For this assignment, imagine you are an expatriate manager for a subsidiary of a major company headquartered in the United States. You are preparing a PowerPoint presentation to brief the CEO on your plan to address the safety issues specific to the country (of your choice) where you are working as the expatriate manager.
In your introduction, discuss four concerns in the workplace: benefits, safety, health, and global security issues. List one issue for each concern listed.
Next, prepare a solution for each of the four concerns. Discuss how your solutions address the issues within the workplace. Discuss what would be the responsibility of the global leadership team.
Conclude your presentation with a summary of how you noted the needs of your global audience, how you will design and deliver the training for employees keeping in mind Geert Hofstede’s research about cultural differences, and your plans to assess its success.
Be sure to include clear and specific speaker notes for each slide. You must include a minimum of one image or graphic within your presentation. You must use at least two sources, with one being the textbook.
Your PowerPoint presentation should be a minimum of seven slides, not counting title or reference slides. Adhere to APA style when constructing this assignment, including in-text citations and references for all sources that are used.
UnitVII Lecture Transcript
Slide 1
Unit VII, Employee Benefits and Workplace Safety, Health, and
Security
Slide 2
In order to gain a deeper understanding of the concepts presented in
this course, the unit lessons will be structured in question and answer
format. Each slide will provide at least one question based on concepts
presented in this unit and an accompanying audio response from a subject
matter expert. Review each slide to further enhance your practical
knowledge about the field of human resource management.
Slide 3
Meet Marilyn Pike. Marilyn has over 20 years of experience in HR
leadership positions in both the public and private sector, large and small
businesses, and union and non-union environments. She currently holds
both the SPHR and SHRM-SCP.
Question: Are companies required to offer employees benefits?
Answer: Some benefits are mandatory, due to federal and state
statutes, like the Social Security match. Some employees may not be aware
that the employer matches the amount that an employee is taxed for Social
Security. And some benefits are optional. Benefits a can offer a competitive
advantage in terms of both retention and recruitment. The totality of an
employee’s compensation, including their benefits package, is one major
factor in keeping employees happy, engaged, and willing to create a
competitive advantage for the company. Today’s workers demand more
benefits and a better mix to fit their lifestyles. Because people demand it,
companies add new benefits. There are studies which show that the more
benefits an employer lists in a job ad, the better the response. The benefits
don’t always have to cost the employer. Sometimes, just being able to take
advantage of a group rate can allow employees to purchase services at a
lower rate than they can individually. Pet insurance, long-term care
assistance, legal assistance are examples. Probably everyone has seen the
AFLAC commercials. Employers can offer their employees AFLAC at no
additional cost to the employer. I’ve noticed some employers offering not
only tuition assistance but a student loan repayment.
According to the U.S. Bureau of Labor Statistics (2019), benefits
average roughly 30% of total employee compensation cost. For example, if
you earn $60,000 a year, your benefits cost your employer another $18,000,
bringing wage and benefit cost to $78,000 for your job. Most employees
don’t understand the true cost and value of the benefits that organizations
provide. As a result, they don’t perceive the value that they are get from
having the organization provide their benefits. There are many indications
that employees who are satisfied with their benefits are more satisfied with
their jobs and their companies.
Slide 4
Question: What is OSHA?
Answer: OSHA stands for Occupational Safety and Health Act of 1970.
OSHA requires employers to provide workers a safe workplace. Workplace
safety deals with the physical protection of people from injury or illness
while on the job. OSHA can inspect a worksite without advance notice. In
addition to inspecting the workplace, the inspector has the right to interview
employees during the inspection. The inspector will provide the employer
with a list of any issues they may find during their inspection. Employee
rights during the inspections include the right to refuse to be interviewed, or
if an employee agrees to an interview, they can request that an employer
representative be present or that the interview be held in private. The
employee also has the right to legal representation during the interview if
they request it, and they can end the interview at any time just by
requesting that the interview be discontinued. Finally, employees have a
right against company retaliation for taking part in an interview with the
inspector and telling the truth.
Slide 5
Question: Can you explain psychological wellness in the workforce
further?
Psychological wellness, as well as physical wellness, is important for a
productive workforce. We need to provide our employees with the ability to
maintain both. In analyzing the needs of the workforce, work-life balance is
high on the list of issues facing both employers and employees. Work-life
balance is a perpetually a hot topic. With mobile technology, especially the
smartphone, the boundary between work and non-work hours has become
fuzzy. Studies show that some 44% of Internet users regularly perform
some job task outside of work. Employees will check in at work during their
weekends and vacations, increasing the likelihood of what is known as work-
family spillover. Then on the other side, you have employees using company
electronic devises for personal use during work hours, such as social media
and shopping.
EAPs (Employee Assistance Plans) and EWPs (Employee Wellness
Plans) help employees with their work–life balance. EAPs provide confidential
counseling and other personal services to employees to help them cope with
stress created by personal issues related to either work or home life. EWPs
help employees with their physical wellness. EWPs provide programs to
employees such as health education, training and fitness programs, weight
management, and health risk assessments. And there is stress. According to
Forbes, 35% of Americans have thought about leaving a job because of
stress at work, and 42% have actually done so (Dill, 2014). Absenteeism is
costly, and there is a relationship between absenteeism and workplace
stress. More than 80% of Americans said they were less productive at work
because of stress. Excess stress costs an estimated $300 billion a year in
absenteeism; decreased productivity; employee turnover; accidents; and
medical, legal, and insurance fees (American Institute of Stress, 2018).
Stress is definitely an individual perception matter. Managers should
try to be aware of the types of things at work that stress their employees.
Sometimes, something the manager considers to be a simple extra task, can
cause an employee a great deal of stress. I recall a time I asked an
employee to describe to a visitor how she did her job. Unbeknownst to me at
the time, I caused that employee enormous stress because I did not give her
a heads-up ahead of time so she could prepare. It honestly never occurred
to me that explaining how you do your job would stress someone out. That
was definitely an eye-opener for me. We are all different, we should never
“assume.” Stress is an individual perception matter.
Slide 6
Question: Can you talk about workplace security?
Answer: The five biggest concerns of employers today are
Internet/intranet security, workplace violence, active shooter threats,
business continuity planning, and mobile security. Cyber security in the form
of both Internet/intranet and mobile security deals with the company’s
computers and network security, including how mobile devices connect to
those company systems. Workplace violence is another major issue because
of the continuing rise in incidents of workplace violence. Active shooter
threats, while uncommon, have to be taken seriously, and companies have a
responsibility to take precautions and have a plan in place to respond if such
an incident happens to them. Workplace violence is rarely spontaneous; it is
more commonly passive-aggressive behavior in rising steps, related to an
unresolved conflict. Employees do give warning signs that violence is
possible, so it can be prevented if we are aware of the signs and take action
to defuse the anger before it becomes violent. I have found that being
careful to allow employees to maintain their self-respect in any potentially
confrontational situation goes a long way toward diffusing anger.
Slide 7
Question: What are some trends and issues in human resource
management and OSHA?
Answer: One important recent ruling everyone might not be aware of
is that OSHA has basically made it illegal to do blanket post-accident drug
and alcohol testing. OSHA says these blanket policies have the effect of
retaliating against workers who report injuries. Employers can continue to
test when there is “a reasonable possibility” that drug use by the reporting
employee was a contributing factor. Then, there is eDocAmerica, which is an
online provider of occupational and employee health-related services that
gives individuals and their family members unlimited email access to board-
certified physicians, psychologists, dietitians, and the like who provide
personal answers to all health-related questions. The main benefits are that
the employee can take control of their health and that it takes some
pressure off of the larger healthcare system because employees are not
constantly going to the doctor’s office.
Slide 8
This concludes the Unit VII question and answer session with subject
matter expert, Marilyn Pike. Reflect on this question and answer session as
Upon completion of this unit, students should be able to:
7. Explain the basic training process for orientation.
7.1 Integrate the steps of the training process into a safety orientation.
8. Analyze the roles and responsibilities of leaders in the safety and health of employees.
8.1 Discuss concerns surrounding benefits, safety, security, and health within the workplace.
8.2 Explore leadership responsibilities for addressing benefits, safety, security, and health issues
for an organization.
Course/Unit
Learning Outcomes
Learning Activity
7.1
Chapter 7, review pp. 229–231
Unit VII PowerPoint Presentation
8.1
Unit Lesson
Chapter 13, pp.462–498
Chapter 14, pp. 508–534
Unit VII PowerPoint Presentation
8.2
Unit Lesson
Chapter 13, pp. 462–498
Chapter 14, pp. 508–534
Unit VII PowerPoint Presentation
Required Unit Resources
Chapter 7: Learning and Development, pp. 229–231
Chapter 13: Employee Benefits, pp. 462–498
Chapter 14: Workplace Safety, Health, and Security, pp. 508–534
UNIT VII STUDY GUIDE
Employee Benefits and
Workplace Safety, Health, and
Security
2
UNIT x STUDY GUIDE
Title
Unit Lesson
Review the Unit VII Lesson.
Transcript of the Unit VII Lesson.
Suggested Unit Resources
In order to access the following resources, click the links below.
To learn more about how employee benefit packages can be not only a recruitment tool, but also aid in
employee retention, view the following video.
Resourcing Edge. (2012, June 20). Offering an employee benefits package to recruit and retain quality
employees [Video file]. Retrieved from https://www.youtube.com/watch?v=WkOMp8bnWsE
Video transcript for Offering an Employee Benefits Package to Recruit and Retain Quality Employees
Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.
Are you Type A or Type B? Complete the “14-1 Self-Assessment: Personality Type A or B and Stress” on
page 522 of your textbook.
After studying this chapter, you should be able to do the following:
13-1.
Discuss the strategic value of benefits programs, why these programs continue to grow, and considerations that need to be taken into account in providing benefits.
PAGE 464
13-2.
Identify and summarize the major components of OASDI and the Medicare program.
PAGE 468
13-3.
Identify the statutory requirements other than OASDI, including those required iforganizations choose to provide health care or retirement plans for their employees.
PAGE
471
13-4.
Briefly describe the main categories of voluntary benefits available to organizations.
PAGE
482
13-5.
Discuss the organization’s options when providing flexible benefit plans and why benefit plans need to be communicated to employees.
PAGE 493
13-6.
Discuss the issue of domestic partner benefits and review the issues in personalization of health care.
PAGE
496
CHAPTER OUTLINE
The Strategic Value of Benefits Programs
Why Are Benefits Continuing to Grow as a Portion of Overall Compensation?
Considerations in Providing Benefits Programs
Old Age, Survivors, and
Disability Insurance
(OASDI)
Social Security and Medicare
Other Statutory Benefits
Workers’ Compensation
Unemployment Insurance
Family and Medical Leave Act of 1993 (FMLA)
The Patient Protection and Affordable Care Act of 2010 (ACA)
Statutory Requirements When Providing Certain Voluntary Benefits
Voluntary Benefits
Group Health Insurance
Retirement Benefits
Paid Time Off
Other Employee Insurance Coverage
Employee Services
Administration and Communication of Benefits
Flexible Benefit (Cafeteria) Plans
Communicate Value to Employees
Trends and Issues in HRM
Benefits for “Domestic Partners”
Personalization of Health Care
p.463
Practitioner’s Perspective
Cindy says that as a benefits administrator for several years, she is a firm believer in the value of health and welfare benefits as part of an attractive total compensation package. But she asks: “Do all employees value all benefits equally?”
The first-ever employee benefits survey at one company revealed real differences between different ages and classifications of employees. Older workers valued employer contributions to the 401(k) plan; younger workers wanted more paid time off. Floor workers were concerned about affordable health care premiums, while the supervisors were interested in vision insurance. Management wisely proved to their employees that their opinion counted—an increase was made in the employer 401(k) contribution, vision insurance was added with the total cost of the payroll-deducted premium paid by the employee (employees still regarded it as a desirable benefit), and the firm adopted a paid-time-off plan that allowed the largely male workforce some flexible time off to attend to family responsibilities.
How do we create benefit packages that provide the greatest value to employees at a price employers can afford?
Chapter 1
3
provides insight into voluntary and involuntary benefits and company benefit plans.
SHRM
HR CONTENT
See Appendix: SHRM 2016 Curriculum Guidebook for the complete list
B. Employment Law (required)
7.
Employer Retirement Income Security Act of 1974 (ERISA)
9. Family and Medical Leave Act of 1993 (FMLA)
33.
COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985
34.
American Recovery and Reinvestment Act of 2009 (ARRA)
37.
Health Insurance Portability and Accountability Act (HIPAA) of 1996
K. Total Rewards (required)
B. Employee Benefits
1. Statutory vs. voluntary benefits
2. Types of retirement plans (defined benefit, defined contribution, hybrid plans)
3. Regulation of retirement plans (FLSA, ERISA, Pension Protection Act of 2006)
4. Types of health care plans (multiple payer/single payer, universal health care systems, HMOs, PPOs, fee-for-service, consumer-directed)
5. Regulation of health insurance programs (COBRA, HIPAA, Health Maintenance Organization Act of 1973)
6. Federal insurance programs (Old-Age, Survivor, and Disability Insurance [OASDI], Medicare)
7. Disability insurance
8. Educational benefits
10. Family-oriented benefits
12. Life insurance
13. Nonqualified plans for highly paid and executive employees
Discuss the strategic value of benefits programs, why these programs continue to grow, and considerations that need to be taken into account in providing benefits.
The last of our chapters on compensation deals with benefits—indirect compensation that provides something of value to the employee. Some benefits are mandatory, due to federal and state statutes, and some are optional, based on the desires of the firm. In addition, we need to understand that if we choose to provide some benefits to our employees, there are mandatory laws that we have to follow as well. We will get into all of these shortly. First, though, we want to discuss the cost of benefits programs to the company.
Licensed Video
Employee Benefits
SHRM
K:B1
Statutory vs. Voluntary Benefits
How much would you think that companies spend on benefits packages—5% of direct wages? 10%? more? Benefits are expensive.1 According to the US Bureau of Labor Statistics (BLS), benefits for all groups of workers average roughly 32% of total employee compensation cost.2 Looking at it another way, benefit costs equaled about a 46.4% premium on top of direct wage costs in March 2014. This means that for every $100 that goes into employee paychecks, another $46.40 is spent on benefits. So, if you get a full-time job with average benefits and your salary is $50,000, you would be getting around $23,200 in benefits, or have a total compensation cost (to the firm) of around $73,200.
SHRM
K:B19
Managing Employee Benefits
If you became the HR manager for an organization and you were spending nearly one third of your total compensation dollars on employee benefits, would you want to manage those costs as closely as possible? It makes sense that you would. Luckily, we have somecontrol over benefits costs, and as HR managers, we want to make sure that we get the best return possible—in loyalty, job satisfaction, and employee engagement—for our money.
SHRM
K:B10
Family-Oriented Benefits
The costs of benefits programs are staggering to most people. Of course, the BLS numbers are just an average cost to companies, but that means that for some employers, the costs are even higher than those noted already. Because benefits cost our companies so much, we need to plan our benefits programs to add value for our employees and their families as well as provide a strategic advantage to the company.3 How do benefits programs provide strategic value to the firm? As we noted in Chapter 1, our human resources are one of the few potential sources for competitive advantage in a modern organization. What keeps these employees happy and engaged and willing to create a competitive advantage for our firm? The totality of their compensation—including their benefits packages—is one major factor.4 While we are all aware that most employees take a job because of the advertised level of pay, many stay with a job because of the benefits package associated with it.5
p.465
WORK
APPLICATION 13-1
How important are benefits to you in selecting and staying on a job? How do benefits affect employment where you work or have worked?
Today, workers are demanding more benefits and an improved mix of choices and flexibility to better fit with their lifestyle and that of their family.6 This phenomenon has made it more difficult for the firm to keep track of and control benefits costs. Because people demand more and better benefits, companies add new benefits to what they have historically offered.7 This requires HR to spend more time monitoring the cost as well as the value provided by different types of benefits. But it also provides an incentive to our employees to continue working for us due to the fact that they feel as if they are being cared for by the company.8We increase job satisfaction and engagement because when employees are taken care of, they work harder and take good care of our customers and the organization.9
Why Are Benefits Continuing to Grow as a Portion of Overall Compensation?
Growth in the cost of providing employee benefits has occurred for a number of reasons. Let’s take a quick look at some of the biggest reasons for growth in benefits programs in the United States and worldwide.
TAX ADVANTAGES. One reason benefits are growing is that there are federal and sometimes state tax advantages for companies that provide them. If the company provides its employees with a benefit, the firm can write off all or part of the cost of providing the benefit. Sometimes the company can get benefits pretax for employees as well. As an example, most health insurance premiums are tax deductible for employers and are not taxable as income (pretax) for employees. So providing some benefits can reduce the tax burden on both the company and the individual. Take a look at the table on benefits taxation that is reproduced from IRS Publication 15B10 in
Exhibit 13-1
.
STATUTORY REQUIREMENTS. Federal—and, increasingly, state and local—laws require companies to provide certain benefits. A number of states have now made sick leave, other paid time off, retirement, health care, and other benefits mandatory for most or all private corporate employers in addition to the minimum wage increases we noted in
Chapter 11
. In 1935, Social Security laws were passed that required companies to provide employees with old-age, survivor, and disability benefits. Over the ensuing years, Congress has added other mandatory benefits such as unemployment, workers’ compensation, family and medical leave, and the Affordable Care Act or ACA (we will discuss each of these shortly). Each time Congress or the states require employers to provide a new benefit, the cost to employers for providing benefits goes up.
Exhibit 13-1 SPECIAL RULES FOR VARIOUS TYPES OF FRINGE BENEFITS
a Exemption doesn’t apply to S corporation employees who are 2% shareholders.
b Exemption doesn’t apply to certain highly compensated employees under a self-insured plan that favors those employees.
c Exemption doesn’t apply to certain highly compensated employees under a program that favors those employees.
d Exemption doesn’t apply to certain key employees under a plan that favors those employees.
e Exemption doesn’t apply to services for tax preparation, accounting, legal, or brokerage services.
f If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee can’t receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month.
g You must include in your employee’s wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the insurance. Report it as wages in boxes 1, 3, and 5 of the employee’s Form W-2. Also, show it in box 12 with code “C.” The amount is subject to social security and Medicare taxes, and you may, at your option, withhold federal income tax.
p.467
INFLUENCE OF ORGANIZED LABOR. We talked about the National Labor Relations Act in
Chapter 9
and noted then that the act allows employees to “bargain collectively” with their employers. This is another reason that benefit costs have grown for companies over the years. A large part of collective bargaining is usually focused on employee benefits (for a variety of reasons), and once union members gain such benefits, employees in other competing companies use this as leverage to have the same benefits added to their workplace, even if the company is not unionized. Unions also use the tax-favored status of many benefits to make them more palatable to the company during negotiations, and organizations may prefer benefits concessions to wage concessions because of the tax advantages. So unions have had a significant effect on the cost and variety of benefits.
BUYING IN BULK. Virtually everyone now knows that if you buy things in larger quantities, you get them cheaper (think Sam’s Club or Costco). Buying benefits in bulk works the same way. If companies buy benefits in bulk for employees, it is cheaper than if the employee buys the same benefits individually.
As you can see, there are a variety of reasons why the costs of benefits have grown in the last 80 years. And once a benefit becomes part of the employee’s compensation package, it is very hard to delete that benefit in the future. We consider them an entitlement (
Chapter 12
)—we feel that the company owes us this benefit.11 So the cost of providing benefits almost never goes down; it just keeps going up. However, some companies, especially companies with fewer than 50 employees, have decided to drop health care benefits for their employees as a result of the detailed requirements in the ACA. An EBRI study noted that “many small employers may have decided that the increasing costs and risks associated with offering health coverage were no longer justified.”12
Considerations in Providing Benefits Programs
How do we create and then administer a benefits program for our workforce? We need to understand several things before creating the program so that we create a system that is both valuable to the employees and affordable for the organization. Remember that our goal is to have a program that increases employee motivation and engagement and helps create a competitive advantage.
As part of strategic value, to help attract and retain the best workers, some companies offer generous voluntary benefits. Google is well known for its generous benefits, including free gourmet food all day long, free gyms and massages, and generous parental leave, and dogs are welcome at work.13 L.L. Bean gives employees discounts of 33% to 40% on company-made items, and it increased its tuition reimbursement from $2,750 to $5,250 per year.14 Starbucks will reimburse tuition cost for online degrees from Arizona State University.15 But of course, any firm that decides to provide these generous benefits must be able to afford the high cost.
AMOUNTS. The first issue is how much money the company is willing to spend to provide an employee benefits program. Many companies will calculate this as a percentage of direct compensation. We may analyze the current situation and come to the conclusion that we are able to provide a 40% premium to direct compensation for the cost of benefits. We have to be very careful in our consideration of the amounts available for employee benefit programs. As with other types of compensation, if we tell our employees that we will provide a benefit that they value and then fail to follow through for any reason, it is just as damaging to motivation and engagement as any other type of management action that breaks the expectancy theory process discussed in Chapter 11. We need to make absolutely sure that we will have the funds available if we commit to providing the benefit.
MIX. Once we know how much money is available, we need to decide what types of benefits we will offer. Here again, the number of different types of benefits has exploded over the past 40 years. In the 1960s and 1970s, most companies had limited benefit programs. They might have offered their employees a retirement benefit, health insurance, life and disability insurance, and possibly dental care, but nobody ever thought about providing “$2,000 to travel” like Airbnb or “acupuncture or improv classes” like Twitter!16 Today, the number and type of benefits available in some company programs is limited only by the imagination of the employees of the firm.
p.468
John van Hasselt/Corbis via Getty Images
Airbnb CEO Brian Chesky. Airbnb provides employees $2,000 to travel as part of its benefits program.
As an example, companies today may provide a transportation subsidy such as a vehicle allowance, a public transportation voucher, free parking near the office or a parking voucher, alternative vehicle allowances (for buying “green” vehicles), allowances for bicycles and places for bike parking, a van or shuttle service to take employees to work and back home . . . and this is just benefits associated with transporting the worker to and from work. The company can provide on-site wellness centers and child care,17 child care vouchers, sick child care, paid child care leave, paid leave for pregnancy and childbirth, elder care, and/or pet care. So we can quickly see how large the pool of potential employee benefits can become. We have to decide which of the options is going to provide our workforce with the best benefits package for the money spent.
WORK
APPLICATION 13-2
How important is benefits flexibility to you? How does benefits flexibility affect employment where you work or have worked?
FLEXIBILITY. Finally, we need to consider how much flexibility we are willing to build into our benefits program because flexible options are very important to today’s employees. Flexible benefit programs allow employees to pick from a set of benefits in some way. The employee can, at least for a portion of their benefit package, choose one type of benefit over another in flexible benefit plans. Flexibility is important to motivation because it gives employees the benefits that are of value to them—expectancy theory.
We will get into the reasons behind these issues later in the chapter. Right now let’s get into a review of the mandatory and common voluntary benefits available today.
OLD AGE, SURVIVORS, AND DISABILITY INSURANCE (OASDI)
LO 13-2
Identify and summarize the major components of OASDI and the Medicare program.
Statutory benefits are benefits that are required by law. A number of benefits are required by federal laws in the United States and in many other countries. There are also laws that apply if the company chooses certain optional, or nonmandatory, benefits in certain cases. Always remember that laws vary in every state and every country, so check to make sure you know all of the requirements based on where your organization is based. The first of our statutory benefits in the United States is Old Age, Survivors, and Disability Insurance.
Social Security and Medicare
SHRM
K:B6
Federal Insurance Programs
By far the largest of the statutory US programs, in both size and cost to employers (and employees), are Social Security and Medicare. The combined cost of the Old Age, Survivors, and Disability Insurance (OASDI)—the formal name for what we generally call Social Security—and Medicare programs was more than $1.5 trillion in 2016.18 To put that in perspective, the total federal revenue collected in 2016 was expected to be about $ 3.27 trillion.19 This means that this one group of programs cost more than 46% of all money the federal government received in 2016.
Employers and employees are required to provide funds for Social Security benefits. The program was created with the passage of the Social Security Act of 1935. The act created a series of programs for the social welfare of the population of the United States, including OASDI, Medicare for elderly and disabled individuals, and several other lesser-known programs. Since these programs are so complex, and this is an introductory overview of the field of HRM, the best that we can do in this text is to provide some general information on the programs.
p.469
How much money does the employee’s Social Security benefit cost, and who pays for it? The employer and employee jointly pay into Social Security through withholdings from the employee’s paycheck and a mandatory employer payment. Each of them pays 6.2% of the employee’s total pay per pay period into OASDI and 1.45% of the employee’s pay into the Medicare fund. The 6.2% contribution is only withheld on the first $127,200 the employee earns during the year (in 2017),20 and then it stops, but the 1.45% tax for Medicare is paid on all income, no matter how much is earned. So the combined amount sent to the federal government is 15.3% of the employee’s income, half from the employer and half from the employee.
How does an employee become eligible for OASDI benefits? As a general rule, the individual must receive 40 “credits” in their lifetime in order to become eligible for Social Security retirement. They must earn $1,300 in one quarter (in 2017) in order to receive 1 credit. The amount of earnings required to receive 1 credit rises each year as average earnings rise. The 40 credits do not have to be in consecutive quarters—the individual does not have to work for 10 years without a break in employment—and more than 1 credit can be earned in a quarter (if a person made $2,600 in a quarter, they would earn 2 credits), but a person can only earn 4 credits per year.21 However, the 40-credit rule does not necessarily apply to disability or survivor benefits. While we would normally need 40 credits in order to be eligible for disability payments, if we were disabled before we could reasonably earn the 40 credits, we might become eligible earlier. For example, if disabled before age 24, you could qualify for disability benefits with as few as 6 credits earned in the 3 years prior to becoming disabled.22
WORK
APPLICATION 13-3
Look at your last pay stub. How much was taken out for Social Security tax and Medicare tax? How much did your employer pay?
RETIREMENT. Once an employee becomes eligible through earning 40 credits and meeting the retirement age requirements, they can receive a monthly check, but is that monthly check supposed to help the employee maintain the lifestyle that they had before retirement? Social Security was only designed to pay about 30% of preretirement income. It was never designed to replace 100% of preretirement income. However, many employees plan on it as their only retirement.
The key to having money at retirement is to start saving at a young age to take advantage of compound interest.
As HR managers, part of your job will be to make employees aware that they need to also save for retirement. Most people aren’t saving at all or are not saving enough for retirement.23 The savings rate in the United States compared to that in many other developed countries is low. In 1990 the US savings rate was around 7%, but by 2005 it had dropped to less than 1.5% and by 2017 had recovered to about 5.5%.24 This compares with savings rates of 10% or more in Germany, Sweden, and Switzerland.
Regardless of your age, think retirement, right now.25 There are sayings, such as pay yourself first and retirement should always be your top payment priority.26 The common recommendation is to start when you get your first full-time job by putting 10% of your income into a retirement fund every month, no matter how low or high your income is, and always take advantage of matching benefits from your employer.27 We’ll talk more about retirement later in this chapter.
At what age are we eligible for Social Security retirement? If you were born in 1937 or earlier, you are eligible for retirement at age 65. If you were born in 1960 or later, your retirement age is 67. For those born between 1937 and 1960, it is based on a sliding scale. Take a look at
Exhibit 13-2
. If you were born in 1956, you are eligible for full retirement benefits from Social Security at age 66 and 4 months.28
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Exhibit 13-2 FULL SOCIAL SECURITY RETIREMENT AGE
Source: US Social Security Administration, https://www.ssa.gov/planners/retire/agereduction.html, retrieved July 29, 2017.
One of the most important things to understand about social security is how many people lived to be age 65 when the Social Security law originally passed and how many it supports now. In 1935, approximately 6% of the population was age 65 or older, but in the year 2000, that number was about 12.4%, and in 2017, it was estimated at 14.9%.29 The Social Security program was designed around a retiree population of 6%, but that has more than doubled, and it will continue to rise for many years to come. This is one of the issues with the way Social Security is set up today and one of the reasons that the program constantly has to be reevaluated. The changes in life span and changes in income that have occurred over the past 70 years have made the program unsustainable in its current form.
Another major issue with Social Security is the large number of baby boomers who are starting to retire, with fewer younger workers paying into the Social Security system. The Social Security Board of Governors estimates that the OASDI fund will have greater outflows than it takes in beginning in 2022 and will exhaust its funds in 2034 if legislative corrections are not undertaken.30
What about early retirement? Can a person retire earlier than age 65–67? Yes, but their benefits will be permanently reduced. For example, if an employee was eligible for retirement at age 65, they could take early retirement and get an 80% benefit at age 62. That 20% reduction is forever, not just until they reach age 65. If an individual is not eligible for full retirement benefits until age 67 (they were born after 1960), the reduction is 30% at age 62—again for the life of the retirement benefit.
DISABILITY AND SURVIVOR BENEFITS. These components are really basically the same benefit. If an employee becomes disabled or dies and is otherwise eligible, the disability or survivor benefit will apply in most cases. The employee, or their survivors, will get payments each month roughly equal to what the employee would have gotten in retirement based on their historical earnings. If the employee is disabled for at least 5 months and is expected to be disabled for at least 12 months, Social Security disability will be allowed. The disability must last at least 12 months or be expected to ultimately cause the covered person’s death.
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Survivor benefits can go to a widow/widower over age 60, any child or grandchild who is a dependent of the deceased and is under age 18, or any dependent parent over 62. If an individual has survivors in multiple categories, then the survivor benefit gets split among eligible survivors.31
MEDICARE. Finally, there is the Medicare component. Individuals become eligible for Medicare at the same time as their eligibility for Social Security retirement begins. There are currently four parts to Medicare:32
• Part A is Hospital Insurance (HI). Hospitalization covers the inpatient care of a retiree in a hospital, skilled nursing facility, or hospice. Again, according to the Social Security Board of Governors: “The HI . . . trust fund ratio is already below 100 percent of annual costs, and is expected to stay about unchanged to 2021 before declining in a continuous fashion until reserve depletion in 2029.”33
• Part B covers non–hospital-related (outpatient) Medical Services Insurance (MSI).
• Part C Medicare recipients can also now choose this option, called Medicare Advantage plans, instead of Part A and Part B. Option C combines Part A (HI) and Part B (MSI) coverage in a plan similar to an HMO or PPO (we will talk about these in detail shortly). Private insurance companies approved by Medicare provide this coverage. Costs may be lower than in the original Medicare Part A and B plans, and the insured may get extra benefits.
• Part D is a prescription drug benefit. Part A and B are basically automatic upon the individual’s retirement. The retiree has to elect to participate in Part C and/or D.
WORK
APPLICATION 13-4
Using
Exhibit 13-2
, at what age can you expect to collect full Social Security?
Medicare is not completely free to the retiree. The covered person has to pay copayments and deductibles of various types, the details of which are beyond the scope of this text. But understand that there are out-of-pocket costs involved with Medicare. There are also limitations on what is covered. So Medicare provides basic medical benefits, but it was not designed to be a full-coverage program.
OTHER STATUTORY BENEFITS
LO 13-3
Identify the statutory requirements other than OASDI, including those required if organizations choose to provide health care or retirement plans for their employees.
While social security and Medicare are massive programs that take up much of the federal budget in the US, there are a number of other required benefits. In addition, there are several statutory requirements if the company chooses to provide certain health and welfare or retirement benefits to their workforce. Let’s review these requirements now.
Workers’ Compensation
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Workers’ Compensation
The next mandatory benefit is workers’ compensation. Workers’ compensation is an insurance program designed to provide medical treatment and temporary payments to employees who cannot work because of an employment-related injury or illness. “Employment-related” means that the illness or injury had to do with the worker’s actions for the company, although the injury or illness didn’t have to happen while the person was actually at work. For instance, if an employee were traveling through an airport as part of their job and picked up their suitcase, injuring their back, this would be an “employment-related” injury.
The workers’ compensation program is paid for by employers—employees pay none of the cost of workers’ compensation insurance. Workers’ compensation payments to sick or injured employees are not permanent in most cases. The program was created to provide workers with short-term relief because of work-related injuries or illnesses. Social Security disability, on the other hand, generally provides long-term relief in the form of disability payments. Workers’ compensation does, however, pay a survivor benefit in the case of death of the employee.
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Workers’ compensation is a type of “no-fault” insurance, which means that no matter which party—the employer or the employee—was at fault in an accident- or illness-related situation, the insurance will be paid out to the party harmed. Why is no-fault such an issue? The main reason is the problems that would arise if the employee had to sue in court. First, there would almost certainly be animosity between the employer and employee if the employer were to be sued. It would also take significant time to get the case settled and for the injured party (if the decision went in their favor) to receive compensation. The employer’s maximum liability is also limited by workers’ compensation. Without it, the employer could potentially be bankrupted by a single employment accident or incident, especially if an employee were killed. In all but situations of gross negligence or intent to harm (willful misconduct), neither party can take the other to court over compensation for such an injury or illness because of the no-fault nature of the insurance. So the ability to provide no-fault insurance in this circumstance is valuable to both parties.
Workers’ compensation is mandatory in every state with the exception of Texas, where coverage is optional.34 In the states where it is mandatory, employers must purchase workers’ compensation insurance in order to operate their business. In Texas, companies can choose not to purchase insurance, but in fact most still do. Texas’s nonsubscriber rate (those companies that do not purchase workers’ compensation insurance) was about 22% in 2016.35 Why would they buy this insurance if it is not mandatory? The simple answer is that it is cheaper than losing a court case concerning an employee injury. Here again, if there isn’t an insurance policy in place, the employee can, and likely will, sue the company because they are unable to work. As most of you have seen in the newspaper, these types of court cases may provide very large awards to injured parties. It is likely that workers’ compensation insurance is a very low-cost method to insure against a very large potential jury award. Of course, the company can get a blanket liability policy that would cover on-the-job injuries, but it might be much more expensive than workers’ compensation insurance, and the company could still be bankrupted by a lawsuit if the liability policy limits were exceeded.
Just how expensive is workers’ compensation insurance? It varies, but as an average, it generally costs between 1.2% and 2% of payroll for most companies.36 It can go much higher than this, though, in some cases. Rates are primarily determined by three factors:
1. Occupations. Within a company, what are the risks of injury associated with each job? Some occupations are much more risky than others. For instance, it costs a lot more to insure firefighters, police officers, or construction workers than it does to cover office workers, sales clerks in a mall, or a librarian.
2. Experience ratings. An experience rating is a measure of how often claims are made against an insurance policy. A company’s workers’ compensation experience rating is basically calculated on the frequency and severity of injuries that occur within that company. There are companies that are in dangerous industries, but they have very few on-the-job injuries because they have very strong safety programs, while other companies in the same industry might have really high injury rates because they don’t pay as much attention to safety. Experience ratings can significantly affect a company’s workers’ compensation costs.
3. Level of benefits payable. Injured workers will get compensated based on their particular state’s workers’ compensation rating manual. This manual provides the required payout rates for various types of injuries. For instance, an amputation of a finger other than the index finger or thumb might provide the employee with a small, one-time payment, but amputation of an arm below the elbow would likely provide more and continuing payments. Individual states can set the rates for injuries within the state’s boundaries, and these rates affect the cost of workers’ compensation insurance.
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If you read the previous paragraph closely, you will notice that the company has some control over their workers’ compensation rates. The experience rating figures heavily into the company’s cost of providing this insurance, so if we can lower our experience rating, we can lower our insurance cost as well. And the savings associated with a low experience rating aren’t just one-time savings; our costs continue to be lower for as long as we maintain a safer-than-average work environment (we will discuss safety further in the next chapter). This is an area that HR managers need to understand so that they can lower company costs for workers’ compensation insurance.
Who manages and monitors the workers’ compensation programs? State governments have the primary authority for managing their state’s program. However, the insurance doesn’t come from the state itself. The insurance is almost always provided by a private insurance company that provides workers’ compensation insurance in that state. Each state has an insurance commission that authorizes insurance firms to operate in that state, and if insurance companies choose to offer workers’ compensation insurance in a particular state, they have to follow that state’s guidelines. The company approaches a private insurer for workers’ compensation insurance and purchases a policy from whichever state-licensed insurer they choose.
What if the company has a poor experience rating because of excessive accidents? In such a case, the insurers may choose not to provide insurance to the company because the risk to the insurance firm is too great. In this situation, the company that has been denied insurance can go to the state workers’ compensation commission and ask to be covered in the workers’ compensation pool. The pool is made up of insurers who provide workers’ compensation policies in the state. Each insurer that is licensed to provide such insurance typically has to be part of the pool. The state commission will then assign the company requesting coverage to one of the insurers, and the insurer will have to write the policy for the company that was previously denied coverage.
The pool assignments are usually based on the percent share of each insurer’s policies within the state. For instance, if one insurer writes workers’ compensation policies that cover 13% of all employees in the state of Arkansas, that insurer would be asked to cover about 13% of the employees whose companies have to resort to the state pool for coverage. While this is a simplified example, it gives you an idea of how companies can get insured, even if no insurance company is willing to cover the risks associated with such an employer with a poor experience rating. Remember though that the cost associated with being in the state pool is significantly more in most cases than it is if the company can get insurance coverage without becoming part of the pool.
WORK
APPLICATION 13-5
How would you rate the risk of occupational injury or illness where you work or at an organization where you have worked? Is it high, moderate, or low? Why?
Because of their industry and their experience rating, there are cases where companies are spending significant amounts of money on worker’s compensation. In some cases, as much as 25% of a company’s total personnel costs can come from workers’ compensation costs if they are in a high-risk business and their experience rating is also high. Obviously, it can be different from company to company. But again, we can actually lower our experience rating by providing safety training as discussed in
Chapter 14
.
Unemployment Insurance
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Unemployment Insurance
The third statutory benefit is Unemployment Insurance. Unemployment Insurance (UI) provides workers who lose their jobs with continuing subsistence payments from their state for a specified period of time. It is a federally mandated program but is managed and administered separately by each of the states. UI originated under the Social Security Act of 1935 and is applied as a tax on the employers—“Only Alaska, New Jersey, and Pennsylvania levy UI taxes on workers.”37 The basic federal tax rate is set at 6.2% of wages earned (in 2011) for the first $7,000 in individual wages, but this rate can be (and generally is) reduced by up to 5.4% if the employer pays state unemployment taxes on time and avoids tax delinquencies. A minimum of 5.4% of the first $7,000 paid to each employee goes to the state unemployment fund, and 0.8% goes to the federal government.38
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In addition to the federal minimum of 6.2%, states can vary the tax rate and effective wage rate within their borders. Here again, as in workers’ compensation, the tax rate is also affected by the company’s “experience rating.” Employers who tend to terminate more employees who are eligible for UI benefits have a higher experience rating and, as a result, a higher UI tax rate. So, within the same state, some employers will pay much more in UI taxes than other employers will.
