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MGT 580

Mid Term Exam

Fall 2003

Physical and capital assets include all of the following except

a. plant

b. machinery

c. employees

d. technology

Which of the following is characteristic of behavior-based approaches to performance appraisal?

a. behavior-based approaches are not very useful because they do not

indicate what an employee should do differently

b. behavior-based approaches are appropriate for focusing on how a

job is done

c. trait-based approaches are generally more valid than behavior-

based approaches

d. behavior-based approaches are appropriate for measuring the results of

work behavior

Technology includes all of the following except

a. machinery

b. raw materials

c. employee knowledge and skills

d. work procedures

Aggregate_level human resource planning focuses on

a. planning for every single position in the organization

b. figuring out the total future size of the industry as a whole

c. executive succession

d. planning for the number of people needed in a job or job family

The skills required for most jobs are becoming

a. less manual and more cerebral and knowledge-based

b. more manual and less cerebral and knowledge-based

c. less manual and more service-based

d. more manual and less service-based

Which of the following is not an approach to measuring performance?

a. trait-based approach

b. behavior-based approach

c. task-based approach

d. results-based approach

Technology has affected organizations by facilitating

a. elimination of many lower-level positions

b. less need to upgrade employee skills

c. ease of employment for workers with little or no training

d. all of the above

Objectives of human resource planning include all of the following except

a. allowing a reactive response to environment charge

b. ensuring that the right employees with the right skills are in the right places at the right times

c. preventing employee surpluses and shortages

d. providing direction and coherence to HR activities

Assets that are not easily cloned by competitors are

a. products, but not services

b. services, but not products

c. technologies

d. employees

A benefit of results-based performance measures is

a. such measures are always under employee control

b. the ease of obtaining such information for all jobs

c. their meaningfulness to the organization

d. their focus on the "means" (process) rather than the "ends" (outcome)

Advanced technologies have allowed organizations to

a. increase the levels in their hierarchies

b. minimize the need for teamwork

c. relocate work from the office to the home

d. adopt more rigid management practices

The single most critical piece of information used to forecast demand for employees is

a. the transition probability matrix

b. macroeconomic trends

c. demand for the company's product

d. the company's turnover rate

Technology is becoming more invested in an organization’s

a. capital

b. people

c. new product development

d. market strategy

Which of the following is not a subjective measure of performance appraisal?

a. time taken to complete a task

b. ranking against coworkers

c. critical incident logs

d. self-evaluation

The graying of the workforce has resulted in all of the following except

a. fewer advancement opportunities for younger workers

b. mandatory retirement policies

c. resistance to change

d. increased health care costs

Unit forecasting is synonymous with

a. the Delphi technique

b. Markov analysis

c. top_down planning

d. bottom_up planning

Which of the following is not a factor that influences how investment-oriented

an organization is?

a. management values

b. needed employee skills

c. the product produced or service provided

d. attitudes toward risk

Absolute standards of measuring performance include all of the following except

a. behaviorally anchored rating scales

b. weighted checklists

c. graphic rating scales

d. forced distribution rankings

Employees today

a. have less loyalty to their employers than their predecessors

b. demand a more balanced life than their predecessors

c. seek more non-traditional work arrangements than their predecessors

d. all of the above

Efficiency, rather than responsiveness, is more provided by which aggregate planning technique?

a. unit forecasting

b. succession planning

c .bottom-up forecasting

d. top-down forecasting

Sources of employee value include all of the following except

a. the ability to learn and grow

b. decision making capabilities

c. self-loyalty

d. technical knowledge

The most widely used evaluation technique is

a. behaviorally anchored rating scales

b. weighted checklists

c. graphic rating scales

d. forced distribution rankings

23. Which of the following is not a strategic HR issue in the consideration of adopting a new technology?

a. retention of equipment

b. hiring costs

c. impact on workgroup dynamics

d. all of the above are considerations

An organization can plan for employee surpluses by all of the following except

a. downsizing

b. transfer or reassignment of employees

c. providing incentives for postponing retirement

d. cross-training during slack periods

25. Which of the following tends to be true?

a. subordinates overestimate situational causes of behavior for

poor performance

b. supervisors overestimate situational causes of behavior for poor performance

c. subordinates underestimate situational causes of behavior for poor performance

d. supervisors underestimate personal causes of behavior for poor performance

. 26. “Plateauing” is a current major concern for the management of

a. baby boomers

b. baby busters

c. Generation X

d. retirees

27. Which of the following is not a concern relative to managing changing demographics?

a. domestic partner benefits

b. decreased employee loyalty

c. deciding which groups to include in diversity initiatives

d. discouraging nontraditional employment arrangements

Which of the following is not a guideline for improving the effectiveness of

the performance management system?

