CHAPTER 19 Managing Human Resources

1. Part 5 Managing Growth in the Small Business CHAPTER 19Managing Human Resources © 2008 Cengage Learning. All rights reserved.

2. LookingAHEAD • Explain the importance of employee recruitment and list some sources that can be useful in finding suitable applicants. • Identify the steps to take in evaluating job applicants. • Describe the roles of training and development for both managerial and nonmanagerial employees in a small business. • Explain the various types of compensation plans, including the use of incentive plans. • Discuss the human resource issues of employee leasing, legal protection, labor unions, and the formalizing of employer–employee relationships. After you have read this chapter, you should be able to: © 2008 Cengage Learning. All rights reserved.

3. Recruiting Personnel • The Need for Quality Employees • Employee performance directly or indirectly affects the capability of the firm to service customer needs. • Employee performance affects profitability. • Payroll costs affect firm’s bottom line. • Quality of employees determines the long-term competitive potential of the firm. © 2008 Cengage Learning. All rights reserved.

4. The Lure of Entrepreneurial Firms • Advantages of Employment in Small Firms • Quicker movement to decision-making levels of management • Greater managerial freedom • More opportunities for broad-based managerial experience • Flexibility in work scheduling and job sharing © 2008 Cengage Learning. All rights reserved.

5. Help-WantedAdvertising Walk-ins Schools Public EmploymentOffices Private EmploymentAgencies ExecutiveSearch Firms EmployeeReferrals InternetRecruiting Temporary HelpAgencies Sources of Employees © 2008 Cengage Learning. All rights reserved.

6. Diversity in the Workforce • Workforce Diversity • Differences among employees in terms of such dimensions as gender, age, and race. • Diversity is increasing with higher proportions of women, older workers, and racial minorities entering the workforce. © 2008 Cengage Learning. All rights reserved.

7. Job Descriptions • Job Description • A written summary of the essential duties required by a specific job • Aids in personnel recruitment. • Helps focus employees on their work. • Provides direction in training. • Serves as the basis for performance review. • Job Specification • A list of the skills and abilities needed by the job holder to successfully perform a specific job • Aids in selecting the most qualified job applicant. © 2008 Cengage Learning. All rights reserved.

8. 1 2 3 4 5 Evaluating Prospects and Selecting Employees Steps in Recruiting Employees Using application forms Interviewing the applicant Checking references and background information Testing the applicant Requiring physical examinations © 2008 Cengage Learning. All rights reserved.

9. Is an Idea a Good Investment Opportunity? Market Factors Fatal Flaws Competitive Advantage Judging a Business Opportunity Economics Management Capability © 2008 Cengage Learning. All rights reserved.

10. Orientation ofNew Personnel TrainingandDevelopment Training to Improve Quality Development of Managers and Professionals Training of Nonmanagerial Employees Types of Training and Development © 2008 Cengage Learning. All rights reserved.

11. Training and Developing Employees • Purposes of Training and Development • Prepare new recruit to perform the duties of the job. • Improve the performance of current employees. • Prepare employees for career advancement. • Improve morale of current employees. • Serve as an inducement to potential applicants. © 2008 Cengage Learning. All rights reserved.

12. 19-1 Steps in Job Instruction Training © 2008 Cengage Learning. All rights reserved.

13. Training and Developing Employees (cont’d) • Development of Managerial and Professional Employees • Determining the need for training • Creating a plan for training • Setting a timetable for training • Providing employee counseling © 2008 Cengage Learning. All rights reserved.

14. Compensation and Incentives for Employees • Wage or Salary Levels • Competitive compensation • Time- or output-based compensation • Financial Incentives • Commission systems • Piecework • Group incentives and team awards • Bonus and profit-sharing plans © 2008 Cengage Learning. All rights reserved.

15. Compensation and Incentives for Employees (cont’d) • Performance-Based Compensation Plans • Keys to developing an effective bonus plan: • Set attainable goals. • Include employees in planning. • Keep updating goals. © 2008 Cengage Learning. All rights reserved.

16. Stock Incentives • Stock Options • Employee Stock Ownership Plans (ESOPs) • Plans through which a firm is sold either in part or in total to its employees. • Employees’ performance is motivated by their sharing of ownership in the firm. • Owners can cash out and withdraw without selling to outsiders. • ESOPs offer tax advantages to owners and employees. © 2008 Cengage Learning. All rights reserved.

