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Human Resource Management G A I N I N G A CO M P E T I T I V E A DVA N TAG E 11e

RAYMOND A. NOE The Ohio State University

JOHN R. HOLLENBECK Michigan State University

BARRY GERHART University of Wisconsin–Madison

PATRICK M. WRIGHT University of South Carolina

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HUMAN RESOURCE MANAGEMENT: GAINING A COMPETITIVE ADVANTAGE, ELEVENTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2019 by McGraw- Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2017, 2015, and 2013. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

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ISBN 978-1-260-07684-4 (bound edition)

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Library of Congress Cataloging-in-Publication Data

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Names: Hollenbeck, John R., author. | Noe, Raymond A., author. | Gerhart,

Barry A., author.

Title: Human resource management : gaining a competitive advantage / John R.

Hollenbeck, Michigan State University, Raymond A. Noe, The Ohio State University, Berry Gerhart, University of Wisconsin, Madison, Patrick M.

Wright, University of South Carolina.

Description: Eleventh Edition. | New York, NY : McGraw-Hill Education, 2018.

| Revised edition of Human resource management, 2015.

Identifiers: LCCN 2017040499| ISBN 9781260076844 (hardback : alk. paper) |

ISBN 1260076849

Subjects: LCSH: Personnel management—United States. | BISAC: BUSINESS &

ECONOMICS / Human Resources & Personnel Management.

Classification: LCC HF5549.2.U5 H8 2018 | DDC 658.3—dc23 LC record available at

https://lccn.loc.gov/2017040499

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

mheducation.com/highered

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https://lccn.loc.gov/2017040499
https://www.mheducation.com/highered
Page v To my wife, Caroline, and my children,

Ray, Tim, and Melissa — R. A. N.

To my parents, Harold and Elizabeth, my wife, Patty, and my children, Jennifer, Marie, Timothy,

and Jeffrey — J. R. H.

To my parents, Robert and Shirley, my wife, Heather, and my children, Chris and Annie

— B. G.

To my parents, Patricia and Paul, my wife, Mary, and my sons, Michael and Matthew

— P. M. W.

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ABOUT THE AUTHORS

RAYMOND A. NOE is the Robert and Anne Hoyt Designated Professor of Management at The Ohio State University. He was previously a professor in the Department of Management at Michigan State University and the Industrial Relations Center of the Carlson School of Management, University of Minnesota. He received his BS in psychology from The Ohio State University and his MA and PhD in psychology from Michigan State University. Professor Noe conducts research and teaches undergraduate as well as MBA and PhD students in human resource management, managerial skills, quantitative methods, human resource information systems, training, employee development, performance management, and organizational behavior. He has published over 70 articles and invited chapters and authored, coauthored or edited seven books covering a variety of topics in training and development (training needs, trainee motivation, informal learning, autonomous learning, mentoring), human resource management (recruiting), and organizational behavior (psychological contracts, teams, work and family). Professor Noe has received awards for his teaching and research excellence, including the Ernest J. McCormick Award for Distinguished Early Career Contribution from the Society for Industrial and Organizational Psychology. He is also a fellow of the Society of Industrial and Organizational Psychology and American Psychological Association.

JOHN R. HOLLENBECK holds the positions of University Distinguished Professor at Michigan State University and Eli Broad Professor of Management at the Eli Broad Graduate School of Business Administration. Dr. Hollenbeck received his PhD in Management from New York University in 1984. He served as the acting editor at Organizational Behavior and Human Decision Processes in 1995, the associate editor of Decision Sciences from 1999 to 2004, and the editor of Personnel Psychology from 1996 to 2002. He has published over 90 articles and book chapters on the topics of team decision making and work motivation. According to the Institute for Scientific Information, this body of work has been cited over 4,000 times by other researchers. Dr. Hollenbeck has been awarded fellowship status in both the Academy of Management and the American Psychological Association, and was recognized with the Career Achievement Award by the HR Division of the Academy of Management (2011), the Distinguished Service Contributions Award (2014), and the Early Career Award by the Society of Industrial and Organizational Psychology (1992). At Michigan State, Dr. Hollenbeck has won several teaching awards including the Michigan State Distinguished Faculty Award, the Michigan State Teacher-Scholar Award, and the Broad MBA Most Outstanding Faculty Member.