What is the logic behind UI? It is there to allow people to continue to have at least some purchasing power even when they are unemployed. If UI was not available, when the country experienced a recession, many individuals and families would stop spending as much as they possibly could. This could cause the recession to deepen even more and make it more difficult for the economy to recover, because consumer spending is the largest input into the national economy. If, however, unemployed individuals are provided with some funds, the overall economy is not harmed as much as it would otherwise be. In ordinary times, when unemployment rates are not very high, unemployment payments are capped at 26 weeks per recipient in most states. However, in times of high unemployment, this can be (and usually is) extended. In the 2007–2009 recession, some states with very high unemployment rates were allowed to extend unemployment benefits to as long as 99 weeks—nearly 2 years!39
How does an individual become eligible for UI? What has to happen? They have to be terminated from employment—either through downsizing, layoff, or other processes—and in most cases must have worked in four of the last five quarters and met minimum income guidelines in each of those quarters. What makes them ineligible? A series of things can occur that make the individual ineligible:
• The individual quit voluntarily.
• They fail to look for work.
• They were terminated “for cause” (because they did something wrong).
• They refuse suitable work (work comparable to what they were doing prior to being terminated).
• They, as a member of a union, participate in a strike against the company (in most states).
• They become self-employed.
• They fail to disclose any monies earned in a period of unemployment.
What does the individual receive in the way of UI benefits? Generally the weekly benefit is about 60% of what the person was making when they were employed, but this also varies some by state, and there is a cap on the amount that will be paid out in unemployment benefits. So if the individual was highly paid, in some states they may only receive 25% (or even less) of their prior weekly pay because of the cap.
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Family and Medical Leave Act of 1993 (FMLA)
Family and Medical Leave Act of 1993 (FMLA)
The next mandatory benefit is Family and Medical Act leave, more commonly known as FMLA leave. FMLA requires that the employer provide unpaid leave for an “eligible employee” when they are faced with any of the following situations:40
• Leave of 12 workweeks in a 12-month period for:
○ The birth of a child and to care for the newborn child within 1 year of birth
○ The placement with the employee of a child for adoption or foster care and to care for the newly placed child within 1 year of placement
○ To care for the employee’s spouse, child, or parent who has a serious health condition
○ A serious health condition that makes the employee unable to perform the essential functions of their job
○ Any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty”
or . . .
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• Leave of 26 workweeks during a single 12-month period to care for a covered service member with a serious injury or illness if the eligible employee is the spouse, son, daughter, parent, or next of kin (military caregiver leave)
In addition, upon the employee’s return from FMLA leave, they must be restored to their original job or one that is equivalent in pay, benefits, and other terms and conditions of employment.
Any private-sector employer is covered under the act if they have 50 or more employees who worked at least 20 weeks during the year, working within a 75-mile radius of a central location.
Eligible employees must
• work for a covered employer;
• have worked for the employer for a total of 12 months (not necessarily consecutive); or
• have worked at least 1,250 hours over the previous 12 months.
The act also exempts some eligible employees. “A salaried eligible employee who is among the highest paid 10% of the employees employed by the employer within 75 miles of the facility at which the employee is employed”41 is exempted from FMLA leave and can be denied restoration of their job if they utilize their “eligible employee” status to take such leave.
Reasons to deny restoration to a job include the following:42
• Such denial is necessary to prevent substantial and grievous economic injury to the operations of the employer.
• The employer notifies the employee of the intent of the employer to deny restoration on such basis at the time the employer determines that such injury would occur.
• In any case in which the leave has commenced, the employee elects not to return to employment after receiving such notice.
One of the problems that employers run into with FMLA is the definition of “serious health condition.” Under FMLA, a serious health condition means an illness, injury, impairment, or physical or mental condition that involves either inpatient care or continuing care for at least 3 consecutive days, but there is strong evidence that FMLA leave is heavily abused. All an employee needs in order to be able to claim FMLA leave is a document from a health care provider that says that they have such a serious health condition. When President Bill Clinton pushed the law through during his first term, the intent of the law was noble. However, the execution left something to be desired for businesses dealing with abuse of this benefit.
Why are there problems with the law? The employer has little leeway when an employee requests FMLA leave and has documentation of a serious health condition. The employer has to cover the costs of not having the employee at work (we talked about the costs of absenteeism in Chapter 1). The law also says that we have to give at least 90% (remember, we can exempt the top 10%) of our employees up to 12 weeks of FMLA leave per year and then have to give them their job back, or a comparable job. So if we have 50 employees who work within 75 miles of a central location, we would have to allow up to 45 of those employees to miss up to a quarter of the work year, every year. This puts a huge burden on both HR and operational managers, and it can easily affect morale of the other employees who have to take up the slack for the employee who is on FMLA leave. And remember when we discussed the issue of bad employees in Chapter 9, we noted that one bad employee can affect everyone’s productivity. In fact, there is evidence that one person who games the company for unfair time off can bring performance of the entire organization down by 30% to 40%.43
Many employees want to have time to spend with their family, which is made possible through FMLA leave.
Because of the burden that FMLA can create, employers want to make sure to the best of their ability that employees are not abusing FMLA. One thing that the employer can do to lower abuse is to enforce the requirement that employees give 30 days’ advance notice of intent to use FMLA leave if they know that it will be needed. The law also says that if an employee cannot foresee the need 30 days ahead of time, they must provide notice to the company as soon as practicable. Usually this is within 1 day of learning of the need for FMLA leave, or if the need is emergent (for example, an employee is hurt in a car accident), they must notify the employer as soon as possible. Employers also have the right to require that the reason behind a request for FMLA leave be documented by a health care provider, at the employee’s expense. The employer can also require a second or even third opinion on such reasons for FMLA leave (at the employer’s expense), as well as requiring periodic certification of the continuing need for FMLA leave when the condition lasts for an extended period of time. Employers should typically get a second certification when it is suspected that an employee is abusing FMLA.
Companies can additionally require that employees substitute paid leave and completely use such leave up before taking unpaid FMLA leave as long as that is the employer’s normal policy. And they can recover health care premiums that were paid to an employee on FMLA leave if the employee doesn’t return to work.
Additional employer requirements include the requirement to post notice of FMLA benefits prominently in the workplace and to include this notice in either an employee handbook or other written guidance to employees when they are hired. Employers must also maintain health insurance coverage for the employee on FMLA leave if such health benefits are normally provided, again adding to the employer’s costs.
All in all, even though FMLA requires only unpaid leave, the costs to the company are significant. It puts a significant strain on businesses, especially small businesses. The HR department usually bears a large part of the burden of monitoring and curbing abuses of FMLA leave, and HR managers must be aware of the rules and regulations in order to apply the law correctly.
The Patient Protection and Affordable Care Act of 2010 (ACA)
The last mandatory benefit is the Patient Protection and Affordable Care Act of 2010. This act mandated that all employers with more than 50 employees provide their full-time employees with health care coverage or face penalties for failing to do so.44 Offering health insurance benefits helps to attract and retain employees, and it is a major concern for both employees and employers.45 A MetLife study found that 60% of employees are concerned about having access to affordable health insurance and worry about how they will pay for the out-of-pocket medical costs. Employers are concerned about the rising cost of health care and how the ACA will affect their health care benefits as it is implemented46 and the still unknown possible changes and effects of the ACA. The major provisions of the law are presented in
Exhibit 13-3
, by the year in which they became effective.
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Exhibit 13-3 AFFORDABLE CARE ACT
Source: Affordable Care Act of 2010.
The “pay or play” penalty noted in Exhibit 13-3 under 2015 applies to full-time equivalent (FTE) employees. Full-time equivalents include all workers putting in 30 or more hours per week plus the total number of hours worked by part-time employees per month divided by 120. For example, take a look at the calculation below. If a company has 42 employees who work 40 or more hours per week, 22 employees who work fewer than 40 hours per week but more than 30, and 25 employees who work fewer than 30 hours per week and worked a total of 1,500 hours per month (an average of about 15 hours per person per week), the calculation of FTEs would be as follows:
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If this company chose not to provide health insurance, they would have to pay a fine of $94,000: 77 FTEs − 30 FTEs = 47, 47 × $2,000 = $94,000.
Another provision of the law is that employees not covered by a health care plan at work are requiredto go to the state health exchange, where they can purchase individual coverage. Individuals who fail to gain coverage will also be fined. The penalty was a minimum of $695 in 2017 and is indexed for inflation after that. The total amount of the penalty for a family will not exceed $2,250. One caveat is necessary here. These penalties and amounts are as of the time that this text was written. There are ongoing attempts to change the structure of the ACA or even completely repeal the law. If this were to happen, HR managers would need to update themselves on the provisions of the law.
“Qualified” ACA plans (plans that meet the guidelines of the law) will have to pay at least 60% of allowed charges and meet some minimum benefit standards. The plan must also be “affordable,” which means it will not exceed 9.5% of the employee’s household income. If an employer offers a plan that is not “qualified and affordable,” they will be fined $3,000 annually for each employee who goes to the health care exchange for coverage. So for an employer, offering no plan is cheaper than offering a plan that isn’t qualified and affordable—it costs $2,000 per employee to have no coverage but $3,000 to have nonqualifying coverage.
One of the most significant questions associated with the ACA is “Will employers just choose to pay the fine rather than provide health insurance, because the fine is less expensive?” The average cost for employer coverage of a full-time worker in 2016 was nearly $6,000,47 and cost for a family health plan was about $17,000,48 and that is just the direct cost of the insurance; it doesn’t include the costs of managing the program requirements created by the ACA. So a $2,000 penalty may be the lesser of two evils for companies that are struggling with profitability.
Another concern associated with the ACA is that the company only has to provide insurance to full-time employees, even though part-time employees are part of the calculation of firm size under the law. This has caused a significant number of businesses to shift at least a portion of their workforce from full-time to part-time49 and to cut existing part-timers’ hours.50 There has also been a notable shift to more part time, contract, and other contingent employment, and companies expect that shift to intensify as they adjust to the new law.51 Uber has thousands of drivers, but they are contractors and don’t get any benefits. Everyone hired at Sid Simone Solutions is an independent contractor.52Authors Robert Lussier and John Hendon are contractors for SAGE Publishing. Some companies are outsourcing work from employees to contractor companies, such as Virgin American. Googleparent Alphabet has roughly equal numbers of outsourced workers and full-time employees.53Companies such as FedEx are also reclassifying their current employees as contractors to cut costs as they continue to do essentially the same work.54
Statutory Requirements When Providing Certain Voluntary Benefits
Let’s take a look now at some legal requirements if we choose to provide certain benefits to our employees. These requirements don’t apply unless we make the choice to provide our employees with health insurance or company-sponsored retirement plans.
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CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985 (COBRA). If employers choose to provide health insurance, we have to abide by the Consolidated Omnibus Budget Reconciliation Act (COBRA) law. COBRA is a law that requires employers to offer to maintain health insurance on individuals who leave their employment (for a period of time). The individual former employee has to pay for the insurance, but the employer is required to keep the former employee on their group insurance policy.
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Regulation of Health Insurance Programs (COBRA, HIPAA, HMO Act of 1973)
Why would a former employee want to remain on the company’s health insurance policy? Primarily because buying an individual health insurance policy is much more expensive than buying insurance for a group of people. According to Smart Money,
Buying individual health insurance isn’t as easy as having a clean bill of health and enough cash. . . . Should an insurer agree to provide coverage, it will almost certainly be costly and confusing. The average out-of-pocket costs for people insured individually is almost double what people covered by an employer pay.55
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COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985
So this option will save people money over buying health insurance on their own. Another reason is that in most cases, people don’t leave one job and start another on the same day, so they will have a gap in their health coverage if they don’t utilize COBRA coverage. COBRA allows coverage after termination of employment for at least 18 months and for as many as 36 months in some limited cases. This period is usually sufficient to allow an individual to leave one job, gain employment elsewhere, and switch to the new employer’s health care plan without losing health coverage for themselves and their family.
COBRA applies to companies with 20 or more full-time equivalent employees. It is required to be offered to both terminated employees and those who voluntarily quit, in most cases. An interesting thing about this law is that it doesn’t make failure to comply illegal. It instead denies a tax deduction that employers could otherwise take if they fail to comply with the COBRA regulations, and the law has been amended to charge an excise tax on employers who are not in compliance. So the employer’s effective tax rate goes up significantly if they fail to comply with COBRA rules.
The employee, as noted earlier, has to pay the premium for health insurance continuation. The company can also charge the former employee a fee of up to 2% above the premium cost for administration costs. But even at 102% of the basic premium cost, COBRA coverage is almost always a good deal for the former employee, again because of the power of buying in bulk.
Why don’t more former employees choose to continue their insurance under COBRA? In most cases it is because of the cost of paying the premium, especially if they will be out of work for a period of time. However, as HR managers, we need to remember that federal law requires that we offer COBRA to individuals who leave our employment.
The American Recovery and Reinvestment Act of 2009 (ARRA) added a new requirement to the COBRA rules: Companies were required to “front” a 65% subsidy of the COBRA cost of health continuation coverage for qualified employees who lost their jobs between September 2008 and December 2009. This means that the employer had to pay this cost and then file for a reimbursement of the cost on their quarterly payroll tax deposits. This was significantly different from providing COBRA coverage for individuals who lost their jobs outside of this period. ARRA also modified some other compensation and benefits requirements that continued past the end of the recession, including new shared health care IT networks, modifications to unemployment compensation, and some new limits on executive compensation in certain companies. You can read more about it at
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA). The Health Insurance Portability and Accountability Act (HIPAA) is another health insurance mandate from the federal government that applies if the company provides health insurance to its employees. Only part of the HIPAA law applies directly to all employers. What are the general provisions of HIPAA that all employers need to understand?
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American Recovery and Reinvestment Act of 2009 (ARRA)
First, HIPAA requires that our health insurance is “portable.” This means that if we had group health insurance at our previous employer and if our new employer has health care coverage for their employees, the new employer is required to provide us with the opportunity to participate in their health insurance plan. Why wouldn’t the new company want us to participate in their plan? Well, if we had a preexisting condition that required a lot of health care expense, the new employer’s premiums might go up.
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Health Insurance Portability and Accountability Act (HIPAA) of 1996
The second issue that is mandatory for all employers under HIPAA is the privacy and security requirements for medical information on employees. This is the accountability part of HIPAA. HIPAA protects “the privacy of individually identifiable health information” from being disclosed to unauthorized individuals.56 It also provides that employers must take action to ensure the security of personal health information. The privacy rule requires that covered firms take “reasonable steps to limit the use or disclosure of, and requests for, protected health information.” The security rule requires covered firms to have “appropriate administrative, technical, and physical safeguards to protect the privacy of protected health information” for individual employees.57 So COBRA and HIPAA are mandatory if we as an employer offer health insurance to our employees.
In addition to its effects on COBRA and other forms of compensation, the American Recovery and Reinvestment Act of 2009 (ARRA) also created new HIPAA privacy and security requirements for companies with group health plans. Most privacy and security rules originally created by HIPAA were limited to the covered entities, including group health benefit plans. ARRA has extended HIPAA’s privacy and security rules to business associates and other vendors directly, and has enhanced HIPAA’s civil and criminal penalties.”58 New “notice requirements” for an inadvertent release of protected health information (PHI) are also included under ARRA.
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Employer Retirement Income Security Act of 1974 (ERISA)
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA). The first two government mandates that we discussed were contingent on company actions in companies that choose to provide group health insurance to their employees. However, the last one that we will discuss covers employers who provide a group retirement plan and/or group health and welfare plans of basically any type, including medical, dental, vision, life insurance and others. Employee Retirement Income Security Act (ERISA) guidance must be followed in any of these cases.59 Let’s take a look at the main provisions of ERISA.
General provisions. Any organization that provides retirement or health and welfare plans must provide a document called a Summary Plan Description (SPD) telling beneficiaries about the plan and how it works—in plain language that the average employee can understand. The organization also has to provide similar information whenever the plan changes significantly and send an annual report to members, as well as meet some other requirements.
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Regulation of
Retirement Plans
Eligibility. A major provision of ERISA is guidance on retirement (pension) plan eligibility. If the company provides employees with a retirement plan, the guidelines in ERISA say that the plan has to be available to all employees over 21 years of age who have worked in the company for 1 year. This brings up a common question about such laws. Can the company offer retirement options to employees who are not yet 21 or who haven’t worked there for a year? The answer is yes. The company can relax the requirements of ERISA, but it cannot be more restrictive than the law allows. This is the case in many similar laws and federal regulations.
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Vesting. A second major provision of ERISA is the vesting rules. Vesting provides for a maximum amount of time beyond which the employee will have unfettered access to their retirement funds, both employee contributions and employer contributions. Most retirement plans today take in contributions from both the employer and the employee. Of course, the employee’s money is available to the employee at pretty much any time. There are rules about how the employee can remove money from a “qualified retirement account” (an account that has federal and sometimes state tax advantages associated with it), including the requirement that they reinvest it into another qualified retirement fund within a certain time period, but the money they contribute can be removed from the account when they leave the employer or even before as long as they follow some IRS rules. ERISA identifies the maximum amount of time that the company can retain company contributions to the employee’s retirement account. The rules in ERISA say that the employer must vest the employee in all employer contributions based on one of two options:
• 100% of employer contributions at the end of 5 years of contributions to the plan; or
• 20% of employer contributions from the end of year 3 through the end of year 7.
SHRM
K:B13
Nonqualified Plans for Highly Paid and Executive Employees
So if an employer and employee have been contributing to the employee’s retirement fund for 5 years and the employer has provided $1,000 per year to the account, the employee can take that $5,000 employer contribution out of the retirement fund and move it to any other qualified retirement fund that they choose. Alternately, under the 20% per year option, the employee might only be allowed to have access to 20% of $3,000 at the end of year 3, 40% of $4,000 at the end of year 4, 60% of $5,000 at the end of year 5, up until the end of year 7, when they would have access to all of the employer’s contributions to their retirement fund.
Can the company allow the employee to be vested earlier? Of course it can. In some cases, companies will immediately vest employees in their own retirement funds as a recruiting incentive. This can be a significant advantage over having to wait 5 years to have access to employer-provided funds. If the company doesn’t vest us in our retirement fund for 5 years, then if we leave the company for a better job after 4 years and 10 months, we forfeit all of the employer contributions to the fund (in this case about $4,850).
Employers have to be aware that a number of factors may cause retirement plans (as well as other benefits) to be nonqualified. Executive compensation in the form of a deferred contribution to the executive’s retirement accounts is one of the most common forms of nonqualified retirement funds. If the benefit doesn’t meet the requirements of IRS rules governing qualified retirement plans, the company must treat the contributions to the account as taxable.
Portability. The third major issue that ERISA addresses is portability of retirement accounts. The portability rule allows us to take our retirement fund and move it from our employer to another qualified fund. The employer cannot require that we keep the funds with them or under their control. Once the vesting requirements have been met, the employee has the ability to move funds from the employer’s control into another qualified retirement account.
Fiduciaries. The next provision of ERISA is the responsibility of individuals acting as fiduciaries for company retirement or health and welfare funds. A fiduciary is a person who has authority over how those funds are managed but also has financial responsibilities associated with that authority. ERISA notes that fiduciaries have the requirement to act under a concept called the “prudent man.” This includes requirements that the fiduciary will act to benefit the fund’s participants, minimize unnecessary expenses to the fund, and use “care, skill, prudence, and diligence” in managing the funds entrusted to them.
But what is prudence? Is it prudent to put the bulk of retirement investments into dot-com stocks, as many investment managers did prior to the year 2000? What about putting large portions of the fund into financial firm and real estate stocks, as many did up until 2007–2008? While in hindsight these were probably not good investments, they would have probably passed the “prudent man” standard, so prudence is a pretty minimal standard of diligence for the managers of retirement funds.
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13-1 APPLYING THE CONCEPT
Statutory Benefit Laws
Place the letter of the relevant statutory benefit law on the line next to the statement below.
a. FMLA
b. ACA
c. COBRA
d. HIPAA
e. ERISA
____ 1. I don’t trust my company’s financial future, so I like this law because it will allow me to move my funds out of my company fund to a new account with the stockbroker of my choice.
____ 2. I like this law because it will allow me to take time off from work to take care of my sick mother.
____ 3. I’m going to quit and look for a new job, so I like this law because I need to continue to have health insurance while I search for a new job.
____ 4. I currently have health insurance and medical problems, but when I change jobs, the new company can’t refuse to give me insurance based on any medical problems I have when I join the firm.
____ 5. I’m out of school and almost 25, so I like this law that allows me to continue on my parents’ insurance plan.
WORK
APPLICATION 13-6
Which, if any, statutory requirements governing certain voluntary benefits would be mandatory where you work or have worked?
PBGC. The last big provision of ERISA is the creation of the Pension Benefit Guarantee Corporation (PBGC). The PBGC is a governmental corporation established within the Department of Labor whose purpose is to insure retirement funds from failure. Its main function is to act as an insurer for the benefits promised to employees whose employers go bankrupt or are for other reasons not able to provide the promised retirement benefits to their employees. It covers only “defined benefit” retirement plans (which we will cover shortly)—plans that have specified benefits that will be paid out to the individual employee on their retirement. The PBGC may not fund 100% of what was promised in the specific retirement plan, but it “guarantees ‘basic benefits’ earned before the plan’s termination date” or the employer’s date of bankruptcy.60 There are also caps on coverage of pensions, which are determined by ERISA.
Who provides funds for the PBGC? In this case, even though PBGC is a federal government entity, the funds for the program come from employer payments into the program. If an employer chooses to provide “defined benefit” retirement accounts for their employees, they are required to pay into the PBGC. These funds are then used to provide benefits to workers whose employers are unable to pay the promised benefits. So PBGC acts as a guarantor of these retirement plans.
VOLUNTARY BENEFITS
LO 13-4
Briefly describe the main categories of voluntary benefits available to organizations.
In addition to mandatory benefits, almost all employers provide some group of voluntary benefits to their employees. These can range from a narrow group of commonly provided benefits such as retirement accounts, life insurance, and vacation time to a very broad group including company nap rooms, sick-child care services, and personal valets. How do companies determine what voluntary benefits they are going to provide? They look at their workforce and the funds available to the company and choose the package that will best allow them to minimize turnover while maintaining a satisfied and engaged workforce. Let’s discuss some of the more common voluntary benefits, including group health insurance, retirement, paid time off, and other forms of employee insurance.
Group Health Insurance
While the ACA requires certain employers with more than 50 full-time employees to provide health insurance to their full-time workforce, all other organizations generally have the choice of whether or not to offer this benefit. As we have already noted, if a company chooses to provide health care to employees, they have to follow the COBRA, HIPAA, and ERISA rules. Companies also have to look at the rising cost of providing such care. In 1980, health care services accounted for less than 10% of gross domestic product (GDP), in 2000, that figure was 13.8%, and in 2015 (the latest government figures), these services accounted for 17.8% of GDP, or $3.2 trillion.61
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SHRM
K:B4
Types of Health Care Plans
A survey by the Bureau of Labor Statistics reported that 67% of private-industry workers receive medical care benefits and that employers offering health insurance paid an average of 80% of the cost of premiums for single coverage and 68% of the cost for family coverage in 2017.62 Thus, companies that do provide health care have to be concerned with the costs. And remember that the ACA required many companies to start providing health insurance beginning in 2015, thereby increasing their overall costs of doing business. Costco offers its workers higher-than-average wages and better benefits. In 2013, 85% of its US employees, including part-time workers, received health care and other benefits (compared to less than 50% at Walmart and Target) prior to the implementation of the Affordable Care Act.63 One of the ways that companies can control costs is to understand what coverage they are buying for what price. Let’s look at the major types of group health insurance currently available to companies.
TRADITIONAL PLANS (ALSO CALLED FEE-FOR-SERVICE). Traditional health care plans typically cover a set percentage of fees for medical services—for either doctors or in-patient care. The most common percentage split between the insurance plan and the individual is 80/20. In other words, if the employee has to go to the hospital and is charged $10,000 for services, the insurance would pay $8,000 and the individual would be responsible for the other $2,000. There are, of course, some variations on these plans, but this is basically how they work. One of the issues with traditional fee-for-service plans is that they typically do not cover preventive care, such as an annual physical exam. They do, however, cover most but not all of the costs to treat medical conditions covered by the policy.
One of the biggest advantages of traditional plans is that they allow employees to go to any doctor or provider they want without a referral to see specialists. Also, if the employee has traditional health insurance, they can live anywhere. With some managed care health insurance (we will talk about this next), employees are limited to living within a certain range of the network controlled by the insurance company. However, the big problem with such insurance is the high overall cost of medical care today. If a patient went to the hospital for a serious medical problem, such as cancer, it would be very easy to incur bills in excess of $1 million. In such a case, the individual would be responsible for $200,000 of the total charges, unless they had separate gap coverage or other major medical insurance. So traditional plans have somewhat fallen out of favor. Traditional plans do give the employee a lot of choice, but there are some serious issues with potential out-of-pocket costs.
HEALTH MAINTENANCE ORGANIZATIONS (HMO). HMOs are managed care programs. An HMO is a health care plan that provides both health maintenance services and medical care as part of the plan. This is health care that provides the patient with routine preventive care, but in the case of nonpreventive care, it requires that a review of specific circumstances concerning the individual and their health condition be completed before any significant medical testing, medical procedures, or hospital care is approved. Managed care plans generally require that the employee and their family use doctors and facilities that are in the managed care network. In some cases, the managed care plan will allow the insured person to go outside the network, but if this is done, the cost of care is usually significantly higher. This allows the managed care company to attempt to ensure that unnecessary tests and procedures are not done, thereby saving both the insured and the insurance company money.
In the HMO form of managed care, the insured person will generally be required to use doctors and facilities in the network. The employee (and their family, if covered) will choose a primary care physician (PCP). The primary care physician (PCP) will be the first point of contact for all preventive care and in any routine medical situation, except emergencies. The PCP will see the patient and, if they feel the need for a specialist to be involved with the case, will refer the patient to that specialist. The specialists also usually have to be part of the network in order to accept referral patients from the HMO.
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In the HMO form of managed care, the patient pays a copayment each time they visit their PCP and will generally also pay a copayment if they see a specialist after a referral. Once the copayment is paid, all other billable costs for the physician visit will generally be paid by the insurer. In addition, there will almost always be an annual deductible, an amount that the patient will be required to cover for any care beyond physician office visits (such as an outpatient procedure to have a child’s tonsils removed) before the remainder of such costs will be paid by the insurer.
In an HMO plan, the PCP physicians are generally paid a flat fee per patient to take care of that patient for the year. This fee is provided to the physician to be the gatekeeper for any other medical services that the employee or their family may need during that year. The PCP will get the same amount of money no matter how many times a patient visits them during the year. Why is this significant? If the physician happens to be selected as the PCP by patients who don’t use medical services at the average rate of the overall population, the HMO knows this (because they do a utilization analysis) and will cut payments to the physician next year because the PCP isn’t using up as much time as the average physician.
The company should always do a similar utilization analysis on its employees. If the HMO can cut payments to the physicians that serve our company, we should share in the cost reduction. If the company fails to complete the utilization analysis itself, the HMO will be happy to keep all of the savings, but if the company is doing a utilization analysis, it can demand some share of the cash saved. This is another place where good HRM can save the company money.
HMOs have some very good characteristics and some bad ones. Preventive care is covered, and there are maximum out-of-pocket costs to the employee in any given year (at least for covered illnesses and injuries). However, the employee may be required to live in certain areas (because of the network of physicians and medical facilities) so that they can be safely covered without having to go long distances in an emergency. There may also be limits to the number and types of procedures that will be covered by the HMO; the employee does not have free choice in doctors, clinics, and hospitals for their care; and various copayments and deductibles are the employee’s responsibility before the HMO covers the rest of the costs.
PREFERRED PROVIDER ORGANIZATIONS (PPO). Preferred provider organizations (PPOs) are a kind of hybrid between traditional fee-for-service plans and HMOs. They have some of the advantages and disadvantages as well as some of the requirements of both. PPOs have networks of physicians and medical facilities, just like HMOs. PPOs act like HMOs in that they prefer (but do not require) that you have a PCP within their medical network and that you go to that PCP before going elsewhere for medical care. They also provide preventive care services to their insured members, similar to HMOs, and have similar copayments and annual deductibles.
However, PPOs do not require that you have a referral from the PCP to see a specialist. In this way, they are more similar to a traditional health care plan. They will also allow you to see any provider of care either in or outside the network, although you may be required to pay a larger percentage of the cost of care if you choose to go beyond the network of physicians and facilities.
So if we compare PPOs with HMOs, we see that the advantages of PPOs include the ability to see any physician and use any medical facilities (as with a traditional plan), which in turn relieves the individual insured by the PPO of the necessity to live within certain geographical boundaries. The member can live anywhere they want because they can use any medical facilities they choose. In addition, similar to HMOs, PPOs cover preventive care. However, unlike with HMOs, the cost of care can be significantly higher if the individual chooses to go outside the preferred providers that are identified as PPO participants. So PPOs prefer that we use physicians and facilities within their network, but we have a choice to go outside the network and pay at a higher rate if desired.
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HEALTH OR MEDICAL SAVINGS ACCOUNTS (HSA/MSA) AND HEALTH REIMBURSEMENT ACCOUNTS (HRA). HSAs and MSAs are two very similar savings accounts for health care services. MSAs are medical savings accounts available to self-employed persons and small businesses with fewer than 50 employees. HSAs are available to employees of larger businesses who choose to provide these accounts. An HSA or MSA allows the employer and employee to fund a medical savings account from which the employee can pay medical expenses each year with pretax dollars. The money in this account is then used to pay for medical services for the employee (and their family, if desired) over the course of that year. One of the big advantages of HSAs and MSAs is that money remaining in the account at the end of the year can be rolled over to future years without paying a tax penalty as a general rule.64
For example, assume that our employer provides an HSA and shares equally in funding our account at the maximum amount allowed for an individual for the year 2017—$3,350. The employer puts in $1,675, and we put in $1,675 (deducted from our pay over the entire year). In February of that year, we go to our physician for our annual physical. The cost of the physical including tests is $465. Our HSA provided us with a debit card for medical expenses at the beginning of the year, so we provide the debit card to our physician, and they bill $465 to our card.
The remaining balance on our card will be $2,885. Our physician reports that it appears that we have a small cancerous growth on our skin that needs to be removed in an outpatient surgery. We go to the outpatient surgery center, where they remove the cancer and charge us $1,842, which we pay with our debit card, leaving a balance of $1,043. The only other medical service that we have that year is a physician’s office visit and antibiotics for a sinus infection. We are billed for the full cost of the office visit at $80 and for the full cost of the antibiotics at $34. This would leave a balance of $929 in our HSA. At the end of the year, this $929 will roll over to next year’s HSA account and be added to the new contribution of $3,350.
As you can see, in an HSA you pay the full cost of each of the medical services used in a plan year from the HSA account. There are no copayments; there are no deductibles. However, if you don’t use the full value of the services, the remaining dollar amounts can be rolled over to future years, so you don’t lose that money.
HSAs are also portable, so we can take our HSA balance with us if we change employers. One of the benefits to companies using an HSA or MSA is that it causes the employee to understand the full cost of providing health care for the year. If the full cost of health care is coming out of the employee’s pocket through the use of the HSA debit card, it is thought that they might pay more attention to unnecessary medical expenses, including such things as going to the doctor’s office when they have a cold or if they sprain a finger. The assumption is that if the employees pay more attention to the overall cost of health care, we can lower that cost.
One of the biggest differences between HRAs and HSAs is the portability of the account.65 HRAs do not go with an employee who leaves the company. Another difference is that the HRA is not funded with real dollars until the employee provides a claim against the HRA. So HRAs provide more control to the employer than does an HSA. The employer can choose what deductibles to require and can manage the account in other ways such as through managing the pharmacy benefits and maximum out-of-pocket costs. The HRA also does not carry over from year to year unless the employer decides that they want it to, and it is not treated as a retirement account. Finally, there is no requirement that an HRA is tied to an high-deductible health plan,66 which we will discuss next.
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WORK
APPLICATION 13-8
Select a company that offers health insurance and identify the type of insurance it offers.
High-deductible health plan (HDHP). One of the problems that we can quickly see within HSA is that our medical services in a particular year could cost us much more than $3,350, especially if we had to have a surgery. However, federal rules on HSAs and MSAs require that employees who have these accounts also participate in something called an HDHP. A high-deductible health plan (HDHP) is a “major medical” insurance plan that protects against catastrophic health care costs and in most cases is paid for by the employer. A very common HDHP would pay for medical costs in any given year that total more than $10,000. So if an individual exceeded the $3,350 in their HSA, they would be responsible for out-of-pocket costs of a maximum of $6,650, at which time the HDHP would take over and pay the remaining costs of the individual’s health care for the year.
At first glance, this looks like a large out-of-pocket expense for the individual employee. However, in other forms of health care, the employee generally has copayments, deductibles, and prescription copayments that come out of their own pocket during the course of the year. Annual deductibles can frequently be as high as $2,000 to $4,000, while each PCP visit can cost between $20 and $40, each specialist’s office visit costs $40 to $50, and prescription copayments typically cost from $25 to $40 or more. So if an individual had large-scale medical costs in any given year, they would most likely have at least as much in out-of-pocket costs as they would under the HSA plan.
One of the big advantages of HSAs and MSAs is that the individual can go to any physician or medical facility. There is no HMO network and no preferred providers. If the employee wants to go to the top specialist in their field and is willing to pay the extra cost of the office visit for such a specialist, they have the ability to go. In this way, HSAs and MSAs are much more like traditional fee-for-service plans than HMOs and PPOs. However, they are much more like HMOs and PPOs in the fact that there are maximum out-of-pocket costs per year before the HDHP takes over and pays all other medical expenses.
Because HSAs and MSAs cause the individual employee to see the total cost of their health care and might cause these employees to use such care at a lower level because it is a direct cost to the employee, about 50% of employers now offer these accounts to employees in an attempt to control ever-rising health care costs.67 The HSA can cause people to realize that medical care costs a lot more than their copayments. If the employee only pays $20 to go to the doctor, they will go whenever they feel the slightest problem coming on, but if they have to pay the entire $125 for the cost of the office visit, they may think much harder before they spend that money to go to the doctor to remove a splinter. Because of the fact that it makes employees aware of the entire cost of health care, it is expected that HSAs and MSA accounts will continue to become a more significant proportion of the health care plans provided by employers over at least the next several years.
UTILIZATION ANALYSIS. We briefly mentioned utilization analyses earlier. Let’s take another look at them now. A utilization analysis is a review of the cost of a program and comparison of program costs with the rate of the program’s usage by the members of the company. In other words, is the company getting a valuable benefit out of the program, or could the same money be spent in a different way to get better returns on money spent?
If, for instance, our average employee is healthier than the national average employee, we might use fewer medical services over time than other companies of similar size in the same industry. But our premiums for health insurance will (at least initially) be based on the “average” employee in our industry. If we investigate and find that our employees do, in fact, use fewer medical services each year than the average, we can ask the insurer to lower our insurance rates to match our utilization rates. Health insurance is one of the easiest things for us to do a utilization analysis on because we are provided information on the services that our employees use by the insurance company. If we have a strong case, we need to go to the insurance company and request that they lower our rates to match our utilization of services.
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13-2 APPLYING THE CONCEPT
Group Health Insurance
Place the letter of each type of health insurance option offered on the line next to the statement describing it.
a. Traditional
b. HMO
c. PPO
d. HSA
e. MSA
____ 6. I don’t like the new insurance plan because I can only go to doctors and hospitals that are approved by the plan. I have to stop seeing my doctor and start with a new one that I’m assigned to.
____ 7. I have expensive health problems, and my insurance plan requires me to pay 20% of my health care costs, making it very expensive for me.
____ 8. I like my insurance plan because I’m healthy and pay the full cost, but I don’t use it all every year and it has accumulated in case I need it someday.
____ 9. I have the same insurance deal that you have (#8), but my company only has 25 employees.
____ 10. I do have copays and deductibles, but at least I can go to any doctor or hospital I want too at an extra cost.
Retirement Benefits
According the Bureau of Labor Statistics, employer-provided retirement plans are available to 77% of all full-time workers and 38% of part-time workers in private industry.68 They are not mandatory, but if we provide them, we have to comply with ERISA. Employees say that retirement benefits are very important for feelings of loyalty—retention.69 As with health insurance, companies provide retirement benefits to motivate employees. However, as discussed in Chapter 12, employees may view them as simply an entitlement.70 Retirement benefits are categorized into two types. Let’s discuss both followed by five options for defined contribution plans.
DEFINED BENEFIT VERSUS DEFINED CONTRIBUTION PLANS. A defined benefit plan provides the retiree with a specific amount and type of benefits that will be available when the individual retires. The retiree knows exactly what they are going to receive in benefits when they retire. For instance, a simple defined benefit plan might provide that employees who work in the company for 25 years will get 60% of the average of their two highest years of pay. In addition, they will receive 1% more for every additional year that they work. So if the same employee worked for 35 years, they would receive 70% of the average of their two highest years of pay. If such an employee made $64,238 in their highest-paid year and $63,724 in their second-highest-paid year, their two highest years’ average pay would equal $63,981. If this individual retired with 25 years of service, they would receive $38,388.60 per year in retirement. If they instead retired after 35 years of service, they would receive $44,786.70 per year in retirement. Because it is a defined benefit retirement plan, the employee knows exactly what their retirement will be.
Defined contribution plan. Unlike with a defined benefit plan, under a defined contribution plan, the employee does not know what their retirement benefit will be. Defined contribution plans identify only the amount of funds that will go into a retirement account, not what the employee will receive upon retirement. The employee only knows what their contribution to the retirement fund consists of. What will the employee who contributes to a defined contribution plan receive upon retirement? The answer to this question will depend on the success of the investment of their retirement funds over the years between the contribution of the funds and the employee’s ultimate retirement. If the retirement funds are invested successfully, growing significantly over time, the individual’s retirement account will be able to pay much higher benefits than if the funds are not invested successfully and don’t grow very much.
