Chapter 1

Meeting Present and

Emerging Strategic
Human Resource
Challenges

CHAPTER OVERVIEW

This first chapter provides a broad overview of the strategic human resource
challenges organizations face, and provides a framework to understand the
role of human resource strategies, activities, and programs to achieve
sustained competitive advantage. To support this broad perspective, some of
the most important external and internal challenges vis-‘a-vis HR strategies
are discussed in three categories: environmental challenges, organizational
challenges, and individual challenges. The chapter explains the planning and
implementation of strategic HR policies, as well as the role of line managers
and the HR department in the effective use of human resources. Also
explored here is how managers, in partnership with Human Resource
professionals, adopt and implement HR strategies through specific strategies
and programs. HR professionals are often responsible for designing these
programs in order to meet business goals and employee needs. While the line
managers provide the necessary input during the program design phase, they
are primarily responsible for carrying out or implementing such programs.
This chapter provides a strong overview of how firms can use HR strategies
and initiatives to deal with external and internal challenges which are then
explored in detail in later chapters.

ANNOTATED OUTLINE

I. Human Resource Management: The Challenges (PPT 1.1 and 1.2)

Human resource challenges that face today’s managers may be
categorized according to their primary focus: the environment, the
organization; or the individual. Firms that deal with these challenges
effectively are likely to outperform those that do not.

A. Environmental Challenges (PPT 1.3)

Environmental challenges refer to forces external to the firm that

are largely beyond management’s control but influence
organizational performance. They include: rapid change, the
Internet revolution, workforce diversity, globalization, legislation,
evolving work and family roles, and skill shortages and the rise of
the service sector.

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B. Organizational Challenges (PPT 1.4 and

1.5)

Organizational challenges refer to concerns that are internal to the

firm. However, they are often a byproduct of environmental forces
because no firm operates in a vacuum. These issues include:
competitive position (cost, quality, and distinctive capability),
decentralization, downsizing, organizational restructuring, self-
managed work teams, small businesses, technology, outsourcing,
and organizational culture.

Organizational culture is a particularly important element. Culture

is the basic assumptions and beliefs shared by members of the
organization that express themselves through the rules, norms,
dominant values, philosophy, and climate. Firms that regularly
make adjustments to these elements to match environmental
changes are likely to outperform those whose culture is rigid and
unresponsive to external factors.

C. Individual Challenges (PPT

1.6)

Human resource issues at the individual level address concerns that

are most pertinent to decisions involving specific employees.
These issues almost always reflect what is happening in the larger
organization. How individuals are treated also is likely to have an
effect on organizational issues. For instance, if many key
employees leave a firm to join its competitor, it will affect the
competitive posture of the firm. The individual issues include
matching people and organization, ethics and social responsibility,
productivity, empowerment, brain drain, and job insecurity.

II. Planning & Implementing Strategic HR Policies (PPT 1.7 –

1.9)

To be successful, firms must closely align their HR strategies and

programs (tactics) with environmental opportunities, business strategies,
and the organization’s unique characteristics and distinctive competence.
A firm with a poorly defined HR strategy or a business strategy that does
not explicitly incorporate human resources is likely to lose ground to its
competitors. Similarly, a firm may have a well-articulated HR strategy
yet fail if its HR tactics/policies do not help to implement its HR strategy
effectively.

A. The Benefits of Strategic HR Planning

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Formulating HR strategies and establishing programs to implement

them is strategic human resource planning. Successful HR
strategic planning provides many benefits for the company,
including (1) encouraging proactive rather than reactive behavior,
(2) explicit communication of company goals, (3) stimulation of
critical thinking and ongoing examination of assumptions, (4)
identification of gaps between current situation and future vision,
(5) encouragement of line managers’ participation, (6)
identification of HR constraints and opportunities, and (7) creation
of common bonds

B. The Challenges of Strategic HR Planning

In developing HR strategy, organizations face several important

challenges including (1) maintaining a competitive advantage, (2)
reinforcing overall business strategy, (3) avoiding excessive
concentration on day-to-day problems, (4) developing HR
strategies suited to unique organizational features, (5) coping with
the environment, (6) securing management commitment, (7)
translating the strategic plan into action, (8) combining intended
and emergent strategies, and (9) accommodating change.