a. provide specific feedback

b. provide feedback from a credible trustworthy source

c. provide information from no more than one evaluation device

d. set clear goals for the future

Which of the following is not a form of graphic rating scale?

a. behaviorally-anchored rating scale

b. critical incident log

c. behavioral observation scale

d. all of the above are form of graphic rating scale

Which of the following best describes performance management systems?

a. They can significantly impact organizational performance and processes

b. There is no one optimal way to develop and design effective performance v management systems

c. Organizations face a number of strategic choices as to how they measure performance

d. All the above

1. Adopting An Investment Perspective

Physical and capital assets such as plant, property, machinery, and technology are acquired and subsequently managed most effectively by treating them as investments whereby the organization determines the optimal mix of high-performance, high-return assets to guide the organization's strategic objectives.

Viewing human resources from an investment perspective, much as physical assets are viewed, rather than as variable costs of production, allows an organization to strategize how to best invest in its people.

Other physical assets such as facilities, products and services, technologies, markets, etc. can be readily cloned or imitated by competitors.

An investment perspective is increasing in importance as the skills required for most jobs become less manual and more cerebral or knowledge-based in nature. Rapid and ongoing advances in technology have influenced this shift.

Technology is becoming more invested in people rather than capital. Thought and decision-making processes as well as skills in analyzing complex data are not “owned” by an organization but by individual employees.

One organization that has consistently been cited as a model for investment in its people and has produced virtually unmatched results and performance is Southwest Airlines. The reading “Southwest Airlines: A Case Study Linking Employee Needs Satisfaction and Organizational Capabilities to Competitive Advantage” presents an extensive case study as to how Southwest has established and maintained its competitive advantage.

Strategic HR does not always mean that an organization will adopt a “human relations” approach to HR. United Parcel Service (UPS) is a prime example of this, as illustrated in the text.

Managing an organization's employees as investments mandates an integrated approach to managing various human resource functions.

As an example, consider an organization whose primary strategic objective involves innovation. It is critical as part of the organization's overall strategy that the organization devise strategies to retain its employees and their knowledge bases until the "new knowledge" becomes "owned" by the organization itself (through diffusion throughout the organization) rather than by the employee.

However, a dilemma exists involving investment in human assets. An organization that doesn't invest in its employees may be less attractive to prospective employees and may have a more difficult time retaining current employees, resulting in inefficiency and a weakening of the organization's competitive position. However, an organization that does invest in its people needs to insure that these investments are not lost. Well-trained employees, for example, become more attractive in the marketplace, particularly to competitors. While an organization's physical assets can't "walk," its human assets can, making the latter a much more risky investment.

Organizations need to develop strategies that encourage employees to stay on long enough for the organization to realize an acceptable return on its investment. This return is relative to the employees’ acquired skills and knowledge, particularly when the organization has subsidized the acquisition. This calls for the organization to determine the actual "value" of each employee. Valuation of human assets has implications for compensation, advancement opportunities, and retention strategies as well as how much should be invested in each area for each employee.

Factors Influencing How Investment-Oriented An Organization Is

Five major factors affect how investment-oriented a company is in its management of human resources, as indicated in Exhibit 1-2. The first of these is management values. The extent to which an organization can be characterized as investment-oriented may be revealed through answers to the following questions:

The second factor is attitudes toward risk. A tradeoff exists between risk and return. Both personal and institutional investment strategies can be highly conservative or risk averse or, pursue unlimited returns with reckless abandon. Investments in human assets are generally far more risky for an organization than investments in physical assets due to the fact that, unlike physical assets, human assets are not owned by the organization. An organization with risk-averse management philosophies is far less likely to make significant investments in people.

The third factor is the nature of the skills needed by employees. Certain organizations require employees to develop and utilize very specialized skills that might not be applicable in another organization, while another employer might have employees utilize and develop skills that are highly marketable. For example, if an employer has a custom-made information system to handle administrative HR functions, the skills required would be less transferable than those associated with a more generic information system.