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Shift from defined benefit to defined contribution plans. Defined benefit plans used to be the most common type of retirement plan, but they have been overtaken by defined contribution plans—some would say for legitimate business reasons. Kroger Co. had to raise $1 billion in 2017 to add to its underfunded defined benefit retirement plan while moving some participants in the plan to other (defined contribution) plans moving into the future.71 Providing a defined contribution retirement plan to employees shifts the investment risk from the company to the individual employee. Under a defined benefit plan, the employer puts money into retirement accounts and expects that money to grow at a certain rate over time. But if the funds do not grow at the expected rate, the employer is left with a shortage in the retirement accounts and must add money to those accounts in order to be able to pay the promised benefit to retired workers. This also happened in the US auto industry as large numbers of retiring employees combined with lower sales and a period of no profits and layoffs, which left fewer employees to cover the cost of those retirees. So the cost of adding funds to the defined benefit plans for their retirees contributed to a cost advantage for foreign automakers, and (when the 2007–08 recession occurred) to the US government bailout of General Motors and Chrysler.
SHRM
K:B2
Types of Retirement Plans
In the case of a defined contribution plan, the risk of slow growth of the investment shifts to the employee. The company has no obligation to pay a specific amount to the employee, so if the fund doesn’t grow at the expected rate, the employer is not required to add money to that fund. However, the employee may not be able to draw as much in benefits as they had anticipated if the account hasn’t earned interest or grown at the rate that was expected over time.
There are a number of different defined contribution plans that meet federal and state guidelines for favorable tax treatment (these are called qualified plans) and therefore have added value to both employers and employees. Let’s take a look at some of the most common types of defined contribution plans now.
401(K) AND 403(B) PLANS. The most well-known retirement plan in US companies today is the 401(k). 401(k) accounts are available to nearly all employees of corporations as well as most self-employed persons. A 401(k) retirement plan is a savings investment account for individual employees of corporations. A 403(b) retirement plan is a very similar plan to the 401(k) with the exception that it is used for nonprofit entities.
Both the employee and the employer are allowed to contribute funds each year to the employee’s 401(k) or 403(b) account, with the employee allowed to contribute up to a maximum of $18,000 (for an employee under 50 years of age in 2017).72 Contributions to these accounts are made on a “pretax basis.” This means that when funds are put into the account, they do not count as taxable income for the individual. Once the individual retires and begins to remove funds from the account, they pay income taxes on the distributions at their current tax rate, which tends to be lower at retirement. The earliest point at which the contributor can withdraw money without incurring a penalty from a 401(k) or 403(b) account is at age 59½.
Matching contributions. Many employers that offer a 401(k) or 403(b) provide a matching contribution up to a set maximum. Matching dollar for dollar is a 100% return on your investment. For example, an employer might allow a 100% match of employee contributions up to a $2,000 maximum. So if the employee put $2,000 of their salary into the retirement account over the course of the year, this plus the employer’s matching funds would add $4,000 a year to the individual’s retirement account. Among the 250 largest companies, ConocoPhillips offers the largest potential match at 9%; companies at a 6% match include Citigroup, Bristol-Myers Squibb, and Verizon.73 Some companies in certain industries say they need to spend more to retain the best employees and motivate staff. Microsoft and Host Hotels are among a growing number of companies boosting contributions to 401(k) plans because some workers aren’t saving enough, a move many firms have long resisted because of the costs.74
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On a personal note, never refuse free money. “If your employer offers a 401(k) plan, embrace it. . . . Whatever the match is, put as much into the plan as you need to get it.”75 You would be amazed at how many people refuse the retirement match. Taking the full match as early as you can is one of the most important tips in this book.
Would you like to be a millionaire? If you start putting away $2,000 a year (with or without a match) in your early 20s, such as in a low-fee stock index fund,76 with competent professional help, you can be a millionaire by the time you retire at age 67. Besides, if you start your retirement account with your first job, you will never miss the money. So pay yourself first by putting away 10% to 15% of your gross income into retirement every payday,77 and even more if you are older, no matter how low your income is.78 It’s also a lot less stressful and can bring happiness knowing you have financial security.79
IRAs AND ROTH IRAs. An IRA is an Individual Retirement Account. Under US law, any person who pays taxes can have and contribute to an IRA, and the contributions are tax free (subject to a maximum annual income limit). In other words, they reduce your taxable income by the full amount of the contribution in the year in which they are contributed to the account. Both IRAs and Roth IRAs can supplement the amount that an individual is contributing to a company-sponsored 401(k) account, because we are allowed to contribute to both. An individual can contribute a maximum of 100% of their income up to $5,500 per year (in 2017) into a standard, or Roth, IRA.80
The Roth IRA is basically the same type of account as a regular IRA with the exception that the Roth IRA “front-loads,” or requires that we pay the taxes immediately for funds put into the retirement account. If we put $4,000 into a Roth IRA in 2017 and were in the 25% federal tax bracket, we would pay $1,000 in tax for 2017, but when we withdrew these funds upon retirement, they would be tax free. With the standard IRA, you pay no tax on the funds when you contribute them, but you pay taxes at your current tax rate when those funds are withdrawn.
What is the advantage to paying the taxes up front on a Roth IRA? If you expect to be in a much higher tax bracket later in life, it makes sense to pay the taxes at your lower (current) tax rate instead of paying a higher tax rate later. Assume that you are currently in the 15% tax bracket, but your income triples over the next 40 years and you expect that (based on current tax rates) you will be in a 38% tax bracket later. You can pay $750 on a $5,000 Roth IRA contribution today but might have to pay $1,900 on that same $5,000 contribution (plus any interest earned) when you withdraw it in 40 years. So if you expect your tax bracket to go up over time, a Roth IRA may be advantageous.
SIMPLIFIED EMPLOYEE PENSION (SEP) PLANS. The last common retirement plan that we will discuss here is the SEP. SEPs are primarily used for self-employed individuals and members of small companies. According to the US Department of Labor, “Under a SEP, an employer contributes directly to traditional individual retirement accounts (SEP-IRAs) for all employees (including the employer). A SEP . . . allows for a contribution of up to 25% of each employee’s pay” up to a maximum of $52,000 (in 2014) into the person’s IRA each year.81 Because the owner is not an employee with pay, the self-employed person can tax defer a set percentage of the company profits. A SEP can also be used by a person who has a job that has retirement benefits and who is also self-employed to defer taxes and save more for retirement.
What makes a SEP retirement plan valuable to small business is the lower paperwork burden compared to a 401(k) or 403(b) retirement account. The contributions follow the same basic tax rules as a 401(k): Contributions are not taxed when made, but the individual pays taxes on the money when it is withdrawn during retirement. For self-employed proprietorships without any employees getting SEP retirement benefits, the only records needed are the individual tax return 1040 with a Schedule C for self-employed income showing the SEP deduction from profits going into the SEP and the SEP account records verifying that the money was actually put into the SEP.
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13-3 APPLYING THE CONCEPT
Retirement Plans
Recommend the appropriate retirement plan based on the person’s situation.
a. 401(k)
b. 403(b)
c. IRA
d. Roth IRA
e. SEP
____ 11. I work for a church, but we do have a retirement account.
____ 12. My company doesn’t offer any retirement benefits for part-time employees, so how should I save for retirement?
____ 13. I work for a major corporation, and it offers the standard retirement plan with a 5% match.
____ 14. I already have a retirement plan at work and put in the maximum tax-deferred contribution. What other options do I have to save even more for my retirement?
____ 15. I started my own business and want to save for retirement. What retirement plan should I use?
Paid Time Off
WORK
APPLICATION 13-9
Select a company that offers retirement benefits and state the type of plan it offers. If it is a defined benefit, describe the plan. If it is a defined contribution, identify the option selected and, if the employer offers any matching contributions, what they are.
Paid time off (PTO) benefits include a group of options such as vacation time/annual leave, severance pay, personal time off, sick days, and holidays. Some companies provide an all-encompassing PTO plan, sometimes called a “PTO Bank,” that allows the employee to use their paid time off in any way they wish, whether for sick days or vacation, holidays, or any other purpose. Others apportion the available days for vacation, sick time, holidays, and others.82 These benefits contribute approximately 7% of the average employer’s total cost of wages and benefits, or a little over 10% of direct wages.83 Another way to look at this is that the average cost of paid time off is $1 for every $10 in direct wages. None of the listed PTO benefits is mandatory at the federal level in the United States at this point, yet most employers provide at least some holidays off and some vacation and/or sick time. In addition, you need to be aware that some states have already passed, or are currently attempting to pass, mandatory sick leave and even, in some cases, annual leave and other PTO laws. Paid time off is commonly viewed as an entitlement (Chapter 12). Let’s do a quick review of the most common types of PTO.
SHRM
K:B15
Time Off and Other Benefits
VACATION OR ANNUAL LEAVE. Although federal law does not currently require any paid vacation time, the majority of US firms provide paid vacations to their employees, according to the US Bureau of Labor Statistics. In fact, about 97% of employers provide paid vacation in some form—either as a stand-alone benefit or as part of a PTO plan—to their full-time workforce.84 The average time provided was about 8 days after 1 year of service in 2017, while workers with 10 years of service averaged 14 days.85 Why do companies provide this time off? The simple answer is that it refreshes the employee so that they can come back to work and be more productive. Many studies show that when we leave a stressful situation for a period of time, we lower our stress level, which in turn raises our ability to be productive.86 Good employers know this and, as a result, provide time off to allow their employees to relax.
SHRM
K:B21
Paid Leave Plans
SICK LEAVE. The next most popular PTO is sick leave. Approximately 92% of employers in the United States provide sick leave of some type to their employees, whether in an all-encompassing PTO plan or specifically designated as “sick days.”87 Paid sick leave can offer employees relief from loss of income associated with having to miss work due to an illness. However, there is significant evidence that sick leave is abused by employees, especially in the case of a “use it or lose it” sick leave policy. With the entitlement mentality, some employees take every sick day off even though they are not sick. This is one of the reasons why more companies have moved to the PTO Bank concept instead of designating a specific number of days as sick leave.
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Bryan Chan/Los Angeles Times via Getty Images
Former Amgen CEO Kevin Sharer at the Amgen campus. Amgen has been rated one of the top companies for paid time off, with more than five weeks of paid time off per year.
HOLIDAY PAY. Nearly all employers provide for at least some paid holidays with their workforce. In 2017, the US government identified 10 federal holidays, and many companies also observe some local, state, and religious holidays as well. Here again, companies can be subject to problems or even charges of discrimination if there is cultural or religious diversity in the firm. Because of these issues, some companies provide “floating” holidays so that the employee can pick which days they will observe as holidays during the work year. Between one third and one half of companies in the United States currently provide floating holidays. In addition, some firms allow employees to swap holidays to observe a holiday of their choice that would normally be unpaid, for instance swapping Christmas Day for Yom Kippur or the first day of Eid al-Fitr.
WORK
APPLICATION 13-10
Identify the paid time off benefits offered where you work or have worked.
PAID PERSONAL LEAVE. Finally, many companies today provide time off for a wide variety of personal needs. Many firms allow employees to use such leave to visit their child at school or accompany them on a field trip. Other options might include funeral leave, family leave that would not be covered under the FMLA, time off on their birthday, and “mental health” days among others. A growing number of companies have even gone as far as providing unlimited PTO, where workers decide how much time off they will take in any given year. Personal leave is an effort on the part of the organization to maintain or improve job satisfaction and organizational commitment on the part of their employees.
Other Employee Insurance Coverage
The next major category of voluntary benefits is insurance. There are a number of different types of insurance that are provided as common voluntary benefits to our employees. The largest of these is life insurance, but disability policies (both short- and long-term), supplemental unemployment policies, income continuation (also called supplemental health) policies, travel accident insurance, individual cancer and genetic disease policies, and other insurance options are also available and are part of some companies’ voluntary benefit programs. Let’s review some of the major employee insurance options.
SHRM
K:B12
Life Insurance
LIFE INSURANCE. Many firms will provide group term life (GTL) insurance policies to provide for survivors of an employee who dies while employed by the company. In 2017, about 80% of employers provided this service to their full-time employees.88 GTL provides for a survivor payment to occur only if the employee dies during the term that is covered by the insurance policy. It is also a valuable benefit to the employer because it is eligible for an employer tax deduction for up to $50,000 in coverage if it complies with IRS regulations.89 A fairly standard benefit here would be 1 to 2 times the individual’s annual compensation. So if an employee dies, on or off the job for most causes of death, the beneficiary would get 1 to 2 years’ salary. Many companies will allow the employee to add to this coverage at the group rates, which is generally a very good deal for the employee. Generally, once the employee leaves the company, the term insurance policy will be discontinued.
In addition to GTL, employers can provide permanent, or whole, life insurance. Unlike term life policies, this life insurance benefit has no termination or end date. It continues for the life of the individual as long as premiums continue to be paid. Whole life policies can also be used for retirement. However, they are not commonly offered.
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SHRM
K:B7
Disability Insurance
DISABILITY INSURANCE. The other large-scale insurance benefit in many companies is disability insurance. This insurance can be either short- or long-term in nature, and some companies offer both options.
Short-term disability is insurance against being unable to perform the essential functions expected of the employee at work for up to 6 months due to illness or injury—not necessarily a work-related illness or injury. This is valuable because most long-term disability policies do not provide replacement income until the employee completes a 180-day “elimination period” (a period during which they are unable to work). Short-term coverage closes this 6-month gap. Because 71% of Americans say that it would be difficult to pay their bills if their paycheck were delayed for more than a week, waiting 6 months would likely create a massive hardship for the disabled worker.90 Remember, too, that Social Security Disability doesn’t apply unless the employee is going to be disabled for at least 5 months, so short-term disability can bridge this gap in income.
Long-term disability policies cover employees who are unable to work for more than 6 months due to illness or injury—again, not necessarily a work-related illness or injury. Long-term disability is designed to replace a portion of the disabled employee’s income (typically 50%–60%) for extended periods of time, or even permanently.91 This is a supplemental benefit to Social Security Disability payments because, remember, Social Security payments are not designed to replace 100% of an employee’s preretirement (or predisability) income. Long-term benefits most often begin once the employee has exhausted their short-term disability benefits. Benefits from group long-term policies will generally continue until the employee reaches their eligible retirement age under Social Security or until they are able to return to work.92
OTHER COMMON INSURANCE BENEFITS. In addition to standard life and disability insurance, there are a number of other insurance benefits provided by at least some employers. These can be loosely grouped into two categories: life and health and other insurance. Among the life and health benefits, we might see (percentage of firms offering coverage is in parentheses) vision (87%) and dental (96%) insurance; long-term care (27%); cancer insurance (12%); critical illness insurance (31%); accident insurance (48%); and supplemental insurance policies such as AFLAC, which pay for routine expenses (like car payments) not generally covered by health or disability insurance.93
In the other insurance category, we may provide many types of additional insurance to employees. Some common examples are employer-sponsored automobile (6%) insurance, homeowners and renters insurance (7%), and pet insurance (9%).94
SHRM
K:B8
Educational Benefits
Employee Services
In addition to other voluntary benefits, companies may provide a wide variety of employee services as benefits for their workforce. Educational (or tuition) assistanceis one common benefit in this group. In 2017, roughly 55% of all companies provided some form of educational assistance to their employees.95 Unfortunately, with the rising cost of benefits, this benefit has been cut back at many firms.
WORK
APPLICATION 13-11
Select a company that offers voluntary benefits. Besides paid time off, retirement, and health and employee insurance, what other benefits does it offer?
Other common employee services include on-site child care or child care vouchers; elder care assistance; executive coaching; company-provided gyms and fitness facilities or vouchers for memberships outside the business; organization-sponsored sports teams; services to mitigate commuting costs including work shuttles, company-provided or paid parking, “green” vehicle allowances, or public or private transportation vouchers; cafeterias or meal vouchers; plus too many others to name.
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Exhibit 13-4
EMPLOYEE BENEFITS
Employee services are provided in order to minimize disruptions to the employee’s work life. If the employee isn’t worried about their children (because the company has a day care facility on site), they can concentrate on work. If they don’t have to deal with figuring out where they can park downtown, they are less stressed when they start their day. If they need 15 minutes’ rest, they can take a nap, and if they want to work out to relieve some stress, they can go to the company gym. Companies don’t provide these services because they like to throw money away. They provide employee services to lower stress and allow employees to concentrate on the job. Any service that takes the employee away from being able to focus on work is a legitimate target for an employee service benefit, and more and more companies are paying attention to such services.
Before we go on to discuss how to administer and communicate benefits, let’s review the list of benefits discussed so far in Exhibit 13-4. Note that there are an unlimited number of voluntary benefits, but only the major ones discussed are listed here.
ADMINISTRATION AND COMMUNICATION OF BENEFITS
LO 13-5
Discuss the organization’s options when providing flexible benefit plans and why benefit plans need to be communicated to employees.
Because of their significant cost to the company, HR managers must pay close attention to the administration of benefit programs in order to get the most return for the money spent. In almost all cases today, benefit programs are not “one size fits all”—they are flexible because that is what employees want.96 And because they are flexible for the employees, they take more management time. Let’s briefly discuss the management of flexible benefits programs now, followed by how to communicate value to employees.
Flexible Benefit (Cafeteria) Plans
Flexibility focus should be on work performed, not set hours worked.97 In a survey, 87% of respondents said that flexibility in the offered benefits package would be extremely or very important in deciding whether to take a new job or not.98 Because the mix of workers is so broad, we need to allow at least some flexibility in our benefits system so that it can be partially tailored to the needs of the worker. We need to be careful, though. If an unlimited amount of flexibility is allowed in the benefits program, some bad consequences can occur. We will discuss this issue shortly when we cover full-choice plans.
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13-1 SELF ASSESSMENT
Selecting Employee Benefits
Assume you are graduating with your college degree and getting your first or a new full-time job. The organization gives you the list below and asks you to rank order the list of employee benefits from 1 (the most important to you) to 11 (the least important to you).
________ Paid time off (vacations, sick and personal days, holidays)
________ Health insurance (traditional, HMO, PPO, HSA/MSA)
________ Retirement benefits (401[k] or 403[b], IRA or Roth IRA, SEP)
________ Educational (or tuition) assistance (getting your MBA or other degree or some type of certification or license like the PHR and SPHR, CPA, or FICF)
________ Child care (on-site or vouchers)
________ Elder care (on-site or vouchers)
________ Fitness (organization-provided fitness facilities or vouchers for memberships)
________ Organization-sponsored sports teams (softball, basketball, bowling, golf, etc.)
________ Commuting (work shuttles, company-provided or paid parking, “green” vehicle allowances, public or private transportation vouchers)
________ Meals (free or low-cost meals on site or meal vouchers)
There is no scoring as this is a personal choice. Think about your selection today. Will your priority ranking change in 5, 10, 15, or 20 years?
What is a flexible benefits plan, commonly known as a cafeteria plan? Cafeteria plans are called that because they are similar to a cafeteria restaurant or college dining hall. You get to pick what you want—at least as far as what is available. You may decide that you want more paid time off and less insurance or that you want medical coverage for you and your family, or you may choose to put more money into retirement accounts. Flexible practices by Ryan LLC resulted in a decrease in voluntary turnover from 18.53% to 10.33%.99 Most cafeteria plans fall into one of three categories—each with its own advantages and disadvantages.
MODULAR PLANS. Modular plans are pretty much what they sound like. The employee has several basic modules from which they can choose to provide a set of benefits that match their life and family circumstances. Each module has a different mix of insurance, employee services, and retirement options. The employee chooses a module that most closely meets their needs. There may be a module for young single employees that maximizes work flexibility with more time off for personal activities but has minimal or no benefits in areas such as family health plans, child care, or dental. Another module designed for families with children might have much more emphasis on family health, retirement planning, and more life insurance in case the employee were to die and leave the family without income. And still a third module might be designed for workers whose children are grown.
Modular plans are much easier for HR to manage than other types of flexible benefit plans, because there are a limited number of modules to keep track of. Because they are easier to manage, they are cheaper. We also have the advantage of having more people using the same set of benefits, so utilization analyses are a bit easier in this case. However, since there is no flexibility within each module (you get the exact set of benefits specified within the module), the employee may not be able to get the coverage and options that they want or need.
CORE-PLUS PLANS. In a core-plus plan, we have a base set of benefits, called the core, that are provided to everyone, and then employees are allowed to choose other options to meet personal needs and desires. The core benefits are there to provide basic protection for all of the company’s employees in areas such as health and life insurance and maybe a minimum amount of retirement funding. The remaining benefits are available for the employee to pick and choose other options that match their personal needs.
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If the employee has a family and wants to provide them with coverage, they can choose family health coverage. If they are getting older and didn’t save for retirement earlier in their work life, they can put more funds into their retirement account. The limiting factor is that each employee is provided with a benefits account, and once that account is empty, they can’t pick any additional benefits for their personal plan.
The biggest advantage of core-plus plans to the employee is, of course, the ability to partially tailor the plan to their individual circumstances while providing a minimum level of health and wellness benefits. The plan is also cheaper than a full-choice plan to administer. HRM personnel can still analyze the benefit options and complete utilization analyses on core-plus plans, but it is more difficult than in modular plans.
FULL-CHOICE PLANS. The full-choice plans provide complete flexibility to the organizational member. Each employee can choose exactly the set of benefits that they desire, within specified monetary limitations. If a member chooses to have no health care coverage, they can use the money saved for whatever other available benefit that they want. This is truly a cafeteria plan in that employees can choose any offered benefit they want without a modular or core set of benefits.
Probably the biggest advantage in a full-choice plan is that it is easy for the employee to understand. However, there are some significant problems with full-choice plans for both the individual and the organization. One of the problems, “moral hazard,” may occur because the employee doesn’t fully identify the consequences of their selection. Moral hazard problems can occur when the individual makes bad choices and will be forced to live with those choices in the future. For instance, we may have an employee that decides that they don’t need a retirement account because they are going to “work until I die anyway.” A few years down the line, this same person may be getting tired of working or may even be unable to continue to work in the same field because of illness or injuries and want to retire but will be unable to because of the choices made in previous years.
A second disadvantage to full-choice plans comes from the problem of “adverse selection.” For example, most company plans allow changes to the employee’s benefits during an open enrollment period at the end of the year. Suppose an employee knows that they have a physical problem that will likely result in the need for surgery in the coming year, and they therefore choose to increase their health care insurance to pay for more of the cost of the upcoming surgery. The next year, with the surgery over and knowing that they have children who are going to need braces, they choose to increase their dental coverage and lower their health care insurance coverage. Through this manipulation of the benefits system, the overall cost to the organization for providing these benefits can go up significantly over time. So this problem of adverse selection is an issue of selecting only the benefits that we think will immediately benefit us and then dropping those benefits once we feel that we don’t need them. This can cause the utilization rates for the organization to significantly increase over time, which in turn causes an increase in the cost to the organization of providing those benefits.
The third big issue with full-choice plans is the cost associated with administration of the plans. It is not too difficult to manage the paperwork of a modular plan—HRM just figures out the number of employees choosing each module and then calculates the total usage for each benefit based on the modules. In full-choice plans, every employee can change their plan (in its entirety) every year. This is much more difficult to manage and creates a much larger paperwork burden for HRM.
WORK
APPLICATION 13-12
Select a company that offers a flexible benefit plan. Identify its type and describe the major benefit options within that category of flexibility.
The bottom line is that flexible plans are really gaining ground because our workforce is much more diverse than it used to be. Benefits need to match the needs of our workers, but we have to remember that the more flexible the plan, the more expensive it is.
Communicate Value to Employees
In addition to administration of benefit programs, HR is spending significantly more time than in past years to educate their employees and communicate the value of company benefits to all workers.100Many of us may work for a company that provides a summary of benefits and the value of each of them on some routine basis, usually at the end of the year. The basic reason for doing so is that most of us don’t understand the true cost and value of the benefits that our organizations provide. And if we don’t understand the cost and the return of our benefits programs, we don’t perceive the value that we get from having the organization provide us with these benefits.
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13-4 APPLYING THE CONCEPT
Flexible Benefit Plans
Place the letter of the type of flexible plan on the line next to statement that describes it.
a. modular
b. core-plus
c. full-choice
____ 16. I don’t think our benefit plan is fair because I use my spouse’s health insurance plan and I just lose the benefit. To be fair, I should be able to use the money for other benefits I want.
____ 17. I sure wish we got more of our compensation in benefits, but at least with my benefit package, I can choose any benefit I want to every year.
____ 18. My benefit plan has five packages, and I get to pick any one of them that I want every year. But it’s difficult to select one.
____ 19. I definitely want to get health care and retirement benefits, and it’s nice to have the option of selecting a few other benefits with a set dollar value.
____ 20. The hard part about my benefit plan is that there are so many options to choose from that I have a hard time selecting the ones I may really need.
All we really need in order to communicate the value of benefit programs is a basic, ongoing communication process. We provide information through multiple communication channels and should provide it more often than just once per year during open enrollment. There are a number of methods that have achieved acceptability in HR departments around the world and can reach at least part of our workforce.
WORK
APPLICATION 13-13
Does any company you know of offer domestic partner benefits? Do you believe these benefits should or should not be offered by a specific organization you work or have worked for? Why or why not?
We may want to use more than one method because of the multigenerational nature of today’s workforce. For older baby boomers, standard mailings to the employees’ homes may be a good method, but for generation X and Y employees, searchable knowledge bases and email reminders may work better, while finally with net-gen employees, social media may take the lead. We have to consider the makeup of our workforce and use methods that will be appropriate in reaching each of the groups within it. Finally, if we aren’t sure of the best way to communicate with our employees, we should ask them. On a global basis, the channels of communication may be very different. For example, in underdeveloped countries, many employees will not have a home computer to receive the communications in an email or through a social network. Value communication is one of the most important jobs within HR in the 21st-century workplace. We have to try to help all employees understand their benefit packages, which in turn makes the package more valuable to the individual employee. If they understand the total value of their benefits, we end up with a more loyal and more satisfied workforce. The effort is absolutely worth it.
TRENDS AND ISSUES IN HRM
LO 13-6
Discuss the issue of domestic partner benefits and review the issues in personalization of health care.
The first trend that we will discuss is the question of providing benefits for “domestic partners” who are not spouses of our employees.
Licensed Video
Health Benefits
HRM in Action
Employee Benefits
Benefits for “Domestic Partners”
One of the more significant recent issues in benefits management has been the question of providing benefits for domestic partners. Sometimes called “significant others,” domestic partners are individuals who are not legally married but who are in a one-to-one living arrangement similar to marriage, whether that arrangement is same-sex or opposite-sex. About 25% of companies offered some benefits to domestic partners in 2017,101 but should we treat such domestic partners the same as spouses for the purpose of providing company benefits?
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SHRM
K:B20
Domestic Partner Benefits
Our purpose here is not to discuss the validity of domestic partner arrangements and whether or not they are morally right or wrong. That is up to the individuals, the organization, and the state and country in which they operate. Our analysis has to look at the costs as well as any organizational advantage that might be gained by providing domestic partner coverage. Organizations may choose to provide domestic partner benefits in order to support a more diverse workforce, to recruit the best talent possible, or just to provide equity to all of their employees.
Benefits that are affected by the employee’s marital status include Social Security survivor benefits, workers’ compensation survivor payments, access to FMLA, and coverage under COBRA and ERISA. Each of these laws has at least some language that provides for benefits only to legal spouses of employees, not to domestic partners. In some cases, federal law requires the employer to tax any benefits provided to an employee’s unmarried domestic partner, because the tax code says that to receive favorable tax treatment for benefits, such as a health savings account, the coverage has to go to the employee and their immediate family members, not to domestic partners. Employers have to be aware of the language of the laws so that they don’t unintentionally violate such laws. One significant recent change has been the recognition of same-sex marriage at the federal level in the United States, which is different in the eyes of the law from domestic partnerships. The Treasury Department and the IRS have ruled that legally married same-sex couples must be treated the same as other married couples for federal tax purposes.
In addition, companies have to be aware that providing domestic partner benefits may cost them significant amounts of money. Allowing domestic partners to be covered under company insurance and other benefit policies will almost always add to the cost of the benefits program. We must weigh the value of the loyalty and satisfaction gained by such actions against the direct monetary cost of this type of coverage. Companies are taking a hard look at the cost of domestic partner benefits and, in some cases at least, deciding that the cost is too high to cover the added value to their employee base.
Personalization of Health Care
In 2014, Jeff Bauer, a “health futurist,” said, “The health care system in the United States will change more in the next five to seven years than it has in the last 50.”102 And by all accounts, the personalization of health care continues at a rapid pace. Individuals continue to gain more control over their own health and their health care planning. From apps to health services shopping and finally to managing ongoing health care costs, individuals will continue to gain power as they become closer to the health care provider by using technology.
Smartphone apps continue to evolve as a mechanism for managing personal health care. We now have apps for checking symptoms (WebMD and MayoClinic); apps for checking and tracking heart rate, blood pressure, and other vital information (Cardiio and HealthKit); apps to interface directly with medical service providers without going into a doctor’s office (eDocAmerica); and many others that help us manage our health—and the number and types of these tools continues to grow at a rapid rate.103
Shopping for the best plans for you as an individual will also continue to get easier as the state, federal, and even some private insurance exchanges become more readily available online. The ACA requires that the prices for insurance on these exchanges be public information, so it is pretty easy to compare coverage, which is a significant change from in the past when it was very difficult to compare policies.
Managing cost will also become easier as more of us move to HSA/MSA/HRA and HDHPs, where we directly control medical expenditures. The monies in an HSA/MSA/HRA are controlled by the insured individual104—again a change from what has been the case in HMO/PPO organizations. The insured person decides when, where, and how to spend their HSA/MSA/HRA funds, which gives them direct control over their health care dollars.
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This trend toward individualization of health care will only continue to expand in the future. There doesn’t appear to be any evidence that we are going to go back to the days when your health care decisions were made completely by other people. So company employees will need to become more knowledgeable about their health care options, which means HR will have to educate them.
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DIGITAL RESOURCES
Employee Benefit*
Understanding the FMLA
Federal Opportunity Knocks
Employee Relations*
Offering Employee Benefit Packages
Municipal Employee Benefit
Health Benefits*
Unemployment Insurance
* premium video only available in the interactive eBook
CHAPTER SUMMARY
13-1. Discuss the strategic value of benefits programs, why these programs continue to grow, and considerations that need to be taken into account in providing benefits.
Human resources are one of the few potential sources for competitive advantage in a modern organization. The totality of their compensation—including their benefits packages—is one major factor in keeping employees happy and engaged and willing to create a competitive advantage for our company. Today’s workers demand more benefits and a better mix to fit their lifestyles. Because people demand it, companies add new benefits. This allows companies to increase job satisfaction and engagement, because when we take care of our employees, they work harder and take better care of our customers and organization, which in turn allows us to create a competitive advantage based on our people.
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There are four major reasons for benefits growth. First, there are tax advantages to providing employee benefits to both employers and employees. Second, federal laws are requiring companies to provide more benefits than ever before. Third, organized labor has historically bargained for benefits for their workers, and benefits earned in these negotiations carry over to nonunion companies. Finally, buying in bulk can save significant amounts of money, so if companies buy many insurance plans, each plan costs less than if the individual bought the same insurance.
The three major considerations in providing benefits are amounts, mix, and flexibility. Amount is a function of how much the company is willing to spend on its employees. Many companies will calculate this as a percentage of direct compensation. Mix deals with the types of benefits that will be offered to employees. In many cases today, the number and type of benefits available are limited only by the imagination of the employees of the firm. Finally, we need to consider how much flexibility we are willing to build into our benefits program, because flexible options are very important to today’s employees. Can different employees choose different benefits from the mix available, or will they all have to get the same benefits?
13-2. Identify and summarize the major components of OASDI and the Medicare program.
Social Security—composed of Old-Age, Survivors, and Disability Insurance (OASDI) programs. The largest federal spending program, using nearly half of the federal budget in a given year. The Old-Age component provide retirement payments to those who reach retirement age under the OASDI rules. If a worker becomes disabled or dies before reaching retirement age and was otherwise eligible for Social Security retirement, they or their survivors will receive benefits similar to the retirement benefit that they would have received in old age.
Medicare is the national health care program for the elderly or disabled. Individuals become eligible for Medicare at the same time as their eligibility for Social Security or disability retirement. Medicare covers at least part of the cost of hospitalization and non–hospital-related care and provides prescription coverage options.
13-3. Identify the statutory requirements other than OASDI, including those required
if
organizations choose to provide health care or retirement plans for their employees.
Workers’ compensation is a program to provide medical treatment and temporary payments to employees who are injured on the job or become ill because of their job.
Unemployment Insurance is a federal program managed by each state to provide payments for a fixed period of time to workers who lose their jobs.
FMLA is leave that must be provided by the employer to eligible employees when they or their immediate family members are faced with various medical issues. The leave is unpaid, but the employer must maintain health coverage for the employee while they are on leave.
ACA requires that all employers with more than 50 employees provide health insurance for their full-time employees or face significant penalties levied by the federal government.
COBRA is a law that requires employers to offer continuation of health insurance on individuals who leave their employment for up to 18 to 36 months if the employee is willing to pay the premium cost of the insurance policy.
HIPAA requires that, if the employee had health insurance at their old job and the new company provides health insurance as a benefit, it must be offered to the employee. In other words, the individual’s health insurance is “portable.” HIPAA also requires that companies take care to protect the health information of employees from unauthorized individuals.
ERISA lays out requirements that must be followed if the employer provides a retirement or health and welfare plan of basically any type. ERISA determines who is eligible to participate and when they are eligible, it provides rules for “vesting” of the employee’s retirement funds, it requires portability of those funds, and it requires that the funds are managed “prudently” by the fiduciary that maintains them.
13-4. Briefly describe the main categories of voluntary benefits available to organizations.
Major voluntary benefits include paid time off, group health insurance, retirement plans, other insurance coverage, and employee services. Paid time off comes in various forms, such as sick leave, vacation time, holidays, and personal days. Group health insurance provides employees with health care coverage, and retirement plans allow them to save for their own retirement, sometimes with some help from the organization. Other insurance includes a wide variety of options including group term life insurance, short- and long-term disability policies, dental and vision insurance, group automobile and homeowners insurance, and many more. Finally, employee services can include a massive range of options from educational assistance to child or adult day care, gyms, cafeterias, transportation and parking assistance, and too many others to list.
13-5. Discuss the organization’s options when providing flexible benefit plans and why benefit plans need to be communicated to employees.
Companies can choose modular plans, core-plus plans, or full-choice plans. Modular plans provide several basic modules from which each employee chooses. There is no other option outside one of the modules. Core-plus plans provide a base set of benefits to all employees (the core) and then other options that the employee can choose from freely to meet their personal desires and needs. Full-choice plans allow the employee complete freedom of choice, but they come with some potential problems such as “moral hazard,” “adverse selection,” and high management costs.
Most employees don’t understand the true cost and value of the benefits that organizations provide and, as a result, don’t perceive the value that they get from having the organization provide their benefits. There are many indications that employees who are satisfied with their benefits are more satisfied with their jobs and their companies. Providing employees with knowledge concerning their benefit package will help to create and maintain trust in the organization as well as improve job satisfaction on the part of those employees.
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13-6. Discuss the issue of domestic partner benefits and review the issues in personalization of health care.
Domestic partners are individuals who are not legally married but who are in a one-to-one living arrangement similar to marriage. A number of federal laws have at least some language that provides for benefits only to legal spouses of employees, not to domestic partners. In some cases, federal law requires the employer to tax any benefits provided to an employee’s unmarried domestic partner. Employers have to be aware of the language of the laws so that they don’t unintentionally violate such laws. Finally, companies have to be aware that providing domestic partner benefits may cost them significant amounts of money. Allowing domestic partners to be covered under company insurance and other benefit policies will almost always add to the cost of the benefits program.
Individuals continue to gain more control over their own health and their health care planning. From apps to health services shopping and finally to managing ongoing health care costs, individuals will continue to gain power as they become closer to the health care provider by using technology. In this environment, company employees will need to become more knowledgeable about their health care options, which means HR will have to educate them.
KEY TERMS
COBRA 479
defined benefit plan 487
defined contribution plan 487
domestic partners 496
experience rating 472
high-deductible health plan (HDHP) 486
HMO 483
HSA or MSA 485
PBGC 482
preferred provider organizations (PPOs) 484
primary care physician (PCP) 483
serious health condition 475
traditional health care plans 483
Unemployment Insurance (UI) 473
utilization analysis 486
vesting 481
workers’ compensation 471
KEY TERMS REVIEW
Complete each of the following statements using one of this chapter’s key terms:
1. __________ is an insurance program designed to provide medical treatment and temporary payments to employees who cannot work because of an employment related injury or illness.
2. __________ is a measure of how often claims are made against an insurance policy.
3. __________ provides workers who lose their jobs with continuing subsistence payments from their state for a specified period of time.
4. __________ is an illness, injury, impairment, or physical or mental condition that involves either inpatient care or continuing care for at least 3 consecutive days.
5. __________ is a law that requires employers to offer to maintain health insurance on individuals who leave their employment (for a period of time).
6. __________ provides for a maximum amount of time beyond which the employee will have unfettered access to their retirement funds, both employee contributions and employer contributions.
7. __________ is a governmental corporation established within the Department of Labor whose purpose is to insure retirement funds from failure.
8. __________ typically cover a set percentage of fees for medical services—for either doctors or in-patient care.
9. __________ is a health care plan that provides both health maintenance services and medical care as part of the plan.
10. __________ will be the first point of contact for all preventive care and in any routine medical situation, except emergencies.
11. __________ are a kind of hybrid between traditional fee-for-service plans and HMOs.
12. __________ allows the employer and employee to fund a medical savings account from which the employee can pay medical expenses each year with pretax dollars.
13. __________ is a “major medical” insurance plan that protects against catastrophic health care costs and in most cases is paid for by the employer.
14. __________ is a review of the cost of a program and comparison of program costs with the rate of the program’s usage by the members of the company.
15. __________ provide the retiree with a specific amount and type of benefits that will be available when the individual retires.
16. __________ identify only the amount of funds that will go into a retirement account, not what the employee will receive upon retirement.
17. __________ are individuals who are not legally married but who are in a one-to-one living arrangement similar to marriage.
COMMUNICATION SKILLS
The following critical-thinking questions can be used for class discussion and/or for written assignments to develop communication skills. Be sure to give complete explanations for all answers.
1. Would you rather have better benefits and a modest salary or a high salary and lower levels of benefits? Why?
2. Based on the high cost of the average benefits package, what would you do if you were the manager in charge of figuring out how to cut benefit costs in your company? Remember that you want to meet the company’s strategic goals.
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3. How would you “fix” Social Security to allow it to continue as a viable retirement program? Would you raise the retirement age? Would you lower the benefit level? Are there any other options to make the program solvent long term?
4. Should workers’ compensation insurance continue to be “no-fault”? Why or why not?
5. How would you lower your company’s experience rating in the areas of workers’ compensation and Unemployment Insurance if you were the HR manager?
6. What would you do to minimize the abuse of FMLA leave if you became the HR manager in a company in which abuse was rampant? Explain how your answer would help overcome the problem.