C. Strategic HR Choices

Human resource strategies, which are implemented through HR

activities and programs, may affect the performance of the
business. The options that a firm has available in designing its HR
system are its strategic HR choices. Figure 1-5 shows a sampling,
rather than an exhaustive list, of strategic HR choices. Firms may
fall near the left, right, or middle of such a continuum.

III. Selecting HR Strategies to Increase Firm Performance (PPT

1.10)

No HR Strategy is “good” or “bad” in and of itself. The success of HR

strategies depends on the situation or context in which they are used. In
other words, an HR strategy’s effect on firm performance is always
dependent on how well it fits with some of the factors. Fit refers to the
consistency or compatibility between HR strategies and other important
aspects of the organization

A. Fit with Organizational Strategies (PPT 1.11-

17)

Organizational strategies may be examined at two levels:

corporate and business.

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Corporate strategy refers to the mix of businesses a corporation

decides to hold and the flow of resources among those businesses.
This involves decisions pertaining to acquisition, divestment,
diversification, and growth. At one end of the spectrum is the
evolutionary business strategy; at the other end is the steady-state
strategy.

Business unit strategies refer to those established by firms or

autonomous units of the corporation. Well-known business
strategies were formulated by Porter (overall cost leadership
strategy, differentiation business strategy, and focus strategy) and
Miles and Snow (defender strategy and prospector strategy).

B. Fit with the Environment

HR strategies should help the organization better exploit

environmental opportunities or cope with the unique
environmental forces that affect it. The environment can be
examined on four dimensions, including (1) degree of uncertainty,
(2) volatility, (3) magnitude, and (4) complexity.

C. Fit with Organizational Characteristics

To be effective, HR strategies must be tailored to the

organization’s personality. The features of an organization’s
personality are its (1) production process for converting inputs into
output, (2) market posture, (3) overall managerial philosophy, (4)
organizational structure, and (5) organizational culture.

D. Fit with Organizational Capabilities

An organization’s capabilities are its distinct competencies. HR

strategies make a greater contribution to a firm’s performance (1)
when they help to exploit the firm’s specific advantages or
strengths while avoiding its weaknesses, and (2) when they assist
in better using its own unique blend of human resource skills and
assets.

E. Choosing Consistent and Appropriate HR Tactics to

Implement HR Strategies

Even the best-laid strategic HR plans may fail when specific HR

programs are poorly chosen or implemented. A firm’s HR
strategies must be mutually consistent. That is, HR strategies are
more likely to be effective if they reinforce one another rather than
work at cross-purposes.

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IV. The HR Department and Managers: An Important Partnership

(PPT 1.18-
22)

All managers must effectively deal with human resource issues because
these issues are at the core of being a good manager. Moreover, mutual
partnerships must be formed among line managers and HR professionals
in order to effectively and efficiently meet the employees’ and
employers’ goals and needs. It is not uncommon for the two groups to
view each other negatively, which often hinders the establishment of an
effective partnership between the two groups. Five competencies for
Human Resource professionals are required for a Human Resources
department to becoming a full strategic partner: (1) leadership, (2)
knowledge of the business, (3) HR strategic thinking, (4) process skills,
(5) and HR technologies.

Specific steps a company can take to foster an effective partnership

between managers and the HR department include: (1) analyze the
people side of productivity, (2) view HR professionals as internal
consultants, (3) instill a shared sense of common fate, (4) require some
managerial experience, (5) actively involve top corporate and divisional
managers, (6) require senior HR executives to participate.

A. Specialization in Human Resource Management

During the past 30 years, the size of the typical HR department has
increased significantly. This increase may reflect the growth and
complexity of government regulations as well as a greater
awareness that HR issues are important to achieving business goals
and objectives. In addition, in recent years, the compensation of
HR professionals has increased significantly, reflecting greater
value being placed on the role, and heightened awareness that a
well-managed HR function may help the firm to achieve a
sustainable competitive advantage.