The fourth factor affecting the investment orientation is the "utilitarian" mentality of the organization. Organizations that take a utilitarian or “bottom line” perspective evaluate investments utilizing utility analysis, also known as cost-benefit analysis. Here, the costs of any investment are weighted against its benefits to determine whether the prospective investment either is profitable or, more commonly, achieves the target rate of return the organization has set for its investments. A highly utilitarian approach attempts to quantify all costs and benefits.

The distinct problem many utilitarian organizations run into regarding investments in people involves the fact the many benefits of HR programs and policies are extremely difficult to quantify. Even if they can be assessed quantitatively, subjectivity as to the actual value of the benefit may make consensus on the overall value difficult. Consider, as an example, the customer service division of a local internet service provider. Similarly, a government organization or public utility that attempts to develop a program to enhance efficiency may have a difficult time in finding the cost justifiable.

The final factor impacting an organization's willingness to invest in its people is the availability of cost-effective outsourcing. An investment-oriented approach to managing an organization will attempt to determine whether its investments produce a sustainable competitive advantage over time. When specialists exist outside of the organization who may perform certain functions much more efficiently, any internal programs will be challenged and have to be evaluated relative to such a standard.

The organization is further likely to invest its resources where key decision makers perceive they'll have the greatest potential return. This may result in few investments in people at the expense of investment in market and product development, physical expansion, or acquisition of new technology. As an example, employers in the fast food industry, such as McDonald’s, invest little in their employees.

Conclusion

American organizations are so infused with short-term measures of performance that investments in human assets, which tend to be longer-term investments, are often ignored. Organizations performing well financially may feel no need to change their investment strategies. Those not doing well usually need a "quick fix" to turn things around and hence ignore longer-term investments in people.

However, while investments in HR are longer-term, once an organization gains a competitive advantage through its employees, the outcomes associated with the strategy are likely to be enduring and difficult to duplicate by competitors as such programs and values become more firmly entrenched in the organization's culture. The reading "Producing Sustainable Competitive Advantage Through the Effective Management of People" illustrates how financially successful companies employ and implement an investment perspective of HR to gain such an advantage.

2. Impact of Technology

Technology is the process by which inputs from an organization’s environment are transformed into outputs. Technology includes tools, machinery, equipment, work procedures and employee knowledge and skills. All organizations employ some form of technology.

With constant advances in technology and work processes, organizations are under increased competitive pressure to implement, if not develop, more efficient means of operations. However, the financial considerations of whether or not to adopt a new technology must be balanced with a number of strategic issues and more specifically a number of specific strategic HR issues, as illustrated in Exhibit 2-1. Six specific challenges which technology presents for human resource management are illustrated in Exhibit 2-2.

As newer technologies are developed and implemented, the skills and work habits required of employees change as well. There is a much greater need to continue to upgrade existing employee skills today than there has ever been at any time in the past.

At the same time that technological change is creating demand for workers with more sophisticated training and skills, a significant number of new workforce entrants have limited technical skills and, in some cases, have little or no training beyond basic literacy.

Service sector employees need different skills than those utilized in manufacturing. Customers of service organization need much more “customized” or individualized output.

The implementation of advanced technologies has also resulted in many organizations eliminating lower-level positions held by employees who performed tasks that can now be accomplished through automation.

Organizations have been able to reduce and, in some cases, eliminate layers of management and move toward "flatter" organization structures with fewer levels in the hierarchy. At the same time, because these technical workers have advanced training, the power bases in many organizations have been rearranged from management to technical workers.

Technological change has resulted in hierarchical distinctions being blurred and more collaborative teamwork where managers, technicians and analysts work together on projects.

Similarly, technology has facilitated more flexible, dynamic organization structures to facilitate change and adaptation to changes in the organization's environment.

Technology has also facilitated the relocation of work from the office to the home. Telecommuting programs offer attractive and significant benefits for both employers and employees. However, despite the fact that many organizations have successfully implemented telecommuting on a large-scale basis, telecommuting programs, if not developed and managed appropriately, can create a number of problems. The reading "Telecommuting As Part of A Strategic Human Resource Management Program" outlines some of the issues and management challenges inherent with telecommuting and provides recommendations on how to develop an effective telecommuting program.

The Internet is being increasingly utilized for managing employees and the employment process. The uses of information technology and the Internet by employees has raised concerns regarding the privacy of employee work activities as well as concerns relative to personal privacy.