7. Based on what is in the chapter, should the ACA federal health care legislation remain in its current form, or should we rescind the requirement that employers and/or employees have to pay a fine if the employee is not covered by a health care plan? Explain your answer.
8. Is the vesting requirement in ERISA too long, too short, or just about right? Why did you answer the way that you did?
9. Should the United States mandate a certain amount of paid time off per year as many other countries currently do? Why or why not?
10. If you were the head of HR, would you argue for a company-sponsored retirement plan for your employees? What are the pros and cons to such an argument?
11. What employee services can you think of that were not mentioned in the text but would likely be highly valued by the employees where you work (or have worked)?
12. Do you think that in today’s workforce, it is becoming necessary to have a “full-choice” flexible benefits plan? Why or why not?
CASE 13-1 IT IS NOT JUST ABOUT THE BLING ANYMORE: BENEFITS AND PERKS—THE COMPETITIVE EDGE IN EMPLOYEE RECRUITMENT
Landing a dream job is not always just about big bucks, a great location, amazing coworkers, or even the work itself—what sells jobs in the 21st century are amazing benefits and outstanding perquisites.(1) How do we know this is true? Glassdoor, a firm that provides employee-based review of which are the best and worst firms to work for, found that outstanding firms like Google could recruit the best and the brightest because they offer ridiculously marvelous benefits. Eighty percent of the workforce said they would rather have more benefits over a pay raise, while nearly three in five (57%) employees indicated that rewards and benefits topped their list of what determined their acceptance or rejection of a job offer.(2)
What is driving the move away from straight pay to benefits and perquisites (B & P)? Millennials have hit the workforce, bringing with them huge college debt and a different attitude toward work/life balance. The Society for Human Resource Management has noted that approximately 3% of businesses are using student loan repayments as a recruitment device, while the majority of businesses have upped the ante on offering extended paid maternity and paternity leave including offering training assistance when these employees return to work.(3)
And there is more to come. Leading firms have kept the pressure on their competition and industry in general by offering unique B & Ps to interest top candidates. Here are some examples:
(a) Like to travel? Well, Airbnb will give you $2,000 per annum to go wherever you please.
(b) Want extra time home with your newborn or adopted child? Netflix says stay at home as long as you like for the first year, no questions asked.
(c) Even better, need to ship breast milk home to your infant? Zillow says no problem, we will pick up the tab.
(d) Don’t know where your life is heading? Work for Asana, where you get free life and executive coaching services.(4)
CareerBliss, a service similar to Glassdoor, found that happy companies are B & P–heavy companies. An employee from Adobe wrote in the CareerBliss website, “The company has great perks for their employees that include company parties, outdoor activities, indoor pool and ping-pong tables, and a computer gaming room. They also have a great cafeteria that provides excellent food.”(5)
Some think B & P’s have gone overboard. Rewards run galore for most firms and include tuition and adoption assistance, health insurance and 401(k) retirement plans—more than 50 in general as reported by Glassdoor Benefits Review of more than 100,000 B & P employee reviews posted on their site since August 2014.(6) Glassdoor, given their abundance of information, noted that for their entire sample population, five benefits stood out:
Health care insurance (e.g., medical, dental): 40%
Unlike the top five benefits, some of these remunerations focused on 21st-century issues. As part of Accenture’s pledge to support diversity and LGBTQ rights, employees were granted the right to reselect their gender.(8)
Glassdoor also reported on the top 20 companies’ benefits and perquisites where, as of January 28, 2016, at least 20 employees posted their reviews. Here from Glassdoor’s website are the top 20 companies:
1. Netflix offers 1 paid year of maternity and paternity leave to new parents.
2. REI encourages its employees to get outside by offering 2 paid days off a year (called “Yay Days”) to enjoy their favorite outside activity.
3.
Salesforce.com
employees receive 6 days of paid volunteer time off a year, as well as $1,000 a year to donate to a charity of their choice.
4. Spotify covers costs for egg freezing and fertility assistance.
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5. World Wildlife Fund employees take Friday off every other week, also known as “Panda Fridays” at the nonprofit.
6. Airbnb gives its employees an annual stipend of $2,000 to travel and stay in an Airbnb listing anywhere in the world.
7. PwC offers its employees $1,200 per year for student loan debt reimbursement.
8. Pinterest provides 3 paid months off, plus an additional month of part-time hours, as well as two counseling sessions to create a plan to reenter the workplace.
9. Burton employees receive season ski passes and “snow days.”
10. Twillo offers employees a Kindle plus $30 a month to purchase books.
11. Twitter provides three catered meals a day, on-site acupuncture, and improv classes.
12. Accenture covers gender reassignment for their employees as part of their commitment to LGBTQ rights and diversity.
13. Walt Disney Company offers employees free admission to its parks, as well as discounts on hotels and merchandise.
14. Facebook provides $4,000 in “Baby Cash” to employees with a newborn.
15. Evernote hosts classes through “Evernote Academy,” which offers team-building courses like macaroon baking.
16. Epic Systems Corporation offers employees a paid 4-week sabbatical to pursue their creative talents after 5 years at the company.
17. Adobe shuts down the entire company for 1 week in December and 1 week over the summer.
18. Asana employees have access to executive and life-coaching services outside of the company.
19. Zillow allows employees who are traveling to ship their breast milk.
20. Google provides the surviving spouse or partner of a deceased employee 50% of their salary for the next 10 years.
What new perks will hit after 2017? Time certainly will tell, but it’s likely that in order to compete for top-notch labor, firms will continue to add products and services to their B & P portfolios that will ease the burden of employees both at work and at home, especially specialty perks for the 21st-century family.
It’s likely that more employers will follow suit by adding benefits and perks that matter most for their specific workforce this year that could make employees’ lives easier in and out of work, especially those with families.
Questions
1. Glassdoor reported that four in five workers say they would prefer new benefits to a pay raise. Why might that be the case?
2. What factors should a firm consider when deciding which benefits to provide its employees?
3. The top five most-demanded benefits include health care insurance, vacation/paid time off, performance bonus, paid sick days, and 401(k) plan, retirement plan, and/or pension. Which of these benefits are mandated/statutory benefits?
4. Given the top five benefits mentioned in question 3, which benefits, although voluntary, once offered have certain statutory requirements? What are those statutes and requirements?
5. Given the top five benefits mentioned in question 3, which benefits are voluntary?
6. What are flexible benefit plans, and why might they have not come up as a top-five employee requirement?
7. What trends and issues in health care noted in the text are discussed in the case as being key benefits for the top 20 firms?
8. In examining the top 20 firms, which firm’s benefit most attracts you and why?
References
(1) Dishman, L. (2016, February 3). These are the best employee benefits and perks. Fast Company. Retrieved May 10, 2017, from
(3) Dishman, L. (2016, February 3). These are the best employee benefits and perks. Fast Company. Retrieved May 10, 2017, from https://www.fastcompany.com/3056205/these-are-the-best-employee-benefits-and-perks
(4) The Glassdoor Team. (2016, January 12). Glassdoor’s 5 job trends to watch in 2016. Glassdoor. Retrieved May 10, 2017, from
(5) CareerBliss. (n.d.). Adobe reviews. Retrieved September 20, 2017, from
https://www.careerbliss.com/adobe/reviews/
(6) Dishman, L. (2016, February 3). These are the best employee benefits and perks. Fast Company. Retrieved May 10, 2017, from https://www.fastcompany.com/3056205/these-are-the-best-employee-benefits-and-perks
(7) The Glassdoor Team. (2016, February 3). Top 20 employee benefits & perks. Glassdoor. Retrieved May 10, 2017, from https://www.glassdoor.com/blog/top-20-employee-benefits-perks/
(8) Dishman, L. (2016, February 3). These are the best employee benefits and perks. Fast Company. Retrieved May 10, 2017, from https://www.fastcompany.com/3056205/these-are-the-best-employee-benefits-and-perks
(9) The Glassdoor Team. (2016, February 3). Top 20 employee benefits & perks. Glassdoor. Retrieved May 10, 2017, from https://www.glassdoor.com/blog/top-20-employee-benefits-perks/
(10) The Glassdoor Team. (2016, January 12). Glassdoor’s 5 job trends to watch in 2016. Glassdoor. Retrieved May 10, 2017, from https://www.glassdoor.com/blog/glassdoors-5-job-trends-watch-2016/
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, School of Business Brooklyn Campus, Long Island University
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CASE 13-2 GOOGLE SEARCHES SAS FOR THE BUSINESS SOLUTION TO HOW TO CREATE AN AWARD-WINNING CULTURE
Statistical Analysis System Institute Inc. (SAS) is a privately held company that develops software to provide business solutions for their clients. As of 2013, they employed more than 14,000 people and reported revenues of $3 billion. Founded in 1976, they have maintained high profits during the five recessions since then. They have also maintained a growth rate of more than 10% per year from 1980 to 2000.(1) Besides posting impressive growth, SAS has made it onto the Fortune “Best Companies to Work For” list for almost two decades. Google has made it to the top of this list for the past 3 years, but they do not hesitate to confess that they implemented SAS’s model in their HR practices. Yet why would Google, a very successful firm in its own right, copy SAS?(2)
Perhaps Google mimics SAS because the company’s achievements are built upon a culture that keeps their employees satisfied and motivated. Feeling ecstatic about the company’s cultural environment, SAS employees are highly motivated, intensely loyal, and very dedicated to delivering only the highest performance results. Why? According to the CEO/cofounder, James Goodnight, SAS functions like a triangle in which happy employees are essential for great customer service and great customer service is the key to a successful business. Employees know that SAS will provide anything that will increase productivity or inspire their imagination. For example, more than 3,000 pieces of art are displayed throughout its premises, and two full-time artists are employed to keep the environment updated.(3) By testing their perks, SAS realized that these types of benefits are key factors to their highly profitable business.
One advantage of running a private business is that CEO James Goodnight does not have the obligation to answer to shareholders, a board of directors, or anyone on Wall Street and therefore can take some calculated risks when it comes to building that cutting-edge culture, a culture that focuses on creating an environment that fosters originality and innovation and keeps employees’ minds sharp. Software development is a mentally challenging business, and therefore the proper environment is needed to foster creativity and thinking outside the box. The goal of SAS is to create a stress-free environment for their employees so they enjoy being at work, and SAS does this by providing a work environment with as much comfort and convenience as possible.(4) What are the foundations of a stress-free environment?
SAS provides their employees competitive pay, discretionary bonuses, medical care, retirement plans (401[k]), profit sharing, and disability benefits. SAS also provides a vast amount of what are called “convenience benefits,” which are very appealing to job applicants. These new benefits began with free M&Ms every Wednesday and later included a no-dress-code policy and no specific working hours when employees have to clock in or clock out.(5)
In addition, the main headquarters in North Carolina provides employees with an on-site, state-of-the-art fitness center, a swimming pool, tennis courts, and even a golf course. The following no-cost amenities are also available: dry-cleaning, car detailing, day care programs for employees’ children, and a cafeteria that serves 2,500 meals per lunch with no reserved room for executives. In SAS, there is a work/life center that provides care for the elderly, helps manage financial debts, and handles personal problems like divorce. SAS provides in-house health benefits and amenities free to all their employees. They only require an employee to pay 20% of the bill when seeing an outside specialist.
SAS’s culture and benefits programs have led to a remarkably low employee turnover rate of 3%.(6) But good luck landing a job there: They receive more than 15,000 applications per year!(7)
Questions
1. What are the statutory benefits SAS must offer every employee? What defined benefits do they offer beyond those requirements?
2. SAS offers an array of employee benefits, especially at their main headquarters. What might be their rationale for providing such services to their employees?
3. What would you suggest if utilization analysis indicated that only a few employees used those additional benefits, such as the work/life center?
4. What seems to be the weakest part of SAS’s benefits package? What would you do instead of offering that particular benefit?
5. What additional amenities might SAS offer their employees? Why?
6. How does their 3% turnover rate impact training and recruiting expenses?
References
(1) Leung, R. (2013, April 18). Working the “good life.” CBS News. Retrieved from
To develop your skill at designing flexible benefits
Skills
The primary skills developed through this exercise are as follows:
1. HR management skills—Technical, conceptual and design, and business skills
2. SHRM 2016 Curriculum Guidebook—K: Total rewards—Employee benefits
Assignment
1. Using the “Voluntary Benefits” column of Exhibit 13-4: Employee Benefits, as the HR benefits manager, select the benefits to be offered in three different modular plans. Be sure to identify the target group for each of the three modules.
2. Again using Exhibit 13-4, as the HR benefits manager, develop a core-plus benefits plan.
To develop your skill at selecting flexible benefits
Skills
The primary skills developed through this exercise are as follows:
1. HR management skills—Technical, conceptual and design, and business skills
2. SHRM 2016 Curriculum Guidebook—K: Total rewards—Employee benefits
Assignment
As an employee, rank order the voluntary benefits listed in Self-Assessment Exercise 13-1 from 1 being most important to 9 being the least important to you. In class, break into groups of four to six and discuss your rankings. (For online classes, use your discussion system.) What similarities and differences emerge in the discussion of your rankings?
After studying this chapter, you should be able to do the following:
14-1.
Briefly describe what OSHA does in a worksite inspection, the types of violations that OSHA looks for, and employer rights during the inspection.
PAGE
510
14-2.
Briefly discuss EAPs, EWPs, and ergonomics and what the value of each of these is to companies and employees.
PAGE
516
14-3.
Briefly discuss the causes of stress and how it can be managed.
PAGE
521
14-4.
Identify the top concerns for security in the workplace today and what can be done to make the workplace more secure.
PAGE
527
14-5.
Discuss the new OSHA regulation on drug testing and the value of wellness organizations like eDocAmerica.
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CHAPTER OUTLINE
Workplace Safety and OSHA
The Occupational Safety and Health Act (OSH Act)
The Occupational Safety and Health Administration (OSHA)
National Institute of Occupational Safety and Health (NIOSH)
Federal Notice
Posting Requirements
Employee Health
Work–Life Balance
Employee Assistance Programs (EAPs) and
Employee Wellness Programs
(EWPs)
Ergonomics
and Musculoskeletal Disorders (MSDs)
Safety and Health Management and Training
Stress
Functional and Dysfunctional Stress
Causes of Job Stress
Stress Management
The Stress Tug-of-War
Workplace Security
Cyber Security
Workplace Violence
Social Media for Workplace Safety and Security
Employee Selection and Screening
General Security Policies, Including Business Continuity and Recovery
Trends and Issues in HRM
OSHA Limits Postaccident Drug Testing
eDocAmerica: Health and Wellness Online
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Practitioner’s Perspective
Describing her workplace, Cindy says, “We believe a safe and healthy workplace is a right—whether you work in a factory or an office. Is it also an employer’s responsibility to provide for their employees’ mental health? Not everyone may see it as an obligation, but there is great benefit in assisting an employee whose personal issues may be impacting their job performance.”
“I think I am going to have to take time off,” Nancy confessed the other day. “I just can’t seem to manage everything going on in my life, and I can’t concentrate at work.”
“I know things are tough with the divorce—but can you really afford to miss work right now?” her coworker Chloe queried. “Have you seen the information HR posted about the Employee Assistance Program? Let’s get the contact information. It’s completely confidential and available to you and your family. Perhaps they can help. In the meantime, you can talk to your supervisor about the new flexible work hours until things are better.”
Could this level of support “save” a good employee? Learn more about the issues and ethics behind workplace health, safety, and security in
Chapter 1
4
.
SHRM
HR CONTENT
See Appendix: SHRM 2016 Curriculum Guidebook for the complete list
A. Employee and Labor Relations (required)
23. Posting requirements
B. Employment Law (required)
26.
The Occupational Safety and Health Act of 1970 (OSHA)
C. Ethics (required)
6. Behavior within ethical boundaries
14. Abusive behavior—Workplace bullying
E. Job Analysis/Job Design (required)
6. Compliance with legal requirements
Ergonomics and workplace safety (work hazards and mitigation)
K. Total Rewards (required)
B. Employee Benefits
9. Employee assistance/wellness programs
17. Wellness programs
T. HR Career Planning (secondary)
4. Company policies to accommodate work and nonwork activities
X. Workplace Health, Safety, and Security (secondary)
1. OSHA citations and penalties (required)
2. Disaster preparation, continuity, and recovery planning
3. Employee health
4.
Inspection
5. Protection from retaliation
6. Safety management
7. Security concerns at work
8. Communicable diseases
9. Data security
11. Ergonomics
Get the edge on your studies.
edge.sagepub.com/lussierhrm3e
• Take a quiz to find out what you’ve learned.
• Review key terms with eFlashcards.
• Watch videos that enhance chapter content.
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WORKPLACE SAFETY AND OSHA
LO 14-1
Briefly describe what OSHA does in a worksite inspection, the types of violations that OSHA looks for, and employer rights during the inspection.
We now have a workforce that is reasonably compensated, well trained, and productive. The next major management concern is to keep them safe and healthy so that they can continue to perform at high levels. This chapter will first focus on federal workplace safety laws and regulations as well as the governing agencies for industrial safety and health. Later in the chapter, we will cover employee health issues—including the need for work–life balance for our employees, employee assistance and employee wellness programs, and stress—and how they affect our employees. Finally, we will discuss the increasingly important topic of workplace security from the organizational perspective, so let’s get started.
Employees are concerned about safety.1 The HR department commonly has responsibility for ensuring the health and safety of employees and needs to develop policies and rules to provide a safe environment for all groups.2 It works closely with the other departments to enforce safety rules and maintains health and safety records. Employee-owned PCL Construction boasts a safety record five times better than the national average.3 A growing area of safety concern is workplace incivility and violence.4 As a manager, you should know the safety and security rules, be sure your employees know them, and enforce them to prevent accidents and acts of violence.
SHRM
B:26
The Occupational Safety and Health Act of 1970 (OSHA)
The Occupational Safety and Health Act (OSH Act)
Workplace safety is a concern for all companies, but especially in more dangerous industries with higher death rates ranked as construction; transportation and warehousing; agriculture, forestry, fishing, and hunting; professional and business services; and manufacturing.5 Most accidents such as plane crashes,6 and 98% of truck accidents,7 are caused by human error. To help protect employees, the Occupational Safety and Health Act (OSH Act) of 1970 requires employers to pursue workplace safety. Workplace safety deals with the physical protection of people from injury or illness while on the job. Employers must meet all Occupational Safety and Health Administration (OSHA) safety standards, maintain records of injuries and deaths due to workplace accidents, and submit to on-site inspections when notified. Those who do not comply are subject to citations and penalties, usually in the form of fines.8 You may save a few bucks skimping on safety, but it can be very costly, like at BP for the Gulf oil spill.
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Many of you know that OSHA is a US safety and health regulator, but did you know that employers can go to prison for willfully failing to maintain safe work environments? You may have heard that the walls of a building that was being demolished in Philadelphia in 2013 caved in on a Salvation Armystore, killing six people. The company in that case, Campbell Construction, has been cited for willful violations (we will discuss this term shortly) of the OSH Act, and the general contractor, Griffin Campbell, was convicted of involuntary manslaughter and aggravated assault in that case and received a sentence of 15 to 30 years in prison for failing to follow a series of safety procedures. In addition, the crane operator subcontractor who was working on the building when it collapsed was convicted of involuntary manslaughter.9 Willful violations of the OSH Act that cause a death are punishable with a fine of up to $500,000 for the organization and $250,000 and up to 6 months in prison for an individual who is found culpable.
Today, the HR department commonly has responsibility for ensuring the health and safety of employees. HRM works closely with other departments and maintains health and safety records along with managing safety training programs. As an HR manager, it will be absolutely critical that you know the safety rules, be sure your employees know them, and that you and other managers enforce them to prevent accidents. In addition to many specific requirements in the act, the general duties clause in the OSH Act that covers all employers states that each employer10
1. shall furnish a place of employment that is free from recognized hazards that are causing or are likely to cause death or serious physical harm to employees;
2. shall comply with occupational safety and health standards and all rules, regulations, and orders issued pursuant to this Act which are applicable to his own actions and conduct.
The general duties clause also states that each employee has a duty to comply with occupational safety standards, rules, and regulations.
In 1970, the year that the OSH Act was passed, job-related accidents accounted for more than 14,000 worker deaths in the United States.11 The good news is that the rate of fatal work injuries has fallen, but the bad news is that in 2015 (the last year of available Bureau of Labor Statisticsinformation), there were still 4,836 fatalities12 and almost 3 million injuries or illnesses, half of which required time away from work.13 This is a rate of about 3 per 100 equivalent full-time workers. Recall from Chapter 1 that absenteeism is one of the major concerns of all managers, and by allowing injuries and occupational illnesses to occur, we are contributing to that absenteeism. So losing this many workdays, as well as more than 4,800 lives, has to be a concern for HRM as well as line managers.
The Occupational Safety and Health Administration (OSHA)
OSHA is the division within the Department of Labor that is charged with overseeing the OSH Act. It was created to “assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education and assistance.”14OSHA has broad authority to investigate complaints and impose citations and penalties on employers who violate the OSH Act.
WHAT DOES OSHA DO? OSHA is responsible for setting federal safety and health standards and promulgating those standards to employers. OSHA is also the responsible agency of the federal government for occupational safety and health inspections. Inspections are made without any advance notice to the employer and are done based on the following issues (in priority order):15
• Imminent danger
• Catastrophes (fatalities or hospitalizations)
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• Worker complaints and referrals
• Targeted inspections (particular hazards, high injury rates)
• Follow-up inspections
Inspectors must identify themselves and tell the employer the reason for the inspection upon arrival at the worksite. The employer can decide not to allow the inspection without an inspection warrant (a court order establishing OSHA’s probable cause for the inspection), but this is generally not a very good idea on a number of levels. Besides making it look like the company might have something to hide, it wastes time, and the inspector will be less likely to be disposed to assist the employer in immediately correcting discrepancies that might be found during the inspection—which will ultimately occur anyway after the warrant is provided. In general, it makes more sense to allow the inspection to go on, in accordance with OSHA rules.16
WORK
APPLICATION 14-1
Identify any unsafe or unhealthy working conditions that you have observed in any organization (business, sports, school, etc.).
EMPLOYER AND EMPLOYEE RIGHTS AND RESPONSIBILITIES UNDER OSHA. General rights of employers and employees are shown in
Exhibit 14-1
. We want to make sure that company management always stays within their rights in interactions with OSHA.
Employer rights. Employer rights during an inspection are a bit more specific. The employer has a right to get the inspector’s credentials, including their name and badge number, and to receive information on the reason for the inspection—either the employee complaint or the program inspection information.17 The employer also has the right to refuse to allow the inspection without a warrant being provided (which we have already said is generally a bad idea).
Exhibit 14-1 EMPLOYER AND EMPLOYEE RIGHTS AND RESPONSIBILITIES UNDER OSHA
Sources: SHRM, https://www.shrm.org/resourcesandtools/hr-topics/risk-management/pages/osha-employer-inspection-rights.aspx; OSHA, https://www.osha.gov/Publications/3439at-a-glance (retrieved July 31, 2017).
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14-1 APPLYING THE CONCEPT
Employer Rights and Responsibilities Under OSHA
Respond yes or no to each question regarding employer rights and responsibilities.
a. Yes
b. No
____ 1. Is it permissible to ask the inspector the reason for the inspection?
____ 2. Henry got us into trouble with OSHA, so is it OK to demote him?
____ 3. Is it OK to take some notes during the OSHA inspection?
____ 4. Does OSHA require us to inform and train employees about existing hazards in the workplace?
____ 5. Does OSHA require us to keep records of work-related injuries or illnesses?
____ 6. Does a member of the HR staff have to accompany the OSHA inspector during the site visit?
____ 7. Can we require employees to buy their own safety equipment?
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Inspection
So assuming that the inspection is allowed, we need to be aware of some things that we have a right to and that we should do during the inspection.
• If the inspection is being conducted due to a worker complaint, we have the right to get a copy of the complaint (without the employee’s name), and we want to do so because we want to know what is being alleged.
• Secondly, we have a right to have a company representative accompany inspectors as they go through their site visit, and we, as the HR representative, want to accompany them.
There are a few reasons to accompany the inspector. First, we want to understand any violations that the inspector finds and notes because sometimes, no matter how hard a person tries to describe a problem, it will sometimes be unclear unless we see it ourselves. Secondly, in many cases we can immediately fix a discrepancy such as loose lines or hoses strung across a workspace. Although the discrepancy will almost surely still be noted, the inspector will see that we are willing to comply with the law and OSHA regulations quickly and to the best of our ability. This willingness can keep minor infractions from becoming major infractions. Third, we want to make sure that the inspection stays within the scope noted in the complaint or the program inspection guidelines. We don’t really want the OSHA representative wandering all over the worksite, and we have a right to limit their movements to cover only the inspection scope.
An employer representative also has a right to be present when the inspector is interviewing employees (unless the interview is private by request of the employee being interviewed) and the right to stop interviews that are becoming confrontational or disturbing the work environment.
The employer also has a right to inform the employees of their rights during the inspection. The inspector will provide the employer with a list of discrepancies upon completion of their inspection. After an inspection, employers have a right to contest any citations that they receive through OSHA.
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Protection From Retaliation
Employee rights. Employee rights during inspections include the right to refuse to be interviewed, or if an employee agrees to an interview, they can request that an employer representative be present or that the interview be held in private. The employee also has the right to legal representation during the interview if they request it, and they can end the interview at any point in time just by requesting that the interview be discontinued. Finally, employees have a right against company retaliation for taking part in an interview with the inspector and telling the truth.18
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14-2 APPLYING THE CONCEPT
Employee Rights and Responsibilities Under OSHA
Respond yes or no to each questions regarding employee rights and responsibilities.
a. Yes
b. No
____ 8. Is it OK to object to the time frame for correction of discrepancies of OSHA standards?
____ 9. Can OSHA make my employer maintain working conditions free from any hazards?
____ 10. If I see hazardous conditions, does OSHA state that I have to tell my supervisor?
____ 11. Do I have to wear this back brace? It is heavy and uncomfortable, and I can’t move as well with it on.
____ 12. If I report hazardous conditions to HR, do I have to tell them who I am?
____ 13. If an OSHA inspector interviews me, can I cover up for the company and say we followed OSHA guidelines so we don’t get into trouble?
____ 14. Do I have to tell my supervisor I just got hurt? I don’t want him to be mad at me for making him do all the paperwork.
HAZARD COMMUNICATION STANDARDS. OSHA requires that all employers maintain information at each work site that describes any chemical hazards that may be present on-site. A new set of Hazard Communication Standards (HCS) was promulgated in 2012 and can be found on the OSHA website (
http://www.osha.gov
). Under federal law, “All employers with hazardous chemicals in their workplaces are required to have a hazard communication program, including container labels, safety data sheets, and employee training.”19 Safety Data Sheets (SDS) are documents that provide information on a hazardous chemical and its characteristics. The OSHA-required SDS format is provided in
Exhibit 14-2
(Items 12–15 are nonmandatory). The SDS provides employees with a quick reference to the hazards of working with a particular chemical compound.20 Electronic versions of SDS are acceptable, as long as there are no barriers to immediate access at the worksite.
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OSHA Citations and Penalties
VIOLATIONS, CITATIONS, AND PENALTIES. OSHA violations include the following:21
• Willful—a violation in which the employer knew that a hazardous condition existed but made no effort to eliminate the hazard
• Serious—a violation where the hazard could cause injury or illness that would most likely result in death or significant physical harm
• Other than serious—a violation where any illness or injury likely to result from the hazard is unlikely to cause death or serious physical harm, but the violation does have a direct impact on employees’ safety and health
• De minimis—violations that have no direct or immediate safety or health danger. This does not result in citations or penalties.
• Failure to abate—violations where the employer has not corrected a previous violation for which a citation was issued and the settlement date has passed
• Repeated—violations where the employer has been previously cited for the same type of violation within the previous 5 years
WORK
APPLICATION 14-2
Identify any organization (business, sports, school, etc.) that was cited and/or penalized for not meeting OSHA standards. Be sure to provide details of the situation.
Willful and/or repeated violations can bring the employer up to a $126,749 fine for each violation. Failure to abate violations can cost the employer as much as $12,675 per day while the violation continues to exist, and serious violations can also cost the employer a $12,675 fine.22
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Exhibit 14-2 SAFETY DATA SHEETS (SDS) FORMAT
Source: OSHA, https://www.osha.gov/dsg/hazcom/hazcom-appendix-d.html, retrieved July 31, 2017.
National Institute of Occupational Safety and Health (NIOSH)
NIOSH works under the umbrella of the Centers for Disease Control and Prevention (CDC). NIOSH was also created as part of the 1970 OSH Act, and its mission is global in scope. “[NIOSH] is the federal agency that conducts research and makes recommendations to prevent worker injury and illness.”23 NIOSH notes three major goals in its strategic plan:24
• Conduct research to reduce work-related illnesses and injuries.
• Promote safe and healthy workplaces through interventions, recommendations, and capacity building.
• Enhance international workplace safety and health through global collaborations.
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Mark Boster / Los Angeles Times via Getty Images
Workplace safety is of critical importance to employers. Here, Los Angeles prosecutor Hoon Chun and Deputy District Attorney Christopher Curtis discuss the settlement for Bumble Bee Foods’ violation of worker safety rules that caused the death of employee Jose Melina in 2012.
NIOSH routinely works with worldwide government health laboratories and other member nations in the World Health Organization (WHO) to identify workplace issues that can cause illness or injury and to create standards for the WHO member countries. NIOSH also works hand in hand with OSHA to identify workplace illnesses and to track diseases that can be passed from one person to another in the work environment. It does research on occupational safety and health topics from ergonomics (we will discuss this shortly) to MRSA (methicillin-resistant Staphylococcus aureus) infections and workplace violence. NIOSH research frequently provides the data that OSHA uses to create new workplace standards and regulations.
One of the most significant areas of research at NIOSH is communicable disease research. Again, in conjunction with other countries in the WHO, NIOSH has done research on a number of respiratory diseases that can be passed from one person to another, including tuberculosis and various strains of flu virus. NIOSH research attempts to identify methods of transmission and then provide guidelines for minimizing danger of transmission of dangerous diseases that may exist in the workplace. The entire intent of NIOSH research is to make the workplace safer for all employees.
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Communicable Diseases
Federal Notice Posting Requirements
There are a number of notices that employers are required to post in a convenient location frequented by employees during normal working hours. The notices or posters contain important information about employee rights and company responsibilities under federal law. OSHA’s Job Safety and Health Protection poster is one of these, but there are also other posting requirements. Take a look at the following information for general federally mandated posting requirements.
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Posting Requirements
The Department of Labor provides a number of posting requirements on its website (
http://www.dol.gov
), and we have reproduced some of the major ones in an abridged version in
Exhibit 14-3
.25
WORK
APPLICATION 14-3
Identify safety and health posters you have seen displayed at any organization (business, sports, school, etc.).
In addition to all of the other requirements, each state has its own posting requirements. Most states have requirements to at least post information on workers’ compensation, unemployment insurance, and state minimum wage laws, while many states have a large number of other requirements as well. We need to become aware of and maintain knowledge of our state’s requirements. Finally, employers must make certain that they also notify new hires of the above information.
EMPLOYEE HEALTH
LO 14-2
Briefly discuss EAPs, EWPs, and ergonomics and what the value of each of these is to companies and employees.
Meeting OSHA requirements is necessary, but there are many other aspects to maintaining good employee health. Employee health is the state of physical and psychological wellness in the workforce. We have to consider both physical andpsychological health in order to have a strong workforce. We need to provide our employees with the ability to maintain both. In this section, we are going to complete a quick review of some of the other physical and psychological issues in today’s workplace.
Work–Life Balance
In analyzing the needs of the workforce, work–life balance is high on the list of issues facing both employers and employees.26 Thus, individual employees and their leaders are seeking work–life balance.27 Work–life balance is a perpetually hot topic.28 With mobile technology, especially the smartphone,29 the boundary between work and nonwork hours becomes fuzzy.30 Some 44% of Internet users regularly perform some job tasks outside of work,31 as employees even check in at work during their weekends and vacations, increasing the likelihood of work–family spillover. On the other side, employees are using company electronic devices for personal use during work hours, such as social media and shopping.32 Spillover is the effect of work and family on one another that generates similarities between the two domains.33
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Exhibit 14-3 DEPARTMENT OF LABOR POSTING REQUIREMENTS FOR BUSINESSES AND OTHER EMPLOYERS
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Source: US Department of Labor.
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Employee Health
With 40% of full-time American workers logging more than 50 work hours a week,34 organizations are starting to intervene when employees are working too many hours.35 In fact, one in three full-time employees say, “maintaining a healthy work–life balance has become more difficult in the last five years.”36
Although more men are getting more involved in child care,37 and both men and women say balancing work and family life difficulties deters them from seeking executive roles,38 work–life balance is especially difficult for women because of gender family responsibility inequity.39 Balance between work and home lives is sought but rarely happens for long because of work–family conflict. This conflict is also linked with some other bad consequences such as stress; absenteeism; burnout; and dissatisfaction with job, family, and life—all of which can lead to excessive job turnover and the breakup of families.40
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Company Policies to Accommodate Work and Nonwork Activities
To help employees maintain a better work–life balance, the trend is for firms to offer more work–family benefits.41 commonly called family-friendly practices.42 For example, employers are offering flexible work schedules so that employees can start and end work around the times that help them balance work and family, and they also allow their people flexible time off to attend family activities such as parent–teacher meetings and sporting events. Many more firms are offering child care and elder care at or near their place of work than in the past, and they are providing the flexibility for their employees to select this as a standard benefit, as on-site child-care relates to lower absenteeism.43 Some companies, including Campbell Soup and Lowe’s, are providing seminars and workshops on how to better balance work and life. Family-friendly practices also include individual and family counseling benefits to help improve family life so that it doesn’t have a negative impact on work. Such counseling is commonly offered through the employee assistance programs (EAP), our next topic. For more information and help, visit the Families and Work Institute website
www.familiesandwork.org
.
WORK
APPLICATION 14-4
Assess your work–life and/or school–life balance? What percentage of your waking hours are typically devoted to work, school, and personal life? How can you improve the balance?
Employee Assistance Programs (EAPs) and Employee Wellness Programs (EWPs)
Two significant employee services that can assist with work–life balance and other aspects of employee mental and physical health are employee assistance programs (EAPs) and employee wellness programs (EWPs), also known as workplace wellness programs (WWPs). EAPs and EWPs continue to grow in popularity in the United States and other countries around the world, most likely because companies are seeing results from the use of such programs.44
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Employee Assistance/Wellness Programs
EAPS. An EAP is a set of counseling and other services provided to employees that help them to resolve personal issues that may affect their work. About three-quarters of private-sector workers (77%) have access to an employee assistance plan (EAP).45 An EAP is designed to assist employees in confronting and overcoming problems in their personal life such as marital problems or divorce, financial problems, substance addictions, emotional problems, and many other issues. Why do the majority of employers pay for these services? The simple answer is that such services can save valuable employees and, as a result, save the company money if they are available to the employee when they are needed.46,47
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Wellness Programs
EAPs are confidential services provided to the employee. The employee can contact the company EAP and receive counseling and/or treatment for emotional or other personal issues as necessary. In some cases, EAPs may be regulated by federal laws, including the requirements of ERISA and COBRA, so company HR personnel need to be aware of this fact.
WORK
APPLICATION 14-5
Select an organization that offers an Employee Assistance Program (EAP) and Employee Wellness Program (EWP). Describe the program offerings.
EWPS. EWPs are designed to cater to the employee’s physical, instead of psychological, welfare through education and training programs. Wellness programs offer health education, training and fitness, weight and lifestyle management, and health risk assessment services to employees. The obvious goal is improving the health of our workforce, but why? There is strong evidence that Americans (and people in most other countries) do not exercise enough. More than a third of Americans are obese, with many more overweight.48 Obesity and excess weight create all kinds of health problems, and we are seeing the effects of overweight employees at work. Many employees have health problems such as diabetes, high blood pressure, and heart disease that are brought on by excess weight. Employee wellness programs (EWPs) work to help our employees become more healthy and fit and to lower the incidence of these types of health problems.
HRM in Action
Employee Wellness Programs
In a now-famous Harvard Business Review article, a Harvard lecturer said that “sitting is the smoking of our generation.”49 A research study by the National Institutes of Health says that “sitting for prolonged periods can compromise metabolic health” and that “too much sitting is distinct from too little exercise.”50 Getting people up and moving is valuable to organizations. Companies like Johnson & Johnson claim EWPs have succeeded in slowing health care cost increases because they get employees moving.51 EWPs can return from $2 to $6 in lower health care and lost productivity costs for every dollar spent.52 Another interesting effect of EWPs appears to be lower turnover: “Healthy employees stay with your company. . . . [O]rganizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9% vs. 15%).”53 The Affordable Care Act also provides an employer benefit; it allows an incentive for participation in wellness programs of up to 30% of an employee’s total health care premium, up from a 20% premium prior to the law’s passage. So wellness programs provide employers with high return on investment and help with productivity, absenteeism, and turnover. No wonder companies continue to institute these programs.
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We need to remember, though, that EWPs are also regulated at the federal level. There is currently some concern that some EWPs may violate provisions of the Genetic Information Nondisclosure Act (GINA), 54 and because they are employee welfare programs ERISA may apply. Congress is reviewing options to allow EWPs to continue to provide incentives for employee wellness while also being in compliance with GINA. HR managers will want to stay apprised of changes in regulations concerning EWPs so that they can continue to provide wellness services to their employees without violating federal law or regulations.
Ergonomics and Musculoskeletal Disorders (MSDs)
According to OSHA, “Ergonomics is the science of fitting workplace conditions and job demands to the capabilities of the working population.”55 The CDC identifies the goal of ergonomics as being to “reduce stress and eliminate injuries and disorders associated with the overuse of muscles, bad posture, and repeated tasks.”56 Workplace ergonomics focuses on design of jobs and workspaces to limit the repetitive stresses that employees face in doing their daily work. OSHA provides employers with a set of voluntary guidelines on ergonomics in the workplace. These voluntary guidelines took the place of an earlier set of more rigid rules from OSHA on ergonomics that were rescinded by Congress in 2001.57
Several industries, including shipyards, poultry processors, retail stores, and nursing homes, among others, have specific sets of guidelines provided by OSHA. Other industries have the general set of voluntary guidelines published by OSHA.58 It is wise for the organization to know OSHA’s voluntary guidelines for their industry even though the earlier ergonomics rule was rescinded, because the OSHA website notes that “under the OSH Act’s General Duty Clause, employers must keep their workplaces free from recognized serious hazards, including ergonomic hazards. This requirement exists whether or not there are voluntary guidelines.”59
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Compliance With Legal Requirements
Ergonomics and Workplace Safety
In addition to the potential for enforcement actions on the part of OSHA, it just makes sense to pay attention to ergonomics. Musculoskeletal disorders (MSDs) affect the body’s muscles, joints, tendons, ligaments, and nerves and can occur in many different work environments. They can take a toll on employee productivity when workers suffer from these issues. MSDs include a commonly known repetitive stress injury (RSI) called carpal tunnel syndrome in which the nerves in the wrist become inflamed and painful, making movement difficult. But a large number of other problems fall under the MSD category, including other RSIs like rotator cuff syndrome, tennis elbow, carpet layer’s knee, and many others.60 All of these problems have the potential to cost the organization money in the form of lost productivity as well as workers’ compensation claims. So paying attention to ergonomics at work can both improve productivity and save the company money.
