1.

Managers

WHY ARE MANAGERS IMPORTANT?

Managers have an important impact on both employees and the organizations in which they
work. The following three reasons address their importance:
1. Organizations need their managerial skills and abilities more than ever in these uncertain,
complex, and chaotic times.
2. Managers are critical to getting things done.
3. Managers do matter to organizations.

WHO ARE MANAGERS AND WHERE DO THEY WORK?

Who Is a Manager?

1. First-line (or front-line) managers (often called supervisors) are typically involved with
producing the organization’s products or servicing the organization’s customers. These
managers are located on the lowest level of management.
2. Middle managers include all levels of management between the first level and the top level
of the organization. They may have titles such as regional manager, project leader, store
manager, or division manager.
3. Top managers include managers at or near the top of the organization who are responsible
for making organization-wide decisions and establishing plans and goals that affect the entire
organization.

Where Do Managers Work?

An organization is a deliberate arrangement of people to accomplish some specific purpose.
Organizations share three common characteristics : (1) each has a distinct purpose; (2) each is
composed of people; and (3) each develops some deliberate structure so members can do their
work.

WHAT DO MANAGERS DO?

Management involves coordinating and overseeing the work activities of others so that their
activities are completed efficiently and effectively.
1. Coordinating and overseeing the work of others is what distinguishes a managerial position
from a non managerial one.
2. Efficiency is getting the most output from the least amount of inputs in order to minimize
resource costs. Efficiency is often referred to as “doing things right”
3. Effectiveness is completing activities so that organizational goals are attained and is often
described as “doing the right things”
B. Management Functions
Henri Fayol proposed that managers perform five management functions: POLC
1. Planning involves defining goals, establishing strategies for achieving those goals, and
developing plans to integrate and coordinate activities.
2. Organizing involves arranging and structuring work to accomplish the organization’s goals.
3. Leading involves working with and through people to accomplish organizational goals.
4. Controlling involves monitoring, comparing, and correcting work performance.

C. Management Roles
Henry Mintzberg, a management researcher, conducted a precise study of managers at work. He
concluded that managers perform 10 different roles, which are highly interrelated.
1. Management roles refer to specific categories of managerial behavior
 Interpersonal roles include figurehead, leadership, and liaison activities.
 Informational roles include monitor, disseminator, and spokesperson.
 Decisional roles include entrepreneur, disturbance handler, resource allocator, and
negotiator.

D. Management Skills
Managers need certain skills to perform the challenging duties and activities associated with
being a manager.

Technical skills are job-specific knowledge and techniques needed to proficiently perform
specific tasks.
Human skills involve the ability to work well with other people individually and in a group.
Conceptual skills involve the ability to think and to conceptualize abstract and complex
situations.

2. Decision making

THE DECISION-MAKING PROCESS

A decision is a choice made from two or more alternatives. The decision- making process is a set
of eight steps that include identifying a problem, selecting an alternative, and evaluating the
decision’s effectiveness.

Step 1: Identify a Problem. A problem is a discrepancy between an existing and a desired

condition. In order to identify a problem, you, as a manager, should recognize and understand the
three characteristics of problems:
Step 2: Identify Decision Criteria. Decision criteria are criteria that define what is relevant in a
decision.
Step 3: Allocate Weights to the Criteria. The criteria identified in Step 2 of the decision-
making process do not have equal importance, so the decision-maker must assign a weight to
each of the items in order to give each item accurate priority in the decision.
Step 4: Develop Alternatives. The decision-maker must now identify viable alternatives that
could resolve the problem.
Step 5: Analyze Alternatives. Each of the alternatives must now be critically analyzed by
evaluating it against the criteria established in Steps 2 and 3.
Step 6: Select an Alternative. This step to select the best alternative from among those
identified and assessed is critical. If criteria weights have been used, the decision-maker simply
selects the alternative that received the highest score in Step 5.
Step 7: Implement the Alternative. The selected alternative must be implemented by
effectively communicating the decision to the individuals who will be affected by it and winning
their commitment to the decision.
Step 8: Evaluate Decision Effectiveness. This last step in the decision- making process assesses
the result of the decision to determine whether or not the problem has been resolved.