A QUESTION OF ETHICS: Guide to discussion

Page 4: How much responsibility does an organization have to shield its

employees from the effects of rapid change in the environment? What
risks does this type of “shock absorber” approach to management entail?

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How much responsibility an organization carries to shield its employees

from change depends on one’s view of the world. The answers here will
closely mirror the answers in the end-of-chapter discussion questions #4
and #5. Please refer to those discussions as well. There should be little
doubt that an organization has SOME responsibility to shield its
employees from some of the effects of changes. The question is how far
that responsibility extends. Certainly minor downturns and cyclical
changes should not put people out on the street looking for work;
management has a responsibility to plan and manage better than that.
Also, managers have some level of responsibility to keep their
employees up-to-date on skills and information, not only to make them
of better service to the company, but also to make them more marketable
should layoffs occur. However, at some point the individual has
responsibility for his or her own destiny and at some point the company
must be concerned with its own ability to survive. Where that line lies is
a matter of differing opinion and debate and is subject to one’s own
values and view of the world. A lively discussion on this topic can help
students to see that some issues are not easily definable and solvable.

Page 9: What is the ethical responsibility of an employer to employees

who lack basic literacy and numeracy skills? Should companies be
required by law to provide training opportunities for such employees, as
some have proposed?

This question also bears much similarity to end-of-chapter discussion

questions #4 and #5. It may be easily agreeable among students that
companies may have an ethical responsibility to provide basic literacy
training to those employees. However, the issue becomes more clouded
if the company is in a very competitive, low-skills industry and is barely
breaking even. Adding such training programs could be the difference
between the company making it and folding. However, it can also be
noted that there is much free and volunteer training available in this area
that companies could seek out and coordinate. The question of
legislation delves into one’s views regarding the role of government.
See the end-of-chapter question #5 for more discussion.

Page 28: Experts in career development note that in today’s increasingly

chaotic business and economic environment, individual employees need to
prepare themselves for job and career changes. Does an employer have
an ethical duty to help employees prepare for the change that is almost
certain to come?

This question is similar to the “Question of Ethics” on page 4. Certainly

companies bear some responsibility to help prepare employees for
change. The difficulty comes in determining what form that preparation
should take and how extensive the company’s efforts should be.

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ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS

1. According to an analysis of the most recent 2000-2002 recession

conducted by a team of academics, U.S. businesses are adopting a
dual approach to deal with economic fluctuations: boost output
by lifting productivity (through better technology, careful selection
of employees, more training opportunities and the like), and hire
temporary workers to adjust to swings in demand. Thus,
“companies can quickly lay off temps when demand slows. But
these same businesses can give real raises to the remaining
workers commensurate with faster productivity” (Cooper,
Madigan & Miller, 2002:33): Do you think these policies may lead
to perceived inequities? From a human resource perspective, do
you support these policies? Explain.

These policies will most likely lead to perceived inequities among the
temporary workforce sector. It may promote a “second class citizen”
mentality among temporary workers, which could in turn, create a
variety of employee relations issues among temporary employees and
full time workers. The strategy is effective, however, in terms of
providing job security to full time employees, by protecting employees
from layoff and providing better chances for wage increases, even
during volatility in economic conditions.

2. Which of the environmental, organizational and individual challenges

identified in this chapter appear to be most important for human
resource management in the twenty-first century, in your opinion?
Which are least important? Use your own experiences in your answer.

Answers will vary. Some examples of the most important and least
important challenges are listed here with objective information. The
students will use their own experiences to support their choices.

Most Important
Skill Shortages
There are approximately 40 million illiterate or barely literate adults in
the U.S. work force. This means that the U.S. work force is running out
of qualified people. The cost of this incompetence in U.S. industry is
higher than any of us realizes. It is manifested in missed opportunities,
in bad decisions, in reduced quality of work, and in the inability to
compete. This skill shortage is likely to remain a major challenge for
U.S. firms for years to come.