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Ergonomics
Cornell University has an ergonomics program called CUErgo that has a large number of tools to help design jobs that are less stressful on employees; for a listing, go to its website at
http://ergo.human.cornell.edu
. It provides information from research by the Cornell Human Factors and Ergonomics Research Group (CHFERG).61 It also provides information on everything from hospital work environments to general workstation design in offices and is a great help in identifying potential ergonomic issues in the workplace.
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WORK
APPLICATION 14-6
Identify potential ergonomics and musculoskeletal disorders (MSDs) in an industry that you work in or want to work in.
Safety and Health Management and Training
HR managers need to understand OSHArules and standards in order to be able to make the workplace as safe as possible, and offering EAPs and EWPs and stress management training (our next section) is part of safety and health management.
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Safety Management
By keeping the number of accidents and incidents low, we lower absenteeism plus increase job satisfaction. Nobody wants to work in an unsafe environment. Because we improve two of our four most important variables at work—absenteeism and job satisfaction—we are almost assured of increasing productivity over time. This is yet another way that HRM can assist in reaching organizational goals while using the fewest organizational resources possible.
STRESS
LO 14-3
Briefly discuss the causes of stress and how it can be managed.
People often have internal reactions to external environmental stimuli. Stress is the body’s reaction to environmental demands.This reaction can be emotional and/or physical and can be caused by a lack of work–life balance.62 According to Forbes, 35% of Americans have thought about leaving a job because of stress at work, and 42% have actually done so!63 As stated in Chapter 1, absenteeism is costly, and there is a relationship between absenteeism and workplace stress.64 Stress levels are on a continuum from low to high. But stress is an individual perception matter. Some people are better at handling stress than others.65 In the same situation, one person may be very comfortable and stress free while another is stressed out. In this section, we discuss functional and dysfunctional stress, the causes of stress, how to manage it, and the stress tug-of-war.
Licensed Video
Workplace Stress
WORK
APPLICATION 14-7
Describe any safety, health, and stress training offered by an organization, preferably one you work or have worked for.
Functional and Dysfunctional Stress
Let’s begin by describing the difference between functional and dysfunctional stress and the consequences of dysfunctional stress.
WORK
APPLICATION 14-8
Assess your ability to deal with stress. Identify when you tend to get stressed and the negative consequences you experience from dysfunctional stress.
FUNCTIONAL STRESS. Stress is functional (also called acute and eustress66 stress) when it helps improve performance by challenging and motivating people to meet objectives. People perform best under some pressure. Stress is an asset that stretches capacity and fuels creativity. When deadlines are approaching, adrenaline flows and people rise to the occasion. Stress actually provides greater strength and focus than we think we are capable of—so long as we are in control of it.67
DYSFUNCTIONAL STRESS. On the other hand, too much stress is dysfunctional because it decreases performance. Stressors are factors that may, if extreme, cause people to feel overwhelmed by anxiety, tension, and/or pressure. Stress that is constant, chronic, and severe can lead to burnout over a period of time.68 Burnout is a constant lack of interest and motivation to perform one’s job.Burnout results from too much stress.69 Stress that is severe enough to lead to burnout is dysfunctional stress.70
NEGATIVE CONSEQUENCES OF DYSFUNCTIONAL STRESS. Some readers may wonder why individual stress is a topic in an HRM text. The fact is that stress has some significant organizational consequences due to its effects on individual employees, so managers need to understand and be able to recognize the symptoms of stress, and especially dysfunctional stress because it causes mental and physical health problems.71 More than 80% of Americans said they were less productive at work because of stress. Excess stress costs an estimated $300 billion a year in absenteeism; decreased productivity; employee turnover; accidents; and medical, legal, and insurance fees.72
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Burnout can cause mental and physical health problems including colds, weight gain, sleep dysfunction, heart disease, depression, ulcers and other stomach problems, and back, neck, and shoulder pain.73 Stress also weakens our immune system, it makes us sick more often, it ages us so we look older, it makes us fatter, it decreases our sex drive, it ruins our sleep, and it can even kill us.74 In fact, at its extremes, stress can cause even more serious problems. For instance, an Uber engineer was said to have suffered so much stress on the job due to overwork that he committed suicide.75 We should always be aware that extreme stress can cause extreme reactions.
Causes of Job Stress
There are five common contributors to job stress: personality type, organizational culture and change, management behavior, type of work, and interpersonal relations.
PERSONALITY TYPE. The Type A personality is characterized as fast-moving, hard-driving, time-conscious, competitive, impatient, and preoccupied with work.76 The Type B personality is pretty much the opposite of Type A. In general, people with Type A personalities experience more stress than people with Type B personalities. If you have a Type A personality, you could end up with some of the problems associated with dysfunctional stress. Complete Self-Assessment 14-1 to determine your personality type as it relates to stress.
14-1 SELF ASSESSMENT
Personality Type A or B and Stress
Identify how frequently each item applies to you at work or school. Place a number from 1 to 5 on the line before each statement.
_______ 1. I enjoy competition, and I work/play to win.
_______ 2. I skip meals or eat fast when there is a lot of work to do.
_______ 3. I’m in a hurry.
_______ 4. I do more than one thing at a time.
_______ 5. I’m aggravated and upset.
_______ 6. I get irritated or anxious when I have to wait.
_______ 7. I measure progress in terms of time and performance.
_______ 8. I push myself to work to the point of getting tired.
_______ 9. I work on days off.
_______ 10. I set short deadlines for myself.
_______ 11. I’m not satisfied with my accomplishments for very long.
_______ 12. I try to outperform others.
_______ 13. I get upset when my schedule has to be changed.
_______ 14. I consistently try to get more done in less time.
_______ 15. I take on more work when I already have plenty to do.
_______ 16. I enjoy work/school more than other activities.
_______ 17. I talk and walk fast.
_______ 18. I set high standards for myself and work hard to meet them.
_______ 19. I’m considered a hard worker by others.
_______ 20. I work at a fast pace.
_______ Total. Add up the numbers you assigned to all 20 items. Your score will range from 20 to 100. Indicate where your score falls on the continuum below.
The higher your score, the more characteristic you are of the Type A personality. The lower your score, the more characteristic you are of the Type B personality.
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ORGANIZATIONAL CULTURE AND CHANGE. The amount of cooperation and motivation that a person experiences and the level of organizational morale both affect stress levels. The more positive the organizational culture, the less stress there is. Organizations that push employees to high levels of performance but do little to ensure a positive work climate create a stressful situation. A climate with fear of layoffs can also be extremely stressful. Plus, change is stressful to many people, so cultures that continually make major changes can be stressful.77
MANAGEMENT BEHAVIOR. The better managers are at supervising employees, the less stress there is. Lack of control tends to induce stress. Calm, participative management styles are less stressful. Bad bosses cause employee stress. Workers with bad bosses are more likely to report the stress-related problems that we discussed earlier.78
TYPE OF WORK. Some types of work are more stressful than others.79 People who have jobs that they enjoy derive more satisfaction from their work and handle stress better than those who do not. In some cases, changing to a job with more enjoyable work is a wise move that can lower stress levels. This is one major reason that people decide to make career changes.
INTERPERSONAL RELATIONS. Conflicts among people who do not get along can be very stressful. People who don’t really like the work they must perform but who do like the people they work with can feel less stress and experience higher job satisfaction.
• Time Pressure. The time pressure of a deadline can help motivate completing the task,80 but too much time pressure of deadlines can be very stressful.81
• Smartphones. Smartphones are actually more of a time waster than saver, as the average person stairs at their phone 221 times per day. Repeatedly checking your phone, especially after work hours, can be stressful. Constantly looking at your phone creates eyestrain, and looking down puts stress on your neck and shoulders, which can cause long-term problems.82
How we manage stress affects our job performance and health.
Stress Management
When we continually feel pressured and fear that we will miss deadlines or fail, we are experiencing stress. People watch TV or movies, drink, take drugs, eat, or sleep more than usual to escape stress. But for the most part, these activities don’t work in the long run because they are used mostly to escape stress rather than to deal directly with the stress.
We can limit job stress,83 so many firms are making wellness a top priority through training employees in stress management because it affects the bottom line.84 EWPs (mentioned earlier in this chapter) frequently provide stress management programs for employees. Stress management is about taking control of stress and making it functional.85 We can reduce stress with stress management interventions by better recognizing and managing stress symptoms as they occur.86 Stress management is the process of reducing stress and making it functional. Here are seven stress management techniques. We don’t need to use them all because little changes can make big differences, so just implement the techniques that interest you.87
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TIME MANAGEMENT. Generally, people with good time management skills experience less job stress.88Vince Lombardi, the famous football coach, said, “Plan your work and work your plan.” Remember that procrastinating gives us more time to think about what we have to do and to get stressed before starting. It’s a huge relief when we finish the task. 89 If we are perfectionists, we may do a high-quality job, but perfectionism stresses us as we perform the work, so sometimes it’s OK to define what is “good enough” and stop there.
RELAXATION. Relaxation is an excellent stress management technique, and we should relax both on and off the job. Laughter releases stress-reducing endorphins that lower blood pressure, relax muscles, stimulate our brain, improve our mood, and increase our oxygen intake—so laugh it up.90 In addition, understand that each of us has our own way of relaxing. Some will read a book; others will lie in the sun; still others will play a game. Religious practices also combat stress, as nearly 100 studies found a positive association between religious involvement and better health, longevity, incomes, and happiness.91 It doesn’t matter how you relax as long as you relax in a way that is soothing to you.
Relaxation on the job. Use relaxation on the job and off when feeling stress coming on by meditating or doing deep breathing and/or muscle relaxation exercises.92
• Meditation. This can be simple. When we feel stress, we can close our eyes and think happy thoughts to calm ourselves: for example, picture ourselves doing something we enjoy or visualize the ocean with waves crashing down. Meditation works well with deep breathing.
• Deep breathing. When feeling stress, simply take five slow, deep breaths, preferably through the nose. Hold each breath (about 5 seconds), then let it out slowly (about 7 seconds), preferably through lightly closed lips. To breathe deeply, we must inhale by expanding the stomach, not the chest. Think of the stomach as a balloon; slowly fill and then empty it. We can also breathe deeply while performing relaxation exercises.
• Muscle relaxation exercises. When feeling stress, we can also perform relaxation exercises. If we feel tension in one muscle, we may do a specific relaxation exercise. We may relax our entire body going from head to toe or vice versa.
Exhibit 14-4
lists relaxation exercises that we can do almost anywhere.
Relaxation off the job. We need to relax off the job. Try to leave work behind—don’t do any work while away, and don’t even think about it. If you have a Type A personality, slow down and enjoy yourself. Cultivate interests that do not relate to the job.
• Activities. Take time for yourself and do things you enjoy to relax and get away from work. What do you enjoy doing?
• Sleep. A good night’s sleep makes you more productive.93 Recent research found that 7 hours of sleep a night is the best amount of sleep to function the next day; and skimping on a full night’s sleep, even by 20 minutes, impairs performance and memory the next day. But too much sleep is associated with diabetes, obesity, and cardiovascular disease. Of course, not everyone is average, and some people need more sleep than others.94 A lack of sleep can even cause brain damage,95 and it also makes you more selfish and emotional, and you are more likely to get into arguments and hurt relationships.96
• Sleeping tips. Stress can delay sleep or reduce deep sleep. Working, using the Internet, cellphones, text messages, and caffeine close to bedtime can delay sleep and increase alertness. Doing a relaxing activity, like reading, before going to bed helps us sleep. We should shut off the TV, computer, and cell phone, because the flickering lights from these devices overstimulate our brain and hurt the quality of our sleep.97 Alcohol can promote sleep initially, but it can contribute to wakefulness later.98
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Exhibit 14-4 RELAXATION EXERCISES
NUTRITION. Good health is essential to everyone’s performance, and nutrition is a major factor in health.99 Underlying stress can lead to overeating and compulsive dieting, and being overweight is stressful on the body. Unfortunately, around 34% of Americans are obese, while another 32% are overweight.100 Men with a waist over 40 inches and women over 35 inches are twice as likely to die a premature death.101 Obesity costs US businesses about $45 billion a year in medical expenses and lost productivity.102 Are you overweight? Do you need to change your eating habits?
We should watch our intake of junk foods, which contain fat (fried meat and vegetables, including French fries and chips), sugar (pastry, candy, fruit drinks, and soda), too much caffeine (coffee, tea, soda), and salt. Artificial sweeteners, like in coffee and diet soda, may not have sugar or calories, but they do increase your risk of developing diabetes and other health problems.103 Eat more fruits and vegetables and whole grains, and drink water and pure juices. Realize that poor nutrition, overeating, and the use of tobacco, alcohol, and drugs to reduce stress often create other stressful problems over a period of time.
WORK
APPLICATION 14-9
Identify your major causes of stress; then select stress management techniques you will use to help overcome the causes of your stress.
When we eat, we should take our time and relax, because rushing is stressful and can cause an upset stomach and weight gain. Also, when people eat more slowly, they tend to eat less. Taking a break generates energy and makes us more productive. So we should avoid eating at our work area.
Breakfast is considered the most important meal of the day for good reason. Getting up and going to work just drinking coffee or soda without eating until lunch is stressful on the body. A good breakfast increases our ability to resist stress.
EXERCISE. Contrary to the belief of many, proper exercise increases our energy level rather than depleting it. Physical exercise is an excellent way to improve health while releasing stress.104 If we are stressed for any reason, the fastest way to tame our anxiety can be physical activity. In fact, exercise is usually more effective than antidepressants in making moderate depression disappear.105 Staying fit can reduce the production of stress hormones.106
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Aerobic exercise, in which we increase the heart rate and maintain it for 30 minutes, is generally considered the most beneficial type of exercise for stress reduction. Fast walking or jogging, biking, swimming, and aerobic dance or exercise fall into this category. Playing sports and weight lifting are also beneficial and can be aerobic if we don’t take many breaks and we cross-train by mixing weights with other aerobic exercises.
Before starting an exercise program, check with a doctor to make sure you are able to do so safely. Always remember that the objective is to relax and reduce stress. The “no pain, no gain” mentality applies to competitive athletes, not to stress management.
If we don’t enjoy the workout, we most likely will not stick with it anyway, so pick something fun or at least enjoyable, like playing a sport. Having an exercise partner really makes exercise more enjoyable, and it helps motivate us to show up and exercise when we’d rather not. We may also find out that we get in a great workout when we think we were too tired to exercise.
POSITIVE THINKING. People with an optimistic personality and attitude generally have less stress than pessimists107 because thoughts of gloom and doom (which are often distorted anyway) lead to stress.108 Once we start having doubts about our ability to do what we have to do, we become stressed. Make statements to yourself in the affirmative, such as “This is easy,” and “I will do it.” Repeating positive statements while doing deep breathing helps us relax and increase performance.
SUPPORT NETWORK. Reaching out to supportive family, friends, and colleagues in our network can help reduce stress.109 So we can find a confidant at work or people outside of the workplace and talk things through.110 Venting to people we trust and hearing their support of our abilities relieves stress. Being out of work–life balance is stressful, so cultivate a supportive network of family, friends, and colleagues to help maintain that critical work–life balance.111
CUT BACK SMARTPHONE CHECKING. Stop your addiction to constantly looking at it. Set a time limit of frequency of checking it (such as every half hour), or better yet shut it off for an extended period when you can; especially when you have a high-priority task to complete. When looking at it, hold it higher to help avoid neck and shoulder stress.112 Also, place your other screens (computer monitor, TV) higher so you look up a bit to help offset your downward pressure.
The Stress Tug-of-War
Think of stress as a tug-of-war with you in the center, as illustrated in
Exhibit 14-5
. On the left are causes of stress trying to pull you toward burnout. On the right are stress management techniques you use to keep you in the center. If the stress becomes too powerful, it will pull us off center to the left, and we may suffer burnout and dysfunctional stress with low performance. If there is no stress, we tend to move to the right and just take it easy and perform at low levels. The stress tug-of-war is an ongoing game. Our main objective is to stay in the center with functional stress, which leads to high levels of performance.113
If we try stress management but still experience long-term burnout, we should seriously consider getting out of the situation. Ask yourself two questions: Is my long-term health important? Is this situation worth hurting my health for? If you answer yes and no respectively, a change of situations may be advisable. Career changes are often made for this reason.
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Exhibit 14-5 THE STRESS TUG-OF-WAR
WORKPLACE SECURITY
LO 14-4
Identify the top concerns for security in the workplace today and what can be done to make the workplace more secure.
Workplace security is the management of personnel, equipment, and facilities in order to protect them. While workplace safety deals with the issue of minimizing occupational illness and injury, workplace security covers topics such as violence in the workplace (including bullying), bomb threats, management of natural and man-made disasters, risk to company computer systems and intranets, and many other issues. Workplace security is concerned with mitigating these risks to the organization and its members. Securitas Security Services USA, a large security firm, identified Internet/intranet security, workplace violence, active shooter threats, business continuity planning, and mobile security as the top security threats to businesses for the year 2017.114 Prior to 2010, workplace violence had been the number-one concern for more than 10 years, but cyber security in several forms replaced it as the number-one concern in 2010.115 Let’s take a brief look at some of these major workplace security issues in order of concern.
SHRM
X:7
Security Concerns at Work
Cyber Security
While this is not an information systems text, let’s do a quick review of some of the issues companies face today with cyber security in the form of both Internet/intranet and mobile systems security. Cyber security is the use of tools and processes to protect organizational computer systems and networks. This topic has been in the news constantly for the past several years, with concerns that amateur and professional hackers, hactivists, terrorist organizations, and even some governments are working to break into company computer systems and mobile devices for a variety of purposes. In 2014, the US attorney general accused hackers working for the Chinese government of hacking US companies, including Westinghouse, Alcoa, and the United Steel Workers Union.116 More recently, the Russian government was accused of being complicit in hacking various political institutions to try to sway the 2016 presidential election.117Every company has to be concerned with this issue and do what they can to prevent becoming a victim.
SHRM
X:9
Data Security
HRM is especially concerned with outsiders penetrating company computer systems that have sensitive employee information on them, such as information on medical records, payroll and banking data, and other personal data. HR managers must work with company security managers to put up strong roadblocks to outsiders who seek to enter systems with this type of data. In 2013, AvMed left two unsecured laptops with private employee data on them in an unlocked conference room, and they were stolen. The company ultimately agreed to pay a $3 million settlement to the employees for failure to safeguard information in accordance with HIPAA.118 While there is no foolproof way to harden company computer systems, we have to do the best that we can to make it as hard as possible for hackers or other unauthorized users to find and exploit employee data. Obviously, the HR manager won’t be the person to research and implement this type of computer security, but we do need to know that it is an issue. We will work with our company’s computer security managers to make it as hard as possible to get access if a person is not an authorized user. One simple tool is to encrypt any company computers with sensitive data on their hard drives. This makes it much more difficult to gain access to such information.
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14-3 APPLYING THE CONCEPT
Stress Management Techniques
Put the letter of the technique being used on the line next to the corresponding statement.
a. time management
b. relaxation
c. nutrition
d. exercise
e. positive thinking
f. support network
____ 15. “I’ve been stressed out, so I have been praying more lately.”
____ 16. “I’ve been working on positive affirmations, so I have been repeating to myself that ‘I can meet the deadline.’”
____ 17. “I’m not too organized, so I’ve started using a to-do list.”
____ 18. “I’ve been taking a walk at lunchtime with Latoya.”
____ 19 “I’ve been getting up earlier and eating a healthy breakfast.”
____ 20. “I have a bad boss, so I’ve been talking to my colleague Tom about her.”
Workplace Violence
There were 417 workplace homicides in 2015, and workplace shootings rose by 15%. While this is serious, and we need to take precautions to respond if such incidents happen, we should also understand that workplace homicides are still extremely rare and that we should not panic over such statistics. These 417 homicides took place in an environment with tens of millions of businesses.119So for now, let’s focus on anger that can lead to violence and how to prevent it. Human resource managers have reported increased violence between employees, stating it can happen anywhere. And don’t think that this is just an issue of men harming women. Women commit nearly a quarter of all threats or attacks. There has also been an increase in violence between outsiders and employees, such as customers shooting employees and other customers. A psychiatrist at Mercy Fitzgerald Hospital outside Philadelphia was forced to shoot a patient after he had killed a case worker in 2014, and this is just one of thousands of incidents that occur in the United States alone each year.120The key to preventing workplace violence is to recognize and handle suspicious behavior before it turns violent;121 that’s what this subsection is all about.
Licensed Video
Workplace Violence
CAUSES OF ANGER AND VIOLENCE. Anger can lead to violence. You have most likely heard of road rage. In business we have desk rage, which can take the form of yelling, verbal abuse, and physical violence. Frustration, stress, and fear also bring out anger.122 Unresolved interpersonal conflicts make people angry.123 In fact, violence is almost always prompted by unresolved conflict, and the violence often takes the form of sabotage against other employees (backstabbing, spreading false rumors) or the organization (damage to property) to get even.124
The physical work environment (such as space to work, noise, odors, temperature [hot], ventilation, and color) contributes to making people angry. A bad work environment (called toxicity) leads to violence. People also tend to copy, or model, others’ behavior. For example, children who have been abused (emotionally and/or physically) are more likely, as parents, to abuse their children. If employees see others being violent, especially managers, and nothing is done about it, they are more apt to also use violent behavior at work. Violence in the community surrounding an organization, including family violence, may be brought into the workplace. Some but not all experts also report that drugs contribute to violence.125
Employees need to find a healthy way to deal with conflict. Unresolved conflict can lead to resentment, anger, and potentially violence.
DEALING WITH ANGER
Your anger and emotional control. A secondary feeling of anger follows many of our feelings. Your boss may surprise you with extra work, which makes you angry. Disappointment often leads to anger. Your coworkers don’t do their share of the work, so you get mad at them. Buddha said, “You will not be punished FOR your anger; you will be punished BY your anger.” Anger can lead to perception problems and poor decisions and hostility, which are stressful and can harm your health.126
It is natural to get angry sometimes, as we cannot control the feeling of anger. However, we can control our behavior, and we can learn to deal with anger in more positive ways to get rid of it. Letting anger build up often leads initially to passively not doing or saying anything but then later blowing up at another person. Here are some tips for effectively getting rid of our anger:
• Use objective, rational thinking. For example, when dealing with customers, tell yourself, “Their anger is to be expected. It’s part of my job to stay calm.”
• Look for positives. In many bad situations, there is some good.
• Look for the humor in the situation to help defuse the anger. Finding appropriate humor can help keep us from moping and getting angry.
• Develop a positive attitude about how to deal with anger. Develop positive affirmations such as “I stay calm when in traffic” (not “I must stop getting mad in traffic”) and “I get along well with Joe” (not “I must stop letting Joe get me angry”).
• Use an anger journal. A first step to emotional control of anger is self-awareness. Answer these questions. How often do you get irritated/angry each day? What makes you irritated/angry? How upset do you get? What feelings do you have when you are angry? What behavior (yell, say specific words, pound desk, do and say nothing, accommodate) do you use when you are angry? Are you good at dealing with your irritations/anger? One good way to improve your ability to control your anger is to write the answers to these questions in an anger journal. It is a method of letting out the anger in an effective way. People who use a journal often change their behavior without even trying.
Anger of others and emotional control. Here are some tips from the Crisis Prevention Institute and the National Institute for Occupational Safety & Health (NIOSH) to help us deal with the anger of others through our emotional control to prevent violence. These tips can be very valuable to us as managers:
• Never make any type of putdown statement, as it can make the person angrier. As stated earlier, you may use appropriate humor to cut the tension, but be careful that it is not viewed as a sarcastic putdown. Such behavior can lead to violence.
• Don’t respond to anger and threats with the same behavior. This is the key to success in maintaining your emotional control.
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• Don’t give orders or ultimatums. This can increase anger and push the person to violence.
• Watch your nonverbal communications to show concern and to avoid appearing aggressive. Use eye contact to show concern, but be aware that staring or glaring can make you appear aggressive. Maintain a calm, soothing tone to defuse anger and frustration. Talking loudly and with frustration, anger, or annoyance in your tone of voice will convey aggression. Don’t move rapidly, point at the person, get too close (stay 2–5 feet apart), or touch.
• Realize that anger is natural and encourage people to vent in appropriate ways. With the aggressor, the problem is usually to keep the behavior acceptable. With the passive person, you may need to ask probing questions to get them to vent, such as “What is making you angry? What did I do to make you mad?”
• Acknowledge the person’s feelings. Using reflective responses by paraphrasing the way the person appears to be feeling shows that we care and helps calm the person so they can get back in control of their emotions.
• Get away from the person if necessary. If possible, call in a third party to deal with the person and leave.
WORK
APPLICATION 14-10
Recall a situation in which someone was angry with you, preferably at work. What was the cause of the anger? Did the person display any signs of potential violence? If so, what were they? How well did the person deal with their anger? Give specific tips the person did and did not follow.
SIGNS OF POTENTIAL VIOLENCE. Workplace violence is rarely spontaneous; it is more commonly passive-aggressive behavior in rising steps, related to an unresolved conflict. Employees do give warning signs that violence is possible, so it can be prevented if we look for these signs and take action to defuse the anger before it becomes violent.127
• Take verbal threats seriously. Most violent people do make a threat of some kind before they act. If we hear a threat or hear about a threat from someone else, talk to the person who made the threat and try to resolve the issue.
• Watch nonverbal communication. Behavior such as yelling, gestures, or other body language that conveys anger can also indicate a threat of violence. Talk to the person to find out what’s going on.
• Watch for stalking and harassment. It usually starts small, but it can lead to violence. Put a stop to it.
• Watch for damage to property. If an employee kicks a desk, punches a wall, and so on, talk to the person to get to the reason for the behavior. People who damage property can become violent to coworkers.
• Watch for indications of alcohol and drug use. People can be violent under their influence. Get them out of the workplace, and get them professional help from the EAP if it’s a recurring problem.
• Include the isolated employee. It is common for violent people to be employees who don’t fit in, especially if they are picked on or harassed by coworkers. Reach out to this employee and help them fit in or get them to a place where they do.
• Look for the presence of weapons or objects that might be used as weapons. You may try talking to the person if you feel safe, but get security involved if you feel the least bit unsafe.
SHRM
C:6
Behavior Within Ethical Boundaries
BULLYING IN THE WORKPLACE. Have you ever been the victim of a bully—on the school playground or at work? Managers do not want their company put into the news spotlight because of such behavior. Bullying behaviors have been found to be four times more common than sexual harassment,128 but there are still no laws at the national level in the United States that deal directly with bullying as an offense.129 There are certainly ways in which managers can use existing laws when bullying behaviors are based on protected-class characteristics (e.g., race, religion, disability, etc.) or other illegal actions such as assault or sexual harassment, but there is no federal law directly associated with workplace bullying.
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SHRM
C:14
Abusive Behavior: Workplace Bullying
HR managers need to know the state and local laws that can be used for bullying behaviors, but they also need to address the issue in company handbooks and provide training on processes that should be used if someone suspects bullying behaviors or are themselves a victim of such behavior.
ORGANIZATIONAL PREVENTION OF VIOLENCE. The number-one preventive method is to train all employees to deal with anger and prevent violence,130 which is what you are learning now. In addition, company culture should encourage employees to talk about any concerns about coworkers or others that they think might be violent toward others.131 However, the starting place is with a written policy addressing workplace violence, and a zero-tolerance policy is the best preventive policy. From the HR manager’s perspective, it is very important to take quick disciplinary action against employees who are violent at work. Follow these steps to help stop any type of violent behavior in your organization:
1. Develop a policy on bullying and other forms of violent behavior, defining the concepts and making it clear that such behavior will not be tolerated.
2. Train all employees on the policy on a routine basis—typically at least once per year and upon hiring of new employees.
3. Develop mechanisms for reporting violent behaviors that are outside the normal chain of command, since such behavior frequently occurs with supervisors who have control over other employees.
4. Investigate all reported incidents using the Just Cause procedures that we discussed in
Chapter 9
.
5. Take prompt, fair disciplinary action with those individuals who have been found to be guilty of any violent behaviors, whether senior members of the organization or subordinate individuals.
As discussed in
Chapter 10
, the organization should have a system for dealing with grievances, and it should also track incidents of violence as part of its policy. Organizations can (and should when allowed by law) also screen job applicants for past or potential violence so that they are not hired. They should also develop a good work environment, addressing the issues listed earlier as causes of violence. Demotions, firing, and layoffs should be handled in a humane way following the guidelines to deal with anger, and outplacement services to help employees find new jobs can help cut down on violence. Finally, it is probably prudent in most, if not all, companies to hold training on active shooters and practice active shooter drills on an ongoing basis.132
INDIVIDUAL PREVENTION OF VIOLENCE. One thing you should realize is that the police department will not help prevent personal or workplace violence. Police only get involved after violence takes place. We have already given you most of the tips. But here are a few more tips.133 Keep in mind that there is always potential violence, and look for escalating frustration and anger to defuse it before it becomes violence. Never be alone with a potentially violent person or stand between the person and the exit. Know when to get away from the person, and utilize the organization policy of calling in security help if you are concerned. Report any troubling incidents to security staff.
Social Media for Workplace Safety and Security
We have discussed a number of areas of HRM that have been enhanced through the use of social media. This is another case where social media tools can assist companies in dealing with a situation in which employees may need information quickly and accurately. Organizations around the world are establishing security alert systems like Rave Guardian and AlertMedia to be used in the case of a company emergency of any type, including a violent individual or group on organization property. The systems use existing technology like Twitter and text messaging to provide immediate warnings to all persons who are signed up to receive alerts, and they can even provide information on what steps to take to remain safe in such situations. These systems have already undoubtedly saved lives in violent incidents in many companies, and any company without such a system should probably look at installing the capability as soon as feasible.
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WORK
APPLICATION 14-11
Recall a situation in which you were angry with someone, preferably at work. What was the cause of your anger? Did you display any signs of potential violence? If so, what were they? How well did you deal with your anger? Give specific tips you did and did not follow.
Employee Selection and Screening
We discussed tools concerning employee selection and screening in
Chapter 6
, but we need to be reminded of some of them again here because of their importance to company security. The first tool that we want to make sure that we use in employee screening is background checks. Recall that we can be held liable for monetary damages if we are guilty of a “negligent hire.” One way to guard against such a hire is through the consistent use of criminal background checks that specifically look for a history of violent actions or threats of violence on the part of an applicant or employee. Even in states and cities that have passed “ban-the-box” laws, a background check can generally be completed once a conditional employment offer is extended.
Other background checks can also help with organizational security. Web searches can sometimes turn up negative information on an applicant that may show that they are a potential security risk, even when criminal checks do not. In addition, credit checks might show evidence of a history of unethical behavior that would make it more likely that an applicant might be unscrupulous and might even intentionally harm other employees if hired. So we do have some tools available in background checks to mitigate the risk of hiring the wrong type of person.
In addition to background checks, substance abuse testing can provide us with a tool to minimize the security dangers in your company. As we noted in Chapter 6, “Most employers have the right to test for a wide variety of substances in the workplace,”134 and the former head of the White House Office of National Drug Control Policy has said that the “issue of drugs in the workplace is an understated crisis that results in $200 billion in lost productivity annually.”135 According to SHRM, “Substance abuse prevention is an essential element of an effective workplace safety and security program. Properly implemented preventive programs—including drug and alcohol testing—protect the business from liability.”136 The US Department of Justice noted that “the link between drug use and crime has been well-documented in recent years.”137 Screening out substance abusers in the applicant stage can minimize security threats to the organization, because there is strong evidence that at least some substance abusers will commit crimes, including violent crimes at work in many cases.
SHRM
X:2
Disaster Preparation, Continuity, and Recovery Planning
General Security Policies, Including Business Continuity and Recovery
Common disasters and emergencies might include such events as fires, floods, earthquakes, severe weather, tsunamis, terrorist attacks, bomb threats, and many others. Some are dependent on the company’s geographic location, while others are universal possibilities. One thing is sure, though—disasters and emergencies happen without warning, creating a situation in which the normal organizational services can become overwhelmed or even disappear. You may remember the nuclear crisis in Fukushima, Japan, when a tsunami wiped out electrical power to a nuclear plant and then, because there was no power to pump water, several of the reactors melted down. During such a crisis, companies require a set of processes that address the needs of emergency response and recovery operations. The power company, TEPCO, did not have a sufficient process for such a disaster. To address these types of emergencies, the company should establish an emergency response plan, which provides guidelines for immediate actions and operations required to respond to an emergency or disaster, and these guidelines need to take into consideration everything that a company can think of in order to provide the appropriate plan.
The overall priorities of any plan in any emergency or disaster should be these:
• Protect human life; prevent/minimize personal injury.
• Preserve physical assets.
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• Protect the environment.
• Restore programs and return operations to normal.
The overall objective is to respond to the emergency and manage the process of restoring the organization, as well as its associated programs and services.
But what part does the HRM professional play in this planning process? HRM should be part of the management team that determines the goals of the plan. Once the goals are determined, HR can again help operational management to staff the various key positions in the disaster recovery teams by understanding the types of people that are necessary to do these jobs under crisis circumstances.
Additionally, HR is typically responsible for the training function in the company, and everyone in the organization needs to be trained on the plan and its processes. The training should also become part of the new employee orientation (
Chapter 7
) so that all personnel are aware of the correct responses to potential emergencies. There are many examples of good emergency response and business recovery plans out there on the Internet for free. All the company needs to do is find a good sample and modify it for their particular circumstances and the likely disasters that would occur based on their geographic locations. A company in Arkansas probably doesn’t need a plan for tsunami recovery, while a company on the coast of California is unlikely to need tornado or hurricane sheltering plans.
One final thing that HRM needs to determine is where extra assistance might come from if needed because of a disaster or emergency. For instance, if severe weather were to kill and injure a number of company employees, grief counseling services might become necessary. Most companies don’t routinely have grief counselors on hand, but in this type of situation, they may need access to such counselors very quickly. HRM can think of likely situations and their aftermaths and determine where these types of services might be procured if the need presented itself. One potential provider in at least some cases might be the vendor that services the company EAP. Recall that EAPs are services for the psychological well-being of our employees. Therefore, they may have the needed personnel to handle the psychological aftermath of a disaster.
TRENDS AND ISSUES IN HRM
LO 14-5
Discuss the new OSHA regulation on drug testing and the value of wellness organizations like eDocAmerica.
What are some of the significant trends and issues in workplace safety and health? First, we are going to explore a new OSHAregulation concerning when we can complete drug testing. The second item we will take a look at is a program that uses the Internet to promote workplace health—a trend that is occurring with greater frequency in today’s workplaces, so let’s get started.
OSHA Limits Postaccident Drug Testing
In late 2016, OSHA announced new rules on workplace safety programs to take effect in January 2017. While rule-making by OSHA is not unusual, some of the provisions of one of the new rules included significant changes that require many companies to revisit their workplace drug and alcohol testing policies. The new rule—29 CFR 1904—basically made it illegal to do blanket post-accident drug and alcohol testing. In the eyes of OSHA, these blanket policies “have the effect of retaliating against workers who report injuries.”138
OSHA says workplace drug testing policies should be limited to cases in which drug use likely contributed to the accident to prevent these policies from having a punitive effect. In other words, if we have a policy to automatically drug test someone who reports that they had an accident and then punish them because we found drugs in their system, the assumption is that the employee may not report such accidents if they can avoid doing so. OSHA wants to remove the potential punishment to encourage truthful reporting of workplace accidents.
Using the same logic, OSHA also said that “it considers injury-free incentive programs may also deter reporting of injuries.”139 So if the company provides an incentive for “zero workplace accidents for the quarter,” OSHA would consider that to be a deterrent to reporting, and it would violate their safety regulations.
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What can companies do under the new regulation? Do we have to stop using postaccident drug testing? No, that isn’t the case. Employers can continue to use such testing in any case where there is “a reasonable possibility that drug use by the reporting employee was a contributing factor to the reported injury or illness to justify an employer requiring a drug test [emphasis added].”140 Also, OSHA will not issue citations for drug testing required under a mandatory state law, a voluntary drug-free workplace law, workers’ compensation law, or other federally-regulated program,141 so employers can and should continue testing under these programs.
However, most employers will likely need to review and update their current testing policies. “Remove any blanket testing rules for OSHA post-accident testing and make certain testing occurs only when there is a reasonable basis to assume drug use contributed to an accident or injury.”142 “All post-accident policies should be reviewed and updated to ensure that the language is not retaliatory and does not deter or discourage the reporting of illnesses or injuries.”143
Companies will also need to look at requiring supervisory training, since they will need to recognize potential impairment and determine whether there is reasonable evidence (remember Chapter 10’s discussion of reasonable evidence) that drug use may have contributed to an accident before we can legitimately apply postaccident drug testing.144 If we follow these guidelines, the new rules should not create a significant barrier to drug testing after a workplace accident.
eDocAmerica: Health and Wellness Online
One example of a new kind of online provider of occupational and employee health-related services is eDocAmerica, found at
. eDocAmerica is a health care service provider that “gives individuals and their family members unlimited email access to board certified physicians, psychologists, pharmacists, dentists, dietitians and fitness experts who provide personal answers to all health-related questions.”145 eDocAmerica was started by a physician at the University of Arkansas for Medical Sciences to provide outreach services to employees of client businesses.
The services of eDocAmerica and other similar providers make it much easier and quicker for employees of client firms to get answers to most of their routine health questions. This has two major benefits. First, it allows the employee to take more control of their personal and family health, and second, it takes some pressure off of the larger health care system because employees are not running to the doctor’s office every time they need a simple question answered.
As a side benefit for the organization, it appears that companies may save money on their group health insurance plans because of the lower utilization rates made possible by quick and easy email access to expertise. eDocAmerica has so far been quite successful in creating a more open and accessible health care system with their client company employees. This is just one of the new breed of web-based providers of safety and health services to companies and employees. We will likely continue to see more companies with similar services come online in the near future.
