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THIRD EDITION

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VICE PRESIDENT & EXECUTIVE PUBLISHER George Hoffman EXECUTIVE EDITOR Lisé Johnson PROJECT EDITOR Brian Baker EDITORIAL ASSISTANT Jacqueline Hughes ASSOCIATE DIRECTOR OF MARKETING Amy Scholz MARKETING MANAGER Kelly Simmons DESIGN DIRECTOR Harry Nolan PRODUCT DESIGNER Allison Morris ASSOCIATE PRODUCTION MANAGER Joyce Poh PRODUCTION EDITOR Eugenia Lee COVER DESIGNER Wendy Lai

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ISBN-13 978-1118-58280-0 (paperback)

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To Lisa, Brandon, Ryan, Jason, and Analisa—GLS

For my Mom—KGB

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http://www.wiley.com/go/citizenship
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GREG L. STEWART, PH.D. Greg L. Stewart is the Henry B. Tippie Research Professor of Management and Organizations in the Henry B. Tippie College of Business at the University of Iowa. He received his Ph.D. in human resource management from Arizona State University and has been a faculty member at Vanderbilt University and Brigham Young University. His research has been published in top academic journals, including Journal of Applied Psychology, Personnel Psychology, Academy of Management Journal, Organizational Dynamics, and Organization Science. He served as an Associate Editor for Journal of Management. He has taught human resource management courses to undergraduate, MBA, and Executive MBA students, including international programs in Hong Kong, Italy, and India. He has received numerous teaching awards including GREAT Instructor of the Year for Executive MBA, the Dean’s Award for Teaching Excellence, and MBA Professor of the Year at the Consortium Institute of Management and Business Analysis (CIMBA). He has worked with a variety of large and small organizations including Eli Lilly, LG Electronics, Newton Manufacturing, and the National Federation of Independent Business. He is currently involved in a number of projects working to improve the delivery of healthcare within the Veterans Health Administration.

KENNETH G. BROWN, SPHR, PH.D. Kenneth G. Brown is a Professor and Tippie Research Fellow in the Henry B. Tippie College of Business at the University of Iowa. He also serves by courtesy appointment as a Professor of Educational Policy and Leadership Studies. He received his Ph.D. in industrial and organizational psychology from Michigan State University and his B.S. from the University of Maryland, and he is certi- fied as a senior professional in human resource management (SPHR). He has taught courses in training and career development, organizational behavior, and general management to undergraduate, MBA, and Ph.D. students. He is the recipient of numerous teaching awards, including the Student’s Choice for Faculty Excellence Award, the Dean’s Teaching Award, the Collegiate Teaching Award, the James N. Murray Faculty Award for outstanding teach- ing and assistance to students, and the President and Provost Award for Teaching Excellence. His work using experiential learning was recognized as a finalist for the inaugural Academy of Management Human Resources Division Innovative Teaching Award in 2006 and for the 2007 Iowa Campus Compact Faculty Award. He has published articles in human resource man- agement and organizational behavior for both academic and applied audi- ences. His academic work appears in such top journals as Journal of Applied Psychology, Personnel Psychology, and Organizational Behavior and Human Decision Processes. His applied work has been published by the American Society of Training and Development in T&D magazine and by the UK-based Chartered Institute of Personnel and Development. His consulting clients have included the Ford Motor Company, Rosetta Stone, the Society of Human Resource

iii

About the Authors

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Management, Toyota Motor Credit Corporation, the University of Iowa, and numerous local non-profit organizations. From 2012 to 2014, Brown serves as the editor-in-chief of the Academy of Management Learning and Education, a premiere journal of research on helping students acquire management knowledge and skill. From 2014–2016, Brown also serves as a Director of the HR Certification Institute, the worldwide leader in certifying HR competency.

iv About the Authors

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WHY LINK HUMAN RESOURCE PRACTICE TO STRATEGY?

