions to the organization. HR
New Attitude,” USA Today, November 6, 2005. managers can also help contain costs in several ways,
[11] Alvaro Fernandez, “Training the Aging Workforce,” SharpBrains, such as managing benefits plans and compensation and
August 10, 2007, accessed October 6,
providing training.
2010, http://www.sharpbrains.com/blog/2007/08/10/training-the-aging-
workforce-and-their-brains.  The fast-changing nature of technology is also a
[12] Joe Weisenthal, “3 of 5 Baby Boomers Don’t Have Enough for challenge in HRM. As new technologies are developed,
Retirement,” Business Insider Magazine, August 16, employees may be able to implement innovative ways of
2010, http://www.businessinsider.com/boomers-cutting-back-2010-8.
[13] Brenda Wenning, “Baby Boomer Retirement May Be a working such as flextime. HR managers are also
Bust,” Metrowest News Daily, March 21, 2010. responsible for developing policies dealing with cyber
[14] Michelle Capezza, “Employee Benefits in a Multigenerational loafing and other workplace time wasters revolving
Workplace,” EpsteinBeckerGreen, August 12, 2010, accessed October 6,
around technology. Employee stress and lack of work-
2010, http://www.ebglaw.com/showNewsletter.aspx?Show=13313.
[15] Strategic Management Partners, “Unethical Statistics Announced At life balance are also greatly influenced by technology.
Business Leaders Event,” news release, http://www.consult-  Awareness of the changes in the economy allows the
smp.com/archives/2005/02/unethical_stati.html, accessed August 31, human resource manager to adequately plan for
2011.
[16] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June
reductions and additions to the workforce.
16, 2011, accessed July 7,  The aging and changing workforce is our final factor.
2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153. As baby boomers retire, there likely will not be enough
[17] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June
people to replace them, and many of the skills the baby
16, 2011, accessed July 7,
2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153, boomers have may be lost. In addition, having to work
brackets in the original. with multiple generations at once can create challenges
[18] Mark McGraw, “The HR-Ethics Alliance,” HR Executive Online, June as different expectations and needs arise from
16, 2011, accessed July 7,
multigenerational workforces.
2011, http://www.hreonline.com/HRE/story.jsp?storyId=533339153.
[19] “The Spirit and the Letter,” General Electric Company, accessed CHAPTER CASE
August 10, 2011,
http://files.gecompany.com/gecom/citizenship/pdfs/TheSpirit&TheLette Changes, Changes
r.pdf. Jennifer, the owner and manager of a company with ten
employees, has hired you to take over the HRM function so
1.4 Cases and Problems she can focus on other areas of her business. During your
CHAPTER SUMMARY first two weeks, you find out that the company has been
greatly affected by the up economy and is expected to
 Human resource management is the process of experience overall revenue growth by 10 percent over the
employing people, training them, compensating them, next three years, with some quarters seeing growth as high as
developing policies relating to the workplace, and 30 percent. However, five of the ten workers are expected to
developing strategies to retain employees. Three retire within three years. These workers have been with the
certification exams, which are offered by the Human organization since the beginning and provide a unique
Resource Certification Institute, can be taken to show historical perspective of the company. The other five workers
HRM skills and become more marketable. are of diverse ages.
In addition to these changes, Jennifer believes they may be
 Human resource management involves seven main
able to save costs by allowing employees to telecommute one
areas: (1) staffing, (2) workplace policies, (3) benefits and
compensation, (4) retention, (5) training, (6) to two days per week. She has some concerns about
employment laws, and (7) employee protection.

Leading Innovative Organizations Series

 Westover — Strategic Human Resource Management — 12

productivity if she allows employees to work from home. 2.

What are some considerations the company and HR
Despite these concerns, Jennifer has even considered closing should be aware of when making changes related to this
down the physical office and making her company a virtual case study?
organization, but she wonders how such a major change will 3. What would the initial steps be to start planning for these
affect the ability to communicate and worker motivation. changes?
Jennifer shares with you her thoughts about the costs of 4. What would your role be in implementing these
health care on the organization. She has considered cutting changes? What would Jennifer’s role be?
benefits entirely and having her employees work for her on a TEAM ACTIVITIES
contract basis, instead of being full-time employees. She isn’t
1. In a group of two to three people, research possible
sure if this would be a good choice.
career paths in HRM and prepare a PowerPoint
Jennifer schedules a meeting with you to discuss some of her
presentation to discuss your findings.
thoughts. To prepare for the meeting, you perform research
2. Interview an HR manager and discuss his or her career
so you can impress your new boss with recommendations on
path, skills, and daily tasks. Present your findings to your
the challenges presented.
class.
1. Point out which changes are occurring in the business
that affect HRM.
NOTES:

Leading Innovative Organizations Series

Westover — Strategic Human Resource Management — 13

Leading Innovative Organizations Series