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.
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DIGITAL RESOURCES
Workplace Safety, Health, and Security*
Workplace Accidents and Prevention
Assessment of Workplace Safety Symbols
Workplace Violence*
Healthy Employees
A Union-Initiated Safety Training Program Leads to Improved Workplace Safety
Workplace Stress*
Can Stress Actually Kill You?
* premium video only available in the interactive eBook
CHAPTER SUMMARY
14-1. Briefly describe what OSHA does in a worksite inspection, the types of violations that OSHA looks for, and employer rights during the inspection.
OSHA can inspect a worksite without advance notice. The inspector will identify themselves and provide the reason for the inspection when they arrive. Once the employer provides access to the worksite, the inspector will do an inspection. The inspector has the right to interview employees during the inspection and may do so unless the interview becomes confrontational or disruptive of the work environment. The inspector will provide the employer with a list of discrepancies upon completion of the inspection.
Violations include the following:
1. Willful—where the employer knew that a hazardous condition existed but made no effort to eliminate the hazard
2. Serious—where the hazard could cause injury or illness that would most likely result in death or significant physical harm
3. Other than serious—where any illness or injury incurred is unlikely to cause death or serious physical harm, but the violation does have a direct impact on safety and health
4. De minimis—violations that have no direct or immediate safety or health danger
5. Failure to abate—where the employer has not corrected a previous violation for which a citation was issued and the settlement date has passed
6. Repeated—the employer has been cited for the same type of violation within 5 years
The employer has a right to ask for positive identification from the OSHA inspector. The employer also has a right to know the reason for the inspection. Employers can refuse to allow the inspector into the worksite, unless they have a court order, but this is usually not a very good idea. The employer also has a right to have a representative accompany the inspector and has the right to tell employees their rights in the inspection process. The employer can also have a representative in any interviews unless the employee specifically requests that the interview be private, and the employer can stop interviews if they become disruptive. Finally, the employer has the right to contest any citations that they receive.
14-2. Briefly discuss EAPs, EWPs, and ergonomics and what the value of each of these is to companies and employees.
EAPs and EWPs both help employees with their work–life balance. EAPs provide confidential counseling and other personal services to employees to help them cope with stress created by personal issues related to either work or home life. EWPs help employees with their physical wellness. They provide programs to employees such as health education, training and fitness programs, weight management, and health risk assessments.
Ergonomics is the science of fitting workplace conditions and job demands to the capabilities of the working population. The goal of ergonomics is to reduce stress and limit injuries due to overuse of muscles, bad posture, and repetitive tasks. OSHA provides guidelines on ergonomics in the workplace that are voluntary but that can be assessed during an inspection based on the general duties clause of the OSH Act. OSHA also has specific ergonomic guidelines for a number of different industries, so HR representatives should check to make sure that they are following OSHA guidelines based on the industry that they are a part of.
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14-3. Briefly discuss the causes of stress and how it can be managed.
The major causes of stress include personality type, organizational culture and change, management behavior, type of work, and interpersonal issues. Type A personalities, weak organizational cultures and rapidly changing organizations, bad management, jobs that employees don’t enjoy, and poor interpersonal relations all make stress more prevalent in the workplace. Stress management techniques include good time management skills, the ability to relax once in a while (in whatever form you choose), good nutrition, moderate amounts of exercise, positive thinking skills, and a strong personal support network. All of these tools help us cope with stress successfully.
14-4. Identify the top concerns for security in the workplace today and what can be done to make the workplace more secure.
The five biggest concerns of employers today are Internet/intranet security, workplace violence, active shooter threats, business continuity planning, and mobile security. Cyber security in the form of both Internet/intranet and mobile security deals with the company’s computers and network security, including how mobile devices connect to those company systems. Workplace violence is another major issue because of the continuing rise in incidents of workplace violence. Active shooter threats, while uncommon, must be taken seriously, and companies should take precautions to respond if such an incident happens to them. Business continuity planning has become a much more significant issue to most employers in the past 10 years, partly because of terrorism threats but also because of a number of large-scale environmental and natural disasters worldwide.
Companies need to do the following:
1. Develop a policy on violent behavior, defining the concepts and making it clear that such behavior will not be tolerated.
2. Train all employees on the policy on a routine basis.
3. Develop mechanisms for reporting violent behaviors that are outside the normal chain of command.
4. Investigate all reported incidents using Just Cause procedures.
5. Take prompt, fair disciplinary action with those found guilty of any violent behaviors.
14-5. Discuss the new OSHA regulation on drug testing and the value of wellness organizations like eDocAmerica.
OSHA announced new rules that basically made it illegal to do blanket post-accident drug and alcohol testing. OSHA says these blanket policies have the effect of retaliating against workers who report injuries. Employers can continue to test when there is “a reasonable possibility” that drug use by the reporting employee was a contributing factor to the reported injury or illness to justify an employer requiring a drug test. However, companies need to go over existing policies and train supervisors on the new regulation.
eDocAmerica is an online provider of occupational and employee health-related services that gives individuals and their family members unlimited email access to board-certified physicians, psychologists, dietitians, and the like who provide personal answers to all health-related questions. The main benefits are that the employee can take control of their health and that it takes some pressure off of the larger health care system because employees are not constantly going to the doctor’s office.
KEY TERMS
burnout 521
cyber security 527
EAP 519
employee health 516
ergonomics 520
EWPs 519
Safety Data Sheets 514
stress 521
stressors 521
workplace safety 510
workplace security 527
KEY TERMS REVIEW
Complete each of the following statements using one of this chapter’s key terms.
1. _________ is the physical protection of people from injury or illness while on the job.
2. _________ are documents that provide information on a hazardous chemical and its characteristics.
3. _________ is the state of physical and psychological wellness in the workforce.
4. _________ is a set of counseling and other services provided to employees that help them to resolve personal issues that may affect their work.
5. _________ are designed to cater to the employee’s physical, instead of psychological, welfare through education and training programs.
6. _________ is the science of fitting workplace conditions and job demands to the capabilities of the working population.
7. _________ is the body’s reaction to environmental demands.
8. _________ are factors that may, if extreme, cause people to feel overwhelmed by anxiety, tension, and/or pressure.
9. _________ is a constant lack of interest and motivation to perform one’s job.
10. _________ is the management of personnel, equipment, and facilities in order to protect them.
11. _________ is the use of tools and processes to protect organizational computer systems and networks.
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COMMUNICATION SKILLS
The following critical-thinking questions can be used for class discussion and/or for written assignments to develop communication skills. Be sure to give complete explanations for all answers.
1. Are some number of occupational illnesses and injuries an acceptable part of doing business? Why or why not? Explain your answers.
2. Do you foresee a situation in which you would ever refuse to allow an OSHA inspector on your worksite? Why or why not?
3. What actions would you take if you were the company representative accompanying an OSHA inspector who found a serious violation in your company? Explain your answer.
4. Is there ever a reason why a company should be charged with a failure to abate a hazard in the workplace? Can you think of any situations that might cause such a charge that would be outside the employer’s control?
5. Do you think the OSHA and NIOSH occupational safety and health requirements generally make sense? Why or why not?
6. If you were in charge, would you put an EAP into place at your company? How about an EWP? Why or why not?
7. Can you think of some things that you might be able to institute at work for very little or no cost in order to improve work–life balance for your employees? Be specific in your answers.
8. Have you ever suffered from an MSD injury? Were you able to recover from it? What did you do to help you recover or mitigate the problem associated with the MSD injury?
9. Do you think that you suffer from too much stress? Name a few things that you could do to minimize the dysfunctional stress in your life.
10. Go through the process of how you would train your employees on a new business continuity and disaster recovery plan. What do you think the most important part of the training would be? Why?
11. Should smoking be banned in all buildings where smokers and nonsmokers have to work together? Why or why not?
12. What programs would you put into effect as a leader in order to make your employees understand that occupational safety and health are critical to a modern company?
CASE 14-1 HANDLING THE UNHEALTHY EMPLOYEE
Bill is an award-winning newspaper reporter for the city news who can crank out twice as many feature articles as anyone else. To keep relevant in a period of downsizing in the newspaper industry, Bill also maintains the newspaper blog and social network pages. Over time, his work hours grew. He often chain-smoked his way to 3 hours of sleep or less. He gained weight and started to develop a considerable waist. He always had snacks by his desk because he had little time to go out to a restaurant or make a home-cooked meal.
Bill was known to be irritable and often yelled at his colleagues for not getting information he needed for articles. “Time is important. The second reporter to the story might as well be the last reporter to the story.” His colleagues thought he was too pushy and often yelled back at him.
One morning he collapsed at his office desk. He was rushed to the hospital via ambulance. Doctors found that he’d had a retinal stroke with loss of significant vision in his right eye. Doctors said he would be fine as long as he would lose weight and take better care of himself.
Diane is the owner/manager of the newspaper and is concerned about Bill’s condition, along with that of with the other overworked reporters and editors who have been survivors of the many downsizings over the years. She has decided to implement several stress and health management policies to help maintain productivity while keeping the employees healthy. In an employee meeting, she mentioned several new initiatives as follows:
“First, in the past, smoking has been limited to offices. Now smoking will be banned from the building. If you want to smoke, there will be a designated smoking area in back of the building.
“Second, in the past, vending machines have had junk food. Now the machines have been eliminated. Fresh fruits and vegetables will be provided for free in the cafeteria.
“Third, periodically, courses on healthy eating and exercise will be provided by experts. These courses will be regarded as important as mandatory staff meetings. The courses will last for approximately 1 hour and may involve minor physical activity.
“Fourth, health checks by a nearby medical service will be available for free twice a year. This will be totally paid for by our organization.
“Finally, if management feels that you are overworked or overstressed, we would like to sit down with you and talk to see what is happening.”
Bill was aghast at this new policy. In discussions with a colleague, Bill said the following:
“Diane is trying to impose her will and culture upon me. Smoking relaxes me. I write better when I smoke. Now that there is a no-smoking policy in the office, this is the one thing that would increase my blood pressure through the roof.”
“The vending machines were a convenient way to get food. I am a carnivore, and I like my occasional beef jerky. I like my chips. Granola is for the birds.”
“The mandatory classes concerning nutrition and exercise are a waste of time for the staff. If there is a great story out there, it is more important to get the story in the middle of the day than waste time on Diane’s religion. The newspaper provides significant financial incentives for each feature that is published every week. I write the most features because I am good at it, I write fast, and I need the money. My wife’s sick in the hospital, and I’ve got two teenagers to feed. I might lose my house.”
“The ‘free’ medical service and management visits about health are basically nosy efforts by management to pry into personal business. It is none of management’s business to intervene in my personal affairs.”
There are several other reporters in the office who feel the same way as Bill and have threatened to resign if Diane’s initiatives go through. The reporters offered a very simple alternative of having the newspaper add 3 days of sick leave benefits per year. They feel that Diane has no right to impose her lifestyle and her culture on them. Diane especially has no right to monitor the lifestyle and personal habits of employees that do not affect work.
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Diane counters the group by saying that lifestyle and culture can affect work. “If you are not healthy, in the long term, you will not be productive. I want you around for a long time.”
Questions
1. What are the causes of stress in Bill’s organization?
2. Has Diane gone too far in imposing a smoking policy, removing junk food from the vending machines, and offering free medical service and management visits?
3. Diane has selected several ways to reduce the stress and improve the health of her employees. What other ways did the chapter mention she could also use to reduce stress and improve employee health?
4. What do you think about the reporters’ sick leave proposal?
Case created by Gundars Kaupins, Boise State University
CASE 14-2 YOU ARE NOT HURT? GOOD—YOU’RE FIRED!
CEO Ashley Chen founded ActioNet (AN) in 1998, supporting clients hailing from industries including transportation, manufacturing, telecommunications, retail, the public sector and financial services; their most prominent clients include the Departments of Labor and Energy and Qwest with IT services. AN is a full-service IT firm providing their clients with project management, custom software development, network design, computer security assessment, training, systems integration, and design and consulting services.(1)
AN’s “core values” include instilling integrity in everything they do, innovating to enable their mission, making their customers and each other successful, achieving service delivery excellence and partnering for success.
At ActioNet, we are committed to conducting our business with integrity, not only doing things right, but also doing the right things. We believe in transparency and accuracy with open and honest communication. Being fair and ethical are an integral part of how we do business and strengthens our relationships.(2)
Core values aside, the firms of V. James DeSimone Law and Navab Law won a substantive civil law suit against AN, alleging that their client was subjected to wrongful termination and workplace violence. (See Case 2:14-cv-00792-AB-PJW, Yowan Yang v. ActioNet, Inc.) Why did AN have to pay $2.4 million plus $5 million in punitive damages to Los Angeles employment lawyers Jim DeSimone and Kaveh Navab’s client? How is this possible given the firm’s core values and their belief in open and honest communications?
Mr. Yang was originally hired as an employee of L-3 National Security Solutions in September 2008 and became an employee of AN when they took over L-3’s federal contract to the Federal Aviation Administration in April 2010. Yang provided technical support to the contract and was employed by AN because of his prior excellent performance. He continued to excel at his job with AN, obtaining merit pay and superior evaluations, the last one leading to a pay raise merely a few months before his job loss. The problems started at AN when they hired Cy Tymony to provide similar services as Yang. Yang and Tymony were placed on the same work group and worked in close proximity (4 feet away from one another).(3)
Yang said he and Tymony had several public incidents in the workplace, including some in which Tymony was publicly upset because Yang had either stored cans of soda in the office freezer or was eating candy during a staff meeting, according to the amended complaint. Towards the end of the meeting, Tymony pounded his fist against a cubicle, told Yang that he had no respect for others, and cursed several times, the later-filed complaint said. On July 24, 2012, both Tymony and Yang met individually with supervisors to see who would be willing to move to another cubicle, according to the complaint. After Tymony left the meeting, he loudly complained that Yang was an “asshole” who chewed ice. After Yang suggested that Tymony move his cubicle, Tymony grabbed him by the neck and, yelling curses, threatened his life.(4) The results? Yang’s workstation lay in a shambles, the result of Tymony’s losing control of his emotions.
AN took quick, albeit questionable, action. They fired both Tymony and Yang on the spot without supporting documentation. Although a federal investigation 2 days later indicated no wrong doing on Yang’s part (he was called a “complete victim”), AN took no further action in the matter. One would have expected AN to rehire Yang, or at least do their own research on the matter. Worse, AN never responded to requests from Yang asking for a rationale for his firing as well as a demand for his job back.
Mr. Yang then filed a civil legal complaint that said that rather than properly investigate the incident, AN simply moved to quickly fire him and the other employee, causing him emotional harm and making it difficult for him to find a new job.
After being fired “for cause,” Mr. Yang applied unsuccessfully for hundreds of jobs, says DeSimone, his lawyer. Mr. Yang lost his career, his apartment, his independence, his self-worth, and his self-esteem.(5)
AN argued in the case that it should not be held responsible because of any violent tendencies of Tymony, because he was fit to perform his job, because there is no evidence that the company tolerated Tymony’s conduct and because Tymony was not acting in the “course and scope” of his job during the altercation.(6)
AN was penalized and Mr. Yang compensated for what the jury regarded as callous disregard of Mr. Yang’s rights. “The jury sent a loud and clear message via this case to companies that harassment, workplace violence and termination would not be tolerated. ActioNet never took responsibility for its wrongful conduct and the jury held them accountable.”(7)
Questions
1. This case was a civil case. How might it have become a federal case under OSHA’s charge?
2. How might ActioNet have not upheld their OSHA responsibilities?
3. Although a federal investigation 2 days later indicated no wrongdoing on Yang’s part (he was called a “complete victim”), ActioNet took no further action in the matter. If these were OSHA investigators, under what category of violation might ActioNet be subject to penalty?
4. Stress might have been the cause of Tymony’s intolerable conduct. Which cause(s) of stress might have accounted for his inexcusable behavior?
p.539
5. What are the causes of workplace violence, and how might they help us better understand this case?
6. What are the signs of potential violence, and were any exhibited in this case?
7. What trends or issues in workplace safety apply to this case?
References
(1) Green, T. (n.d.). ActioNet Inc. Hoovers. Retrieved May 15, 2017, from
(4) Penton, K. (n.d.). Tech co. must pay $7.4M to worker choked at office. Portfolio Media. Inc. Retrieved May 15, 2017, from
http://www.vjamesdesimonelaw.com/documents/law360
(5) DiSimone, J. (2016, March 18). Workplace violence wrongful termination case. V James DiSimone Law. Retrieved May 15, 2017, from http://www.vjamesdesimonelaw.com/Blog/2016/March/Workplace-Violence-Wrongful-Termination-Case.aspx
(6) Penton, K. (n.d.). Tech co. must pay $7.4m to worker choked at office. Portfolio Media. Inc. Retrieved May 15, 2017, from http://www.vjamesdesimonelaw.com/documents/law360
(7) DiSimone, J. (2016, March 18). Workplace violence wrongful termination case. V James DiSimone Law. Retrieved May 15, 2017, from http://www.vjamesdesimonelaw.com/Blog/2016/March/Workplace-Violence-Wrongful-Termination-Case.aspx
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, Long Island University School of Business, Brooklyn Campus
SKILL BUILDER 14-1 DEVELOPING A STRESS MANAGEMENT PLAN
Objective
To develop your skill at managing stress
Skills
The primary skills developed through this exercise are as follows:
1. HR management skills—Conceptual and design
2. SHRM 2016 Curriculum Guidebook—X: Workplace health, safety, and security
Assignment
Write out the answers to these questions:
1. Identify your major causes of stress.
2. How do you currently manage stress?
3. Select stress management techniques you will use to help overcome the causes of your stress.
SKILL BUILDER 14-2 SAFETY, HEALTH, AND SECURITY
Objective
To assess the safety, health, and security at your place of work, school, and home and to recommend improvements
Skills
The primary skills developed through this exercise are as follows:
1. HR management skills—Conceptual and design
2. SHRM 2016 Curriculum Guidebook—L: Training and development
Assignment
Write out the answers to these questions:
1.A. How safe do you feel at work, at school, and at home? Have you seen any OSHA violations?
1.B. How can safety be improved at work, at school, and at home?
2.A. Has your place of work, school, or home experienced a cyber attack, including social media? Have you seen or experienced any uncontrolled anger, bullying, or violence at work, at school, or at home?
2.B. How can security be improved at work, at school, and at home?
3.A. How good is your balance of work, school, and home life? Is there an EAP and/or EWP available to help you?
After studying this chapter, you should be able to do the following:
7-1.
Discuss the major difference between training and development and identify the common situations where training may be needed.
PAGE
226
7-2.
Briefly discuss the steps in the training and development process and the common challenges to the process.
PAGE 229
7-3.
Identify the three common learning theories and how they are used to create the four methods for shaping behavior.
PAGE
233
7-4.
Discuss each of the major training delivery types.
PAGE 239
7-5.
Briefly discuss the Four-Level Evaluation Method for assessing training programs and the three common ways we measure training success.
PAGE 243
7-6.
Discuss the term career and the three common methods of employee development.
PAGE 247
7-7.
Describe the concepts of gamification, digital learning, and micro-learning, and the reasons that they have become more critical in today’s organizations.
PAGE 254
CHAPTER OUTLINE
The Need for
Training and Development
Training and Development
When Is Training Needed?
The Training Process and
Needs Assessment
Steps in the Training Process
Needs Assessment
Challenges to the Training Process
Employee Readiness
Learning and
Shaping Behavior
Learning
Learning Theories
Shaping Behavior
Learning Styles
Design and Delivery of Training
On-the-Job Training (OJT)
Classroom Training
Distance or E-Learning
Simulations
Assessing Training
Assessment Methods
Choosing Assessment Methods
Measuring Training Success
Talent Management and Development
Careers
Why
Career Development
?
Common Methods of Employee Development
A Model of Career Development Consequences
Trends and Issues in HRM
Gamification—A Phoenix Rising?
The Corporate Learning Imperative
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Practitioner’s Perspective
Cindy told the story of Jennifer, who had worked in the same position for 10 years. Jennifer had always been a valuable employee, but lately, her productivity and performance had started to decline. Her supervisor, Mandy, finally called her in to find out what was wrong.
After some hesitation, Jennifer said, “To tell the truth, I feel like I am in a rut. I just don’t get the same satisfaction from doing my job that I used to get.”
“I wish we’d had this talk sooner,” Mandy replied, “but now that I know how you feel, there is something we can do. Let’s take a look at some of the training opportunities coming up this quarter. Tell me what training classes you might be interested in taking.”
What if Jennifer and Mandy never had that talk? Do you think Jennifer would have remained at her job?
Chapter 7
looks at the ins and outs of managing and retaining talent through training and development.
SHRM
HR CONTENT
See Appendix: SHRM 2016 Curriculum Guidebook for the complete list
Q. Organizational Development (required—graduate students only)
2. Developing human resources
3. Emotional intelligence
4. Equipping the organization for present and future talent needs
8. Measurement systems
11. Organizational learning
13. Outsourcing employee development
16. Training employees to meet current and future job demands
T. HR Career Planning (secondary)
1. Definition of a career
2. Balancing work and life
7.
Plateauing
9. Career development
Get the edge on your studies.
edge.sagepub.com/lussierhrm3e
• Take a quiz to find out what you’ve learned.
• Review key terms with eFlashcards.
• Watch videos that enhance chapter content.
p.226
THE NEED FOR TRAINING AND DEVELOPMENT
LO 7-1
Discuss the major difference between training and development and identify the common situations where training may be needed.
Now that we’ve made it through the process of selecting individuals into the organization, the next thing we need to do is train them to successfully work within the new environment and to do their new jobs. In all cases, new employees should get at least basic training about the organization and its routine processes as well as the training for the job they are going to be filling. We can’t reasonably expect them to do a job successfully unless they’re trained in how to do it; and there is a relationship between training and job satisfaction,1 so we need to insure that the required onboarding training is completed. Offering training and development also generally decreases expensive turnover2 and makes it less likely that employees will engage in neglectful behavior.3 Training is costly though, so it must be done correctly to get sufficient benefits to outweigh the cost.4
Effective training and development are investments, not expenses, as they pay for themselves through competitive advantage and increased performance.5 This is why companies worldwide are investing heavily in training and long-term employee development.6 Hudson Trail Outfitters even rewards employees for completing training programs.7 As managers’ skills should also be developed,8leadership programs and courses are currently popular.9 This is why best-practice companies (e.g., GE, IBM, and Johnson & Johnson) provide leadership programs.10
Training and Development
Before we get into the details of training and development, we need to understand competency models because training is based on the competencies we want employees to have. Competency models identify the knowledge, skills, and abilities (known in HR as KSAs) needed to perform a particular job in the organization. We can utilize competency models to identify what types of training a new employee or an employee changing jobs will need. We go through a process of identifying and providing the training, evaluating how well the employee has learned, and then assessing the training process itself using one of several options. We will discuss this in more detail in a little while, but for now, just remember that training is a critical piece in the education of each employee in the organization.
SHRM
L:2
Competency Models
In this chapter, we will discuss both organizational training and employee development. The two are related but separate pieces of the organization’s processes involving the management of its employees.
p.
227
Marriott is one of many companies that offer a variety of training programs to its employees. Training topics include leadership, management, and work-life balance.
Spencer Platt/Getty Images
Training is the process of teaching employees the skills necessary to perform a job. We train employees to provide them with the KSAs that they will need to succeed in their work for the organization. Training is primarily intended to be put to immediate use by the individual being trained. As an example, Amazon focuses on customer service, so it trains its employees by drilling them in what steps to follow when they get everyday questions and when fielding more unusual requests. To make sure everyone at Amazon understands how customer service works, each employee, including the CEO, spends 2 days on the service desk every 2 years.11
SHRM
E:5
Training and Development
Somewhat in contrast to the training we do so that employees can do a new job or do an existing job better is the process of employee development. Both colleges and corporations have been criticized for not doing a good job of developing business leaders.12 This is one of the reasons why this book focuses on developing HR skills, not just knowledge. Employee development is ongoing education to improve knowledge and skills for present and future jobs. So, employee development is designed to teach our workers how to move up in the organization in the future by becoming skilled at those tasks that they will need to know to move into higher-level jobs. Development tends to be less technical, and it is aimed at improving human, communication, conceptual, and decision-making skills in employees. To remain competitive in today’s dynamic environment, organizations must have employees who maintain up-to-date knowledge and skills; and development plays an important role in this effort.13
SHRM
Q:16
Training Employees to Meet Current and Future Job Demands
When Is Training Needed?
To successfully determine what kinds of training need to be carried out within the organization, HR managers should begin by completing a needs assessment. We will discuss needs assessments in the next section. For now, let’s review some common points at which we should probably complete a needs assessment and at least consider providing training to our people.
SHRM
Q:2
Developing Human Resources
NEW EMPLOYEE ONBOARDING.Orientation, known better now by the term onboarding, is the process of introducing new employees to the organization and their jobs. New employees are often called newcomersin organizational entry;14 and newcomer socialization done effectively during the onboarding process increases new employee job satisfaction and performance and reduces turnover rates.15,16 Onboarding frequently emphasizes corporate values, culture, and strengths.17 Organizations that have developed innovative onboarding programs include
Rover.com
, Wipro, Rackspace, Bazaarvoice, and Google.18 This socialization process is important to both newcomers and organizations, as newcomers learn the ropes and understand what is expected from them in their work as they assimilate into the organization and attempt to become productive members.19 Thus, job and career orientation have long-lasting effects on new employee job attitudes and satisfaction, behavior, work mastery, and performance.20
Onboarding is an introduction of the person to the company. What do we need to think about when we introduce somebody to the company? We need to think about introducing the new employee to all of the things that exist within the organizational society that they are entering. The process is very similar to someone moving to a different country and having to assimilate into a new culture. What do people need to know in order to be able to go about their daily lives, do the routine things that they need to do, and provide for their own personal needs? Orientation should be designed to answer all of the questions necessary to allow new employees to integrate into the “society” that they are entering.
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228
WORK
APPLICATION 7-1
Select a job you hold in the present or held in the past. Did you receive both training and development or just training? Explain in some detail why it was one or both.
One of the first things an individual would need to know is what the laws, rules, and regulations are in the new society; so we need to introduce the new employee to the organization’s policies and procedures, rules, and regulations. The second thing that people would probably want to know is how to act and interact with others in the new society. So in addition to introducing the employee to the job and how to perform it within the organization, we would want to talk to the individual about the underlying organizational structure, plus where to go and whom to talk to in order to get certain things done. Who should they talk to in their department if they have questions about their job or about how things are done within the department? Who should they speak with in other departments if they have questions that can’t be answered within their primary workgroup, and when is it acceptable to go to individuals in other departments?
Next, they might want to know how they get the money that they need in order to survive in society. So we need to tell them about their pay and benefits, including whom to contact with questions. People entering this new society would also probably want to know how to stay safe as they go about their business, so we need to talk to them about safety in the organization. They would also likely need to fill out paperwork—to get a driver’s license, to open a bank account, to identify who they are, and so forth. Similarly, certain paperwork is necessary for the organization to function successfully, so during onboarding we ask the new employee to fill out this paperwork.
As you can see, there are many different things that we need to teach someone entering our new society, so we can’t legitimately perform the entire onboarding process in one day or a couple of hours. Effective onboarding of employees also results in lower turnover rates,21 so orientation to the firm and the new employee’s job should “last at least one year to ensure high retention say staffing and HR experts.”22 Here are a few examples of world-class companies with long onboarding programs: Toyota has a 5-week orientation, Honda has a 6-week orientation, and Southwest Airlines has a 90-day orientation.
However, in most organizations, the onboarding process is significantly shorter than this, and this is one reason that our organizations suffer significant early turnover of new hires. If our new employee is frustrated due to not knowing how to do the job, where to locate tools, whom to go to with a problem, or how to fix an issue with pay, the likelihood of that person leaving the organization goes up drastically. Many organizations could significantly reduce new-hire turnover by modestly increasing the onboarding and socialization period for new hires.
WORK
APPLICATION 7-2
Briefly describe the orientation you received for a job. How could it be improved?
NEW JOB REQUIREMENTS OR PROCESSES. The second common point where training may be necessary occurs when jobs change in some form. Whether our employee is in the same job or is changing jobs and needs to learn new processes, if there is a significant change in any work requirements, we need to train the employee. The change may be based on discovery of new techniques or technologies to perform particular work to make the work more efficient. The organization may have changed its strategic direction; and as a result, some or all of the jobs within the organization may require new processes or procedures. In any of these cases or any similar situation where the change has significance for that job, we should go through the process of performing a training needs assessment. If the result of the needs assessment shows that training is necessary, then an appropriate training program can be designed and implemented.
REMEDIATION. The third common point at which managers need to investigate the requirement for additional training occurs when there has been some failure of an employee or some employees to perform successfully and meet organizational standards. Remediation is the correction of a deficiency or failure in a process or procedure. In remediation, we work to correct the actions of the individual or individuals responsible for the process or procedure so that they can successfully carry out the action in the future. We don’t want to make a common mistake, though. Remediation is not about assigning blame for a failure. The emphasis in this case should always be on correcting the actions of the employee to better serve both the employee’s and the organization’s interests. Organizational managers act just as a good physician or mechanic would act—by diagnosing the situation first and then taking appropriate corrective action to solve the problem.
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EMPLOYEE DEVELOPMENT FOR ADVANCEMENT. The next point at which to evaluate the need for training is in situations where we are working to develop current employee skills and abilities so that employees can move into higher level jobs within the organization. Offering development opportunities generally decreases turnover.23 As noted in
Chapter 4
, all organizations have a responsibility to plan for the succession of individuals in management and executive positions; and this planning is usually a function assigned to the HR department. Providing development opportunities and succession planning is the only way the organization can be sustainable over long periods of time. To successfully carry out a succession process, people at lower levels in the organization must be trained in the knowledge and skills necessary to be able to take on higher-level duties. One area getting particular attention today is training and development in ethics and social responsibility, in part because of the litany of ethical failures in scores of companies over the past couple of decades. While very few organizations will attempt to develop all of the employees within the firm, most organizations go through an informal or formal process of identifying high-potential individuals for development and, ultimately, advancement into managerial and executive slots.
SHRM
L:11
The Role of Training in Succession Planning
Many 21st century organizations have rigorous development programs that include job rotation to various departments within the organization, classroom and on-the-job training, assigned mentors, and many other programs–all of which are designed to train employees and develop their capabilities for future use within the firm. Organizations that neglect succession processes and employee development can find themselves at a competitive disadvantage when senior personnel leave the firm through either retirement or resignation. It is critical that HR lead the process of planning for succession and employee development. Although in this chapter we will focus more on training than development (there are five major sections explaining training, followed by one section on employee development), both are important to the organization over the long term.
THE TRAINING PROCESS AND NEEDS ASSESSMENT
LO 7-2
Briefly discuss the steps in the training and development process and the common challenges to the process.
How are we going to go about training our employees? How do we know who needs what training, in what forms, and at what point? How do we determine whether or not the employee is ready and willing to participate in the training? Finally, how do we know that the training was effective? In order to answer these questions, we have to plan our training processes very carefully. We need to look at what’s currently going on in the organization and how that differs from what needs to happen in the future to accomplish our strategic business goals. So training and development are another set of strategic HRM tasks. Once we do this, we can analyze the types of training that will be necessary to build new knowledge, skills, and abilities for our workforce.
Licensed Video
Evaluating Training Programs
Steps in the Training Process
This chapter is primarily organized to follow the steps in the training process. Let’s take a look at how we go through the training process in
Exhibit 7-1
. We’ll follow that up with a brief discussion of the steps and then provide more detail throughout the chapter.
Step 1: Assessing needs. We conduct a needs assessment to determine what training is necessary to improve performance. We will discuss this step in this section.
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230
Exhibit 7-1 THE TRAINING PROCESS
Step 2: Selecting how to shape behavior. We select a method of shaping employee behavior based on learning theories so that we can change employee behavior to improve performance. We will discuss this step in this chapter’s section “Learning and Shaping Behavior.”
Step 3: Designing training. We design the training and development based on the needs assessment. We must determine which training methods we will use to shape employee behavior. We discuss this step in this chapter’s section “Design and Delivery of Training.”
Step 4: Delivering training. Before we actually conduct the training and development, we must select the delivery method. We also discuss the delivery options in the section “Design and Delivery of Training.”
SHRM
Q:4
Equipping the Organization for Present and Future Talent Needs
Step 5: Assessing training. After we complete the training, our last step is to assess how effective the training was at developing the needed skills. We do this by determining our success at shaping behavior. We discuss this step in this chapter’s section “Assessing Training.”
SHRM
E:5, L:1
Needs Assessment
Interrelationship of the Training Process Steps. Note in Exhibit 7-1 that each of steps 2, 3, 4, and 5 has a double-headed arrow; this is because all the steps are so closely related and based on each other that they are commonly planned together before actually delivering the training. In other words, you are constantly thinking ahead and behind your current step in the training process. If the assessment of the training reveals that the behavior has not been shaped (changed) as needed, we may have to go back to step 1 and start the training process again.
Needs Assessment
The first major step in the training process, and probably one of the most important, is the needs assessment. A needs assessment is the process of analyzing the difference between what is currently occurring within a job or jobs and what is required—either now or in the future—based on the organization’s operations and strategic goals. If a needs assessment is not done correctly, a training course may be poorly designed, or it may cover the wrong information. The wrong employees may be asked to participate in the training, or they may not yet be capable of absorbing the information in the training because of a lack of a knowledge base or skill set. We may end up creating a training program that’s unnecessary, or we may fail to determine that an issue is based on poor performance rather than lack of knowledge. These are significant issues that we can avoid if we correctly go through the process of a needs assessment.
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Similar to those good physicians and automobile mechanics that we just mentioned, organizational managers have to diagnose what may currently be wrong with a process so that they can successfully repair and/or tune the process up. If they don’t do the diagnosis correctly, managers may create training solutions that don’t solve the existing problem. So the manager has to go through a process of identifying where in a current sequence of events things are not working the way they should, or how they can be done more efficiently. Only by diligently going through the process of looking at that chain of events in the status quo can a manager identify where the process can be changed to improve organizational productivity and reach the organization’s goals.
Challenges to the Training Process
As part of the needs assessment and in order to design training appropriately, we need to identify and discuss some common challenges to the training process. These include minimally prepared or unprepared workers, difficulty in identifying the return on investment provided from training, employee resistance to change and feelings of insecurity, matching the training to the strategic goals of the organization, and logistics issues—including scheduling and making locations available for training courses. Managers have to work through each of these challenges in order for training programs to be successful.
Unprepared Workforce. One of the most significant challenges to work process training is the fact that so many of the individuals being hired into the workforce are ill prepared in the educational basics, including reading and math skills. As we noted in
Chapter 6
, employers continue to hire substantial numbers of new entrants who have significant education but poor work skills, requiring additional company investment to improve workforce readiness.24 In cases where the employees don’t have the basic skills necessary to succeed, the organization must train them in those basic skill sets before they can be taught the advanced skills necessary to improve organizational processes.
WORK
APPLICATION 7-3
Do a simple needs assessment for a job you have or had. Be sure to state the competency model (knowledge, skills, and abilities) it takes to do the job.
Return on Investment/Cost Justification.Businesses today are naturally concerned with the return that they get from any corporate investment. Training is time-consuming and expensive,25 and it is no different from any other investment. Executives expect and, in fact, require that training provide a positive return on investment (ROI). HR managers have become more familiar with the ROI calculation discussed in
Chapter 2
, and they use it to provide justification for the financial cost of training programs.
WORK
APPLICATION 7-4
Think about the people you have worked with. What is your perception of the preparation they have had for the workforce?
Resistance to Change and Employee Insecurity.Since this is not a change management text, suffice it to say that virtually all individuals resist changes to their routine. They resist for a variety of reasons—including insecurity, based on their concern that they may not be able to successfully adapt to the change in some way. This insecurity leads to resistance to change, and it can cause significant difficulty in the training process. Management must overcome resistance to change exhibited by the workers so that training can be successful.
WORK
APPLICATION 7-5
Think about the people you have worked with. What is your perception of their resistance to changes in their work routine?
Strategic Congruence. Strategic congruence is another challenge to the training process. One of the most critical requirements in corporate training programs is the need to ensure that the training furthers the strategic goals of the organization. Any training program that does not aim squarely at the strategic goals of the organization is difficult to justify in a corporate environment. As HR managers, we have to ensure that our training and development programs help to carry out the organization’s strategy over the long term.
Scheduling. The last of our common challenges, scheduling, involves both the timing and the location of the training. As with most things, there’s never an ideal time to schedule a training course, especially if it runs for several days or even weeks. The trainees have to leave their regular jobs undone for the period of the training, and the organization has to be able to operate without those trainees performing their normal tasks. In addition, the training may require the use of physical locations that have special equipment or tools and that are available only for limited time periods during the year. These logistics issues may seem minimal, but they frequently create significant problems for the HR department in scheduling training courses.
HR managers select employees who have the ability and willingness to be trained to succeed on the job.
Employee Readiness
As part of our needs assessment, the manager needs to evaluate the employees who would be taking part in the training. Employees may feel insecure about their ability to learn, and they may therefore be unwilling to participate in training for new processes. We must also evaluate whether the employees are physically and mentally ready to go through the training process successfully. In other words, are they able and willing to learn?26 Do they have the skills and competencies necessary to succeed in this training process?
ABILITY. We have to determine whether or not our employees feel that they are able to participate in the training process. They might feel that they don’t have the background training necessary to succeed in training for a more complex process, meaning they may feel that their core set of skills needs to be improved before they can be successful in more intricate training. Self-efficacy is whether or not a person believes that they have the capability to do something or attain a particular goal. If the employee’s self-efficacy is low, they may not believe that they have the ability to succeed in the training process. Regardless of whether or not it is true, if the employee believes they are unable to learn, then it is highly unlikely that they will be successful in any training process because they are unlikely to try.
If employees feel that they are unable to learn, then the job of the manager becomes one of upgrading the employees’ abilities if necessary and then convincing them of their capabilities. In addition, the manager has to analyze the true abilities and limitations of each of the employees who may participate in the training process. Remember that each of us has physical abilities and intellectual abilities, but we don’t all have the same physical and intellectual abilities. Again, it is management’s job to diagnose and determine whether or not an individual has the abilities necessary to succeed in a training process, and not to put people into situations where their lack of specific abilities condemns them to failure.
What happens when people are put into situations where they are almost certain to fail? What happens to their motivation, morale, and job satisfaction? What most likely will happen to their productivity? If managers put people into this type of situation, we are almost assured of lowering their performance level rather than raising it. This is certainly not the way to get maximum productivity out of our workforce, so we want to avoid putting people in training situations where they are almost certainly going to fail.