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The last decade has been an interesting period of change and survival for businesses. The worst economic recession in over 50 years forced many com- panies to rethink the way they did business. More recently, recovery from the recession has presented organizations with a number of different opportuni- ties and threats. Only the best companies survive and thrive in such trying times. But what makes some companies more successful than others? What gives organizations an advantage over their competitors? One answer empha- sizes the benefit of having the right people as members of the organization. It is often said that “the people make the place,” which tells us that employees are the most important asset of any organization. Practices that help obtain and motivate employees are the core focus of human resource management, which is the field of study presented in this textbook.

As you read this book, we hope you will agree that human resource man- agement is an exciting field of study. In order to make ideas and concepts come to life, we include a number of examples from real companies that illustrate how effective human resource management is helping companies achieve success. Each chapter explains how an organization can increase its effectiveness by improving its processes for hiring and motivating top- performing employees. We also specifically link human resource practices to competitive strategies. This linkage is critical, as it shows how a company can use human resource management to gain a competitive advantage over other companies.

The field of human resource management has evolved a great deal during the past 20 years. Today, many practitioners and researchers argue that human resource management should extend beyond its traditional focus on legal compliance and adopt a more strategic perspective for managing employees. Perhaps more importantly, successful organizations are taking a more stra- tegic approach to managing people. Many human resource textbooks have added material to reflect some of this change, but most books still lack a con- sistent strategic framework—even though this framework is rapidly becoming the norm within the field.

We have written Human Resource Management: Linking Strategy to Practice, Third Edition, in order to more fully develop and integrate the strategic per- spective. Throughout the book, we emphasize the theme that organizations excel when they have consistent human resource practices that align with their

Preface

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vi Preface

WHAT IS NEW IN THIS EDITION?

strategic direction. We begin by establishing a strategic framework that illus- trates how different approaches to human resource management fit with basic competitive strategies. We then integrate this strategic perspective into our discussion of traditional human resource practices, such as work design, staff- ing, performance management, training, compensation, and labor relations. At the same time, we clearly illustrate how these specific human resource prac- tices help increase organizational effectiveness.

The practice of human resource management continues to evolve and improve. New research is being published at a rapid pace, and organizations are constantly innovating. This third edition of Human Resource Management: Linking Strategy to Practice reflects these changes. We have combed through research studies conducted since the first and second editions to identify and include new and updated ideas. This edition contains a number of “How Do We Know?” features that describe recently published research that informs our understanding of human resource management. We have also updated our case examples to reflect innovative ideas being carried out in contempo- rary organizations. These additions to the third edition ensure that students are exposed to the latest ideas and innovative thinking.

One particular area of change in the revision concerns updated material related to finding balance between work and family demands. Both academic studies and organizational practices provide new insights for organizations seeking to help organizations reduce conflict between these important, yet sometimes competing, aspects of life. In particular, Chapter 4 provides an array of concepts and illustrations explaining how companies benefit from making work more family friendly. New laws and government practices, such as the Affordable Care Act (Obamacare), also present new challenges and opportunities for businesses. Many of the critical issues that organizations will face as they implement these new policies are discussed in the section of Chapter 12 that describes how health insurance is becoming a legally required rather than discretionary benefit.

We continue to emphasize the impact of globalization. The importance of thinking globally is emphasized in each chapter with specific examples of ways that human resource practices are similar and different across national boundaries.

The revision also continues to emphasize the strategic approach. New research supporting the benefits of aligning human resource practice with organizational strategy is included. Company illustrations are also used to describe how many of the companies that have performed well during the economic downturn did so largely because of their human resource strengths. In this way, the third edition continues our unique approach to integrating strategy and practice.

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Preface vii

A book designed around a strategic framework, such as the guiding model presented in Chapters 1 and 2, helps students not only to develop a set of human resource tools but also to know when each tool is most appropriate. The overall objective of Human Resource Management: Linking Strategy to Practice is thus to provide students with both an understanding of traditional human resource concepts and a framework for making decisions about when specific practices can be most beneficial. This link between strategy and practice is necessary for students to be able to correctly apply human resource tools to improve organizations.