BARRY GERHART is Professor of Management and Human Resources and the Bruce R. Ellig Distinguished Chair in Pay and Organizational Effectiveness, Wisconsin School of Business, University of Wisconsin-Madison. He has also served as department chair or area coordinator at Cornell,

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Vanderbilt, and Wisconsin. His research interests include compensation, human resource/human capital strategy, international human resources, and employee retention. Professor Gerhart received his BS in psychology from Bowling Green State University and his PhD in Industrial Relations from the University of Wisconsin-Madison. He has co-authored two books in the area of compensation. He serves on the editorial boards of and has published in the Academy of Management Journal, Industrial and Labor Relations Review, International Journal of Human Resource Management, Journal of Applied Psychology, Management and Organization Review, and Personnel Psychology. Professor Gerhart is a past recipient of the Heneman Career Achievement Award, the Scholarly Achievement Award, and (twice) the International Human Resource Management Scholarly Research Award, all from the Human Resources Division, Academy of Management. He is a Fellow of the Academy of Management, the American Psychological Association, and the Society for Industrial and Organizational Psychology.

PATRICK M. WRIGHT is Thomas C. Vandiver Bicentennial Chair and the Director of the Center for Executive Succession in the Darla Moore School of Business at the University of South Carolina. Prior to joining USC, he served on the faculties at Cornell University, Texas A&M University, and the University of Notre Dame. Professor Wright teaches, conducts research, and consults in the area of strategic human resource management (SHRM), particularly focusing on how firms use people as a source of competitive advantage and the changing nature of the chief HR officer (CHRO) role. He is the faculty leader for the Cornell ILR Executive Education/NAHR program, “The Chief HR Officer: Strategies for Success,” aimed at developing potential successors to the CHRO role. He served as the lead editor on the recently released book, The Chief HR Officer: Defining the New Role of Human Resource Leaders, published by Wiley. Professor Wright has published more than 60 research articles in journals as well as more than 20 chapters in books and edited volumes. He recently served as the editor at the Journal of Management, has co-edited a special issue of Research in Personnel and Human Resources Management titled “Strategic Human Resource Management in the 21st Century,” and guest edited a special issue of Human Resource Management Review titled “Research in Strategic HRM for the 21st Century.” He currently serves as a member on the Board of Directors for the Society for Human Resource Management and the National Academy of Human Resources. He is a former board member of HRPS, SHRM Foundation, and World at Work (formerly American Compensation Association). From 2011 to 2016, he was named by HRM Magazine as one of the 20 “Most Influential Thought Leaders in HR.”

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PREFACE Our intent is to provide students with the background to be successful HRM professionals, to manage human resources effectively, and to be knowledgeable consumers of HRM products. Managers must be able to identify effective HRM practices to purchase these services from a consultant, to work with the HRM department, or to design and implement them personally. Human Resources Management: Gaining a Competitive Advantage, 11th edition, emphasizes how a manager can more effectively manage human resources and highlights important issues in current HRM practice.

Human Resources Management: Gaining a Competitive Advantage, represents a valuable approach to teaching human resource management for several reasons:

The text draws from the diverse research, teaching, and consulting experiences of four authors who have taught human resource management to undergraduates, traditional day MBA students as a required and elective course, and more experienced managers and professional employees in weekend and evening MBA programs. The teamwork approach gives a depth and breadth to the coverage that is not found in other texts.

Human resource management is viewed as critical to the success of a business. The text emphasizes how the HRM function, as well as the management of human resources, can help companies gain a competitive advantage.

The book discusses current issues such as social media, use of nontraditional employment relationships, big data, talent management, diversity, and employee engagement, all of which have a major impact on business and HRM practice.

Strategic human resource management is introduced early in the book and integrated throughout.

Examples of how new technologies are being used to improve the efficiency and effectiveness of HRM practices are provided throughout.

We provide examples of how companies are evaluating HRM practices to determine their value.

The chapter openers, in-text boxes, and end-of-chapter materials provide questions that provide students the opportunity to discuss and apply HR concepts to a broad range of issues including strategic human resource management, HR in small businesses, ethics and the role of HR in helping companies achieve sustainability, adopt and use technology, adapt to globalization, and practice integrity. This should make the HR classroom more interactive and increase students’ understanding of the concepts and their application.

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Organization Human Resource Management: Gaining a Competitive Advantage, 11th edition, includes an introductory chapter (Chapter 1) and five parts.

Chapter 1 provides a detailed discussion of the global, new economy, stakeholder, and work system challenges that influence companies’ abilities to successfully meet the needs of shareholders, customers, employees, and other stakeholders. We discuss how the management of human resources can help companies meet the competitive challenges.

Part One includes a discussion of the environmental forces that companies face in attempting to capitalize on their human resources as a means to gain competitive advantage. The environmental forces include the strategic direction of the business, the legal environment, and the type of work performed and physical arrangement of the work.