Work Force Diversity

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Demographic trends present a significant challenge and opportunity in

the management of human resources. These demographic trends include
the age composition of the work force (during 1983-1993, employees
over age 45 increased by 20%), the racial composition (by 2000,
approximately one third of the work force will consist of blacks,
Hispanics, Asians, and other minorities), and the gender composition (in
1993, almost 70% of employed men had employed wives; this compares
to 54% in 1980 and 45% in 1975). These data affect other issues such as
work and family roles, cultural sensitivity, the glass ceiling, generation
gaps, appraisal feedback that vary based on race, and the extent of
government regulation of business. Nevertheless, firms that can
formulate and implement HR strategies that capitalize on employee
diversity are more likely to survive and prosper.

Least Important
Generation Gap
While older individuals may resent reporting to a brash upstart whose
career is racing ahead faster than their own, these feelings are not
widespread. Also, many of those upstarts are children of older workers,
who want them to be successful.

Nepotism
Nepotism among small business owners is quite widespread. However,
this practice tends to decrease significantly with firm size, competitive
arena (neighborhood, city, state, region, national, or international), the
demand for expertise, and the demand for customer satisfaction.

3. In a recent national survey of HR executives in more than 400

companies, most respondents reported that the priorities of top
management at their firms are to counter competition, cut costs, and
improve performance. Yet only 12% of these HR executives said that
their department had a major responsibility for improving productivity,
quality, and customer service in their companies. What do you think are
some of the reasons for this gap between top management’s priorities and
the responsibility of the HR department? What are some of the
consequences of this gap? Outline several ways in which HR
departments can align themselves with their company’s strategic goals.
How do you think an HR department can gain top management’s support
for its programs and goals?

Some of the reasons for this gap between top management’s priorities
and the responsibility of the HR department are due to the HR
manager’s lack of line experience, the inability of top managers to
effectively use HR expertise, and the lack of a historical partnership
between the two. The consequences can be devastating for the company

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because HR professionals can play a critical role in enhancing

organizational capability.

The key way for HR departments to align themselves with their

companies’ strategic goals is to follow the eight guidelines listed in the
Manager’s Notebook (Enhancing Strategic Ties between the HR
Department and Managers). These include viewing firm performance as
a key variable in the design and implementation of all HR programs,
adopting a long-term orientation, developing a general business
orientation, and securing top management commitment.

4. According to a 2002 survey by USA Today/CNN/Gallup poll, only

10% of respondents think American corporations can be trusted to look
out for the interests of their employees (Armour, 2002a). In a recent
cover story, USA Today notes that “dozens of the largest companies –
from Polaroid to IBM to Cisco Systems – have canceled severance, halted
health benefits, withdrawn job offers, changed pension plans or issued
misleading audit reports. The result? A troubling erosion in the trust
that workers place in our nation’s business institution” (Armour, 2002a).
What impact is lack of employee trust likely to have on a company?
What HR policies can a company put in place to increase the level of
trust?

Lack of employee trust typically results in a decrease of employee

loyalty, which in turn affects employee retention, morale, individual and
team performance. All these factors directly or indirectly impact the
bottom line performance of the organization. Human Resource
strategies to address these issues may include a communication strategy
which articulates the organizations cultural beliefs and assumptions with
regard to their people, and provides a greater sense of employees’
connection to the organization; development of specific goals and
program to support employee retention; employee attitude surveys
which will provide organizational data regarding employee motivation
and morale; performance management systems which reward employees
for high levels of performance; and communications vehicles which
provide direct lines of communication to upper management in order to
build trust, with mechanisms for employees to ask questions, and give
and receive feedback about important organizational issues.

5. In recent years, much of the outsourcing of HR services has gone to

consulting firms that also do auditing work. According to a 2002 study
by three well known college professors who examined 3,000 proxy
statements, the more consulting a company bought from its auditor the
more likely its earnings met or beat Wall Street expectation. Thus, “if
you want impressive earnings, hire your auditor as a consultant too”
(study reported in Haddad, 2002: 12). Do you think this is mere

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coincidence? What may account for this observed empirical

relationship?