Workforce Demographic Changes and Diversity

Advances in health care are allowing us, as a society, to live longer, remain healthier longer and remain in the workplace longer. This is often referred to as the "graying of the workforce." Older workers are often perceived to be more resistant to change, particularly in implementing radically new programs and utilizing new technology that break from long-established ways of doing things. They may also have increased health care costs relative to their younger counterparts. As older workers remain in the workplace longer, fewer advancement opportunities are made available for younger workers and in many instances, older workers command higher salaries despite the fact that they may have skills and training that are less current than those of younger workers, particularly relative to technology.

At the same time, it is important to remember that older workers can be as productive, if not more productive than younger employees. The United States is a society that tends to de-value its older citizens and such biases and predispositions are often found in organizational settings. However, older workers generally display more loyalty to their employers than their younger counterparts. Older workers also have significant knowledge of the organization and industry as well as key contacts within their professional networks.

Organizations are creating incentive programs for early retirement and then, in many cases, hiring retirees back on a part-time basis or as consultants to take advantage of their knowledge and experience.

Baby boomers

Further up the management hierarchy there are fewer and fewer positions available and the competition for senior management positions among boomers has become intense. Many of these individuals will never progress beyond middle management. Consequently, this creates a new HR challenge in managing these "plateaued" workers. Slower and alternative career paths have become the norm for many of these workers. An increasing number are choosing to go out and start their own businesses.

Baby busters

Boomers have created "bottlenecks" in management hierarchies for busters. Baby busters often receive higher wages than some of the baby boomers due to the forces of supply and demand. There are far fewer individuals in this lower age bracket and in many industries, particularly rapidly growing industries like multimedia and the Internet, these workers have skills and training that the previous generation lacks and are commanding significant incomes in their early career years.

“Generation X”

These individuals are now entering the workforce. They have been utilizing computers and other advanced technologies all of their lives and have been exposed to near-constant change in the everyday lives. They have attitudes and perceptions toward work that significantly differ from those of their predecessor generations.

Managing Professionals

One of the most notable consequences of these new workplace dynamics is that there is now an increased emphasis on the management of professionals. These technical workers need and want more autonomy in their responsibilities and seek greater input and participation in their work activities. In response to this, some organizations have established two separate career tracks; technical / professional and managerial / administrative.

Project teams

With project teams, technical employees often report to a technical supervisor and yet are assigned to a project team, overseen by a project or engagement manager. This often involves technical workers being responsible to both the technical and project managers which can provide enhanced opportunities for employee skill and career development. This dual reporting relationship can be stressful.

Employee values and attitudes

Today’s employees display values and attitudes that stress less loyalty to the company and more loyalty to oneself and one's career than those exhibited by employees in the past. This is not surprising in light of the waves of corporate downsizing and layoffs and the manner in which they have eroded employee loyalty and commitment. Employees today have higher levels of training, education and skills demand more meaningful work and more involvement in organizational decisions that affect them.

Personal and family life dynamics

Demographics are changing with a significant increase in single-parent families and dual-career couples. Employees have concerns around child and elder care, relocation and "parental stigma."

Nontraditional family arrangements place increased pressure on organizations to offer domestic partner benefits to employees equal to those that the organization provides to employees with legal spouses.

An increasing number of employees are opting for nontraditional work relationships, often in the form of part-time work, independent consulting, or contingent or temporary employment. Workers opting for such arrangements often seek to enjoy more flexibility in their lives as well as the opportunity to have time to pursue other endeavors. These employees generally receive few or no benefits and obviously have little job security and tend to be less loyal. The trend toward outsourcing or contracting certain functions or activities outside of the organization creates numerous entrepreneurial opportunities for individuals. Many plateaued baby boomers have, in fact, left their organizations and then taken their former employers on as clients.

Managing diversity

Organizations are experiencing increasing proportions of various ethnic and minority groups in the American consumer population and in the labor force. This makes it imperative that organizations understand the needs and wants of these groups if they hope to effectively market goods and services to them and attract them to work for the organization.

Diversity Initiatives At Intel

The demand for trained professionals in the industry greatly exceeds supply. Intel has developed a creative program for recruiting and developing minority employees. Included in this program is an undergraduate minority scholarship fund, a college internship program and a formal mentoring program.

There is probably no better way to understand and market to diverse groups than to have them represented as employees at all levels of the organization. In addition to this, diversity initiatives help to insure that personal differences which have nothing to do with job performance are less likely to impact hiring, promotion and retention decisions.