The strategic perspective is critical for students because most people enrolled in an introductory course will not spend their careers working as human resource professionals. A majority will, however, work someday as managers with the charge to lead and direct others. Understanding the stra- tegic benefits of good human resource management can help future manag- ers better secure and motivate talented employees. The strategic perspective also provides a valuable framework for the future study of those students who do choose to become human resource professionals. Information from addi- tional courses that provide more in-depth coverage of topics such as staffing, training, and compensation will easily fit within the strategic orientation of this book and provide guidance for knowing when to use specific tools.

HOW CAN STUDENTS BENEFIT FROM A STRATEGIC PERSPECTIVE?

HOW IS THIS BOOK ORGANIZED?

Human Resource Management: Linking Strategy to Practice is organized to provide coverage of both strategic topics and specific practices, as illustrated in the accompanying schematic. We open the book in Chapter 1 by examining the value of aligning human resource practices with organizational strategies. Chapter 2 describes the strategic perspective in more detail. It discusses vari- ous ways organizations try to be more effective than their competitors, and it illustrates how human resource management can help organizations carry out their strategies. Chapter 3 discusses legal and safety issues. Laws and regu- lations drive many human resource practices, and knowledge of these legal realities is necessary for understanding several issues related to securing and motivating employees. Chapters 2 and 3 thus provide information that estab- lishes a strategic perspective and provides a context for much of the material in later chapters.

Chapters 4 through 7 focus on the process of securing employees. Chapter 4 describes work design, which creates job descriptions that clarify who does what. The work design process also identifies the characteristics of people most likely to carry out tasks successfully. The result is a type of shopping list that defines the types of people most likely to succeed in specific jobs and

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viii Preface

organizations. Chapters 5 and 6 build on this information by discussing how to locate and identify people who have these characteristics. Chapter 5 gives details about recruiting and illustrates methods for attracting people to apply for jobs with the organization. Faced with a pool of applicants, the organization must decide which of them to hire. Chapter 6 devel- ops several selection methods useful in carry- ing out this task. Chapter 7 then explains ways of keeping good employees, as well as remov- ing low performers. Taken together, Chapters 4 through 7 provide information that helps guide efforts to get the right people doing the right tasks. These chapters combine a strate- gic perspective of securing employees with a review of specific activities associated with recruiting, hiring, and retaining workers.

Once the right people have been placed in the right jobs, the next step is to maxi- mize their performance. Chapters 8 through 13 focus on this process. Chapter 8 describes performance management, which provides methods for measuring what individuals con- tribute to the organization. Performance assessments are used to create feedback that teaches employees how to improve. Chapter

9 discusses the training process. Chapter 10 emphasizes career development and offers guidance for planning how employees can continue to contribute to the organization over the long term. Through training, people learn new things and become more valuable employees. Chapters 11 and 12 focus on compensation and illustrate how pay and benefits can increase motivation. Chapter 13 emphasizes the need for good labor relations and discusses meth- ods for working with labor unions and treating employees fairly. In sum, this set of chapters provides information about developing skills and increasing motivation to ensure that employees are reaching peak performance. The overall emphasis is on ensuring that employees have the skills and motivation necessary to carry out the organization’s strategy for competing with other firms.

The final chapter, Chapter 14, describes strategic alignment. The human resource practices of successful organizations align with organizational strate- gies for doing things better than competitors. Good human resource practices also work together. Staffing practices, for example, combine with compensa- tion practices to help the organization hire and motivate people with certain characteristics. Performance management measures areas where people need to improve, and training teaches them how to improve. The final chapter thus presents the big picture by illustrating how different pieces of human resource management fit together to create successful organizations.

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Each chapter opens with a real-life scenario describing a decision faced by an individual employee, manager, or human resource professional. These sce- narios, labeled “A Manager’s Perspective,” highlight the importance of strate- gic decision making and help students see exactly how the chapter material is relevant to their future careers. Each scenario ends with five thought ques- tions designed to get students thinking about core concepts from the upcoming chapter. A section labeled “A Manager’s Perspective Revisited” at the end of each chapter pro- vides answers to the thought questions and once again emphasizes how the material cov- ered in the chapter can help students build successful careers.