WORK
APPLICATION 7-6
Describe your self-efficacy for a job you have or have had. How does or did your self-efficacy affect your job performance?
WILLINGNESS. The second major piece in the employee readiness equation is whether or not employees are willing to learn what’s being taught in a training program. In other words, we have to determine their motivation to learn. Why would our workers not be motivated to learn? There are several potential reasons.
First, the individual may not feel that they need to learn a new process. If they feel that the current process is sufficient and that the new process won’t improve their work environment, they may be unwilling to learn. If they feel that the training process is being done solely for political reasons (e.g., many workers harbor a false belief that programs such as diversity training and sexual harassment prevention training are motivated by the perceived need of the organization to be politically correct, even though this is not true), then they may not be interested in the training. If the individual doesn’t feel that the training is related to their job, they may not be motivated to learn. If the employee is concerned that their work will pile up while they’re gone, they may not be motivated to train. If their coworkers or supervisors don’t support the fact that the individual will have to be away from the job in order to go through a training course, and as a result put pressure on the individual, that person may not be motivated to go through the training.
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A significant part of willingness to learn is based on the support the individual gets from the people around them, including coworkers, supervisors, and even family members. If one of your employees is going to be away from home for a period of several weeks and the employee’s family members are opposed to this extended period of separation, it’s extremely unlikely the employee is going to be willing to participate in the training. So the manager needs to make sure that the employee is willing to go through the training process.
LEARNING AND SHAPING BEHAVIOR
LO 7-3
Identify the three common learning theories and how they are used to create the four methods for shaping behavior.
Step 2 of the training process consists of selecting how to shape or change employee behavior. To do this, trainers have to understand how people learn. So in this section, we begin by explaining learning. Then we discuss three basic learning theories used to shape employee behavior. Next, we put the theories together in
Exhibit 7-2
and discuss how to shape or change employee behavior. Then we end with learning styles.
WORK
APPLICATION 7-7
Do you like to learn new things? Describe your willingness to learn in college and to train on the job. Will you voluntarily sign up for company training and development programs that are not required for your job?
Learning
What is learning? Learning can be many different things; but in a business, we usually need to know that our employees have learned something that we are trying to train them to do. How do we know that they have learned a particular thing, then? We know because of changes in their behavior at work. So in our case, learning is any relatively permanent change in behavior that occurs as a result of experience or practice.27 This is a good definition to use in the organizational learning process, due to the fact that it provides us with the visible evidence that individuals have learned something because they change the way they act.
People learn in multiple ways. We learn through trial and error, from the consequences that occur as a result of something we’ve done, and from the consequences of other people’s actions. And what makes this process even more complex is the fact that different people prefer to learn differently. We all have preferred learning styles, and we like having the option to pick one style over another.
SHRM
Q:11
Organizational Learning
Learning Theories
Let’s take a look now at three common learning theories: classical conditioning, operant conditioning, and social learning. Each of the three is useful for certain types of training.
SHRM
L:3
Learning Theories
CLASSICAL CONDITIONING. Classical conditioning was made famous by a physiologist named Ivan Pavlov. Pavlov became famous by causing dogs to salivate even when not in the presence of food. Pavlov proved that when dogs were conditioned to associate the ringing of a bell with being fed, they “learned” to salivate when the bell was rung. What does the fact that a dog would salivate on command have to do with human learning? At first glance, it looks a little silly. However, what Pavlov proved was that animals will react involuntarily to a stimulus in their environment if they associate that stimulus with something else. OK, but humans are not dogs, so do humans react involuntarily to a stimulus in the environment? Of course they do. Human beings react involuntarily to stimuli the same way all other animals do.
Have you ever walked down a row of restaurants in your hometown and smelled the aroma of fresh food being prepared, and that reminded you of a relative’s home when they were cooking your favorite dinner? This pleasant memory may change your mood, and in fact, it may change your behavior because of the feeling of well-being that it creates. Alternately, have you ever heard a sound that caused you to be afraid or to want to run away from it? Why does such as sound cause you to be afraid? If you think for a few seconds, you will probably realize that the sound indicates danger to you, whether you consciously realize it or not. You’ve been involuntarily conditioned to the feeling of danger associated with the sound. So, Pavlov’s classical conditioning results in “direct, involuntary, learned behaviors.” The behaviors are learned because you have changed the way you act due to some prior experience, and they are involuntary because you didn’t intentionally learn to act in a particular way in response to the stimulus. Finally, the behaviors are direct because the learning occurs as a result of something happening directly to you.
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OPERANT CONDITIONING. The second common learning theory is called operant conditioning, which is based on reinforcement. Again, most of us have heard of the individual who made this learning theory famous—B. F. Skinner. Skinner’s theory of operant conditioning says that behavior is based on the consequences received from behaving in a similar way at an earlier point in time. In other words, if we acted in a certain way previously and received a reward, we will likely repeat that behavior. If, however, we acted in a particular way and received a negative consequence (punishment), then we will probably not repeat the behavior. Skinner tested his theory using his “Skinner box.” He would put animals such as a pigeon or a rat in a box and provide a stimulus such as a light above a lever. If the animal chose the right lever, they were rewarded with food. If the animal chose the incorrect lever they would receive punishment such as a mild electrical shock.
Skinner showed that very quickly, the animals would figure out which lever to press in order to receive the reward. So, operant conditioning results in “direct, voluntary, learned behaviors.” The subjects in Skinner’s experiments voluntarily selected the lever that provided the reward, so they learned to behave in a particular way based on the direct consequences of their actions. So Skinner proved that animals will voluntary act in order to receive a reward and avoid acting in order to avoid receiving punishment.
WORK
APPLICATION 7-8
Give examples of what you learned in an organization through classical conditioning, operant conditioning, and social learning.
SOCIAL LEARNING. Our third type of learning, social learning, is similar in form to operant conditioning. The difference here is that we are not learning from the consequences of our own actions but from the consequences of the actions of another person. Social learning is also called vicarious learning. The word vicarious means “experienced or realized through imaginative or sympathetic participation in the experience of another.”28 So social or vicarious learning is experienced through watching the actions of another person and witnessing the consequences of those actions. In other words, if a young boy watches his sister receive a cookie as a reward for cleaning her room and he wants a cookie too, he may determine that the best way to get a cookie is to go clean his own room. This would be an example of social learning. Again, social learning is based on voluntary, learned actions on the part of the individual, but it is based on indirect consequences of the actions of another person.
7-1 APPLYING THE CONCEPT
Learning Theories
Review the three learning theories below and write the letter corresponding to each theory before the statement(s) illustrating it:
a. classical conditioning
b. operant conditioning
c. social learning
____ 1. My parents continuously told me how to behave properly as I was growing up. Could that be why customers comment on my good manners and social skills?
____ 2. I got caught smoking in a no-smoking area and was given a verbal warning. I’m not doing it again because I don’t want to get into more trouble and possibly end up losing my job.
____ 3. Shelly is a very hard worker, but I’ve never even seen her get as much as a thank-you for her performance. So why should I work?
____ 4. After seeing what happened to Sean, you better believe that I’m keeping my goggles on when I’m on the job.
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SOCIAL MEDIA FOR SOCIAL LEARNING. Recent innovation in using social media has provided a new tool for applying social learning. We know that people learn from each other as much as or more than they do from formal training. This is one reason why OJT is used so much. Because this type of learning works so well, and because more than 3 billion people worldwide are members of at least one social media site, we can utilize social media as a learning tool.
Social media is all around us today. It is also easy to adapt as a platform for organizational learning, especially a fairly new form called micro-learning that we will discuss in more detail in the Trends and Issues section of this chapter. We can discuss problems, provide video and/or audio step-by-step instructions, utilize team-based brainstorming sessions and problem analysis, and discuss complex questions with large groups of combined customers, employees, and managers. You will need to understand the applications of social media in a training and learning environment to successfully manage learning in today’s organizations.
Shaping Behavior
We can use the three types of learning that we have just reviewed, especially Skinner’s concept of operant conditioning, to shape the behaviors of the employees in the organization. In order to shape the behavior of our employees, we can provide reinforcement (rewards) or punishment or, as a third alternative, provide neither. Take a look at Exhibit 7-2. It shows four methods of shaping behavior. We can break these methods down into a process of applying a reward, removing a reward, applying punishment, removing punishment, or providing no response to the actions of the individual.
So, what’s the value of understanding Exhibit 7-2 and the four methods of shaping behavior? If we understand each of the four methods, we can use them to cause workers to act in ways that are conducive to the improvement and ultimate success of the organization. Let’s discuss each part of the exhibit.
Exhibit 7-2 SHAPING BEHAVIOR
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236
Positive reinforcement. If we apply a reward (the upper left quadrant A in the exhibit), we’re using the concept of positive reinforcement. Positive reinforcement is providing a reward in return for a constructive action on the part of the subject. For example, if our employees do something that improves the safety of workers in the organization, we may give them a bonus as a reward. This would be positive reinforcement. Applying a reward to a particular behavior is likely to cause the individual to perform that behavior, or similar behaviors, again. So our employees would be likely to provide other suggestions to improve our business operations because of the past reward. We should realize that positive reinforcement is the most commonly used method of shaping employee behavior when we train new employees to do their jobs and when existing employees need to learn new job requirements and processes.
Negative reinforcement. Our second option would be to avoid or remove a noxious stimulus (the lower right quadrant D in the exhibit), a process called negative reinforcement. Negative reinforcement is the withdrawal of a harmful thing from the environment in response to a positive action on the part of the subject. Negative reinforcement is commonly based on rules, with punishment being given for breaking the rules. A rule itself is not a punishment; it is a means of getting people to do or avoid a specific behavior, such as coming to work on time. But if the rule is broken, punishment is usually the consequence. An example of negative reinforcement working as intended would be you coming to work on time not because you want to be on time but because you want to avoid a punishment for being late. It can also be removing an employee from disciplinary probation for tardiness in response to their positive action of showing up for work on time for a period of time after being disciplined. Avoiding or taking away a negative consequence in response to a positive behavior is likely to cause the individual to perform the desired behavior again. We should realize that negative reinforcement is commonly used during the new employee orientation to make sure employees know the expected behaviors and the consequences for breaking rules. We certainly don’t want to punish employees for breaking a rule that they don’t know exists.
WORK
APPLICATION 7-9
Give examples of how an organization uses positive reinforcement, punishment, negative reinforcement, and extinction to shape employee behavior.
Punishment. In contrast to reinforcement, we may punish bad behaviors. Punishment is the application of an adverse consequence, or the removal of a reward, in order to decrease an unwanted behavior. One method of punishment would be to remove a reward (the lower left quadrant C in the exhibit) as a result of people doing something that they shouldn’t have done. Think of taking away the car keys for a school-age driver who does something wrong. Or let’s say that our organization has a policy of providing free parking for our workers in a crowded downtown area. We might take away the parking privileges of an individual who continually harasses other workers in the parking lot.
Alternatively, we can apply a noxious stimulus (the upper right quadrant B in the exhibit), which is also considered to be punishment. An example here would be suspending a worker without pay because of excessive absenteeism. By suspending the worker, we’re applying a negative response. The negative response received by the worker is designed to cause a decline in the behavior that created such a response. So in other words, punishment can be the application of something bad (a noxious stimulus) or the removal of something good (a reward).
We should realize that punishment is not commonly used during training of employees; rather, it is commonly used when employees know how to do the job but just will not meet the job standards, or when employees break a rule and get disciplined for doing so. We will learn more about when and how to discipline employees in
Chapter 9
.
Extinction. We noted earlier in this section that there are four options for shaping behavior. What is the other option? The last option doesn’t fit in the diagram itself, because it’s the absence of reinforcement or punishment of any kind. Extinction is the lack of response, either positive or negative, in order to avoid reinforcing an undesirable behavior. You may have heard the phrase “Ignore it and it will go away.” How does a lack of response cause behavior to be shaped in a way that we desire?
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Employees will sometimes exhibit problem behavior to cause a reaction from the manager or fellow employees. The employee who exhibits the behavior may delight in causing others concern or consternation. For example, the male employee who continually asks his female manager about organizational sexual harassment policies in front of other workers to cause her discomfort as she explains the policy is most likely intentionally acting to cause her embarrassment. In such a case, the female manager may be able to ignore the stimulus behavior and provide no reinforcement. If the manager does so for a long enough time, the employee’s behavior will most likely decline or go away completely, because it is not having the desired negative effect on the manager. We should realize that extinction is also not very commonly used because when we train employees, we don’t usually ignore behavior in the hope that it will not be repeated—we correct it.
Shaping (changing) behavior. If you understand these methods of shaping behavior, they become powerful tools in your managerial toolbox for changing behavior to increase performance. These tools allow you to cause your employees to act in ways you want them to and avoid acting in ways that are detrimental to themselves, their division or department, or the organization as a whole. Now let’s discuss how to increase and decrease behaviors to increase performance.
Increasing targeted behavior. If we want to cause the behavior to increase, then we want to use positive or negative reinforcement (quadrant A or D in Exhibit 7-2). Reinforcement, whether positive or negative, is designed to cause an increase in the targeted behavior.
Decreasing targeted behavior. If, on the other hand, we want to cause a particular behavior to decrease, we would use punishment (in either of its forms) or extinction (quadrant B, C, or E in Exhibit 7-2). Punishment and extinction are designed to cause a targeted behavior to decrease over time.
Learning Styles
As a last point in our review of the learning process, we need to briefly discuss various learning styles that people prefer to use. There are more than 70 learning style inventories available in the psychology literature and even some questionnaires that track learning style on the Internet.29 There is, however, disagreement concerning whether or not we should use preferred learning styles in designing training, including work-related training. Some of the recent research, including a study done by Dr. Beth Rogowsky and her colleagues, says that although we do have preferred learning styles, there is no evidence that receiving instruction in that preferred style allows us to learn any better than receiving instruction in another style.30 Others argue, though, that there is evidence that we learn better using individual preferred learning styles, if for no other reason than we are more comfortable with our preferred style.31,32 Despite the disagreement, it pays us to at least understand the issue of individual learning styles because there is no evidence that training using preferred learning styles harm the learning environment, and using individual preferred learning style may even help the trainee learn better. HRM training and development experts might want to continue to review this research over the next several years to see how it ultimately affects student learning though.
7-2 APPLYING THE CONCEPT
Shaping Behavior
Review the following methods of shaping employee behavior and write the letter corresponding to each before the situation(s) illustrating it.
a. positive reinforcement
b. punishment—give bad consequence
c. punishment—remove reward
d. negative reinforcement
e. extinction
____ 6. Betty used to give me that intimidating look when I assigned her a task she didn’t want to do, and that behavior made me uncomfortable. So I just ignored it and didn’t let her make me feel uncomfortable, and she stopped giving me the look.
____ 7. You know the rules. That behavior is going to cost you $25.
____ 8. You got that angry lady to calm down and leave the store as a happy customer. This behavior leads to keeping our customers. Thanks, keep up the good work.
____ 9. If you don’t stop breaking the pricing gun, you will have to buy a new one.
____ 10. I know you like to get out of work for a while and get our lunches, but because you mixed up the order today, Santana will go tomorrow.
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7-1 SELF ASSESSMENT
Your Learning Style
Below are 10 statements. For each statement, distribute 5 points between the A and B alternatives. If the A statement is very characteristic of you and the B statement is not, place a 5 on the A line and a 0 on the B line. If the A statement is characteristic of you and the B statement is occasionally or somewhat characteristic of you, place a 4 on the A line and a 1 on the B line. If both statements are characteristic of you, place a 3 on the line that is more characteristic of you and a 2 on the line that is less characteristic of you. Be sure to distribute 5 points between each A and B alternative for each of the 10 statements. When distributing the 5 points, try to recall recent situations on the job or in school.
1. When learning:
_____ A. I watch and listen.
_____ B. I get involved and participate.
2. When learning:
_____ A. I rely on my hunches and feelings.
_____ B. I rely on logical and rational thinking.
3. When making decisions:
_____ A. I take my time.
_____ B. I make them quickly.
4. When making decisions:
_____ A. I rely on my gut feelings about the best alternative course of action.
_____ B. I rely on a logical analysis of the situation.
5. When doing things:
_____ A. I am careful.
_____ B. I am practical.
6. When doing things:
_____ A. I have strong feelings and reactions.
_____ B. I reason things out.
7. I would describe myself in the following way:
_____ A. I am a reflective person.
_____ B. I am an active person.
8. I would describe myself in the following way:
_____ A. I am influenced by my emotions.
_____ B. I am influenced by my thoughts.
9. When interacting in small groups:
_____ A. I listen, watch, and get involved slowly.
_____ B. I am quick to get involved.
10. When interacting in small groups:
_____ A. I express what I am feeling.
_____ B. I say what I am thinking.
Scoring: Place your answer numbers (0–5) on the lines below. Then add the numbers in each column vertically. Each of the four columns should have a total number between 0 and 25. The total of the two A and B columns should equal 25.
1. _____ A. _____ B. (5)
2. _____ A. _____ B. (5)
3. _____ A. _____ B. (5)
4. _____ A. _____ B. (5)
5. _____ A. _____ B. (5)
6. _____ A. _____ B. (5)
7. _____ A. _____ B. (5)
8. _____ A. _____ B. (5)
9. _____ A. _____ B. (5) 10. _____ A. _____ B. (5)
Totals: _____ A. _____ B. (25) _____ A. _____ B. (25)
Style: Observing Doing Feeling Thinking
There is no best or right learning style; each of the four learning styles has its pros and cons. The more evenly distributed your scores are between the A’s and B’s, the more flexible you are at changing styles. Understanding your preferred learning style can help you get the most from your learning experiences.
Determining Your Preferred Learning Style
The five odd-numbered A statements refer to your self-description as being “observing,” and the five odd-numbered B statements refer to your self-description as “doing.” The column with the highest number is your preferred style of learning. Write that style here: _________________________
The five even-numbered A statements refer to your self-description as being a “feeling” person, and the five even-numbered B statements refer to your self-description as being a “thinking” person. The column with the highest number is your preferred style. Write that style here: _____________________________
Putting the two preferences together gives you your preferred learning style. Check it off below:
_____ Diverger (combines observing and feeling)
_____ Converger (combines doing and thinking)
_____ Assimilator (combines observing and thinking)
_____ Accommodator (combines doing and feeling)
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Fleming learning styles. One of the common learning style inventories, by Neil Fleming, provides three primary learner options. These three options are visual, auditory, and tactile learning.33 As you would think, visual learners prefer to have material provided in a visual format such as graphs and charts. Auditory learners, on the other hand, generally prefer to learn information based on hearing that information. Auditory learners tend to perform best in a historical classroom setting where the teacher stands in front of the class and teaches while the students passively listen. Finally, tactile learners prefer to learn by doing. Tactile learners want to physically perform a task in order to learn. Most of us use a mix of all three of the major learning styles. Therefore, a trainer should take each of the styles into account when creating a training program.
You should realize that we provide multiple tactile-learning application and skill-building opportunities in this book. Which of the three options do you prefer when learning something?
Kolb learning styles. A more complex learning style inventory was developed by David Kolb.34 Kolb’s model is probably the most accepted of the learning style models in use today.35 To determine your preferred learning style, complete Self-Assessment 7-1.
DESIGN AND DELIVERY OF TRAINING
LO 7-4
Discuss each of the major training delivery types.
Recall that back in
Chapter 1
, we identified four important HRM skills: technical, human relations, conceptual and design (decision making), and business skills. Essentially, all of the training methods are used to develop specific skills that can be classified into one of these four skills categories. Once we have completed our needs assessment and selected how we plan to shape behavior, we are ready to complete step 3 of the training process: designing the training by selecting training methods and then delivering the training. So in this section, we will present which training methods to use based on which types of skills we are developing.
Exhibit 7-3
presents the type of skills, the training methods appropriate for developing each skill, and descriptions of the training methods.
Before we actually conduct the training, in step 4, the HR department or other trainers also have to select the types of training delivery. The choice will depend to some extent on what information is being transferred, as well as on the options that are available to the particular organization. We also need to look at the best type of training to use in order to maximize transfer of knowledge while minimizing the cost of the training process. Each of the four training types has advantages and disadvantages that have to be understood to assign the correct option to a specific type of training program. In the next sections, we discuss our four options: on-the-job, classroom, distance, and simulation training.
WORK
APPLICATION 7-10
Identify and describe the training method(s) used to train and develop you for a job you have or have had.
On-the-Job Training (OJT)
On-the-job training (OJT) is done at the work site with the resources the employee uses to perform the job. The manager, or an employee selected by the manager, usually conducts the training one-on-one with the trainee. Because of its proven record of success, job instructional training (JIT)—a specific type of on-the-job training—is a popular training type used worldwide.
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Exhibit 7-3 SKILLS AND TRAINING METHODS
7-3 APPLYING THE CONCEPT
Training Methods
For each of the training situations below, identify the most appropriate training method. Use the letters a through j from Exhibit 7-3 as your answers.
____ 11. You want your customer service staff to do a better job of handling customer complaints.
____ 12. Your large department has a high turnover rate, and new employees need to learn several rules and regulations to perform their jobs.
____ 13. You need your new employees to learn how to handle the typical daily problems they will face on the job.
____ 14. You need an employee to conduct an Internet search to find out more about a new product you want to buy for the department; you want a special report.
____ 15. You want employees to be able to do each other’s job when they take vacations.
____ 16. You want to improve your employees’ ability to sell products to customers in the store so that customers don’t end up leaving and buying the products online.
____ 17. You need to prepare middle managers to advance to upper-level managers. You are considering having them run a simulated company getting quarterly results.
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MODEL 7-1 JOB INSTRUCTIONAL TRAINING STEPS
SHRM
L:6
On-the-Job Training (OJT)
JOB INSTRUCTIONAL TRAINING (JIT). JIT has four steps, presented in
Model 7-1
and described here.
Step 1: Preparation of the trainee. Put the trainee at ease as you create interest in the job and encourage questions. Explain the task objectives and quantity and quality requirements, and discuss their importance.
Step 2: Presentation of the task by the trainer. Perform the task yourself slowly, explaining each step several times. Once the trainee seems to have the steps memorized, have the trainee explain each step as you perform the task. Prepare a written list of the steps in complex tasks and give a copy to the trainee.
Step 3: Performance of the task by the trainee. Have the trainee perform the task slowly while explaining each step. Correct any errors and be willing to help the trainee perform any difficult steps. Continue until the employee can perform the task proficiently.
Step 4: Follow-up. Tell the trainee who is available to provide help with any questions or problems. Gradually give the trainee more autonomy. Begin by checking quality and quantity frequently; then decrease the amount of checking based on the trainee’s skill level. Watch the trainee perform the task and be sure to correct any errors or faulty work procedures before they become habits. Be patient and encouraging.
Even though OJT is fairly expensive on a per-person basis, many organizations still use it heavily because of the fact that it works very well. See
Exhibit 7-4
for the advantages and disadvantages of OJT.
John Lund/Marc Romanelli
Employees are often given on-the-job training, especially in small businesses.
Classroom Training
Our second training option is classroom training. Classroom training is also a common form of training in organizations. To accomplish classroom training, the organization will create a training course—including content, instruction methods, lesson plans, and instructor materials—and provide all these materials to a qualified instructor who will teach the class.
Classroom training is generally very good for consistently transferring general knowledge or theories about a topic to a large number of people. It is generally not very good for teaching specific hands-on skills because of the passive nature of learning in a classroom. However, it is effective when using the same equipment that is used on the job. For example, many large banks have to train lots of tellers, and they conduct teller training in a classroom setting at headquarters, using an expert trainer so that the employees can go to the bank and actually begin work without any further training at the branch.
Let’s do a quick review of some of the advantages and disadvantages of classroom training in
Exhibit 7-5
.
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Exhibit 7-4 ON-THE-JOB TRAINING’S ADVANTAGES AND DISADVANTAGES
Exhibit 7-5 CLASSROOM TRAINING’S ADVANTAGES AND DISADVANTAGES
Distance or E-Learning
Our third option is some form of distance learning—also called e-learning—in either a synchronous or an asynchronous format. Synchronous distance learning occurs when all of the trainees sign in to a particular Learning Management System (LMS) such as Blackboard or Moodle, or a corporate LMS, where their instructor then interacts with them and teaches the topics for the day. In contrast, asynchronous distance learning is a process in which the student can sign in to the training site at any point in time, and materials are available for their studies. The instructor may or may not be online at the same time as the student, but there’s no dedicated connection between the two for the purpose of teaching the information. In many cases today, the student does not have to work through an LMS. They can learn using any number of free or low-cost apps for training in just about any field.
Distance learning, similar to classroom training, is valuable for teaching basic concepts and providing general information on the topic. There’s typically even less interaction between an instructor and trainees in this form than in classroom training. Let’s analyze some of the advantages and disadvantages of distance learning in
Exhibit 7-6
.
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Exhibit 7-6 DISTANCE TRAINING’S ADVANTAGES AND DISADVANTAGES
SHRM
L:5
E-Learning and Use of Technology in Training
Self-directed learning is a specific kind of distance learning. In self-directed learning, individuals go completely at their own pace, and they are able to study whatever aspects of the topic they think they need to study to be successful while leaving other parts of the training uncompleted. Massively Open Online Courses, or MOOCs, are primarily self-directed learning. Self-directed training tends to have all of the potential advantages and disadvantages of other forms of distance learning. The most significant issue in self-directed learning tends to be the fact that if individuals are not motivated to learn on their own, they will be unsuccessful because nobody else is going to follow their progress and push them to complete the training.
WORK
APPLICATION 7-11
Identify and describe the type(s) of training you received for a job you have or had.
Simulations
The trend today is toward having more active involvement of participants and offering online simulation training and development.36 A simulation is a training method whereby we may simulate a real-life situation to teach students what actions to take in the event that they encounter the same or a similar situation on the job. Some common examples of simulations are flight simulators, driving simulators, and firefighting simulations. Simulations would typically be used in situations where actually performing an action or set of actions could lead to significant financial cost (because of lost equipment) or could put the trainee in significant danger of injury or death.
SHRM
Q:8
Measurement Systems
In these types of cases, providing simulations makes much more sense than actually performing a particular task. Asking students to perform in a simulation will also generally cause them to go through the same set of emotions that they would go through in the real-life situation being simulated. Training through the use of a simulation allows the student to experience these emotions and learn to control them in order to resolve a complex and dangerous situation. Let’s review the advantages and disadvantages of simulations in
Exhibit 7-7
.
ASSESSING TRAINING
LO 7-5
Briefly discuss the Four-Level Evaluation Method for assessing training programs and the three common ways we measure training success.
The fifth and last step of our training process (Exhibit 7-1) is assessment. No matter what the training covers, we always want to evaluate whether or not it achieved the shaped behavior identified through our needs assessment. Training can be designed to cause changes in a variety of employee attitudes and behaviors; and as a result, it can be assessed in a number of different ways, depending on what we were trying to accomplish. In this section, we present four assessment methods and how to choose an assessment method.
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Exhibit 7-7 SIMULATION TRAINING’S ADVANTAGES AND DISADVANTAGES
SHRM
L:4
Training Evaluation: Kirkpatrick’s Model
Assessment Methods
One of the most common assessment options, first identified by Donald Kirkpatrick, is called the Four-Level Evaluation Method.37 It measures reaction, learning, behaviors, and results.
Reaction evaluations measure how the individual responds to the actual training process. Self-reporting measures are quick and common measures of training.38 In reaction evaluations, the organization asks the participants how they feel about the training process, including the content provided, the instructors, and the knowledge that they gained by going through the process. They may also be asked about what new skills they have learned during the training process. This is the lowest level of training evaluation, and it is frequently discounted due to its subjectivity and because some people overestimate their capabilities.39 After all, is the trainee the best person to evaluate the knowledge they’ve gained if that knowledge is brand new to them? Certainly, reaction evaluations are less rigorous than some other forms of evaluation, but they still provide the organization with valuable feedback concerning the learners’ state of mind at the end of the training process as well as their attitude toward the process at its conclusion. Student course assessments are an example of reaction evaluations.
Learning evaluations are level-two measures designed to determine what knowledge the individual gained, whether they learned any new skills because of the training, and whether the person’s attitudes toward their knowledge or skill set has changed as a result of the training. Learning evaluations are easily done using quizzes, tests, and even topic-based discussions. Learning evaluations help the organization evaluate the skill of the instructor as well as the change in the knowledge set of the trainee. If the instructor is inadequate as a teacher, it should show up in a learning evaluation measurement. We should also be able to see whether or not the individual gained knowledge of the subject because of the training process.
Behavior evaluations are the third level of evaluating training processes. Behavior evaluations are designed to determine whether or not the trainee’s on-the-job behaviors changed as a result of the training. Behavior evaluations usually take the form of observation of the individual on the job, after completion of the training process. Did the process of going through the training have a direct effect on the individual’s post-training job performance? The behavior evaluation is specifically designed to identify whether or not the individual is able to transfer the knowledge gained into new skills that they then use in their work.
The Four-Level Evaluation Method helps managers measure the effectiveness of employee training.
Results evaluation is the fourth and final level of training evaluation. In a results evaluation, we try to determine whether or not individual behavioral changes have improved organizational results. In other words, we look at the organization’s bottom line to determine whether or not productivity has increased. This is the level at which ROI is measured and evaluated to see whether or not the training has paid off for the company. However, ROI is not the only thing that we measure at this level. Other results that we may measure include increased quality of work, lower absenteeism and turnover, reductions in rework and scrap, lower on-the-job accident rates, and many others. What we’re looking for in a results evaluation is concrete evidence that the training resulted in organizational changes that were valuable in some form.
WORK
APPLICATION 7-12
Which training assessment methods are used where you work or have worked? Give examples of the training and its assessment method.
Choosing Assessment Methods
Why not just evaluate all of our training programs at each of the four levels? The primary reason is that it costs the organization money to go through the evaluation process. So we don’t want to evaluate something unless we need to. In fact, as we go from levels 1 through 4, the cost of evaluating the training process increases with each level. Let’s identify when we might use each of the four evaluation levels.
SHRM
L:8
Transfer of Training: Design Issues, Facilitating Transfer
Reaction evaluations (level 1) help us identify employee attitudes toward the training process. If, in fact, the training process has been designed to change employee attitudes such as motivation toward their work or satisfaction with their job, level 1 evaluation may be critical. The perception of the trainee in this case may be more important in changing their level of motivation and job satisfaction than any new skills that they actually learned.
Learning evaluations (level 2) are used if there’s a need to evaluate more than employee attitude. We may wish to be certain that the trainee has gained a depth of knowledge of a particular issue to ensure that they are capable of putting their knowledge to use. For instance, to comply with federal harassment statutes, all US businesses need to ensure that their employees are trained on the concept of sexual harassment and how to avoid it. If we want to be certain that our employees know what sexual harassment is, we may choose to do a learning evaluation of that particular training session through giving a test.
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Behavior evaluation (level 3) is needed not only to ensure that new knowledge has been gained but also to ensure that the individual knows how to apply that knowledge by acting in a certain way. Performing a behavior evaluation is the only way that we can truly measure whether or not the individual has transferred the knowledge gained into actions that will improve their performance. An example here would be training operators for a nuclear power plant. Determining their attitude toward their work and whether or not they have the innate knowledge necessary to perform the work is insufficient in this case. It would be critical to determine whether or not they could act correctly to maintain and operate the nuclear reactor, so we would observe their actual performance on the job. You can quickly see here that we need to be absolutely certain that they’ll take correct action—in other words, that they will behave in the manner necessary to correct the failure.
Results evaluation (level 4) is the fourth and final level. In a results evaluation, we’re trying to determine whether individual behavioral changes have improved organizational results. In other words, we’re looking at the bottom line for the organization to determine if productivity increased. This is the level at which ROI will be measured and evaluated in order to see it the training has paid off for the company. However, ROI is not the only thing that we will measure at this level. Other results that may be measured include increased quality of work, lower absenteeism and turnover, reductions in rework and scrap, lower on-the-job accident rates, and many others. What we’re looking for in a results evaluation is concrete evidence that the training resulted in organizational changes that were valuable in some form.
Measuring Training Success
One challenge in assessment is developing metrics to assess training.40 Measurements of training have become significantly more important in the past few years. We now have the capacity to analyze large sets of data to find out how successful a particular approach is in creating a more skilled workforce. We also want to make sure we don’t spend money without getting results. There are dozens of metrics for measuring training effectiveness, but let’s take a look at a few of the most common measures here.
7-4 APPLYING THE CONCEPT
Training Assessment Methods
Review the following assessment methods and write the letter corresponding to each one before the situation(s) where it is most appropriate.
a. reaction evaluation
b. learning evaluation
c. behavior evaluation
d. results evaluation
____ 18. You are a software sales manager and you want your new sales reps to be able to demonstrate the various features of your software.
____ 19. You are a restaurant owner who installed a new food-ordering computer system with the objective of speeding up the time it takes to serve meals, so you need to train employees on how to use the new system.
____ 20. You are the HR manager and want to make sure that your staff understands what questions they can and can’t legally ask during the selection process.
____ 21. You are the service desk manager at a retail store and need to train employees on how to effectively deal with angry customers when they return merchandise. You want the employees to remain calm and satisfy the customer.
____ 22. You are the HR manager responsible for diversity, and you develop a training program to help employees better understand each other and not use stereotypes so that they can work well together.
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SHRM
L:10
Determining Return on Investment (ROI)
ROI (a results metric) is probably still the measure with the most meaning to those outside the HR department. Although it is sometimes hard to identify how to calculate ROI in a training situation (because of the difficulty of identifying the specific value of the gain), in at least some cases, it can be done quickly and easily. For instance, if a particular training program is designed to reduce annual voluntary turnover rates and it does so, the ROI measure would be as follows:
Average cost of turnover of one employee = $7,500
Annual voluntary turnover reduction after training = 8 employees
Total cost of training (course development, materials, instructor, etc.) 5 $25,000
Customer satisfaction (another result) is another area where we may want to measure training results. If we perform customer service training and have baseline surveys on historical levels of customer satisfaction, we can compare those levels prior to and after the training to see whether customer satisfaction rates went up. This will not provide a direct dollar value for the training, but if the sales or marketing managers have data on “value per customer” provided to the organization and rates at which dissatisfied customers leave, and if these rates show lower customer attrition
—then this can give us the means to do an indirect ROI calculation.
We may also want to evaluate employee satisfaction (reaction) levels after particular types of training—especially developmental training, which usually doesn’t give us an immediate return on our investment. We will talk in detail about employee job satisfaction, and why and how we measure it, in
Chapter 10
. But for now, just remember that it is a predictor of absenteeism and turnover, which both cost companies lots of money. There are also strong correlations between job satisfaction and customer satisfaction as well as other positive organizational outcomes like sales performance/revenue generation (result), individual productivity (behavior), accuracy/quality(learning/behavior) of work, and others.
TALENT MANAGEMENT AND DEVELOPMENT
LO 7-6
Discuss the term career and the three common methods of employee development.
Now that you have learned about the five steps of the training process, let’s discuss developing employees. We should realize, however, that development programs also follow the same five steps of the training process, as the steps listed in Exhibit 7-1 state both training and development. Remember from the beginning of the chapter that employee development deals primarily with training workers for futurejobs, not their current position. In this section, we discuss careers, common methods of employee development, and a model of career development consequences.
HRM in Action
Training Employees
Careers
What is a career? Is a career in the 21st century the same as a career in the 1960s or 1970s? Do individuals today go through just one or many careers throughout their work life? Half a century ago, a large percentage of people would spend their entire work life with one company. This obviously does not happen very often in modern organizations. In fact, there’s much evidence that says that you will likely have several changes in career throughout your work life.
A Bureau of Labor Statistics survey that followed individuals born between 1957 and 1964 cited an average of 11 jobs per person in this group. The report defined a job as an uninterrupted period of work with a particular employer.41 So, if we defined a career as we did in the 1960s and said that to have a successful career, you had to go to work after graduating from college, stay with that employer for 40 years while moving upward through a progression of jobs from lower levels to higher levels, and then retire with a pension, very few of us today would have a “successful” career. Obviously, then, the concept of career has changed.
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248
SHRM
T:1
Definition of a Career
So how do we define a career in the 21st century workforce? Douglas Hall defined career as a process where the person, not the organization, is the manager of the process. His definition states: “A career is the individually perceived sequence of attitudes and behaviors associated with work-related experiences and activities over the span of the person’s life.”42 Whew! Let’s break this definition down into its subcomponents.
“Individually perceived.” This definition of the term career relies heavily on the perception of the individual who is making the judgment concerning success or failure of the career. So, whether or not a career is defined as successful or a failure is determined within the individual’s own mind. If you go through 4, or 5, or 10 different jobs in your lifetime, and if you perceive that as being successful, then you are a success. If you perceive it as a failure, then you have failed.
“Sequence of attitudes and behaviors.” A career consists of both attitudes and behaviors, so it is not only what you do; it’s also the way you feel about what you do and how well you think you’ve done over time. What is an attitude? Attitude is simply a positive or negative individual judgment about a particular situation. So your career involves not only the things that you do but also the way you think and how you feel about your progression of jobs over time.
SHRM
T:2
Balancing Work and Life
“Associated with work-related experiences and activities over the span of the person’s life.” The definition of career involves not only the direct work that is done but also all work-related experiences and activities. So, even nonwork activities that are work related, such as training off-site, would be included in our definition of career. We can even extend this to the way your family and friends interact with you and your job, and we can say that any interaction of family, friends, and work could help define your career. This is one place where attitudes come into play. Your friends and family know how you feel about your job and how it allows you to interact with others or prevents you from interacting with others in different circumstances. Using this definition of career avoids the problem of having to confront the fact that by the 1960s definition, most of us would fail to have a successful career; and it also allows us to take into account the significant factors of perception and attitude.
SHRM
E:5
Training and Development: Vocational and Career Counseling/ Career Pathing
Why Career Development?
Twenty-first century organizations need to provide our employees with reasonable career paths and career counseling so that they can achieve their personal goals over the course of their career. These services can create significant motivation in our workforce that, as we noted earlier, can lead to a major improvement in productivity and job satisfaction as well as lower absenteeism and turnover.43
SHRM
T:9
Career Development
The first factor that has caused companies to become more concerned with career development is the nature of jobs in a modern organization. Recall from Chapter 2that many of our jobs are knowledge management jobs and that the individuals who fill these jobs have special skills. Because people with these special skills (human intellectual capital) are in short supply, the organization cannot afford to lose individuals with such abilities. So we spend significant amounts of time and money on developing them, which can help the organization reduce turnover of highly skilled employees.