However, many diversity initiatives are ill-conceived, not integrated with the organization's mission and objectives and can create additional challenges above those in which they were designed to respond. The reading "The Strategic Management of Workplace Diversity Initiatives" outlines some of these issues and challenges.

Conclusion

The larger environments in which organizations operate can be in a state of constant change. Nowhere is this more evident than in the areas of technology, workforce composition and globalization. Constant, if not continuous, changes in who organizations employ and what these employees do requires HR practices and systems that are well conceived and effectively implemented to insure high performance and continued success. More importantly, HR practices must constantly be reviewed and evaluated.

3. Human Resource Planning

The human resource strategies can begin to be developed once the overall corporate and business-unit strategies have been established. The HR strategy involves taking the organization's strategic goals and objectives and translating them into a consistent, integrated, complimentary set of programs and policies for managing employees.

This does not imply, however, that strategic HR is reactive in nature. HR strategy is carried out in a proactive manner with HR staff attempting to design and develop appropriate systems to meet the anticipated conditions in which the organization will be operating.

The first component of human resource management strategy is human resource planning. (The second component, the design of work systems, will be covered in Chapter 6). All other functional HR activities, such as staffing, training, performance management, compensation, labor relations and employee separation, are derived and should flow from the human resource planning process. When undertaking human resource planning, the organization considers the implications of its future plans on the nature and types of individuals it will need to employ and the necessary skills and training they'll need and also assesses its current stock of employees as well as those available for employment externally. The key facet of human resource planning is that it is a proactive process. Rather than react to changes in the industry, marketplace, economy, society and technological world, human resource planning assures that the organization will be able to adapt in tandem with these changes and maintain the fit between the organization and its environment. HR planning is particularly important during periods of organizational turbulence, such as during a merger or acquisition, or when labor market conditions are tight, with low unemployment.

Because human resource planning involves making assumptions about the future, it is critical that all human resource planning initiatives be flexible. Changes to any planning initiatives should not be viewed as a weakness in the planning process. Rather, they should be a positive sign that the organization is carefully monitoring its external environment and responding appropriately to any changes taking place.

In order to facilitate this flexibility, it is critical that key decision makers in the organization clarify and write down all assumptions they make about the external environment and the organization when developing the human resource plan. There is a very good chance that the plans were developed based on inaccurate assumptions about what might happen in the future or assumptions that failed to materialize.

Clarifying and writing down these assumptions makes subsequent intervention and corrective action much easier. However, as previously noted, much of the assessment of the external environment involves assumptions that various conditions of the economy, technology, marketplace, competition and regulatory environment will remain the same or change. These assumptions are often understood by key decision makers and not verbalized.

Objectives of Human Resource Planning

There are five major objectives of HR planning, as outlined in Exhibit 5-1. The first is preventing over and understaffing. If an organization employs too many individuals, it experiences a loss of efficiency in operations due to excess payroll costs and/or surplus production that can't be marketed and must be inventoried. Having too few employees results in lost sales revenue since the organization is unable to satisfy existing demand of customers. This can also result in the future loss of customers who turn to competitors. Human resource planning helps to insure that operations are not only efficient but timely in response to customer demand.

The second objective is to make sure that the organization has the right employees with the right skills at the appropriate times and places. Organizations need to anticipate the kinds of employees they need in terms of skills, work habits and personal characteristics and time their recruiting efforts so that the best employees have been hired, fully trained and prepared to deliver peak performance exactly when the organization needs them.

The third objective is to make sure that the organization is responsive to changes in its environment. The human resource planning process requires decision makers to consider a variety of scenarios relative to what could happen in numerous domains in the environment. Human resource planning forces the organization to speculate and assess the state of its eternal environment.

The fourth objective is to provide direction and coherence to all human resource activities and systems. Human resource planning sets the direction for all other HR functions, such as staffing, training and development, performance measurement and compensation, to follow. There must be an appreciation of the interrelatedness of the collection of HR programs and systems and how changes in one area may impact what is done in another area. A coherent human resource plan will assure, for example, that the areas in which employees are being trained are being incorporated into their performance measurements and that these factors are additionally considered in compensation decisions.

