Description
Introduction
Imagine trying to run a business where you have to replace every employee two or three times a year. If that sounds chaotic, you can sympathize with the challenge facing Rob Cecere when he took the job of regional manager for a group of eight Domino’s Pizza stores in New Jersey. In Cecere’s region, store managers were quitting after a few months on the job. The lack of consistent leadership at the store level contributed to employee turnover rates of up to 300 percent a year (one position being filled three times in a year). In other words, new managers constantly had to find, hire, and train new workers—and rely on inexperienced people to keep customers happy. Not surprisingly, the stores in Cecere’s new territory were failing to meet sales goals.
Cecere made it his top goal to build a stable team of store managers who in turn could retain employees at their stores. He held a meeting with the managers and talked about improving sales, explaining, “It’s got to start with people”: hiring good people and keeping them on board. He continues to coach his managers, helping them build sales and motivate their workers through training and patience. In doing so, he has the backing of Domino’s headquarters. When the company’s former chief executive, David Brandon, took charge, he was shocked by the high employee turnover (then 158 percent nationwide), and he made that problem his priority. Brandon doubts the pay rates are what keeps employees with any fast-food company; instead, he emphasizes careful hiring, extensive coaching, and opportunities to earn promotions. In the years since Brandon became CEO, employee turnover at Domino’s has fallen. And in New Jersey, Cecere is beginning to see results from his store managers as well. 1
The challenges faced by Domino’s are important dimensions of human resource management (HRM), the policies, practices, and systems that influence employ-ees’ behavior, attitudes, and performance. Many companies refer to HRM as involv-ing “people practices.” Figure 1.1 emphasizes that there are several important HRM practices that should support the organization’s business strategy: analyzing work and designing jobs, determining how many employees with specific knowledge and skills are needed (human resource planning), attracting potential employees (recruiting), choosing employees (selection), teaching employees how to perform their jobs and preparing them for the future (training and development), evaluating their perfor-mance (performance management), rewarding employees (compensation), and cre-ating a positive work environment (employee relations). An organization performs best when all of these practices are managed well. At companies with effective HRM, employees and customers tend to be more satisfied, and the companies tend to be more innovative, have greater productivity, and develop a more favorable reputation in the community. 2
In this chapter, we introduce the scope of human resource management. We begin by discussing why human resource management is an essential element of an organization’s success. We then turn to the elements of managing human resources: the roles and skills needed for effective human resource management. Next, the chapter describes how all managers, not just human resource professionals, participate in the activities related to human resource management. The following section of the chapter addresses some of the ethical issues that arise with regard to human resource management. We then pro-vide an overview of careers in human resource management. The chapter concludes by highlighting the HRM practices covered in the remainder of this book.
Human Resources and Company Performance
Managers and economists traditionally have seen human resource management as a necessary expense, rather than as a source of value to their organizations. Economic value is usually associated with capital —cash, equipment, technology, and facilities. However, research has demonstrated that HRM practices can be valuable. 3 Deci-sions such as whom to hire, what to pay, what training to offer, and how to evaluate employee performance directly affect employees’ motivation and ability to provide goods and services that customers value. Companies that attempt to increase their competitiveness by investing in new technology and promoting quality throughout the organization also invest in state-of-the-art staffing, training, and compensation practices. 4
The concept of “human resource management” implies that employees are resources of the employer. As a type of resource, human capital means the organization’s employees, described in terms of their training, experience, judgment, intelligence, relationships, and insight—the employee characteristics that can add economic value to the organization. In other words, whether it manufactures automobiles or forecasts the weather, for an organization to succeed at what it does, it needs employees with certain qualities, such as particular kinds of training and experience. This view means employees in today’s organizations are not interchangeable, easily replaced parts of a system but the source of the company’s success or failure. By influencing who works for the organization and how those people work, human resource management therefore contributes to basic measures of an organization’s performance such as quality, profit-ability, and customer satisfaction. Figure 1.2 shows this relationship.
Fabick Caterpillar (CAT), which sells, rents, and repairs Caterpillar construction equipment, demonstrates the importance of human capital to the company’s bottom line. Fabick CAT, which serves construction businesses and contractors in Missouri and southern Illinois and pipeline contractors throughout the world, has more than 600 employees in 12 locations. When Doug Fabick inherited the business from his father in 1999, he wondered why it was underperforming many other CAT dealerships in the United States. Fabick studied traditional financial indicators and organiza-tional charts but could find no common thread. He began to think success depended on getting the right people in the right positions and doing something to get them passionate about their jobs. Initial assessments of employee attitudes suggested he was right: only 16 percent of employees were “engaged” (fully committed to their work). Fabick began working with managers and employees on such HR practices as devel-oping management talent, selecting new employees with the right skills and abili-ties to succeed, and training salespeople to develop strong customer relationships. As employees began to feel the company was focused on building on their strengths, their engagement with their work began to rise—and so did Fabick CAT’s sales and profits. 5