DECISION MAKING APPROACHES

A. Rationality. Managerial decision-making is assumed to be rational—that is, making choices
that are consistent and value-maximizing within specified constraints. If a manager could be
perfectly rational, he or she would be completely logical and objective.
1. Rational decision-making assumes that the manager is making decisions in the best interests of
the organization, not in his or her own interests.
2. The assumptions of rationality can be met if the manager is faced with a simple problem in
which (1) goals are clear and alternatives limited, (2) time pressures are minimal and the cost of
finding and evaluating alternatives is low, (3) the organizational culture supports innovation and
risk taking, and (4) outcomes are concrete and measurable.

B. Bounded Rationality. In spite of these limits to perfect rationality,managers are expected to

be rational as they make decisions. Because the perfectly rational model of decision-making isn’t
realistic, managers tend to operate under assumptions of bounded rationality, which is decision-
making behavior that is rational, but limited (bounded) by an individual’s ability to process
information.
1. Under bounded rationality, managers make satisficing decisions, in which they accept
solutions that are “good enough.”
2. Managers’ decision-making may be strongly influenced by the organization’s culture, internal
politics, power considerations, and by a phenomenon called escalation of commitment—an
increased commitment to a previous decision despite evidence that it may have been wrong.

C. Intuition. Managers also regularly use their intuition. Intuitive decision-making is a

subconscious process of making decisions on the basis of experience and accumulated judgment.
1. Making decisions on the basis of gut feeling doesn’t necessarily happen independently of
rational analysis; the two complement each other.
2. Although intuitive decision-making will not replace the rational decision-making process, it
does play an important role in managerial decision-making.

TYPES OF DECISIONS AND DECISION-

MAKING CONDITIONS
A. Types of Decisions
1. Structured problems are straightforward, familiar, and easily defined. In dealing with
structured problems, a manager may use a programmed decision, which is a repetitive decision
that can be handled by a routine approach. Managers rely on three types of programmed
decisions:
a. A procedure is a series of interrelated sequential steps that can be used to respond to a
structured problem.
b. A rule is an explicit statement that tells managers what they can or cannot do.
c. A policy is a guideline for making decisions.
2. Unstructured problems are problems that are new or unusual and for which information is
ambiguous or incomplete. These problems are best handled by a nonprogrammed decision that is
a unique decision that requires a custom-made solution.

B. Decision-Making Conditions
1. Certainty is a situation in which a manager can make accurate decisions because all outcomes
are known. Few managerial decisions are made under the condition of certainty.
2.Uncertainty is a situation in which the decision-maker is not certain and cannot even make
reasonable probability estimates concerning outcomes of alternatives.
3) Risk is a situation in which the manager is able to estimate the likelihood of outcomes that
result from the choice of particular alternatives.

DECISION - MAKING BIASES AND ERRORS

Managers use different styles and “rules of thumb” (heuristics) to simplify their decision-
making.
1. Overconfidence bias occurs when decision-makers tend to think that they know more than
they do or hold unrealistically positive views of themselves and their performance.
2. Immediate gratification bias describes decision-makers who tend to want immediate rewards
and avoid immediate costs.
3. The anchoring effect describes when decision-makers fixate on initial information as a
starting point and then, once set, fail to adequately adjust for subsequent information.
4. Selective perception bias occurs when decision-makers selectively organize and interpret
events based on their biased perceptions.
5. Confirmation bias occurs when decision-makers seek out information that reaffirms their
past choices and discount information that contradicts their past judgments.
6. Framing bias occurs when decision-makers select and highlight certain aspects of a situation
while excluding others.
7. Availability bias is seen when decision-makers tend to remember events that are the most
recent and vivid in their memory.
8. Decision-makers who show representation bias assess the likelihood of an event based on
how closely it resembles other events or sets of events.
9. Randomness bias describes the effect when decision-makers try to create meaning out of
random events.
10. The sunk costs error is when a decision-maker forgets that current choices cannot correct
the past. Instead of ignoring sunk costs, the decision-maker cannot forget them. In assessing
choices, the individual fixates on past expenditures rather than on future consequences.
11. Self-serving bias is exhibited by decision-makers who are quick to take credit for their
successes and blame failure on outside factors.
12. Hindsight bias is the tendency for decision-makers to falsely believe, once the outcome is
known, that they would have accurately predicted the outcome

3. Planning

Planning is one of the four functions of management. Fundamental information about managerial
planning is presented in this chapter; the text discusses the nature and purposes of planning,
strategies for effective planning, and contemporary planning issues.