17. Compensation and Incentives for Employees (cont’d) • Fringe Benefits • Supplements to compensation designed to be attractive and beneficial to employees. • Benefits are a substantial portion of payroll costs. • Small firms tend to provide fewer benefits. • Small firms are increasingly outsourcing the administration of their benefits programs. © 2008 Cengage Learning. All rights reserved.

18. 19-2 Some Affordable Perks • Give employees a paid day off on their birthday. • Offer employees $100 a year to use for personal enrichment, such as taking an art class, getting a massage, or attending a play—if it makes them happy, they may be more productive. • Bring in lunch for everyone on Fridays. • Have employees select a “star employee” for his or her contributions at the office, and reward that individual with an extra day of vacation, a cash prize, or some other gift. • Offer recruitment bonuses to those who refer potential employees who stay with your company six months or longer—one good employee can often lead to another. • Pass on to employees perks accrued from the use of corporate credit cards, including airline miles, tickets to fun events, and other benefits. Sources: Rich Mintzer, “20 Low-Cost Employee Perks,” Entrepreneur, December 8, 2006, http://www.entrepreneur.com/article/printthis/171630.html, accessed December 12, 2006; and Kathleen Landis, “Blue Sky Thinking,” MyBusiness, June-July 2003, p. 39. © 2008 Cengage Learning. All rights reserved.

19. Special Issues in HRM • Employee Leasing • The “renting” of personnel from an organization that handles paperwork and administers benefits for those employees • Leasing allows small firms to provide employee benefits. • Leasing makes small firms subject to additional government regulations. • Professional Employment Organization • A personnel-leasing company that places employees on its own payroll and then “rents” them to employers on a permanent basis. © 2008 Cengage Learning. All rights reserved.

20. Special Issues in HRM (cont’d) • Legal Protection of Employees • Civil Rights Act (1964) as amended • Legislation prohibiting discrimination based on race, color, religion, sex, or national origin. • Applies to all employers of more than 15 people. • Americans with Disabilities Act (1990) • Legislation prohibiting discrimination against persons with disabilities; requires “reasonable accommodation” by firms in the employment of disabled persons. © 2008 Cengage Learning. All rights reserved.

21. Special Issues in HRM (cont’d) • Legal Protection of Employees (cont’d) • Sexual harassment policy guidelines: • Establish clear policies and procedures regarding sexual harassment in the workplace. • Require employees to report incidents of harassment to management immediately. • Investigate any and all complaints of sexual harassment fairly and thoroughly. • Take appropriate action against violators and maintain claimant confidentiality. • If a lawsuit is to be filed, contact an attorney. © 2008 Cengage Learning. All rights reserved.

22. Special Issues in HRM (cont’d) • Legal Protection of Employees (cont’d) • Occupational Safety and Health Act (1970) • Legislation that regulates the safety of workplaces and work practices. • Created the Occupational Safety and Health Administration (OSHA) to establish and enforce health and safety standards. • Fair Labor Standards Act (FLSA) • Federal law that establishes a minimum wage and provides for overtime pay for more than 40 hours per week. © 2008 Cengage Learning. All rights reserved.

23. Special Issues in HRM (cont’d) • Legal Protection of Employees (cont’d) • Family and Medical Leave Act (1993) • Firms must provide up to 12 weeks of unpaid leave for childbirth and other family needs. • Firms must continue health-care coverage during the leave and guarantee that employee can return to the same or a comparable job. • Labor Unions • Participating in collective bargaining for labor contracts • Implementing HR policies to minimize employees’ desire for organization and representation. © 2008 Cengage Learning. All rights reserved.

24. Special Issues in HRM (cont’d) • Formalizing of Employer-Employee Relationships • Employee handbook contents • Expression of company philosophy • Recruitment • Selection • Training • Vacations • Grievances • Discipline • Performance reviews © 2008 Cengage Learning. All rights reserved.

25. Special Issues in HRM (cont’d) • The Need for a Human Resource Manager • Conditions favoring appointment of an HR manager: • A substantial number of employees (100 or more) • Unionized employees • High labor turnover rate • Need to recruit and select skilled/professional employees • Considerable need to train supervisors or operative employees • Poor employee morale • Strong competition for personnel © 2008 Cengage Learning. All rights reserved.

26. headhunter workforce diversity job specification behavioral interview validity reliability Job Instruction Training fringe benefits employee stock ownership plans (ESOPs) employee leasing professional employment organization (PEO) Civil Rights Act Occupational Safety and Health Act Fair Labor Standards Act (FLSA) Family and Medical Leave Act (FMLA) Key TERMS © 2008 Cengage Learning. All rights reserved.