The fifth objective is uniting the perspectives of line and staff managers. Effective planning requires the input and cooperation of all managers within an organization. Communication between HR staff and line managers is essential for the success of any HR planning initiatives. Corporate HR staff need to assist line managers in the planning process but simultaneously acknowledge the expertise of and responsibility assigned to individual line managers in considering their input to the planning process.

Types of Planning

Planning is generally done on two different levels. Aggregate planning anticipates needs for groups of employees in specific, usually lower-level jobs and the general skills employees need to ensure sustained high performance. Succession planning focuses on key individual management positions that the organization needs to make sure remain filled and the types of individuals who might provide the best “fit” in these critical positions.

Aggregate Planning

The first step in aggregate planning is forecasting the future demand for employees. It needs to consider its strategic plan and any kinds and rates of growth or retrenchment that may be planned. The reason for this is that the single greatest indicator of the demand for employees is demand for the organization's product or service. It is imperative when forecasting the demand for employees to clarify and write down any assumptions that may be made that might affect utilization of employees (new technology that might be developed or acquired, competition for retention of existing employers, changes in the production of a product or provision of a service, new quality or customer service initiatives, redesign of work systems, etc.) to allow more accurate forecasts.

While there are a number of mathematical methods, such as multiple regression and linear programming, to assist in forecasting demand for employees, most organizations rely more on the judgements of experienced and knowledgeable managers to assist in determining employee requirements. This may be done through unit forecasting (sometimes called bottom-up planning) or top-down planning or some combination of both.

In unit forecasting, each individual unit, department, or branch of the organization estimates its future needs for employees. This technique has the advantage of potentially being the most responsive to the needs of the marketplace because it places responsibility for estimating employee needs at the "point of contact" in service provision or product production. However, unless there is some mechanism for control and accountability for allocating resources, such a technique can easily lead managers into overestimating their own unit needs.

Top-down forecasting involves senior managers allocating a budgeted set amount for employee payroll expenditures and then dividing the "pool" at subsequent levels down the hierarchy. Each unit is "assigned" a budgeted amount and then required to make decision on deploying those resources in the manner most consistent with business objectives. While this technique may be efficient, as senior management allocates HR costs within a strict organization-wide budget, there is no guarantee that it will be responsive to the needs of the marketplace.

Unit forecasting promotes responsiveness to customers and the marketplace while top-down forecasting promotes organizational efficiency in resource allocation. Consequently an organization can choose a planning technique that is consistent with its overall strategy. An organization whose key strategic objectives involve cost minimization can opt for top-down forecasting. An organization more concerned with change and adaptability can opt for unit or bottom-up forecasting.

In addition to the demand for the actual headcount of employees, the organization also needs to consider the demand for specific skills that it will require of its employees as part of the HR planning process. Consideration should be paid to impact that technology is having on the skills required of employees. Employers also need to find the kinds of workers who will best “fit” with the organization in the future relative to personal characteristics, work habits and specific skills.

Once demand for employees has been forecast the organization then has to plan to ensure that there is an adequate supply of employees to meet this demand. This process involves estimating not only the actual number of employees but also determining the skills that these employees have and whether their backgrounds, training and career plans will provide a sufficient fit for the organization's future plans.

Skill inventories are usually computerized databases that are part of the organizations' overall human resource information system. Each employee provides information on his or her experience, education, abilities, job preferences, career aspirations and other relevant personal information that allows an organization to gain a collective sense of who their employees are and what capabilities they have. It is critical that skill inventories be constantly updated to be of any value to an organization.

Estimates of the existing supply of human resources relative to quantity is not a static measure. Employees change positions and job levels constantly as well as leave the organization. Consequently, any attempt to assess the supply of employees that can be expected at any point in the future relative to quantity, needs to assess mobility within the organization as well as turnover rates. This can be done through a mathematical technique known as Markov analysis Markov analysis utilizes a transition probability matrix that is established based on past, historical trends of mobility. Markov analysis can also be utilized to allow managers to identify problem departments within an organization or positions that appear to be less desirable as reflected in high rates of turnover or low rates of retention. A sample Markov analysis is illustrated in Exhibit 5-2.

Once reliable estimates have been made for both supply and demand of employees, programs can be implemented that attempt to address any anticipated surplus or shortage of employees in a particular job category. In planning for anticipated shortages, the organization first needs to consider whether the shortage is expected to be temporary or indefinite. Another important consideration is whether the individuals will need the latest up-to-date skills or whether the organization requires more hands-on practical experience.