We have developed a number of pedagogical features for Human Resource Management: Linking Strategy to Practice, Third Edition, to support the strategic framework and enhance student interest and learning.

A M A N AG E R ’ S P E R S P E C T I V E A N D A M A N AG E R ’ S P E R S P E C T I V E R E V I S I T E D

Key Features

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x Key Features

Research is an important part of the field of human resources. Each chapter therefore includes a number of features describing specific research studies. These features—labeled “How Do We Know?”—use nontechnical language to summarize research studies that have been published in scholarly journals. Each concludes with a “Bottom Line” summary that shows how the findings of the study contribute to our under- standing of effective human resource management. These research sum- maries help students understand how knowledge is generated and help them see the science behind many of the principles discussed throughout the textbook.

H OW D O W E K N OW ?

The opening section of each chapter includes a discussion that illustrates how a specific company has used the concepts discussed in the chapter to increase effectiveness. Trader Joe’s, Southwest Airlines, Marriott, and General Electric are just a few of the firms included in these in-depth examinations of stra- tegic HR. Each of the company descriptions ends with a “Building Strength Through HR” feature that clearly summarizes how the firm has used specific human resource practices to become more effective and competitive.

Additional “Building Strength Through HR” features appear throughout each chapter. These brief cases illustrate how specific companies have benefited from implementing particular human resource practices—for example, how Leicester Royal Infirmary, a large teach- ing hospital in England, improved effi- ciency and patient satisfaction through work redesign and how LG Electronics created a global instructional program to connect company vision and values with leadership development practices. These discussions clearly illustrate how effective human resource practices have translated into success for a num- ber of organizations. The inclusion of foreign-based firms points up the fact that the usefulness of strategic HR crosses international boundaries.

B U I L D I N G S T R E N GT H T H R O U G H H R

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Key Features xi

T E C H N O L O G Y I N H R

Technological change has had a per- vasive influence on every aspect of management, and human resource man- agement is no exception. “Technology in HR” features describe how techno- logical advances are affecting the field of human resource management. The information included in this feature illustrates how the Internet and other forms of electronic communication are affecting human resource practices in areas such as employee selection, train- ing, and compensation. These discus- sions show students how advancements in technology are being incorporated to increase the effectiveness of human resource management.

A number of features included in each chapter help students focus on and learn key concepts.

Learning Objectives. A list of learning objectives opens each chapter and pre- pares readers for the key concepts to be discussed.

Key Terms and Definitions. Key terms shown in boldface in the chapter text and linked to margin definitions highlight critical concepts and pro- vide an opportunity for review.

. Each major section concludes with review questions that focus students’ atten- tion on major topics.

. Each chap- ter ends with a summary of key con- cepts linked to the chapter’s learning objectives and major sections.

. End-of-chapter discussion questions revisit major top- ics, providing readers with an oppor- tunity not only for review but also for critical thinking and interpretation.

R E C A L L F E AT U R E S

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xii Key Features

E N D - O F - C H A P T E R A P P L I C AT I O N E X E R C I S E S

Knowledge is most useful when it can be applied to solve real problems. We end each chapter with cases and experiential exercises that help students begin the process of applying the concepts to solve actual problems associated with effective human resource management.

. An example case illustrates how a specific company imple- ments the human resource practice discussed in the chapter.

. A discussion case provides background information about a fictional company that can serve as the launching point for a class discussion.

An experiential exercise describes an activity that a student can complete, often online, to actively learn more about the topic discussed in the chapter.

An interactive experiential exercise pro- vides a link to the companion website where students can go to participate in a role-play that tests their knowl- edge of the basic concepts discussed in the chapter.