THE WHAT AND WHY OF PLANNING

Planning involves defining the organization’s goals, establishing an overall strategy for
achieving these goals, and developing plans for organizational work activities. The term planning
as used in this chapter refers to formal planning.

GOALS AND PLANS

Planning involves two important elements: goals and plans.
Types of Goals
Goals (often called objectives) are desired outcomes for individuals, groups, or entire
organizations.

Financial goals versus strategic goals

Financial goals are related to the financial performance of the organization.
Strategic goals are related to all other areas of an organization’s performance.
Stated goals versus real goals
Stated goals are official statements of what an organization says and what it wants its various
stakeholders to believe its goals are.
Real goals are those that an organization actually pursues, as defined by the actions of its
members.

Types of Plans
1. Plans are documents that outline how goals are going to be met.
2. Plans can be described by their breadth, time frame, specificity, and frequency of use
a. Breadth: Strategic versus operational plans. Strategic plans (long-term plans) are plans that
apply to the entire organization, establish the organization’s overall goals, and seek to position
the organization in terms of its environment. Operational plans (short-term plans) are plans that
specify the details of how the overall goals are to be achieved.
b. Time frame: Short-term versus long-term plans. Short-term plans are plans that cover one
year or less. Long-term plans are plans with a time frame beyond three years.
c. Specificity: Specific versus directional plans. Specific plans are plans that are clearly defined
and leave no room for interpretation. Directional plans are flexible plans that set out general
guidelines.
d. Frequency of use: Single-use versus standing plans. A single-use plan is a one-time plan
specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans
that provide guidance for activities performed repeatedly.

SETTING GOALS AND DEVELOPING PLANS

A. Approaches to Setting Goals.
Goals can be established through the process of traditional goal setting or through MBO
(management by objectives).
1. Traditional goal setting is an approach to setting goals in which goals are set at the top level of
the organization and then broken into subgoals for each level of the organization.
 Traditional goal setting assumes that top managers know what is best because of their ability
to see the “big picture.” Employees are to work to meet the goals for their particular area of
responsibility.
 This traditional approach requires that goals must be made more specific as they flow down
to lower levels in the organization. In striving to achieve specificity, however, objectives
sometimes lose clarity and unity with goals set at a higher level in the organization
 When the hierarchy of organizational goals is clearly defined, it forms an integrated means-
end chain—an integrated network of goals in which the accomplishment of goals at one level
serves as the means for achieving the goals, or ends, at the next level.
2. Management by objectives (MBO) is a process of setting mutually agreed-upon goals and
using those goals to evaluate employee performance.
 Studies of actual MBO programs confirm that MBO can increase employee performance and
organizational productivity. However, top management commitment and involvement are
important contributions to the success of an MBO program.

Characteristics of Well-Written Goals

1 Written in terms of outcomes
2. Measurable and quantifiable
3. Clear as to a time frame
4. Challenging yet attainable
5. Written down
6. Communicated to all organizational members

Steps in Goals Setting

1. Review the organization’s mission (the purpose of the organization).
2. Evaluate available resources.
3. Determine the goals individually or with input from others
4. Write down the goals and communicate them to all who need to know.
5. Review results and whether goals are being met. Make changes as needed.

B. Developing Plans
The process of developing plans is influenced by three contingency factors and by the particular
planning approach used by the organization.
Contingency Factors in Planning:
 Manager’s level in the organization. Operational planning usually dominates the planning
activities of lower-level managers. As managers move up through the levels of the
organization, their planning becomes more strategy oriented
 Degree of environmental uncertainty. The greater the environmental uncertainty, the more
directional plans should be, with emphasis placed on the short term.When uncertainty is
high, plans should be specific, but flexible.
 Length of future commitments. According to the commitment concept, plans should extend
far enough to meet those commitments made today.Planning for too long or for too short a
time period is inefficient and ineffective.

Approaches to Planning
1. In the traditional approach, planning was done entirely by top-level managers who were often
assisted by a formal planning department.
2. Another approach to planning is to involve more members of the organization in the planning
process. In this approach, plans are not handed down from one level to the next, but are
developed by organizational members at various levels to meet their specific needs.

4. Strategic Management

STRATEGIC MANAGEMENT
Managers must carefully consider their organization’s internal and external environments as they
develop strategic plans. They should have a systematic means of analyzing the environment,
assessing their organization’s strengths and weaknesses, identifying opportunities that would
give the organization a competitive advantage, and incorporating these findings into their
planning. The value of thinking strategically has an important impact on organization
performance.