It is probably not a coincidence, but more of a deliberate management

strategy on the part of both the consulting firms and the organizations
that they work with. The executives making the decisions about the
accounting firms they select to perform auditing work are often the
same executives who make decisions about outsourcing services for
the organization, including Human Resource functions. In the past ten
to fifteen years, many of the large accounting firms have expanded
their offerings to include human resource consulting services. The
obvious benefit of these comprehensive services is that they enable
both the consulting firms and their clients to manage business
initiatives from a whole system perspective. Companies will therefore
outsource other functions to their accounting firms in whom they have
confidence, as they are already familiar with their business, and
understand the organization’s overall business strategy.

6. A study by Professors Judiesch and Lyness of the City University of

New York’s Baruch College found that adjusting for factors such as age,
gender, education and job factors, employees who take leave under the
Family and Medical Leave Act (FMLA) of 1993 were heavily penalized.
(The FMLA permits employees to take unpaid leave of up to 12 weeks for
family or medical reasons). Employees who took leave were less likely to
be promoted than non-leave takers, received lower job performance
ratings fort the year in which they took time off and received smaller
salary increases than their peers with similar low raig. What may account
for these findings? Based on your opinion, what does this say in terms of
attempts to induce changes in HR practices via government intervention?
Explain.

It is clear that most employers do not look kindly on employees using

FMLA leaves. The interpretation that employers have of that action
may vary widely, but it might include the belief that the employee is
taking advantage of the system, that they are unreliable, that they are
less loyal to the company, or a variety of other negative views. It seems
that government intervention to change HR practices can result in
resentment and subtle methods of retaliation by employers.

7. 3M’s competitive business strategy is based on innovation. 3M

requires that at least 25% of its annual sales come from products
introduced over the previous 5 years, a goal it often exceeds. Specific HR
programs adopted to implement this strategy include the creation of a
special fund that allows employees to start new projects or follow up on
ideas. 3M’s “release time” program, in which workers are given time off
during the day to pursue their own interests, is given credit for the

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creation of new products that management would not have thought of by

itself. In addition, 3M’s appraisal process encourages risk taking. A
senior manager at 3M says, “If you are threatened with dismissal after
working on a project that fails, you will never try again.” What other
types of HR policies might 3M institute to spur product innovation?

3M is a leader in the area of encouraging product innovation. As such, it

may be difficult for students to come up with additional ideas for ways
to spur employees in this area. However, there are many areas to
consider. Some of these are ones that 3M already has, but are not
mentioned in this question. Encourage the students to be creative in
answering this question (after all, the essence of innovation is
creativity), but then encourage them to examine the drawbacks of each
suggestion. Some possible answers might include: decentralization,
self-managed work teams, organizational restructuring into small
business units, awards, use of modeling technology, flexible work-time
(some employees may be more creative late at night), etc.

8. Many believe that top managers care little about human resources
compared to such areas as marketing, finance, production, and
engineering. What might account for this perception, and what would
you do to change it?

Students may refer to The Role of the HR Department in HR Strategy

Formulation and Implementation section in responding to this question.
Such a section explains the evolution of the HR department in four
stages. Additionally, it is important to note that top management has not
done a good job of clearly communicating their priorities in ways that
are convincing. While many make statements about the importance of
their human resources, they are not seen by much of the public as having
actions that are consistent with those statements. In order to be
convincing, top management must actually make human resources a top
priority with their time and resources and make their commitments
visible. Making those commitments visible is the most difficult thing to
accomplish well. Most of our society is fairly cynical in this area and
will tend to believe that top management is just saying the words.
However, consistent action over time will help overcome these doubts.

Emerging Trends Case 1.1

At Risk From Smoking: Your Job

Critical Thinking Questions

1. Many people believe that policies such as the ones described in the case
represent an unacceptable degree of employer’s intrusion into the
personal lives of employees. Do you agree? Explain.