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Several supplements have been designed to make both teaching and learning easier and more interesting for users of Human Resource Management: Linking Strategy to Practice, Third Edition. We are especially grateful to the following people for helping us to provide such a comprehensive teaching and learning package: Dyanne J. Ferk, University of Illinois–Springfield; Marcia Marriott, Monroe Community College and Rochester Institute of Technology.

Companion Website

The companion website for Human Resource Management: Linking Strategy to Practice, Third Edition, contains a myriad of tools and links to aid both teaching and learning, including nearly all of the resources described in this section. To access the site, go to www.wiley.com/college/stewart.

Instructor’s Resource Manual

The includes an introduction with sample syllabi, chapter outlines, chapter objectives, teaching notes on how to integrate and assign special features, and suggested answers for all quiz and test questions found in the text. The also includes additional dis- cussion questions and assignments that relate specifically to the cases, as well as case notes, self-assessments, and team exercises.

Test Bank

The robust test bank consists of over 100 true/false, multiple-choice, and short-answer questions per chapter. Furthermore, it is specifically designed so that questions vary in degree of difficulty, from straightforward recall to chal- lenging, to offer instructors the most flexibility when designing their exams. Adding still more flexibility is the , which requires a PC running Windows. The computerized test bank, which contains all the ques- tions from the manual version, includes a test-generating program that allows instructors to customize their exams.

PowerPoint Presentations

This resource provides another visual enhancement and learning aid for stu- dents, as well as additional talking points for instructors. This set of interactive PowerPoint slides includes lecture notes to accompany each slide.

Personal Response System

Personal Response System questions (PRS or “clicker” content) were designed for each chapter in order to spark additional discussion and debate in the classroom. For more information on PRS, please contact your local Wiley sales representative.

Supplements

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http://www.wiley.com/college/stewart
xiv Supplements

Web Quizzes

Online quizzes, available on the student portion of the Human Resource Management: Linking Strategy to Practice, Third Edition, companion website, include questions varying in level of difficulty, designed to help students eval- uate their individual progress through a chapter. Each chapter’s quiz includes 10 questions, including true/false and multiple-choice questions. These review questions, developed in conjunction with the test bank, were created to provide the most effective and efficient testing system. Within this system, students have the opportunity to “practice” the type of knowledge they’ll be expected to demonstrate on the exam.

Pre- and Post-Lecture Quizzes

The pre- and post-lecture quizzes, found on the student companion website, consist of 10 to 15 questions (multiple-choice and true/false) per chapter, varying in level of detail and difficulty, but all focusing on that chapter’s key terms and concepts. This resource allows instructors to quickly and easily eval- uate their students’ progress by monitoring their comprehension of the mate- rial from before the lecture to after it.

Videos

A set of short video clips from CBS News provides an excellent starting point for lectures or for general classroom discussion. Teaching notes, including clip introductions and assessment questions, are included for class discussion or assignment.

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This book could not have happened without contributions from an outstanding team. We thank Lisé Johnson for her outstanding efforts to make this third edition a reality. Brian Baker guided us, kept us on task, and answered numerous questions throughout the process. Eugenia Lee provided superb production and editorial help. We also thank Judy Joseph, Jayme Heffler, Leslie Kraham, Joan Kalkut, and Beverly Peavler for their assistance with many features of earlier editions of this book.

Our efforts have also been aided by a number of outstanding colleagues who have read different manuscript versions and provided valuable input. Their feedback has improved our coverage of topics and helped us identify areas of weakness. These colleagues include

Muriel Anderson, Vondra Armstrong, Tim Barnett, Myrtle Bell,

Jerry Bennett, Stephen Betts, Thomas Bock

Walter Bogumil, Angela Boston, H. Michael Boyd, Gene Brady, Lynda Brown, April Cobb,

Patrick Coughlin, Ralph Covino, Craig Cowles, Carol Cumber, Tammy Davis, Diana Deadrick,

Paula Donson, Karen Eastwood, Dyanne Ferk, Bill Ferris,

Mary Gowan, Brooke Hargreaves-Heald, John Hendon, University

Kim Hester, John Hulsebus, Samira Hussein,