A. What Is Strategic Management?

1. Strategic management is what managers do to develop the organization’s strategies.
2. Strategic management involves all four of the basic management functions—planning,
organizing, leading, and controlling.
B. Why Is Strategic Management Important?
1. Strategic management has a significant impact on how well an organization performs.
2. In today’s business world, organizations of all types and sizes must manage constantly
changing situations.
3. Today’s companies are composed of diverse divisions, departments, functions, and work
activities that must be coordinated.
4. Strategic management is involved in many of the decisions that managers make.

THE STRATEGIC MANAGEMENT PROCESS

The strategic management process is a six-step process that encompasses strategic planning,
implementation, and evaluation.
Step 1: Identifying the Organization’s Current Mission, Goals, and Strategies
 Every organization needs a mission which is a statement of the purpose of an organization.
The mission statement addresses the question: What is the organization’s reason for being in
business?
 The organization must also identify its current goals and strategies.
Step 2: Doing an External Analysis
 Managers in every organization need to conduct an external analysis. Influential factors such
as competition, pending legislation, and labor supply are included in the external
environment.
 After analyzing the external environment, managers must assess what they have learned in
terms of opportunities and threats. Opportunities are positive trends in external
environmental factors; threats are negative trends in environmental factors.
 Because of different resources and capabilities, the same external environment can present
opportunities to one organization and pose threats to another.
Step 3: Doing an Internal Analysis
 Internal analysis should lead to a clear assessment of the organization’s resources and
capabilities.
 The organization’s major value-creating skills and capabilities that determine its competitive
weapons are the organization’s core competencies.
 Any activities the organization does well or any unique resources that it has are called
strengths.
 Weaknesses are activities the organization does not do well or resources it needs but does not
possess.
 Organizational culture is important in internal analysis; the company’s culture can promote
or hinder its strategic actions.
 SWOT analysis is an analysis of the organization’s strengths, weaknesses, opportunities, and
threats.
Step 4: Formulating Strategies
 After the SWOT, managers develop and evaluate strategic alternatives and select strategies
that are appropriate.
 Strategies need to be established for corporate, business, and functional levels.
Step 5: Implementing Strategies
A strategy is only as good as its implementation.
Step 6: Evaluating Results

Strategic planning takes place on three different and distinct levels: corporate, business, and
functional strategies.
CORPORATE STRATEGIES
Corporate strategy is an organizational strategy that determines what businesses a company is in,
should be in, or wants to be in, and what it wants to do with those businesses.
1. There are three main types of corporate strategies:
a. A growth strategy is a corporate strategy that is used when an organization wants to grow and
does so by expanding the number of products offered or markets served, either through
its current business(es) or through new business(es).
b. A stability strategy is a corporate strategy characterized by an absence of significant change in
what the organization is currently doing.
c. A renewal strategy is a corporate strategy designed to address organizational weaknesses that
are leading to performance declines. Two such strategies are retrenchment strategy and
turnaround strategy.
How are corporate strategies managed? Corporate Portfolio Analysis is used when an
organization’s corporate strategy involves a number of businesses. Managers can manage this
portfolio of businesses using a corporate portfolio matrix, such as the BCG matrix. The BCG
matrix is a strategy tool that guides resource allocation decisions on the basis of market share and
growth rate of SBUs.

COMPETITIVE STRATEGY
A business strategy (also known as a competitive strategy) is strategy focused on how the
organization will compete in each of its businesses.
The Role of Competitive Advantage. A competitive advantage is what sets an organization
apart, that is, its distinctive edge. An organization’s competitive advantage can come from its
core competencies.
 Quality as a Competitive Advantage. If implemented properly, quality can be one way for an
organization to create a sustainable competitive advantage.
 Sustaining Competitive Advantage. An organization must be able to sustain its competitive
advantage; it must keep its edge despite competitors’ action and regardless of evolutionary
changes in the organization’s industry.

Michael Porter’s work explains how managers can create and sustain a competitive advantage
that will give a company above-average profitability. Industry analysis is an important step in
Porter’s framework. He says there are five competitive forces at work in an industry; together,
these five forces determine industry attractiveness and profitability. Porter proposes that the
following five factors can be used to assess an industry’s attractiveness:
1) Threat of new entrants. How likely is it that new competitors will come into the industry?
2) Threat of substitutes. How likely is it that products of other industries could be substituted for
a company’s products?
3) Bargaining power of buyers. How much bargaining power do buyers (customers) have?
4) Bargaining power of suppliers. How much bargaining power do a company’s suppliers have?
5) Current rivalry. How intense is the competition among current industry competitors?