If a surplus of employees is anticipated, a critical strategic issue that must be addressed is whether this surplus is expected to be temporary or permanent. The most extreme action to reduce a surplus is to layoff employees. Surpluses can also be addressed through early retirement programs, transfer and retraining of existing employees, and/or an across-the-board reduction in salaries or working hours. Exhibit 5-3 summarizes some strategies for managing employee shortages and surpluses.

Succession Planning

Succession planning involves identifying key management positions of critical importance that the organization cannot afford to have vacant. These are usually senior management positions and/or positions that the organization has traditionally had a very difficult time filling. Succession planning serves two purposes. First, it facilitates transition in these key positions when an employee leaves. Second, succession planning identifies the development needs of high-potential employees and assists with their career planning. As part of this planning, the organization can attempt to develop key necessary skills in these individuals that might be needed in their subsequent assignments.

Succession planning is relatively easy to understand in concept and organizations seem to appreciate its importance. Nonetheless, many fail to implement the process effectively. The reading “Heirs Unapparent” discusses practical difficulties in succession planning, particularly in light of some of the demographic changes taking place in the workforce.

Traditional succession planning utilizes a relatively simple planning tool called a replacement chart. The chart identifies key positions and possible successors for each of these positions as well as whether each potential successor currently has the background to assume the job responsibilities, or the expected additional amount of time it will take until the potential successor is ready. It can represent a close-up of the organization chart by narrowing in on one key position and the subordinates who report to the individual holding that position. A sample replacement chart is presented in Exhibit 5-4. Some organizations, however, are much more systematic about their succession planning. Their replacement charts may contain specific skills, competencies and experiences rather than subjective estimates of “time readiness.”

Many organizations are beginning to embrace the development of succession planning strategies that are based more on organization-needed competencies and flexibility rather than focusing on subjective assessment of “readiness.” Such a system is outlined in the reading “Designing Succession Systems for New Competitive Realities.” Here, a complex system was designed to fit with the organization’s strategic goals.

Succession planning programs can also come at a significant cost to an organization. While it is prudent for an employer to ensure that for every critical position, there is at least one individual able to assume that position if something were to prevent the incumbent from continuing in it, it is critical to remember that the more prepared an individual is for a promotion that he or she does not receive, the greater the possibility that he or she might seek such a position elsewhere. This is particularly true for succession planning programs built around defined management competencies. Hence, succession planning initiatives aimed at key managers need to be coupled with a specific retention strategy designed for potential successors.

Conclusion

It is particularly critical for the success of smaller, rapidly growing companies to see that their growth is properly managed and focused. Human resource planning allows the HR function to contribute to an organization’s effectiveness by laying a foundation for proactive management that is strategically focused. The reading “If HR Were Strategically Proactive” outlines how strategically proactive thinking is critical to an organization’s competitive advantage.

More specifically, human resource planning facilitates a number of key processes within an organization. First, it facilitates leadership continuity through succession planning. Second, it facilitates strategic planning by examining the future availability of employees and their skill sets. Third, it facilitates an understanding of shifts and trends in the labor market through an examination of job requirements and employee capabilities. Fourth, it facilitates employee development by determining the skills that will be needed to achieve strategic objectives as well Human Resource Planning

Objectives of Human Resource Planning

Types of Planning

Aggregate Planning

Succession Planning

Conclusion

4 & 5 Use of the Performance Management System

There are five strategic decisions that an organization faces in establishing its performance management system, as illustrated in Exhibit 1. The first is a determination of the purpose of the system and how it will be used. The performance management system can serve multiple purposes and it is important for the organization to strategize how it will be used.

One purpose of performance management systems is to facilitate employee development. By identifying specific deficiencies in performance levels and skills, an organization is able to determine specific training and development needs. A reciprocal relationship exists between the two as the desired outcomes of training and development initiatives must be incorporated and taken into the performance management system. At the same time, the performance management system provides data that impacts the needs assessment of training and development, as displayed in Exhibit 2.

In addition, there may be a number of reasons why supervisors might intentionally inflate or deflate employee ratings. The performance management process can inherently be very political in many organizations. In most instances, when supervisors conduct performance evaluations they personally have job and career issues at stake in the ratings they give to their employees.

In addition to these errors, supervisors and subordinates may agree on levels of performance but disagree on the causes for such performance. Supervisors are much more likely to place the responsibility for poor performance with the employee whereas the employee is likely to cite organizational factors. Employees are much more like to attribute their own job success to their own behaviors rather than to "external" factors such as easy job assignments, assistance from others, etc.