A key focus of Chapter 2 , on strategic human resource management, is to highlight the role that staffing, performance management, training and development, and compensation play in different types of business strategies.

A key focus of Chapter 3 , on the legal environment, is to enhance managers’ understanding of laws related to sexual harassment, affirmative action, and accommodations for disabled employees. The various types of discrimination and ways they have been interpreted by the courts are discussed.

Chapter 4 , on analysis and design of work, emphasizes how work systems can improve company competitiveness by alleviating job stress and by improving employees’ motivation and satisfaction with their jobs.

Part Two deals with the acquisition and preparation of human resources, including human resource planning and recruitment, selection, and training.

Chapter 5 , on human resource planning and recruitment, illustrates the process of developing a human resource plan. Also, the strengths and weaknesses of staffing options such as outsourcing, use of contingent workers, and downsizing are discussed. Strategies for recruiting talented employees are emphasized.

Chapter 6 , on selection and placement, emphasizes ways to minimize errors in employee selection and placement to improve the company’s competitive position. Selection method standards such as validity and reliability are discussed in easily understandable terms without compromising the technical complexity of these issues. The chapter discusses selection methods such as interviews and various types of tests (including personality, honesty, and drug tests) and compares them on measures of validity, reliability, utility, and legality.

Chapter 7 discusses the components of effective training systems and the manager’s role in determining employees’ readiness for training, creating a positive learning environment, and ensuring that training is used on the job. The advantages and disadvantages of different training methods are described, such as e-learning, serious games, and mobile training.

Part Three explores how companies can determine the value of employees and capitalize on their talents through retention and development strategies.

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Chapter 8 , on performance management, examines the strengths and weaknesses of performance management methods that use ratings, objectives, or behaviors.

Chapter 9 , on employee development, introduces the student to how assessment, job experiences, formal courses, and mentoring relationships are used to develop employees.

Chapter 10, on retention and separation, discusses how managers can maximize employee productivity and satisfaction to avoid absenteeism and turnover. The chapter emphasizes the use of employee surveys to monitor job and organizational characteristics that affect satisfaction and subsequently retention.

Part Four covers rewarding and compensating human resources, including designing pay structures (Chapter 11 ), recognizing individual contributions (Chapter 12 ), and providing benefits (Chapter 13 ).

Here we explore how managers should decide the pay rate for different jobs, given the company’s compensation strategy and the worth of jobs. The advantages and disadvantages of merit pay, gainsharing, and skill-based pay are discussed. The benefits chapter highlights the different types of employer-provided benefits and discusses how benefit costs can be contained. International comparisons of compensation and benefit practices are provided.

Part Five covers special topics in human resource management, including labor–management relations, international HRM, and strategically managing the HRM function.

Chapter 14 , on collective bargaining and labor relations, focuses on traditional issues in labor–management relations, such as union structure and membership, the organizing process, and contract negotiations; it also discusses new union agendas and less adversarial approaches to labor–management relations.

Chapter 15 discusses social and political changes, such as Brexit, on global human resource management. Selecting, preparing, and rewarding employees for foreign assignments is also discussed.

The text concludes with Chapter 16 , which emphasizes how HRM practices should be aligned to help the company meet its business objectives. The chapter emphasizes that the HRM function needs to have a customer focus to be effective.

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New Feature and Content Changes in This Edition All examples, figures, and statistics have been updated to incorporate the most recently published human resource data. Each chapter was revised to include current examples, research results, and relevant topical coverage. All of the Exercising Strategy, Managing People, and HR in Small Business end-of-chapter cases are either new or updated. Following are the highlights for each chapter:

Chapter 1 New Opening Vignette: Looks at how Publix’s use of human resource practices contributes to its dedication to the dignity, value, and employment security of its associates, which has led to its recognition as a great place to work and shop.

New Boxes:

Dow Chemical, Novartis, and Mars help improve living conditions and employees skills around the world.

How Verizon, Best Buy, and Kohl’s use social media and apps to enhance HR practices.

How Sodexo used data to show how gender balance on teams was related to financial performance, employee engagement, and client retention.

How Amtrak’s first-ever chief human capital officer used competencies and behaviors to build integrity and demonstrate integrity, which helped rebuilding HR and provided value to Amtrak’s business.

Iberdrola USA, Boeing, and L’Oreal efforts to prepare employees for global assignments.

New Text Material:

HR in organizations: budgets, example of the role of HR in companies (Airbnb, Marsh, Juniper Networks, Abbott, Tesla Motors), managers’ expectations for the HR function, and the skills needed by HR professionals to contribute to the businesses.