B. Choosing A Competitive Strategy. According to Porter, managers must choose a strategy

that will give their organization a competitive advantage. Porter identifies three generic
competitive strategies. Which strategy managers select depends on the organization’s strengths
and core competencies and the particular weaknesses of its competitor(s).

a. A cost leadership strategy is a business or competitive strategy in which the organization

competes on the basis of having the lowest costs in its industry.
b. A differentiation strategy is a business or competitive strategy in which a company offers
unique products that are widely valued by customers.
c. A focus strategy is a business or competitive strategy in which a company pursues a cost or
differentiation advantage in a narrow industry segment.
d. An organization that has not been able to develop either a cost or differentiation advantage is
said to be “stuck in the middle.”

5. Organization Design

Organizing is arranging and structuring work to accomplish the organization’s goals.

Organizational structure is the formal arrangement of jobs within an organization.

ORGANIZATION DESIGN is developing or changing an organization’s structure. This

process
involves decisions about six key elements: work specialization, departmentalization, chain of
command, span of control, centralization/decentralization, and formalization.
A. Work Specialization
Work specialization is dividing work activities into separate job tasks.
Most of today’s managers regard work specialization as an important organizing mechanism but
not as a source of ever increasing productivity.
Human diseconomies from division of labor boredom, fatigue, stress, low productivity, poor
quality, increased absenteeism, and high turnover eventually exceed the economic advantages
created by work specialization.

B. Departmentalization
When work tasks have been defined, they must be arranged in order to accomplish
organizational goals. This process, known as departmentalization, is the basis by which jobs are
grouped.
There are five major ways to departmentalize

1.Functional departmentalization groups jobs by functions performed.

2.Product departmentalization groups jobs by product line.
3.Geographical departmentalization groups jobs on the basis of geographical region.
4.Process departmentalization groups jobs on the basis of product or customer flow.
5.Customer departmentalization groups jobs on the basis of specific and unique customers
who have common needs

C.Chain of Command
The chain of command is the line of authority extending from upper organizational levels to the
lowest levels, which clarifies who reports to whom.Three concepts related to chain of command
are authority,responsibility, and unity of command
1.Authority is the right inherent in a managerial position to tell people what to do and to expect
them to do it.
a.The acceptance theory of authority says that authority comes from the willingness of
subordinates to accept it.Subordinates will accept orders only if the following conditions are
satisfied:
 They understand the order.
 They feel the order is consistent with the organization’s purpose.
 The order does not conflict with their personal beliefs.
 They are able to perform the task as directed.
b.Line authority entitles a manager to direct the work of an employee. It is the employer
employee authority relationship that extends from the top of the organization to the lowest
echelon
c.Staff authority functions to support, assist, advise, and generally reduce some of their
informational burdens.
2.Responsibility is the obligation to perform any assigned duties
3.Unity of command is the management principle that each person should report to only one
manager.

D. Span of Control
Span of control is the number of employees a manager can efficiently and effectively manage.
1.The span of control concept is important because it determines how many levels and managers
an organization will have.
What determines the “ideal” span of control?
Contingency factors such as the skills and abilities of the manager and the employees,the
characteristics of the work being done, similarity and complexity of employee tasks,the physical
proximity of subordinates, the degree to which standardized procedures are in place, the
sophistication of the organization’s information system, the strength of the organization’s
culture, and the preferred style of the manager influence the ideal number of subordinates.

E. Centralization and Decentralization

The concepts of centralization and decentralization address who, where, and how decisions are
made in organizations.
- Centralization is the degree to which decision making is concentrated at upper levels of the
organization.
- Decentralization is the degree to which lower level employees provide input or actually make
decisions.
- The current trend is toward decentralizing decision making in order to make organizations more
flexible and responsive.
- Employee empowerment is giving employees more authority (power) to make decisions.

F. Formalization refers to the degree to which jobs within an organization are standardized and
the extent to which employee behavior is guided by rules and procedures.
- In a highly formalized organization, employees have little discretion, and a high level of
consistent and uniform output exists. Formalized organizations have explicit job descriptions,
many organizational rules, and clearly defined procedures.
- In a less formalized organization, employees have much freedom and can exercise discretion in
the way they do their work.
- Formalization not only fosters relatively unstructured job behaviors, but also eliminates the
need for employees to consider alternatives.
- The degree of formalization can vary widely between organizations and even within
organizations.