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Students should be able to take a stance agreeing or disagreeing with this

statement. The measure of how well they answer this question is in how
well they form their argument and defend their position. Those agreeing
should provide a rationale as to why this type of policy would be an
unacceptable and unreasonable degree of employer’s intrusion into
employees’ personal lives. Those disagreeing should show why this
policy is reasonable and does not tread on employees rights to privacy.
2. While many companies claim that zero-tolerance, no-smoking policies
are enforced for the well-being of employees, some critics argue that the
real reason behind these policies is to save on insurance costs. This “false
pretense” makes both smokers and non-smokers more cynical of the
firm’s real intentions when it comes to explanations concerning incentive
programs, introduction of new technology, lay-offs, restructuring, and
the like. If you were asked to justify adoption of a zero tolerance non-
smoking policy, how would you do it?

Students should identify the strategy they would take in order to adopt
and implement this policy. They should describe the business reasons
why a zero tolerance smoking policy is being implemented and describe
the elements of their communication plan, one of the goals being to
address the cynicism of employees about the firm’s real intentions.
Their strategy should include an identification of the obstacles they
would expect to encounter and how they would go about dealing with
those issues. Students should be able to speak to employee vs. employer
rights in the context of this example.

3. An alternative to the policy described in this Manager’s Notebook, is

to require smokers to pay a higher insurance premium, in a sense asking
them to pay for the cost of their habit. Do you think this is a better
policy? Explain.

Once again, students may take either stance. Those who would support
this alternative would likely make a case that this approach still provides
individual freedom and rights, albeit at a higher cost. Those disagreeing
should show why this policy still imposes on individual privacy and
freedom at an unreasonable level.

Emerging Trends Case 1.2

Greater Security or Looking for Dirty Laundry

Critical Thinking Questions

1. Some people believe that security measures, such as those outlined in

this “You Manage It,” violate the privacy rights of prospective and

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current employees, and that they create a climate where big brother is
watching over you. Do you agree? Explain.

While few students will probably disagree that some level of security
measures are necessary, one of the responsibilities of management
from a human resource perspective is to ensure that prospective and
current employees rights are not violated, and that due process is
apparent whenever suspected problems are identified. One of the
issues in question is how, when questionable data is uncovered, that
data is interpreted. The increase in scrutiny of prospective and current
employees reveals information of all types, so how the information is
used has become a major issue from human resource standpoint. The
ways in which employers respond when they discover a discrepancy
varies depending on company policies, the worker’s perceived value
and the organizational culture. How security related information is
used becomes a matter of interpretation, except perhaps in the most
grievous cases

2. One potential problem with security screening systems is that people

with minor peccadilloes, (for instance being late on two credit payments)
nay be penalized unfairly, perhaps even without their knowledge. What
kinds of policies should a firm put in place to decide what is a serious or a
trivial security concern? Explain.

Developing a security screening policy, with a set of criteria by which

security concerns can be evaluated would be one method of dealing
with this issue. Such a policy would outline criteria to determine
whether a security concern falls into the “trivial” category versus a
“serious” concern or threat, and would provide guidelines for what to
do once the level of threat has been determined. For example, the
policy might define a serious security concern as one which poses a
physical threat to an individual or to the organization, or which
compromises the integrity of the business. The policy should also
provide guidelines on the appropriate action to take when presented
with a security concern (for example, concerns which would results in
the refusal to hire, and concerns that would be reason for
termination).

3. One troubling aspect of security screening systems is the potential for

false alarm, particularly when private security firms are paid to identify
and investigate current or prospective employees and customers who may
be security risks. And there is always a possibility that consciously or
unconsciously, racial or ethnic profiling may enter into consideration.
What can a company do to avoid the problem of mistakes being made
and potential discrimination as a result of security screening? Explain

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Employers need to be concerned with the accuracy of what is

discovered in the screening process, as identify theft has become a
major issue in the credit checking process. In fact, as a result of these
types of issues, recent legislature in California is now requiring
employers to provide notice to applicants and employees of the results
of third party investigative consumer reports. Additionally, outdated or
incorrect information is another concern as database information can
often be missing or out of date. Reference checking, criminal checks,
and credit checks are all common tools used in security screening.
Arrest and conviction information in the screening process, in
particular, may inadvertently result in the disproportionate screening
of minorities and other protected groups. Employers need to be
particularly cautious in this area. Because an arrest record is, by
definition, not evidence of criminal guilt, such information should
generally not be used as definitive grounds for rejection. However,
evidence of a criminal conviction may, depending upon the nature of
the conviction and the related circumstances, be information that an
employer arguably must consider given the employer’s primary
business (e.g., security) or other federal or state law requirements (e.g.,
child care or nursing home care providers). Therefore, in the absence
of a controlling federal or state law, employers should generally
consider the following before making any negative employment
decision based on an applicant’s or employee’s criminal record: the
length of time since a conviction; the nature of the crime; the
relationship between the job to be performed and the crime committed;
the number of convictions; rehabilitation efforts; and the subsequent
employment history.