Companies’ use of big data and workforce analytics to identify successful new employees and reduce turnover (Google, Mattress Firm, Credit Suisse).

Economy data, labor force statistics, occupational and job growth projections, skill shortages, working at home, flexible schedules, nontraditional employment, and the gig economy.

The role of HR in ensuring product quality and customer service, including examples of HR practices of 2016 Baldrige Award winner Don Chalmers Ford.

Actions that Alcoa and General Electric are taking to overcome problems finding employees with the necessary skills.

How Keller Williams Realty facilitates continuous learning.

Steps that Portsmouth Naval Shipyard is taking to manage change.

Echo Global Logistics’s, Whole Foods’s, and Timberlane’s efforts to support employee engagement.

Talent management at BNSF Railway.

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Ammacore’s and KPMG’s use of nontraditional employment and work arrangements.

How Blue Apron is developing develop human, social, and intellectual capital.

Discussion of characteristics and expectations that Generation Z and Millennials bring to the workplace.

How Coke gives millennial employees a voice in shaping the business.

Discussion of the role of immigration in the economy; the workforce; and restaurant, roofing, landscaping, and high-tech businesses.

How Microsoft’s approach to diversity focuses on its employees, culture, suppliers, and customers.

Legal issues and the gig economy (e.g., Uber) and immigration restrictions.

Growth of global business for companies such as Ford, General Motors, Yum! Brands, McDonalds, and Uber.

Offshoring jobs in the United States (Rexnord Corporation).

Use of artificial intelligence and robots (BMW, Airport Guide Robot, Whirpool, H&R Block, and Watson).

Chapter 2 New Opening Vignette: Discusses Amazon’s move into traditional brick-and-mortar stores.

New Information: Updated example of Merck’s mission and values statement.

New Boxes:

Companies use ADP’s app to help manage pay for gig workers.

Volkswagen’s efforts to develop zero-emission vehicles to enhance its reputation.

IKEA’s expanding parental leave policy.

Chapter 3 New Opening Vignette: Looks into alleged discrimination in pay and hiring practices at Oracle.

New Information:

Updated figures for different types of discrimination complaints in the United States.

Description of the potential discrimination and retaliation at Uber.

Discussion of LGBT issues in the workplace.

Evidence-based HR about how weight discrimination can impact hiring decisions.

New Boxes:

Tech companies challenges in increasing workforce diversity.

Banning head scarves: Discriminatory or not in the European Union?

The use of a wearable human grasp assist device to reduce repetitive injuries.

Southwest’s decision to end overbooking.

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New Text Material:

Frequency of discrimination cases.

Chapter 4 New Opening Vignette: Analyzes challenges associated with new organizational structures that try and promote teamwork but inadvertently create jobs that can get too large in scope, using Royal DSM as an example.

New Boxes:

Data from wearable sensors to construct social network patterns that reveal the organizations informal structure.

The aging of both equipment and workers in Japan are limiting national productivity.

Chipotle’s decentralized decision-making structures create recurrent problems when it comes to standardized food safety practices.

The International Federation of Association Football (FIFA) has been accused of violating worker rights in Qatar due to the widespread practice of “kafala”.

The dangers associated with working from sedentary position and the push to get people to use “stand- up desks”.

New Text Material:

Portuguese manufacturers successfully compete against low cost Chinese competitors via work processes that promote quality over cost.

Lean productivity practices promote lower costs, but also reduce the need for labor.

Workflow analyses often identify the overuse of specific and costly pieces of equipment in the field of medicine.

Centralized decision-making structures can identify critical customer needs that might be resisted by local managers, such as McDonald’s All-day Breakfast.

Jobs change over time, using the specific example of increased obesity in nursing care contexts and how this led to increased injuries until it was addressed.

Chapter 5 New Opening Vignette: Examines how more restrictive immigration policies regarding immigrants and refugees are creating labor shortages in the area of agriculture and meat processing.

New Boxes:

Robotic technology still relies very heavily on human intervention using call centers as an example.

Limits on H1-B visas in the U.S. are creating competitive disadvantages versus Canada in the field of high tech.

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the Trade Adjustment Assistance (TAA) program provides money for training to U.S. workers when their jobs move overseas.

The increased aggressiveness of workplace raids conducted by Immigration and Customs Enforcement (ICE) office is breaking up families and local communities.

Recent evidence shows that immigration results in a loss of U.S. jobs in the short term, but in the long term, results in large job gains for the country.

New Text Material:

Qualcomm used leading indicators and forecasting to avoid a labor surplus that would have been caused by failures at Samsung–one of their primary customers.