MECHANISTIC AND ORGANIC STRUCTURES

Organizations do not have identical structures. Even companies of comparable size do not
necessarily have similar structures.
Mechanistic organization is an organizational design that is rigid and tightly controlled. It is
characterized by high specialization, rigid departmentalization, narrow spans of control, high
formalization, a limited information network, and little participation in decision making by
lower-level employees.
An organic organization is an organizational design that is highly adaptive and flexible. It is
characterized by little work specialization, minimal formalization, and little direct supervision of
employees.

Under what circumstances is each design favored?

It “depends”on contingency variables.
Appropriate organizational structure depends upon four contingency variables:

A.Strategy and structure

The organization’s strategy is one of the contingency variables that influences organizational
design.Organizations change their strategies, they must change their structure to support that
strategy.
Most current strategy structure frameworks focus on three strategy dimensions:
a)Innovation needs the flexibility and free flow of information present in the organic
organization
b)Cost minimization needs the efficiency, stability, and tight controls of the mechanistic
organization

B.Size and structure

Larger organizations tend to have more specialization, departmentalization, centralization, and
formalization ,although the size-structure relationship is not linear.

C.Technology

D.Environmental uncertainty and structure

The more uncertain the environment, the more flexible and responsive the organization needs to
be.

TRADITIONAL ORGANIZATIONAL DESIGNS

Simple structure is an organizational design with low departmentalization, wide spans of
control, authority centralized in a single person, and little formalization.
Functional structure is an organizational design that groups similar or related occupational
specialties together.
Divisional structure is an organizational structure made up of separate, semiautonomous units
or divisions.

ORGANIZING FOR FLEXIBILITY

Team Structure is an organizational structure in which the entire organization is made up of
work teams. Matrix Structure is an organizational structure that assigns specialists from
different functional departments to work on one or more projects.
Project Structure is an organizational structure in which employees continuously work on
projects.
Boundaryless organization is an organization whose design is not defined by, or limited to , the
horizontal, vertical, or external boundaries imposed by a predefined structure.
Virtual organization: an organization that consist of a small core of full-time employees and outside
specialists temporarily hired as needed to work on projects

6. Summary - Human Resource Management

The quality of an organization is, to a large degree, dependent upon the quality of the people it
hires and retains.

THE HUMAN RESOURCE MANAGEMENT PROCESS

Various studies have concluded that an organization’s human resources can be an important
strategic tool and can help establish a firm’s sustainable competitive advantage.

Why Is Human Resource Management Important?

Whether or not an organization has a human resource department, every manager is involved
with human resource management activities.
 Studies that have explored the link between HRM policies and practices and organizational
performance have found that certain HRM policies and practices have a significant impact on
performance.
 These high-performance work practices are human resource policies and practices that lead
to both high individual and high organizational performance.
The human resource management process consists of eight activities necessary for staffing the
organization and sustaining high employee performance.

External Factors that affect the HRM Process.

A number of environmental forces constrain human resource management activities.
The four factors most directly influencing the HRM process are economic conditions, employee
labor unions, governmental laws and regulations, and demographic trends.

 Economic conditions. Economic news, whether good or bad, has an effect on employment,
attitudes toward work, careers, and retirement.
 A labor union is an organization that represents workers and seeks to protect their interests
through collective bargaining.
 Federal laws and regulations have greatly expanded the federal government’s influence over
HRM. Managers that operate in an international context must also be aware of specific laws
that apply to the countries in which they do business.
 Demographic trends. Aging workforce - company executives decide to redesign its factory
for older workers.

IDENTIFYING AND SELECTING COMPETENT EMPLOYEES

A. Human resource planning is ensuring that the organization has the right number and kinds of
capable people in the right places and at the right times.
1. Current Assessment. Managers begin HR planning by conducting a current assessment of the
organization’s human resource status.
 This assessment is typically accomplished through a human resource inventory.
 Another part of the current assessment process is the job analysis, which is an assessment
that defines jobs and the behaviors necessary to perform them.
 From this information, management can draw up a job description, which is a written
statement that describes a job.
 In addition, management must develop a job specification, which is a statement of the
minimum qualifications that a person must possess to perform a given job successfully.