Discussion Case 1.3

Managers and HR Professionals at Sands Corporation: Friends or Foes?

Critical Thinking Questions

1. What seems to be the main source of conflict between supervisors and

the HR department at Sands Corporation? Explain.

The main source of conflict seems to be an imbalance in power which

leads to work role conflicts. Top management at Sands believes that a
strong HR department with a highly qualified staff can do a better job of
handling most personnel matters than supervisors. Also, they believe
that a good HR department can help prevent legal problems that naive
line managers may inadvertently create. One of Sand's competitors
recently lost a $5 million sex discrimination suit, and this added to the
top managers’ resolve to have a strong HR component.

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2. Do you believe that managers should be given more autonomy to make

personnel decisions such as hiring, appraising, and compensating
subordinates? If so, what are some potential drawbacks to granting them
this authority? Explain.

Yes. Managers should be given more autonomy to make these

decisions. The core of good management is manifested in how line
managers manage people. The drawbacks, however, to giving them
more autonomy are numerous. First, they may make poor decisions that
would be costly to the company and to employee morale. For example,
the employees, according to the managers, are presently complaining
about limitations on pay increases for excellent performers. They are
not complaining that the pay scale is inherently unfair. Inherently unfair
systems tend to violate the law (Civil Rights Act, Title VII, Fair Labor
Standards Act, Equal Pay Act). Undue limitation on pay for excellent
performers is not an exemplary management practice; however, it is not
a violation of EEO laws.

Second, the supervisors say that they are afraid to indicate certain
"truthful" statements on the performance appraisals because they fear
investigations by the HR department. This indicates that the supervisors
may, by telling the "truth" cause the company to be sued. For example,
if a supervisor says that she systematically pays male welders more than
female welders because they are the primary breadwinners, she is being
truthful about her motives. But, her actions violate the law (i.e., Equal
Pay Act, prohibiting sex-based wage discrimination).

Third, the supervisors complain that the HR department ranks applicants

on test scores and other formal criteria, yet those persons do not fit well
in the department and do not get along with them or the coworkers. It
appears that if supervisors had their way they would select applicants on
more subjective factors. This could cause lots of problems in terms of
adherence to Sand's federal contract requirements and the company's
ability to gain subsequent contracts with the federal government.

3. How should Sand's top executives deal with the complaints expressed
by supervisors? How should the director of the HR department deal with
the situation? Explain.

Top executives should listen very carefully to the complaints of

supervisors. They must be able to discern the needs of the supervisors,
develop training programs to meet their need for more autonomy, and at
the same time use leadership skills to persuade them to "buy" into
particular human resource programs.

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Supervisors and other line managers must learn to view HR

professionals as valuable internal consultants who can provide advice
and support to improve the management of operations, rather than
perceiving them as enforcers of bureaucratic procedures.

In addition, the top executives may need to establish a forum to discuss

the strategic implications of HR programs in conjunction with
operations. This would help to open communication channels, to
exchange ideas, and to forge a closer linkage between HRM and line
management. Also, it can help ensure that daily tactical decisions
become part of a larger picture or plan. The bottom line is that firm
performance, not the supervisors' preferences, must be seen as a key
variable in the design and implementation of all human resource
programs.