SHRM
L:12
Human/Intellectual Capital
Another issue is that the national culture of the United States has changed in the past 30 to 40 years, and the millennial generation of workers (many of you) have significantly different expectations of what they are going to be able to do in their careers than did their parents. millennial workers expect to have significant freedom at work to do what they think they need to do and make the money that they expect to make. Such high expectations create difficulty for organizations. We have to create policies and procedures that will not harm these individuals’ initiative to work but that will also cause them to recognize the realities of the workplace. Through the process of career development, we can show these younger workers how they can progress in their careers, be entrepreneurial, and reach their personal career goals.
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249
The next major reason for career development is the significant continuing pressure that organizations are getting from governments to provide career paths for individuals who have historically been disadvantaged. Even though there are many different EEO laws on the books and we have had such laws for over 50 years, there’s still a significant disparity between the number of Caucasian male managers and managers from all other groups.44 Career development programs can create career paths for individuals who are members of these disadvantaged groups and who are qualified to go into management or other professional programs. This not only helps the individual employee; it also assists the organization in its diversity efforts.
Finally, good employee development and career planning programs can help the organization avoid productivity and disciplinary problems associated with employees who are stagnating in a particular job. This may be due to career plateauing. A career plateau occurs when an individual feels unchallenged in their current job and has little or no chance of advancement. If our employees feel as if their career has stagnated, they are more likely to become disciplinary problems. We may be able to avoid such problems by providing the opportunity for individuals to progress in their career over time.
SHRM
T:7
Plateauing
There are many other reasons for career development, but these are some of the most common issues. So as you can see, there are a number of reasons why career planning has become a major issue to 21st century organizations.
Common Methods of Employee Development
So we need to develop our employees. How do we go about doing that? Can we outsource the development function to organizations with specific expertise in that field, or should we perform this function in-house? There are a series of common methods that organizations use, including the outsourcing option, or internal development through formal education, experience, and assessments. Let’s go through a brief description of each of these options for development.
OUTSOURCING EMPLOYEE DEVELOPMENT. Based on a recent survey by ADP, “91 percent of large companies and 80 percent of midsized companies” say that outsourcing one or more HR functions provides “real value.”45 Outsourcing of the training and development function significantly lags other functions in the HR department, though.46 Even so, modern organizations must evaluate whether or not outsourcing of the training and development functions makes sense. If the company can reduce costs for training and development as well as improve the quality of the development function, it may make sense for the organization to consider outsourcing of these functions.
SHRM
L:7; Q:13
Outsourcing Employee Development
Probably the most significant strategic issue in any outsourcing debate is whether or not the organization might lose control of key processes or functions that have historically been performed within the company. If training and development are critical functions within the organization that help us maintain or advance our competitive advantage over rivals, we can ill afford to outsource those functions.
FORMAL EDUCATION. Our first internal method of employee development, formal education, provides employees the opportunity to participate in programs that will improve their general knowledge in areas such as finance, project management, or logistics. These formal education opportunities include such things as degree programs at colleges and universities, short courses of study that are available from many different sources (including private training firms and public agencies), and courses in community colleges. Such formal education courses may be held with any of the training and delivery methods discussed earlier.
The intent of formal education programs is to provide the student with a specific set of information about a particular topic. Through formal education, we can provide programs for every individual within the organization, from the executives down to the first-line supervisors. At the executive level, we might send a strong midlevel manager from the company to a university executive MBA program. In contrast, at the supervisor level, the organization would probably want new first-line supervisors to go through courses that teach supervisory skills, leadership, coaching, and basic financial analysis. Many organizations pay part or all of the cost of formal education for their employees.
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EXPERIENCE. Employee development programs that use experience as a method for developing the individual would seek to put the person through a number of different types of job-related experiences over time. Such an experience-based program might include job rotation to provide them with a wide range of experiences within the company. This allows the person to see more of what goes on within the organization and how each job ties to others.
Experience-based employee development might also include the use of coaches or mentors for the individual. The coach or mentor will work with the person to identify how these different job experiences help the individual to learn and grow within the organization.47 Development using job experience can successfully be used from the executive level all the way down to the level of work teams within the organization. In fact, there’s significant evidence that career experience, team experience, and job-related skills are all related to higher levels of team performance.48
In today’s flatter organizations, it has become more difficult to climb the old corporate ladder. Plus, younger workers become bored doing the same job. Therefore, giving employees a variety of experience through lateral jobs that provide new challenges and experience, with pay raises, may help to keep employees satisfied and with the organization.
WORK
APPLICATION 7-13
State some of your career goals and the methods you will use to develop yourself to meet these goals.
EMPLOYEE ASSESSMENT. There are a number of different assessment tools that provide individuals with information about how they think, how they interact with others, and how they manage their own actions and emotions. These assessments provide individuals with information that allows them to understand better how they can manage others within the organization. Some of the more common measures include psychological assessments, emotional intelligence tests, and performance appraisals. Each of these assessments, if properly used, provides individuals with information that can be used to modify the way that they interact with others within the organization. We will review performance appraisals in the next chapter. However, let’s take a look at the other two options now.
SHRM
Q:3
Emotional Intelligence
Psychological Assessments. These have gained significant acceptance within the workplace, and they include tests such as the Myers-Briggs Type Indicator (MBTI), the Birkman Method, and the Benchmarks Assessment tool. Each of the psychological assessment tools provides information about the person’s style of thinking, interacting with others, management, and leadership.
The MBTI is probably the most common personality-type assessment used for employee development, but each of the tests has advantages and disadvantages compared to the other options. However, the validity and reliability of any of the common forms of psychological assessment have been questioned by various researchers.49 Even with the weaknesses in validity and reliability, several of the personality assessment tools have been in use for many years and have shown legitimate real-world value in assessing the basic type of personality exhibited by individual employees within the organization.
Emotional Intelligence. Emotional intelligence is the way that we identify, understand, and use our own emotions as well as the emotions of others to promote our working relationships. It is an important part of human relations skills. Emotional intelligence is also referred to as an emotional quotient (EQ), making it similar to intelligence quotient (IQ). It is said that to be highly successful, a person needs a high IQ, a high EQ, and training on what to do to succeed.
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Emotional intelligence has also been described as “Our Most Versatile Tool for Success.”50 Author James Runde says, “What I found was that EQ was the secret sauce to career success.”51 We also now know that “regulating negative emotions is critical to peak performance”52 in any work we perform, so how do we analyze EQ? The Mayer-Salovey-Caruso Emotional Intelligence Test (MSCEIT) is one of the more common tools used to measure emotional intelligence. The MSCEIT consists of four pieces: perceiving emotion (the ability to identify your own and others’ emotions), the use of emotion to facilitate thought (the ability to use emotions to focus attention and to think more rationally, logically, and creatively), understanding emotion (the ability to analyze and evaluate your own and others’ emotions), and managing emotion (the ability to adjust emotions of yourself and others).53
Here again, the validity and reliability of the tests are still in some question. However, as with personality assessments, there’s at least some evidence in the business arena that higher levels of emotional intelligence provide employees with a greater chance of success as they move up in the organization.54
A Model of Career Development Consequences
Because the organization and the individual have joint responsibility for career planning and development, both will suffer significant consequences if the planning isn’t done successfully. Individual employees go through a series of career stages as they progress through their work life. Within each of these stages, the employee has different needs that the organization must meet so the relationship between the two can remain stable and the worker will continue to be motivated to produce for the organization. Organizations must respond successfully to the individual employee based on the employee’s current career stage.
Let’s discuss the commonly identified stages of career development first identified by Donald Super and Douglas Hall.55 You can see them summarized in the first section of
Exhibit 7-8
.
Exploration. The first career development stage, called the exploration stage, is the period of time during which the individual is identifying the personal needs that will be satisfied by a particular type of work, the types of jobs that interest them, and the skill sets necessary to be able to accomplish those types of jobs. This stage is usually identified as being between the ages of 15 and 24.
Exhibit 7-8 CAREER STAGES AND THE HIERARCHY OF NEEDS
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Establishment. The second stage, called establishment, is the period when the individual has entered into a career and becomes concerned with building a skill set, developing work relationships, and advancing and stabilizing their career. In the establishment phase, we see the individual begin to make significant personal contributions to their career in the organization and begin to create relationships or alliances with coworkers that allow them to become more secure within the organization. This stage is usually identified as covering approximately age 25 through the mid-40s.
Maintenance. This is the third stage of career development. The maintenance stage covers the period from the mid-40s to age 60 years old or older. In the maintenance stage, the individual typically continues to advance but begins to seek personal satisfaction in the jobs that they perform for the organization. This is the phase where we see individual employees begin to act as mentors or trainers to their younger coworkers and to act to improve the organization and its processes and policies because they see a need to do so.
Disengagement. Finally, the fourth stage is identified as the disengagement stage. This stage typically shows lower levels of output and productivity as the individual prepares for life after work. During this stage, because of the desire to balance nonwork with work activities, the individual may begin to choose to work only on efforts they feel are necessary or worthy of their attention. They may continue to mentor or sponsor other individuals in the organization as those others progress through their own careers. Obviously, this stage goes from the early 60s to whatever point at which the individual finally completely disengages from the organization through retirement.
You may be wondering why these career stages matter. Let’s take a look now at the second part of Exhibit 7-8. We have added Abraham Maslow’s Hierarchy of Needs below each of the career stages. It’s rather surprising how closely Maslow’s needs hierarchy matches up with our career stages. We could accomplish a similar matching process with many other motivation theories, but this one serves to illustrate why career stages matter so much to managers in the organization, and especially to HR management.
WORK
APPLICATION 7-14
Identify the level of career development you are on. Using
Exhibit 7-8
, but in your own words, describe your career stage and the Maslow motivational issues you are dealing with now.
What are people most concerned with at the earliest career stage or when they have to fall back to a lower level of work? They are typically most concerned with physical and safety/security issues, right? Are they physically able to get the basic things that they need in order to live and work—like money for shelter, food to eat, fuel for their car? Are they getting paid enough to survive and be safe? Then, as they get into the establishment and maintenance stages, they become more concerned with social interactions and then gaining status and recognition as organizational leaders. Finally, as they move to the disengagement stage, they are more concerned with higher-level esteem needs such as self-respect, achievement of personal goals, and being able to do the things that they think are important. So, we see people go through these different motivational points in their life as they go through their career. It’s very interesting that the career stages follow almost exactly with what the motivation theories show us.
Now that we understand a little bit about the career stages that individuals go through during their work life and how those stages identify what might motivate workers in a particular stage, let’s match those up with organizational HR strategies that are available to reinforce employee behavior. This will give us a general working model of how organizational HR strategies can create either positive or negative consequences for both the individual and the organization, depending on how the HR strategies are applied in a particular situation. Take a look at
Exhibit 7-9
. We have individual career stages identified on the left side of the diagram. On the right side are some of the major organizational HR strategies that are available. Depending on how the HR strategies are applied, and based on the individual’s career stage and motivating factors, we end up with either positive or negative consequences to both the individual and the organization.
If we apply the correct HR strategy or strategies to an individual employee based on the factors that motivate the employee, we can improve each of the major organizational dependent variables that we identified in Chapter 1—job satisfaction, productivity, absenteeism, and turnover. In addition, there are several other organizational factors that can either improve or decline based on the application (or lack thereof) of the correct HR strategy. These factors include labor costs, organizational safety, employee lawsuits, and organizational reputation, among others. So as you can see, if the organization fails to apply the correct strategy to motivate the employee (based on the employee’s current career stage), the consequences can be severe.
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Exhibit 7-9 CONSEQUENCES OF CAREER PLANNING
On the other side of the diagram, the consequences to the employee are equally significant. If the organization applies the correct types of HR strategies to develop the employee successfully over time, individual feelings of accomplishment and achievement increase, self-worth and self-reliance increase, the employee’s sense of security increases, and their morale is likely to increase due to higher individual satisfaction levels. Again, if the strategies applied are unsuccessful, each of these individual consequences can become negative. After looking at the model, it should become obvious that successfully applying HR strategies to individual employees based on their personal motivating factors and career stage is critical to overall organizational success over time.
So now you know why it’s so important to create career paths for our employees within the organization and provide employee development opportunities. If we do these things successfully, we end up with a series of positive consequences for both the organization and the individuals involved. We have better productivity, better job satisfaction and employee engagement, and lower absenteeism and turnover. However, if we fail to do these things successfully, a series of negative consequences can occur that ultimately cost both the organization and the individual time and money. Employee development is a critical piece in the organizational puzzle in order to provide long-term success.
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TRENDS AND ISSUES IN HRM
LO 7-7
Describe the concepts of gamification, digital learning, and micro-learning, and the reasons that they have become more critical in today’s organizations.
Let’s take a look now at a couple of current trends and issues in training and development. The first trend involves the “gamification” of training and development and where it has been over the past several years, and the second looks at the issues of digital and micro-learning and their necessity in today’s workforce.
Gamification—A Phoenix Rising?
A 2017 article by author Simon Parkin asks, “Was Gamification a Terrible Lie?”56 Gamification continues to be a major trend in organizational training, but it has had its ups and downs in the past few years. Gamification is the process of designing and utilizing video, social media, and other game technologies to teach the player a business concept. It gained popularity a few years ago, but some early attempts did not provide the learning outcomes that were expected because of poor training design so it fell out of favor with some companies. Technology providers that jumped into gamification programs and apps, although they were not well versed in training and learning, have now washed out of the market though; and gamification is making a comeback in some circles. In many cases gamification is simply a new form of simulation training. It is being used for training in areas such as corporate values training, leadership development, customer service training, technical training, and more. It is also being used by a diverse group of organizations including Unilever, the Department of Defense, Weight Watchers, and Nike, so you can see that it isn’t just useful in technology companies.57
Gamification is not a panacea for what is ailing a corporate learning and development program. There is at least some evidence that it does not improve long-term retention of concepts learned in training environments in all training situations. In fact, in some cases, traditional classroom learning has been shown to outperform various types of gamification or social learning.58 What problems do we continue to see in learning using gamification? One issue has been the fact that gamification has been overhyped as a cure-all for training problems. Another common problem is that the player may become wrapped up in playing the game, and not understand why a result occurs, and will therefore miss the lesson to be learned. A third issue is poor game design—about 80% of them still fail to meet business objectives because the provider does not understand basic learning theories. However, one of the key challenges with training has always been to get people engaged in the process, and the evidence is mounting that gamification can help with engagement and ultimately get people to learn and retain key information for work.
The Corporate Learning Imperative
Employers today are concerned that their workers don’t have the skills necessary to compete in modern organizations. In a recent Gallup poll, almost 90 percent of business leaders said that college graduates did not have the necessary skill sets for the workplace.59 Other studies note that existing employee skill sets go stale at an alarming rate as well. Partially as a result of this lack of confidence in employee skills, US and European companies continue to increase their spending on internal talent development. Each year from 2010 through 2015 companies increased their spending on employee training, and that trend appears to be continuing.60,61
There is a problem with corporate learning environments though—no large blocks of time to learn. The average employee has about 25 minutes a week to “slow down and learn.”62 One manager noted, “Even TED Talks are now too long” in many cases!63 As a result of this problem, companies are exploring various forms of digital learning that can provide just-in-time content that is compact and valuable. Digital learning, according to Josh Bersin of Bersin by Deloitte, is “employee-directed, intelligent-machine driven, and brings “learning to where employees are.”64
One solution to the problem of lack of time for training is micro-learning. Micro-learning is a learning form that uses “small, specific bursts” or chunks to learn a single piece of content that the user needs to know to solve a problem right now.65 Micro-learning as a form of digital learning allows around the clock access in many cases—whenever, wherever, however the employee wants to access it. Most micro-learning takes less than 5 minutes and includes a quiz.66 Micro-learning “is effective, but limited,” according to Stanford neuroscientist Priya Rajasethupathy67—it is designed to answer specific questions, quickly, during the course of doing the work—but it is one tool available for learning on the fly. However, other continued learning will be necessary for workers in modern organizations.
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Life-long learning will continue to become more necessary.68 Many times a professor will hear “I’ll be glad when I graduate. I’ll never have to go to class again” from one of their students and will chuckle. The professor knows that their student will be “going to class” constantly for the rest of their work life. Executives note that the average “shelf life” of skills associated with a college degree is 5 years.69HR managers will need to understand the new technologies available and the new ways that their employees learn, and will have to adapt to each challenge to enable the self-directed training that will become a more important part of the workplace.
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.
DIGITAL RESOURCES
Training*
Training and Development
Experiential Learning as Management Development
Onboarding*
Bloom’s Taxonomy
Effects of Training in Universal Design for Learning on Lesson Plan Development
Evaluating Training Programs*
Classical Conditioning
* premium video only available in the interactive eBook
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CHAPTER SUMMARY
7-1. Discuss the major difference between training and development and identify the common situations where training may be needed.
Training is designed to provide employees with the knowledge, skills, and abilities (KSAs) that they need to succeed in their work for the organization. Training is primarily intended to be put to immediate use by the individual being trained. Employee development is designed to teach our workers how to move up in the organization in the future by becoming skilled at those tasks that they will need to know how to do to perform higher-level jobs.
The most common points at which managers should consider workforce training include new-employee orientation, which is used to acculturate new employees to the organization and its culture and to prepare them to do their own job within the organization; when processes or procedures have changed; whenever there has been some failure to performsuccessfully; or when employee development opportunities come up, allowing the company to develop current employees’ skills and abilities so that they are able to move into higher-level jobs within the organization.
7-2. Briefly discuss the steps in the training and development process and the common challenges to the process.
The first step involves conducting a needs assessment to identify the type of training needed. The second step involves selecting how to shape employee behavior. The third step involves designing the training by selecting training methods. The fourth step involves selecting the delivery method and delivering the training. The last step involves assessing the training to determine if employee behavior has changed to improve performance—if not, return to step one. The steps are so closely related and based on each other that they are commonly planned together before actually delivering the training.
Common challenges to the training process include unprepared workers, difficulty in identifying the ROI provided from training, employee resistance to changes in processes and procedures, matching the training to the company’s strategic goals, and logistics issues—including scheduling and locations available for training courses.
7-3. Identify the three common learning theories and how they are used to create the four methods for shaping behavior.
The three common learning theories are classical conditioning, operant conditioning, and social learning theory. Classical conditioning results in direct, involuntary, learned behaviors. Operant conditioning results in direct, voluntary, learned behaviors. Social learning is experienced through watching the actions of other people and witnessing the consequences of their actions, so it is voluntary and learned, but it is based on indirect consequences of the actions of others.
We can use the operant conditioning and social learning concepts of reward and punishmentto create the four options for shaping behavior. These include positive reinforcement, negative reinforcement, punishment, and extinction. Positive reinforcement involves the application of a reward in response to a person’s behavior in order to increase the chances that that behavior will be repeated. Negative reinforcement involves the withdrawal of a noxious stimulus, or a negative thing, in response to a person’s positive behavior to increase the chances that the behavior will be repeated. Punishment occurs either when a noxious stimulus is applied or when a reward is taken away in response to a negative behavior. Extinction provides no reinforcement, either positive or negative, to the actions of the subject.
7-4. Discuss each of the major training delivery types.
On-the-job training (OJT) is done at the work site with the resources the employee uses to perform the job, and it is conducted one-on-one with the trainee. In classroom training, the organization creates a training course and provides a qualified instructor to teach the class in a single location at a specific time. Distance learning, also called e-learning, allows the students to sign in to the training site and provides materials to them for their studies. There’s typically less interaction between an instructor and trainee than in OJT or classroom training. Simulations mimic a real-life situation to teach students what actions to take in the event that they encounter the same or a similar situation in their job.
7-5. Briefly discuss the Four-Level Evaluation Method for assessing training programs and the three common ways we measure training success.
The four-level evaluation method measures reaction, learning, behaviors, and results. In reaction evaluations, we ask the participants how they feel about the training process, including the content provided, the instructor(s), and the knowledge that they gained. Learning evaluations are designed to determine what knowledge was gained by the individual, whether any new skills have been learned, and whether attitudes have changed as a result of the training. Behavior evaluations are designed to determine whether or not the trainee’s on-the-job behaviors changed as a result of the training. In a results evaluation, we try to determine whether or not individual behavioral changes have improved organizational results. This is the level at which ROI will be measured and evaluated.
ROI, customer satisfaction and employee satisfaction were discussed as ways to measure training success. ROI and customer service are results metrics, while employee satisfaction is a reaction metric. There are strong correlations between employee satisfaction and customer satisfaction, and indirect relationships with ROI through individual productivity and accuracy/quality of work.
7-6. Discuss the term
career
and the three common methods of employee development.
Our definition of a career is “the individually perceived sequence of attitudes and behaviors associated with work-related experiences and activities over the span of the person’s life.”
Individually perceived means that if you perceive your career as being successful, then you are a success. If you perceive it as a failure, then you have failed. Sequence of attitudes and behaviors means that your career involves not only the things that you do, but also the way you think and how you feel about your progression of jobs over time. Associated with work-related experiences and activities over time means that even nonwork activities that are work related would be included in our definition of career. Using this definition of career avoids the problem of having to confront the fact that by the 1960s definition, most of us would fail to have a successful career.
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The three methods of employee development are formal education, experience, and assessment. Formal education provides the opportunity to participate in programs that will improve general knowledge in areas such as finance, project management, or logistics. Experience as a method for developing the individual seeks to put the person through different types of job-related experiences over time. Assessment tools provide employees with information about how they think, how they interact with others, and how they manage their own actions and emotions.
7-7. Describe the concepts of gamification, digital learning, and micro-learning, and the reasons that they have become more critical in today’s organizations.
Gamification is the process of designing and utilizing video, social media, and other game technologies to teach the player a business concept. There is some evidence that gamification can engage the learners better than traditional learning in some cases and ultimately get people to learn and retain key information for work. Digital learning is “employee-directed, intelligent-machine driven, and brings “learning to where employees are.” Again, engagement may increase if the company can provide the necessary training whenever and wherever the employee needs it. Micro-learning is one form of digital learning. It uses small, specific bursts to learn a single piece of content that the user needs right now, and again meets the learner when and where he or she needs the information. Each process gives information to solve problems that engages the employee better than some traditional forms of learning, in at least some cases.
KEY TERMS
career 248
career plateau 249
competency model 226
emotional intelligence 250
employee development 227
extinction 236
learning 233
needs assessment 230
negative reinforcement 236
onboarding 227
positive reinforcement 236
punishment 236
remediation 228
self-efficacy 232
training 227
KEY TERMS REVIEW
Complete each of the following statements using one of this chapter’s key terms.
1. __________ identifies the knowledge, skills, and abilities (KSAs) needed to perform a particular job in the organization.
2. __________ is the process of teaching employees the skills necessary to perform a job.
3. __________ is ongoing education to improve knowledge and skills for present and future jobs.
4. __________ is the process of introducing new employees to the organization and their jobs.
5. __________ is the correction of a deficiency or failure in a process or procedure.
6. __________ is the process of analyzing the difference between what is currently occurring within a job or jobs in comparison with what is required—either now or in the future—based on the organization’s operations and strategic goals.
7. __________ is whether people believe that they have the capability to do something or attain a particular goal.
8. __________ is any relatively permanent change in behavior that occurs as a result of experience or practice.
9. __________ is providing a reward in return for a constructive action on the part of the subject.
10. __________ is the withdrawal of a harmful thing from the environment in response to a positive action on the part of the subject.
11. __________ is the application of an adverse consequence, or the removal of a reward, in order to decrease an unwanted behavior.
12. __________ is the total lack of response, either positive or negative, to avoid reinforcing an undesirable behavior.
13. __________ is the individually perceived sequence of attitudes and behaviors associated with work-related experiences and activities over the span of a person’s life.
14. __________ occurs when an individual feels unchallenged in their current job and has little or no chance of advancement.
15. __________ is the way that we identify, understand, and use our own emotions as well as the emotions of others to promote our working relationships.
COMMUNICATION SKILLS
The following critical-thinking questions can be used for class discussion and/or for written assignments to develop communication skills. Be sure to give complete explanations for all answers.
1. Is the currently available workforce really not sufficiently trained to participate in knowledge-intensive jobs? Why or why not?
2. Think of and then list all of the items that you think should be included in a new employee orientation. Briefly justify why each item should be included.
3. Briefly describe a job you have or had. (If you haven’t had a job, think of someone you know well.) If you were to be promoted, which training method(s) would you use to train the person to do your current job?
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4. Which one of the primary delivery of training types would you use to teach basic accounting to a group of employees? Justify your answer.
5. Have you ever filled out an evaluation form for an employee training class? Which type of evaluation was it? What evidence led you to think it was this type?
6. Do you agree with the definition of a career presented in the text? Why or why not? How would you change it?
7. Which of the reasons for creating career development programs from the text do you feel are most valid, considering the cost of career development programs? Justify your choice.
8. Which method of development, formal education, experience, or assessment do you think is most valuable? Justify your choice.
9. Identify and discuss two or three ways in which poor application of HR strategies (Exhibit 7-9) would create negative employee consequences.
10. If you were the lead trainer for your company, how would you go about trying to create an organization-wide commitment to sustainability? Why?
CASE 7-1 DOING CRUNCHES AT NESTLé: CONTINUOUS IMPROVEMENT OF HUMAN ASSETS
With instant coffee, baby food, and bottled water in the mix, Nestlé crunches more than just chocolate. The world’s #1 food and drinks company in terms of sales, Nestlé is also the world leader in coffee (Nescafé). It also makes coffee for the home-brewing system, Nespresso. Nestlé is one of the world’s top bottled water makers (Nestlé Waters), one of the biggest frozen pizza makers (DiGiorno), and a big player in the pet food business (Friskies, Purina). Its most well-known global food brands include Buitoni, Dreyer’s, Maggi, Milkmaid, Carnation, and Kit Kat. The company also owns Gerber Products. North America is Nestlé’s most important market.(1)
Nestlé has over 2,000 brands, which are made in 418 factories located in 86 countries, and employees nearly 330,000 employees selling products in 191 countries.(2) How does one feed this growing concern? Mergers and acquisitions is one answer, yet that does not solve the skills-gap issue faced worldwide. The firm credits their success to their top-down/bottom-up approach to training.
Top-Down. Their Rive-Reine International Training Centre in Switzerland, since the late 1980s, has served as the focal point for mentoring and training from senior management. Trainee selection matches local domestic managers’ candidate nominations, who hail from over 80 countries, with corporate-driven selection criteria usually resulting in a class of 15 to 20 nationalities from differing areas of expertise.
Who teaches these classes? “Course leaders” as they are called provide instruction to about 1,700 managers and are comprised predominately of highly experienced executives from numerous locations, with consultants teaching only 25% of the 70 courses offered per annum. The courses have two differing foci: internal operations and working with external stakeholders.
Executive Courses/Industry Analysis: This series of courses has been created to assist managers who attended management courses between five and ten years ago to develop the ability to identify and work with key external stakeholders (i.e., customers, competitors, suppliers). The focus is on industry analysis from the stakeholder’s point of view and the actions they might take (i.e., What are our competitors’ mostly likely actions and how do we counteract them?).
Management Courses/Operations and Business Value Chain: Two-thirds of the classes in this program are taken by managers who have been with the company 5 years or less. Here managers learn about the firm’s business model (its internal operations) and the underlying values that drive that model.(3)
Bottom-up. An important factor in Nestlé’s productivity is the skill set of entry-level workers. Employers invest in the skills of new entrants as an alternative to hiring more experienced people, partly on grounds of cost but also for the opportunity to shape ways of working around specific technologies and processes and particular company values.(4)
For most employees at Nestlé to be successful, they must have a passion for learning, and their recruitment process emphasizes this. Once hired, employees’ training is predominately “on-the-job” (OTJ), where an employee’s supervisor serves as mentor, providing motivation and guidance to ensure employees’ growth. Before training can begin, whether formally or informally, employees must possess the basic skill set necessary for continued learning (i.e., reading, writing, computer usage, oral communications, etc.); this is usually provided through an employee’s schooling. In certain countries, their education may have been inadequate and the worker may decide to improve their skill set, especially in the area of communications. Special programs have been established to provide such training on a country-by-country basis. Once employees have acquired the basic skill set, individualized development formal training programs are created that increase workers’ knowledge, skills, and abilities (KSAs). New employees with high school or university qualifications inevitably enter management-training programs in their local centers.
Local Training Centers. In addition to centralized training, residential training centers exist for many of their local operations—the net effect being that “people development” occurs predominately at local centers. This decentralized approach for employee training and development makes each manager accountable and directly involved in employee learning. Coaching and counseling skills are therefore emphasized where needed through a myriad of programs. Besides training current managers, local centers look to develop future managers by developing supervisory skills of ex-apprentices as well as technical personnel in the areas of IT management, maintenance and electrical engineering. Specialists are also “home-grown” through continuous training, given local market and employment conditions. Those seeking a purely administrative career path will find that OJT plays a critical role supported by in-house training. Even at the local level, outsourcing of training and education increases with an employee’s rank and use of new technologies.
Production is one of the key success factors for Nestlé, and therefore employees (two-thirds of whom work in factories) need continuous OTJ on new factory technology and equipment; the faster the change, the greater the need for training. New technology also means learning how to work better and differently with others. Team and inter-team management training (including self-managed work teams) focusing on developing flex-manufacturing capabilities is needed in order to maximize equipment utilization.
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Training methods are also changing with the times, especially related to the Internet. Distance learning, the use of information technology to deliver content, has led to the new methods of corporate instruction and special corporate training assistants and has allowed employees to obtain training and education that align with their life styles. For example, employees in Singapore are given the option to attend online, job-related night courses, which, if they lead to some formal qualification (i.e., certificate, diploma, degree), would qualify for cost reimbursement.(5)
The Singapore example indicates that although there is a commonality of training among local centers, training can be significantly different by location. New employees at Nestlé take management-training courses, but the approach of these courses varies widely by country. For example, in Japan the courses are short and usually last about 3 days each. In India, however, the programs run for 12 months. In West African countries, the management training programs run even longer, typically 18–24 months.(6)
Questions
1. For what purposes does Nestlé train and develop employees?
2. What challenges does Nestlé face in conducting their training programs?
3. Which skill sets does Nestlé focus on in their training programs?
4. What on-the-job training methods does Nestlé utilize in their training programs?
5. What forms of off-the-job training are available at Nestlé?
6. What are some of the ways that Nestlé’s training programs address career development?
7. What trends in training and development is Nestlé utilizing, and what trends could they benefit from?
References
(1) Oliver, L. (n.d.). Nestlé S.A. Hoovers. Retrieved April 26, 2017, from
(5) Francis, A. (n.d.). Case study of Nestlé: Training and development. Retrieved April 26, 2017, from https://www.mbaknol.com/management-case-studies/case-study-of-nestle-training-and-development/
(6) Ibid.
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, Long Island University School of Business, Brooklyn Campus
CASE 7-2 GOOGLE SEARCH: BUILDING THE PROGRAM THAT WRITES THE CODE TO FIND FEMALE TALENT
Google Inc. took Web searching to a much more sophisticated level when it offered targeted search results from billions of Web pages, based on a proprietary algorithm that allowed for greater customization than did prior engines like Web Crawler and Dogpile. Employing more than 50,000 people, Google generates most of its revenue from advertising sales. In 2013, its net income was close to $13 billion, and the company showed 60% revenue growth between 2012 and 2014. Added to that, Google has been on the top of the Fortune “Best Places to Work” list since 2012.(1) Google is one of the best firms at making employees feel welcomed and supported; but being in the technology field, the company had become a “boys’ club,” with women constituting only 30% of its entire workforce.
Alongside Google, other Silicon Valley technology giants like Facebook, Yahoo, and LinkedIn recently disclosed their gender and racial diversity ratios in their workplaces. On average, Google’s workforce consists of more than 65% males, 55% whites, and 35% Asians. The gaps between these numbers are even wider in technology-related positions. As shown in its May 2014 report, it employs only 2% blacks and 3% Hispanics. Google admitted that this problem required immediate action. Google’s sharing of demographic information is a promising sign that it is willing to change, but action speaks louder than words.
Google took quick action and performed its own search. It found that women were losing interest in computer sciences as a career at an alarming rate. Only 14% of the computer science graduates were women in 2013, and surveys indicated that less than 1% of women expressed any interest in majoring in computer sciences in college.(2) Google then recognized that it could not use traditional recruitment techniques to hire women since they were just not present in the labor pool.
Google also examined its own unique hiring processes and concluded that they were both difficult and tedious—women were not emerging through these processes, and Google could not just sit back and hope to gain new female employees from a labor pool that could not supply them.(3)
Google decided to be far more proactive in the area of women employee development and committed $50 million for both research and solution strategies. Its research indicated that if women were exposed to coding at an early age, they would more likely look favorably at a career path in computer science.(4) Google’s research also noted that compared to the companies led by men, tech companies led by women achieved a 35% higher return on investment and 12% higher revenue.(5)
Google understood that its answer to this labor shortage, as well as to greater profitability, was to show young girls how interesting aspects of computer science could be, as well as how lucrative, and to inspire them to pursue a career in this field. Secondly, only 10% of the schools in the United States offered computer science courses, so access to this field was a major problem. To achieve its goal of more women in the workforce, Google initiated a project called “Made With Code” (MWC) that was designed to attract women to the sciences and, in the long run, diminish possible gender biases in its own organization, as well as in the field.(6)
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MWC was launched as an event in New York City, with the participation of teenage girls from local public schools; famous female entrepreneurs; and many professional women who utilized coding in the film, music, and fashion industries. To increase exposure and inspiration, Google is working closely with producers and writers in the Science & Entertainment Exchange to have more female coders in movies and television series.(7)
With the MWC program targeting the people who normally did not have the access or the opportunity to pursue a career in computer science, Google provided accelerated tech-training programs to help them succeed in high-level tech jobs. Google did this by offering free coding classes online to pull extraordinary talent from the cities surrounding Silicon Valley.(8) It also provided workshops that fostered student collaboration on simple coding projects like 3-D printed bracelets. Research has noted that women thrive in team environments, and Google wanted them to understand that teamwork is the cornerstone of software development. To this end, Google gave an additional 3 months of free access to its Code School to women.(9) Google hopes that the outcome of its programs will increase younger girls’ involvement in computer science and, in the long run, increase women’s visibility in the profession and at Google.
Questions
1. What is a needs assessment, and how might Google use this tool to increase the presence of women in its workforce?
2. Some might argue that Google’s “Made With Code” program has redefined the concept of employee development. Agree or disagree and provide an explanation supporting your position.
3. Explain how Google’s particular situation demonstrates the relationship between employee recruitment and employee development, given the above discussion.
4. Explain how Google’s “Made With Code” has become an integral part of its career planning.
5. How might the concepts of self-efficacy and reinforcement theory help us better understand schoolgirls’ relative lack of interest in computer science?
6. Assume that Google is ultimately successful and receives more female applicants, whom it then hires. What suggestions do you have for managing this new talent pool?
References
(1) Hoover’s Inc. (2014). Google Inc. Hoover’s Company Records: In-Depth Records. Retrieved July 19, 2014, from Long Island University Academic Database.
(2) Lapowsky, I. (2014, July 1). Google and Square recruit girls early to tackle tech’s gender problem.
Wired.com
. Retrieved from
http://www.wired.com/2014/07/girls-coding/
(3) Warnes, S. (2014, July 1). 70% male, 50% white: Why Silicon Valley needs to diversify. Mirror.Retrieved from
(5) Warnes, S. (2014, July 1). 70% male, 50% white: Why Silicon Valley needs to diversify. Mirror.Retrieved from http://ampp3d.mirror.co.uk/2014/07/01/70-male-50-white-why-silicon-valley-needs-to-diversify/
(6) Mejia, P. (2014, July 11). Codes, not bros: Google pledges $50 million to ladies in tech. Newsweek.Retrieved from http://www.newsweek.com/codes-not-bros-google-pledges-50-million-ladies-tech-258298/
(7) Ibid.
(8) Jones, V. (2014, July 8). How to hook up tech sector with talent. CNN. Retrieved from
(9) Mejia, P. (2014, July 11). Codes, not bros: Google pledges $50 million to ladies in tech. Newsweek.Retrieved from http://www.newsweek.com/codes-not-bros-google-pledges-50-million-ladies-tech-258298/
Case created by Herbert Sherman and Theodore Vallas, Department of Management Sciences, Long Island University School of Business, Brooklyn Campus
SKILL BUILDER 7-1 THE TRAINING PROCESS
Objectives
To develop your ability to conduct a needs assessment, to select how to shape employee behavior, to design a training program by selecting training methods, to select a method to deliver training, and to choose an assessment method
Skills
The primary skills developed through this exercise are as follows:
1. HR management skill—conceptual and design skills
2. SHRM 2016 Curriculum Guidebook—L: Training and Development
Assignment
As an individual or group, select a job and write out your answers. Follow the steps in the training process below to train a person to do the job.
Step 1: Needs assessment. Conduct a needs assessment for the job by developing a competency model identifying the knowledge, skills, and abilities needed to do the job successfully.
Step 2: Select how you will shape behavior. Be sure to specify if you will use positive reinforcement, punishment, negative reinforcement, or extinction. State the rewards and/or punishment.
Step 3: Design the training. Select and describe in detail the training method(s) you will use to shape the behavior.
Step 4: Deliver the training. Just select one of the four methods of delivery that you will use to conduct the actual training and describe how you will deliver the training.
Step 5: Assessment of training. Just select one of the four assessment methods and describe in detail how you will determine if the training did in fact shape the behavior.
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Apply It
What did I learn from this experience? How will I use this knowledge in the future?
Your instructor may ask you to do this Skill Builder in class by breaking into groups of four to six and doing the preparation. If so, the instructor will provide you with any necessary information or additional instructions.
SKILL BUILDER 7-2 CAREER DEVELOPMENT
Objective
To begin to think about and develop your career plan
Skills
The primary skills developed through this exercise are as follows:
1. HR management skill—conceptual and design skills
2. SHRM 2016 Curriculum Guidebook—L: Training and Development
Assignment
Write out your answers to the following questions.
1. Do you now, or do you want to, work in HRM? Why? If not, what career do you want to pursue, and why?
2. If you want to work in HR, based on your self-assessment back in Chapter 1 or other knowledge, list your highest levels of interest in HR disciplines. If not, what are your highest levels of interests, functions, or disciplines within your chosen career?
3. What methods of employee development (formal education, experience-internships and jobs, and assessment) are you using to prepare for your career?
Apply It
What did I learn from this exercise? How will I use this knowledge in the future?
Your instructor may ask you to do this Skill Builder in class by breaking into groups of two to three and discussing your career plans. If so, the instructor will provide you with any necessary information or additional instructions.
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