Improvements in technology reduce the need for workers when manufacturing jobs that moved overseas move back to the U.S.

Changes in American eating habits related to restaurants is causing a shortage of labors for cooks, where turnover rates have soared to 100% in some regions.

Low cost, online degree programs in the field of law have created a vast over-supply of unemployable lawyers.

Deloitte is addressing a potential brain drain caused by the imminent retirement of a large cadre of workers.

Chapter 6 New Opening Vignette: Discusses how personnel selection processes in the field of law enforcement make it difficult to weed out police officers with criminal records.

New Boxes:

Employers in the field of software use programming competitions to cheaply identify gifted programmers from around the world.

Educational achievements reported by job applicants from some countries like Egypt mean nothing due to corruption in educational institutions.

Increased use of opioid drugs in some regions of the U.S. make it impossible to hire people for “safety sensitive” jobs.

“Religious Freedom Bills” are complicating the relationship between some firms and their communities.

Employment gaps attributed to having children negatively affects some job applicants in certain fields.

New Text Material:

Recent Supreme Court rulings have expanded the scope of Affirmative Action protections based upon race.

Age discrimination cases have been expanding in the service sector of the economy as employers try to respond to customer preferences.

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The “Wounded Warriors Project” has helped create job opportunities for Gulf War Era veterans.

Employers use information from social networking sites to obtain information that might be illegal to obtain in an interview.

Programming teams at Pinterest are composed one person at a time, where each person added to the team is selected based upon some unique trait or perspective.

Chapter 7 New Opening Vignette: Highlights how GameStop uses an online game-based training program to deal with seasonal hiring and turnover.

New Boxes:

How Sears is using learning to emphasize continuous learning and try to reinvent itself to survive.

How Operation Smile and Marriott use language and cultural understanding to enhance global success.

Central Iowa Works and Aon’s use of education and training partnerships to develop workforce skills and meet both business and community needs.

Janssen Pharmaceuticals use of just-in time technology-driven learning.

How Pfizer evaluated the effectiveness of a new mobile training app.

New Text Material:

Knowledge sharing at Defense Acquisition University.

How Aerospace Corporation and Hilton Worldwide use training in ways that support the business.

How the design elements of the training programs at Verizon, Farmers Insurance, and General Motors support learning and transfer of training.

How companies such as PricewaterhouseCoopers, Western Union, Sonic, Cathay Life Insurance, Tata Consultancy Services, and EMC insure managers and peers support, incorporate action plans, and use performance support and communities of practice to enhance employees learning and transfer of training.

Examples of how companies such as Asurion, EY, IBM, PPD, BNSF Railway, TELUS, ADP, University Health System, and PepsiCo use different training methods including video, serious games, simulations, online learning, social media, blended learning, and action learning.

Example of how Massive Open Online Courses (MOOCs) are being developed through joint university industry partnership to offer programs and degrees designed to provide employees and companies with high demand skills unavailable in the workforce.

The training outcomes companies such as The Maryland Transit Administration (MTA) use to evaluate training effectiveness.

Highlight how Deloitte prepares its employees on global assignments for repatriation.

Discussion of the difficulties companies in high tech industries are facing to increase the diversity of their workforces.

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Chapter 8 New Opening Vignette: Shows the changes that General Electric made to its performance evaluation system to more closely align it with business cycles and the company strategy.

New Boxes:

How performance management at The Analysis Group includes both how the partner is contributing to the firm’s financial health as well as what the partner is doing to insure the future health and growth of the business.

Highlights how Wells-Fargo overemphasis on performance goals results in driving unethical behavior which is detrimental to customers and the organization.

The advantages and potential disadvantages of companies (such as Gables Residential, IBM, Uber, and Amazon) use of apps for providing and receiving feedback.

Shows the data that Cargill is using to monitor the effectiveness of its new performance management system.

New Text Material:

Recent survey results on the problems with traditional performance appraisal.

Shows how companies such as Procter & Gamble, and Gables Residential, and FORUM Credit Union are changing their performance management approach to make it more of an ongoing process emphasizing performance conversations and employee development.

Highlights how companies such as Whirpool are training managers to help increase their effectiveness in performance management.

Shows how companies including Etsy, Unami Burger, and Intellicare are using peer, customer, and self- ratings in their performance management systems.

The actions that Kimberly-Clark and Zulily take to avoid the potential problems of the use of performance goals.

Examples of how companies such as UPS, Florida Hospital Celebration Health, and Shuttle Express are using electronic monitoring, including cameras and wearables to track employees performance.