The following list shows what the director of the HR department should
do:
• The HR department director should not be defensive, but attempt
to understand the supervisor's dilemma. Furthermore, he should
prepare a document which shows the quality of services provided
by the HR department to the managers of the company. The HR
director also may propose supervisory training that would
broaden their view concerning human resources as a key element
in organizational effectiveness and performance.
• The HR director would do well to indicate to what extent the
federal contracts require certain items to be processed and, thus,
dictate some of the so-called "bureaucratic" paperwork, which
affords the company and its employees a regular paycheck.
• The HR director should prepare a document that indicates the
measurable effect that current HR programs have had on
productivity, reductions in litigation, labor cost savings in
compensation expenditures, etc.
• Finally, the HR department should seek to design training
programs that reflect line management's values and input,
establish pay structures that are flexible enough to reward
excellent performers, provide more supervisory training on
performance appraisal feedback, and create a more mutual or
shared-power relationship with these managers. Such a
relationship would place them more appropriately in a position of
business-partner rather than adversary.

Video Shorts Case 1.4

The Strategic Role of Human Resource Management

Critical Thinking Questions

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1. Do you agree with SPOTLIGHT panelists Jenny Herman of

Loews and Martin Buckingham of Hot Jobs that Daryl Hulme did
a good job? How is she protecting the interests of the company?
How is she protecting the interests of the employee as well as
fostering commitment?

Yes. Right now she needs to help Jackson and other employees to
absorb the shock and deal with a temporary lack of direction. She is
protecting the company’s competitive advantage by doing everything
she can to retain Jackson and explaining to Jackson that he and people
like him are the reason that Hot Jobs is attractive to Yahoo. Daryl is
counting on the commitment he has to Hot Jobs and taking this
opportunity to reinforce that commitment. She is protecting Jackson by
giving him a game plan to help him look after his own interests, while
letting him know how important he is as a leader and a talented
employee. Some students may feel that she has let Jackson down, and
that her honesty did nothing to gain his trust.

2. Hot Jobs Associate Director of HR, Martin Buckingham is

apprehensive that this period of transition will affect the focus of the Hot
Jobs staff resulting in lower productivity and the loss of some of the
company’s best people. Why is this especially significant at an Internet
company like Hot Jobs?

Yahoo intends to integrate not only Hot Jobs’ superior database and
brand, but its industry leading talent as well. Human capital, meaning
the knowledge, education, training, skills and expertise of a firm’s
workers is especially important in a technology business. HR has
invested heavily in the ongoing training of its staff and cannot afford
to lose them. Superior “knowledge” is what differentiates Hot Jobs
form the competition.

3. If you were in Jackson’s place, what would you do? Why?

Student answers will vary, depending upon experience and inclination.

Based on his “star” performance at Hot Jobs, he has become
accustomed to excellent compensation and the perks that come with
being a manager. He may not want to leave. Based on his reactions
during his conversation with Daryl, he seems to be motivated by
money and may choose to accept an outside offer.

4. Host Meg Allen feels that communication during a time of

corporate flux is especially important. Using Jackson and Daryl as
examples, would you say that Hot Jobs enjoys good communication
between its line mangers and HR managers? Explain.

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Part One

Students may interpret the surveillance tape in various ways. They

may feel Jackson and Daryl are being honest with one another.
Jackson does not seem to have taken any decisive steps without first
seeking her guidance. As a line manager, he has come to HR first,
which is evidence that there is excellent communication between the
two. Other students my reason that he has obviously not been briefed
by HR until now, when he has had to initiate the dialogue, showing
that communication between line managers and HR managers is not
what it should be.

5. According to Martin Buckingham, all HR employee policies

“trickle down” from the specific vision of the CEO. How does this
affect HR’s role in executing and formulating strategy? How does this
differ from Loews Hotels?

This makes perfect sense. All HR functions included in planning,

organizing, staffing, leading and controlling such as counseling and
training employees should reflect the philosophy of the company.
When HR management is called upon to help with strategically pivotal
processes like formulating downsizing and restructuring strategies, or
environmental scanning all efforts must be cohesive in order to
contribute to corporate success. At Loews, HR personnel are well
represented on the board that formulates corporate policy, giving them
direct input during the planning process. However, it should be noted
that the company is run very much in accordance with the personal
convictions of the CEO and philanthropist Jonathan M. Tisch.

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