For these reasons, organizations have been moving away from the traditional means of performance feedback. Feedback from peers can be useful for developmental purposes but peer feedback systems must be administered with care as they can be very political and self-serving.

Performance feedback from subordinates can provide significant insights toward the interpersonal and managerial styles of employees. Subordinate evaluations are also excellent measures of an individual=s leadership capabilities. However, subordinate evaluations can suffer from the same political problems as peer evaluations.

Because our economy is becoming increasingly service-oriented and many organizations emphasize customer service as a key competitive and strategic issue, customers are increasingly being sought for feedback on employee performance.

Self-evaluations allow employees to provide their own assessments. Allowing employees to evaluate their own performance has at least two important benefits for organizations. First, it is motivating and second, the employee "lives with him or herself" and can provide insights, examples and a more holistic assessment of performance.

Multi-rater systems or 360 degree feedback systems allow the organization and employee to gain multiple perspectives and insights on the employee's performance. There is a cost to such systems; they can be very time consuming and laborious to administer. There is a cost-benefit aspect to any type of multi-rater performance feedback system. The more performance data collected, the greater the overall facilitation of the assessment and development of the employee. At the same time, larger volumes of data are costly to collect and process. At some point, the collection of additional data will undoubtedly provide diminishing returns. The reading "Has 360 Degree Feedback Gone Amock?" addresses why organizations have embraced the idea of 360 degree feedback as well as provides some strategies for getting the maximum benefit from 360 systems.

What to Evaluate

The next strategic question is designing the performance management system is what is to be evaluated. Essentially employees' evaluations can be based on their traits, their behaviors or the results or outcomes they achieve. While assessments of traits or personal characteristics can often allow the organization to determine how the employee fits with the organization's culture, such measures ignore what the employee actually does.

Behavior-based measures focus specifically on what an employee does by examining specific behaviors in which the employee engages. They can be very useful for feedback purposes as they can specify exactly what the employee is doing correctly and what the employee should do differently. However, it is possible for employees to engage in "appropriate" behaviors yet not necessarily achieve results for the organization.

Results-based measures focus on specific accomplishments or direct outcomes. Results-based measures are often criteria than can be measured objectively. However, there are some limitations to the utilization of results-based feedback measures. First, it may be difficult to obtain results for certain types of job responsibilities. Second, results are sometimes outside of an individual employee's control. Third, results, taken by themselves, focus on the ends or outcomes while ignoring the means or process by which the results were obtained. Finally, results are limiting in that they fail to tap some critical areas of performance for modern organizations such as teamwork, initiative and openness to change.

There are limitations to all three types of performance measures. However, the strengths of one approach can offset the limitations of the others. Nothing prevents an organization from utilizing any combination of traits, behaviors and results-based measures.

How to Evaluate

The decision of how to assess employees offers the choice or evaluations that are done on an absolute or relative basis. Absolute measures evaluate employees strictly according to the performance requirements or standards of the job while relative measures evaluate employees in comparison to coworkers.

Measures of Evaluation

Another strategic decision that needs to be made in the design of the performance management system is the means of evaluation.

$ graphic rating scales are the most widely-used assessment and feedback devices. They provide the evaluator with the performance measures for traits, behaviors or results listed below the scale

$ weighted checklists ask the evaluations to check those criteria that apply to the employee

$ behaviorally-anchored rating scales (BARS) provide the evaluator with specific descriptions of behaviors

$ behavioral observation scales (BOS) addressed the problem of inconsistent employee performance by measuring frequencies along the scale

$ critical incident measures provide specific examples of the employee's "critical" behaviors or results, either outstanding or problematic, during the performance period through the use of a log or diary. This technique can be very time-consuming but allows the actual performance feedback to cite specific examples of performance measures rather than just provide general impressions

$ predetermined, negotiated work objectives (MBO) have the employee and supervisor jointly agree on the employee's work objectives for the forthcoming time period. Objectives can be set that are simultaneously consistent with the organizations' strategy and satisfy job requirements yet also provide challenging work assignments that are consistent with the employee's developmental needs and career aspirations

Informal regular feedback is more effective; particularly when it is provided immediately following some outcome or behavior. It can have a far stronger and more constant impact on motivation than feedback that is only provided annually in a more formal manner.