2. Meeting Future Human Resource Needs. Future HR needs are determined by looking at the
organization’s mission, goals, and strategies. Developing a future program requires estimates in
which the organization will be understaffed or overstaffed.

B. Recruitment And Decruitment.

1. Recruitment is the process of locating, identifying, and attracting capable applicants. Job
candidates can be found using a number of different sources
2. Decruitment is reducing an organization’s workforce. Decruitment options include firing,
layoffs, attrition, transfers, reduced workweeks, early retirements, and job sharing.
C. Selection. Selection is screening job applicants to ensure that the most appropriate candidates
are hired. Selection is an exercise in prediction. Prediction is important because any selection
decision can result in four possible outcomes. The major aim of any selection activity should be
to reduce the probability of making reject errors or accept errors, while increasing the probability
of making correct decisions.
 Validity and Reliability; Validity is the proven relationship that exists between a selection
device and some relevant job criterion. Reliability is the ability of a selection device to
measure the same thing consistently.
 Types of Selection Devices; Managers can select employees using numerous and varied
selection devices.
 A realistic job preview is a preview of a job that provides both positive and negative
information about the job and the company. Including an RJP can increase job
satisfaction among employees and reduce turnover.

PROVIDING EMPLOYEES WITH THE NEEDED SKILLS AND KNOWLEDGE

A. Orientation is introducing a new employee to his or her job and the organization
 Work unit orientation familiarizes the employee with the goals of the work unit, clarifies how
his/her job contributes to the unit’s goals, and includes an introduction to his or her
coworkers.
 Organization orientation informs the new employee about the organization’s objectives,
history, philosophy, procedures, and rules.

Major objectives of orientation include the following:

a. To reduce initial anxiety.
b. To familiarize new employees with the job, the work unit, and the organization.
c. To facilitate the outsider-insider transition.

B. Training
 Types of training include general and specific.

 Traditional Training methods. On-the-job training is very common, and it may involve job
rotation. Job rotation is on- the-job training that involves lateral transfers to enable
employees who work on the same level of the organization to work in different jobs. On-the-
job training can also involve mentoring, coaching, experiential exercises, and classroom
training.
 Technology-driven training methods. Today’s organizations are increasingly relying on
technology-based training, including e-learning applications to communicate important
information and to train employees.

RETAINING COMPETENT, HIGH-PERFORMING EMPLOYEES

A. Employee Performance Management. Managers need to know whether their employees are
performing their jobs efficiently and effectively or when improvement is needed. A performance
management system establishes performance standards that are used to evaluate employee
performance.
Performance Appraisal Methods
 A written essay appraises performance through a written description of an employee’s
strengths and weaknesses, past performance, and potential.
 Critical incidents are used to appraise performance by focusing on the critical job behaviors.
In this technique the appraiser writes anecdotes to describe what the employee did that was
especially effective or ineffective. Only specific behaviors, rather than vaguely defined
personality traits, are cited.
 The use of graphic rating scales is one of the oldest and most popular performance appraisal
methods. This method appraises performance using a rating scale on a set of performance
factors. Graphic rating scales list a set of performance factors; the evaluator goes down the
list and rates the employee on each factor, using an incremental scale.
 Using behaviorally anchored rating scales (BARS) is an appraisal approach that appraises
performance using a rating scale on examples of actual job behavior. BARS combines major
elements from the critical incident and graphic rating scale approaches. The appraiser rates
an employee according to items along a scale, but the items are examples of actual behavior
on the job rather than general descriptions or traits.
 Multiperson comparison appraises performance by comparing it with others’ performance.
 Management by objectives (MBO) is another mechanism for appraising performance. It is
often used to assess the performance of managers and professional employees.
 360 degree feedback appraises performance by using feedback from supervisors, employees,
and coworkers.

B. Compensation and Benefits

How do organizations determine the compensation levels and benefits that employees will
receive?
 The purpose of having an effective reward system is to attract and retain competent and
talented individuals who can help the organization achieve its mission and goals.
 A compensation system can include base wages and salaries,wage and salary add-ons,
incentive payments, and benefits and services.

What factors determine the compensation and benefits packages for different employees?
A number of factors influence these differences
 Under a skill-based pay system, employees are compensated for the job skills they can
demonstrate.Research shows that skill-based pay systems tend to be more successful in
manufacturing organizations than in service organizations.
 Under a variable pay system, an individual’s compensation is contingent on performance.